Document:

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                                                                   EXHIBIT 10.18

Confidential                                                Final Execution Copy

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.

                        DEVELOPMENT AND LICENSE AGREEMENT

         This Development and License Agreement (the "Agreement"), entered into
as of the July 18, 2003 (the "Effective Date"), is made by and between ADVANCIS
PHARMACEUTICAL CORP., a company organized and existing under the laws of the
state of Delaware and having a place of business at 20425 Seneca Meadows
Parkway, Germantown, Maryland 20876 ("ADVANCIS"), and GLAXO GROUP LIMITED, a
company incorporated in England and Wales, having its registered office at Glaxo
Wellcome House, Berkeley Avenue, Greenford, Middlesex, England UB6 0NN ("GSK").

         WHEREAS, ADVANCIS is the owner of certain patents and know-how relating
to formulations for the delivery of antibiotics; and

         WHEREAS, GSK desires to obtain, and ADVANCIS desires to grant to GSK,
an exclusive right and license to such patents and know-how with respect to any
product that contains Compound (as defined below) and a Beta Lactamase
Inhibitor, on the terms and conditions set forth in this Agreement.

         NOW, THEREFORE, in consideration of the mutual promises and other good
and valuable consideration, the parties agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

         As used in this Agreement, the following capitalized terms shall have
the meanings set forth below

         1.1      "ADVANCIS PATENTS" means (1) all Patents in the Territory in
existence as of the Effective Date or during the Term of this Agreement claiming
generically or specifically: Compound or Products, a method for manufacturing or
formulating Compound or Products, an intermediate used in such process or a use
of Compound or Products, or any other process which claims the making, use,
sale, offer for sale or importation of Compound or Products in the Territory;
that is owned or Controlled, in whole or in part, by license, assignment, or
otherwise by ADVANCIS as of the Effective Date, or during the Term of the
Agreement. The current list of patent applications and patents encompassed
within ADVANCIS Patents is set forth in Schedule 1.2, and such list shall be
updated by ADVANCIS on a semi-annual basis during the Term of

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the Agreement. For the avoidance of doubt, ADVANCIS Patents does not include any
Program Intellectual Property. Unpublished ADVANCIS Patents shall be
Confidential Information of ADVANCIS subject to Section 9.1. Notwithstanding the
foregoing, ADVANCIS Patents do not include any patent or patent application
licensed to ADVANCIS after the Effective Date that requires ADVANCIS to pay a
royalty based on Product sold by GSK, its Affiliates or their Sublicensees
unless GSK agrees to pay such royalty, which royalty shall be deductible under
Section 4.6.

         1.2      "ADVANCIS KNOW-HOW" means Know-How owned or Controlled by
ADVANCIS as of the Effective Date or during the Term of this Agreement. ADVANCIS
Know-How shall be Confidential Information of ADVANCIS subject to Section 9.1.
For the avoidance of doubt, ADVANCIS Know-How does not include any Program
Intellectual Property. Notwithstanding the foregoing, ADVANCIS Know-How does not
include any of the foregoing licensed to ADVANCIS after the Effective Date that
requires ADVANCIS to pay a royalty based on Product sold by GSK, its Affiliates
or their Sublicensees unless GSK agrees to pay such royalty, which royalty shall
be creditable under Section 4.6.

         1.3      "AFFILIATE" means any legal entity (such as a corporation,
partnership, or limited liability company) that directly or indirectly Controls,
is Controlled by, or is under common Control with a Party to this Agreement. For
the purposes of this definition, the term "Control" means: (1) beneficial
ownership of at least fifty percent (50%) of the voting securities of a
corporation or other business organization with voting securities (or such
lesser percentage required under local jurisdiction); (2) a fifty percent (50%)
or greater interest in the net assets or profits of a partnership or other
business or other business organization without voting securities; or (3) the
ability to direct the affairs of any such entity.

         1.4      "ARISING TECHNOLOGY" means Patents and Know-How other than
Program Intellectual Property developed by either Party in the course of
performing activities subject to this Agreement.

         1.5      "BETA LACTAMASE INHIBITOR" means a compound that inhibits the
enzyme Beta-Lactamase produced by one or more clinically relevant infectious
microorganisms including all racemates, chelates, complexes, enantiomers,
diastereoisomers, salts, bases, esters, hydrates, solvates, polymorphs, crystal
forms, crystal habits, prodrugs, isotopic or radiolabeled equivalents,
metabolites, or the like of such Beta Lactamase Inhibitor. By way of
illustration, clavulanic acid is a Beta Lactamase Inhibitor.

         1.6      "COMMERCIALLY REASONABLE EFFORTS" means, with respect to
development and regulatory approval, in a country, efforts and resources that
are calculated to initiate clinical trials with respect to and to obtain
regulatory approval of Product within a time period that is comparable to
similar GSK products that are at a similar stage of development, technical risk
and commercial potential, and with respect to Commercialization in a country,
efforts and resources that are comparable to those used for a GSK product of
similar commercial potential.

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         1.7      "COMPOUND" means the compound amoxicillin, including all
racemates, chelates, complexes, enantiomers, diastereoisomers, salts, bases,
esters, hydrates, solvates, polymorphs, crystal forms, crystal habits,
prodrugs, isotopic or radiolabeled equivalents, metabolites, or the like,
thereof and all mixtures of any of the foregoing.

         1.8      "COMMERCIALIZATION" means the marketing, promotion,
advertising, selling or distribution of a Product in a country after approval
for commercial sale has been obtained in such country. The term "Commercialize"
has a correlative meaning.

         1.9      "CONFIDENTIAL INFORMATION" means, subject to Section 9.1, (1)
any proprietary or confidential information or material in tangible form
disclosed by the Disclosing Party hereunder that is marked as "Confidential" at
the time it is delivered to the Receiving Party, and/or (2) proprietary or
confidential information disclosed orally hereunder that is identified as
confidential or proprietary when disclosed and such disclosure of confidential
information is confirmed in writing within a reasonable period of time
thereafter by the Disclosing Party.

         1.10     "CONSULTANTS" has that meaning ascribed to such term in
Section 3.4(c) below.

         1.11     "CONTROL," "CONTROLS," "CONTROLLED" or "CONTROLLING" means
(except with respect to "Affiliate" as defined in Section 1.3) possession of the
ability to grant the licenses or sublicenses as provided herein without
violating the terms of any license agreement or other arrangement with any Third
Party, or any government regulation or statute.

         1.12     "DISCLOSING PARTY" means a Party that discloses its
Confidential Information to the other Party.

         1.13     "EFFECTIVE PROFILE" means a pharmacokinetic profile for
Product which: [***]

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         1.14     "FDA" means the Food and Drug Administration of the United
States Department of Health and Human Services, or any successor agency(ies)
thereof performing similar functions.

         1.15     "FIRST COMMERCIAL SALE" means the date of the first commercial
invoice for Product sold by GSK or its Affiliate(s) or Sublicensee(s) to a Third
Party in a country of the Territory, as part of a nationwide introduction of
Product and after approval for commercial sale by the FDA or a Regulatory
Authority, as the case may be.

         1.16     "GSK PATENT" means (1) all Patents in the Territory filed or
granted after the Effective Date and during the Term of this Agreement claiming
generically or specifically: Compound or Products, a method for manufacturing or
formulating Compound or Products, an intermediate used in such process or a use
of Compound or Products, or which covers the making, use, sale, offer for sale
or importation of Compound or Products in the Territory that are owned or
Controlled in whole or in part, by GSK or its Affiliate.

         1.17     "GSK PROPRIETARY TECHNOLOGY" means (i) all ideas, inventions,
data, instructions, processes, procedures, formulas, expert opinions and
information, including, without limitation, biological, chemical, toxicological,
pharmacological, physical and analytical, clinical, analytical, stability,
safety, manufacturing and quality control data and information which are in
existence as of the Effective Date or which come into existence after the
Effective Date and which are owned or Controlled by GSK(other than through a
license granted to GSK under this Agreement by ADVANCIS), and which are
identified by GSK to ADVANCIS as GSK Proprietary Technology (ii) all GSK Sole
Inventions and Program Intellectual Property which are improvements to or are
based on, incorporate, or derived from anything in subsection (i) above. GSK may
identify GSK Proprietary Technology to ADVANCIS in (1) any tangible form that is
marked as "GSK Proprietary Technology" at the time it is disclosed to ADVANCIS
or (2) if disclosed orally hereunder, such disclosure is confirmed as GSK
Proprietary Technology, in writing, within a reasonable period of time
thereafter. For the avoidance of doubt, "GSK Proprietary Technology" does not
include published patent applications or granted patents or information or data
or know-how or inventions disclosed therein to the extent such information was
published or disclosed prior to the identification of such information as GSK
Proprietary Technology by GSK to ADVANCIS.

         1.18     "INDEPENDENT PRODUCT" means a pharmaceutical presentation or
presentations, intended for once-daily administration, of a combination of the
Compound and a Beta Lactamase Inhibitor as the only active components,
including but not limited to the Beta Lactamase Inhibitor known as clavulanic
acid, and including all racemates, chelates, complexes, enantiomers,
diastereoisomers, salts, bases, esters, hydrates, solvates, polymorphs, crystal
forms, crystal habits, prodrugs, isotopic or radiolabeled equivalents,
metabolites, or the like, of such Beta Lactamase Inhibitor that is not a
Product.

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         1.19     "INVENTION" means any invention or discovery, whether
patentable or unpatentable made while performing under this Agreement.

         1.20     "JOINT INVENTION(S)" means any Invention that is conceived or
made by at least one employee or agent of ADVANCIS and at least one employee or
agent of GSK.

         1.21     "KNOW-HOW" means all data, information, methods, procedures,
processes and materials, but only to the extent that such inventions, data,
information, methods, procedures, processes and materials relate to the
manufacture, research, development, testing or use of a Compound or a Product,
including but not limited to, biological, chemical, biochemical, toxicological,
pharmacological, metabolic, formulation, clinical, analytical and stability
information and data.

         1.22     "LICENSED TECHNOLOGY" means ADVANCIS Know-How and ADVANCIS
Patents that are licensed to GSK under this Agreement.

         1.23     "NEW DRUG APPLICATION" or "NDA" means a New Drug Application
as defined in the United States Federal Food, Drug and Cosmetic Act and
applicable regulations promulgated thereunder as amended from time to time.

         1.24     "NDA ACCEPTANCE" means the earlier of: (i) receipt by GSK of
written notice of acceptance from the FDA of an NDA filed by or on behalf of GSK
under this Agreement necessary for Commercialization of Product in the United
States, or (ii) sixty (60) days following filing of such an NDA with the FDA so
long as GSK has not received a "Notice of Refusal to File" from the FDA with
respect to such NDA.

         1.25     "NDA APPROVAL" means approval by the FDA to market Product in
the United States, including, the issuance by the FDA of an action letter
indicating that an NDA is approved, final FDA approval of promotional materials
for Product sufficient for launch, and final FDA approval of manufacturing
processes and facilities for Product sufficient that commercial quantities of
Product can be manufactured prior to launch. For avoidance of doubt, NDA
Approval does not mean that the FDA issues an action letter indicating that an
NDA is approvable.

         1.26     "NET SALES" means the [***] sales of Product to Third Parties
by GSK and/or its Affiliates and/or their Sublicensees, as recorded by the
selling party in accordance with generally accepted accounting principals, less
the following:

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                                     [***]

"Net Sales" excludes any amounts invoiced or received in connection with any
transfers of a Product between GSK and its Affiliates prior to final disposition
to Third Party customers but only where Product is to be resold to a Third
Party. "Net Sales" excludes transfers of Product made or used for tests or
development purposes, or distributed as donations or samples and for which no
payment is received by GSK, or its Affiliates or Sublicensees. In the event that
GSK or its Affiliate or Sublicensee sells, transfers or disposes of any Product
for consideration, in whole or in part, other than cash, the gross amount used
for calculating Net Sales for such Product shall be deemed to be the standard
invoice price then being invoiced by GSK, its Affiliates or Sublicensees in
arm's length transactions with similar customers . In the event that GSK sells a
Product as part of a bundle or group sale with other products not covered by
this Agreement, and GSK provides a discount, allowance or rebate to the
purchaser of such products based on the invoiced prices for all products sold,
such

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discount must be allocated pro rata based on average wholesale prices across all
such products and may not be applied disproportionately to the Product sold as
part of such bundle.

         1.27     "PATENT" means patents, applications for patents, provisional
applications for patents, and any patents issuing therefrom (including any
divisionals, continuations, continued prosecution applications and
continuations-in-part thereof), reexamination certificates, reissue patents,
patent extensions, patent term restorations, supplementary protection
certificates, and any foreign equivalents of any of the foregoing.

         1.28     "PARTY" means ADVANCIS or GSK and, when used in the plural,
shall mean ADVANCIS and GSK.

         1.29     "PHASE I CLINICAL TRIAL" means the first phase of human
clinical trials with the principal purpose of determining the metabolism and
pharmacologic actions of a pharmaceutical product for its intended use in
healthy individuals or patients, and an early safety profile of the product in
order to support its continued testing in similar clinical trials.

         1.30     "PHASE III CLINICAL TRIAL" means a clinical trial, conducted
in accordance with 21 C.F.R. 312.21(c) or other applicable regulatory
requirements outside the United States, that is conducted after preliminary
evidence suggesting effectiveness has been obtained, that is of appropriate size
and design to establish that a pharmaceutical product is safe and effective for
its intended use, to define warnings, precautions and adverse reactions that are
associated with the pharmaceutical product in the dosage range to be prescribed,
and to support regulatory approval of such pharmaceutical product or label
expansion of such pharmaceutical product.

         1.31     "PRIME RATE" means the prime rate published during the
applicable period in the Wall Street Journal, Eastern Edition.

         1.32     "PRODUCT(S)" means any of the following:

                  (a)    a pharmaceutical presentation or presentations,
         including presentations intended for once daily administration, of a
         combination of the Compound and a Beta Lactamase Inhibitor as the only
         active components that (a) is derived from or incorporates ADVANCIS
         Know-How or infringes a Valid Claim of ADVANCIS Patents (a "Category A
         Product"). In addition, any once-daily product developed or
         Commercialized by GSK incorporating amoxicillin and a beta-lactamase
         inhibitor that comprise  [* * *]  will be deemed to be a Product for
         purposes of this Agreement whether or not incorporating Licensed
         Technology.

                                    [* * *]

                  (c)    a formulation comprising a combination of Compound, a
         Beta Lactamase Inhibitor and any therapeutically active compound or
         excipient, that is derived from or incorporates ADVANCIS Know-How
         and/or infringes a Valid Claim of ADVANCIS Patents (a "Category C
         Product").

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         1.33     "PROGRAM INTELLECTUAL PROPERTY" means all Inventions,
discoveries and Know-How which are made, conceived, reduced to practice or
generated in the course of (i) work performed by ADVANCIS for GSK pursuant to
Section 3.1 below or (ii) activities conducted under the process described in
3.4 (c) below, each regardless of whether the invention, discovery or know-how
is patentable and regardless of whether it was made solely by an employee or
agent of ADVANCIS, GSK, or jointly by ADVANCIS and GSK, or jointly by ADVANCIS
and a Third Party.

         1.34     "PRSP" means penicillin-resistant S. pneumoniae with a
breakpoint of 2 mcg/ml for amoxicillin.

         1.35     "PRSP CLAIM" means a claim for the treatment of PRSP in a
proposed Product label filed by GSK with the FDA in connection with an NDA.

         1.36     "PRSP LABELING" means, in connection with a Product for which
GSK has received NDA Approval from the FDA to include a PRSP Claim in the
approved label and to Commercialize such Product for PRSP in the United States.

         1.37     "RECEIVING PARTY" means a Party that receives Confidential
Information from a Disclosing Party, including, but not limited to, employees,
directors and officers of the Receiving Party.

         1.38     "REGULATORY AUTHORITY" means those regulatory authorities in a
particular country of the Territory outside of the United States that have
equivalent authority in the relevant country to the FDA.

         1.39     "SOLE INVENTION" means any Invention conceived solely by the
employees or agents of a Party or its Affiliates.

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         1.40     "SUBLICENSEE" means a Third Party to which GSK has granted
sublicense rights under the licenses granted to GSK hereunder.

         1.41     "TERM" means the term of this Agreement as set forth in
Section 10.1.

         1.42     "TERRITORY" means all countries of the world.

         1.43     "THIRD PARTY" means any party(ies) other than ADVANCIS, GSK,
or an Affiliate of either of them.

         1.44     "UNITED STATES" means the fifty states of the United States of
America and all of its territories and possessions, including, without
limitation, the District of Columbia and the Commonwealth of Puerto Rico.

         1.45     "VALID CLAIM" means either (i) a claim of an issued or
unexpired patent within ADVANCIS Patents that has not been held unenforceable,
unpatentable or invalid by a governmental agency or a court of competent
jurisdiction in any unappealable or unappealed decision within the time allowed
for appeal, and that has not been admitted to be unenforceable, unpatentable or
invalid through abandonment, reissue, disclaimer or otherwise, or (ii) a claim
of a pending patent application within ADVANCIS Patents that has not been
abandoned or finally rejected by ADVANCIS without the possibility of appeal or
refiling, provided that the claim at issue has been under examination for less
than four (4) years.

                                    ARTICLE 2

                     GRANT OF LICENSES AND NEGOTIATION RIGHT

         2.1      LICENSE GRANT FROM ADVANCIS TO GSK. (a) Subject to the terms
and conditions of this Agreement, ADVANCIS hereby grants to GSK an exclusive
license, even as to ADVANCIS, with the right to grant sublicenses, under the
ADVANCIS Patents and ADVANCIS Know-How to make, have made, use, sell, offer for
sale and import Products in the Territory.

                  (b)      GSK agrees that it will use ADVANCIS Technology and
ADVANCIS Patents only as licensed under this Agreement, only as long as licensed
under this Agreement and in each case in accordance with the terms and
conditions of this Agreement.

                  (c)      GSK shall have the right to grant sublicenses to a
Third Party under the license granted pursuant to Section 2.1(a) provided that
(i) GSK shall be responsible for the making of all payments due, the making of
reports under this Agreement, including milestones achieved and sales of Product
by its Sublicensees and their Sublicensees' compliance with all applicable
licensing terms of this Agreement to the extent that they are applicable to a
Sublicensee; and (ii) each Sublicensee agrees in writing to comply with

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Sections 2.1(b), 6.4, 6.5, 10.5(d), Article 8 and Article 9 (with respect to
Confidential Information of ADVANCIS). Any sublicense granted by GSK to a Third
Party shall include a provision prohibiting further sublicenses and a provision
terminating the sublicense when the license to GSK terminates.

         2.2          CATEGORY B AND C PRODUCTS

         GSK will only develop or Commercialize a Category B Product or Category
C Product if such development and/or Commercialization is approved in writing by
ADVANCIS.

         2.3      It is expressly understood and agreed that the only licenses
granted under this Agreement are the licenses expressly granted under this
Agreement and that there is no implied license or license by estoppel.

                                    ARTICLE 3

                         DEVELOPMENT; COMMERCIALIZATION;

                         SUPPLY OF COMPOUND TO ADVANCIS

         3.1               PAYMENTS FOR ADVANCIS WORK PRODUCT. From time to time
GSK may request ADVANCIS to conduct specific work or provide consultation beyond
the transfer of ADVANCIS Know-How to GSK (which transfer includes the initial
technology transfer as outlined in Section 3.4 and patent review). GSK shall
make such request in writing, and ADVANCIS shall provide notice as to whether
ADVANCIS accepts such request. ADVANCIS' agreement to perform such work is in
ADVANCIS sole discretion and ADVANCIS may decline to perform such work for any
reason or no reason. If ADVANCIS agrees to perform such work, ADVANCIS will also
provide GSK with an estimate of the resources required to conduct such effort.
As consideration for such effort actually conducted by ADVANCIS Qualified
Employees (as defined below) and as authorized by GSK, in writing, GSK shall pay
per ADVANCIS Qualified Employee a rate of [***] per hour, which rate shall
change each calendar year upon the anniversary date of the Effective Date in
accordance with the annual percentage change in the Consumer Price Index (U.S.
Bureau of Labor Statistics for all urban consumers, U.S. city average - all
items). The maximum amount GSK will be required to pay for any agreed upon scope
of work is the estimate amount agreed to in advance by GSK unless GSK requests
in writing that additional work be performed in addition to the original scope
of work. Any work performed on a specific project or task assigned by GSK under
this Agreement shall be performed only by an ADVANCIS Qualified Employee, i.e.,
an employee of ADVANCIS who is qualified, in GSK's sole discretion, to perform
such work. GSK shall make payment to ADVANCIS on

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a quarterly basis for work conducted by ADVANCIS and authorized by GSK within
forty-five (45) days after receipt of an invoice from ADVANCIS. Each invoice
shall describe in detail the work performed by ADVANCIS Qualified Employees and
a breakdown of hours of work performed, as is customary for the industry and the
type of work being performed. ADVANCIS shall be responsible for paying all
salaries, benefits, and payroll (or similar) taxes to all ADVANCIS Qualified
Employees whether or not such individuals are actual employees of ADVANCIS and
in no event will such ADVANCIS Qualified Employees be construed to be employees
of GSK. It is understood that ADVANCIS shall keep weekly records of the hours of
work of ADVANCIS Qualified Employees in a manner which will enable GSK or its
authorized representative to audit such records and in sufficient detail to
permit GSK to confirm the accuracy of payments due hereunder. No cost other than
such hourly reimbursement rate of ADVANCIS Qualified Employees (e.g., per diem
or out-of-pocket costs) shall be reimbursed by GSK unless specifically
authorized by GSK in writing in advance.

         3.2      GSK DEVELOPMENT RESPONSIBILITY. As of the Effective Date, and
at its sole cost and expense, GSK shall be solely responsible for, and have sole
control over, clinical development including, but not limited to, clinical
trials, manufacturing, and Commercialization of Product in the Territory. In
addition, at its sole cost and expense, GSK shall be solely responsible for, and
have sole control over, the development of the formulation of Product.

         3.3      GSK OBLIGATIONS/DEVELOPMENT AND FILINGS.

                  (a)      GSK shall use Commercially Reasonable Efforts to
develop a Product in the United States and to obtain NDA Approval. In the event
that the first NDA Approval does not include PRSP labeling, GSK agrees to use
Commercially Reasonable Efforts to try to obtain NDA Approval with PRSP
Labeling.

                  (b)      After obtaining NDA Approval for a Product, GSK
shall, within six (6) months thereafter, launch such Product in the United
States. GSK shall thereafter use Commercially Reasonable Efforts to
Commercialize such Product in the United States.

                  (c)      Development, regulatory filing, and Commercialization
of Product outside of the United States shall be at GSK's sole discretion.

                  (d)      Within sixty (60) days after the end of each calendar
half-year, GSK shall provide a written summary report substantially in the form
of and including the categories of information described in Schedule 3.3(d)
attached hereto to ADVANCIS with respect to the efforts exerted by GSK to obtain
NDA Approval and, after such approval is obtained, launch of Product in the
United States. Notwithstanding the

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foregoing, it is understood and agreed that GSK has no obligation to disclose
GSK Confidential Information to ADVANCIS under this provision, including, but
not limited to, GSK Proprietary Technology.

                  (e)      GSK shall comply with all applicable laws, rules and
regulations with respect to the import, export, manufacture, use and sale of
Product.

                  (f)      If GSK decides to discontinue (or suspend) the use of
Commercially Reasonable Efforts with respect to development and/or marketing of
Product, GSK shall notify ADVANCIS in writing within thirty (30) days after such
decision.

                  (g)      Subject to Section 11.1, in the event that GSK
conducts no material activity toward the development or Commercialization of
Product for a period of [***], ADVANCIS shall have the right, but not the
obligation, to terminate this Agreement upon thirty (30) days written notice to
GSK.

                  (h)      If GSK has not commenced a Phase I Clinical Trial
for a Product within thirteen months from the Effective Date and GSK has
commenced a Phase I Clinical Trial for an Independent Product during such
period, ADVANCIS shall have the right, but not the obligation, to terminate
this Agreement upon thirty (30) days written notice to GSK, and such
termination shall be effective upon the expiration of such thirty (30) day
period unless GSK can provide evidence that GSK's failure to commence a Phase I
Clinical Trial for a Product during such period is due to scientific,
technical, or regulatory circumstances, or other circumstances beyond GSK's
reasonable control, which caused such failure, despite GSK's use of
Commercially Reasonable Efforts to commence such Phase I Clinical Trial within
such period.

                  (i)      If GSK has not commenced a Phase III Clinical Trial
for a Product within thirty-seven months from the Effective Date and GSK has
commenced a Phase III Clinical Trial for an Independent Product during such
period, ADVANCIS shall have the right, but not the obligation, to terminate
this Agreement upon thirty (30) days written notice to GSK, and such
termination shall be effective upon the expiration of such thirty (30) day
period unless GSK can provide evidence that GSK's failure to commence a Phase
III Clinical Trial for a Product during such period is due to scientific,
technical, or regulatory circumstances, or other circumstances beyond GSK's
reasonable control, which caused such failure, despite GSK's use of
Commercially Reasonable Efforts to commence such Phase III Clinical Trial
within such period.

                  (j)      For the avoidance of doubt, a material breach of this
Section 3.3 shall be a material breach of this Agreement subject to the terms of
Section 10.2 below.

                  (k)      The remedies available under Section 3.3(g), (h) and
(i) are cumulative to any other remedies available under this Agreement,
including those available for breach of Section 3.3(a).

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         3.4      ADVANCIS TECHNOLOGY TRANSFER. (a) Within thirty (30) days
after the Effective Date, ADVANCIS shall transfer, or cause to be transferred,
to GSK, a copy of all documented ADVANCIS Know-How and orally communicate all
material undocumented ADVANCIS Know-How licensed to GSK under this Agreement to
enable GSK to develop, manufacture and commercialize Product. Such transfer will
include, at a minimum, the information set forth in Schedule 3.4 to this
Agreement, attached hereto and incorporated herein. ADVANCIS shall promptly
disclose and supply to GSK any further material ADVANCIS Know-How licensed to
GSK under this Agreement which may become known to ADVANCIS and which may be
useful to GSK for purposes of this Agreement.

         (b)      GSK may ask follow-up questions with regard to the transfer
and implementation of the ADVANCIS Know-How and the contents of the ADVANCIS
Patents. Such questions will be submitted to ADVANCIS in writing and ADVANCIS
will provide written answers within a reasonable time free of charge to the
extent that such questions can be answered without ADVANCIS having to conduct
additional research or development.

         (c)      GSK may determine that it wishes to obtain further
understanding or conduct further discussions with ADVANCIS with respect to the
application of ADVANCIS Patents and ADVANCIS Know-How (beyond that which is
reasonably answered as described in subsection (b) above) and may request in
writing that ADVANCIS participate in such discussions. ADVANCIS' participation
in such discussions will be at its sole discretion and ADVANCIS may decline to
participate for any reason or no reason.. If ADVANCIS agrees to participate,
such further discussions will occur through the use of a team of one or more
consultants who are (a) experts in formulation technology or development, (b)
not employees of either GSK or ADVANCIS, and (c) mutually acceptable to both
Parties ("Consultant(s)"). The role of such Consultants shall be to learn the
relevant ADVANCIS Know-How necessary or useful for development or
commercialization of Product to explain and assist GSK with implementing the
ADVANCIS Know-How. Such Consultants shall be contractually bound to each of GSK
and ADVANCIS and each such Consultant shall agree, in writing, that (x) all
Inventions which are made, conceived, reduced to practice or generated by such
Consultant in the course of or as a result of such contract will be Program
Intellectual Property and will be solely owned by GSK, regardless of whether the
invention is patentable and regardless of whether it was made solely by such
Consultant, jointly by such Consultant and an employee of ADVANCIS and/or GSK,
or jointly by such Consultant and a Third Party; (y) no information such
Consultant learns from GSK as a result of any such contract shall be revealed to
ADVANCIS unless such revelation is expressly authorized by GSK, in writing,
prior to such disclosure, and (z) all

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information which such Consultant learns from either Party under such contract
shall be kept confidential by such Consultant in accordance with confidentiality
obligations to the disclosing Party which are at least as stringent as those
which the Parties have undertaken under this Agreement. GSK shall be liable for
all costs charged by such Consultants.

         3.5      TRADEMARKS. GSK, its Affiliates, and its Sublicensees shall
have the right to market Product under their own labels, tradenames, and
trademark(s) (collectively, the "GSK Marks") and GSK shall solely own such
trademarks, labels and tradenames. GSK shall be responsible for the selection of
all GSK Marks that it employs in connection with Product in the Territory and
shall own and control such GSK Marks and retain ownership upon termination or
expiration of this Agreement. GSK shall be responsible for filing, registering
and maintaining any GSK Marks throughout the Territory.

         3.6      SUPPLY OF COMPOUND. In the event that ADVANCIS requires
Compound to fulfill its internal manufacturing needs for Compound or its
manufacturing needs for Compound under any agreement relating to Compound which
it enters into with a Third Party, ADVANCIS shall present an offer to GSK to
purchase Compound from GSK. In the event that within thirty (30) days GSK
accepts the offer to supply Compound to ADVANCIS, the parties shall negotiate
the terms of such supply in a definitive supply agreement (the "Supply
Agreement") within sixty (60) days after the acceptance of the offer to supply,
or such later date as is agreed upon in writing between the Parties. The Supply
Agreement will contain terms and conditions as are customary in the
pharmaceutical industry and shall include, but not be limited to terms covering
the quality, specifications, yield, quantity, payment, batch failure, change
control, regulatory obligations and audits, audit rights, information related to
manufacture of Product, QA release, testing and shipping requirements.
Notwithstanding the above, in no event shall such Supply Agreement require
ADVANCIS to use GSK as its single source for its requirements of Compound for
either its internal needs or for any agreement for Compound which it enters into
with a Third Party, or require ADVANCIS to make such an offer only to GSK and
not a Third Party.

                                    ARTICLE 4

                      FEE; MILESTONE PAYMENTS AND ROYALTIES

         4.1      INITIAL FEE BY GSK. In consideration for the license to the
Licensed Technology with respect to Product granted by ADVANCIS to GSK
hereunder, GSK shall pay to ADVANCIS five million US

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dollars (US $5,000,000) within fifteen (15) days after the Effective Date. This
amount shall be non-refundable and non-creditable.

         4.2      MILESTONE PAYMENTS BY GSK FOR COVERED PRODUCT. In
consideration for the license to the Licensed Technology with respect to Product
granted by ADVANCIS to GSK hereunder, GSK shall pay to ADVANCIS the following
non-refundable, non-creditable amounts following the first achievement of each
of the following milestone events with respect to a Product, the manufacture,
use or sale of which infringes a Valid Claim of an ADVANCIS Patent in the United
States if it was manufactured, used or sold in the United States at the time the
milestone is achieved ("Milestones"), but only in the event that such Product is
the first to reach a particular milestone event:

                                     [***]

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                                     [***]

         (a)      The achievement of Milestones 4 and 5 will occur with respect
to the same NDA Acceptance in the event the first NDA Acceptance includes FDA
Acceptance of an NDA for Product with a PRSP Claim.

         (b)      The achievement of Milestones 6 and 7 will occur with respect
to the same NDA Approval in the event the first NDA Approval includes FDA's
approval of an NDA filed by or on behalf of GSK for marketing of Product in the
United States for PRSP.

         (c)      In the event that Milestone 3 of Section 4.2 is reached and
Milestone 1 and/or Milestone 2 of Section 4.2 has not been paid, then such
unpaid Milestone 1 and/or 2 of Section 4.2, as the case may be, shall become due
and payable as of the date for payment of Milestone 3 of Section 4.2.

         (d)      The achievement of Milestones 8, 9, and 10 may occur in the
same calendar year and, thus, payments of Milestones 8, 9 and 10 may be
cumulative and more than one of such Milestones may be made for the same
calendar year. By way of illustration only: if aggregate sales of Product in a
calendar year exceeds [***] and Milestone 8 has not been previously paid, then
Milestones 8, and 9 are due for that calendar year.

         (e)      Except as provided in Section 4.4 below, each milestone
payment shall be made only one time regardless of how many times such milestones
are achieved, and except as expressly provided otherwise in this Section 4.2, no
payment will be made for Milestones that have not been achieved.

         (f)      Milestone payments shall be payable by GSK to ADVANCIS within
[***] after achievement of the relevant Milestone and receipt of an invoice for
such amounts.

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         (g)      Milestone payments shall be payable when achieved, regardless
of the order in which they are achieved.

         (h)      Upon marketing of Product in the United States without PRSP
labeling any of Milestones 1-4 and 6 that have not been paid shall be payable
and upon marketing of Product in the United Sates with PSRP labeling any of
Milestone's 1-7 that have not been paid shall be payable.

         (i)      In the event that any of milestones 4, 5, 6 or 7 has been
achieved, and any of milestones 1-3 has not been paid, then each such unpaid
milestone is payable when any of milestones 4, 5, 6 or 7 is payable.

         (j)      GSK agrees to promptly notify ADVANCIS in writing of the
achievement of a milestone, in any event no later than ten (10) days after
achievement thereof.

         4.3      MILESTONE PAYMENTS BY GSK FOR PRODUCT NOT COVERED BY A VALID
CLAIM. In the event that the first Product to reach a particular Milestone would
not infringe a Valid Claim of an ADVANCIS Patent in the United States if it was
manufactured, used or sold in the United States at the time the Milestone is
achieved, GSK shall pay to ADVANCIS [***] of the amount due for such event as
provided in the chart in Section 4.2 above. If such a Product subsequently would
infringe a Valid Claim of an ADVANCIS Patent in the United States, if such
Product were manufactured, used or sold in the United States at the time the
next relevant Milestone is achieved, all subsequent relevant Milestones will be
paid at the full amount described in chart in provided in Section 4.2. If a
Product which would not infringe a Valid Claim of an ADVANCIS Patent in the
United States if it was manufactured, used or sold in the United States at the
time the Milestone is achieved is the first Product to reach a particular
Milestone, and subsequently a different Product the manufacture, use or sale of
which would infringe a Valid Claim of an ADVANCIS Patent in the United States if
it was manufactured, used or sold in the United States at the time the Milestone
is achieved subsequently reaches such Milestone, then on the first occurrence of
such a Product the manufacture, use or sale of such Product would infringe a
Valid Claim of an ADVANCIS Patent in the United States if it was manufactured,
used or sold in the United States at the time the Milestone is achieved the
remaining [***] of the relevant Milestone will become payable. In each case,
such amounts are non-refundable and non-creditable.

         4.4      ROYALTIES. (a) In consideration for the license to the
Licensed Technology with respect to Product granted by ADVANCIS to GSK
hereunder, GSK shall pay to ADVANCIS a royalty in an amount equal to the
following percentages of the specified portions of the aggregate annual Net
Sales of Products sold by GSK, its Affiliates, and its Sublicensees throughout
the Territory in a calendar year as provided below:

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<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                               Column A
                                       Applicable Royalty Rate
                                      for Product in country of                     Column B
                                      sale where Product infringes         Applicable Royalty Rate for
                                      a Valid Claim of an ADVANCIS         Product in countries where
  Worldwide annual Net Sales of       Patent in such country at time        royalties are not due for
       Licensed Products                       of sale                       Product under Column A
------------------------------------------------------------------------------------------------------
<S>                                   <C>                                  <C>
Up to and including [***]                     [***]                                  [***]
------------------------------------------------------------------------------------------------------
Over [***] up to and
including [***]                               [***]                                  [***]
------------------------------------------------------------------------------------------------------
Over [***] up to and
including [***]                               [***]                                  [***]
------------------------------------------------------------------------------------------------------
Over [***] up to and
including [***]                               [***]                                  [***]
------------------------------------------------------------------------------------------------------
Over [***] up to and
including [***]                               [***]                                  [***]
------------------------------------------------------------------------------------------------------
    Over [***]                                [***]                                  [***]
------------------------------------------------------------------------------------------------------
</TABLE>

         (b)      Achievement of the annual Net Sales thresholds recited above
shall be determined by adding the total annual Net Sales of Product in all
countries of the Territory where such sales are subject to royalties pursuant to
this Agreement ; and the incremental royalty rates set forth in the chart above
will only be applicable to the total annual Net Sales calculated as described in
this Section 4.4(b). By way of illustration only, if worldwide net sales in a
given year on Product are [***], then the royalty payable to ADVANCIS would be
[***].

         (c)      The obligation of GSK to pay royalties using the rates set
forth in Section 4.4(a) above on Net Sales of Product in any country of the
Territory will continue, on a country by country and Product-by-Product basis,
until the later of (i) the date upon which all Valid Claims in such country have
expired, or (ii) the date which is [***] from the date of First Commercial Sale
of such Product in such country (the "Royalty Payment Period"). For the
avoidance of doubt, it is understood and agreed that in countries where all
Valid Claims in such country have expired sooner than the date which is [***]
from the date of First Commercial Sale of Product in such country, GSK will pay
royalties at the applicable reduced rates specified in the far right

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column of the chart in Section 4.4(a) above or as specified in Section 4.5, 4.6
or 478, if applicable, for the remainder of the Royalty Payment Period.

         4.5      COMPETING PRODUCTS. In each country in which a Third Party
sells a product that is a pharmaceutical presentation or presentations of a
combination of the Compound and a Beta Lactamase Inhibitor, which combination is
in a formulation that results in a once a day formulation with similar label
claims to Product sold by GSK or its Affiliate or Sublicensee for which
royalties are due under this Agreement (such product sold by a Third Party being
a "Third Party Product") , then any royalties due under Column A of Section
4.4(a) with respect to such Product in each such country shall be reduced by
[***] in each calendar quarter in which such Third Party Product is on sale in
each such country; and if due under Column B of Section 4.4(a), the royalty rate
for such Net Sales will be [***]; provided further, that in all such cases GSK
can demonstrate through any industry recognized survey that such sales of the
Third Party Product in such country exceeds [***], on a unit sales basis, of the
sales in such country of such Product by GSK during such calendar quarter.

         4.6      THIRD PARTY ROYALTIES. In the event that it becomes
commercially necessary for GSK to obtain a patent license from a Third Party in
order to make, have made, use, offer for sale, sell or import a Product sold by
GSK or its Affiliate or Sublicensee for which royalties are due under this
Agreement in a country of the Territory ("Third Party License"), [***] of the
royalties paid under a Third Party License for sale of such Product in such
country in a calendar quarter shall be creditable against the royalties owed to
ADVANCIS hereunder with respect to such Product in such country in such calendar
quarter up to an amount equal to [***] of the total royalties otherwise due for
such Product in such country in such calendar quarter.

         4.7      COMPULSORY LICENSES. Should a compulsory license be granted by
ADVANCIS to a Third Party under the applicable laws of any country in the
Territory with respect to Product the royalty rate payable hereunder for sales
of Products in such country will be adjusted to match any lower royalty rate
granted to such Third Party for such country, with respect to the sales of such
Products, and during such periods, for which such Third Parties sell, under the
compulsory license, material quantities of articles that compete with Products
then marketed and sold by GSK in that country.

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                                    ARTICLE 5

                            WARRANTIES AND COVENANTS

         5.1      REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES. Each Party
represents and warrants to the other Party that, as of the Effective Date such
Party is duly organized and validly existing and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof;

         5.2      REPRESENTATIONS AND WARRANTIES OF ADVANCIS. As of the
Effective Date, ADVANCIS represents and warrants to GSK that:

(a)      ADVANCIS has the right to grant the licenses granted to GSK under
         Section 2.1 and, to the knowledge of ADVANCIS, there is nothing in any
         Third Party agreement that ADVANCIS has entered into as of the
         Effective Date that limits ADVANCIS' ability to grant the licenses
         granted to GSK under Section 2.1.

(b)      To the knowledge of ADVANCIS, ADVANCIS owns or Controls all of the
         ADVANCIS Patents licensed to GSK under Section 2.1 that exist as of the
         Effective Date.

(c)      Except for termination that may result under applicable bankruptcy
         laws, ADVANCIS has not encumbered Licensed Technology with liens,
         mortgages, security interests or otherwise that, if enforced, will
         result in termination of the licenses granted to GSK under Section 2.1.

(d)      There are no existing or threatened actions, suits or claims pending
         against ADVANCIS with respect to ADVANCIS' right to grant the licenses
         granted to GSK, under Section 2.1.

(e)      ADVANCIS has not granted any right, license or interest in or to the
         Licensed Technology that is in conflict with the rights or licenses
         granted to GSK under Section 2.1 of this Agreement.

(f)      Without having made an investigation, ADVANCIS has no actual knowledge
         that the use of ADVANCIS Patent Rights for the purpose licensed to GSK
         under this Agreement would infringe a valid claim of a granted United
         States patent owned by a Third Party. The warranty of this Section
         5.2(f) does not apply to any patent that is listed in Schedule 5.2(f).

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(g)      ADVANCIS has no actual knowledge that ADVANCIS Know-How licensed to GSK
         would constitute a misappropriation of a Third Party's trade secrets.

(h)      To the knowledge of ADVANCIS, (i) the technical information and data
         provided to GSK by ADVANCIS with respect to ADVANCIS Know-How licensed
         to GSK under this Agreement is complete and accurate in all material
         respects and (ii) ADVANCIS has not withheld from GSK any technical
         information or data with respect to ADVANCIS Know-How licensed to GSK
         under this Agreement that would make such technical information
         provided to GSK misleading in any material respect.

(i)      ADVANCIS has not intentionally concealed from GSK the existence of any
         material adverse data or information known to ADVANCIS concerning the
         quality, toxicity, safety and/or efficacy of ADVANCIS Know-How licensed
         to GSK under this Agreement.

(j)      The ADVANCIS Patents that exist as of the Effective Date and that are
         licensed to GSK hereunder do not include any patent or patent
         application licensed to ADVANCIS that requires ADVANCIS to pay a
         royalty or other consideration based on Product sold by GSK, its
         Affiliates or their Sublicensees.

         5.3      COVENANTS. (a) ADVANCIS covenants and agrees that it will not
enter into any agreement or grant any rights that are inconsistent with the
licenses granted to GSK under Section 2.1.

         (b)      Except for termination that may result from applicable
bankruptcy laws, ADVANCIS agrees that it will not encumber Licensed Technology
with liens, mortgages, security interests or otherwise that, if enforced, will
result in termination of the licenses granted to GSK under Section 2.1.

         5.4      REPRESENTATIONS AND WARRANTIES OF GSK. GSK represents and
warrants to ADVANCIS that, as of the Effective Date, there are no existing or
threatened actions, suits or claims pending against GSK that will limit GSK's
ability to perform all of the obligations undertaken by GSK hereunder.

         5.5      DISCLAIMER OF WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN THIS AGREEMENT OR MANDATED BY APPLICABLE LAW (WITHOUT THE RIGHT TO
WAIVE OR DISCLAIM), NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY WITH
RESPECT TO THE PRODUCT, ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS, OR OTHER
SUBJECT

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MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ALL WARRANTIES, CONDITIONS OR
REPRESENTATIONS OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF
PERFORMANCE, MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR
PURPOSE OR NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.

                                    ARTICLE 6

                              PAYMENTS AND REPORTS

         6.1      ROYALTY PAYMENTS. All royalty payments due hereunder shall be
paid quarterly within [***] of the end of each calendar quarter. Each such
payment shall be accompanied by a statement, on a Product-by-Product and
country-by-country basis as to the amount of Net Sales, the amount of royalties
due on such Net Sales, including an explanation and separate calculation of
royalty reductions taken under Section 4.5, 4.6 and 4.7, and the conversion
rates used in converting to United States Dollars. [***] The Parties acknowledge
and agree that because certain deductions required to calculate Net Sales may
take months before being confirmed with Third Parties (such as Medicare and
Medicaid rebates), and that a final reconciliation of the royalties due
hereunder will be completed nine (9) months after the end of the calendar year
in which the estimated royalties were paid, and any balancing amount will be
paid to ADVANCIS by GSK within [***] of ADVANCIS' receipt of such final
reconciliation report.

         6.2      MODE OF PAYMENT. Each of ADVANCIS and GSK shall make all
payments to the other required under this Agreement in United States Dollars. If
governmental regulations prevent remittances from a foreign country with respect
to sales made in that country, the obligation of GSK to pay royalties on sales
in that country shall be suspended until such remittances are possible. ADVANCIS
shall have the right, upon giving written notice to GSK, to receive payment in
that country in local currency. Monetary conversion from the currency of a
foreign country, in which Product is sold, into United States currency, shall be
calculated at the actual average rates of exchange for the year to date as used
by GSK in producing its quarterly and annual accounts, as confirmed by GSK's
independent public auditors.

         6.3      MANNER OF PAYMENT. All sums due to ADVANCIS under this
Agreement shall be payable in United States Dollars by wire transfer in
immediately available funds to the designated account below in

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accordance with the following wire instructions, or such other account and
instructions as may from time to time be designated in writing by an officer of
ADVANCIS:

         CASH-WIRE TRANSFER

         [***]

         6.4      RECORDS RETENTION. GSK and its Affiliates and Sublicensees
shall keep complete and accurate records pertaining to the sale of Products in
the Territory and covering all transactions from which Net Sales are derived for
a period of three (3) calendar years after the year in which such sales
occurred, and in sufficient detail to permit ADVANCIS to confirm the accuracy of
payments due hereunder.

         6.5      AUDIT REQUEST. At the request and expense (except as provided
below) of ADVANCIS, GSK and its Affiliates and Sublicensees shall permit an
independent, certified public accountant appointed by ADVANCIS and reasonably
acceptable to GSK, at reasonable times and upon reasonable notice, to examine
those records and all other material documents relating to or relevant to Net
Sales in the possession or control of GSK and/or its Affiliates and/or its
Sublicensees. GSK shall provide such auditors with access to the records during
reasonable business hours. Such access need not be given to, not shall request
for access be requested for, any such set of records more often than once each
calendar year, or more than three (3) years after the date of any report to be
audited, and the auditors shall report to ADVANCIS no information other than the
amount of royalty due. ADVANCIS shall provide GSK with written notice of its
election to inspect and audit the records related to the royalty due hereunder
not less than thirty (30) days prior to the proposed date of review of such
records by ADVANCIS auditors. Results of any such examination shall be made
available to both Parties. If, as a result of any inspection of the books and
records of GSK or its Affiliates and/or its Sublicensees, it is shown

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that GSK's royalty payments under this Agreement were less than the amount which
should have been paid, then GSK shall make all payments required to be made to
eliminate any discrepancy revealed by said inspection within forty five (45)
days after ADVANCIS' demand therefor. Any over-payment will be credited against
future amounts due to ADVANCIS hereunder and in the event no further payments
are owed by GSK to ADVANCIS, ADVANCIS shall remit such amounts to GSK within
forty-five (45) days after receipt of an invoice from GSK. Furthermore, if the
royalty payments were less than the amount that should have been paid by an
amount in excess of [***] not including the Medicare/Medicaid rebate
adjustments estimated in good faith as described in Section 1.26 of the royalty
payments actually made during the period in question, GSK shall also reimburse
ADVANCIS for ADVANCIS' reasonable out-of-pocket costs related to such
inspection.

         6.6      TAXES. GSK may withhold taxes in the event that revenue
authorities in any country require the withholding of taxes on amounts paid
hereunder to ADVANCIS. Any tax, duty or other levy paid or required to be
withheld by GSK on account of royalties or other payments payable to ADVANCIS
under this Agreement shall be deducted from the amount of royalties or other
payments otherwise due. GSK shall secure and send to ADVANCIS proof of any such
taxes, duties or other levies withheld and paid by GSK or its sublicensees for
the benefit of ADVANCIS. Each Party agrees to cooperate with the other Party in
claiming exemptions from such deductions or withholdings under any agreement or
treaty from time to time in effect.

         6.7      INTEREST.

                  Any payment due pursuant to this Agreement that is not made
within [***] of the date due will accrue interest, compounded daily, for the
number of days elapsed between the due date and the payment date at the Prime
Rate plus [***]. The Parties agree this provision, unless otherwise
provided, will not apply to payments that are the result of a subsequent
adjustment of an estimated payment, including rebates, adjustments, returns or
true-ups.

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                                    ARTICLE 7

                 PATENT PROSECUTION; ENFORCEMENT; INFRINGEMENT,

                             OWNERSHIP OF INVENTIONS

         7.1      OWNERSHIP OF INVENTIONS AND TECHNOLOGY.

                  (a)      Ownership. All ADVANCIS Patents and ADVANCIS Know-How
existing as of the Effective Date will remain the property of ADVANCIS, and
GSK's right to use such Licensed Technology shall be limited to the license
grant set forth in Section 2.1. All GSK Patents and Know-How (including, but not
limited to, those related to GSK Proprietary Technology) existing as of the
Effective Date shall remain the property of GSK, and ADVANCIS shall acquire no
rights to such Patents and Know-How.

                  (b)      Program Intellectual Property. GSK will own all
right, title and interest in and to the Program Intellectual Property ,
including any intellectual property rights appurtenant thereto. ADVANCIS hereby
assigns to GSK all its rights to and interest in Inventions within Program
Intellectual Property made by ADVANCIS, its Affiliates or their Contractors
engaged in the work performed pursuant to Sections 3.1 or Section 3.4(c), and
will ensure that any agreements with Affiliates and Contractors include the
assignment of such Inventions to ADVANCIS or directly to GSK. ADVANCIS will
cooperate with GSK with respect to patent filing, prosecution and enforcement of
such inventions within Program Intellectual Property.

                  (c)      Subject to the provisions of Section 7.1(b) above,
each Party will own all right, title and interest in Arising Technology that is
its Sole Invention. ADVANCIS and GSK will each own an undivided 1/2 interest in,
to and under Arising Technology that is a Joint Invention and all rights
appurtenant thereto, and may practice and grant licenses to such Joint
Inventions without a duty of accounting to, or the requirement of obtaining
consent from, the other Party (subject to the express provisions of this
Agreement), except for use in breach of the exclusivity provisions of this
Agreement.

                  (d)      Inventorship of Inventions will be determined in
accordance with United States Patent law in the cause of patentable inventions,
and in accordance with U.S. federal or state law, as appropriate in the case of
non-patentable inventions.

         7.2      DISCLOSURE OF ADVANCIS PATENTS. ADVANCIS shall disclose to GSK
the complete texts of all patent applications filed by ADVANCIS as of the
Effective Date that are Licensed Technology, as well as all information received
as of the Effective Date concerning the institution or possible institution of
any interference, opposition, re-examination, reissue, revocation, nullification
or any official proceeding involving such an ADVANCIS Patent Right anywhere in
the Territory. ADVANCIS further agrees that it will disclose to GSK the complete
texts of all patent applications filed by ADVANCIS after the Effective Date that
are Licensed Technology as well as all information received after the Effective
Date concerning the institution or possible institution of any interference,
opposition, re-examination, reissue, revocation, nullification or any

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official proceeding involving such an ADVANCIS Patent Right anywhere in the
Territory. GSK shall have the right to review all such pending applications and
other proceedings and make recommendations to ADVANCIS concerning them and their
conduct. ADVANCIS agrees to keep GSK promptly and fully informed of the course
of patent prosecution or other proceedings by means that include providing GSK
with copies of substantive communications, search reports and Third Party
observations submitted to or received from patent offices throughout the
Territory. GSK shall provide such patent consultation to ADVANCIS at no cost to
ADVANCIS and shall treat all information disclosed to it under this Section as
Confidential Information and subject to the provisions of this Agreement.

         7.3      PATENT FILING, MAINTENANCE AND PROSECUTION.

                  (a)      GSK shall have the first right, using in-house or
outside legal counsel selected at GSK's sole discretion, to prepare, file,
prosecute, maintain and extend all GSK Sole Inventions and Joint Inventions in
countries of GSK's choice throughout the Territory with appropriate credit to
ADVANCIS representatives, including the naming of such Parties as inventors
where appropriate and in accordance with the relevant legal requirements, for
which GSK shall bear the costs relating to such activities which occur at GSK's
request or direction. With respect to any Joint Inventions, GSK shall solicit
ADVANCIS' advice and review of the nature and text of any such patent
applications and important prosecution matters related thereto in reasonably
sufficient time prior to filing thereof, and GSK shall take into account
ADVANCIS' reasonable comments related thereto.

         (b)      ADVANCIS shall have the first right, using in-house or outside
legal counsel selected at ADVANCIS' sole discretion, to prepare, file,
prosecute, maintain and extend patent applications and patents concerning all
ADVANCIS Patents and ADVANCIS Sole Inventions in countries of ADVANCIS' choice
throughout the Territory, for which ADVANCIS shall bear the costs. ADVANCIS
shall solicit GSK's advice and review of the nature and text of such patent
applications to the extent such are Licensed Technology and important
prosecution matters related thereto in reasonably sufficient time prior to
filing thereof, and ADVANCIS shall take into account GSK's reasonable comments
related thereto.

         (c)      If GSK, prior or subsequent to filing patent applications on
any Joint Invention in the Territory elects not to file, prosecute or maintain
such patent applications or ensuing patents or claims encompassed by such patent
applications or ensuing patents in any country of the Territory, as the case may
be, GSK shall give ADVANCIS notice thereof within a reasonable period prior to
allowing such patent applications or patents or

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such claims encompassed by such patent applications or patents to lapse or
become abandoned or unenforceable, and ADVANCIS shall thereafter have the right,
at its sole expense, to prepare, file, prosecute and maintain patent
applications and patents or divisional applications related to such claims
encompassed by such patent applications or patents concerning all such
inventions and discoveries in countries of its choice throughout the world.

         (d)      If ADVANCIS, prior or subsequent to filing patent applications
on any ADVANCIS Patents or ADVANCIS Sole Invention that is Licensed Technology,
ADVANCIS elects not to file, prosecute or maintain such patent applications or
ensuing patents or claims encompassed by such patent applications or ensuing
patents in any country of the Territory, ADVANCIS shall give GSK notice thereof
within a reasonable period prior to allowing such patent applications or patents
or such claims encompassed by such patent applications or patents to lapse or
become abandoned or unenforceable, and GSK shall thereafter have the right, at
its sole expense, to prepare, file, prosecute and maintain patent applications
and patents or divisional applications related to such claims encompassed by
such patent applications or patents concerning all such inventions and
discoveries in countries of its choice throughout the world.

         (e)      The Party filing patent applications for Joint Inventions
shall do so in the name of and on behalf of both GSK and ADVANCIS.

         (f)      Each of ADVANCIS and GSK shall hold all information it
presently knows or acquires under this Section 7.3 that is related to all such
patents and patent applications of the other Party as confidential subject to
the provisions of this Agreement.

         (g)      Each Party shall cooperate with the other as reasonably
requested to effect the provisions of this Section 7.3.

         7.4      ENFORCEMENT.

                  (a)      ADVANCIS Patents. Subject to Section 7.4(b) below, in
the event that a Party learns that any ADVANCIS Patents are infringed by
manufacture, use or sale of Product by a Third Party in any country in the
Territory, such Party shall promptly notify the other Party hereto. GSK shall
have the initial right (but not the obligation) to enforce such ADVANCIS Patents
against such Third Party infringer, at its expense, and to use ADVANCIS' name in
connection therewith; provided that such use without ADVANCIS' written consent
may only occur where required by law for GSK to bring such action. In the event
that GSK fails to initiate a suit to enforce such ADVANCIS Patents against such
a Third Party against such Product in any jurisdiction in the Territory within
ninety (90) days after notification of such infringement, ADVANCIS may

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initiate such suit in the name of the ADVANCIS with regard to the applicable
ADVANCIS Patents against such infringement, at the expense of ADVANCIS, and to
use GSK's name in connection therewith. The Party involved in any such claim,
suit or proceeding (the "Enforcing Party"), shall keep the other Party hereto
reasonably informed of the progress of any such claim, suit or proceeding.
ADVANCIS and GSK shall recover their respective actual out-of-pocket expenses,
or equitable proportions thereof, associated with any litigation or settlement
thereof from any recovery made by any Party. Any excess amount shall be retained
by the Enforcing Party except if GSK is an Enforcing Party in which case, such
excess amount shall be Net Sales subject to royalty under Column A of Section
4.4. Within the sole discretion of ADVANCIS, ADVANCIS may jointly institute such
action with GSK (ADVANCIS shall be responsible for its expenses), in which case
ADVANCIS shall have joint control over such action with GSK insofar as the
action affects the validity and/or enforceability and/or scope and/or ownership
of ADVANCIS Patents. In any such action, GSK shall make no admission, decision,
agreement, settlement or compromise that will or is likely to adversely affect
the validity and/or enforceability and/or scope and/or ownership of any ADVANCIS
Patents unless agreed to in writing by ADVANCIS.

                  (b)      Jointly Owned Patents. Notwithstanding Section 7.4(a)
above, in the event that any patent related to a Joint Invention is infringed or
misappropriated by a Third Party, GSK and ADVANCIS shall discuss whether, and,
if so, how, to enforce such jointly owned patent or defend such jointly owned
patent in an infringement action, declaratory judgment or other proceeding. In
the event only one Party wishes to participate in such proceeding, it shall have
the right to proceed alone, at its expense and may retain any recovery;
provided, at the request and expense of the participating Party, the other Party
agrees to cooperate and join in any proceedings in the event that a Third Party
asserts that the co-owner of such Joint Invention is necessary or indispensable
to such proceedings.

                  (c)      In any infringement suit that either Party may
institute pursuant to the terms hereof to enforce any ADVANCIS Patents Rights
pursuant to this Agreement, the other Party hereto shall, at the request of the
Party initiating such suit, cooperate in all respects and, to the extent
possible, have its employees testify when requested and make available relevant
records, papers, information, samples, specimens, and the like. All reasonable
out-of-pocket costs incurred in connection with rendering cooperation requested
hereunder shall be paid by the Party requesting cooperation.

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         7.5.     INFRINGEMENT CLAIMS. If the manufacture, sale or use of
Product in the Territory pursuant to this Agreement results in any claim, suit
or proceeding alleging patent infringement against ADVANCIS or GSK, such Party
shall promptly notify the other Party hereto. If GSK is not named as a party in
such a claim, suit or proceeding, GSK may, at its own expense and through
counsel of its own choice, seek leave to intervene in such claim, suit or
proceeding. ADVANCIS agrees not to oppose such intervention If GSK, and not
ADVANCIS, is named as a party to such claim, suit or proceeding, GSK shall have
the right to control the defense and settlement of such claim, suit or
proceeding, at its own expense, using counsel of its own choice, however
ADVANCIS, at its own expense and through counsel of its own choice, may seek to
intervene if the claim, suit or proceeding relates to the commercialization of
the Product in the Territory, and in such event, GSK agrees not to oppose such
intervention. If GSK is named as a party and ADVANCIS shall, at any time, tender
its defense to GSK, then GSK shall defend ADVANCIS in such claim, suit or
proceeding, at GSK's own expense and through counsel of its own choice, and GSK
shall control the defense and settlement of any such claim, suit or proceeding;
provided, GSK shall not enter into any agreement, settlement or compromise or
make any decision or admission (i) that extends or purports to exercise GSK's
rights under Licensed Technology beyond the rights granted pursuant to this
Agreement, (ii) regarding (a) wrongdoing on the part of ADVANCIS, or (b) that
adversely affects the validity, enforceability, infringement or scope of any
ADVANCIS Patents or patent claiming a Joint Invention, without the prior written
consent of ADVANCIS, which consent shall not be unreasonably withheld. The
Parties shall cooperate with each other in connection with any such claim, suit
or proceeding and shall keep each other reasonably informed of all material
developments in connection with any such claim, suit or proceeding. Subject to
the terms of Section 4.6, GSK shall assume full responsibility for the payment
of any award for damages, or of any amount due pursuant to any settlement
entered into by GSK with such Third Party with respect to any such claim, suit
or proceeding.

         7.6      LITIGATION ACTIVITIES UPDATE. The Parties shall keep one
another informed of the status of and of their respective activities regarding
any litigation or settlement thereof concerning Licensed Technology, provided
however that no settlement or consent judgment or other voluntary final
disposition of any suit defended or action brought by a Party pursuant to this
Article 7 may be entered into without the written consent of the other Party,
which consent shall not be unreasonably withheld or delayed.

         7.7      THIRD PARTY ACTIONS AS TO ADVANCIS PATENTS. In the event a
Third Party brings an action with respect to the validity or enforceability of
ADVANCIS Patents, ADVANCIS shall have the sole right to defend such action at
the cost and expense of ADVANCIS, except if such claim of invalidity or

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unenforceability is part of an infringement action initiated by GSK under an
ADVANCIS Patent Right pursuant to Section 7.2, in which case, GSK shall have the
right to defend such claim at the cost and expense of GSK alone, or within the
sole discretion of ADVANCIS, jointly with ADVANCIS.

                                    ARTICLE 8

                                 INDEMNIFICATION

         8.1      GSK INDEMNIFICATION. GSK shall defend, indemnify and hold
harmless ADVANCIS and its Affiliates and their respective directors, officers,
employees, agents and counsel and the successors and assigns of the forgoing
(the "ADVANCIS Indemnitees"), from and against any and all liabilities, damages,
costs or expenses (including reasonable attorneys' and professional fees and
other expenses of litigation and/or arbitration actually incurred) resulting
from a claim, suit or proceeding (including any manufacturing or other product
defects, failure to comply with regulatory and other legal requirements, failure
to provide adequate warnings and misuse of the Product) brought by a Third Party
against an ADVANCIS Indemnitee arising from or occurring as a result of: (i) the
research, testing, development, manufacture, use, distribution or sale of any
Product by GSK, its Affiliates, distributors, co-marketers or Sublicensees,
their agents or any person or entity that prepares or manufactures Product for
or on behalf of any of the foregoing or (ii) GSK's material breach of any
representation or any warranty set forth in Sections 5.1 or 5.4 (each a "Third
Party Claim"), except those losses which have been determined by a court to
solely arise out of the willful misconduct of ADVANCIS or to the extent that
ADVANCIS is obligated to indemnify GSK under Section 8.1 below.

         8.2      ADVANCIS INDEMNIFICATION. ADVANCIS shall indemnify and hold
harmless GSK and its Affiliates, and their respective directors, officers,
employees, agents and counsel, and the successors and assigns of the foregoing
(the "GSK Indemnitees"), from and against any and all liabilities, damages,
losses, costs or expenses (including reasonable attorneys' and professional fees
and other expenses of litigation and/or arbitration actually incurred) arising
from or occurring as a result of ADVANCIS material breach of any representation
or any warranty set forth in Sections 5.1 or 5.2, except, in each case, to the
extent caused by the willful misconduct of GSK or to the extent that GSK is
obligated to indemnify ADVANCIS under Section 8.1 above.

         8.3      COSTS OF ENFORCEMENT. As the parties intend complete
indemnification, all costs and expenses of enforcing any provision of this
Article 8 shall also be reimbursed by the indemnifying Party.

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         8.4      CONDITIONS TO INDEMNIFICATION. A Party that intends to claim
indemnification under this Section (the "Indemnitee") shall promptly notify the
other Party (the "Indemnitor") of any loss, claim, damage, liability or action
in respect of which the Indemnitee intends to claim such indemnification, and
the Indemnitor shall assume the defense thereof with counsel mutually
satisfactory to the Parties, whether or not the underlying Third Party Claim is
rightfully brought. In addition to counsel provided by the Indemnitor, an
Indemnitee shall have the right to retain its own counsel at its own cost in
such proceedings. The indemnity agreement in this Article 8 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld or delayed unreasonably. The failure to deliver notice to
the Indemnitor within a reasonable time after Indemnitee has knowledge of any
claim, suit or demand or the commencement of any suit, if prejudicial to its
ability to defend such action, shall relieve such Indemnitor of any liability to
the Indemnitee under this Article 8. At the Indemnitor's request, the Indemnitee
under this Article 8, and its employees and agents, shall cooperate fully with
the Indemnitor and its legal representatives in the investigation and defense of
any action, claim or liability covered by this indemnification and provide full
information with respect thereto. The Indemnitor shall not settle or compromise
any such Third Party Claim without the written consent of the Indemnitee which
consent shall not be unreasonably withheld, but such consent shall not be
required if the settlement or compromise involves only the payment of monies and
the Indemnitee obtains a complete release thereunder.

         8.5      CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY OR THEIR
AFFILIATES BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE, TREBLE OR
CONSEQUENTIAL DAMAGES, WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER LEGAL
THEORY; PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT LIMIT THE
INDEMNIFICATION OBLIGATION OF SUCH PARTY UNDER THE PROVISIONS OF SECTIONS 8.1 or
8.2 OF THIS ARTICLE 8 FOR SUCH DAMAGES CLAIMED BY A THIRD PARTY.

                                    ARTICLE 9

                   EXCHANGE OF INFORMATION AND CONFIDENTIALITY

         9.1      NON-DISCLOSURE. Except as expressly provided in Section 9.2,
the Parties agree that, for the Term of this Agreement and for five (5) years
thereafter, the Receiving Party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose except for the
purposes

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contemplated by this Agreement, any Confidential Information furnished to it by
the Disclosing Party hereto pursuant to this Agreement, except that to the
extent that it can be established by the Receiving Party by competent proof that
such Confidential Information:

         (i)      was already known to the Receiving Party, other than under an
                  obligation of confidentiality, at the time of disclosure;

         (ii)     was generally available to the public or otherwise part of the
                  public domain at the time of its disclosure to the Receiving
                  Party;

         (iii)    became generally available to the public or otherwise part of
                  the public domain after its disclosure and other than through
                  any act or omission of the Receiving Party in breach of this
                  Agreement;

         (iv)     was independently developed by the Receiving Party without
                  reference to any information or materials disclosed by the
                  Disclosing Party; or

         (v)      was subsequently disclosed to the Receiving Party by a person
                  other than a Party without breach of any legal obligation to
                  the Disclosing Party.

         9.2      PERMITTED DISCLOSURES. Each Party hereto may disclose the
other's Confidential Information to the extent such disclosure is reasonably
necessary in connection with the conduct of the development, manufacturing and
commercialization activities to be conducted hereunder, in filing or prosecuting
patent applications, prosecuting or defending litigation, complying with
applicable governmental regulations or otherwise submitting information to tax
or other governmental authorities, conducting clinical trials, or making a
permitted sublicense or otherwise exercising its rights hereunder, provided that
if a Party is required to make any such disclosure of another Party's
Confidential Information, other than pursuant to a confidentiality agreement, it
will give reasonable advance notice to the latter Party of such disclosure and,
save to the extent inappropriate in the case of patent applications, will secure
confidential treatment of such information prior to its disclosure (whether
through protective orders or otherwise).

         9.3      TAX TREATMENT. (a) GSK or any Affiliate of GSK (a "GSK
Entity") that has received (or whose agents or representatives have received) a
statement made by (or on behalf of) ADVANCIS or any Affiliate of ADVANCIS (an
"ADVANCIS Entity") as to the tax consequences to the GSK Entity of any of the
arrangements, agreements, or transactions provided for in this Agreement may
disclose as it wishes the tax treatment and tax structure of such arrangement,
agreement, or transaction, including any tax opinions or tax analyses related
thereto.

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         (b)      Any ADVANCIS Entity that has received (or whose agents or
representatives have received) a statement made by (or on behalf of) a GSK
Entity as to the tax consequences to the ADVANCIS Entity of any of the
arrangements, agreements, or transactions provided for in this Agreement may
disclose as it wishes the tax treatment and tax structure of such arrangement,
agreement, or transaction, including any tax opinions or tax analyses related
thereto

         9.4      PUBLIC ANNOUNCEMENTS. No public announcement or any other
disclosure to Third Parties concerning the terms or subject matter of this
Agreement or public announcement as to the existence or termination of this
Agreement may be made, either directly or indirectly, by any Party to this
Agreement, except as may be required by applicable law, rule, regulation or
court order or as may be required for recording purposes, without first
obtaining the written approval of the other Party and agreement upon the nature
and text of such announcement or disclosure, which approval shall not be
withheld or delayed unreasonably. The Party desiring to make any such public
announcement or other public disclosure (including those that are legally
required or may be required for recording purposes) shall inform the other Party
of the proposed announcement at least five (5) business days prior to proposed
release of such announcement or such disclosure, and shall provide the other
Party with a written copy thereof, in order to allow such other Party to comment
upon and approve or disapprove where approval is required, such announcement or
such disclosure.

         9.5      The material terms of this Agreement will be the Confidential
Information of each Party subject to the special authorized disclosure
provisions set forth below in this Section 9.5 and the authorized disclosure
provisions set forth in Section 9.4. The Parties acknowledge that either Party
may be obligated to file a copy of this Agreement with the U.S. Securities and
Exchange Commission (the "SEC") with its next quarterly report on Form 10-Q,
annual report on Form 10-K or current report on Form 8-K or with any
registration statement filed with the SEC pursuant to the Securities Act of
1933, as amended. Each Party will be entitled to make any such required filing;
provided that it requests confidential treatment of the more sensitive terms
hereof to the extent such confidential treatment is reasonably available to the
filing Party under the circumstances then prevailing. In the event of any such
filing, the filing Party will provide the non-filing Party with an advance copy
of the Agreement marked to show provisions for which the filing Party intends to
seek confidential treatment and will reasonably consider the non-filing Party's
timely comments thereon. A Party may disclose the terms of this Agreement to a
Third Party with the consent of the other Party, which will not be unreasonably
withheld. Notwithstanding the foregoing, a Party may disclose the terms and
conditions of this Agreement to a Third Party without such consent or approval
under an obligation of non-disclosure at least as strict as in this Agreement
and

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an obligation of non-use other than for the purposes disclosed (i) in connection
with a transaction or proposed transaction involving a merger, consolidation,
stock purchase, a sale of the business and/or assets of a Party in the entirety
and/or the portion thereof to which this Agreement is directed or similar
transaction, or (ii) in connection with a public or private financing, loan,
equity investment or similar transaction , (iii) or in connection with a
licensing transaction, where such disclosure is solely with respect to the scope
of the license granted under this Agreement. In the event that after good faith
efforts, ADVANCIS can not obtain a confidentiality agreement with respect to the
events of (i) or (ii) of the preceding sentence, ADVANCIS will have the right to
make such disclosure without an obligation of confidentiality.

         9.6      THIRD PARTY PUBLICATIONS. ADVANCIS shall not submit for
written or oral publication any manuscript, abstract or the like which includes
data or other information pertaining to Product without first obtaining the
prior written consent of GSK (which consent shall not be withheld and/or delayed
unreasonably).

         9.7      BANKRUPTCY. All Confidential Information disclosed by a
Disclosing Party to a Receiving Party shall remain the intellectual property of
the Disclosing Party. In the event that a court or other legal or administrative
tribunal, directly or through an appointed master, trustee or receiver, assumes
partial or complete control over the assets of a Party to this Agreement based
on the insolvency or bankruptcy of such Party, the bankrupt or insolvent Party
shall promptly notify the court or other tribunal (1) that Confidential
Information received from a Disclosing Party under this Agreement remains the
property of the Disclosing Party, and (2) of the confidentiality obligations
under this Agreement. In addition, the bankrupt or insolvent Party shall, to the
extent permitted by law, take all steps necessary or desirable to maintain the
confidentiality of the Disclosing Party's Confidential Information and to ensure
that the court, other tribunal or appointee maintains such information in
confidence in accordance with the terms of this Agreement.

         9.8      LIABILITY. A Party shall be liable for a breach of the
obligations of this Article 9 by an employee or agent of such Party.

                                   ARTICLE 10

                                TERM; TERMINATION

         10.1     TERM.

                  (a)      This Agreement shall commence as of the Effective
Date and, unless sooner terminated pursuant to Section 10.2, 10.3, 10.4, shall
continue in full force and effect on a country by country and Product by Product
basis for the Royalty Payment Period.

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                  (b)      Upon expiration of the Royalty Payment Period in a
particular country of the Territory, GSK will have a fully paid up, royalty
free, perpetual, irrevocable, exclusive, worldwide license under Section 2.1,
with the right to sublicense and GSK will be free to make, have made, use and
sell Compound and Product and to use Licensed Technology under such license in
such country, without further royalty payments or any other remuneration to
ADVANCIS.

         10.2     TERMINATION FOR MATERIAL BREACH. Either Party may terminate
this Agreement in the event the other Party has materially breached or defaulted
in the performance of any of its obligations hereunder. The breaching Party will
have [***] (the "Cure Period") to cure such breach. If such default is not
corrected within the Cure Period after receiving written notice from such Party
with respect to such default or such plan is not offered, such notifying Party
shall have the right to terminate this Agreement by giving written notice of
termination to the Party in default, provided the notice of default is given
within [***] of when the Party giving notice knew of the default and prior to
correction of the default. Any termination of this Agreement after the
expiration of the applicable Cure Period will take effect upon delivery of the
notice of termination. The right to terminate this Agreement is in addition to
any other remedies available at law or in equity.

         10.3     TERMINATION FOR BANKRUPTCY; RETENTION OF LICENSE. If voluntary
or involuntary proceedings by or against a Party are instituted in bankruptcy
under any insolvency law, or a receiver or custodian is appointed for such
Party, or proceedings are instituted by or against such Party for corporate
reorganization or the dissolution of such Party, which proceedings, if
involuntary, shall not have been dismissed within sixty (60) days after the date
of filing, or if such Party makes an assignment for the benefit of creditors, or
substantially all of the assets of such Party are seized or attached and not
released within sixty (60) days thereafter, the other Party may immediately
terminate this Agreement effective upon notice of such termination.
Notwithstanding the bankruptcy of a Party, or the impairment of performance by a
Party of its obligations under this Agreement as a result of bankruptcy or
insolvency of such Party, and subject to such Party's rights to terminate this
Agreement for reasons other than bankruptcy or insolvency as expressly provided
in this Agreement, the other Party shall be entitled to retain the licenses
under the terms and conditions granted herein, provided that such other Party
has not terminated this Agreement.

         10.4     TERMINATION FOR CONVENIENCE BY GSK. GSK shall have the right
to terminate this Agreement in its sole discretion for any reason on a
country-by-country basis, or in its entirety, by giving ADVANCIS at least sixty
(60) days prior written notice.

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         10.5     EFFECT OF EXPIRATION OR TERMINATION.

         (a)      Termination of this Agreement shall terminate the rights and
obligations of the Parties under this Agreement; provided, however, termination
of this Agreement for any reason will not release any Party hereto from any
liability that, at the time of such termination, has already accrued to the
other Party or that is attributable to a period prior to such termination, nor
will termination preclude either Party from pursuing any rights and remedies it
may have hereunder or at law or in equity that have accrued or are based upon
any event occurring prior to such termination nor will termination affect the
rights and obligations of the Parties that survive termination under Section
10.6.

         (b)      Upon termination of this Agreement (other than expiration
under Section 10.1), GSK shall not develop or Commercialize Product that was
developed or Commercialized pursuant to this Agreement prior to termination of
the Agreement.

         (c)      Upon the termination of any rights granted hereunder, in whole
or in part as to any country in the Territory, for any reason other than a
failure to cure a material breach of this Agreement by GSK, GSK shall have the
right to dispose of all Product then on hand to which such termination applies,
and the royalties and Milestones shall be paid to ADVANCIS with respect to such
as though such rights had not terminated.

         (d)      Upon any termination of this Agreement, GSK and ADVANCIS shall
promptly return to the other Party all materials and tangible Confidential
Information received from the other Party (except one copy of which may be
retained by legal counsel for archival purposes).

         10.6     BANKRUPTCY PROVISIONS. All rights and licenses rights granted
under or pursuant to the Agreement by ADVANCIS to GSK are, and shall otherwise
be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code,
licenses of rights to "intellectual property" as defined under Section 101(52)
of the U.S. Bankruptcy Code. The Parties agree that GSK, as licensee of such
rights under this Agreement, shall retain and may fully exercise all of its
rights and elections under the U.S. Bankruptcy Code, subject to performance by
GSK of its pre-existing obligations under the Agreement. The Parties further
agree that, in the event of the commencement of a bankruptcy proceeding by or
against ADVANCIS under the U.S. Bankruptcy Code, GSK shall be entitled to a
complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property, and
same, if not already in its possession, shall be promptly delivered to GSK (1)
upon any such commencement of a bankruptcy proceeding upon written request
therefore by GSK, unless ADVANCIS elects to continue to perform all of its
obligations

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under this Agreement, or (2) if not delivered under (1) above, upon the
rejection of this Agreement by or on behalf of ADVANCIS upon written request
therefore by GSK.

         10.7     SURVIVING OBLIGATIONS.

         Sections 2.1(b), 5.5, 6.1, 6.4, 6.5, 7.1, 8.1-8.5, 9.1-9.8, 10.3, 10.5,
10.6 and 10.7 and Articles 1 and 12 will survive the expiration or termination
of this Agreement for any reason. In addition, any other provision required to
interpret and enforce the Parties' rights and obligations under this Agreement
shall also survive, but only to the extent required for the observation and
performance of the aforementioned surviving portions of this Agreement.

                                   ARTICLE 11

                                  FORCE MAJEURE

         11.1     EVENTS OF FORCE MAJEURE. Except for payments due under this
Agreement, neither Party shall be held liable or responsible to the other Party
nor be deemed to be in default under or in breach of any provision of this
Agreement for failure or delay in fulfilling or performing any obligation of
this Agreement when such failure or delay is due to force majeure, and without
the fault or negligence of the Party so failing or delaying. For purposes of
this Agreement, force majeure is defined as causes beyond the control of the
Party, including, without limitation, earthquakes, riots, civil commotion,
terrorism, war, hostilities between nations, governmental laws, order or
regulation, embargo, action by the government or any agency thereof, acts of
God; storm, fire, accident, labor dispute or strike, sabotage, explosion or
other similar or different contingencies, in each case, beyond the reasonable
control of the respective Party. In such event, the Party affected by force
majeure shall provide the other Party with full particulars thereof as soon as
it becomes aware of the same (including its best estimate of the likely extent
and duration of the interference with its activities), and will use its best
endeavors to overcome the difficulties created thereby and to resume performance
of its obligations as soon as practicable. If the performance of any obligation
under this Agreement is delayed owing to a force majeure for any continuous
period of more than six (6) months, the parties hereto shall consult with
respect to an equitable solution including the possible termination of this
Agreement.

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                                   ARTICLE 12

                                  MISCELLANEOUS

         12.1     RELATIONSHIP OF PARTIES. In making and performing this
Agreement, the Parties are acting, and intend to be treated, as independent
entities and nothing contained in this Agreement shall be construed or implied
to create an agency, partnership, joint venture, or employer and employee
relationship between GSK and ADVANCIS. Except as otherwise expressly provided
herein, neither Party may make any representation, warranty or commitment,
whether express or implied, on behalf of or incur any charges or expenses for
the act of any other Party, unless such act is expressly authorized in writing
by both Parties hereto.

         12.2     ASSIGNMENT. Neither Party shall be entitled to assign its
rights or duties hereunder without the express written consent of the other
Party hereto, except that both GSK and ADVANCIS may otherwise assign their
respective rights and transfer their respective duties hereunder without such
consent (1) to an Affiliate of such Party, or (2) to an assignee or transferee
of all or substantially all of the business or assets of such Party to which
this Agreement pertains (whether by merger, reorganization, acquisition, sale,
consolidation or similar transaction) and provided that the assignee agrees in
writing to be bound by the terms and conditions of this Agreement and the
assigning party remains liable thereunder. The terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the permitted
successors and assigns of the Parties. Nothing in this Section 12.2 shall be
construed to prevent GSK from sublicensing its rights to develop, manufacture or
commercialize Product under this Agreement.

         12.3     FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

         12.4     NOTICE. Any notice or request required or permitted to be
given under or in connection with this Agreement shall be deemed to have been
sufficiently given if in writing and personally delivered or sent by certified
mail (return receipt requested), facsimile transmission (receipt verified), or
overnight express courier service (signature required), prepaid, to the Party
for which such notice is intended, at the address set forth for such Party
below:

         (a)      In the case of GSK, to:
                  Glaxo Group Limited
                  Glaxo Wellcome House
                  Berkeley Avenue
                  Greenford, Middlesex
                  England UB6 0NN

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                  Attention: The Company Secretary Facsimile
                  Facsimile: 44 208 047 6905

                  With a copy to:

                  GlaxoSmithKline

                  709 Swedeland Rd.

                  King of Prussia, PA 19406

                  Attention:       Senior Vice President,

                                   Worldwide Business Development

                  Telephone:       [***]

                  Facsimile:       [***]

                  With a copy to:

                  GlaxoSmithKline

                  Corporate Legal Department

                  2301 Renaissance Blvd.

                  Mail Code RN0220

                  King of Prussia, PA 19406-2772

                  Attention:       Head, Business Development Transactions Team

                  Telephone:       [***]

                  Facsimile:       [***]

         (b)      In the case of ADVANCIS, to:

                  ADVANCIS PHARMACEUTICAL CORP.

                  20425 Seneca Meadows Parkway

                  Germantown, Maryland 20876

                  Attention: CEO

                  Telephone:       [***]

                  Facsimile:       [***]

                                       39

<PAGE>

Confidential                                                Final Execution Copy

or to such other address for such Party as it shall have specified by like
notice to the other Party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery shall be deemed to be the next business day after such notice
or request was deposited with such service. If sent by certified mail, the date
of delivery shall be deemed to be the third business day after such notice or
request was deposited with the U.S. Postal Service.

         12.5     USE OF NAME. Except as otherwise provided herein, neither
Party shall have any right, express or implied, to use in any manner the name or
other designation of the other Party or any other trade name or trademark of the
other Party for any purpose in connection with the performance of this
Agreement.

         12.6     WAIVER. A waiver by either Party of any of the terms and
conditions of this Agreement in any instance shall not be deemed or construed to
be a waiver of such term or condition for the future, or of any subsequent
breach hereof. All rights, remedies, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either Party.

         12.7     SEVERABILITY. When possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement and the parties shall negotiate, in good faith, a new provision
which will, as closely as possible, carry out the intentions of the parties
provided for in the invalidated provision. If such agreement is not reached in
sixty (60) days, the affected Party(ies) may terminate this Agreement. In the
event that in any country the payment of royalties over the entire Term is
invalid or illegal, then this Agreement shall be amended so that royalty
payments are made only over the portion of the Term that is legal and valid,
with such royalty payments being increased during the new term so that the total
amount of royalties over the shortened term in any such country is equal to the
total amount of royalties that would have been paid over the entire Term in any
such country.

                                       40

<PAGE>

Confidential                                                Final Execution Copy

         12.8     AMENDMENT. No amendment, modification or supplement of any
provisions of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each Party.

         12.9     GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York, without regard
to its choice of law principles.

         12.10    ENTIRE AGREEMENT. This Agreement, together with the Exhibits
hereto, sets forth the entire agreement and understanding between the Parties as
to the subject matter hereof and merges all prior discussions and negotiations
between them, and neither of the Parties shall be bound by any conditions,
definitions, warranties, understandings or representations with respect to such
subject matter other than as expressly provided herein or as duly set forth on
or subsequent to the date hereof in writing and signed by a proper and duly
authorized officer or representative of the Party to be bound thereby.

         12.11    PARTIES IN INTEREST. All the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties hereto and their respective permitted successors and assigns.

         12.12    DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are for convenience only, and shall be of no force or effect in
construing or interpreting any of the provisions of this Agreement.

         12.13    CONSTRUCTION. Except where the context otherwise requires,
where used, the singular will include the plural, the plural the singular, the
use of any gender will be applicable to all genders and the word "or" is used in
the inclusive sense (and/or). The term "including" as used herein will mean
including, without limiting the generality of any description preceding such
term. All references to "$" and dollars shall be deemed to refer to United
States currency unless otherwise specifically provided herein. All references to
the word "will" are interchangeable with the word "shall" and shall be
understood to be imperative or mandatory in nature. "Herein," "hereby,"
"hereunder," "hereof" and other equivalent words refer to this Agreement as an
entirety and not solely to the particular portion of this Agreement in which any
such word is used. The language of this Agreement is English. No rule of strict
construction will be applied against either Party hereto. Unless expressly
provided herein to the contrary, all time limits, notice periods, deadlines or
the like described herein will be governed by the follow parameters: (i) for all
time periods that are 5 days in length or less, such periods will be deemed to
be business days and (ii) for all time periods greater than 5 days in length
will be deemed to be calendar days.

                                       41

<PAGE>

Confidential                                                Final Execution Copy

         12.13    RECORDING. GSK shall have the right, at any time, to record,
register, or otherwise notify this Agreement in appropriate governmental or
regulatory offices anywhere in the Territory and ADVANCIS shall provide
reasonable assistance to GSK in effecting such recording, registering or
notifying.

         12.14    COUNTERPARTS. This Agreement may be executed simultaneously in
any number of counterparts, any one of which need not contain the signature of
more than one Party but all such counterparts taken together shall constitute
one and the same agreement. A signature on a copy of this Agreement received by
either Party by facsimile is binding upon the other Party as an original. Both
Parties agree that a photocopy of such facsimile may also be treated by the
Parties as a duplicate original.

         12.15    PERFORMANCE BY AFFILIATES AND SUBCONTRACTORS. The Parties
recognize that each Party may perform some or all of its obligations under this
Agreement through Affiliates or Third Party subcontractors unless otherwise
expressly limited herein; provided, however, that each Party will remain
responsible for the performance by its Affiliates and subcontractors and will
cause its Affiliates and subcontractors to comply with the provisions of this
Agreement in connection with such performance. Wherever in this Agreement the
Parties delegate responsibility to Affiliates or local operating entities, the
Parties agree that such entities may not make decisions inconsistent with this
Agreement, amend the terms of this Agreement or act contrary to its terms in any
way.

              THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK

                                       42

<PAGE>

Confidential                                                Final Execution Copy

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
by its duly authorized officer as of the day and year first above written.

                                            ADVANCIS PHARMACEUTICAL CORP.

                                    By: /s/ Edward M. Rudnic
                                        ---------------------------------------
                                    Name: Edward M. Rudnic, PhD
                                    Title President & Chief Executive Officer

                                            GLAXO GROUP LIMITED,

                                            D/B/A GLAXOSMITHKLINE

                                    By: /s/ Jean-Pierre Garnier
                                        ---------------------------------------
                                    Name: Jean-Pierre Garnier
                                    Title Attorney-in-Fact

                                       43<PAGE>

                                                                  EXHIBIT 10.6

                               STATE OF NEW JERSEY

                          DEPARTMENT OF HUMAN SERVICES

               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                                       AND

                           AMERIGROUP NEW JERSEY, INC.

                        AGREEMENT TO PROVIDE HMO SERVICES

In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract
between AMERIGROUP New Jersey, Inc. and the State of New Jersey, Department of
Human Services, Division of Medical Assistance and Health Services (DMAHS),
effective date October 1, 2000, all parties agree that the contract shall be
amended, effective July 1, 2003, as follows:

<PAGE>

2.   ARTICLE 2, "CONDITIONS PRECEDENT," Sections A; D; H and L (NEW) shall be
     amended as reflected in Article 2, Sections A, D, H and L attached hereto
     and incorporated herein.

3.   ARTICLE 3, "MANAGED CARE MANAGEMENT INFORMATION SYSTEM," Sections 3.1.4(B)
     (DELETED); 3.2(C); 3.2.1(A); 3.2.2(D)1; 3.3.1(A); 3.5.1(D)

          Sections 3.9(A); 3.9(B) (NEW); 3.9(C) (NEW); 3.9.1(B); 3.9.1(C);
     3.9.2(A); 3.9.2(B); 3.9.4(A) and 3.9.4(B)

          shall be amended as reflected in Article 3, Sections 3.1.4(B), 3.2(C),
     3.2.1(A), 3.2.2(D)1, 3.3.1(A), 3.5.1(D), 3.9(A), 3.9(B), 3.9(C), 3.9.1(B),
     3.9.1(C), 3.9.2(A), 3.9.2(B), 3.9.4(A) and 3.9.4(B) attached hereto and
     incorporated herein.

4.   ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1; 4.1.1(G)3
     (NEW); 4.1.1(P) (NEW); 4.1.2(A)14; 4.1.2(A)19; 4.1.2(A)23; 4.1.2(B)3 (NEW);
     4.1.2(B)4 (NEW); 4.1.2(B)5 (NEW); 4.1.2(B)6 (NEW); 4.1.2(B)7 (NEW);
     4.1.2(B)8 (NEW); 4.1.2(B)9 (NEW); 4.1.2(B)10; 4.1.2(B)11; 4.1.2(B)16;
     4.1.2(B)17; 4.1.2.(B)18 (NEW); 4.1.2.(B)21 (NEW); 4.1.2(B)25 (NEW);
     4.1.2.(B)26 (NEW); 4.1.2(B)27 (NEW); 4.1.2.(B)28 (NEW); 4.1.2(B)29 (NEW);
     4.1.4(B); 4.1.4(C); 4.1.7 (DELETED); renumber remaining sections; 4.1.8(S)
     (NEW); 4.1.8(T) (NEW);

          Sections 4.2.1(D)2 (NEW); 4.2.1(F); 4.2.1(G); 4.2.1(G)1 (DELETED
     AND MOVED TO 4.2.1(H)3); 4.2.1(H)1; 4.2.1(H)3; 4.2.1(I); 4.2.1(K)2 (NEW);
     4.2.3 (title); 4.2.3(C) (NEW); 4.2.4(C)8 (NEW); 4.2.7(A);

          Sections 4.6.1(B); 4.6.2(A); 4.6.2(J); 4.6.4(A)1; 4.6.4(B); 4.6.4(B)2;
     4.6.4(B)4; 4.6.4(B)5; 4.6.4(B)6; 4.6.4(B)8; 4.6.4(B)8(a); 4.6.4(B)8(d);

<PAGE>

     4.8.8(E), 4.8.8(E)16, 4.8.8(F), 4.8.8(F)1, 4.8.8(F)2, 4.8.8(F)3, 4.8.8(F)4,
     4.8.8(G), 4.8.8(H)8, 4.8.8(H)9, 4.8.8(H)10, 4.8.8(H)11, 4.8.8(I),
     4.8.8(J)8, 4.8.8(M), 4.9.1(F), 4.9.1(F)5, 4.9.3(A), 4.9.4(A), 4.9.5 and
     4.10(E) attached hereto and incorporated herein.

5.   ARTICLE 5, "ENROLLEE SERVICES," Sections 5.2(A)8 (DELETED); 5.3; 5.4(A);
     5.5(A); 5.5(G)1(c); 5.5(G)1(c)i; 5.5(K); 5.5(P) (NEW);

          Sections 5.8.1 (A); 5.8.1(B); 5.8.1(D) (NEW); 5.8.1(E) (NEW); 5.8.2;
     5.8.2(I); 5.8.2(K); 5.8.2(T); 5.8.2(V); 5.8.2(TT)1; 5.8.2(CCC) (NEW);
     5.10.2(A)1(b) (NEW); 5.10.3(A); 5.10.3(A)1; 5.10.3(C);

          Sections 5.15.1(A); 5.15.1(B); 5.15.2(A); 5.15.2(B)1 (DELETED);
     (renumber remaining items); 5.15.2(B)6; 5.15.2(B)7; 5.15.2(C); 5.15.3(B);
     5.15.3(C); 5.15.3(D); 5.15.4(B) and 5.16.1(C)

          shall be amended as reflected in Article 5, Sections 5.2(A)8, 5.3,
     5.4(A), 5.5(A), 5.5(G)1(c), 5.5(G)1(c)i, 5.5(K), 5.5(P),

          Sections 5.8.1(A), 5.8.1(B), 5.8.1(D), 5.8.1(E), 5.8.2, 5.8.2(I),
     5.8.2(K), 5.8.2(T), 5.8.2(V), 5.8.2(TT)1, 5.8.2(CCC),

          Sections 5.10.2(A)1(b), 5.10.3(A), 5.10.3(A)1, 5.10.3(C), 5.15.1(A),
     5.15.1(B), 5.15.2(A), 5.15.2(B)1, 5.15.2(B)6, 5.15.2(B)7, 5.15.2(C),
     5.15.3(B), 5.15.3(C), 5.15.3(D), 5.15.4(B) and 5.16.1(C) attached hereto
     and incorporated herein.

6.   ARTICLE 6, "PROVIDER INFORMATION," Section 6.2(A)18 (NEW); 6.5(D); 6.5(D)1
     and 6.5(D)2
<PAGE>

          shall be amended as reflected in Article 8, Sections 8.3.1, 8.5.1,
     8.5.2, 8.5.2.1, 8.5.2.2, 8.5.2.3, 8.5.2.4, 8.5.2.5, 8.5.2.6, 8.5.2.7,
     8.5.2.8, 8.5.2.9, 8.5.2.10, 8.5.3, 8.5.4, 8.5.5, 8.5.6, 8.5.7, 8.5.8,

          Sections 8.6, 8.7(J)1, 8.8(C) and 8.8(D) attached hereto and
     incorporated herein.

9.   APPENDIX, SECTION A, "REPORTS"

     -    Section A, Reports Narrative;

     -    A.0.0 - Summary Table of Reports (DELETED);

     -    A.4.1 - Provider Network File: Electronic Media Provider Files,
          Attachment A, Attachment B and Attachment E;

     -    A.4.2 - Data Elements for Assessment of Provider Capacity by County
          (DELETED);

     -    A.7.5 - Table 3: Grievance Summary (DELETED AND REPLACED WITH TABLES
          3A, 3B, 3C);

     -    A.7.21 - Table 19: Income Statement by Rate Cell Grouping, Tables T-
          AF (NEW);

     -    A.7.23 (NEW) - Table 19T: Maternity Outcome Counts

          shall be amended as reflected in Appendix, Section A, A.0.0, A.4.1,
     A.4.2, A.7.5, A.7.21 and A.7.23 attached hereto and incorporated herein.

10.  APPENDIX, SECTION B, "REFERENCE MATERIALS"

     -    B.2.2 - Pre-Contracting Checklist (DELETED);

     -    B.3.3 - Managed Care Medicaid Encounter Claims EMC Manual
          (DELETED);

     -    B.4.3 - ACIP Recommended Childhood and Adolescent Immunization
          Schedule (DELETED);

<PAGE>

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

            AMERIGROUP                        STATE OF NEW JERSEY

         NEW JERSEY, INC.                 DEPARTMENT OF HUMAN SERVICES

BY: _______________________________       BY: __________________________________

                                                  KATHRYN A. PLANT

TITLE: ____________________________       TITLE: DIRECTOR, DMAHS

DATE: _____________________________       DATE: ________________________________

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY: _______________________________

    DEPUTY ATTORNEY GENERAL

DATE: _____________________________

<PAGE>

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures;

            AMERIGROUP                        STATE OF NEW JERSEY

         NEW JERSEY, INC.                 DEPARTMENT OF HUMAN SERVICES

BY: _______________________________       BY: __________________________________

                                                    KATHRYN A. PLANT

TITLE: ____________________________       TITLE: DIRECTOR, DMAHS

DATE: _____________________________       DATE: ________________________________

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY: _______________________________

    DEPUTY ATTORNEY GENERAL

DATE: _____________________________

<PAGE>

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

            AMERIGROUP                        STATE OF NEW JERSEY

         NEW JERSEY, INC.                 DEPARTMENT OF HUMAN SERVICES

BY: _______________________________       BY: __________________________________

                                                    KATHRYN A. PLANT

TITLE: ____________________________       TITLE: DIRECTOR, DMAHS

DATE: _____________________________       DATE: ________________________________

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY: _______________________________

    DEPUTY ATTORNEY GENERAL

DATE: _____________________________

<PAGE>

ARTICLE ONE: DEFINITIONS

         The following terms shall have the meaning stated, unless the context
         clearly indicates otherwise.

         ABUSE--means provider practices that are inconsistent with sound
         fiscal, business, or medical practices, and result in an unnecessary
         cost to the Medicaid/NJ FamilyCare program, or in reimbursement for
         services that are not medically necessary or that fail to meet
         professionally recognized standards for health care. It also includes
         enrollee practices that result in unnecessary cost to the Medicaid/NJ
         FamilyCare program. (See 42 C.F.R. Section 455.2)

         ACTUARIALLY SOUND CAPITATION RATES--Means Capitation Rates That--

         A.   Have been developed in accordance with generally accepted
              actuarial principles and practices;

         B.   Are appropriate for the populations to be covered, and the
              services to be furnished under the contract; and

         C.   Have been certified, as meeting the requirements of payments under
              risk contracts, by actuaries who meet the qualification standards
              established by the American Academy of Actuaries and follow the
              practice standards established by the Actuarial Standards Board.

         ADDP--AIDS Drug Distribution Program, a Department of Health and Senior
         Services-sponsored program which provides life-sustaining and
         life-prolonging medications to persons who are HIV positive or who are
         living with AIDS and meet certain residency and income criteria for
         program participation.

         ADJUDICATE--THE point in the claims processing at which a final
         decision is reached to pay or deny a claim.

         ADJUSTMENTS TO SMOOTH DATA--Adjustments made, by cost-neutral methods,
         across rate cells, to compensate for distortions in costs, utilization,
         or the number of eligibles.

         ADMINISTRATIVE SERVICE(S)--the contractual obligations of the
         contractor that include but may not be limited to utilization
         management, credentialing providers, network management, quality
         improvement, marketing, enrollment, member services, claims payment,
         management information systems, financial management, and reporting.

         ADVERSE EFFECT--medically necessary medical care has not been provided
         and the failure to provide such necessary medical care has presented an
         imminent danger to the health, safety, or well-being of the patient or
         has placed the patient unnecessarily in a high-risk situation.

                                                                             I-1

<PAGE>

         ADVERSE SELECTION--the enrollment with a contractor of a
         disproportionate number of persons with high health care costs.

         AFDC OR AFDC/TANF--Aid to Families with Dependent Children, established
         by 42 U.S.C. Section 601 et seq., and N.J.S.A. 44:10-1 et seq., as a
         joint federal/State cash assistance program administered by counties
         under State supervision. For cash assistance, it is now called "TANF."
         For Medicaid, the former AFDC rules still apply.

         AFDC-RELATED--see "SPECIAL MEDICAID PROGRAMS" and "TANF"

         AID CODES--the two-digit number which indicates the aid category under
         which a person is eligible to receive Medicaid and NJ FamilyCare.

         AMELIORATE--to improve, maintain, or stabilize a health outcome, or to
         prevent or mitigate an adverse change in health outcome.

         ANTICIPATORY GUIDANCE--the education provided to parents or authorized
         individuals during routine prenatal or pediatric visits to prevent or
         reduce the risk to their fetuses or children developing a particular
         health problem.

         APPEAL--a request for review of an action.

         ASSIGNMENT--the process by which a Medicaid enrollee in a New Jersey
         Care 2000+ contractor receives a Primary Care Provider (PCP) if not
         selected.

         AT-RISK--any service for which the provider agrees to accept
         responsibility to provide or arrange for in exchange for the capitation
         payment.

         AUTHORIZED PERSON--in general means a person authorized to make medical
         determinations for an enrollee, including, but not limited to,
         enrollment and disenrollment decisions and choice of a PCP.

         For individuals who are eligible through the Division of Youth and
         Family Services (DYFS), the authorized person is authorized to make
         medical determinations, including but not limited to enrollment,
         disenrollment and choice of a PCP, on behalf of or in conjunction with
         individuals eligible through DYFS. These persons may include a foster
         home parent, an authorized health care professional employee of a group
         home, an authorized health care professional employee of a residential
         center or facility, a DYFS employee, a pre-adoptive or adoptive parent
         receiving subsidy from DYFS, a natural or biological parent, or a legal
         caretaker.

         For individuals who are eligible through the Division of Developmental
         Disabilities (DDD), the authorized person may be one of the following:

                  A.       The enrollee, if he or she is an adult and has the
                           capacity to make medical decisions;

                                                                             I-2

<PAGE>

                  B.       The parent or guardian of the enrollee, if the
                           enrollee is a minor, or the individual or agency
                           having legal guardianship if the enrollee is an adult
                           who lacks the capacity to make medical decisions;

                  C.       The Bureau of Guardianship Services (BGS); or

                  D.       A person or agency who has been duly designated by a
                           power of attorney for medical decisions made on
                           behalf of an enrollee.

         Throughout the contract, information regarding enrollee rights and
         responsibilities can be taken to include authorized persons, whether
         stated as such or not.

         AUTOMATIC ASSIGNMENT--the enrollment of an eligible person, for whom
         enrollment is mandatory, in a managed care plan chosen by the New
         Jersey Department of Human Services pursuant to the provisions of
         Article 5.4 of this contract.

         BASIC SERVICE AREA--the geographic area in which the contractor is
         obligated to provide covered services for its Medicaid/NJ FamilyCare
         enrollees under this contract.

         BENEFICIARY--any person eligible to receive services in the New Jersey
         Medicaid/NJ FamilyCare program.

         BENEFITS PACKAGE--the health care services set forth in this contract,
         for which the contractor has agreed to provide, arrange, and be held
         fiscally responsible.

         BILINGUAL--see "MULTILINGUAL"

         BONUS--a payment the contractor makes to a physician or physician group
         beyond any salary, fee-for-service payments, capitation, or returned
         withholding amount.

         CAPITATED SERVICE--any covered service for which the contractor
         receives capitation payment.

         CAPITATION--a contractual agreement through which a contractor agrees
         to provide specified health care services to enrollees for a fixed
         amount per month.

         CAPITATION PAYMENTS--the amount prepaid monthly by DMAHS to the
         contractor in exchange for the delivery of covered services to
         enrollees based on a fixed Capitation Rate per enrollee,
         notwithstanding (a) the actual number of enrollees who receive services
         from the contractor, or (b) the amount of services provided to any
         enrollee.

         CAPITATION RATE--the fixed monthly amount that the contractor is
         prepaid by the Department for each enrollee for which the contractor
         provides the services included in the Benefits Package described in
         this contract.

         CARE MANAGEMENT--a set of enrollee-centered, goal-oriented, culturally
         relevant, and logical steps to assure that an enrollee receives needed
         services in a supportive, effective, efficient, timely, and
         cost-effective manner. Care management emphasizes prevention,

                                                                             I-3

<PAGE>

         continuity of care, and coordination of care, which advocates for, and
         links enrollees to, services as necessary across providers and
         settings. Care management functions include 1) early identification of
         enrollees who have or may have special needs, 2) assessment of an
         enrollees risk factors, 3) development of a plan of care, 4) referrals
         and assistance to ensure timely access to providers, 5) coordination of
         care actively linking the enrollee to providers, medical services,
         residential, social, and other support services where needed, 6)
         monitoring, 7) continuity of care, and 8) follow-up and documentation.

         CENTERS FOR MEDICARE AND MEDICAID SERVICES (CMS) -- formerly the Health
         Care Financing Administration (HCFA) within the U.S. Department of
         Health and Human Services.

         CERTIFICATE OF AUTHORITY--a license granted by the New Jersey
         Department of Banking and Insurance and the New Jersey Department of
         Health and Senior Services to operate an HMO in compliance with
         N.J.S.A. 26:2J-1 et. seq.

         CHILDREN'S HEALTH CARE COVERAGE PROGRAM--means the program established
         by the "Children's Health Care Coverage Act", P.L. 1997, c.272 as a
         health insurance program for targeted, low-income children.

         CHILDREN WITH SPECIAL HEALTH CARE NEEDS--those children who have or are
         at increased risk for chronic physical, developmental, behavioral, or
         emotional conditions and who also require health and related services
         of a type and amount beyond that required by children generally.

         CHRONIC ILLNESS--a disease or condition of long duration (repeated
         inpatient hospitalizations, out of work or school at least three months
         within a twelve-month period, or the necessity for continuous health
         care on an ongoing basis), sometimes involving very slow progression
         and long continuance. Onset is often gradual and the process may
         include periods of acute exacerbation alternating with periods of
         remission.

         CLINICAL PEER--a physician or other health care professional who holds
         a non-restricted license in New Jersey and is in the same or similar
         specialty as typically manages the medical condition, procedure, or
         treatment under review.

         CNM OR CERTIFIED NURSE MIDWIFE--a registered professional nurse who is
         legally authorized under State law to practice as a nurse-midwife, and
         has completed a program of study and clinical experience for
         nurse-midwives or equivalent.

         CNP OR CERTIFIED NURSE PRACTITIONER--a registered professional nurse
         who is licensed by the New Jersey Board of Nursing and meets the
         advanced educational and clinical practice requirements beyond the two
         to four years of basic nursing education required of all registered
         nurses.

         CNS OR CLINICAL NURSE SPECIALIST--a person licensed to practice as a
         registered professional nurse who is licensed by the New Jersey State
         Board of Nursing or similarly licensed and certified by a comparable
         agency of the state in which he/she practices.

                                                                             I-4

<PAGE>

         COLD CALL MARKETING--any unsolicited personal contact with a potential
         enrollee by an employee or agent of the contractor for the purpose of
         influencing the individual to enroll with the contractor. Marketing by
         an employee of the contractor is considered direct; marketing by an
         agent is considered indirect.

         COMMISSIONER--the Commissioner of the New Jersey Department of Human
         Services or a duly authorized representative.

         COMPLAINT--a protest by an enrollee as to the conduct by the contractor
         or any agent of the contractor, or an act or failure to act by the
         contractor or any agent of the contractor, or any other matter in
         which an enrollee feels aggrieved by the contractor, that is
         communicated to the contractor and that could be resolved by the
         contractor within three (3) business days.

         COMPLAINT RESOLUTION--completed actions taken to fully settle a
         complaint to the DMAHS' Satisfaction.

         COMPREHENSIVE RISK CONTRACT--a risk contract that covers comprehensive
         services, that is, inpatient hospital services and any of the following
         services, or any three or more of the following services:

         1.   Outpatient hospital services.

         2.   Rural health clinic services.

         3.   FQHC services.

         4.   Other laboratory and X-ray services.

         5.   Nursing facility (NF) services.

         6.   Early and periodic screening, diagnosis and treatment (EPSDT)
              services.

         7.   Family planning services.

         8.   Physician services.

         9.   Home health services.

         CONDITION--a disease, illness, injury, disorder, or biological or
         psychological condition or status for which treatment is indicated.

         CONTESTED CLAIM--a claim that is denied because the claim is an
         ineligible claim, the claim submission is incomplete, the coding or
         other required information to be submitted is incorrect, the amount
         claimed is in dispute, or the claim requires special treatment.

         CONTINUITY OF CARE--the plan of care for a particular enrollee that
         should assure progress without unreasonable interruption.

         CONTRACT--the written agreement between the State and the contractor,
         and comprises the contract, any addenda, appendices, attachments, or
         amendments thereto.

         CONTRACTING OFFICER--the individual empowered to act and respond for
         the State throughout the life of any contract entered into with the
         State.

                                                                             I-5

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         CONTRACTOR--the Health Maintenance Organization with a valid
         Certificate of Authority in New Jersey that contracts hereunder with
         the State for the provision of comprehensive health care services to
         enrollees on a prepaid, capitated basis.

         CONTRACTOR'S PLAN--all services and responsibilities undertaken by the
         contractor pursuant to this contract.

         CONTRACTOR'S REPRESENTATIVE--the individual legally empowered to bind
         the contractor, using his/her signature block, including his/her title.
         This individual will be considered the Contractor's Representative
         during the life of any contract entered into with the State unless
         amended in writing pursuant to Article 7.

         COPAYMENT--the part of the cost-sharing requirement for NJ FamilyCare
         Plan D and H enrollees in which a fixed monetary amount is paid for
         certain services/items received from the contractor's providers.

         COST AVOIDANCE--a method of paying claims in which the provider is not
         reimbursed until the provider has demonstrated that all available
         health insurance has been exhausted.

         COST NEUTRAL--the mechanism used to smooth data, share risk, or adjust
         for risk that will recognize both higher and lower expected costs and
         is not intended to create a net aggregate gain or loss across all
         payments.

         COVERED SERVICES--see "BENEFITS PACKAGE"

         CREDENTIALING--the contractor's determination as to the qualifications
         and ascribed privileges of a specific provider to render specific
         health care services.

         CULTURAL COMPETENCY--a set of interpersonal skills that allow
         individuals to increase their understanding, appreciation, acceptance
         of and respect for cultural differences and similarities within, among
         and between groups and the sensitivity to how these differences
         influence relationships with enrollees. This requires a willingness and
         ability to draw on community-based values, traditions and customs, to
         devise strategies to better meet culturally diverse enrollee needs, and
         to work with knowledgeable persons of and from the community in
         developing focused interactions, communications, and other supports.

         CWA OR COUNTY WELFARE AGENCY ALSO KNOWN AS COUNTY BOARD OF SOCIAL
         SERVICES--the agency within the county government that makes
         determination of eligibility for Medicaid and financial assistance
         programs.

         DAYS--calendar days unless otherwise specified.

         DBI--the New Jersey Department of Banking and Insurance in the
         executive branch of New Jersey State government.

         DEFAULT--see "AUTOMATIC ASSIGNMENT"

                                                                             I-6

<PAGE>

         DELIVERABLE--a document/report/manual to be submitted to the Department
         by the contractor pursuant to this contract.

         DENTAL DIRECTOR--the contractor's Director of dental services, who is
         required to be a Doctor of Dental Science or a Doctor of Medical
         Dentistry and licensed by the New Jersey Board of Dentistry, designated
         by the contractor to exercise general supervision over the provision of
         dental services by the contractor.

         DEPARTMENT--the Department of Human Services (DHS) in the executive
         branch of New Jersey State government. The Department of Human Services
         includes the Division of Medical Assistance and Health Services (DMAHS)
         and the terms are used interchangeably. The Department also includes
         Division of Youth and Family Services (DYFS), the Division of Family
         Development (DFD), the Division of Mental Health Services (DMHS), the
         Division of Disability Services (DDS), the Commission for the Blind and
         Visually Impaired (CBVI), the Division of the Deaf and Hard of Hearing
         (DDHH) and the Division of Developmental Disabilities (DDD).

         DEVELOPMENTAL DISABILITY--a severe, chronic disability of a person
         which is attributable to a mental or physical impairment or combination
         of mental and physical impairments; is manifested before the person
         attains age twenty-two (22); is likely to continue indefinitely;
         results in substantial functional limitations in three or more of the
         following areas of major life activity: self-care, receptive and
         expressive language, learning, mobility, self-direction, capacity for
         independent living and economic self-sufficiency; and reflects the
         person's need for a combination and sequence of special,
         interdisciplinary, or generic care, treatment, or other services which
         are lifelong or of extended duration and are individually planned and
         coordinated. Developmental disability includes but is not limited to
         severe disabilities attributable to mental retardation, autism,
         cerebral palsy, epilepsy, spina bifida and other neurological
         impairments where the above criteria are met.

         DFD--the Division of Family Development, within the New Jersey
         Department of Human Services that administers programs of financial and
         administrative support for certain qualified individuals and families.

         DIAGNOSTIC SERVICES--any medical procedures or supplies recommended by
         a physician or other licensed practitioner of the healing arts, within
         the scope of his or her practice under State law, to enable him or her
         to identify the existence, nature, or extent of illness, injury, or
         other health deviation in an enrollee.

         DIRECTOR--the Director of the Division of Medical Assistance and Health
         Services or a duly authorized representative.

         DISABILITY--a physical or mental impairment that substantially limits
         one or more of the major life activities for more than three months a
         year.

         DISABILITY IN ADULTS--for adults applying under New Jersey Care Special
         Medicaid Programs and Title II (Social Security Disability Insurance
         Program) and for adults

                                                                             I-7

<PAGE>

         applying under Title XVI (the Supplemental Security Income [SSI]
         program), disability is defined as the inability to engage in any
         substantial gainful activity by reason of any medically determinable
         physical or mental impairment(s) which can be expected to result in
         death or which has lasted or can be expected to last for a continuous
         period of not less than 12 months.

         DISABILITY IN CHILDREN--a child under age 18 is considered disabled if
         he or she has a medically determinable physical or mental impairment(s)
         which results in marked and severe functional limitations that limit
         the child's ability to function independently, appropriately, and
         effectively in an age-appropriate manner, and can be expected to result
         in death or which can be expected to last for 12 months or longer.

         DISENROLLMENT--the removal of an enrollee from participation in the
         contractor's plan, but not from the Medicaid program.

         DIVISION OF DEVELOPMENTAL DISABILITIES (DDD)--a Division within the New
         Jersey Department of Human Services that provides evaluation,
         functional and guardianship services to eligible persons. Services
         include residential services, family support, contracted day programs,
         work opportunities, social supervision, guardianship, and referral
         services.

         DIVISION OF DISABILITY SERVICES (DDS)--a Division within the Department
         of Human Services that promotes the maximum independence and
         participation of people with disabilities in community life. The DDS
         administers seven Medicaid waiver programs, the work incentives
         Medicaid buy-in program, the New Jersey personal assistance services
         program (PASP) and the New Jersey cash and counseling demonstration
         program.

         DIVISION OR DMAHS--the New Jersey Division of Medical Assistance and
         Health Services within the Department of Human Services which
         administers the contract on behalf of the Department.

         DHHS OR HHS--United States Department of Health and Human Services of
         the executive branch of the federal government, which administers the
         Medicaid program through the Centers for Medicare and Medicaid Services
         (CMS).

         DHSS--the New Jersey Department of Health and Senior Services in the
         executive branch of New Jersey State government, one of the regulatory
         agencies of the managed care industry. Its role and functions are
         delineated throughout the contract.

         DRUG UTILIZATION REVIEW (DUR) -- the process whereby the medical
         necessity is determined for a drug that exceeds a DUR standard
         prospectively (prior to a drug being dispensed) or retrospectively
         (after a drug has been dispensed). Prospective DUR shall utilize
         established prior authorization procedures as described in Article 4.
         Retrospective DUR shall utilize telephonic or written interventions
         with prescribers to determine medical necessity for prescribed
         medications.

                                                                             I-8

<PAGE>

         DURABLE MEDICAL EQUIPMENT (DME)--equipment, including assistive
         technology, which: a) can withstand repeated use; b) is used to service
         a health or functional purpose; c) is ordered by a qualified
         practitioner to address an illness, injury or disability; and d) is
         appropriate for use in the home or work place/school.

         DYFS--the Division of Youth and Family Services, within the New Jersey
         Department of Human Services, whose responsibility is to ensure the
         safety of children and to provide social services to children and their
         families. DYFS enrolls into Medicaid financially eligible children
         under its supervision who reside in DYFS-supported substitute living
         arrangements such as foster care and certain subsidized adoption
         placements.

         DYFS RESIDENTIAL FACILITIES--include Residential Facilities, Teaching
         Family Homes, Juvenile Family In-Crisis Shelters, Children's Shelters,
         Transitional Living Homes, Treatment Homes Programs, Alternative Home
         Care Program, and Group Homes.

         EARLY AND PERIODIC SCREENING, DIAGNOSIS AND TREATMENT (EPSDT)-a Title
         XIX mandated program that covers screening and diagnostic services to
         determine physical and mental defects in enrollees under the age of 21,
         and health care, treatment, and other measures to correct or ameliorate
         any defects and chronic conditions discovered, pursuant to Federal
         Regulations found in Title XIX of the Social Security Act.

         Early and Periodic Screening, Diagnosis and Treatment/Private Duty
         Nursing (EPSDT/PDN) Services --the private duty nursing services
         provided to all eligible EPSDT beneficiaries under 21 years of age who
         live in the community and whose medical condition and treatment plan
         justify the need. Private duty nursing services are provided in the
         community only, and not in hospital inpatient or nursing facility
         settings. See Appendix B 4.1 for eligibility requirements.

         EFFECTIVE DATE OF CONTRACT--shall be October 1, 2000.

         EFFECTIVE DATE OF DISENROLLMENT--the last day of the month in which the
         enrollee may receive services under the contractor's plan.

         EFFECTIVE DATE OF ENROLLMENT--the date on which an enrollee can begin
         to receive services under the contractor's plan pursuant to Article
         Five of this contract.

         ELDERLY PERSON--a person who is 65 years of age or older.

         EMERGENCY MEDICAL CONDITION--A medical condition manifesting itself by
         acute symptoms of sufficient severity, (including severe pain) such
         that a prudent layperson, who possesses an average knowledge of
         medicine and health, could reasonably expect the absence of immediate
         medical attention to result in placing the health of the individual
         (or, with respect to a pregnant woman, the health of the woman or her
         unborn child) in serious jeopardy; serious impairment to bodily
         functions; or serious dysfunction of any bodily organ or part.

                                                                             I-9

<PAGE>

         EMERGENCY SERVICES--covered inpatient and outpatient services furnished
         by any qualified provider that are necessary to evaluate or stabilize
         an emergency medical condition.

         ENCOUNTER--the basic unit of service used in accumulating utilization
         data and/or a face-to-face contact between a patient and a health care
         provider resulting in a service to the patient.

         ENCOUNTER DATA--the record of the number and types of services rendered
         to patients during a specific time period and defined in Article 3.9 of
         this contract.

         ENROLLEE--an individual who is eligible for Medicaid/NJ FamilyCare,
         residing within the defined enrollment area, who elects or has had
         elected on his or her behalf by an authorized person, in writing, to
         participate in the contractor's plan and who meets specific Medicaid/NJ
         FamilyCare eligibility requirements for plan enrollment agreed to by
         the Department and the contractor. Enrollees include individuals in the
         AFDC/TANF, AFDC/TANF-Related Pregnant Women and Children, SSI-Aged,
         Blind and Disabled, DYFS, NJ FamilyCare, and Division of Developmental
         Disabilities/Community Care Waiver (DDD/CCW) populations. See also
         "Authorized Person."

         ENROLLEE WITH SPECIAL NEEDS--for adults, special needs includes
         complex/chronic medical conditions requiring specialized health care
         services, including persons with physical, mental/substance abuse,
         and/or developmental disabilities, including such persons who are
         homeless. Children with special health care needs are those who have or
         are at increased risk for a chronic physical, developmental,
         behavioral, or emotional conditions and who also require health and
         related services of a type or amount beyond that required by children
         generally.

         ENROLLMENT--the process by which an individual eligible for Medicaid
         voluntarily or mandatorily applies to utilize the contractor's plan in
         lieu of standard Medicaid benefits, and such application is approved by
         DMAHS.

         ENROLLMENT AREA--the geographic area bound by county lines from which
         Medicaid/NJ FamilyCare eligible residents may enroll with the
         contractor unless otherwise specified in the contract.

         ENROLLMENT LOCK-IN PERIOD--the period between the first day of the
         fourth (4th) month and the end of twelve (12) months after the
         effective date of enrollment in the contractor's plan, during which the
         enrollee must have good cause to disenroll or transfer from the
         contractor's plan. This is not to be construed as a guarantee of
         eligibility during the lock-in period. Lock-in provisions will not
         apply to clients of DDD or SSI, New Jersey Care Special Medicaid
         Program - Aged, Blind, Disabled, and DYFS enrollees.

         ENROLLMENT PERIOD--the twelve (12) month period commencing on the
         effective date of enrollment.

         EPSDT--see "EARLY AND PERIODIC SCREENING, DIAGNOSIS AND TREATMENT"

                                                                            I-10

<PAGE>

         EQUITABLE ACCESS--the concept that enrollees are given equal
         opportunity and consideration for needed services without exclusionary
         practices of providers or system design because of gender, age, race,
         ethnicity, sexual orientation, health status, or disability.

         EXCLUDED SERVICES--those services covered under the fee-for-service
         Medicaid program that are not included in the contractor benefits
         package.

         EXISTING PROVIDER--recipient relationship--one in which the provider
         was the main source of medicaid services for the recipient during the
         previous year.

         EXTERNAL REVIEW ORGANIZATION (ERO)--an outside independent accredited
         review organization under contract with the Department for the purposes
         of conducting annual contractor operation assessments and quality of
         care reviews for contractors.

         FAIR HEARING--the appeal process available to all Medicaid Eligibles
         pursuant to N.J.S.A. 30:4D-7 and administered pursuant to N.J.A.C.
         10:49-10.1 et seq.

         FEDERAL FINANCIAL PARTICIPATION--the funding contribution that the
         federal government makes to the New Jersey Medicaid and NJ FamilyCare
         programs.

         FEDERALLY QUALIFIED HEALTH CENTER (FQHC)--an entity that provides
         outpatient health programs pursuant to 42 U.S.C. Section 201 et seq.

         FEDERALLY QUALIFIED HMO--an HMO that CMS has determined is a qualified
         HMO under section 1310(d) of the Public Health Services Act.

         [Reserved]

         FEE-FOR-SERVICE OR FFS--a method for reimbursement based on payment for
         specific services rendered to an enrollee.

         FRAUD--an intentional deception or misrepresentation made by a person
         with the knowledge that the deception could result in some unauthorized
         benefit to him/herself or some other person. It includes any act that
         constitutes fraud under applicable federal or State law. (See 42 C.F.R.
         Section 455.2)

         FULL TIME EQUIVALENT--the number of personnel with the same job title
         and responsibilities who, in the aggregate, perform work equivalent to
         a singular individual working a 40-hour work week.

         GOOD CAUSE--reasons for disenrollment or transfer that include failure
         of the contractor to provide services including physical access to the
         enrollee in accordance with contract terms, enrollee has filed a
         grievance and has not received a response within the specified

                                                                            I-11

<PAGE>

         time period or enrollee has filed a grievance and has not received
         satisfaction. See Article 5.10.2 for more detail.

         GOVERNING BODY--a managed care organization's Board of Directors or,
         where the Board's participation with quality improvement issues is not
         direct, a designated committee of the senior management of the managed
         care organization.

         GRIEVANCE--means an expression of dissatisfaction about any matter or a
         complaint that is submitted in writing, or that is orally communicated
         and could not be resolved within three (3) business days of receipt.

         GRIEVANCE SYSTEM--means the overall system that includes grievances and
         appeals at the contractor level and access to the State fair hearing
         process.

         GROUP MODEL--a type of HMO operation similar to a group practice except
         that the group model must meet the following criteria: (a) the group is
         a separate legal entity, (i.e. administrative entity) apart from the
         HMO; (b) the group is usually a corporation or partnership; (c) members
         of the group must pool their income; (d) members of the group must
         share medical equipment, as well as technical and administrative staff;
         (e) members of the group must devote at least 50 percent of their time
         to the group; and (f) members of the group must have "substantial
         responsibility" for delivery of health services to HMO members, within
         four years of qualification. After that period, the group may request
         additional time or a waiver in accordance with federal regulations at
         42 C.F.R. Section 110.104(2), Subpart A.

         HCFA--the Health Care Financing Administration, the former name of CMS
         (Centers for Medicare and Medicaid Services), within the U.S.
         Department of Health and Human Services.

         HEALTH BENEFITS COORDINATOR (HBC)--the external organization under
         contract with the Department whose primary responsibility is to assist
         Medicaid eligible individuals in contractor selection and enrollment.

         HEALTH CARE PROFESSIONAL--a physician or other health care professional
         if coverage for the professional's services is provided under the
         contractor's contract for the services. It includes podiatrists,
         optometrists, chiropractors, psychologists, dentists, physician
         assistants, physical or occupational therapists and [Reserved]
         therapist assistants, speech-language pathologists, audiologists,
         registered or licensed practical nurses (including nurse practitioners,
         clinical nurse specialists, certified registered [Reserved] nurse
         anesthetists, and certified nurse midwives), licensed certified social
         workers, registered respiratory therapists, and certified respiratory
         therapy technicians.

         HEALTH CARE SERVICES--are all preventive and therapeutic medical,
         dental, surgical, ancillary (medical and non-medical) and supplemental
         benefits provided to enrollees to diagnose, treat, and maintain the
         optimal well-being of enrollees provided by physicians, other health
         care professionals, institutional, and ancillary service providers.

                                                                            I-12

<PAGE>

         HEALTH INSURANCE--private insurance available through an individual or
         group plan that covers health services. It is also referred to as Third
         Party Liability.

         HEALTH MAINTENANCE ORGANIZATION (HMO)--any entity which contracts with
         providers and furnishes at least basic comprehensive health care
         services on a prepaid basis to enrollees in a designated geographic
         area pursuant to N.J.S.A. 26:2J-1 et seq., and with regard to this
         contract is either:

                  A.       A Federally Qualified HMO; or

                  B.       Meets the State Plan's definition of an HMO which
                           includes, at a minimum, the following requirements:

                           1.       It is organized primarily for the purpose of
                                    providing health care services;

                           2.       It makes the services it provides to its
                                    Medicaid enrollees as accessible to them (in
                                    terms of timeliness, amount, duration, and
                                    scope) as the services are to non-enrolled
                                    Medicaid eligible individuals within the
                                    area served by the HMO;

                           3.       It makes provision, satisfactory to the
                                    Division and Departments of Banking and
                                    Insurance and Health and Senior Services,
                                    against the risk of insolvency, and assures
                                    that Medicaid enrollees will not be liable
                                    for any of the HMO's debts if it does become
                                    insolvent; and

                           4.       It has a Certificate of Authority granted by
                                    the State of New Jersey to operate in all or
                                    selected counties in New Jersey.

         HEDIS--Health Plan Employer Data and Information Set.

         HIPAA--Health Insurance Portability And Accountability Act.

         INCURRED-BUT-NOT-REPORTED (IBNR) -- estimate of unpaid claims
         liability, includes received but unpaid claims.

         INDICATORS--the objective and measurable means, based on current
         knowledge and clinical experience, used to monitor and evaluate each
         important aspect of care and service identified.

         INDIVIDUAL HEALTH CARE PLAN (IHCP)--a multi-disciplinary plan of care
         for enrollees with special needs who qualify for a higher level of care
         management based on a Complex Needs Assessment. IHCPs specify short-
         and long-term goals, identify needed medical services and relevant
         social/support services, specialized transportation and communication,
         appropriate outcomes, and barriers to effective outcomes, and
         timelines. The IHCP is implemented and monitored by the care manager.

         INQUIRY--means a request for information by an enrollee, or a verbal
         request by an enrollee for action by the contractor that is so clearly
         contrary to the Medicaid Managed Care Program or the contractor's
         operating procedures that it may be construed as a factual
         misunderstanding, provided that the issue can be immediately explained
         and

                                                                            I-13

<PAGE>

         resolved by the contractor. Inquiries need not be treated or reported
         as complaints or grievances.

         INSOLVENT--unable to meet or discharge financial liabilities pursuant
         to N.J.S.A. 17B:32-33.

         INSTITUTIONALIZED--residing in a nursing facility, psychiatric
         hospital, or intermediate care facility/mental retardation (ICF/MR);
         this does not include admission in an acute care or rehabilitation
         hospital setting.

         IPN OR INDEPENDENT PRACTITIONER NETWORK--one type of HMO operation
         where member services are normally provided in the individual offices
         of the contracting physicians.

         LIMITED-ENGLISH-PROFICIENT POPULATIONS--individuals with a primary
         language other than English who must communicate in that language if
         the individual is to have an equal opportunity to participate
         effectively in and benefit from any aid, service or benefit provided by
         the health provider.

         MAINTENANCE SERVICES--include physical services provided to allow
         people to maintain their current level of functioning. Does not include
         habilitative and rehabilitative services.

         MANAGED CARE--a comprehensive approach to the provision of health care
         which combines clinical preventive, restorative, and emergency services
         and administrative procedures within an integrated, coordinated system
         to provide timely access to primary care and other medically necessary
         health care services in a cost effective manner.

         MANAGED CARE ENTITY--a managed care organization described in Section
         1903(m)(1)(A) of the Social Security Act, including Health Maintenance
         Organizations (HMOs), organizations with Section 1876 or
         Medicare+Choice contracts, provider sponsored organizations, or any
         other public or private organization meeting the requirements of
         Section 1902(w) of the Social Security Act, which has a risk
         comprehensive contract and meets the other requirements of that
         Section.

         MANAGED CARE ORGANIZATION (MCO)--an entity that has, or is seeking to
         qualify for, a comprehensive risk contract, and that is -

         1.   A Federally qualified HMO that meets the advance directives
              requirements of 42 CFR 489 subpart I; or

         2.   Any public or private entity that meets the advance directives
              requirements and is determined to also meet the following
              conditions:

              (i)  Makes the services it provides to its Medicaid enrollees as
                   accessible (in terms of timeliness, amount, duration, and
                   scope) as those services are to other Medicaid recipients
                   within the area served by the entity; and

              (ii) Meets the solvency standards of 42 CFR 438.116.

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<PAGE>

         MANDATORY--the requirement that certain DMAHS beneficiaries, delineated
         in Article 5, must select, or be assigned to a contractor in order to
         receive Medicaid services.

         MANDATORY ENROLLMENT--the process whereby an individual eligible for
         Medicaid/NJ FamilyCare is required to enroll in a contractor's plan,
         unless otherwise exempted or excluded, to receive the services
         described in the standard benefits package as approved by the
         Department of Human Services through necessary federal waivers.

         MARKETING--any activity by or means of communication from the
         contractor, its employees, affiliated providers, subcontractors, or
         agents, or on behalf of the contractor by any person, firm or
         corporation by which information about the contractor's plan is made
         known to Medicaid or NJ FamilyCare Eligible Persons that can reasonably
         be interpreted as intended to influence the individual to enroll in the
         contractor's plan or either to not enroll in, or to disenroll from,
         another contractor's plan [Reserved].

         MARKETING MATERIALS -- materials that are produced in any medium, by or
         on behalf of the contractor and can reasonably be interpreted as
         intended to market to potential enrollees.

         MATERNITY OUTCOME -- still births or live births that occur after the
         first trimester (after the twelfth week of gestation), excluding
         elective abortions.

         MAXIMUM PATIENT CAPACITY--the estimated maximum number of active
         patients that could be assigned to a specific provider within mandated
         access-related requirements.

         MCMIS--managed care management information system, an automated
         information system designed and maintained to integrate information
         across the enterprise. The State recommends that the system include,
         but not necessarily be limited to, the following functions:

                  -        Enrollee Services

                  -        Provider Services

                  -        Claims and Encounter Processing

                  -        Prior Authorization, Referral and Utilization
                           Management

                  -        Financial Processing

                  -        Quality Assurance

                  -        Management and Administrative Reporting

                  -        Encounter Data Reporting to the State

         MEDICAID--the joint federal/State program of medical assistance
         established by Title XIX of the Social Security Act, 42 U.S.C. Section
         1396 et seq., which in New Jersey is administered by DMAHS in DHS
         pursuant to N.J.S.A. 30:4D-1 et seq.

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<PAGE>

         MEDICAID ELIGIBLE--an individual eligible to receive services under the
         New Jersey Medicaid program.

         MEDICAID EXPANSION--means the expansion of the New Jersey
         Care...Special Medicaid Programs, that incorporates NJ FamilyCare Plan
         A, that will extend coverage to uninsured children below the age of 19
         years with family incomes up to and including 133 percent of the
         federal poverty level. (See NJ FamilyCare Plan A)

         MEDICAID RECIPIENT OR MEDICAID BENEFICIARY--an individual eligible for
         Medicaid who has applied for and been granted Medicaid benefits by
         DMAHS, generally through a CWA or Social Security District Office.

         MEDICAL COMMUNICATION--any communication made by a health care provider
         with a patient of the health care provider (or, where applicable, an
         authorized person) with respect to:

                  A.       The patient's health status, medical care, or
                           treatment options;

                  B.       Any utilization review requirements that may affect
                           treatment options for the patient; or

                  C.       Any financial incentives that may affect the
                           treatment of the patient.

         The term "medical communication" does not include a communication by a
         health care provider with a patient of the health care provider (or,
         where applicable, an authorized person) if the communication involves a
         knowing or willful misrepresentation by such provider.

         MEDICAL DIRECTOR--the licensed physician, in the State of New Jersey,
         i.e. Medical Doctor (MD) or Doctor of Osteopathy (DO), designated by
         the contractor to exercise general supervision over the provision of
         health service benefits by the contractor.

         MEDICAL GROUP--A partnership, association, corporation, or other group
         which is chiefly composed of health professionals licensed to practice
         medicine or osteopathy, and other licensed health professionals who are
         necessary for the provision of health services for whom the group is
         responsible.

         MEDICALLY DETERMINABLE IMPAIRMENT--an impairment that results from
         anatomical, physiological, or psychological abnormalities which can be
         shown by medically acceptable clinical and laboratory diagnostic
         techniques. A physical or mental impairment must be established by
         medical evidences consisting of signs, symptoms, and laboratory
         findings -- not only the individual's statement of symptoms.

         MEDICAL RECORDS--the complete, comprehensive records, accessible at the
         site of the enrollee's participating primary care physician or
         provider, that document all medical services received by the enrollee,
         including inpatient, ambulatory, ancillary, and emergency care,
         prepared in accordance with all applicable DHS rules and regulations,
         and signed by the medical professional rendering the services.

                                                                            I-16

<PAGE>
'
         MEDICAL SCREENING--an examination 1) provided on hospital property, and
         provided for that patient for whom it is requested or required, and 2)
         performed within the capabilities of the hospital's emergency room (ER)
         (including ancillary services routinely available to its ER), and 3)
         the purpose of which is to determine if the patient has an emergency
         medical condition, and 4) performed by a physician (M.D. or D.O.)
         and/or by a nurse practitioner, or physician assistant as permitted by
         State statutes and regulations and hospital bylaws.

         MEDICALLY NECESSARY SERVICES--services or supplies necessary to
         prevent, diagnose, correct, prevent the worsening of, alleviate,
         ameliorate, or cure a physical or mental illness or condition; to
         maintain health; to prevent the onset of, an illness, condition, or
         disability; to prevent or treat a condition that endangers life or
         causes suffering or pain or results in illness or infirmity; to prevent
         the deterioration of a condition; to promote the development or
         maintenance of maximal functioning capacity in performing daily
         activities, taking into account both the functional capacity of the
         individual and those functional capacities that are appropriate for
         individuals of the same age; to prevent or treat a condition that
         threatens to cause or aggravate a handicap or cause physical deformity
         or malfunction, and there is no other equally effective, more
         conservative or substantially less costly course of treatment available
         or suitable for the enrollee. The services provided, as well as the
         type of provider and setting, must be reflective of the level of
         services that can be safely provided, must be consistent with the
         diagnosis of the condition and appropriate to the specific medical
         needs of the enrollee and not solely for the convenience of the
         enrollee or provider of service and in accordance with standards of
         good medical practice and generally recognized by the medical
         scientific community as effective. Course of treatment may include mere
         observation or, where appropriate, no treatment at all. Experimental
         services or services generally regarded by the medical profession as
         unacceptable treatment are not medically necessary for purposes of this
         contract.

         Medically necessary services provided must be based on peer-reviewed
         publications, expert pediatric, psychiatric, and medical opinion, and
         medical/pediatric community acceptance.

         In the case of pediatric enrollees, this definition shall apply with
         the additional criteria that the services, including those found to be
         needed by a child as a result of a comprehensive screening visit or an
         inter-periodic encounter whether or not they are ordinarily covered
         services for all other Medicaid enrollees, are appropriate for the age
         and health status of the individual and that the service will aid the
         overall physical and mental growth and development of the individual
         and the service will assist in achieving or maintaining functional
         capacity.

         MEDICALLY NEEDY (MN) PERSON OR FAMILY--a person or family receiving
         services under the Medically Needy Program.

         MEDICARE--the program authorized by Title XVIII of the Social Security
         Act to provide payment for health services to federally defined
         populations.

                                                                            I-17

<PAGE>

         MEDICARE+CHOICE ORGANIZATION--an entity that contracts with CMS to
         offer a Medicare+Choice plan pursuant to 42 U.S.C. Section 1395w-27.

         MEMBER--an enrolled participant in the contractor's plan; also means
         enrollee.

         MINORITY POPULATIONS--Asian/Pacific Islanders, African-American/Black,
         Hispanic/ Latino, and American Indians/Alaska Natives.

         MIS--management information system.

         MULTILINGUAL--at a minimum, English and Spanish and any other language
         which is spoken by 200 enrollees or five percent of the enrolled
         Medicaid population of the contractor's plan, whichever is greater.

         NCQA--the National Committee for Quality Assurance.

         NEWBORN--an infant born to a mother enrolled in a contractor's plan at
         the time of birth.

         NEW JERSEY STATE PLAN OR STATE PLAN--the DHS/DMAHS document, filed with
         and approved by CMS, that describes the New Jersey Medicaid program.

         N.J.A.C.--New Jersey Administrative Code.

         NJ FAMILYCARE PLAN A--means the State-operated program which provides
         comprehensive managed care coverage to:

         -    Uninsured children below the age of 19 with family incomes up to
              and including 133 percent of the federal poverty level;

         -    Children under the age of one year and pregnant women eligible
              under the New Jersey Care...Special Medicaid Programs;

         -    Pregnant women up to 200 percent of the federal poverty level;

         -    AFDC eligibles [Reserved] who are in work-related extensions.

         In addition to covered managed care services, eligibles under this
         program may access certain other services which are paid
         fee-for-service by the State and not covered under this contract.

         NJ FAMILYCARE PLAN B--means the State-operated program which provides
         comprehensive managed care coverage, including all benefits provided
         through the New Jersey Care...Special Medicaid Programs, to uninsured
         children below the age of 19 with family incomes above 133 percent and
         up to and including 150 percent of the federal poverty level. In
         addition to covered managed care services, eligibles under this program
         may access certain other services which are paid fee-for-service and
         not covered under this contract.

         NJ FAMILYCARE PLAN C--means the State-operated program which provides
         comprehensive managed care coverage, including all benefits provided
         through the New

                                                                            I-18

<PAGE>

         Jersey Care...Special Medicaid Programs, to uninsured children below
         the age of 19 with family incomes above 150 percent and up to and
         including 200 percent of the federal poverty level. Eligibles are
         required to participate in cost-sharing in the form of monthly premiums
         and a personal contribution to care for most services. Exception - Both
         Eskimos and Native American Indians under the age of 19 years old,
         identified by Race Code 3, shall not participate in cost sharing, and
         shall not be required to pay a personal contribution to care. In
         addition to covered managed care services, eligibles under this program
         may access certain other services which are paid fee-for-service and
         not covered under this contract.

         NJ FAMILYCARE PLAN D--means the State-operated program which provides
         managed care coverage to uninsured:

         -    Parents/caretakers -with children below the age of 19 who do not
              qualify for AFDC Medicaid with family incomes up to and including
              [Reserved] 133 percent of the federal poverty level; and
              [Reserved]

         -    Children below the age of 19 with family incomes between 201
              percent and up to and including 350 percent of the federal poverty
              level.

         Eligibles with incomes above 150 percent of the federal poverty level
         are required to participate in cost sharing in the form of monthly
         premiums and copayments for most services with the exception of both
         Eskimos and Native American Indians under the age of 19 years. These
         groups are identified by Program Status Codes (PSCs) or Race Code on
         the eligibility system as indicated below. For clarity, the Program
         Status Codes or Race Code, in the case of Eskimos and Native American
         Indians under the age of 19 years, related to Plan D non-cost sharing
         groups are also listed.

<TABLE>
<CAPTION>
     PSC                 PSC                Race Code
Cost Sharing       No Cost Sharing       No Cost Sharing
------------       ---------------       ---------------
<S>                <C>                   <C>
[Reserved]           [Reserved]                 3
   493                  380
   494               [Reserved]
   495
[Reserved]
</TABLE>

         In addition to covered managed care services, eligibles under these
         programs may access certain services which are paid fee-for-service and
         not covered under this contract.

[Reserved]

[Reserved]

                                                                            I-19

<PAGE>

         [Reserved]

         [Reserved]

         [Reserved]

         NJ FAMILYCARE PLAN I -- means the State-operated program that provides
         certain benefits on a fee-for-service basis through the DMAHS for Plan
         D parents/caretakers with a program status code of 380.

         N.J.S.A.--New Jersey Statutes Annotated.

         NON-COVERED CONTRACTOR SERVICES--services that are not covered in the
         contractor's benefits package included under the terms of this
         contract.

         NON-COVERED MEDICAID SERVICES--all services that are not covered by the
         New Jersey Medicaid State Plan.

         NON-PARTICIPATING PROVIDER--a provider of service that does not have a
         contract with the contractor.

         OIT--the New Jersey Office of Information Technology.

         OTHER HEALTH COVERAGE--private non-Medicaid individual or group
         health/dental insurance. It may be referred to as Third Party Liability
         (TPL) or includes Medicare.

         OUT OF AREA SERVICES--all services covered under the contractor's
         benefits package included under the terms of the Medicaid contract
         which are provided to enrollees outside the defined basic service area.

         OUTCOMES--the results of the health care process, involving either the
         enrollee or provider of care, and may be measured at any specified
         point in time. Outcomes can be medical, dental, behavioral, economic,
         or societal in nature.

         OUTPATIENT CARE--treatment provided to an enrollee who is not admitted
         to an inpatient hospital or health care facility.

                                                                            I-20

<PAGE>

         P FACTOR (P7)--the grade of service for the telephone system. The digit
         following the P (e.g., 7) indicates the number of calls per hundred
         that are or can be blocked from the system. In this sample, P7 means
         seven (7) calls in a hundred may be blocked, so the system is designed
         to meet this criterion. Typically, the grade of service is designed to
         meet the peak busy hour, the busiest hour of the busiest day of the
         year.

         PARTICIPATING PROVIDER--a provider that has entered into a provider
         contract with the contractor to provide services.

         PARTIES-the DMAHS, on behalf of the DHS, and the contractor.

         PATIENT--an individual who is receiving needed professional services
         that are directed by a licensed practitioner of the healing arts toward
         the maintenance, improvement, or protection of health, or lessening of
         illness, disability, or pain.

         PAYMENTS--any amounts the contractor pays physicians or physician
         groups or subcontractors for services they furnished directly, plus
         amounts paid for administration and amounts paid (in whole or in part)
         based on use and costs of referral services (such as withhold amounts,
         bonuses based on referral levels, and any other compensation to the
         physician or physician groups or subcontractor to influence the use of
         referral services). Bonuses and other compensation that are not based
         on referral levels (such as bonuses based solely on quality of care
         furnished, patient satisfaction, and participation on committees) are
         not considered payments for purposes of the requirements pertaining to
         physician incentive plans.

         PEER REVIEW--a mechanism in quality assurance and utilization review
         where care delivered by a physician, dentist, or nurse is reviewed by a
         panel of practitioners of the same specialty to determine levels of
         appropriateness, effectiveness, quality, and efficiency.

         PERSONAL CONTRIBUTION TO CARE (PCC)--means the portion of the
         cost-sharing requirement for NJ FamilyCare Plan C enrollees in which a
         fixed monetary amount is paid for certain services/items received from
         contractor providers.

         PERSONAL INJURY (PI)--a program designed to recover the cost of medical
         services from an action involving the tort liability of a third party.

         PHYSICIAN GROUP--a partnership, association, corporation, individual
         practice association, or other group that distributes income from the
         practice among members. An individual practice association is a
         physician group only if it is composed of individual physicians and has
         no subcontracts with physician groups.

         PHYSICIAN INCENTIVE PLAN--any compensation arrangement between a
         contractor and a physician or physician group that may directly or
         indirectly have the effect of reducing or limiting services furnished
         to Medicaid beneficiaries enrolled in the organization.

         PMPD -- Per Member Per Delivery

                                                                            I-21

<PAGE>

         PMPM -- Per Member Per Month

         [Reserved]

         POSTSTABILIZATION CARE SERVICES--covered services, related to an
         emergency medical condition that are provided after an enrollee is
         stabilized in order to maintain the stabilized condition, or to improve
         or resolve the enrollee's condition.

         POTENTIAL ENROLLEE--a Medicaid recipient or individual eligible for, or
         applying for, NJ FamilyCare coverage who is subject to mandatory
         enrollment or may voluntarily elect to enroll in an MCO, but is not yet
         an enrollee of a specific MCO.

         PREPAID HEALTH PLAN--an entity that provides medical services to
         enrollees under a contract with the DHS and on the basis of prepaid
         capitation fees, but does not necessarily qualify as an MCE.

         PREVALENT LANGUAGE--a language other than English, spoken by a
         significant number or percentage of potential enrollees and enrollees
         in the State.

         PREVENTIVE SERVICES--services provided by a physician or other licensed
         practitioner of the healing arts within the scope of his or her
         practice under State law to:

                  A.       Prevent disease, disability, and other health
                           conditions or their progression;

                  B.       Treat potential secondary conditions before they
                           happen or at an early remediable stage;

                  C.       Prolong life; and

                  D.       Promote physical and mental health and efficiency

         PRIMARY CARE DENTIST (PCD)--a licensed dentist who is the health care
         provider responsible for supervising, coordinating, and providing
         initial and primary dental care to patients; for initiating referrals
         for specialty care; and for maintaining the continuity of patient care.

         PRIMARY CARE--all health care services and laboratory services
         customarily furnished by or through a general practitioner, family
         physician, internal medicine physician, obstetrician/gynecologist, or
         pediatrician, to the extent the furnishing of those services is legally
         authorized in the State in which the practitioner furnishes them.

         PRIMARY CARE PROVIDER (PCP)--a licensed medical doctor (MD) or doctor
         of osteopathy (DO) or certain other licensed medical practitioner who,
         within the scope of practice and in accordance with State
         certification/licensure requirements, standards, and practices, is
         responsible for providing all required primary care services to
         enrollees, including

                                                                            I-22

<PAGE>

         periodic examinations, preventive health care and counseling,
         immunizations, diagnosis and treatment of illness or injury,
         coordination of overall medical care, record maintenance, and
         initiation of referrals to specialty providers described in this
         contract and the Benefits Package, and for maintaining continuity of
         patient care. A PCP shall include general/family practitioners,
         pediatricians, internists, and may include specialist physicians,
         physician assistants, CNMs or CNPs/CNSs, provided that the practitioner
         is able and willing to carry out all PCP responsibilities in accordance
         with these contract provisions and licensure requirements.

         PRIOR AUTHORIZATION (ALSO KNOWN AS "PRE-AUTHORIZATION" OR "APPROVAL")--
         authorization granted in advance of the rendering of a service after
         appropriate medical/dental review.

         PRIVATE DUTY NURSING (PDN)--individual and continuous nursing care, as
         different from part-time or intermittent care, provided by licensed
         nurses in the community to eligible EPSDT beneficiaries.

         PROVIDER--means any physician, hospital, facility, or other health care
         professional who is licensed or otherwise authorized to provide health
         care services in the state or jurisdiction in which they are furnished.

         PROVIDER CAPITATION--a set dollar payment per patient per unit of time
         (usually per month) that the contractor pays a provider to cover a
         specified set of services and administrative costs without regard to
         the actual number of services.

         PROVIDER CONTRACT--any written contract between the contractor and a
         provider that requires the provider to perform specific parts of the
         contractor's obligations for the provision of health care services
         under this contract.

         QAPI--Quality Assessment and Performance Improvement.

         QARI--Quality Assurance Reform Initiative.

         QIP--Quality Improvement Project.

         QISMC--Quality Improvement System for Managed Care.

         QUALIFIED INDIVIDUAL WITH A DISABILITY--an individual with a disability
         who, with or without reasonable modifications to rules, policies, or
         practices, the removal of architectural, communication, or
         transportation barriers, or the provision of auxiliary aids and
         services, meets the essential eligibility requirements for the receipt
         of services or the participation in programs or activities provided by
         a public entity (42 U.S.C. Section 12131).

         REASSIGNMENT--the process by which an enrollee's entitlement to receive
         services from a particular Primary Care Practitioner/Dentist is
         terminated and switched to another PCP/PCD.

                                                                            I-23

<PAGE>

         REFERRAL SERVICES--those health care services provided by a health
         professional other than the primary care practitioner and which are
         ordered and approved by the primary care practitioner or the
         contractor.

                  Exception A: An enrollee shall not be required to obtain a
                  referral or be otherwise restricted in the choice of the
                  family planning provider from whom the enrollee may receive
                  family planning services.

                  Exception B: An enrollee may access services at a Federally
                  Qualified Health Center (FQHC) in a specific enrollment area
                  without the need for a referral when neither the contractor
                  nor any other contractor has a contract with the Federally
                  Qualified Health Center in that enrollment area and the cost
                  of such services will be paid by the Medicaid fee-for-service
                  program.

         REINSURANCE--an agreement whereby the reinsurer, for a consideration,
         agrees to indemnify the contractor, or other provider, against all or
         part of the loss which the latter may sustain under the enrollee
         contracts which it has issued.

         RISK [Reserved] CONTRACT--a contract under which the contractor assumes
         risk for the cost of the services covered under the contract, and
         [Reserved] may incur a loss [Reserved] if the cost of providing
         services [Reserved] exceeds the payments made by the Department to the
         contractor for services covered under the contract.

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

         RISK POOL - an account(s) funded with revenue from which medical claims
         of risk pool members are paid. If the claims paid exceed the revenues
         funded to the account, the participating providers shall fund part or
         all of the shortfall. If the funding exceeds paid claims, part or all
         of the excess is distributed to the participating providers.

         RISK THRESHOLD--the maximum liability, if the liability is based on
         referral services, to which a physician or physician group may be
         exposed under a physician incentive plan without being at substantial
         financial risk.

                                                                            I-24

<PAGE>

         ROUTINE CARE--treatment of a condition which would have no adverse
         effects if not treated within 24 hours or could be treated in a less
         acute setting (e.g., physician's office) or by the patient.

         SAFETY-NET PROVIDERS OR ESSENTIAL COMMUNITY PROVIDERS--public-funded or
         government-sponsored clinics and health centers which provide
         specialty/specialized services which serve any individual in need of
         health care whether or not covered by health insurance and may include
         medical/dental education institutions, hospital-based programs,
         clinics, and health centers.

         SAP--Statutory Accounting Principles.

         SCOPE OF SERVICES--those specific health care services for which a
         provider has been credentialed, by the plan, to provide to enrollees.

         SCREENING SERVICES--any encounter with a health professional practicing
         within the scope of his or her profession as well as the use of
         standardized tests given under medical direction in the examination of
         a designated population to detect the existence of one or more
         particular diseases or health deviations or to identify for more
         definitive studies individuals suspected of having certain diseases.

         SECRETARY--the Secretary of the United States Department of Health and
         Human Services.

         SEMI--Special Education Medicaid Initiative, a federal Medicaid program
         that allows for reimbursement to local education agencies for certain
         special education related services (e.g., physical therapy,
         occupational therapy, and speech therapy).

         SERVICE AREA--the geographic area or region comprised of those counties
         as designated in the contract.

         SERVICE AUTHORIZATION REQUEST--a managed care enrollee's request for
         the provision of a service.

         SERVICE LOCATION/SERVICE SITE--any location at which an enrollee
         obtains any health care service provided by the contractor under the
         terms of the contract.

         SHORT TERM--a period of 30 calendar days or less.

         SIGNING DATE--the date on which the parties sign this contract. In no
         event shall the signing date be later than 5 P.M. Eastern Standard Time
         on March 17, 2000.

         SPECIAL MEDICAID PROGRAMS--programs for: (a) AFDC/TANF-related family
         members who do not qualify for cash assistance, and (b) SSI-related
         aged, blind and disabled individuals whose incomes or resources exceed
         the SSI Standard.

                  For AFDC/TANF, they are:

                                                                            I-25

<PAGE>

                  Medicaid Special: covers children ages 19 to 21 using AFDC
                  standards; New Jersey Care: covers pregnant women and children
                  up to age 1 with incomes at or below 185 percent of the
                  federal poverty level (FPL); children up to age 6 at 133
                  percent of FPL; and children up to age 13 (the age range
                  increases annually, pursuant to federal law until children up
                  to age 18 are covered) at 100 percent of FPL.

                  For SSI-related, they are:

                  Community Medicaid Only-provides full Medicaid benefits for
                  aged, blind and disabled individuals who meet the SSI age and
                  disability criteria, but do not receive cash assistance,
                  including former SSI recipients who receive Medicaid
                  continuation;

                  New Jersey Care-provides full Medicaid benefits for all
                  SSI-related Aged, Blind, and Disabled individuals with income
                  below 100 percent of the federal poverty level and resources
                  at or below 200 percent of the SSI resource standard.

         SSI--the Supplemental Security Income program, which provides cash
         assistance and full Medicaid benefits for individuals who meet the
         definition of aged, blind, or disabled, and who meet the SSI financial
         NEEDS criteria.

         STAFF MODEL--a type of HMO operation in which HMO employees are
         responsible for both administrative and medical functions of the plan.
         Health professionals, including physicians, are reimbursed on a salary
         or fee-for-service basis. These employees are subject to all policies
         and procedures of the HMO. In addition, the HMO may contract with
         external entities to supplement its own staff resources (e.g., referral
         services of specialists).

         STANDARD SERVICE PACKAGE-see "COVERED SERVICES" and "BENEFITS PACKAGE"

         STATE--the State of New Jersey.

         STATE PLAN-see "NEW JERSEY STATE PLAN"

         STOP-LOSS--the dollar amount threshold above which the contractor
         insures the financial coverage for the cost of care for an enrollee
         through the use of an insurance underwritten policy.

         SUBCONTRACT--any written contract between the contractor and a third
         party to perform a specified part of the contractor's obligations under
         this contract.

         SUBCONTRACTOR--any third party who has a written contract with the
         contractor to perform a specified part of the contractor's obligations
         under this contract.

         SUBCONTRACTOR PAYMENTS--any amounts the contractor pays a provider or
         subcontractor for services they furnish directly, plus amounts paid for
         administration and amounts paid (in whole or in part) based on use and
         costs of referral services (such as withhold

                                                                            I-26

<PAGE>

         amounts, bonuses based on referral levels, and any other compensation
         to the physician or physician group to influence the use of referral
         services). Bonuses and other compensation that are not based on
         referral levels (such as bonuses based solely on quality of care
         furnished, patient satisfaction, and participation on committees) are
         not considered payments for purposes of physician incentive plans.

         SUBSTANTIAL CONTRACTUAL RELATIONSHIP--any contractual relationship that
         provides for one or more of the following services: 1) the
         administration, management, or provision of medical services; and 2)
         the establishment of policies, or the provision of operational support,
         for the administration, management, or provision of medical services.

         TANF--Temporary Assistance for Needy Families, which replaced the
         federal AFDC program.

         TARGET POPULATION--the population of individuals eligible for
         Medicaid/NJ FamilyCare residing within the stated enrollment area and
         belonging to one of the categories of eligibility found in Article Five
         from which the contractor may enroll, not to exceed any limit specified
         in the contract.

         TDD--Telecommunication Device for the Deaf.

         TT-Tech Telephone.

         TERMINAL ILLNESS--a condition in which it is recognized that there will
         be no recovery, the patient is nearing the "terminus" of life and
         restorative treatment is no longer effective.

         THIRD PARRY--any person, institution, corporation, insurance company,
         public, private or governmental entity who is or may be liable in
         contract, tort, or otherwise by law or equity to pay all or part of the
         medical cost of injury, disease or disability of an applicant for or
         recipient of medical assistance payable under the New Jersey Medical
         Assistance and Health Services Act N.J.S.A. 30:4D-1 et seq.

         THIRD PARTY LIABILITY--the liability of any individual or entity,
         including public or private insurance plans or programs, with a legal
         or contractual responsibility to provide or pay for medical/dental
         services. Third Party is defined in N.J.S.A. 30:4D-3m.

         TRADITIONAL PROVIDERS--those providers who have historically delivered
         medically necessary health care services to Medicaid enrollees and have
         maintained a substantial Medicaid portion in their practices.

         TRANSFER--an enrollee's change from enrollment in one contractor's plan
         to enrollment of said enrollee in a different contractor's plan.

         UNCONTESTED CLAIM--A claim that can be processed without obtaining
         additional information from the provider of the service or third party.

                                                                            I-27

<PAGE>

         URGENT CARE--treatment of a condition that is potentially harmful to a
         patient's health and for which his/her physician determined it is
         medically necessary for the patient to receive medical treatment within
         24 hours to prevent deterioration.

         UTILIZATION--the rate patterns of service usage or types of service
         occurring within a specified time.

         UTILIZATION REVIEW--procedures used to monitor or evaluate the clinical
         necessity, appropriateness, efficacy, or efficiency of health care
         services, procedures or settings, and includes ambulatory review,
         prospective review, concurrent review, second opinions, care
         management, discharge planning, or retrospective review.

         VOLUNTARY ENROLLMENT--the process by which a Medicaid eligible
         individual voluntarily enrolls in a contractor's plan.

         WIC--A special supplemental food program for Women, Infants, and
         Children.

         WITHHOLD--a percentage of payments or set dollar amounts that a
         contractor deducts from a practitioner's service fee, capitation, or
         salary payment, and that may or may not be returned to the physician,
         depending on specific predetermined factors.

                                                                            I-28

<PAGE>

ARTICLE TWO: CONDITIONS PRECEDENT

         A.       This contract shall be with qualified, established HMOs
                  operating in New Jersey through a Certificate of Authority for
                  the Medicaid/[Reserved]-NJ FAMILYCARE line of business
                  approved by the New Jersey Department of Banking and Insurance
                  and Department of Health and Senior Services. The contractor
                  shall receive all necessary authorizations and approvals of
                  governmental or regulatory authorities to operate in the
                  service/enrollment areas as of the effective date of
                  operations.

         B.       The contractor shall ensure continuity of care and full access
                  to primary, specialty, and ancillary care as required under
                  this contract and access to full administrative programs and
                  support services offered by the contractor for all its lines
                  of business and/or otherwise required under this contract.

         C.       The contractor shall, by the effective date, have received all
                  necessary authorizations and approvals of governmental or
                  regulatory authorities including an approved Certificate of
                  Authority (COA) to operate in all counties in a geographic
                  region as defined in Article 5.1 or shall have an approved (by
                  DMAHS) county phase-in plan defined in Section H. This Article
                  does not and is not intended to require the contractor to
                  obtain COAs in all three geographic regions.

         D.       Documentation. Subsequent to the signing date by the
                  contractor but prior to contract execution by the Department,
                  the Department shall review and approve the materials listed
                  in a precontracting checklist issued by the DMAHS.
                  [Reserved]

         E.       Readiness Review. The Department will, prior to the signing
                  date, conduct a readiness review of the areas set forth in
                  Section B.2.3 of the Appendices to generally assess the
                  contractor's readiness to begin operations and issue a letter
                  to the contractor that conveys its findings and any changes
                  required before contracting with the Department.

         F.       This contract, as well as any attachments or appendices hereto
                  shall only be effective, notwithstanding any provisions in
                  such contract to the contrary, upon the receipt of federal
                  approval and approval as to form by the Office of the Attorney
                  General for the State of New Jersey.

         G.       The contractor shall remain in compliance with the following
                  conditions which shall satisfy the Departments of Banking and
                  Insurance, Health and Senior Services, and Human Services
                  prior to this contract becoming effective:

                  1.       The contractor shall maintain an approved certificate
                           of authority to operate as a health maintenance
                           organization in New Jersey from the Department of
                           Banking and Insurance and the Department of Health
                           and Senior Services for the Medicaid/NJ FamilyCare
                           population.

                                                                          II - 1

<PAGE>

                  2.       The contractor shall comply with and remain in
                           compliance with minimum net worth and fiscal solvency
                           and reporting requirements of the Department of
                           Banking and Insurance, the Department of Human
                           Services, the federal government, and this contract.

                  3.       The contractor shall provide written certification of
                           new written contracts for all providers other than
                           FQHCs and shall provide copies of fully executed
                           contracts for new contracts with FQHCs on a quarterly
                           basis.

                  4.       If insolvency protection arrangements change, the
                           contractor shall notify the DMAHS sixty (60) days
                           before such change takes effect and provide written
                           copy of DOBI approval.

         H.       County Expansion Phase-In Plan. If the contractor does not
                  have an approved COA for each of the counties in a designated
                  region, the contractor shall submit to DMAHS a county
                  expansion phase-in plan for review and approval by DMAHS prior
                  to the execution of this contract. The plan shall include
                  detailed information of:

                  -    The region and names of the counties targeted for
                       expansion;

                  -    Anticipated dates of the submission of the COA
                       modification to DOBI and DHSS (with copies to DMAHS);

                  -    Anticipated date of approval of the COA;

                  -    Anticipated date for full operations in the region;

                  -    Anticipated date for initial beneficiary enrollment in
                       each county

                  The phase-in plan shall indicate that full expansion into a
                  region shall be completed by June 30, [Reserved] 2004. The
                  contractor shall maintain full coverage for each county in
                  each region in which the contractor operates for the duration
                  of this contract.

         I.       No court order, administrative decision, or action by any
                  other instrumentality of the United States Government or the
                  State of New Jersey or any other state is outstanding which
                  prevents implementation of this contract.

         J.       Net Worth

                  1.       The contractor shall maintain a minimum net worth in
                           accordance with N.J.A.C. Title 8:38-11 et seq.

                  2.       The Department shall have the right to conduct
                           targeted financial audits of the contractor's
                           Medicaid/NJ FamilyCare line of business. The
                           contractor

                                                                          II - 2

<PAGE>

                           shall provide the Department with financial data, as
                           requested by the Department, within a timeframe
                           specified by the Department.

         K.       The contractor shall comply with the following financial
                  operations requirements:

                  1.       A contractor shall establish and maintain:

                           a.   An office in New Jersey, and

                           b.   Premium and claims accounts in a bank with a
                                principal office in New Jersey.

                  2.       The contractor shall have a fiscally sound operation
                           as demonstrated by:

                           a.       Maintenance of a minimum net worth in
                                    accordance with DOBI requirements (total
                                    line of business) and the requirements
                                    outlined in G and J above and Article 8.2.

                           b.       Maintenance of a net operating surplus for
                                    Medicaid/NJ FamilyCare line of business. If
                                    the contractor fails to earn a net operating
                                    surplus during the most recent calendar year
                                    or does not maintain minimum net worth
                                    requirements on a quarterly basis, it shall
                                    submit a plan of action to DMAHS within the
                                    time frame specified by the Department. The
                                    plan is subject to the approval of DMAHS. It
                                    shall demonstrate how and when minimum net
                                    worth will be replenished and present
                                    marketing and financial projections. These
                                    shall be supported by suitable back-up
                                    material. The discussion shall include
                                    possible alternate funding sources,
                                    including invoking of corporate parental
                                    guarantee. The plan will include:

                                    i.       A detailed marketing plan with
                                             enrollment projections for the next
                                             two years.

                                    ii.      A projected balance sheet for the
                                             next two years,

                                    iii.     A projected statement of revenues
                                             and expenses on an accrual basis
                                             for the next two years.

                                    iv.      A statement of cash flow projected
                                             for the next two years.

                                    v.       A description of how to maintain
                                             capital requirements and replenish
                                             net worth.

                                    vi.      Sources and timing of capital shall
                                             be specifically identified.

                  3.       The contractor may be required to obtain prior to
                           this contract and maintain "Stop-Loss" insurance,
                           pursuant to provisions in Article 8.3.2.

                                                                          II - 3

<PAGE>

                  4.       The contractor shall obtain prior to this contract
                           and maintain for the duration of this contract, any
                           extension thereof or for any period of liability
                           exposure, protection against insolvency pursuant to
                           provisions in G above and Article 8.2.

         L.       CERTIFICATIONS--The contractor shall comply with required
                  certifications, program integrity and prohibited affiliation
                  requirements of 42 CFR 438 subpart H as a condition for
                  receiving payment under this contract. Data that must be
                  certified include, but are not limited to, enrollment data,
                  encounter data, and other information specified in this
                  contract.

                                                                          II - 4

<PAGE>

ARTICLE THREE: MANAGED CARE MANAGEMENT INFORMATION SYSTEM

The contractor's MCMIS shall provide certain minimum functional capabilities as
described in this contract. The contractor shall have sophisticated information
systems capabilities that support the specific requirements of this contract, as
well as respond to future program requirements. The DHS shall provide the
contractor with what the DHS, in its sole discretion, believes is sufficient
lead time to make system changes.

The various components of the contractor's MCMIS shall be sufficiently
integrated to effectively and efficiently support the requirements of this
contract. The contractor's MCMIS shall also be a collection point and repository
for all data required under this contract and shall provide comprehensive
information retrieval capabilities. Contractors with multiple systems and/or
subcontracted health care services shall integrate the data, at a minimum, to
provide for combined reporting and, as required, to support the required
processing functions.

3.1      GENERAL OPERATIONAL REQUIREMENTS FOR THE MCMIS

         The following requirements apply to the contractor's MCMIS. Any
         reference to "systems" in this Article shall mean contractor's MCMIS
         unless otherwise specified. If the contractor subcontracts any MCMIS
         functions, then these requirements apply to the subcontractor's
         systems. For example, if the contractor contracts with a dental network
         to provide services and pay claims/collect encounters, then these
         requirements shall apply to the dental network's systems. However, if
         the contractor contracts with a dental network only to provide dental
         services, then these requirements do not apply.

3.1.1    ONLINE ACCESS

         The system(s) shall provide online access for contractor use to all
         major files and data elements within the MIS including enrollee
         demographic and enrollment information, provider demographic and
         enrollment data, processed claims and encounters, prior approvals,
         referrals, reference files, and payment and financial transactions.

3.1.2    PROCESSING REQUIREMENTS

         A.       Timely Processing. The contractor shall provide for timely
                  updates and edits for all transactions on a schedule that
                  allows the contractor to meet the State's performance
                  requirements. In general, the State expects the following
                  schedule:

                  1.       Enrollee and provider file updates to be daily

                  2.       Reference file updates to be at least weekly or as
                           needed

                  3.       Prior authorizations and referral updates to be daily

                  4.       Claims and encounters to be processed (entered and
                           edited) daily

                  5.       Claim payments to be at a minimum biweekly

                  6.       Capitation payments to be monthly

                                                                           III-1

<PAGE>

                  Specific update schedule requirements are identified in the
                  remaining subarticles of this Article.

         B.       Error Tracking and Audit Trails. The update and edit processes
                  for each transaction shall provide for the monitoring of
                  errors incurred by type of error and frequency. The system
                  shall maintain information indicating the errors failed, the
                  person making the corrections, when the correction was made,
                  and if the error was overridden on all critical transactions
                  (e.g., terminating enrollment or denying a claim). The major
                  update processes shall maintain sufficient audit trails to
                  allow reconstruction of the processing events.

         C.       Comprehensive Edits and Audits. The contractor's system shall
                  provide for a comprehensive set of automated edits and audits
                  that will ensure the data are valid, the benefits are covered
                  and appropriate, the payments are accurate and timely, other
                  insurance is maximized, and all of the requirements of this
                  contract are met.

         D.       System Controls and Balancing. The contractor's system shall
                  provide adequate control totals for balancing and ensuring
                  that all inputs are accounted for. The contractor shall have
                  operational procedures for balancing and validating all
                  outputs and processes. Quality checkpoints should be as
                  automated as possible.

         E.       Multimedia Input Capability. The system shall support a
                  variety of input media formats including hardcopy, diskette,
                  tape, clearing house, direct entry, electronic transmission or
                  other means, as defined by all federal and State laws and
                  regulations. The contractor may use any clearing house(s)
                  and/or alternatively provide for electronic submissions
                  directly from the provider to the contractor. These
                  requirements apply to claims/encounter and prior authorization
                  (PA), referral, and UM subsystems. Provider/vendor data must
                  be routed through the contractor when submitting
                  data/information to the State.

         F.       Backup/Restore and Archiving. The contractor shall provide for
                  periodic backup of all key processing and transaction files
                  such that there will be a minimum of interruption in the event
                  of a disaster. Unless otherwise agreed by the State, key
                  processes must be restored as follows:

                  1.       Enrollment verification - twenty-four (24) hours

                  2.       Enrollment update process - twenty-four (24) hours

                  3.       Prior authorization/referral processing - twenty-four
                           (24) hours

                  4.       Claims/encounter processing - seventy-two (72) hours

                  5.       Encounter submissions to State - one (1) week

                  6.       Other functions - two (2) weeks

                  The contractor shall demonstrate its restore capabilities at
                  least once a year. The contractor shall also provide for
                  permanent archiving of all major files for a

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<PAGE>

                  period of no less than seven (7) years. The contractor's
                  backup/recover plan must be approved by State.

3.1.3    REPORTING AND DOCUMENTATION REQUIREMENTS

         A.       Regular Reporting. The contractor's system shall provide
                  sufficient reports to meet the requirements of this contract
                  as well as to support the efficient and effective operation of
                  its business functions. The required reports, including time
                  frames and format requirements, are in Section A of the
                  Appendices.

         B.       Ad Hoc Reporting. The contractor shall have the capability to
                  support ad hoc reporting requests, in addition to those listed
                  in this contract, both from its own organization and from the
                  State in a reasonable time frame. The time frame for
                  submission of the report will be determined by DMAHS with
                  input from the contractor based on the nature of the report.
                  DMAHS shall at its option request six (6) to eight (8) reports
                  per year, hardcopy or electronic reports and/or file extracts.
                  This does not preclude or prevent DMAHS from requiring, or the
                  contractor from providing, additional reports that are
                  required by State or federal governmental entities or any
                  court of competent jurisdiction.

         C.       System Documentation. The contractor shall update
                  documentation on its system(s) within 30 days of
                  implementation of the changes. The contractor's documentation
                  must include a system introduction, program overviews,
                  operating environment, external interfaces, and data element
                  dictionary. For each of the functional components, the
                  documentation should include where applicable program
                  narratives, processing flow diagrams, forms, screens, reports,
                  files, detailed logic such as claims pricing algorithms and
                  system edits. The documentation should also include job
                  descriptions and operations instructions. The contractor shall
                  have available current documentation on-site for State audit
                  as requested.

3.1.4    OTHER REQUIREMENTS

       [Reserved] Future Changes. The system shall be easily modifiable to
                  accommodate future system changes/enhancements to claims
                  processing or other related systems at the same time as
                  changes take place in the State's MMIS. In addition, the
                  system shall be able to accommodate all future requirements
                  based upon federal and State statutes, policies and
                  regulations. Unless otherwise agreed by the State, the
                  contractor shall be responsible for the costs of these
                  changes.

       [Reserved]

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<PAGE>

3.2      ENROLLEE SERVICES

         The MCMIS shall support all of the enrollee services as specified in
         Article 5 of this contract. The system shall:

         A.       Capture and maintain contractor enrollment data
                  electronically.

         B.       Provide information so that the contractor can send plan
                  materials and information to enrollees.

         C.       Capture electronically the Primary Care Provider (PCP)
                  selections by enrollees as well as enrollee health profiles
                  from the Health Benefits Coordinator and/or the State.

         D.       Provide contractor enrollment and Medicaid information to
                  providers.

         E.       Maintain an enrollee complaint and grievance tracking system
                  for Medicaid and NJ FamilyCare enrollees.

         F.       Produce the required enrollee data reports.

         The enrollee module(s) shall interface with all other required modules
         and permit the access, search, and retrieval of enrollee data by key
         fields, including date-sensitive information.

3.2.1    CONTRACTOR ENROLLMENT DATA

         A.       Enrollee Data. The contractor shall maintain a complete
                  history of enrollee information, including contractor
                  enrollment, primary care provider selection or assignment,
                  third party liability coverage, and Medicare coverage. In
                  addition, the contractor shall capture demographic information
                  relating to the enrollee (age, sex, county, etc.), information
                  related to family linkages, information relating to benefit
                  and service limitations, and information related to health
                  care for enrollees with special needs.

         B.       Updates. The contractor shall accept and process a weekly
                  enrollment and eligibility file (the managed care register
                  files; See Section B.3.2 of the Appendices) within 48 hours of
                  receipt from the Department. The system shall provide reports
                  that identify all errors encountered, count all transactions
                  processed, and provide for a complete audit trail of the
                  update processes. The MCMIS shall accommodate the following
                  specific Medicaid/NJ FamilyCare requirements.

                  1.       The contractor shall be able to access and identify
                           all enrollees by their Medicaid/NJ FamilyCare
                           Identification Number. This number shall be readily
                           cross-referenced to the contractor's enrollee number
                           and the

                                                                           III-4

<PAGE>

                           enrollee's social security number. For DYFS cases, it
                           is important that the contractor's system be able to
                           distinguish the DYFS enrolled children from other
                           cases and that mailings to the DYFS enrolled children
                           not be consolidated based on the first 10 digits of
                           the Medicaid ID number because the family members may
                           not be residing together.

                  2.       The system shall be able to link family members for
                           on-line inquiry access and for consolidated mailings
                           based on the first ten-digits of the Medicaid ID
                           number.

                  3.       The system shall be able to identify newborns from
                           the date of birth, submit the proper eligibility form
                           to the State, and link the newborn record to the NJ
                           FamilyCare/Medicaid eligibility and enrollment data
                           when these data are received back from the State.

                  4.       The system shall capture and maintain all of the data
                           elements provided by the Department on the weekly
                           update files.

                  5.       The system shall allow for day-specific enrollment
                           into the contractor's plan.

3.2.2    ENROLLEE PROCESSING REQUIREMENTS

         The contractor's system shall support the enrollee processing
         requirements of this contract. The system shall be modified/enhanced as
         required to meet the contract requirements in an efficient manner and
         ensure that each requirement is consistently and accurately
         administered by the contractor. Materials shall be sent to the enrollee
         or authorized representative, as applicable.

         A.       Enrollee Notification. The contractor shall issue contractor
                  plan materials and information to all new enrollees prior to
                  the effective date of enrollment or within seven (7) calendar
                  days following the receipt of weekly enrollment file specified
                  above, or, in case of retroactive enrollment, issue the
                  materials by the 1st of the subsequent month or within seven
                  (7) calendar days following receipt of the weekly enrollment
                  file. The specifications for the contractor plan materials and
                  information are listed in Article 5.8.

         B.       ID Cards. The contractor shall issue an Identification Card to
                  all new enrollees within ten (10) calendar days following
                  receipt of the weekly enrollment file specified above but no
                  later than seven (7) calendar days after the effective date of
                  enrollment.

                  The specifications for Identification Cards are in Article
                  5.8.5. The system shall produce ID cards that include the
                  information required in that Article. The contractor shall
                  also be able to produce replacement cards on request.

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<PAGE>

         C.       PCP Selection. The contractor shall provide the enrollee with
                  the opportunity to select a PCP. If no selection is made by
                  the enrollee, the contractor shall assign the PCP for the
                  enrollee according to the timeframes specified in Article 5.9.

                  If the enrollee selects a PCP, the contractor shall process
                  the selection. The contractor is responsible for monitoring
                  the PCP capacity and limitations prior to assignment of an
                  enrollee to a PCP. The contractor shall notify the enrollee
                  accordingly if a selected PCP is not available.

                  The contractor shall notify the PCP of newly assigned
                  enrollees or any other enrollee roster changes that affect the
                  PCP monthly by the second working day of the month.

         D.       Other Enrollee Processing. The contractor's enrollee
                  processing shall also support the following:

                  1.       Notification [Reserved] to the State of any enrollee
                           demographic changes including date of death, change
                           of address, newborns, and commercial enrollment.

                  2.       Generation of correspondence to enrollees based on
                           variable criteria, including PCP and demographic
                           information.

3.2.3    CONTRACTOR ENROLLMENT VERIFICATION

         A.       Electronic Verification System. The contractor shall provide a
                  system that supports the electronic verification of contractor
                  enrollment to network providers via the telephone 24 hours a
                  day and 365 days a year or on a schedule approved by the
                  State. This capability should require the enrollee's
                  contractor Identification Number, the Medicaid/NJ FamilyCare
                  Identification Number, or the Social Security Number. The
                  system should provide information on the enrollee's current
                  PCP as well as the enrollment information.

         B.       Telephone Enrollment Inquiry. The contractor shall provide
                  telephone operator personnel (both member services and
                  provider services) to verify contractor enrollment during
                  normal business hours. The contractor's telephone operator
                  personnel should have the capability to electronically verify
                  contractor enrollment based on a variety of fields, including
                  contractor Identification Number, Medicaid/NJ FamilyCare
                  Identification Number, Social Security Number, Enrollee Name,
                  Date of Birth. [Reserved]

                  The contractor shall ensure that a recorded message is
                  available to providers when enrollment capability is
                  unavailable for any reason.

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<PAGE>

3.2.4    ENROLLEE COMPLAINT AND GRIEVANCE TRACKING SYSTEM

         The contractor shall develop an electronic system to capture and track
         the content and resolution of enrollee complaints or grievances.

         A.       Data Requirements. The system shall capture, at a minimum, the
                  enrollee, the reason for the complaint or grievance, the date
                  the complaint or grievance was reported, the operator who
                  talked to the enrollee, the explanation of the resolution, the
                  date the complaint or grievance was resolved, the person who
                  resolved the complaint or grievance, referrals to other
                  departments, and comments including general information and/or
                  observations. See Article 5.15.

         B.       Processing and Reporting. The contractor shall identify trends
                  in complaint and grievance reasons and responsiveness to the
                  complaints or grievances. The system shall provide detail
                  reports to be used in tracking individual complaints and
                  grievances. The system shall also produce summary reports that
                  include statistics indicating the number of complaints and
                  grievances, the types, the dispositions, and the average time
                  for dispositioning, broken out by category of eligibility. See
                  Article 5.15.

3.2.5    ENROLLEE REPORTING

         The contractor shall produce all of the reports according to the
         timeframes and specifications outlined in Section A of the Appendices.

         The contractor shall provide the State with a monthly file of enrollees
         (See Section A.3.1 of the Appendices). The State's fiscal agent will
         reconcile this file with the State's Recipient File. The contractor
         shall provide for reconciling any differences and taking the
         appropriate corrective action.

3.3      PROVIDER SERVICES

         The contractor's system shall collect, process, and maintain current
         and historical data on program providers. This information shall be
         accessible to all parts of the MCMIS for editing and reporting.

3.3.1    PROVIDER INFORMATION AND PROCESSING REQUIREMENTS

         A.       Provider Data. The contractor shall maintain individual and
                  group provider network information with basic demographics,
                  EIN or tax identification number, professional credentials,
                  license and/or certification numbers and dates, sites, risk
                  arrangements (i.e., individual and group risk pools), services
                  provided, payment methodology and/or reimbursement schedules,
                  group/individual provider relationships, facility linkages,
                  number of grievances and/or complaints.

                  For PCPs, the contractor shall maintain identification as
                  traditional or safety net

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<PAGE>

                  provider, specialties, enrollees with beginning and ending
                  effective dates, capacity, emergency arrangements or contact,
                  other limitations or restrictions, languages spoken, address,
                  office hours, disability access. See Articles 4.8 and 5.

                  The contractor shall maintain provider history files and
                  provide for easy data retrieval. The system should maintain
                  audit trails of key updates.

                  Providers should be identified with a unique number. The
                  contractor shall be able to cross-reference its provider
                  number with the provider's EIN or tax number, the provider's
                  license number, UPIN, Medicaid provider number, and Medicare
                  provider number where applicable. The contractor shall comply
                  with HIPAA requirements for provider identification.

         B.       Updates. The contractor shall apply updates to the provider
                  file daily.

         C.       Complaint Tracking System. The system shall provide for the
                  capabilities to track and report provider complaints as
                  specified in Article 6.5. The contractor shall provide detail
                  reports identifying open complaints and summary statistics by
                  provider on the types of complaints, resolution, and average
                  time for resolution.

3.3.2    PROVIDER CREDENTIALING

         A.       Credentialing. The contractor shall credential and
                  re-credential each network provider as specified in Article
                  4.6.1. The system should provide a tracking and reporting
                  system to support this process.

         B.       Review. The contractor shall be able to flag providers for
                  review based on problems identified during credentialing,
                  information received from the State, information received from
                  CMS, complaints, and in-house utilization review results.
                  Flagging providers should cause all claims to deny as
                  appropriate.

3.3.3    PROVIDER/ENROLLEE LINKAGE

         A.       Enrollee Rosters. The contractor shall generate electronic
                  and/or hard copy enrollee rosters to its PCPs each month by
                  the second business day of the month. The rosters shall
                  indicate all enrollees that are assigned to the PCP and should
                  provide the provider with basic demographic and enrollment
                  information related to the enrollee.

         B.       Provider Capacity. The contractor's system shall support the
                  provider network requirements described in Article 4.8.

3.3.4    PROVIDER MONITORING

         The contractor's system shall support monitoring and tracking of
         provider/enrollee complaints, grievances and appeals from receipt to
         disposition. The system shall be able

                                                                           III-8

<PAGE>

         to produce provider reports for quality of medical and dental care
         analysis, flag and identify providers with restrictive conditions
         (e.g., fraud monitoring), and identify the confidentiality level of
         information (i.e., to manage who has access to the information).

3.3.5    REPORTING REQUIREMENTS

         The contractor shall produce all of the reports identified in Section A
         of the Appendices. In addition, the system shall provide ongoing and
         periodic reports to monitor provider activity, support provider
         contracting, and provide administrative and management information as
         required for the contractor to effectively operate.

3.4      CLAIMS/ENCOUNTER PROCESSING

         The system shall capture and adjudicate all claims and encounters
         submitted by providers. The major functions of this module(s) include
         enrollee enrollment verification, provider enrollment verification,
         claims and encounter edits, benefit determination, pricing, medical
         review and claims adjudication, and claims payment. Once claims and
         encounters are processed, the system shall maintain the
         claims/encounter history file that supports the State's encounter
         reporting requirements as well as all of the utilization management and
         quality assurance functions and other reporting requirements of the
         contractor.

3.4.1    GENERAL REQUIREMENTS

         The contractor shall have an automated claims and encounter processing
         system that will support the requirements of this contract and ensure
         the accurate and timely processing of claims and encounters. The
         contractor shall offer its providers an electronic payment option.

         A.       Input Processing. The contractor shall support both hardcopy
                  and electronic submission of claims and encounters for all
                  claim types (hospital, medical, dental, pharmacy, etc.). The
                  contractor should also support hardcopy and electronic
                  submission of referral and authorization documents, claim
                  inquiry forms, and adjustment claims and encounters. Providers
                  shall be afforded a choice between an electronic or a hardcopy
                  submission. Electronic submissions include diskette, tape,
                  clearinghouse, electronic transmission, and direct entry. The
                  contractor must process all standard electronic formats
                  recognized by the State. The contractor may use any
                  clearinghouse(s) and/or alternatively provide for electronic
                  submission directly from providers to the contractor.

                  The system shall maintain the receipt date for each document
                  (claim, encounter, referral, authorization, and adjustment)
                  and track the processing time from date of receipt to final
                  disposition.

         B.       Edits and Audits. The system shall perform sufficient edits to
                  ensure the accurate payment of claims and ensure the accuracy
                  and completeness of encounters that

                                                                           III-9

<PAGE>

                  are submitted. Edits should include, but not be limited to,
                  verification of member enrollment, verification of provider
                  eligibility, field edits, claim/encounter crosscheck and
                  consistency edits, validation of code values, duplicate
                  checks, authorization checks, checks for service limitations,
                  checks for service inconsistencies, medical review, and
                  utilization management. Pharmacy claim edits shall include
                  prospective drug utilization review (ProDUR) checks.

                  The contractor shall comply with New Jersey law and
                  regulations to process records in error. (Note: Uncontested
                  payments to providers and uncontested portions of contested
                  claims should not be withheld pending final adjudication.)

         C.       Benefit and Reference Files. The system shall provide
                  file-driven processing for benefit determination, validation
                  of code values, pricing (multiple methods and schedules), and
                  other functions as appropriate. Files should include code
                  descriptions, edit criteria, and effective dates. The system
                  shall support the State's procedure and diagnosis coding
                  schemes and other codes that shall be submitted on the
                  hardcopy and electronic reports and files.

                  The system shall provide for an automated update to the
                  National Drug Code file including all product, packaging,
                  prescription, and pricing information.

                  The system shall provide online access to reference file
                  information. The system should maintain a history of the
                  pricing schedules and other significant reference data.

         D.       Claims/Encounter History Files. The contractor shall maintain
                  two (2) years active history of adjudicated claims and
                  encounter data for verifying duplicates, checking service
                  limitations, and supporting historical reporting. For drug
                  claims, the contractor may maintain nine (9) months of active
                  history of adjudicated claims/encounter data if it has the
                  ability to restore such information back to two (2) years and
                  provide for permanent archiving in accordance with Article
                  3.1.2F. Provisions should be made to maintain permanent
                  history by service date for those services identified as
                  "once-in-a-lifetime" (e.g., hysterectomy). The system should
                  readily provide access to all types of claims and encounters
                  (hospital, medical, dental, pharmacy, etc.) for combined
                  reporting of claims and encounters. Archive requirements are
                  described in Article 3.1.2F.

3.4.2    COORDINATION OF BENEFITS

         The contractor shall exhaust all other sources of payment prior to
         remitting payment for a Medicaid enrollee.

         A.       Other Coverage Information. The contractor shall maintain
                  other coverage information for each enrollee. The contractor
                  shall verify the other coverage information provided by the
                  State pursuant to Article 8.7 and develop a system to include
                  additional other coverage information when it becomes
                  available. The

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<PAGE>

                  contractor shall provide a periodic file of updates to other
                  coverage back to the State as specified in Article 8.7.

         B.       Cost Avoidance. As provided in Article 8.7, except in certain
                  cases, the contractor shall attempt to avoid payment in all
                  cases where there is other insurance.

                  The system should have edits to identify potential other
                  coverage situations and flag the claims accordingly. The edits
                  should include looking for accident indicators, other
                  coverage information from the claims, other coverage
                  information on file for the enrollee, and potential
                  accident/injury diagnoses.

         C.       Postpayment Recoupments. Where other insurance is discovered
                  after the fact, for the exceptions identified in 8.7, and for
                  encounters, recoveries shall be initiated on a postpayment
                  basis.

         D.       Personal Injury Cases. These cases should be referred to the
                  Department for recovery.

         E.       Medicare. The contractor's system shall provide for
                  coordinating benefits on enrollees that are also covered by
                  Medicare. See Article 8.7.

         F.       Reporting and Tracking. The contractor's system shall identify
                  and track potential collections. The system should produce
                  reports indicating open receivables, closed receivables,
                  amounts collected, and amounts written off.

3.4.3    REPORTING REQUIREMENTS

         A.       General. The contractor's operational reports shall be
                  created, maintained and made available for audit by State
                  personnel and will include, but will not be limited to, the
                  following:

                  1.       Claims Processing Statistics

                  2.       Inventory and Claims Aging Statistics

                  3.       Error Reports

                  4.       Contested Claims and Encounters

                  5.       Aged Claims and Encounters

                  6.       Checks and EOB(s)

                  7.       Lag Factors and IBNR

         B.       The contractor shall produce reports according to the
                  timeframes and specification outlined in Section A of the
                  Appendices.

3.5      PRIOR AUTHORIZATION, REFERRAL AND UTILIZATION MANAGEMENT

         The prior authorization/referral and utilization management functions
         shall be an

                                                                          III-11

<PAGE>

         integrated component of the MCMIS. It shall allow for effective
         management of delivery of care. It shall provide a sophisticated
         environment for managing the monitoring of both inpatient and
         outpatient care on a proactive basis.

3.5.1    FUNCTIONS AND CAPABILITIES

         A.       Prior Authorizations. The contractor shall provide an
                  automated system that includes the following:

                  1.       Enrollee eligibility, utilization, and case
                           management information.

                  2.       Edits to ensure enrollee is eligible, provider is
                           eligible, and service is covered.

                  3.       Predefined treatment criteria to aid in adjudicating
                           the requests.

                  4.       Notification to provider of approval or denial.

                  5.       Notification to enrollees of any denials or cutbacks
                           of service.

                  6.       Interface with claims processing system for editing.

         B.       Referrals. The contractor shall provide an automated system
                  that includes the following:

                  1.       Ability for providers to enter referral information
                           directly, fax information to the contractor, or call
                           in on dedicated phone lines.

                  2.       Interface with claims processing system for editing.

         C.       Utilization Management. The contractor should provide an
                  automated system that includes the following:

                  1.       Provides case tracking, notifies the case worker of
                           outstanding actions.

                  2.       Provide case history of all activity.

                  3.       Provide online access to cases by enrollee and
                           provider numbers.

                  4.       Includes an automated correspondence generator for
                           letters to clients and network providers.

                  5.       Reports for case analysis, concurrent review, and
                           case follow up including hospital admissions,
                           discharges, and census reports.

         D.       Fraud and Abuse. The contractor shall have a system that
                  supports the requirements in Article [Reserved] 7.38 to
                  identify potential and/or actual instances of fraud, abuse,
                  underutilization and/or overutilization and shall meet the
                  reporting requirements in Section A of the Appendices.

3.5.2    REPORTING REQUIREMENTS

         The contractor's system shall support the reporting requirements as
         described in Section A of the Appendices.

3.6      FINANCIAL PROCESSING

                                                                          III-12

<PAGE>

         The contractor's system shall provide for financial processing to
         support the requirements of the contract and the contractor's
         operations.

3.6.1    FUNCTIONS AND CAPABILITIES

         A.       General. The system shall provide the necessary data for all
                  accounting functions including claims payment, capitation
                  payment, capitation reconciliation, recoupments, recoveries,
                  accounts receivable, accounts payable, general ledger, and
                  bank reconciliation. The financial module shall provide the
                  contractor's management with information to demonstrate the
                  contractor is meeting, exceeding or falling short of its
                  fiscal and level of risk goals. It shall interface with other
                  relevant modules. The information shall provide management
                  with the necessary tools to monitor financial performance,
                  make prompt payments on financial obligations, monitor
                  accounts receivables, and keep accurate and complete financial
                  records.

                  Reports should:

                  1.       Provide information useful in making business and
                           economic decisions.

                  2.       Provide information that will allow the Department to
                           monitor the future cash flow of the contractor
                           resulting from this contract.

                  3.       Provide information relative to an enterprise's
                           economic resources, the claims on those resources,
                           and the effects of transactions, events and
                           circumstances that change resources and claims to
                           resources.

                  4.       Generate data to evaluate the contractor's operations
                           (i.e., indicators of risk, efficiency,
                           capitalization, and profitability).

                  5.       Provide support for detailed actuarial analysis of
                           the operations performed under the contract resulting
                           from this contract.

                  6.       Provide other information that is useful in
                           evaluating important past events or predicting
                           meaningful future events.

         B.       Specific Functions. The contractor's system shall provide for
                  integration of the financial system with the claims and
                  encounter system. At a minimum the system shall:

                  1.       Update the specific claim records in the claims
                           history if payments are voided or refunded.

                  2.       Update the specific claims records in the claims
                           history if amounts are recovered.

                                                                          III-13

<PAGE>

                  3.       Update capitation history if payments are voided or
                           refunded.

                  4.       Provide for liens and withholds of payments to
                           providers.

                  5.       Provide for reissuing lost or stolen checks.

                  6.       Provide for automatic recoupment if a claim is
                           adjusted and results in a negative payment.

3.6.2    REPORTING PRODUCTS

         Report descriptions and criteria required by the State for the
         financial portion of the system are set forth in Section A of the
         Appendices.

3.7      QUALITY ASSURANCE

         The contractor's system shall produce reports for analysis that focus
         on the review and assessment of quality of care given, the detection of
         over- and under-utilization, the development of user-defined criteria
         and standards of care, and the monitoring of corrective actions.

3.7.1    FUNCTIONS AND CAPABILITIES

         A.       General. The system shall provide data to assist in the
                  definition and establishment of contractor performance
                  measurement standards, norms and service criteria.

                  1.       The system shall provide reports to monitor and
                           identify deviations of patterns of treatment from
                           established standards or norms and established
                           baselines. These reports shall profile utilization of
                           providers and enrollees and compare them against
                           experience and norms for comparable individuals.

                  2.       The system should provide cost utilization reports by
                           provider and service in various arrays.

                  3.       It should maintain data for medical and dental
                           assessments and evaluations.

                  4.       It should collect, integrate, analyze, and report
                           data necessary to implement the Quality Assessment
                           and Performance Improvement (QAPI) program.

                  5.       It should collect data on enrollee and provider
                           characteristics and on services furnished to
                           enrollees, as needed to guide the selection of

                                                                          III-14

<PAGE>

                           performance improvement project topics and to meet
                           the data collection requirements for such projects.

                  6.       It should collect data in standardized formats to the
                           extent feasible and appropriate. The contractor must
                           review and ensure that data received from providers
                           are accurate, timely, and complete.

                  7.       Reports should facilitate at a minimum monthly
                           tracking and trending of enrollee care issues to
                           monitor and assess contractor and provider
                           performance and services provided to enrollees.

                  8.       Reports should monitor billings for evidence of a
                           pattern of inappropriate billings, services, and
                           assess potential mispayments as a result of such
                           practices.

                  9.       Reports should support tracking utilization control
                           function(s) and monitoring activities for out-of-area
                           and emergency services.

         B.       Specific Capabilities. The system should:

                  1.       Include a database for utilization, referrals,
                           tracking function for utilization controls, and
                           consultant services.

                  2.       Accommodate and apply standard norms/criteria and
                           medical and dental policy standards for quality of
                           care and utilization review.

                  3.       Include all types of claims and encounters data along
                           with service authorizations and referrals.

                  4.       Include pharmacy utilization data from MH/SA
                           providers.

                  5.       Interface, as applicable, with external utilization
                           and quality assurance/measurement software programs.

                  6.       Include tracking of coordination requirements with
                           MH/SA providers.

                  7.       Include ability to protect patient confidentiality
                           through the use of masked identifiers and other
                           safeguards as necessary.

         C.       Measurement Functions. The system should include:

                  1.       Ability to track review committee(s) functions when
                           case requires next review and/or follow-up.

                  2.       Track access, use and coordination of services.

                                                                          III-15

<PAGE>

                  3.       Provide patient satisfaction data through use of
                           enrollee surveys, grievance, complaint/appeals
                           processes, etc.

                  4.       Generate HEDIS reports in the version specified by
                           the State.

3.7.2    REPORTING PRODUCTS

         The system shall support the reporting requirements and other functions
         described in Article 4 and Section A of the Appendices.

3.8      MANAGEMENT AND ADMINISTRATIVE REPORTING

         The MCMIS shall have a comprehensive reporting capability to support
         the reporting requirements of this contract and the management needs
         for all of the contractor operations.

3.8.1    GENERAL REQUIREMENTS

         A.       Purpose. The reports should provide information to determine
                  and review fiscal viability, to evaluate the appropriateness
                  of care rendered, and to identify reporting/billing problems
                  and provider practices that are at variance with the norm, and
                  measure overall performance.

         B.       General Capabilities. MCMIS reporting capabilities shall
                  include the capabilities to access relatively small amounts of
                  data very quickly as well as to generate comprehensive reports
                  using multiple years of historical claims and encounter data.
                  The contractor shall provide a management and administrative
                  reporting system that allows full access to all of the
                  information utilized in the MCMIS. The contractor shall
                  provide a solution that makes all data contained in any
                  subcontractor's MIS available to authorized users through the
                  use of the various software that provides the capabilities
                  detailed in the following Articles.

         C.       Regular Reports. The system shall generate a comprehensive set
                  of management and administrative management reports that
                  facilitate the oversight, evaluation, and management of this
                  program as well as the contractor's other operations.

                  The system should provide the capability for pre-defined,
                  parameter driven report/trend alerts. The system shall have
                  the capability to select important and specific parameters of
                  utilization, and have specified users alerted when these
                  parameters are being exceeded. For example, the State may want
                  to monitor the use of a specific drug as treatment for a
                  specific condition.

         D.       The contractor shall acquire the capability to receive and
                  transmit data in a secure manner electronically to and from
                  the State's data centers, which are operated by OIT. The
                  standard data transfer software that OIT utilizes for
                  electronic data exchange is Connect: Direct. Both mainframe
                  and PC versions are available. A

                                                                          III-16

<PAGE>

                  dedicated line is preferred, but at a minimum connectivity
                  software can be used for the connection.

3.8.2    QUERY CAPABILITIES

         The contractor's MCMIS should have a sophisticated, query tool with
         access to all major files for the users.

         A.       General. The system should provide a user-friendly, online
                  query language to construct database queries to data available
                  across all of the database(s), down to raw data elements. It
                  should provide options to select query output to be displayed
                  on-line, in a formatted hard-copy report, or downloaded to
                  disk for PC-based analysis.

         B.       Unduplicated Counts. The system should provide the capability
                  to execute queries that perform unduplicated counts (e.g.,
                  unduplicated count of original beneficiary ID number),
                  duplicated counts (e.g., total number of services provided for
                  a given aid category), or a combination of unduplicated and
                  duplicated counts.

3.8.3    REPORTING CAPABILITIES

         The contractor should provide reporting tools with its MCMIS that
         facilitate ad hoc, user, and special reporting. The MCMIS should
         provide flexible report formatting/editing capabilities that meet the
         contractor's business requirements and support the Department's
         information needs. For example, it should provide the ability to
         import, export and manipulate data files from spreadsheet, word
         processing and database management tools as well as the database(s) and
         should provide the capability to indicate header information, date and
         run time, and page numbers on reports. The system should provide
         multiple pre-defined report types and formats that are easily selected
         by users.

3.9      ENCOUNTER DATA REPORTING

         A.   The contractor shall collect, process, format, and submit
              electronic encounter data for all services delivered for which the
              contractor is responsible. The contractor shall capture all
              required encounter data elements using coding structures
              recognized by the Department. The contractor shall process the
              encounter data, integrating any manual or automated systems to
              validate the adjudicated encounter data. The contractor shall
              interface with any systems or modules within its organization to
              obtain the required encounter data elements. The contractor shall
              submit the encounter data to the Department's fiscal agent
              electronically, via diskette, tape, or electronic transmission,
              according to specifications in the Division's Electronic Media
              Claims (EMC) Manual which will be distributed with regular
              updates [Reserved]. The encounter data processing system shall
              have a data quality assurance plan to include timely data capture,
              accurate and complete encounter records, and internal data quality
              audit procedures. If DMAHS determines that changes are required,
              the contractor shall be given advance notice and time to make the
              change according to the extent and nature of the required change.

                                                                          III-17
<PAGE>

         B. The contractor shall ensure that data received from providers is
            accurate and complete by-

            (i)      Verifying the accuracy and timeliness of reported data;

            (ii)     Screening the data for completeness, logic, and
                     consistency; and

            (iii)    Collecting service information in standardized formats to
                     the extent feasible and appropriate.

         C. Regardless of whether the contractor is considered a covered entity
            under HIPAA, the contractor shall use the HIPAA Transaction and Code
            Sets as the exclusive format for the electronic communication of
            health care claims and encounter data for data with dates of service
            on or after October 16, 2003.

3.9.1    REQUIRED ENCOUNTER DATA ELEMENTS

         A.       All Types of Claims. The contractor shall capture all required
                  encounter data elements for each of the eight claim types:
                  Inpatient, Outpatient, Professional, Home Health,
                  Transportation, Vision, Dental, and Pharmacy.

         B.       Data Elements. The required data elements are provided in
                  Section A.7.11 [Reserved]. Note that New Jersey-specific
                  Medicaid codes are required in some fields. Providers shall be
                  identified using the provider's EIN or tax identification
                  number. Inpatient hospital claims and encounters shall be
                  combined into a single stay when the enrollee's dates of
                  services are consecutive.

         C.       Contractor Encounter. The contractor shall submit encounter
                  data for claims and encounters received by the contractor. The
                  contractor shall identify a capitated arrangement versus a
                  "fee-for-service" arrangement for its network providers. For
                  noncapitated arrangements, the contractor shall report the
                  actual payment made to the provider for each encounter. For
                  capitated arrangements, the contractor may report a zero
                  payment for each encounter. However, a monthly "Capitation
                  Summary Record" shall be required for each provider type,
                  beneficiary capitation category, and service month
                  combination. The specifications for the submission of monthly
                  capitation summary records is further detailed in the EMC
                  Manual [Reserved] issued by the Division.

3.9.2    SUBMISSION OF TEST ENCOUNTER DATA

         A.       Submitter ID. The contractor shall make application in order
                  to obtain a Submitter Identification Number, according to the
                  instructions listed in the EMC Manual [Reserved] issued by the
                  Division.

                                                                          III-18

<PAGE>
         B.       Test Requirement. The contractor shall be required to pass a
                  testing phase for each of the eight encounter claim types
                  before production encounter data will be accepted. The
                  contractor shall pass the testing phase for all encounter
                  claim type submissions within twelve (12) calendar weeks from
                  the [Reserved] effective date of the contract. Contractors
                  with prior contracting experience with DHS who have
                  successfully passed test phases and have successfully
                  submitted approved production data may be exempted at DHS's
                  option.

                  The contractor shall submit the test encounter data to the
                  Department's fiscal agent electronically, via diskette, tape,
                  or electronic transmission, according to the specifications of
                  the Electronic Media Claims (EMC) Manual[Reserved] issued by
                  the Division.

                  The contractor shall be responsible for passing a two-phased
                  test for each encounter claim type. The first phase requires
                  that each submitted file follows the prescribed format, that
                  header and trailer records are present and correctly located
                  within the file, and that the key fields are present. The
                  second phase requires that the required data elements are
                  present and properly valued.

                  Following each submission, an error report will be forwarded
                  to the contractor identifying the file and record location of
                  each error encountered for both testing phases. The contractor
                  shall analyze the report, complete the necessary corrections,
                  and re-submit the encounter data test file(s).

                  The contractor shall utilize production encounter data,
                  systems, tables, and programs when processing encounter test
                  files. The contractor shall submit error-free production data
                  once testing has been approved for all of the encounter claims
                  types.

3.9.3    SUBMISSION OF PRODUCTION ENCOUNTER DATA

         A.       Adjudicated Claims and Encounters. The contractor shall submit
                  all adjudicated encounter data for all services provided for
                  which the contractor is responsible. Adjudicated encounter
                  data are defined as data from claims and encounters that the
                  contractor has processed as paid or denied. The contractor is
                  not responsible for submitting contested claims or encounters
                  until final adjudication has been determined.

         B.       Schedule. Encounter data shall be submitted per the schedule
                  established by the Department. Each submission shall include
                  encounter data that were adjudicated in the prior period and
                  any adjustments for encounter data previously submitted.

         C.       Two-Phase Process. Similar to testing, the contractor shall be
                  responsible for passing a two-phased test for all production
                  encounter data submitted. The first phase requires each
                  submitted file follow the prescribed format, that header and
                  trailer records are present and correctly located within the
                  file, and that the key

                                                                          III-19

<PAGE>

                  fields are present. The second phase requires that the
                  required data elements are present and properly valued.

         D.       Phase One Errors. If all or part of a production encounter
                  file(s) rejects during phase one, an error report will be
                  forwarded to the contractor identifying the file and record
                  location of each error encountered. The contractor shall
                  analyze the report, complete the necessary corrections, and
                  re-submit the "rejected" encounter production data within
                  forty-five (45) calendar days from the date the contractor
                  receives the notice of error(s).

         E.       The contractor shall not be permitted to provide services
                  under this contract nor shall the contractor receive
                  capitation payment until it has passed the testing and
                  production submission of encounter data.

3.9.4    REMITTANCE ADVICE

         A.       Remittance Advice File Processing Report. The Department's
                  fiscal agent shall produce a Remittance Advice File on a
                  monthly basis that itemizes all processed encounters. The
                  contractor shall be responsible for the acceptance and
                  processing of a Remittance Advice (RA) File according to the
                  specifications listed in the Division's EMC Manual[Reserved].
                  The Remittance Advice File is produced on magnetic tape and
                  contains all submitted encounter data that passed phase one
                  testing. The disposition (paid or denied) shall be reported
                  for each encounter along with the "phase two" errors for those
                  claims that [Reserved] the Division denied.

         B.       Reconciliation. The contractor shall be responsible for
                  matching the encounters on the Remittance Advice File against
                  the contractor's data files(s). The contractor shall correct
                  any encounters that denied improperly and/or any other
                  discrepancies noted on the file. Corrections shall be
                  resubmitted within thirty (30) calendar days from the date the
                  contractor receives the Remittance Advice File.

                  All corrections to "denied" encounter data, as reported on the
                  Remittance Advice File, shall be resubmitted as "full record"
                  adjustments, according to the requirements listed in the
                  Division's EMC Manual [Reserved].

3.9.5    SUBCONTRACTS AND ENCOUNTER DATA REPORTING FUNCTION

         A.       Interfaces. All encounter data shall be submitted to the
                  Department directly by the contractor. DMAHS shall not accept
                  any encounter data submissions or correspondence directly from
                  any subcontractors, and DMAHS shall not forward any electronic
                  media, reports or correspondence directly to a subcontractor.
                  The contractor shall be required to receive all electronic
                  files and hardcopy material from the Department, or its
                  appointed fiscal agent, and distribute them within its

                                                                          III-20

<PAGE>

                  organization or to its subcontractors appropriately.

         B.       Communication. The contractor and its subcontractors shall be
                  represented at all DMAHS meetings scheduled to discuss any
                  issue related to the encounter function requirements.

3.9.6    FUTURE ELECTRONIC ENCOUNTER SUBMISSION REQUIREMENTS

         At the present time, the Centers for Medicare and Medicaid Services
         (CMS) is pursuing a standardization of all electronic health care
         information, including encounter data. The contractor shall be
         responsible for completing and paying for any modifications required to
         submit encounter data electronically, according to the same
         specifications and timeframes outlined by CMS for the New Jersey MMIS.

                                                                          III-21

<PAGE>

ARTICLE FOUR: PROVISION OF HEALTH CARE SERVICES

4.1      COVERED SERVICES

         For enrollees who are eligible through Title V, Title XIX or the NJ
         FamilyCare program the contractor shall provide or arrange to have
         provided comprehensive, preventive, and diagnostic and therapeutic,
         health care services to enrollees that include all services that
         Medicaid-/NJ FamilyCare beneficiaries are entitled to receive under
         Medicaid/NJ FamilyCare, subject to any limitations and/or excluded
         services "as specified in this Article. Provision of these services
         shall be equal in amount, duration, and scope as established by the
         Medicaid/NJ FamilyCare program, in accordance with medical necessity
         and without any predetermined limits, unless specifically stated, and
         as set forth in 42 C.F.R. Part 440; 42 C.F.R. Part 434; the Medicaid
         State Plan; the Medicaid Provider Manuals: The New Jersey
         Administrative Code, Title 10, Department of Human Services Division of
         Medical Assistance and Health Services; Medicaid/NJ FamilyCare Alerts;
         Medicaid/NJ FamilyCare Newsletters; and all applicable federal and
         State statutes, rules, and regulations.

4.1.1    GENERAL PROVISIONS AND CONTRACTOR RESPONSIBILITIES

         A.       With the exception of certain emergency services described in
                  Article 4.2.1 of this contract, all care covered by the
                  contractor pursuant to the benefits package must be provided,
                  arranged, or authorized by the contractor or a participating
                  provider.

         B.       The contractor and its providers shall furnish all covered
                  services required to maintain or improve health in a manner
                  that maximizes coordination and integration of services, and
                  in accordance with professionally recognized standards of
                  quality and shall ensure that the care is appropriately
                  documented to encompass all health care services for which
                  payment is made.

         C.       For beneficiaries eligible solely through the NJ FamilyCare
                  Plan A the contractor shall provide the same managed care
                  services and products provided to enrollees who are eligible
                  through Title XIX. For beneficiaries eligible solely through
                  the NJ FamilyCare Plans B and C the contractor shall provide
                  the same managed care services and products provided to
                  enrollees who are eligible through Title XIX with the
                  exception of limitations on EPSDT coverage as indicated in
                  Articles 4.1.2A.3 and 4.2.6A.2. NJ FamilyCare Plan D and other
                  plans have a different service package specified in Articles
                  4.1.6 and 4.1.7.

         D.       Out-of-Area Coverage. The contractor shall provide or arrange
                  for out-of-area coverage of contracted benefits in emergency
                  situations and non-emergency situations when travel back to
                  the service area is not possible, is impractical, or when
                  medically necessary services could only be provided elsewhere.
                  Except for full-time students, the contractor shall not be
                  responsible for out-of-state coverage for care if the enrollee
                  resides out-of-state for more than 30 days. In this instance,
                  the individual will be disenrolled. This does not apply to
                  situations when the

                                                                            IV-l

<PAGE>

                  enrollee is out of State for care provided/authorized by the
                  contractor, for example, prolonged hospital care for
                  transplants. For full time students attending school and
                  residing out of the country, the contractor shall not be
                  responsible for health care benefits while the individual is
                  in school.

         E.       Existing Plans of Care. The contractor shall honor and pay for
                  plans of care for new enrollees, including prescriptions,
                  durable medical equipment, medical supplies, prosthetic and
                  orthotic appliances, and any other on-going services initiated
                  prior to enrollment with the contractor. Services shall be
                  continued until the enrollee is evaluated by his/her primary
                  care physician and a new plan of care is established with the
                  contractor.

                  The contractor shall use its best efforts to contact the new
                  enrollee or, where applicable, authorized person and/or
                  contractor care manager. However, if after documented,
                  reasonable outreach (i.e., mailers, certified mail, use of
                  MEDM system provided by the State, contact with the Medical
                  Assistance Customer Center (MACC), DDD, or DYFS to confirm
                  addresses and/or to request assistance in locating the
                  enrollee) the enrollee fails to respond within 20 working days
                  of certified mail, the contractor may cease paying for the
                  pre-existing service until the enrollee or, where applicable,
                  authorized person, contacts the contractor for re-evaluation.

         F.       Routine Physicals. The contractor shall provide for routine
                  physical examinations required for employment, school, camp or
                  other entities/programs that require such examinations as a
                  condition of employment or participation.

         G.       Non-Participating Providers.

                  1.       The contractor shall pay for services furnished by
                           non-participating providers to whom an enrollee was
                           referred, even if erroneously referred, by his/her
                           PCP or network specialist. Under no circumstances
                           shall the enrollee bear the cost of such services
                           when referral errors by the contractor or its
                           providers occur. It is the sole responsibility of the
                           contractor to provide regular updates on complete
                           network information to all its providers as well as
                           appropriate policies and procedures for provider
                           referrals.

                  2.       The contractor may pay an out-of-network hospital
                           provider, located outside the State of New Jersey,
                           the New Jersey Medicaid fee-for-service rate for the
                           applicable services rendered.

                  3.       Whenever the contractor authorizes services by
                           out-of-network providers, the contractor shall
                           require those out-of-network providers to coordinate
                           with the contractor with respect to payment. Further,
                           the contractor shall ensure that any cost sharing to
                           the

                                                                            IV-2

<PAGE>

                           enrollee is no greater than it would be if the
                           services were furnished within the network.

         H.       The contractor shall have policies and procedures on the use
                  of enrollee self-referred services.

         I.       The contractor shall have policies and procedures on how it
                  will provide for genetic testing and counseling.

         J.       Second Opinions. The contractor shall have a Second Opinion
                  program that can be utilized at the enrollee's option for
                  diagnosis and treatment of serious medical conditions, such as
                  cancer and for elective surgical procedures. The program shall
                  include at a minimum: hernia repair (simple) for adults (18
                  years or older), hysterectomy (elective procedures), spinal
                  fusion (except for children under 18 years of age with a
                  diagnosis of scoliosis or spina bifida), and laminectomy
                  (except for children under 18 years of age with a diagnosis of
                  scoliosis). The Second Opinion program shall be incorporated
                  into the contractor's medical procedures and submitted to
                  DMAHS for review and approval.

         K.       Unless otherwise required by this contract, the contractor
                  shall make no distinctions with regard to the provision of
                  services to Medicaid and NJ FamilyCare enrollees and the
                  provision of services provided to the contractor's
                  non-Medicaid/NJ FamilyCare enrollees.

         L.       DMAHS may intercede on an enrollee's behalf when DMAHS deems
                  it appropriate for the provision of medically necessary
                  services and to assist enrollees with the contractor's
                  operations and procedures which may cause undue hardship for
                  the enrollee. In the event of a difference in interpretation
                  of contractually required service provision between the
                  Department and the contractor, the Department's interpretation
                  shall prevail until a formal decision is reached, if
                  necessary.

         M.       A New Jersey Care 2000+ enrollee who seeks self-initiated care
                  from a non-participating provider without referral/
                  authorization shall be held responsible for the cost of care.
                  The enrollee shall be fully informed of the requirement to
                  seek care when it is available within the network and the
                  consequences of obtaining unauthorized out-of-network care for
                  covered services.

         N.       Protection of Enrollee - Provider Communications. Health care
                  professionals may not be prohibited from advising their
                  patients about their health status or medical care or
                  treatment, regardless of whether this care is covered as a
                  benefit under the contract.

         O.       Medical or Dental Procedures. For procedures that may be
                  considered either medical or dental such as surgical
                  procedures for fractured jaw or removal of cysts, the
                  contractor shall establish written policies and procedures
                  clearly and

                                                                            IV-3

<PAGE>

                  definitively delineated for all providers and administrative
                  staff, indicating that either a physician specialist or oral
                  surgeon may perform the procedure and when, where, and how
                  authorization, if needed, shall be promptly obtained.

         P.       Out-of-Network Services. If the contractor is unable to
                  provide in-network necessary services, covered under the
                  contract to a particular enrollee, the contractor must
                  adequately and timely cover those services out-of-network for
                  the enrollee, for as long as the contractor is unable to
                  provide them in-network.

4.1.2    BENEFIT PACKAGE

         A.       The following categories of services shall be provided by the
                  contractor for all Medicaid and NJ FamilyCare Plans A, B, and
                  C enrollees, except where indicated. See Section B.4.1 of the
                  Appendices for complete definitions of the covered services.

                  1.       Primary and Specialty Care by physicians and, within
                           the scope of practice and in accordance with State
                           certification/licensure requirements, standards and
                           practices, by Certified Nurse Midwives, Certified
                           Nurse Practitioners, Clinical Nurse Specialists, and
                           Physician Assistants

                  2.       Preventive Health Care and Counseling and Health
                           Promotion

                  3.       Early and Periodic Screening, Diagnosis, and
                           Treatment (EPSDT) Program Services

                           For NJ FamilyCare Plans B and C participants,
                           coverage includes early and periodic screening and
                           diagnosis medical examinations, dental, vision,
                           hearing, and lead screening services. It includes
                           only those treatment services identified through the
                           examination that are available under the contractor's
                           benefit package or specified services under the FFS
                           program.

                  4.       Emergency Medical Care

                  5.       Inpatient Hospital Services including acute care
                           hospitals, rehabilitat on hospitals, and special
                           hospitals.

                  6.       Outpatient Hospital Services

                  7.       Laboratory Services [Except routine testing related
                           to administration of Clozapine and the other
                           psychotropic drugs listed in Article 4.1.4B for
                           non-DDD clients.]

                  8.       Radiology Services-diagnostic and therapeutic

                                                                            IV-4

<PAGE>

                  9.       Prescription Drugs (legend and non-legend covered by
                           the Medicaid program) - For payment method for
                           Protease Inhibitors, certain other anti- retrovirals,
                           blood clotting factors VIII and IX, and coverage of
                           protease inhibitors and certain other
                           anti-retrovirals under NJ FamilyCare, see Article 8.

                  10.      Family Planning Services and Supplies

                  11.      Audiology

                  12.      Inpatient Rehabilitation Services

                  13.      Podiatrist Services

                  14.      Chiropractor Services for children under 21 years of
                           age and pregnant women only

                  15.      Optometrist Services

                  16.      Optical Appliances

                  17.      Hearing Aid Services

                  18.      Home Health Agency Services - Not a
                           contractor-covered benefit for the non-dually
                           eligible ABD population. All other services provided
                           to any enrollee in the home, including but not
                           limited to pharmacy and DME services, are the
                           contractor's fiscal and medical management
                           responsibility.

                  19.      Hospice [Reserved] Services - are covered in the
                           community as well as in institutional settings. Room
                           and board services are included only when services
                           are delivered in an institutional (non-private
                           residence) setting.

                  20.      Durable Medical Equipment (DME)/Assistive Technology
                           Devices in accordance with existing Medicaid
                           regulations.

                  21.      Medical Supplies

                  22.      Prosthetics and Orthotics including certified shoe
                           provider.

                  23.      Dental Services for children under 21 years of age
                           and pregnant women only.

                  24.      Organ Transplants-includes donor and recipient
                           costs. Exception: The contractor will not be
                           responsible for transplant-related donor and

                                                                            IV-5

<PAGE>

                           recipient inpatient hospital costs for an individual
                           placed on a transplant list while in the Medicaid FFS
                           program prior to enrollment into the contractor's
                           plan.

                  25.      Transportation Services for any contractor-covered
                           service or non-contractor covered service including
                           ambulance, mobile intensive care units (MICUs) and
                           invalid coach (including lift equipped vehicles)

                  26.      Post-acute Care

                  27.      Mental Health/Substance Abuse Services for enrollees
                           who are clients of the Division of Developmental
                           Disabilities

         B.       Conditions Altering Mental Status. Those diagnoses which are
                  categorized as altering the mental status of an individual but
                  are of organic origin shall be part of the contractor's
                  medical, financial and care management responsibilities for
                  all categories of enrollees. These include the diagnoses in
                  the following ICD-9-CM Series:

                   1.   290.0     Senile dementia, simple type

                   2.   290.1     Presenile dementia

                   3.   290.10    Presenile dementia, uncomplicated

                   4.   290.11    Presenile dementia with delerium

                   5.   290.12    Presenile dementia with delusional features

                   6.   290.13    Presenile dementia with depressive features

                   7.   290.2     Senile dementia with delusional or depressive
                                  features

                   8.   290.20    Senile dementia with delusional features

                   9.   290.21    Senile dementia with depressive features

                  10.   290.3     Senile dementia [Reserved] with [Reserved]
                                  delerium

                  11.   290.4     Arteriosclerotic dementia [Reserved]

                  12.   290.40    Arteriosclerotic dementia, uncomplicated

                  13.   290.41    Arteriosclerotic dementia with delirium

                  14.   290.42    Arteriosclerotic dementia with delusional
                                  features

                  15.   290.43    Arteriosclerotic dementia with depressive
                                  features

                  16.   290.8     Other specific senile psychotic conditions

                  17.   290.9     Unspecified senile psychotic condition

                  18.   291.1     [Reserved] Alcohol amnestic syndrome

                  19.   291.2     Other alcoholic dementia

                  20.   292.82    Drug induced dementia

                  21.   292.83    Drug-induced amnestic syndrome

                  22.   292.9     Unspecified drug induced mental disorders

                  23.   293.0     Acute delirium

                  24.   293.1     Subacute delirium

                  25.   293.8     Other specific transient organic mental
                                  disorders

                                                                            IV-6

<PAGE>

                  26.      293.81   Organic delusional syndrome

                  27.      293.82   Organic hallucinosis syndrome

                  28.      293.83   Organic affective syndome

                  29.      293.84   Organic anxiety syndrome

                  30.      294.0    Amnestic syndrome

                  31.      294.1    Dementia in conditions classified elsewhere

                  32.      294.8    Other specified organic brain syndromes
                                    (chronic)

                  33.      294.9    Unspecified organic brain syndrome (chronic)

                  34.      305.1    Non-dependent abuse of drugs-tobacco

                  35.      310.0    Frontal lobe syndrome

                  36.      310.2    Postconcussion syndrome

                  37.      310.8    Other specified nonpsychotic mental disorder
                                    following organic brain damage

                  38.      310.9    Unspecified nonpsychotic mental disorder
                                    following organic brain damage

                  In addition, the contractor shall retain responsibility for
                  delivering all covered Medicaid mental health/substance abuse
                  services to enrollees who are clients of the Division of
                  Developmental Disabilities (referred to as "clients of DDD").
                  Articles Four and Five contain further information regarding
                  clients of DDD.

4.1.3    SERVICES REMAINING IN FEE-FOR-SERVICE PROGRAM AND MAY NECESSITATE
         CONTRACTOR ASSISTANCE TO THE ENROLLEE TO ACCESS THE SERVICES

         A.       The following services provided by the New Jersey Medicaid
                  program under its State plan shall remain in the
                  fee-for-service program but may require medical orders by the
                  contractor's PCPs/providers. These services shall not be
                  included in the contractor's capitation.

                  1.       Personal Care Assistant Services (not covered for NJ
                           FamilyCare Plans B and C)

                  2.       Medical Day Care (not covered for NJ FamilyCare Plans
                           B and C)

                  3.       Outpatient Rehab - Physical therapy, occupational
                           therapy, and speech pathology services (For NJ
                           FamilyCare Plans B & C enrollees, limited to 60 days
                           per therapy per year)

                  4.       Abortions and related services including surgical
                           procedure, cervical dilation, insertion of cervical
                           dilator, anesthesia including para cervical block,
                           history and physical examination on day of surgery;
                           lab tests including PT, PTT, OB Panel (includes
                           hemogram, platelet count, hepatitis B surface
                           antigen, rubella antibody, VDRL, blood typing ABO and
                           Rh, CBC and differential), pregnancy test, urinalysis
                           and urine drug

                                                                            IV-7

<PAGE>

                           screen, glucose and electrolytes; routine
                           venapuncture; ultrasound, pathological examination of
                           aborted fetus; Rhogam and its administration.

                  5.       Transportation-lower mode (not covered for NJ
                           FamilyCare Plans B and C)

                  6.       Sex Abuse Examinations

                  7.       Services Provided by New Jersey MH/SA and' DYFS
                           Residential Treatment Facilities or Group Homes. For
                           enrollees living in residential facilities or group
                           homes where ongoing care is provided, contractor
                           shall cooperate with the medical, nursing, or
                           administrative staff person designated by the
                           facility to ensure that the enrollees have timely and
                           appropriate access to contractor providers as needed
                           and to coordinate care between those providers and
                           the facility's employed or contracted providers of
                           health services. Medical care required by these
                           residents remains the contractor's responsibility
                           providing the contractor's provider network and
                           facilities are utilized.

                  8.       Family Planning Services and Supplies when furnished
                           by a non-participating provider

                  9.       Home health agency services for the non-dually
                           eligible ABD population

         B.       Dental Services. For those dental services specified below
                  that are initiated by a Medicaid non-New Jersey Care 2000+
                  provider prior to first time New Jersey Care 2000+ enrollment,
                  an exemption from contractor-covered services based on the
                  initial managed care enrollment date will be provided and the
                  services paid by Medicaid FFS. The exemption shall only apply
                  to those beneficiaries who have initially received these
                  services during the 60 or 120 day period immediately prior to
                  the initial New Jersey Care 2000+ enrollment date.

                  1.       Procedure Codes to be paid by Medicaid FFS up to 60
                           days after first time New Jersey Care 2000+
                           enrollment:

                          02710         02792           03430
                          02720         02950           05110
                          02721         02952           05120
                          02722         02954           05211
                          02750         03310           05211-52
                          02751         03320           05212
                          02752         03330           05212-52
                          02790         03410-22        05213
                          02791         03411           05214

                                                                            IV-8

<PAGE>

                  2.       Procedure Codes to be paid by Medicaid FFS up to 120
                           days from date of last preliminary extractions after
                           patient enrolls in New Jersey Care 2000+ (applies to
                           tooth codes 5-12 and 21-28 only):

                           05130
                           05130-22
                           05140
                           05140-22

                  3.       Extraction Procedure Codes to be paid by Medicaid FFS
                           up to 120 days from last date of preliminary
                           extractions after first time New Jersey Care 2000+
                           enrollment in conjunction with the following codes
                           (05130, 05130- 22,05140,05140-22):

                           07110
                           07130
                           07210

4.1.4    MEDICAID COVERED SERVICES NOT PROVIDED BY CONTRACTOR

         A.       Mental Health/Substance Abuse. The following mental
                  health/substance abuse services (except for the conditions
                  listed in 4.1.2.B) will be managed by the State or its agent
                  for non-DDD enrollees, including all NJ FamilyCare enrollees.
                  (The contractor will retain responsibility for furnishing
                  mental health/substance abuse services, excluding the cost of
                  the drugs listed below, to Medicaid enrollees who are clients
                  of the Division of Developmental Disabilities).

                  -        Substance Abuse Services--diagnosis, treatment, and
                           detoxification

                  -        Costs for Methadone and its administration

                  -        Mental Health Services

         B.       Drugs. The following drugs will be paid fee-for-service by the
                  Medicaid program for all DMAHS enrollees:

                  -        Clozapine

                  -        Risperidone

                  -        Olanzapine

                  -        Ziprasidone

                  -        Abilify

                  -        Quetiapine

                  -        Methadone -- cost and its administration. Except as
                           provided in Article 4.4, the contractor will remain
                           responsible for the medical care of enrollees
                           requiring substance abuse treatment

                  -        Generically-equivalent drug products of the drugs
                           listed in this section.

                                                                            IV-9

<PAGE>

         C.       Up to twelve (12) inpatient hospital days required for social
                  necessity in accordance with Medicaid regulations.

         D.       DDD/CCW waiver services: individual supports (which includes
                  personal care and training), habilitation, case management,
                  respite, and Personal Emergency Response Systems (PERS).

4.1.5    INSTITUTIONAL FEE-FOR-SERVICE BENEFITS-NO COORDINATION BY THE
         CONTRACTOR

         The following institutional services shall remain in the
         fee-for-service program without requiring coordination by the
         contractor. In addition, Medicaid beneficiaries participating in a
         waiver (except the Division of Developmental Disabilities Community
         Care Waiver) or demonstration program or admitted for long term care
         treatment in one of the following shall be disenrolled from the
         contractor's plan on the date of admission to institutionalized care.

         A.       Nursing Facility care (Exception: if the admission is only for
                  inpatient rehabilitation/postacute care services and is 30
                  days or less, the enrollee will not be disenrolled. The
                  contractor remains financially responsible for services in
                  this setting for 30 days. Thereafter, if the enrollee
                  continues to receive services in this setting the enrollee
                  will be disenrolled. The contractor will no longer be
                  financially responsible.) Not covered for NJ FamilyCare Plans
                  B and C.

         B.       Inpatient psychiatric services (except for RTCs) for
                  individuals under age 21 and 65 and over - Services that are
                  provided:

                  1.       Under the direction of a physician;

                  2.       In a facility or program accredited by the Joint
                           Commission on Accreditation of Health Care
                           Organizations; and

                  3.       Meet the federal and State requirements.

         C.       Intermediate Care Facility/Mental Retardation Services--Items
                  and services furnished in an intermediate care facility for
                  the mentally retarded.

         D.       Waiver (except Division of Developmental Disabilities
                  Community Care Waiver) and demonstration program services.

4.1.6    BENEFIT PACKAGE FOR NJ FAMILYCARE PLAN D

         A.       Services Included In The Contractor's Benefits Package for NJ
                  FamilyCare Plan D. The following services shall be provided
                  and case managed by the contractor:

                  1.       Primary Care

                                                                           IV-10

<PAGE>

                           a.       All physicians services, primary and
                                    specialty

                           b.       In accordance with state
                                    certification/licensure requirements,
                                    standards, and practices, primary care
                                    providers shall also include access to
                                    certified nurse midwifes, certified nurse
                                    practitioners, clinical nurse specialists,
                                    and physician assistants

                           c.       Services rendered at independent clinics
                                    that provide ambulatory services

                           d.       Federally Qualified Health Center primary
                                    care services

                  2.       Emergency room services

                  3.       Family Planning Services, including medical history
                           and physical examinations (including pelvic and
                           breast), diagnostic and laboratory tests, drugs and
                           biologicals, medical supplies and devices,
                           counseling, continuing medical supervision,
                           continuity of care and genetic counseling

                           Services provided primarily for the diagnosis and
                           treatment of infertility, including sterilization
                           reversals, and related office (medical and clinic)
                           visits, drugs, laboratory services, radiological and
                           diagnostic services and surgical procedures are not
                           covered by the NJ FamilyCare program. Obtaining
                           family planning services from providers outside the
                           contractor's provider network is not available to NJ
                           FamilyCare Plan D enrollees.

                  4.       Home Health Care Services -- Limited to skilled
                           nursing for a home bound beneficiary which is
                           provided or supervised by a registered nurse, and
                           home health aide when the purpose of the treatment is
                           skilled care; and medical social services which are
                           necessary for the treatment of the beneficiary's
                           medical condition

                  5.       Hospice Services

                  6.       Inpatient Hospital Services, including general
                           hospitals, special hospitals, and rehabilitation
                           hospitals. The contractor shall not be responsible
                           when the primary admitting diagnosis is mental health
                           or substance abuse related.

                  7.       Outpatient Hospital Services, including outpatient
                           surgery

                  8.       Laboratory Services -- All laboratory testing sites
                           providing services under this contract must have
                           either a Clinical Laboratory

                                                                           IV-11

<PAGE>

                           Improvement Act (CLIA) certificate of waiver or a
                           certificate of registration along with a CLIA
                           identification number. Those providers with
                           certificates of waiver shall provide only the types
                           of tests permitted under the terms of their waiver.
                           Laboratories with certificates of registration may
                           perform a full range of laboratory services.

                  9.       Radiology Services -- Diagnostic and therapeutic

                  10.      Optometrist Services, including one routine eye
                           examination per year

                  11.      Optical appliances -- Limited to one pair of glasses
                           (or contact lenses) per 24 month period or as
                           medically necessary

                  12.      Organ transplant services which are non-experimental
                           or non-investigational

                  13.      Prescription drugs, excluding over-the-counter drugs
                           Exception: See Article 8 regarding Protease
                           Inhibitors and other antiretrovirals.

                  14.      Dental Services -- Limited to preventive dental
                           services for children under the age of 12 years,
                           including oral examinations, oral prophylaxis, and
                           topical application of fluorides

                  15.      Podiatrist Services -- Excludes routine hygienic care
                           of the feet, including the treatment of corns and
                           calluses, the trimming of nails, and other hygienic
                           care such as cleaning or soaking feet, in the absence
                           of a pathological condition

                  16.      Prosthetic appliances -- Limited to the initial
                           provision of a prosthetic device that temporarily or
                           permanently replaces all or part of an external body
                           part lost or impaired as a result of disease, injury,
                           or congenital defect. Repair and replacement services
                           are covered when due to congenital growth.

                  17.      Private duty nursing -- Only when authorized by the
                           contractor

                  18.      Transportation Services -- Limited to ambulance for
                           medical emergency only

                  19.      Well child care including immunizations, lead
                           screening and treatments

                  20.      Maternity and related newborn care

                  21.      Diabetic supplies and equipment

                                                                           IV-12

<PAGE>

         B.       Services Available To NJ FamilyCare Plan D Under
                  Fee-For-Service. The following services are available to NJ
                  FamilyCare Plan D enrollees under fee-for-service:

                  1.       Abortion services

                  2.       Outpatient Rehabilitation Services -- Physical
                           therapy, Occupational therapy, and Speech therapy for
                           non-chronic conditions and acute illnesses and
                           injuries. Limited to treatment for a 60-day (that is,
                           60 business days) consecutive period per incident of
                           illness or injury beginning with the first day of
                           treatment per contract year. Speech therapy services
                           rendered for treatment of delays in speech
                           development, unless resulting from disease, injury or
                           congenital defects are not covered

                  3.       Inpatient hospital services for mental health,
                           including psychiatric hospitals, limited to 35 days
                           per year

                  4.       Outpatient benefits for short-term, outpatient
                           evaluative and crisis intervention, or home health
                           mental health services, limited to 20 visits per year

                           a.       When authorized by the Division of Medical
                                    Assistance and Health Services, one (1)
                                    mental health inpatient day may be exchanged
                                    for up to four (4) home health visits or
                                    four (4) outpatient services, including
                                    partial care. This is limited to an exchange
                                    of up to a maximum of 10 inpatient days for
                                    a maximum of 40 additional outpatient
                                    visits.

                           b.       When authorized by the Division of Medical
                                    Assistance and Health Services, one (1)
                                    mental health inpatient day may be exchanged
                                    for two (2) days of treatment in partial
                                    hospitalization up to the maximum number of
                                    covered inpatient days.

                  5.       Inpatient and outpatient services for substance abuse
                           are limited to detoxification.

         C.       Exclusions. The following services are not covered for NJ
                  FamilyCare Plan D participants either by the contractor or the
                  Department:

                  1.       Non-medically necessary services

                  2.       Intermediate Care Facilities/Mental Retardation

                  3.       Private duty nursing unless authorized by the
                           contractor

                  4.       Personal Care Assistant Services

                                                                           IV-13

<PAGE>

                  5.       Medical Day Care Services

                  6.       Chiropractic Services

                  7.       Dental services except preventive dentistry for
                           children under age 12

                  8.       Orthotic devices

                  9.       Targeted Case Management for the chronically ill

                  10.      Residential treatment center psychiatric programs

                  11.      Religious non-medical institutions care and services

                  12.      Durable Medical Equipment

                  13.      Early and Periodic Screening, Diagnosis and Treatment
                           (EPSDT) services (except for well child care,
                           including immunizations and lead screening and
                           treatments)

                  14.      Transportation Services, including non-emergency
                           ambulance, invalid coach, and lower mode
                           transportation

                  15.      Hearing Aid Services

                  16.      Blood and Blood Plasma, except administration of
                           blood, processing of blood, processing fees and fees
                           related to autologous blood donations are covered.

                  17.      Cosmetic Services

                  18.      Custodial Care

                  19.      Special Remedial and Educational Services

                  20.      Experimental and Investigational Services

                  21.      Medical Supplies (except diabetic supplies)

                  22.      Infertility Services

                  23.      Rehabilitative Services for Substance Abuse

                  24.      Weight reduction programs or dietary supplements,
                           except surgical operations, procedures or treatment
                           of obesity when approved by the contractor

                  25.      Acupuncture and acupuncture therapy, except when
                           performed as a form of anesthesia in connection with
                           covered surgery

                  26.      Temporomandibular joint disorder treatment, including
                           treatment performed by prosthesis placed directly in
                           the teeth

                  27.      Recreational therapy

                  28.      Sleep therapy

                  29.      Court-ordered services

                  30.      Thermograms and thermography

                  31.      Biofeedback

                  32.      Radial keratotomy

                  33.      Respite Care

                  34.      Skilled nursing facility services

         D.     Continuity of Care. With respect to former Plan A
                parent/caretaker relatives with a program status code of 380
                who are transferred to Plan D, the contractor shall continue
                to provide to completion the following services that have been
                approved or initiated under the contractor's plan:

                  1. Blood and blood plasma

                                                                           IV-14

<PAGE>

                  2. Dental services

                  3. DME

                  4. Hearing aids

                  5. Medical supplies

                  6. Orthotics

                  7. TMJ treatment

[Reserved]

[Reserved]

[Reserved]

[Reserved]

[Reserved]

[Reserved]

[Reserved]

[Reserved]

[Reserved]

[Reserved]

[Reserved]

                                                                           IV-15

<PAGE>

[Reserved]

                                                                           IV-16
<PAGE>

[Reserved]

                                                                           IV-17
<PAGE>

[Reserved]

4.1.87   SUPPLEMENTAL BENEFITS

         Any service, activity or product not covered under the State Plan may
         be provided by the contractor only through written approval by the
         Department and the cost of which shall be borne solely by the
         contractor.

4.1.98   CONTRACTOR AND DMAHS SERVICE EXCLUSIONS

         Neither the contractor nor DMAHS shall be responsible for the
         following:

         A.       All services not medically necessary, provided, approved or
                  arranged by a contractor's physician or other provider (within
                  his/her scope of practice) except emergency services.

         B.       Cosmetic surgery except when medically necessary and approved.

         C.       Experimental organ transplants.

                                                                           IV-18

<PAGE>

         D.       Services provided primarily for the diagnosis and treatment of
                  infertility, including sterilization reversals, and related
                  office (medical or clinic), drugs, laboratory services,
                  radiological and diagnostic services and surgical procedures.

         E.       Respite Care

         F.       Rest cures, personal comfort and convenience items, services
                  and supplies not directly related to the care of the patient,
                  including but not limited to, guest meals and accommodations,
                  telephone charges, travel expenses other than those services
                  not in Article 4.1 of this contract, take home supplies and
                  similar cost. Costs incurred by an accompanying parent(s) for
                  an out-of-state medical intervention are covered under EPSDT
                  by the contractor.

         G.       Services involving the use of equipment in facilities, the
                  purchase, rental or construction of which has not been
                  approved by applicable laws of the State of New Jersey and
                  regulations issued pursuant thereto.

         H.       All claims arising directly from services provided by or in
                  institutions owned or operated by the federal government such
                  as Veterans Administration hospitals.

         I.       Services provided in an inpatient psychiatric institution,
                  that is not an acute care hospital, to individuals under 65
                  years of age and over 21 years of age.

         J.       Services provided to all persons without charge. Services and
                  items provided without charge through programs of other public
                  or voluntary agencies (for example, New Jersey State
                  Department of Health and Senior Services, New Jersey Heart
                  Association, First Aid Rescue Squads, and so forth) shall be
                  utilized to the fullest extent possible.

         K.       Services or items furnished for any sickness or injury
                  occurring while the covered person is on active duty in the
                  military.

         L.       Services provided outside the United States and territories.

         M.       Services or items furnished for any condition or accidental
                  injury arising out of and in the course of employment for
                  which any benefits are available under the provisions of any
                  workers' compensation law, temporary disability benefits law,
                  occupational disease law, or similar legislation, whether or
                  not the Medicaid beneficiary claims or receives benefits
                  thereunder, and whether or not any recovery is obtained from a
                  third-party for resulting damages.

         N.       That part of any benefit which is covered or payable under any
                  health, accident, or other insurance policy (including any
                  benefits payable under the New Jersey no-fault automobile
                  insurance laws), any other private or governmental health
                  benefit

                                                                           IV-19

<PAGE>

                  system, or through any similar third-party liability, which
                  also includes the provision of the Unsatisfied Claim and
                  Judgment Fund.

         O.       Any services or items furnished for which the provider does
                  not normally charge.

         P.       Services furnished by an immediate relative or member of the
                  Medicaid beneficiary's household.

         Q.       Services billed for which the corresponding health care
                  records do not adequately and legibly reflect the requirements
                  of the procedure described or procedure code utilized by the
                  billing provider.

         R.       Services or items reimbursed based upon submission of a cost
                  study when there are no acceptable records or other evidence
                  to substantiate either the costs allegedly incurred or
                  beneficiary income available to offset those costs. In the
                  absence of financial records, a provider may substantiate
                  costs or available income by means of other evidence
                  acceptable to the Division.

         S.       Chiropractor services for individuals 21 years of age or older
                  other than pregnant women.

         T.       Dental services for individuals 21 years of age or older other
                  than pregnant women.

4.2      SPECIAL PROGRAM REQUIREMENTS

4.2.1    EMERGENCY SERVICES

         A.       For purposes of this contract, "emergency" means an onset of a
                  medical or behavioral condition, the onset of which is sudden,
                  that manifests itself by symptoms of sufficient severity,
                  including severe pain, that a prudent layperson, who possesses
                  an average knowledge of medicine and health, could reasonably
                  expect the absence of immediate medical attention to result
                  in:

                  1.       Placing the health of the person or others in serious
                           jeopardy;

                  2.       Serious impairment to such person's bodily
                           functions;

                  3.       Serious dysfunction of any bodily organ or part of
                           such person; or

                  4.       Serious disfigurement of such person.

                  With respect to a pregnant woman who is having contractions,
                  an emergency exists where there is inadequate time to effect a
                  safe transfer to another hospital before delivery or the
                  transfer may pose a threat to the health or safety of the
                  woman or the unborn child.

                                                                           IV-20

<PAGE>

         B.       The contractor shall be responsible for emergency services,
                  both within and outside the contractor's enrollment area, as
                  required by an enrollee in the case of an emergency. Emergency
                  services shall also include:

                  1.       Medical examination at an Emergency Room which is
                           required by N.J.A.C. 10:122D-2.5(b) when a foster
                           home placement of a child occurs after business
                           hours.

                  2.       Examinations at an Emergency Room for suspected
                           physical/child abuse and/or neglect.

                  3.       Post-Stabilization of Care. The contractor shall
                           comply with 42 C.F.R. Section 422.100(b)(iv). The
                           contractor must cover post-stabilization services
                           without requiring authorization and regardless of
                           whether the enrollee obtains the services within or
                           outside the contractor's network if:

                           a.       The services were pre-approved by the
                                    contractor or its providers; or

                           b.       The services were not pre-approved by the
                                    contractor because the contractor did not
                                    respond to the provider of
                                    post-stabilization care services' request
                                    for pre-approval within one (1) hour after
                                    being requested to approve such care; or

                           c.       The contractor could not be contacted for
                                    pre-approval.

         C.       Access Standards. The contractor shall ensure that all covered
                  services, that are required on an emergency basis are
                  available to all its enrollees, twenty-four (24) hours per
                  day, seven (7) days per week, either in the contractor's own
                  provider network or through arrangements approved by DMAHS.
                  The contractor shall maintain-twenty-four (24) hours per day,
                  seven (7) days per week on-call telephone coverage, including
                  Telecommunication Device for the Deaf (TDD)/Tech Telephone
                  (TT) systems, to advise enrollees of procedures for emergency
                  and urgent care and explain procedures for obtaining non-
                  emergent/non-urgent care during regular business hours within
                  the enrollment area as well as outside the enrollment area.

         D.       Non-Participating Providers.

                  1. The contractor shall be responsible for developing and
                     advising its enrollees and where applicable, authorized
                     persons of procedures for obtaining emergency services,
                     including emergency dental services, when it is not
                     medically feasible for enrollees to receive emergency
                     services from or through a participating provider, or when
                     the time required to reach the participating provider would
                     mean risk of permanent damage to the enrollee's health. The

                                                                           IV-21

<PAGE>

                     contractor shall bear the cost of providing emergency
                     service through non-participating providers.

                  2. Non-contracted hospitals providing emergency services to
                     Medicaid or NJ FamilyCare members enrolled in the managed
                     care program shall accept, as payment in full, the amounts
                     that the non-contracted hospitals would receive from
                     Medicaid for the emergency services and/or any related
                     hospitalization as if the beneficiary were enrolled in
                     fee-for-service Medicaid.

         E.       Emergency Care Prior Authorization. Prior authorization shall
                  not be required for emergency services. This applies to
                  out-of-network as well as to in-network providers.

         F.       Medical Screenings/Urgent Care. Prior authorization shall not
                  be required for medical screenings or for providing services
                  in urgent care situations at the hospital emergency room. The
                  hospital emergency room physician may determine the necessity
                  for contacting the PCP or the contractor for information about
                  an enrollee who presents with an urgent condition.

         G.       The contractor shall pay for all medical screening services
                  rendered to its enrollees by hospitals and emergency room
                  physicians regardless of the admitting symptoms or discharge
                  diagnosis. The amount and method of reimbursement for medical
                  screenings shall be subject to negotiation between the
                  contractor and the hospital and directly with non-hospital
                  salaried emergency room physicians and shall include
                  reimbursement for urgent care and non-urgent care rates.
                  Non-participating hospitals may be reimbursed for hospital
                  costs at Medicaid rates or other mutually agreeable rates for
                  medical screening services. Additional fees for additional
                  services may be included at the discretion of the contractor
                  and the hospital.

                  [Reserved]

         H.       The contractor shall be liable for payment for the following
                  emergency services provided to an enrollee:

                  1.       If the screening examination leads to a clinical
                           determination by the examining physician that an
                           actual emergency medical condition exists, the
                           contractor shall pay for both the services involved
                           in the screening exam and the services required to
                           diagnose the specific condition or stabilize the
                           patient.

                                                                           IV-22

<PAGE>

                  2.       All emergency services which are medically necessary
                           until the clinical emergency is stabilized. This
                           includes all treatment that is necessary to assure,
                           within reasonable medical probability, that no
                           material deterioration of the patient's condition is
                           likely to result from, or occur during, discharge of
                           the patient or transfer of the patient to another
                           facility.

                           If there is a disagreement between a hospital and the
                           contractor concerning whether the patient is stable
                           enough for discharge or transfer, or whether the
                           medical benefits of an unstabilized transfer outweigh
                           the risks, the judgment of the attending physician(s)
                           actually caring for the enrollee at the treating
                           facility prevails and is binding on the contractor.
                           The contractor may establish arrangements with
                           hospitals whereby the contractor may send one of its
                           physicians with appropriate ER privileges to assume
                           the attending physician's responsibilities to
                           stabilize, treat, or transfer the patient.

                  3.       If the screening examination leads to a clinical
                           determination by the examining physician that an
                           actual emergency medical condition does not exist,
                           but the enrollee had acute symptoms of sufficient
                           severity at the time of presentation to warrant
                           emergency attention under the prudent layperson
                           standard, the contractor shall pay for all services
                           related to the screening examination. The contractor
                           shall not retroactively deny a claim for an emergency
                           medical screening exam because the condition, which
                           appeared to be an emergency medical condition under
                           the prudent layperson standard, was subsequently
                           determined to be non-emergency in nature.

                  4.       The enrollee's PCP or other contractor representative
                           instructs the enrollee to seek emergency care
                           in-network or out-of-network, whether or not the
                           patient meets the prudent layperson definition.

         I.       The contractor may not limit what constitutes an emergency
                  medical condition based on lists of diagnoses or symptoms.
                  [Reserved]

                  [Reserved]

                                                                           IV-23

<PAGE>

                  [Reserved]

         J.       Women who arrive at any emergency room in active labor shall
                  be considered as an emergency situation and the contractor
                  shall reimburse providers of care accordingly.

         K.       Notification.

                  1. If within thirty (30) minutes after receiving a request
                     from a hospital emergency department for a specialty
                     consultation, the contractor fails to identify an
                     appropriate specialist who is available and willing to
                     assume the care of the enrollee, the emergency department
                     may arrange for medically necessary emergency services by
                     an appropriate specialist, and the contractor shall not
                     deny coverage for these services due to lack of prior
                     authorization. The contractor shall not require prior
                     authorization for specialty care emergency services for
                     treatment of any immediately life-threatening medical
                     condition.

                  2. The contractor may not refuse to cover emergency services
                     based on the emergency room provider, hospital, or fiscal
                     agent not notifying the contractor or the enrollee's PCP of
                     the enrollee's screening and treatment.

         L.       The contractor shall establish and maintain policies and
                  procedures for emergency dental services for all enrollees.

                  1.       Within the contractor's Enrollment/Service Area, the
                           contractor will ensure that:

                           a.       Enrollees shall have access to emergency
                                    dental services on a twenty-four (24) hour,
                                    seven (7) day a week basis.

                           b.       The contractor shall bear full
                                    responsibility for the provision of
                                    emergency dental services, and shall assure
                                    the availability of a back-up provider in
                                    the event that an on-call provider is
                                    unavailable.

                                                                           IV-24

<PAGE>

                  2.       Outside the contractor's Service Area, the contractor
                           shall ensure that:

                           a.       Enrollees shall be able to seek emergency
                                    dental services from any licensed dental
                                    provider without the need for prior
                                    authorization from the contractor while
                                    outside the Service Area (including
                                    out-of-state services covered by the
                                    Medicaid program).

         M.       The contractor shall reimburse ambulance and MICU
                  transportation providers responding to "911" calls whether or
                  not the patient's condition is determined, retrospectively, to
                  be an emergency.

4.2.2    FAMILY PLANNING SERVICES AND SUPPLIES

         A.       General. Except where specified in Section 4.1, the
                  contractor's enrollees are permitted to obtain family planning
                  services and supplies from either the contractor's family
                  planning provider network or from any other qualified Medicaid
                  family planning provider. The DMAHS shall reimburse family
                  planning services provided by non-participating providers
                  based on the Medicaid fee schedule.

         B.       Non-Participating Providers. The contractor shall cooperate
                  with non-participating family planning providers accessed at
                  the enrollee's option by establishing cooperative working
                  relationships with such providers for accepting referrals from
                  them for continued medical care and management of complex
                  health care needs and exchange of enrollee information, where
                  appropriate, to assure provision of needed care within the
                  scope of this contract. The contractor shall not deny coverage
                  of family planning services for a covered diagnostic,
                  preventive or treatment service solely on the basis that the
                  diagnosis was made by a non-participating provider.

4.2.3  [Reserved] WOMEN'S HEALTH SERVICES

         A.       Obstetrical services shall be provided in the same amount,
                  duration, and scope as the Medicaid HealthStart program.
                  Guidelines, standards, and required program provisions are
                  found in Section B.4.2 of the Appendices.

         B.       The contractor shall not limit benefits for postpartum
                  hospital stays to less than forty-eight (48) hours following a
                  normal vaginal delivery or less than ninety-six (96) hours
                  following a cesarean section, unless the attending provider,
                  in consultation with the mother, makes the decision to
                  discharge the mother or the newborn before that time and the
                  provisions of N.J.S.A. 26:2J-4.9 are met.

                  1.       The contractor shall not provide monetary payments or
                           rebates to mothers to encourage them to accept less
                           than the minimum protections provided for in this
                           Article.

                                                                           IV-25

<PAGE>

                  2.       The contractor shall not penalize, reduce, or limit
                           the reimbursement of an attending provider because
                           the provider provided care in a manner consistent
                           with this Article.

         C.       The contractor shall provide female enrollees with direct
                  access to a woman's health specialist within its network for
                  covered care necessary to provide women's routine and
                  preventive health care services. This shall be in addition to
                  the enrollee's designated PCP if that PCP is not a women's
                  health specialist.

4.2.4    PRESCRIBED DRUGS AND PHARMACY SERVICES

         A.       General. The contractor shall provide all medically necessary
                  legend and non- legend drugs which are also covered by the
                  Medicaid program and ensure the availability of quality
                  pharmaceutical services for all enrollees including drugs
                  prescribed by Mental Health/Substance Abuse providers. See
                  Article 4.4C for additional information pertaining to MH/SA
                  pharmacy benefits.

         B.       Use of Formulary. The contractor may use a formulary as long
                  as the following minimum requirements are met:

                  1.       The contractor shall only exclude coverage of drugs
                           or drug categories permitted under 1927(d) of the
                           Social Security Act as amended by OBRA 1993. In
                           addition, the contractor shall include in its
                           formulary, if it chooses to operate a formulary, any
                           FDA-approved drugs that may allow for clinical
                           improvement or are clinically advantageous for the
                           management of a disease or condition.

                  2.       The contractor's formulary shall be developed by a
                           Pharmacy and Therapeutics (P&T) Committee that shall
                           represent the needs of all its enrollees including
                           enrollees with special needs. Network physicians and
                           dentists shall have the opportunity to participate in
                           the development of the formulary and, prior to any
                           changes to a drug formulary, to review, consider and
                           comment on proposed changes. The formulary shall be
                           reviewed in its entirety and updated at least
                           annually.

                  3.       The formulary for the DMAHS pharmacy benefit and any
                           revision thereto shall be reviewed and approved by
                           DMAHS.

                  4.       The formulary shall include only FDA approved drug
                           products. For each Specific Therapeutic Drug (STD)
                           class, the selection of drugs included for each drug
                           class shall be sufficient to ensure the availability
                           of covered drugs with the least need for prior
                           authorization to be initiated by providers of
                           pharmaceutical services and include FDA approved
                           drugs to

                                                                           IV-26

<PAGE>

                           best serve the medical needs of enrollees with
                           special needs. In addition, the formulary shall be
                           revised periodically to assure compliance with this
                           requirement.

                  5.       The contractor shall authorize the provision of a
                           drug not on the formulary requested by the PCP or
                           referral provider on behalf of the enrollee if the
                           approved prescriber certifies medical necessity for
                           the drug to the contractor for a determination.
                           Medically accepted indications shall be consistent
                           with Section 1927(k)(6) of the Social Security Act.
                           The contractor shall have in place a DMAHS-approved
                           prior approval process for authorizing the dispensing
                           of such drugs. In addition:

                           a.       Any prior approval issued by the contractor
                                    shall take into consideration prescription
                                    refills related to the original pharmacy
                                    service.

                           b.       A formulary shall not be used to deny
                                    coverage of any Medicaid covered outpatient
                                    drug determined medically necessary through
                                    the review and appeal process.

                           c.       Prior approval may be used for covered drug
                                    products under the following conditions:

                                    i.       For prescribing and dispensing
                                             medically necessary non-formulary
                                             drugs.

                                    ii.      To limit drug coverage consistent
                                             with the policies of the Medicaid
                                             program.

                                    iii.     To minimize potential drug
                                             over-utilization.

                                    iv.      To accommodate exceptions to
                                             Medicaid drug utilization review
                                             standards related to proper
                                             maintenance drug therapy.

                           d.       Except for the use of approved generic drug
                                    substitution of brand drugs, under no
                                    circumstances shall the contractor permit
                                    the therapeutic substitution of a prescribed
                                    drug without a prescriber's authorization.

                           e.       The contractor shall not penalize the
                                    prescriber or enrollee, financially or
                                    otherwise, for such requests and approvals.

                           f.       Determinations shall be made within
                                    twenty-four (24) hours of receipt of all
                                    necessary information. The contractor shall
                                    provide for a 72-hour supply of medication
                                    while awaiting a prior authorization
                                    determination.

                                                                           IV-27

<PAGE>

                           g.       Denials of off-formulary requests or
                                    offering of an alternative medication shall
                                    be provided to the prescriber and/or
                                    enrollee in writing. All denials shall be
                                    reported to the DMAHS quarterly.

                  6.       Submission and Publication of the Formulary.

                           a.       The contractor shall publish and distribute
                                    hard copy or on-line, at least annually, its
                                    current formulary (if the contractor uses a
                                    formulary) to all prescribing providers and
                                    pharmacists. Updates to the formulary shall
                                    be distributed in all formats within sixty
                                    (60) days of the changes.

                           b.       The contractor shall submit its formulary to
                                    DMAHS quarterly.

                           c.       It is strongly encouraged that the
                                    contractor publish the formulary on its
                                    internet website.

                  7.       If the formulary includes generic equivalents, the
                           contractor shall provide for a brand name exception
                           process for prescribers to use when medically
                           necessary.

                  8.       The contractor shall establish and maintain a
                           procedure, approved by DMAHS, for internal review and
                           resolution of complaints, such as timely access and
                           coverage issues, drug utilization review, and claim
                           management based on standards of drug utilization
                           review.

          C.       Pharmacy Lock-In Program. The contractor may
                   implement a pharmacy lock-in program including
                   policies, procedures and criteria for establishing
                   the need for the lock-in which must be prior approved
                   by DMAHS and must include the following components to
                   the program:

                   1.       Enrollees shall be notified prior to the
                            lock-in and must be permitted to choose or
                            change pharmacies for good cause.

                   2.       A seventy-two (72)-hour emergency supply of
                            medication at pharmacies other than the
                            designated lock-in pharmacy shall be
                            permitted to assure the provision of
                            necessary medication required in an
                            interim/urgent basis when the assigned
                            pharmacy does not immediately have the
                            medication.

                   3.       Care management and education reinforcement
                            of appropriate medication/pharmacy use shall
                            be provided. A plan for an education program
                            for enrollees shall be developed and
                            submitted for review and approval.

                   4.       The continued need for lock-in shall be
                            periodically (at least every two years)
                            evaluated by the contractor for each
                            enrollee in the program.

                                                                           IV-28

<PAGE>

                  5.       Prescriptions from all participating
                           prescribers shall be honored and may not be
                           required to be written by the PCP only.

                  6.       The contractor shall fill medications
                           prescribed by mental health/substance abuse
                           providers, subject to the limitations
                           described in Article 4.4C.

                  7.       The contractor shall submit quarterly
                           reports on Pharmacy Lock-in participants.
                           See Section A.7.17 of the Appendices (Table
                           15).

                  8.       The contractor shall create a protocol for
                           identifying pharmacy benefit misuse and abuse by
                           Medicaid/NJ FamilyCare beneficiaries and restricting
                           or locking-in those beneficiaries to a single
                           pharmacy. [Reserved] The contractor shall establish
                           lock-in policy and procedure [Reserved] for
                           beneficiaries determined, by either the contractor or
                           the State, to have misused, abused or overutilized
                           pharmacy benefits. The policy and procedure shall
                           comply with N.J.A.C. 10:49-14.2 and any amendments
                           thereto.

         D.       The contractor shall develop criteria and protocols
                  to avoid enrollee injury due to the prescribing of
                  drugs by more than one provider.

         E.       The contractor shall permit its pharmacy providers to
                  dispense a 72-hour supply of any drug, on or off the
                  formulary, that is subject to a prior authorization
                  process. (e.g., Article 4.2.4.B.5.f)

4.2.5    LABORATORY SERVICES

         A.       Urgent/Emergent Results. The contractor shall develop policies
                  and procedures to require providers to notify enrollees of
                  laboratory and radiology results within twenty-four (24) hours
                  of receipt of results in urgent or emergent cases. The
                  contractor may allow its providers to arrange an appointment
                  to discuss laboratory/radiology results within 24 hours of
                  receipt of results when it is deemed face-to-face discussion
                  with the enrollee/authorized person may be necessary.
                  Urgent/emergency appointment standards must be followed (see
                  Article 5.12). Rapid strep test results must be available to
                  the enrollee within 24 hours of the test.

         B.       Routine Results. The contractor shall assure that its
                  providers establish a mechanism to notify enrollees of
                  non-urgent or non-emergent laboratory and radiology results
                  within ten business days of receipt of the results.

         C.       The contractor shall reimburse, on a fee-for service basis,
                  PCPs and other providers for blood drawing in the office for
                  lead screening.

4.2.6    EPSDT SCREENING SERVICES

                                                                           IV-29

<PAGE>

         A.       The contractor shall comply with EPSDT program requirements
                  and performance standards found below.

                  1.       The contractor shall provide EPSDT services.

                  2.       NJ FamilyCare Plans B and C. For children eligible
                           solely through NJ FamilyCare Plans B and C, coverage
                           includes all preventive screening and diagnostic
                           services, medical examinations, immunizations,
                           dental, vision, lead screening and hearing services.
                           Includes only those treatment services identified
                           through the examination that are included under the
                           contractor's benefit package or specified services
                           through the FFS program. Other services identified
                           through an EPSDT examination that are not included in
                           the New Jersey Care 2000+ covered benefits package
                           are not covered.

                  3.       Enrollee Notification. The contractor shall provide
                           written notification to its enrollees under
                           twenty-one (21) years of age when appropriate
                           periodic assessments or needed services are due and
                           must coordinate appointments for care:

                  4.       Missed Appointments. The contractor shall implement
                           policies and procedures and shall monitor its
                           providers to provide follow up on missed appointments
                           and referrals for problems identified through the
                           EPSDT exams. Reasonable outreach shall be documented
                           and must consist of: mailers, certified mail as
                           necessary; use of MEDM system provided by the State;
                           and contact with the Medical Assistance Customer
                           Center (MACC), DDD, or DYFS regional offices in the
                           case of DYFS enrollees to confirm addresses and/or to
                           request assistance in locating an enrollee.

                  5.       PCP Notification. The contractor shall provide each
                           PCP, on a calendar quarter basis, a list of the PCP's
                           enrollees who have not had an encounter during the
                           past year and/or who have not complied with the EPSDT
                           periodicity and immunization schedules for children.
                           Primary care sites/PCPs and/or the contractor shall
                           be required to contact these enrollees to arrange an
                           appointment. Documentation of the outreach efforts
                           and responses is required.

                  6.       Reporting Standards. The contractor shall submit
                           quarterly reports, hard copy and on diskette, of
                           EPSDT services. See Section A.7.16 of the Appendices
                           (Table 14).

         B.       Section 1905(r) of the Social Security Act (42 U.S.C. Section
                  1396d) and federal regulation 42 C.F.R. Section 441.50 et seq.
                  requires EPSDT services to include:

                  1.       EPSDT Services which include:

                                                                           IV-30

<PAGE>

                           a.       A comprehensive health and developmental
                                    history including assessments of both
                                    physical and mental health development and
                                    the provision of all diagnostic and
                                    treatment services that are medically
                                    necessary to correct or ameliorate a
                                    physical or mental condition identified
                                    during a screening visit. The contractor
                                    shall have procedures in place for referral
                                    to the State or its agent for non-covered
                                    mental health/substance abuse services.

                           b.       A comprehensive unclothed physical
                                    examination including:

                                    -        Vision and hearing screening;

                                    -        Dental inspection; and

                                    -        Nutritional assessment.

                           c.       Appropriate immunizations according to age,
                                    health history and the schedule established
                                    by the Advisory Committee on Immunization
                                    Practices (ACIP) for pediatric vaccines (See
                                    Section B.4.3 of the Appendices). Contractor
                                    and its providers must adjust for periodic
                                    changes in recommended types and schedule of
                                    vaccines. Immunizations must be reviewed at
                                    each screening examination as well as during
                                    acute care visits and necessary
                                    immunizations must be administered when not
                                    contraindicated. Deferral of administration
                                    of a vaccine for any reason must be
                                    documented.

                           d.       Appropriate laboratory tests: A recommended
                                    sequence of screening laboratory
                                    examinations must be provided by the
                                    contractor. The following list of screening
                                    tests is not all inclusive:

                                    -        Hemoglobin/hematocrit/EP

                                    -        Urinalysis

                                    -        Tuberculin test - intradermal,
                                             administered annually and when
                                             medically indicated

                                    -        Lead screening using blood lead
                                             level determinations must be done
                                             for every Medicaid-eligible and NJ
                                             FamilyCare child:

                                             -    between nine (9) months and
                                                  eighteen (18) months,
                                                  preferably at twelve (12)
                                                  months of age

                                             -    at 18-26 months, preferably at
                                                  twenty-four (24) months of age

                                             -    test any child between
                                                  twenty-seven (27) to
                                                  seventy-two (72) months of age
                                                  not previously tested

                                    -        Additional laboratory tests may be
                                             appropriate and medically indicated
                                             (e.g., for ova and parasites) and
                                             shall be obtained as necessary.

                                                                           IV-31

<PAGE>

                           e.       Health education/anticipatory guidance.

                           f.       Referral for further diagnosis and treatment
                                    or follow-up of all abnormalities which are
                                    treatable/correctable or require maintenance
                                    therapy uncovered or suspected (referral may
                                    be to the provider conducting the screening
                                    examination, or to another provider, as
                                    appropriate.)

                           g.       EPSDT screening services shall reflect the
                                    age of the child and be provided
                                    periodically according to the following
                                    schedule:

                                    -        Neonatal exam

                                    -        Under six (6) weeks

                                    -        Two (2) months

                                    -        Four (4) months

                                    -        Six (6) months

                                    -        Nine (9) months

                                    -        Twelve (12) months

                                    -        Fifteen (15) months

                                    -        Eighteen (18) months

                                    -        Twenty-four (24) months

                                    -        Annually through age twenty (20)

                  2.       Vision Services. At a minimum, include diagnosis and
                           treatment for defects in vision, including
                           eyeglasses. Vision screening in an infant means, at a
                           minimum, eye examination and observation of responses
                           to visual stimuli. In an older child, screening for
                           distant visual acuity and ocular alignment shall be
                           done for each child beginning at age three.

                  3.       Dental Services. Dental services may not be limited
                           to emergency services. Dental screening in this
                           context means, at a minimum, observation of tooth
                           eruption, occlusion pattern, presence of caries, or
                           oral infection. A referral to a dentist at or after
                           one year of age is recommended. A referral to a
                           dentist is mandatory at three years of age and
                           annually thereafter through age twenty (20) years.

                  4.       Hearing Services. At a minimum, include diagnosis and
                           treatment for defects in hearing, including hearing
                           aids. For infants identified as at risk for hearing
                           loss through the New Jersey Newborn Hearing Screening
                           Program, hearing screening should be conducted prior
                           to three months of age using professionally
                           recognized audiological assessment techniques. For
                           all other children, hearing screening means, at a
                           minimum, observation of an infant's response to
                           auditory stimuli and audiogram for a child three (3)
                           years of age and older. Speech and hearing assessment
                           shall be a part of each preventive visit for an older
                           child.

                                                                           IV-32

<PAGE>

                  5.       Mental Health/Substance Abuse. Include a mental
                           health/substance abuse assessment documenting
                           pertinent findings. When there is an indication of
                           possible MH/SA issues, a mental health/substance
                           abuse screening tool(s) found in Section B.4.9 of the
                           Appendices or a DHS - approved equivalent shall be
                           used to evaluate the enrollee.

                  6.       Such other necessary health care, diagnostic
                           services, treatment, and other measures to correct or
                           ameliorate defects, -and physical and
                           mental/substance abuse illnesses and conditions
                           discovered by the screening services.

                  7.       Lead Screening. The contractor shall provide a
                           screening program for the presence of lead toxicity
                           in children which shall consist of two components:
                           verbal risk assessment and blood lead testing.

                           a.       Verbal Risk Assessment - The provider shall
                                    perform a verbal risk assessment for lead
                                    toxicity at every periodic visit between the
                                    ages of six (6) and seventy-two (72) months
                                    as indicated on the schedule. The verbal
                                    risk assessment includes, at a minimum, the
                                    following types of questions:

                                    i.       Does your child live in or
                                             regularly visit a house built
                                             before 1960? Does the house have
                                             chipping or peeling paint?

                                    ii.      Was your child's day care
                                             center/preschool/babysitter's home
                                             built before 1960? Does the house
                                             have chipping or peeling paint?

                                    iii.     Does your child live in or
                                             regularly visit a house built
                                             before 1960 with recent, ongoing,
                                             or planned renovation or
                                             remodeling?

                                    iv.      Have any of your children or their
                                             playmates had lead poisoning?

                                    v.       Does your child frequently come in
                                             contact with an adult who works
                                             with lead? Examples include
                                             construction, welding, pottery, or
                                             other trades practiced in your
                                             community.

                                    vi.      Do you give your child home or folk
                                             remedies that may contain lead?

                                                                           IV-33

<PAGE>

                                    Generally, a child's level of risk for
                                    exposure to lead depends upon the answers to
                                    the above questions. If the answer to all
                                    questions are negative, a child is
                                    considered at low risk for high doses of
                                    lead exposure. If the answers to any
                                    question is affirmative or "I don't know," a
                                    child is considered at high risk for high
                                    doses of lead exposure. Regardless of risk,
                                    each child must be tested between nine (9)
                                    months and eighteen (18) months, preferably
                                    at twelve (12) months of age, at 18-26
                                    months, preferably at two (2) years, and any
                                    child between twenty-seven (27) and
                                    seventy-two (72) months of age not
                                    previously tested. A child's risk category
                                    can change with each administration of the
                                    verbal risk assessment.

                           b.       Blood Lead Testing - All screening must be
                                    done through a blood lead level
                                    determination. The contractor must implement
                                    a screening program to identify and treat
                                    high-risk children for lead-exposure and
                                    toxicity. The screening program shall
                                    include blood level screening, diagnostic
                                    evaluation and treatment with follow-up care
                                    of children whose blood lead levels are
                                    elevated. The EP test is no longer
                                    acceptable as a screening test for lead
                                    poisoning; however, it is still valid as a
                                    screening test for iron deficiency anemia.
                                    Screening blood lead testing may be
                                    performed by either a capillary sample
                                    (fingerstick) or a venous sample. However,
                                    all elevated blood levels (equal to or
                                    greater than ten (10) micrograms per one (1)
                                    deciliter) obtained through a capillary
                                    sample must be confirmed by a venous sample.
                                    The blood lead test must be performed by a
                                    New Jersey Department of Health and Senior
                                    Services licensed laboratory. The frequency
                                    with which the blood test is to be
                                    administered depends upon the results of the
                                    verbal risk assessment. For children
                                    determined to be at low risk for high doses
                                    of lead exposure, a screening blood lead
                                    test must be performed once between the ages
                                    of nine (9) and eighteen (18) months,
                                    preferably at twelve (12) months, once
                                    between 18-26 months, preferably at
                                    twenty-four (24) months, and for any child
                                    between twenty-seven (27) and seventy-two
                                    (72) months not previously tested. For
                                    children determined to be at high risk for
                                    high doses of lead exposure, a screening
                                    blood test must be performed at the time a
                                    child is determined to be a high risk
                                    beginning at six months of age if there is
                                    pertinent information or evidence that the
                                    child may be at risk at younger ages than
                                    stated in 4.2.6.B.l.d.

                                    i.       If the initial blood lead test
                                             results are less than ten (10)
                                             micrograms per deciliter, a verbal
                                             risk assessment is required at
                                             every subsequent periodic visit
                                             through seventy-two (72) months of
                                             age, with mandatory blood lead
                                             testing performed according to the
                                             schedule in 4.2.6B.7.

                                                                           IV-34

<PAGE>

                                    ii.      If the child is found to have a
                                             blood lead level equal to or
                                             greater than ten (10) micrograms
                                             per deciliter, providers should use
                                             their professional judgment, in
                                             accordance with the CDC guidelines
                                             regarding patient management and
                                             treatment, as well as follow-up
                                             blood test.

                                    iii.     If a child between the ages of
                                             twenty-four (24) months and
                                             seventy-two (72) months has not
                                             received a screening blood lead
                                             test, the child must receive the
                                             blood lead test immediately,
                                             regardless of whether the child is
                                             determined to be a low or high risk
                                             according to the answers to the
                                             above-listed questions.

                                    iv.      When a child is found to have a
                                             blood lead level equal to or
                                             greater than twenty (20)
                                             (micro)g/dl, the contractor shall
                                             ensure its PCPs cooperate with the
                                             local health department in whose
                                             jurisdiction the child resides to
                                             facilitate the environmental
                                             investigation to determine and
                                             remediate the source of lead. This
                                             cooperation shall include sharing
                                             of information regarding the
                                             child's care, including the
                                             scheduling and results of follow-up
                                             blood lead tests.

                                    v.       When laboratory results are
                                             received, the contractor shall
                                             require PCPs to report to the
                                             contractor all children with blood
                                             lead levels > or = 10 (micro)/dl.
                                             Conversely, when a provider other
                                             than the PCP has reported the lead
                                             screening test to the contractor,
                                             the contractor shall ensure that
                                             this information is transmitted to
                                             the PCP.

                           c.       On a semi-annual basis, the contractor shall
                                    outreach, via letters and informational
                                    materials to parents/custodial caregivers of
                                    all children enrolled in the contractor's
                                    plan who have not been screened, educating
                                    them as to the need for a lead screen and
                                    informing them how to obtain lead screening
                                    and transportation to the screening
                                    location.

                                    i.       The contractor shall provide to
                                             DMAHS, 45 days after the end of
                                             each semi-annual reporting period,
                                             documentation of all lead outreach
                                             activities including the
                                             distribution of the letters and
                                             informational materials indicated
                                             above.

                                    ii.      The contractor shall implement a
                                             corrective action plan, which
                                             describes the interventions to be
                                             taken to outreach
                                             parents/caregivers who do not
                                             respond to the letters and outreach
                                             indicated above. Corrective actions
                                             may include

                                                                           IV-35

<PAGE>

                                             interventions such as telephone
                                             follow-up, home visits, or other
                                             actions proposed by the contractor
                                             and incorporated in the corrective
                                             action plan for review and approval
                                             by DMAHS.

                           d.       On an annual basis, the contractor shall
                                    send letters to PCPs who have lead screening
                                    rates of less than 80% for two consecutive
                                    six-month periods, educating them on the
                                    need and their responsibility to provide
                                    lead screening services.

                                    i.       The contractor shall provide to
                                             DMAHS documentation as to the
                                             efforts made to educate providers
                                             with low screening rates.

                                    ii.      The contractor shall implement
                                             corrective action plans that
                                             describe interventions to be taken
                                             to identify and correct
                                             deficiencies and impediments to the
                                             screening and how the effectiveness
                                             of its interventions will be
                                             measured.

                           e.       On a quarterly basis, the contractor shall
                                    submit to DMAHS a report of all
                                    lead-burdened children who are receiving
                                    treatment and case management services.

                           f.       Lead Case Management Program. The contractor
                                    shall establish a Lead Case Management
                                    Program (LCMP) and have written policies and
                                    procedures for the enrollment of children
                                    with blood lead levels > or = 10 (micro)g/dl
                                    and members of the same household who are
                                    between six months and six years of age,
                                    into the contractor's LCMP.

                                    i.       Lead Case Management shall consist
                                             of, at a minimum:

                                             1)      Follow-up of a child in
                                                     need of lead screening, or
                                                     who has been identified
                                                     with an elevated blood lead
                                                     level > or = 10
                                                     (micro)g/dl. At minimum,
                                                     follow-up shall include:

                                                     A)   For a child with an
                                                          elevated blood lead
                                                          level > or = 10
                                                          (micro)g/dl, the
                                                          Plan's LCM shall
                                                          ascertain if the blood
                                                          lead level has been
                                                          confirmed by a venous
                                                          blood determination.
                                                          In the absence of
                                                          confirmatory test
                                                          results, the LCM will
                                                          arrange for a test.

                                                     B)   For a child with a
                                                          confirmed blood
                                                          (venous) lead level of
                                                          > or = 10 (micro)g/dl,
                                                          the contractor's

                                                                           IV-36

<PAGE>

                                                          LCM shall notify and
                                                          provide to the local
                                                          health department the
                                                          child's name, primary
                                                          health care provider's
                                                          name, the confirmed
                                                          blood lead level, and
                                                          any other pertinent
                                                          information.

                                    2)       Education of the family about all
                                             aspects of lead hazard and
                                             toxicity. Materials shall explain
                                             the sources of lead exposure, the
                                             consequences of elevated blood
                                             levels, preventive measures,
                                             including housekeeping, hygiene,
                                             and appropriate nutrition. The
                                             reasons why it is necessary to
                                             follow a prescribed medical regimen
                                             shall also be explained.

                                    3)       Communication among all interested
                                             parties.

                                    4)       Development of a written case
                                             management plan with the PCP and
                                             the child's family and other
                                             interested parties. The case
                                             management plan shall be reviewed
                                             and updated on an ongoing basis.

                                    5)       Coordination of the various aspects
                                             of the affected child's care, e.g.,
                                             WIC, support groups, and community
                                             resources, and

                                    6)       Aggressively pursuing
                                             non-compliance with follow-up
                                             tests and appointments, and
                                             document these activities in the
                                             LCMP.

                           ii.      Active case management may be discontinued
                                    if one of the following criteria has been
                                    met:

                                    1)       The child has two confirmed blood
                                             lead levels < 10 (micro)g/dl drawn
                                             at least three months apart and all
                                             other children under the age of six
                                             years living in the household who
                                             have been tested and their blood
                                             levels are < 10 (micro)g/dl, and
                                             the sources of lead have been
                                             identified and reduced, or

                                    2)       The family has been permanently
                                             relocated to a lead-Safe house, or

                                    3)       The parent/guardian has given a
                                             written refusal of service, or

                                                                           IV-37

<PAGE>

                                    4)       The LCM is unable to locate the
                                             child after a minimum of three
                                             documented attempts, using the
                                             assistance of County Board of
                                             Social Services, and the LHD. The
                                             child's PCP will be notified in
                                             writing.

4.2.7    IMMUNIZATIONS

         A.       General. The contractor shall ensure that its providers
                  furnish immunizations to its enrollees in accordance with the
                  most current recommendations for vaccines and periodicity
                  schedule of the Advisory Committee on Immunization Practices
                  (ACIP) [Reserved] and any subsequent revision to the schedule
                  as formally recommended by the ACIP, whether or not included
                  as a contract amendment. To the extent possible, the State
                  will provide copies of updated schedules and vaccine
                  recommendations.

         B.       New Vaccines. New vaccines and/or new scheduling or method of
                  administration shall be provided as recommended by the ACIP.
                  The contractor shall monitor periodic recommendations and
                  disseminate updated instruction to its providers and assure
                  appropriate payment adjustment to its providers.

         C.       The contractor shall build in provisions for appropriate
                  reimbursement for catch-up immunizations its providers shall
                  provide for those pediatric enrollees who have missed
                  age-appropriate vaccines.

         D.       Vaccines for Children Program

                  1.       Contractor's providers must enroll with the
                           Department of Health and Senior Services' Vaccines
                           for Children (VFC) Program and use the free vaccine
                           for its enrollees if the vaccine is covered by VFC.
                           The contractor shall not receive from DHS any
                           reimbursement for the cost of VFC-covered vaccines.

                  2.       For non-VFC vaccines the contractor shall reimburse
                           its providers for the cost of both administration and
                           the vaccines.

         E.       To the extent possible, and as permitted by New Jersey
                  statutes and regulations, the contractor and its network
                  providers shall participate in the Statewide immunization
                  registry database, when it becomes fully operational.

         F.       The contractor shall provide immunizations recommended by
                  local health departments based on local epidemiological
                  conditions.

4.2.8    CLINICAL TRIALS

                                                                           IV-38

<PAGE>

         A.       The contractor shall permit participation in an approved
                  clinical trial to a qualified enrollee (as defined in 4.2.8B),
                  and the contractor:

                  1.       May not deny the enrollee participation in the
                           clinical trial referred to in 4.2.8B.2.

                  2.       Subject to 4.2.8C, may not deny (or limit or impose
                           additional conditions on) the coverage of routine
                           patient costs for items and services furnished in
                           connection with participation in the trial.

                  3.       May not discriminate against the enrollee on the
                           basis of the enrollee's participation in such trial.

         B.       Qualified Enrollee Defined. For purposes of this Article, the
                  term "qualified enrollee" means an enrollee under the
                  contractor's coverage who meets the following conditions:

                  1.       The enrollee has a life-threatening or serious
                           illness for which no standard treatment is effective;

                  2.       The enrollee is eligible to participate in an
                           approved clinical trial with respect to treatment of
                           such illness;

                  3.       The enrollee and the referring physician conclude
                           that the enrollee's participation in such trial would
                           be appropriate; and

                  4.       The enrollee's participation in the trial offers
                           potential for significant clinical benefit for the
                           enrollee.

         C.       Payment. The contractor shall provide for payment for medical
                  problems/complications and for routine patient costs described
                  in Article 4.2.8A2 but is not required to pay for costs of
                  items and services that are reasonably expected to be paid for
                  by the sponsors of an approved clinical trial.

         D.       Approved Clinical Trial. For purposes of this Article, the
                  term "approved clinical trial" means a clinical research study
                  or clinical investigation that meets the following
                  requirements:

                  1.       The trial is approved and funded by one or more of
                           the following:

                           a.       The National Institutes of Health

                           b.       A cooperative group or center of the
                                    National Institutes of Health

                           c.       The Department of Veterans Affairs

                           d.       The Department of Defense

                           e.       The Food and Drug Administration, in the
                                    form of an investigational new drug (IND)
                                    exemption

                                                                           IV-39

<PAGE>

                  2.       The facility and personnel providing the treatment
                           are capable of doing so by virtue of their experience
                           or training.

                  3.       There is no alternative noninvestigational therapy
                           that is clearly superior.

                  4.       The available clinical or preclinical data provide a
                           reasonable expectation that the protocol treatment
                           will be at least as effective as the
                           noninvestigational alternative.

         E.       Coverage of Investigational Treatment. The contractor should
                  make a determination for coverage/denial of experimental
                  treatment for a terminal condition based on the following:

                  1.       The treating physician refers the case to a
                           contractor internal review group not associated with
                           the case or referral center.

                  2.       If the internal review group denies the referral, a
                           second, ad hoc group with two or more experts in the
                           field and not involved with the case must review the
                           case.

         F.       Experimental treatments for rare disorders shall not be
                  automatically excluded from coverage but decisions regarding
                  their medical necessity should be considered by a medical
                  review board established by the contractor. Routine costs
                  associated with investigational procedures that are part of an
                  approved research trial are considered medically appropriate.
                  Under no circumstances shall the contractor implement a
                  medical necessity standard that arbitrarily limits coverage on
                  the basis of the illness or condition itself.

4.2.9    HEALTH PROMOTION AND EDUCATION PROGRAMS

         The contractor shall identify relevant community issues (such as TB
         outbreaks, violence) and health education needs of its enrollees, and
         implement plans that are culturally appropriate to meet those needs,
         issues relevant to each of the target population groups of enrollees
         served, as defined in Article 5.2, and the promotion of health. The
         contractor shall use community-based needs assessments and other
         relevant information available from State and local governmental
         agencies and community groups. Health promotion activities shall be
         made available in formats and presented in ways that meet the needs of
         all enrollee groups including elderly enrollees and enrollees with
         special needs, including enrollees with cognitive impairments. The
         contractor shall comply with all applicable State and federal statutes
         and regulations on health wellness programs. The contractor shall
         submit a written description of all planned health education activities
         and targeted implementation dates for DMAHS' approval, prior to
         implementation, including culturally and linguistically appropriate
         materials and materials developed to accommodate each of the enrolled
         target population groups. Thereafter, the plan shall be reviewed,
         revised, and pre-approved by the Department annually.

                                                                           IV-40

<PAGE>

         Health promotion topics shall include, but are not limited to, the
         following:

         A.       General health education classes

         B.       Smoking cessation programs, with targeted outreach for
                  adolescents and pregnant women

         C.       Childbirth education classes

         D.       Nutrition counseling, with targeted outreach for pregnant
                  women, elderly enrollees, and enrollees with special needs

         E.       Signs and symptoms of common diseases and complications

         F.       Early intervention and risk reduction strategies to avoid
                  complications of disability and chronic illness

         G.       Prevention and treatment of alcohol and substance abuse

         H.       Coping with losses resulting from disability or aging

         I.       Self care training, including self-examination

         J.       Need for clear understanding of how to take over-the-counter
                  and prescribed medications and the importance of coordinating
                  all such medications

         K.       Understanding the difference between emergent, urgent and
                  routine health conditions

4.3      COORDINATION WITH ESSENTIAL COMMUNITY PROVIDERS

4.3.1    GENERAL

         The contractor shall identify and establish working relationships for
         coordinating care and services with external organizations that
         interact with in enrollees, including State agencies, schools, social
         service organizations, consumer organizations, and civic/community
         groups, such as an Hispanic coalition.

4.3.2    HEAD START PROGRAMS

         A.       The contractor shall demonstrate to DMAHS that it has
                  established working relationships with Head Start programs
                  (See Section B.4.5 of the Appendices for a list of Head Start
                  Programs). Such relationships will include an exchange of
                  information on the following:

                                                                           IV-41

<PAGE>

                  1.       Policies and procedures for referrals for routine,
                           urgent and emergent care.

                  2.       Policies and procedures for scheduling appointments
                           for routine and urgent care.

                  3.       Policies and procedures for the exchange of
                           information of Head Start participants who are
                           contractor enrollees.

                  4.       Policies and procedures for follow-up and assuring
                           the provision of health care services.

                  5.       Policies and procedures for appealing denials of
                           service and/or reductions in the level of service.

                  6.       Policies and procedures for Head Start staff in
                           supporting enforcement of contractor's health care
                           delivery system policies and procedures for accessing
                           all health care needs.

                  7.       Policies and procedures addressing the need through
                           prior authorization to utilize the contractor's
                           established provider network and what will be done
                           for out-of-network referrals in cases where the
                           contractor does not have an appropriate participating
                           provider in accordance with Article 4.8.7.

                  8.       Policies and procedures for providing comprehensive
                           medical examinations in accordance with EPSDT
                           standards and addressing the need for an examination
                           based on a Head Start referral if the enrollee has
                           had an age-appropriate EPSDT examination (for
                           infants) or an EPSDT examination (for children two
                           (2) to five (5) years old) within six (6) months of
                           the referral date.

                  9.       Policies and Procedures for Head Start's role in
                           prevention activities or programs developed by the
                           contractor.

         B.       The contractor shall evaluate referred Head Start patients to
                  determine the need for treatment/therapies for problems
                  identified by staff of those programs. The contractor/PCP
                  shall be responsible for providing treatment and follow-up
                  information for medically necessary care.

         C.       The contractor shall review referrals and provide appointments
                  in accordance with Article 5.12. Denials of service requests
                  or reduction in level of service, only after an evaluation is
                  completed, shall be in writing, following the requirements in
                  Article 4.6.4.

4.3.3    SCHOOL-BASED YOUTH SERVICES PROGRAMS

                                                                           IV-42

<PAGE>

         A.       The contractor shall demonstrate to DMAHS that it has
                  established a working linkage with school-based youth services
                  programs (SBYSP) that meet credentialing and scope of service
                  requirements for services offered by these programs which are
                  covered MCE services. (See Section B.4.6 of the Appendices for
                  a list of SBYSPs).

                  1.       SBYSP service provision must meet MCE contract
                           requirements, e.g., twenty-four (24)-hour coverage.

                  2.       SBYSP employees must meet credentialing requirements.

         B.       Such working linkages shall include, at minimum, an exchange
                  of information on the following:

                  1.       Policies and procedures for referrals for routine,
                           urgent and emergent care, and standing referrals.

                  2.       Policies and procedures for scheduling appointments
                           for routine and urgent care.

                  3.       Policies and procedures for the exchange of
                           information of SBYSP participants who are contractor
                           enrollees.

                  4.       Policies and procedures for follow-up and assuring
                           the provision of health care services.

                  5.       Policies and procedures for appealing denials of
                           service and/or reductions in the level of service.

                  6.       Policies and procedures for SBYSP staff in supporting
                           enforcement of contractor's health care delivery
                           system policies and procedures for accessing all
                           health care needs.

                  7.       Policies and procedures addressing the need through
                           prior authorization to utilize the contractor's
                           established provider network and what will be done
                           for out-of-network referrals in cases where the
                           contractor does not have an appropriate participating
                           provider in accordance with Article 4.8.7.

                  8.       Policies and procedures for providing comprehensive
                           medical examinations in accordance with EPSDT
                           standards and addressing the need for an examination
                           based on a SBYSP if the enrollee has had an age-
                           appropriate EPSDT examination (for infants) or an
                           EPSDT examination (for children two (2) to five (5)
                           years) within six (6) months of the referral date.

                                                                           IV-43

<PAGE>

                  9.       Policies and Procedures for the SBYSP's role in
                           prevention activities or programs developed by the
                           contractor.

         C.       The contractor shall evaluate referred SBYSP patients to
                  determine the need for treatment/therapies for problems
                  identified by staff of those programs. The contractor/PCP
                  shall be responsible for providing treatment and follow-up
                  information for medically necessary care for SBYSPs
                  participants where there is no formal
                  contractual/reimbursement relationship.

         D.       The contractor shall review referrals and provide appointments
                  in accordance with Article 5.12. Denials of service requests
                  or reduction in level of service, only after an evaluation is
                  completed, shall be in writing, following the requirements in
                  Article 4.6.4.

         E.       The contractor shall provide the DMAHS with a description of
                  its plans to meet the requirements of this contract provision
                  in establishing a working linkage with SBYSPs.

4.3.4    LOCAL HEALTH DEPARTMENTS

         The contractor shall demonstrate to DMAHS that it has established a
         working linkage with local health departments (LHDs) that meet
         credentialing and scope of service requirements.

         The contractor should include linkages with LHDs especially for meeting
         the lead screening and toxicity treatment compliance standards required
         in this contract. The contractor shall refer lead-burdened children to
         LHDs for environmental investigation to determine and remediate the
         source of lead.

4.3.5    WIC PROGRAM REQUIREMENTS/ISSUES

         The contractor shall require its providers to refer potentially
         eligible women (pregnant, breast-feeding and postpartum), infants, and
         children up to age five, to established community Women, Infants and
         Children (WIC) programs. The referral shall include the information
         needed by WIC programs in order to provide appropriate services. The
         required information to be included with the referral is found on the
         sample forms in Section B.4.8 of the Appendices, the New Jersey WIC
         program medical referral form, and must be completed with the current
         (within sixty (60) days) height, weight, hemoglobin, or hematocrit, and
         any identified medical/nutritional problems for the initial WIC
         referral and for all subsequent certifications. The contractor shall
         submit a quarterly WIC referral report. (See Section A.7.14 of the
         Appendices (Table 12).)

4.3.6    COMMUNITY LINKAGES

         The contractor shall describe any relationships being explored,
         planned, and/or existing between the contractor and provider entities
         including for example:

                                                                           IV-44

<PAGE>

         A.       Public health clinics or agencies

         B.       DYFS contracted Child Abuse Regional Diagnostic Centers

         C.       Environmental health clinics

         D.       Women's health clinics

         E.       Family Planning/Reproductive health clinics

         F.       Developmental disabilities clinics

4.4      COORDINATION WITH MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES

         The State shall retain a separate Mental Health/Substance Abuse system
         for the coordination and monitoring of most mental health/substance
         abuse conditions. The contractor shall furnish MH/SA services to
         clients of DDD. However, as described below, the contractor shall
         retain responsibility for MH/SA screening, referrals, prescription
         drugs, higher-mode transportation, and for treatment of the conditions
         identified in Article 4.1.2B.

         A.       Screening Procedures. Mental health and substance abuse
                  problems shall be systematically identified and addressed by
                  the enrollee's PCP at the earliest possible time following
                  initial participation of the enrollee in the contractor's plan
                  or after the onset of a condition requiring mental health
                  and/or substance abuse treatment. PCPs and other providers
                  shall utilize mental health/substance abuse screening tools as
                  set forth in Section B.4.9 of the Appendices as well as other
                  mechanisms to facilitate early identification of mental health
                  and substance abuse needs for treatment. The contractor may
                  request permission to use alternative screening tools. The use
                  of alternative screening tools shall be pre-approved by DMAHS.
                  The lack of motivation of an enrollee to participate in
                  treatment shall not be considered a factor in determining
                  medical necessity and shall not be used as a rationale for
                  withholding or limiting treatment of an enrollee.

                  The contractor shall present its policies and procedures
                  regarding how its providers will identify enrollees with MH/SA
                  service needs, how they will encourage these enrollees to
                  begin treatment, and the screening tools to be used to
                  identify enrollees requiring MH/SA services. The contractor
                  should refer to the DSM-IV Primary Care Version in development
                  of its procedures.

         B.       Referrals. The contractor shall be responsible for referring
                  or coordinating referrals of enrollees as indicated to Mental
                  Health/Substance Abuse providers. In order to facilitate this,
                  the contractor may contact DMHS or its agent (e.g., if the
                  State contracts with a third party administrator (TPA) for a
                  list of MH/SA

                                                                           IV-45

<PAGE>

                  providers. Enrollees may be referred to a MH/SA provider by
                  the PCP, family members, other providers, State agencies, the
                  contractor's staff, or may self-refer.

                  1.       The contractor shall be responsible for referrals
                           from MH/SA providers for medical diagnostic work-up
                           to formulate a diagnosis or to effect the treatment
                           of a MH/SA disorder and ongoing medical care for any
                           enrollee with a MH/SA diagnosis and shall coordinate
                           the care with the MH/SA provider. This includes the
                           responsibility for physical examinations (with the
                           exception of physical examinations performed in
                           direct connection with the administration of
                           Methadone, which will remain FFS), neurological
                           evaluations; laboratory testing and radiologic
                           examinations, and any other diagnostic procedures
                           that are necessary to make the diagnostic
                           determination between a primary MH/SA disorder and an
                           underlying physical disorder, as well as for medical
                           work-ups required for medical clearances prior to the
                           provision of psychiatric medication or
                           electroconvulsive therapy (ECT), or for transfer to a
                           psychiatric/SA facility. Routine laboratory
                           procedures ordered by treating MH/SA providers in
                           conjunction with MH/SA treatment, for routine blood
                           testing performed in conjunction with the
                           administration of Clozapine and the other drugs
                           listed in Article 4.1.4B for non-DDD enrollees, are
                           not the responsibility of the contractor.

                  2.       The contractor shall develop a referral process to be
                           used by its providers which shall include providing a
                           copy of the medical consultation and diagnostic
                           results to the MH/SA provider. The contractor shall
                           develop procedures to allow for notification of an
                           enrollee's MH/SA provider of the findings of his/her
                           physical examination and laboratory/radiological
                           tests within twenty-four (24) hours of receipt for
                           urgent cases and within five business days in
                           non-urgent cases. This notification shall be made by
                           phone with follow-up in writing when feasible.

         C.       Pharmacy Services. Except for the drugs specified in Article
                  4.1.4 (Clozapine, Risperidone, Olanzapine, etc.), all pharmacy
                  services are covered by the contractor. This includes drugs
                  prescribed by the contractor or MH/SA providers. The
                  contractor shall only restrict or require a prior
                  authorization for prescriptions or pharmacy services
                  prescribed by MH/SA providers if one of the following
                  exceptions is demonstrated:

                  1.       The drug prescribed is not related to the treatment
                           of substance abuse/dependency/addiction or mental
                           illness or to any side effects of the
                           psychopharmacological agents. These drugs are to be
                           prescribed by the contractor's PCP or specialists in
                           the contractor's network.

                  2.       The prescribed drug does not conform to standard
                           rules of the contractor's pharmacy plan.

                                                                           IV-46

<PAGE>

                  3.       The contractor, at its option, may require a prior
                           authorization (PA) process if the number of
                           prescriptions written by the MH/SA provider for
                           MH/SA-related conditions exceed four (4) per month
                           per enrollee. For drugs that require weekly
                           prescriptions, these prescriptions shall be counted
                           as one per month and not as four separate
                           prescriptions. The contractor's PA process for the
                           purposes of this section shall require review and
                           prior approval by DMAHS.

         D.       Prescription Abuse. If the contractor suspects prescription
                  abuse by a MH/SA provider, the contractor shall contact DMAHS
                  for investigation and decision of potentially excluding the
                  provider from the NJ Medicaid program. The contractor shall
                  provide the Department with any and all documentation.

         E.       Inpatient Hospital Services for Enrollees who are not clients
                  of DDD with both a Physical Health as well as a Mental
                  Health/Substance Abuse Diagnosis. The contractor's financial
                  and medical management responsibilities are as follows:

                  1.       If the inpatient hospital admission of an enrollee
                           who is not a client of DDD is for a physical health
                           primary diagnosis, the contractor shall be
                           responsible for inpatient hospital costs and medical
                           management. Where psychiatric consultation is
                           required to assist the contractor with mental
                           health/substance abuse management, the State or its
                           agent (e.g., a TPA) shall be responsible for
                           authorizing the psychiatric consult/services provided
                           during the inpatient stay. The State shall not
                           require service authorization for at least one
                           psychiatric consultation per inpatient admission.
                           When a substance abuse disorder is known to be the
                           primary diagnosis of an enrollee and a co-occurring
                           psychiatric disorder is not a management concern,
                           then the State or its agent may authorize that the
                           consult/services be by an ASAM certified physician.
                           The contractor shall coordinate inpatient MH/SA
                           consultations and services with the enrollee's MH/SA
                           provider as well as discharge planning and follow-up.

                  2.       If the inpatient hospital admission of an enrollee
                           who is not a client of DDD is for a mental
                           health/substance abuse primary diagnosis, the
                           inpatient stay will be paid by the State through the
                           FFS program. The contractor shall provide and pay for
                           participating providers who may be called in as
                           consultants to manage any physical problems.

         F.       Transportation. The contractor shall be responsible for all
                  transportation through ambulance, Mobile Intensive Care Units
                  (MICUs), and invalid coach modalities, even if the enrollee is
                  being transported to a Medicaid or NJ FamilyCare service that
                  is not included in the contractor's benefit package including
                  to MH/SA services.

                                                                           IV-47

<PAGE>

4.5      ENROLLEES WITH SPECIAL NEEDS

4.5.1    INTRODUCTION

         For purposes of this contract, adults with special needs includes
         complex/chronic medical conditions requiring specialized health care
         services, including persons with physical, mental, substance abuse,
         and/or developmental disabilities, including such persons who are
         homeless. Children with special health care needs are those who have or
         are at increased risk for a chronic physical, developmental,
         behavioral, or emotional condition and who also require health and
         related services of a type or amount beyond that required by children
         generally.

         In addition to the standards set forth in this Article, contractor
         shall make all reasonable efforts and accommodations to ensure that
         services provided to enrollees with special needs are equal in quality
         and accessibility to those provided to all other enrollees.

4.5.2    GENERAL REQUIREMENTS

         A.       Identification and Service Delivery. The contractor shall have
                  in place all of the following to identify and serve enrollees
                  with special needs:

                  1.       Methods for identifying persons at risk of, or having
                           special needs who should be referred for a
                           comprehensive needs assessment. (See Articles 4.5.4B
                           and 4.6.5D for information on Complex Needs
                           Assessments). Such methods should include the
                           application of screening procedures/instruments for
                           new enrollees as well as the conditions and
                           indicators listed in Article 4.6.5D.1 and 2. These
                           include review of hospital and pharmacy utilization
                           and policies and procedures for providers or, where
                           applicable, authorized persons, to make referrals of
                           assessment candidates and for enrollees to self-refer
                           for a Complex Needs Assessment.

                  2.       Methods and guidelines for determining the specific
                           needs of referred individuals who have been
                           identified through a Complex Needs Assessment as
                           having complex needs and developing care plans that
                           address their service requirements with respect to
                           specialist physician care, durable medical equipment,
                           medical supplies, home health services, social
                           services, transportation, etc. Article 4.5.4D
                           contains additional information on Individual Health
                           Care Plans.

                  3.       Care management systems to ensure all required
                           services, as identified through a Complex Needs
                           Assessment, are furnished on a timely basis, and that
                           communication occurs between participating and non-
                           participating providers (to the extent the latter are
                           used). Articles 4.5.4 and 4.6.5 contain additional
                           information on care management.

                                                                           IV-48

<PAGE>

                  4.       Policies and procedures to allow for the continuation
                           of existing relationships with non-participating
                           providers, when appropriate providers are not
                           available within network or it is otherwise
                           considered by the contractor to be in the best
                           medical interest of the enrollee with special needs.
                           Articles 4.5.2D and 4.8.7G contain more specific
                           standards for use of non-participating providers.

                  5.       Methods to assure that access to all
                           contractor-covered services, including
                           transportation, is available for enrollees with
                           special needs whose disabilities substantially impede
                           activities of daily living. The contractor shall
                           reasonably accommodate enrollees with disabilities
                           and shall ensure that physical and communication
                           barriers do not prohibit enrollees with disabilities
                           from obtaining services from the contractor.

                  6.       Services for enrollees with special needs must be
                           provided in a manner responsive to the nature of a
                           person's disability/specific health care need and
                           include adequate time for the provision of the
                           service.

         B.       The contractor shall ensure that any new enrollee identified
                  (either by the information on the Plan Selection form at the
                  time of enrollment or by contractor providers after
                  enrollment) as having complex/chronic conditions receives
                  immediate transition planning. The planning shall be completed
                  within a timeframe appropriate to the enrollee's condition,
                  but in no case later than ten (10) business days from the
                  effective date of enrollment when the Plan Selection form has
                  an indication of special health care needs or within thirty
                  (30) days after special conditions are identified by a
                  provider. This transition planning shall not constitute the
                  IHCP described in Sections 4.5.4 and 4.6.5. Transition
                  planning shall provide for a brief, interim plan to ensure
                  uninterrupted services until a more detailed plan of care is
                  developed. The transition planning process includes, but is
                  not limited to:

                  1.       Review of existing care plans.

                  2.       Preparation of a transition plan that ensures
                           continuous care during the transfer into the
                           contractor's network.

                  3.       If durable medical equipment had been ordered prior
                           to enrollment but not received by the time of
                           enrollment, the contractor must coordinate and
                           follow-through to ensure that the enrollee receives
                           necessary equipment.

         C.       Outreach and Enrollment Staff. The contractor shall have
                  outreach and enrollment staff who are trained to work with
                  enrollees with special needs, are knowledgeable about their
                  care needs and concerns, and are able to converse in the
                  different languages common among the enrolled population,
                  including TDD/TT and American Sign Language if necessary.

                                                                           IV-49

<PAGE>

         D.       Specialty Care. The contractor shall have a procedure by which
                  a new enrollee upon enrollment, or an enrollee upon diagnosis,
                  who requires very complex, highly specialized health care
                  services over a prolonged period of time, or with (i) a
                  life-threatening condition or disease or (ii) a degenerative
                  and/or disabling condition or disease, either of which
                  requires specialized medical care over a prolonged period of
                  time, may receive a referral to a specialist or a specialty
                  care center with expertise in treating the life-threatening
                  disease or specialized condition, who shall be responsible for
                  and capable of providing and coordinating the enrollee's
                  primary and specialty care.

                  If the contractor or primary care provider in consultation
                  with the contractor's medical director and a specialist, if
                  any, determines that the enrollee's care would most
                  appropriately be coordinated by such specialist/specialty care
                  center, the contractor shall refer the enrollee. Such referral
                  shall be pursuant to a care plan approved by the contractor,
                  in consultation with the primary care provider if appropriate,
                  the specialist, care manager, and the enrollee (or, where
                  applicable, authorized person). The contractor-participating
                  specialist/specialty care center acting as both primary and
                  specialty care provider shall be permitted to treat the
                  enrollee without a referral from the enrollee's primary care
                  provider and may authorize such referrals, procedures, tests
                  and other medical services as the enrollee's primary care
                  provider would otherwise be permitted to provide or authorize,
                  subject to the terms of the care plan. If the
                  specialist/specialty care center will not be providing primary
                  care, then the contractor's rules for referrals apply.
                  Consideration for policies and procedures should be given for
                  a standing referral when on-going, long-term specialty care is
                  required.

                  If the contractor refers an enrollee to a non
                  contractor-participating provider, services provided pursuant
                  to the approved care plan shall be provided at no additional
                  cost to the enrollee. In no event shall the contractor be
                  required to permit an enrollee to elect to have a non
                  contractor-participating specialist/specialty care center.

                  For purposes of this Article a specialty care center shall
                  mean the Centers of Excellence identified in Section B.4.10 of
                  the Appendices. These centers have special expertise in
                  treating life-threatening diseases/conditions and degenerative
                  /disabling diseases/conditions.

         E.       Dental. While the contractor must assure that enrollees with
                  special needs have access to all medically necessary care, the
                  State considers dental services to be an area meriting
                  particular attention. The contractor, therefore, shall accept
                  for network participation dental providers with expertise in
                  the dental management of enrollees with developmental
                  disabilities. All current providers of dental services to
                  enrollees with developmental disabilities shall be considered
                  for participation in the contractor's dental provider network.
                  Credentialing and recredentialing standards must be
                  maintained. The contractor shall make provisions for providers
                  of dental services to enrollees with developmental
                  disabilities to allow for limiting

                                                                           IV-50

<PAGE>

                  their dental practices at their choice to only those patients
                  with developmental disabilities.

                  The contractor shall develop specific policies and procedures
                  for the provision of dental services to enrollees with
                  developmental disabilities. At a minimum, the policies and
                  procedures shall address:

                  1.       Special needs/issues of enrollees with developmental
                           disabilities, including the importance of providing
                           consultations and assistance to patient caregivers.

                  2.       Provisions in the contractor's dental reimbursement
                           system for initial and follow-up dental visits which
                           may require up to 60 minutes on average to allow for
                           a comprehensive dental examination and other services
                           to include, but not limited to: a visual examination
                           of the enrollee; appropriate radiographs; dental
                           prophylaxis, including extra scaling and topical
                           applications, such as fluoride treatments;
                           non-surgical periodontal treatment, including root
                           planing and scaling; the application of dental
                           sealants on molars and premolars; thorough inquiries
                           regarding patient medical histories; and most
                           importantly, consultations with patient caregivers to
                           establish a thorough understanding of proper dental
                           management during visits.

                  3.       Standards for dental visits that recognize the
                           additional time that may be required in treatment of
                           patients with developmental disabilities. Standards
                           should allow for up to four (4) visits annually
                           without prior authorization.

                  4.       Provisions for home visits when medically necessary
                           and where available.

                  5.       Policies and procedures to ensure that providers
                           specializing in the treatment of enrollees with
                           developmental disabilities have adequate support
                           staff to meet the needs of such patients.

                  6.       Provisions for use and replacement of fixed as well
                           as removable prosthetic devices as medically
                           necessary and appropriate.

                  7.       Provisions in the contractor's dental reimbursement
                           system to reimburse dentists for the costs of
                           preoperative and postoperative evaluations associated
                           with dental surgery performed on patients with
                           developmental disabilities. Preauthorization shall
                           not be required for dental procedures performed
                           during surgery on these patients for dentally
                           appropriate restorative care provided under general
                           anesthesia. Informed consent, signed by the enrollee
                           or authorized person, must be obtained prior to the
                           surgical procedure. Provisions should be made to
                           evaluate such procedures as part of a post payment
                           review process.

                                                                           IV-51

<PAGE>

                  8.       Provisions in the contractor's dental reimbursement
                           system for dentists to receive reimbursement for the
                           cost of providing oral hygiene instructions to
                           caregivers to maintain a patient's overall oral
                           health between dental visits. Such provisions shall
                           include designing and implementing a "dental
                           management" plan, coordinated by the care manager,
                           for overseeing a patient's oral health.

                  9.       The care manager of an enrollee with a developmental
                           disability shall coordinate authorizations for
                           dentally required hospitalizations by consulting with
                           the plan's dental and medical consultants in an
                           efficient and time-sensitive manner.

         F.       After Hours. The contractor shall have policies and procedures
                  to respond to crisis situations after hours for enrollees with
                  special needs. Training sessions/materials and triage
                  protocols for all staff/providers who respond to after- hours
                  calls shall address enrollees with special needs. For example,
                  protocols should recognize that a non-urgent condition for an
                  otherwise healthy individual, such as a moderately elevated
                  temperature, may indicate an urgent care need in the case of a
                  child with a congenital heart anomaly.

         G.       Behavior Problems. The contractor shall take appropriate steps
                  to ensure that its care managers, network providers and Member
                  Services staff are able to serve persons with behavior
                  problems associated with developmental disabilities, including
                  to the extent these problems affect their level of compliance.
                  The contractor shall educate providers and staff about the
                  nature of such problems and how to address them. The
                  contractor shall identify providers who have expertise in
                  serving persons with behavior problems.

         H.       ADA Compliance. The contractor shall have written policies and
                  procedures that ensure compliance with requirements of the
                  Americans with Disabilities Act of 1990, and a written plan to
                  monitor compliance to determine the ADA requirements are being
                  met. The plan shall be sufficient to determine the specific
                  actions that will be taken to remove existing barriers and/or
                  to accommodate the needs of enrollees who are qualified
                  individuals with a disability. The plan shall include the
                  assurance of appropriate physical access to obtain included
                  benefits for all enrollees who are qualified individuals with
                  a disability including, but not limited to, the following:

                  1.       Street level access or accessible ramp into
                           facilities;

                  2.       Access to lavatory; and

                  3.       Access to examination rooms.

                                                                           IV-52

<PAGE>

                  The contractor shall also address in its policies and
                  procedures regarding ADA compliance the following issues:

                  1.       Provider refusal to treat qualified individuals with
                           disabilities, including but not limited to
                           individuals with HIV/AIDS.

                  2.       Contractor's role in ensuring providers receive
                           available resource information on how to accommodate
                           qualified individuals with a disability, particularly
                           mobility impaired enrollees, in examination rooms and
                           for examinations.

                  3.       How the contractor will accommodate visual and
                           hearing impaired individuals and assist its providers
                           in communicating with these individuals.

                  4.       How the contractor will accommodate individuals with
                           communication-affecting disorders and assist its
                           providers in communicating with these individuals.

                  5.       Holding community events as part of its provider and
                           consumer education responsibilities in places of
                           public accommodation, i.e., facilities readily
                           accessible to and useable by qualified individuals
                           with disabilities.

                  6.       How the contractor will ensure it will link qualified
                           individuals with disabilities with the
                           providers/specialists with the knowledge and
                           expertise in treating the illness, condition, and
                           special needs of the enrollees.

4.5.3    PROVIDER NETWORK REQUIREMENTS

         A.       General. The contractor's provider network shall include
                  primary care and specialist providers who are trained and
                  experienced in treating individuals with special needs. The
                  contractor shall ensure that such providers will be equally
                  accessible to all enrollees covered under this contract.

                  1.       The contractor shall operate a program to provide
                           services for enrollees with special needs that
                           emphasizes: (a) that providers are educated regarding
                           the needs of enrollees with special needs; (b) that
                           providers will reasonably accommodate enrollees with
                           special needs; (c) that providers will assist
                           enrollees in maximizing involvement in the care they
                           receive and in making decisions about such care; and
                           (d) that providers maximize for enrollees with
                           special needs independence and functioning through
                           health promotions and preventive care, decreased
                           hospitalization and emergency room care, and the
                           ability to be cared for at home.

                  2.       The contractor shall describe how its provider
                           network will respond to the cultural and linguistic
                           needs of enrollees with special needs.

                                                                           IV-53

<PAGE>

                  3.       The network shall include primary care providers and
                           dentists whose clinical practice has specialized to
                           some degree in treating one or more groups of
                           children and adults with complex/chronic or disabling
                           conditions. To the extent possible, children and
                           adults with complex physical conditions should be in
                           the care of board certified pediatricians and family
                           practitioners or internists, respectively, or
                           subspecialists, as appropriate.

                  4.       The network shall include adult and pediatric
                           subspecialists for cardiology, hematology/oncology,
                           gastroenterology, emergency medicine, endocrinology,
                           infectious disease, orthopedics, neurology,
                           neurosurgery, ophthalmology, physiatry, pulmonology,
                           surgery, and urology, as well as providers who have
                           knowledge and experience in behavioral- developmental
                           pediatrics, adolescent health, geriatrics, and
                           chronic illness management.

                  5.       The network shall include an appropriate and
                           accessible number of institutional facilities,
                           professional allied personnel, home care and
                           community based services to perform the
                           contractor-covered services included in this
                           contract.

         B.       SCHSNA. The contractor shall include in its provider network
                  Special Child Health Services Network Agencies (SCHSNA) for
                  children with special health care needs. These agencies are
                  designated and approved by the Department of Health and Senior
                  Services and include Pediatric Ambulatory Tertiary Centers
                  (pediatric tertiary centers may also be used when a pediatric
                  subspecialty is not sufficiently accessible in a county to
                  meet the needs of the child), Regional Cleft Lip/Palate
                  Centers, Pediatric AIDS/HIV Network, Comprehensive Regional
                  Sickle Cell/Hemoglobinopathies Treatment Centers, PKU
                  Treatment Centers, Genetic Testing and Counseling Centers, and
                  Hemophilia Treatment Centers, and others as designated from
                  time to time by the Department of Health and Senior Services.
                  A list of such providers is found in Section B.4.10 of the
                  Appendices.

         C.       Credentialing. The contractor shall collect and maintain, as
                  part of its credentialing process or through special survey
                  process, information from licensed practitioners including
                  pediatricians and pediatric subspecialists about the nature
                  and extent of their experience in serving children with
                  special health care needs including developmental
                  disabilities.

4.5.4    CARE MANAGEMENT AND COORDINATION OF CARE FOR PERSONS WITH SPECIAL NEEDS

         A.       The contractor shall provide coordination of care to actively
                  link the enrollee to providers, medical services, residential,
                  social and other support services as needed. For persons with
                  special needs, care management shall be provided, but,

                                                                           IV-54

<PAGE>

                  for those with higher needs, as determined through the Complex
                  Needs Assessment (the CNA is described in Article 4.6.5), the
                  contractor shall provide care management at a higher level of
                  intensity. (See Section B.4.12 of the Appendices for a
                  flowchart of the three levels of care management.) Specific
                  requirements for this highest level of care management are
                  described below.

         B.       Complex Needs Assessment. For enrollees with special needs,
                  the contractor shall perform a Complex Needs Assessment no
                  later than forty-five (45) days (or earlier, if urgent) from
                  initial enrollment if special needs are indicated on the Plan
                  Selection Form or from the point of identification of special
                  needs. See 4.6.5 for a description of the CNA. Additional time
                  will be permitted if the contractor demonstrates a good faith
                  level of effort in developing the CNA, and the contractor has
                  in place a continuum of care while assessment is being
                  completed.

         C.       Experience and Caseload. Care managers for enrollees who
                  require a higher level of care management will have the same
                  role and responsibilities as the care manager for the lower
                  intensity care management and additionally will address the
                  complex intensive needs of the enrollee identified as being at
                  "high risk" of adverse medical outcomes absent active
                  intervention by the contractor. For example, a
                  visually-impaired, insulin-dependent diabetic who requires
                  frequent glucose monitoring, nutritional guidance, vision
                  checks, and assistance in coordination with visits with
                  multiple providers, therapeutic regimen, etc. The contractor
                  shall provide intensive acute care services to treat
                  individuals with multiple complex conditions. The number of
                  medical and social services required by an enrollee in this
                  level of care management will generally be greater, thus the
                  number of linkages to be created, maintained, and monitored,
                  including the promotion of communication among providers and
                  the consumer and of continuity of care, will be greater. The
                  contractor shall provide these enrollees greater assistance
                  with scheduling appointments/visits. The intensity and
                  frequency of interaction with the enrollee and other members
                  of the treatment team will also be greater. The care manager
                  shall contact the enrollee bi-weekly or as needed.

                  1.       At a minimum, the care manager for this level of care
                           management shall include, but is not limited to,
                           individuals who hold current RN licenses with at
                           least three (3) years experience serving enrollees
                           with special needs or a graduate degree in social
                           work with at least two (2) years experience serving
                           enrollees with special needs.

                  2.       The contractor shall ensure that the care manager's
                           caseload is adjusted, as needed, to accommodate the
                           work and level of effort needed to meet the needs of
                           the entire case mix of assigned enrollees including
                           those determined to be high risk.

                  3.       The contractor should include care managers with
                           experience working with pediatric as well as adult
                           enrollees with special needs.

                                                                           IV-55

<PAGE>

         D.       IHCPs. The contractor through its care manager shall ensure
                  that an Individual Health Care Plan (IHCP) is developed and
                  implemented as soon as possible, according to the
                  circumstances of the enrollee. The contractor shall ensure the
                  full participation and consent of the enrollee or, where
                  applicable, authorized person and participation of the
                  enrollee's PCP and other case managers identified through the
                  Complex Needs Assessment (e.g. DDD case manager) in the
                  development of the plan.

         E.       The contractor shall provide written notification to the
                  enrollee, or authorized person, of the name of the care
                  manager as soon as the IHCP is completed. The contractor shall
                  have a mechanism to allow for changing levels of care
                  management as needs change.

         F.       Offering of Service. The contractor shall offer and document
                  the enrollee's response for this higher level care management
                  to enrollees (or, where applicable, authorized persons) who,
                  upon completion of a Complex Needs Assessment, are determined
                  to have complex needs which merit development of an IHCP and
                  comprehensive service coordination by a care manager.
                  Enrollees shall have the right to decline coordination of care
                  services; however, such refusal does not preclude the
                  contractor from case managing the enrollee's care.

4.5.5    CHILDREN WITH SPECIAL HEALTH CARE NEEDS

         A.       The contractor shall provide services to children with special
                  health care needs, who may have or are suspected of having
                  serious or chronic physical, developmental, behavioral, or
                  emotional conditions (short-term, intermittent, persistent, or
                  terminal), who manifest some degree of delay or disability in
                  one or more of the following areas: communication, cognition,
                  mobility, self-direction, and self-care; and with specified
                  clinically significant disturbance of thought, behavior,
                  emotions, or relationships that can be described as a syndrome
                  or pattern, generally resulting from neurochemical
                  dysfunction, negative environmental influences, or some
                  combination of both. Services needed by these children may
                  include but are not limited to psychiatric care and substance
                  abuse counseling for DDD clients (appropriate referrals for
                  all other pediatric enrollees); medications; crisis
                  intervention; inpatient hospital services; and intensive care
                  management to assure adherence to treatment requirements.

         B.       The contractor shall be responsible for establishing:

                  1.       Methods for well child care, health promotion, and
                           disease prevention, specialty care for those who
                           require such care, diagnostic and intervention
                           strategies, home therapies, and ongoing ancillary
                           services, as well as the long-term management of
                           ongoing medical complications.

                                                                           IV-56

<PAGE>

                  2.       Care management systems for assuring that children
                           with serious, chronic, and rare disorders receive
                           appropriate diagnostic work-ups on a timely basis.

                  3.       Access to specialty centers in and out of New Jersey
                           for diagnosis and treatment of rare disorders. A
                           listing of specialty centers is included in Section
                           B.4.10 of the Appendices.

                  4.       Policies and procedures to allow for continuation of
                           existing relationships with out-of-network providers,
                           when considered to be in the best medical interest of
                           the enrollee.

         C.       Linkages. The contractor shall have methods for coordinating
                  care and creating linkages with external organizations,
                  including but not limited to school districts, child
                  protective service agencies, early intervention agencies,
                  behavioral health, and developmental disabilities service
                  organizations. At a minimum, linkages shall address:

                  1.       Contractor's process for generating or receiving
                           referrals, and sharing information;

                  2.       Contractor's process for obtaining consent from
                           enrollees or, where applicable, authorized persons to
                           share individual beneficiary medical information; and

                  3.       Ongoing coordination efforts (regularly scheduled
                           meetings, newsletters, joint community based
                           project).

         D.       IEPs. The contractor shall cooperate with school districts to
                  provide medically necessary contractor-covered services when
                  included as a recommendation in an enrollee's Individualized
                  Education Program (IEP) developed by the school district's
                  child study team, e.g. recommended medications or DME. The
                  contractor shall work with local school districts to develop
                  and implement procedures for linking and coordinating services
                  for children who need to receive medical services under an
                  Individualized Education Plan, in order to prevent duplication
                  of services, and to provide for cost effective services. Those
                  services which are included in the IEP as required services
                  are paid for by the school district, e.g. physical therapy.
                  Services covered under the Special Education Medicaid
                  Initiative (SEMI) program, or not included in Article 4.1 of
                  this contract, or not available under EPSDT are not the
                  contractor's responsibility. The provision of services shall
                  be based on medical necessity as defined in this contract.

         E.       Early Intervention. The contractor shall cooperate with and
                  coordinate its services with local Early Intervention Programs
                  to provide medically necessary (as defined in this contract)
                  contractor-covered services included in the

                                                                           IV-57

<PAGE>

                  Individualized Family Support Plan (IFSP). These programs are
                  comprehensive, community based programs of integrated
                  developmental services which use a family centered approach to
                  facilitate the developmental progress of children between the
                  ages of birth and three (3) years of age whose developmental
                  patterns are atypical, or are at serious risk to become
                  atypical through the influence of certain biological or
                  environmental risk factors. At a minimum, the contractor must
                  have policies and procedures for identifying children who are
                  candidates for early intervention, making referrals through
                  Special Child Health Services County Case Management Units
                  (See Appendix B.4.11) in accordance with the Department of
                  Health and Senior Services procedures for referrals, and
                  sharing information with early intervention providers.

4.5.6    CLIENTS OF THE DIVISION OF DEVELOPMENTAL DISABILITIES

         A.       The contractor shall provide all physical health services
                  required by this contract as well as the MH/SA services
                  included in the Medicaid State Plan to enrollees who are
                  clients of DDD. The contractor shall include in its provider
                  network a specialized network of providers who will deliver
                  both physical as well as MH/SA services (in accordance with
                  Medicaid program standards) to clients of DDD, and ensure
                  continuity of care within that network.

         B.       The contractor's specialized network shall provide disease
                  management services for clients of DDD, which shall include
                  participation in:

                  1.       Care Management, including Complex Needs Assessment,
                           development and implementation of IHCP, referral,
                           coordination of care, continuity of care, monitoring,
                           and follow-up and documentation.

                  2.       Coordination of care across multi-disciplinary
                           treatment teams to assist PCPs in identifying the
                           providers within the network who will meet the
                           specific needs and health care requirements of
                           clients of DDD with both physical health and MH/SA
                           needs and provide continuity of care with an
                           identified provider who has an established
                           relationship with the patient.

                  3.       Apply quality improvement techniques/protocols to
                           effect improved quality of life outcomes.

                  4.       Design and implement clinical pathways and practice
                           guidelines that will produce overall quality outcomes
                           for specific diseases/conditions identified in
                           clients of DDD.

                  5.       Medical treatment.

         C.       The specialized provider network shall consist of credentialed
                  providers for physical health and MH/SA services, who have
                  experience and expertise in treating clients of DDD who have
                  both physical health and MH/SA needs, and

                                                                           IV-58

<PAGE>

                  who can provide internal management of the complex care needs
                  of these enrollees. The contractor shall ensure that the
                  specialized provider network will be able to deliver
                  identified physical health and MH/SA outcomes.

         D.       Clients of DDD may, at their option, receive their physical
                  health and/or MH/SA services from any qualified provider in
                  the contractor's network. They are not required to receive
                  their services through the contractor's specialized network.

         E.       Individuals who are both DYFS clients and clients of DDD who
                  voluntarily enroll shall receive MH/SA services through the
                  contractor's network.

4.5.7    PERSONS WITH HIV/AIDS

         A.       Pregnant Women. The contractor shall implement a program to
                  educate, test and treat pregnant women with HIV/AIDS to reduce
                  perinatal transmission of HIV from mother to infant. All
                  pregnant women shall receive HIV education and counseling and
                  HIV testing with their consent as part of their regular
                  prenatal care. A refusal of testing shall be documented in the
                  patient's medical record. Additionally, counseling and
                  education regarding perinatal transmission of HIV and
                  available treatment options (the use of Zidovudine [AZT] or
                  most current treatment accepted by the medical community for
                  treating this disease) for the mother and newborn infant
                  should be made available during pregnancy and/or to the infant
                  within the first months of life. The contractor shall submit a
                  quarterly report on HIV referrals and treatment. (See Section
                  A.7.15 of the Appendices (Table 13).)

         B.       Prevention. The contractor shall address the HIV/AIDS
                  prevention needs of uninfected enrollees, as well as the
                  special needs of HIV+ enrollees. The contractor shall
                  establish:

                  1.       Methods for promoting HIV prevention to all enrollees
                           in the contractor's plan. HIV prevention information
                           shall be consistent with the enrollee's age, sex, and
                           risk factors as well as culturally and linguistically
                           appropriate.

                  2.       Methods for a commodating self-referral and early
                           treatment.

                  3.       A process to facilitate access to specialists and/or
                           include HIV/AIDS specialists as PCPs.

                  4.       Methods for education concerning HIV/AIDS risk
                           reduction.

                  5.       A process for HIV/AIDS testing and counseling.

         C.       Traditional Providers. The contractor shall include
                  traditional HIV/AIDS providers in its networks, including
                  HIV/AIDS Specialty Centers (Centers of

                                                                           IV-59

<PAGE>

                  Excellence), and shall establish linkages with AIDS clinical
                  educational programs to keep current on up-to-date treatment
                  guidelines and standards.

         D.       Current Protocols. The contractor shall establish policies and
                  procedures for its providers to assure the use of the most
                  current diagnosis and treatment protocols and standards
                  established by the DHSS and the medical community.

         E.       Care Management. The contractor shall develop and implement an
                  HIV/AIDS care management program with adequate capacity to
                  provide services to all enrollees who would benefit from
                  HIV/AIDS care management services. Contractors shall establish
                  linkage with Ryan White CARE Act grantees for these services
                  either through a contract, MOA, or other cooperative working
                  agreement approved by the Department.

         F.       ADDP. The contractor shall have policies and procedures for
                  supplying DHSS application forms and referring qualified NJ
                  FamilyCare enrollees to the AIDS Drug Distribution Program
                  (ADDP). Qualified individuals, described in Article 8.5.16,
                  receive protease inhibitors and certain anti-retrovirals
                  solely through the ADDP. The contractor shall ensure timely
                  referral for registration with the program to assure these
                  individuals receive appropriate and timely treatment.

4.6      QUALITY MANAGEMENT SYSTEM

         A.       The contractor shall provide for medical care and health
                  services that comply with federal and State Medicaid and NJ
                  FamilyCare standards and regulations and shall satisfy all
                  applicable requirements of the federal and State statutes and
                  regulations pertaining to medical care and services.

                  1.       The contractor shall fulfill all its obligations
                           under this contract so that all health care services
                           required by its enrollees under this contract will
                           meet quality standards within the acceptable medical
                           practice of care for that individual, consistent with
                           the medical community standards of care, and such
                           services will comply with equal amount, duration, and
                           scope requirements in this contract, as described in
                           Article 4.1.

         B.       The contractor shall use its best efforts to ensure that
                  persons and entities providing care and services for the
                  contractor in the capacity of physician, dentist, CNP/CNS,
                  physician's assistant, CNM, or other medical professional meet
                  applicable licensing, certification, or qualification
                  requirements under New Jersey law or applicable state laws in
                  the state where service is provided, and that the functions
                  and responsibilities of such persons and entities in providing
                  medical care and services under this contract do not exceed
                  those permissible under New Jersey law. This shall also
                  include knowledge, training and experience in providing care
                  to individuals with special needs.

                                                                           IV-60

<PAGE>

4.6.1    QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PLAN

         A.       General. The contractor shall implement and maintain a Quality
                  Assessment and Performance Improvement program (QAPI) that is
                  capable of producing prospective, concurrent, and
                  retrospective analyses. Delegation of any QAPI activities
                  shall not relieve the contractor of its obligations to perform
                  all QAPI functions.

         B.       Goals. The contractor's QAPI shall be based on [Reserved] CMS
                  Guidelines and shall:

                  1.       Provide for health care that is medically necessary
                           with an emphasis on the promotion of health in an
                           effective and efficient manner;

                  2.       Assess the appropriateness and timeliness of the care
                           provided;

                  3.       Evaluate and improve, as necessary, access to care
                           and quality of care with a focus on improving
                           enrollee outcomes; and

                  4.       Focus on the clinical quality of medical care
                           rendered to enrollees.

         C.       Required Standards. The contractor's QAPI shall include all
                  standards described in New Jersey modified QARI/QISMC (See
                  Section B.4.14 of the Appendices). The following standards
                  shall be included in addition to the QARI/QISMC requirements:

                  1.       QM Committee. The contractor shall have adequate
                           general liability insurance for members of the QM
                           committee and subcommittees, if any. The committee
                           shall include representation by providers who serve
                           enrollees with special needs.

                  2.       Medical Director. The contractor shall have on staff
                           a Medical Director who is currently licensed in New
                           Jersey as a Doctor of Medicine or Doctor of
                           Osteopathic Medicine. The Medical Director shall be
                           responsible for:

                           a.       The development, implementation and medical
                                    interpretation of medical policies and
                                    procedures to guide and support the
                                    provision of medical care to enrollees;

                           b.       Oversight of provider recruitment
                                    activities;

                           c.       Reviewing all providers' applications and
                                    making recommendations to those with
                                    contracting authority regarding
                                    credentialing and reappointing all providers
                                    prior to the providers' contracting (or
                                    renewal of contract) with the contractor's
                                    plan;

                                                                           IV-61

<PAGE>

                           d.       Continuing surveillance of the performance
                                    of providers in their provision of health
                                    care to enrollees;

                           e.       Administration of all medical activities of
                                    the contractor;

                           f.       Continuous assessment and improvement of the
                                    quality of care provided to enrollees;

                           g.       Serving as Chairperson of Quality Management
                                    Committee; [Note: the medical director may
                                    designate another physician to serve as
                                    chairperson with prior approval from DMAHS.]

                           h.       Oversight of provider education, in-service
                                    training and orientation;

                           i.       Assuring that adequate staff and resources
                                    are available for the provision of proper
                                    medical care to enrollees; and

                           j.       The review and approval of studies and
                                    responses to DMAHS concerning QM matters.

                  3.       Enrollee Rights and Responsibilities. Shall include
                           the right to the Medicaid Fair Hearing Process for
                           Medicaid enrollees.

                  4.       Medical Record standards shall address both Medical
                           and Dental records. Records shall also contain
                           notation of any cultural/linguistic needs of the
                           enrollee.

                  5.       Provider Credentialing. Before any provider may
                           become part of the contractor's network, that
                           provider shall be credentialed by the contractor.
                           ,The contractor must comply with Standard IX of NJ
                           modified QARI/QISMC (Section B.4.14 of the
                           Appendices). Additionally, the contractor's
                           credentialing procedures shall include verification
                           that providers and subcontractors have not been
                           suspended, debarred, disqualified, terminated or
                           otherwise excluded from Medicaid, Medicare, or any
                           other federal or state health care program. The
                           contractor shall obtain federal and State lists of
                           suspended/debarred providers from the appropriate
                           agencies.

                  6.       Institutional and Agency Provider Credentialing. The
                           contractor shall have written policies and procedures
                           for the initial quality assessment of institutional
                           and agency providers with which it intends to
                           contract. At a minimum, such procedures shall include
                           confirmation that a provider has been reviewed and
                           approved by a recognized accrediting body and is in
                           good standing with State and federal regulatory
                           bodies. If a provider has not been approved by a
                           recognized accrediting body, the contractor shall

                                                                           IV-62

<PAGE>

                           develop and implement standards of participation. For
                           home health agency and hospice agency providers, the
                           contractor shall verify that the providers are
                           licensed and meet Medicare certification
                           participation requirements.

                  7.       Delegation/subcontracting of QAPI activities shall
                           not relieve the contractor of its obligation to
                           perform all QAPI functions. The contractor shall
                           submit a written request and a plan for active
                           oversight of the QAPI activities to DMAHS for review
                           and approval prior to subcontracting/delegating any
                           QAPI responsibilities.

4.6.2    QAPI ACTIVITIES

         The contractor shall carry out the activities described in its QAPI.
         The contractor shall develop and submit to DMAHS annually an annual
         work plan of expected accomplishments which includes a schedule of
         clinical standards to be developed, medical care evaluations to be
         completed, and other key quality assurance activities to be completed.
         The contractor shall also prepare and submit to DMAHS an annual report
         on quality assurance activities which demonstrate the contractor's
         accomplishments, compliance and/or deficiencies in meeting its previous
         year's work plan and should include studies undertaken, subsequent
         actions, and aggregate data on utilization and clinical quality of
         medical care rendered.

         The contractor's quality assurance activities shall include, at a
         minimum:

         A.       Guidelines. The contractor shall develop guidelines that meet
                  the requirements of 42 CFR 438 for the management of selected
                  diagnoses and basic health maintenance, and shall distribute
                  all standards, protocols, and guidelines to all providers and
                  upon request to enrollees.

         B.       Treatment Protocols. The contractor may use treatment
                  protocols, however, such protocols shall allow for adjustments
                  based on the enrollee's medical condition and contributing
                  family and social factors.

         C.       Monitoring. The contractor shall have procedures for
                  monitoring the quality and adequacy of medical care including:
                  1) assessing use of the distributed guidelines and 2)
                  assessing possible under-treatment/under-utilization of
                  services.

         D.       Focused Evaluations. The contractor shall have procedures for
                  focused medical care evaluations to be employed when
                  indicators suggest that quality may need to be studied. The
                  contractor shall also have procedures for conducting problem-
                  oriented clinical studies of individual care.

         E.       Follow-up. The contractor shall have procedures for prompt
                  follow-up of reported problems and complaints involving
                  quality of care issues.

                                                                           IV-63

<PAGE>

         F.       Reserved.

         G.       Data Collection. The contractor shall have procedures for
                  gathering and trending data including outcome data.

         H.       Mortality Rates. The contractor shall review inpatient
                  hospital mortality rates of its enrollees.

         I.       Corrective Action. The contractor shall have procedures for
                  informing providers of identified deficiencies, conducting
                  ongoing monitoring of corrective actions, and taking
                  appropriate follow-up actions, such as instituting progressive
                  sanctions and appeal processes. The contractor shall conduct
                  reassessments to determine if corrective action yields
                  intended results.

         J.       Discharge Planning. The contractor shall have procedures to
                  ensure adequate discharge planning, and to include
                  coordination [Reserved] of services for enrollees with special
                  needs.

         K.       Ethical Issues. The contractor shall comply and monitor its
                  providers for compliance with state and federal laws and
                  regulations concerning ethical issues, including but not
                  limited to:

                  -        Advance Directives

                  -        Family Planning services for minors

                  -        Other issues as identified

                  Contractor shall submit report annually or within thirty (30)
                  days to DMAHS with changes or updates to the policies.

         L.       Emergency Care. The contractor shall have methods to track
                  emergency care utilization and to take follow-up action,
                  including individual counseling, to improve appropriate use of
                  urgent and emergency care settings.

         M.       New Medical Technology. The contractor shall have policies and
                  procedures for criteria which are based on scientific evidence
                  for the evaluation of the appropriate use of new medical
                  technologies or new applications of established technologies
                  including medical procedures, drugs, devices, assistive
                  technology devices, and DME.

         N.       Informed Consent. The contractor is required and shall require
                  all participating providers to comply with the informed
                  consent forms and procedures for hysterectomy and
                  sterilization as specified in 42 C.F.R. Part 441, Sub-part B,
                  and shall include the annual audit for such compliance in its
                  quality assurance reviews of participating providers. Copies
                  of the forms are included in Section B.4.15 of the Appendices.

                                                                           IV-64

<PAGE>

         O.       Continuity of Care. The contractor's Quality Management Plan
                  shall include a continuity of care system including a
                  mechanism for tracking issues over time with an emphasis on
                  improving health outcomes, as well as preventive services and
                  maintenance of function for enrollees with special needs.

         P.       HEDIS. The contractor shall submit annually, on a date
                  specified by the State, HEDIS 3.0 data or more updated
                  version, aggregate population data as well as, if available,
                  the contractor's commercial and Medicare enrollment HEDIS data
                  for its aggregate, enrolled commercial and Medicare population
                  in the State or region (if these data are collected and
                  reported to DHSS, a copy of the report should be submitted
                  also to DMAHS) the following clinical indicator measures:

<TABLE>
<CAPTION>
                         HEDIS                                         Report Period
                  Reporting Set Measures                              by Contract Year
                  ----------------------                              ----------------
<S>                                                                   <C>
Childhood Immunization Status                                             annually
Adolescent Immunization Status                                            annually
Well-Child Visits in first 15 months of life                              annually
Well-Child Visits in the 3rd, 4th, 5th and 6th year of life               annually
Adolescent Well-Care Visits                                               annually
Prenatal and Postpartum Care                                              annually
Frequency of Ongoing Prenatal Care                                        annually
Breast Cancer Screening                                                   annually
</TABLE>

         Q.       Quality Improvement Projects (QIPs). The contractor shall
                  participate in QIPs defined annually by the State with input
                  from the contractor. The State will, with input from the
                  contractor and possibly other MCEs, define measurable
                  improvement goals and QIP-specific measures which shall serve
                  as the focus for each QIP. The contractor shall be responsible
                  for designing and implementing strategies for achieving each
                  QIP's objectives. At the beginning of each contract year the
                  contractor shall present a plan for designing and implementing
                  such strategies, which shall receive approval from the State
                  prior to implementation. The contractor shall then submit
                  semiannual progress reports summarizing performance relative
                  to each of the objectives of each contract year.

                  The QIPs shall be completed annually and shall include the
                  areas identified below. The external review organization (ERO)
                  under contract with DHS shall prepare a final report for year
                  one that will contain data, using State-approved sampling and
                  measurement methodologies, for each of the measures below.
                  Changes in required QIPs shall be defined by the DHS and
                  incorporated into the contract by amendment.

                  For each measure the DHS will identify a baseline and a
                  compliance standard. Baseline data, target standards, and
                  compliance standards shall be established or updated by the
                  State.

                                                                           IV-65

<PAGE>

                  If DHS determines that the contractor is not in compliance
                  with the requirements of the annual QIP objectives, either
                  based on the contractor's progress report or the ERO's report,
                  the contractor shall prepare and submit a corrective action
                  plan for DHS approval.

                  1.       Well-Child Care (EPSDT)

                           The QIP for Well-Child Care shall focus upon
                           achieving compliance with the EPSDT periodicity
                           schedule (See Article 4.2.6) in the following
                           priority areas:

<TABLE>
<CAPTION>
                                                            Minimum
                                             Performance   Compliance   Discretionary
               Clinical Area                  Standard      Standard      Sanction
-------------------------------------------------------------------------------------
<S>                                          <C>           <C>          <C>
 Age-appropriate
 Comprehensive exams

 < 1 year old                                    80%           60%          60-70%
 1-2 years old                                   80%           60%          60-70%
 3-5 years old (at least 1 visit)                80%           65%          60-70%
 6-9 years old (at least 1 visit)                80%           60%          60-70%
 10-14 years old (at least 1 visit)              80%           60%          60-70%
 15-18 years old (at least 1 visit)              80%           60%          60-70%
 19-20 years old (at least 1 visit)              80%           60%          60-70%

-------------------------------------------------------------------------------------
 Immunizations
 2 year olds (combined rate)                     80%           60%          60-70%
-------------------------------------------------------------------------------------
 Annual Dental Visit -
 3-12 yr olds                                    80%           60%          60-70%
 13- 21 yr olds                                  80%           60%          60-70%
-------------------------------------------------------------------------------------
 Lead screens (6 months through 4 yr olds)       80%           60%          60-70%
-------------------------------------------------------------------------------------
</TABLE>

                  2.       Prenatal Care and Pregnancy Outcome

                           The QIP for Prenatal Care and Pregnancy Outcome shall
                           focus upon achieving improvements in compliance with
                           prenatal care protocols and in obtaining positive
                           pregnancy outcomes

<TABLE>
<CAPTION>
                                                             Compliance
         Clinical Area                   Target Standard     Standard
-----------------------------------------------------------------------
<S>                                      <C>                 <C>
Initial visit in first trimester or
 within 6 wks of enrollment                   85%               75%
-----------------------------------------------------------------------
Adequate frequency of prenatal care           85%               75%
-----------------------------------------------------------------------
Low birth weight babies
-----------------------------------------------------------------------
</TABLE>

                                                                           IV-66

<PAGE>

<TABLE>
<S>                                           <C>               <C>
1500 grams or less                             -                 1%
2500 grams or less                             -                 6%
-----------------------------------------------------------------------
Post partum exam within 60 days after
 delivery                                     75%               60%
-----------------------------------------------------------------------
</TABLE>

         R.       Care for Persons with Disabilities and the Elderly (Defined as
                  SSI-Aged and New Jersey Care - Aged enrollees and SSI and New
                  Jersey Care enrollees with disabilities)

                  1.       General. The contractor's Quality Department shall
                           promote improved or clinical outcomes and enhanced
                           quality of life for elderly enrollees and enrollees
                           with disabilities. The Quality Department shall:

                           a.       Oversee quality of life indicators, such as:

                                    i.       Degree of personal autonomy;

                                    ii.      Provision of services and supports
                                             that assist people in exercising
                                             medical and social choices;

                                    iii.     Self-direction of care to the
                                             greatest extent appropriate; and

                                    iv.      Maximum use of natural support
                                             networks.

                           b.       Review persistent or significant complaints
                                    from elderly enrollees and enrollees with
                                    disabilities or their authorized person,
                                    identified through contractors' complaint
                                    procedures and through external oversight;

                           c.       Review quality assurance policies, standards
                                    and written procedures to ensure they
                                    adequately address the needs of elderly
                                    enrollees and enrollees with disabilities;

                           d.       Review utilization of services, including
                                    any relationship to adverse or unexpected
                                    outcomes specific to elderly enrollees and
                                    enrollees with disabilities;

                           e.       Develop written procedures and protocols for
                                    at least the following:

                                    i.       Assessing the quality of complex
                                             health care/care management;

                                    ii.      Ensuring contractor compliance with
                                             the Americans with Disabilities
                                             Act; and

                                    iii.     Instituting effective health
                                             management protocols for elderly
                                             enrollees and enrollees with
                                             disabilities.

                           f.       Develop and test methods to identify and
                                    collect quality measurements including
                                    measures of treatment efficacy of

                                                                           IV-67

<PAGE>

                                    particular relevance to elderly enrollees
                                    and enrollees with disabilities.

                           g.       The contractor shall submit by March 1st of
                                    each year an annual report of the quality
                                    activities of this Article.

                  2.       Initiatives for Aged. The contractor shall implement
                           specific initiatives for the aged population through
                           the development of programs and protocols approved by
                           DMAHS annually including:

                           a.       The contractor shall develop a program to
                                    ensure provision of the pneumococcal vaccine
                                    and influenza immunizations, as recommended
                                    by the Centers for Disease Control (CDC).
                                    The adult preventive immunization program
                                    shall include the following components:

                                    i.       Development, distribution, and
                                             measurement of PCP compliance with
                                             practice guidelines;

                                    ii.      Educational outreach for enrollees
                                             and practitioners;

                                    iii.     Access for ambulatory and homebound
                                             enrollees; and

                                    iv.      Mechanism to report to DMAHS, via
                                             encounter data, all immunizations
                                             given.

                           b.       The contractor shall develop a program to
                                    ensure the provision of preventive cancer
                                    screening services including, at a minimum,
                                    mammography and prostate cancer screening.
                                    The program shall include the following
                                    components:

                                    i.       Measurement of provider compliance
                                             with performance standards;

                                    ii.      Education outreach for both
                                             enrollees and practitioners
                                             regarding preventive cancer
                                             screening services;

                                    iii.     Mammography services for women ages
                                             sixty-five (65) to seventy-five
                                             (75) offered at least annually;

                                    iv.      Screen for prostate cancer
                                             scheduled for enrollees aged
                                             sixty-five (65) to seventy-five
                                             (75) at least every two (2) years;
                                             and

                                    v.       Documentation on medical records of
                                             all tests given, positive findings
                                             and actions taken to provide
                                             appropriate follow-up care.

                           c.       The contractor shall develop specific
                                    programs for the care of enrollees
                                    identified with congestive heart failure,
                                    chronic obstructive lung disease (COPD),
                                    diabetes, hypertension, and depression. The
                                    program shall include the following:

                                                                           IV-68

<PAGE>

                                    i.       Written quality of care plan to
                                             monitor clinical management,
                                             including diagnostic,
                                             pharmacological, and functional
                                             standards and to evaluate outcomes
                                             of care;

                                    ii.      Measurement and distribution to
                                             providers of reports on outcomes of
                                             care;

                                    iii.     Educational programming for
                                             enrollees and significant
                                             caregivers which emphasizes
                                             self-care and maximum independence;

                                    iv.      Educational materials for clinical
                                             providers in the best practices of
                                             managing the disease;

                                    v.       Evaluation of effectiveness of each
                                             program by measuring outcomes of
                                             care; and

                           d.       The contractor shall develop a program to
                                    manage the care for enrollees identified
                                    with cognitive impairments. The program
                                    shall include the following:

                                    i.       Written quality of care plans to
                                             monitor clinical management,
                                             including functional standards, and
                                             to evaluate outcomes of care;

                                    ii.      Measurement and distribution to
                                             providers of reports on outcomes of
                                             care;

                                    iii.     Educational programming for
                                             significant caregivers which
                                             emphasizes community based care and
                                             support systems for caregivers; and

                                    iv.      Educational materials for clinical
                                             providers in the best practices of
                                             managing cognitive impairments.

                           e.       Initiatives to Prevent Long Term
                                    Institutionalization: Contractor shall
                                    develop a program to prevent unnecessary or
                                    inappropriate nursing facility admissions
                                    for the ABD, dually eligible population.
                                    This program shall include, but is not
                                    limited to, the following:

                                    i.       Identification of medical and
                                             social conditions that indicate
                                             risk of being institutionalized;

                                    ii.      Monitoring and risk assessment
                                             mechanisms that assist PCPs and
                                             others to identify enrollees
                                             at-risk of institutionalization;

                                    iii.     Protocols to ensure the timely
                                             provision of appropriate preventive
                                             care services to at-risk enrollees.
                                             Such protocols should emphasize
                                             continuity of care and coordination
                                             of services; and

                                    iv.      Provision of home/community
                                             services covered by the contractor
                                             as needed.

                                                                           IV-69

<PAGE>

                           f.       Abuse and Neglect Identification Initiative:
                                    Contractor shall develop a program on
                                    prevention, awareness, and treatment of
                                    abuse and neglect of enrollees, to include
                                    the following:

                                    i.       Diagnostic tools for identifying
                                             enrollees who are experiencing or
                                             who are at risk of abuse and
                                             neglect;

                                    ii.      Protocols and interventions to
                                             treat abuse and neglect of
                                             enrollees, including ongoing
                                             evaluation of the effectiveness of
                                             these protocols and interventions;
                                             and

                                    iii.     Coordination of these efforts
                                             through the PCP.

                  3.       Focused Studies for Persons with Disabilities and the
                           Elderly. The contractor shall cooperate with the
                           DMAHS and the ERO in providing the data and in
                           participating in the focused studies for persons with
                           disabilities and the elderly. The study and final
                           report will be conducted and prepared by the ERO.

                           a.       Preventive Medicine

                                    i.       Influenza vaccinations rates:
                                             percentage of enrollees who have
                                             received an influenza vaccination
                                             in the past year;

                                    ii.      Pneumonia vaccination rate:
                                             percentage of enrollees who have
                                             received the pneumonia vaccination
                                             at any time.

                                    iii.     Biennial eye examination:
                                             percentage of enrollees receiving
                                             vision screening in the past two
                                             (2) years;

                                    iv.      Biennial hearing examination:
                                             percentage of enrollees receiving
                                             hearing screening in the past two
                                             (2) years;

                                    v.       Screening for smoking: percentage
                                             of enrollees who reported smoking
                                             tobacco, and percentage of those
                                             encouraged to stop smoking during
                                             the past year;

                                    vi.      Screening for drug abuse:
                                             percentage of enrollees reporting
                                             alcohol utilization in the
                                             substance abuse risk areas, and
                                             percentage of those referred for
                                             counseling; and

                                    vii.     Screening for colon cancer:
                                             percentage of enrollees who
                                             received this service in the past
                                             two (2) years.

                           b.       Congestive Heart Failure (CHF):

                                    i.       The number of enrollees diagnosed
                                             with CHF:

                                    ii.      The number hospitalized for CHF and
                                             average lengths of stay;

                                    iii.     Percentage of enrollees for whom
                                             Angiotensin Converting Enzyme (ACE)
                                             Inhibitors were prescribed;

                                    iv.      Percentage for whom cardiac
                                             arrhythmias were diagnosed;

                                    v.       CHF readmission rate (the number of
                                             enrollees admitted more than once
                                             for CHF during the past year);

                                                                           IV-70

<PAGE>

                                    vi.      CHF readmission rate ratio (the
                                             ratio of enrollees admitted more
                                             than once for CHF compared to
                                             enrollees admitted only once);

                                    vii.     Percentage who died during the past
                                             year in hospitals; and

                                    viii.    Percentage who died during the past
                                             year in non-hospital settings.

                           c.       Hypertension:

                                    i.       The number of enrollees identified
                                             as hypertensive using HEDIS
                                             methodology,

                                    ii.      Percentage who received a blood
                                             test for cholesterol or LDL.

         S.       For the elderly and enrollees with disabilities, the
                  contractor shall monitor and report outcomes annually to DMAHS
                  of the following quality indicators of potential adverse
                  outcomes and provide for appropriate education, outreach and
                  care management, and other activities as indicated:

                  1.       Aspiration pneumonia

                  2.       Injuries, fractures, and contusions

                  3.       Decubiti

                  4.       Seizure management

         T.       Reserved.

         U.       The contractor shall provide to DMAHS for review and approval
                  a written description of its compensation methodology for
                  marketing representatives, including details of commissions,
                  financial incentives, and other income.

         V.       Provider Performance Measures. The contractor shall conduct a
                  multidimensional assessment of a provider's performance, and
                  utilize such measures in the evaluation and management of
                  those providers. Data shall be supplied to providers for their
                  management activities. The contractor shall indicate in its
                  QAPI/Utilization Management Plan how it will address this
                  provision subject to DHS approval. At a minimum, the
                  evaluation management approach shall address the following:

                  1.       Resource utilization of services, specialty and
                           ancillary services;

                  2.       Clinical performance measures on outcomes of care;

                  3.       Maintenance and preventive services;

                  4.       Enrollee experience and perceptions of service
                           delivery; and

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                  5.        Access.

                  For MH/SA services provided to enrollees who are clients of
                  DDD the contractor shall report MH/SA utilization data to its
                  providers.

         W.       Member Satisfaction. The State will assess member satisfaction
                  of contractor services by conducting surveys employing the
                  Consumer Assessments of Health Plans Study (CAHPS) survey, or
                  another survey instrument specified by the State. The survey
                  shall be stratified to capture statistically significant
                  results for all categories of New Jersey Care 2000+ enrollees
                  including AFDC/TANF, DYFS, SSI and New Jersey Care Aged, Blind
                  and Disabled, NJ FamilyCare, pregnant and parenting women, and
                  racial and linguistic minorities. Sample size, sample
                  selection, and implementation methodology shall be determined
                  by the State, with contractor input, to assure comparability
                  of results across State contractors.

                  The contractor shall fully cooperate with the State and the
                  independent survey administrator such that final, analyzed
                  survey results shall be available from the survey
                  administrator to the State, in a format approved by the State,
                  by a date specified by the State of each contract year. Within
                  sixty (60) days of receipt of the final, analyzed survey
                  results sent to the contractor, it shall identify leading
                  sources of enrollee dissatisfaction, specify additional
                  measurement or intervention efforts developed to address
                  enrollee dissatisfaction, and a timeline, subject to State
                  approval, indicating when such activities will be completed. A
                  status report on the additional measurement or intervention
                  efforts shall be submitted to the State by a date specified by
                  DMAHS. The contractor shall respond to and submit a corrective
                  action to address and correct problems and deficiencies found
                  through the survey.

                  If the contractor conducts a member satisfaction survey of its
                  own, it shall send to DMAHS the results of the survey.

         X.       Focus Groups. The State will annually conduct four focus
                  groups with enrolled populations identified by the State and
                  communicated in writing to the contractor. Objectives for the
                  focus groups will be collaboratively developed by the State
                  and the contractor. For the first contract year, two focus
                  groups each will be conducted with enrollees who have
                  communication-affecting disorders and with enrollees who are
                  elderly.

                  Focus group results will be reported by the State. The
                  contractor shall identify opportunities for improvement
                  identified through the focus groups, specify additional
                  measurement or intervention efforts developed to address the
                  opportunities for improvement, and a timeline, subject to
                  State approval, indicating when such activities will be
                  completed. A status report on the additional measurement or
                  intervention efforts shall be submitted annually to the State
                  by a date specified by DMAHS.

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         Y.       ERO. Other "areas of concern" shall be monitored through the
                  external review process. The External Review Organization
                  (ERO) shall, in its monitoring activities, validate the
                  contractor's protocols, sampling, and review methodologies.

         Z.       Community/Health Education Advisory Committee. The contractor
                  shall establish and maintain a community advisory committee,
                  consisting of persons being served by the contractor,
                  including enrollees or authorized persons, individuals and
                  providers with knowledge of and experience with serving
                  elderly people or people with disabilities; and
                  representatives from community agencies that do not provide
                  contractor-covered services but are important to the health
                  and well-being of members. The committee shall meet at least
                  quarterly and its input and recommendations shall be employed
                  to inform and direct contractor quality management activities
                  and policy and operations changes. The DMAHS shall conduct
                  on-site review of the membership of this committee, as well as
                  the committee's activities throughout the year.

         AA.      Provider Advisory Committee. The contractor shall establish
                  and maintain a provider advisory committee, consisting of
                  providers contracting with the contractor to serve enrollees.
                  At least two providers on the committee shall maintain
                  practices that predominantly serve Medicaid beneficiaries and
                  other indigent populations, in addition to at least one other
                  practicing provider on the committee who has experience and
                  expertise in serving enrollees with special needs. The
                  committee shall meet at least quarterly and its input and
                  recommendations shall be employed to inform and direct
                  contractor quality management activities and policy and
                  operations changes. The DMAHS shall conduct on-site review of
                  the membership of this committee, as well as the committee's
                  activities throughout the year.

4.6.3    REFERRAL SYSTEMS

         A.       The contractor shall have a system whereby enrollees needing
                  specialty medical and dental care will be referred timely and
                  appropriately. The system shall address authorization for
                  specific services with specific limits or authorization of
                  treatment and management of a case when medically indicated
                  (e.g., treatment of a terminally ill cancer patient requiring
                  significant specialist care). The contractor shall maintain
                  and submit a flow chart accurately describing the contractor's
                  referral system, including the title of the person(s)
                  responsible for approving referrals. The following items shall
                  be contained within the referral system:

                  1.       Procedures for recording and tracking each authorized
                           referral.

                  2.       Documentation and assurance of completion of
                           referrals.

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                  3.       Policies and procedures for identifying and
                           rescheduling broken referral appointments with the
                           providers and/or contractor as appropriate (e.g.
                           EPSDT services).

                  4.       Policies and procedures for accepting, resolving and
                           responding to verbal and written enrollee requests
                           for referrals made to the PCP and/or contractor as
                           appropriate. Such requests shall be logged and
                           documented. Requests that cannot be decided upon
                           immediately shall be responded to in writing no later
                           than five (5) business days from the date of receipt
                           of the request (with a call made to the enrollee on
                           final disposition) and postmarked the next day.

                  5.       Policies and procedures for proper notification of
                           the enrollee and where applicable, authorized person,
                           the enrollee's provider, and the enrollee's care
                           manager, including notice of right to appeal and/or
                           right to a request a second opinion when services are
                           denied.

                  6.       A referral form which can be given to the enrollee
                           or, where applicable, an authorized person to take to
                           a specialist.

                  7.       Referral form mailed, faxed, or sent by electronic
                           means directly to the referral provider.

                  8.       Telephoned authorization for urgent situations or
                           when deemed appropriate by the enrollee's PCP or the
                           contractor.

                  9.       Where applicable, the contractor must also notify the
                           contractor care manager or authorized person.

         B.       The contractor shall provide a mechanism to assure the
                  facilitation of referrals when traveling by an enrollee
                  (especially when very ill) from one location to another to
                  pick-up and deliver forms can cause undue hardship for the
                  enrollee. Referrals from practitioners or prior authorizations
                  by the contractor shall be sent/processed within two (2)
                  working days of the request, one (1) day for urgent cases. The
                  contractor shall have procedures to allow enrollees to receive
                  a standing referral to a specialist in cases where an enrollee
                  needs ongoing specialty care.

         C.       The contractor shall not impose an arbitrary number of
                  attempted dental treatment visits by a PCD as a condition
                  prior to the PCD initiating any specialty referral requests.

         D.       The contractor shall authorize any reasonable referral request
                  from a PCP/PCD without imposing any financial penalties to the
                  same PCP/PCD.

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         E.       All final decisions regarding denials of referrals, PAs,
                  treatment and treatment plans for non-emergency services shall
                  be made by a physician and/or peer physician specialist or by
                  a dentist/dental specialist in the case of dental services.
                  Prior authorization decisions for non-emergency services shall
                  be made within ten (10) business days or sooner as required by
                  the needs of the enrollee.

4.6.4    UTILIZATION MANAGEMENT

         A.       Utilization Review Plan. The contractor shall develop a
                  written Utilization Review Plan that includes all standards
                  described in the NJ modified QARI/QISMC (See Section B.4.14 of
                  the Appendices). The written plan shall also include policies
                  and procedures that address the following:

                  1.       The contractor shall not deny benefits to require
                           enrollees and providers to go through the appeal
                           process in an effort to forestall and reduce needed
                           benefits. The contractor shall not arbitrarily deny
                           or reduce the amount, duration, or scope of a
                           required service solely because of the diagnosis,
                           type of illness, or condition. The contractor shall
                           provide all medically necessary services covered by
                           the NJ Division of Medical Assistance and Health
                           Services program in this contract. If a dispute
                           arises concerning the provision of a service or the
                           level of service, the service, if initiated, shall be
                           continued until the issue is resolved.

                  2.       Utilization Management Committee. The committee shall
                           have written parameters for operating and will meet
                           on a regular schedule, defined to be at least
                           quarterly. Committee members shall be clearly
                           identified and representative of the contractor's
                           providers, accountable to the medical director and
                           governing body, and shall maintain appropriate
                           documentation of the committee's activities,
                           findings, recommendations, and actions.

                  3.       Data Collection and Reporting. The plan shall provide
                           for systematic utilization data collection and
                           analysis, including profiling of provider utilization
                           patterns and patient results. The contractor must use
                           aggregate data to establish utilization patterns,
                           allow for trend analysis, and develop statistical
                           profiles of both individual providers and all network
                           providers. Such data shall be regularly reported to
                           the contractor management and contractor providers.
                           The plan shall also provide for interpretation of the
                           data to providers.

                  4.       Corrective Action. The plan shall include procedures
                           for corrective action and follow-up activities when
                           problems in utilization are identified.

                  5.       Roles and Responsibilities. The plan shall clearly
                           define the roles, functions, and responsibilities of
                           the utilization management committee and medical
                           director.

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                  6.       Prohibitions on Compensation. The contractor or the
                           contractor's delegated utilization review agent shall
                           not permit or provide compensation or anything of
                           value to its employees, agents or contractors based
                           on:

                           a.       Either a percentage of the amount by which a
                                    claim is reduced for payment or the number
                                    of claims or the cost of services for which
                                    the person has denied authorization or
                                    payment; or

                           b.       Any other method that encourages the
                                    rendering of an adverse determination.

                  7.       Retrospective Review. If a health care service has
                           been pre-authorized or approved, the specific
                           standards, criteria or procedures used in the
                           determination shall not be modified pursuant to
                           retrospective review.

                  8.       Collection of Information. Only such information as
                           is necessary to make a determination shall be
                           collected. During prospective or concurrent review,
                           copies of medical records shall only be required when
                           necessary to verify that the health care services
                           subject to review are medically necessary. In such
                           cases, only the relevant sections of the records
                           shall be required. Complete or partial medical
                           records may be requested for retrospective reviews.
                           In no event shall such information be reviewed by
                           persons other than health care professionals,
                           registered health information technicians, registered
                           health information administrators, or administrative
                           personnel who have received appropriate training and
                           who will safeguard patient confidentiality.

                  9.       Prohibited Actions. Neither the contractor's UM
                           committee nor its utilization review agent shall
                           take any action with respect to an enrollee or a
                           health care provider that is intended to penalize or
                           discourage the enrollee or the enrollee's health care
                           provider from undertaking an appeal, dispute
                           resolution or judicial review of an adverse
                           determination.

         B.       Prior Authorization. The contractor shall have policies and
                  procedures for prior-authorization and have in effect
                  mechanisms to ensure consistent application of service
                  criteria for authorization decisions. Prior authorization
                  shall be conducted by a currently licensed, registered or
                  certified health care professional, including a registered
                  nurse or a physician who is appropriately trained in the
                  principles, procedures and standards of utilization review.
                  The following timeframes and requirements shall apply to all
                  prior authorization determinations:

                  1.       Routine determinations. Prior authorization
                           determinations for non-urgent services shall be made
                           and a notice of determination provided by telephone
                           and in writing to the provider within ten (10)
                           business days (or

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                           sooner as required by the needs of the enrollee) of
                           receipt of necessary information sufficient to make
                           an informed decision.

                  2.       Urgent determinations. Prior authorization
                           determinations for urgent services shall be made
                           within twenty-four (24) hours of receipt of the
                           necessary information, but no later than three (3)
                           business days after receipt of the request for
                           service.

                  3.       Determination for Services that have been delivered.
                           Determinations involving health care services which
                           have been delivered shall be made within thirty (30)
                           days of receipt of the necessary information.

                  4.       Adverse Determinations. A physician with appropriate
                           clinical experience in treating the enrollee's
                           condition or disease and/or a physician peer reviewer
                           shall make the final determination in all adverse
                           determinations.

                  5.       Continued/Extended Services. A utilization review
                           agent shall make a determination involving continued
                           or extended health care services, or additional
                           services for an enrollee undergoing a course of
                           continued treatment prescribed by a health care
                           provider and provide notice of such determination to
                           the enrollee or the enrollee's designee and to
                           [Reserved] the enrollee's health care provider, by
                           telephone and in writing within one (1) business day
                           of receipt of the necessary information. Notification
                           of continued or extended services shall include the
                           number of extended services approved, the new total
                           of approved services, the date of onset of services
                           and the next review date. For services that require
                           multiple visits, a series of tests, etc. to complete
                           the service, the authorized time period shall be
                           adequate to cover the anticipated span of time that
                           best fits the service needs and circumstances of each
                           individual enrollee.

                  6.       Reconsiderations. The contractor's policies and
                           procedures for authorization shall include consulting
                           with the requesting provider when appropriate. The
                           contractor shall have policies and procedures for
                           reconsideration in the event that an adverse
                           determination is made without an attempt to discuss
                           such determination with the referring provider.
                           Determinations in such cases shall be made within the
                           timeframes established for initial considerations.

                  7.       The contractor shall provide written notification to
                           enrollees and/or, where applicable, an authorized
                           person at the time of denial, deferral or
                           modification of a request for prior approval to
                           provide a medical/dental service(s), when the
                           following conditions exist:

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                           a.       The request is made by a medical/dental or
                                    other health care provider who has a formal
                                    arrangement with the contractor to provide
                                    services to the enrollee.

                           b.       The request is made by the provider through
                                    the formal prior authorization procedures
                                    operated by the contractor.

                           c.       The service for which prior authorization is
                                    requested is a Medicaid covered service for
                                    which the contractor has established a prior
                                    authorization requirement.

                           d.       The prior authorization decision is being
                                    made at the ultimate level of responsibility
                                    within the contractor's organization for
                                    approving, denying, deferring or modifying
                                    the service requested but prior to the point
                                    at which the enrollee must initiate the
                                    contractor's grievance procedure.

                  8.       Notice of Action. Notice of Action shall be in
                           writing and shall meet the language and format
                           requirements of 42 CFR 438.10 to ensure ease of
                           understanding. In the case of expedited appeal
                           process, the contractor shall also provide oral
                           notice. Written notification shall be given on a
                           standardized form approved by the Department and
                           shall inform the provider, enrollee or authorized
                           person of the following:

                           a.       Results of the resolution process and
                                    [Reserved] the effective date of the denial,
                                    reduction, suspension or termination of
                                    service, or other medical coverage
                                    determination;

                           b.       The enrollee's rights to, and method for
                                    obtaining, a State hearing (Fair Hearing
                                    and/or IURO) to contest the denial, deferral
                                    or modification action;

                           c.       The enrollee's right to represent
                                    himself/herself at the State hearing or to
                                    be represented by legal counsel, friend or
                                    other spokesperson;

                           d.       The action taken or intended to be taken by
                                    the contractor on the request for prior
                                    authorization and the reason for such action
                                    including clinical rationale and the
                                    underlying contractual basis or Medicaid
                                    authority;

                           e.       The name and address of the contractor;

                           f.       Notice of internal (contractor) appeal
                                    rights and instructions on how to initiate
                                    such appeal;

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                           g.       Notice of the availability, upon request, of
                                    the clinical review criteria relied upon to
                                    make the determination;

                           h.      The notice to the enrollee shall inform the
                                   enrollee that he or she may file an appeal
                                   concerning the contractor's action using the
                                   contractor's appeal procedure prior to or
                                   concurrent with the initiation of the State
                                   hearing process;

                           i.       The contractor shall notify enrollees,
                                    and/or authorized persons within the time
                                    frames set forth in this contract and in 42
                                    CFR 438.404(c);

                           j.       The enrollee's right to have benefits
                                    continue (see Article 4.6.4C) pending
                                    resolution of the appeal and how to request
                                    that benefits be continued.

                  9.       In no instance shall the contractor apply prior
                           authorization requirements and utilization controls
                           that effectively withhold or limit medically
                           necessary services, or establish prior authorization
                           requirements and utilization controls that would
                           result in a reduced scope of benefits for any
                           enrollee.

         C.       Appeal Process for UM Determinations. The contractor shall
                  have policies and procedures for the appeal of utilization
                  management determinations and similar determinations. In the
                  case of an enrollee who was receiving a covered service (from
                  the contractor, another contractor, or the Medicaid
                  Fee-for-Service program) prior to the determination, the
                  contractor shall continue to provide the same level of service
                  while the determination is in appeal. However, the contractor
                  may require the enrollee to receive the service from within
                  the contractor's provider network, if equivalent care can be
                  provided within network.

                  1.       The contractor shall provide that an enrollee, and
                           any provider acting on behalf of the enrollee with
                           the enrollee's consent (enrollee's consent shall not
                           be required in the case of a deceased patient, or
                           when an enrollee has relocated and cannot be found),
                           may appeal any UM decision resulting in a denial,
                           termination, or other limitation in the coverage of
                           and access to health care services in accordance with
                           this contract and as defined in C.2 under the
                           procedures described in this Article. Such enrollees
                           and providers shall be provided with a written
                           explanation of the appeal process upon the conclusion
                           of each stage in the appeal process.

                  2.       Action [Reserved] means, at a minimum, any of the
                           following:

                           a.       An adverse determination under a utilization
                                    review program;

                           b.       Denial of access to specialty and other
                                    care;

                           c.       Denial of continuation of care;

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                           d.       Denial of a choice of provider;

                           e.       Denial of coverage of routine patient costs
                                    in connection with an approved clinical
                                    trial;

                           f.       Denial of access to needed drugs;

                           g.       The imposition of arbitrary limitation on
                                    medically necessary services; [Reserved]

                           h.       Denial in whole or in part, of payment for a
                                    benefit.

                           i.       Denial or limited authorization of a
                                    requested service, including the type or
                                    level of services;

                           j.       The reduction, suspension, or termination of
                                    a previously authorized service;

                           k.       Failure to provide services in a timely
                                    manner (See Article 5.12);

                           1.       Denial of a service based on lack of medical
                                    necessity.

                  3.       Hearings. If the contractor provides a hearing to the
                           enrollee on the appeal, the enrollee shall have the
                           right to representation. The contractor shall permit
                           the enrollee to be accompanied by a representative of
                           the enrollee's choice to any proceedings and
                           grievances. Such hearing must take place in community
                           locations convenient and accessible to the enrollee.

                  4.       The appeal process shall consist of an informal
                           internal review by the contractor (stage 1 appeal), a
                           formal internal review by the contractor (stage 2
                           appeal), and a formal external review (stage 3
                           appeal) by an independent utilization review
                           organization under the DHSS and/or the Medicaid Fair
                           Hearing process that shall be in accordance with
                           N.J.A.C 10:49 et seq. Stages 1-3 appeals shall be in
                           accordance with N.J.A.C. 8:38-8 with the exception of
                           time frames stated for stage 2 appeals where, for
                           purposes of this contract, the contractor may extend
                           the timeframes by up to 14 calendar days if the
                           enrollee requests the extension or the contractor
                           shows (to the DMAHS' satisfaction upon its request)
                           that there is need for additional information and how
                           the delay is in the enrollee's interest.

                  5.       Utilization Management Appeals. Appropriate clinical
                           personnel shall be involved in the investigation and
                           resolution of all UM appeals. The processing of all
                           such appeals shall be incorporated in the
                           contractor's quality management activities and shall
                           be reviewed periodically (at least quarterly) by the
                           Medical Director/Dental Director.

                  6.       Continuation of benefits. The MCO shall continue the
                           enrollee's benefits if -

                           a.       The enrollee or the provider files the
                                    appeal timely;

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                        b. The appeal involves the termination, suspension, or
                           reduction of a previously authorized course of
                           treatment;

                        c. The services were ordered by an authorized provider;

                        d. The original period covered by the original
                           authorization has not expired.

                  7. Duration of continued or reinstated benefits. The
                     contractor shall continue the enrollee's benefits while an
                     appeal is pending. The benefits must be continued until one
                     of the following occurs: -

                     1. The enrollee withdraws the appeal.

                     2. Ten days pass after the contractor mails the notice,
                        providing the resolution of the appeal against the
                        enrollee, unless the enrollee, within the 10-day
                        timeframe, has requested a State fair hearing with
                        continuation of benefits until a State fair hearing
                        decision is reached.

                     3. A State fair hearing Office issues a hearing decision
                        adverse to the enrollee.

                     4. The time period to service limits of a previously
                        authorized service has been met.

                  8. Effectuation of reversed appeal resolutions.

                        a. Services not furnished while the appeal is pending.
                           If the contractor or the State fair hearing officer
                           reverses a decision to deny, limit, or delay services
                           that were not furnished while the appeal was pending,
                           the contractor must authorize or provide the disputed
                           services promptly, and as expeditiously as the
                           enrollee's health condition requires.

                        b. Services furnished while the appeal is pending. If
                           the contractor or the State fair hearing officer
                           reverses a decision to deny authorization of
                           services, and the enrollee received the disputed
                           services while the appeal was pending, the contractor
                           must pay for those services, in accordance with this
                           contract.

                  9. Expedited Resolution of Appeals. The contractor shall
                     establish and maintain an expedited review process for
                     appeals when the contractor determines (for a request from
                     the enrollee) or the provider indicates (in making the
                     request on the enrollee's behalf or supporting the
                     enrollee's request) that taking the time for a standard
                     resolution could seriously jeopardize the enrollee's life
                     or health or ability to attain, maintain, or regain maximum
                     function.

                        a. The contractor shall ensure that the expedited
                           resolution of an appeal and notice to affected
                           parties is no longer than 3 business days after the

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                           contractor receives the appeal. This timeframe may be
                           extended by up to 14 calendar days if

                           i.  the enrollee requests the extension; or

                           ii. the contractor shows (to the DMAHS' satisfaction,
                               upon its request) that there is need for
                               additional information and how the delay is in
                               the enrollee's interest.

                        b. Action following denial of a request for expedited
                           resolution. If the contractor denies a request for
                           expedited resolution of an appeal, it must

                               i.  Transfer the appeal to the timeframe for
                                   standard resolution, i.e., no longer than 45
                                   days from the day the contractor receives the
                                   appeal;

                               ii. Make reasonable efforts to give the enrollee
                                   prompt oral notice of the denial, and follow
                                   up within two calendar days with a written
                                   notice.

                        c. The contractor shall provide the enrollee a
                           reasonable opportunity to present evidence, and
                           allegations of fact or law, in person as well as in
                           writing and must inform the enrollee of the limited
                           time available for this in the case of expedited
                           resolution.

                        d. Format of notice. For notice of an expedited
                           resolution, the contractor shall provide oral and
                           written notice of the disposition.

                  10. Nothing in this Article shall be construed as removing any
                      legal rights of enrollees under State or federal law,
                      including the right to file judicial actions to enforce
                      rights or request a Medicaid Fair Hearing for Medicaid
                      enrollees in accordance with their rights under State and
                      federal laws and regulations. All written notices to
                      Medicaid/NJ FamilyCare Plan A enrollees, and Plan D
                      enrollees with a program status code of 380 shall include
                      a statement of their right to access the Medicaid Fair
                      Hearing process at any time.

         D.       Drug Utilization Review (DUR) Program: The contractor shall
                  establish and maintain a drug utilization review (DUR) program
                  that satisfies the minimum requirements for prospective and
                  retrospective DUR as described in 1927(g) of the Social
                  Security Act, amended by the Omnibus Budget Reconciliation Act
                  (OBRA) of 1990. The contractor shall include review of Mental
                  Health/Substance Abuse drugs in its DUR program. The State or
                  its agent shall provide its expertise in developing review
                  protocols and shall assist the contractor in analyzing MH/SA
                  drug utilization. Results of the review shall be provided to
                  the State or its agent and, where applicable, to the
                  contractor's network providers.

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                  included therein; and any revisions. The DUR program and
                  revisions must be submitted to the DMAHS for prior approval at
                  least 45 days in advance of the proposed effective date.

4.6.5    CARE MANAGEMENT

         A.       Care Management Standards. The contractor shall develop and
                  implement care management as defined in Article 1 with
                  adequate capacity to provide services to all enrollees who
                  would benefit from care management services. In addition, the
                  contractor shall develop a higher level of care management for
                  enrollees with special needs, as described in Article 4.5.4.
                  Specific care management activities shall include at least the
                  following:

                  1.       An effective mechanism to initiate and discontinue
                           care management services in both inpatient and
                           outpatient settings, in addition to catastrophic
                           incidents.

                  2.       An effective mechanism to coordinate services
                           required by enrollees, including community support
                           services. When appropriate, such activities shall be
                           coordinated with those of the Division of Family
                           Development (DFD), Division of Youth and Family
                           Services (DYFS), Division of Mental Health Services
                           (DMHS), Division of Developmental Disabilities,
                           Special Child Health Services County Case Management
                           Units, Division of Addiction Services, and community
                           agencies.

                  3.       Care plans specifically developed for each care
                           managed enrollee which ensure continuity and
                           coordination of care among the various clinical and
                           non-clinical disciplines and services.

                  4.       A process to evaluate and improve individual care
                           management services as well as the effectiveness of
                           care management as a whole.

                  5.       Protocols for the following care management
                           activities:

                           a.       Pregnancy services including HealthStart
                                    program requirements;

                           b.       All EPSDT services and coordination for
                                    children with elevated blood lead levels;

                           c.       Mental health/substance abuse services
                                    coordination;

                           d.       HIV/AIDS services coordination; and

                           e.       Dental services for enrollees with
                                    developmental disabilities.

         B.       Early Identification. The contractor shall develop policies
                  and procedures for early identification of enrollees who
                  require care management. The contractor shall include in its
                  policies and procedures a review of the following possible
                  indicators of complex care needs:

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                  1.       Poor health or functional status, as reported by the
                           enrollee or authorized person;

                  2.       Existence of a care plan;

                  3.       Existence of a case manager;

                  4.       Request for an assessment from the enrollee or
                           authorized person;

                  5.       Request for an assessment from a State agency or
                           private agency contracting with DDD involved with the
                           enrollee;

                  6.       A chronic condition;

                  7.       A recent hospitalization or admission to a nursing
                           facility;

                  8.       Recent critical social events, such as the death or
                           relocation of a family member or a move to a new
                           home;

                  9.       Existence of multiple medical or social service
                           systems or providers in the life of the enrollee;

                  10.      Use of prescription drugs, particularly multiple
                           drugs; and

                  11.      Use of interpreter or any special services.

         C.       Complex Needs Assessment. The contractor shall have protocols
                  and tools for performing and reviewing/updating Complex Needs
                  Assessments.

                  1.       The Complex Needs Assessment must cover at least the
                           following risk factors:

                           a.       Medical status and history, including
                                    primary and secondary diagnosis and current
                                    and past medications prescribed

                           b.       Functional status

                           c.       Physical well-being

                           d.       Mental health status

                           e.       History of tobacco, alcohol and drug use or
                                    abuse

                           f.       Identification of existing and potential
                                    formal and informal supports

                           g.       Determination of willingness and capacity of
                                    family members or, where applicable,
                                    authorized persons and others to provide
                                    informal support

                           h.       Condition and proximity to services of
                                    current housing, and access to appropriate
                                    transportation

                           i.       Identification of current or potential long
                                    term service needs

                           j.       Need for medical supplies and DME

                  2.       When any of the following conditions are met, the
                           contractor shall ensure that a Complex Needs
                           Assessment is conducted, or an existing assessment is
                           reviewed, within a time frame that meets the needs of
                           the enrollee but within no more than forty-five (45)
                           days:

                           a.       Special needs are identified at the time of
                                    enrollment or any time thereafter;

                           b.       An enrollee or authorized person requests an
                                    assessment;

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                           c.       The enrollee's PCP requests an assessment;

                           d.       A State agency involved with an enrollee
                                    requests an assessment; or

                           e.       An enrollee's status otherwise indicates.

         D.       Plan of Care. The contractor, through its care manager, shall
                  ensure that a plan of care is developed and implementation has
                  begun within thirty (30) business days of the date of a needs
                  assessment, or sooner, according to the circumstances of the
                  enrollee. The contractor shall ensure the full participation
                  and consent of the enrollee or, where applicable, authorized
                  person and participation of the enrollee's PCP and other case
                  managers identified through the Complex Needs Assessment
                  (e.g., DDD case manager) in the development of the plan. The
                  plan shall specify treatment goals, identify medical service
                  needs, relevant social and support services, appropriate
                  linkages and timeframe as well as provide an ongoing accurate
                  record of the individual's clinical history. The care manager
                  shall be responsible for implementing the linkages identified
                  in the plan and monitoring the provision of services
                  identified in the plan. This includes making referrals,
                  coordinating care, promoting communication, ensuring
                  continuity of care, and conducting follow-up. The care manager
                  shall also be responsible for ensuring that the plan is
                  updated as needed, but at least annually. This includes early
                  identification of changes in the enrollee's needs.

         E.       Referrals. The contractor shall have policies and procedures
                  to process and respond within ten (10) business days to care
                  management referrals from network providers, state agencies,
                  private agencies under contract with DDD, self-referrals, or,
                  where applicable, referrals from an authorized person.

         F.       Continuity of Care

                  1.       The contractor shall establish and operate a system
                           to assure that a comprehensive treatment plan for
                           every enrollee will progress to completion in a
                           timely manner without unreasonable interruption.

                  2.       The contractor shall construct and maintain policies
                           and procedures to ensure continuity of care by each
                           provider in its network.

                  3.       An enrollee shall not suffer unreasonable
                           interruption of his/her active treatment plan. Any
                           interruptions beyond the control of the provider will
                           not be deemed a violation of this requirement.

                  4.       If an enrollee has already had a medical or dental
                           treatment procedure initiated prior to his/her
                           enrollment in the contractor's plan, the initiating
                           treating provider must complete that procedure (not
                           the entire treatment plan). See 4.1.1.E for details.

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         G.       Documentation. The contractor shall document all contacts and
                  linkages to medical and other services in the enrollee's case
                  files.

         H.       Informing Providers. The contractor shall inform its PCPs and
                  specialists of the availability of care management services,
                  and must develop protocols describing how providers will
                  coordinate services with the care managers.

         I.       Care Managers. The contractor shall establish a distinct care
                  management function within the contractor's plan. This
                  function shall be overseen by a Care Management Supervisor, as
                  described in Article 7.3. Care managers shall be dedicated to
                  providing care management and may be employees or contracted
                  agents of the contractor. The care manager, in conjunction
                  with and with approval from, the enrollee's PCP, shall make
                  referrals to needed services. The care management system shall
                  recognize three levels set forth in Section B.4.12 of the
                  Appendices. Level 3 is described in Article 4.5.4.

                  1.       The care manager for the first level of care
                           management shall have as a minimum a license as a
                           registered nurse or a Bachelor's degree in social
                           work, health or behavioral science.

                  2.       For level two of care management, in addition to the
                           requirements in 4.6.5I.1. above, the care managers
                           shall also have at least one (1) year of experience
                           serving enrollees with special needs.

                  3.       The contractor shall have procedures to monitor the
                           adequacy of staffing and must adjust staffing ratios
                           and caseloads as appropriate based on its staffing
                           assessment.

         J.       Care management shall also be made available to enrollees who
                  exhibit inappropriate, disruptive or threatening behaviors in
                  a medical practitioner's office when such behaviors may relate
                  to or result from the existence of the enrollee's special
                  needs.

         K.       Hours of Service. The contractor shall make care management
                  services available during normal office hours, Monday through
                  Friday.

4.7      MONITORING AND EVALUATION

4.7.1    GENERAL PROVISIONS

         A.       For purposes of monitoring and evaluating the contractor's
                  performance and compliance with contract provisions, to assure
                  overall quality management (QM), and to meet State and federal
                  statutes and regulations governing monitoring, DMAHS or its
                  agents shall have the right to monitor and evaluate on an
                  on-going basis, through inspection or other means, the
                  contractor's provision of health care services and operations
                  including, but not limited to, the quality, appropriateness,

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                  and timeliness of services provided under this contract and
                  the contractor's compliance with its internal QM program.
                  DMAHS shall establish the scope of review, review sites,
                  relevant time frames for obtaining information, and the
                  criteria for review, unless otherwise provided or permitted by
                  applicable laws, rules, or regulations.

         B.       The contractor shall cooperate with and provide reasonable
                  assistance to DMAHS in monitoring and evaluation of the
                  services provided under this contract.

         C.       The contractor hereby agrees to medical audits in accordance
                  with the protocols for care specified in this contract, in
                  accordance with medical community standards for care, and of
                  the quality of care provided all enrollees, as may be required
                  by appropriate regulatory agencies.

         D.       The contractor shall cooperate with DMAHS in carrying out the
                  provisions of applicable statutes, regulations, and guidelines
                  affecting the administration of this contract.

         E.       The contractor shall distribute to all subcontractors
                  providing services to enrollees, informational materials
                  approved by DMAHS that outlines the nature, scope, and
                  requirements of this contract.

         F.       The contractor, with the prior written approval of DMAHS,
                  shall print and distribute reporting forms and instructions,
                  as necessary whenever such forms are required by this
                  contract.

         G.       The contractor shall make available to DMAHS copies of all
                  standards, protocols, manuals and other documents used to
                  arrive at decisions on the provision of care to its DMAHS
                  enrollees.

         H.       The contractor shall use appropriate clinicians to evaluate
                  the clinical data, and must use multi-disciplinary teams to
                  analyze and address systems issues.

         I.       Contractor shall develop an incentive system for providers to
                  assure submission of encounter data. At a minimum, the system
                  shall include:

                  1.       Mandatory provider profiling that includes complete
                           and timely submissions of encounter data. Contractor
                           shall set specific requirements for profile elements
                           based on data from encounter submissions.

                  2.       Contractor shall set up data submission requirements
                           based on encounter data elements for which compliance
                           performance will be both rewarded and/or sanctioned.

         J.       The contractor shall include in its quality management system
                  reviews/audits which focus on the special dental needs of
                  enrollees with developmental

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                  disabilities. Using encounter data reflecting the utilization
                  of dental services and other data sources, the contractor
                  shall measure clinical outcomes; have these outcomes evaluated
                  by clinical experts; identify quality management tools to be
                  applied; and recommend changes in clinical practices intended
                  to improve the quality of dental care to enrollees with
                  developmental disabilities.

4.7.2    EVALUATION AND REPORTING - CONTRACTOR RESPONSIBILITIES

         A.       The contractor shall collect data and report to the State its
                  findings on the following:

                  1.       Encounter Data: The contractor shall prepare and
                           submit encounter data to DMAHS. Instructions and
                           formats for this report are specified in Section
                           B.3.3 of the Appendices of this contract.

                  2.       Grievance Reports: The contractor shall provide to
                           DMAHS quarterly reports of all grievances in
                           accordance with Articles 5.15 and the contractor's
                           approved grievance process included in this contract.
                           See Section A.7.5 of the Appendices (Table 3).

                  3.       Appointment Availability Studies: The contractor
                           shall conduct a review of appointment availability
                           and submit a report to DMAHS annually. The report
                           must list the average time that enrollees wait for
                           appointments to be scheduled in each of the following
                           categories: baseline physical, routine, specialty,
                           and urgent care appointments. DMAHS must approve the
                           methodology for this review in advance in writing.
                           The contractor shall assess the impact of appointment
                           waiting times on the health status of enrollees with
                           special needs.

                  4.       Twenty-four (24) Hour Access Report: The contractor
                           shall submit to DMAHS an annual report describing its
                           twenty-four (24) hour access procedures for
                           enrollees. The report must include the names and
                           addresses of any answering services that the
                           contractor uses to provide twenty-four (24) hour
                           access.

                  5.       The contractor shall submit to DMAHS, on a quarterly
                           basis, the number of early discharges that pertain to
                           hospital stays for newborns and mothers.

                  6.       The contractor shall monitor, evaluate, and submit an
                           annual report to DMAHS on the incidence of HIV/AIDS
                           patients, the impact of the contractor's program to
                           promote HIV prevention (Article 4.5.7), counseling,
                           treatment and quality of life outcomes, mortality
                           rates.

                  7.       Additional Reports: The contractor shall prepare and
                           submit such other reports as DMAHS may request.
                           Unless otherwise required by law or regulation, DMAHS
                           shall determine the timeframe for submission based

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                           on the nature of the report and give the contractor
                           the opportunity to discuss and comment on the
                           proposed requirements before the contractor is
                           required to submit such additional reports.

                  8.       The contractor shall submit to the Division, on a
                           quarterly basis, documentation of its ongoing
                           internal quality assurance activities. Such
                           documentation shall include at a minimum:

                           a.       Agenda of quality assurance meetings of its
                                    medical professionals; and

                           b.       Attendance sheets with attendee signatures.

         B.       Clinical areas requiring improvement shall be identified and
                  documented with a corrective action plan developed and
                  monitored by the State.

                  1.       Implementation of remedial/corrective action. The
                           QAPI shall include written procedures for taking
                           appropriate remedial action whenever, as determined
                           under the QAPI, inappropriate or substandard services
                           are furnished, or services that should have been
                           furnished were not. Quality assurance actions which
                           result in the termination of a medical provider shall
                           be immediately forwarded by the contractor to DMAHS.
                           Written remedial/corrective action procedures shall
                           include:

                           a.       Specification of the types of problems
                                    requiring remedial/corrective action;

                           b.       Specification of the person(s) or body
                                    responsible for making the final
                                    terminations regarding quality problems;

                           c.       Specific actions to be taken;

                           d.       Provision of feedback to appropriate health
                                    professionals, providers and staff;

                           e.       The schedule and accountability for
                                    implementing corrective actions;

                           f.       The approach to modifying the corrective
                                    action if improvements do not occur; and

                           g.       Procedures for notifying a primary care
                                    physician/provider group that a particular
                                    physician/provider is no longer eligible to
                                    provide services to enrollees.

                  2.       Assessment of effectiveness of corrective actions.
                           The contractor shall monitor and evaluate corrective
                           actions taken to assure that appropriate changes have
                           been made. In addition, the contractor shall track
                           changes in practice patterns.

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                  3.       The contractor shall assure follow-up on identified
                           issues to ensure that actions for improvement have
                           been effective and provide documentation of same.

                  4.       The findings, conclusions, recommendations, actions
                           taken, and results of the actions taken as a result
                           of QM activity, shall be documented and reported to
                           appropriate individuals within the organization and
                           through the established QM channels. The contractor
                           shall document coordination of QM activities and
                           other management activities.

         C.       The contractor shall conduct an annual satisfaction survey of
                  a statistically valid sample of its participating providers
                  who provide services to DMAHS enrollees. The contractor shall
                  submit a copy of the survey instrument and methodology to
                  DMAHS. The survey should include as a minimum questions that
                  address provider opinions of the impact of the referral, prior
                  authorization and provider appeals processes on his/her
                  practice/services, reimbursement methodologies, care
                  management assistance from the contractor. The contractor
                  shall communicate the findings of the survey to DMAHS in
                  writing within one hundred twenty (120) days after conducting
                  the survey. The written report shall also include
                  identification of any corrective measures that need to be
                  taken by the contractor as a result of the findings, a time
                  frame in which such corrective action will be taken by the
                  contractor and recommended changes as needed for subsequent
                  use.

4.7.3    MONITORING AND EVALUATION - DEPARTMENT ACTIVITIES

The contractor shall permit the Department and the United States Department of
Health and Human Services or its agents to have the right to inspect, audit or
otherwise evaluate the quality, appropriateness and timeliness of services
performed under this contract, including through a medical audit. Medical audit
by Department staff shall include, at a minimum, the review of:

         A.       Health care delivery system for patient care;

         B.       Utilization data;

         C.       Medical evaluation of care provided and patient outcomes for
                  specific enrollees as well as for a statistical representative
                  sample of enrollee records;

         D.       Health care data elements submitted electronically to DMAHS;

         E.       Annual, on-site review of the contractor's operations with
                  necessary follow-up reviews and corrective actions;

         F.       The grievances and complaints (recorded in a separately
                  designated complaint log for DMAHS enrollees) relating to
                  medical care including their disposition;

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         G.       Minutes of all quality assurance committee meetings conducted
                  by the contractor's medical staff. Such reviews will be
                  conducted on-site at the contractor's facilities or
                  administrative offices.

4.7.4    INDEPENDENT EXTERNAL REVIEW ORGANIZATION REVIEWS

         A.       The contractor shall cooperate with the external review
                  organization (ERO) audits and provide the information
                  requested and in the time frames specified (generally within
                  sixty (60) days or as indicated in the notice), including
                  medical and dental records, QAPI reports and documents, and
                  financial information. Contractors shall submit a plan of
                  action to correct, evaluate, respond to, resolve, and follow-
                  up on any identified problems reported by such activities.

         B.       The scope of the ERO reviews shall be as follows:

                  1.       Annual, onsite review of contractor's operations with
                           necessary follow-up reviews and corrective actions.

                  2.       The contractor's quality management plan and
                           activities.

                  3.       Individual medical record reviews.

                  4.       Randomly selected studies.5. Focused studies
                           utilizing where possible HEDIS measurements,
                           comparison to Healthy People 2010 Objectives and/or
                           Healthy New Jersey 2010 standards, EPSDT or
                           HealthStart standards as appropriate, and standards
                           guidelines and requirements of the following
                           entities:

                           a.       New Jersey Department of Health and Senior
                                    Services;

                           b.       Centers for Disease Control;

                           c.       National Institutes of Health;

                           d.       National Committee for Quality Assurance;

                           e.       American Diabetes Association;

                           f.       Joint Commission on Accreditation of
                                    Healthcare Organizations;

                           g.       American Pain Society;

                           h.       American Society of Anesthesiologists;

                           i.       American Geriatrics Society;

                           j.       American Medical Association;

                           k.       U.S. Public Health Service;

                           l.       World Health Organization; and

                           m.       Interdisciplinary Council on Developmental
                                    and Learning Disorders.

                           For each focused study, the contractor will be
                           notified as to which standards will be applied.

                  6.       Validation review of the contractor's QM/HEDIS
                           studies required in this contract.

                  7.       Validation and evaluation of encounter data.

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                  8.       Health care data analysis.

                  9.       Monitoring to ensure enrollees are issued written
                           determinations, including appeal rights and
                           notification of their right to a Medicaid Fair
                           Hearing as well as a review by the DHSS IURO.

                  10.      Ad hoc studies and reviews.

                  11.      ERO reviews for dental services include but are not
                           limited to:

                           a.       New Jersey licensed Dental Consultants of
                                    the ERO will review a random sample of
                                    patient charts and conduct provider
                                    interviews. A random number of patients will
                                    receive screening examinations.

                           b.       Auditors will review appointment logs,
                                    referral logs, health education material,
                                    and conduct staff interviews.

                           c.       Audit documents will be completed by
                                    appropriate consultant/auditor.

4.8      PROVIDER NETWORK

4.8.1    GENERAL PROVISIONS

         A.       The contractor shall establish and maintain at all times a
                  complete provider network consisting of traditional providers
                  for primary and specialty care, including primary care
                  physicians, other approved non-physician primary care
                  providers, physician specialists, non-physician practitioners,
                  hospitals (including teaching hospitals), Federally Qualified
                  Health Centers and other essential community
                  providers/safety-net providers, and ancillary providers. The
                  provider network shall be reviewed and approved by DMAHS and
                  the sufficiency of the number of participating providers shall
                  be determined by DMAHS in accordance with the standards found
                  in Article 4.8.8 "Provider Network Requirements."

         B.       The contractor shall ensure that its provider network
                  includes, at a minimum:

                  1.       Sufficient number, available and physically
                           accessible, of physician and non-physician providers
                           of health care to cover all services in the amount,
                           duration, and scope included in the benefits package
                           under this contract. The number of enrollees assigned
                           to a PCP shall be decreased by the contractor if
                           necessary to maintain the appointment availability
                           standards. The contractor's network, at a minimum,
                           shall be sufficient to serve at least 25 percent of
                           all individuals eligible for managed care in each
                           urban county it serves. The contractor's network, at
                           a minimum, shall be sufficient to serve at least 33
                           percent of all individuals eligible for managed care
                           in the remaining non-urban counties it serves, i.e.,
                           Cape May, Hunterdon, Salem, Sussex, and Warren.

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                  2.       A number and distribution of Primary Care Physicians
                           shall be such as to accord to all enrollees a ratio
                           of at least one (1) full time equivalent Primary Care
                           Physician who will serve no more than 1500 enrollees
                           and one FTE primary care dentist for 1500 enrollees.
                           Exemption to the 1:1500 ratio limit may be granted by
                           DMAHS if criteria specified further below are met.

                  3.       Providers who can accommodate the different languages
                           of the enrollees including bilingual capability for
                           any language which is the primary language of five
                           (5) percent or more of the enrolled DMAHS population.

                  4.       Providers, including dentists, pediatricians,
                           physiatrists, gynecologists, family practitioners,
                           internists, neurologists, nurse practitioners or
                           other individual specialists, who are experienced in
                           treating enrollees with special needs. This includes
                           dentists who provide service to persons with
                           developmental disabilities and who may have to take
                           additional time in providing a specific service. Each
                           contractor shall demonstrate the availability and
                           accessibility of institutional facilities and
                           professional allied personnel, home care and
                           community based services to perform the agreed upon
                           services.

                  5.       Medical primary care network shall include
                           internists, pediatricians, family and general
                           practice physicians. The contractor shall have the
                           option to include obstetricians/gynecologists as PCPs
                           as well as other physician specialists as primary
                           care providers for enrollees with special needs who
                           will supervise and coordinate their care via a team
                           approach providing that the contract with the
                           physician specialist is, at a minimum, the same as
                           for all other PCPs and that enrollees are enrolled
                           with the physician specialist in the same manner and
                           with the same physician/enrollee ratio requirements
                           as for all other primary care physicians. The
                           contractor shall include certified nurse midwives in
                           its provider network where they are available and
                           willing to participate in accordance with 1905
                           (a)(17) of the Social Security Act. CNPs/CNSs
                           included as PCPs or specialists in the network may
                           provide a scope of services that comply with their
                           licensure requirements.

                  6.       A CNP/CNS to enrollee ratio may not exceed one CNP or
                           one CNS to 1000 enrollees per contractor or 1500
                           enrollees cumulative across plans.

                  7.       Compliance with the standards delineated in Article
                           4.8.

         C.       All providers and subcontractors shall, at a minimum, meet
                  Medicaid provider requirements and standards as well as all
                  other federal and State requirements. For example, a home
                  health agency subcontractor shall meet Medicare certification
                  participation requirements and be licensed by the Department
                  of Health and Senior Services; hospice providers shall meet
                  Medicare certification

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                  participation requirements; providers for mammography services
                  shall meet the Food and Drug Administration (FDA)
                  requirements.

         D.       The contractor shall include in its network at least one (1)
                  hospital located in the inner city urban area and at least 1
                  non-urban-based hospital in every county except where
                  indicated in Article 4.8.8.M. For those counties with only one
                  (1) hospital, the contractor shall include that hospital in
                  its network subject to good faith negotiations.

         E.       The contractor shall offer a choice of two specialists in each
                  county where available. If only one or no providers of a
                  particular specialty is available, the contractor shall
                  provide documentation of the lack of availability and propose
                  alternative specialty providers in neighboring counties.

         F.       The contractor shall include in its network mental
                  health/substance abuse providers for Medicaid covered MH/SA
                  services with expertise to serve enrollees who are clients of
                  the Division of Developmental Disabilities.

         G.       Changes in large provider groups, IPAs or subnetworks such as
                  pharmacy benefits manager, vision network, or dental network
                  shall be submitted to DMAHS for review and prior approval at
                  least ninety (90) days before the anticipated change. The
                  submission shall include contracts, provider network files,
                  enrollee/provider notices and any other pertinent information.

         H.       Requirement to contract with FQHC. The contractor shall
                  contract for primary care services with at least one Federally
                  Qualified Health Center (FQHC) located in each enrollment area
                  based on the availability and capacity of the FQHCs in that
                  area. FQHC providers shall meet the contractor's credentialing
                  and program requirements.

         I.       Requirement to contract with Children's Hospital of New Jersey
                  at Newark Beth Israel Medical Center for school-based health
                  services. The contractor shall contract with the Children's
                  Hospital of New Jersey at Newark Beth Israel Medical Center
                  for the provision of primary health care services, including
                  but not limited to, EPSDT services, and dental care services,
                  to be provided at designated schools in the city of Newark.
                  Providers at the school-based clinics shall meet the
                  contractor's credentialing and program requirements of this
                  contract.

4.8.2    PRIMARY CARE PROVIDER REQUIREMENTS

         A.       The contractor shall offer each enrollee a choice of two (2)
                  or more primary care physicians within the enrollee's county
                  of residence. Where applicable, this offer can be made to an
                  authorized person. An enrollee with special needs shall be
                  given the choice of a primary care provider which must include
                  a pediatrician, general/family practitioner, and internist,
                  and may include physician specialists

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                  and nurse practitioners. The PCP shall supervise the care of
                  the enrollee with special needs who requires a team approach.
                  Subject to any limitations in the benefits package, each
                  primary care provider shall be responsible for overall
                  clinical direction, serve as a central point of integration
                  and coordination of covered services listed in Article 4.1,
                  provide a minimum of twenty (20) hours per week of personal
                  availability as a primary care provider; provide health
                  counseling and advice; conduct baseline and periodic health
                  examinations; diagnose and treat covered conditions not
                  requiring the referral to and services of a specialist;
                  arrange for inpatient care, for consultation with specialists,
                  and for laboratory and radiological services when medically
                  necessary; coordinate referrals for dental care, especially in
                  accordance with EPSDT requirements; coordinate the findings of
                  laboratories and consultants; and interpret such findings to
                  the enrollee and the enrollee's family (or, where applicable,
                  an authorized person), all with emphasis on the continuity and
                  integration of medical care; and, as needed, shall participate
                  in care management and specialty care management team
                  processes. The primary care provider shall also be
                  responsible, subject to any limitations in the benefits
                  package, for determining the urgency of a consultation with a
                  specialist and, if urgent, shall arrange for the consultation
                  appointment.

                  Justification to include a specialist as a PCP or
                  justification for a physician practicing in an academic
                  setting for less than twenty (20) hours per week must be
                  provided to DMAHS. Include in the justification for the
                  specialist as a PCP the number of enrollees to be served as a
                  PCP and as a specialist, full details of the services and
                  scope of services to be provided, and coverage arrangements
                  documenting twenty-four (24) hours/seven (7) days a week
                  coverage.

         B.       The PCP shall be responsible for supervising, coordinating,
                  managing the enrollee's health care, providing initial and
                  primary care to each enrollee, for initiating referrals for
                  specialty care, maintaining continuity of each enrollee's
                  health care and maintaining the enrollee's comprehensive
                  medical record which includes documentation of all services
                  provided to the enrollee by the PCP, as well as any specialty
                  or referral services. The contractor shall establish policies
                  and procedures to ensure that PCPs are adequately notified of
                  specialty and referral services. PCPs who provide professional
                  inpatient services to the contractor's enrollees shall have
                  admitting and treatment privileges in a minimum of one general
                  acute care hospital that is under subcontract with the
                  contractor and is located within the contractor's service
                  area. The PCP shall be an individual, not a facility, group or
                  association of persons, although he/she may practice in a
                  facility, group or clinic setting.

                  1.       The PCP shall provide twenty-four (24) hour, seven
                           (7) day a week access; and

                  2.       Make referrals for specialty care and other medically
                           necessary services, both in-network and
                           out-of-network.

                                                                           IV-96

<PAGE>

                  3.       Enrollees with special needs requiring very complex,
                           highly specialized health care services over a
                           prolonged period of time, and by virtue of their
                           nature and complexity would be difficult for a
                           traditional PCP to manage or with a life-threatening
                           condition or disease, or with a degenerative and/or
                           disabling condition or disease may be offered the
                           option of selecting an appropriate physician
                           specialist (where available) in lieu of a traditional
                           PCP. Such physicians having the clinical skills,
                           capacity, accessibility, and availability shall be
                           specially credentialed and contractually obligated to
                           assume the responsibility for overall health care
                           coordination and assuring that the special needs
                           person receives all necessary specialty care related
                           to their special need, as well as providing for or
                           arranging all routine preventive care and health
                           maintenance services, which may not customarily be
                           provided by or the responsibility of such specialist
                           physicians.

                  4.       Where a specialist acting as a PCP is not available
                           for chronically ill persons or enrollees with complex
                           health care needs, those enrollees shall have the
                           option to select a traditional PCP upon enrollment,
                           with the understanding that the contractor may permit
                           a more liberal, direct specialty access (See section
                           4.5.2) to a specific specialist for the explicit
                           purpose of meeting those specific specialty service
                           needs. The PCP shall in this case retain all
                           responsibility for provision of primary care services
                           and for overall coordination of care, including
                           specialty care.

                  5.       If the enrollee's existing PCP is a participating
                           provider in the contractor's network, and if the
                           enrollee wishes to retain the PCP, contractor shall
                           ensure that the PCP is assigned, even if the PCP's
                           panel is otherwise closed at the time of the
                           enrollee's enrollment.

         C.       In addition to offering, at a minimum, a choice of two or more
                  primary care physicians, the contractor shall also offer an
                  enrollee or, where applicable, an authorized person the option
                  of choosing a certified nurse midwife, certified nurse
                  practitioner or clinical nurse specialist whose services must
                  be provided within the scope of his/her license. The
                  contractor shall submit to DMAHS for review a detailed
                  description of the CNP/CNS's responsibilities and health care
                  delivery system within the contractor's plan.

4.8.3    PROVIDER NETWORK FILE REQUIREMENTS

         The contractor shall provide a certified [see Appendix A.4.4 for form]
         provider network file monthly, to be reported by hard copy and
         electronically in a format and software application system determined
         by DMAHS that will include the names and addresses of every provider in
         the contractor's network. The file shall be submitted electronically by
         the close of business on the fourth monday of every month. This
         includes all contracted providers and required established
         relationships. It excludes all non-

                                                                           IV-97
<PAGE>

         participating providers. The format for computer diskette submission is
         found in Section A.4.1 of the Appendices.

         A.       The contractor shall provide the DMAHS a full network,
                  monthly, on computer diskette in accordance with the
                  specifications provided in Section A.4.1 of the Appendices.
                  The network file shall include an indicator for new additions
                  and deletions and shall include:

                  1.       Any and all changes in participating primary care
                           providers, including, for example, additions,
                           deletions, or closed panels, must be reported monthly
                           to DMAHS.

                  2.       Any and all changes in participating physician
                           specialists, health care providers, CNPs/CNSs,
                           ancillary providers, and other subcontractors must be
                           reported to DMAHS on a monthly basis. [Reserved]

         B.       The contractor shall provide the HBC with a full network on a
                  monthly basis in accordance with the specifications found in
                  Section A.4.1 of the Appendices. The electronic files shall be
                  sent to DMAHS, and a copy to the DMAHS' designee for
                  distribution.

4.8.4    PROVIDER DIRECTORY REQUIREMENTS

         The contractor shall prepare a provider directory which shall be
         presented in the following manner. Fifty (50) copies of the provider
         directory, and any updates, shall be provided to the HBC, and
         [Reserved] ten (10) copies shall be provided to DMAHS at least every
         six months or within 30 days of an update.

         A.       Primary care providers who will serve enrollees listed by

                  -        County, by city, by specialty

                  -        Provider name and degree; specialty board
                           eligibility/certification status; office address(es)
                           (actual street address); telephone number; fax number
                           if available; office hours at each location; indicate
                           if a provider serves enrollees with disabilities and
                           how to receive additional information such as type of
                           disability; hospital affiliations; transportation
                           availability; special appointment instructions if
                           any; languages spoken; disability access; and any
                           other pertinent information that would assist the
                           enrollee in choosing a PCP.

         B.       Contracted specialists and ancillary services providers who
                  will serve enrollees

                  -        Listed by county, by city, by physician specialty, by
                           non-physician specialty, and by adult specialist and
                           by pediatric specialist for those specialties
                           indicated in Section 4.8.8.C.

                                                                           IV-98

<PAGE>

         C.       Subcontractors

                  -        Provide, at a minimum, a list of all other health
                           care providers by county, by service specialty, and
                           by name. The contractor shall demonstrate its ability
                           to provide all of the services included under this
                           contract.

4.8.5    CREDENTIALING/RECREDENTIALING REQUIREMENTS/ISSUES

         The contractor shall develop and enforce credentialing and
         recredentialing criteria for all provider types which should follow the
         CMS' credentialing criteria, as delineated in the NJ modified
         QARI/QISMC standards found in Article 4.6.1 and Section B.4.14 of the
         Appendices.

4.8.6    LABORATORY SERVICE PROVIDERS

         A.       The contractor shall ensure that all laboratory testing sites
                  providing services under this contract, including those
                  provided by primary care physicians, specialists, other health
                  care practitioners, hospital labs, and independent
                  laboratories have either a Clinical Laboratory Improvement
                  Amendment (CLIA) certificate of waiver or a certificate of
                  registration along with a CLIA identification number, and
                  comply with New Jersey DHSS disease reporting requirements.
                  Those laboratory service providers with a certificate of
                  waiver shall provide only those tests permitted under the
                  terms of their waiver. Laboratories with certificates of
                  registration may perform a full range of laboratory tests.

                  1.       The contractor shall provide to DMAHS, on request,
                           copies of certificates that its own laboratory or any
                           other laboratory it conducts business with, has a
                           CLIA certificate for the services it is performing as
                           fulfillment of requirements in 42 C.F.R. Section
                           493.1809:

                  2.       If the contractor has its own laboratory, the
                           contractor shall submit at the time of initial
                           contracting a written list of all diagnostic tests
                           performed in its own laboratory if applicable and
                           those tests which are referred to other laboratories
                           annually and within fifteen (15) working days of any
                           changes.

                  3.       The contractor shall inform DMAHS and provide a
                           geographic access analysis in accordance with the
                           specifications found in the Appendix, Section A.4.3
                           if it contracts with a new laboratory subcontractor
                           45 days prior to the effective date of the
                           subcontractor's contract and shall notify DMAHS of a
                           termination of a laboratory subcontractor 90 days
                           prior to the effective date of the subcontractor's
                           termination. The contractor shall provide a copy of a
                           new subcontractor's certificate of waiver or
                           certificate of registration within ten (10) days of
                           operation.

                                                                           IV-99

<PAGE>

         B.       The contractor shall contract with clinical diagnostic
                  laboratories that have implemented a compliance plan to help
                  avoid activities that might be regarded as fraudulent. The
                  compliance plan shall, at a minimum, include the following:

                  1.       Written standards of conduct for employees;

                  2.       Development and distribution of written policies that
                           promote the laboratory's commitment to compliance and
                           that address specific areas of potential fraud, such
                           as billing, marketing, and claims processing;

                  3.       The designation of a chief compliance officer or
                           other appropriate high-level corporate structure or
                           official who is charged with the responsibility of
                           operating the compliance program;

                  4.       The development and offering of education and
                           training programs to all employees;

                  5.       The use of audits and/or other evaluation techniques
                           to monitor compliance and ensure a reduction in
                           identified problem areas;

                  6.       The development of a code of improper/illegal
                           activities and the use of disciplinary action against
                           employees who have violated internal compliance
                           policies or applicable laws or who have engaged in
                           wrongdoing;

                  7.       The investigation and remediation of identified
                           systemic and personnel problems;

                  8.       The promotion of and adherence to compliance as an
                           element in evaluating supervisors and managers;

                  9.       The development of policies addressing the
                           non-employment or retention of sanctioned
                           individuals;

                  10.      The maintenance of a hotline to receive complaints
                           and the adoption of procedures to protect the
                           anonymity of complainants; and

                  11.      The adoption of requirements applicable to record
                           creation and retention.

         C.       The contractor shall maintain a sufficient network of
                  drawing/specimen collection stations (may include independent
                  lab stations, hospital outpatient departments, provider
                  offices, etc.) to ensure ready access for all enrollees.

4.8.7    SPECIALTY PROVIDERS AND CENTERS (ALSO ADDRESSED IN 4.5)

                                                                          IV-100

<PAGE>

         A.       The contractor shall include in its network pediatric medical
                  subspecialists, pediatric surgical specialists, and
                  consultants. Access to these services shall be provided when
                  referred by a pediatrician.

         B.       The contractor shall include in its provider network Centers
                  of Excellence (designated by the DHSS; See Appendix B.4.10)
                  for children with special health care needs. Inclusion of such
                  agencies or their equivalent may be by direct contracting, as
                  a consultant, or on a referral basis. Payment mechanism and
                  rates shall be negotiated directly with the center.

         C.       The contractor shall include primary care providers
                  experienced in caring for enrollees with special needs. (See
                  A.4.1 provider network file.)

         D.       The contractor shall include providers who have knowledge and
                  experience in identifying child abuse and neglect and should
                  include Child Abuse Regional Diagnostic Centers or their
                  equivalent through either direct contracting, as a consultant
                  or on a referral basis. A list of Child Abuse Regional
                  Diagnostic Centers is in Section B.4.16 of the Appendices.

         E.       The contractor shall have a procedure by which an enrollee who
                  needs ongoing care from a specialist may receive a standing
                  referral to such specialist. If the contractor, or the primary
                  care provider in consultation with the contractor's medical
                  director [Reserved] and specialist, if any, determines that
                  such a standing referral is appropriate, the organization
                  shall make such a referral to a specialist. The contractor
                  shall not be required to permit an enrollee to elect to have a
                  non-participating specialist if a network provider of
                  equivalent expertise is available. Such referral shall be
                  pursuant to a treatment plan approved by the contractor in
                  consultation with the primary care provider, the specialist,
                  the care manager, and the enrollee or, where applicable,
                  authorized person. Such treatment plan may limit the number of
                  visits or the period during which such visits are authorized
                  and may require the specialist to provide the primary care
                  provider with regular updates on the specialty care provided,
                  as well as all necessary medical information.

         F.       The contractor shall have a procedure by which an enrollee as
                  described in Articles 4. .2D may receive a referral to a
                  specialist or specialty care center with expertise in treating
                  such conditions in lieu of a traditional PCP.

         G.       If the contractor determines that it does not have a health
                  care provider with appropriate training and experience in its
                  panel or network to meet the particular health care needs of
                  an enrollee, the contractor shall make a referral to an
                  appropriate out-of-network provider, pursuant to a treatment
                  plan approved by the contractor in consultation with the
                  primary care provider, the non-contractor participating
                  provider and the enrollee or where applicable, authorized
                  person, at no additional cost to the enrollee. The contractor
                  shall provide for a review by a

                                                                          IV-101

<PAGE>

                  specialist of the same or similar specialty as the type of
                  physician or provider to whom a referral is requested before
                  the contractor may deny a referral.

4.8.8    PROVIDER NETWORK REQUIREMENTS

         Provider networks and all provider types within the network shall be
         reviewed on a county basis, i.e., must be located within the county
         except where indicated. (See also Section 4.8.8.M.) The contractor
         shall monitor the capacity of each of its providers and decrease ratio
         limits as needed to maintain appointment availability standards.

         A.       Primary Care Provider Ratios

                  PCP ratios shall be reviewed and calculated by provider
                  specialty on a county basis and on an index city basis, i.e.,
                  the major city of each county where the majority of the
                  Medicaid and NJ FamilyCare beneficiaries reside.

                  1.       Physician

                           A primary care physician shall be a General
                           Practitioner, OR Family Practitioner, Pediatrician,
                           or Internist. Obstetricians/Gynecologists and other
                           physician specialists may also participate as primary
                           care providers providing they participate on the same
                           contractual basis as all other PCPs and contractor
                           enrollees are enrolled with the specialists in the
                           same manner and with the same PCP/enrollee ratio
                           requirements applied.

                           a.       1 FTE PCP per 1500 enrollees per contractor;
                                    1 FTE per 2000 enrollees, cumulative across
                                    all contractors.

                           b.       1 FTE PCP per 1000 DD enrollees per
                                    contractor; 1 FTE per 1500 DD enrollees
                                    cumulative across all contractors.

                  2.       Dentist

                           The contractor shall include and make available
                           sufficient number of primary care dentists from the
                           time of initial enrollment in the contractor's plan.
                           Pediatric dentists shall be included in the network
                           and may be both primary care and specialty care
                           providing primary care ratio limit, are maintained.

                           a.       1 FTE primary care dentist per 1500
                                    enrollees per contractor; 1 FTE primary care
                                    dentist per 3000 enrollees, cumulative
                                    across all contractors.

                  3.       Certified Nurse Midwife (CNM)

                           If the contractor includes CNMs in its provider
                           network as PCPs, it shall utilize the following
                           ratios for CNMs as PCPs.

                                                                          IV-102

<PAGE>

                           a.       1 FTE CNM per 1000 enrollees per contractor;
                                    1 FTE CNM per 1500 enrollees across all
                                    contractors.

                           b.       A minimum of two (2) providers shall be
                                    initially available for selection at the
                                    enrollee's option. Additional providers
                                    shall be included as capacity limits are
                                    needed.

                  4.       Certified Nurse Practitioner/Clinical Nurse
                           Specialist (CNP/CNS)

                           If the contractor includes CNPs/CNSs in the provider
                           network as PCPs, it shall utilize the following
                           ratios.

                           a.       1 FTE CNP or 1 CNS per 1000 enrollees per
                                    contractor; 1 FTE CNP or 1 FTE CNS per 1500
                                    enrollees cumulative across all contractors.

                           b.       A minimum of two (2) providers where
                                    available shall be initially available for
                                    selection at the enrollee's option.
                                    Additional providers shall be included as
                                    capacity limits are reached.

         B.       Primary Care Providers [Non-Institutional File]

                  The contractor shall contract with the following primary care
                  providers. All provider types within the network shall be
                  located within the enrollment area, i.e., county, except where
                  indicated.

                  1.       The contractor shall include contracted providers
                           for:

                           a.       General/Family Practice Physicians

                           b.       Internal Medicine Physicians

                           c.       Pediatricians

                           d.       Dentists - adult and pediatric

                  2.       Certified Nurse Midwives and Nurse Practitioners
                           [Non-Institutional File]

                           The contractor shall include in the network and
                           provide access to CNMs/CNPs/CNSs at the enrollee's
                           option. If there are no contracted CNMs/CNPs/CNSs in
                           the contractor's network in an enrollment area, then
                           the contractor shall reimburse for these services out
                           of network.

                           a.       Certified Nurse Midwife

                           b.       Clinical Nurse Specialist

                           c.       Certified Nurse Practitioner

                  3.       Optional Primary Care Provider Designations

                                                                          IV-103

<PAGE>

                           The contractor may include as primary care providers:

                           a.       OB/GYNs who will provide such services in
                                    accordance with the requirements and
                                    responsibilities of a primary care provider.

                           b.       Other physician specialists who have agreed
                                    to provide primary care to enrollees with
                                    special needs and will provide such services
                                    in accordance with the requirements and
                                    responsibilities of a primary care provider.

                           c.       Physician Assistants in accordance with
                                    their licensure and scope of practice
                                    provisions.

         C.       Physician Specialists [Non-Institutional File]

                  The contractor shall contract with physician specialists,
                  listed below, and should include two (2) providers per
                  specialty to permit enrollee choice. All specialty types
                  within the enrollment area network are reviewed on a county
                  basis, i.e., must be located within the county. Where certain
                  specialists are not available within the county, the
                  contractor shall provide written documentation (not just a
                  statement that there are no specialists available) of the lack
                  of a specialist located in the county and a detailed
                  description of how, by whom, and where the specialty care will
                  be provided. The contractor shall utilize an official
                  resource, such as the Board of Medical Examiners, for
                  determining presence or absence of specialists with offices
                  located in the county. Specialists shall have admitting
                  privileges in at least one participating hospital in the
                  county in which the specialist will be seeing enrollees.

                  [Reserved]

                  The contractor shall provide a detailed description of
                  accessibility and capacity for each physician who will serve
                  as both a PCP and a specialist; and/or who will serve with
                  more than one specialty. The description shall include at a
                  minimum a certification that the physician is actively
                  practicing in each specialty, has been credentialed in each
                  specialty, and a description of the provider's availability in
                  each specialty (i.e. percent of time and number of hours per
                  week in each specialty). The credentialing criteria used to
                  determine a provider's appropriateness for a specialty shall
                  indicate whether the provider is board eligible, board
                  certified, or has completed an accredited fellowship in the
                  specialty.

                  The contractor shall include contracted providers for:

                                                                          IV-104

<PAGE>

                  1.       Allergy/Immunology

                  2.       Anesthesiology

                  3.       Cardiology - pediatric

                  4.       Cardiovascular [Reserved] Disease - adult

                  5.       Colon & Rectal [Reserved] Surgery

                  6.       Dermatology

                  7.       Emergency Medicine

                  8.       Endocrinology - adult and pediatric

                  9.       Gastroenterology - adult and pediatric

                  10.      General Surgery - adult and pediatric

                  11.      Geriatric Medicine

                  12.      Hematology - adult and pediatric

                  13.      Infectious Disease - adult and pediatric

                  14.      [Reserved] Neonatal-Perinatal Medicine

                  15.      Nephrology - adult and pediatric

                  16.      Neurology - adult [Reserved]

                  17.      Neurological surgery

                  18.      Obstetrics/gynecology

                  19.      Oncology - adult and pediatric

                  20.      Ophthalmology

                  21.      Orthopedic Surgery

                  22.      [Reserved] Otolaryngology

                  23.      Plastic Surgery

                  24.      Psychiatry (for clients of DDD)

                  25.      Pulmonary Disease - adult and pediatric

                  26.      Radiation Oncology

                  27.      Radiology

                  28.      Rheumatology - adult and pediatric

                  29.      Thoracic surgery

                  30.      Urology

         D.       Non-Physician Providers [Non-Institutional File]

                  The contractor shall include contracted providers for:

                  1.       Chiropractor

                  2.       Dentists [Reserved] Required Contracted Providers

                           a. Primary care

                           b. Orthodontist

                           c. Oral Maxillofacial Surgeon

                  3.       Optometrist

                  4.       Podiatrist

Amended as of July 1, 2003                                                IV-105

<PAGE>

                  5.       Audiologist

                  [Reserved]

         E.       Ancillary Providers [Institutional File]

                  The contractor shall include the following contracted
                  providers [Reserved]:

                  1.       Durable Medical Equipment

                  2.       Federally Qualified Health Centers

                  3.       School-Based Health Service Programs

                  4.       Hearing Aid Providers

                  5.       Home Health Agency - must be approved on a
                           county-specific basis

                  6.       Hospice Agency

                  7.       Hospitals - inpatient and outpatient services; at
                           least two per county with one urban where the
                           majority of Medicaid beneficiaries reside

                  8.       Laboratory with one drawing station per every five
                           mile radius within a county

                  9.       Medical Supplier

                  10.      Optical appliance providers

                  11.      Organ Transplant Providers/Centers

                  12.      Pharmacy

                  13.      Private Duty Nursing Agency (service area which
                           includes a 50 mile radius from its home
                           administrative base office must be approved on a
                           county-specific basis)

                  14.      Prosthetist, Orthotist, and Pedorthist

                  15.      Radiology centers including diagnostic and
                           therapeutic

                  l6.      Transportation providers (ambulance, MICUs,
                           [Reserved] mobility assistance vehicles
                           [invalid coach])

         F.       The contractor shall also establish relationships with
                  physician specialists and subspecialists [Non-Institutional
                  File] through a contract, as a consultant, or on a referral
                  basis for:

                  1.       Dental Specialists - Required relationships for
                           dental conditions that require specialists for:

                           a. Prosthodontia

                           b. Endodontia

                           c. Periodontia

                  2.       Pain Management

                           [Reserved]

                  3.       Medical Genetics

                  4.       Developmental-Behavioral Pediatrics

         G.       Specialty Centers (Centers of Excellence) shall be included in
                  the network either through a contract, as a consultant, or on
                  a referral basis [Institutional File]

                                                                          IV-106

<PAGE>

                  1.       Providers and health care facilities for the care and
                           treatment of HIV/AIDS (list of available centers
                           found in Section B.4.13 of the Appendices).

                  2.       Special Child Health Services Network Agencies for:

                           a.       Pediatric Ambulatory Tertiary Centers

                           b.       Regional Cleft Lip/Palate Centers

                           c.       Pediatric HIV Treatment Centers

                           d.       Comprehensive Regional Sickle
                                    Cell/Hemoglobinpathies Treatment Centers

                           e.       PKU Treatment Centers

                           f.       Other as designated from time to time by the
                                    Department of Health and Senior Services.

                  3.       Other:

                           a.       Genetic Testing and Counseling Centers

                           b.       Hemophilia Treatment Centers

         H.       Other Specialty Centers/Providers [Institutional File]

                  Contractor should establish relationships with the following
                  providers/centers on a consultant or referral basis.

                  1.       Spina Bifida Centers/providers

                  2.       Adult Scoliosis

                  3.       Autism and Attention Deficits

                  4.       Spinal Cord Injury

                  5.       Lead Poisoning Treatment Centers

                  6.       Child Abuse Regional Diagnostic Centers

                  7.       County Case Management Units

                  8.       Psychologists (for clients of DDD)

                  9.       Physical Medicine (for inpatient rehabilitation
                           services)

                  10.      Maternal & Fetal Medicine

                  11.      Medical Toxicology

                                                                          IV-107

<PAGE>

         I.       Provider Network Access Standards and Ratios

<TABLE>
<CAPTION>
                                                                               Min. No. Per County
                             A - Miles per 2         B - Miles per 1              [Reserved]                 Capacity Limit
Specialty                   Urban    Non-Urban     Urban     Non-urban         Except Where Noted             Per Provider
-------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>      <C>           <C>       <C>               <C>                       <C>
 PCP Children  GP             6         15           2          10             2                                  1:      1,500
-------------------------------------------------------------------------------------------------------------------------------
               FP             6         15           2          10             2                                  1:      1,500
-------------------------------------------------------------------------------------------------------------------------------
               Peds           6         15           2          10             2                                  1:      1,500
-------------------------------------------------------------------------------------------------------------------------------
     Adults    GP             6         15           2          10             2                                  1:      1,500
-------------------------------------------------------------------------------------------------------------------------------
               FP             6         15           2          10             2                                  1:      1,500
-------------------------------------------------------------------------------------------------------------------------------
               IM             6         15           2          10             2                                  1:      1,500
-------------------------------------------------------------------------------------------------------------------------------
 CNP/CNS                      6         15           2          10             2                                  1:       1000
-------------------------------------------------------------------------------------------------------------------------------
 CNM                         12         25           6          15             2                                  1:      1,500
-------------------------------------------------------------------------------------------------------------------------------
 Dentist, Primary Care        6         15           2          10             2                                  1:      1,500
-------------------------------------------------------------------------------------------------------------------------------
 Allergy                     15         25          10          15             2                                  1:     75,000
-------------------------------------------------------------------------------------------------------------------------------
 Anesthesiology              15         25          10          15             2                                  1:     17,250
-------------------------------------------------------------------------------------------------------------------------------
 Cardiology                  15         25          10          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 Cardiovascular surgery      15         25          10          15             2                                  1:    166,000
-------------------------------------------------------------------------------------------------------------------------------
 Chiropractor                15         25          10          15             1                                  1:     20,000
-------------------------------------------------------------------------------------------------------------------------------
 Colorectal surgery          15         25          10          15             2                                  1:     30,000
-------------------------------------------------------------------------------------------------------------------------------
 Dermatology                 15         25          10          15             2                                  1:     75,000
-------------------------------------------------------------------------------------------------------------------------------
 Emergency Medicine          15         25          10          15             2                                  1:     19,000
-------------------------------------------------------------------------------------------------------------------------------
 Endocrinology               15         25          10          15             2                                  1:    143,000
-------------------------------------------------------------------------------------------------------------------------------
 Endodontia                  15         25          10          15             1                                  1:     30,000
-------------------------------------------------------------------------------------------------------------------------------
 Gastroenterology            15         25          10          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 General Surgery             15         25          10          15             2                                  1:     30,000
-------------------------------------------------------------------------------------------------------------------------------
 Geriatric Medicine          15         25          10          15             1                                  1:     10,000
-------------------------------------------------------------------------------------------------------------------------------
 Hematology                  15         25          10          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 Infectious Disease          15         25          10          15             2                                  1:    125,000
-------------------------------------------------------------------------------------------------------------------------------
 Neonatology                 15         25          10          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 Nephrology                  15         25          10          15             2                                  1:    125,000
-------------------------------------------------------------------------------------------------------------------------------
 Neurology                   15         25          10          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 Neurological Surgery        15         25          10          15             2                                  1:    166,000
-------------------------------------------------------------------------------------------------------------------------------
 Obstetrics/Gynecology       15         25          10          15             2                                  1:      7,100
-------------------------------------------------------------------------------------------------------------------------------
 Oncology                    15         25          10          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 Ophthalmology               15         25          10          15             2                                  1:     60,000
-------------------------------------------------------------------------------------------------------------------------------
 Optometrist                 15         25          10          15             2                                  1:      8,000
-------------------------------------------------------------------------------------------------------------------------------
 Oral Surgery                15         25          10          15             2                                  1:     20,000
-------------------------------------------------------------------------------------------------------------------------------
 Orthodontia                 15         25          10          15             1                                  1:     20,000
-------------------------------------------------------------------------------------------------------------------------------
 Orthopedic Surgery          15         25          10          15             2                                  1:     28,000
-------------------------------------------------------------------------------------------------------------------------------
 Otolaryngology (ENT)        15         25          10          15             2                                  1:     53,000
-------------------------------------------------------------------------------------------------------------------------------
 Periodontia                 15         25          10          15             1                                  1:     30,000
-------------------------------------------------------------------------------------------------------------------------------
 Physical Medicine           15         25          10          15             2                                  1:     75,000
-------------------------------------------------------------------------------------------------------------------------------
 Plastic Surgery             15         25          10          15             2                                  1:    250,000
-------------------------------------------------------------------------------------------------------------------------------
 Podiatrist                  15         25          10          15             2                                  1:     20,000
-------------------------------------------------------------------------------------------------------------------------------
 Prosthodontia               15         25          10          15             1 (where available)                1:     30,000
-------------------------------------------------------------------------------------------------------------------------------
 Psychiatrist                15         25          10          15             2                                  1:     30,000
-------------------------------------------------------------------------------------------------------------------------------
 Psychologist                15         25          10          15             2                                  1:     30,000
-------------------------------------------------------------------------------------------------------------------------------
 Pulmonary Disease           15         25          10          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 Radiation Oncology          15         25          10          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 Radiology                   15         25          10          15             2                                  1:     25,000
-------------------------------------------------------------------------------------------------------------------------------
 Rheumatology                15         25          10          15             2                                  1:    150,000
-------------------------------------------------------------------------------------------------------------------------------
 Ther. - Audiology           12         25           6          15             2                                  1:    100,000
-------------------------------------------------------------------------------------------------------------------------------
 Thoracic Surgery            15         25          10          15             2                                  1:    150,000
-------------------------------------------------------------------------------------------------------------------------------
 Urology                     15         25          10          15             2                                  1:     60,000
-------------------------------------------------------------------------------------------------------------------------------
 Fed Qua Health Ctr                                                            1                         1/county, if available
-------------------------------------------------------------------------------------------------------------------------------
 Hospital                    20         35          10          15             2                                   2 per county
-------------------------------------------------------------------------------------------------------------------------------
 Pharmacies                  10         15           5          12                                                1:      1,000
-------------------------------------------------------------------------------------------------------------------------------
 Laboratory                 N/A        N/A           7          12
-------------------------------------------------------------------------------------------------------------------------------
 DME/Med Supplies            12         25           6          15             1                                  1:     50,000
-------------------------------------------------------------------------------------------------------------------------------
 Hearing Aid                 12         25           6          15             1                                  1:     50,000
-------------------------------------------------------------------------------------------------------------------------------
 Optical Appliance           12         25           6          15             2                                  1:     50,000
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                          IV-108

<PAGE>

         J.       Geographic Access

                  The following lists guidelines for urban geographic access for
                  the DMAHS population. (Standards for non-urban areas are
                  included in the table IN I. above.) The State shall review
                  (and approve) exceptions on a case-by-case basis to determine
                  appropriateness for each situation.

                  For each contractor and for each municipality in each county
                  in which the contractor is operational, the access shall be
                  reviewed in accordance with the number and percentage of:

                  1.       Beneficiary children who reside within 6 miles of 2
                           PCPs whose specialty is Family Practice, General
                           Practice or Pediatrics or 2 CNPs/CNSs; within 2 miles
                           of 1 PCP whose specialty is Family Practice, General
                           Practice or Pediatrics or 1 CNP or 1 CNS

                  2.       Beneficiary adults who reside within 6 miles of 2
                           PCPs whose specialty is Family Practice, General
                           Practice or Internal Medicine or 2 CNPs or 2 CNSs;
                           within 2 miles of 1 PCP whose specialty is Family
                           Practice, General Practice or Internal Medicine or 1
                           CNP or 1 CNS

                  3.       Beneficiaries who reside within 6 miles of 2
                           providers of general dentistry services; within 2
                           miles of 1 provider of general dentistry services

                  4.       Beneficiaries who reside within 10 miles of 2
                           pharmacies; within 5 miles of 1 pharmacy

                  5.       Beneficiaries who reside within 15 miles of at least
                           2 specialists in each of the following specialties:
                           all physician and dental specialists, Podiatry,
                           Optometry, Chiropractic; within 10 miles of at least
                           1 provider in each type of specialty noted above

                  6.       Beneficiaries who reside within 15 miles of 2 acute
                           care hospitals; within 10 miles of one acute care
                           hospital

                  7.       Beneficiaries who reside within 12 miles of 2 of each
                           of the following provider types: durable medical
                           equipment, medical supplier, hearing aid supplier,
                           optical appliance supplier, certified nurse midwife;
                           within 6 miles of one of each type of provider

                  8.       Beneficiaries who reside within 7 miles of a
                           laboratory/drawing station.

                  9.       Beneficiaries with desired access and average
                           distance to 1, 2 or more providers

                                                                          IV-109

<PAGE>

                  10.      Beneficiaries without desired access and average
                           distance to 1, 2 or more providers

                  Access Standards

                  1.       90% of the enrollees must be within 6 miles of 2 PCPs
                           in an urban setting

                  2.       85% of the enrollees must be within 15 miles of 2
                           PCPs in a non-urban setting

                  3.       Covering physicians must be within 15 miles in urban
                           areas and 25 miles in non-urban areas.

                  Travel Time Standards

                  The contractor shall adhere to the 30 minute standard, i.e.,
                  enrollees will not live more than 30 minutes away from their
                  PCPs, PCDs or CNPs/CNSs. The following guidelines shall be
                  used in determining travel time.

                  1.       Normal conditions/primary roads - 20 miles

                  2.       Rural or mountainous areas/secondary routes - 20
                           miles

                  3.       Flat areas or areas connected by interstate highways
                           - 25 miles

                  4.       Metropolitan areas such as Newark, Camden, Trenton,
                           Paterson, Jersey City - 30 minutes travel time by
                           public transportation or no more than 6 miles from
                           PCP

                  5.       Other medical service providers must also be
                           geographically accessible to the enrollees.

                  6.       Exception: SSI or New Jersey Care-ABD enrollees and
                           clients of DDD may choose to see network providers
                           outside of their county of residence.

         K.       Conditions for Granting Exceptions to the 1:1500 Ratio Limit
                  for Primary Care Physicians

                  1.       A physician must demonstrate increased office hours
                           and must maintain (and be present for) a minimum of
                           20 hours per week in each office.

                  2.       In private practice settings where a physician
                           employs or directly works with nurse practitioners
                           who can provide patient care within the scope of
                           their practices, the capacity may be increased to 1
                           PCP FTE to 2500 enrollees. The PCP must be
                           immediately available for consultation, supervision
                           or to take over treatment as needed. Under no
                           circumstances

                                                                          IV-110

<PAGE>

                           will a PCP relinquish or be relieved of direct
                           responsibility for all aspects of care of the
                           patients enrolled with the PCP.

                  3.       In private practice settings where a primary care
                           physician employs or is assisted by other licensed,
                           but non-participating physicians, the capacity may be
                           increased to 1 PCP FTE to 2500 enrollees.

                  4.       In clinic practice settings where a PCP provides
                           direct personal supervision of medical residents with
                           a New Jersey license to practice medicine in good
                           standing with State Board of Medical Examiners, the
                           capacity may be increased with the following ratios:
                           1 PCP to 1500 enrollees; 1 licensed medical resident
                           per 1000 enrollees. The PCP must be immediately
                           available for consultation, supervision or to take
                           over treatment as needed. Under no circumstances will
                           a PCP relinquish or be relieved of direct
                           responsibility for all aspects of care of the
                           patients enrolled with the PCP.

                  5.       Each provider (physician or nurse practitioner) must
                           provide a minimum of 15 minutes of patient care per
                           patient encounter and be able to provide four visits
                           per year per enrollee.

                  6.       The contractor shall submit for prior approval by
                           DMAHS a detailed description of the PCP's delivery
                           system to accommodate an increased patient load, work
                           flow, professional relationships, work schedules,
                           coverage arrangements, 24 hour access system.

                  7.       The contractor shall provide information on total
                           patient load across all plans, private patients,
                           Medicaid fee-for-service patients, other.

                  8.       The contractor shall adhere to the access standards
                           required in the contractor's contract with the
                           Department.

                  9.       There will be no substantiated complaints or
                           demonstrated evidence of access barriers due to an
                           increased patient load.

                  10.      The Department will make the final decision on the
                           appropriateness increasing the ratio limits and
                           what the limit will be.

         L.       Conditions for Granting Exceptions to the 1:1500 Ratio Limit
                  for Primary Care Dentists.

                  1.       A PCD must provide a minimum of 20 hours per week per
                           office.

                  2.       In clinic practice settings where a PCD provides
                           direct personal supervision of dental residents who
                           have a temporary permit from the State Board of
                           Dentistry in good standing and also dental students,
                           the

                                                                          IV-111

<PAGE>

                           capacity may be increased with the following ratios:
                           1 PCD to 1500 enrollees per contractor; 1 dental
                           resident per 1000 enrollees per contractor; 1 FTE
                           dental student per 200 enrollees per contractor. The
                           PCD shall be immediately available for consultation,
                           supervision or to take over treatment as needed.
                           Under no circumstances shall a PCD relinquish or be
                           relieved of direct responsibility for all aspects of
                           care of the patients enrolled with the PCD.

                  3.       In private practice settings where a PCD employs or
                           is assisted by other licensed, but non-participating
                           dentists, the capacity may be increased to 1 PCD FTE
                           to 3000 enrollees.

                  4.       In private practice settings where a PCD employs
                           dental hygienists or is assisted by dental
                           assistants, the capacity may be increased to 1 PCD to
                           3000 enrollees. The PCD shall be immediately
                           available for consultation, supervision or to take
                           over treatment as needed. Under no circumstances
                           shall a PCD relinquish or be relieved of direct
                           responsibility for all aspects of care of the
                           patients enrolled with the PCD.

                  5.       Each PCD shall provide a minimum of 15 minutes of
                           patient care per patient encounter.

                  6.       The contractor shall submit for prior approval by the
                           DMAHS a detailed description of the PCD's delivery
                           system to accommodate an increased patient load, work
                           flow, professional relationships, work schedules,
                           coverage arrangements, 24 hour access system.

                  7.       The contractor shall provide information on total
                           patient load across all plans, private patients,
                           Medicaid fee-for-service patients, other.

                  8.       The contractor shall adhere to the access/appointment
                           availability standards required in the contractor's
                           contract with the Department.

                  9.       There must be no substantiated complaints or
                           demonstrated evidence of access barriers due to an
                           increased patient load.

                  10.      The contractor shall monitor the providers and
                           practices granted an exception every other month to
                           assure the continued employment of an adequate number
                           and type of auxiliary personnel described in
                           4.8.8.L.4 above, to warrant continuation of the
                           exception.

                  11.      The contractor shall submit reports to the DMAHS,
                           bi-monthly, of the additions, deletions or any other
                           change of auxiliary personnel; and include the names,
                           license numbers, functions and work schedules of each
                           currently employed auxiliary staff.

                                                                          IV-112

<PAGE>

                  12.      The Department will make the final decision on the
                           appropriateness of increasing the ratio limits and
                           what the limit will be.

         M.       Regional/Statewide Networks

                  1.       The contractor shall pay for organ transplants in
                           accordance with Article 4.1.2 and shall contract with
                           or refer to organ transplant providers/centers. The
                           contractor shall provide the name and address of a
                           transplant center for each type of organ transplant
                           required under this contract.

                  2.       The providers/specialists listed below may be
                           included in the contractor's provider network on a
                           regional or statewide basis. The contractor shall
                           indicate for each group whether the services by each
                           provider are provided statewide or by region,
                           specifying the counties in the region. The contractor
                           shall provide documentation (license/certification)
                           and certify that the providers are willing, capable,
                           and authorized (through licensure or certification)
                           to serve multiple counties or statewide.

                              a. Medical Toxicology

                              b. Developmental & Behavioral Pediatrics

                              c. Medical Genetics

                              d. Specialty Centers (Centers of Excellence)

                              e. Other Specialty Centers/Providers

                              f. DME providers

                              g. Medical suppliers

                              h. Prosthetists, orthotists, pedorthists

                              i. Hearing aid suppliers

                              j. Transportation providers

                  3.       Specialists. The contractor shall submit specific
                           provider information with the monthly network file
                           with a certification of the unavailability of the
                           American Board of Medical Specialists (ABMS)
                           diplomates in the county, the provider who shall
                           provide the service and documentation that the
                           provider is able, willing, and authorized to provide
                           the service. The contractor shall notify the DMAHS if
                           the alternate provider terminates. The contractor
                           shall assure that the specialist or alternate
                           provider has privileges in a network hospital or
                           shall authorize and pay for services provided by the
                           specialist or alternate provider at an out of network
                           hospital provider. Where there is neither a certified
                           specialist or acceptable alternative provider for a
                           particular specialty service, the contractor may
                           refer an enrollee out of county. For the physician
                           specialist types listed below, where there is
                           documentation of limited access or unavailability in
                           a county of a specific type of specialist, the
                           contractor may indicate the name of a contracted
                           provider as an alternative for the following:

                                                                          IV-113

<PAGE>

                           a) Colon & Rectal surgeon - A general surgeon with
                              privileges to perform this surgery may be
                              substituted for a certified subspecialist in this
                              field of medicine in the following counties: Cape
                              May, Cumberland, Gloucester, Hunterdon, Salem,
                              Sussex.

                           b) Cardiology, pediatric - In-county alternative:
                              adult cardiovascular disease; out of county
                              pediatric referral applies to: Cumberland,
                              Hunterdon, Somerset, Sussex, Warren.

                           c) Endocrinology, adult - In-county alternative:
                              none, refer out of county for Warren.

                           d) Endocrinology, pediatric - In-county alternative:
                              adult endocrinologist; out of county referral for
                              pediatric endocrinology applies to: Atlantic, Cape
                              May, Cumberland, Gloucester, Hunterdon, Mercer,
                              Ocean, Salem, Somerset, Sussex, Warren.

                           e) Gastroenterology, pediatric - In-county
                              alternative: adult gastroenterologists; out of
                              county referral for pediatric gastroenterology
                              applies to: Atlantic, Burlington, Cape May,
                              Cumberland, Gloucester, Hunterdon, Mercer, Ocean,
                              Salem, Sussex, Warren.

                           f) General Surgery, pediatric-- In-county
                              alternative: adult general surgery; out of county
                              referral for pediatrics applies to: Burlington,
                              Cape May, Cumberland, Gloucester, Hunterdon,
                              Mercer, Morris, Salem, Somerset, Sussex, Warren.

                           g) Geriatrics - In-county alternative: Family
                              Practitioner or Internist; applies to: Cape May,
                              Cumberland, Gloucester, Mercer, Morris, Salem,
                              Somerset, Sussex, Warren.

                           h) Hematology/Oncology, pediatric - In-county
                              alternative: none; out of county pediatrics
                              referral applies to: Burlington, Cape May,
                              Cumberland, Gloucester, Salem, Somerset, Warren.

                           i) Infectious Disease, pediatric - In-county
                              alternative: Adult infectious disease; out of
                              county pediatric referral applies to: Atlantic,
                              Burlington, Cape May, Cumberland, Gloucester,
                              Hunterdon, Ocean, Salem, Somerset, Sussex, Warren.

                           j) Nephrology, adult - In-county alternative: none;
                              refer out of county for Sussex, Warren.

                           k) Nephrology, pediatric - In-county alternative:
                              adult nephrologist; out of county pediatric
                              referral applies to: Atlantic, Burlington, Cape
                              May, Cumberland, Gloucester, Hunterdon, Mercer,
                              Monmouth, Ocean, Salem, Somerset, Sussex, Warren.

                           l) Neonatal/Perinatal medicine - Alternative: none,
                              refer out of county.

                           m) Neurology, pediatric - In-county alternative:
                              adult neurology; out of county pediatric referral
                              applies to: Burlington, Cape May, Cumberland,
                              Gloucester, Hunterdon, Sussex, Warren.

                                                                          IV-114

<PAGE>

                           n) Neurological Surgery - In-county alternative:
                              none; out of county referral applies to: Cape May,
                              Gloucester, Hudson, Salem, Warren.

                           o) Plastic Surgery - In-county alternative: None; out
                              of county referral applies to: Cape May, Salem,
                              Sussex, Warren.

                           p) Pulmonary Disease, Pediatric - In-county
                              alternative: adult pulmonary disease; out of
                              county pediatric referral applies to: Burlington,
                              Cape May, Cumberland, Gloucester, Ocean, Warren.

                           q) Radiation Oncology- In-county alternative: none;
                              out of county referral applies to: Salem, Sussex,
                              Warren.

                           r) Rheumatology, Pediatric - In-county alternative:
                              adult rheumatology; out of county pediatric
                              referral applies to: all counties except Bergen
                              and Essex.

                           s) Thoracic Surgery - In-county alternative: none,
                              refer out of county for Cape May, Hunterdon,
                              Morris, Sussex.

                  4.       Hospitals. For the follow countries, the contractor
                           may limit its hospital provider network to one (1)
                           hospital, which must be a full service, acute care
                           hospital including at least licensed
                           medical-surgical, pediatric, obstetrical, and
                           critical care services: Cape May, Cumberland,
                           Gloucester, Hunterdon, Salem, Somerset, Sussex, and
                           Warren.

4.8.9    DENTAL PROVIDER NETWORK REQUIREMENTS

         A.       The contractor shall establish and maintain a dental provider
                  network, including primary, and specialty care dentists, which
                  is adequate to provide the full scope of benefits. The
                  contractor shall include general dentists and pediatric
                  dentists as primary care dentists (PCDs). A system whereby the
                  PCD initiates and coordinates any consultations or referrals
                  for specialty care deemed necessary for the treatment and care
                  of the enrollee is preferred.

         B.       The dental provider network shall include sufficient providers
                  able to meet the dental treatment requirements of patients
                  with developmental disabilities. (See Article 4.5.2E for
                  details.)

         C.       The contractor shall ensure the participation of traditional
                  and safety-net providers within an enrollment area.
                  Traditional providers include private practitioners/entities
                  who provide treatment to the general population or have
                  participated in the regular Medicaid program. Safety-net
                  providers include dental education institutions,
                  hospital-based dental programs, and dental clinics

                                                                          IV-115

<PAGE>

                  sponsored by governmental agencies as well as dental clinics
                  sponsored by private organizations in urban/under-served
                  areas.

4.8.10   GOOD FAITH NEGOTIATIONS

         The State shall, in its sole discretion, waive the contractor's
         specific network requirements in circumstances where the contractor has
         engaged, or attempted to engage in good faith negotiations with
         applicable providers. If the contractor asks to be waived from a
         specific networking requirement on this basis, it shall document to the
         State's satisfaction that good faith negotiations were offered and/or
         occurred. Nothing in this Article will relieve the contractor of its
         responsibility to furnish the service in question if it is medically
         necessary, using qualified providers.

4.8.11   PROVIDER NETWORK ANALYSIS

         The contractor shall submit prior to execution of this contract and
         annually thereafter a provider network accessibility analysis, using
         geographic information system software, in accordance with the
         specifications found in Section A.4.3 of the Appendices.

4.9      PROVIDER CONTRACTS AND SUBCONTRACTS

4.9.1    GENERAL PROVISIONS

         A.       Each generic type of provider contract form shall be submitted
                  to the DMAHS for review and prior approval to ensure required
                  elements are included and shall have regulatory approval prior
                  to the effective date of the contract. Any proposed changes to
                  an approved contract form shall be reviewed and prior approved
                  by the DMAHS and shall have regulatory approval from DHSS and
                  DOBI prior to the effective date. The contractor shall comply
                  with all DMAHS procedures for contract review and approval
                  submission. Letters of Intent are not acceptable. Memoranda of
                  Agreement (MOAs) shall be permitted only if the MOA
                  automatically converts to a contract within six (6) months of
                  the effective date and incorporates by reference all
                  applicable contract provisions contained herein, including but
                  not limited to Appendix B.7.2, which shall be attached to all
                  MOAs.

         B.       Each proposed subcontracting arrangement or substantia
                  contractual relationship including all contract documents and
                  any subcontractor contracts including all provider contract
                  forms shall be submitted to the DMAHS for review and prior
                  approval to ensure required elements are included and shall
                  have regulatory approval prior to the effective date. Any
                  proposed change(s) to an approved subcontracting arrangement
                  including any proposed changes to approved contract forms
                  shall be reviewed and prior approved by the DMAHS and shall
                  have regulatory approval from DHSS and DOBI prior to the
                  effective date. The contractor shall comply with all DMAHS
                  procedures for contract review and approval submissions.

                                                                          IV-l16

<PAGE>

         C.       The contractor shall at all times have satisfactory written
                  contracts and subcontracts with a sufficient number of
                  providers in and adjacent to the enrollment area to ensure
                  enrollee access to all medically necessary services listed in
                  Article 4.1. All provider contracts and subcontracts shall
                  meet established requirements, form and contents approved by
                  DMAHS.

         D.       The contractor, in performing its duties and obligations
                  hereunder, shall have the right either to employ its own
                  employees and agents or, for the provision of health care
                  services, to utilize the services of persons, firms, and other
                  entities by means of sub-contractual relationships.

         E.       No provider contract or subcontract shall terminate or in any
                  way limit the legal responsibility of the contractor to the
                  Department to assure that all activities under this contract
                  are carried out. The contractor is not relieved of its
                  contractual responsibilities to the Department by delegating
                  responsibility to a subcontractor.

         F.       All provider contracts and subcontracts shall be in writing
                  and shall fulfill the requirements of 42 C.F.R. Part 434 and
                  42 C.F.R. part 438.6 that are appropriate to the service or
                  activity delegated under the subcontract.

                  1.       Provider contracts and subcontracts shall contain
                           provisions allowing DMAHS and HHS to evaluate through
                           inspection or other means, the quality,
                           appropriateness and timeliness of services performed
                           under a subcontract to provide medical services (42
                           C.F.R. Section 434.6(a)(5)).

                  2.       Provider contracts and subcontracts shall contain
                           provisions pertaining to the maintenance of an
                           appropriate record system for services to enrollees.
                           (42 C.F.R. Section 434.6(a)(7))

                  3.       Each provider contract and subcontract shall contain
                           sufficient provisions to safeguard all rights of
                           enrollees and to ensure that the subcontract complies
                           with all applicable State and federal laws, including
                           confidentiality. See Section B.7.2 of the Appendices.

                  4.       Provider contracts and subcontracts shall include the
                           specific provisions and verbatim language found in
                           Appendix B.7.2. The verbatim language requirements
                           shall be used when entering into new provider
                           contracts, new subcontracts, and when renewing,
                           renegotiating or recontracting with providers and
                           subcontractors with existing contracts.

                  5.       The contractor shall submit to dmahs for review and
                           approval prior to implementation any changes required
                           to comply with HIPAA.

         G.       The contractor shall submit at least annually or 30 days prior
                  to any changes, lists of names, addresses, ownership/control
                  information of participating providers and

                                                                          IV-117

<PAGE>

                  subcontractors, and individuals or entities, which shall be
                  incorporated in this contract.

                  1.       The contractor shall obtain prior DMAHS review and
                           written approval of any proposed plan for merger,
                           reorganization or change in ownership of the
                           contractor and approval by the appropriate State
                           regulatory agencies.

                  2.       The contractor shall comply with Article 4.9.1 G.1 to
                           ensure uninterrupted and undiminished services to
                           enrollees, to evaluate the ability of the modified
                           entity to support the provider network, and to ensure
                           that any such change has no adverse effects on DMAHS'
                           managed care program and shall comply with the
                           Departments of Banking and Insurance, and Health and
                           Senior Services statutes and regulations.

         H.       The contractor shall demonstrate its ability to provide all of
                  the services included under this contract through the approved
                  network composition and accessibility.

         I.       The contractor shall not oblige providers to violate their
                  state licensure regulations.

         J.       The contractor shall provide its providers and subcontractors
                  with a schedule of fees and relevant policies and procedures
                  at least 30 days prior to implementation.

         K.       The contractor shall arrange for the distribution of
                  informational materials to all its providers and
                  subcontractors providing services to enrollees, outlining the
                  nature, scope, and requirements of this contract.

         L.       Subcontractor Delegation. The contractor shall monitor any
                  functions and responsibilities it delegates to any
                  subcontractor. The. contractor shall be accountable for any
                  and all functions and responsibilities it delegates to a
                  subcontractor. The contractor shall obtain the prior approval
                  of DMAHS for any such delegation and shall meet the
                  requirements of 42 C.F.R. Section 438.

4.9.2    CONTRACT SUBMISSION

         The contractor shall submit to DMAHS one complete, fully executed
         contract for each type of provider, i.e., primary care physician,
         physician specialist, non-physician practitioner, hospital and other
         health care providers/services covered under the benefits package,
         subcontract and the form contract of any subcontractor's provider
         contracts. The use of a signature stamp is not permitted and shall not
         be considered a fully executed contract. Contracts shall be submitted
         with all attachments, appendices, rate schedules, etc. A copy of the
         appropriate completed contract checklist for DHS, DHSS, and DOBI shall
         be attached to each contract form. Regulatory approval and approval by
         the Department is required for each provider contract form and
         subcontract prior to use. Submission of all other contracts shall
         follow the format and procedures described below:

                                                                          IV-l18

<PAGE>

         A.       Copies of the complete fully executed contract with every
                  FQHC. Certification of the continued in force contracts
                  previously submitted will be permitted.

         B.       Hospital contracts shall list each specific service to be
                  covered including but not limited to:

                  1.       Inpatient services;

                  2.       Anesthesia and whether professional services of
                           anesthesiologists and nurse anesthetists are
                           included;

                  3.       Emergency room services

                           a.       Triage fee - whether facility and
                                    professional fees are included;

                           b.       Medical screening fee - whether facility and
                                    professional-fees are included;

                           c.       Specific treatment rates for:

                                    (1)      Emergent services

                                    (2)      Urgent services

                                    (3)      Non-urgent services

                                    (4)      Other

                           d.       Other - must specify

                  4.       Neonatology - facility and professional fees

                  5.       Radiology

                           a.       Diagnostic

                           b.       Therapeutic

                           c.       Facility fee

                           d.       Professional services

                  6.       Laboratory - facility and professional services

                  7.       Outpatient/clinic services must be specific and
                           address

                           a.       School-based health service programs

                           b.       Audiology therapy and therapists

                  8.       AIDS Centers

                  9.       Any other specialized service or center of excellence

                  10.      Hospice services if the hospital has an approved
                           hospice agency that is Medicare certified.

                  11.      Home Health agency services if hospital has an
                           approved home health agency license from the
                           Department of Health and Senior Services that meets
                           licensing and Medicare certification participation
                           requirements.

                  12.      Any other service.

         C.       FQHC contracts:

                  1.       Shall list each specific service to be covered.

                  2.       Shall include reimbursement schedule and methodology.

                  3.       Shall include the credentialing requirements for
                           individual practitioners.

                  4.       Shall include assurance that continuation of the FQHC
                           contract is contingent on maintaining quality
                           services and maintaining the Primary Care Evaluation
                           Review (PCER) review by the federal government at a
                           good quality level. FQHCs must make available to the
                           contractor the

                                                                          IV-119

<PAGE>

                           PCER results annually which shall be considered in
                           the contractor's QM reviews for assessing quality of
                           care.

         D.       School-based health service programs:

                  1.       Shall list each specific service to be covered.

                  2.       Shall include reimbursement schedule and methodology.

                  3.       Shall include the credentialing requirements for
                           individual practitioners.

         E.       For those providers for whom a complete contract is not
                  required to be submitted as provided for in the first
                  paragraph of Article 4.9.2, the contractor shall submit a
                  list of the providers' names, addresses, Social Security
                  Numbers, and Medicaid provider numbers (if available). The
                  contractor shall attach to this list a completed, signed
                  "Certification of Contractor Provider Network" form (See
                  Section A.4.4 of the Appendices). This form must be completed
                  and signed by the contractor's attorney or high-ranking
                  officer with decision-making authority.

4.9.3    PROVIDER CONTRACT AND SUBCONTRACT TERMINATION

         A.       The contractor shall comply with all the provisions of the New
                  Jersey HMO regulations at N.J.A.C. 8:38 et seq. regarding
                  provider termination, including but not limited [Reserved]
                  written notice to enrollees [Reserved] including continuity of
                  care requirements not less than 30 days prior to the effective
                  date of service cessation.

         B.       The contractor shall notify DMAHS at least 45 days prior to
                  the effective date of suspension, termination, or voluntary
                  withdrawal of a provider or subcontractor from participation
                  in this program. If the termination was "for cause," the
                  contractor's notice to DMAHS shall include the reasons for the
                  termination.

                  1.       Provider resource consumption patterns shall not
                           constitute "cause" unless the contractor can
                           demonstrate it has in place a risk adjustment system
                           that takes into account enrollee health-related
                           differences when comparing across providers.

                  2.       The contractor shall assure immediate coverage by a
                           provider of the same specialty, expertise, or service
                           provision and shall submit a new contract with a
                           replacement provider to DMAHS 45 days prior to the
                           effective date.

         C.       If a primary care provider ceases participation in the
                  contractor's organization, the contractor shall provide
                  written notice at least thirty (30) days from the date that
                  the contractor becomes aware of such change in status to each
                  enrollee who has chosen the provider as their primary care
                  provider. If an enrollee is in an ongoing course of treatment
                  with any other participating provider who becomes unavailable
                  to continue to provide services to such enrollee and
                  contractor is

                                                                          IV-120

<PAGE>

                  aware of such ongoing course of treatment, the contractor
                  shall provide written notice within fifteen days from the date
                  that the contractor becomes aware of such unavailability to
                  such enrollee. Each notice shall also describe the procedures
                  for continuing care and choice of other providers who can
                  continue to care for the enrollee.

         D.       All provider contracts shall contain a provision that states
                  that the contractor shall not terminate the contract with a
                  provider because the provider expresses disagreement with a
                  contractor's decision to deny or limit benefits to a covered
                  person or because the provider assists the covered person to
                  seek reconsideration of the contractor's decision; or because
                  a provider discusses with a current, former, or prospective
                  patient any aspect of the patient's medical condition, any
                  proposed treatments or treatment alternatives, whether covered
                  by the contractor or not, policy provisions of a plan, or a
                  provider's personal recommendation regarding selection of a
                  health plan based on the provider's personal knowledge of the
                  health needs of such patients. Nothing in this Article shall
                  be construed to prohibit the contractor from:

                  1.       Including in its provider contracts a provision that
                           precludes a provider from making, publishing,
                           disseminating, or circulating directly or indirectly
                           or aiding, abetting, or encouraging the making,
                           publishing, disseminating, or circulating of any oral
                           or written statement or any pamphlet, circular,
                           article, or literature that is false or maliciously
                           critical of the contractor and calculated to injure
                           the contractor; or

                  2.       Terminating a contract with a provider because such
                           provider materially misrepresents the provisions,
                           terms, or requirements of the contractor.

4.9.4    PROHIBITION OF INTERFERENCE WITH CERTAIN MEDICAL COMMUNICATIONS

         A.       Any contract between the contractor in relation to health
                  coverage and a health care provider (or group of health care
                  providers) shall not prohibit or restrict the provider from
                  engaging in medical communications with the provider's
                  patient, either explicit or implied, nor shall any provider
                  manual, newsletters, directives, letters, verbal instructions,
                  or any other form of communication prohibit medical
                  communication between the provider and the provider's patient.
                  Providers shall be free to communicate freely with their
                  patients about the health status of their patients, medical
                  care or treatment options including any alternative treatment
                  that may be self-administered, the risks, benefits, and
                  consequences of treatment or non-treatment regardless of
                  whether benefits for that care or treatment are provided under
                  the contract, if the professional is acting within the lawful
                  scope of practice. The health care providers shall be free to
                  practice their respective professions in providing the most
                  appropriate treatment required by

                                                                          IV-121

<PAGE>

                  their patients and shall provide informed consent within the
                  guidelines of the law including possible positive and negative
                  outcomes of the various treatment modalities.

         B.       Nothing in this Article shall be construed:

                  1.       To prohibit the enforcement, as part of a contract or
                           agreement to which a health care provider is a party,
                           of any mutually agreed upon terms and conditions,
                           including terms and conditions requiring a health
                           care provider to participate in, and cooperate with,
                           all programs, policies, and procedures developed or
                           operated by the contractor to assure, review, or
                           improve the quality and effective utilization of
                           health care services (if such utilization is
                           according to guidelines or protocols that are based
                           on clinical or scientific evidence and the
                           professional judgment of the provider) but only if
                           the guidelines or protocols under such utilization do
                           not prohibit or restrict medical communications
                           between providers and their patients; or

                  2.       To permit a health care provider to misrepresent the
                           scope of benefits covered under this contract or to
                           otherwise require the contractor to reimburse
                           providers for benefits not covered.

         C.       The contractor shall not have to provide, reimburse, or
                  provide coverage of a counseling service or referral service
                  if the contractor objects to the provision of a particular
                  service on moral or religious grounds and if the contractor
                  makes available information in its policies regarding that
                  service to prospective enrollees before or during enrollment.
                  Notices shall be provided to enrollees within 90 days after
                  the date that the contractor adopts a change in policy
                  regarding such a counseling or referral service.

4.9.5    ANTIDISCRIMINATION

         The contractor shall not discriminate with respect to participation,
         reimbursement, or indemnification against any provider who is acting
         within the scope of the provider's license or certification under
         applicable State law, solely on the basis of such licensure or
         certification or against any provider that serves high-risk populations
         or specializes in conditions that require costly treatment. The
         contractor may, however, include providers only to the extent necessary
         to meet the needs of the organization's enrollees, establish any
         measure designed to maintain quality and control costs consistent with
         the responsibilities of the contractor, or use different reimbursement
         amounts for different specialties or for different practitioners in the
         same specialty. if the contractor declines to include individual or
         groups of providers in its network, it must give the affected providers
         written notice of the reason for its decision.

                                                                          IV-122

<PAGE>

4.10     EXPERT WITNESS REQUIREMENTS AND COURT OBLIGATIONS

         The contractor shall comply with the following provisions concerning
         expert witness testimony and court-ordered services:

         A.       The contractor shall bear the sole responsibility to provide
                  expert witness services within the State of New Jersey for any
                  hearings, proceedings, or other meetings and events relative
                  to services provided by the contractor.

         B.       These expert witness services shall be provided in all actions
                  initiated by the Department, providers, enrollees, or any
                  other party(ies) and which involve the Department and the
                  contractor.

         C.       The contractor shall designate and identify staff person(s)
                  immediately available to perform the expert witness function,
                  subject to prior approval by the Department. The Department
                  shall exercise, at its sole discretion, a request for
                  additional or substitute employees other than the designated
                  expert witness.

         D.       The contractor shall notify the Department prior to the
                  delivery of all expert witness services, and/or response(s) to
                  subpoenas. The notification shall be no later than twenty-four
                  (24) hours after the contractor is aware of the need to appear
                  or of the subpoena.

         E.       The contractor shall provide written analysis, representation
                  and expert witness services in Fair Hearings and in court
                  regarding any actions the contractor has taken. In the case of
                  a contractor's denial, modification, or deferral of a prior
                  authorization request, the contractor shall present its
                  position for the denial, modification, or deferral of
                  procedures during Fair Hearing proceedings. The parties to the
                  Medicaid fair hearing include the contractor, the enrollee,
                  and his/her representative or the representative of a deceased
                  enrollee's estate.

         F.       The Department will notify the contractor in a timely manner
                  of the nature of the subject matter to be covered and the
                  testimony to be presented and the date, time and location of
                  the hearing, proceeding, or other meeting or event at which
                  specific expert witness services are to be provided.

         G.       The contractor shall coordinate and provide court ordered
                  medical services (except sexual abuse evaluations). It is the
                  responsibility of the contractor to inform the courts about
                  the availability of its providers. If the court orders a non-
                  contractor source to provide the treatment or evaluation, the
                  contractor shall be liable for the cost up to the Medicaid
                  rate if the contractor could not have provided the service
                  through its own provider network or arrangements.

4.11     ADDITIONS, DELETIONS, AND/OR CHANGES

                                                                          IV-123

<PAGE>

         The contractor shall submit any significant and material changes
         regarding policies, procedures, changes to health care delivery system
         and substantial changes to contractor operations, providers, provider
         networks, subcontractors, and reports to DMAHS for final approval at
         least 90 days prior to being published, distributed, and/or
         implemented.

                                                                          IV-124

<PAGE>

ARTICLE FIVE: ENROLLEE SERVICES

5.1      GEOGRAPHIC REGIONS

         A.       Service Area. The geographic region(s) for which the
                  contractor has been awarded a contract to establish and
                  maintain operations for the provision of services to Medicaid
                  and NJ FamilyCare beneficiaries are indicated below. The
                  contractor shall have complete provider networks for each of
                  the counties included in the region(s) approved for this
                  contract. Coverage for partial regions shall only be permitted
                  through a prior approval process by DMAHS. The contractor
                  shall submit a phase-in plan to DMAHS. See Article 2 for
                  details.

                  _________Region 1:         Bergen, Hudson, Hunterdon, Morris,
                                             Passaic, Somerset, Sussex, and
                                             Warren

                  _________Region 2:         Essex, Union, Middlesex, and Mercer

                  _________Region 3:         Atlantic, Burlington, Camden, Cape
                                             May, Cumberland, Gloucester,
                                             Monmouth, Ocean, and Salem

         B.       Enrollment Area. For the purposes of this contract, the
                  contractor's enrollment area(s) and maximum enrollment limits
                  (cumulative during the term of the contract) shall be as
                  follows:

                                                      Maximum
                                                      Enrollment
                   County:                            Limit:
                  _________         Atlantic
                  _________         Bergen
                  _________         Burlington
                  _________         Camden
                  _________         Cape May
                  _________         Cumberland
                  _________         Essex
                  _________         Gloucester
                  _________         Hudson
                  _________         Hunterdon
                  _________         Mercer
                  _________         Middlesex
                  _________         Monmouth
                  _________         Morris
                  _________         Ocean
                  _________         Passaic
                  _________         Salem
                  _________         Somerset
                  _________         Sussex
                  _________         Union
                  _________         Warren

                                                                           V - l

<PAGE>

5.2      AID CATEGORIES ELIGIBLE FOR CONTRACTOR ENROLLMENT

         A.       Except as specified in Article 5.3, all persons who are not
                  institutionalized, belong to one of the following eligibility
                  categories, and reside in any of the enrollment areas, as
                  identified in Article 5.1, are in mandatory aid categories and
                  shall be eligible for enrollment in the contractor's plan in
                  the manner prescribed by this contract.

                  1.       Aid to Families with Dependent Children
                           (AFDC)/Temporary Assistance for Needy Families
                           (TANF);

                  2.       AFDC/TANF-Related, New Jersey Care...Special Medicaid
                           Program for Pregnant Women and Children;

                  3.       SSI-Aged. Blind, Disabled, and Essential Spouses;

                  4.       New Jersey Care...Special Medicaid programs for Aged,
                           Blind, and Disabled;

                  5.       Division of Developmental Disabilities Clients
                           including the Division of Developmental Disabilities
                           Community Care Waiver:

                  6.       Medicaid only or SSI-related Aged, Blind, and
                           Disabled:

                  7.       Uninsured parents/caretakers and children who are
                           covered under NJ FamilyCare;

                  [Reserved]

         B.       The contractor shall enroll the entire Medicaid case, i.e.,
                  all individuals included under the ten digit Medicaid
                  identification number.

         C.       DYFS. Individuals who are eligible through the Division of
                  Youth and Family Services may enroll voluntarily. All
                  individuals eligible through DYFS shall be considered a unique
                  Medicaid case and shall be issued an individual 12 digit
                  Medicaid identification number, and may be enrolled in his/her
                  own contractor.

         D.       The contractor shall be responsible for keeping its network of
                  providers informed of the enrollment status of each enrollee.

         E.       Dual eligibles (Medicaid-Medicare) may voluntarily enroll.

5.3      EXCLUSIONS AND EXEMPTIONS

         Persons who belong to one of the eligible populations (defined in
         5.2A) shall not be subject to mandatory enrollment if they meet one or
         more criteria defined in this Article. Persons who fall into an
         "excluded" category (Article 5.3.1A) shall not be eligible to enroll
         in the contractor's plan. Persons falling into the categories under
         Article 5.3.1B are eligible to enroll on a voluntary basis. Persons
         falling into a category under Article 5.3.2 may be eligible for
         enrollment exemption, subject to the Department's review.

                                                                           V - 2

<PAGE>

5.3.1    ENROLLMENT EXCLUSIONS

         A.       The following persons shall be excluded from enrollment in the
                  managed care program:

                  1.       Individuals in the following Home and Community-based
                           Waiver programs: Model Waiver I, Model Waiver II,
                           Model Waiver III, Enhanced Community Options Waiver,
                           Aids Community Care Alternative Program (ACCAP),
                           Community Care Program for Elderly and Disabled
                           (CCPED), assisted living programs, ABC Waiver for
                           Children, Traumatic Brain Injury (TBI), and DYFS Code
                           65 children.

                  2.       Individuals in a Medicaid demonstration program.

                  3.       Individuals who are institutionalized in an inpatient
                           psychiatric institution, long term care nursing
                           facility or in a residential facility including
                           Intermediate Care Facilities for the Mentally
                           Retarded. However, individuals who are eligible
                           through DYFS and are placed in a DYFS residential
                           center/facility or individuals in a mental health or
                           substance abuse residential treatment facility are
                           not excluded from enrolling in the contractor's plan.

                  4.       Individuals in the Medically Needy, Presumptive
                           Eligibility for pregnant women, Presumptive
                           Eligibility for NJ FamilyCare, Home Care Expansion
                           Program, or PACE program.

                  5.       Infants of inmates of a public institution living in
                           a prison nursery.

                  6.       Individuals already enrolled in or covered by a
                           Medicare or private HMO that does not have a contract
                           with the Department to provide Medicaid services.

                  7.       Individuals in out-of-state placements.

                  8.       Full time students attending school and residing out
                           of the country will be excluded from New Jersey Care
                           2000+ participation while ii school.

                  9.       The following types of dual beneficiaries: Qualified
                           Medicare Beneficiaries (QMBs) not otherwise eligible
                           for Medicaid; Special Low-Income Medicare
                           Beneficiaries (SLMBs); Qualified Disabled and Working
                           Individuals (QDWIs); and Qualifying Individuals 1 and
                           2.

         B.       The following individuals shall be excluded from the Automatic
                  Assignment process described in Article 5.4C but may
                  voluntarily enroll:

                                                                           V - 3

<PAGE>

                  1.       Individuals whose Medicaid eligibility will terminate
                           within three (3) months or less after the projected
                           date of effective enrollment.

                  2.       Individuals in mandatory eligibility categories who
                           live in a county where mandatory enrollment is not
                           yet required based on a phase-in schedule determined
                           by DMAHS.

                  3.       Individuals enrolled in or covered by either a
                           Medicare or commercial HMO will not be enrolled in
                           New Jersey Care 2000+ contractor unless the New
                           Jersey Care 2000+ contractor and the
                           Medicare/commercial HMO are the same.

                  4.       Individuals in the Pharmacy Lock-in or Provider
                           Warning or Hospice programs.

                  5.      Individuals in eligibility categories other than
                          AFDC/TANF, AFDC/TANF-related New Jersey Care,
                          SSI-Aged, Blind and Disabled populations, the Division
                          of Developmental Disabilities Community Care Waiver
                          population, New Jersey Care - Aged, Blind and
                          Disabled, or NJ FamilyCare Plan A.

                  6.       Children awaiting adoption through a private agency.

                  7.       Individuals identified as having more than one active
                           eligible Medicaid number.

                  8.       DYFS Population.

         C.       The following individuals shall be excluded from the Automatic
                  Assignment process:

                  1.       Individuals included under the same Medicaid Case
                           Number where one or more household member(s) are
                           exempt.

                  2.       Individuals participating in NJ FamilyCare Plans B,
                           C, and D [Managed Care is the only program option
                           available for these individuals].

5.3.2    ENROLLMENT EXEMPTIONS

                  The contractor, its subcontractors, providers or agents shall
                  not coerce individuals to disenroll because of their health
                  care needs which may meet an exemption reason, especially when
                  the enrollees want to remain enrolled. Exemptions do not apply
                  to NJ FamilyCare Plan B, Plan C, or Plan D individuals or to
                  individuals who have been enrolled in any of the contracted
                  plans for greater than one hundred and eighty (180) days. All
                  exemption requests are reviewed by DMAHS

                                                                           V - 4

<PAGE>

                  on a case by case basis. Individuals may be exempted by DMAHS
                  from enrollment in a contractor for the following reasons:

         A.       First-time Medicaid/NJ FamilyCare Plan A beneficiaries who are
                  pregnant women, beyond the first trimester, who have an
                  established relationship with an obstetrician who is not a
                  participating provider in any contractor. These individuals
                  will be tracked and enrolled after sixty (60) days postpartum.

         B.       Individuals with a terminal illness and who have an
                  established relationship with a physician who is not a
                  participating provider in any contractor's plan.

         C.       Individuals with a chronic, debilitating illness or disability
                  who have received treatment from a physician and/or team of
                  providers with expertise in treating that illness with whom
                  the individuals have an established relationship (greater than
                  12 months) and who are not participating in any contractor;
                  and there is no other reasonable alternative as determined by
                  DMAHS at its sole discretion. Such requests shall be reviewed
                  by DMAHS on a case by case basis. The individuals or
                  authorized persons must provide written documentation
                  identifying all of the providers who provide regular, ongoing
                  care and who will certify their continued involvement in the
                  care of these individuals; also provide documentation
                  detailing how and who will provide medical management for the
                  individual.

                  1.       Temporary exemption may be granted by DMAHS to allow
                           the contractor time to contract with a specific
                           specialist needed by an enrollee with whom there is a
                           long-standing established relationship (greater than
                           twelve (12) months) and there is no equivalent
                           specialist available in the network. The contractor
                           shall establish appropriate contractual/referral
                           relationships with any or all specialists needed to
                           accommodate the needs of enrollees with special
                           needs.

         D.       Individuals who do not speak English or Spanish and who meet
                  the following criteria: i) have an illness requiring on-going
                  treatment; ii) have an established relationship with a
                  physician who speaks their primary language; and iii) there is
                  no available primary care physician in any participating
                  contractor who speaks the beneficiary's language. These cases
                  shall be reviewed by DMAHS on a case-by-case basis with no
                  automatic exemption from initial enrollment.

         E.       Individuals who do not have a choice of at least two (2) PCPs
                  within thirty (30) miles of their residence.

5.4      ENROLLMENT OF MANAGED CARE ELIGIBLES

         A.       Enrollment. The health benefits coordinator (HBC), an agent of
                  DMAHS, shall enroll Medicaid and NJ FamilyCare applicants. The
                  HBC will explain the contractors' programs, answer any
                  questions, and assist eligible individuals or, where
                  applicable, an authorized person in selecting a contractor.
                  The contractor

                                                                           V - 5

<PAGE>

                  may also enroll and directly market to individuals eligible
                  for Aged, Blind, and Disabled (ABD) benefits. The contractor
                  shall not enroll any other Medicaid-eligible beneficiary
                  except as described in Article 5.16.1.(A).2. Except as
                  provided in 5.16, the contractor shall not directly market to
                  or assist managed care eligibles in completing enrollment
                  forms. The duties of the HBC will include, but are not limited
                  to, education, enrollment, disenrollment, transfers,
                  assistance through the contractor's grievance/appeal process
                  and other problem resolutions with the contractor, and
                  communications. The duties of the contractor, when enrolling
                  ABD beneficiaries will include education and enrollment, as
                  well as other activities required within this contract. The
                  contractor shall cooperate with the HBC in developing
                  information about its plan for dissemination to Medicaid/NJ
                  FamilyCare beneficiaries.

         B.       Individuals eligible under NJ FamilyCare Plan A and NJ
                  FamilyCare Plan B, Plan C, and Plan D may request an
                  application via a toll-free number operated under contract for
                  the State, through an outreach source, or from the contractor.
                  The applications, including ABD applications taken by the
                  contractor, may be mailed back to a State vendor. Individuals
                  eligible under Plan A also have the option of completing the
                  application either via a mail-in process or on site at the
                  county welfare agency. Individuals eligible under Plan B, Plan
                  C, and Plan D have the option of requesting assistance from
                  the State vendor, the contractor or one of the registered
                  servicing centers in the community. Assistance will also be
                  made available at State field offices (e.g. the Medicaid
                  District Offices) and county offices (e.g. Offices on Aging
                  for grandparent caretakers).

         C.       Automatic Assignment. Medicaid eligible persons who reside in
                  enrollment areas that have been designated for mandatory
                  enrollment, who qualify for AFDC/TANF, New Jersey Care...
                  Special Medicaid programs eligibility categories, NJ
                  FamilyCare Plan A, and SSI populations, who do not meet the
                  exemption criteria, and who do not voluntarily choose
                  enrollment in the contractor's plan, shall be assigned
                  automatically by DMAHS to a contractor.

5.5      ENROLLMENT AND COVERAGE REQUIREMENTS

         A.       General. The contractor shall comply with DMAHS enrollment
                  procedures. The contractor shall accept for enrollment any
                  individual who selects or is assigned to the contractor's
                  plan, whether or not they are subject to mandatory enrollment,
                  without regard to race, ethnicity, gender, sexual or
                  affectional preference or orientation, age, religion, creed,
                  color, national origin, ancestry, disability, health status or
                  need for health services and will not use any policy or
                  practice that has the effect of discrimination on the basis of
                  race, color, or national origin.

         B.       Coverage commencement. Coverage of enrollees shall commence at
                  12:00 a.m., Eastern Time, on the first day of the calendar
                  month as specified by the DMAHS with the exceptions noted in
                  Article 5.5. The day on which coverage commences shall be the
                  enrollee's effective date of enrollment.

                                                                           V - 6

<PAGE>

         C.       The contractor shall accept enrollment of Medicaid/NJ
                  FamilyCare eligible persons within the defined enrollment
                  areas in the order in which they apply or are auto-assigned to
                  the contractor (on a random basis with equal distribution
                  among all participating contractors) without restrictions,
                  within contract limits. Enrollment shall be open at all times
                  except when the contract limits have been met. A contractor
                  shall not deny enrollment of a person with an SSI disability
                  or New Jersey Care Disabled category who resides outside of
                  the enrollment area. However, such enrollee with a disability
                  shall be required to utilize the contractor's established
                  provider network. The contractor shall accept enrollees for
                  enrollment throughout the duration of this contract.

         D.       Enrollment timeframe. As of the effective date of enrollment,
                  and until the enrollee is disenrolled from the contractor's
                  plan, the contractor shall be responsible for the provision
                  and cost of all care and services covered by the benefits
                  package listed in Article 4.1. Enrollees who become eligible
                  to receive services between the 1st through the end of the
                  month shall be eligible for Managed Care services in that
                  month. When an enrollee is shown on the enrollment roster as
                  covered by a contractor's plan, the contractor shall be
                  responsible for providing services to that person from the
                  first day of coverage shown to the last day of the calendar
                  month of the effective date of disenrollment. DMAHS will pay
                  the contractor a capitation rate during this period of time.

         E.       Hospitalizations. For any eligible person who applies for
                  participation in the contractor's plan, but who is
                  hospitalized prior to the time coverage under the plan becomes
                  effective, such coverage shall not commence until the date
                  after such person is discharged from the hospital and DMAHS
                  shall be liable for payment for the hospitalization, including
                  any charges for readmission within forty-eight (48) hours of
                  discharge for the same diagnosis. If an enrollee's
                  disenrollment or termination becomes effective during a
                  hospitalization, the contractor shall be liable for
                  hospitalization until the date such person is discharged from
                  the hospital, including any charges for readmission within
                  forty-eight (48) hours of discharge for the same diagnosis.
                  The contractor shall notify DMAHS within 180 days of initial
                  hospital admission.

         F.       Unless otherwise required by statute or regulation, the
                  contractor shall not condition any Medicaid/NJ FamilyCare
                  eligible person's enrollment upon the performance of any act
                  or suggest in any way that failure to enroll may result in a
                  loss of Medicaid/NJ FamilyCare benefits.

         G.       There shall be no retroactive enrollment in Managed Care.
                  Services for those beneficiaries during any retroactive period
                  will remain fee-for-service, except for individuals eligible
                  under NJ FamilyCare Plans B, C, and D who are not eligible
                  until enrolled in an MCE. Coverage shall continue indefinitely
                  unless this contract expires or is terminated, or the enrollee
                  is no longer eligible or is deleted from the contractor's list
                  of eligible enrollees.

                                                                           V - 7

<PAGE>

                  1.         Exceptions and Clarifications

                           a.       The contractor shall be responsible for
                                    providing services to an enrollee unless
                                    otherwise notified by DMAHS. In certain
                                    situations, retroactive re-enrollments may
                                    be authorized by DMAHS.

                           b.       Deceased enrollees. If an enrollee is
                                    deceased and appears on the recipient file
                                    as active, the contractor shall promptly
                                    notify DMAHS. DMAHS shall recover capitation
                                    payments made on a prorated basis after the
                                    date of death.

                           c.       Newborn infants. Coverage of newborn infants
                                    shall be the responsibility of the
                                    contractor that covered the mother on the
                                    date of birth from the date of birth and for
                                    a minimum of 60 days after the birth,
                                    through the period ending at the end of the
                                    month in which the 60th day falls, unless
                                    the baby is determined eligible beyond that
                                    point. Any baby that is hospitalized during
                                    the first 60 days of life shall remain the
                                    contractor's responsibility until discharge
                                    as well as for any hospital readmissions
                                    within forty-eight (48) hours of discharge
                                    for the same diagnosis (other than "liveborn
                                    infant"). The contractor shall notify DMAHS
                                    when a newborn who has been hospitalized and
                                    has not been accreted to its enrollment
                                    roster after [Reserved] twelve (12) weeks
                                    from the date of birth. DMAHS will take
                                    action with the appropriate CWA to have the
                                    infant accreted to the eligibility file and
                                    subsequently the enrollment roster following
                                    this notification. (See Section B.5.1 of the
                                    Appendices, for the applicable Notification
                                    of Newborns form and amendments thereto).
                                    The mother's MCE shall be responsible for
                                    the hospital stay for the newborn following
                                    delivery and for subsequent services based
                                    on enrollment in the contractor's plan.
                                    [Reserved] See Article 8 for reimbursement
                                    provisions.

                                    i.       SSI. Newborns born to an SSI mother
                                             who never applies for or may not be
                                             eligible for AFDC/TANF remain the
                                             responsibility of the mother's MCE
                                             from the date of birth and for a
                                             minimum of 60 days after the birth,
                                             through the period ending at the
                                             end of the month in which the 60th
                                             day falls, unless the baby is
                                             determined eligible beyond that
                                             point. Any baby that is
                                             hospitalized during the first 60
                                             days of life shall remain the
                                             contractor's responsibility until
                                             discharge as well as for any
                                             hospital readmission within
                                             forty-eight (48) hours of discharge

                                                                           V - 8

<PAGE>

                                             for the same diagnosis (other than
                                             "liveborn infant"). The contractor
                                             shall be responsible for notifying
                                             DMAHS when a newborn who has been
                                             hospitalized and has not been
                                             accreted to its enrollment roster
                                             after [Reserved] twelve (12) weeks
                                             from the date of birth.

                                    ii.      DYFS. Newborns who are placed under
                                             the jurisdiction of the Division of
                                             Youth and Family Services are the
                                             responsibility of the MCE that
                                             covered the mother on the date of
                                             birth for medically necessary
                                             newborn care. Such children shall
                                             become FFS upon their placement in
                                             a DYFS-approved out-of-home
                                             placement.

                                    iii.     NJ FamilyCare. Newborn infants born
                                             to NJ FamilyCare Plans B, C, and D
                                             mothers shall be the responsibility
                                             of the MCE that covered the mother
                                             on the date of birth for a minimum
                                             of 60 days after the birth through
                                             the period ending at the end of the
                                             month in which the 60th day falls
                                             unless the child is determined
                                             eligible beyond this time period.
                                             The contractor shall notify DMAHS
                                             of the birth immediately in order
                                             to assure payment for this period.

                           d.       Enrollee no longer in contract area. If an
                                    enrollee moves out of the contractor's
                                    enrollment area and would otherwise still be
                                    eligible to be enrolled in the contractor's
                                    plan, the contractor shall continue to
                                    provide or arrange benefits to the enrollee
                                    until the DMAHS can disenroll him/her. The
                                    contractor shall ask DMAHS to disenroll the
                                    enrollee due to the change of residence as
                                    soon as it becomes aware of the enrollee's
                                    relocation. This provision does not apply to
                                    persons with disabilities, who may elect to
                                    remain with the contractor, or to NJ
                                    FamilyCare Plans B, C, and D enrollees, who
                                    remain enrolled until the end of the month
                                    in which the 60th day after the request
                                    falls.

         H.       Enrollment Roster. The enrollment roster and weekly
                  transaction register generated by DMAHS shall serve as the
                  official contractor enrollment list. However, enrollment
                  changes can occur between the time when the monthly roster is
                  produced and capitation payment is made. The contractor shall
                  only be responsible for the provision and cost of care for an
                  enrollee during the months on which the enrollee's name
                  appears on the roster, except as indicated in Article 8.8.
                  DMAHS shall make available data on eligibility determinations
                  to the contractor to resolve discrepancies that may arise
                  between the roster and contractor enrollment files. If DMAHS
                  notifies the contractor in writing of changes in the roster,
                  the contractor shall rely upon that written notification in
                  the same manner as the roster. Corrective action shall be
                  limited to one (1) year from the date that the change was
                  effective.

                                                                           V - 9

<PAGE>

         I.       Enrollment of Medicaid case. Enrollment shall be for the
                  entire Medicaid case, i.e., all individuals included under the
                  ten-digit Medicaid identification number (or 12-digit ID
                  number in the case of DYFS population). The contractor shall
                  not enroll a partial case except at the DMAHS' sole
                  discretion.

         J.       Weekly Enrollment Transactions. In keeping with a schedule
                  established by DMAHS, DMAHS will process and forward
                  enrollment transactions to the contractor on a weekly basis.

         K.       Capitation Recovery. Capitation payments for a full month
                  coverage shall be recovered from the contractor on a prorated
                  basis when an enrollee is admitted to a nursing facility for
                  long term care services [Note: this does not pertain to
                  nursing facility admissions solely for hospice services OR PT,
                  OT, or speech.], psychiatric care facility or other
                  institution including incarceration and the individual is
                  disenrolled from the contractor's plan on the day prior to
                  such admission.

         L.       Adjustments to Capitation. The monthly capitation payments
                  shall include all adjustments made by DMAHS for reasons such
                  as but not limited to retroactive validation as for newborns
                  or retroactive termination of eligibility as for death,
                  incarceration or institutionalization. These adjustments will
                  be documented by DMAHS by means of a remittance tape. With the
                  exception of newborns, DMAHS shall be responsible for
                  fee-for-service payments incurred by the enrollee during the
                  period prior to actual enrollment in the contractor's plan.

         M.       The contractor shall cooperate with established procedures
                  whereby DMAHS and the HBC shall monitor enrollment and
                  disenrollment practices.

         N.       Nothing in this Article or contract shall be construed to
                  limit or in any way jeopardize a Medicaid beneficiary's
                  eligibility for New Jersey Medicaid.

         O.       DMAHS shall arrange for the determination of eligibility of
                  each potential enrollee for covered services under this
                  contract and to arrange for the provision of complete
                  information to the contractor with respect to such
                  eligibility, including notification whenever an enrollee's
                  Medicaid/NJ FamilyCare eligibility is discontinued.

         P.       Automatic Re-enrollment. An individual may be automatically
                  re-enrolled in the contractor's plan when he/she was
                  disenrolled solely due to loss of Medicaid eligibility for a
                  period of 2 months or less.

5.6      VERIFICATION OF ENROLLMENT

                                                                          V - 10

<PAGE>

         A.       The contractor shall be responsible for keeping its network of
                  providers informed of the enrollment status of each enrollee.
                  The contractor shall be able to report and ensure enrollment
                  to network providers through electronic means.

         B.       The contractor shall maintain procedures to ensure that each
                  individual's enrollment in the contractor's plan may be
                  verified with the use of the Medicaid/NJ FamilyCare
                  Eligibility Identification Card issued by the State and/or
                  card issued by the contractor through:

                  1.       Point of Service Device (POS)

                  2.       Claims and Eligibility Real Time System (CERTS)

                  3.       Automated Eligibility Verification System (AEVS)

         C.       Providers should not wait more than three (3) minutes to
                  verify enrollment.

5.7      MEMBER SERVICES UNIT

         A.       Defined. The contractor shall have in place a Member Services
                  Unit to coordinate and provide services to Medicaid/NJ
                  FamilyCare managed care enrollees. The services as described
                  in this Article include, but are not limited to enrollee
                  selection, changes, assignment, and/or reassignment of a PCP,
                  explanation of benefits, assistance with filing and resolving
                  inquiries, billing problems, grievances and appeals,
                  referrals, appointment scheduling and cultural and/or
                  linguistic needs. This unit shall also provide orientation to
                  contractor operations and assistance in accessing medical and
                  dental care.

         B.       Staff Training. The contractor shall develop a system to
                  ensure that new and current Member Services staff receive
                  basic and ongoing training and have expertise necessary to
                  provide accurate information to all Medicaid/NJ FamilyCare
                  enrollees regarding program benefits and contractor's
                  procedures.

         C.       Communication-Affecting Conditions. The contractor shall
                  ensure that Member Services staff have training and experience
                  needed to provide effective services to enrollees with special
                  needs, and are able to communicate effectively with enrollees
                  who have communication-affecting conditions, in accordance
                  with this Article.

         D.       Language Requirements. The Member Services staff shall include
                  individuals who speak English, Spanish and any other language
                  which is spoken as a primary language by a population that
                  exceeds five (5) percent of the contractor's Medicaid/NJ
                  FamilyCare enrollees or two hundred (200) enrollees in the
                  contractor's plan, whichever is greater.

         E.       Member Services Manual. The contractor shall maintain a
                  current Member Services Manual to serve as a resource of
                  information for Member Services staff. A copy shall be
                  provided to the Department during the readiness site visit. On
                  an

                                                                          V - 11

<PAGE>

                  annual basis, all changes to the Member Services Manual shall
                  be incorporated into the master used for making additional
                  distribution copies of the manual.

         F.       The contractor shall provide an after-hours call-in system to
                  triage urgent care and emergency calls from enrollees.

         G.       The contractor shall have written policies and procedures for
                  member services to refer enrollees to a health professional to
                  triage urgent care and emergencies during normal hours of
                  operation.

         H.       The Contractor shall submit any significant and material
                  changes to its member services policies and procedures to the
                  Department prior to being implemented.

5.8      ENROLLEE EDUCATION AND INFORMATION 5.8.1 GENERAL REQUIREMENTS

         A.       Written Material Submission to DMAHS. The contractor shall
                  provide all materials/notifications relating to enrollees and
                  potential enrollees in a manner and format that may be easily
                  understood. The contractor shall submit the format and content
                  of all written materials/notifications and orientations
                  described in this contract to DMAHS for review and approval
                  prior to enrollee contact/distribution. All appropriate
                  materials shall be submitted by DMAHS to the State Medical
                  Advisory Committee for review.

         B.       The contractor shall prepare and distribute with prior
                  approval by DMAHS, bilingual marketing and informational
                  materials to Medicaid/NJ FamilyCare beneficiaries, enrollees
                  (or, where applicable, an authorized person), and providers,
                  and shall include basic information about its plan.
                  Information must be in language and formats that ensures that
                  all beneficiaries can understand each process and make an
                  informed decision about enrollment in the contractor's plan.
                  Written information shall be culturally and linguistically
                  sensitive.

         C.       [Reserved] The contractor shall establish a mechanism and
                  present to DMAHS how its enrollees will be continually
                  educated about its policies and procedures; the role of
                  participants in the education process including contractor
                  administration, member and provider services, care managers,
                  and network providers; how the "educators" are made aware of
                  their education role; and how the contractor will assure the
                  State this process will be monitored to assure successful
                  outcomes for all enrollees, particularly enrollees with
                  special needs and the homeless.

         D.       The contractor shall make its written information available in
                  the prevalent non-English languages in each service area of
                  operation.

         E.       The contractor shall inform enrollees that information is
                  available in alternative formats and how to access those
                  formats.

                                                                          V - 12

<PAGE>

5.8.2    ENROLLEE NOTIFICATION/HANDBOOK

         Prior to the effective date of enrollment, the contractor shall provide
         each enrolled case or, where applicable, authorized person, with a
         bilingual (English/Spanish) member handbook and an Identification Card.
         The handbook shall be written at the fifth grade reading level or at an
         appropriate reading level for enrollees with special needs. The
         handbook shall also be available in prevalent languages and on request
         in other languages and alternative formats, e.g., large print, Braille,
         audio cassette, or diskette for enrollees with sensory impairments or
         in a modality that meets the needs of enrollees with special needs. The
         content and format of the handbook shall have the prior written
         approval of DMAHS and shall describe all services covered by the
         contractor, exclusions or limitations on coverage, the correct use of
         the contractor's plan, and other relevant information, including but
         not limited to the following:

         A.       Cover letter, explaining the member handbook, expected
                  effective date of enrollment, and when identification card
                  will be received (if not sent with the handbook);

                  1.       The enrollee's expected effective date of enrollment;
                           provided that, if the actual effective date of
                           enrollment is different from that given to the
                           enrollee or, where applicable, an authorized person,
                           at the time of enrollment, the contractor shall
                           notify the enrollee or, where applicable, an
                           authorized person of the change;

         B.       A clear description of benefits included in this contract with
                  exclusions, restrictions, and limitations. Clarification that
                  enrollees who are clients of the Division of Developmental
                  Disabilities will receive mental health/substance abuse
                  services through the contractor (may be addressed through a
                  separate insert to the basic handbook);

         C.       An explanation of the procedures for obtaining covered
                  services;

         D.       An explanation of the use of the contractor's toll free
                  telephone number (staffed for twenty-four (24) hours per
                  day/seven (7) days per week communication);

         E.       A listing of primary care practitioners (in the format
                  described in Article 4.8.4);

         F.       An identification card clearly indicating that the bearer is
                  an enrollee of the contractor's plan; and the name of the
                  primary care practitioner and telephone number on the card; a
                  description of the enrollee identification card to be issued
                  by the contractor; and an explanation as to its use in
                  assisting beneficiaries to obtain services;

         G.       An explanation that beneficiaries shall obtain all covered
                  non-emergency health care services through the contractor's
                  providers;

                                                                          V - 13

<PAGE>

         H.       An explanation of the process for accessing emergency services
                  and services which require or do not require referrals;

         I.       A definition of the terms "emergency medical condition" and
                  "post stabilization care services" and an explanation of the
                  procedure for obtaining emergency services, including the need
                  to contact the PCP for urgent care situations and prior to
                  accessing such services in the emergency room;

         J.       An explanation of the importance of contacting the PCP
                  immediately for an appointment and appointment procedures;

         K.       An explanation of where and how twenty-four (24) hour per day,
                  seven (7) day per week, emergency services are available,
                  including out-of-area coverage, and procedures for emergency
                  and urgent health care service, including the fact that the
                  enrollee has a right to use any hospital or other setting for
                  emergency care;

         L.       A list of the Medicaid and/or NJ FamilyCare services not
                  covered by the contractor and an explanation of how to receive
                  services not covered by this contract including the fact that
                  such services may be obtained through the provider of their
                  choice according to regular Medicaid program regulations. The
                  contractor may also assist an enrollee or, where applicable,
                  an authorized person, in locating a referral provider;

         M.       A notification of the enrollee's right to obtain family
                  planning services from the contractor or from any appropriate
                  Medicaid participating family planning provider (42 C.F.R.
                  Section 431.51(b)); as well as an explanation that enrollees
                  covered under NJ FamilyCare Plan D may only obtain family
                  planning services through the contractor's provider network,
                  and that family planning services outside the contractor's
                  provider network are not covered services.

         N.       A description of the process for referral to specialty and
                  ancillary care providers and second opinions;

         O.       An explanation of the reasons for which an enrollee may
                  request a change of PCP, the process of effectuating that
                  change, and the circumstances under which such a request may
                  be denied;

         P.       The reasons and process by which a provider may request an
                  enrollee to change to a different PCP;

         Q.       An explanation of an enrollee's rights to disenroll or
                  transfer at any time for cause; disenroll or transfer in the
                  first 90 days after the latter of the date the individual
                  enrolled or the date they receive notice of enrollment and at
                  least every

                                                                          V - 14

<PAGE>

                  twelve (12) months thereafter without cause and that the
                  lock-in period does not apply to ABD, ODD or DYFS individuals;

         R.       Complaints and Grievances/Appeals

                  1.       Procedures for resolving complaints, as approved by
                           the DMAHS;

                  2.       A description of the grievance/appeal procedures to
                           be used to resolve disputes between a contractor and
                           an enrollee, including: the name, title, or
                           department, address, and telephone number of the
                           person(s) responsible for assisting enrollees in
                           grievance/appeal resolutions; the time frames and
                           circumstances for expedited and standard grievances;
                           the right to appeal a grievance determination and the
                           procedures for filing such an appeal; the time frames
                           and circumstances for expedited and standard appeals;
                           the right to designate a representative; a notice
                           that all disputes involving clinical decisions will
                           be made by qualified clinical personnel; and that all
                           notices of determination will include information
                           about the basis of the decision and further appeal
                           rights, if any;

                  3.       The contractor shall notify all enrollees in their
                           primary language of their rights to file grievances
                           and appeal grievance decisions by the contractor;

         S.       An explanation that Medicaid/NJ FamilyCare Plan A enrollees,
                  and Plan D enrollees with a program status code of 380, have
                  the right to a Medicaid Fair Hearing with DMAHS and the appeal
                  process through the DHSS for Medicaid and NJ FamilyCare
                  enrollees, including instructions on the procedures involved
                  in making such a request;

         T.       Title, addresses, phone numbers and a brief description of the
                  contractor's plan for contractor management/service personnel;

         U.       The interpretive, linguistic, and cultural services available
                  through the contractor's personnel;

         V.       An explanation of the terms of enrollment in the contractor's
                  plan, continued enrollment, automatic re-enrollment,
                  disenrollment procedures, time frames for each procedure,
                  default procedures, enrollee's rights and responsibilities and
                  causes for which an enrollee shall lose entitlement to receive
                  services under this contract, and what should be done if this
                  occurs;

         W.       A statement strongly encouraging the enrollee to obtain a
                  baseline physical and dental examination, and to attend
                  scheduled orientation sessions and other educational and
                  outreach activities;

         X.       A description of the EPSDT program, and language encouraging
                  enrollees to make regular use of preventive medical and dental
                  services;

                                                                          V - 15

<PAGE>

         Y.       Provision of information to enrollees or, where applicable, an
                  authorized person, to enable them to assist in the selection
                  of a PCP;

         Z.       Provision of assistance to clients who cannot identify a PCP
                  on their own;

         AA.      An explanation of how an enrollee may receive mental health
                  and substance abuse services;

         BB.      An explanation of how to access transportation services;

         CC.      An explanation of service access arrangements for home bound
                  enrollees;

         DD.      A statement encouraging early prenatal care and ongoing
                  continuity of care throughout the pregnancy;

         EE.      A notice that an enrollee may obtain a referral to a health
                  care provider outside of the contractor's network or panel
                  when the contractor does not have a health care provider with
                  appropriate training and experience in the network or panel to
                  meet the particular health care needs of the enrollee and
                  procedure by which the enrollee can obtain such referral;

         FF.      A notice that an enrollee with a condition which requires
                  ongoing care from a specialist may request a standing referral
                  to such a specialist and the procedure for requesting and
                  obtaining such a specialist referral;

         GG.      A notice that an enrollee with (i) a life-threatening
                  condition or disease or (ii) a degenerative and/or disabling
                  condition or disease, either of which requires specialized
                  medical care over a prolonged period of time may request a
                  specialist or specialty care center responsible for providing
                  or coordinating the enrollee's medical care and the procedure
                  for requesting and obtaining such a specialist or access to
                  the center;

         HH.      A notice of all appropriate mailing addresses and telephone
                  numbers to be utilized by enrollees seeking information or
                  authorization;

         II.      A notice of pharmacy Lock-In program and procedures;

         JJ.      An explanation of the time delay of thirty (30) to forty-five
                  (45) days between the date of initial application and the
                  effective date of enrollment; however, during this interim
                  period, prospective Medicaid enrollees will continue to
                  receive health care benefits under the regular fee-for-service
                  Medicaid program or the HMO with which the person is currently
                  enrolled. Enrollment is subject to verification of the
                  applicant's eligibility for the Medicaid program and New
                  Jersey Care 2000+ enrollment; and the time delay of thirty
                  (30) to forty-five (45) days

                                                                          V - 16

<PAGE>

                  between the date of request for disenrollment and the
                  effective date of disenrollment;

         KK.      An explanation of the appropriate uses of the Medicaid/NJ
                  FamilyCare identification card and the contractor
                  identification card;

         LL.      A notification, whenever applicable, that some primary care
                  physicians may employ other health care practitioners, such as
                  nurse practitioners or physician assistants, who may
                  participate in the patient's care;

         MM.      The enrollee's or, where applicable, an authorized person's
                  signed authorization on the enrollment application allows
                  release of medical records;

         NN.      Notification that the enrollee's health status survey
                  (obtained only by the HBC) will be sent to the contractor
                  by the Health Benefits Coordinator;

         OO.      A notice that enrollment and disenrollment is subject to
                  verification and approval by DMAHS;

         PP.      An explanation of procedures to follow if enrollees receive
                  bills from providers of services, in or out of network;

         QQ.      An explanation of the enrollee's financial responsibility for
                  payment when services are provided by a health care provider
                  who is not part of the contractor's organization or when a
                  procedure, treatment or service is not a covered health care
                  benefit by the contractor and/or by Medicaid;

         RR.      A written explanation at the time of enrollment of the
                  enrollee's right to terminate enrollment, and any other
                  restrictions on the exercise of those rights, to conform to 42
                  U.S.C. Section 1396b(m)(2)(F)(ii). The initial enrollment
                  information and the contractor's member handbook shall be
                  adequate to convey this notice and shall have DMAHS approval
                  prior to distribution;

         SS.      An explanation that the contractor will contact or facilitate
                  contact with, and require its PCPs to use their best efforts
                  to contact, each new enrollee or, where applicable, an author
                  zed person, to schedule an appointment for a complete, age/sex
                  specified baseline physical, and for enrollees with special
                  needs who have been identified through a Complex Needs
                  Assessment as having complex needs, the development of an
                  Individual Health Care Plan at a time mutually agreeable to
                  the contractor and the enrollee, but not later than ninety
                  (90) days after the effective date of enrollment for children
                  under twenty-one (21) years of age, and not later than one
                  hundred eighty (180) days after initial enrollment for adults;
                  for adult clients of DDD, no later than ninety (90) days after
                  the effective date of enrollment; and encourage enrollees to
                  contact the contractor and/or their PCP to schedule an
                  appointment;

                                                                          V - 17

<PAGE>

         TT.      An explanation of the enrollee's rights and responsibilities
                  which should include, at a minimum, the following, as well as
                  the provisions found in Standard X in NJ modified QARI/QISMC
                  in Section B.4.14 of the Appendices.

                  1.       Provision for "Advance Directives," pursuant to 42
                           C.F.R. Part 422 and Part 489, Subpart I; must also
                           include a description of state law and any changes in
                           state law. Such changes must be made and issued no
                           later than 90 days after the effective date of the
                           change;

                  2.       Participation in decision-making regarding their
                           health care;

                  3.       Provision for the opportunity for enrollees or, where
                           applicable, an authorized person to offer suggestions
                           for changes in policies and procedures; and

                  4.       A policy on the treatment of minors.

         UU.      Notification that prior authorization for emergency services,
                  either in-network or out-of-network, is not required;

         VV.      Notification that the costs of emergency screening
                  examinations will be covered by the contractor when the
                  condition appeared to be an emergency medical condition to a
                  prudent layperson;

         WW.      For beneficiaries subject to cost-sharing (i.e., those
                  eligible through NJ FamilyCare Plan C, and D; See Section
                  B.5.2 of the Appendices), information that specifically
                  explains:

                  1.       The limitation on cost-sharing;

                  2.       The dollar limit that applies to the family based on
                           the reported income;

                  3.       The need for the family to keep track of the
                           cost-sharing amounts paid; and

                  4.       Instructions on what to do if the cost-sharing
                           requirements are exceeded.

         XX.      An explanation on how to access WIC services;

         YY.      Any other information essential to the proper use of the
                  contractor's plan as may be required by the Division;
                  [Reserved]

         ZZ.      Inform enrollees of the availability of care management
                  services;

         AAA.     Enrollee right to adequate and timely information related to
                  physician incentives;

                                                                          V - 18

<PAGE>

         BBB.     An explanation that Medicaid benefits received after age 55
                  may be reimbursable to the State of New Jersey from the
                  enrollee's estate. The recovery may include premium payments
                  made on behalf of the beneficiary to the managed care
                  organization in which the beneficiary enrolls; and

         CCC.     Information on how to obtain continued services during a
                  transition, i.e., from the Medicaid FFS program to the
                  contractor's plan, from one MCO to another MCO, from the
                  contractor's plan to Medicaid FFS, when applicable.

5.8.3    ANNUAL INFORMATION TO ENROLLEES

         The contractor shall distribute an updated handbook which will include
         the information specified in Article 5.8.2 to each enrollee or
         enrollee's family unit and to all providers at least once every twelve
         (12) months.

5.8.4    NOTIFICATION OF CHANGES IN SERVICES

         The contractor shall revise and distribute the information specified in
         Article 5.8 at least thirty (30) calendar days prior to any changes
         that the contractor makes in services provided or in the locations at
         which services may be obtained, or other changes of a program nature or
         in administration, to each enrollee and all providers affected by that
         change.

5.8.5    ID CARD

         A.       Except as set forth in Section 5.9.1C. the contractor shall
                  deliver to each new enrollee prior to the effective enrollment
                  date but no later than seven (7) days after the enrollee's
                  effective date of enrollment a contractor Identification Card
                  for those enrollees who have selected a PCP. The
                  Identification Card shall have at least the following
                  information:

                  1.       Name of enrollee

                  2.       Issue Date for use in automated card replacement
                           process

                  3.       Primary Care Provider Name (may be affixed by
                           sticker)

                  4.       Primary Care Provider Phone Number (may be affixed by
                           sticker)

                  5.       What to do in case of an emergency and that no prior
                           authorization is required

                  6.       Relevant copayments/Personal Contributions to Care

                  7.       Contractor 800 number - emergency message

                  Any additional information shall be approved by DMAHS prior to
                  use on the ID card.

         B.       For children and individuals eligible solely through the NJ
                  FamilyCare Program, the identification card must clearly
                  indicate "NJ FamilyCare"; for children and individuals who are
                  participating in NJ FamilyCare Plans C and D the cost-

                                                                          V - 19

<PAGE>

                  sharing amount shall be listed on the card. However, for both
                  Eskimo and Native American Indian children under the age of 19
                  years with Race Code 3, or if the family limit for
                  cost-sharing has been reached, the identification card shall
                  indicate a zero cost-sharing amount. The State will notify the
                  contractor when such limits have been reached.

5.8.6    ORIENTATION AND WELCOME LETTER

         A.       Welcome Letter. The contractor shall mail a welcome letter to
                  each new enrollee or authorized person prior to the enrollee's
                  effective date of coverage. The welcome letter shall explain
                  the member handbook, the enrollee's expected effective date of
                  enrollment, and when the enrollee's identification card will
                  be received.

         B.       Individual or Group Orientation. The contractor shall offer
                  barrier free individual or group orientation, by telephone or
                  in person, to enrollees, family members, or, where applicable,
                  authorized persons who are able to be contacted regarding the
                  delivery system. Orientation shall normally occur within
                  thirty (30) days of the date of enrollment, except that the
                  contractor shall attempt to provide orientation within ten
                  (10) days to each enrollee who has been identified as having
                  special needs. The contractor shall provide orientation
                  education that includes at least the following:

                  1.       Specific information listed within the member
                           handbook.

                  2.       The circumstances under which a team of professionals
                           (e.g., care management) is convened, the role of the
                           team, and the manner in which it functions.

         C.       Prior to conducting the first orientation, the contractor
                  shall submit for the readiness on-site review, a curriculum
                  that meets the requirements of this provision to DMAHS for
                  approval.

5.9      PCP SELECTION AND ASSIGNMENT

         The contractor shall place a high emphasis on ensuring that enrollees
         are informed and have access to enroll with traditional and safety net
         providers. The contractor shall place a high priority on enrolling
         enrollees with their existing PCP. If an enrollee does not select a
         PCP, the enrollee shall be assigned to his/her PCP of record (based
         upon prior history information) if that PCP is still a participating
         provider with the contractor. All contract materials shall provide
         equal information about enrollment with traditional and safety net
         providers as that provided about contractor operated offices. All
         materials, documents, and phone scripts shall be reviewed and approved
         by the Department before use.

5.9.1    INITIAL SELECTION/ASSIGNMENT

                                                                          V - 20

<PAGE>

         A.       General. Each enrollee in the contractor's plan shall be given
                  the option of choosing a specific PCP in accordance with
                  Articles 4.5 and 4.8 within the contractor's provider network
                  who will be responsible for the provision of primary care
                  services and the coordination of all other health care needs
                  through the mechanisms listed in this Article.

                  The HBC will provide the contractor with information, when
                  available, of existing PCP relationships via the Plan
                  Selection Form. The contractor shall, at the enrollee's
                  option, maintain the PCP-patient relationship.

         B.       PCP Selection. The contractor shall provide enrollees with
                  information to facilitate the choice of an appropriate PCP.
                  This information shall include, where known, the name of the
                  enrollee's provider of record, and a listing of all
                  participating providers in the contractor's network. (See
                  Article 4.8.4 for a description of the required listing.)

         C.       PCP Assignment. If the contractor has not received an
                  enrollee's PCP selection within ten (10) calendar days from
                  the enrollee's effective date of coverage or the selected
                  PCP's panel is closed, the contractor shall assign a PCP and
                  deliver an ID card by the fifteenth (15th) calendar day after
                  the effective date of enrollment. The assignment shall be made
                  according to the following criteria, in hierarchical order:

                  1.       The enrollee shall be assigned to his/her current
                           provider, if known, as long as that provider is a
                           part of the contractor's provider network.

                  2.       The enrollee shall be assigned to a PCP whose office
                           is within the travel time/distance standards, as
                           defined in Article 4.8.8. If the language and/or
                           cultural needs of the enrollee are known to the
                           contractor, the enrollee shall be assigned to a PCP
                           who is or has office staff who are linguistically and
                           culturally competent to communicate with the enrollee
                           or have the ability to interpret in the provision of
                           health care services and related activities during
                           the enrollee's office visits or contacts.

5.9.2    PCP CHANGES

         A.       Enrollee Request. Any enrollee or, where applicable,
                  authorized person dissatisfied with the PCP selected or
                  assigned shall be allowed to reselect or be assigned to
                  another PCP. Such reassignment shall become effective no later
                  than the beginning of the first month following a full month
                  after the request to change the enrollee's PCP. Except for
                  DYFS enrollees, this reselection or reassignment for any cause
                  may be limited, at the contractor's discretion, to two (2)
                  times per year. However, in the event there is reasonable
                  cause following policies and procedures as determined by the
                  contractor and approved by the Department, the enrollee or,
                  where applicable, authorized person may reselect or be
                  reassigned at

                                                                          V - 21

<PAGE>

                  any time, regardless of the number of times the enrollee has
                  previously changed PCPs.

                  In the event an enrollee becomes non-eligible and then
                  re-eligible within six (6) months in the same region, said
                  enrollee shall, if at all possible, be assigned to the same
                  PCP. In such a circumstance, the contractor may count previous
                  PCP changes toward the annual two-change limit.

         B.       PCP Request. The contractor shall develop policies and
                  procedures, which shall be prior approved by the Department,
                  for allowing a PCP to request reassignment of an enrollee,
                  e.g., for irreconcilable differences, for when an enrollee has
                  taken legal action against the provider, or if an enrollee
                  fails to comply with health care instructions and such
                  non-compliance prevents the provider from safely and/or
                  ethically proceeding with that enrollee's health care
                  services. The contractor shall approve any reassignments and
                  require documentation of the reasons for the request for
                  reassignment. For example, if a PCP requests reassignment of
                  an enrollee for failure to comply with health care
                  instructions, the contractor shall take into consideration
                  whether the enrollee has a physical or developmental
                  disability that may contribute to the noncompliance, and
                  whether the provider has made reasonable efforts to
                  accommodate the enrollee's needs. In the case of DYFS-eligible
                  children, copies of such requests shall be sent to the
                  Division of Youth and Family Services, c/o Medicaid Liaison,
                  PO Box 717, Trenton, NJ 08625-0717.

         C.       PCP Change Form. If a change form is used, by the contractor,
                  the contractor shall immediately provide the PCP Change Form
                  to an enrollee wishing a change, if such request is made in
                  person, or by mail if requested by telephone or in writing.
                  The contractor shall mail the form within three (3) business
                  days of receiving a telephone or written request for a form.

         D.       Processing of PCP Change Forms. If a change form is used by
                  the contractor, enrollees shall submit the PCP change form to
                  the contractor for processing. The contractor shall process
                  the form and return the enrollee identification card or
                  self-adhering sticker to the enrollee within ten (10) calendar
                  days of the postmark date on the mailing envelope or, if not
                  received by mail, the date received by the contractor.

         E.       Verbal Requests for PCP Change. The contractor may accept
                  verbal requests from enrollees or authorized persons to change
                  PCPs. However, the contractor shall document the verbal
                  request including at a minimum name of caller, date of call,
                  and selected PCP. The contractor shall process the request and
                  return the enrollee identification card or self-adhering
                  sticker to the enrollee within ten (10) calendar days of the
                  request for PCP change.

5.10     DISENROLLMENT FROM CONTRACTOR'S PLAN

                                                                          V - 22

<PAGE>

5.10.1   GENERAL PROVISIONS

         A.       Non-discrimination. Disenrollment from contractor's plan shall
                  not be based in whole or in part on an adverse change in the
                  enrollee's health, on any of the factors listed in Article
                  7.8, or on amounts payable to the contractor related to the
                  enrollee's participation in the contractor's plan.

         B.       Coverage. The contractor shall not be responsible for the
                  provision and cost of care and services for an enrollee after
                  the effective date of disenrollment unless the enrollee is
                  admitted to a hospital prior to the expected effective date of
                  disenrollment, in which case the contractor is responsible for
                  the provision and cost of care and services covered under this
                  contract until the date on which the enrollee is discharged
                  from the hospital, including any charge for the enrollee
                  readmitted within forty-eight (48) hours of discharge for the
                  same diagnosis.

         C.       Notification of Disenrollment Rights. The contractor shall
                  notify through personalized, written notification the enrollee
                  or, where applicable, authorized person of the enrollee's
                  disenrollment rights at least sixty (60) days prior to the end
                  of his/her twelve (12)-month enrollment period. The contractor
                  shall notify the enrollee of the effective disenrollment date.

         D.       Release of Medical Records. The contractor shall transfer or
                  facilitate the transfer of the medical record (or copies of
                  the medical record), upon the enrollee's or, where applicable,
                  an authorized person's request, to either the enrollee, to the
                  receiving provider, or, in the case of a child eligible
                  through the Division of Youth and Family Services, to a
                  representative of the Division of Youth and Family Services or
                  to an adoptive parent receiving subsidy through DYFS, at no
                  charge, in a timely fashion, i.e., no later than ten days
                  prior to the effective date of transfer. The contractor shall
                  release medical records of the enrollee, and/or facilitate the
                  release of medical records in the possession of participating
                  providers as may be directed by DMAHS authorized personnel and
                  other appropriate agencies of the State of New Jersey, or the
                  federal government. Release of medical records shall be
                  consistent with the provisions of confidentiality as expressed
                  in Article 7.40 of this contract and the provisions of 42
                  C.F.R. Section 431.300. For individuals, being served through
                  the Division of Youth and Family Services, release of medical
                  records must be in accordance with the provisions under
                  N.J.S.A. 9:6-8.l0a and 9:6-8.40 and consistent with the need
                  to protect the individual's confidentiality.

         E.       In the event the contract, or any portion thereof, is
                  terminated, or expires, the contractor shall assist DMAHS in
                  the transition of enrollees to other contractors. Such
                  assistance and coordination shall include, but not be limited
                  to, the forwarding of medical and other records and the
                  facilitation and scheduling of medically necessary
                  appointments for care and services. The cost of reproducing
                  and forwarding medical charts and other materials shall be
                  borne by the contractor. The contractor shall be responsible
                  for providing all reports set forth

                                                                          V - 23

<PAGE>

                  in this contract. The contractor shall make provision for
                  continuing  all management and administrative services until
                  the transition of enrollees is completed and all other
                  requirements of this contract are satisfied. The contractor
                  shall be responsible for the following:

                  1.       Identification and transition of chronically ill,
                           high risk and hospitalized enrollees, and enrollees
                           in their last four weeks of pregnancy.

                  2.       Transfer of requested medical records.

5.10.2   DISENROLLMENT FROM THE CONTRACTOR'S PLAN AT THE ENROLLEE'S REQUEST

         A.       An individual enrolled in a contractor's plan may be subject
                  to the enrollment Lock-In period provided for in this Article.
                  The enrollment Lock-In provision does not apply to SSI and New
                  Jersey Care ABD individuals, clients of DDD or to individuals
                  eligible to participate through the Division of Youth and
                  Family Services.

                  1.       An enrollee subject to the enrollment Lock-In period
                           may initiate disenrollment or transfer for any reason
                           during the first ninety (90) days after the latter of
                           the date the individual is enrolled or the date they
                           receive notice of enrollment with a new contractor
                           and at least every twelve (12) months thereafter
                           without cause. NJ FamilyCare Plans B, C, or D
                           enrollees will be subject to a twelve (12)-month
                           Lock-In period.

                           a.       [Reserved] The period during which an
                                    individual has the right to disenroll from
                                    the contractor's plan without cause applies
                                    to an individual's initial period of
                                    enrollment with the contractor. If that
                                    individual chooses to re-enroll with the
                                    contractor, his/her initial date of
                                    enrollment with the contractor will apply.

                           b.       Upon automatic re-enrollment of an
                                    individual who is disenrolled solely because
                                    he or she loses Medicaid eligibility for a
                                    period of 2 months or less, if the temporary
                                    loss of Medicaid eligibility has caused the
                                    individual to miss the annual disenrollment
                                    opportunity.

                  2.       An enrollee subject to the Lock-In period may
                           initiate disenrollment for good cause at any time.

                           a.       Good cause reasons for disenrollment or
                                    transfer shall include, unless otherwise
                                    defined by DMAHS:

                                                                          V - 24

<PAGE>

                                    i.       Failure of the contractor to
                                             provide services including physical
                                             access to the enrollee in
                                             accordance with the terms of this
                                             contract;

                                    ii.      Enrollee has filed a
                                             grievance/appeal with the
                                             contractor pursuant to the
                                             applicable grievance/appeal
                                             procedure and has not received a
                                             response within the specified time
                                             period stated therein, or in a
                                             shorter time period required by
                                             federal law;

                                    iii.     Documented grievance/appeal, by the
                                             enrollee against the contractor's
                                             plan without satisfaction.

                                    iv.      Enrollee is subject to enrollment
                                             exemption as set forth in Article
                                             5.3.2. If an exemption situation
                                             exists within the contractor's plan
                                             but another contractor can
                                             accommodate the individual's needs,
                                             a transfer may be granted.

                                    v.       Enrollee has substantially more
                                             convenient access to a primary care
                                             physician who participates in
                                             another MCE in the same enrollment
                                             area.

         B.       Voluntary Disenrollment. The contractor shall assure that
                  enrollees who disenroll voluntarily are provided with an
                  opportunity to identify, in writing, their reasons for
                  disenrollment. The contractor shall further:

                  1.       Require the return, or invalidate the use of the
                           contractor's identification card; and

                  2.       Forward a copy of the disenrollment request or refer
                           the beneficiary to DMAHS/HBC by the eighth (8th) day
                           of the month prior to the month in which
                           disenrollment is to become effective.

         C.       HBC Role. All enrollee requests to disenroll must be made
                  through the Health Benefits Coordinator. The contractor may
                  not induce, discuss or accept disenrollments. Any enrollee
                  seeking to disenroll should be directed to contact the HBC.
                  This applies to both mandatory and voluntary enrollees.
                  Disenrollment shall be completed by the HBC at facilities and
                  in a manner so designated by DMAHS.

         D.       Effective Date. The effective date of disenrollment or
                  transfer shall be no later than the first day of the month
                  immediately following the full calendar month the
                  disenrollment is initiated by DMAHS. Notwithstanding anything
                  herein to the contrary, the remittance tape, along with any
                  changes reflected in the weekly register or agreed upon by
                  DMAHS and the contractor in writing, shall serve as official
                  notice to the contractor of disenrollment of an enrollee.

                                                                          V - 25

<PAGE>

5.10.3   DISENROLLMENT FROM THE CONTRACTOR'S PLAN AT THE CONTRACTOR'S REQUEST

         A.       Criteria for Contractor Disenrollment Request. The contractor
                  may recommend, with written documentation to DMAHS, the
                  disenrollment of an enrollee. In no event may an enrollee be
                  disenrolled due to health status, [Reserved] need for health
                  services or a change in health status. Enrollees may be
                  disenrolled in any of the following circumstances:

                  1.       The contractor determines that the willful actions of
                           the enrollee are inconsistent with membership in the
                           contractor's plan, and the contractor has made and
                           provides DMAHS with documentation of at least three
                           attempts to reconcile the situation. Examples of
                           inconsistent actions include but are not limited to:
                           persistent refusal to cooperate with any
                           participating provider regarding procedures for
                           consultations or obtaining appointments (this does
                           not preclude an enrollee's right to refuse
                           treatment), intentional misconduct, willful refusal
                           to receive prior approval for non-emergency care;
                           willful refusal to comply with reasonable
                           administrative policies of the contractor, fraud, or
                           making a material misrepresentation to the
                           contractor. In no way can this provision be applied
                           to individuals on the basis of their physical
                           condition, utilization of services, age,
                           socio-economic status, [Reserved] mental disability,
                           or uncooperative or disruptive behavior resulting
                           from his/her special needs. (See Article 4.5
                           regarding special needs enrollees.)

                  2.       The contractor becomes aware that the enrollee falls
                           into an aid category that is not set forth in Article
                           5.2 of this contract, has become ineligible for
                           enrollment pursuant to Article 5.3.1 of this
                           contract, or has moved to a residence outside of the
                           enrollment area covered by this contract.

                  3.       The contractor learns that the enrollee is residing
                           outside the State of New Jersey for more than 30
                           days. This does not apply to situations when the
                           enrollee is out of State for care provided/authorized
                           by the contractor. This does not apply to full-time
                           students.

         B.       Reasonable Efforts Prior to Disenrollment. Prior to
                  recommending disenrollment of an enrollee, the contractor
                  shall make a reasonable effort to identify for the enrollee
                  or, where applicable, an authorized person those actions that
                  have interfered with effective provision of covered medical
                  care and services, and to explain what actions or procedures
                  are acceptable. The contractor must allow the enrollee or,
                  where applicable, an authorized person sufficient opportunity
                  to comply with acceptable procedures prior to recommending
                  disenrollment. The contractor shall provide at least one
                  verbal and at least one written warning to the enrollee
                  regarding the implications of his/her actions.

                                                                          V - 26

<PAGE>

                  If the enrollee, or, where applicable, an authorized person
                  fails to comply with acceptable procedures, the contractor
                  shall give at least thirty (30) days prior written notice to
                  the enrollee, or, where applicable, an authorized person, of
                  its intent to recommend disenrollment. The notice shall
                  include a written explanation of the reason the contractor
                  intends to request disenrollment, and advise the enrollee or,
                  where applicable, an authorized person of his/her right to
                  file a disenrollment grievance. The contractor shall give
                  DMAHS a copy of the notice and advise DMAHS immediately if the
                  enrollee or, where applicable, an authorized person files a
                  disenrollment grievance.

         C.       Disenrollment Appeals. The contractor shall notify DMAHS of
                  decisions related to all appeals filed by an enrollee or,
                  where applicable, an authorized person as a result of the
                  contractor's notice to an enrollee of its intent to recommend
                  disenrollment. If the enrollee has not filed an appeal or if
                  the contractor determines that the appeal is unfounded,
                  the contractor may submit to [Reserved] DMAHS a recommendation
                  for disenrollment of the enrollee. The contractor shall notify
                  the enrollee in writing of such request at the time it is
                  filed with DMAHS.

                  DMAHS will decide within ten (10) business days after receipt
                  of the contractor's recommendation whether to disenroll the
                  enrollee and will provide a written determination and
                  notification of the right to a Fair Hearing to the enrollee
                  or, where applicable, an authorized person and the contractor.

         D.       The DMAHS shall review each involuntary disenrollment and may
                  require an in- depth review by State staff, including but not
                  limited to patient and provider interviews, medical record
                  review, and home assessment to determine with the enrollee
                  what plan of action would serve the best interests of the
                  enrollee (and family as applicable.)

5.10.4   TERMINATION

         A.       Enrollees shall be terminated from the contractor's plan
                  whenever:

                  1.       The contract between the contractor and DMAHS is
                           terminated for any reason;

                  2.       The enrollee loses Medicaid/NJ FamilyCare
                           eligibility;

                  3.       Nonpayment of premium for individuals eligible
                           through the NJ FamilyCare Program occurs;

                  4.       DMAHS is notified that the enrollee has moved outside
                           of the enrollment area that the contractor does not
                           service;

                                                                          V - 27

<PAGE>

                  5.      The enrollee requires more than thirty (30) days of
                          service from a post-acute facility for inpatient
                          rehabilitation services as described in Article 4 and
                          Appendix B.4.1. The enrollee shall be terminated from
                          the contractor's plan after the 30th day.

         B.       For enrollees covered by the contractor's plan who are
                  eligible through the Division of Youth and Family Services and
                  who move to a residence outside of the enrollment area covered
                  by this contract:

                  1.       The DYFS representative will immediately contact the
                           HBC. '

                  2.       The HBC will process the enrollee's disenrollment and
                           transfer the enrollee to a new contractor; or
                           disenroll the enrollee to the fee-for-service
                           coverage under DMAHS.

                  3.       The contractor shall continue to provide services to
                           the enrollee until the enrollee is disenrolled from
                           the contractor's plan.

         C.       Loss of Medicaid or NJ FamilyCare Eligibility. When an
                  enrollee's coverage is terminated due to a loss of Medicaid or
                  NJ FamilyCare eligibility, the contractor shall offer to the
                  enrollee the opportunity to convert the enrollee's membership
                  to a non-group, non-Medicaid enrollment, consistent with
                  conversion privileges offered to other groups enrolled in the
                  contractor.

         D.       In no event shall an enrollee be disenrolled due to health
                  status, need for health services, or pre-existing medical
                  conditions.

5.11     TELEPHONE ACCESS

         A.       Twenty-Four Hour Coverage. The contractor shall maintain a
                  twenty-four (24) hours per day, seven (7) days per week
                  toll-free telephone answering system that will respond in
                  person (not voice mail) and will include Telecommunication
                  Device for the Deaf (TDD) or Tech Telephone (TT) systems.
                  Telephone staff shall be adequately trained and staffed and
                  able to promptly advise enrollees of procedures for emergency
                  and urgent care. The telephone answering system must be
                  available at no cost to the enrollees for local and
                  long-distance calls from within or out-of-state.

         B.       The contractor shall maintain toll-free telephone access to
                  the contractor for the enrollees at a minimum from 8:00 a.m.
                  to 5:00 p.m. on Monday through Friday, for calls concerning
                  administrative or routine care services.

         C.       After Hours Response. The contractor shall have standards for
                  PCP and on-call medical/dental professional response to after
                  hours phone calls from enrollees or other medical/dental
                  professionals providing services to an enrollee (including,
                  but not limited to emergency department staff). The telephone
                  response time

                                                                          V - 28

<PAGE>

                  shall not exceed two (2) hours, except for emergencies which
                  require immediate response from the PCP.

         D.       Protocols.

                  1.       Contractor. The contractor shall develop and use
                           telephone protocols for all of the following
                           situations:

                           a.       Answering the volume of enrollee telephone
                                    inquiries on a timely basis.

                                    i.       Enrollees shall wait no more than
                                             five (5) minutes on hold.

                           b.       Identifying special enrollee needs e.g.,
                                    wheelchair and interpretive linguistic
                                    needs. (See also Article 4.5.)

                           c.       Triage for medical and dental conditions and
                                    special behavioral needs for non-compliant
                                    individuals who are mentally deficient.

                           d.       Response time for telephone call-back
                                    waiting times: after hours telephone care
                                    for non-emergent, symptomatic issues -
                                    within thirty (30) to forty-five (45)
                                    minutes; same day for non-symptomatic
                                    concerns; fifteen (15) minutes for crisis
                                    situations.

                  2.       Providers. The contractor shall monitor and require
                           its providers to develop and use telephone protocols
                           for all of the following situations:

                           a.       Answering the enrollee telephone inquiries
                                    on a timely basis.

                           b.       Prioritizing appointments.

                           c.       Scheduling a series of appointments and
                                    follow-up appointments as needed by an
                                    enrollee.

                           d.       Identifying and rescheduling broken and
                                    no-show appointments.

                           e.       Identifying special enrollee needs while
                                    scheduling an appointment, e.g., wheelchair
                                    and interpretive linguistic needs. (See also
                                    Article 4.5.)

                           f.       Triage for medical and dental conditions and
                                    special behavioral needs for non-compliant
                                    individuals who are mentally deficient.

                           g.       Response time for telephone call-back
                                    waiting times: after hours telephone care
                                    for non-emergent, symptomatic issues -
                                    within thirty

                                                                          V - 29

<PAGE>

                                    (30) to forty-five (45) minutes; same day
                                    for non-symptomatic concerns; fifteen (15)
                                    minutes for crisis situations.

                           h.       Scheduling continuous availability and
                                    accessibility of professional, allied, and
                                    supportive medical/dental personnel to
                                    provide covered services within normal
                                    working hours. Protocols shall be in place
                                    to provide coverage in the event of a
                                    provider's absence.

         E.       The contractor shall maintain a P-Factor of P7 or less for
                  calls to Member Services and shall submit the P-Factor report
                  in Section A.5.1 of the Appendices.

5.12     APPOINTMENT AVAILABILITY

         The contractor shall have policies and procedures to ensure the
         availability of medical, mental health/substance abuse (for DDD
         clients) and dental care appointments in accordance with the following
         standards:

         A.       Emergency Services. Immediately upon presentation at a service
                  delivery site.

         B.       Urgent Care. Within twenty-four (24) hours. An urgent,
                  symptomatic visit is an encounter with a health care provider
                  associated with the presentation of medical signs that require
                  immediate attention, but are not life-threatening.

         C.       Symptomatic Acute Care. Within seventy-two (72) hours. A
                  non-urgent, symptomatic office visit is an encounter with a
                  health care provider associated with the presentation of
                  medical signs, but not requiring immediate attention.

         D.       Routine Care. Within twenty-eight (28) days. Non-symptomatic
                  office visits shall include but shall not be limited to:
                  well/preventive care appointments such as annual gynecological
                  examinations or pediatric and adult immunization visits.

         E.       Specialist Referrals. Within four (4) weeks or shorter as
                  medically indicated. A specialty referral visit is an
                  encounter with a medical specialist that is required by the
                  enrollee's medical condition as determined by the enrollee's
                  Primary Care Provider (PCP). Emergency appointments must be
                  provided within 24 hours of referral.

         F.       Urgent Specialty Care. Within twenty-four (24) hours of
                  referral.

         G.       Baseline Physicals for New Adult Enrollees. Within one
                  hundred-eighty (180) calendar days of initial enrollment.

         H.       Baseline Physicals for New Children Enrollees and Adult
                  Clients of DDD. Within ninety (90) days of initial enrollment,
                  or in accordance with EPSDT guidelines.

                                                                          V - 30

<PAGE>

         I.       Prenatal Care. Enrollees shall be seen within the following
                  timeframes:

                  1.       Three (3) weeks of a positive pregnancy test (home or
                           laboratory)

                  2.       Three (3) days of identification of high-risk

                  3.       Seven (7) days of request in first and second
                           trimester

                  4.       Three (3) days of first request in third trimester

         J.       Routine Physicals. Within four (4) weeks for routine physicals
                  needed for school, camp, work or similar.

         K.       Lab and Radiology Services. Three (3) weeks for routine
                  appointments; forty-eight (48) hours for urgent care.

         L.       Waiting Time in Office. Less than forty-five (45) minutes.

         M.       Initial Pediatric Appointments. Within three (3) months of
                  enrollment. The contractor shall attempt to contact and
                  coordinate initial appointments for all pediatric enrollees.

         N.       For dental appointments, the contractor shall be able to
                  provide:

                  1.       Emergency dental treatment no later than forty-eight
                           (48) hours, or earlier as the condition warrants, of
                           injury to sound natural teeth and surrounding tissue
                           and follow-up treatment by a dental provider.

                  2.       Urgent care appointments within three days of
                           referral.

                  3.       Routine non-symptomatic appointments within thirty
                           (30) days of referral.

         O.       For MH/SA appointments, the contractor shall provide:

                  1.       Emergency services immediately upon presentation at a
                           service delivery site.

                  2.       Urgent care appointments within twenty-four (24)
                           hours of the request.

                  3.       Routine care appointments within ten (10) days of the
                           request.

         P.       Maximum Number of Intermediate/Limited Patient Encounters.
                  Four (4) per hour for adults and four (4) per hour for
                  children.

         Q.       For SSI and New Jersey Care - ABD elderly and disabled
                  enrollees, the contractor shall ensure that each new enrollee
                  or, as appropriate, authorized

                                                                          V - 31

<PAGE>

                  person is contacted to offer an Initial Visit to the
                  enrollee's selected PCP. Each new enrollee shall be contacted
                  within forty-five (45) days of enrollment and offered an
                  appointment date according to the needs of the enrollee,
                  except that each enrollee who has been identified through the
                  enrollment process as having special needs shall be contacted
                  within ten (10) business days of enrollment and offered an
                  expedited appointment.

5.13     APPOINTMENT MONITORING PROCEDURES

         A.       Contractor shall monitor the adequacy of its appointment
                  processes and reduce the unnecessary use of alternative
                  methods such as emergency room visits. Contractor shall
                  monitor and institute policies that an enrollee's waiting time
                  at the PCP or specialist office is no more than forty-five
                  (45) minutes, except when the provider is unavailable due to
                  an emergency. Contractor shall have written policies and
                  procedures, about which it educates its provider network,
                  about appointment time requirements. Contractor shall have
                  established written procedures for disseminating its
                  appointment standards to the network, shall monitor compliance
                  with appointment standards, and shall have a corrective action
                  plan when appointment standards are not met.

         B.       The contractor shall have established policies and procedures
                  for monitoring and evaluating appointment scheduling for all
                  PCPs which shall include, but is not limited to, the
                  following:

                  1.       A methodology for monitoring:

                           a.       Enrollee waiting time for receipt of both
                                    urgent and routine appointments

                           b.       Availability of appointments

                           c.       Providers with whom enrollees regularly
                                    experience long waiting times

                           d.       Broken and no-show appointments

                  2.       A description of the policies and procedures for
                           addressing appointment problems that may occur and
                           the plan for corrective action if any of the
                           above-referenced items are not met.

5.14     CULTURAL AND LINGUISTIC NEEDS

         The contractor shall participate in the Department's Cultural and
         Linguistic Competency Task Force, and cooperate in a study to review
         the provision of culturally competent services.

                                                                          V - 32

<PAGE>

         The contractor shall address the relationship between culture,
         language, and health care outcomes through, at a minimum, the following
         Cultural and Linguistic Service requirements.

         A.       Physical and Communication Access. The contractor shall
                  provide documentation regarding the availability of and access
                  procedures for services which ensure physical and
                  communication access to: providers and any contractor related
                  services (e.g. office visits, health fairs); customer service
                  or physician office telephone assistance; and, interpreter,
                  TDD/TT services for individuals who require them in order to
                  communicate. Document availability of interpreter, TDD/TT
                  services.

         B.       Twenty-four (24)-Hour Interpreter Access. The contractor shall
                  provide [Reserved] twenty-four (24)-hour access to interpreter
                  services for all enrollees including the deaf or hard of
                  hearing at provider sites within the contractor's network,
                  either through telephone language services or in-person
                  interpreters to ensure that enrollees are able to communicate
                  with the contractor and providers and receive covered
                  benefits. The contractor shall identify and report the
                  linguistic capability of interpreters or bilingual employed
                  and contracted staff (clinical and non-clinical). The
                  contractor shall provide professional interpreters when needed
                  where technical, medical, or treatment information is to be
                  discussed, or where use of a family member or friend as
                  interpreter is inappropriate. Family members, especially
                  children, should not be used as interpreters in assessments,
                  therapy and other situations where impartiality is critical.
                  The contractor shall provide for training of its health care
                  providers on the utilization of interpreters.

         C.       Interpreter Listing. Throughout the term of this contract, the
                  contractor shall maintain a current list of interpreter
                  agencies/interpreters who are "on call" to provide interpreter
                  services.

         D.       Language Threshold. In addition to interpreter services, the
                  contractor will provide other linguistic services to a
                  population of enrollees if they exceed five (5) percent of
                  those enrolled in the contractor's Medicaid/NJ FamilyCare line
                  of business or two hundred (200) enrollees in the contractor's
                  plan, whichever is greater.

         E.       The contractor shall provide the following services to the
                  enrollee groups identified in D above.

                  1.       Key Points of Contact

                           a.       Medical/Dental: Advice and urgent care
                                    telephone, face to face encounters with
                                    providers

                           b.       Non-medical: Enrollee assistance,
                                    orientations, and appointments

                                                                          V - 33

<PAGE>

                  2.       Types of Services

                           a.       Translated signage

                           b.       Translated written materials

                           c.       Referrals to culturally and linguistically
                                    appropriate community services programs

         F.       Community Advisory Committee. Contractor shall implement and
                  maintain community linkages through the formation of a
                  Community Advisory Committee (CAC) with demonstrated
                  participation of consumers (with representatives of each
                  Medicaid/NJ FamilyCare eligibility category- See Article 5.2),
                  community advocates, and traditional and safety net providers.
                  The contractor shall ensure that the committee
                  responsibilities include advisement on educational and
                  operational issues affecting groups who speak a primary
                  language other than English and cultural competency.

         G.       Group Needs Assessment. Contractor shall assess the linguistic
                  and cultural needs of its enrollees who speak a primary
                  language other than English. The findings of the assessment
                  shall be submitted to DMAHS in the form of a plan entitled,
                  "Cultural and Linguistic Services Plan" at the end of year one
                  of the contract. In the plan, the contractor will summarize
                  the methodology, findings, and outline the proposed services
                  to be implemented, the timeline for implementation with
                  milestones, and the responsible individual. The contractor
                  shall ensure implementation of the plan within six months
                  after the beginning of year two of the contract. The
                  contractor shall also identify the individual with overall
                  responsibility for the activities to be conducted under the
                  plan. The DMAHS approval of the plan is required prior to its
                  implementation.

         H.       Policies and Procedures. The contractor shall address the
                  special health care needs of all enrollees. The contractor
                  shall incorporate in its policies and procedures the values of
                  (1) honoring enrollees' beliefs, (2) being sensitive to
                  cultural diversity, and (3) fostering respect for enrollees'
                  cultural backgrounds. The contractor shall have specific
                  policy statements on these topics and communicate them to
                  providers and subcontractors.

         I.       Mainstreaming. The contractor shall be responsible for
                  ensuring that its network providers do not intentionally
                  segregate DMAHS enrollees from other persons receiving
                  services. Examples of prohibited practices, based on race,
                  color, creed, religion, sex, age, national origin, ancestry,
                  marital status, sexual preference, income status, program
                  membership or physical or mental disability, include, but may
                  not be limited to, the following:

                                                                          V - 34

<PAGE>

                  1.       Denying or not providing to an enrollee any covered
                           service or access to a facility.

                  2.       Providing to an enrollee a similar covered service in
                           a different manner or at a different time from that
                           provided to other enrollees, other public or private
                           patients or the public at large.

                  3.       Subjecting an enrollee to segregation or separate
                           treatment in any manner related to the receipt of any
                           covered service.

                  4.       Assigning times or places for the provision of
                           services.

                  5.       Closing a provider panel to DMAHS beneficiaries but
                           not to other patients.

         J.       Resolution of Cultural Issues. The contractor shall
                  investigate and resolve access and cultural sensitivity issues
                  identified by contractor staff, State staff, providers,
                  advocate organizations, and enrollees.

5.15     ENROLLEE COMPLAINTS AND GRIEVANCES/APPEALS

5.15.1   GENERAL REQUIREMENTS

         A.       DMAHS Approval. The contractor shall draft and disseminate to
                  enrollees, providers, and subcontractors, a system and
                  procedure which has the prior written approval of DMAHS for
                  the receipt and adjudication of complaints and
                  grievances/appeals by enrollees. The grievance/appeal policies
                  and procedures shall be in accordance with N.J.A.C. 8:38 et
                  seq., 42 C.F.R. 438, and with the modifications that are
                  incorporated in the contract. The contractor shall not modify
                  the grievance/appeal procedure without the prior approval of
                  DMAHS, and shall provide DMAHS with a copy of the
                  modification. The contractor's grievance/appeal procedures
                  shall provide for expeditious resolution of grievances/appeals
                  by contractor personnel at a decision-making level with
                  authority to require corrective action, and will have separate
                  tracks for administrative and utilization management
                  grievances/appeals. (For the utilization management
                  complaints/grievance/appeal process, see Article 4.6.4C.)

                  The contractor shall review the grievance/appeal procedure at
                  reasonable intervals, but no less than annually, for the
                  purpose of amending same as needed, with the prior written
                  approval of the DMAHS, in order to improve said system and
                  procedure.

                  The contractor's system and procedure shall be available to
                  both Medicaid beneficiaries and NJ FamilyCare beneficiaries.
                  All enrollees have available the complaint and
                  grievance/appeal process under the contractor's plan, the
                  Department of Health and Senior Services and, for Medicaid and
                  certain NJ

                                                                          V - 35

<PAGE>

                  FamilyCare beneficiaries (i.e., Plan A enrollees and
                  beneficiaries with a PSC OF 380 UNDER Plan D), the Medicaid
                  Fair Hearing process. Individuals eligible solely through NJ
                  FamilyCare Plans B, C, and D (except for individuals with a
                  program status code of 380), [Reserved] do not have the right
                  to a Medicaid Fair Hearing.

         B.       Complaints. The contractor shall have procedures for
                  receiving, responding to, and documenting resolution of
                  enrollee complaints that are received orally and are of a less
                  serious or formal nature. Complaints that are resolved to the
                  enrollee's satisfaction [Reserved] within three (3) business
                  days of receipt do not require a formal written response or
                  notification. The contractor -shall call back an enrollee
                  within twenty-four hours of the initial contact if the
                  contractor is unavailable for any reason or the matter cannot
                  be readily resolved during the initial contact. Any complaint
                  that is not resolved within three business days shall be
                  treated as a grievance/appeal, in accordance with requirements
                  defined in Article 5.15.3.

         C.       HBC Coordination. The contractor shall coordinate its efforts
                  with the health benefits coordinator including referring the
                  enrollee to the HBC for assistance as needed in the management
                  of the complaint/grievance/appeal procedures.

         D.       DMAHS Intervention. DMAHS shall have the right to intercede on
                  an enrollee's behalf at any time during the contractor's
                  complaint/grievance/appeal process whenever there is an
                  indication from the enrollee, or, where applicable, authorized
                  person, or the HBC that a serious quality of care issue is not
                  being addressed timely or appropriately. Additionally, the
                  enrollee may be accompanied by a representative of the
                  enrollee's choice to any proceedings and grievances/appeals.

         E.       Legal Rights. Nothing in this Article shall be construed as
                  removing any legal rights of enrollees under State or federal
                  law, including the right to file judicial actions to enforce
                  rights.

5.15.2   NOTIFICATION TO ENROLLEES OF GRIEVANCE/APPEAL PROCEDURE

         A.       The contractor shall provide all enrollees or, where
                  applicable, an authorized person, upon enrollment in the
                  contractor's plan, and annually thereafter, pursuant to this
                  contract, with a concise statement of the contractor's
                  grievance/appeal procedure and the enrollees' rights to a
                  hearing by the Independent Utilization Review Organization
                  (IURO) per NJAC 8:38-8.7 as well as their right to pursue the
                  Medicaid Fair Hearing process described in N.J.A.C. 10:49-10.1
                  et seq. The information shall be provided through an annual
                  mailing, a member handbook, or any other method approved by
                  DMAHS. The contractor shall prepare the information orally and
                  [Reserved] in writing in English, Spanish, and other bilingual
                  translations and a format accessible to the visually impaired,
                  such as Braille, large print, or audio tapes.

                                                                          V - 36

<PAGE>

         B.       Written information to enrollees regarding the
                  grievance/appeal process shall include at a minimum:

                  [Reserved]

                  1.       Information to enrollees on how to file
                           complaints/grievances/appeals

                  2.       Identification of who is responsible for processing
                           and reviewing grievances/appeals

                  [Reserved]

                  3.       Local or toll-free telephone number for filing of
                           complaints/grievances/appeals

                  4.       Information on obtaining grievance/appeal forms and
                           copies of grievance/appeal procedures for each
                           primary medical/dental care site

                  5.       Expected timeframes for acknowledgment of receipt of
                           grievances/appeals

                  6.       Expected timeframes for disposition of
                           grievances/appeals in accordance with N.J.A.C. 8:38
                           et seq. and 42 CFR 438.

                  7.       Extensions of the grievance/appeal process if needed
                           and time frames in accordance with N.J.A.C. 8:38 et
                           seq. and 43 CFR 4398.

                  8.       Fair hearing procedures including the Medicaid
                           enrollee's right to access the Medicaid Fair Hearing
                           process at any time to request resolution of a
                           grievance/appeal

                  9.       DHSS process for use of Independent Utilization
                           Review Organization (IURO)

         C.       A description of the process under which an enrollee may file
                  an appeal shall include at a minimum:

                  1.       Title of person responsible for processing appeal

                  2.       Title of person(s) responsible for resolution of
                           appeal

                  3.       Time deadlines for notifying enrollee of appeal
                           resolution

                  4.       The right to request a Medicaid Fair Hearing/DHSS
                           IURO processes where applicable to specific enrollee
                           eligibility categories

                                                                          V - 37
<PAGE>

5.15.3   GRIEVANCE/APPEAL PROCEDURES

         A.       Availability. The contractor's grievance/appeal procedure
                  shall be available to all enrollees or, where applicable, an
                  authorized person, or permit a provider acting on behalf of an
                  enrollee and with the enrollee's consent. The procedure shall
                  assure that grievances/appeals may be filed verbally directly
                  with the contractor.

         B.       The grievance/appeal procedure shall be in accordance with
                  N.J.A.C. 8:38 et seq and 42 CFR 438 subpart F.

         C.       DMAHS shall have the right to submit comments to the
                  contractor regarding the merits or suggested resolution of any
                  grievance/appeal.

                  by the fifteenth of every month the contractor shall submit
                  electronically reports of all UM and non-UM enrollee
                  grievance/appeal requests and dispositions directly to the
                  DMAHS on the database format provided by DMAHS. The
                  information submitted to DMAHS shall include information for
                  the reporting month and all open cases to date and indicate
                  the enrollee's name, Medicaid/NJ FamilyCare number, date of
                  birth, age, eligibility category, as well as the date of the
                  grievance/appeal, resolution and date of resolution.[Reserved]

                  [Reserved]

         D.       Time Limits to File. The contractor may provide reasonable
                  time limits within which enrollees must file
                  grievances/appeals, but such time period shall not be less
                  than sixty (60) days [Reserved] and not exceed 90 days from
                  the date of the contractor's notice of action. (Within that
                  timeframe, the enrollee may file an appeal or request a State
                  fair hearing).

5.15.4   PROCESSING GRIEVANCES/APPEALS

         A.       Staffing. The contractor shall have an adequate number of
                  staff to receive and assist with enrollee grievances/appeals
                  by phone, in person and by mail. All staff involved in the
                  receipt, investigation and resolution of complaints shall be
                  trained

                                                                          V - 38

<PAGE>

                  on the contractor's policies and procedures and shall treat
                  all enrollees with dignity and respect.

         B.       Grievance/Appeal Forms. If the contractor uses a
                  grievance/appeal form, the contractor must make available
                  written grievance/appeal forms in the enrollee's primary
                  language in accordance with the multilingual definition. Such
                  forms shall be readily available through the contractor upon
                  request by telephone or in writing. The contractor shall mail
                  the form within five (5) work days of receiving a telephone or
                  written request for a form. The contractor shall permit
                  grievances/appeals to be filed in writing, either on the
                  contractor's form or in any other written format, by fax, or
                  verbally. For appeals, an oral filing must be followed with a
                  written, signed appeal except when the request is for
                  expedited resolution. For purposes of this section the
                  contractor may use an approved translation service to
                  translate grievance/appeal forms in an enrollee's primary
                  language in order to meet the timeframes of this contract
                  provision. A copy of the translated form shall be sent to
                  DMAHS for post review.

         C.       Confidentiality. The contractor shall have written policies
                  and procedures to assure enrollee confidentiality and
                  reasonable privacy throughout the complaint and
                  grievance/appeal process.

         D.       Non-discrimination. The contractor shall have written policies
                  and procedures to assure that the contractor or any provider
                  or agent of the contractor shall not discriminate against an
                  enrollee or attempt to disenroll an enrollee for filing a
                  complaint or grievance/appeal against the contractor.

         E.       Documentation. Upon receipt of a grievance/appeal, the
                  contractor's staff shall record the date of receipt, a written
                  summary of the problem, the response given, the resolution
                  effected, if any, and the department or staff personnel to
                  whom the grievance/appeal has been routed. See Article 5.15.5
                  for further information on records maintenance.

         F.       Tracking System. The contractor shall maintain a separate
                  complaint log as well as a grievance/appeal tracking and
                  resolution system for Medicaid/ NJ FamilyCare enrollees. The
                  tracking system shall categorize complaints or
                  grievances/appeals according to type of issue, standardize a
                  system for routing complaints or grievances/appeals to
                  operational department(s) for the dual purpose of resolving
                  specific complaints or grievances/appeals and for improving
                  the contractor's operating procedures, indicate the status and
                  locus of each open grievance/appeal, send all requisite
                  notices to enrollees within the appropriate timeframe, and log
                  in the final resolution of each grievance/appeal. The tracking
                  system shall differentiate between medical/dental and
                  administrative complaints and grievances/appeals.

5.15.5   RECORDS MAINTENANCE

                                                                          V - 39

<PAGE>

         A.       The contractor shall develop and maintain a separate complaint
                  log tracking and resolution system for Medicaid and NJ
                  FamilyCare enrollees for issues not requiring a formal
                  grievance/appeal hearing. The system shall be made accessible
                  to the State for review.

         B.       A grievance/appeal log to document all verbal (telephone or in
                  person) and written grievances/appeals and resolutions shall
                  be maintained. The grievance/appeal log shall be available in
                  the office of the contractor. The grievance/appeal log shall
                  include the following information:

                  1.       A log number

                  2.       The date and time the grievance/appeal is filed with
                           the contractor or provider

                  3.       The name of the enrollee filing the grievance/appeal

                  4.       The name of the contractor, provider or staff person
                           receiving the grievance/appeal

                  5.       A description of the grievance/appeal or problem

                  6.       A description of the action taken by the contractor
                           or provider to investigate and resolve the
                           grievance/appeal

                  7.       The proposed resolution by the contractor or provider

                  8.       The name of the contractor, provider or staff person
                           responsible for resolving the grievance/appeal

                  9.       The date of notification to the enrollee of the
                           proposed resolution

         C.       The contractor shall develop and maintain policies for the
                  following:

                  1.       Collection and analysis of grievance/appeal data

                  2.       Frequency of review of the grievance/appeal system

                  3.       File maintenance

                  4.       Protecting the anonymity of the grievant.

5.16     MARKETING

5.16.1   GENERAL PROVISIONS - CONTRACTOR'S RESPONSIBILITIES

                                                                          V - 40

<PAGE>

         A.       The DMAHS' enrollment agent, health benefits coordinator
                  (HBC), will outreach and educate Medicaid and NJ FamilyCare
                  beneficiaries (or, where applicable, an authorized person),
                  and assist eligible beneficiaries (or, where applicable, an
                  authorized person), in selection of a MCE. Direct marketing or
                  discussion by the contractor to a Medicaid or NJ FamilyCare
                  beneficiary already enrolled in another contractor shall not
                  be permitted; direct marketing to non-enrolled Medicaid
                  beneficiaries will be limited and only allowed in locations
                  specified by DMAHS. The duties of the HBC will include, but
                  are not limited to, education, enrollment, disenrollment,
                  transfers, assistance through the contractor's
                  grievance/appeal process and other problem resolutions with
                  the contractor, and communications. The contractor shall
                  cooperate with the HBC in developing information about its
                  plan for dissemination to Medicaid/NJ FamilyCare
                  beneficiaries.

                  1.       Active face-to-face marketing is prohibited:

                           a.       To New Jersey Care...Special Medicaid
                                    Programs for Pregnant Women and Children;

                           b.       To DYFS-supervised individuals;

                           c.       At County Welfare Agency offices;

                           d.       At open areas (other than designated
                                    events); and

                           e.       To AFDC/TANF beneficiaries and
                                    AFDC/TANF-related beneficiaries.

                  2.       Active face-to-face marketing will be allowed:

                           a.       Only at times, events, and locations
                                    specified and approved by DMAHS. Examples of
                                    permissible venues include provider sites,
                                    health fairs, and community centers.

                           b.       To NJ FamilyCare populations.

                           c.       To the ABD population.

         B.       Marketing activities that shall be permitted include:

                  1.       Media advertising limited to billboards, bus and
                           newspaper advertisements, posters, literature display
                           stands, radio and television advertising.

                  2.       Fulfillment of potential enrollee requests to the
                           contractor for general information, brochure and/or
                           provider directories that will be mailed to the
                           beneficiary.

         C.       All marketing plans, procedures, presentations, and materials
                  shall be accurate and shall not mislead, confuse, or defraud
                  either the enrollee, providers or DMAHS. Such inaccurate,
                  false, or misleading statements include, but are

                                                                          V - 41

<PAGE>

                  not limited to, any assertion/statement (oral or written) that
                  the individual must enroll in the contractor's plan in order
                  to obtain benefits or in order not to lose benefits, or that
                  the contractor's plan is endorsed by CMS, the federal or state
                  government or similar entity. If such misrepresentation
                  occurs, the contractor shall hold harmless the State in
                  accordance with .Article 7.33 and shall be subject to damages
                  described in Article 7.16.

         D.       The contractor shall be required to submit to DMAHS for prior
                  written approval a complete marketing plan that adheres to
                  DMAHS' policies and procedures. Written or audio-visual
                  marketing materials, e.g., ads, flyers, posters,
                  announcements, and letters, and marketing scripts, public
                  information releases to be distributed to or prepared for the
                  purpose of informing Medicaid beneficiaries, and subsequent
                  revisions thereto, and promotional items shall be approved by
                  DMAHS prior to their use. If the contractor develops new or
                  revised marketing materials, it shall submit them to DMAHS for
                  review and approval prior to any dissemination. The contractor
                  shall not, under any circumstances, use marketing material
                  that has not been approved by DMAHS.

         E.       The DMAHS will consult with a medical care advisory committee
                  in the review of pertinent marketing materials and will
                  respond within 45 days with either an approval, denial, or
                  request for additional information or modifications.

         F.       The contractor shall distribute all approved marketing
                  materials throughout all enrollment areas for which it is
                  contracted to provide services.

         G.       All marketing materials that will be used by marketing agents
                  for every type of marketing presentation shall be prior
                  approved by DMAHS. The contractor shall coordinate and submit,
                  annually or as changes occur, to DMAHS and its agents, all of
                  its schedules, plans, activities by month and informational
                  materials for community education and outreach programs. The
                  contractor shall work in cooperation with community-based
                  groups and shall participate in such activities as health
                  fairs and other community events. The contractor shall make
                  every effort to ensure that all materials and outreach
                  provided by them provide both physical and communication
                  accessibility. This outreach should go beyond traditional
                  venues and any health fairs or community events should be held
                  in accessible facilities.

                  1.       For those instances where marketing is allowed,
                           contractors shall submit schedules to the DMAHS at
                           least five (5) days prior to the activity taking
                           place. The schedules can be submitted in any format,
                           but must include the full name of the marketing
                           representative, the name and full address of the
                           location where marketing is being conducted, the
                           date(s) and beginning and ending times of the
                           activity. All schedules will be reviewed and must be
                           approved in writing by the DMAHS. Plans may not
                           commence any marketing activity without prior DMAHS
                           approval.

                                                                          V - 42

<PAGE>

         H.       With the exception allowed under Article 5.16.11, neither the
                  contractor nor its marketing representatives may put into
                  effect a plan under which compensation, reward, gift, or
                  opportunity are offered to eligible enrollees as an inducement
                  to enroll in the contractor's plan other than to offer the
                  health care benefits from the contractor pursuant to this
                  contract. The contractor is prohibited from influencing an
                  individual's enrollment with the contractor in conjunction
                  with the sale of any other insurance.

         I.       The contractor may offer promotional give-aways that shall not
                  exceed a combined total of $10 to any one individual or family
                  for marketing purposes. Giveaways and premiums that have DMAHS
                  approval may be distributed at approved events. These items
                  shall be limited to items that promote good health behavior
                  (e.g., toothbrushes, immunization schedules). For NJ
                  FamilyCare, other promotional items shall be considered with
                  prior approval by DMAHS.

         J.       The contractor shall ensure that marketing representatives are
                  appropriately trained and capable of performing marketing
                  activities in accordance with terms of this contract, N.J.A.C.
                  11:17, 11:2-11, 11:4-17, 8:38-13.2, N.J.S.A. 17:22 A-1,
                  26:2J-16, and the marketing standards described in Article
                  5.16.

         K.       The contractor shall ensure that marketing representatives are
                  versed in and adhere to Medicaid policy regarding beneficiary
                  enrollment and disenrollment as stated in 42 C.F.R. Section
                  434.27. This policy includes, but is not limited to,
                  requirements that enrollees do not experience unreasonable
                  barriers to disenroll, and that the contractor shall not act
                  to discriminate on the basis of adverse health status or
                  greater use or need for health care services.

         L.       Door-to-door canvassing, telephone, telemarketing, or "cold
                  call" marketing of enrollment activities, by the contractor
                  itself or an agent or independent contractor thereof, shall
                  not be permitted. For NJ FamilyCare (Plans B, C, D),
                  telemarketing shall be permitted after review and prior
                  approval by DMAHS of the contractor's marketing plan, scripts
                  and methods to use this approach.

         M.       Contractor employees or agents shall not present themselves
                  unannounced at an enrollee's home for marketing or
                  "educational" purposes. This shall not limit such visits for
                  medical emergencies, urgent medical care, clinical outreach,
                  and health promotion for known enrollees.

         N.       Under no conditions shall a contractor use DMAHS'
                  client/enrollee data base or a provider's patient/customer
                  database to identify and market its plan to Medicaid or NJ
                  FamilyCare beneficiaries. No lists of Medicaid/NJ FamilyCare
                  beneficiary names, addresses, telephone numbers, or
                  Medicaid/NJ FamilyCare numbers of potential Medicaid/NJ
                  FamilyCare enrollees shall be obtained by a contractor under
                  any circumstances. Neither shall the contractor violate
                  confidentiality by sharing or selling enrollee lists or
                  enrollee/beneficiary data with other persons or organizations
                  for any purpose other than performance of the contractor's

                                                                          V - 43

<PAGE>

                  obligations pursuant to this contract. For NJ FamilyCare and
                  ABD marketing only, general population lists such as census
                  tracts are permissible for marketing outreach after review and
                  prior approval by DMAHS.

         O.       The contractor shall allow unannounced, on-site monitoring by
                  DMAHS of its enrollment presentations to prospective
                  enrollees, as well as to attend scheduled, periodic meetings
                  between DMAHS and contractor marketing staff to review and
                  discuss presentation content, procedures, and technical
                  issues.

         P.       The contractor shall explain that all health care benefits as
                  specified in Article 4.1 must be obtained through a PCP.

         Q.       The contractor shall periodically review and assess the
                  knowledge and performance of its marketing representatives.

         R.       The contractor shall assure culturally competent presentations
                  by having alternative mechanisms for disseminating information
                  and must receive acknowledgment of the receipt of such
                  information by the beneficiary.

         S.       Individual Medicaid beneficiaries shall be able to contact the
                  contractor for information, and the contractor may respond to
                  such a request.

         T.       Incentives.

                  1.       The contractor may provide an incentive program to
                           its enrollees based on health/educational activities
                           or for compliance with health related
                           recommendations. The incentive program may include,
                           but is not limited to:

                           a.      Health related gift items

                           b.      Gift certificates in exchange for merchandise

                           Cash or redeemable coupons with a cash value are
                           prohibited.

                  2.       The contractor's incentive program shall be proposed
                           in writing and prior approved by DMAHS.

         U.       Periodic Survey of Enrollees.

                  1.       The contractor shall quarterly survey and report
                           results to DMAHS of new enrollees, in person, by
                           phone, or other means, on a random basis to verify
                           the enrollees' understanding of the contractor's
                           procedures and services availability.

         V.       All marketing materials, plans and activities shall be prior
                  approved by DMAHS.

                                                                          V - 44

<PAGE>

5.16.2   STANDARDS FOR MARKETING REPRESENTATIVES

         A.       General Requirements

                  1.       Only a trained marketing representative of the
                           contractor's plan who meets the DHS, DHSS, and DBI
                           requirements shall be permitted to market and to
                           enroll prospective NJ FamilyCare and ABD enrollees.
                           All marketing representatives shall be registered
                           with both the Department of Banking and Insurance
                           (DBI) and the Division of Medical Assistance and
                           Health Services (DMAHS). Delegation of enrollment
                           functions, such as to the office staff of a
                           subcontracting provider of service, shall not be
                           permitted.

                  2.       The contractor shall submit to DMAHS a listing of the
                           contractor's marketing representatives as updates and
                           changes occur. Marketing schedules shall be submitted
                           at least five days in advance of marketing
                           activities. Information on each marketing
                           representative shall include the names, three digit
                           Identification Numbers, and marketing locations.

                  3.       All marketing representatives shall wear an
                           identification tag that has been prior approved by
                           DMAHS with a photo identification that must be
                           prominently displayed when the marketing
                           representative is performing marketing activities.
                           The tag shall be at least three inches (3") by five
                           inches (5") and shall display the marketing
                           representative's name, the name of the contractor,
                           and a three-digit identification number.

                  4.       In those counties where enrollment is in a voluntary
                           stage, marketing representatives shall not state or
                           imply that enrollment may be made mandatory in the
                           future in an attempt to coerce enrollment.

                  5.       Canvassing shall not be permitted.

                  6.       Outbound telemarketing shall not be permitted. For NJ
                           FamilyCare (Plans B, C, D), telemarketing shall be
                           permitted after review and prior approval by DMAHS of
                           the contractor's marketing plan, script, and methods
                           to use this approach.

                  7.       Marketing in or around a County Welfare Agency (CWA)
                           office shall not be permitted. The term "in and
                           around the CWA" is defined as being in an area where
                           the marketing representative can be seen from the CWA
                           office and/or where the CWA facility can be seen. The
                           fact that an obstructed view prohibits the marketing
                           activities from being seen shall not mitigate this
                           prohibition.

                  8.       No more than two (2) marketing representatives shall
                           approach a Medicaid/NJ FamilyCare beneficiary at any
                           one time.

                                                                          V - 45

<PAGE>

                  9.       Marketing representatives shall not encourage clients
                           to disenroll from another contractor's plan or assist
                           an enrollee of another MCE in completing a
                           disenrollment form from the other MCE.

                  10.      Marketing representatives shall ask the prospective
                           enrollee about existing relationships with physicians
                           or other health care providers. The prospective
                           enrollees shall be clearly informed as to whether
                           they will be able to continue to go to those
                           providers as enrollees of the contractor's plan
                           and/or if the Medicaid program will pay for continued
                           services with such providers.

                  11.      Marketing representatives shall secure the signature
                           of new enrollees (head of household) on a statement
                           indicating that an explanation has been provided to
                           them regarding the important points of the
                           contractor's plan and have understood its procedures.
                           A parent or, where applicable, an authorized person,
                           shall enroll minors and ABD beneficiaries, when
                           appropriate, and sign the statement of understanding.
                           However, the contractor may accept an application
                           from pregnant minors and minors living totally on
                           their own who have their own Medicaid ID numbers as
                           head of their own household.

                  12.      Prior to approval of this contract by HCFA, the
                           contractor's staff or agents are prohibited from
                           marketing to, contacting directly or indirectly, or
                           enrolling Medicaid beneficiaries.

                  13.      Marketing representatives shall not state or imply
                           that continuation of Medicaid benefits is contingent
                           upon enrollment in the contractor's plan.

                  14.      Attendance by the contractor's marketing
                           representatives at State-sponsored training sessions
                           is required at the contractor's own expense.

         B.       Commissions/Incentive Payments

                  1.       Commissions/incentive payments may not be based on
                           enrollment numbers alone but shall include other
                           criteria, such as but not limited to, the retention
                           period of enrollees enrolled (at least three (3)
                           months), member satisfaction, and education by the
                           marketing representative.

                           a.       The contractor shall also review
                                    disenrollment information/surveys and all
                                    complaints/grievances specifically
                                    referencing marketing staff.

                  2.       Marketing commissions (including cash, prizes,
                           contests, trips, dinners, and other incentives) shall
                           not exceed thirty (30) percent of the
                           representative's monthly salary.

                                                                          V - 46

<PAGE>

         C.       Enrollment Inducements

                  1.       The contractor's marketing representatives and other
                           contractor's staff are prohibited from offering or
                           giving cash or any other form of compensation to a
                           Medicaid beneficiary as an inducement or reward for
                           enrolling in the contractor's plan.

                  2.       Promotional items, gifts, "give-aways" for marketing
                           purposes shall be permitted, but will be limited to
                           items that promote good health behavior (e.g.,
                           toothbrushes, immunization schedules). However, the
                           combined total of such gifts or gift package shall
                           not exceed an amount of $10 to any one individual or
                           family. Such items:

                           a.       Shall be offered to the general public for
                                    marketing purposes whether or not an
                                    individual chooses to enroll in the
                                    contractor's plan.

                           b.       Shall only be given at the time of marketing
                                    presentations and may not be a continuous,
                                    periodic activity for the same individual,
                                    e.g., monthly or quarterly give-aways, as an
                                    inducement to remain enrolled.

                           c.       Shall not be in the form of cash.

                           For NJ FamilyCare, other promotional items shall be
                           considered with prior approval by DMAHS.

                  3.       Raffles shall not be allowed.

         D.       Sanctions

                  Violations of any of the above may result in any one or
                  combination of the following:

                  1.       Cessation or reduction of enrollment including auto
                           assignment.

                  2.       Reduction or elimination of marketing and/or
                           community event participation.

                  3.       Enforced special training/re-training of marketing
                           representatives including, but not limited to,
                           business ethics, marketing policies, effective sales
                           practices, and State marketing policies and
                           regulations.

                  4.       Referral to the Department of Banking and Insurance
                           for review and suspension of commercial marketing
                           activities.

                                                                          V - 47

<PAGE>

                  5.       Application of assessed damages by the State.

                  6.       Referral to the Secretary of the United States
                           Department of Health and Human Services for civil
                           money penalties.

                  7.       Termination of contract.

                  8.       Referral to the New Jersey Division of Criminal
                           Justice Department of Justice as warranted.

                                                                          V - 48

<PAGE>

ARTICLE SIX: PROVIDER INFORMATION

6.1      GENERAL

         The contractor shall provide information to all contracted providers
         about the Medicaid/NJ FamilyCare managed care program in order to
         operate in full compliance with the contract and all applicable federal
         and State regulations. The contractor shall monitor provider knowledge
         and understanding of program requirements, and take corrective actions
         to ensure compliance with such requirements.

6.2      PROVIDER PUBLICATIONS

         A.       Provider Manual. The contractor shall issue a Provider Manual
                  and Bulletins or other means of provider communication to the
                  providers of medical/dental services. The manual and bulletins
                  shall serve as a source of information to providers regarding
                  Medicaid covered services, policies and procedures, statutes,
                  regulations, telephone access and special requirements to
                  ensure all contract requirements are being met. Alternative to
                  provider manuals shall be prior approved by DMAHS.

                  The contractor shall provide all of its providers with, at a
                  minimum, the following information:

                  1.       Description of the Medicaid/NJ FamilyCare managed
                           care program and covered populations

                  2.       Scope of Benefits

                  3.       Modifications to Scope of Benefits

                  4.       Emergency Services Responsibilities, including
                           responsibility to educate enrollees regarding the
                           appropriate use of emergency services

                  5.       EPSDT program services and standards

                  6.       Grievance/appeal procedures for both enrollee and
                           provider

                  7.       Medical necessity standards as well as practice
                           guidelines or other criteria that will be used in
                           making medical necessity decisions. Medical necessity
                           decisions must be in accordance with the definition
                           in Article 1 and based on peer-reviewed publications,
                           expert medical opinion, and medical community
                           acceptance.

                  8.       Practice protocols/guidelines, including in
                           particular guidelines pertaining to treatment of
                           chronic/complex conditions common to the enrolled
                           populations if utilized by the contractor to monitor
                           and/or evaluate

                                                                            VI-1

<PAGE>

                           provider performance. Practice guidelines may be
                           included in a separate document.

                  9.       The contractor's policies and procedures

                  10.      PCP responsibilities

                  11.      Other provider/subcontractors' responsibilities

                  12.      Prior authorization and referral procedures

                  13.      Description of the mechanism by which a provider can
                           appeal a contractor's service decision through the
                           DHSS' Independent Utilization Review Organization
                           process

                  14.      Protocol for encounter data element reporting/records

                  15.      Procedures for screening and referrals for the MH/SA
                           services

                  16.      Medical records standards

                  17.      Payment policies

                  18.      Enrollee rights and responsibilities

         B.       Bulletins. The contractor shall develop and disseminate
                  bulletins as needed to incorporate any and all changes to the
                  Provider Manual. All bulletins shall be mailed to the State at
                  least three (3) calendar days prior to publication or mailing
                  to the providers or as soon as feasible. The Department shall
                  have the right to issue and/or modify the bulletins at any
                  time. If the DHS determines that there are factual errors or
                  misleading information, the contractor shall be required to
                  issue corrected information in the manner determined by the
                  DHS.

         C.       Timeframes. Within twenty (20) calendar days after the
                  contractor places a newly enrolled provider in an active
                  status, the contractor shall furnish the provider with a
                  current Provider Manual, all related bulletins and the
                  contractor's methodology for supplying encounter data.

         D.       The contractor shall provide a Provider Manual to the
                  Department. All updates of the manual shall also be provided
                  to the Department on a timely basis.

         E.       The Provider Manual and all policies and procedures shall be
                  reviewed at least annually to ensure that the contractor's
                  current practices and contract requirements are reflected in
                  the written policies and procedures.

                                                                            VI-2

<PAGE>

6.3      PROVIDER EDUCATION AND TRAINING

         A.       Initial Training. The contractor shall ensure that all
                  providers receive sufficient training regarding the managed
                  care program in order to operate in full compliance with
                  program standards and all applicable federal and State
                  regulations. At a minimum, all providers shall receive initial
                  training in managed care services, the contractor's policies
                  and procedures, and information about the needs of enrollees
                  with special needs. Ongoing training shall be provided as
                  deemed necessary by either the contractor or the State in
                  order to ensure compliance with program standards.

                  Subjects for provider training shall be tailored to the needs
                  of the contractor's plan's target groups. Listed below are
                  some examples of topics for training:

                  1.       Identification and management of polypharmacy.

                  2.       Identification and treatment of depression among
                           elderly people and people with disabilities.

                  3.       Identification and treatment of alcohol/substance
                           abuse.

                  4.       Identification of abuse and neglect.

                  5.       Coordination of care with long-term services, mental
                           health and substance abuse providers, including
                           instruction regarding policies and procedures for
                           maintaining the centralized member record.

                  6.       Skills to assist elderly people and people with
                           disabilities in coping with loss.

                  7.       Cultural sensitivity to providing health care to
                           various ethnic groups.

         B.       Ongoing Training. The contractor shall continue to provide
                  communications and guidance for PCPs, specialty providers, and
                  others about the health care needs of enrollees with special
                  needs and foster cultural sensitivity to the diverse
                  populations enrolled with the contractor.

6.4      PROVIDER TELEPHONE ACCESS

         A.       The contractor shall maintain a mechanism by which providers
                  can access the contractor by telephone. The contractor shall
                  maintain policies and procedures for staffing and training the
                  allocated personnel, including the hours of operation, days of
                  the week and numbers of personnel available, and the telephone
                  number to the providers. Telephone access to the contractor
                  shall be available to providers, at a minimum, from 8:00 a.m.
                  to 5:00 p.m., Monday through Friday.

                                                                            VI-3

<PAGE>

         B.       Response time. The contractor shall respond to after hours
                  telephone calls regarding medical care within the following
                  timeframes: fifteen (15) minutes for crisis situations;
                  forty-five (45) minutes for non-emergent, symptomatic issues;
                  same day for non-symptomatic concerns.

         C.       At no time shall providers wait more than five (5) minutes on
                  hold.

6.5      PROVIDER GRIEVANCES/APPEALS

         A.       Payment Disputes. The contractor shall establish and utilize a
                  procedure to resolve billing, payment, and other
                  administrative disputes between health care providers and the
                  contractor for any reason including, but not limited to: lost
                  or incomplete claim forms or electronic submissions; requests
                  for additional explanation as to services or treatment
                  rendered by a health care provider; inappropriate or
                  unapproved referrals initiated by the providers; or any other
                  reason for billing disputes. The procedure shall include an
                  appeal process and require direct communication between the
                  provider and the contractor and shall not require any action
                  by the enrollee.

         B.       Complaints, Grievances/Appeals. The contractor shall establish
                  and maintain provider complaint, grievance/appeal procedures
                  for any provider who is not satisfied with the contractor's
                  policies and procedures, or with a decision made by the
                  contractor, or disagrees with the contractor as to whether a
                  service, supply, or procedure is a covered benefit, is
                  medically necessary, or is performed in the appropriate
                  setting. The contractor procedure shall satisfy the following
                  minimum standards:

                  1.       The contractor shall have in place an informal
                           complaint process which network providers can use to
                           make verbal complaints, to ask questions, and get
                           problems resolved without going through the formal,
                           written grievance/appeal process.

                  2.       The contractor shall have in place a formal
                           grievance/appeal process which network providers and
                           non-participating providers can use to complain in
                           writing. The contractor shall issue a written
                           response to a grievance within 30 days. With respect
                           to appeals, the contractor shall also issue a written
                           response within 30 days.

                  3.       Such procedures shall not be applicable to any
                           disputes that may arise between the contractor and
                           any provider regarding the terms, conditions, or
                           termination or any other matter arising under
                           contract between the provider and contractor.

         C.       The contractor shall log, track and respond to provider
                  complaints and grievances/appeals. Provider grievance/appeal
                  logs are subject to on-site review by DMAHS staff.

                                                                            VI-4

<PAGE>

         D.       The contractor shall electronically submit quarterly a
                  Provider Grievances/Complaints Report on the database format
                  provided by DMAHS. All provider grievances/appeals shall be
                  summarized, with actions and recommendations of the Medical or
                  Dental Director and QA Committee (if involved) clearly stated.
                  The summary report shall include, but not be limited to, the
                  following data elements:

                  1.       Information from the reporting month of all provider
                           grievances/appeals and complaints received

                  2.       [Reserved] Unresolved (pending) grievances/appeals
                           and complaints

                  3.       Category of the grievance/appeal or complaint,
                           including, but not limited to:

                           a.       Denials of requested services prior
                                    authorizations

                           b.       Denials of specialty referrals

                           c.       Enrollee allocation inequities

         E.       The contractor shall notify providers of the mechanism to
                  appeal a contractor service decision on behalf of an enrollee,
                  with the enrollee's consent, through the DHSS' Independent
                  Utilization Review Organization process and that the provider
                  is not entitled to request a Medicaid administrative law
                  hearing.

                                                                            VI-5

<PAGE>

ARTICLE SEVEN: TERMS AND CONDITIONS (ENTIRE CONTRACT)

7.1      CONTRACT COMPONENTS

         The Contract, Attachments, Schedules, Appendices, Exhibits, and any
         amendments determine the work required of the contractor and the terms
         and conditions under which said work shall be performed.

         No other contract, oral or otherwise, regarding the subject matter of
         this contract shall be deemed to exist or to bind any of the parties or
         vary any of the terms contained in this contract.

7.2      GENERAL PROVISIONS

         A.       CMS Approval. This contract is subject to approval by the
                  Centers for Medicare and Medicaid Services (CMS) and shall not
                  be effective absent such approval. In addition, this contract
                  is subject to CMS' grant of a 1915(b) waiver to mandate
                  enrollment of children with special health care needs.

         B.       General. The contractor agrees that it shall carry out its
                  obligations as herein provided in a manner prescribed under
                  applicable federal and State laws, regulations, codes, and
                  guidelines including New Jersey licensing regulations, the
                  Medicaid, NJ KidCare and NJ FamilyCare State Plans, and in
                  accordance with procedures and requirements as may from time
                  to time be promulgated by the United States Department of
                  Health and Human Services. These include:

                  1.       42 U.S.C Section 1320a-7e

                  2.       42 U.S.C. Section 1396 et seq.

                  3.       42 C.F.R., Parts 417, 430, 431, 434, 435, 438, 440,
                           447, 455, 1000

                  4.       45 C.F.R., Part 74

                  5.       45 C.F.R, Part 160,164

                  6.       P.L. 2001, c. 267

                  7.       N.J.S.A. 30:4D-1 et seq.

                  8.       N.J.S.A. 30:41-1 et seq.

                  9.       N.J.S.A. 30:4J-1 et seq.

                  10.      N.J.S.A. 26:2J-1 et seq.

                                                                           VII-1

<PAGE>

                  11.      N.J.A.C. 10:74 et seq.

                  12.      N.J.A.C. 10:49 et seq.

                  13.      N.J.A.C. 10:79 et seq.

                  14.      N.J.A.C. 10:78-11

                  l5.      New Jersey Medicaid, NJ KidCare, and NJ FamilyCare
                           State Plans

                  16.      1915(b) Waiver

                  l7.      N.J.A.C. 8:38 et seq. and amendments thereof, and the
                           contractor shall comply with the higher standard
                           contained in N.J.A.C. 8:38 et seq. or this contract.

                  18.      N.J.S.A. 59:13 et seq.

                  19.      The federal and State laws and regulations above have
                           been cited for reader ease. They are available for
                           review at the New Jersey State Library, 185 West
                           State Street, Trenton, New Jersey 08625. However,
                           whether cited or not, the contractor is obligated to
                           comply with all applicable laws and regulations and,
                           in turn, is responsible for ensuring that its
                           providers and subcontractors comply with all laws and
                           regulations.

                  20.      Neither the contractor nor its employees, providers,
                           or subcontractors shall violate, or induce others to
                           violate, any federal or state laws or regulations, or
                           professional licensing board regulations.

         C.       Applicable Law and Venue. This contract and any and all
                  litigation arising there from or related thereto shall be
                  governed by the applicable laws, regulations, and rules of
                  evidence of the State of New Jersey without reference to
                  conflict of laws principles. The contractor shall agree and
                  submit to the jurisdiction of the courts of the State of New
                  Jersey should any dispute concerning this contract arise, and
                  shall agree that venue for any legal proceeding against the
                  State shall be in Mercer County.

         D.       Medicaid Provider. The contractor shall be a Medicaid provider
                  and a health maintenance organization with a Certificate of
                  Authority to operate government programs in New Jersey.

         E.       Significant Changes. The contractor shall report to the
                  Contracting Officer (See Article 7.5) immediately all
                  significant changes that may affect the contractor's
                  performance under this contract.

                                                                           VII-2

<PAGE>

         F.       Provider Enrollment Process. The contractor shall comply with
                  the Medicaid provider enrollment process including the
                  submission of the [Reserved] CMS 1513 Form.

         G.       Conflicts in Provisions. The contractor shall advise DMAHS of
                  any conflict of any provision of this contract with any
                  federal or State law or regulation. The contractor is required
                  to comply with the provisions of the federal or State law or
                  regulation until such time as the contract may be amended.
                  (See also Article 7.11.)

                  Any provision of this contract that is in conflict with the
                  above laws, regulations, or federal Medicaid statutes,
                  regulations, or  [Reserved] CMS policy guidance is hereby
                  amended to conform to the provisions of those laws,
                  regulations, and federal policy. Such amendment of the
                  contract shall be effective on the effective date of the
                  statutes or regulations necessitating it and will be binding
                  on the parties even though such amendment may not have been
                  reduced to writing and formally agreed upon and executed by
                  the parties.

         H.       Compliance with Codes. The contractor shall comply with the
                  requirements of the New Jersey Uniform Commercial Code, the
                  latest National Electrical Code, the Building Officials & Code
                  Administrators International, Inc. (B.O.C.A.) Basic Building
                  Code, and the Occupational Safety and Health Administration to
                  the extent applicable to the contract.

         I.       Corporate Authority. All New Jersey corporations shall obtain
                  a Certificate of Incorporation from the Office of the New
                  Jersey Secretary of State prior to conducting business in the
                  State of New Jersey.

                  If a contractor is a corporation incorporated in a state other
                  than New Jersey, the contractor shall obtain a Certificate of
                  Authority to do business from the Office of the Secretary of
                  State of, New Jersey prior to execution of the contract. The
                  contractor shall provide either a certification or
                  notification of filing with the Secretary of State.

                  If the contractor is an individual, partnership or joint
                  venture not residing in this State or a partnership organized
                  under the laws of another state, then the contractor shall
                  execute a power of attorney designating the Secretary of State
                  as his true and lawful attorney for the sole purpose of
                  receiving process in any civil action which may arise out of
                  the performance of this contract or agreement. This
                  appointment of the Secretary of State shall be irrevocable and
                  binding upon the contractor, his heirs, executors,
                  administrators, successors or assigns. Within ten (10) days of
                  receipt of this service, the Secretary of State shall forward
                  same to the contractor at the address designated in the
                  contract.

         J.       Contractor's Warranty. By signing this contract, the
                  contractor warrants and represents that no person or selling
                  agency has been employed or retained to

                                                                           VII-3

<PAGE>

                  solicit or secure the contract upon an agreement or
                  understanding for a commission, percentage, brokerage or
                  contingent fee, except bona fide employees or bona fide
                  established commercial or selling agencies maintained by the
                  contractor for the purpose of securing business. The penalty
                  for breach or violation of this provision may result in
                  termination of the contract without the State being liable for
                  damages, costs and/or attorney fees or, in the Department's
                  discretion, a deduction from the contract price or
                  consideration the full amount of such commission, percentage,
                  brokerage or contingent fee.

         K.       MacBride Principles. The contractor shall comply with the
                  MacBride principles of nondiscrimination in employment and
                  have no business operations in Northern Ireland as set forth
                  in N.J.S.A. 52:34-12.1.

         L.       Ownership of Documents. All documents and records, regardless
                  of form, prepared by the contractor in fulfillment of the
                  contract shall be submitted to the State and shall become the
                  property of the State.

         M.       Publicity. Publicity and/or public announcements pertaining to
                  the project shall be approved by the State prior to release.
                  See Article 5.16 regarding Marketing.

         N.       Taxes. Contractor shall maintain, and produce to the
                  Department upon request, proof that all appropriate federal
                  and State taxes are paid.

7.3      STAFFING

         In addition to complying with the specific administrative requirements
         specified in Articles Two through Six and Eight, the contractor shall
         adhere to the standards delineated below.

         A.       The contractor shall have in place the organization,
                  management and administrative systems necessary to fulfill all
                  contractual arrangements. The contractor shall demonstrate to
                  DMAHS' satisfaction that it has the necessary staffing, by
                  function and qualifications, to fulfill its obligations under
                  this contract which include at a minimum:

                  -        A designated administrative liaison for the
                           ledicaid/NJ FamilyCare contract who shall be the main
                           point of contact responsible for coordinating all
                           administrative activities for this contract
                           ("Contractor's Representative"; See also Article 7.5
                           below)

                  -        A medical director who shall be a New Jersey licensed
                           physician (M.D. or D.O.)

                  -        Financial officer(s) or accounting and budgeting
                           officer

                                                                           VII-4

<PAGE>

                  -        QM/UR coordinator who is a New Jersey-licensed
                           registered nurse or physician

                  -        Prior authorization staff sufficient to authorize
                           medical care twenty-four (24) hours per day/seven (7)
                           days per week

                  -        Designated Medicaid care manager(s) who shall be
                           available to DMAHS medical staff to respond to
                           medically related problems, complaints, and emergent
                           or urgent situations

                  -        A full-time Care Management Supervisor who is a New
                           Jersey-licensed physician or has a Bachelor's degree
                           in nursing and has a minimum of four (4) years of
                           experience serving enrollees with special needs. The
                           Care Management Supervisor shall be responsible for
                           the management and supervision of the Care Management
                           staff.

                  -        Member services staff

                  -        Provider services staff

                  -        Encounter reporting staff/claims processors

                  -        Grievance coordinator

                  -        Adequate administrative and support staff

                  -        Compliance Officer

         B.       Staff Changes. The contractor shall inform the DMAHS, in
                  writing, within seven (7) days of key administrative staffing
                  changes (listed in A) in any of the positions noted in this
                  Article.

         C.       Training. The contractor shall ensure that all staff have
                  appropriate training, education, experience, and orientation
                  to fulfill the requirements of the positions they hold and
                  shall verify and document that it has met this requirement.

         D.       DMAHS Meetings. The contractor's CEO, president, or
                  DHS-approved representative shall be required to attend
                  DHS-sponsored contractor CEO dinners. No substitutes will be
                  permitted. The Contractor's Representative, as hereinafter
                  defined, shall be required to attend DHS-sponsored contractor
                  Roundtable sessions.

7.4      RELATIONSHIPS WITH DEBARRED OR SUSPENDED PERSONS PROHIBITED

         Pursuant to Section 1932(d)(a) of the Social Security Act (42
         U.S.C. section 1396u-2(d)(a)):

                                                                           VII-5

<PAGE>

         A.       The contractor shall not have a director, officer, partner, or
                  person with beneficial ownership of more than five (5) percent
                  of the contractor's equity who has been debarred or suspended
                  from participating in procurement activities under the Federal
                  Acquisition Regulation or from participating in nonprocurement
                  activities under regulations issued pursuant to Executive
                  Order No. 12549 or under guidelines implementing such order.

         B.       The contractor shall not have an employment, consulting, or
                  any other agreement with a debarred or suspended person (as
                  defined in Article 7.4.A above) for the provision of items or
                  services that are significant and material to the contractor's
                  contractual obligation with the State.

         C.       The contractor shall certify to DMAHS that it meets the
                  requirements of this Article prior to initial contracting with
                  the Department and at any time there is a changed circumstance
                  from the last such certification. The contractor shall, among
                  other sources, consult with the Excluded Parties List, which
                  can be obtained from the General Services Administration.

         D.       If the contractor is found to be non-compliant with the
                  provisions concerning affiliation with suspended or debarred
                  individuals, DMAHS:

                  1.       Shall notify the Secretary of the US Department of
                           Health and Human Services of such non-compliance;

                  2.       May continue the existing contract with the
                           contractor unless the Secretary (in consultation with
                           the Inspector General of the US Department of Health
                           and Human Services [DHHS]) directs otherwise; and

                  3.       May not renew or otherwise extend the duration of an
                           existing contract with the contractor unless the
                           Secretary (in consultation with the Inspector General
                           of the DHHS) provides to DMAHS and to Congress a
                           written statement describing compelling reasons that
                           exist for renewing or extending the contract.

         E.       The contractor shall agree and certify it does not employ or
                  contract directly or indirectly, with:

                  1.       Any individual or entity excluded from Medicaid or
                           other federal health care program participation under
                           Sections 1128 (42 U.S.C. section 1320a-7) or 1128 A
                           (42 U.S.C. section 1320a-7a) of the Social Security
                           Act for the provision of health care, utilization
                           review, medical social work, or administrative
                           services or who could be excluded under Section
                           1128(b)(8) of the Social Security Act as being
                           controlled by a sanctioned individual;

                                                                          VII-6

<PAGE>

                  2.       Any entity for the provision of such services
                           (directly or indirectly) through an excluded
                           individual or entity;

                  3.       Any individual or entity excluded from Medicaid or NJ
                           FamilyCare participation by DMAHS;

                  4.       Any individual or entity discharged or suspended from
                           doing business with the State of New Jersey; or

                  5.       Any entity that has a contractual relationship
                           (direct or indirect) with an individual convicted of
                           certain crimes as described in Section 1128(b)(8)
                           of the Social Security Act.

         F.       The contractor shall obtain, whenever issued, available State
                  listings and notices of providers, their contractors,
                  subcontractors, or any of the aforementioned individuals or
                  entities, or their owners, officers, employees, or associates
                  who are suspended, debarred, disqualified, terminated, or
                  otherwise excluded from practice and/or participation in the
                  fee-for-service Medicaid program. Upon verification of such
                  suspension, debarment, disqualification, termination, or other
                  exclusion, the contractor shall immediately act to terminate
                  the provider from participation in this program. Termination
                  for loss of licensure, criminal convictions, or any other
                  reason shall coincide with the effective date of termination
                  of licensure or the Medicaid program's termination effective
                  date whichever is earlier.

7.5      CONTRACTING OFFICER AND CONTRACTOR'S REPRESENTATIVE

         A.       The Department shall designate a single administrator,
                  hereafter called the "Contracting Officer." The Contracting
                  Officer shall be appointed by the Commissioner of DHS. The
                  Contracting Officer shall make all determinations and take all
                  actions as are appropriate under this contract, subject to the
                  limitations of applicable federal and New Jersey laws and
                  regulations. The Contracting Officer may delegate his/her
                  authority to act to an authorized representative through
                  written notice to the contractor.

         B.       The contractor shall designate a single administrator,
                  hereafter called the Contractor's Representative, who shall be
                  an employee of the contractor. The Contractor's Representative
                  shall make all determinations and take all actions as are
                  appropriate to implement this contract, subject to the
                  limitations of the contract, and to federal and New Jersey
                  laws and regulations. The Contractor's Representative may
                  delegate his or her authority to act to an authorized
                  representative through written notice to the Contracting
                  Officer. The Contractor's Representative shall have direct
                  managerial and administrative responsibility and control over
                  all aspects of the contract and shall be empowered to legally
                  bind the contractor to all agreements reached with the
                  Department.

                                                                           VII-7

<PAGE>

         C.       The Contractor's Representative shall be designated in writing
                  by the contractor no later than the first day on which the
                  contract becomes effective.

         D.       The Department shall have the right to approve or disapprove
                  the Contractor's Representative.

         7.6      AUTHORITY OF THE STATE

         The State is the ultimate authority under this contract to:

         A.       Establish, define, or determine the reasonableness, the
                  necessity and the level and scope of covered benefits under
                  the managed care program administered in this contract or
                  coverage for such benefits, or the eligibility of enrollees or
                  providers to participate in the managed care program, or any
                  aspect of reimbursement to providers, or of operations.

         B.       Establish or interpret policy and its application related to
                  the above.

7.7      EQUAL OPPORTUNITY EMPLOYER

         The contractor shall, in all solicitations or advertisements for
         employees placed by or on behalf of the contractor, state that it is an
         equal opportunity employer, and shall send to each labor union or
         representative of workers with which it has a collective bargaining
         agreement or other contract or understanding, a notice to be provided
         by the Department advising the labor union or workers' representative
         of the contractor's commitments as an equal opportunity employer and
         shall post copies of the notice in conspicuous places available to
         employees and applicants for employment.

7.8      NONDISCRIMINATION REQUIREMENTS

         The contractor shall comply with the following requirements regarding
         nondiscrimination:

         A.       The contractor shall and shall require its providers and
                  subcontractors to accept assignment of an enrollee and not
                  discriminate against eligible enrollees because of race,
                  color, creed, religion, ancestry, marital status, sexual
                  orientation, national origin, age, sex, physical or mental
                  handicap in accordance with Title VI of the Civil Rights Act
                  of 1964, 42 U.S.C. section 2000d, Section 504 of the
                  Rehabilitation Act of 1973, 29 U.S.C. section 794, the
                  Americans with Disabilities Act of 1990 (ADA), 42 U.S.C.
                  section 12131 and rules and regulations promulgated pursuant
                  thereto, or as otherwise provided by law or regulation.

         B.       ADA Compliance. The contractor shall and shall require its
                  providers or subcontractor to comply with the requirements of
                  the Americans with Disabilities Act (ADA). In providing health
                  care benefits, the contractor shall not directly or
                  indirectly, through contractual, licensing, or other
                  arrangements, discriminate

                                                                           VII-8

<PAGE>

                  against Medicaid/NJ FamilyCare beneficiaries who are qualified
                  disabled individuals covered by the provisions of the ADA (See
                  also Article 4.5.2 for a description of the contractor's ADA
                  compliance plan).

                  A "qualified individual with a disability" defined pursuant to
                  42 U.S.C. section 12131 is an individual with a disability
                  who, with or without reasonable modifications to rules,
                  policies, or practices, the removal of architectural,
                  communication, or transportation barriers, or the provision of
                  auxiliary aids and services, meets the essential eligibility
                  requirements for the receipt of services or the participation
                  in programs or activities provided by a public entity (42
                  U.S.C. section 12131).

                  The contractor shall submit to DMAHS a written certification
                  that it is conversant with the requirements of the ADA, that
                  it is in compliance with the law, and that it has assessed its
                  provider network and certifies that the providers meet ADA
                  requirements to the best of the contractor's knowledge. The
                  contractor shall survey its providers of their compliance with
                  the ADA using a standard survey document that will be
                  developed by the State. Survey attestation shall be kept on
                  file by the contractor and shall be available for inspection
                  by the DMAHS. The contractor warrants that it will hold the
                  State harmless and indemnify the State from any liability
                  which may be imposed upon the State as a result of any failure
                  of the contractor to be in compliance with the ADA. Where
                  applicable, the contractor shall abide by the provisions of
                  Section 504 of the federal Rehabilitation Act of 1973, as
                  amended, 29 U.S.C. section 794, regarding access to programs
                  and facilities by people with disabilities.

         C.       The contractor shall and shall require its providers and
                  subcontractors to not discriminate against eligible persons or
                  enrollees on the basis of their health or mental health
                  history, health or mental health status, their need for health
                  care services, amount payable to the contractor on the basis
                  of the eligible person's actuarial class, or pre-existing
                  medical/health conditions.

         D.       The contractor shall and shall require its providers and
                  subcontractors to comply with the Civil Rights Act of 1964 (42
                  U.S.C. section 2000d), Title IX of the Education Amendments of
                  1972 (regarding education programs and activities), the Age
                  Discrimination Act of 1975, The Rehabilitation Act of 1973,
                  the regulations (45 C.F.R. Parts 80 & 84) pursuan to that Act,
                  and the provisions of Executive Order 11246, Equal
                  Opportunity, dated September 24, 1965, the New Jersey anti-
                  discrimination laws including those contained within N.J.S.A.
                  10:2-1 through N.J.S.A. 10:2-4, N.J.S.A. 10:5-1 et seq. and
                  N.J.S.A. 10:5-38, and all rules and regulations issued
                  thereunder, and any other laws, regulations, or orders which
                  prohibit discrimination on grounds of age, race, ethnicity,
                  mental or physical disability, sexual or affectional
                  orientation or preference, marital status, genetic
                  information, source of payment, sex, color, creed, religion,
                  or national origin or ancestry. The contractor shall not
                  discriminate against any employee engaged in the work required
                  to produce the services covered by this contract, or against
                  any applicant for such employment because of race, creed,
                  color, national origin, age,

                                                                           VII-9

<PAGE>

                  ancestry, sex, marital status, religion, disability or sexual
                  or affectional orientation or preference.

         E.       The contractor shall not discriminate with respect to
                  participation, reimbursement, or indemnification as to any
                  provider who is acting within the scope of the provider's
                  license or certification under applicable State law, solely on
                  the basis of such license or certification or against any
                  provider that serves high-risk populations or specializes in
                  conditions that require costly treatment. This paragraph shall
                  not be construed to prohibit an organization from including
                  providers only to the extent necessary to meet the needs of
                  the organization's enrollees, from establishing any measure
                  designed to maintain quality and control costs consistent with
                  the responsibilities of the organization, or use different
                  reimbursement amounts for different specialties or for
                  different practitioners in the same specialty. if the
                  contractor declines to include individual or groups of
                  providers in its network, it shall give the affected providers
                  written notice of the reason for the decision.

         F.       Scope. This non-discrimination provision shall apply to but
                  not be limited to the following: recruitment or recruitment
                  advertising, hiring, employment upgrading, demotion, or
                  transfer, lay-off or termination, rates of pay or other forms
                  of compensation, and selection for training, including
                  apprenticeship included in PL 1975, Chapter 127 as attached
                  hereto and made a part hereof.

         G.       Grievances. The contractor shall forward to the Department
                  copies of all grievances alleging discrimination against
                  enrollees because of race, color, creed, sex, religion, age,
                  national origin, ancestry, marital status, sexual or
                  affectional orientation, physical or mental handicap for
                  review and appropriate action within three (3) business days
                  of receipt by the contractor.

7.9      INSPECTION RIGHTS

         The contractor shall allow the New Jersey Department of Human Services,
         the US Department of Health and Human Services (DHHS), and other
         authorized State agencies, or their duly authorized representatives, to
         inspect or otherwise evaluate the quality, appropriateness, and
         timeliness of services performed under the contract, and to inspect,
         evaluate, and audit any and all books, records, financial records, and
         facilities maintained by the contractor and its providers and
         subcontractors, pertaining to such services, at any time during normal
         business hours (and after business hours when deemed necessary by DHS
         or DHHS) at a New Jersey site designated by the Contracting Officer.
         Pursuant to N.J.S.A. 10:49-9.8m inspections of contractors may be
         unannounced with or without cause, and inspections of providers and
         subcontractors may be unannounced for cause. Books and records include,
         but are not limited to, all physical records originated or prepared
         pursuant to the performance under this contract, including working
         papers, reports, financial records and books of account, medical
         records, dental records, prescription files, provider contracts and
         subcontracts, credentialing files, and any other documentation
         pertaining to medical, dental, and nonmedical services to enrollees.
         Upon

                                                                          VII-10

<PAGE>

         request, at any time during the period of this contract, the contractor
         shall furnish any such record, or copy thereof, to the Department or
         the Department's External Review Organization within thirty (30) days
         of the request. If the Department determines, however, that there is an
         urgent need to obtain a record, the Department shall have the right to
         demand the record in less than thirty (30) days, but no less than
         twenty-four (24) hours.

         Access shall be undertaken in such a manner as to not unduly delay the
         work of the contractor and/or its provider(s) or subcontractor(s). The
         right of access herein shall include onsite visits by authorized
         designees of the State.

         The contractor shall also permit the State, at its sole discretion, to
         conduct onsite inspections of facilities maintained by the contractor,
         its providers and subcontractors, prior to approval of their use for
         providing services to enrollees.

7.10     NOTICES/CONTRACT COMMUNICATION

         All notices or contract communication under this contract shall be in
         writing and shall be validly and sufficiently served by the State upon
         the contractor, and vice versa, if addressed and mailed by certified
         mail, delivered by overnight courier or hand-delivered to the following
         addresses:

         For DHS:

                  Contracting Officer
                  Division of Medical Assistance and Health Services
                  P.O. Box 712
                  Trenton, NJ 08625-0712

         The contractor shall specify the name of the Contractor's
         Representative and official mailing address for all formal
         communications. The name and address of the individual appears in
         Appendix D.6 and is incorporated herein by reference.

7.11     TERM

7.11.1   CONTRACT DURATION AND EFFECTIVE DATE

         The performance, duties, and obligations of the parties hereto shall
         commence on the effective date, provided that at the effective date the
         Director and the contractor agree that all procedures necessary to
         implement this contract are ready and shall continue for a period of
         nine (9) months thereafter unless suspended or terminated in accordance
         with the provisions of this contract. The initial nine (9) month period
         shall be known as the "original term" of the contract. The effective
         date of the contract shall be October 1, 2000.

                                                                          VII-11

<PAGE>

7.11.2   AMENDMENT, EXTENSION, AND MODIFICATION

         A.       The contract may be amended, extended, or modified by written
                  contract duly executed by the Director and the contractor. Any
                  such amendment, extension or modification shall be in writing
                  and executed by the parties hereto. It is mutually understood
                  and agreed that no amendment of the terms of the contract
                  shall be valid unless reduced to writing and executed by the
                  parties hereto, and that no oral understandings,
                  representations or contracts not incorporated herein nor any
                  oral alteration or variations of the terms hereof, shall be
                  binding on the parties hereto. Every such amendment,
                  extension, or modification shall specify the date its
                  provisions shall be effective as agreed to by the Department
                  and the contractor. Any amendment, extension, or modification
                  is not effective or binding unless approved, in writing, by
                  duly authorized officials of DHS, [Reserved] CMS, and any
                  other entity, as required by law or regulation.

         B.       This contract may be extended for successive twelve (12) month
                  periods beyond the original term of the contract whenever the
                  Division supplies the contractor with at least ninety (90)
                  days advance notice of such intent and if a written amendment
                  to extend the contract is obtained from both parties. This
                  successive twelve (12) month period shall be known as an
                  "extension period" of the contract. In addition, ninety (90)
                  days prior to the contract expiration, the Director shall
                  provide the contractor with the proposed capitation rates for
                  the extension period.

         C.       In the event that the capitation rates for the extension
                  period are not provided ninety (90) days prior to the contract
                  expiration, the contract will be extended at the existing rate
                  which shall be an interim rate. After the execution of the
                  succeeding rate amendment, a retroactive rate adjustment will
                  be made to bring the interim rate to the level established by
                  that amendment.

         D.       Nothing in this Article shall be construed to prevent the
                  Director by amendment to the contract from extending the
                  contract on a month to month basis under the existing rates
                  until such a time that the Director provides revised
                  capitation rates pursuant to Article 7.11.2B.

7.12     TERMINATION

         A.       Change of Circumstances. Where circumstances and/or the needs
                  of the State significantly change or the contract is otherwise
                  deemed by the Director to no longer be in the public interest,
                  the DMAHS may terminate this contract upon no less than thirty
                  (30) days notice to the contractor.

         B.       Emergency Situations. In cases of emergency the Department may
                  shorten the time periods of notification.

         C.       For Cause. DMAHS shall have the right to terminate this
                  contract, without liability to the State, in whole or in part
                  if the contractor:

                                                                          VII-12

<PAGE>

                  1.       Takes any action or fails to prevent an action that
                           threatens the health, safety or welfare of any
                           enrollee, including significant marketing abuses;

                  2.       Takes any action that threatens the fiscal integrity
                           of the Medicaid program;

                  3.       Has its certification suspended or revoked by DOBI,
                           DHSS, and/or any federal agency or is federally
                           debarred or excluded from federal procurement and
                           non-procurement contracts;

                  4.       Materially breaches this contract or fails to comply
                           with any term or condition of this contract that is
                           not cured within twenty (20) working days of DMAHS'
                           request for compliance;

                  5.       [Reserved] Violates state or federal law;

                  6.       Fails to carry out the substantive terms of this
                           contract;

                  7.       [Reserved] Becomes insolvent; or

                  8.       Fails to meet applicable requirements in sections
                           1932, 1903 (m) and 1905(t) of the SSA;

                  9.       Brings a proceeding voluntarily, or has a proceeding
                           brought against it involuntarily, under the
                           Bankruptcy Act

                  [Reserved]

         D.       Notice and Hearing. Except as provided in A and B above, DMAHS
                  shall give the contractor ninety (90) days advance, written
                  notice of termination of this contract, with an opportunity to
                  protest said termination and/or request an informal hearing.
                  This notice shall specify the applicable provisions of this
                  contract and the effective date of termination, which shall
                  not be, less than will permit an orderly disenrollment of
                  enrollees to the Medicaid fee-for-service program or transfer
                  to another managed care program.

         E.       Contractor's Right to Terminate for Material Breach. The
                  contractor shall have the right to terminate this contract in
                  the event that DMAHS materially breaches this contract or
                  fails to comply with any material term or condition of this
                  contract that is not cured within twenty (20) working days of
                  the contractor's request for compliance. In such event, the
                  contractor shall give DMAHS written notice specifying the
                  reason for and the effective date of the termination, which
                  shall not be less than will permit an orderly disenrollment of
                  enrollees to the Medicaid fee-for-service program or transfer
                  to another managed care program and in no event

                                                                          Vll-13

<PAGE>

                  shall be less than ninety (90) days from the end of the twenty
                  (20) day working day cure period. The effective date of
                  termination is subject to DMAHS concurrence and approval.

         F.       Contractor's Right to Terminate for Act of God. The contractor
                  shall have the right to terminate this contract if the
                  contractor is unable to provide services pursuant to this
                  contract because of a natural disaster and/or an Act of God to
                  such a degree that enrollees cannot obtain reasonable access
                  to services within the contractor's organization, and, after
                  diligent efforts, the contractor cannot make other provisions
                  for the delivery of such services. The contractor shall give
                  DMAHS, within forty-five (45) days after the disaster, written
                  notice of any such termination that specifies:

                  1.       The reasons for the termination, with appropriate
                           documentation of the circumstances arising from a
                           natural disaster or Act of God that precludes
                           reasonable access to services;

                  2.       The contractor's attempts to make other provisions
                           for the delivery of services; and

                  3.       The requested effective date of the termination,
                           which shall not be less time than will permit an
                           orderly disenrollment of enrollees to the Medicaid
                           fee-for-service program or transfer to another
                           managed care program. The effective date of
                           termination is subject to DMAHS concurrence and
                           approval.

         G.       Should the contractor, for good cause shown, wish to terminate
                  its participation in this contract, it shall seek approval
                  from DMAHS. Such approval shall not be unreasonably withheld
                  or delayed. Written notice of intent to terminate must be
                  given six (6) months prior to the contractor's proposed last
                  day of operation. The contractor shall comply with the
                  closeout provisions in Article 7.13. The closeout period shall
                  begin no earlier than two (2) months after the DMAHS approves
                  the contractor's termination date. For the purposes of this
                  section, "good cause" shall include, but not be limited to,
                  significant financial losses.

         H.       Reduction in Funding. In the event that State and federal
                  funding for the payment of services under this contract is
                  reduced so that payments to the contractor cannot be made in
                  full, this contract shall terminate, without liability to the
                  State, unless both parties agree to a modification of the
                  obligations under this contract. The effective date of such
                  termination shall be ninety (90) days after the contractor
                  receives written notice of the reduction in payment, unless
                  available funds are insufficient to continue payments in full
                  during the ninety (90) day period, in which case the
                  Department shall give the contractor written notice of the
                  earlier date upon which the contract shall terminate.

                                                                          VII-14

<PAGE>

         I.       It is hereby understood and agreed by both parties that this
                  contract shall be effective and payments by DMAHS made to the
                  contractor subject to the availability of State and federal
                  funds. It is further agreed by both parties that this contract
                  can be renegotiated or terminated, without liability to the
                  State in order to comply with state and federal requirements
                  for the purpose of maximizing federal financial participation.

         J.       Upon termination of this contract, the contractor shall comply
                  with the closeout procedures in Article 7.13.

         K.       Rights and Remedies. The rights and remedies of the Department
                  provided in this Article shall not be exclusive and are in
                  addition to all other rights and remedies provided by law or
                  under this contract.

7.13     CLOSEOUT REQUIREMENTS

         A.       A closeout period shall begin one hundred-twenty (120) days
                  prior to the last day the contractor is responsible for
                  operating under this contract. During the closeout period, the
                  contractor shall work cooperatively with, and supply program
                  information to, any subsequent contractor and DMAHS. Both the
                  program information and the working relationships between the
                  two contractors shall be defined by DMAHS.

         B.       The contractor shall be responsible for the provision of
                  necessary information and records, whether a part of the MCMIS
                  or compiled and/or stored elsewhere, to the new contractor
                  and/or DMAHS during the closeout period to ensure a smooth
                  transition of responsibility. The new contractor and/or DMAHS
                  shall define the information required during this period and
                  the time frames for submission. Information that shall be
                  required includes but is not limited to:

                  1.       Numbers and status of complaints and grievances in
                           process;

                  2.       Numbers and status of hospital authorizations in
                           process, listed by hospital;

                  3.       Daily hospital logs;

                  4.       Prior authorizations approved and disapproved;

                  5.       Program exceptions approved;

                  6.       Medical cost ratio data;

                  7.       Payment of all outstanding obligations for medical
                           care rendered to enrollees;

                                                                          VII-15

<PAGE>

                  8.       All encounter data required by this contract; and

                  9.       Information on beneficiaries in treatment plans who
                           will require continuity of care consideration.

         C.       All data and information provided by the contractor shall be
                  accompanied by letters, signed by the responsible authority,
                  certifying to the accuracy and completeness of the materials
                  supplied. The contractor shall transmit the information and
                  records required under this Article within the time frames
                  required by the Department. The Department shall have the
                  right, in its sole discretion, to require updates to these
                  data at regular intervals.

         D.       The new contractor shall reimburse any reasonable costs
                  associated with the contractor providing the required
                  information or as mutually agreed upon by the two contractors.
                  The contractor shall not charge more than a cost mutually
                  agreed upon by the contractor and DMAHS or as mutually agreed
                  upon by the two contractors. If program operations are
                  transferred to DMAHS, no such fees shall be charged by the
                  contractor nor paid by DMAHS. Under no circumstances shall a
                  Medicaid beneficiary be billed for any record transfer.

         E.       The contractor shall continue to be responsible for provider
                  and enrollee toll free numbers and after-hours calls until the
                  last day of the closeout period. The new contractor shall bear
                  financial responsibility for costs incurred in modifying the
                  toll free number telephone system. The contractor shall, in
                  good faith, negotiate a contract with the new contractor to
                  coordinate/transfer the toll free number responsibilities, and
                  will provide space at the contractor's current business
                  address including access to necessary records, and information
                  for the new contractor during a due diligence review period.

         F.       Effective two (2) weeks prior to the last day of the closeout
                  period, the contractor shall work cooperatively with the new
                  contractor to process service authorization requests received.
                  The contractor shall be financially responsible for approved
                  requests when the service is provided on or before the last
                  day of the closeout period or if the service is provided
                  through the date of discharge or thirty-one (31) days after
                  the cancellation or termination of this contract for enrollees
                  who remain hospitalized after the last day of the transition
                  period. Disputes between the contractor and the new contractor
                  regarding service authorizations shall be resolved by DMAHS.

         G.       The contractor shall continue to provide all required reports
                  during the closeout period.

         H.       Runout Requirements - General. Runout for this Managed Care
                  Contract shall consist of the processing, payment and monetary
                  reconciliation(s) necessary regarding all enrollees, claims
                  for payment from the contractor's provider network, appeals by
                  both providers and/or enrollees, and final reports which

                                                                          VII-16

<PAGE>

                  identify all expenditures, up to and including the last month
                  of capitated payment made to the contractor.

         I.       The contractor shall complete the processing and payment of
                  claims generated during the life of the contract.

         J.       Runout Requirements-Items of Concern.

                  1.       Information and documentation that the Department
                           deems necessary under this Article, to effect a
                           smooth Turnover to a successor contractor, shall be
                           required to be submitted on a monthly basis. The
                           Department shall have the right to require updates to
                           this data at regular intervals.

                  2.       Any other information or data, within the parameters
                           of this Managed Care Contract, deemed necessary by
                           the Department to assist in the reprocurement of the
                           contract including where applicable, but not limited
                           to, duplicate copies of x-rays, charting and lab
                           reports, and copies of actual documents and
                           supporting documentation, etc., relevant to access,
                           quality of care, and enrollee history shall be
                           provided to DMAHS.

         K.       Runout Requirements - Final Transition. During the final
                  forty-five (45) days before the end of the closeout period,
                  the terminating and successor contractors shall share
                  operational responsibilities, as delineated below:

                  1.       Record Sharing. The contractor shall make available
                           and/or require its providers to make available to the
                           Department copies of medical/dental records, patient
                           files, and any other pertinent information, including
                           information maintained by any subcontractor or
                           sub-subcontractor, necessary for efficient care
                           management of enrollees, as determined by the
                           Director. Under no circumstances shall a Medicaid
                           enrollee be billed for this service.

                  2.       Enrollee Notification. The terminating and successor
                           contractors shall notify enrollees of the pending
                           transition, with all notices to be submitted to DMAHS
                           for review and approval before mail out.

         L.       Post-Operations Period. The post-operations period shall begin
                  at 12:00 a.m. the day after the last day of the closeout
                  period. During the post-operations period, the contractor
                  shall no longer be responsible for the operation of the
                  program. Obligations of the contractor under this contract
                  that are applicable to the post-operations period will apply
                  whether or not they are enumerated in this Article.

                  1.       The contractor shall maintain local telephone access
                           for providers during the first six (6) months of the
                           post-operations period.

                                                                          VII-17

<PAGE>

                  2.       The contractor shall be financially responsible for
                           the resolution of beneficiary complaints and
                           grievances timely filed prior to the last day of the
                           post-operations period.

                  3.       The contractor shall have a continuing obligation to
                           provide any required reports during the closeout and
                           post-operations periods.

                  4.       The contractor shall refill prescriptions to cover a
                           minimum of ten (10) days beyond the contract
                           termination date, unless other arrangements are made
                           with the receiving contractor and approved by DMAHS.

                  5.       The contractor shall provide DME for a minimum of the
                           first thirty (30) days of the post-operations period,
                           unless other arrangements are made with the receiving
                           contractor and approved by DMAHS.

                           a.       Customized DME is considered to belong to
                                    the enrollee and stays with the enrollee
                                    when there is a change of contractors.

                           b.       Non-customized DME may be reclaimed by the
                                    contractor when the enrollee no longer
                                    requires the equipment if a system is in
                                    place for refurbishing and reissuing the
                                    equipment. If no such system is in place,
                                    the non-customized DME shall be considered
                                    the property of the enrollee.

                  6.       The contractor shall, within sixty days after the end
                           of the closeout period, account for and return any
                           and all funds advanced by the Department for coverage
                           of enrollees for periods subsequent to the effective
                           date of post-operations.

                  7.       The contractor shall submit to the Department within
                           ninety (90) days after the end of the closeout
                           period an annual report for the period through which
                           services are rendered, and a final financial
                           statement and audit report including at a minimum,
                           revenue and expense statements relating to this
                           contract, and a complete financial statement relating
                           to the overall lines of business of the contractor
                           prepared by a Certified Public Accountant or a
                           licensed public accountant.

         M.       In the event of termination of the contract by DMAHS, such
                  termination shall not affect the obligation of contractor to
                  indemnify DMAHS for any claim by any third party against the
                  State or DMAHS arising from contractor's performance of this
                  contract and for which contractor would otherwise be liable
                  under this contract.

7.14     MERGER/ACQUISITION REQUIREMENTS

                                                                          VII-18

<PAGE>

         A.       General Information. In addition to any other information
                  otherwise required by the State, a contractor that intends to
                  merge with or be acquired by another entity ("non-surviving
                  contractor") shall provide the following information and
                  documents to DHS, and copies to DHSS and DOBI, one
                  hundred-twenty (120) days prior to the effective date of the
                  merger/acquisition:

                  1.       The basic details of the sale, including the name of
                           the acquiring legal entity, the date of the sale and
                           a list of all owners with five (5) percent or more
                           ownership.

                  2.       The source of funds for the purchase.

                  3.       A Certificate of Authority modification.

                  4.       Any changes in the provider network, including but
                           not limited to a comparison of hospitals that no
                           longer will be available under the new network, and
                           comparison of PCPs and specialists participating and
                           not participating in both HMOs. This shall also
                           include an analysis of the impact on members.

                  5.       Submit a draft of the asset purchase agreement to
                           DHS, DHSS, and DOBI for prior approval prior to
                           execution of the document.

                  6.       The closing date for the merger/acquisition, which
                           shall occur prior to the required notification to
                           enrollees, i.e. no later than forty-five (45) days
                           prior to effective date of transition of enrollees.

                  7.       Submit a copy of all information, including all
                           financials, sent to/required by DHSS and DOBI.

         B.       General Requirements. The non-surviving contractor shall:

                  1.       Comply with the provisions of Article 7.13, Closeout;
                           and

                  2.       Meet and complete all outstanding issues, reporting
                           requirements (including but not limited to encounter
                           data reporting, quality assurance studies, financial
                           reports, etc.)

         C.       Beneficiary Notification. By no later than sixty (60) days,
                  the non-surviving contractor shall prepare and submit, in
                  English and Spanish, to the DMAHS, letters and other materials
                  which shall be mailed to its enrollees no later than
                  forty-five (45) days prior to the effective date of transfer
                  in order to assist them in making an informed decision about
                  their health and needs. Separate notices shall be prepared for
                  mandatory populations and voluntary populations. The letter
                  should contain the following, at a minimum:

                                                                          VII-19

<PAGE>

         1.       From the non-surviving contractor:

                           a.       The basic details of the sale, including the
                                    name of the acquiring legal entity, and the
                                    date of the sale.

                           b.       Any major changes in the provider network,
                                    including at minimum a comparison of
                                    hospitals that no longer will be available
                                    under the network, if that is the case.

                           c.       For each enrollee, a representation whether
                                    that individual's primary care provider
                                    under the non-surviving contractor's plan
                                    will be available under the acquiring
                                    contractor's plan. When the PCP is no longer
                                    available under the acquiring contractor's
                                    plan, the enrollee shall be advised to call
                                    the HBC to see what other MCE the PCP
                                    participates in.

                           d.       In those cases where a primary dentist is
                                    selected under the non-surviving
                                    contractor's plan, a representation whether
                                    each individual's primary dentist under the
                                    non-surviving contractor's plan will be
                                    available under the acquiring contractor's
                                    plan.

                           e.       Information on beneficiaries in treatment
                                    plans and the status of any continuing
                                    medical care being rendered under the non-
                                    surviving contractor's plan, how that
                                    treatment will continue, and time frames for
                                    transition from the non-surviving
                                    contractor's plan to the acquiring
                                    contractor's plan.

                           f.       Any changes in the benefits/procedures
                                    between the non-surviving contractor's plan
                                    and the acquiring contractor's plan,
                                    including for example, eye care and glasses
                                    benefits, over-the-counter drugs, and
                                    referral procedures, etc.

                           g.       Toll free telephone numbers for the HBC and
                                    the acquiring entity where enrollees'
                                    questions can be answered.

                           h.       A time frame of not less than two weeks
                                    (fourteen days) for the beneficiary to make
                                    a decision about staying in the acquiring
                                    contractor's plan, or switching to another
                                    MCE (for mandatory beneficiaries). The time
                                    frame should incorporate the monthly cut off
                                    dates established by the DMAHS and the HBC
                                    for the timely and accurate production of
                                    identification cards.

                           i.       For voluntary populations, the letter should
                                    indicate the option to revert to the
                                    fee-for-service system.

                  2.       From the acquiring contractor:

                                                                          VII-20

<PAGE>

                           a.      If the acquiring contractor wishes to send
                                   welcoming letters, it shall submit for prior
                                   approval to DMAHS, all welcoming letters and
                                   information it will send to the new enrollees
                                   no later than thirty (30) days prior to the
                                   effective date of transfer.

                           b.      The acquiring contractor may not, either
                                   directly or indirectly, contact the enrollees
                                   of the non-surviving contractor, prior to the
                                   enrollees conversion (approximately ten (10)
                                   days prior to the effective date of
                                   transfer).

                           c.      The contractor shall re-send any returned
                                   mail two additional times. If the mail to a
                                   beneficiary is returned three times, the
                                   contractor shall submit the name, the
                                   Medicaid/NJ FamilyCare identification number
                                   and last known address to the DMAHS for
                                   research to determine a more current address.

         D.       Provider Notification. By no later than ninety (90) days prior
                  to the effective date of transfer, the non-surviving
                  contractor shall notify its providers of the pending sale or
                  merger, and of hospitals, specialists and laboratories that
                  will no longer be participating as a result of the
                  merger/acquisition.

         E.       Marketing/Outreach.

                  1.       The acquiring contractor may not make any unsolicited
                           home visits or telephone calls to enrollees of the
                           non-surviving contractor, before the effective date
                           of coverage under the acquiring contractor's plan.

                  2.       Coincident with the date that enrollee notification
                           letters are sent to those enrollees affected by the
                           merger/acquisition, the non-surviving contractor
                           shall no longer be offered as an option to either new
                           enrollees or to those seeking to transfer from other
                           plans. DMAHS shall approve all enrollee notification
                           letters, and they shall be mailed by the
                           non-surviving contractor. Marketing by the
                           non-surviving contractor shall also cease on that
                           date.

         F.       Provider Network. The acquiring contractor shall supply the
                  DMAHS and the HBC with an updated provider network fifty (50)
                  days prior to the effective date of transfer on a diskette
                  formatted in accordance with the procedures set forth in
                  Section A.4.1 of the Appendices. Additionally, the acquiring
                  contractor shall furnish to the DMAHS individual provider
                  capacity analyses and how the provider/enrollee ratio limits
                  will be maintained in the new entity. This network information
                  shall be furnished before the enrollee notification letters
                  are to be sent. Such letters shall not be mailed until there
                  is a clear written notification by the DMAHS that the provider
                  network information meets all of the DMAHS requirements. The
                  network submission shall include all required provider types

                                                                          VII-21

<PAGE>

                  listed in Article 4, shall be formatted in accordance with
                  specifications in Article 4 and Section A.4.1 of the
                  Appendices, and shall include a list of all providers who
                  decline participation with the acquiring contractor and new
                  providers who will participate with the acquiring contractor.
                  The acquiring contractor shall submit weekly updates through
                  the ninety (90) day period following the effective date of
                  transfer.

         G.       Administrative.

                  1.       The non-surviving contractor shall inform DMAHS of
                           the corporate structure it will assume once all
                           enrollees are transitioned to the acquiring
                           contractor. Additionally, an indication of the time
                           frame that this entity will continue to exist shall
                           be provided.

                  2.       The contract of the non-surviving contractor is not
                           terminated until the transaction (acquisition or
                           merger) is approved, enrollees are placed, and all
                           outstanding issues with DOBI, DHSS, and DHS are
                           resolved. Some infrastructure shall exist for up to
                           one year beyond the last date of services to
                           enrollees in order to fulfill remaining contractual
                           requirements.

                  3.       The acquiring contractor and the non-surviving
                           contractor shall maintain their own separate
                           administrative structure and staff until the
                           effective date of transfer.

7.15     SANCTIONS

         In the event DMAHS finds the contractor to be out-of-compliance with
         program standards, performance standards or the terms or conditions of
         this contract, the Department shall issue a written notice of
         deficiency, request a corrective action plan and/or specify the manner
         and timeframe in which the deficiency is to be cured. If the contractor
         fails to cure the deficiency as ordered, the Department shall have the
         right to exercise any of the administrative sanction options described
         below, in addition to any other rights and remedies that may be
         available to the Department. The type of action taken shall be in
         relation to the nature and severity of the deficiency:

         A.       Suspend enrollment of beneficiaries in contractor's plan.

         B.       Notify enrollees of contractor non-performance and permit
                  enrollees to transfer to another MCE without cause.

         C.       Reduce or eliminate marketing and/or community event
                  participation.

         D.       Terminate the contract, under the provisions of the preceding
                  Article.

         E.       Cease auto-assignment of new enrollees.

                                                                          VII-22

<PAGE>

         F.       Refuse to renew the contract.

         G.       Impose and maintain temporary management in accordance with
                  Section 1932(e)(2) of the Social Security Act during the
                  period in which improvements are made to correct violations.

         H.       In the case of inappropriate marketing activities, referral
                  may also be made to the Department of Banking and Insurance
                  for review and appropriate enforcement action.

         I.       Require special training or retraining of marketing
                  representatives including, but not limited to, business
                  ethics, marketing policies, effective sales practices, and
                  State marketing policies and regulations, at the contractor's
                  expense.

         J.       In the event the contractor becomes financially impaired to
                  the point of threatening the ability of the State to obtain
                  the services provided for under the contract, ceases to
                  conduct business in the normal course, makes a general
                  assignment for the benefit of creditors, or suffers or permits
                  the appointment of a receiver for its business or its assets,
                  the State may, at its option, immediately terminate this
                  contract effective the close of business on the date
                  specified.

         K.       Refuse to consider for future contracting a contractor that
                  fails to submit encounter data on a timely and accurate basis.

         L.       Refer the matter to the US Department of Justice, the US
                  Attorney's Office, the New Jersey Division of Criminal
                  Justice, and/or the New Jersey Division of Law as warranted.

         M.       Refer the matter to the applicable federal agencies for civil
                  money penalties.

         N.       Refer the matter to the New Jersey Division of Civil Rights
                  where applicable.

         O.       Exclude the contractor from participation in the Medicaid
                  program.

         P.       Refer the matter to the New Jersey Division of Consumer
                  Affairs.

         The contractor may appeal the imposition of sanctions or damages in
         accordance with Article 7.18.

                                                                          VII-23

<PAGE>

7.16     LIQUIDATED DAMAGES PROVISIONS

7.16.1   GENERAL PROVISIONS

         It is agreed by the contractor that:

         A.       If contractor does not provide or perform the requirements
                  referred to or listed in this provision, damage to the State
                  may result.

         B.       Proving such damages shall be costly, difficult, and
                  time-consuming.

         C.       Should the State choose to impose liquidated damages, the
                  contractor shall pay the State those damages for not providing
                  or performing the specified requirements; if damages are
                  imposed, collection shall be from the date the State placed
                  the contractor on notice or as may be specified in the written
                  notice.

         D.       Additional damages may occur in specified areas by prolonged
                  periods in which contractor does not provide or perform
                  requirements.

         E.       The damage figures listed below represent a good faith effort
                  to quantify the range of harm that could reasonably be
                  anticipated at the time of the making of the contract.

         F.       The Department may, at its discretion, withhold capitation
                  payments in whole or in part, or offset with advanced notice
                  liquidated damages from capitation payments owed to the
                  contractor.

         G.       The DHS shall have the right to deny payment or recover
                  reimbursement for those services or deliverables which have
                  not been performed and which due to circumstances caused by
                  the contractor cannot be performed or if performed would be of
                  no value to the State. Denial of the amount of payment shall
                  be reasonably related to the amount of work or deliverable
                  lost to the State.

         H.       The DHS shall have the right to recover incorrect payments to
                  the contractor due to omission, error, fraud or abuse, or
                  defalcation by the contractor. Recovery to be made by
                  deduction from subsequent payments under this contract or
                  other contracts between the State and the contractor, or
                  by the State as a debt due to the State or otherwise as
                  provided by law.

         I.       Whenever the State determines that the contractor failed to
                  provide one (1) or more of the medically necessary covered
                  contract services, the State shall have the right to withhold
                  a portion of the contractor's capitation payments for the
                  following month or subsequent months, such portion withheld to
                  be equal to the amount of money the State shall pay to provide
                  such services along with administrative costs of making such
                  payment. Any other harm to the State or the

                                                                          VII-24
<PAGE>

                  beneficiary/enrollee shall be calculated and applied as a
                  damage. The contractor shall be given written notice prior to
                  the withholding of any capitation payment.

         J.       The contractor shall submit a written corrective action plan
                  for any deficiency identified by the Department in writing
                  within five (5) business days from the date of receipt of the
                  Department's notification or within a time determined by the
                  Department depending on the nature of the issue. For each day
                  beyond that time that the Department has not received an
                  acceptable corrective action plan, monetary damages in the
                  amount of one hundred dollars ($100) per day for five (5) days
                  and two hundred fifty ($250) per day thereafter will be
                  deducted from the capitation payment to the contractor. The
                  contractor shall implement the corrective action plan
                  immediately from time of Department notification of the
                  original problem pending approval of the final corrective
                  action plan. The damages shall be applied for failure to
                  implement the corrective action plan from the date of original
                  State notification of the problem. Corrective action plans
                  apply to each of the areas in this Article for potential
                  liquidated damages and the time period allowed shall be at the
                  sole discretion of the DMAHS.

         K.       Self-Reporting of Failures and Noncompliance. Any monetary
                  damages that otherwise would be assessed pursuant to this
                  Article of this contract, may be reduced, at the State's
                  option, if the contractor reports the failure or noncompliance
                  in written detail to DMAHS prior to notice of the
                  noncompliance from the Department. The amount of the reduction
                  shall be no more than ninety (90) percent of the total value
                  of the monetary damages.

         L.       Nothing in this provision shall be construed as relieving the
                  contractor from performing any other contract duty not listed
                  herein, nor is the State's right to enforce or to seek other
                  remedies for failure to perform any other contract duty hereby
                  diminished.

7.16.2   MANAGED CARE OPERATIONS, TERMS AND CONDITIONS, AND PAYMENT PROVISIONS

         During the life of the contract, the contractor shall provide or
         perform each of the requirements as stated in the contract.

         Except as provided for elsewhere in this Article (i.e., the other
         liquidated damages provisions in this Article take precedence), for
         each and every contractor requirement not provided or performed as
         scheduled, or if a requirement is provided or performed inaccurately or
         incompletely, the Department, if it intends to impose liquidated
         damages, shall notify the contractor in writing that the requirement
         was not provided or performed as specified and that liquidated damages
         will be assessed accordingly.

         The contractor shall have fifteen (15) business days from the date of
         such written notice from the Department, or longer if the Department so
         allows, or through a corrective action plan approved by DHS to provide
         or perform the requirement as specified.

                                                                          VII-25

<PAGE>

         Liquidated Damages:

         If the contractor does not provide or perform the requirement within
         fifteen (15) business days of the written notice, or longer if allowed
         by the Department, or through an approved corrective action plan, the
         Department may impose liquidated damages of $250 per requirement per
         day for each day the requirement continues not to be provided or
         performed. If after fifteen (15) additional days from the date the
         Department imposes liquidated damages, the requirement still has not
         been provided or performed, the Department, after written notice to the
         contractor, may increase the liquidated damages to $500 per requirement
         per day for each day the requirement continues to be unprovided or
         unperformed.

7.16.3   TIMELY REPORTING REQUIREMENTS

         The contractor shall produce and deliver timely reports within the
         specified timeframes and descriptions in the contract including
         information required by the ERO. Reports shall be produced and
         delivered on both a scheduled and mutually agreed upon on-request basis
         according to the schedule established by DMAHS.

         Liquidated Damages:

         For each late report, the Department shall have the right to impose
         liquidated damages of $250 per day per report until the report is
         provided. For any late report that is not delivered after thirty (30)
         days or such longer period as the Department shall allow, the
         Department, after written notice, shall have the right to increase the
         liquidated damages assessment to $500 per day per report until the
         report is provided.

7.16.4   ACCURATE REPORTING REQUIREMENTS

         Every report due the State shall contain sufficient and accurate
         information and in the approved media format to fulfill the State's
         purpose for which the report was generated.

         If the Department imposes liquidated damages, it shall give the
         contractor written notice of a report that is either insufficient or
         inaccurate and that liquidated damages will be assessed accordingly.
         After such notice, the contractor shall have fifteen (15) business
         days, or such longer period as the Department may allow, to correct
         the report.

         Encounter data shall be accurate and complete, i.e., have no missing
         encounters or required data elements, and shall have no more than 5%
         edit errors.

         Liquidated Damages:

         If the contractor fails to correct the report within the fifteen (15)
         business days, or such longer period as the Department may allow, the
         Department shall have the right to impose liquidated damages of $250
         per day per report until the corrected report is

                                                                          VII-26

<PAGE>

         delivered. If the report remains uncorrected for more than thirty (30)
         days from the date liquidated damages are imposed, the Department,
         after written notice, shall have the right to increase the liquidated
         damages assessment to $500 per day per report until the report is
         corrected.

         The DMAHS will conduct, on a calendar year basis, annual reviews of
         encounter data to determine compliance performance. Encounter data will
         be reviewed for missing or omitted encounter data and for pending
         encounters or edit errors. An amount of $1 may be assessed for each
         missing or omitted encounter. In addition, $1 per encounter or
         encounter data element may be assessed for any pending encounter or
         error that is not corrected and returned to DMAHS within thirty (30)
         days after notification by DMAHS that the data are incomplete or
         incorrect. The Department shall have the right to calculate the total
         number of missing or omitted encounters and encounter data by
         extrapolating from a sample of missing or omitted encounters and
         encounter data.

7.16.5   TIMELY PAYMENTS TO MEDICAL PROVIDERS

         The contractor shall process claims in accordance with New Jersey laws
         and regulations and shall be subject to damages pursuant to such laws
         and regulations. In addition, pursuant to this contract the Department
         may assess liquidated damages if the contractor does not process (pay
         or deny) claims within the following timeframes: ninety (90) percent of
         all claims (the totality of claims received whether contested or
         uncontested) submitted electronically by medical providers within
         thirty (30) days of receipt; ninety (90) percent of all claims filed
         manually within forty (40) days of receipt; ninety-nine (99) percent of
         all claims, whether submitted electronically or manually, within sixty
         (60) days of receipt; and one hundred (100) percent of all claims
         within ninety (90) days of receipt. Claims processed for providers
         under investigation for fraud or abuse and claims suppressed pursuant
         to Article 8.9 (regarding PIPs) are not subject to these requirements.

         The amount of time required to process a paid claim shall be computed
         in days by comparing the initial date of receipt with the check mailing
         date. The amount of time required to process a denied claim (whether
         all or part of the claim is denied) shall be computed in days by
         comparing the date of initial receipt with the denial notice mailing
         date. Claims processed during the quarter shall be reported in required
         categories through the Claims Lag report (See Section A.7.6 of the
         Appendices (Table 4A and B)). Table 4A shall be used to report claims
         submitted manually and Table 4B shall be used to report claims
         submitted electronically.

         Liquidated Damages:

         Liquidated damages may be assessed if the contractor does not meet the
         above requirements on a quarterly basis. Based on the
         contractor-reported information on the claims lag reports, the
         Department shall determine for each time period (thirty (30)/forty
         (40), sixty (60), and ninety (90) days) the actual percentage of claims
         processed (electronic and manual claims shall be added together). This
         number shall be subtracted from the percentage of claims the contractor
         should have processed in the particular time

                                                                          VII-27

<PAGE>

         period. The difference shall be expressed in points. For example, if
         the contractor only processed eighty-eight (88) percent of electronic
         claims within thirty (30) days and eighty-eight (88) percent of manual
         claims within forty (40) days, it shall be considered to be two (2)
         points short for that time period. The points that the contractor is
         short for each of the three time periods shall be added together. This
         sum shall then be multiplied times .0004 times the capitation payments
         received by the contractor during the quarter at issue to arrive at the
         liquidated damages amount.

         No offset shall be given if a criterion is exceeded. DMAHS reserves the
         right to audit and/or request detail and validation of reported
         information. DMAHS shall have the right to accept or reject the
         contractor's report and may substitute reports created by DMAHS if
         contractor fails to submit reports or the contractor's reports are
         found to be unacceptable.

7.16.6   CONDITIONS FOR TERMINATION OF LIQUIDATED DAMAGES

         Except as waived by the Contracting Officer, no liquidated damages
         imposed on the contractor shall be terminated or suspended until the
         contractor issues a written notice of correction to the Contracting
         Officer certifying the correction of condition(s) for which liquidated
         damages were imposed and until all contractor corrections have been
         subjected to system testing or other verification at the discretion of
         the Contracting Officer. Liquidated damages shall cease on the day of
         the contractor's certification only if subsequent testing of the
         correction establishes that, indeed, the correction has been made in
         the manner and at the time certified to by the contractor.

         A.       The contractor shall provide the necessary system time to
                  system test any correction the Contracting Officer deems
                  necessary.

         B.       The Contracting Officer shall determine whether the necessary
                  level of documentation has been submitted to verify
                  corrections. The Contracting Officer shall be the sole judge
                  of the sufficiency and accuracy of any documentation.

         C.       System corrections shall be sustained for a reasonable period
                  of at least ninety (90) days from State acceptance; otherwise,
                  liquidated damages may be reimposed without a succeeding grace
                  period within which to correct.

         D.       Contractor use of resources to correct deficiencies shall not
                  be allowed to cause other system problems.

7.16.7   EPSDT & LEAD SCREENING PERFORMANCE STANDARDS

         A.       EPSDT Screening

                  1.       The contractor shall ensure that it has achieved an
                           eighty (80) percent participation rate for the twelve
                           (12)-month contract period. "Participation" is
                           defined as one initial or periodicity visit and will
                           be

                                                                          VII-28

<PAGE>

                           measured using encounter data. If the contractor has
                           not achieved the eighty (80) percent participation
                           rate by the end of the twelve-month period, it shall
                           submit a corrective action plan to DMAHS within
                           thirty (30) days of notification by DMAHS of its
                           actual participation rate. DMAHS shall have the right
                           to conduct a follow-up onsite review and/or impose
                           financial damages for non-compliance.

                  a.   Mandatory Sanction. Failure of the contractor to achieve
                       the minimum screening rate shall require the following
                       refund of capitation paid:

                       i.   Achievement of a 50 percent to less than 60 percent
                            EPSDT screening, dental visit and immunization rate
                            (the lowest measured rate of each of the components
                            of EPSDT screening, i.e., periodic exam,
                            immunization rate, and dental screening rate, shall
                            be considered to be the rate for EPSDT participation
                            and the basis for the sanction): refund of $1 per
                            enrollee for all enrollees under age 21 not
                            screened.

                      ii.   Achievement of a 40 percent to less than 50 percent
                            EPSDT screening, dental visit, and immunization
                            rate: refund of $2 per enrollee for all enrollees
                            under age 21 not screened.

                     iii.   Achievement of a 30 percent to less than 40 percent
                            EPSDT screening, dental visit and immunization rate:
                            refund of $3 per enrollee for all enrollees under
                            age 21 not screened.

                      iv.   Achievement of less than 30 percent: refund of $4
                            per enrollee for all enrollees under age 21 not
                            screened.

                  b.   Discretionary Sanction. The DMAHS shall have the right to
                       impose a financial or administrative sanction if the
                       contractor's performance screening rate is between sixty
                       (60) - seventy (70) percent. The DMAHS, in its sole
                       discretion, may impose a sanction after review of the
                       contractor's corrective action plan and ability to
                       demonstrate good faith efforts to improve compliance.

         2.       Failure to achieve and maintain the required screening rate
                  shall result in the Local Health Departments being permitted
                  to screen the contractor's pediatric members. The cost of
                  these screenings shall be paid by the DMAHS to the LHD, and
                  the screening cost shall be deducted from the contractor's
                  capitation rate in addition to the damages imposed as a result
                  of failure to achieve EPSDT performance standards.

         3.       Mandatory sanctions may be offset when the contractor
                  demonstrates improved compliance. The Division, in its sole
                  discretion, may reduce the sanction amount by $1 for each
                  twelve (12) point improvement over prior reporting period

                                                                          VII-29

<PAGE>

                  performance rate. Offsets shall not reduce the financial
                  sanction amount to below $1 per enrollee not screened.

         B.       Blood Lead Screening

              1.  The contractor shall ensure that it has achieved an eighty
                  (80) percent blood lead screening rate of its enrollees under
                  three years of age during a twelve (12)-month contract period.
                  Blood lead screening is described in Article 4 and shall be
                  measured using encounter data. If the contractor has not
                  achieved the eighty (80) percent blood lead screening rate by
                  the end of the twelve (12)-month period, it shall submit a
                  corrective action plan to DMAHS within thirty (30) days of
                  notification by DMAHS of its actual blood lead level screening
                  rate. DMAHS shall have the right to conduct a follow-up onsite
                  review and/or impose financial damages for non-compliance.

                  a.   Mandatory sanction. Failure of the contractor to achieve
                       sixty (60) percent screening rate shall require the
                       following refund of capitation paid:

                       i    Achievement of a 50 percent to less than 60 percent
                            lead screening rate: refund of $2 per enrollee for
                            all enrollees under age 3 not screened.

                       ii   Achievement of a 40 percent to less than 50 percent
                            lead screening rate: refund of $3 per enrollee for
                            all enrollees under age 3 not screened.

                       iii  Achievement of a 30 percent to less than 40 percent
                            lead screening rate: refund of $4 per enrollee for
                            all enrollees under age 3 not screened.

                       iv   Achievement of less than 30 percent lead screening
                            rate: refund of $5 per enrollee for all enrollees
                            under age 3 not screened.

                  b.   Discretionary sanction. The DMAHS shall have the right to
                       impose a financial or administrative sanction if the
                       contractor's performance screening rate is between sixty
                       (60) - seventy (70) percent. The DMAHS, in its sole
                       discretion, may impose a sanction after review of the
                       contractor's corrective action plan and ability to
                       demonstrate good faith efforts to improve compliance.

         C.       The contractor must demonstrate continuous quality improvement
                  in achieving the performance standards for EPSDT and lead
                  screenings as stated in Article 4. The Division shall, in its
                  sole discretion, determine the appropriateness of contractor
                  proposed corrective action and the imposition of any other
                  financial or administrative sanctions in addition to those set
                  out above.

7.16.8   DEPARTMENT OF HEALTH AND HUMAN SERVICES CIVIL MONEY PENALTIES

                                                                          VII-30

<PAGE>

7.16.8.1 FEDERAL STATUTES

         Pursuant to 42 U.S.C. Section 1396b(m)(5)(A), the Secretary of the
         Department of Health and Human Services may impose substantial monetary
         and/or criminal penalties on the contractor when the contractor:

         A.       Fails to substantially provide an enrollee with required
                  medically necessary items and services, required under law or
                  under contract to be provided to an enrolled beneficiary, and
                  the failure has adversely affected the enrollee or has
                  substantial likelihood of adversely affecting the enrollees.

         B.       Imposes premiums or charges on enrollees in violation of this
                  contract, which provides that no premiums, deductibles,
                  co-payments or fees of any kind may be charged to Medicaid
                  enrollees.

         C.       Engages in any practice that discriminates among enrollees on
                  the basis of their health status or requirements for health
                  care services by expulsion or refusal to re-enroll an
                  individual or engaging in any practice that would reasonably
                  be expected to have the effect of denying or discouraging
                  enrollment by eligible persons whose medical condition or
                  history indicates a need for substantial future medical
                  services.

         D.       Misrepresents or falsifies information that is furnished to 1)
                  the Secretary, 2) the State, or 3) to any person or entity.

         E.       Fails to comply with the requirements for physician incentive
                  plans found in 42 U.S.C. Section 1876(i)(8), Section B.7.1 of
                  the Appendices, and at 42 C.F.R. Section 417.479, or fails to
                  submit to the Division its physician incentive plans as
                  required or requested in 42 C.F.R. Section 434.70,422.208, AND
                  422.210.

         F.       Violates the prohibition of restricting provider-enrollee
                  communications.

         G.       Distributes directly or indirectly through any agent or
                  independent contracted entity, marketing materials that have
                  not been approved by DHS or that contain false or materially
                  misleading information.

         H.       Violates any of the requirements of sections 1903(m) or 1932
                  of the Social Security Act, and any implementing regulations.

7.16.8.2 FEDERAL PENALTIES

         A.       The Secretary may provide, in addition to any other remedies
                  available under the law, for any of the following remedies:

                  1.       Civil money penalties of not more than $25,000 for
                           each determination above; or,

                                                                          VII-31

<PAGE>

                           with respect to a determination under Article
                           7.16.8.1C or 1D, above, of not more than $100,000 for
                           each such determination; plus,

                           with respect to a determination under Article
                           7.16.8.1B above, $25,000 or double the amount charged
                           (whichever is greater) in violation of such Article
                           (and the excess amount charged shall be deducted from
                           the penalty and returned to the individual
                           concerned); and the Secretary may seek criminal
                           penalties; and plus,

                           with respect to a determination under Article
                           7.16.8.1C above, $15,000 for each individual not
                           enrolled as a result of a practice described in such
                           Article. [This is subject to the overall limit of
                           $100,000 for each determination].

                  2.       Suspension of enrollment of individuals after the
                           date the Secretary notifies the Division of a
                           determination to assess damages as described in
                           Article 7.16.8.2A above, and until the Secretary is
                           satisfied that the basis for such determination has
                           been corrected and is not likely to recur, or

                  3.       Suspension of payment to the contractor for
                           individuals enrolled after the date the Secretary
                           notifies the Division of a determination under
                           Article 7.16.8.2A above and until the Secretary is
                           satisfied that the basis for such determination has
                           been corrected and is not likely to recur.

         B.       The contractor shall be responsible to pay any costs incurred
                  by the State as a result of the Secretary denying payment to
                  the State under 42 U.S.C. Section 1396(m)(5)(B)(ii). The State
                  shall have the right to offset such costs from amounts
                  otherwise due to the contractor.

         C.       Determination by the Division/Secretary regarding the amount
                  of the penalty and assessment for failure to comply with
                  physician incentive plans shall be in accordance with 42
                  C.F.R. Section 1003.106, i.e., the extent to which the failure
                  to provide medically necessary services could be attributed to
                  a prohibited inducement to reduce or limit services under a
                  physician incentive plan and the harm to the enrollee which
                  resulted or could have resulted from such failure. It would be
                  considered an aggravating factor if the contracting
                  organization knowingly or routinely engaged in any prohibited
                  practice which acted as an inducement to reduce or limit
                  medically necessary services provided with respect to a
                  specific enrollee in the contractor's plan.

         D.       Sanctions for failure to report. Pursuant to 42 U.S.C. Section
                  1320a-7e, if a contractor fails to report any final adverse
                  action or other adjudicated action or decision against a
                  health care provider that is required to be reported to the
                  Healthcare Integrity and Protection Data Bank, the contractor
                  shall be subject to a civil

                                                                          VII-32

<PAGE>

                  money penalty of not more than $25,000 for each such adverse
                  action not reported.

7.17     STATE SANCTIONS

         DMAHS shall have the right to impose any of the sanctions and damages
         authorized or required by N.J.S.A. 30:4D-1 et seq., N.J.A.C. 10:49-1 et
         seq., or federal statute or regulation against the contractor or its
         providers or subcontractors pursuant to this contract. The DMAHS shall
         have the right to withhold and/or offset any payments otherwise due to
         the contractor pursuant to such sanctions and damages.

7.18     APPEAL PROCESS

         In order to appeal the DMAHS imposition of any sanctions or damages,
         the contractor shall request review by and submit supporting
         documentation first to the Executive Director, Office of Managed Health
         Care (OMHC), within twenty (20) days of receipt of notice. The
         Executive Director, OMHC, shall issue a response within thirty (30)
         days of receipt of the contractor's submissions. Thereafter, the
         contractor may obtain a second review by the Director by filing the
         request for review with supporting documentation and copy of the
         Executive Director's decision within twenty (20) days of the
         contractor's receipt of the Executive Director's decision. The
         imposition of sanctions and damages is not automatically stayed pending
         appeal. Pending final determination of any dispute hereunder, the
         contractor shall proceed diligently with the performance of this
         contract and in accordance with the Contracting Officer's direction.

7.19     ASSIGNMENTS

         The contractor shall not, without the Department's prior written
         approval, assign, delegate, transfer, convey, sublet, or otherwise
         dispose of this contract; of the contractor's administrative or
         management operations/service under this contract; of the contractor's
         right, title, interest, obligations or duties under this contract; of
         the contractor's power to execute the contract; or, by power of
         attorney or otherwise, of any of the contractor's rights to receive
         monies due or to become due under this contract. The contractor shall
         retain obligations and responsibilities as stated under this contract
         or under state or federal law or regulations.

         All requests shall be submitted in writing, including all
         documentation, contracts, agreements, etc., at least 90 days prior to
         the anticipated implementation date, to DMAHS for prior approval. DMAHS
         approval shall also be contingent on regulatory agency review and
         approval. Any assignment, transfer, conveyance, sublease, or other
         disposition without the Department's consent shall be void and subject
         this contract to immediate termination by the Department without
         liability to the State of New Jersey.

                                                                          VII-33
<PAGE>

7.20     CONTRACTOR CERTIFICATIONS

7.20.1   GENERAL PROVISIONS

         A.       With respect to any report, invoice, record, papers,
                  documents, books of account, or other contract-required data
                  submitted to the Department in support of an invoice or
                  documents submitted to meet contract requirements, including,
                  but not limited to, proofs of insurance and bonding, Lobbying
                  Certifications and Disclosures, Conflict of Interest
                  Disclosure Statements and/or Conflict of Interest Avoidance
                  Plans, pursuant to the requirements of this contract, the
                  Contractor's Representative or his/her designee shall certify
                  that the report, invoice, record, papers, documents, books of
                  account or other contract required data is current, accurate,
                  complete and in full compliance with legal and contractual
                  requirements to the best of that individual's knowledge and
                  belief.

         B.       The contractor shall attest, based on best knowledge,
                  information, and belief, as to the accuracy, completeness and
                  truthfulness of enrollment information, encounter data,
                  provider networks, marketing materials, provider and
                  beneficiary notifications and educational materials and any
                  other information/documents specified in this contract.

7.20.2   CERTIFICATION SUBMISSIONS

         A.       Where in this contract there is a requirement that the
                  contractor "certify" or submit a "certification," such
                  certification shall be in the form of an affidavit or
                  declaration under penalty of perjury dated and signed by the
                  Contractor's Representative or his/her designee.

         B.       The data must be certified by one of the following:

                           1.       Chief Executive Officer (CEO)

                           2.       Chief Financial Office (CFO)

                           3.       An individual who has delegated authority to
                                    sign for, and who reports directly to the
                                    contractor's CEO or CFO.

         C.       The contractor shall submit the certification concurrently
                  with the certified data.

7.20.3   ENVIRONMENTAL COMPLIANCE

         The contractor shall comply with all applicable environmental laws,
         rules, directives, standards, orders, or requirements, including but
         not limited to, Section 306 of the Clean Air Act (42 U.S.C. Section
         1857(h)), Section 508 of the Clean Water Act (33 U.S.C. Section 1368),
         Executive Order 11738, and the Environmental Protection Agency (EPA)
         regulations (40

                                                                          VII-34

<PAGE>

         C.F.R., Part 15) that prohibit the use of the facilities included on
         the EPA List of Violating Facilities.

7.20.4   ENERGY CONSERVATION

         The contractor shall comply with any applicable mandatory standards and
         policies relating to energy efficiency that are contained in the state
         energy conservation plan issued in compliance with the Energy Policy
         and Conservation Act of 1975 (Public L. 94-165) and any amendments to
         the Act.

7.20.5   INDEPENDENT CAPACITY OF CONTRACTOR

         The parties agree that the contractor is an independent contractor, and
         that the contractor, its agents, officers, and employees act in an
         independent capacity and not as officers or employees or agents of the
         State, the Department or any other government entity.

7.20.6   NO THIRD PARTY BENEFICIARIES

         Nothing in this contract is intended or shall confer upon anyone, other
         than the parties hereto, any legal or equitable right, remedy or claim
         against any of the parties hereto.

7.20.7   PROHIBITION ON USE OF FEDERAL FUNDS FOR LOBBYING

         A.       The contractor agrees, pursuant to 31 U.S.C. Section 1352 and
                  45 C.F.R. Part 93, that no federal appropriated funds have
                  been paid or will be paid to any person by or on behalf of the
                  contractor for the purpose of influencing or attempting to
                  influence an officer or employee of any agency, a member of
                  Congress, an officer or employee of Congress, or an employee
                  of a member of Congress in connection with the award of any
                  federal contract, the making of any federal grant, the making
                  of any federal loan, the entering into of any cooperative
                  contract, or the extension, continuation, renewal, amendment,
                  or modification of any federal contract, grant loan, or
                  cooperative contract. The contractor shall complete and submit
                  the "Certification Regarding Lobbying", as attached in Section
                  A.7.1 of the Appendices.

         B.       If any funds other than federal appropriated funds have been
                  paid or will be paid by the contractor to any person for the
                  purpose of influencing or attempting to influence an officer
                  or employee of any agency, a member of Congress, an officer or
                  employee of Congress, or an employee of a member of Congress
                  in connection with the award of any federal contract, the
                  making of any federal grant, the making of any federal loan,
                  the entering into of any cooperative contract, or the
                  extension, continuation, renewal, amendment, or modification
                  of any federal contract, grant, loan, or cooperative contract,
                  and the contract exceeds $100,000, the contractor shall
                  complete and submit Standard Form LLL-"Disclosure of Lobbying
                  Activities" in accordance with its instructions.

                                                                          VII-35

<PAGE>

         C.       The contractor shall include the provisions of this Article in
                  all provider and subcontractor contracts under this contract
                  and require all participating providers or subcontractors
                  whose contracts exceed $100,000 to certify and disclose
                  accordingly to the contractor.

7.21     REQUIRED CERTIFICATE OF AUTHORITY

         During the term of the contract, the contractor shall maintain a
         Certificate of Authority (COA) from the Department of Health and Senior
         Services and the Department of Banking and Insurance and function as a
         Health Maintenance Organization in each of the counties in the
         region(s) it is contracted to serve or for each of the counties as
         approved in accordance with Article 2.H.

7.22     SUBCONTRACTS

         In carrying out the terms of the contract, the contractor may elect to
         enter into subcontracts with other entities for the provision of health
         care services and/or administrative services as defined in Article 1.
         In doing so, the contractor shall, at a minimum, be responsible for
         adhering to the following criteria and procedures.

         A.       All subcontracts shall be in writing and shall be submitted to
                  DMAHS for prior approval at least 90 days prior to the
                  anticipated implementation date. DMAHS approval shall also be
                  contingent on regulatory agency review and approval.

         B.       The Department shall prior approve all provider contracts and
                  all subcontracts.

         C.       All provider contracts and all subcontracts shall include the
                  terms in Section B.7.2 of the Appendices,
                  Provider/Subcontractor Contract Provisions.

         D.       The contractor shall monitor the performance of its
                  subcontractors on an ongoing basis and ensure that performance
                  is consistent with the contract between the contractor and the
                  Department.

         E.       Unless otherwise provided by law, contractor shall not cede or
                  otherwise transfer some or all financial risk of the
                  contractor to a subcontractor.

         F.       Every third party administrator engaged by the contractor
                  shall be licensed or registered by the Department of Banking
                  and Insurance pursuant to P.L. 2001, c. 267

                                                                          VII-36

<PAGE>

7.23     SET-OFF FOR STATE TAXES AND CHILD SUPPORT

         Pursuant to N.J.S.A 54:49-19, if the contractor is entitled to payment
         under the contract at the same time as it is indebted for any State tax
         (or is otherwise indebted to the State) or child support, the State
         Treasurer may set off payment by the amount of the indebtedness.

7.24     CLAIMS

         The contractor shall have the right to request an informal hearing
         regarding disputes under this contract by the Director, or the designee
         thereof. This shall not in any way limit the contractor's or State's
         right to any remedy pursuant to New Jersey law.

7.25     MEDICARE RISK CONTRACTOR

         To maximize coordination of care for dual eligibles while promoting the
         efficient use of public funds, the contractor:

         A.       Is recommended to be a Medicare+Choice contractor.

         B.       Shall serve all eligible populations.

7.26     TRACKING AND REPORTING

         As a condition of acceptance of a managed care contract, the contractor
         shall be held to the following reporting requirements:

         A.       The contractor shall develop, implement, and maintain a system
                  of records and reports which include those described below and
                  shall make available to DMAHS for inspection and audit any
                  reports, financial or otherwise, of the contractor and require
                  its providers or subcontractors to do the same relating to
                  their capacity to bear the risk of potential financial losses
                  in accordance with 42 C.F.R. Section 434.38. Except where
                  otherwise specified, the contractor shall provide reports on
                  hard copy, computer diskette or via electronic media using a
                  format and commonly-available software as specified by DMAHS
                  for each report.

         B.       The contractor shall maintain a uniform accounting system that
                  adheres to generally accepted accounting principles for
                  charging and allocating to all funding resources the
                  contractor's costs incurred hereunder including, but not
                  limited to, the American Institute of Certified Public
                  Accountants (AICPA) Statement of Position 89-5 "Financial
                  Accounting and Reporting by Providers of Prepaid Health Care
                  Services".

         C.       The contractor shall submit financial reports including, among
                  others, rate cell grouping costs, in accordance with the
                  timeframes and formats contained in Section A of the
                  Appendices.

                                                                          VII-37

<PAGE>

         D.       The contractor shall provide its primary care practitioners
                  with quarterly utilization data within forty-five (45) days of
                  the end of the program quarter comparing the average medical
                  care utilization data of their enrollees to the average
                  medical care utilization data of other managed care enrollees.
                  These data shall include, but not be limited to, utilization
                  information on enrollee encounters with PCPs, children who
                  have not received an EPSDT examination or a blood lead
                  screening, specialty claims, prescriptions, inpatient stays,
                  and emergency room use.

         E.       The contractor shall collect and analyze data to implement
                  effective quality assurance, utilization review, and peer
                  review programs in which physicians and other health care
                  practitioners participate. The contractor shall review and
                  assess data using statistically valid sampling techniques
                  including, but not limited to, the following:

                  Primary care practitioner audits; specialty audits; inpatient
                  mortality audits; quality of care and provider performance
                  assessments; quality assurance referrals; credentialing and
                  recredentialing; verification of encounter reporting rates;
                  quality assurance committee and subcommittee meeting agendas
                  and minutes; enrollee complaints, grievances, and follow-up
                  actions; providers identified for trending and sanctioning,
                  including providers with low blood lead screening rates;
                  special quality assurance studies or projects; prospective,
                  concurrent, and retrospective utilization reviews of inpatient
                  hospital stays; and denials of off-formulary drug requests.

         F.       The contractor shall prepare and submit to DMAHS quarterly
                  reports to be reported by hard copy and diskette in a format
                  and software application system determined by DMAHS,
                  containing summary information on the contractor's operations
                  for each quarter of the program (See Section A.7 of the
                  Appendices, Tables 1 through 201. Exception - Table 3 shall be
                  submitted monthly by the fifteenth (15th) of every month.).
                  These reports shall be received by DMAHS no later than
                  forty-five (45) calendar days after the end of the quarter.
                  After a grace period of five (5) calendar days, for each
                  calendar day after a due date that DMAHS has not yet received
                  at a prescribed location a report that fulfills the
                  requirements of any one item, assessment for damages equal to
                  one half month's negotiated blended capitation rate that would
                  normally be owed by DMAHS to the contractor for one recipient
                  shall be applied. The damages shall be applied as an offset to
                  subsequent payments to the contractor.

                  The contractor shall be responsible for continued reporting
                  beyond the term of the contract because of lag time in
                  submitting source documents by providers.

         G.       The contractor may submit encounter reports daily but must
                  submit encounter reports at least quarterly. However,
                  encounter reports will be processed by DMAHS' fiscal agent no
                  more frequently than monthly. All encounters shall be reported
                  to DMAHS within seventy-five (75) days of the end of the
                  quarter in

                                                                          VII-38

<PAGE>

                  which they are received by the contractor and within one year
                  plus seventy-five (75) days from the date of service.

         H.       The contractor shall annually and at the time changes are made
                  report its staffing positions including the names of
                  supervisory personnel (Director level and above and the QM/UR
                  personnel), organizational chart, and any position vacancies
                  in these major areas.

         I        DMAHS shall have the right to create additional reporting
                  requirements at any time as required by applicable federal or
                  State laws and regulations, as they exist or may hereafter be
                  amended and incorporated into this contract.

         J.       Reports that shall be submitted on an annual or semi-annual
                  basis, as specified in this contract, shall be due within
                  sixty (60) days of the close of the reporting period, unless
                  specified otherwise.

7.27     FINANCIAL STATEMENTS

7.27.1   AUDITED FINANCIAL STATEMENTS (SAP BASIS)

         A.       Annual Audit. The contractor shall submit its audited annual
                  financial statements prepared in accordance with Statutory
                  Accounting Principles (SAP) certified by an independent public
                  accountant no later than June 1 of each year, for the
                  immediately preceding calendar year as well as for any company
                  that is a financial guarantor for the contractor in accordance
                  with N.J.S.A. 8:38-11.6.

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                                                                          VII-39

<PAGE>

            [Reserved]

         B. Audit of Rate Cell Grouping Costs

            The [Reserved] contractor shall submit, quarterly, reports found in
            Appendix, Section A in accordance with the "HMO Financial Guide for
            Reporting Medicaid/NJ Family Care Rate Cell Grouping Costs"
            (Appendix, Section B7.3). These reports shall be reviewed by an
            independent public accountant in accordance with the standard
            "Agreed Upon Procedures" (Appendix, Section B).

            The contractor shall require its independent public accountant to
            prepare a letter and report of findings which shall be submitted to
            DMAHS by June 1 of each year. Only the fourth quarter report (period
            October 1 through December 31) of each calendar year will be subject
            to this agreed upon procedures audit.

            The contractor shall require its independent public accountant to
            explain any differences between the Statewide Rate Cell Grouping
            Cost Reports (Report 2 - Part S) and the annual audit statements in
            the letter.

            When findings indicate significantly reduced Medical/Hospital
            Expenses from those originally reported, a corresponding rate
            reduction may take effect in [Reserved] future periods.

            The Department at its sole discretion shall have the right to
            conduct targeted audits, request additional information or
            reporting, and/or investigate or verify submitted reports for any
            period of the contract term at the contractor's expense.

7.27.2   UNAUDITED FINANCIAL STATEMENTS (SAP)

         Contractor shall submit to DMAHS all quarterly and annual financial
         statements and annual supplements in accordance with Statutory
         Accounting Principles (SAP) required in N.J.A.C. 8:38-11.6. Submissions
         to DMAHS shall be on the same time frame described in N.J.A.C.
         8:38-14, i.e., quarterly reports are due the fifteenth (15th) day of
         the second month following the quarter end and statutory unaudited
         statement and the annual supplemental are due March 1 covering the
         preceding calendar year. Such information shall be subject to the
         confidentiality provisions in Article 7.40.

7.28     FEDERAL APPROVAL AND FUNDING

         This managed care contract shall not be implemented until and unless
         all necessary federal approval and funding have been obtained.

7.29     CONFLICT OF INTEREST

                                                                          VII-40

<PAGE>

         A.       No contractor shall pay, offer to pay, or agree to pay, either
                  directly or indirectly, any fee, commission, compensation,
                  gift, gratuity, or other thing of value of any kind to any
                  State officer or employee or special State officer or
                  employee, as defined by N.J.S.A. 52:13D-13b and e, in the
                  Department or any other agency with which such contractor
                  transacts or offers or proposes to transact business, or to
                  any member of the immediate family, as defined by N.J.S.A.
                  52:13D-13i, of any such officer or employee, or partnership,
                  firm or corporation with which they are employed or
                  associated, or in which such officer or employee has an
                  interest within the meaning of N.J.S.A. 52:13D-13g.

         B.       The solicitation of any fee, commission, compensation, gift,
                  gratuity or other thing of value by any State officer or
                  employee or special State officer or employee from any State
                  contractor shall be reported in writing forthwith by the
                  contractor to the Attorney General and the Executive
                  Commission on Ethical Standards.

         C.       No contractor may, directly or indirectly, undertake any
                  private business, commercial or entrepreneurial relationship
                  with, whether or not pursuant to employment, contract or other
                  agreement, express or implied, or sell any interest in such
                  contractor to any State officer or employee or special State
                  officer or employee having any duties or responsibilities in
                  connection with the purchase, acquisition or sale of any
                  property or services by or to any State agency or any
                  instrumentality thereof, or with any person, firm or entity
                  with which he is employed or associated or in which he has an
                  interest within the meaning of N.J.S.A. 52:13D-13g. Any
                  relationships subject to this provision shall be reported in
                  writing forthwith to the Executive Commission on Ethical
                  Standards which may grant a waiver of this restriction upon
                  application of the State officer or employee or special State
                  officer or employee upon a finding that the present or
                  proposed relationship does not present the potential, actual
                  or appearance, of a conflict of interest.

         D.       No contractor shall influence, or attempt to influence or
                  cause to be influenced, any State officer or employee or
                  special State officer or employee in his official capacity in
                  any manner which might tend to impair the objectivity or
                  independence of judgment of said officer or employee.

         E.       No contractor shall cause or influence, or attempt to cause or
                  influence, any State officer or employee or special State
                  officer or employee to use, or attempt to use, his official
                  position to secure unwarranted privileges or advantages for
                  the contractor or any other person.

         F.       The provisions cited above in this Article shall not be
                  construed to prohibit a State officer or employee or special
                  State officer or employee from receiving gifts from or
                  contracting with the contractor under the same terms and
                  conditions as are

                                                                          VII-41

<PAGE>

                  offered or made available to members of the general public
                  subject to any guidelines the Executive Commission on Ethical
                  Standards may promulgate.

7.30     RECORDS RETENTION

         A.       The contractor hereby agrees to maintain an appropriate
                  recordkeeping system (See Section B.4.14 of the Appendices)
                  for services to enrollees and further require its providers
                  and subcontractors to do so. Such system shall collect all
                  pertinent information relating to the medical management of
                  each enrolled beneficiary; and make that information readily
                  available to appropriate health professionals and the
                  Department. Records shall be retained for the later of

                  1.       Five (5) years from the date of service, or

                  2.       Three (3) years after final payment is made under the
                           contract or subcontract and all pending matters are
                           closed.

         B.       If an audit, investigation, litigation, or other action
                  involving the records is started before the end of the
                  retention period, the records shall be retained until all
                  issues arising out of the action are resolved or until the end
                  of the retention period, whichever is later. Records shall be
                  made accessible at a New Jersey site, and on request to
                  agencies of the State of New Jersey and the federal
                  government. For enrollees covered by the contractor's plan who
                  are eligible through the Division of Youth and Family
                  Services, records shall be kept in accordance with the
                  provisions under N.J.S.A. 9:6-8.lOa and 9:6-8:40 and
                  consistent with need to protect the enrollee's
                  confidentiality. All providers and subcontractors shall comply
                  with, and all provider contracts and subcontracts shall
                  contain the requirements stated in this paragraph. (See also
                  Article 7.40, "Confidentiality".)

         C.       If contractor's enrollees disenroll from the contractor's
                  plan, the contractor shall require participating providers to
                  release medical records of enrollees as may be directed by the
                  enrollee, authorized representatives of the Department and
                  appropriate agencies of the State of New Jersey and of the
                  federal government. Release of records shall be consistent
                  with the provision of confidentiality expressed in Article
                  7.40 and at no cost to the enrollee.

7.31     WAIVERS

         Nothing in the contract shall be construed to be a waiver by the State
         of any warranty, expressed or implied, except as specifically and
         expressly stated in writing executed by the Director. Further, nothing
         in the contract shall be construed to be a waiver by the State of any
         remedy available to the State under the contract, at law or equity
         except as specifically and expressly stated in writing executed by the
         Director. A waiver by the State of any default or breach shall not
         constitute a waiver of any subsequent default or breach.

                                                                          VII-42

<PAGE>

7.32     CHANGE BY THE CONTRACTOR

         The contractor shall not make any enhancements, limitations, or changes
         in benefits or benefits coverage; any changes in definition or
         interpretation of benefits; or any changes in the administration of the
         managed care program related to the scope of benefits, allowable
         coverage for those benefits, eligibility of enrollees or providers to
         participate in the program, reimbursement methods and/or schedules to
         providers, or substantial changes to contractor operations without the
         express, written direction or approval of the State. The State shall
         have the sole discretion for determining whether an amendment is
         required to effect a change (e.g., to provide additional services).

7.33     INDEMNIFICATION

         A.       The contractor agrees to indemnify and hold harmless the
                  State, its officers, agents and employees, and the enrollees
                  and their eligible dependents from any and all claims or
                  losses accruing or resulting from contractor's negligence to
                  any participating provider or any other person, firm, or
                  corporation furnishing or supplying work, services, materials,
                  or supplies in connection with the performance of this
                  contract.

         B.       The contractor agrees to indemnify and hold harmless the
                  State, its officers, agents, and employees, and the enrollees
                  and their eligible dependents from liability deriving or
                  resulting from the contractor's insolvency or inability or
                  failure to pay or reimburse participating providers or any
                  other person, firm, or corporation furnishing or supplying
                  work, services, materials, or supplies in connection with the
                  performance of this contract.

                  1.   Further the contractor agrees that its enrollees are not
                       held liable for payments for covered services furnished
                       under a contract, referral, or other arrangement, to the
                       extent that those payments are in excess of the amount
                       that the enrollee would owe if the contractor provided
                       the services directly.

         C.       The contractor agrees further that it shall require under all
                  provider contracts that, in the event the contractor becomes
                  insolvent or unable to pay the participating provider, the
                  participating provider shall not seek compensation for
                  services rendered from the State, its officers, agents, or
                  employees, or the enrollees or their eligible dependents.

         D.       The contractor agrees further that it shall indemnify and hold
                  harmless the State, its officers, agents, and employees, and
                  the enrollees and their eligible dependents from any and all
                  claims for services for which the contractor receives monthly
                  capitation payments, and shall not seek payments other than
                  the capitation payments from the State, its officers, agents,
                  and/or employees, and/or the enrollees and/or their eligible
                  dependents for such services, either during or subsequent to
                  the term of the contract.

                                                                          VII-43

<PAGE>

         E.       The contractor agrees further to indemnify and hold harmless
                  the State, its officers, agents and employees, and the
                  enrollees and their eligible dependents, from all claims,
                  damages, and liability, including costs and expenses, for
                  violation of any proprietary rights, copyrights, or rights of
                  privacy arising out of the contractor's or any participating
                  provider's publication, translation, reproduction, delivery,
                  performance, use, or disposition of any data furnished to it
                  under this contract, or for any libelous or otherwise unlawful
                  matter contained in such data that the contractor or any
                  participating provider inserts.

         F.       The contractor shall indemnify the State, its officers, agents
                  and employees, and the enrollees and their eligible dependents
                  from any injury, death, losses, damages, suits, liabilities
                  judgments, costs and expenses and claim of negligence or
                  willful acts or omissions of the contractor, its officers,
                  agents and employees, subcontractors, participating providers,
                  their officers, agents or employees, or any other person for
                  any claims arising out of alleged violation of any State or
                  federal law or regulation. The contractor shall also indemnify
                  and hold the State harmless from any claims of alleged
                  violations of the Americans with Disabilities Act by the
                  contractor, its subcontractors or providers.

         G.       The contractor agrees to pay all losses, liabilities, and
                  expenses under the following conditions:

                  1.       The parties who shall be entitled to enforce this
                           indemnity of the contractor shall be the State, its
                           officials, agents, employees, and representatives,
                           including attorneys or the State Attorney General,
                           other public officials, Commissioner and DHS
                           employees, any successor in office to any of the
                           foregoing individuals, and their respective legal
                           representatives, heirs, and beneficiaries.

                  2.       The losses, liabilities and expenses that are
                           indemnified shall include but not be limited to the
                           following examples: judgments, court costs, legal
                           fees, the costs of expert testimony, amounts paid in
                           settlement, and all other costs of any type whether
                           or not litigation is commenced. Also covered are
                           investigation expenses, including but not limited to,
                           the costs of utilizing the services of the
                           contracting agency and other State entities incurred
                           in the defense and handling of said suits, claims,
                           judgments, and the like, and in enforcing and
                           obtaining compliance with the provisions of this
                           paragraph whether or not litigation is commenced.

                  3.       Nothing in this contract shall be considered to
                           preclude an indemnified party from receiving the
                           benefits of any insurance the contractor may carry
                           that provides for indemnification for any loss,
                           liability, or expense that is described in this
                           contract.

                                                                          VII-44

<PAGE>

                  4.       The contractor shall do nothing to prejudice the
                           State's right to recover against third parties for
                           any loss, destruction of, or damage to the
                           contracting agency's property. Upon the request of
                           the DHS or its officials, the contractor shall
                           furnish the DHS all reasonable assistance and
                           cooperation, including assistance in the prosecution
                           of suits and the execution of instruments of
                           assignment in favor of the contracting agency in
                           obtaining recovery.

                  5.       Indemnification includes but is not limited to, any
                           claims or losses arising from the promulgation or
                           implementation of the contractor's policies and
                           procedures, whether or not said policies and
                           procedures have been approved by the State, and any
                           claims of the contractor's wrong doing in
                           implementing DHS policies.

7.34     INVENTIONS

         Inventions, discoveries, or improvements of computer programs developed
         pursuant to this contract by the contractor, and paid for by DMAHS in
         whole or in part, shall be the property of DMAHS.

7.35     USE OF CONCEPTS

         The ideas, knowledge, or techniques developed and utilized through the
         course of this contract by the contractor, or jointly by the contractor
         and DMAHS, for the performance under the contract, may be used by
         either party in any way they may deem appropriate. However, such use
         shall not extend to pre-existing intellectual property of the
         contractor or DMAHS that is patented, copyrighted, trademarked or
         service marked, which shall not be used by another party unless a
         license is granted.

7.36     PREVAILING WAGE

         The New Jersey Prevailing Wage Act, PL 1963, Chapter 150, is hereby
         made a part of this contract, unless it is not within the contemplation
         of the Act. The contractor's signature on the contract is a guarantee
         that neither the contractor nor any providers or subcontractors it
         might employ to perform the work covered by this contract is listed or
         is on record in the Office of the Commissioner of the New Jersey
         Department of Labor and Industry as one who has failed to pay
         prevailing wages in accordance with the provisions of this Act.

7.37     DISCLOSURE STATEMENT

         The contractor shall report ownership and related information to DMAHS
         at the time of initial contracting, and yearly thereafter, and upon
         request, to the Secretary of DHHS and the Inspector General of the
         United States in accordance with federal and state law.

                                                                          VII-45

<PAGE>

         A.       The contractor shall include full and complete information as
                  to the name and address of each person or corporation with a
                  five (5) percent or more ownership or controlling interest in
                  the contractor's plan, or any provider or subcontractor in
                  which the contractor has a five (5) percent or more ownership
                  interest (Section 1903(m)(2)(A) of the Social Security Act and
                  N.J.A.C. 10:49-19.2)

                  The contractor shall comply with this disclosure requirement
                  through submission of the HCFA-1513 Form whether federally
                  qualified or not.

         B.       If the contractor is not federally qualified, it shall
                  disclose to DMAHS at the time of contracting (and within ten
                  days of any change) information on types of transactions with
                  a "party in interest" as defined in Section 1318(b) of the
                  Public Health Service Act (Section 1903(m)(4)(A) of the Social
                  Security Act).

                  1.       All contractor business transactions shall be
                           reported. This requirement shall not be limited to
                           transactions related only to serving the Medicaid
                           enrollees and applies at least to the following
                           transactions:

                           a.       Any sale, exchange, or leasing of property
                                    between the contractor and a "party in
                                    interest";

                           b.       Any furnishing for consideration of goods,
                                    services or facilities between the
                                    contractor and a "party in interest" (not
                                    including salaries paid to employees for
                                    services provided in the normal course of
                                    their employment);

                           c.       Any lending of money or other extension of
                                    credit between the contractor and a "party
                                    in interest"; and

                           d.       Transactions or series of transactions
                                    during any one fiscal year that are expected
                                    to exceed the lesser of $25,000 or five (5)
                                    percent of the total operating expenses of
                                    the contractor.

                  2.       The information that shall be disclosed regarding
                           transactions listed in B.1 above between the
                           contractor and a "party in interest" includes:

                           a.       The name of the "party in interest" for each
                                    transaction;

                           b.       A description of each transaction and the
                                    quantity or units involved;

                           c.       The accrued dollar value of each transaction
                                    during the fiscal year; and

                           d.       The justification of the reasonableness of
                                    each transaction.

                                                                          VII-46

<PAGE>

                  3.      This information shall be reported annually to DMAHS
                          and shall also be made available, upon request, to the
                          Office of the Inspector General, the Comptroller
                          General and to the contractor's enrollees. DMAHS may
                          request that the information be in the form of a
                          consolidated financial statement for the organization
                          and entity (N.J.A.C. 10:49-19.2).

         C.       The contractor shall disclose the identity of any person who
                  has been convicted of certain offenses, as defined in Section
                  1126 of the Social Security Act. This includes any person who
                  has ownership or control interest in the contractor, or is an
                  agent or managing employee of the contractor and:

                  1.       Has been convicted of a criminal offense related to
                           the delivery of an item or service under Medicare,
                           Medicaid, or title XXI;

                  2.       Has been convicted of a criminal offense relating to
                           neglect or abuse of patients in connection with the
                           delivery of a health care item or service;

                  3.       Has been convicted for an offense that occurred after
                           the date of the enactment of the Health Insurance
                           Portability and Accountability Act of 1996, in
                           connection with the delivery of a health care item or
                           service or omission in a health care program operated
                           by or financed in whole or in part by any Federal,
                           State, or local government agency, of a criminal
                           offense consisting of a felony relating to fraud,
                           theft, embezzlement, breach of fiduciary
                           responsibility, or other financial misconduct; or

                  4.       Has been convicted for an offense that occurred after
                           the date of the enactment of the Health Insurance
                           Portability and Accountability Act of 1996 of a
                           criminal offense consisting of a felony relating to
                           the unlawful manufacture, distribution, prescription,
                           or dispensing of a controlled substance.

7.38     FRAUD AND ABUSE

7.38.1   ENROLLEES

         A.       Policies and Procedures. The contractor shall establish
                  written policies and procedures for identifying potential
                  enrollee fraud and abuse. Proven cases are to be referred to
                  the Department for screening for advice and/or assistance on
                  follow-up actions to be taken. Referrals are to be accompanied
                  by all supporting case documentation.

         B.       Typical Cases. The most typical cases of fraud or abuse
                  include but are not limited to: the alteration of an
                  identification card for possible expansion of benefits; the
                  loaning of an identification card to others; use of forged or
                  altered prescriptions; and mis-utilization of services.

                                                                          VII-47

<PAGE>

7.38.2 PROVIDERS

         A.       Policies and Procedures. The contractor shall establish
                  written policies and procedures for identifying,
                  investigating, and taking appropriate corrective action
                  against fraud and abuse (as defined in 42 C.F.R. Section
                  455.2) in the provision of health care services. The policies
                  and procedures will include, at a minimum:

                  1.       Written notification to DMAHS within five (5)
                           business days of intent to conduct an investigation
                           or to recover funds, and approval from DMAHS prior to
                           conducting the investigation or attempting to recover
                           funds. Details of potential investigations shall be
                           provided to DMAHS and include the data elements in
                           Section A.7.2.B of the Appendices. Representatives of
                           the contractor may be required to present the case to
                           DMAHS. DMAHS, in consultation with the contractor,
                           will then determine the appropriate course of action
                           to be taken.

                  2.       Incorporation of the use of claims and encounter data
                           for detecting potential fraud and abuse of services.

                  3.       A means to verify services were actually provided.

                  4.       Reporting investigation results within twenty (20)
                           business days to DMAHS.

                  5.       [Reserved] Specifications of, and reports generated
                           by, the contractor's prepayment and postpayment
                           surveillance and utilization review systems,
                           including prepayment and postpayment edits.

         B.       Distinct Unit. The contractor shall establish a distinct fraud
                  and abuse unit, solely dedicated to the detection and
                  investigation of fraud and abuse by its New Jersey Medicaid
                  and NJ FamilyCare beneficiaries and providers. It shall be
                  separate from the contractor's utilization review and quality
                  of care functions. The unit can either be part of the
                  contractor's corporate structure, or operate under contract
                  with the contractor. The unit shall be staffed with
                  individuals with the qualifications and an
                  investigator-to-beneficiary ratio for the New Jersey
                  Medicaid/NJ FamilyCare enrollment consistent, it a minimum,
                  with the Department of Banking and Insurance requirements for
                  fraud units (i.e., one investigator per 60,000 or fewer New
                  Jersey enrollees) within health insurance carriers or greater
                  ratio as needed to meet the investigative demands.

         C.       Prepayment Monitoring. The contractor shall conduct prepayment
                  monitoring of its own network providers and subcontractors
                  when it believes fraud or abuse may be occurring.

         D.       It shall be the responsibility of the contractor to report in
                  writing to DMAHS' Office of Program Integrity Administration
                  the following:

                                                                          VII-48

<PAGE>

                  1.       All cases of suspected fraud and abuse, using the
                           format described in Section A.7.2 of the Appendices;

                  2.       Inappropriate or inconsistent practices by providers,
                           subcontractors, enrollees or employees or anyone who
                           can order or refer services, and related parties; and

                  3.       Prepayment monitoring by the contractor of a provider
                           or a subcontractor [Reserved].

         E.       DMAHS shall have the right to withhold from a contractor's
                  capitation payments an appropriate amount if DMAHS determines
                  that evidence of fraud or abuse exists relating to the
                  contractor, its providers, subcontractors, enrollees,
                  employees, or anyone who can order or refer services, and
                  related parties.

         F.       When DMAHS has withheld payment and/or initiated a recovery
                  action against one of the contractor's providers or
                  subcontractors or a withholding of payments action pursuant to
                  42 C.F.R. Section 455.23, DMAHS may require the contractor to
                  withhold payments to that provider or subcontractor and/or
                  forward those payments to DMAHS.

         G.       DMAHS may direct the contractor to monitor one of its
                  providers or subcontractors, or take such corrective action
                  with respect to that provider or subcontractor as DMAHS deems
                  appropriate, when, in the opinion of DMAHS, good cause exists.

         H.       Sanctions. Failure of the contractor to investigate and
                  correct fraud and abuse problems relating to its enrollees,
                  network providers or subcontractors, and to notify DMAHS
                  timely of same, may result in sanctions. Timely notification
                  is defined as within five (5) business days of identification
                  of the fraud and/or abuse and within twenty (20) business days
                  of the completion of an investigation. For purposes of this
                  subsection, the term "investigation" shall include prepayment
                  monitoring as described above.

                  DMAHS shall have the right to also impose sanctions and/or
                  withhold payments to the contractor (in accordance with
                  provisions of 42 C.F.R. Section 455.23) if it has reliable
                  evidence of fraud or willful misrepresentation relating to the
                  contractor's participation in the New Jersey Medicaid or NJ
                  FamilyCare program or if the contractor fails to initiate its
                  investigation of an identified fraud and/or abuse within one
                  year of identification.

7.38.3   NOTIFICATION TO DMAHS

         The contractor shall submit quarterly the report in Section A.7.2 of
         the Appendices, Fraud & Abuse.

                                                                          VII-49

<PAGE>

7.39     EQUALITY OF ACCESS AND TREATMENT/DUE PROCESS

         A.       Unless a higher standard is required by this contract, the
                  contractor shall provide and require its subcontractors and
                  its providers to provide the same level of medical care and
                  health services to DMAHS enrollees as to enrollees in the
                  contractor's plan under private or group contracts unless
                  otherwise required in this contract.

         B.       Enrollees shall be given equitable access, i.e., equal
                  opportunity and consideration for needed services without
                  exclusionary practices of providers or system design because
                  of gender, age, race, ethnicity, color, creed, religion,
                  ancestry, national origin, marital status, sexual or
                  affectional orientation or preference, mental or physical
                  disability, genetic information, or source of payment.

         C.       DMAHS shall assure that all due process safeguards that are
                  otherwise available to Medicaid/NJ FamilyCare beneficiaries
                  remain available to enrollees under this contract.

         D.       The contractor shall assure the provision of services,
                  notifications, preparation of educational materials in
                  appropriate alternative formats, for enrollees including the
                  blind, hearing impaired, people with cognitive or
                  communication impairments, and individuals who do not speak
                  English.

7.40     CONFIDENTIALITY

         A.       General. The contractor hereby agrees and understands that all
                  information, records, data, and data elements collected and
                  maintained for the operation of the contractor and the
                  Department and pertaining to enrolled persons, shall be
                  protected from unauthorized disclosure in accordance with the
                  provisions of 42 U.S.C. Section 1396(a)(7)(Section 1902(a)(7)
                  of the Social Security Act), 42 C.F.R. Part 431, subpart F, 45
                  CFR Parts 160 and 164, subparts A & E, N.J.S.A. 30:4D-7 (g)
                  and N.J.A.C. 10:49-9.7. Access to such information, records,
                  data and data elements shall be physically secured and
                  safeguarded and shall be limited to those who perform their
                  duties in accordance with provisions of this contract
                  including the Department of Health and Human Services and to
                  such other as may be authorized by DMAHS in accordance with
                  applicable law. For enrollees covered by the contractor's plan
                  that are eligible through the Division of Youth and Family
                  Services, records shall be kept in accordance with the
                  provisions under N.J.S.A. 9:6-8.10a and 9:6-8:40 and
                  consistent with the need to protect the enrollee's
                  confidentiality.

         B.       Enrollee-Specific Information. With respect to any
                  identifiable information concerning an enrollee under the
                  contract that is obtained by the contractor or its providers
                  or subcontractors, the contractor: (1) shall not use any such
                  information for any purpose other than carrying out the
                  express terms of this contract; (2) shall

                                                                          VII-50

<PAGE>

                  promptly transmit to the Department all requests for
                  disclosure of such information; (3) shall not disclose except
                  as otherwise specifically permitted by the contract, any such
                  information to any party other than the Department without the
                  Department's prior written authorization specifying that the
                  information is releasable under 42 C.F.R. Section 431.300 et
                  seq., and (4) shall, at the expiration or termination of the
                  contract, return all such information to the Department or
                  maintain such information according to written procedures sent
                  the contractor by the Department for this purpose.

         C.       Employees. The contractor shall instruct its employees to keep
                  confidential all information, records, data and data elements
                  pertaining to enrolled persons. The contractor shall further
                  instruct its employees to keep confidential information
                  concerning the business of DMAHS, DMAHS' financial affairs and
                  DMAHS' relations with its enrollees and its employees. Any
                  request for records concerning DMAHS must be referred by the
                  contractor's employees to the DMAHS custodian of records.

         D.       Medical records and management information data concerning
                  Medicaid/NJ FamilyCare beneficiaries enrolled pursuant to this
                  contract shall be confidential and shall be disclosed to other
                  persons within the contractor's organization only as necessary
                  to provide medical care and quality, peer, or grievance review
                  of medical care under the terms of this contract.

         E.       The provisions of this Article shall survive the termination
                  of this contract and shall bind the contractor so long as the
                  contractor maintains any individually identifiable information
                  relating to Medicaid/NJ FamilyCare beneficiaries.

         F.       If DMAHS receives a request pursuant to the Right To Know Law
                  or the common law Right to Know for release of information
                  concerning the contractor, DMAHS (a) shall notify the
                  contractor and (b) shall release that information which is
                  required by law to be released in accordance with procedures
                  established by federal regulation and the Right to Know Law,
                  unless the contractor, prior to the expiration of the time
                  period within which DMAHS must respond to the request,
                  provides DMAHS with an order of a court of competent
                  jurisdiction prohibiting release of the requested information.
                  The contractor may label information it supplies to DMAHS as
                  confidential pursuant to a specific exemption contained in the
                  Right to Know Law, but such label is not conclusive on DMAHS'
                  determination as to whether the specific information requested
                  is subject to public access under either federal or state law.

7.41     SEVERABILITY

         If this contract contains any unlawful provision that is not an
         essential part of the contract and that was not a controlling or
         material inducement to enter into the contract, the provision shall
         have no effect and, upon notice by either party, shall be deemed
         stricken from the contract without affecting the binding force of the
         remainder of the contract.

                                                                          VII-51

<PAGE>

7.42     CONTRACTING OFFICER AND CONTRACTOR'S REPRESENTATIVE

         It is agreed that_______________________________, Director of DMAHS, or
         his/her representative, shall serve as the Contracting Officer for the
         State and that______________________________________shall serve as the
         Contractor's Representative. The Contracting Officer and the
         Contractor's Representative each reserve the right to delegate such
         duties as may be appropriate to others in the DMAHS's or contractor's
         employ.

         Each party shall provide timely written notification of any change in
         Contracting Officer or Contractor's Representative.

                                                                          VII-52

<PAGE>

ARTICLE EIGHT: FINANCIAL PROVISIONS

8.1      GENERAL INFORMATION

         This Article includes financial requirements (including solvency and
         insurance), medical cost ratio requirements, information on rates set
         by the State, third party liability (TPL) requirements, general
         capitation requirements, and provider payment requirements.

8.2      FINANCIAL REQUIREMENTS

8.2.1    COMPLIANCE WITH CERTAIN CONDITIONS

         The contractor shall remain in compliance with the following conditions
         which shall satisfy the Departments of Human Services, Banking and
         Insurance (DOBI) and Health and Senior Services prior to this contract
         becoming effective:

         A.       Provider Contracts Executed. The contractor has entered into
                  written contracts with providers in accordance with Article
                  Four of this contract.

         B.       No Judgment Preventing Implementation. No court order,
                  administrative decision, or action by any other
                  instrumentality of the United States government or the State
                  of New Jersey or any other state which prevents implementation
                  of this contract is outstanding.

         C.       Approved Certificate of Authority. The contractor has and
                  maintains an approved certificate of authority to operate as a
                  health maintenance organization in New Jersey from the DOBI
                  and the Department of Health and Senior Services for the
                  Medicaid population.

         D.       Compliance with All Solvency Requirements. The contractor
                  shall comply with and remain in compliance with minimum net
                  worth and fiscal solvency and reporting requirements of the
                  DOBI and the Department of Human Services, the federal
                  government, and this contract.

8.2.2    SOLVENCY REQUIREMENTS

         The contractor shall maintain a minimum net worth in accordance with
         N.J.A.C. 8:38-11 et seq.

         The Department shall have the right to conduct targeted financial
         audits of the contractor's Medicaid line of business. The contractor
         shall provide the Department with financial data, as requested by the
         Department, within a timeframe specified by the Department.

                                                                          VIII-1

<PAGE>

8.3      INSURANCE REQUIREMENTS

         The contractor shall maintain general comprehensive liability
         insurance, products/completed operations insurance, premises/operations
         insurance, unemployment compensation coverage, workmen's compensation
         insurance, reinsurance, and malpractice insurance in such amounts as
         determined necessary in accordance with state and federal statutes and
         regulations, insuring all claims which may arise out of contractor
         operations under the terms of this contract. The DMAHS shall be an
         additional named insured with sixty (60) days prior written notice in
         event of default and/or non-renewal of the policy. Proof of such
         insurance shall be provided to and approved by DMAHS prior to the
         provision of services under this contract and annually thereafter. No
         policy of insurance provided or maintained under this Article shall
         provide for an exclusion for the acts of officers.

8.3.1    INSURANCE CANCELLATION AND/OR CHANGES

         In the event that any carrier of any insurance described in
         8.[Reserved]3 or 8.43.2 exercises cancellation and/or changes, or
         cancellation or change is initiated by the contractor, notice of such
         cancellation and/or change shall be sent immediately to DMAHS for
         approval. At State's option upon cancellation and/or change or lapse of
         such insurance(s), DMAHS may withhold all or part of payments for
         services under this contract until such insurance is reinstated or
         comparable insurance purchased. The contractor is obligated to provide
         any services during the period of such lapse or termination.

8.3.2    STOP-LOSS INSURANCE

         At the discretion of the Departments of Banking and Insurance, Human
         Services, and Health and Senior Services and notwithstanding the
         requirements of N.J.A.C. 8:38-11.5 (b), the contractor may be required
         to obtain, prior to this contract, and maintain "stop-loss" insurance
         from a reinsurance company authorized to do business in New Jersey that
         will cover medical costs that exceed a threshold per case for the
         duration of the contract period. Any coverage other than stipulated
         must be based on an actuarial review, taking into account geographic
         and demographic factors, the nature of the clients, and state solvency
         safeguard requirements

         All "stop-loss" insurance arrangements, including modifications, shall
         be reviewed and prior approved by the Departments of Banking and
         Insurance, Human Services, and Health and Senior Services. The
         "stop-loss" insurance underwriter must meet the standards of financial
         stability as set forth by the DOBI.

                                                                          VIII-3

<PAGE>

         Contractors with sufficient reserves may choose self-insurance, subject
         to approval by the Department of Human Services and the DOBI where
         appropriate.

8.4      MEDICAL COST RATIO

8.4.1    MEDICAL COST RATIO STANDARD

         The contractor shall maintain direct medical expenditures for enrollees
         equal to or greater than eighty (80) percent of premiums paid in all
         forms from the State. This medical cost ratio (MCR) shall apply to
         annual periods from the contract effective date (if the contract ends
         before the completion of an annual period, the MCR shall apply to that
         shorter period). The MCR shall be based on reports completed by the
         contractor and acceptable to the Department.

         A.       Direct Medical Expenditures. Direct medical expenditures are
                  the incurred costs of providing direct care to enrollees for
                  covered health care services as stated in Article 4.1 (Report
                  on Tables 6a and 6B). Costs related to information and
                  materials for general education and outreach and/or
                  administration are not considered direct medical expenditures.

                  Personnel costs are generally considered to be administrative
                  in nature and must be reported as an administrative expense on
                  Tables 6a and 6b (Statement of Revenues and Expenses) on line
                  30 (Compensation). However, a portion of these costs may
                  qualify as direct medical expenditures, subject to prior
                  review and approval by the State. Those activities that the
                  contractor expects to generate these costs must be specified
                  and detailed in a Medical Cost Ratio - Direct Medical
                  Expenditures Plan which must be reviewed and approved by the
                  State. At the end of the reporting period, the contractor's
                  reporting shall be based only on the approved Medical Cost
                  Ratio - Direct Medical Expenditures Plan. In order to consider
                  these costs as Direct Medical Expenditures, the contractor
                  must complete Table 6c, entitled "Allowable Direct Medical
                  Expenditures," which will be used by the State to determine
                  the allowable portion of costs. The allowable components of
                  these personnel costs include the following activities:

                  1. Care Management. Allowable direct medical expenditures for
                     care management include: 1) assessment(s) of an enrollee's
                     risk factors; and 2) development of Individual Health Care
                     Plans. The costs of performing these two allowable
                     components may be considered a direct medical expenditure
                     for purposes of calculating MCR and must be reported on
                     Table 6c.

                  2. The cost associated with the provision of a face-to-face
                     home visit by the contractor's clinical personnel for the
                     purpose of medical education or anticipatory guidance can
                     be considered a direct medical expenditure (Report on Table
                     6c).

                  3. Costs for activities required to achieve compliance
                     standards for EPSDT participation, lead screening, and
                     prenatal care as specified in Article IV may

                                                                          VIII-4

<PAGE>

                      be considered direct medical expenditures. The
                      contractor's reporting shall be based only on the approved
                      Medical Cost Ratio -- Direct Medical Expenditures Plan
                      (Report on Table 6c).

         Calculation of MCR. The calculation of MCR will be made using
         information submitted by each contractor on the quarterly reports -
         Statement of Revenues and Expenses (Section A.7.8 of the Appendices
         (Tables 6a, 6b and 6c)). The costs related to 8.4.1. A 1-3 are to be
         reported on Table 6c and the allowable amount will be added to the
         calculation of Medical and Hospital Expenses. The sum of all applicable
         quarters for Total Medical and Hospital Expenses (line 28) less
         Coordination of Benefits (COB) (line 6) and less reinsurance recoveries
         (line 7) will be divided by the sum of all applicable quarters of
         Medicaid/NJ FamilyCare premiums (line 4) to arrive at the ratio.

8.4.2    RESERVED

8.4.3    DAMAGES

The Department shall have the right to impose damages on a contractor that has
failed to maintain an appropriate MCR. The damages shall be assessed when MCR is
below 80% and an underexpenditure occurs. The formula for imposing damages
follows:

<TABLE>
<CAPTION>
ACTUAL MCR                 1ST OFFENSE               2ND OFFENSE
----------                 -----------               -----------
<S>                       <C>                     <C>
80% or above              NONE                    NONE

78.00-79.99%              .15 times               .15 times
                          underexpenditure        underexpenditure

75.00-77.99%              .50 times               .50 times
                          underexpenditure        underexpenditure

74.99 or below            .90 times               1.00 times
                          underexpenditure        underexpenditure
</TABLE>

If the contractor fails to meet the MCR requirement and a penalty is applied, a
plan of corrective action shall be required.

8.5      REGIONS, PREMIUM GROUPS, AND SPECIAL PAYMENT PROVISIONS

8.5.1    REGIONS

Rates for DYFS, NJ FamilyCare Plans B, C, and D, [Reserved] and the non
risk-adjusted rates for AIDS and clients of DDD are statewide. Rates have been
set for each premium group in each of the following regions:

                                                                          VIII-5

<PAGE>

         -  Region 1: Bergen, Hudson, Hunterdon, Morris, Passaic, Somerset,
            Sussex, and Warren counties

         -  Region 2: Essex, Union, Middlesex, and Mercer counties

         -  Region 3: Atlantic, Burlington, Camden, Cape May, Cumberland,
            Gloucester, Monmouth, Ocean, and Salem counties

         Contractors may contract for one or more regions but, except as
         provided in Article 2, may not contract for part of a region.

8.5.2    MAJOR PREMIUM GROUPS

         The following is a list of the major premium groups. The individual
         rate groups (e.g. children under 2 years, etc.) with their respective
         rates are presented in the rate tables in the appendix

8.5.2.1  AFDC/TANF AND NJ FAMILYCARE PLAN A CHILDREN

         [Reserved] This grouping includes capitation rates for Aid to Families
         with Dependent Children (AFDC)/Temporary Assistance for Needy Families
         (TANF), [Reserved] New Jersey Care Pregnant Women and Children and NJ
         FamilyCare Plan A children (age <19), but excludes individuals who have
         AIDS or are clients of DDD. [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

[Reserved]

                                                                          VIII-6

<PAGE>

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

8.5.2.2  NJ FAMILYCARE PLANS B & C

         [Reserved] This grouping includes capitation rates for NJ FamilyCare
         Plans B and C enrollees, excluding individuals with AIDS. [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

8.5.2.3  NJ FAMILYCARE PLAN D CHILDREN

         [Reserved] This grouping includes capitation rates for NJ FamilyCare
         Plan D children, excluding individuals with AIDS. [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

8.5.2.4  NJ FAMILYCARE PLAN D PARENTS/CARETAKERS

         [Reserved] This grouping includes capitation rates for NJ FamilyCare
         Plan D parents/caretakers, excluding individuals with AIDS. [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

[Reserved]

                                                                          VIII-7

<PAGE>

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

8.5.2.5  [Reserved] DYFS AND AGING OUT FOSTER CHILDREN

         [Reserved] This grouping includes capitation rates for Division of
         Youth and Family Services, excluding individuals with AIDS and clients
         of DDD. [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

8.5.2.6  ABD WITHOUT MEDICARE

         Compensation to the contractor for the ABD individuals without Medicare
         will be risk-adjusted using the Health Based Payments System (HBPS),
         which is described in Article 8.6. [Reserved]. In addition, the HBPS
         adjusts for the diagnosis of AIDS; therefore, separate AIDS rates are
         not necessary for this population. Finally, the HBPS adjusts for age
         and sex so separate rates for age and sex within this population are
         not necessary. [Reserved]

         [Reserved]

         [Reserved]

8.5.2.7  ABD WITH MEDICARE

         [Reserved] This grouping includes capitation rates for the ABD with
         Medicare population, excluding individuals with AIDS and clients of
         DDD. [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

                                                                          VIII-8

<PAGE>

8.5.2.8  CLIENTS OF DDD

         The contractor shall be paid separate, statewide rates for subgroups of
         the DDD population, excluding individuals with AIDS. These rates
         include MH/SA services. [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

8.5.2.9  [Reserved] ENROLLEES WITH AIDS

         A.       [Reserved] The contractor shall be paid Special statewide
                  capitation rates [Reserved] for enrollees with AIDS.

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

         B.       The contractor will be reimbursed double the AIDS rate, once
                  in a member lifetime, in the first month of payment for a
                  recorded diagnosis of AIDS, prospective and newly diagnosed.
                  This is a one-time-only-per-member payment, regardless of MCE.

8.5.2.10 PREGNANT WOMEN CATEGORIES

         This grouping includes New Jersey Care Pregnant Women, with incomes up
         to and including 185% FPL; NJ FamilyCare pregnant women with incomes
         above 185% and up to and including 200% FPL.

                                                                          VIII-9

<PAGE>

8.5.3    Newborn Infants

         The contractor shall be reimbursed for newborns from the date of birth
         through the first 60 days after the birth through the period ending at
         the end of the month in which the 60th day falls by a supplemental
         payment as part of the supplemental maternity payment. Thereafter,
         capitation payments will be made prospectively, i.e., only when the
         baby's name and ID number are accreted to the medicaid eligibility file
         and formally enrolled in the contractor's plan.

8.5.4    SUPPLEMENTAL PAYMENT PER PREGNANCY OUTCOME

         Because costs for pregnancy outcomes were not included in the
         capitation rates, the contractor shall be paid supplemental payments
         for pregnancy outcomes for all eligibility categories.

         Payment for pregnancy outcome shall be a single, predetermined lump sum
         payment. This amount shall supplement the existing capitation rate
         paid. The Department will make a supplemental payment to contractors
         following pregnancy outcome. For purposes of this Article, pregnancy
         outcome shall mean each live birth, still birth or miscarriage
         occurring at the thirteenth (13th) or greater week of gestation. This
         supplemental payment shall reimburse the contractor for its inpatient
         hospital, antepartum, and postpartum costs incurred in connection with
         delivery. Costs for care of the baby for the first 60 days after the
         birth plus through the end of the month in which the 60th day falls are
         [Reserved] included (See Section 8.5.3). Payment shall be made by the
         State to the contractor based on submission of appropriate encounter
         data and use of a special indicator on the claim as specified by DMAHS.

8.5.5    PAYMENT FOR CERTAIN BLOOD CLOTTING FACTORS

         The contractor shall be paid separately for factor VIII and IX blood
         clotting factors. Payment will be made by DMAHS to the contractor based
         on: 1) submission of appropriate encounter data; and 2) [Reserved]
         notification from the contractor to DMAHS within 12 months of the date
         of service of identification of individuals with factor VIII or IX
         hemophilia. Payment for these products will be the lesser of: 1)
         Average Wholesale Price (AWP) minus the State's discount [Reserved] and
         2) rates paid by the contractor.

8.5.6    PAYMENT FOR HIV/AIDS DRUGS

         The contractor shall be paid separately for protease inhibitors and
         other anti-retroviral agents (First Data Bank Specific Therapeutic
         Class Codes W5C, W5B, W5I, W5J, W5K, W5L, [Reserved] W5M, W5N) for all
         eligibility groups. [Reserved] Payment for protease inhibitors shall be
         made by DMAHS to the contractor based on: 1) submission of appropriate
         encounter data; and 2)

                                                                         VIII-10

<PAGE>

         [Reserved] notification from the contractor to DMAHS within 12 months
         of the date of service of identification of individuals with HIV/AIDS.
         Payment for these products will be the lesser of: 1) Average Wholesale
         Price (AWP) minus the state's discount for each drug [Reserved] and 2)
         rates paid by the contractor.

         [Reserved]

8.5.7    EPSDT INCENTIVE PAYMENT

         The contractor shall be paid separately, $10 for every documented
         encounter record for [Reserved] contractor-approved--EPSDT screening
         examination. The contractor shall be required to pass the $10 amount
         directly to the screening provider.

         The incentive payment shall be reimbursed for EPSDT encounter records
         submitted in accordance with 1) procedure codes specified by DMAHS, and
         2) EPSDT periodicity schedule.

8.5.8    ADMINISTRATIVE COSTS

         The capitation rates, effective July 1, [Reserved] 2003, recognize
         costs for anticipated contractor administrative expenditures due to
         Balanced Budget Act regulations.

8.6      [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

                                                                         VIII-11

<PAGE>

         [Reserved]

                                                                         VIII-12
<PAGE>
         [Reserved]

                                                                         VIII-13
<PAGE>

8.6      Health Based Payment System (HBPS) For The Abd Population Without
         Medicare

         The DMAHS shall utilize a Health-Based Payment System (HBPS) for
         reimbursements for the ABD population without Medicare to recognize
         larger average health care costs and greater dispersion around the
         average than other DMAHS populations. The contractor shall be
         reimbursed not only on the basis of the demographic cells into which
         individuals fall, but also on the basis of individual health status.

         The Chronic Disability Payment System (CDPS) (University of California,
         San Diego) is the HBPS or the system of Risk Adjustment that shall be
         used in this contract. The methodology for CDPS specific to New Jersey
         is provided in the Actuarial Certification Letter for Risk Adjustment
         issued separately to the contractor. Two base capitation rates and a
         DDD mental health/substance abuse add-on are developed for this
         population. These are:

         -        ABD without Medicare, non-DDD

         -        ABD - DDD without Medicare, physical health component

         -        ABD - DDD without Medicare, Mental Health/Substance Abuse
                  add-on-component

         The Risk adjustment process has four major components.

         -        Development of base rates for the risk adjusted populations.

         -        Development of algebraic expressions that relate demographic
                  and clinical characteristics of beneficiaries to their
                  expected, prospective covered health care costs, relative to
                  the cost of the average person in the populations. This
                  measure of cost relative to the average cost is known as the
                  individual case score. By definition, the average cost
                  beneficiary will have a case score of 1.0, others with more or
                  less costly conditions and demographic characteristics will
                  have scores that are greater or less than 1.0.

         -        Compilation of case scores for each beneficiary for whom
                  requisite data are available and establishment of criteria to
                  assign case scores to those without claims and eligibility
                  data.

         -        Based on the monthly enrollment, calculation of an average
                  case mix for each participating contractor. This average case
                  mix is normalized and used in conjunction with the base
                  capitation rate to determine the actual reimbursement to the
                  contractor for the risk-adjusted population, contemporaneous
                  with the monthly remittance.

                                                                         VIII-14

<PAGE>

8.7      THIRD PARTY LIABILITY

         A.       General. The contractor, and by extension its providers and
                  subcontractors, hereby agree to utilize, whenever available,
                  other public or private sources of payment for services
                  rendered to enrollees in the contractor's plan. "Third party",
                  for the purposes of this Article, shall mean any person or
                  entity who is or may be liable to pay for the care and
                  services rendered to a Medicaid beneficiary (See N.J.S.A.
                  30:4D-3m). Examples of a third party include a beneficiary's
                  health insurer, casualty insurer, a managed care organization,
                  Medicare, or an employer administered ERISA plan. Federal and
                  State law requires that Medicaid payments be last dollar
                  coverage and should be utilized only after all other sources
                  of third party liability (TPL) are exhausted, subject to the
                  exceptions in Section F below.

         B.       Third Party Coverage Unknown. If coverage through health or
                  casualty insurance is not known or is unavailable at the time
                  the claim is filed, then the claim must be paid and
                  postpayment recovery must be initiated within six months from
                  the date of service.

         C.       Capitation Rates. The State has taken into account historical
                  and/or anticipated cost avoidance and recovery due to the
                  existence of liable third parties in setting capitation rates
                  and determining the payment amounts. These factors do not
                  include any reductions due to tort recoveries, or to
                  recoveries made by the State from the estates of deceased
                  Medicaid beneficiaries. In addition, future rates may be based
                  upon the contractor's actual or expected performance involving
                  TPL. Consequently, it is in the interests of both the State
                  and the contractor for the contractor to maximize its revenue
                  by fully exhausting all sources of available third party
                  coverage.

         D.       Categories. Third party resources are categorized as 1) health
                  insurance, 2) casualty insurance, 3) legal causes of action
                  for damages, and 4) estate recoveries.

                  1.       Health Insurance. The contractor shall pursue and
                           collect payments from health insurers when health
                           insurance coverage is available, unless prior
                           approval to take other action is obtained from the
                           State. "Health insurance" shall include, but not be
                           limited to, coverage by any health care insurer, HMO,
                           Medicare, or an employer-administered ERISA plan.
                           Funds so collected shall be retained by the
                           contractor. In pursuing such recoveries, the
                           contractor may utilize the State's assignment and
                           subrogation authority to the extent permitted by
                           State law.

                           a.       The State shall have the right to pursue,
                                    collect, and retain payments from liable
                                    health insurers if the contractor has failed
                                    to initiate collection from the health
                                    insurer within six (6) months from the date
                                    of service. The contractor shall cooperate
                                    with the State in all such collection
                                    efforts, and shall also direct its providers
                                    to do so.

                                                                         VIII-15

<PAGE>

                  2.       Casualty Insurance. The contractor shall pursue and
                           collect payment from casualty insurance available to
                           the enrollee, unless prior approval to take other
                           action is obtained from the State. "Casualty
                           insurance" shall include, but not be limited to, no
                           fault auto insurance benefits, worker's compensation
                           benefits, and medical payments coverage through a
                           homeowner's insurance policy. Funds so collected
                           shall be retained by the contractor. In pursuing such
                           recoveries, the contractor may utilize the State's
                           assignment and subrogation authority to the extent
                           permitted by State law.

                           a.       The State shall have the right to pursue,
                                    collect, and retain casualty insurance
                                    payments where the contractor has failed to
                                    initiate collection within six (6) months
                                    from the date of service.

                  3.       Legal Causes of Action for Damages. The State shall
                           have the sole and exclusive right to pursue and
                           collect payments made by the contractor when a legal
                           cause of action for damages is instituted on behalf
                           of a Medicaid enrollee against a third party or when
                           the State receives notice that legal counsel has been
                           retained by or on behalf of any enrollee. The
                           contractor shall cooperate with the State in all
                           collection efforts, and shall also direct its
                           providers to do so. State collections identified as
                           contract or related resulting from such legal actions
                           will be retained by the State.

                  4.       Estate Recoveries. The State shall have the sole and
                           exclusive right to pursue and recover correctly paid
                           benefits from the estate of a deceased Medicaid
                           enrollee in accordance with federal and State law.
                           Such recoveries will be retained by the State.

         E.       Cost Avoidance.

                  1.       When the contractor is aware of health or casualty
                           insurance coverage prior to paying for a health care
                           service, it shall avoid payment by rejecting a
                           provider's claim and directing that the claim be
                           submitted first to the appropriate third party, or by
                           directing its provider to withhold payments to a
                           subcontractor.

                  2.       If insurance coverage is not available, or if one of
                           the exceptions to the cost avoidance rule discussed
                           below applies, then payment must be made and a claim
                           made against the third party, if it is determined
                           that the third party is or may be liable.

         F.       Exceptions to the Cost Avoidance Rule.

                  1.       In the following situations, the contractor must
                           first pay its providers and then coordinate with the
                           liable third party, unless prior approval to take
                           other action is obtained from the State.

                                                                         VIII-16

<PAGE>

                           a.       The coverage is derived from a parent whose
                                    obligation to pay support is being enforced
                                    by the Department of Human Services.

                           b.       The claim is for prenatal care for a
                                    pregnant woman or for preventive pediatric
                                    services (including EPSDT services) that are
                                    covered by the Medicaid program.

                           c.       The claim is for labor, delivery, and
                                    post-partum care and does not involve
                                    hospital costs associated with the inpatient
                                    hospital stay.

                           d.       The claim is for a child who is in a DYFS
                                    supported out of home placement.

                           e.       The claim involves coverage or services
                                    mentioned in 1.a, 1.b, 1.c, or 1.d, above
                                    in combination with another service.

                  2.       If the contractor knows that the third party will
                           neither pay for nor provide the covered service, and
                           the service is medically necessary, the contractor
                           shall neither deny payment for the service nor
                           require a written denial from the third party.

                  3.       If the contractor does not know whether a particular
                           service is covered by the third party, and the
                           service is medically necessary, the contractor shall
                           contact the third party and determine whether or not
                           such service is covered rather than requiring the
                           enrollee to do so. Further, the contractor shall
                           require the provider or subcontractor to bill the
                           third party if coverage is available.

                  4.       Postpayment recovery rather than cost avoidance is
                           necessary in cases where the contractor was not aware
                           of third party coverage at the time that services
                           were rendered or paid for, or was unable to cost
                           avoid, in accordance with the provisions of this
                           Article as applicable. Under these circumstances, the
                           contractor shall identify all potentially liable
                           third parties and pursue reimbursement from them,
                           unless prior approval to take other action is
                           obtained from the State. In pursuing such recoveries,
                           the contractor may utilize the State's assignment and
                           subrogation authority to the extent permitted by
                           State law. This provision shall not apply in the case
                           of any tort matter but rather the provisions of
                           Article 8.7D.3 shall be applicable.

         G.       Sharing of TPL Information by the State.

                  1.       By the fifteenth (15th) day of every month, the State
                           may provide the contractor with a list of all known
                           health insurance coverage information for the purpose
                           of updating the contractor's files.

                                                                         VIII-17

<PAGE>

                  2.       Additionally, the State may provide a quarterly
                           health insurer file to the contractor that will
                           contain all of the health insurers that the State has
                           on file and related information that is needed in
                           order to file TPL claims.

         H.       Sharing of TPL Information by the Contractor.

                  1.       The contractor shall notify the State within thirty
                           (30) days after it learns that an enrollee has health
                           insurance coverage not reflected in the State's
                           health insurance coverage file, or casualty insurance
                           coverage, or of any change in an enrollee's health
                           insurance coverage. (See Section A.8.1 of the
                           Appendices.) The contractor shall impose a
                           corresponding requirement upon its servicing
                           providers to notify it of any newly discovered
                           coverage, or of any changes in an enrollee's health
                           insurance coverage.

                  2.       When the contractor becomes aware that an enrollee
                           has retained counsel, who either may institute or has
                           instituted a legal cause of action for damages
                           against a third party, the contractor shall notify
                           the State in writing, including the enrollee's name
                           and Medicaid identification number, date of
                           accident/incident, nature of injury, name and address
                           of enrollee's legal representative, copies of
                           pleadings, and any other documents related to the
                           action in the contractor's possession or control.
                           This shall include, but not be limited to (for each
                           service date on or subsequent to the date of the
                           accident/incident), the name of the provider,
                           practitioner or subcontractor, the enrollee's
                           diagnosis, the nature of the service provided to the
                           enrollee, and the amount paid to the provider (or to
                           a provider's authorized subcontractor) by the
                           contractor for each service. A form is available for
                           this purpose and is included in Section A.8.2 of the
                           Appendices.

                  3.       The contractor shall notify the State within thirty
                           (30) days of the date it becomes aware of the death
                           of one of its Medicaid enrollees age fifty-five (55)
                           or older, giving the enrollee's full name, Social
                           Security Number, Medicaid identification number, and
                           date of death. The State will then determine whether
                           it can recover correctly paid Medicaid benefits from
                           the enrollee's estate.

                  4.       The contractor agrees to cooperate with the State's
                           efforts to maximize the collection of third party
                           payments by providing to the State updates to the
                           information required by this Article.

         I.       Enrollment Exclusions and Contractor Liability for the Costs
                  of Care.

                  1.       Any Medicaid beneficiary enrolled in or covered by
                           either a Medicare or commercial HMO will not be
                           enrolled by the contractor. The only

                                                                         VIII-18

<PAGE>

                           exception to this exclusion from enrollment is when
                           the contractor and the beneficiary's
                           Medicare/commercial HMO are the same. When
                           beneficiaries are enrolled under this exception,
                           appropriate reductions will be made in the State's
                           capitation payments to the contractor.

                  2.       If the contractor and the Medicaid beneficiary's
                           Medicare or commercial HMO are the same, the
                           contractor will be responsible for either:

                           a.       Paying all cost-sharing expenses of the
                                    Medicaid beneficiary; or

                           b.       Addressing cost sharing in the contracts
                                    with its providers in such a way that the
                                    Medicaid beneficiary is not liable for any
                                    cost sharing expenses, subject to subarticle
                                    3 below.

                  3.       If a Medicaid beneficiary otherwise covered by the
                           provisions of subarticle 2 above wishes to utilize a
                           provider outside of the Medicare or commercial HMO's
                           network, the HMO's rules apply. Failure to follow the
                           HMO's rules relieves both the contractor and the
                           State of any liability for the cost of the care and
                           services rendered to the beneficiary, subject to
                           subarticle 4 below.

                  4.       The only exception to subarticle 3 above is if the
                           HMO's rules cannot be followed solely because
                           emergency services were provided by a
                           nonparticipating provider, practitioner, or
                           subcontractor because the services were immediately
                           required due to sudden or unexpected onset of a
                           medical condition. In this circumstance, the
                           contractor remains responsible for the cost of the
                           care and services rendered to the beneficiary.

                  5.       If a Medicaid beneficiary enrolled with the
                           contractor is also enrolled in or covered by a health
                           or casualty insurer other than a Medicare or
                           commercial HMO, the contractor is fully responsible
                           for coordinating benefits so as to maximize the
                           utilization of third party coverage in accordance
                           with the provisions of this Article. The contractor
                           shall be responsible for payment of the enrollee's
                           coinsurance, deductibles copayments and other
                           cost-sharing expenses, but the contractor's total
                           liability shall not exceed what it would have paid in
                           the absence of TPL. The contractor shall coordinate
                           benefits and payments with the health or casualty
                           insurer for services authorized by the contractor,
                           but provided outside the contractor's plan. The
                           contractor remains responsible for the costs incurred
                           by the beneficiary with respect to care and services
                           which are included in the contractor's capitation
                           rate, but which are not covered or payable under the
                           health or casualty insurer's plan.

                  6.       The State will continue to pay Medicare Part A and
                           Part B premiums for Medicare/Medicaid dual eligibles
                           and Qualified Medicare Beneficiaries.

                                                                         VIII-19

<PAGE>

                  7.       Any references to Medicare coverage in this Article
                           shall apply to both Medicare/Medicaid dual eligibles
                           and Qualified Medicare Beneficiaries.

        J.        Other Protections for Medicaid Enrollees.

                  1.       The contractor shall not impose, or allow its
                           participating providers or subcontractors to impose,
                           cost-sharing charges of any kind upon Medicaid
                           beneficiaries enrolled in the contractor's plan
                           pursuant to this contract. This Article does not
                           apply to individuals eligible solely through the NJ
                           FamilyCare Program Plan C or D [Reserved] for whom
                           providers will be required to collect cost-sharing
                           for certain services.

                  2.       The contractor's obligations under this Article shall
                           not be imposed upon the enrollees, although the
                           contractor shall require enrollees to cooperate in
                           the identification of any and all other potential
                           sources of payment for services. Instances of
                           non-cooperation shall be referred to the State.

                  3.       The contractor shall neither encourage nor require a
                           Medicaid enrollee to reduce or terminate TPL
                           coverage.

                  4.       Unless otherwise permitted or required by federal and
                           State law, health care services cannot be denied to a
                           Medicaid enrollee because of a third party's
                           potential liability to pay for the services, and the
                           contractor shall ensure that its cost avoidance
                           efforts do not prevent an enrollee from receiving
                           medically necessary services.

8.8      COMPENSATION/CAPITATION CONTRACTUAL REQUIREMENTS

         A.       Contractor Compensation. Compensation to the contractor shall
                  consist of monthly capitation payments, supplemental payments
                  per pregnancy outcome/delivery, certain blood products for
                  hemophilia factors VIII & IX disorders, and payment for
                  certain HIV/AIDS drugs. Contractors must agree to enroll all
                  non-exempt Aged, Blind and Disabled and NJ FamilyCare
                  beneficiaries to qualify to serve AFDC/TANF beneficiaries.

         B.       Capitation Payment Schedule. DMAHS hereby agrees to pay the
                  capitation by the fifteenth (15th) day of any month during
                  which health care services will be available to an enrollee;
                  provided that information pertaining to enrollment and
                  eligibility, which is necessary to determine the amount of
                  said payment, is received by DMAHS within the time limitation
                  contained in Article 5 of this contract.

         C.       [Reserved] Capitation Rates and Budget Neutrality/-Cost-
                  Effectiveness. The contractor shall receive monthly capitation
                  payments, for a

                                                                         VIII-20

<PAGE>

                  defined scope of services to be furnished to a defined number
                  of enrollees, for providing the services contained in the
                  Benefits Package described in Article 4.1 of this contract.
                  Such payments [Reserved] Shall be in accordance with 42 cfr
                  438.6(c). The CONTRACTOR shall receive a rate certification
                  letter demonstrating actuarial soundness.

         D.       Adjustments and Renegotiation of Capitation Rates. Capitation
                  rates are prospective in nature and will not be adjusted
                  retroactively or subject to renegotiation during the contract
                  period except as explicitly noted in the contract. Capitation
                  rates will be paid only for eligible beneficiaries enrolled
                  during the period for which the adjusted capitation payments
                  are being made. Payments provided for under the contract will
                  be denied for new enrollees when, and for so long as, payments
                  for those enrollees [Reserved] are denied by [Reserved] CMS
                  under 42 C.F.R. [Reserved] 438.730.

         E.       Payment by State Fiscal Agent. The State fiscal agent will
                  make payments to the contractor.

         F.       Payment in Full. The monthly capitation payments plus
                  supplemental payments for pregnancy outcomes and payment for
                  certain HIV/AIDS drugs and blood clotting factors VIII and IX
                  to the contractor shall constitute full and complete payment
                  to the contractor and full discharge of any and all
                  responsibility by the Division for the costs of all services
                  that the contractor provides pursuant to this contract.

         G.       Payments to Providers. Payments shall not be made on behalf of
                  an enrollee to providers of health care services other than
                  the contractor for the benefits covered in Article Four and
                  rendered during the term of this contract.

         H.       Time Period for Capitation Payment per Enrollee. The monthly
                  capitation payment per enrollee is due to the contractor from
                  the effective date of an enrollee's enrollment until the
                  effective date of termination of enrollment or termination of
                  this contract, whichever occurs first.

         I.       Payment If Enrollment Begins after First Day of Month. When
                  DMAHS' capitation payment obligation is computed, if an
                  enrollee's coverage begins after the first day of a month,
                  DMAHS will pay the contractor a fractional capitation payment
                  that is proportionate to the part of the month during which
                  the contractor provides coverage. Payments are calculated and
                  made to the last day of a calendar month except as noted in
                  this Article.

                                                                         VIII-21

<PAGE>

         J.       Risk Assumption. The capitation rates shall not include any
                  amount for recoupment of any losses suffered by the contractor
                  for risks assumed under this contract or any prior contract
                  with the Department.

         K.       Hospitalizations. For any eligible person who applies for
                  participation in the contractor's plan, but who is
                  hospitalized prior to the time coverage under the plan becomes
                  effective, such coverage shall not commence until the date
                  after such person is discharged from the hospital and DMAHS
                  shall be liable for payment for the hospitalization, including
                  any charges for readmission within forty-eight (48) hours of
                  discharge for the same diagnosis. If an enrollee's
                  disenrollment or termination becomes effective during a
                  hospitalization, the contractor shall be liable for
                  hospitalization until the date such person is discharged from
                  the hospital, including any charges for readmission within
                  forty-eight (48) hours of discharge for the same diagnosis.
                  The contractor must notify DMAHS of these occurrences to
                  facilitate payment to appropriate providers.

         L.       Continuation of Benefits. The contractor shall continue
                  benefits for all enrollees for the duration of the contract
                  period for which capitation payments have been made, including
                  enrollees in an inpatient facility until discharge. The
                  contractor shall notify DMAHS of these occurrences.

8.9      CONTRACTOR ADVANCED PAYMENTS AND PIPS TO PROVIDERS

         A.       The contractor shall make advance payments to its providers,
                  capitation, FFS, or other financial reimbursement arrangement,
                  based on a provider's historical billing or utilization of
                  services if the contractor's claims processing systems become
                  inoperational or experience any difficulty in making timely
                  payments. Under no circumstances shall the contractor default
                  on the claims payment timeliness provisions of this contract.
                  Advance payments shall also be made when compliance with
                  claims payment timeliness is less than ninety (90) percent for
                  two (2) quarters. Such advance payments will continue until
                  the contractor is in full compliance with timely payment
                  provisions for two (2) successive quarters.

         B.       Periodic Interim Payments (PEPs) to Hospitals. The contractor
                  shall provide periodic interim payments to participating,
                  PIP-qualifying hospitals.

                  1.       Designation of PIP-Qualifying Hospitals. Each
                           quarter, DMAHS shall determine which hospitals
                           qualify for monthly PIPs.

                  2.       When Contractor is Required to Make PIPs. The
                           contractor shall make PIPs to a participating
                           (network provider), qualifying hospital when the
                           average monthly payment from the contractor to the
                           hospital is at least $100,000 for the most recent
                           six-month period excluding outliers. An outlier is
                           defined as a single admission for which the payment
                           to the hospital exceeds $100,000. It should be noted
                           that outlier claims paid are

                                                                         VIII-22

<PAGE>

                           included in the establishment of the monthly PIPs and
                           the reconciliation of the PIPs.

                  3.       Methodologies to Establish Amount of PIPs.

                           a.       The contractor may work out a mutually
                                    agreeable arrangement with the participating
                                    PIP-qualifying hospitals for developing a
                                    methodology for determining the amount of
                                    the PIPs and reconciling the PIP advances to
                                    paid claims. If a mutually agreeable
                                    arrangement cannot be reached, the
                                    contractor shall make PIPs in accordance
                                    with the methodology described in 3.b.
                                    below.

                           b.       Beginning August 1, 2000, the contractor
                                    shall provide a participating,
                                    PIP-qualifying hospital with an initial
                                    60-day PIP (representing two 30-day cash
                                    advances) which shall be reconciled using a
                                    claims offset process, with the first 30-day
                                    PIP reconciled to claims adjudicated during
                                    the first month following the initial PIP
                                    (August), and the second 30-day PIP
                                    reconciled to claims adjudicated during the
                                    second month following the initial PIP
                                    (September). In September 2000 and all
                                    subsequent months, the hospital shall
                                    receive a 30-day PIP which shall be offset
                                    against claims adjudicated at the end of the
                                    following month. At reconciliation, any
                                    excess claims adjudicated above the PIP
                                    amount shall result in an additional payment
                                    to the hospital equal to the value of any
                                    excess claims above the PIP. If the value of
                                    claims adjudicated is less than the PIP, the
                                    shortage shall be offset against the next
                                    PIP made to the hospital. An example of how
                                    this methodology shall work is as follows:

         EXAMPLE:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
                     PIP           Claims          Reconciliation        Net
                   Payment       Adjudicated         Adjustment        Payment          Balance
-----------------------------------------------------------------------------------------------
<S>              <C>             <C>               <C>                 <C>              <C>
Aug 1            300,000 (A)
-----------------------------------------------------------------------------------------------
Aug 1            300,000 (B)                                                            600,000
-----------------------------------------------------------------------------------------------
Aug 1-31                           180,000                                              420,000
-----------------------------------------------------------------------------------------------
Sept 1           300,000 (C)                        (120,000) (A)       180,000         600,000
-----------------------------------------------------------------------------------------------
Sept 1-30                          270,000                                              330,000
-----------------------------------------------------------------------------------------------
Oct l            300,000 (D)                         (30,000) (B)       270,000         600,000
-----------------------------------------------------------------------------------------------
Oct l-31                           320,000                                              280,000
-----------------------------------------------------------------------------------------------
Nov l            300,000 (E)                          20,000  (C)       320,000         600,000
-----------------------------------------------------------------------------------------------
</TABLE>

8.10     FEDERALLY QUALIFIED HEALTH CENTERS

                                                                         VIII-23

<PAGE>

         A.       Standards for Contractor FQHC Rates. The contractor shall not
                  reimburse FQHCs less than the level and amount of payment that
                  the contractor would make for a similar set of services if the
                  services were furnished by a non-FQHC. The contractor may pay
                  the FQHCs on a fee-for-service or capitated basis. The
                  contractor shall make payments for primary care equal to, or
                  greater than, the average amounts paid to other primary care
                  providers. Non-primary care services may be included if
                  mutually agreeable between the contractor and FQHC. For
                  non-primary care services, payments shall be equal to, or
                  greater than, the average amounts paid to other non-primary
                  care providers for equivalent services.

         B.       DMAHS Reimbursement to FQHCs. Under Title XIX, an FQHC shall
                  be paid reasonable cost reimbursement by DMAHS. At the end of
                  each fiscal year the contractor and the FQHC will complete
                  certain reporting requirements specified that will enable
                  DMAHS to determine reasonable costs and compare that to what
                  was actually paid by the contractor to the FQHC. DMAHS will
                  reimburse the FQHC for the difference (i.e., difference
                  between the determined reasonable cost per encounter and the
                  payments to the FQHC made by the contractor and DMAHS) if the
                  payments by the contractor to the FQHC are less than
                  reasonable costs. DMAHS will recoup payments from the FQHC in
                  excess of reasonable costs. FQHC providers must meet the
                  contractor's credentialing and program requirements.

         C.       Contractor Participation in Reconciliation Process. The
                  contractor shall participate in the reconciliation processes
                  if there is a dispute between what the contractor reported
                  (See Section A.7.20 of the Appendices (Table 18)) and what the
                  FQHC reported as valid encounters or payments. This
                  participation may include appearances in the Office of
                  Administrative Law, as well as meeting with DMAHS staff.

8.11     SCHOOL-BASED HEALTH SERVICE PROGRAMS

         Standards for contractor rates for school-based health service
         programs. The contractor and the Children's Hospital of New Jersey
         shall establish the rates of reimbursement for the health care services
         provided by the designated school-based clinics. The rates shall not be
         less than the median rates that the contractor currently reimburses
         primary health care and dental providers in Essex County. The
         contractor shall submit to DMAHS for review and approval the
         methodology and reimbursement rates for school-based services covered
         by state law. The submission shall demonstrate that the reimbursement
         rates established are not less than the median rates paid by the
         contractor to other primary and dental care providers in Essex county,
         as prescribed by law.

                                                                         VIII-24
<PAGE>

                         TABLE OF CONTENTS - APPENDICES

SECTION A         REPORTS

[Reserved]

A.1.0    DEFINITIONS

         (no reports)

A.2.0    CONDITIONS PRECEDENT

         (no reports)

A.3.0    MANAGED CARE MANAGEMENT INFORMATION SYSTEM

A.3.1    Monthly HMO Reconciliation File

A.4.0    PROVISION OF HEALTH CARE SERVICES

A.4.1    Provider Network File
A.4.2    [Reserved] RESERVED
A.4.3    Network Accessibility Analysis
A.4.4    Certification of Contractor Provider Network

A.5.0    ENROLLEE SERVICES

A.5.1    Enrollee P-Factor

A.6.0    PROVIDER INFORMATION

         (no reports)

A.7.0    TERMS AND CONDITIONS

A.7.1    Certification Regarding Lobbying
A.7.2    Fraud and Abuse
A.7.3    Table 1 - Medicaid Enrollment by PCP
A.7.4    Table 2 - Disenrollment From Plan
A.7.5    Table 3 - Grievance Summary
A.7.6    Table 4 - Claims Lag Report
A.7.7    Table 5 - Hospital-specific Data
A.7.8    Table 6 - Statement of Revenues and Expenses
A.7.9    Table 7 - Stop-Loss Summary

<PAGE>

A.7.10   Table 8 - Medicaid Claims Analysis
A.7.11   Table 9 - Health Care Data Elements
A.7.12   Table 10 - Third Party Liability Collections
A.7.13   Table 11 - Provider Additions and Deletions
A.7.14   Table 12 - Referrals Made to the WIC Program
A.7.15   Table 13 - Access to HIV Testing/Treatment for Pregnant Women
A.7.16   Table 14 - EPSDT Services
A.7.17   Table 15 - Pharmacy Lock-In Participants
A.7.18   Table 16 - Ratio of Prior Authorizations Denied to Requested
A.7.19   Table 17 - RESERVED
A.7.20   Table 18 - Federally Qualified Health Center Payments
A.7.21   Table 19 - Income Statement by Rate Cell Grouping
A.7.22   Table 20 - Lag Reports
A.7.23   TABLE 21 - MATERNITY OUTCOME COUNTS

A.8.0    FINANCIAL PROVISIONS

A.8.1    Other Coverage Information
A.8.2    Tort/Accident Referral Form

SECTION B         REFERENCE MATERIALS

B.1.0    DEFINITIONS

         (no reference documents)

B.2.0    CONDITIONS PRECEDENT

B.2.1    RESERVED
B.2.2    [Reserved] RESERVED
B.2.3    Readiness Review

B.3.0    MANAGED CARE MANAGEMENT INFORMATION SYSTEM

B.3.1    Monthly Roster Extract File
B.3.2    Managed Care Register File
B.3.3    [Reserved] RESERVED

B.4.0    PROVISION OF HEALTH CARE SERVICES

B.4.1    Benefit Packages
B.4.2    HealthStart Guidelines
B.4.3    [Reserved] RESERVED
B.4.4    RESERVED
B.4.5    Head Start Programs

<PAGE>

B.4.6    School-Based Youth Services Programs
B.4.7    Local Health Departments
B.4.8    WIC Referral Forms
B.4.9    Mental Health/Substance Abuse Screening Tools
B.4.10   Centers of Excellence
B.4.11   County Case Management Units
B.4.12   Care Management Flowchart
B.4.13   Ryan White CARE Act Grantees
B.4.14   New Jersey Modified QARI/QISMC Standards
B.4.15   Hysterectomy and Sterilization Procedures and Consent Forms
B.4.16   Child Abuse Regional Diagnostic Centers
B.4.17   DUR Standards

B.5.0    ENROLLEE SERVICES

B.5.1    Notification of Newborns
B.5.2    Cost-Sharing Requirements for NJ FamilyCare Plans C & D

B.6.0    PROVIDER INFORMATION

         (No reference materials)

B.7.0    TERMS AND CONDITIONS

B.7.1    Physician Incentive Plan Provisions
B.7.2    Provider Contract/Subcontract Provisions
B.7.3    Financial Guide for Reporting Medicaid/NJ FamilyCare Rate Cell Grouping
         Costs
B.7.4    Agreed Upon Procedures - For Rate Cell Cost Reports

SECTION C         CAPITATION RATES

SECTION D         CONTRACTOR'S DOCUMENTATION

D.1      Contractor's QAPI/Utilization Management Plans
D.2      Contractor's Grievance Process
D.3      Contractor's Provider Network
D.4      Contractor's List of Subcontractors
D.5      Contractor's Supplemental Benefits
D.6      Contractor's Representative

<PAGE>

                                   APPENDICES

<PAGE>

                                   SECTION A
                                    REPORTS

The State has defined operational and financial reports the contractor must
submit. The reports in this section are those for which the State has a defined
format or template or multiple data elements. The reports are referenced
according to the contract Article to which they correspond, beginning with
Article 3. In cases where a specific report format or template does not exist,
the State instead has defined required report elements, all of which must be
addressed in full. The actual structure of such reports is being left to the
discretion of the contractor. Note that additional reports are required and
described in the contract.[Reserved]

<PAGE>

[Reserved]

<PAGE>

A.3.0    MANAGED CARE MANAGEMENT INFORMATION SYSTEM
<PAGE>

A.3.1    MONTHLY HMO RECONCILIATION FILE

The following is submitted by the contractor to DMAHS' fiscal agent.

<PAGE>

                               STATE OF NEW JERSEY
                          DEPARTMENT OF HUMAN SERVICES
               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES
                    OFFICE OF MANAGEMENT INFORMATION SYSTEMS

                                   File Layout

HMO Reconciliation File                                           _____________0
    File Name                                                     Effective Date

_____________0                            100     0               _____________0
Data Set Name                    Record Size - Bytes                Block Size

<TABLE>
<CAPTION>
                                                                          Cobol
ELEMENT     FIELD NAME      CHARS.   BYTES   BYTES # REL TO 1   FORMAT   PICTURE   DESCRIPTION AND/OR REMARKS
-------------------------------------------------------------------------------------------------------------
<S>       <C>               <C>      <C>     <C>                <C>      <C>       <C>
  1             Medicaid-     12      12            1-12         Num      9(12)           Enrollee's Medicaid
                   Number                                                                              Number
-------------------------------------------------------------------------------------------------------------
  2             Last-Name     12      12           13-24          AN      x(12)          Enrollee's Last Name
-------------------------------------------------------------------------------------------------------------
  3            First-Name      7       7           25-31          AN       x(7)         Enrollee's First Name
-------------------------------------------------------------------------------------------------------------
  4                   DOB      8       8           32-39         Num       9(8)      Enrollee's Date of Birth
-------------------------------------------------------------------------------------------------------------
  5                   SSN      9       9           40-48          AN       x(9)             Enrollee's Social
                                                                                                 Security No.
-------------------------------------------------------------------------------------------------------------
  6       Effect-Enrollee      8       8           49-56         Num       9(8)             Effective date of
                                                                                   enrollment mmddyyyy format
-------------------------------------------------------------------------------------------------------------
  7        Disenroll-Date      8       8           57-64         Num       9(8)            Disenrollment date
                                                                                              mmddyyyy format
-------------------------------------------------------------------------------------------------------------
  8                Filler     33      33           65-97          AN      x(33)           As Needed/If Needed
-------------------------------------------------------------------------------------------------------------
  9             Plan-Code      3       3          98-100          AN       x(3)                 ### (078-098)
-------------------------------------------------------------------------------------------------------------
</TABLE>

Format:  Num = Numeric
         AN = Alpha-Numeric
         PD = Packed Decimal
         BI = Binary

<PAGE>

A.4.0    PROVISION OF HEALTH CARE SERVICES

<PAGE>

A.4.1   PROVIDER NETWORK FILE

<PAGE>

ELECTRONIC MEDIA PROVIDER FILES

There are two provider file layouts; Non-Institutional and Institutional or
Ancillary. Each file type should include all counties in which the contractor
will be operational for Medicaid and NJ FamilyCare. Contractors will be required
to submit complete and up-to-date network files monthly to [Reserved]DMAHS.

Non-Institutional Provider Network Files must include all health care
professionals - Primary Care Practitioners (PCPs), physician specialists,
general dentists, dental specialists, other health care professionals such as
optometrists, chiropractors, therapists, etc. with appropriate primary care or
specialty care indicators.

The Institutional Network File must include all other ancillary, hospital and
specialty care providers.

All provider files must be submitted in an electronic format, in ASCII text
fixed-width format according to the specifications in Attachments A & B. Please
note that field names are not carried with the data in this format. Therefore,
it is not necessary to use the field names as they appear. However, it is
imperative to use the specified field order and sizes (i.e. the full structure)
even if only submitting a subset of your network. You must allow for the
specified number of spaces for every requested data field.

File names are to conform to the following convention, (e.g. @***####.txt)
         where @ = 'i' for institutional or 'n' for non-institutional.
         where *** = plan code
         where #### = month and day
<PAGE>

                                  ATTACHMENT A
                         New Jersey Department of Human
 Services, Division of Medical Assistance and Health Services, Office of Managed
                                   Health Care
           HMO Non-Institutional Provider Network File Specifications

<TABLE>
<CAPTION>
                                  When
Field     Field Name     Size   Required   Definition                                                       Example
---------------------------------------------------------------------------------------------------------------------------------
<S>     <C>              <C>    <C>        <C>                                                              <C>
  1     Last Name         22       A       Individual Provider's Surname; may include Jr. or III. Name      Jones, Jr.
                                           of group or medical school is unacceptable
---------------------------------------------------------------------------------------------------------------------------------
  2     First Name        15       A       Provider's First Name; should include middle initial. Name of    Tom T.
                                           group or medical school is unacceptable
---------------------------------------------------------------------------------------------------------------------------------
  3     SSN                9       A       Provider's Social Security Number. Do not use hyphens or         150999999
                                           spaces.
---------------------------------------------------------------------------------------------------------------------------------
  4     Tax ID             9       B       Provider's Tax ID Number. Do not use hyphens or spaces.          229999999
---------------------------------------------------------------------------------------------------------------------------------
  5     Degree             5       A       MD, DO, etc. Do not use periods.                                 DO
---------------------------------------------------------------------------------------------------------------------------------
  6     Primary            1       A       Is this a primary care provider? (Y or N)                        Y
                                           Do not indicate Y for dental providers.
---------------------------------------------------------------------------------------------------------------------------------
  7     Practice Name     45       B       Name of Practice if different than provider's last name          Jones Family Practice
---------------------------------------------------------------------------------------------------------------------------------
  8     Address 1         60       A       Place where services are rendered. Always start with street      225 Main St.
                                           number if one is contained in the actual address of the
                                           practice. "Serving This Area" is not acceptable.
---------------------------------------------------------------------------------------------------------------------------------
  9     Address 2         30       B       Building Name, PO Box etc.                                       Suite 3
---------------------------------------------------------------------------------------------------------------------------------
 10     City              22       A       Proper Name for Municipality in which practice office is         South Orange
                                           located. No abbreviations.
---------------------------------------------------------------------------------------------------------------------------------
 11     State              2       A       Two Character State Abbreviation, NJ or other with rare          NJ
                                           exceptions
---------------------------------------------------------------------------------------------------------------------------------
 12     Zip                5       A       5 Digit Zip Code                                                 08888
---------------------------------------------------------------------------------------------------------------------------------
 13     Phone             15       A       Include Area Code, Prefix & Number. No spaces or dashes.         6095882705
---------------------------------------------------------------------------------------------------------------------------------
 14     County             2       A       Two digit code for county in which office is actually located    07
---------------------------------------------------------------------------------------------------------------------------------
 15     Office Hours      60       A       List days and hours when patients can be seen at this site.      M9-5, T1-5, Th1-7,
---------------------------------------------------------------------------------------------------------------------------------
 16     Specialty Code     3       A       See list. List only one per record[Reserved]                     080167
---------------------------------------------------------------------------------------------------------------------------------
 17     Age                4       B       [Reserved] Specialty code in string field 16, 1st 2 = min        00000018
        Restrictions                       age, 2nd 2 = max age, 0000 if none for a specialty. Omit if
                                           no specialty is limited.
---------------------------------------------------------------------------------------------------------------------------------
 18     Hosp Affll        35       B       Hospital where provider has admitting privileges.                Newark- Beth Israel
                                           *Required for Physicians, Podiatrists & Oral Surgeons.
---------------------------------------------------------------------------------------------------------------------------------
 19     Hosp Affl2        35       B       If more than One
---------------------------------------------------------------------------------------------------------------------------------
 20     Hosp Affl3        35       B       If more than Two
---------------------------------------------------------------------------------------------------------------------------------
 21     Hosp Affl4        35       B       If more than Three
---------------------------------------------------------------------------------------------------------------------------------
 22     Hosp Affl5        35       B       If more than Four
---------------------------------------------------------------------------------------------------------------------------------
 23     Languages         10       A       Must be at least one even if English; See code list.             EFG9
                                           No Spaces/Commas/Slashes/Hyphens, etc.
---------------------------------------------------------------------------------------------------------------------------------
 24     Plan Code          3       A       Three Digit Plan Code                                            099
---------------------------------------------------------------------------------------------------------------------------------
 25     Panel Status       1       A       O = Open, F = Frozen (no new patients)                           O
---------------------------------------------------------------------------------------------------------------------------------
 26     Specialty Name    30       A       Show one narrative specialty name per record.                    Family Practice
---------------------------------------------------------------------------------------------------------------------------------
 27     Panel Capacity     4       B       Potential Number of Members: PCPs & General Dentists,            1500
                                           should not exceed 1500 unless authorized by DMAHS
---------------------------------------------------------------------------------------------------------------------------------
 28     Members            4       B       Actual Number of Members Assigned: PCPs & Dentists               900
        Assigned
---------------------------------------------------------------------------------------------------------------------------------
 29     Record Type        3       B       a = addition of record to file (excludes d)                      s a
                                           d = deletion of record from file (excludes a & c)
                                           s = multiple listing of provider, unique specialty
                                           l = multiple listing of provider, unique location
                                           Use all that apply. No commas. Spaces allowed.
---------------------------------------------------------------------------------------------------------------------------------
 30     Date              10       A       Fill with date Network Update File or Application Network        06/01/2000
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>     <C>               <C>      <C>     <C>                                                              <C>
                                           File was submitted to [Reserved]DMAHS mm/dd/yyyy.
---------------------------------------------------------------------------------------------------------------------------------
 31     Servicing          4       B       If other than actual county; include a record for each
        County                             county served. Out-of-county physicians may not be
                                           considered in applications except [Reserved] where
                                           specified in the contract
---------------------------------------------------------------------------------------------------------------------------------
 32     Total Hours        2       A       Total number of hours for record. Round down.                    20
---------------------------------------------------------------------------------------------------------------------------------
 33     Medicaid ID        7       A       Provider's Medicaid ID                                           1234567
---------------------------------------------------------------------------------------------------------------------------------
 34     Special Needs      5       A       Indicates provider has expertise serving specific populations.
        Indicator                          Use all OMHC special needs codes that apply to provider.
---------------------------------------------------------------------------------------------------------------------------------
 35     Handicapped        1       C       Use Y if facility is Handicapped Accessible
        Accessible
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

A = Always Required          B = Required When Applicable           C = Optional

<PAGE>

                                  ATTACHMENT B

   New Jersey Department of Human Services, Division of Medical Assistance and
                                Health Services,
                          Office of Managed Health Care
             HMO Institutional Provider Network File Specifications

<TABLE>
<CAPTION>
                                  When
Field     Field Name     Size   Required                         Definition                                    Example
---------------------------------------------------------------------------------------------------------------------------------
<S>     <C>              <C>    <C>        <C>                                                              <C>
  1     Provider Name     45       A                                                                        Doc's Drugs
---------------------------------------------------------------------------------------------------------------------------------
  2     Provider Type     30       A                                                                        Pharmacy
---------------------------------------------------------------------------------------------------------------------------------
  3     Provider Tax ID    9       A       Provider's Tax ID Number                                         229999999
---------------------------------------------------------------------------------------------------------------------------------
  4     Address 1         60       A       Always start with street number if one is contained              22 Main St.
                                           in the actual address of the practice. "Serving This
                                           Area" is not acceptable.
---------------------------------------------------------------------------------------------------------------------------------
  5     Address 2         30       B       Building Name, PO Box etc.                                       Suite 3
---------------------------------------------------------------------------------------------------------------------------------
  6     City              22       A       Proper Name for Municipality in which practice                   South Orange
                                           office is located. Use no abbreviations
---------------------------------------------------------------------------------------------------------------------------------
  7     State              2       A       Two Character State Abbreviation, NJ with rare                   NJ
                                           exceptions.
---------------------------------------------------------------------------------------------------------------------------------
  8     Zip                5       A       5 Digit Zip Codes                                                08888
---------------------------------------------------------------------------------------------------------------------------------
  9     Phone             15       A       Include Area Code, Prefix & Number. Don't include                6095882705
                                           spaces or dashes.
---------------------------------------------------------------------------------------------------------------------------------
 10     County             2       A       Two digit code for county in which office is                     07
                                           actually located.
---------------------------------------------------------------------------------------------------------------------------------
 11     Plan Code          3       A       Three Digit Plan Code.                                           099
---------------------------------------------------------------------------------------------------------------------------------
 12     Specialty Code     3       A       See code list. Use one.                                          500
---------------------------------------------------------------------------------------------------------------------------------
 13     Servicing          4       B       If other than actual county; include a record for
        County                             each county served. Out-of-county institutions may
                                           not be considered in applications except where
                                           specified in the contract.
---------------------------------------------------------------------------------------------------------------------------------
 14     Date              10       A       Fill with date Network Update File or                            06/01/2000
                                           Application Network File was submitted to DMAHS mm/dd/yyyy
---------------------------------------------------------------------------------------------------------------------------------
 15     Record Type        1       B       a = addition of record to file (excludes d)                      a
                                           d = deletion of record from file (excludes a)
---------------------------------------------------------------------------------------------------------------------------------
 16     Medicaid ID        7       B       Provider's Medicaid ID                                           1234567
---------------------------------------------------------------------------------------------------------------------------------
 17     Hospital Code      3       B       Unique Hospital Code                                             999
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

A = Always Required

B = Required When Applicable

<PAGE>

                                  ATTACHMENT C
                          NJ DMAHS OMHC Specialty Codes
                      NETWORK FILES ONLY - NOT FOR BILLING

000      Unknown
010      General Practice
020      General Surgery
021      Surgery, Pediatric
030      Allergy
031      Ped Allergy
032      Medical Toxicology
034      Infectious Disease
035      Pediatric Infectious Disease
036      Endocrinology
037      Reproductive Endocrinology
038      Pediatric Endocrinology
040      Otology, Laryngology, Rhinolgy, Ototaryngology/ENT
041      ENT Pediatric
042      Speech
043      Audiology
050      Anesthesiology '
051      Ped Anesthesiology
060      Cardiology, Cardiovascular Disease
061      Pediatric Cardiology
070      Dermatology
080      Family Practice
082      NP Family
090      Gynecology (Osteopaths Only) - Fetal Medicine
100      Gastroenterology
101      Pediatric Gastroenterology
110      Internal Medicine
120      Manipulative Therapy (Osteopaths Only)
130      Neurology
131      Neurology Pediatric
140      Neurosurgery
141      Pediatric Neurosurgery
142      Spina Bifida Centers/Provider
143      Adult Scoliosis
145      Spinal Cord Injury
150      Certified Nurse Midwife
160      OB/GYN
162      NP OB/GYN
164      NP Women's Health
165      Maternal Fetal Medicine
166      NP Maternity/Child Health
167      Genetics
168      Genetic Testing & Counseling Center
170      Ophthalmology, Otology, Larynogology, Rhinology (Osteopaths Only)
180      Ophthalmology
181      Ped Ophthalmology
190      NP Gerentology
191      Geriatrics
200      Orthopedics
201      Pediatric Orthopedics
204      Rheumatology
205      Ped Rheumatology
210      Clinical Pathology
220      Pathology
223      Hemophilia Treatment Center
224      HIV/AIDS Center
225      Pediatric HIV Treatment Center
226      Sickle Cell Disease & Other Hemoglobinopathies Centers
230      Peripheral Vascular Disease or Surgery (Osteopaths Only)
232      Cardiovascular Surgery
240      Plastic Surgery
250      Physical Medicine
251      Pediatric Physical Medicine
260      Psychiatry
262      NP Psychiatric Mental Health
270      Psychiatry; Neurology (Osteopaths Only)
280      Proctology
282      Colon/Rectal Surgery
290      Pulmonology
291      Ped Pulmonology
300      Radiology
302      NP Oncology
303      Radiation Oncology
305      Gynecologic Oncology
306      Hematology
307      Ped Hematology
308      Oncology
309      Pediatric Oncology
310      Roentgenology, Radiology (Osteopaths Only)
320      Radiation Therapy (Osteopaths Only)
330      Thoracic Surgery
331      Ped Thoracic Surgery
340      Urology
341      Pediatric Urology
350      Chiropractor
360      Nuclear Medicine
370      Pediatrics
371      Adolescent Medicine
372      NP Pediatric
373      Neonatology
<PAGE>

374      NP Neonatal
375      Perinatology
376      NP Perinatal
380      Home Health Agency
390      Nephrology
391      Pediatric Nephrology
400      Hand Surgery
402      Sports Medicine
404      Pain Management
410      Emergency Medicine
412      Critical Care Medicine
420      Heterogeneous Group
440      Public Health
450      NP Community Health
460      NP School Health
470      NP Adult Health
480      Podiatry
490      Miscellaneous (Admin. Medicine)
500      Pharmacy
510      Medical Supply Company with Certified Orthotist
520      Medical Supply Company with Certified Prosthetist
530      Medical Supply Company with Certified Prosthetist Orthotist
540      Medical Supply Company Not Included in 510, 520, 530
550      Individual Certified Orthotist
560      Individual Certified Prosthetist
570      Individual Certified Prosthetist Orthotist
580      Individual Not Included in 550, 560, 570
590      Ambulance Service Supplier, Private
600      Welfare Agencies & Clinics
610      Psychologist
611      Child Development
620      Individual Physical Therapist
622      Individual Occupational Therapist
623      Speech Pathologist
624      Audiologist
625      Hearing Aid Provider
630      Dentist, DDS, DMD
640      Oral Surgeon, Dental
642      Maxiofacial Surgery
645      Cleft Lip/Palate - Craniofacial Center
650      Endodontist
660      Orthodontist
670      Prosthodontist
680      Pedodontist
690      Penodontist
700      Independent Laboratory (billing independently)
710      Clinic or Other Group Practice, Except GPP
712      FQHC
720      Personal Care Assistance - Aged & Disabled
722      Personal Care Assistance - Mental Health
725      Day Training
728      Transportation Services
730      Early Intervention
740      Special Education
741      Child Development/Child Evaluation Center
743      Autism and Attention Deficits
744      Center for Care of Children with PKU
750      Other Medical Care
760      Adult Day Care
762      TBI Day Program
770      Medical Day Care - Free Standing
780      Medical Day Care - Hospital Based
790      Medical Day Care - LTC Based
800      Renal Dialysis
810      Case Management - GSHP
812      Case Management - CCPED
813      Child Clinic Case Management
814      Case Management - Model Waivers
816      Case Management - ACCAP
817      TBI Case Management
819      Adult Clinic Case Management
820      Private Duty Nursing
822      Adult Liaison Services
824      Child Liaison Services
830      Intensive Supervision
831      ABC Waiver
840      Special Group Foster Home
850      Hospice
860      Hospitals
861      Nursing Home
862      Respite
864      TBI Respite Inpatient
868      Subacute Care Facility
870      All Other
871      Pediatric Tertiary Center
880      Optician
890      Optometrist

<PAGE>

895      Optical Appliance Supplier
910      Independent Clinic - Ambulatory Surgery Center
920      Independent Clinic - Drug/Alcohol
930      Independent Clinic - Family Planning
940      Independent Clinic - Mental Health
950      Independent Clinic - Community Health
960      Independent Clinic - Cerebral Palsy
965      Independent Clinic - Birthing Center
970      DOH Clinic
980      Home Health - CCPED/Home Care Expansion
982      Homemaker - CCPED
983      TBI Environmental Modification
984      TBI in Home Care
985      TBI Behavior Program
986      TBI Community Residential Services
987      TBI Transportation
988      TBI Therapies
989      TBI Counseling
990      All Specialties

<PAGE>

                                  ATTACHMENT D

                               NJDHS, DMAHS, OMHC
                           Provider Network File Codes

Language Codes

A        Arabic
B        Hebrew
C        Chinese
D        Greek
E        English
F        French
G        German
H        Hindi
I        Italian
J        Hungarian
K        Korean
L        Polish
M        Tagalog
N        Japanese
O        Pakistani
P        Portuguese
Q        Indian
R        Filipino
S        Persian
T        Russian
U        Danish
V        Spanish/No English
W        Turkish
X        Vietnamese
Y        Yugoslavian
Z        Other
0        American Sign Language
1        Swedish
2        Spanish/Understands English
3        Ukranian
4        Dutch
5        Urdu
6        Romanian
7        Mandann
8        Iranian
9        Thai

County Codes

01       Atlantic
02       Bergen
03       Burlington
04       Camden
05       Cape May
06       Cumberland
07       Essex
08       Gloucester
09       Hudson
10       Hunterdon
11       Mercer
12       Middlesex
13       Monmouth
14       Morris
15       Ocean
16       Passaic
17       Salem
18       Somerset
19       Sussex
20       Union
21       Warren

<PAGE>

                                  ATTACHMENT E
                               Hospital Code List

<TABLE>
<CAPTION>
                ALL HOSPITALS BY COUNTY                                 COUNTY LOCATION
                -----------------------                                 ---------------
<S>                                                                     <C>
Atlantic City Medical Center-City Division                                  Atlantic
--------------------------------------------------------------------------------------
Atlantic City Medical Center-Mainland Division                              Atlantic
--------------------------------------------------------------------------------------
Bacharach Institute for Rehabilitation                                      Atlantic
--------------------------------------------------------------------------------------
Kessler Memorial Hospital                                                   Atlantic
--------------------------------------------------------------------------------------
Shore Memorial Hospital                                                     Atlantic
--------------------------------------------------------------------------------------
Bergen Regional Medical Center                                              Bergen
--------------------------------------------------------------------------------------
Englewood Hospital and Medical Center                                       Bergen
--------------------------------------------------------------------------------------
Hackensack University Medical Center                                        Bergen
--------------------------------------------------------------------------------------
Holy Name Hospital                                                          Bergen
--------------------------------------------------------------------------------------
Kessler Rehabilitation Corporation - Kessler North                          Bergen
--------------------------------------------------------------------------------------
Pascack Valley Hospital                                                     Bergen
--------------------------------------------------------------------------------------
The Valley Hospital                                                         Bergen
--------------------------------------------------------------------------------------
Deborah Heart and Lung Center                                               Burlington
--------------------------------------------------------------------------------------
Mediplex Rehabilitation Hospital                                            Burlington
--------------------------------------------------------------------------------------
Rancocas Hospital                                                           Burlington
--------------------------------------------------------------------------------------
Virtua Memorial Hospital Burlington County                                  Burlington
--------------------------------------------------------------------------------------
Virtua West Jersey-Marlton                                                  Burlington
--------------------------------------------------------------------------------------
Voorhees Pediatric Rehabilitation                                           Burlington
--------------------------------------------------------------------------------------
Cooper Health System                                                        Camden
--------------------------------------------------------------------------------------
Kennedy Memorial-Cherry Hill                                                Camden
--------------------------------------------------------------------------------------
Kennedy Memorial-Stratford                                                  Camden
--------------------------------------------------------------------------------------
Our Lady of Lourdes Medical Center                                          Camden
--------------------------------------------------------------------------------------
Virtua West Jersey-Berlin                                                   Camden
--------------------------------------------------------------------------------------
Virtua West Jersey-Voorhees                                                 Camden
--------------------------------------------------------------------------------------
Burdette Tomlin Memorial Hospital                                           Cape May
--------------------------------------------------------------------------------------
South Jersey Hospital-Bridgeton                                             Cumberland
--------------------------------------------------------------------------------------
South Jersey Hospital-Vineland (Newcomb)                                    Cumberland
--------------------------------------------------------------------------------------
Clara Maass Medical Center                                                  Essex
--------------------------------------------------------------------------------------
Columbus Hospital                                                           Essex
--------------------------------------------------------------------------------------
East Orange Hospital                                                        Essex
--------------------------------------------------------------------------------------
Hospital Center At orange                                                   Essex
--------------------------------------------------------------------------------------
Irvington General Hospital                                                  Essex
--------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                                                                        <C>
--------------------------------------------------------------------------------------
Kessler Rehabilitation Corporation-Kessler East                             Essex
--------------------------------------------------------------------------------------
Newark Beth Israel Medical Center                                           Essex
--------------------------------------------------------------------------------------
St. Barnabas Medical Center                                                 Essex
--------------------------------------------------------------------------------------
St. James Hospital                                                          Essex
--------------------------------------------------------------------------------------
St. Michael's Medical Center                                                Essex
--------------------------------------------------------------------------------------
The Mountainside Hospital                                                   Essex
--------------------------------------------------------------------------------------
UMDNJ-University Hospital                                                   Essex
--------------------------------------------------------------------------------------
Veterans Affairs Medical Center                                             Essex
--------------------------------------------------------------------------------------
Kennedy Memorial Hospital-Washington                                        Gloucester
--------------------------------------------------------------------------------------
Underwood Memorial Hospital                                                 Gloucester
--------------------------------------------------------------------------------------
Bayonne Hospital                                                            Hudson
--------------------------------------------------------------------------------------
Christ Hospital                                                             Hudson
--------------------------------------------------------------------------------------
Greenville Hospital                                                         Hudson
--------------------------------------------------------------------------------------
Jersey City Medical Center                                                  Hudson
--------------------------------------------------------------------------------------
Meadowlands Hospital Medical Center                                         Hudson
--------------------------------------------------------------------------------------
Palisades Medical Center                                                    Hudson
--------------------------------------------------------------------------------------
St. Francis Hospital                                                        Hudson
--------------------------------------------------------------------------------------
St. Mary's Hospital                                                         Hudson
--------------------------------------------------------------------------------------
West Hudson Hospital                                                        Hudson
--------------------------------------------------------------------------------------
Hunterdon Medical Center                                                    Hunterdon
--------------------------------------------------------------------------------------
Capital Health-Fuld Campus                                                  Mercer
--------------------------------------------------------------------------------------
Capital Health-Mercer Campus                                                Mercer
--------------------------------------------------------------------------------------
Medical Center at Princeton                                                 Mercer
--------------------------------------------------------------------------------------
Robert Wood Johnson University Hospital at Hamilton                         Mercer
--------------------------------------------------------------------------------------
St. Francis Medical Center                                                  Mercer
--------------------------------------------------------------------------------------
St. Lawrence Rehabilitation Center                                          Mercer
--------------------------------------------------------------------------------------
Jfk Medical Center                                                          Middlesex
--------------------------------------------------------------------------------------
Raritan Bay Medical Center-Old Bridge                                       Middlesex
--------------------------------------------------------------------------------------
Raritan Bay Medical Center-Perth Amboy                                      Middlesex
--------------------------------------------------------------------------------------
Robert Wood Johnson University Hospital-New Brunswick                       Middlesex
--------------------------------------------------------------------------------------
St Peter's University Hospital                                              Middlesex
--------------------------------------------------------------------------------------
Bayshore Community Hospital                                                 Monmouth
--------------------------------------------------------------------------------------
Centrastate Medical Center                                                  Monmouth
--------------------------------------------------------------------------------------
Jersey Shore Medical Center                                                 Monmouth
--------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                                                                         <C>
Monmouth  Medical Center                                                    Monmouth
--------------------------------------------------------------------------------------
Riverview Medical Center                                                    Monmouth
--------------------------------------------------------------------------------------
The Rehabilitation Hospital of Tinton Falls                                 Monmouth
--------------------------------------------------------------------------------------
Chilton Memorial Hospital                                                   Morris
--------------------------------------------------------------------------------------
Kessler Rehabilitation Corporation - Kessler Welkind                        Morris
--------------------------------------------------------------------------------------
Morristown Memorial Hospital                                                Morris
--------------------------------------------------------------------------------------
St. Clare's-Denville                                                        Morris
--------------------------------------------------------------------------------------
Community Medical Center                                                    Ocean
--------------------------------------------------------------------------------------
Healthsouth Rehabilitation Hospital of New Jersey                           Ocean
--------------------------------------------------------------------------------------
Kimball Medical Center                                                      Ocean
--------------------------------------------------------------------------------------
Medical Center Ocean County-Brick                                           Ocean
--------------------------------------------------------------------------------------
Southern Ocean County Hospital                                              Ocean
--------------------------------------------------------------------------------------
Barnert Hospital                                                            Passaic
--------------------------------------------------------------------------------------
Beth Israel Hospital                                                        Passaic
--------------------------------------------------------------------------------------
St Joseph's Hospital and Medical Center-Paterson                            Passaic
--------------------------------------------------------------------------------------
St. Joseph's Wayne Hospital                                                 Passaic
--------------------------------------------------------------------------------------
St. Mary's Hospital-Passaic                                                 Passaic
--------------------------------------------------------------------------------------
The General Hospital Center at Passaic                                      Passaic
--------------------------------------------------------------------------------------
South Jersey Hospital-Elmer                                                 Salem
--------------------------------------------------------------------------------------
The Memorial Hospital Of Salem County                                       Salem
--------------------------------------------------------------------------------------
Somerset Medical Center                                                     Somerset
--------------------------------------------------------------------------------------
Veterans Affairs Medical Center-Lyons                                       Somerset
--------------------------------------------------------------------------------------
Newton Memorial Hospital                                                    Sussex
--------------------------------------------------------------------------------------
St. Clare's-Sussex                                                          Sussex
--------------------------------------------------------------------------------------
Muhlenburg Regional Medical Center                                          Union
--------------------------------------------------------------------------------------
Overlook Hospital                                                           Union
--------------------------------------------------------------------------------------
Rahway Hospital                                                             Union
--------------------------------------------------------------------------------------
Runnells Specialized Hospital Of Union County                               Union
--------------------------------------------------------------------------------------
Trinitas Hospital-Williamson (St. Elizabeth)                                Union
--------------------------------------------------------------------------------------
Union Hospital                                                              Union
--------------------------------------------------------------------------------------
Hackettstown Community Hospital                                             Warren
--------------------------------------------------------------------------------------
Warren Hospital                                                             Warren
--------------------------------------------------------------------------------------
</TABLE>

<PAGE>

[Reserved]

<PAGE>

[Reserved]
<PAGE>

[Reserved]
<PAGE>

[Reserved]
<PAGE>

[Reserved]
<PAGE>

[Reserved]
<PAGE>

A.4.3   NETWORK ACCESSIBILITY ANALYSIS
<PAGE>

      NETWORK ACCESSIBILITY ANALYSIS FOR NEW JERSEY MEDICAID/NJ FAMILYCARE

To enable DMAHS to accurately compare the accessibility of each contractor's
managed care networks for New Jersey Medicaid/NJ FamilyCare, the contractor's
analysis must meet the following data standards and report specifications.

A -- DATA STANDARDS

1)       The contractor should use the eligibility data files provided by DMAHS.
         The data have been geocoded by street address to assure accuracy and
         consistency between respondents' analyses. The file contains
         eligibility information for each county within the State.

         A random ten percent (10%) sampling has been extracted for each county
         except the following: Burlington, Cape May, Cumberland, Gloucester,
         Hunterdon, Morris, Salem, Somerset, Sussex, and Warren. For the ten
         (10) counties named above, the complete population has been included.

2)       A minimum of sixty percent (60%) of the contractor's network provider
         addresses should be exactly geocoded. For any address that cannot be
         exactly geocoded, the address should be geocoded using a technique that
         takes into account population density. Placing providers at zip code
         centroids or randomly within zip codes is not acceptable.

3)       If more than one provider is located at the same address, all providers
         at that address should have the same geographic coordinates.

4)       Physicians should be classified based on their primary specialty only.
         For example, a pediatric cardiologist should be classified as
         cardiologist, not a pediatrician.

5)       The provider file should include the capacity for each provider. In
         most cases, this will be 1500. When evaluating a county where a 10%
         sampling of the population has been provided (see #1 above), use an
         individual capacity of 150, or one-tenth of the actual capacity. Use
         the "Individual Capacity" option when running the report.

6)       For providers who have more than one office location, indicate each
         location by a separate record in the provider file. Divide the capacity
         of the provider by the number of locations. For example, if the
         provider capacity is 150, and the provider has two offices, each office
         would have a capacity of 75.

<PAGE>

B -- REPORT SPECIFICATIONS

1)       Prepare a separate geographic accessibility analysis for each county.
         Restrict provider groups to service area equal to county. Separate
         analyses are required for each of the following:

<TABLE>
<CAPTION>
                                   BENEFICIARIES - INCLUDE ALL AFDC, DYFS, NJ FAMILYCARE, SSI-ABD
--------------------------------------------------------------------------------------------------
         PROVIDER TYPE                    ALL AGES          CHILDREN UNDER 21   ADULTS 21 AND UP
--------------------------------------------------------------------------------------------------
<S>                                <C>                      <C>                 <C>
Adult PCPs (FP, GP, IM
OB/GYN-women only)                                                               Page Codes 1-9
--------------------------------------------------------------------------------------------------
Pediatric PCPs (FP, Ped., GP)                                Page Codes 1-9
--------------------------------------------------------------------------------------------------
General Dentists                       Page Codes 1-9
--------------------------------------------------------------------------------------------------
Hospitals                           Page Codes 1-10 & 12
--------------------------------------------------------------------------------------------------
Blood Drawing Centers and Labs
that Draw Blood                      Page Codes 11 &12
--------------------------------------------------------------------------------------------------
</TABLE>

2)       See Article 4.8.8 for standards A and B for each provider type. For
         example, eligibles living in urban areas should have two PCPs within
         six miles. Mileage should be calculated on an estimated driving
         distance basis.

3)       Each of the analyses should consist of the pages indicated above.

<TABLE>
<CAPTION>
PAGE   ACCESS
CODE  STANDARD                                                    DESCRIPTION
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>         <C>
 1       na       This cover page of each report includes plan name, county, beneficiary group and date.
------------------------------------------------------------------------------------------------------------------------------------
 2       na       This page uses a graph to illustrate the percentage of beneficiaries who have access to a group of providers at
                  various distances. It includes a table showing the average distances to the nearest choices of one, two, three,
                  four and five providers.
------------------------------------------------------------------------------------------------------------------------------------
 3       na       This page shows, by zip code, the average distance for beneficiaries to two providers and the percentage of
                  beneficiaries having two providers within 2,6, 10 and 15 miles.
------------------------------------------------------------------------------------------------------------------------------------
 4       A        This page shows the number of providers, the number of beneficiaries with access to two providers and the average
                  distance to up to five providers for beneficiaries with access. It also analyzes beneficiary accessibility in ten
                  key cites.
------------------------------------------------------------------------------------------------------------------------------------
 5       A        This page shows, by zip code, the number and percentage of beneficiaries who do not have access to a choice of
                  two providers and the average distance to one and two providers.
------------------------------------------------------------------------------------------------------------------------------------
 6       B        This page shows the number of providers, the number of beneficiaries with access to one provider and the average
                  distance to up to five providers for beneficiaries with access. It also analyzes beneficiary accessibility in ten
                  key cites.
------------------------------------------------------------------------------------------------------------------------------------
 7       B        This page shows, by zip code, the number and percentage of beneficiaries who do not have access to one provider
                  and their average distance to one provider.
------------------------------------------------------------------------------------------------------------------------------------
 8       na       This includes documentation about the report and its data sources.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PAGE   ACCESS
CODE  STANDARD                                                    DESCRIPTION
------------------------------------------------------------------------------------------------------------------------------------
<S>   <C>         <C>
 9        A       This county map shows beneficiary locations for those who do not have access to two providers. Use 2 point black
                  circles for beneficiaries.
------------------------------------------------------------------------------------------------------------------------------------
 10      na       This county map shows provider locations. Use 12 point light gray circles for individual and 12 point black
                  triangles for multiple provider locations.
------------------------------------------------------------------------------------------------------------------------------------
 11      na       This county map shows all beneficiaries and a five mile radius circle around each provider location. The map
                  should show only "Radius 1" which should be transparent. Use provider and beneficiary symbol specifications from
                  page codes 9 and 10.
------------------------------------------------------------------------------------------------------------------------------------
 12      na       This should be a hard copy of the geocoded provider file, which must include name, specialty/type, address, zip
                  code, individual capacity (where applicable), geographic coordinates and geocoding method return code.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

         4)       Save to a dBASE file the geocoded provider file according to
                  the specifications indicated in Figure 1.

Figure 1

<TABLE>
<CAPTION>
FIELD NAME                                                        DESCRIPTION
------------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>
NAME 1                  Last name for individual providers (include suffix, e.g., Jr., Sr.) Entire name for institutions
------------------------------------------------------------------------------------------------------------------------------------
NAME 2                  First name and middle initial with period for individuals
------------------------------------------------------------------------------------------------------------------------------------
ADDRESS 1               Street number first then street name where medical care is actually provided
------------------------------------------------------------------------------------------------------------------------------------
ADDRESS 2               Additional information (e.g., suite #, building name)
------------------------------------------------------------------------------------------------------------------------------------
STDCITY                 Standard city name according to geocoder output field
------------------------------------------------------------------------------------------------------------------------------------
STATE                   State
------------------------------------------------------------------------------------------------------------------------------------
ZIP                     Full zip codes in character or text format to show leading zeros
------------------------------------------------------------------------------------------------------------------------------------
SPECIALTY               Primary specialty only for individual providers Provider type for institutions
------------------------------------------------------------------------------------------------------------------------------------
LONGITUDE               Geocoded Longitude
------------------------------------------------------------------------------------------------------------------------------------
LATITUDE                Geocoded Latitude
------------------------------------------------------------------------------------------------------------------------------------
GEOMETHOD               Return codes from geocoder
------------------------------------------------------------------------------------------------------------------------------------
CAPACITY                Individual capacity used for access analysis when applicable
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Report specifications, calculations and supporting data files for geographic
analysis reports submitted to DMAHS must be retained in accordance with 45
C.F.R. Part 74 and made available on request.

<PAGE>

A.4.4 CERTIFICATION OF CONTRACTOR PROVIDER NETWORK

<PAGE>

                   CERTIFICATION OF CONTRACTOR PROVIDER NETWORK

I,_______________________________, hereby certify both personally and on behalf
  [Name & Title of HMO officer]
of ___________________________that all of the health care providers whose names
       [Name of HMO]
appear on the attached list, dated___________________, have signed valid,
                                        [Date]
written contracts with________________________ which are currently in effect and
                           [Name of HMO]
are similar in all material respects to the sample provider agreements submitted
on___________________to and approved by the Office of Managed Health Care,
        [Date]
Division of Medical Assistance and Health Services by__________________________.
                                                            [Name of HMO]
I further certify that all of the providers listed have expressly agreed to
serve New Jersey Medicaid and NJ FamilyCare beneficiaries who enroll
in___________________________.
        [Name of HMO]
I certify that________________________has in its possession signed, legally
                    [Name of HMO]
binding contracts with each of the providers included on the attached list which
are available to the State for inspection at any time at the following
location:__________________________________________
___________________________agrees that the State shall have access to its
       [Name of HMO]
current provider contracts through any means the State deems reasonable and
appropriate. Entire executed provider contracts shall be submitted to the State
immediately upon request.

I certify that the foregoing statements made by me are true. I am aware if any
of the foregoing statements made by me are willfully false, I am subject to
punishment.

Signature: __________________________________

Print Name:__________________________________

Title of HMO Officer:________________________

Name of HMO: ________________________________

Date:________________________________________

<PAGE>

A.5.0 ENROLLEE SERVICES

<PAGE>

A.5.1 ENROLLEE P-FACTOR

      The P-Factor Report is a monthly report and shall be submitted within ten
      (10) calendar days after the end of every month to monitor telephone
      access to the enrollees. This report shall be a summary report containing
      current and all previous months' information and shall contain, but not be
      limited to, the following:

      a.      Month

      b.      Busy rate

      c.      Waiting time on hold

      d.      Number of lines

      e.      Number of operators

      f.      Number of hang-ups

<PAGE>

A.7.0 TERMS AND CONDITIONS

<PAGE>

A.7.1 CERTIFICATION REGARDING LOBBYING

The contractor must sign and return the form on the following page.

<PAGE>

                        CERTIFICATION REGARDING LOBBYING

The undersigned certifies to the best of his or her knowledge that: .

No federal appropriated funds have been paid or will be paid to any person by or
on behalf of the contractor for the purpose of influencing or attempting to
influence an officer or employee of any agency, a Member of Congress, an officer
or employee of Congress, or an employee of a Member of Congress in connection
with the award of any federal contract, the making of any federal grant, the
making of any federal loan, the entering into of any cooperative contract, or
the extension, continuation, renewal, amendment, or modification of any federal
contract, grant, loan, or cooperative agreement.

If any funds other than federal appropriated funds have been paid or will be
paid to any person for the purpose of influencing or attempting to influence an
officer or employee of a Member of Congress in connection with the award of any
federal contract, the making of any federal grant, the making of any federal
loan, the entering into of any cooperative contract, or the extension,
continuation, renewal, amendment, or modification of any federal contract,
grant, loan, or cooperative contract, and the contract exceeds $100,000, the
contractor shall complete and submit Standard Form-LLL "Disclosure of Lobbying
Activities" in accordance with its instructions.

The contractor shall include the provisions of this section in all provider
contracts under this contract and require all participating providers whose
provider contracts exceed $100,000 to certify and disclose accordingly to the
contractor.

This certification is a material representation of fact upon which reliance was
placed when this transaction was made or entered into. Submission of this
certification is a prerequisite for making or entering into this transaction
pursuant to 31 U.S.C. 1352. The failure to file the required certification shall
subject the violator to a civil penalty of not less than $10,000 and not more
than $100,000 for each such failure.

SIGNATURE:_____________________________________  DATE:_________________

NAME (PRINT):__________________________________

TITLE:_________________________________________

ORGANIZATION:__________________________________

<PAGE>

A.7.2 FRAUD AND ABUSE

      A.    The contractor shall report to the Department all identified
            instances (proven or suspected) of provider, subcontractor, and
            enrollee fraud and abuse with supporting case documentation attached
            to the report.

            The contractor must submit quarterly the following report with
            monthly data identified by reporting month:

            Month
            Year

<TABLE>
<CAPTION>
         Beginning of the    Added during the
              month               month          Completed/closed      End of Month
--------------------------------------------------------------------------------------
        Provider  Enrollee  Provider  Enrollee  Provider  Enrollee  Provider  Enrollee
--------------------------------------------------------------------------------------
<S>     <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
 #Of
Cases
--------------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------------
</TABLE>

B.    The contractor must report in detail to DMAHS the following information
      for cases involving providers, subcontractors, and enrollees:

      Case name
      Date opened
      Reason for initiating case
      Date of notification to DMAHS
      Date of approval from DMAHS
      Personnel assigned to case
      Date of completion
      Findings
      Date of screening with DMAHS
      Actions

<PAGE>

A.7.3

TABLE 1           MEDICAID ENROLLMENT BY PRIMARY CARE PROVIDERS

Listed alphabetically by provider type and for each primary care physician,
primary care dentist primary care CNP/CNS, and primary care physician assistant,
the contractor shall enter the total number of enrollees at the end of the prior
quarter and for the reporting period and member months for the quarter.

<PAGE>

STATE OF NEW JERSEY
Plan Name____________________________           Quarter Ending_____________

                                     TABLE 1
                  MEDICAID ENROLLMENT BY PRIMARY CARE PROVIDERS

<TABLE>
<CAPTION>
            Primary Care Providers
List, by type of provider, alphabetically by last                             # of Enrollees at    Total # Enrollees    Total Member
name with one line for each county in which                                      End of Prior        for Reporting       Months for
              provider practices.                      Specialty   County          Quarter               Period            Quarter
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>         <C>        <C>                  <C>                  <C>
Primary Care Physicians
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Dentists
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
CNP/CNSs
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Physician Assistants
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
                Total
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S>                                                    <C>         <C>
           Total # PCPs
----------------------------------------------------------------------------
   Total # PCPs With Enrollees
----------------------------------------------------------------------------
  Total # PCPs Without Enrollees
----------------------------------------------------------------------------

----------------------------------------------------------------------------
         Total # Dentists
----------------------------------------------------------------------------
 Total # Dentists With Enrollees
----------------------------------------------------------------------------
Total # Dentists Without Enrollees
----------------------------------------------------------------------------

----------------------------------------------------------------------------
         Total # CNP/CNSs
----------------------------------------------------------------------------
 Total # CNP/CNSs With Enrollees
----------------------------------------------------------------------------
     Total # CNP/CNSs Without
            Enrollees
----------------------------------------------------------------------------

----------------------------------------------------------------------------
           Total # PAs
----------------------------------------------------------------------------
    Total # PAs With Enrollees
----------------------------------------------------------------------------
  Total # PAs Without Enrollees
----------------------------------------------------------------------------
</TABLE>

<PAGE>

A.7.4

TABLE 2           DISENROLLMENT FROM PLAN

The contractor shall aggregate the disenrollment from the plan of the number of
enrollees (not cases/families) by eligibility category and reason for
disenrollment by identifying involuntary (Section A) and voluntary (Section B)
disenrollments. All reasons must be explained in the appropriate space provided.

"NJ FamilyCare" in this and other tables includes Plans B, C, and D.

<PAGE>
                                              STATE OF NEW JERSEY
Plan Name_______________________              Quarter Ending___________________

                                     TABLE 2

                             DISENROLLMENT FROM PLAN

A. INVOLUNTARY DISENROLLMENT BY REASON

<TABLE>
<CAPTION>
                                         AFDC        DYFS      SSI - ABD     NJ FamilyCare       TOTAL
------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>       <C>           <C>                 <C>
Death
------------------------------------------------------------------------------------------------------
Institutionalized
------------------------------------------------------------------------------------------------------
Moved From Enrollment Areas
------------------------------------------------------------------------------------------------------
Loss of Medicaid Eligibility
------------------------------------------------------------------------------------------------------
Change in Medicaid Aid Category
------------------------------------------------------------------------------------------------------
Termination By Plan
------------------------------------------------------------------------------------------------------
Other*
------------------------------------------------------------------------------------------------------
TOTAL
------------------------------------------------------------------------------------------------------
</TABLE>

* Explanation of Other

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

B. VOLUNTARY DISENROLLMENT BY REASON

<TABLE>
<CAPTION>
                                         AFDC        DYFS      SSI - ABD     NJ FamilyCare       TOTAL
------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>       <C>           <C>                 <C>
Closed Panel of Providers
------------------------------------------------------------------------------------------------------
Emergency Treatment Procedures
------------------------------------------------------------------------------------------------------
Delay in Securing Appointments
------------------------------------------------------------------------------------------------------
Dissatisfaction With PCP
------------------------------------------------------------------------------------------------------
Other*
------------------------------------------------------------------------------------------------------
TOTAL
------------------------------------------------------------------------------------------------------
</TABLE>

* Explanation of Other

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

A.7.5

TABLE 3           GRIEVANCE SUMMARY

[Reserved]

[Reserved]

[Reserved]

TABLE 3A

The contractor shall submit electronically to DMAHS by the fifteenth of every
month, a report of all utilization management (UM) enrollee grievance/appeal
requests and dispositions. The database format provided by DMAHS shall be used
for reporting information for the reporting period and all open cases to date.

TABLE 3B

The contractor shall submit electronically to DMAHS by the fifteenth of every
month, a report of all non-utilization management (UM) enrollee grievance/appeal
requests and dispositions. The database format provided by DMAHS shall be used
for reporting information for the reporting period and all open cases to date.

TABLE 3C

The contractor shall submit electronically to DMAHS by the fifteenth of every
month, a report of all provider grievance/appeal requests and dispositions. The
database format provided by DMAHS shall be used for reporting information for
the reporting period and all open cases to date.

<PAGE>

                             Table 3A: Utilization Management Grievances/Appeals

HMO:___________________
Reporting Period: (Year/Month)

<TABLE>
<CAPTION>
   ORN
(Original                                                                             Date
Recipient                                     Appeal   Appeal  Appeal    Date    Acknowledgement
 Number)   Last Name  First Name  DOB  PSC  Initiator  Stage    Type   Received    Letter Sent
<S>        <C>        <C>         <C>  <C>  <C>        <C>     <C>     <C>       <C>
------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------

<CAPTION>
   ORN
(Original                                                                                Date
Recipient   Appeal                                                 Date                 Letters
 Number)   Category  Description  Reviewer  Outcome  Resolution  Resolved  Expedited     Sent
<S>        <C>       <C>          <C>       <C>      <C>         <C>       <C>          <C>
-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------
</TABLE>

Total Received_________       Total Resolved_________

                                  VALID VALUES

PROGRAM STATUS CODE (PSC)

110  OAA CN-SSI MP

120  OAA CN-Medicald only, NMP

130  OAA CN-Categorically Related-NMP-NFM

140  OAA CN, Institutional Resident-NFM

150  PRUCOL-Aged

160  OAA CN-HCEP

170  Aged MN-No Spenddown

180  Aged MN-Spenddown

190  NJC-Aged, OCN-Optional Categorically Needy

210  DA-CN SSI MP

220  DA-CN Medicaid only-NMP

230  DA-CN Categorically Related, NMP, NFM

240  DA-CN Institutional resident, NFM

250  PRUCOL-Disabled

260  DA-CN HCEP

270  DA-MN-No Spenddown

280  DA-MN-Spenddown

290  NJC-Disabled, Optional Categorically Needy

291  Ticket to Work, 100-150% FPL

292  Ticket to Work, 151-185% FPL

293  Ticket to Work, 186-200% FPL

294  Ticket to Work, 201-250% FPL

295  Breast and Cervical Cancer

300  FC Health Access, 0-150%, Plan D Services 100% State Funds

301  FC Health Access, 151-250%, Plan D Services 100% State Funds

310  TANF & AFDC-C-CN Regular MP

320  AFDC-C-CN Regular NMP

330  AFDC-C-CN Regular-Categorically Related-NM

340  MN-Pregnant Women-No Spenddown

350  MN-Pregnant Women-Spenddown

<PAGE>

con't PROGRAM STATUS CODE (PSC)

60  MN-Child-No Spenddown

70  MN-Child-Spenddown

80  NJFC, Parents, < 134% FPL

90  PEPW-Presumptive Eligibility Pregnant Women

91  NJ Suppl Prenatal Care Program-Other Pregnant Women

10  AFDC-F-CN MP-FM-Categorically

20  AFDC-F-CN NMP-FM

30  AFDC-C-CN Regular-NMP-NFM-REACH

40  AFDC-F'CN NMP-NFM-REACH

50  AFDC-N-CN Adults-MP/NMP-NFM

51  AFDC-N Adults and TANF

52  AFDC-N Adults but no TANF

60  AFDC-N-CN Children-MP/NMP-Categorically Related-FM

61  AFDC-N,Children and TANF

62  AFDC-N Children but no TANF

70  AFDC-N-CN Child/Adult-NM-NF-REACH-TDI/UIB, no 3/6

80  NJ Care/KidCare-Child, Optional Categorically Needy Plan A to 100%

81  NJ Care/KidCareC-CHILD, OCN, 2-6 years to 133%

82  NJC Child <= 1,133% to 185%

83  NJC Child born after 9/83, <= 100%

84  NJC/KidCare Child <= 19,<= 100% FPL Plan A

85  NJC/KidCare Child Age 6-19,100% to 133% FPL Plan A

86  NJC/KidCare Child Age 1-19,133% to 150% FPL Plan B

87  NJC/KidCare Child Age 1-19,150% to 185% FPL, premium/co-pay required
    Plan C

88  NJC/KidCare Child age 1-19,185% to 200% FPL, premium/co-pay required Plan C

89  NJC/KidCare FFS newborns Plan C

90  NJC Pregnant, OCN <= 100%

91  NJC Pregnant, OCN, 100-133%

92  NJC Pregnant, 133% to <= 165%

93  Family Income from 201% thru 250% of FPL, Child 0 to 19

94  Family Income from 251% thru 300% of FPL, Child 0 to 19

95  Family Income from 301% thru 350% of FPL. Child 0 to 19

96  Family Income from 201% thru 350% of FPL, newborn, FFS

97  NJFC Parents 0-150% (not AFDC)

98  NJFC Parents 151-200% (not AFDC)

99  Other pregnant women 186-200%

10  AB-CN SSI MP

20  AB-CN NMP

30  AB-CN Categorically Related-NMP-NFM

40  AB-CN Institutional Resident-NFM

50  PRUCOL-Blind

60  AB-CN HCEP

70  Blind-MN-No Spenddown

580  Blind-MN-Spenddown

590  NJC-Blind-Optional Categorically Needy

591  Ticket to Work, 100-150% FPL

600  DYFS-Optional Foster Care-Adoption Assistance (County < 22)

601  ISS-SSI MP(Div of Public Welfare BLO ISS,County > 21)

620  DYFS-SSI/Foster Children and Adoption Assistance (DYFS County < 22)

621  ISS-Medicaid Only-SSI Related (Div of Public Welfare BLO ISS, County > 21)

630  DYFS-Title IV-E Foster Children (DYFS County < 22)

631  ISS-AFDC Related AFDC Recipient (Div of Public Welfare BLO ISS, County >21)

640  ISS-lnstitutional Resident-NFM

641  CSOCI-Only

650  DYFS-StateProgram-NFM

700  FC HealthAccess, 0-150%, Plan H Services 100% State Funds

701  FC HealthAccess, 151-250% Plan H Services 100% State Funds

710  MAA-NFM-Age 65 and over

730  PAAD Under 65-Disabled Casino Fund

740  PAAD Over 65-Upper Income Casino Fund

750  PAAD Over 65-Lower Income General Fund

760  GA-General Assistance Program

761  NJFC, Other Adults, 0-23% FPL

762  NJFC, Other Adults, 24-50% FPL

763  NJFC, Other Adults, 51-100% FPL

770  Cystic Fibrosis

780  ADDP

800  Juvenile Services-Not Refugee

810  County Juvenile Services

830  Senior Gold-Disabled

840  Senior Gold-Aged

Appeal Initiator

1    Member

2    Physician

3    Facility

Appeal Stage

1    Stage 1

2    Stage 2

Appeal Type

1    Medical

2    Dental

3    Special Needs

Appeal Category

1    Denial of Inpatient Hospital Days

2    Reduction of acuity level (Inpatient)

3    Denial of surgical procedure

4    Denial of emergency services

5    Denial of outpatient medical treatment/diagnostic testing

6    Denial of outpatient rehabilitation therapy (PT, OT, Cardiac, Speech, etc.)

7    Denial of home health care

8    Denial of hospice care

9    Denial of skilled nursing facility

10   Denial of medical equipment (DME) an/or supplies

11   Denial of referral to out-of-network specialist

12   Service not a covered benefit

13   Service considered experimental/investigational

14   Service considered cosmetic, not medically necessary

15   Service considered dental, not medically necessary

16   Pharmacy

17   Other (Define)

Appeal Outcome

1    Denial Overturned

2    Denial Upheld

Expedited

-1   Yes

 0   No
<PAGE>

                          Table 3B: Non-Utilization Management Grievances/Apeals

HMO:___________________________________

REPORTING PERIOD (YEAR/MONTH):______________________________

<TABLE>
<CAPTION>
ORN (Original
  Recipient                                          Grievance
   Number)     Last Name  First Name  DOB  Age  PSC  Category   Date Received  Date Resolved  Description  Resolution  Satisfaction
-----------------------------------------------------------------------------------------------------------------------------------
<S>            <C>        <C>         <C>  <C>  <C>  <C>        <C>            <C>            <C>          <C>         <C>
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
             TOTAL RECEIVED____            TOTAL RESOLVED_____
</TABLE>
                                  VALID VALUES

PROGRAM STATUS CODE (PSC)

110      OAA CN-SSI MP

120      OAA CN-Medicaid only, NMP

130      OAA CN-Categorically Related-NMP-NFM

140      OAA CN-Institutional Resident-NFM

150      PRUCOL-Aged

160      OAA CN-HCEP

170      Aged MN-No Spenddown

180      Aged MN-Spenddown

190      NJC-Aged, OCN-Optional Categorically Needy

210      DA-CN SSI MP

220      DA-CN Medicaid only-NMP

230      DA-CN Categorically Related, NMP, NFM

240      DA-CN Institutional resident, NFM

250      PRUCOL-Disabled

260      DA-CN HCEP

270      DA-MN-No Spenddown

280      DA-MN-Spenddown

290      NJC-Disabled, Optional Categorically Needy

291      Ticket to Work, 100-150% FPL

292      Ticket to Work, 151-185% FPL

293      Ticket to Work, 186-200% FPL

294      Ticket to Work, 201-250% FPL

295      Breast and Cervical Cancer

300      FC Health Access, 0-150%, Plan D Services 100% State Funds

301      FC Health Access, 151-250%, Plan D Services 100% State Funds

310      TANF & AFDC-C-CN Regular MP

320      AFDC-C-CN Regular NMP

330      AFDC-C-CN Regular-Categorically Related-NM

340      MN-Pregnant Women-No Spenddown

350      MN-Pregnant Women-Spenddown

360      MN-Child-No Spenddown

370      MN-Child-Spenddown

380      NJFC, Parents, <134% FPL

390      PEPW-Presumptive Eligibility Pregnant Women

391      NJ Suppl Prenatal Care Program-Other Pregnant Women

410      AFDC-F-CN MP-FM-Categorically

420      AFDC-F-CN NMP-FM

430      AFDC-C-CN Regular-NMP-NFM-REACH

440      AFDC-F-CN NMP-NFM-REACH

450      AFDC-N-CN Adults-MP/NMP-NFM

451      AFDC-N Adults and TANF

452      AFDC-N Adults but no TANF

460      AFDC-N-CN Children-MP/NMP-Categorically Related-FM

461      AFDC-N Children and TANF

462      AFDC-N Children but no TANF

470      AFDC-N-CN Child/Adult-NM-NF-REACH-TDI/UIB, no 3/6

480      NJ Care/KidCare-Child, Optional Categorically Needy Plan A to 100%

481      NJ Care/KidCareC-CHILD, OCN, 2-6 years to 133%

<PAGE>

                         TABLE 3B: NON-UTILIZATION MANAGEMENT GRIEVANCES/APPEALS

CON'T PROGRAM STATUS CODE (PSC)

482      NJC Child <=1, 133% to 185%

483      NJC Child bom after 9/83, <=100%

484      NJC/KidCare Child <= 19, <=100% FPL Plan A

485      NJC/KidCare Child age 6-19, 100% to 133% FPL Plan A

486      NJC/KidCare Child Age 1-19, 133% to 150% FPL Plan B

487      NJC/KidCare Child Age 1-19, 150% to 185% FPL, premium/co-pay required
         Plan C

488      NJC/KidCare Child age 1-19, 185% to 200% FPL, premium/co-pay required
         Plan C

489      NJC/KidCare FFS newborns Plan C

490      NJC Pregnant, OCN <=100%

491      NJC Pregnant, OCN, 100-133%

492      NJC Pregnant, 133% to <=185%

493      Family income from 201% thru 250% of FPL, Child 0 to 19

494      Family income from 251% thru 300% of FPL, Child 0 to 19

495      Family income from 301% thru 350% of FPL, Child 0 to 19

496      Family income from 201% thru 350% of FPL, newborn, FFS
497      NJFC Parents 0-150% (not AFDC)

498      NJFC Parents 151-200% (not AFDC)

499      Other pregnant women 186-200%

510      AB-CN SSI MP

520      AB-CN NMP

530      AB-CN Categorically Related-NMP-NFM

540      AB-CN Institutional Resident-NFM

550      PRUCOL-Blind

560      AB-CN HCEP

570      Blind-MN-No Spenddown

580      Blind-MN-Spenddown

590      NJC-Blind-Optional Categorically Needy

591      Ticket to Work, 100-150% FPL

600      DYFS-Optional Foster Care-Adoption Assistance (County <22)

601      ISS-SSI MP (Div of Public Welfare BLO ISS, County >21)

620      DYFS-SSI/Foster Children and Adoption Assistance (DYFS County <22)

621      ISS-Medicaid Only-SSI Related (Div of Public Welfare BLO ISS, County
         >21)
630      DYFS-Title IV-E Foster Children (DYFS County <22)

631      ISS-AFDC Related AFDC Recipient (Div of Public Welfare BLO ISS, County
         >21)

640      ISS-Institutional Resident-NFM

641      CSOCI-Only

650      DYFS-State Program-NFM

700      FC HealthAccess, 0-150%, Plan H'Services 100% State Funds

701      FC HealthAccess, 151-250% Plan H Services 100% State Funds

710      MAA-NFM-Age 65 and over

730      PAAD Under 65-Disabled Casino Fund

740      PAAD Over 65-Upper Income Casino Fund

750      PAAD Over 65-Lower Income General Fund

760      GA-General Assistance Program

761      NJFC, Other Adults, 0-23%FPL

762      NJFC, Other Adults, 24-50% FPL

763      NJFC, Other Adults, 51-100% FPL

770      Cystic Fibrosis

780      ADDP

800      Juvenile Services-Not Refugee

810      County Juvenile Services

830      Senior Gold-Disabled

840      Senior Gold-Aged

GRIEVANCE CATEGORY

 1       Appointment Availability, PCP

 2       Appointment Availability, Specialist

 3       Appointment Availability, Other Type of Provider

 4       Waiting Time Too Long at Office, PCP

 5       Waiting Time Too Long at Office, Specialist

 6       Dissatisfaction with Quality of Medical Care, PCP

 7       Dissatisfaction with Quality of Medical Care, Specialist

 8       Dissatisfaction with Quality of Medical Care, Hospital

 9       Dissatisfaction with Quality of Medical Care, Other Type of Provider

10       Difficulty in Obtaining Access to a Health Care Professional after
         Hours

11       Difficulty Related to Obtaining Emergency Services

12       Dissatisfaction with Dental Services

13       Dissatisfaction with Vision Services

14       Dissatisfaction with Ancillary Services (Home health, DME, Therapy,
         etc.)

15       Dissatisfaction with Plan Benefit Design

16       Dissatisfaction with Provider Office Administration

17       Dissatisfaction with marketing, Member services, Member Handbook, etc.

18       Dissatisfaction with Utilization Management Appeal Process

19       Denial of Clinical Treatment for Covered Service

20       Dissatisfaction with Provider Network

21       Difficulty in Obtaining Referral to Network Specialist of Member's
         Choice

22       Difficulty in Obtaining Referrals for Ancillary Services (Home Health,
         DME, etc.)

23       Difficulty in Obtaining Referrals for Covered Services-Eye Care

24       Difficulty in Obtaining Referrals for Covered Services-Dental Services

25       Difficulty with Plan Policies Regarding Specialty Referrals

26       Laboratory Issues

27       Pharmacy/Formulary Issues

28       Reimbursement Problems/Unpaid Claims

MEMBER SATISFACTION

1        Satisfied

2        Not Satisfied

3        TBD

4        Unable to obtain feedback

<PAGE>

                                           TABLE 3C: PROVIDER GRIEVANCES/APPEALS

HMO:______________________

REPORTING PERIOD (YEAR/MONTH):_____________

<TABLE>
<CAPTION>
Provider ID
(Federal Tax                               Grievance    Date      Date                                                    Written
 ID Number)  Provider Name  Provider Type  Category   Received  Resolved  Description  Staff  Action Taken  Resolution  Notification
------------------------------------------------------------------------------------------------------------------------------------
<S>          <C>            <C>            <C>        <C>       <C>       <C>          <C>    <C>           <C>         <C>
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
             TOTAL RECEIVED____            TOTAL RESOLVED_____
</TABLE>

                                  VALID VALUES

PROVIDER TYPE

1        PCP

2        Specialist

3        Dental Provider

4        Hospital

5        Other Provider

 GRIEVANCE CATEGORY

1        Claim issues (reimbursement, timeliness, resubmission), PCP

2        Claim Issues (reimbursement, timeliness, resubmission), Specialist

3        Claim Issues (reimbursement, timeliness, resubmission), Hospital

4        Claim Issues (reimbursement, timeliness, resubmission), Other Provider

5        Complexity of Administrative Process

6        Difficulty Obtaining Prompt Authorization for Needed Medical Services

7        Credentialing/Recredentialing

8        Termination

9        Dissatisfaction with Provider Manual

10       Dissatisfaction with Responsiveness of Provider Services

11       Dissatisfaction with UM Appeal Process/Medical Management Guidelines

12       Dissatisfaction with Provider Network

13       Coordination of Benefits

14       Denials of service prior authorization requests

15       Denials of specialty referrals

15       Enrollee allocation inequities

16       Other (Define)

WRITTEN NOTIFICATION

-1       Yes

 0       No

<PAGE>

                                                             STATE OF NEW JERSEY

[Reserved]

<PAGE>

A.7.6

TABLE 4      CLAIMS LAG REPORT

<PAGE>

A.7.6

TABLE 4      CLAIMS LAG REPORT

Table 4A

Note: Use this form to report manually submitted claims that were processed
during the quarterly period. Claims submitted and processed electronically must
be reported separately on Table 4B. Manual claims submission shall be processed
within 40 days of receipt.

Report amounts for each category of service and total listed in Column 1 in the
following columns:

Non-Processed Claims from Prior Quarters (Column 2) - Enter the number of
manually submitted claims on-hand that were unprocessed as of the closing date
of the last quarterly period. The number should be the same as was reported in
Column 16 of the prior quarterly report.

Claims Rec'd During Quarter (Column 3) - Enter the amount of all manually
submitted claims that were received during the quarterly period being reported.

Total Claims (Column 4) - Enter the sum of Columns 2 and 3.

Claims Processed This Quarter (Column 5) - Enter the amount of all manually
submitted claims processed (both paid and denied) during the quarterly period
being reported. Do not count pended claims

1-40 Days (Column 6) - Enter the number of manually submitted claims that were
processed (either paid or denied) within 40 days of their receipt. Note: The
number of days required to process a claim is calculated by comparing the date
the claim was received by the contractor to the date the claim was paid or
denied by the contractor (See Article 7.16.5 of the contract for further
detail).

% of Total (Column 7) - Enter the percentage of manually submitted claims
processed within 40 days (Compared to total claims processed. Divide Column 6 by
Column 5 to arrive at percent.)

41-60 Days (Column 8) - Enter the number of manually submitted claims that were
processed (either paid or denied) between 41-60 days of their receipt

% of Total (Column 9) - Enter the percentage of manually submitted claims
processed between 41-60 days (Compared to total claims processed. Divide Column
8 by Column 5 to arrive at percent.)

61-90 Days (Column 10) - Enter the number of manually submitted claims that were
processed (either paid or denied) between 61-90 days of their receipt.

<PAGE>

% of Total (Column 11) - Enter the percentage of manually submitted claims
processed between 61-90 days (Compared to total claims processed. Divide Column
10 by Column 5 to arrive at percent.)

91-120 Days (Column 12) - Enter the number of manually submitted claims that
were processed (either paid or denied) between 91-120 days of their receipt

% of Total (Column 13) - Enter the percentage of manually submitted claims
processed between 91-120 days of their receipt (Compared to total claims
processed. Divide Column 12 by Column 5 to arrive at percent.)

>120 Days (Column 14) - Enter the number of manually submitted claims that were
processed (either paid or denied) after 120 days of their receipt.

% of Total (Column 15) - Enter the percentage of manually submitted claims
processed after 120 days (Compared to total claims processed. Divide Column 14
by Column 5 to arrive at percent.)

Non-processed Claims on Hand at End of Quarter (Column 16) - Enter the number of
manually submitted claims on hand that were not processed as of closing date of
the last report period. (Should be the difference of Column 4 minus Column 5).
Same number should match number of claims entered in Column 2 of next quarter
report.

% of Claims Not Processed at End of Quarter (Column 17) - Divide Column 16 by
Column 4 to arrive at percent.

<PAGE>

Table 4B

Note: Use this form to report electronically submitted claims that were
processed during the quarterly period. Claims submitted and processed
electronically must be reported separately on Table 4A. Electronic claims
submission shall be processed within 30 days of receipt.

Report amounts for each category of service and total listed in Column 1 in the
following columns:

Non-Processed Claims from Prior Quarters (Column 2) - Enter the number of
electronically submitted claims on-hand that were unprocessed as of the closing
date of the last quarterly period. The number should be the same as was reported
in Column 16 of the prior quarterly report.

Claims Rec'd During Quarter (Column 3) - Enter the amount of all electronically
submitted claims that were received during the quarterly period being reported.

Total Claims (Column 4) - Enter the sum of Columns 2 and 3.

Claims Processed This Quarter (Column 5) - Enter the amount of all
electronically submitted claims processed (both paid and denied) during the
quarterly period being reported. Do not count pended claims

1-30 Days (Column 6) - Enter the number of electronically submitted claims that
were processed (either paid or denied) within 40 days of their receipt. Note:
The number of days required to process a claim is calculated by comparing the
date the claim was received by the contractor to the date the claim was paid or
denied by the contractor (See Article 7.16.5 of the contract for further
detail).

% of Total (Column 7) - Enter the percentage of electronically submitted claims
processed within 40 days (Compared to total claims processed. Divide Column 6 by
Column 5 to arrive at percent.)

31-60 Days (Column 8) - Enter the number of electronically submitted claims that
were processed (either paid or denied) between 41-60 days of their receipt

% of Total (Column 9) - Enter the percentage of electronically submitted claims
processed between 41-60 days (Compared to total claims processed. Divide Column
8 by Column 5 to arrive at percent.)

61-90 Days (Column 10) - Enter the number of electronically submitted claims
that were processed (either paid or denied) between 61-90 days of their receipt.

% of Total (Column 11) - Enter the percentage of electronically submitted claims
processed between 61-90 days (Compared to total claims processed. Divide Column
10 by Column 5 to arrive at percent.)

<PAGE>

91-120 Days (Column 12) - Enter the number of electronically submitted claims
that were processed (either paid or denied) between 91-120 days of their receipt

% of Total (Column 13) - Enter the percentage of electronically submitted claims
processed between 91-120 days of their receipt (Compared to total claims
processed. Divide Column 12 by Column 5 to arrive at percent.)

>120 Days (Column 14) - Enter the number of electronically submitted claims that
were processed (either paid or denied) after 120 days of their receipt.

% of Total (Column 15) - Enter the percentage of electronically submitted claims
processed after 120 days (Compared to total claims processed. Divide Column 14
by Column 5 to arrive at percent.)

Non-processed Claims on Hand at End of Quarter (Column 16) - Enter the number of
electronically submitted claims on hand that were not processed as of closing
date of the last report period. (Should be the difference of Column 4 minus
Column 5). Same number should match number of claims entered in Column 2 of next
quarter report.

% of Claims Not Processed at End of Quarter (Column 17) - Divide Column 16 by
Column 4 to arrive at percent.

<PAGE>
                                                STATE OF NEW JERSEY
Plan Name______________________                       Quarter Ending____________

                                    TABLE 4A

                 CLAIMS LAG REPORT FOR MANUALLY SUBMITTED CLAIMS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
         1                   2             3         4            5                      Claims Processed During Quarter
-------------------------------------------------------------------------    6      7      8      9     10     11      12
                                                                           ---------------------------------------------------
                             Non-                              Claims
                          Processed     Claims                Processed
                            Claims      Rec'd      Total     This Quarter
                          From Prior    During     Claims     (cols 6+8    01-40  % of   41-60  % of   61-90  % of   91-120
  Category of Services     Quarters    Quarter   (cols 2+3)   +10+12+14)   Days   Total  Days   Total  Days   Total   Days
------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>          <C>       <C>         <C>           <C>    <C>    <C>    <C>    <C>    <C>    <C>
Inpatient Hospital
------------------------------------------------------------------------------------------------------------------------------
Primary Care
------------------------------------------------------------------------------------------------------------------------------
Physician Specialty
Services
------------------------------------------------------------------------------------------------------------------------------
Hospital Outpatient
------------------------------------------------------------------------------------------------------------------------------
Other Professional
Services
------------------------------------------------------------------------------------------------------------------------------
Emergency Room
------------------------------------------------------------------------------------------------------------------------------
DME/Medical Supplies
------------------------------------------------------------------------------------------------------------------------------
Prosthetics & Orthotics
------------------------------------------------------------------------------------------------------------------------------
Dental
------------------------------------------------------------------------------------------------------------------------------
Pharmacy
------------------------------------------------------------------------------------------------------------------------------
AIDS/HIV Reimbursable
Drugs
------------------------------------------------------------------------------------------------------------------------------
Home Health Care
------------------------------------------------------------------------------------------------------------------------------
Transportation
------------------------------------------------------------------------------------------------------------------------------
Lab & X-ray
------------------------------------------------------------------------------------------------------------------------------
Vision Care &
Eyeglasses
------------------------------------------------------------------------------------------------------------------------------
Mental Health/Substance
Abuse
------------------------------------------------------------------------------------------------------------------------------
Other Medical
------------------------------------------------------------------------------------------------------------------------------
Total
------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
-----------------------------------------------------------------------------------
         1                            Claims Processed During Quarter
----------------------     13       14     15         16                17
                       ------------------------------------------------------------
                                                      Non-
                                                   Processed      % of Claims Not
                                                   Claims on    Processed at End of
                          % of     >120   % of    Hand at End         Quarter
  Category of Services    Total    Days   Total   of Quarter      (col 16 + col 4)
-----------------------------------------------------------------------------------
<S>                       <C>      <C>    <C>     <C>           <C>
Inpatient Hospital
-----------------------------------------------------------------------------------
Primary Care
-----------------------------------------------------------------------------------
Physician Specialty
Services
-----------------------------------------------------------------------------------
Hospital Outpatient
-----------------------------------------------------------------------------------
Other Professional
Services
-----------------------------------------------------------------------------------
Emergency Room
-----------------------------------------------------------------------------------
DME/Medical Supplies
-----------------------------------------------------------------------------------
Prosthetics & Orthotics
-----------------------------------------------------------------------------------
Dental
-----------------------------------------------------------------------------------
Pharmacy
-----------------------------------------------------------------------------------
AIDS/HIV Reimbursable
Drugs
-----------------------------------------------------------------------------------
Home Health Care
-----------------------------------------------------------------------------------
Transportation
-----------------------------------------------------------------------------------
Lab & X-ray
-----------------------------------------------------------------------------------
Vision Care &
Eyeglasses
-----------------------------------------------------------------------------------
Mental Health/Substance
Abuse
-----------------------------------------------------------------------------------
Other Medical
-----------------------------------------------------------------------------------
Total
-----------------------------------------------------------------------------------
</TABLE>

<PAGE>

Plan Name_______________                          Quarter Ending_______________

                                TABLE 4B

             CLAIMS LAG REPORT FOR ELECTRONICALLY SUBMITTED CLAIMS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
         1                   2             3         4            5                      Claims Processed During Quarter
-------------------------------------------------------------------------    6      7      8      9     10     11      12
                                                                           ---------------------------------------------------
                            Non-                               Claims
                          Processed     Claims                Processed
                           Claims       Rec'd      Total     This Quarter
                          From Prior    During     Claims     (cols 6+8    01-30  % of   31-60  % of   61-90  % of   91-120
  Category of Services     Quarters    Quarter  (cols 2+3)   +10+12+14)    Days   Total  Days   Total  Days   Total   Days
------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>          <C>      <C>          <C>           <C>    <C>    <C>    <C>    <C>    <C>    <C>
Inpatient Hospital
------------------------------------------------------------------------------------------------------------------------------
Primary Care
------------------------------------------------------------------------------------------------------------------------------
Physician Specialty
Services
------------------------------------------------------------------------------------------------------------------------------
Hospital Outpatient
------------------------------------------------------------------------------------------------------------------------------
Other Professional
Services
------------------------------------------------------------------------------------------------------------------------------
Emergency Room
------------------------------------------------------------------------------------------------------------------------------
DME/Medical Supplies
------------------------------------------------------------------------------------------------------------------------------
Prosthetics & Orthotics
------------------------------------------------------------------------------------------------------------------------------
Dental
------------------------------------------------------------------------------------------------------------------------------
Pharmacy
------------------------------------------------------------------------------------------------------------------------------
AIDS/HIV Reimbursable
Drugs
------------------------------------------------------------------------------------------------------------------------------
Home Health Care
------------------------------------------------------------------------------------------------------------------------------
Transportation
------------------------------------------------------------------------------------------------------------------------------
Lab & X-ray
------------------------------------------------------------------------------------------------------------------------------
Vision Care & Eyeglasses
------------------------------------------------------------------------------------------------------------------------------
Mental Health/Substance Abuse
------------------------------------------------------------------------------------------------------------------------------
Other Medical
------------------------------------------------------------------------------------------------------------------------------
Total
------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
-----------------------------------------------------------------------------------
         1                             Claims Processed During Quarter
-----------------------    13       14     15         16                17
                        -----------------------------------------------------------
                                                      Non-
                                                   Processed      % of Claims Not
                                                   Claims on    Processed at End of
                          % of     >120   % of    Hand at End         Quarter
  Category of Services    Total    Days   Total   of Quarter      (col 16 + col 4)
-----------------------------------------------------------------------------------
<S>                       <C>      <C>    <C>     <C>           <C>
Inpatient Hospital
-----------------------------------------------------------------------------------
Primary Care
-----------------------------------------------------------------------------------
Physician Specialty
Services
-----------------------------------------------------------------------------------
Hospital Outpatient
-----------------------------------------------------------------------------------
Other Professional
Services
-----------------------------------------------------------------------------------
Emergency Room
-----------------------------------------------------------------------------------
DME/Medical Supplies
-----------------------------------------------------------------------------------
Prosthetics & Orthotics
-----------------------------------------------------------------------------------
Dental
-----------------------------------------------------------------------------------
Pharmacy
-----------------------------------------------------------------------------------
AIDS/HIV Reimbursable
Drugs
-----------------------------------------------------------------------------------
Home Health Care
-----------------------------------------------------------------------------------
Transportation
-----------------------------------------------------------------------------------
Lab & X-ray
-----------------------------------------------------------------------------------
Vision Care & Eyeglasses                        <
-----------------------------------------------------------------------------------
Mental Health/Substance Abuse
-----------------------------------------------------------------------------------
Other Medical
-----------------------------------------------------------------------------------
Total
-----------------------------------------------------------------------------------
</TABLE>

<PAGE>

A.7.7

TABLE 5   HOSPITAL SPECIFIC DATA

Table 5

In Table 5, the contractor shall report hospital-specific data for Medicaid and
NJ FamilyCare enrollees for whom hospital services were rendered during the
year. The first year to be reported shall be calendar year 2001, due by March 1,
2003. Subsequent reporting shall follow this model. The contractor must provide
data in Excel format (hard copy and electronically) only for those hospitals
listed on the spreadsheet. The contractor must combine data for hospitals to
which the contractor has assigned multiple provider numbers. The data elements
required for each hospital include:

                  Number of discharges
                  Patient Days
                  Outpatient visits
                  Inpatient charges
                  Inpatient payments
                  Outpatient charges
                  Outpatient payments

Use discharge date as service date for inpatient services.
<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

NAME OF HMO:

<TABLE>
<CAPTION>
                                                         MEDICAID ENROLLEES
===========================================================================================================================
                                                                           CALENDAR YEAR 2001*
                                              -----------------------------------------------------------------------------
HOSP                                            NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #              HOSPITAL NAME                 DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===========================================================================================================================
<S>   <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
      ATLANTIC CITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      BARNERT MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BAYONNE HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BAYSHORE COMMUNITY HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BERGEN REGIONAL M.C.
---------------------------------------------------------------------------------------------------------------------------
      BURDETTE TOMLIN MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CAPITAL HEALTH SYSTEM - FULD CAMPUS
---------------------------------------------------------------------------------------------------------------------------
      CAPITAL HEALTH SYSTEM AT MERCER
---------------------------------------------------------------------------------------------------------------------------
      CATHEDRAL HEALTHCARE SYS.-ST.MICHAEL'S
---------------------------------------------------------------------------------------------------------------------------
      CENTRASTATE MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      CHILTON MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CHRIST HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CLARA MAASS MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      COLUMBUS HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      COMMUNITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      COOPER HOSPITAL/UNIVERSITY MED CTR
---------------------------------------------------------------------------------------------------------------------------
      DEBORAH HEART AND LUNG CENTER
---------------------------------------------------------------------------------------------------------------------------
      EAST ORANGE GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      ENGLEWOOD HOSPITAL & M.C.
---------------------------------------------------------------------------------------------------------------------------
      GENERAL HOSPITAL CENTER AT PASSAIC
---------------------------------------------------------------------------------------------------------------------------
      GREENVILLE HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HACKENSACK UNIV. M.C.
---------------------------------------------------------------------------------------------------------------------------
      HACKETTSTOWN COMMUNITY HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HOLY NAME HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HOSPITAL CENTER AT ORANGE
---------------------------------------------------------------------------------------------------------------------------
      HUNTERDON MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      IRVINGTON GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      JERSEY CITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      JERSEY SHORE MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      JFK MEDICAL CTR @ EDISON
---------------------------------------------------------------------------------------------------------------------------
      KENNEDY HEALTH SYSTEM (VOORHEES)
---------------------------------------------------------------------------------------------------------------------------
      KIMBALL MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      MEADOWLANDS HOSPITAL M.C.
---------------------------------------------------------------------------------------------------------------------------
      MEDICAL CENTER AT PRINCETON
---------------------------------------------------------------------------------------------------------------------------
      MEDICAL CENTER OF OCEAN COUNTY
---------------------------------------------------------------------------------------------------------------------------
      MEMORIAL HOSPITAL OF SALEM COUNTY
---------------------------------------------------------------------------------------------------------------------------
      MONMOUTH MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      MONTCLAIR COMMUNITY HOSPITAL-CLOSED
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                    CALENDAR YEAR 2001*
                                                       -----------------------------------------------------------------------------
HOSP                                                     NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #                      HOSPITAL NAME                  DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
====================================================================================================================================
<S>   <C>                                              <C>         <C>      <C>         <C>        <C>        <C>         <C>
      MORRISTOWN MEMORIAL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      MOUNTAINSIDE M.C.
------------------------------------------------------------------------------------------------------------------------------------
      MUHLENBURG MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      NEWARK BETH ISRAEL MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      NEWTON MEMORIAL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      OUR LADY OF LOURDES HEALTH SYSTEM
------------------------------------------------------------------------------------------------------------------------------------
      OVERLOOK HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      PALISADES M.C.
------------------------------------------------------------------------------------------------------------------------------------
      PASCACK VALLEY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      PASSAIC BETH ISRAEL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      RAHWAY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      RANCOCAS HOSPITAL (FORMERLY ZURBRUGG)
------------------------------------------------------------------------------------------------------------------------------------
      RARITAN BAY MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      RIVERVIEW M.C.
------------------------------------------------------------------------------------------------------------------------------------
      ROBERT WOOD JOHNSON UNIVERSITY HOSP.
------------------------------------------------------------------------------------------------------------------------------------
      RWJ UNIVERSITY HOSP @ HAMILTON
------------------------------------------------------------------------------------------------------------------------------------
      SAINT BARNABAS MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC. /DENVILLE
------------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./ DOVER
------------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./ SUSSEX (WALLKILL)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT FRANCIS HOSPITAL-J.C.(BON SECOURS)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT FRANCIS MEDICAL CENTER (TRENTON)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT JAMES HOSP. (CATHEDRAL HEALTHCARE)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT JOSEPH'S HOSPITAL & M.C.
------------------------------------------------------------------------------------------------------------------------------------
      SAINT MARY HOSPITAL-HOBOKEN (BON SECOURS)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT MARY'S HOSPITAL-PASSAIC
------------------------------------------------------------------------------------------------------------------------------------
      SAINT PETER'S UNIV. HOSP
------------------------------------------------------------------------------------------------------------------------------------
      SHORE MEMORIAL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      SOMERSET MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      SOUTH AMBOY MEMORIAL HOSPITAL-CLOSED
------------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSP-ELMER DIV.
------------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSPITAL-MILLVILLE DIV.
------------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSP-NEWCOMB DIV.
------------------------------------------------------------------------------------------------------------------------------------
      SOUTHERN OCEAN COUNTY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      TRINITAS HOSP - ELIZABETH GENERAL HOSP
------------------------------------------------------------------------------------------------------------------------------------
      TRINITAS HOSPITAL - SAINT ELIZABETH M.C.
------------------------------------------------------------------------------------------------------------------------------------
      UMDNJ - UNIVERSITY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      UNDERWOOD-MEMORIAL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      UNION HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      UNITED HOSPITAL MEDICAL CENTER-CLOSED
------------------------------------------------------------------------------------------------------------------------------------
      VALLEY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      VIRTUA HEALTH (FORMERLY W. JERSEY HEALTH)
------------------------------------------------------------------------------------------------------------------------------------
      VIRTUA-'MEMORIAL HOSPITAL OF BURLINGTON CO
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
===========================================================================================================================
                                                                           CALENDAR YEAR 2001*
                                              -----------------------------------------------------------------------------
HOSP                                            NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #              HOSPITAL NAME                 DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===========================================================================================================================
<S>   <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
      WARREN HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WAYNE GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WEST HUDSON HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WILLIAM B. KESSLER MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      TOTALS                                           0        0           0          0          0           0           0
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

Name of HMO:

<TABLE>
<CAPTION>
                                                        NJ FAMILY CARE      PARENTS UP TO 133% OF THE FEDERAL POVERTY LEVEL
===========================================================================================================================
                                                                           CALENDAR YEAR 2001*
                                              -----------------------------------------------------------------------------
HOSP                                            NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #              HOSPITAL NAME                 DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===========================================================================================================================
<S>   <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
      ATLANTIC CITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      BARNERT MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BAYONNE HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BAYSHORE COMMUNITY HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BERGEN REGIONAL M.C.
---------------------------------------------------------------------------------------------------------------------------
      BURDETTE TOMLIN MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CAPITAL HEALTH SYSTEM - FULD CAMPUS
---------------------------------------------------------------------------------------------------------------------------
      CAPITAL HEALTH SYSTEM AT MERCER
---------------------------------------------------------------------------------------------------------------------------
      CATHEDRAL HEALTHCARE SYS.-ST.MICHAEL'S
---------------------------------------------------------------------------------------------------------------------------
      CENTRASTATE MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      CHILTON MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CHRIST HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CLARA MAASS MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      COLUMBUS HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      COMMUNITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      COOPER HOSPITAL/UNIVERSITY MED CTR
---------------------------------------------------------------------------------------------------------------------------
      DEBORAH HEART AND LUNG CENTER
---------------------------------------------------------------------------------------------------------------------------
      EAST ORANGE GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      ENGLEWOOD HOSPITAL & M.C.
---------------------------------------------------------------------------------------------------------------------------
      GENERAL HOSPITAL CENTER AT PASSAIC
---------------------------------------------------------------------------------------------------------------------------
      GREENVILLE HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HACKENSACK UNIV. M.C.
---------------------------------------------------------------------------------------------------------------------------
      HACKETTSTOWN COMMUNITY HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HOLY NAME HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HOSPITAL CENTER AT ORANGE
---------------------------------------------------------------------------------------------------------------------------
      HUNTERDON MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      IRVINGTON GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      JERSEY CITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      JERSEY SHORE MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      JFK MEDICAL CTR @ EDISON
---------------------------------------------------------------------------------------------------------------------------
      KENNEDY HEALTH SYSTEM (VOORHEES)
---------------------------------------------------------------------------------------------------------------------------
      KIMBALL MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      MEADOWLANDS HOSPITAL M.C.
---------------------------------------------------------------------------------------------------------------------------
      MEDICAL CENTER AT PRINCETON
---------------------------------------------------------------------------------------------------------------------------
      MEDICAL CENTER OF OCEAN COUNTY
---------------------------------------------------------------------------------------------------------------------------
      MEMORIAL HOSPITAL OF SALEM COUNTY
---------------------------------------------------------------------------------------------------------------------------
      MONMOUTH MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
====================================================================================================================================
                                                                                    CALENDAR YEAR 2001*
                                                       -----------------------------------------------------------------------------
HOSP                                                     NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #                      HOSPITAL NAME                  DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
====================================================================================================================================
<S>   <C>                                              <C>         <C>      <C>         <C>        <C>        <C>         <C>
      MONTCLAIR COMMUNITY HOSPITAL-CLOSED
------------------------------------------------------------------------------------------------------------------------------------
      MORRISTOWN MEMORIAL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      MOUNTAINSIDE M.C.
------------------------------------------------------------------------------------------------------------------------------------
      MUHLENBURG MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      NEWARK BETH ISRAEL MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      NEWTON MEMORIAL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      OUR LADY OF LOURDES HEALTH SYSTEM
------------------------------------------------------------------------------------------------------------------------------------
      OVERLOOK HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      PALISADES M.C.
------------------------------------------------------------------------------------------------------------------------------------
      PASCACK VALLEY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      PASSAIC BETH ISRAEL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      RAHWAY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      RANCOCAS HOSPITAL (FORMERLY ZURBRUGG)
------------------------------------------------------------------------------------------------------------------------------------
      RARITAN BAY MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      RIVERVIEW M.C.
------------------------------------------------------------------------------------------------------------------------------------
      ROBERT WOOD JOHNSON UNIVERSITY HOSP.
------------------------------------------------------------------------------------------------------------------------------------
      RWJ UNIVERSITY HOSP @ HAMILTON
------------------------------------------------------------------------------------------------------------------------------------
      SAINT BARNABAS MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC. /DENVILLE
------------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./ DOVER
------------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./ SUSSEX (WALLKILL)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT FRANCIS HOSPITAL-J.C.(BON SECOURS)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT FRANCIS MEDICAL CENTER (TRENTON)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT JAMES HOSP. (CATHEDRAL HEALTHCARE)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT JOSEPH'S HOSPITAL & M.C.
------------------------------------------------------------------------------------------------------------------------------------
      SAINT MARY HOSPITAL-HOBOKEN (BON SECOURS)
------------------------------------------------------------------------------------------------------------------------------------
      SAINT MARY'S HOSPITAL-PASSAIC
------------------------------------------------------------------------------------------------------------------------------------
      SAINT PETER'S UNIV. HOSP
------------------------------------------------------------------------------------------------------------------------------------
      SHORE MEMORIAL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      SOMERSET MEDICAL CENTER
------------------------------------------------------------------------------------------------------------------------------------
      SOUTH AMBOY MEMORIAL HOSPITAL-CLOSED
------------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSP-ELMER DIV.
------------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSPITAL-MILLVILLE DIV.
------------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSP-NEWCOMB DIV.
------------------------------------------------------------------------------------------------------------------------------------
      SOUTHERN OCEAN COUNTY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      TRINITAS HOSP - ELIZABETH GENERAL HOSP
------------------------------------------------------------------------------------------------------------------------------------
      TRINITAS HOSPITAL - SAINT ELIZABETH M.C.
------------------------------------------------------------------------------------------------------------------------------------
      UMDNJ - UNIVERSITY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      UNDERWOOD-MEMORIAL HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      UNION HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      UNITED HOSPITAL, MEDICAL CENTER-CLOSED
------------------------------------------------------------------------------------------------------------------------------------
      VALLEY HOSPITAL
------------------------------------------------------------------------------------------------------------------------------------
      VIRTUA HEALTH (FORMERLY W. JERSEY HEALTH)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
===========================================================================================================================
                                                                           CALENDAR YEAR 2001*
                                              -----------------------------------------------------------------------------
HOSP                                            NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #              HOSPITAL NAME                 DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===========================================================================================================================
<S>   <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
      VIRTUA-'MEMORIAL HOSPITAL OF BURLINGTON CO
---------------------------------------------------------------------------------------------------------------------------
      WARREN HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WAYNE GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WEST HUDSON HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WILLIAM B. KESSLER MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      TOTALS                                           0        0           0          0          0           0           0
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

NAME OF HMO:

<TABLE>
<CAPTION>
            NJ FAMILY CARE - ALL OTHER                                     CALENDAR YEAR 2001*
===========================================================================================================================
                                              -----------------------------------------------------------------------------
HOSP                                            NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #              HOSPITAL NAME                 DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===========================================================================================================================
<S>   <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
      ATLANTIC CITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      BARNERT MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BAYONNE HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BAYSHORE COMMUNITY HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BERGEN REGIONAL M.C.
---------------------------------------------------------------------------------------------------------------------------
      BURDETTE TOMLIN MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CAPITAL HEALTH SYSTEM - FULD CAMPUS
---------------------------------------------------------------------------------------------------------------------------
      CAPITAL HEALTH SYSTEM AT MERCER
---------------------------------------------------------------------------------------------------------------------------
      CATHEDRAL HEALTHCARE SYS.-ST.MICHAEL'S
---------------------------------------------------------------------------------------------------------------------------
      CENTRASTATE MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      CHILTON MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CHRIST HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CLARA MAASS MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      COLUMBUS HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      COMMUNITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      COOPER HOSPITAL/UNIVERSITY MED CTR
---------------------------------------------------------------------------------------------------------------------------
      DEBORAH HEART AND LUNG CENTER
---------------------------------------------------------------------------------------------------------------------------
      EAST ORANGE GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      ENGLEWOOD HOSPITAL & M.C.
---------------------------------------------------------------------------------------------------------------------------
      GENERAL HOSPITAL CENTER AT PASSAIC
---------------------------------------------------------------------------------------------------------------------------
      GREENVILLE HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HACKENSACK UNIV. M.C.
---------------------------------------------------------------------------------------------------------------------------
      HACKETTSTOWN COMMUNITY HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HOLY NAME HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HOSPITAL CENTER AT ORANGE
---------------------------------------------------------------------------------------------------------------------------
      HUNTERDON MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      IRVINGTON GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      JERSEY CITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      JERSEY SHORE MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      JFK MEDICAL CTR @ EDISON
---------------------------------------------------------------------------------------------------------------------------
      KENNEDY HEALTH SYSTEM (VOORHEES)
---------------------------------------------------------------------------------------------------------------------------
      KIMBALL MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      MEADOWLANDS HOSPITAL M.C.
---------------------------------------------------------------------------------------------------------------------------
      MEDICAL CENTER AT PRINCETON
---------------------------------------------------------------------------------------------------------------------------
      MEDICAL CENTER OF OCEAN COUNTY
---------------------------------------------------------------------------------------------------------------------------
      MEMORIAL HOSPITAL OF SALEM COUNTY
---------------------------------------------------------------------------------------------------------------------------
      MONMOUTH MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      MONTCLAIR COMMUNITY HOSPITAL-CLOSED
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
====================================================================================================================================
                                                       -----------------------------------------------------------------------------
HOSP                                                     NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #                      HOSPITAL NAME                  DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
====================================================================================================================================
<S>   <C>                                              <C>         <C>      <C>         <C>        <C>        <C>         <C>
      MORRISTOWN MEMORIAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      MOUNTAINSIDE M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      MUHLENBURG MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      NEWARK BETH ISRAEL MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      NEWTON MEMORIAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      OUR LADY OF LOURDES HEALTH SYSTEM
-----------------------------------------------------------------------------------------------------------------------------------
      OVERLOOK HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      PALISADES M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      PASCACK VALLEY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      PASSAIC BETH ISRAEL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      RAHWAY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      RANCOCAS HOSPITAL (FORMERLY ZURBRUGG)
-----------------------------------------------------------------------------------------------------------------------------------
      RARITAN BAY MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      RIVERVIEW M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      ROBERT WOOD JOHNSON UNIVERSITY HOSP.
-----------------------------------------------------------------------------------------------------------------------------------
      RWJ UNIVERSITY HOSP @ HAMILTON
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT BARNABAS MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./DENVILLE
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./DOVER
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./SUSSEX (WALLKILL)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT FRANCIS HOSPITAL-J.C.(BON SECOURS)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT FRANCIS MEDICAL CENTER (TRENTON)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT JAMES HOSP.(CATHEDRAL HEALTHCARE)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT JOSEPH'S HOSPITAL & M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT MARY HOSPITAL-HOBOKEN (BON SECOURS)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT MARY'S HOSPITAL-PASSAIC
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT PETER'S UNIV. HOSP
-----------------------------------------------------------------------------------------------------------------------------------
      SHORE MEMORIAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      SOMERSET MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTH AMBOY MEMORIAL HOSPITAL-CLOSED
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSP-ELMER DIV.
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSPITAL-MILLVILLE DIV.
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSP-NEWCOMB DIV.
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTHERN OCEAN COUNTY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      TRINITAS HOSP - ELIZABETH GENERAL HOSP
-----------------------------------------------------------------------------------------------------------------------------------
      TRINITAS HOSPITAL - SAINT ELIZABETH M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      UMDNJ - UNIVERSITY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      UNDERWOOD-MEMORIAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      UNION HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      UNITED HOSPITAL MEDICAL CENTER-CLOSED
-----------------------------------------------------------------------------------------------------------------------------------
      VALLEY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      VIRTUA HEALTH (FORMERLY W. JERSEY HEALTH)
-----------------------------------------------------------------------------------------------------------------------------------
      VIRTUA-MEMORIAL HOSPITAL OF BURLINGTON CO
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
===========================================================================================================================
                                              -----------------------------------------------------------------------------
HOSP                                            NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #              HOSPITAL NAME                 DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===========================================================================================================================
<S>   <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
      WARREN HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WAYNE GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WEST HUDSON HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WILLIAM B. KESSLER MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      TOTALS
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

NAME OF HMO:

<TABLE>
<CAPTION>
               NJ KIDCARE HMO PLAN A
===========================================================================================================================
                                                                           CALENDAR YEAR 2001*
                                              -----------------------------------------------------------------------------
HOSP                                            NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #              HOSPITAL NAME                 DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===========================================================================================================================
<S>   <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
      ATLANTIC CITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      BARNERT MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BAYONNE HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BAYSHORE COMMUNITY HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      BERGEN REGIONAL M.C.
---------------------------------------------------------------------------------------------------------------------------
      BURDETTE TOMLIN MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CAPITAL HEALTH SYSTEM - FULD CAMPUS
---------------------------------------------------------------------------------------------------------------------------
      CAPITAL HEALTH SYSTEM AT MERCER
---------------------------------------------------------------------------------------------------------------------------
      CATHEDRAL HEALTHCARE SYS.-ST.MICHAEL'S
---------------------------------------------------------------------------------------------------------------------------
      CENTRASTATE MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      CHILTON MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CHRIST HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      CLARA MAASS MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      COLUMBUS HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      COMMUNITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      COOPER HOSPITAL/UNIVERSITY MED CTR
---------------------------------------------------------------------------------------------------------------------------
      DEBORAH HEART AND LUNG CENTER
---------------------------------------------------------------------------------------------------------------------------
      EAST ORANGE GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      ENGLEWOOD HOSPITAL & M.C.
---------------------------------------------------------------------------------------------------------------------------
      GENERAL HOSPITAL CENTER AT PASSAIC
---------------------------------------------------------------------------------------------------------------------------
      GREENVILLE HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HACKENSACK UNIV. M.C.
---------------------------------------------------------------------------------------------------------------------------
      HACKETTSTOWN COMMUNITY HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HOLY NAME HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      HOSPITAL CENTER AT ORANGE
---------------------------------------------------------------------------------------------------------------------------
      HUNTERDON MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      IRVINGTON GENERAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      JERSEY CITY MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      JERSEY SHORE MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      JFK MEDICAL CTR @ EDISON
---------------------------------------------------------------------------------------------------------------------------
      KENNEDY HEALTH SYSTEM(VOORHEES)
---------------------------------------------------------------------------------------------------------------------------
      KIMBALL MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      MEADOWLANDS HOSPITAL M.C.
---------------------------------------------------------------------------------------------------------------------------
      MEDICAL CENTER AT PRINCETON
---------------------------------------------------------------------------------------------------------------------------
      MEDICAL CENTER OF OCEAN COUNTY
---------------------------------------------------------------------------------------------------------------------------
      MEMORIAL HOSPITAL OF SALEM COUNTY
---------------------------------------------------------------------------------------------------------------------------
      MONMOUTH MEDICAL CENTER
---------------------------------------------------------------------------------------------------------------------------
      MONTCLAIR COMMUNITY HOSPITAL-CLOSED
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
===================================================================================================================================
                                                                                    CALENDAR YEAR 2001*
                                                       -----------------------------------------------------------------------------
HOSP                                                     NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #                      HOSPITAL NAME                  DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===================================================================================================================================
<S>   <C>                                              <C>         <C>      <C>         <C>        <C>        <C>         <C>
      MORRISTOWN MEMORIAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      MOUNTAINSIDE M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      MUHLENBURG MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      NEWARK BETH ISRAEL MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      NEWTON MEMORIAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      OUR LADY OF LOURDES HEALTH SYSTEM
-----------------------------------------------------------------------------------------------------------------------------------
      OVERLOOK HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      PALISADES M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      PASCACK VALLEY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      PASSAIC BETH ISRAEL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      RAHWAY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      RANCOCAS HOSPITAL (FORMERLY ZURBRUGG)
-----------------------------------------------------------------------------------------------------------------------------------
      RARITAN BAY MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      RIVERVIEW M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      ROBERT WOOD JOHNSON UNIVERSITY HOSP.
-----------------------------------------------------------------------------------------------------------------------------------
      RWJ UNIVERSITY HOSP @ HAMILTON
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT BARNABAS MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC. /DENVILLE
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./ DOVER
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT CLARE'S HOSPITAL, INC./ SUSSEX (WALLKILL)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT FRANCIS HOSPITAL-J.C.(BON SECOURS)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT FRANCIS MEDICAL CENTER (TRENTON)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT JAMES HOSP. (CATHEDRAL HEALTHCARE)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT JOSEPH'S HOSPITAL & M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT MARY HOSPITAL-HOBOKEN (BON SECOURS)
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT MARY'S HOSPITAL-PASSAIC
-----------------------------------------------------------------------------------------------------------------------------------
      SAINT PETER'S UNIV. HOSP
-----------------------------------------------------------------------------------------------------------------------------------
      SHORE MEMORIAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      SOMERSET MEDICAL CENTER
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTH AMBOY MEMORIAL HOSPITAL-CLOSED
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSP-ELMER DIV.
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSPITAL-MILLVILLE DIV.
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTH JERSEY HOSP-NEWCOMB DIV.
-----------------------------------------------------------------------------------------------------------------------------------
      SOUTHERN OCEAN COUNTY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      TRINITAS HOSP - ELIZABETH GENERAL HOSP
-----------------------------------------------------------------------------------------------------------------------------------
      TRINITAS HOSPITAL - SAINT ELIZABETH M.C.
-----------------------------------------------------------------------------------------------------------------------------------
      UMDNJ - UNIVERSITY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      UNDERWOOD-MEMORIAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      UNION HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      UNITED HOSPITAL MEDICAL CENTER-CLOSED
-----------------------------------------------------------------------------------------------------------------------------------
      VALLEY HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      VIRTUA HEALTH (FORMERLY W. JERSEY HEALTH
-----------------------------------------------------------------------------------------------------------------------------------
      VIRTUA-MEMORIAL HOSPITAL OF BURLINGTON CO
-----------------------------------------------------------------------------------------------------------------------------------
      WARREN HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
      WAYNE GENERAL HOSPITAL
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

           TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
===========================================================================================================================
                                                                           CALENDAR YEAR 2001*
                                              -----------------------------------------------------------------------------
HOSP                                            NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
 #              HOSPITAL NAME                 DISCHARGES   DAYS      VISITS     CHARGES   PAYMENTS    CHARGES     PAYMENTS
===========================================================================================================================
<S>   <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
      WEST HUDSON HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      WILLIAM B. KESSLER MEMORIAL HOSPITAL
---------------------------------------------------------------------------------------------------------------------------
      TOTALS                                           0        0           0          0          0           0           0
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.
<PAGE>

          TABLE 5 -- HMO HOSPITAL DATA

NAME OF HMO:

          NJ KIDCARE HMO PLANS B, C OR D

<TABLE>
<CAPTION>
===============================================================================================================================
                                                                               CALENDAR YEAR 2001 *
                                                  -----------------------------------------------------------------------------
  HOSP                                              NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
   #                    HOSPITAL NAME             DISCHARGES    DAYS     VISITS     CHARGES   PAYMENTS   CHARGES     PAYMENTS
-------------------------------------------------------------------------------------------------------------------------------
<S>       <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
          ATLANTIC CITY MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          BARNERT MEMORIAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          BAYONNE HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          BAYSHORE COMMUNITY HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          BERGEN REGIONAL M.C.
-------------------------------------------------------------------------------------------------------------------------------
          BURDETTE TOMLIN MEMORIAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          CAPITAL HEALTH SYSTEM - FULD CAMPUS
-------------------------------------------------------------------------------------------------------------------------------
          CAPITAL HEALTH SYSTEM AT MERCER
-------------------------------------------------------------------------------------------------------------------------------
          CATHEDRAL HEALTHCARE SYS.-ST.MICHAEL'S
-------------------------------------------------------------------------------------------------------------------------------
          CENTRASTATE MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          CHILTON MEMORIAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          CHRIST HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          CLARA MAASS MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          COLUMBUS HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          COMMUNITY MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          COOPER HOSPITAL/UNIVERSITY MED CTR
-------------------------------------------------------------------------------------------------------------------------------
          DEBORAH HEART AND LUNG CENTER
-------------------------------------------------------------------------------------------------------------------------------
          EAST ORANGE GENERAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          ENGLEWOOD HOSPITAL & M.C.
-------------------------------------------------------------------------------------------------------------------------------
          GENERAL HOSPITAL CENTER AT PASSAIC
-------------------------------------------------------------------------------------------------------------------------------
          GREENVILLE HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          HACKENSACK UNIV. M.C.
-------------------------------------------------------------------------------------------------------------------------------
          HACKETTSTOWN COMMUNITY HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          HOLY NAME HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          HOSPITAL CENTER AT ORANGE
-------------------------------------------------------------------------------------------------------------------------------
          HUNTERDON MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          IRVINGTON GENERAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          JERSEY CITY MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          JERSEY SHORE MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          JFK MEDICAL CTR @ EDISON
-------------------------------------------------------------------------------------------------------------------------------
          KENNEDY HEALTH SYSTEM (VOORHEES)
-------------------------------------------------------------------------------------------------------------------------------
          KIMBALL MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          MEADOWLANDS HOSPITAL M.C.
-------------------------------------------------------------------------------------------------------------------------------
          MEDICAL CENTER AT PRINCETON
-------------------------------------------------------------------------------------------------------------------------------
          MEDICAL CENTER OF OCEAN COUNTY
-------------------------------------------------------------------------------------------------------------------------------
          MEMORIAL HOSPITAL OF SALEM COUNTY
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

          TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
===============================================================================================================================
                                                                               CALENDAR YEAR 2001 *
                                                  -----------------------------------------------------------------------------
  HOSP                                              NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
   #                    HOSPITAL NAME             DISCHARGES    DAYS     VISITS     CHARGES   PAYMENTS   CHARGES     PAYMENTS
-------------------------------------------------------------------------------------------------------------------------------
<S>       <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
          MONMOUTH MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          MONTCLAIR COMMUNITY HOSPITAL-CLOSED
-------------------------------------------------------------------------------------------------------------------------------
          MORRISTOWN MEMORIAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          MOUNTAINSIDE M.C.
-------------------------------------------------------------------------------------------------------------------------------
          MUHLENBURG MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          NEWARK BETH ISRAEL MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          NEWTON MEMORIAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          OUR LADY OF LOURDES HEALTH SYSTEM
-------------------------------------------------------------------------------------------------------------------------------
          OVERLOOK HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          PALISADES M.C.
-------------------------------------------------------------------------------------------------------------------------------
          PASCACK VALLEY HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          PASSAIC BETH ISRAEL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          RAHWAY HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          RANCOCAS HOSPITAL (FORMERLY ZURBRUGG)
-------------------------------------------------------------------------------------------------------------------------------
          RARITAN BAY MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          RIVERVIEW M.C.
-------------------------------------------------------------------------------------------------------------------------------
          ROBERT WOOD JOHNSON UNIVERSITY HOSP.
-------------------------------------------------------------------------------------------------------------------------------
          RWJ UNIVERSITY HOSP @ HAMILTON
-------------------------------------------------------------------------------------------------------------------------------
          SAINT BARNABAS MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          SAINT CLARE'S HOSPITAL, INC. /DENVILLE
-------------------------------------------------------------------------------------------------------------------------------
          SAINT CLARE'S HOSPITAL, INC./ DOVER
-------------------------------------------------------------------------------------------------------------------------------
          SAINT CLARE'S HOSPITAL, INC./ SUSSEX (WALLKILL)
-------------------------------------------------------------------------------------------------------------------------------
          SAINT FRANCIS HOSPITAL-J.C.(BON SECOURS)
-------------------------------------------------------------------------------------------------------------------------------
          SAINT FRANCIS MEDICAL CENTER (TRENTON)
-------------------------------------------------------------------------------------------------------------------------------
          SAINT JAMES HOSP. (CATHEDRAL HEALTHCARE)
-------------------------------------------------------------------------------------------------------------------------------
          SAINT JOSEPH'S HOSPITAL & M.C.
-------------------------------------------------------------------------------------------------------------------------------
          SAINT MARY HOSPITAL-HOBOKEN (BON SECOURS)
-------------------------------------------------------------------------------------------------------------------------------
          SAINT MARY'S HOSPITAL-PASSAIC
-------------------------------------------------------------------------------------------------------------------------------
          SAINT PETER'S UNIV. HOSP
-------------------------------------------------------------------------------------------------------------------------------
          SHORE MEMORIAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          SOMERSET MEDICAL CENTER
-------------------------------------------------------------------------------------------------------------------------------
          SOUTH AMBOY MEMORIAL HOSPITAL-CLOSED
-------------------------------------------------------------------------------------------------------------------------------
          SOUTH JERSEY HOSP-ELMER DIV.
-------------------------------------------------------------------------------------------------------------------------------
          SOUTH JERSEY HOSPITAL-MILLVILLE DIV.
-------------------------------------------------------------------------------------------------------------------------------
          SOUTH JERSEY HOSP-NEWCOMB DIV.
-------------------------------------------------------------------------------------------------------------------------------
          SOUTHERN OCEAN COUNTY HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          TRINITAS HOSP - ELIZABETH GENERAL HOSP
-------------------------------------------------------------------------------------------------------------------------------
          TRINITAS HOSPITAL - SAINT ELIZABETH M.C.
-------------------------------------------------------------------------------------------------------------------------------
          UMDNJ - UNIVERSITY HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          UNDERWOOD-MEMORIAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          UNION HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          UNITED HOSPITAL MEDICAL CENTER-CLOSED
-------------------------------------------------------------------------------------------------------------------------------
          VALLEY HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

          TABLE 5 -- HMO HOSPITAL DATA

<TABLE>
<CAPTION>
===============================================================================================================================
                                                                               CALENDAR YEAR 2001 *
                                                  -----------------------------------------------------------------------------
  HOSP                                              NUMBER    PATIENT  OUTPATIENT  INPATIENT  INPATIENT  OUTPATIENT  OUTPATIENT
   #                    HOSPITAL NAME             DISCHARGES    DAYS     VISITS     CHARGES   PAYMENTS   CHARGES     PAYMENTS
-------------------------------------------------------------------------------------------------------------------------------
<S>       <C>                                     <C>         <C>      <C>         <C>        <C>        <C>         <C>
          VIRTUA HEALTH (FORMERLY W. JERSEY
           HEALTH)
-------------------------------------------------------------------------------------------------------------------------------
          VIRTUA-'MEMORIAL HOSPITAL OF
           BURLINGTON CO
-------------------------------------------------------------------------------------------------------------------------------
          WARREN HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          WAYNE GENERAL HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          WEST HUDSON HOSPITAL
-------------------------------------------------------------------------------------------------------------------------------
          WILLIAM B. KESSLER MEMORIAL HOSPITAL
===============================================================================================================================
          TOTALS                                       0         0         0           0          0           0           0
</TABLE>

*COLLECT DATA BY SERVICE DATES IN CALENDAR YEAR 2001.

USE DISCHARGE DATE AS SERVICE DATE FOR INPATIENT SERVICES.

<PAGE>

A.7.8

TABLE 6        STATEMENT OF REVENUES AND EXPENSES

The contractor shall report revenues and expenses for all Medicaid premium
groups on an accrual basis for each quarter of the calendar year (Table 6A). A
cumulative year to date report is also required in the second, third, and fourth
quarters of the calendar year (Table 6B).

Note: Shaded (darkened) blocks are not required to be completed.

1.       Member months

REVENUE:

2.       Capitated Premiums - Revenue recognized on a prepaid basis for
         enrollees for provision of a specified range of health services over a
         defined period of time, normally one month. If advance payments are
         made to the plan for more than one reporting period, the portion of the
         payment that has not been earned must be treated as a liability
         (Unearned Premiums).

3.       Supplemental Premiums - Revenue paid to the plan in addition to
         capitated premiums for certain services provided. See a, b, and c
         below.

         a.       Maternity - (See Article 8)

         b.       HIV/AIDS Reimbursable Drugs - (See Article 8)

         c.       Other - Any other revenue paid by DMAHS to the plan in
                  addition to capitation for covered services that is not a or b
                  above.

4.       Total Premiums - All Medicaid premiums paid to the plan reported on
         lines 2, 3a, 3b, and 3c.

5.       Interest - Interest earned from all sources including escrow and
         reserve accounts.

6.       C. O. B. - Income from Coordination of Benefits and Subrogation.

7.       Reinsurance Recoveries - Income from the settlement of claims resulting
         from a policy with a private reinsurance carrier.

8.       Other Revenue - Revenue from sources not covered in the previous
         revenue accounts.

9.       Total Revenue-Total revenue (the sum of lines 2 through 8)

<PAGE>

EXPENSES: Report total actual expenses on an accrual basis for each of the
medical and hospital categories below in column d. Report the applicable amounts
for each of the categories in columns a, b, and c as defined below.

Paid Claims (Column a) - Enter amounts of paid claims (claims for which checks
have actually been mailed) during the quarter for services rendered during the
quarter for each medical and hospital category.

Reported But Unpaid Claims (RBUCs) (Column b) - Enter the amount of all claims
which are received during the quarter by the plan for which a check has not yet
been issued for services during the quarter.

Incurred But Not Reported (IBNR) (Column c) - Enter estimated amounts of the
obligation for claims which have not yet been received by the plan for services
rendered during the quarter.

Actual PMPM (Column e) - Enter the actual cost per member per month for each
line category. Divide the amount in column d by total member months on line 1 to
arrive at the dollar and cents number (use two decimal places, e.g. $14.25).

Medical and Hospital

10.      Inpatient Hospital - Inpatient hospital costs including ancillary
         services for enrollees while confined to an acute care hospital,
         including out of area hospitalization.

11.      Primary Care - Includes all costs associated with medical services
         provided in any setting by a primary care provider, including
         physicians and other practitioners.

12.      Physician Specialty Services - All costs associated with medical
         services provided by a physician other than a primary care physician.

13.      Outpatient Hospital - Includes the facility component of the outpatient
         visit. The visit can be free standing or a hospital outpatient
         department. The professional component should be billed separately and
         reported in the appropriate service category line item, e.g. physician
         specialty services.

14.      Other Professional Services - Compensation paid by the contractor to
         non-physician providers engaged in the delivery of medical services.

15.      Emergency Room - Includes the facility component of the emergency room
         visit as well as out of area emergency room costs. Professional
         components that are billed separately should be reported in the
         appropriate service category line item.

16.      DME/Medical Supplies - Includes the cost of durable medical equipment
         and supplies.

17.      Prosthetics and Orthotics - Includes the cost of Prosthetics and
         Orthotics.

<PAGE>

18.      Dental - Expenses for all dental services provided.

19.      Pharmacy - Expenses for legend and non-legend pharmacy services
         provided that includes both ingredient costs and dispensing fees.
         Exclude expenses reported as HIV/AIDS Reimbursable Drugs on line 20.

20.      HIV/AIDS Reimbursable Drugs - (See Article 8)

21.      Home Health Care - Expenses for home health services provided including
         nurses, aides, hospice costs, private duty nursing.

22.      Transportation - Expenses for all ambulance, medical intensive care
         units (MICUs), and invalid coach services.

23.      Lab & X-Ray - The cost of all laboratory and radiology (diagnostic and
         therapeutic) services for which the contractor is separately billed.

24.      Vision Care including Eyeglasses - The cost of routine exams (by
         non-physicians) and dispensing glasses to correct eye defects. This
         category includes the cost of eyeglasses but excludes ophthalmologist
         costs related to the treatment of disease or injury to the eye; the
         latter should be included in physician specialty or Other Professional
         Services.

25.      Mental Health/Substance Abuse - Include the cost of all mental health
         and substance abuse services including inpatient, physician services,
         outpatient hospital, other professional services, and other services
         associated with mental health or substance abuse treatment.

26.      Reinsurance Expenses - Expenses for reinsurance or "stop-loss"
         insurance made to a contracted reinsurer.

27.      Incentive Pool Adjustment - A reduction to medical expenses for
         adjusting the full medical expenses reported. For example, physician
         withholds retained by the contractor should be included here.

28.      Other Medical - Medical Expenses not included in lines 10 through 27.

29.      Total Medical and Hospital - The total of all medical and hospital
         expenses. (The sum of lines 10 through 28).

ADMINISTRATION: Costs associated with the overall management and operation of
the plan including the following components:

30.      Compensation - All expenses for administrative services including
         compensation and fringe benefits for personnel time devoted to or in
         direct support of administration. Include expenses for management
         contracts. Do not include marketing expenses here.

<PAGE>

31.      Interest expense - Interest on loans paid during the period.

32.      Occupancy, Depreciation, and Amortization

33.      Education and Outreach - Expenses incurred for education and outreach
         activities for enrollees.

34.      Marketing - Expenses directly related to marketing activities including
         advertising, printing, marketing salaries and fringe benefits,
         commissions, broker fees, travel, occupancy, and other expenses
         allocated to the marketing activity.

35.      Other - Costs which are not appropriately assigned to the health plan
         administration categories defined above.

36.      Total Administration - The total of costs of administration (the sum of
         lines 30 through 35).

37.      Total Expenses - The sum of Total Medical and Hospital Expenses (line
         29) and Total Administration (line 36).

38.      Operation Income (Loss) - Excess or deficiency of Total Revenue (line
         9) minus Total Expenses (line 37).

39.      Extraordinary Item - A non-recurring gain or loss.

40.      Provision for Taxes - All income taxes for the period.

41.      Adjustments for prior period IBNR estimates - Should include a
         reconciliation and explanation of prior period IBNR estimates. A
         contra-expense would be reported if IBNR estimates exceeded actual
         expenses.

42.      Net Income (Loss) - Operation Income (Loss)(line 38) minus Lines 39,
         40, and 41.

<PAGE>

                                                  STATE OF NEW JERSEY
Plan Name____________________                     Quarter Ending_______________
                                                  MEDICAID DATA ONLY

                                    TABLE 6A
                                  QUARTER ONLY
                       STATEMENT OF REVENUES AND EXPENSES
              Summary of All Eligibility Groups on Claims Incurred
                             During the Current Quarter

<TABLE>
<CAPTION>
                                         (a)         (b)          (c)             (d)            (e)
                                       =====================================================================
                                        PAID
                                        CLAIMS      RBUCS         IBNR
                                       -----------------------------------------   ACTUAL TOTAL       ACTUAL
                                       FOR SERVICES RECEIVED DURING THIS QUARTER   (COLS A + B + C)    PMPM
------------------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>           <C>              <C>                <C>
1. Member Months
-----------------------------------------------------------------------------------------------------------
REVENUE:

                                       --------------------------------------------------------------------
2.  Capitated Premiums
                                       --------------------------------------------------------------------
3.  Supplemental Premiums
                                       --------------------------------------------------------------------
     a. Maternity
                                       --------------------------------------------------------------------
     b. HIV/AIDS Reimbursable Drugs
                                       --------------------------------------------------------------------
     c. Other
                                       --------------------------------------------------------------------
4.  Total Premiums (Lines 2, 3a, 3b,
      3c)
                                       --------------------------------------------------------------------
5.  Interest
                                       --------------------------------------------------------------------
6.  C.O.B.
                                       --------------------------------------------------------------------
7.  Reinsurance Recoveries
                                       --------------------------------------------------------------------
8.  Other Revenue
-----------------------------------------------------------------------------------------------------------
9.  TOTAL REVENUE
-----------------------------------------------------------------------------------------------------------
EXPENSES:

                                       --------------------------------------------------------------------
MEDICAL & HOSPITAL:
                                       --------------------------------------------------------------------
10. Inpatient Hospital
                                       --------------------------------------------------------------------
11. Primary Care
                                       --------------------------------------------------------------------
12. Physician Specialty Services
                                       --------------------------------------------------------------------
13. Outpatient Hospital
                                       --------------------------------------------------------------------
14. Other Professional Services
                                       --------------------------------------------------------------------
15. Emergency Room
                                       --------------------------------------------------------------------
16. DME/Medical Supplies
                                       --------------------------------------------------------------------
17. Prosthetics & Orthotics
                                       --------------------------------------------------------------------
18. Dental
                                       --------------------------------------------------------------------
19. Pharmacy
                                       --------------------------------------------------------------------
20. HIV/AIDS Reimbursable Drugs
                                       --------------------------------------------------------------------
21. Home Health Care
                                       --------------------------------------------------------------------
22. Transportation
                                       --------------------------------------------------------------------
23. Lab & X-ray
                                       --------------------------------------------------------------------
24. Vision Care Inc. Eyeglasses
                                       --------------------------------------------------------------------
25. Mental Health/Substance Abuse
                                       --------------------------------------------------------------------
26. Reinsurance Expenses
                                       --------------------------------------------------------------------
27. Incentive Pool Adjustment
                                       --------------------------------------------------------------------
28. Other Medical
-----------------------------------------------------------------------------------------------------------
29. TOTAL MEDICAL & HOSPITAL
-----------------------------------------------------------------------------------------------------------
ADMINISTRATION:

                                       --------------------------------------------------------------------
30. Compensation
                                       --------------------------------------------------------------------
31. Interest Expense
                                       --------------------------------------------------------------------
32. Occupancy, Deprec. & Amortiz.
                                       --------------------------------------------------------------------
33. Education & Outreach
                                       --------------------------------------------------------------------
34. Marketing
                                       --------------------------------------------------------------------
35. Other
-----------------------------------------------------------------------------------------------------------
36. TOTAL ADMINISTRATION
-----------------------------------------------------------------------------------------------------------
37. TOTAL EXPENSES
-----------------------------------------------------------------------------------------------------------
38. OPERATION INCOME (LOSS)
-----------------------------------------------------------------------------------------------------------
39. Extraordinary Item
                                       --------------------------------------------------------------------
40. Provisions for Taxes
                                       --------------------------------------------------------------------
41. Adj. For prior period IBNR est.
-----------------------------------------------------------------------------------------------------------
42. NET INCOME (LOSS)
-----------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                                  STATE OF NEW JERSEY
Plan Name____________________                     Quarter Ending_______________
                                                  MEDICAID DATA ONLY

                                    TABLE 6B
                       STATEMENT OF REVENUES AND EXPENSES
              Summary of All Eligibility Groups on Claims Incurred
                                  Year to Date

<TABLE>
<CAPTION>
                                         (a)         (b)          (c)             (d)            (e)
                                       ==============================================================
                                        PAID
                                        CLAIMS      RBUCS         IBNR      ACTUAL TOTAL       ACTUAL
                                       ----------------------------------
                                       FOR SERVICES RECEIVED YEAR TO DATE   (COLS A + B + C)    PMPM
-----------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>           <C>       <C>                <C>
1.  Member Months
-----------------------------------------------------------------------------------------------------
REVENUE:

                                       --------------------------------------------------------------
2.  Capitated Premiums
                                       --------------------------------------------------------------
3.  Supplemental Premiums
                                       --------------------------------------------------------------
     a. Maternity
                                       --------------------------------------------------------------
     b. HIV/AIDS Reimbursable Drugs
                                       --------------------------------------------------------------
     c. Other
                                       --------------------------------------------------------------
4.  Total Premiums (Lines 2, 3a, 3b,
      3c)
                                       --------------------------------------------------------------
5.  Interest
                                       --------------------------------------------------------------
6.  C.O.B.
                                       --------------------------------------------------------------
7.  Reinsurance Recoveries
                                       --------------------------------------------------------------
8.  Other Revenue
-----------------------------------------------------------------------------------------------------
9.  TOTAL REVENUE
-----------------------------------------------------------------------------------------------------
EXPENSES:

                                       --------------------------------------------------------------
MEDICAL & HOSPITAL:
                                       --------------------------------------------------------------
10. Inpatient Hospital
                                       --------------------------------------------------------------
11. Primary Care
                                       --------------------------------------------------------------
12. Physician Specialty Services
                                       --------------------------------------------------------------
13. Outpatient Hospital
                                       --------------------------------------------------------------
14. Other Professional Services
                                       --------------------------------------------------------------
15. Emergency Room
                                       --------------------------------------------------------------
16. DME/Medical Supplies
                                       --------------------------------------------------------------
17. Prosthetics & Orthotics
                                       --------------------------------------------------------------
18. Dental
                                       --------------------------------------------------------------
19. Pharmacy
                                       --------------------------------------------------------------
20. HIV/AIDS Reimbursable Drugs
                                       --------------------------------------------------------------
21. Home Health Care
                                       --------------------------------------------------------------
22. Transportation
                                       --------------------------------------------------------------
23. Lab & X-ray
                                       --------------------------------------------------------------
24. Vision Care Inc. Eyeglasses
                                       --------------------------------------------------------------
25. Mental Health/Substance Abuse
                                       --------------------------------------------------------------
26. Reinsurance Expenses
                                       --------------------------------------------------------------
27. Incentive Pool Adjustment
                                       --------------------------------------------------------------
28. Other Medical
-----------------------------------------------------------------------------------------------------
29. TOTAL MEDICAL & HOSPITAL
-----------------------------------------------------------------------------------------------------
ADMINISTRATION:

                                       --------------------------------------------------------------
30. Compensation
                                       --------------------------------------------------------------
31. Interest Expense
                                       --------------------------------------------------------------
32. Occupancy, Deprec. & Amortiz.
                                       --------------------------------------------------------------
33. Education & Outreach
                                       --------------------------------------------------------------
34. Marketing
                                       --------------------------------------------------------------
35. Other
-----------------------------------------------------------------------------------------------------
36. TOTAL ADMINISTRATION
-----------------------------------------------------------------------------------------------------
37. TOTAL EXPENSES
-----------------------------------------------------------------------------------------------------
38. OPERATION INCOME (LOSS)
-----------------------------------------------------------------------------------------------------
39. Extraordinary Item
                                       --------------------------------------------------------------
40. Provisions for Taxes
                                       --------------------------------------------------------------
41. Adj. For prior period IBNR est.
-----------------------------------------------------------------------------------------------------
42. NET INCOME (LOSS)
-----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                    Table 6c
                      ALLOWABLE DIRECT MEDICAL EXPENDITURES
                 For Purposes of Calculating Medical Cost Ratio
                             For the Quarter Ending

List the employee name or employee number of salaried individuals who have
performed Allowable Direct Medical Expenditure functions during the quarter.
Allowable Direct Medical Expenditures are the salary costs of performing
functions related to the following categories: 1) assessment(s) of an enrollee's
risk factors; 2) development of Individual Health Care Plans; 3) provision of
face-to-face medical education or anticipatory guidance; and 4) activities
required to maintain compliance with EPSDT, lead screening and pre-natal care.
Reporting of direct medical expenditures shall reflect only those activities
approved by the State in the Medical Cost Ratio - Direct Medical Expenditures
Plan. OTHER CARE MANAGEMENT FUNCTIONS ARE CONSIDERED ADMINISTRATIVE AND ARE
UNALLOWABLE.

<TABLE>
<CAPTION>
                                                                                       CATEGORY
      EMPLOYEE NAME OR                    SALARY THIS                      (CARE MANAGEMENT, FACE-TO-FACE,
           NUMBER        EMPLOYEE TITLE     QUARTER     ALLOWABLE AMOUNT    COMPLIANCE WITH EPSDT, ET.AL.)      %
---------------------------------------------------------------------------------------------------------------------
<S>                      <C>              <C>           <C>                 <C>                                 <C>

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
TOTALS*
(attach additional
  sheets if necessary)
---------------------------------------------------------------------------------------------------------------------
</TABLE>

I certify the expenses reported as allowable are the true and accurate salary
costs of the individuals listed above and meet the definition of an Allowable
Direct Medical Expenditure defined in Section 8.4.1. A of the managed care
contract. Further, I certify these costs are included and have been reported as
Administrative costs on Tables 6a and 6b on line 30 (Compensation).

               (Signature) _______________________________________
               Name and Title_____________________________________

<PAGE>

A.7.9

TABLE 7         STOP-LOSS SUMMARY

The contractor shall identify reinsurance coverage in effect during the
quarterly report period. For each of the designated eligibility categories, the
contractor shall report the total number of enrollees that exceeded the
stop-loss threshold and the total net expenditures exceeding the stop-loss
threshold during the period.

<PAGE>
                                                             STATE OF NEW JERSEY
                                                              Quarter
Plan Name _______________________                         Ending____________
                                                              MEDICAID DATA ONLY

                                     TABLE 7

                                STOP-LOSS SUMMARY

A. Coverage

<TABLE>
<CAPTION>
                                       Maximum
                       Maximum Per    Aggregate        Includes                    Cost of
Aggregate Stop-Loss   Enrollee Per   Lifetime Per     Insolvency                   Premiums
     Threshold            Year         Enrollee     Insurance (Y/N)   Deductible     PMPM
-------------------------------------------------------------------------------------------
<S>                   <C>            <C>            <C>               <C>          <C>

-------------------------------------------------------------------------------------------
                      POLICY EXPIRATION DATE:
                                                    ----------------------------
</TABLE>

B.

<TABLE>
<CAPTION>
Category of Eligibility:   AFDC/TANF   DYFS   ABD   NJ FamilyCare   TOTAL
-------------------------------------------------------------------------
<S>                        <C>         <C>    <C>   <C>             <C>
Number of Enrollees
Exceeding Stop-Loss
-------------------------------------------------------------------------
Net Expenditures
Above Stop-Loss
-------------------------------------------------------------------------
</TABLE>

C. List Details for Each Individual (Name or ID Not Required)

<TABLE>
<CAPTION>
        Net Expenditures
        Above Stop-Loss    Primary Diagnosis/Major Procedure
-------------------------------------------------------------
<S>     <C>                <C>
  1
-------------------------------------------------------------
  2
-------------------------------------------------------------
  3
-------------------------------------------------------------
  4
-------------------------------------------------------------
  5
-------------------------------------------------------------
  6
-------------------------------------------------------------
  7
-------------------------------------------------------------
  8
-------------------------------------------------------------
  9
-------------------------------------------------------------
 10
-------------------------------------------------------------
 11
-------------------------------------------------------------
 12
-------------------------------------------------------------
 13
-------------------------------------------------------------
 14
-------------------------------------------------------------
 15
-------------------------------------------------------------
</TABLE>

<PAGE>

A.7.10

TABLE 8        MEDICAID CLAIMS ANALYSIS

PART A: CLAIMS INCURRED DURING CURRENT PERIOD (QUARTER).

Total Expense (COLUMN A): Enter the accrued amounts in each respective medical
expense category in Column A. Amount reported as Line 6 - Total should agree
with Table 6a, line 29 -Total Medical and Hospital Expenses. Column A amounts
should equal the sum of Columns B, C, and D for each respective medical expense
category.

Claims Paid (COLUMN B): Enter the amount of all claims actually processed
(checks mailed) related to services incurred during the quarter. Prior period
claims processed during this quarter but related to services incurred during
prior quarters must be reflected in Part B, Column B.

Claims Reported But Not Paid (COLUMN C): Enter the amount of claims received by
the contractor related to services incurred during the quarter but for which
checks have not yet been issued. Do not include amounts for claims paid or IBNR
amounts in this column.

Claims Incurred But Not Reported (COLUMN D): Enter the amount estimated for
services incurred during the quarter for which the contractor has not yet
received a claim. Prior period IBNR must be reflected in Part B, Column C.

PART B: UNPAID CLAIMS:

Reported Claims that are Unpaid:

On Claims Incurred During Prior Periods (COLUMN A): Enter the amount of claims
received by the contractor related to services incurred during all periods prior
to this quarter for which checks have not yet been issued.

On Claims Incurred During Current Period (COLUMN B): Enter the amount of claims
received by the contractor related to services incurred during the quarter for
which checks have not been issued. (Should be the same as Part A, Column C).

Incurred But Not Reported:

On Claims Incurred During Prior Periods (COLUMN C): Enter the amount estimated
for services incurred during all periods prior to this quarter for which the
contractor has not yet received a claim.

On Claims Incurred During Current Period (COLUMN D): Enter the amount estimated
for services incurred during the quarter for which the contractor has not yet
received a claim.
(Should be the same as Part A, Column D).

Total Unpaid Claims (COLUMN E): Enter the sum of Part B, Columns A, B, C, and D.

<PAGE>

Plan Name_____________________                               STATE OF NEW JERSEY
                                                      Quarter Ending________

                                     TABLE 8

                            MEDICAID CLAIMS ANALYSIS

A. Claims Incurred During Current Period

<TABLE>
<CAPTION>
                                                      (A)            (B)              (C)              (D)
                                                 ---------------------------------------------------------------
                                                                                                 Claims Incurred
             Category of Service                                                    Claims           But Not
         Revenue & Expense Statement             Total Expense                   Reported But       Reported
                  (Table 6A)                      (B + C + D)    Claims Paid       Not Paid          (IBNR)
----------------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>             <C>             <C>
1. Inpatient....(line 10)
----------------------------------------------------------------------------------------------------------------
2. Primary Care.... (line 11)
----------------------------------------------------------------------------------------------------------------
3. Physician Specialty Services.... (line 12)
----------------------------------------------------------------------------------------------------------------
4. Emergency Room.... (line 15)
----------------------------------------------------------------------------------------------------------------
5. All other medical services (line 28)
----------------------------------------------------------------------------------------------------------------
6. TOTAL.... (line 29)
----------------------------------------------------------------------------------------------------------------
</TABLE>

B. Claims Unpaid

<TABLE>
<CAPTION>
                                          (A)                   (B)                (C)              (D)                (E)
                                   ---------------------------------------------------------------------------------------------
                                       Reported Claims That Are Unpaid           Incurred But Not Reported
                                   ---------------------------------------------------------------------------------------------
                                   On Claims Incurred   On Claims Incurred      On Claims         On Claims       Total Unpaid
                                      During Prior        During Current     Incurred During   Incurred During       Claims
       Category of Service              Periods               Period          Prior Periods     Current Period   (A + B + C + D)
--------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                  <C>                  <C>               <C>               <C>
1 . Inpatient
--------------------------------------------------------------------------------------------------------------------------------
2. Primary Care
--------------------------------------------------------------------------------------------------------------------------------
3. Physician Specialty Services
--------------------------------------------------------------------------------------------------------------------------------
4. Emergency Room
--------------------------------------------------------------------------------------------------------------------------------
5. All other medical services
--------------------------------------------------------------------------------------------------------------------------------
6. TOTAL
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

A.7.11

TABLE 9        HEALTH CARE DATA ELEMENTS

The contractor must report encounter data at least quarterly and no more
frequently than monthly. The data shall be enrollee specific, listing all
encounter data elements of the services provided. The data reporting medium
shall be a tape or diskette in a configuration specified by DMAHS. Encounter
report files will be used to create a data base which can be used in a manner
similar to fee-for-service history files to analyze plan utilization, reimburse
the contractor for supplemental payments (e.g., pregnancy outcome), and
calculate capitation premiums. DMAHS will edit the data to assure consistency
and readability. If data are not of an acceptable quality or submitted timely,
the contractor will not be considered in compliance with this contract
requirement until an acceptable file is submitted. All enrollee specific
encounter data must be submitted in accordance with the EMC manual.

The encounter list indicates the "required" data elements for Inpatient and
Ambulatory Care encounters. In addition, "Optional" data elements are also
listed. These elements are optional in the sense that they can be used to custom
fit the reporting to the needs of a particular program, enhance data validity
checking, or allow more flexibility in the use of mandatory data elements.

<PAGE>

                                    TABLE 9A

                            HEALTH CARE DATA ELEMENTS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                          PROFESSIONAL   DENTAL   TRANSPORTATION   VISION            DESCRIPTION
--------------------------------------------------------------------------------------------------------------------------
<S>    <C>                                <C>            <C>      <C>              <C>     <C>
       COMMON DATA
--------------------------------------------------------------------------------------------------------------------------
  1    HMO ID                                   X           X            X           X     HMO ID number assigned by
                                                                                           Medicaid
--------------------------------------------------------------------------------------------------------------------------
  2    Record ID                                X           X            X           X     HMO number assigned to
                                                                                           the record
--------------------------------------------------------------------------------------------------------------------------
  3    Patient Medicaid ID                      X           X            X           X     Recipient ID number
                                                                                           assigned by Medicaid
--------------------------------------------------------------------------------------------------------------------------
  4    Workers Comp/Accident Ind                X           X            X           X     Y/N indicator that
                                                                                           service is subject to
                                                                                           workers comp or is
                                                                                           related to an accident
--------------------------------------------------------------------------------------------------------------------------
  5    Payment Amount                           X           X            X           X     Total amount paid by HMO
--------------------------------------------------------------------------------------------------------------------------
  6    Patient DOB                              O           O                        O     Patient's date of birth
--------------------------------------------------------------------------------------------------------------------------
  7    Date Claim Received                      X           X            X           X     Date claim received by HMO
                                                                                           -mm/dd/yy
--------------------------------------------------------------------------------------------------------------------------
  8    Date of Payment                          X           X            X           X     Date payment made by HMO
                                                                                           -mm/dd/yy
--------------------------------------------------------------------------------------------------------------------------
  9    Status Code                              X           X            X           X     Status code - p=paid, d=denied
--------------------------------------------------------------------------------------------------------------------------
             DETAIL AREA
--------------------------------------------------------------------------------------------------------------------------
 10    Capitation Service Category              X           X            X           X     Classification of service
                                                                                           according to list
--------------------------------------------------------------------------------------------------------------------------
 11    Service Date From                        X           X            X           X     Date service started - mm/dd/yy
--------------------------------------------------------------------------------------------------------------------------
 12    Service Date To                          X           X                              Date service ended - mm/dd/yy
--------------------------------------------------------------------------------------------------------------------------
 13    Procedure Code                           X           X            X           X     HCPCS procedure code
--------------------------------------------------------------------------------------------------------------------------
 14    Procedure Code Modifier 1                X                                          First modifier, if applicable
--------------------------------------------------------------------------------------------------------------------------
 15    Procedure Code Modifier 2                X                                          Second modifier, if applicable
--------------------------------------------------------------------------------------------------------------------------
 16    Place of Service                         X           X                        X     Place of service - 1=office,
                                                                                           2=inpatient hospital,
                                                                                           3=outpatient hospital/ER,
                                                                                           4=outpatient hospital/nonER,
                                                                                           5=home, 6=other
--------------------------------------------------------------------------------------------------------------------------
 17    Diagnosis Codes (up to 5)                X           X                        X     ICD-9CM diagnosis code,
                                                                                           primary first
--------------------------------------------------------------------------------------------------------------------------
 18    Units of Service                         X           X            X           X     Units of service rendered
--------------------------------------------------------------------------------------------------------------------------
 18    Servicing Provider Number                X           X            X           X     Provider SSN or tax ID
--------------------------------------------------------------------------------------------------------------------------
 20    Referring Provider Number                X           X            X           X     Individual/group from who
                                                                                           the patient was referred
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                              Legend: X=Required
                                                                      O=Optional

<PAGE>

                                    TABLE 9B

                            HEALTH CARE DATA ELEMENTS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                                                      HOME
                                           INPATIENT    OUTPATIENT   HEALTH                DESCRIPTION
--------------------------------------------------------------------------------------------------------------------
<S>     <C>                                <C>          <C>          <C>      <C>
             COMMON DATA
--------------------------------------------------------------------------------------------------------------------
  1     HMO ID                                 X            X           X     HMO ID number assigned by Medicaid
--------------------------------------------------------------------------------------------------------------------
  2     Record ID                              X            X           X     HMO number assigned to the record
--------------------------------------------------------------------------------------------------------------------
  3     Patient Medicaid ID                    X            X           X     Recipient ID number assigned by
                                                                              Medicaid
--------------------------------------------------------------------------------------------------------------------
  4     Workers Comp/Accident Ind              X            X           X     Y/N indicator that service is
                                                                              subject to workers comp or is
                                                                              related to an accident
--------------------------------------------------------------------------------------------------------------------
  5     Payment Amount                         X            X           X     Total paid by HMO
--------------------------------------------------------------------------------------------------------------------
  6     Capitation Service Category            X                              Classification of service according to
                                                                              list
--------------------------------------------------------------------------------------------------------------------
  7     Patient DOB                            O            O                 Patient's date of birth
--------------------------------------------------------------------------------------------------------------------
  8     Admit Date/Service From Date           X            X                 Date admitted to hospital - mm/dd/yy
--------------------------------------------------------------------------------------------------------------------
  9     Discharge Date/Service Thru Date       X            X                 Date discharged from hospital or
                                                                              date service ended - mm/dd/yy
--------------------------------------------------------------------------------------------------------------------
 10     DRG Code                               X                              DRG Code
--------------------------------------------------------------------------------------------------------------------
 11     Patient Status                         X                              Status of patient at end of stay -
                                                                              1=discharged to home, 2=discharged
                                                                              to LTC facility, 3=death, 4=other
--------------------------------------------------------------------------------------------------------------------
        Surgery Data (up to 3 times)
--------------------------------------------------------------------------------------------------------------------
 12     Procedure Code                         X            X                 CPT/HCPCS Codes
--------------------------------------------------------------------------------------------------------------------
 13     Surgery Date                           X            X                 Date of surgery, if applicable
--------------------------------------------------------------------------------------------------------------------
 14     Admitting Diagnosis Code               X            X           X     ICD-9-CM diagnosis on admittance
--------------------------------------------------------------------------------------------------------------------
 15     Discharge Diagnosis Code (up to
        5)                                     X                              ICD-9-CM upon discharge, primary first
--------------------------------------------------------------------------------------------------------------------
 16     Attending Physician Code               X            X                 Attending physician SSN or tax ID
--------------------------------------------------------------------------------------------------------------------
 17     Servicing Provider Number              X            X           X     Facility/agency rendering care tax ID
--------------------------------------------------------------------------------------------------------------------
 18     Referring Provider Number              X            X           X     Individual/group from whom the
                                                                              patient was referred - SSN or tax ID
--------------------------------------------------------------------------------------------------------------------
 19     Date Claim Received                    X            X           X     Date claim received by HMO -mm/dd/yy
--------------------------------------------------------------------------------------------------------------------
 20     Date of Payment                        X            X           X     Date payment made by HMO - mm/dd/yy
--------------------------------------------------------------------------------------------------------------------
 21     Status Code                            X            X           X     Status code - p=paid, d=denied
--------------------------------------------------------------------------------------------------------------------
                  DETAIL AREA
--------------------------------------------------------------------------------------------------------------------
 22     Capitation Service Category                         X           X     Classification of service according to
                                                                              list
--------------------------------------------------------------------------------------------------------------------
 23     Service Date From                                               X     Date service started - mm/dd/yy
--------------------------------------------------------------------------------------------------------------------
 24     Service Date To                                                       Date service ended - mm/dd/yy
--------------------------------------------------------------------------------------------------------------------
 25     Procedure Code                                     X                  HCPCS procedure code
--------------------------------------------------------------------------------------------------------------------
 26     Procedure Code Modifier                            X                  Procedure modifier, if applicable
--------------------------------------------------------------------------------------------------------------------
 27     Units of Service                       X           X            X     Units of service rendered
--------------------------------------------------------------------------------------------------------------------
 28     Revenue Code                           X           X            X     Identifies the services rendered
                                                                              in these settings
--------------------------------------------------------------------------------------------------------------------
 29     Clinic Code                                        X                  Identifies specialty clinic in the
                                                                              outpatient hospital setting
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                            Legend:   X=Required
                                                                      O=Optional
<PAGE>

                                    TABLE 9C

                            HEALTH CARE DATA ELEMENTS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                  DRUG                     DESCRIPTION
--------------------------------------------------------------------------------------------------------
<S>     <C>                                       <C>       <C>
  1     HMO ID                                     X        HMO ID number assigned by Medicaid
--------------------------------------------------------------------------------------------------------
  2     Record ID                                  X        HMO number assigned to the record
--------------------------------------------------------------------------------------------------------
  3     Patient Medicaid ID                        X        Recipient ID number assigned by Medicaid
--------------------------------------------------------------------------------------------------------
  4     Workers Comp/Accident Ind                  X        Y/N indicator that service is subject to
                                                            workers comp or is related to an accident
--------------------------------------------------------------------------------------------------------
  5     Payment Amount                             X        Total paid by HMO
--------------------------------------------------------------------------------------------------------
  6     Pharmacy Number                            X        Pharmacy provider SSN or Tax ID
--------------------------------------------------------------------------------------------------------
  7     Prescribing Provider Number                X        Prescribing provider SSN or Tax ID
--------------------------------------------------------------------------------------------------------
  8     Recipient DOB                              X        Date of birth of patient - mm/dd/yy
--------------------------------------------------------------------------------------------------------
  9     Date Dispensed                             X        Date drug was dispensed - mm/dd/yy
--------------------------------------------------------------------------------------------------------
 10     NDC Number                                 X        NDC code of the substance dispensed
--------------------------------------------------------------------------------------------------------
 11     Metric Quantity                            X        Quantity of the substance dispensed and the
                                                            units of measure
--------------------------------------------------------------------------------------------------------
 12     Days Supply                                X        Days supply of the drug dispensed
--------------------------------------------------------------------------------------------------------
 13     Refill Indicator                           X        Number of available refills after this
                                                            dispensing date
--------------------------------------------------------------------------------------------------------
 14     Capitation Service Category                X        Classification of service according to list
--------------------------------------------------------------------------------------------------------
 19     Date Claim Received                        X        Date claim received by HMO -mm/dd/yy
--------------------------------------------------------------------------------------------------------
 20     Date of Payment                            X        Date payment made by HMO - mm/dd/yy
--------------------------------------------------------------------------------------------------------
 21     Status Code                                X        Status code - p=paid, d=denied
--------------------------------------------------------------------------------------------------------
</TABLE>

                                    TABLE 9D

                        CAPITATION SERVICE CATEGORY LIST

<TABLE>
-----------------------------------------------
<S>          <C>
01A          Primary Care: Physician, Nurse
             Practitioners, Physician Assistant
-----------------------------------------------
01B          Specialty Physician
-----------------------------------------------
02           EPSDT
-----------------------------------------------
03           Inpatient Hospital
-----------------------------------------------
04           Outpatient Hospital
-----------------------------------------------
05           Laboratory
-----------------------------------------------
06           Radiology
-----------------------------------------------
07           Prescription Drugs
-----------------------------------------------
08           Family Planning
-----------------------------------------------
09           Outpatient Therapies
-----------------------------------------------
10           Podiatrist Services
-----------------------------------------------
11           Chiropractic Services
-----------------------------------------------
12           Optometrist Services
-----------------------------------------------
13           Optical Appliances
-----------------------------------------------
14           Hearing Aids
-----------------------------------------------
15           Home Health Agency Services
-----------------------------------------------
16           Hospice Services
-----------------------------------------------
17           Durable Medical Equipment
-----------------------------------------------
18           Medical Supplies
-----------------------------------------------
19           Prosthetics and Orthotics
-----------------------------------------------
20           Dental Services
-----------------------------------------------
21           Transportation
-----------------------------------------------
</TABLE>

<PAGE>

A.7.12

TABLE 10                   THIRD PARTY LIABILITY COLLECTIONS

The contractor shall report quarterly the categories of all third party
liability collections to DMAHS and shall include a complete disclosure
demonstrating its efforts to obtain payment from liable third parties and the
amounts and nature of all third party payments recovered for Title XIX and NJ
FamilyCare enrollees including but not limited to payments for services and
conditions which are:

         -        covered through coordination of benefits;

         -        employment related injuries or illnesses;

         -        related to motor vehicle accidents, whether injured as
                  pedestrians, drivers, passengers, or bicyclists; and

         -        contained in diagnosis Codes 800 through 999 (ICD9CM) with the
                  exception of Code 994.6.

<PAGE>

Plan Name____________________               STATE OF NEW JERSEY
                                                  Quarter Ending________________

                                    TABLE 10

                       THIRD PARTY LIABILITY COLLECTIONS*

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
          Eligibility Category                               Casualty Insurance
-----------------------------------------------------------------------------------------------
                                          Employment           Motor Vehicle              Other               Health
                                           Related               Related                                    Insurance
---------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                <C>                          <C>               <C>
AFDC**
---------------------------------------------------------------------------------------------------------------------
DYFS
---------------------------------------------------------------------------------------------------------------------
 SSI AGED W/ MEDICARE*
---------------------------------------------------------------------------------------------------------------------
 SSI AGED W/O MEDICARE+
---------------------------------------------------------------------------------------------------------------------
 SSI-DISABLED & BLIND W
MEDICARE+
---------------------------------------------------------------------------------------------------------------------
 SSI-DISABLED & BLIND W/O
MEDICARE+
---------------------------------------------------------------------------------------------------------------------
NJ FAMILYCARE
---------------------------------------------------------------------------------------------------------------------
TOTAL
---------------------------------------------------------------------------------------------------------------------
</TABLE>

* Enter total amount collected for each eligibility category.

** Include New Jersey Care children and pregnant women.

+ Include essential spouses.

<PAGE>

A.7.13

TABLE 11                   PROVIDER ADDITIONS AND DELETIONS

The contractor shall report, on a quarterly and annual basis, all additions and
deletions to the provider network as well as closed panels. Report closed panels
under the deletions portion of the table and state under the "Reason for Change"
column: "Closed Provider Panel." Include the names and locations of all new
providers and subcontractors; decreases in the provider network, identified by
provider type, name and location; and all PCPs, PCDs, CNPs/CNSs, physician
assistants, physician specialists, and other subcontractors who are not
accepting new patients. The contractor shall not allow enrollment freezes for
any provider unless the same limitations apply to all commercially insured
members as well or contract capacity limits have been reached.
<PAGE>

Plan Name ___________                                        STATE OF NEW JERSEY
                                                             Quarter Ending ____

                                    TABLE 11

                        PROVIDER ADDITIONS AND DELETIONS
<TABLE>
--------------------------------------------------------
<S>                                             <C>
a) Total Physicians at Start of Quarter
--------------------------------------------------------
b) Total Additions this Quarter
--------------------------------------------------------
c) Total Deletions this Quarter
--------------------------------------------------------
d) Total Physicians at End of Quarter                     =a+b-c
--------------------------------------------------------
</TABLE>

<TABLE>
--------------------------------------------------------
<S>                                             <C>
Recruitment Rate                                       %  =(b/a)x100
--------------------------------------------------------
Disenrollment Rate                                     %  =(c/a)x100
--------------------------------------------------------
Growth Rate                                            %  =[(d/a)-1]x100
--------------------------------------------------------
</TABLE>

A. Listing of Changes in Non-Hospital Providers During Quarter

<TABLE>
<CAPTION>
Name of Additions           Provider Type       Address & City       County         Reason for Change
------------------------------------------------------------------------------------------------------
<S>                         <C>                 <C>                  <C>            <C>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Total Additions
------------------------------------------------------------------------------------------------------
Name of Deletions
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Total Deletions
------------------------------------------------------------------------------------------------------
</TABLE>

B. Listing of Contracted Hospital Changes

<TABLE>
<CAPTION>
   Name of Additions                            Address & City       Reason for Change
--------------------------------------------------------------------------------------
<S>                         <C>                 <C>                  <C>
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Total Additions
--------------------------------------------------------------------------------------
Name of Deletions
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Total Deletions
--------------------------------------------------------------------------------------
</TABLE>

<PAGE>

A.7.14

TABLE 12         REFERRALS MADE TO THE WIC PROGRAM

The contractor shall report the number of referrals to the WIC program for
pregnant women who are breast feeding, infants under one, and children under
five years of age.

<PAGE>
                                                          STATE OF NEW JERSEY
Plan Name______________________________                     Quarter Ending______

                                    TABLE 12

        REFERRALS MADE TO THE SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR
                        WOMEN, INFANTS AND CHILDREN (WIC)

<TABLE>
<CAPTION>
         Type of Referral                   Number of Referrals
---------------------------------------------------------------
<S>                                         <C>
1. Pregnant Women
---------------------------------------------------------------
2. Women Who Are Breast Feeding
---------------------------------------------------------------
3. Infants Under Age One (1)
---------------------------------------------------------------
4. Children Under Age Five (5)
---------------------------------------------------------------
TOTAL
---------------------------------------------------------------
</TABLE>

<PAGE>

A.7.15

TABLE 13         ACCESS TO HIV TESTING/TREATMENT FOR PREGNANT WOMEN

The contractor shall report access to HIV testing and AZT therapy every quarter
with the following data elements.

         1.       Number of pregnant women

         2.       Number of pregnant women receiving HIV testing within the HMO

         3.       Number of pregnant women testing positive for HIV

         4.       Number of pregnant women treated with AZT

         5.       Number of births involving AZT treatment in utero (if this
                  number is lower than #4, please explain)

         6.       Number of newborns receiving full AZT treatments

<PAGE>

                                                          STATE OF NEW JERSEY
Plan Name _________                                          Quarter Ending_____

                                    TABLE 13

                         ACCESS TO HIV TESTING/TREATMENT
                               FOR PREGNANT WOMEN

<TABLE>
<CAPTION>
                                                                   Total
------------------------------------------------------------------------
<S>                                                                <C>
1. Number of Pregnant Women
------------------------------------------------------------------------
2. Number of Pregnant Women Tested for HIV Within the HMO
------------------------------------------------------------------------
3. Number of Pregnant Women Tested Positive for HIV
------------------------------------------------------------------------
4. Number of Pregnant Women Treated with AZT
------------------------------------------------------------------------
5. Number of Births Involving In Utero AZT Treatments*
------------------------------------------------------------------------
6. Number of Newborns Receiving Full AZT Treatments
------------------------------------------------------------------------
</TABLE>

* Explain if less than number in line 4.

________________________________________________________________________________

________________________________________________________________________________

<PAGE>

A.7.16

TABLE 14         EPSDT Services

         1.       EPSDT Services
                  The following EPSDT Services reports sorted by age group
                  (0-11.99 months, 1-2 years, 3-5 years, 6-9 years, 10-14 years,
                  15-18 years, and 19-20 years) and separated by Medicaid and NJ
                  Family Care Plan A and NJ Family Care Plans B, C, and D must
                  be submitted quarterly:

                           a.       Number of Enrollees Receiving at least One
                                    Initial or Periodic Screening Service. This
                                    is an unduplicated count of individuals who
                                    received one or more documented initial or
                                    periodic screenings during the quarter.

                           b.       Actual Number of Initial and Periodic
                                    Screening Services by Age. This includes
                                    combined number of initial and periodic
                                    EPSDT child health screening examinations
                                    during the quarter. Do not enter data for
                                    incomplete or inter-periodic screenings, or
                                    for vision, dental, or hearing services.

         2.       Referrals to Specialists

                           a.       Number of Referrals for Vision Assessments

                           b.       Number of Referrals for Dental Assessments

                           c.       Number of Referrals for Hearing Assessments

                           d.       Number of Referrals for Mental Health
                                    Assessments

                           e.       Number of Referrals for Other Health
                                    Assessments

         3.       Appropriate Immunizations According to Age (REPORT ONLY NEWLY
                  IDENTIFIED CASES.)

                  Number of Enrollees Receiving Immunizations Sorted by Age
                  Group (0-11.99 months, 1-2 years, 3-5 years, 6-9 years, and
                  10+ years).

         4.       Lead Screenings and Treatments

                           a.       Total Number of Enrollees Screened for Lead
                                    Toxicity (all ages).

                           b.       Number of Enrollees Screened sorted by age
                                    group (9-18 months, 19-26 months, and 27-72
                                    months).

                           c.       Number of newly identified Lead Positive
                                    Enrollees with Blood Lead Level Between
                                    10-14 (Micro)g/dl (Low Toxicity).

                           d.       Number of newly identified Lead Positive
                                    Enrollees with Blood Lead Level Between
                                    15-19 (Micro)g/dl (Mild Toxicity).

                           e.       Number of newly identified Lead Positive
                                    Enrollees with Blood Lead Level of 20
                                    (Micro)g/dl and Over (Moderate, High, and
                                    Severe Toxicity).

                           f.       Number of Enrollees Referred to Local Health
                                    Departments with Blood Lead Level of 10
                                    (Micro)g/dl and Over.

                           g.       Number of Enrollees Receiving Treatments
                                    with chelation.

<PAGE>

                           h.       Number of Enrollees with Blood Lead Level of
                                    10 (Micro)g/dl and over placed in HMO Case
                                    Management Program.

<PAGE>

STATE OF NEW JERSEY

Plan Name ________________                                 Quarter Ending_______

                                    TABLE 14
                                 EPSDT SERVICES

<TABLE>
<CAPTION>
                                                                 MEDICAID &       NJ FAMILYCARE
1. EPSDT SERVICES                                             NJ FAMILYCARE A       B, C & D
-----------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>
a. Unduplicated count of children screened
-----------------------------------------------------------------------------------------------
b. Number of screens by age:                      < 1
-----------------------------------------------------------------------------------------------
                                                  1-2
-----------------------------------------------------------------------------------------------
                                                  3-5
-----------------------------------------------------------------------------------------------
                                                  6-9
-----------------------------------------------------------------------------------------------
                                                10-14
-----------------------------------------------------------------------------------------------
                                                15-18
-----------------------------------------------------------------------------------------------
                                                19-20
-----------------------------------------------------------------------------------------------
   Total number of screens
-----------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                 MEDICAID &       NJ FAMILYCARE
2. REFERRALS TO SPECIALIST                                    NJ FAMILYCARE A       B, C & D
-----------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>
a. Vision referrals
-----------------------------------------------------------------------------------------------
b. Dental referrals
-----------------------------------------------------------------------------------------------
c. Hearing referrals
-----------------------------------------------------------------------------------------------
d. Mental health referrals
-----------------------------------------------------------------------------------------------
e. Other referrals
-----------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                 MEDICAID &       NJ FAMILYCARE
3. APPROPRIATE IMMUNIZATIONS ACCORDING TO AGE                 NJ FAMILYCARE A       B, C & D
-----------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>
a. Number of enrollees receiving immunizations by age:  < 1
-----------------------------------------------------------------------------------------------
                                                        1-2
-----------------------------------------------------------------------------------------------
                                                        3-5
-----------------------------------------------------------------------------------------------
                                                        6-9
-----------------------------------------------------------------------------------------------
                                                        10+
-----------------------------------------------------------------------------------------------
   Total numbers of enrollees receiving immunizations
-----------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
4. LEAD SCREENINGS AND TREATMENTS                                      MEDICAID &       NJ FAMILYCARE
  (ONLY REPORT NEWLY IDENTIFIED CASES)                              NJ FAMILYCARE A        B, C & D
-----------------------------------------------------------------------------------------------------
<S>                                                                 <C>                 <C>
a. Total No. of enrollees screened (all ages)
-----------------------------------------------------------------------------------------------------
b. No. of enrollees screened by age:            9-18 months
-----------------------------------------------------------------------------------------------------
                                               19-26 months
-----------------------------------------------------------------------------------------------------
                                               27-72 months.
-----------------------------------------------------------------------------------------------------
c. No.of enrollees with low toxicity (BLL 10-14 (Micro)g/dl)
-----------------------------------------------------------------------------------------------------
   Ages                                         9-18 months
-----------------------------------------------------------------------------------------------------
                                               19-26 months
-----------------------------------------------------------------------------------------------------
                                               27-72 months
-----------------------------------------------------------------------------------------------------
d. No.of enrollees with mild toxicity (BLL15-19(Micro)g/dl)
-----------------------------------------------------------------------------------------------------
   Ages                                         9-18 months
-----------------------------------------------------------------------------------------------------
                                               19-26 months
-----------------------------------------------------------------------------------------------------
                                               27-72 months
-----------------------------------------------------------------------------------------------------
e. No.of enrollees with high toxicity (BLL > or = 20 (Micro)g/dl)
-----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------
<S>                                                                              <C>         <C>
   Ages                                         9-18 months
---------------------------------------------------------------------------------------------------
                                               19-26 months
---------------------------------------------------------------------------------------------------
                                               27-72 months
---------------------------------------------------------------------------------------------------
f. No.of enrollees referred to LHDs (BLL > or = 10 (Micro)g/dl)
---------------------------------------------------------------------------------------------------
g. No.of enrollees being treated for lead poisoning with chelation                             ...
---------------------------------------------------------------------------------------------------
h. No.of enrollees with BLL > or = 10 (Micro)g/dl placed in HMO case management.
---------------------------------------------------------------------------------------------------
</TABLE>

NOTE:            If a response is 0, provide explanation

<PAGE>

A.7.17

TABLE 15         PHARMACY LOCK-IN PARTICIPANTS

The contractor, if a Pharmacy Lock-in program is implemented, shall report the
status of participants each quarter, including total number of enrollees at
start of quarter, number of new lock-in enrollees, number of enrollees released
from lock-in during the quarter, and total number of lock-in enrollees at end of
quarter. This report should be sorted by county.

<PAGE>

                                                             STATE OF NEW JERSEY
Plan Name________________________________                    Quarter Ending__

                                    TABLE 15

                         PHARMACY LOCK-IN PARTICIPANTS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                 Gender                                                NJ          Reason
                                M      F      AFDC     SSI - ABD      DYFS         FamilyCare   For Lock-In      County
-----------------------------------------------------------------------------------------------------------------------
<S>                             <C>    <C>    <C>      <C>            <C>          <C>          <C>              <C>
# Lock-In Enrollees at
Start of Quarter
-----------------------------------------------------------------------------------------------------------------------
                     < 10
-----------------------------------------------------------------------------------------------------------------------
                    10-15
-----------------------------------------------------------------------------------------------------------------------
                    16-20
-----------------------------------------------------------------------------------------------------------------------
                    21-44
-----------------------------------------------------------------------------------------------------------------------
                    45-54
-----------------------------------------------------------------------------------------------------------------------
                      65+
-----------------------------------------------------------------------------------------------------------------------
                    Total
-----------------------------------------------------------------------------------------------------------------------
# New Lock-In
Enrollees This Quarter
-----------------------------------------------------------------------------------------------------------------------
                     < 10
-----------------------------------------------------------------------------------------------------------------------
                    10-15
-----------------------------------------------------------------------------------------------------------------------
                    16-20
-----------------------------------------------------------------------------------------------------------------------
                    21-44
-----------------------------------------------------------------------------------------------------------------------
                    45-54
-----------------------------------------------------------------------------------------------------------------------
                      65+
-----------------------------------------------------------------------------------------------------------------------
                    Total
-----------------------------------------------------------------------------------------------------------------------
# Released From Lock-In
This Quarter
-----------------------------------------------------------------------------------------------------------------------
                     < 10
-----------------------------------------------------------------------------------------------------------------------
                    10-15
-----------------------------------------------------------------------------------------------------------------------
                    16-20
-----------------------------------------------------------------------------------------------------------------------
                    21-44
-----------------------------------------------------------------------------------------------------------------------
                    45-54
-----------------------------------------------------------------------------------------------------------------------
                      65+
-----------------------------------------------------------------------------------------------------------------------
                    Total
-----------------------------------------------------------------------------------------------------------------------
Total Lock-Ins at End of
Quarter
-----------------------------------------------------------------------------------------------------------------------
                     < 10
-----------------------------------------------------------------------------------------------------------------------
                    10-15
-----------------------------------------------------------------------------------------------------------------------
                    16-20
-----------------------------------------------------------------------------------------------------------------------
                    21-44
-----------------------------------------------------------------------------------------------------------------------
                    45-54
-----------------------------------------------------------------------------------------------------------------------
                      65+
-----------------------------------------------------------------------------------------------------------------------
                    Total
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

A.7.18

TABLE 16         RATIO OF PRIOR AUTHORIZATIONS DENIED TO REQUESTED

The contractor shall report the number of prior authorizations requested and
denied each quarter by category of service. If prior authorization is not
required, indicate "NA" for not applicable.

<PAGE>

                                                           STATE OF NEW JERSEY
Plan Name________________________________                    Quarter Ending_____

                                    TABLE 16

                RATIO OF PRIOR AUTHORIZATIONS DENIED TO REQUESTED

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
                                                                   Number of PAs   % of PAs
    Category of Service                  Number of PAs Requested      Denied        Denied
-------------------------------------------------------------------------------------------
<S>                                      <C>                       <C>             <C>
Inpatient Hospital
-------------------------------------------------------------------------------------------
Primary Care
-------------------------------------------------------------------------------------------
Physician Specialty Services
-------------------------------------------------------------------------------------------
Outpatient Hospital
-------------------------------------------------------------------------------------------
Other Professional Services
-------------------------------------------------------------------------------------------
Emergency Room
-------------------------------------------------------------------------------------------
DME/Medical Supplies
-------------------------------------------------------------------------------------------
Prosthetics & Orthotics
-------------------------------------------------------------------------------------------
Dental
-------------------------------------------------------------------------------------------
Pharmacy
-------------------------------------------------------------------------------------------
  Formulary
-------------------------------------------------------------------------------------------
  Off-formulary
-------------------------------------------------------------------------------------------
HIV/AIDS Reimbursable Drugs
-------------------------------------------------------------------------------------------
Home Health Care
-------------------------------------------------------------------------------------------
Transportation
-------------------------------------------------------------------------------------------
Lab & X-ray
-------------------------------------------------------------------------------------------
Vision Care & Eyeglasses
-------------------------------------------------------------------------------------------
Mental Health
-------------------------------------------------------------------------------------------
Substance Abuse
-------------------------------------------------------------------------------------------
Hospice
-------------------------------------------------------------------------------------------
Private Duty Nursing
-------------------------------------------------------------------------------------------
Other Medical
-------------------------------------------------------------------------------------------
Total
-------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

A.7.19

TABLE 17         RESERVED

<PAGE>

A.7.20

TABLE 18         FEDERALLY QUALIFIED HEALTH CENTER PAYMENTS

The contractor shall submit quarterly reports of total payments for each
contracted FQHC.

Quarterly reports by month of service are required for each FQHC under contract
with the HMO contractor. The reports must include data from all sites of each
FQHC. These reports should be submitted on diskette in an Excel format.

The contractor must retain all supporting documentation as long as there is a
contractual arrangement with the FQHC. If the contract with the FQHC is
terminated, for any reason, the supporting documentation must be relinquished to
the State within thirty days after the date of termination.

INSTRUCTIONS FOR COMPLETING TABLE 18

A separate Table 18 must be completed for each FQHC.

LINE 1: - NAME OF HMO

Enter the name of the Health Maintenance Organization.

LINE 2: - FEDERALLY QUALIFIED HEALTH CENTER

Enter the name and provider number of the Federally Qualified Health Center
(FQHC) to which payments were made. The contractor must identify each FQHC with
a contractual relationship and the effective date and termination date of the
contract, if applicable (Lines 2, 3, and 4 on Table 18).

LINE 3: - EFFECTIVE DATE OF CONTRACT

Enter the beginning and ending date of the current contract with the FQHC. The
contractor must identify this information for each contracted FQHC.

LINE 4: - TERMINATION DATE OF CONTRACT

If the contract with FQHC has been terminated, enter the termination date.

LINE 5: -PAYMENT QUARTER

The contractor must identify the reporting quarter on Line 5. Payments by
service date are to be reported based on calendar year quarters, i.e. March,
June, September and December. Enter the first and last date of the quarter for
which payments are being reported.

LINE 6 - TYPE OF PAYMENTS

All Medicaid and NJ FamilyCare managed care payments made for the quarter,
including capitation, fee-for-service, referral fund, and any other managed care
payments made to the FQHC, from the first day of the quarter to the end of the
calendar year quarter, must be reported.

<PAGE>

If there is a payment mixture such as fee-for-service and capitation, identify
the amount of payment for each category.

On Table 18, the total payments made during each quarter should be reported in
column 14. The payments must be segregated by month of service. The contractor
must report these payments on Lines 6A through 6E. In columns 1-12, report a
breakdown of the total payments by month the service being paid for was
provided. Specify the month and year at the top of each column. There are 12
month-of-service columns. If payments were made for more than 12 months of
service, add additional columns.

Payments by service date should be segregated by type. For example, all
capitation payments are to be reported on line 6A, case management fees are to
be reported on line 6B and fee-for-service payments are to be reported on line
6C.

Financial incentives to reduce unnecessary utilization of services or otherwise
reduce patient costs that were paid to the FQHC should be reported on line 6D.
Financial penalties, such as withholding a portion of the capitation payments,
should be reported on line 6D as a negative amount. Financial
incentives/penalties should be reported by service date. Please specify on line
6D the type of payment that is being reported.

Additional rows should be added to Table 18 for any other type of payments made
to the FQHC. All payments must be segregated by service date. Please specify the
type of payment that is being reported on each row.
<PAGE>

                                                         STATE OF NEW JERSEY
Plan Name_________________                                 Quarter Ending_______

                                    TABLE 18
                                 FQHC PAYMENTS

<TABLE>
<S>                                          <C>        <C>
                                             ---------------------------
1. Name of HMO                               ---------------------------

2. Federally Qualified Health Center (name   Name:      No.:
   and HMO assigned provider number)         ---------------------------

3. Effective Date of Contract                From:      To:

4. Termination Date of Contract, if          ---------------------------
   applicable*                               ---------------------------

5. Payment Quarter                           From:      To:
                                             ---------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                             MONTH OF SERVICE (SPECIFY)**
                                             -------------------------------------------------------------------------
<S>                                          <C>   <C>   <C>   <C>   <C>   <C>  <C>   <C>   <C>   <C>   <C>   <C>
6. Type of Payments
                                             -------------------------------------------------------------------------
                  A. Capitation
                                             -------------------------------------------------------------------------
                  B. Case Management Fees
                                             -------------------------------------------------------------------------
                  C. Fee for Service
                                             -------------------------------------------------------------------------
                  D. Other (Specify)***
                                             -------------------------------------------------------------------------
                  E. Other Specify
                                             -------------------------------------------------------------------------

                                             -------------------------------------------------------------------------
                  F.Total payments
                    (Lines A through D)
                                             -------------------------------------------------------------------------
</TABLE>

*If contract is terminated within the effective dates of the contract indicated
in #3, enter termination date.

** Add additional columns as necessary.

***Financial incentives to reduce unnecessary utilization of services or
otherwise reduce patient costs that were paid to the FQHC should be reported on
Line 6D. Financial penalties, such as withholding a portion of the capitation
payments should be reported on line 6D as a negative amount. Financial
incentives/penalties should be reported by service date. Specify on Line 6D the
type of payment that is being reported. Add rows as necessary to report other
type(s) of payments.
<PAGE>

A.7.21 TABLES 19A, PARTS A THROUGH AF[Reserved]
<PAGE>

TABLE #19 - PART A - INCOME STATEMENT BY RATE CELL GROUPING

           AFDC/NJCPW/NJ KIDCARE A (EXCLUDING AIDS) - NORTHERN REGION

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                              (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART B - INCOME STATEMENT BY RATE CELL GROUPING

            AFDC/NJCPW/NJ KIDCARE A (EXCLUDING AIDS) - CENTRAL REGION

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART C - INCOME STATEMENT BY RATE CELL GROUPING

           AFDC/NJCPW/NJ KIDCARE A (EXCLUDING AIDS) - SOUTHERN REGION

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART D - INCOME STATEMENT BY RATE CELL GROUPING

                       DYFS (EXCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART E - INCOME STATEMENT BY RATE CELL GROUPING

              ABD WITH MEDICARE - DDD (EXCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART F - INCOME STATEMENT BY RATE CELL GROUPING

            ABD WITH MEDICARE - NON-DDD (EXCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART G - INCOME STATEMENT BY RATE CELL GROUPING

                   NON-ABD - DDD (EXCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART H - INCOME STATEMENT BY RATE CELL GROUPING

             ABD WITHOUT MEDICARE - DDD (INCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART I - INCOME STATEMENT BY RATE CELL GROUPING

          ABD WITHOUT MEDICARE - NON-DDD (INCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART J - INCOME STATEMENT BY RATE CELL GROUPING

                  NJ KIDCARE B&C (EXCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART K - INCOME STATEMENT BY RATE CELL GROUPING

                    NJ KIDCARE D (EXCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                            (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
------------------------------------------------------------------------------------------------------
REVENUES:
------------------------------------------------------------------------------------------------------
 1  Capitated Premiums                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 2  Supplemental Premiums
------------------------------------------------------------------------------------------------------
2a    Maternity
------------------------------------------------------------------------------------------------------
2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
2d    Other                                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 4  Interest                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 5  COB                                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 7  Other Revenue                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
 8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
------------------------------------------------------------------------------------------------------
 9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
10  Primary Care                                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
11  Physician Specialty Services                         $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
13  Other Professional Services                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
14  Emergency Room                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
17  Covered Dental                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
18  Pharmacy                                             $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
20  Home Health Care                                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
21  Transportation                                       $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
22  Lab & X-ray                                          $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
27  Other Medical                                        $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
------------------------------------------------------------------------------------------------------
ADMINISTRATION
------------------------------------------------------------------------------------------------------
29  Compensation
------------------------------------------------------------------------------------------------------
30  Interest Expense
------------------------------------------------------------------------------------------------------
31  Occupancy, Depreciation & Amortization
------------------------------------------------------------------------------------------------------
32  Education & Outreach
------------------------------------------------------------------------------------------------------
33  Marketing
------------------------------------------------------------------------------------------------------
34  Other
------------------------------------------------------------------------------------------------------
35  TOTAL ADMINISTRATION (29 through 34)
------------------------------------------------------------------------------------------------------
36  TOTAL EXPENSES (28+35)
------------------------------------------------------------------------------------------------------
37  OPERATION INCOME (LOSS) (8-36)
------------------------------------------------------------------------------------------------------
38  Extraordinary Item
------------------------------------------------------------------------------------------------------
39  Provisions for Taxes
------------------------------------------------------------------------------------------------------
40  Adjustment for prior period IBNR estimates
------------------------------------------------------------------------------------------------------
41  NET INCOME (LOSS) (37-38-39-40)
------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

[Reserved] RESERVED

                                    RESERVED

[Reserved]
<PAGE>

TABLE #19 - PART M - INCOME STATEMENT BY RATE CELL GROUPING

         NJ FAMILYCARE PARENTS 0-133% FPL (EXCLUDING AIDS) - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                             (HMO Name)

<TABLE>
<CAPTION>
                                                                      THREE-MONTH                 YTD
                 REVENUES / EXPENSES                  THREE-MONTH $       PMPM        YTD $      PMPM
-------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>        <C>
MEMBER MONTHS
-------------------------------------------------------------------------------------------------------
REVENUES:
-------------------------------------------------------------------------------------------------------
   1  Capitated Premiums                                   $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
   2  Supplemental Premiums
-------------------------------------------------------------------------------------------------------
  2a    Maternity
-------------------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products     $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment                            $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  2d    Other                                              $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)                 $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
   4  Interest                                             $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
   5  COB                                                  $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                               $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
   7  Other Revenue                                        $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)                            $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
-------------------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                   $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  10  Primary Care                                         $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  11  Physician Specialty Services                         $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                  $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  13  Other Professional Services                          $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  14  Emergency Room                                       $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                 $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                              $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  17  Covered Dental                                       $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  18  Pharmacy                                             $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                          $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  20  Home Health Care                                     $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  21  Transportation                                       $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  22  Lab & X-ray                                          $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                     $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                        $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                 $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                            $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  27  Other Medical                                        $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)              $     -       $      -       $   -      $  -
-------------------------------------------------------------------------------------------------------
ADMINISTRATION
-------------------------------------------------------------------------------------------------------
  29  Compensation
-------------------------------------------------------------------------------------------------------
  30  Interest Expense
-------------------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
-------------------------------------------------------------------------------------------------------
  32  Education & Outreach
-------------------------------------------------------------------------------------------------------
  33  Marketing
-------------------------------------------------------------------------------------------------------
  34  Other
-------------------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
-------------------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
-------------------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
-------------------------------------------------------------------------------------------------------
  38  Extraordinary Item
-------------------------------------------------------------------------------------------------------
  39  Provisions for Taxes
-------------------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
-------------------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
-------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

[Reserved] RESERVED

                                    RESERVED

[Reserved]

<PAGE>

[Reserved] RESERVED

                                    RESERVED

[Reserved]

<PAGE>

TABLE #19 - PART P - INCOME STATEMENT BY RATE CELL GROUPING

                      ABD WITH MEDICARE - AIDS - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                             (HMO Name)

<TABLE>
<CAPTION>
                                                                         THREE-MONTH                 YTD
                 REVENUES / EXPENSES                     THREE-MONTH $       PMPM        YTD $      PMPM
----------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>             <C>        <C>
MEMBER MONTHS
----------------------------------------------------------------------------------------------------------
REVENUES:
----------------------------------------------------------------------------------------------------------
   1  Capitated Premiums                                      $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
   2  Supplemental Premiums
----------------------------------------------------------------------------------------------------------
  2a    Maternity
----------------------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products        $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment                               $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  2d    Other                                                 $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)                    $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
   4  Interest                                                $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
   5  COB                                                     $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                  $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
   7  Other Revenue                                           $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)                               $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
EXPENSES:
----------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
----------------------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                      $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  10  Primary Care                                            $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  11  Physician Specialty Services                            $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                     $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  13  Other Professional Services                             $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  14  Emergency Room                                          $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                    $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                                 $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  17  Covered Dental                                          $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  18  Pharmacy                                                $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                             $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  20  Home Health Care                                        $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  21  Transportation                                          $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  22  Lab & X-ray                                             $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                        $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                           $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                    $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                               $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  27  Other Medical                                           $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)                 $     -       $      -       $   -     $  -
----------------------------------------------------------------------------------------------------------
ADMINISTRATION
----------------------------------------------------------------------------------------------------------
  29  Compensation
----------------------------------------------------------------------------------------------------------
  30  Interest Expense
----------------------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
----------------------------------------------------------------------------------------------------------
  32  Education & Outreach
----------------------------------------------------------------------------------------------------------
  33  Marketing
----------------------------------------------------------------------------------------------------------
  34  Other
----------------------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
----------------------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
----------------------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
----------------------------------------------------------------------------------------------------------
  38  Extraordinary Item
----------------------------------------------------------------------------------------------------------
  39  Provisions for Taxes
----------------------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
----------------------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
----------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART Q - INCOME STATEMENT BY RATE CELL GROUPING

                           NON-ABD - AIDS - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                             (HMO Name)

<TABLE>
<CAPTION>
                                                                         THREE-MONTH                 YTD
                 REVENUES / EXPENSES                     THREE-MONTH $       PMPM        YTD $      PMPM
---------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>             <C>        <C>
MEMBER MONTHS
---------------------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------------------
   1  Capitated Premiums                                    $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   2  Supplemental Premiums
---------------------------------------------------------------------------------------------------------
  2a    Maternity
---------------------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products      $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment                             $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  2d    Other                                               $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   4  Interest                                              $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   5  COB                                                   $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   7  Other Revenue                                         $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)                             $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  21  Transportation                                        $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------------------
  29  Compensation
---------------------------------------------------------------------------------------------------------
  30  Interest Expense
---------------------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
---------------------------------------------------------------------------------------------------------
  32  Education & Outreach
---------------------------------------------------------------------------------------------------------
  33  Marketing
---------------------------------------------------------------------------------------------------------
  34  Other
---------------------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
---------------------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
---------------------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
---------------------------------------------------------------------------------------------------------
  38  Extraordinary Item
---------------------------------------------------------------------------------------------------------
  39  Provisions for Taxes
---------------------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
---------------------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
---------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART R - INCOME STATEMENT BY RATE CELL GROUPING

                              MATERNITY - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                             (HMO Name)

<TABLE>
<CAPTION>
                                                                        THREE-MONTH PER          YTD PER
                 REVENUES / EXPENSES                     THREE-MONTH $      DELIVERY     YTD $   DELIVERY
---------------------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>              <C>     <C>
DELIVERIES
---------------------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------------------
   1  Capitated Premiums
---------------------------------------------------------------------------------------------------------
   2  Supplemental Premiums
---------------------------------------------------------------------------------------------------------
  2a    Maternity                                           $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products
---------------------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment
---------------------------------------------------------------------------------------------------------
  2d    Other                                                                                      $   -
---------------------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)                  $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
   4  Interest                                              $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
   5  COB                                                   $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
   7  Other Revenue                                         $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)                             $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  21  Transportation                                        $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -       $      -       $   -     $   -
---------------------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------------------
  29  Compensation
---------------------------------------------------------------------------------------------------------
  30  Interest Expense
---------------------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
---------------------------------------------------------------------------------------------------------
  32  Education & Outreach
---------------------------------------------------------------------------------------------------------
  33  Marketing
---------------------------------------------------------------------------------------------------------
  34  Other
---------------------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
---------------------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
---------------------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
---------------------------------------------------------------------------------------------------------
  38  Extraordinary Item
---------------------------------------------------------------------------------------------------------
  39  Provisions for Taxes
---------------------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
---------------------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
---------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART S - INCOME STATEMENT BY RATE CELL GROUPING

                       ALL RATE CELL GROUPINGS - STATEWIDE

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                             (HMO Name)

<TABLE>
<CAPTION>
                                                                         THREE-MONTH                 YTD
                 REVENUES / EXPENSES                     THREE-MONTH $       PMPM        YTD $       PMPM
---------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>             <C>        <C>
MEMBER MONTHS
---------------------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------------------
   1  Capitated Premiums                                    $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   2  Supplemental Premiums
---------------------------------------------------------------------------------------------------------
  2a    Maternity                                           $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products      $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment                             $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  2d    Other                                               $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   4  Interest                                              $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   5  COB                                                   $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   7  Other Revenue                                         $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)                             $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  21  Transportation                                        $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------------------
  29  Compensation                                          $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  30  Interest Expense                                      $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization                $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  32  Education & Outreach                                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  33  Marketing                                             $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  34  Other                                                 $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)                                $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)                        $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  38  Extraordinary Item                                    $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  39  Provisions for Taxes                                  $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates            $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)                       $     -       $      -       $   -      $   -
---------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART T - NON-STATE PLAN SERVICES BY RATE CELL GROUPING

                            NON-STATE PLAN SERVICES

FOR THE THREE MONTHS ENDING ____________________ FOR ___________________________
                                                             (HMO Name)

<TABLE>
<CAPTION>
                                                                            AFDC/NJCPWINJ KIDCARE A - NORTH
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 2                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 3                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 4                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 5                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 6                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 7                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 8                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 9                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
10                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
11 TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                             $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                         $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                           AFDC/NJCPWINJ KIDCARE A - CENTRAL
                                                                  --------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 2                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 3                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 4                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 5                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 6                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 7                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 8                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 9                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
10                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
11  TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)   $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                              $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                          $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                            AFDC/NJCPWINJ KIDCARE A - SOUTH
                                                                  ----------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
----------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 2                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 3                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 4                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 5                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 6                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 7                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 8                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 9                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
10                                                                    $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
11  TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)   $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                              $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                          $   -            -          $   -        -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                            DYFS
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 2                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 3                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 4                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 5                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 6                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 7                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 8                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 9                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
10                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
11 TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                              $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                          $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                               ABD WITH MEDICARE - DDD
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 2                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 3                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 4                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 5                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 6                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 7                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 8                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
 9                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
10                                                                    $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
11  TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)   $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                              $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                          $   -            -          $   -         -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Non-State Plan Services Description
 1
 2
 3
 4
 5
 6
 7
 8
 9
10

* If medical and hospital claim costs for non-State Plan Services, must have
  some amount of administration for non-State Plan Services.
<PAGE>

TABLE #19 - PART T - NON-STATE PLAN SERVICES BY RATE CELL GROUPING

                            NON-STATE PLAN SERVICES

FOR THE THREE MONTHS ENDING ____________________

<TABLE>
<CAPTION>
                                                                             ABD WITH MEDICARE - NON-DDD
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
 2                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
 3                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
 4                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
 5                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
 6                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
 7                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
 8                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
 9                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
10                                                                   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
11 TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)   $   -               -        $   -        -
---------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                             $   -               -        $   -         -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                         $   -               -        $   -         -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                    NON-ADD - DDD
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
 2                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
 3                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
 4                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
 5                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
 6                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
 7                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
 8                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
 9                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
10                                                                   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
11 TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)   $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                             $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                         $   -              -         $   -        -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                               ABD WITHOUT MEDICARE - DDD
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 2                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 3                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 4                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 5                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 6                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 7                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 8                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 9                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
10                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
11 TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                             $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                         $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                               ABD WITHOUT MEDICARE - DDD
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 2                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 3                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 4                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 5                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 6                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 7                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 8                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 9                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
10                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
11 TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                             $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                         $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                      NJ KIDCARE B & C
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 2                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 3                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 4                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 5                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 6                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 7                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 8                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 9                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
10                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
11  TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)  $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                             $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                         $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                      NJ KIDCARE D
                                                                  ---------------------------------------------------
                                                                                  THREE-MONTH                 YTD
                 EXPENSES                                         THREE-MONTH $      UNITS        YTD $      UNITS
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>             <C>        <C>
EXPENSES:
---------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
 1                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 2                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 3                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 4                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 5                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 6                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 7                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 8                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
 9                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
10                                                                   $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
11  TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)  $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
---------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                             $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
---------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                         $   -             -          $   -        -
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Non-State Plan Services Description
 1
 2
 3
 4
 5
 6
 7
 8
 9
10

* If medical and hospital claim costs for non-State Plan Services, must have
  some amount of administration for non-State Plan Services.

<PAGE>

TABLE #19 - PART T - NON-STATE PLAN SERVICES BY RATE CELL GROUPING

                            NON-STATE PLAN SERVICES

FOR THE THREE MONTHS ENDING ____________________

<TABLE>
<CAPTION>
                                                                                NJ FAMILYCARE PARENTS 0-133% FPL
                                                                      ---------------------------------------------------
                                                                                      THREE-MONTH                 YTD
                 EXPENSES                                             THREE-MONTH $      UNITS        YTD $      UNITS
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>             <C>        <C>
EXPENSES:
-------------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
-------------------------------------------------------------------------------------------------------------------------
 1                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 2                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 3                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 4                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 5                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 6                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 7                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 8                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 9                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
10                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
11 TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
-------------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                                  $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
-------------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                              $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                    ABD WITH MEDICARE - AIDS
                                                                      ---------------------------------------------------
                                                                                      THREE-MONTH                 YTD
                 EXPENSES                                             THREE-MONTH $      UNITS        YTD $      UNITS
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>             <C>        <C>
EXPENSES:
-------------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
-------------------------------------------------------------------------------------------------------------------------
 1                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 2                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 3                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 4                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 5                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 6                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 7                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 8                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 9                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
10                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
11 TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
-------------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                                  $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
-------------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                              $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                           NON-ABD - AIDS
                                                                      ---------------------------------------------------
                                                                                      THREE-MONTH                 YTD
                 EXPENSES                                             THREE-MONTH $      UNITS        YTD $      UNITS
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>             <C>        <C>
EXPENSES:
-------------------------------------------------------------------------------------------------------------------------
MEDICAL & HOSPITAL NON-STATE PLAN SERVICES
-------------------------------------------------------------------------------------------------------------------------
 1                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 2                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 3                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 4                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 5                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 6                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 7                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 8                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
 9                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
10                                                                        $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
11  TOTAL MEDICAL & HOSPITAL NON-STATE PLAN SERVICES (1 THROUGH 10)       $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
  ADMINISTRATION FOR NON-STATE PLAN SERVICES*
-------------------------------------------------------------------------------------------------------------------------
12  TOTAL ADMINISTRATION                                                  $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES FOR NON-STATE PLAN SERVICES
-------------------------------------------------------------------------------------------------------------------------
13  TOTAL EXPENSES (11 + 12)                                              $   -            -          $   -        -
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

Non-State Plan Services Description
 1
 2
 3
 4
 5
 6
 7
 8
 9
10

* If medical and hospital claim costs for non-State Plan Services, must have
  some amount of administration for non-State Plan Services.

<PAGE>

TABLE #19 - PART U - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

                  AFDC YOUTH (EXCLUDING AIDS) - NORTHERN REGION

FOR THE TWELVE MONTHS ENDING ____________________ FOR _________________________
                                                             (HMO NAME)

<TABLE>
<CAPTION>
                 REVENUES / EXPENSES                     TWELVE-MONTH $   TWELVE-MONTH PMPM
-------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>
MEMBER MONTHS
-------------------------------------------------------------------------------------------
REVENUES:
-------------------------------------------------------------------------------------------
   1  Capitated Premiums
-------------------------------------------------------------------------------------------
   2  Supplemental Premiums
-------------------------------------------------------------------------------------------
  2a    Maternity
-------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products
-------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment
-------------------------------------------------------------------------------------------
  2d    Other
-------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)
-------------------------------------------------------------------------------------------
   4  Interest
-------------------------------------------------------------------------------------------
   5  COB                                                   $     -           $      -
-------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -           $      -
-------------------------------------------------------------------------------------------
   7  Other Revenue
-------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)
-------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
-------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -           $      -
-------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -           $      -
-------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -           $      -
-------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -           $      -
-------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -           $      -
-------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -           $      -
-------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -           $      -
-------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -           $      -
-------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -           $      -
-------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -           $      -
-------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -           $      -
-------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -           $      -
-------------------------------------------------------------------------------------------
  21  Transportation                                        $     -           $      -
-------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -           $      -
-------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -           $      -
-------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -           $      -
-------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -           $      -
-------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -           $      -
-------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -           $      -
-------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -           $      -
-------------------------------------------------------------------------------------------
ADMINISTRATION
-------------------------------------------------------------------------------------------
  29  Compensation
-------------------------------------------------------------------------------------------
  30  Interest Expense
-------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
-------------------------------------------------------------------------------------------
  32  Education & Outreach
-------------------------------------------------------------------------------------------
  33  Marketing
-------------------------------------------------------------------------------------------
  34  Other
-------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
-------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
-------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
-------------------------------------------------------------------------------------------
  38  Extraordinary Item
-------------------------------------------------------------------------------------------
  39  Provisions for Taxes
-------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
-------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
-------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART V - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

                  AFDC YOUTH (EXCLUDING AIDS) - CENTRAL REGION

FOR THE TWELVE MONTHS ENDING ____________________ FOR _________________________
                                                             (HMO NAME)

<TABLE>
<CAPTION>
                 REVENUES / EXPENSES                     TWELVE-MONTH $   TWELVE-MONTH PMPM
-------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>
MEMBER MONTHS
-------------------------------------------------------------------------------------------
REVENUES:
-------------------------------------------------------------------------------------------
   1  Capitated Premiums
-------------------------------------------------------------------------------------------
   2  Supplemental Premiums
-------------------------------------------------------------------------------------------
  2a    Maternity
-------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products
-------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment
-------------------------------------------------------------------------------------------
  2d    Other
-------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)
-------------------------------------------------------------------------------------------
   4  Interest
-------------------------------------------------------------------------------------------
   5  COB                                                   $     -           $      -
-------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -           $      -
-------------------------------------------------------------------------------------------
   7  Other Revenue
-------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)
-------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
-------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -           $      -
-------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -           $      -
-------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -           $      -
-------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -           $      -
-------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -           $      -
-------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -           $      -
-------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -           $      -
-------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -           $      -
-------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -           $      -
-------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -           $      -
-------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -           $      -
-------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -           $      -
-------------------------------------------------------------------------------------------
  21  Transportation                                        $     -           $      -
-------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -           $      -
-------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -           $      -
-------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -           $      -
-------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -           $      -
-------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -           $      -
-------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -           $      -
-------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -           $      -
-------------------------------------------------------------------------------------------
ADMINISTRATION
-------------------------------------------------------------------------------------------
  29  Compensation
-------------------------------------------------------------------------------------------
  30  Interest Expense
-------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
-------------------------------------------------------------------------------------------
  32  Education & Outreach
-------------------------------------------------------------------------------------------
  33  Marketing
-------------------------------------------------------------------------------------------
  34  Other
-------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
-------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
-------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
-------------------------------------------------------------------------------------------
  38  Extraordinary Item
-------------------------------------------------------------------------------------------
  39  Provisions for Taxes
-------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
-------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
-------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART W - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

                  AFDC YOUTH (EXCLUDING AIDS) - SOUTHERN REGION

FOR THE TWELVE MONTHS ENDING ____________________ FOR__________________________
                                                             (HMO NAME)

<TABLE>
<CAPTION>
                 REVENUES / EXPENSES                     TWELVE-MONTH $   TWELVE-MONTH PMPM
-------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>
MEMBER MONTHS
-------------------------------------------------------------------------------------------
REVENUES:
-------------------------------------------------------------------------------------------
   1  Capitated Premiums
-------------------------------------------------------------------------------------------
   2  Supplemental Premiums
-------------------------------------------------------------------------------------------
  2a    Maternity
-------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products
-------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment
-------------------------------------------------------------------------------------------
  2d    Other
-------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)
-------------------------------------------------------------------------------------------
   4  Interest
-------------------------------------------------------------------------------------------
   5  COB                                                   $     -           $      -
-------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -           $      -
-------------------------------------------------------------------------------------------
   7  Other Revenue
-------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)
-------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
-------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -           $      -
-------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -           $      -
-------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -           $      -
-------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -           $      -
-------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -           $      -
-------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -           $      -
-------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -           $      -
-------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -           $      -
-------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -           $      -
-------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -           $      -
-------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -           $      -
-------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -           $      -
-------------------------------------------------------------------------------------------
  21  Transportation                                        $     -           $      -
-------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -           $      -
-------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -           $      -
-------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -           $      -
-------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -           $      -
-------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -           $      -
-------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -           $      -
-------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -           $      -
-------------------------------------------------------------------------------------------
ADMINISTRATION
-------------------------------------------------------------------------------------------
  29  Compensation
-------------------------------------------------------------------------------------------
  30  Interest Expense
-------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
-------------------------------------------------------------------------------------------
  32  Education & Outreach
-------------------------------------------------------------------------------------------
  33  Marketing
-------------------------------------------------------------------------------------------
  34  Other
-------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
-------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
-------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
-------------------------------------------------------------------------------------------
  38  Extraordinary Item
-------------------------------------------------------------------------------------------
  39  Provisions for Taxes
-------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
-------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
-------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART X - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

             ABD WITHOUT MEDICARE (INCLUDING AIDS) - NORTHERN REGION

FOR THE TWELVE MONTHS ENDING ____________________ FOR___________________________
                                                             (HMO NAME)

<TABLE>
<CAPTION>
                 REVENUES / EXPENSES                     TWELVE-MONTH $   TWELVE-MONTH PMPM
-------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>
MEMBER MONTHS
-------------------------------------------------------------------------------------------
REVENUES:
-------------------------------------------------------------------------------------------
   1  Capitated Premiums
-------------------------------------------------------------------------------------------
   2  Supplemental Premiums
-------------------------------------------------------------------------------------------
  2a    Maternity
-------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products
-------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment
-------------------------------------------------------------------------------------------
  2d    Other
-------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)
-------------------------------------------------------------------------------------------
   4  Interest
-------------------------------------------------------------------------------------------
   5  COB                                                   $     -           $      -
-------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -           $      -
-------------------------------------------------------------------------------------------
   7  Other Revenue
-------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)
-------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
-------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -           $      -
-------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -           $      -
-------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -           $      -
-------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -           $      -
-------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -           $      -
-------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -           $      -
-------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -           $      -
-------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -           $      -
-------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -           $      -
-------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -           $      -
-------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -           $      -
-------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -           $      -
-------------------------------------------------------------------------------------------
  21  Transportation                                        $     -           $      -
-------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -           $      -
-------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -           $      -
-------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -           $      -
-------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -           $      -
-------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -           $      -
-------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -           $      -
-------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -           $      -
-------------------------------------------------------------------------------------------
ADMINISTRATION
-------------------------------------------------------------------------------------------
  29  Compensation
-------------------------------------------------------------------------------------------
  30  Interest Expense
-------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
-------------------------------------------------------------------------------------------
  32  Education & Outreach
-------------------------------------------------------------------------------------------
  33  Marketing
-------------------------------------------------------------------------------------------
  34  Other
-------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
-------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
-------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
-------------------------------------------------------------------------------------------
  38  Extraordinary Item
-------------------------------------------------------------------------------------------
  39  Provisions for Taxes
-------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
-------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
-------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART Y - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

             ABD WITHOUT MEDICARE (INCLUDING AIDS) - CENTRAL REGION

FOR THE TWELVE MONTHS ENDING ____________________ FOR _________________________
                                                             (HMO NAME)

<TABLE>
<CAPTION>
                 REVENUES / EXPENSES                     TWELVE-MONTH $   TWELVE-MONTH PMPM
-------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>
MEMBER MONTHS
-------------------------------------------------------------------------------------------
REVENUES:
-------------------------------------------------------------------------------------------
   1  Capitated Premiums
-------------------------------------------------------------------------------------------
   2  Supplemental Premiums
-------------------------------------------------------------------------------------------
  2a    Maternity
-------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products
-------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment
-------------------------------------------------------------------------------------------
  2d    Other
-------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)
-------------------------------------------------------------------------------------------
   4  Interest
-------------------------------------------------------------------------------------------
   5  COB                                                   $     -           $      -
-------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -           $      -
-------------------------------------------------------------------------------------------
   7  Other Revenue
-------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)
-------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
-------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -           $      -
-------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -           $      -
-------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -           $      -
-------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -           $      -
-------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -           $      -
-------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -           $      -
-------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -           $      -
-------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -           $      -
-------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -           $      -
-------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -           $      -
-------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -           $      -
-------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -           $      -
-------------------------------------------------------------------------------------------
  21  Transportation                                        $     -           $      -
-------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -           $      -
-------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -           $      -
-------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -           $      -
-------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -           $      -
-------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -           $      -
-------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -           $      -
-------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -           $      -
-------------------------------------------------------------------------------------------
ADMINISTRATION
-------------------------------------------------------------------------------------------
  29  Compensation
-------------------------------------------------------------------------------------------
  30  Interest Expense
-------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
-------------------------------------------------------------------------------------------
  32  Education & Outreach
-------------------------------------------------------------------------------------------
  33  Marketing
-------------------------------------------------------------------------------------------
  34  Other
-------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
-------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
-------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
-------------------------------------------------------------------------------------------
  38  Extraordinary Item
-------------------------------------------------------------------------------------------
  39  Provisions for Taxes
-------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
-------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
-------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART Z - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

             ABD WITHOUT MEDICARE (INCLUDING AIDS) - SOUTHERN REGION

FOR THE TWELVE MONTHS ENDING ____________________ FOR _________________________
                                                             (HMO NAME)

<TABLE>
<CAPTION>
                 REVENUES / EXPENSES                     TWELVE-MONTH $   TWELVE-MONTH PMPM
-------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>
MEMBER MONTHS
-------------------------------------------------------------------------------------------
REVENUES:
-------------------------------------------------------------------------------------------
   1  Capitated Premiums
-------------------------------------------------------------------------------------------
   2  Supplemental Premiums
-------------------------------------------------------------------------------------------
  2a    Maternity
-------------------------------------------------------------------------------------------
  2b    Reimbursable HIV/AIDS Drugs and Blood Products
-------------------------------------------------------------------------------------------
  2c    EPSDT Incentive Payment
-------------------------------------------------------------------------------------------
  2d    Other
-------------------------------------------------------------------------------------------
   3  Total Premiums (Lines 1+2a+2b+2c+2d)
-------------------------------------------------------------------------------------------
   4  Interest
-------------------------------------------------------------------------------------------
   5  COB                                                   $     -           $      -
-------------------------------------------------------------------------------------------
   6  Reinsurance Recoveries                                $     -           $      -
-------------------------------------------------------------------------------------------
   7  Other Revenue
-------------------------------------------------------------------------------------------
   8  TOTAL REVENUE (3+4+5+6+7)
-------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
-------------------------------------------------------------------------------------------
   9  Inpatient Hospital                                    $     -           $      -
-------------------------------------------------------------------------------------------
  10  Primary Care                                          $     -           $      -
-------------------------------------------------------------------------------------------
  11  Physician Specialty Services                          $     -           $      -
-------------------------------------------------------------------------------------------
  12  Outpatient Hospital                                   $     -           $      -
-------------------------------------------------------------------------------------------
  13  Other Professional Services                           $     -           $      -
-------------------------------------------------------------------------------------------
  14  Emergency Room                                        $     -           $      -
-------------------------------------------------------------------------------------------
  15  DME/Medical Supplies                                  $     -           $      -
-------------------------------------------------------------------------------------------
  16  Prosthetics & Orthotics                               $     -           $      -
-------------------------------------------------------------------------------------------
  17  Covered Dental                                        $     -           $      -
-------------------------------------------------------------------------------------------
  18  Pharmacy                                              $     -           $      -
-------------------------------------------------------------------------------------------
  19  HIV/AIDS Reimbursable Drugs                           $     -           $      -
-------------------------------------------------------------------------------------------
  20  Home Health Care                                      $     -           $      -
-------------------------------------------------------------------------------------------
  21  Transportation                                        $     -           $      -
-------------------------------------------------------------------------------------------
  22  Lab & X-ray                                           $     -           $      -
-------------------------------------------------------------------------------------------
  23  Vision Care including Eyeglasses                      $     -           $      -
-------------------------------------------------------------------------------------------
  24  Mental Health/Substance Abuse                         $     -           $      -
-------------------------------------------------------------------------------------------
  25  Reinsurance Expenses                                  $     -           $      -
-------------------------------------------------------------------------------------------
  26  Incentive Pool Adjustment                             $     -           $      -
-------------------------------------------------------------------------------------------
  27  Other Medical                                         $     -           $      -
-------------------------------------------------------------------------------------------
  28  TOTAL MEDICAL & HOSPITAL (9 through 27)               $     -           $      -
-------------------------------------------------------------------------------------------
ADMINISTRATION
-------------------------------------------------------------------------------------------
  29  Compensation
-------------------------------------------------------------------------------------------
  30  Interest Expense
-------------------------------------------------------------------------------------------
  31  Occupancy, Depreciation & Amortization
-------------------------------------------------------------------------------------------
  32  Education & Outreach
-------------------------------------------------------------------------------------------
  33  Marketing
-------------------------------------------------------------------------------------------
  34  Other
-------------------------------------------------------------------------------------------
  35  TOTAL ADMINISTRATION (29 through 34)
-------------------------------------------------------------------------------------------
  36  TOTAL EXPENSES (28+35)
-------------------------------------------------------------------------------------------
  37  OPERATION INCOME (LOSS) (8-36)
-------------------------------------------------------------------------------------------
  38  Extraordinary Item
-------------------------------------------------------------------------------------------
  39  Provisions for Taxes
-------------------------------------------------------------------------------------------
  40  Adjustment for prior period IBNR estimates
-------------------------------------------------------------------------------------------
  41  NET INCOME (LOSS) (37-38-39-40)
-------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

TABLE #19 - PART AA - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

            NJ KIDCARE B&C (EXCLUDING AIDS) YOUTH - NORTHERN REGION

FOR THE TWELVE MONTHS ENDING ________________              FOR________________
                                                                  (HMO NAME)

<TABLE>
<CAPTION>
                  REVENUES / EXPENSES                      Twelve-month $   Twelve-month PMPM
---------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>
MEMBER MONTHS
---------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------
   1     Capitated Premiums
---------------------------------------------------------------------------------------------
   2     Supplemental Premiums
---------------------------------------------------------------------------------------------
  2a       Maternity
---------------------------------------------------------------------------------------------
  2b       Reimbursable HIV/AIDS Drugs and Blood Products
---------------------------------------------------------------------------------------------
  2c       Epsdt Incentive Payment
---------------------------------------------------------------------------------------------
  2d       Other
---------------------------------------------------------------------------------------------
   3     Total Premiums (Lines 1+2a+2b+2c+2d)
---------------------------------------------------------------------------------------------
   4     Interest
---------------------------------------------------------------------------------------------
   5     COB                                               $            -   $               -
---------------------------------------------------------------------------------------------
   6     Reinsurance Recoveries                            $            -   $               -
---------------------------------------------------------------------------------------------
   7     Other Revenue
---------------------------------------------------------------------------------------------
   8     TOTAL REVENUE (3+4+5+6+7)
---------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------
   9     Inpatient Hospital                                $            -   $               -
---------------------------------------------------------------------------------------------
  10     Primary Care                                      $            -   $               -
---------------------------------------------------------------------------------------------
  11     Physician Specialty Services                      $            -   $               -
---------------------------------------------------------------------------------------------
  12     Outpatient Hospital                               $            -   $               -
---------------------------------------------------------------------------------------------
  13     Other Professional Services                       $            -   $               -
---------------------------------------------------------------------------------------------
  14     Emergency Room                                    $            -   $               -
---------------------------------------------------------------------------------------------
  15     DME/Medical Supplies                              $            -   $               -
---------------------------------------------------------------------------------------------
  16     Prosthetics & Orthotics                           $            -   $               -
---------------------------------------------------------------------------------------------
  17     Covered Dental                                    $            -   $               -
---------------------------------------------------------------------------------------------
  18     Pharmacy                                          $            -   $               -
---------------------------------------------------------------------------------------------
  19     HIV/AIDS Reimbursable Drugs                       $            -   $               -
---------------------------------------------------------------------------------------------
  20     Home Health Care                                  $            -   $               -
---------------------------------------------------------------------------------------------
  21     Transportation                                    $            -   $               -
---------------------------------------------------------------------------------------------
  22     Lab & X-ray                                       $            -   $               -
---------------------------------------------------------------------------------------------
  23     Vision Care Including Eyeglasses                  $            -   $               -
---------------------------------------------------------------------------------------------
  24     Mental Health/Substance Abuse                     $            -   $               -
---------------------------------------------------------------------------------------------
  25     Reinsurance Expenses                              $            -   $               -
---------------------------------------------------------------------------------------------
  26     Incentive Pool Adjustment                         $            -   $               -
---------------------------------------------------------------------------------------------
  27     Other Medical                                     $            -   $               -
---------------------------------------------------------------------------------------------
  28     TOTAL MEDICAL & HOSPITAL (9 through 27)           $            -   $               -
---------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------
  29     Compensation
---------------------------------------------------------------------------------------------
  30     Interest Expense
---------------------------------------------------------------------------------------------
  31     Occupancy, Depreciation & Amortization
---------------------------------------------------------------------------------------------
  32     Education & Outreach
---------------------------------------------------------------------------------------------
  33     Marketing
---------------------------------------------------------------------------------------------
  34     Other
---------------------------------------------------------------------------------------------
  35     TOTAL ADMINISTRATION (29 through 34)
---------------------------------------------------------------------------------------------
  36     TOTAL EXPENSES (28+35)
---------------------------------------------------------------------------------------------
  37     OPERATION INCOME (LOSS) (8-36)
---------------------------------------------------------------------------------------------
  38     Extraordinary Item
---------------------------------------------------------------------------------------------
  39     Provisions for Taxes
---------------------------------------------------------------------------------------------
  40     Adjustment for prior period IBNR estimates
---------------------------------------------------------------------------------------------
  41     NET INCOME (LOSS) (37-38-39-40)
---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART AB - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

             NJ KIDCARE B&C (EXCLUDING AIDS) YOUTH - CENTRAL REGION

FOR THE TWELVE MONTHS ENDING ________________________      FOR_________________
                                                                  (HMO NAME)

<TABLE>
<CAPTION>
                  REVENUES / EXPENSES                      Twelve-month $   Twelve-month PMPM
---------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>
MEMBER MONTHS
---------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------
   1     Capitated Premiums
---------------------------------------------------------------------------------------------
   2     Supplemental Premiums
---------------------------------------------------------------------------------------------
  2a       Maternity
---------------------------------------------------------------------------------------------
  2b       Reimbursable HIV/AIDS Drugs and Blood Products
---------------------------------------------------------------------------------------------
  2c       EPSDT Incentive Payment
---------------------------------------------------------------------------------------------
  2d       Other
---------------------------------------------------------------------------------------------
   3     Total Premiums (Lines 1+2a+2b+2c+2d)
---------------------------------------------------------------------------------------------
   4     Interest
---------------------------------------------------------------------------------------------
   5     COB                                               $            -   $               -
---------------------------------------------------------------------------------------------
   6     Reinsurance Recoveries                            $            -   $               -
---------------------------------------------------------------------------------------------
   7     Other Revenue
---------------------------------------------------------------------------------------------
   8     TOTAL REVENUE (3+4+5+6+7)
---------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------
   9     Inpatient Hospital                                $            -   $               -
---------------------------------------------------------------------------------------------
  10     PRIMARY CARE                                      $            -   $               -
---------------------------------------------------------------------------------------------
  11     Physician Specialty Services                      $            -   $               -
---------------------------------------------------------------------------------------------
  12     Outpatient Hospital                               $            -   $               -
---------------------------------------------------------------------------------------------
  13     Other Professional Services                       $            -   $               -
---------------------------------------------------------------------------------------------
  14     Emergency Room                                    $            -   $               -
---------------------------------------------------------------------------------------------
  15     DME/Medical Supplies                              $            -   $               -
---------------------------------------------------------------------------------------------
  16     Prosthetics & Orthotics                           $            -   $               -
---------------------------------------------------------------------------------------------
  17     Covered Dental                                    $            -   $               -
---------------------------------------------------------------------------------------------
  18     Pharmacy                                          $            -   $               -
---------------------------------------------------------------------------------------------
  19     HIV/AIDS Reimbursable Drugs                       $            -   $               -
---------------------------------------------------------------------------------------------
  20     Home Health Care                                  $            -   $               -
---------------------------------------------------------------------------------------------
  21     Transportation                                    $            -   $               -
---------------------------------------------------------------------------------------------
  22     Lab & X-Ray                                       $            -   $               -
---------------------------------------------------------------------------------------------
  23     Vision Care Including Eyeglasses                  $            -   $               -
---------------------------------------------------------------------------------------------
  24     Mental Health/Substance Abuse                     $            -   $               -
---------------------------------------------------------------------------------------------
  25     Reinsurance Expenses                              $            -   $               -
---------------------------------------------------------------------------------------------
  26     Incentive Pool Adjustment                         $            -   $               -
---------------------------------------------------------------------------------------------
  27     Other Medical                                     $            -   $               -
---------------------------------------------------------------------------------------------
  28     TOTAL MEDICAL & HOSPITAL (9 through 27)           $            -   $               -
---------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------
  29     Compensation
---------------------------------------------------------------------------------------------
  30     Interest Expense
---------------------------------------------------------------------------------------------
  31     Occupancy, Depreciation & Amortization
---------------------------------------------------------------------------------------------
  32     Education & Outreach
---------------------------------------------------------------------------------------------
  33     Marketing
---------------------------------------------------------------------------------------------
  34     Other
---------------------------------------------------------------------------------------------
  35     TOTAL ADMINISTRATION (29 through 34)
---------------------------------------------------------------------------------------------
  36     TOTAL EXPENSES (28+35)
---------------------------------------------------------------------------------------------
  37     OPERATION INCOME (LOSS) (8-36)
---------------------------------------------------------------------------------------------
  38     Extraordinary Item
---------------------------------------------------------------------------------------------
  39     Provisions for Taxes
---------------------------------------------------------------------------------------------
  40     Adjustment for prior period IBNR estimates
---------------------------------------------------------------------------------------------
  41     NET INCOME (LOSS) (37-38-39-40)
---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART AC - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

             NJ KIDCARE B&C (EXCLUDING AIDS) YOUTH - SOUTHERN REGION

FOR THE TWELVE MONTHS ENDING _____________________         FOR_________________
                                                                 (HMO NAME)

<TABLE>
<CAPTION>
                  REVENUES / EXPENSES                      Twelve-month $   Twelve-month PMPM
---------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>
MEMBER MONTHS
---------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------
   1     Capitated Premiums
---------------------------------------------------------------------------------------------
   2     Supplemental Premiums
---------------------------------------------------------------------------------------------
  2a       Maternity
---------------------------------------------------------------------------------------------
  2b       Reimbursable HIV/AIDS Drugs and Blood Products
---------------------------------------------------------------------------------------------
  2c       EPSDT Incentive Payment
---------------------------------------------------------------------------------------------
  2d       Other
---------------------------------------------------------------------------------------------
   3     Total Premiums (Lines 1+2a+2b+2c+2d)
---------------------------------------------------------------------------------------------
   4     Interest
---------------------------------------------------------------------------------------------
   5     COB                                               $            -   $               -
---------------------------------------------------------------------------------------------
   6     Reinsurance Recoveries                            $            -   $               -
---------------------------------------------------------------------------------------------
   7     Other Revenue
---------------------------------------------------------------------------------------------
   8     TOTAL REVENUE (3+4+5+6+7)
---------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------
   9     Inpatient Hospital                                $            -   $               -
---------------------------------------------------------------------------------------------
  10     Primary Care                                      $            -   $               -
---------------------------------------------------------------------------------------------
  11     Physician Specialty Services                      $            -   $               -
---------------------------------------------------------------------------------------------
  12     Outpatient Hospital                               $            -   $               -
---------------------------------------------------------------------------------------------
  13     Other Professional Services                       $            -   $               -
---------------------------------------------------------------------------------------------
  14     Emergency Room                                    $            -   $               -
---------------------------------------------------------------------------------------------
  15     DME/Medical Supplies                              $            -   $               -
---------------------------------------------------------------------------------------------
  16     Prosthetics & Orthotics                           $            -   $               -
---------------------------------------------------------------------------------------------
  17     Covered Dental                                    $            -   $               -
---------------------------------------------------------------------------------------------
  18     Pharmacy                                          $            -   $               -
---------------------------------------------------------------------------------------------
  19     HIV/AIDS Reimbursable Drugs                       $            -   $               -
---------------------------------------------------------------------------------------------
  20     Home Health Care                                  $            -   $               -
---------------------------------------------------------------------------------------------
  21     Transportation                                    $            -   $               -
---------------------------------------------------------------------------------------------
  22     Lab & X-Ray                                       $            -   $               -
---------------------------------------------------------------------------------------------
  23     Vision Care Including Eyeglasses                  $            -   $               -
---------------------------------------------------------------------------------------------
  24     Mental Health/Substance Abuse                     $            -   $               -
---------------------------------------------------------------------------------------------
  25     Reinsurance Expenses                              $            -   $               -
---------------------------------------------------------------------------------------------
  26     Incentive Pool Adjustment                         $            -   $               -
---------------------------------------------------------------------------------------------
  27     Other Medical                                     $            -   $               -
---------------------------------------------------------------------------------------------
  28     TOTAL MEDICAL & HOSPITAL (9 through 27)           $            -   $               -
---------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------
  29     Compensation
---------------------------------------------------------------------------------------------
  30     Interest Expense
---------------------------------------------------------------------------------------------
  31     Occupancy, Depreciation & Amortization
---------------------------------------------------------------------------------------------
  32     Education & Outreach
---------------------------------------------------------------------------------------------
  33     Marketing
---------------------------------------------------------------------------------------------
  34     Other
---------------------------------------------------------------------------------------------
  35     TOTAL ADMINISTRATION (29 through 34)
---------------------------------------------------------------------------------------------
  36     TOTAL EXPENSES (28+35)
---------------------------------------------------------------------------------------------
  37     OPERATION INCOME (LOSS) (8-36)
---------------------------------------------------------------------------------------------
  38     Extraordinary Item
---------------------------------------------------------------------------------------------
  39     Provisions for Taxes
---------------------------------------------------------------------------------------------
  40     Adjustment for prior period IBNR estimates
---------------------------------------------------------------------------------------------
  41     NET INCOME (LOSS) (37-38-39-40)
---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART AD - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

        NJ FAMILYCARE PARENTS 0-133% FPL 19-44 FEMALE - NORTHERN REGION

FOR THE TWELVE MONTHS ENDING _________________________     FOR_________________
                                                                  (HMO NAME)

<TABLE>
<CAPTION>
                  REVENUES / EXPENSES                      Twelve-month $   Twelve-month PMPM
---------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>
MEMBER MONTHS
---------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------
 1    Capitated Premiums
---------------------------------------------------------------------------------------------
 2    Supplemental Premiums
---------------------------------------------------------------------------------------------
2a       Maternity
---------------------------------------------------------------------------------------------
2b       Reimbursable HIV/AIDS Drugs and Blood Products
---------------------------------------------------------------------------------------------
2c       EPSDT Incentive Payment
---------------------------------------------------------------------------------------------
2d       Other
---------------------------------------------------------------------------------------------
 3    Total Premiums (Lines 1+2a+2b+2c+2d)
---------------------------------------------------------------------------------------------
 4    Interest
---------------------------------------------------------------------------------------------
 5    COB                                               $            -   $                  -
---------------------------------------------------------------------------------------------
 6    Reinsurance Recoveries                            $            -   $                  -
---------------------------------------------------------------------------------------------
 7    Other Revenue
---------------------------------------------------------------------------------------------
 8    TOTAL REVENUE (3+4+5+6+7)
---------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------
 9    Inpatient Hospital                                $            -   $                  -
---------------------------------------------------------------------------------------------
10    Primary Care                                      $            -   $                  -
---------------------------------------------------------------------------------------------
11    Physician Specialty Services                      $            -   $                  -
---------------------------------------------------------------------------------------------
12    Outpatient Hospital                               $            -   $                  -
---------------------------------------------------------------------------------------------
13    Other Professional Services                       $            -   $                  -
---------------------------------------------------------------------------------------------
14    Emergency Room                                    $            -   $                  -
---------------------------------------------------------------------------------------------
15    DME/Medical Supplies                              $            -   $                  -
---------------------------------------------------------------------------------------------
16    Prosthetics & Orthotics                           $            -   $                  -
---------------------------------------------------------------------------------------------
17    Covered Dental                                    $            -   $                  -
---------------------------------------------------------------------------------------------
18    Pharmacy                                          $            -   $                  -
---------------------------------------------------------------------------------------------
19    HIV/AIDS Reimbursable Drugs                       $            -   $                  -
---------------------------------------------------------------------------------------------
20    Home Health Care                                  $            -   $                  -
---------------------------------------------------------------------------------------------
21    Transportation                                    $            -   $                  -
---------------------------------------------------------------------------------------------
22    Lab & X-Ray                                       $            -   $                  -
---------------------------------------------------------------------------------------------
23    Vision Care Including Eyeglasses                  $            -   $                  -
---------------------------------------------------------------------------------------------
24    Mental Health/Substance Abuse                     $            -   $                  -
---------------------------------------------------------------------------------------------
25    Reinsurance Expenses                              $            -   $                  -
---------------------------------------------------------------------------------------------
26    Incentive Pool Adjustment                         $            -   $                  -
---------------------------------------------------------------------------------------------
27    Other Medical                                     $            -   $                  -
---------------------------------------------------------------------------------------------
28    TOTAL MEDICAL & HOSPITAL (9 through 27)           $            -   $                  -
---------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------
29    Compensation
---------------------------------------------------------------------------------------------
30    Interest Expense
---------------------------------------------------------------------------------------------
31    Occupancy, Depreciation & Amortization
---------------------------------------------------------------------------------------------
32    Education & Outreach
---------------------------------------------------------------------------------------------
33    Marketing
---------------------------------------------------------------------------------------------
34    Other
---------------------------------------------------------------------------------------------
35    TOTAL ADMINISTRATION (29 through 34)
---------------------------------------------------------------------------------------------
36    TOTAL EXPENSES (28+35)
---------------------------------------------------------------------------------------------
37    OPERATION INCOME (LOSS) (8-36)
---------------------------------------------------------------------------------------------
38    Extraordinary Item
---------------------------------------------------------------------------------------------
39    Provisions for Taxes
---------------------------------------------------------------------------------------------
40    Adjustment for prior period IBNR estimates
---------------------------------------------------------------------------------------------
41    NET INCOME (LOSS) (37-38-39-40)
---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART AE - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

         NJ FAMILYCARE PARENTS 0-133% FPL 19-44 FEMALE - CENTRAL REGION

FOR THE TWELVE MONTHS ENDING _________________________     FOR_________________
                                                                  (HMO NAME)

<TABLE>
<CAPTION>
                  REVENUES / EXPENSES                      Twelve-month $   Twelve-month PMPM
---------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>
MEMBER MONTHS
---------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------
   1     Capitated Premiums
---------------------------------------------------------------------------------------------
   2     Supplemental Premiums
---------------------------------------------------------------------------------------------
  2a       Maternity
---------------------------------------------------------------------------------------------
  2b       Reimbursable HIV/AIDS Drugs and Blood Products
---------------------------------------------------------------------------------------------
  2c       Epsdt Incentive Payment
---------------------------------------------------------------------------------------------
  2d       Other
---------------------------------------------------------------------------------------------
   3     Total Premiums (Lines 1+2a+2b+2c+2d)
---------------------------------------------------------------------------------------------
   4     Interest
---------------------------------------------------------------------------------------------
   5     COB                                               $            -   $               -
---------------------------------------------------------------------------------------------
   6     Reinsurance Recoveries                            $            -   $               -
---------------------------------------------------------------------------------------------
   7     Other Revenue
---------------------------------------------------------------------------------------------
   8     TOTAL REVENUE (3+4+5+6+7)
---------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------
   9     Inpatient Hospital                                $            -   $               -
---------------------------------------------------------------------------------------------
  10     Primary Care                                      $            -   $               -
---------------------------------------------------------------------------------------------
  11     Physician Specialty Services                      $            -   $               -
---------------------------------------------------------------------------------------------
  12     Outpatient Hospital                               $            -   $               -
---------------------------------------------------------------------------------------------
  13     Other Professional Services                       $            -   $               -
---------------------------------------------------------------------------------------------
  14     Emergency Room                                    $            -   $               -
---------------------------------------------------------------------------------------------
  15     DME/Medical Supplies                              $            -   $               -
---------------------------------------------------------------------------------------------
  16     Prosthetics & Orthotics                           $            -   $               -
---------------------------------------------------------------------------------------------
  17     Covered Dental                                    $            -   $               -
---------------------------------------------------------------------------------------------
  18     Pharmacy                                          $            -   $               -
---------------------------------------------------------------------------------------------
  19     HIV/AIDS Reimbursable Drugs                       $            -   $               -
---------------------------------------------------------------------------------------------
  20     Home Health Care                                  $            -   $               -
---------------------------------------------------------------------------------------------
  21     Transportation                                    $            -   $               -
---------------------------------------------------------------------------------------------
  22     Lab & X-Ray                                       $            -   $               -
---------------------------------------------------------------------------------------------
  23     Vision Care Including Eyeglasses                  $            -   $               -
---------------------------------------------------------------------------------------------
  24     Mental Health/Substance Abuse                     $            -   $               -
---------------------------------------------------------------------------------------------
  25     Reinsurance Expenses                              $            -   $               -
---------------------------------------------------------------------------------------------
  26     Incentive Pool Adjustment                         $            -   $               -
---------------------------------------------------------------------------------------------
  27     Other Medical                                     $            -   $               -
---------------------------------------------------------------------------------------------
  28     TOTAL MEDICAL & HOSPITAL (9 through 27)           $            -   $               -
---------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------
  29     Compensation
---------------------------------------------------------------------------------------------
  30     Interest Expense
---------------------------------------------------------------------------------------------
  31     Occupancy, Depreciation & Amortization
---------------------------------------------------------------------------------------------
  32     Education & Outreach
---------------------------------------------------------------------------------------------
  33     Marketing
---------------------------------------------------------------------------------------------
  34     Other
---------------------------------------------------------------------------------------------
  35     TOTAL ADMINISTRATION (29 through 34)
---------------------------------------------------------------------------------------------
  36     TOTAL EXPENSES (28+35)
---------------------------------------------------------------------------------------------
  37     OPERATION INCOME (LOSS) (8-36)
---------------------------------------------------------------------------------------------
  38     Extraordinary Item
---------------------------------------------------------------------------------------------
  39     Provisions for Taxes
---------------------------------------------------------------------------------------------
  40     Adjustment for prior period IBNR estimates
---------------------------------------------------------------------------------------------
  41     NET INCOME (LOSS) (37-38-39-40)
---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

TABLE #19 - PART AF - ANNUAL REGIONAL SUMMARY BY RATE CELL GROUPING

        NJ FAMILYCARE PARENTS 0-133% FPL 19-44 FEMALE - SOUTHERN REGION

FOR THE TWELVE MONTHS ENDING _________________________     FOR_________________
                                                                 (HMO NAME)

<TABLE>
<CAPTION>
                  REVENUES / EXPENSES                      Twelve-month $   Twelve-month PMPM
---------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>
MEMBER MONTHS
---------------------------------------------------------------------------------------------
REVENUES:
---------------------------------------------------------------------------------------------
   1     Capitated Premiums
---------------------------------------------------------------------------------------------
   2     Supplemental Premiums
---------------------------------------------------------------------------------------------
  2a       Maternity
---------------------------------------------------------------------------------------------
  2b       Reimbursable HIV/AIDS Drugs and Blood Products
---------------------------------------------------------------------------------------------
  2c       EPSDT Incentive Payment
---------------------------------------------------------------------------------------------
  2d       Other
---------------------------------------------------------------------------------------------
   3     Total Premiums (Lines 1+2a+2b+2c+2d)
---------------------------------------------------------------------------------------------
   4     Interest
---------------------------------------------------------------------------------------------
   5     COB                                               $            -   $               -
---------------------------------------------------------------------------------------------
   6     Reinsurance Recoveries                            $            -   $               -
---------------------------------------------------------------------------------------------
   7     Other Revenue
---------------------------------------------------------------------------------------------
   8     TOTAL REVENUE (3+4+5+6+7)
---------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------
MEDICAL AND HOSPITAL
---------------------------------------------------------------------------------------------
   9     Inpatient Hospital                                $            -   $               -
---------------------------------------------------------------------------------------------
  10     Primary Care                                      $            -   $               -
---------------------------------------------------------------------------------------------
  11     Physician Specialty Services                      $            -   $               -
---------------------------------------------------------------------------------------------
  12     Outpatient Hospital                               $            -   $               -
---------------------------------------------------------------------------------------------
  13     Other Professional Services                       $            -   $               -
---------------------------------------------------------------------------------------------
  14     Emergency Room                                    $            -   $               -
---------------------------------------------------------------------------------------------
  15     DME/Medical Supplies                              $            -   $               -
---------------------------------------------------------------------------------------------
  16     Prosthetics & Orthotics                           $            -   $               -
---------------------------------------------------------------------------------------------
  17     Covered Dental                                    $            -   $               -
---------------------------------------------------------------------------------------------
  18     Pharmacy                                          $            -   $               -
---------------------------------------------------------------------------------------------
  19     HIV/AIDS Reimbursable Drugs                       $            -   $               -
---------------------------------------------------------------------------------------------
  20     Home Health Care                                  $            -   $               -
---------------------------------------------------------------------------------------------
  21     Transportation                                    $            -   $               -
---------------------------------------------------------------------------------------------
  22     Lab & X-Ray                                       $            -   $               -
---------------------------------------------------------------------------------------------
  23     Vision Care Including Eyeglasses                  $            -   $               -
---------------------------------------------------------------------------------------------
  24     Mental Health/Substance Abuse                     $            -   $               -
---------------------------------------------------------------------------------------------
  25     Reinsurance Expenses                              $            -   $               -
---------------------------------------------------------------------------------------------
  26     Incentive Pool Adjustment                         $            -   $               -
---------------------------------------------------------------------------------------------
  27     Other Medical                                     $            -   $               -
---------------------------------------------------------------------------------------------
  28     TOTAL MEDICAL & HOSPITAL (9 through 27)           $            -   $               -
---------------------------------------------------------------------------------------------
ADMINISTRATION
---------------------------------------------------------------------------------------------
  29     Compensation
---------------------------------------------------------------------------------------------
  30     Interest Expense
---------------------------------------------------------------------------------------------
  31     Occupancy, Depreciation & Amortization
---------------------------------------------------------------------------------------------
  32     Education & Outreach
---------------------------------------------------------------------------------------------
  33     Marketing
---------------------------------------------------------------------------------------------
  34     Other
---------------------------------------------------------------------------------------------
  35     TOTAL ADMINISTRATION (29 through 34)
---------------------------------------------------------------------------------------------
  36     TOTAL EXPENSES (28+35)
---------------------------------------------------------------------------------------------
  37     OPERATION INCOME (LOSS) (8-36)
---------------------------------------------------------------------------------------------
  38     Extraordinary Item
---------------------------------------------------------------------------------------------
  39     Provisions for Taxes
---------------------------------------------------------------------------------------------
  40     Adjustment for prior period IBNR estimates
---------------------------------------------------------------------------------------------
  41     NET INCOME (LOSS) (37-38-39-40)
---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

A.7.22 TABLES 20, PARTS A THROUGH D

<PAGE>

[TABLE ILLEGIBLE]
<PAGE>

[TABLE ILLEGIBLE]
<PAGE>

[TABLE ILLEGIBLE]
<PAGE>

[TABLE ILLEGIBLE]
<PAGE>

A.7.23 TABLE 21

                                                                            A-96

<PAGE>

                                                            DRAFT & CONFIDENTIAL

TABLE #21 - MATERNITY OUTCOME COUNTS

FOR THE THREE MONTHS ENDING____________________________    FOR_________________
                                                                  (HMO NAME)

<TABLE>
<CAPTION>
                                                 CURRENT PERIOD                             YEAR TO DATE
                                     -------------------------------------------------------------------------------
                                         LIVE BIRTHS                              LIVE BIRTHS
                                     -------------------                     --------------------
                                     C-SECTION   VAGINAL   NON-LIVE BIRTHS   C-SECTION    VAGINAL    NON-LIVE BIRTHS
--------------------------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>       <C>               <C>          <C>        <C>
NORTHERN REGION
AFDC/NJCPW/NJ KIDCARE A
--------------------------------------------------------------------------------------------------------------------
CENTRAL REGION
AFDC/NJCPW/NJKIDCARE A
--------------------------------------------------------------------------------------------------------------------
SOUTHERN REGION
AFDC/NJCPW/NJ KIDCARE A
--------------------------------------------------------------------------------------------------------------------
TOTAL
--------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE: ONLY OUTCOMES AFTER THE TWELFTH WEEK OF GESTATION SHOULD BE INCLUDED IN
THIS REPORT, EXCLUDING ELECTIVE ABORTIONS.

<PAGE>

A.8.0 FINANCIAL PROVISIONS

<PAGE>

A.8.1 OTHER COVERAGE INFORMATION
<PAGE>

                               STATE OF NEW JERSEY
                          DEPARTMENT OF HUMAN SERVICES
               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES
                         MEDICAID THIRD PARTY LIABILITY

                                                PERSON
PLEASE COMPLETE ENTIRE FORM:                    NUMBERS  [ ][ ][ ][ ][ ][ ]
              MEDICAID NUMBER                   COVERED  [ ][ ][ ][ ][ ][ ]
         [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]           BY     [ ][ ][ ][ ][ ][ ]
                                               INSURANCE

<TABLE>
<CAPTION>
               CASE NAME                        FIRST NAME                  BIRTHDATE             SOCIAL SECURITY NUMBER
<S>                                    <C>                          <C>                       <C>
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]   [ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ]
</TABLE>

<TABLE>
<CAPTION>
   INS                 POLICY   HIC                                                  COV     POL
  CODE                 NUMBER/NUMBER                        GROUP NUMBER             TYPE   HOLDER
<S>        <C>                                   <C>                                <C>     <C>
[ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ]    [ ]

[ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ]    [ ]

[ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ]    [ ]

[ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ]    [ ]

<CAPTION>
   INS
  CODE         EFFECTIVE DATE           TERMINATION DATE
<S>       <C>                       <C>
[ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ]

[ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ]

[ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ]

[ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ]  [ ][ ][ ][ ][ ][ ][ ][ ]
</TABLE>

<TABLE>
<S>                                                                   <C>
ATTACH COPY OF FRONT AND BACK OF INSURANCE CARD(S)

Name of Policy Holder:________________________                        SSN of Policy Holder__-___-____

Name, Address and Phone Number of Insurance Carrier:_____________     Enter relationship of policy holder in policy holder block.
                                                         Name         Relationships are as follows:
______________________________________________    _______________     1. Self                     3. Absent Parent
                Street Address                       City             2. Dependent of Medicaid    4. Another Adult
                                                                          Head of Household
______________________________________________    _____-_____-_____
   State                 Zip                       Telephone Number
</TABLE>

Enter the two digit code in the coverage block which corresponds to the type of
insurance coverage reflected in the policy.

The allowance codes are:

<TABLE>
<S>                          <C>                                <C>
01 Inpatient Hospital        07 Optical                         13 Hospital Medical/Surgical and Major Medical
02 Medical/Surgical          08 Hospital and Medical/Surgical   14 Hospital Medical/Surgical Major Medical and Rx
03 Major Medical             09 Long term Care                  15 Hospital Medical/Surgical Major Medical and Rx and Dental
04 Medicare Supplemental     10 HMO with Rx                     16 Hospital Medical/Surgical Major Medical Rx and Dental and Optical
05 Prescription              11 HMO no Rx                       17 HMO Rx and Dental
06 Dental                    12 Outpatient Hospital             18 HMO Rx Dental and Optical
</TABLE>

<TABLE>
<S>                                                                    <C>            <C>
Has any case member sustained a traumatic injury in the last 5 years?  [ ]Yes [ ]No   If yes, name of injured party:_______
Date of injury:__________________   Where did injury take place?_________________     Description:_________________________
</TABLE>

<PAGE>

A.8.2 TORT/ACCIDENT REFERRAL FORM
<PAGE>

                               STATE OF NEW JERSEY
                          DEPARTMENT OF HUMAN SERVICES
               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                          TORT - ACCIDENT REFERRAL FORM
                       PLEASE USE OTHER SIDE IF NECESSARY

HMO__________________________HMO#_____________________PHONE____________________

PART A: IDENTIFICATION

CLIENT'S NAME________________________________HSP#___________________________

DATE OF ACCIDENT/INCIDENT __________________________________________________

NATURE OF INJURY          __________________________________________________

TYPE OF ACCIDENT          __________________________________________________
                                 (auto - fall - med. malpractice, etc.)

ATTORNEY FOR CLIENT       __________________________________________________
(NAME-ADDRESS-PHONE)      __________________________________________________

                          __________________________________________________

Please attach any copies of pleadings or any other documents in your possession
including subpoenas or request for medical information from an attorney,
insurance company or client.

PART B: SERVICES

<TABLE>
<CAPTION>
                      DIAGNOSIS    PROCEDURE
SERVICE    PROVIDER     CODE &       CODE&     PROVIDER      HMO
DATE(S)      NAME      DESCRIP      DESCRIP     CHARGES    PAYMENT
-------      ----      -------      -------     -------    -------
<S>        <C>        <C>          <C>         <C>         <C>
_______    ________   _________    _________   ________    _______
_______    ________   _________    _________   ________    _______
_______    ________   _________    _________   ________    _______
_______    ________   _________    _________   ________    _______
_______    ________   _________    _________   ________    _______
_______    ________   _________    _________   ________    _______
_______    ________   _________    _________   ________    _______
</TABLE>

                              ____________________________________
                             NAME OF PERSON COMPLETING FORM - DATE

<PAGE>

                                    SECTION B
                               REFERENCE MATERIALS

This section contains all reference materials affiliated with the contract. They
are presented according to the Article to which they correspond, beginning with
Article 2.

<PAGE>

B.2.0   CONDITIONS PRECEDENT

<PAGE>

B.2.1  RESERVED

<PAGE>

B.2.2 [Reserved] RESERVED

<PAGE>

B.2.3   READINESS REVIEW

<PAGE>

                                READINESS REVIEW

The following information will be reviewed and discussed during the Division of
Medical Assistance and Health Services readiness review:

1.       Administration and Organizational Structure

         -     Tour office/facility

         -     Identify any changes in organizational structure

               -   interim plans to delegate responsibilities

         -     Identify chain of command

               -   identify and introduce of management team

2.       Quality Management

         -     Identify and meet staff and flow of responsibilities

         -     Review final plans for implementation of Quality Management
               Committees

         -     Review procedures for interdepartmental coordination on quality
               issues

         -     Review final policy and procedure manuals

         -     Review credentialing files

3.       Provider Relations

         -     Identify and meet staff and flow of responsibilities

         -     Process for staff education

         -     Review staff procedure manuals/documents

         -     Policy on provider education and outreach

         -     Processing and monitoring of provider inquiries and complaints

         -     Evaluation/effectiveness of Provider Relation Services

         -     Recruitment policy

         -     Review record keeping of provider files

4.       Member Services/Customer Services

         -     Identify and meet staff and flow of responsibilities

         -     Process for staff education

         -     Review staff procedure manuals/documents

         -     Policy on member education and outreach

         -     Processing and monitoring member inquiries and complaints

         -     Is 24 hour coverage in place

         -     Bilingual staff/translation ability

         -     Evaluation/effectiveness of Member Services

         -     Plans for the initiation of member surveys

         -     Telephone hotline staff and system

         -     Enrollment

<PAGE>

5.       Enrollment

         -     Identify and meet staff and flow of responsibilities

         -     Process for staff education

         -     Review staff procedure manuals/documents

         -     Processing and monitoring enrollment process

         -     Evaluation/effectiveness of Member Services

6.       Complaints and Grievances

         -     Identify responsible staff

         -     Identify process and resolution of complaint

         -     Tracking

         -     Incorporation into quality assurance activities

         -     Process for maintaining confidentiality

7.       Marketing

         -     Identify and meet marketing staff

         -     Education/training of marketing staff

         -     Review of marketing plan/sites for enrollment

         -     Inspect materials inventory

8.       Record Keeping

         -     Check security of record keeping system

         -     Provider and member files

         -     Plans for record retention

         -     Confidentiality

9.       Utilization Management

         -     Identify and meet responsible staff

         -     Education/training of staff

         -     Process for authorization/denials of services

         -     Coordination of alternative services/approvals

         -     Referrals/Precertification

10.      Fiscal Responsibility

         -     Meet responsible Financial staff

         -     Review Provider Payment claims screens

         -     Review Financial Management screens

<PAGE>

11.      Management Information Systems

         -     Review Provider Payment claims screens

         -     Review Member and Provider screens

         -     Review Quality and Utilization Management screens

         -     Review capability for reporting

         -     Identify staff

<PAGE>

B.3.0   MANAGED CARE MANAGEMENT INFORMATION SYSTEMS

<PAGE>

B.3.1    MONTHLY ROSTER EXTRACT FILE

<PAGE>

                              STATE OF NEW JERSEY
                           DEPARTMENT OF THE TREASURY
                        OFFICE OF INFORMATION TECHNOLOGY
                                  FILE LAYOUT

FILE NAME: MONTHLY ROSTER FILE                                    EFFECTIVE DATE

DATASET NAME                     RECORD SIZE 70                       BLOCK SIZE

<TABLE>
<CAPTION>
                                                                         COBOL
ELEM        FIELD NAME          CHARS    BYTES     REL TO 1    FMT      PICTURE    DESCRIPTIONS AND REMARKS
-----------------------------------------------------------------------------------------------------------
<S>    <C>                      <C>      <C>       <C>         <C>      <C>        <C>
 1     NX55-CASE-NUMBER          10       10        1-10        NU       9(10)
-----------------------------------------------------------------------------------------------------------
 2     NX55-RECIPIENT            2        2         11-12       NU       9(02)
-----------------------------------------------------------------------------------------------------------
 3     NX55-LAST-NAME            12       12        13-24       AN       X(12)
-----------------------------------------------------------------------------------------------------------
 4     NX55-FIRST-NAME           7        7         25-31       AN       X(07)
-----------------------------------------------------------------------------------------------------------
 5     NX55-COUNTY-OF-RESID      2        2         32-33       AN       X(02)
-----------------------------------------------------------------------------------------------------------
 6     NX55-MC-CODE              3        3         34-36       AN       X(03)
-----------------------------------------------------------------------------------------------------------
 7     NX55-MC-EFF-DATE          8                  37-44       NU       9(08)            CCYYMMDD
-----------------------------------------------------------------------------------------------------------
 8     NX55-MC-TERM-DTE          8        8         45-52       NU       9(08)            CCYYMMDD
-----------------------------------------------------------------------------------------------------------
 9     NX55-MC-PAYMENT-CODE      1        1           53        AN       X(01)
-----------------------------------------------------------------------------------------------------------
 10    NX55-MC-CAP-CODE          5        5         54-58       AN       X(05)
-----------------------------------------------------------------------------------------------------------
 11    NX55-PSC                  3        3         59-61       AN       X(03)
-----------------------------------------------------------------------------------------------------------
 12    NX-55-RACE                1        1           62        AN       X(01)
-----------------------------------------------------------------------------------------------------------
 13    FILLER                    7        7         63-69       AN       X(07)
-----------------------------------------------------------------------------------------------------------
 14    NX55-RECORD-TYPE          1        1           70        AN       X(01)
-----------------------------------------------------------------------------------------------------------
</TABLE>

FORMAT   BI = BINARY  PD = PACKED DECIMAL  ED = EXTENDED DECIMAL
         AN = ALPHANUMERIC NU = NUMERIC

LAST UPDATED: 3/28/03                                                    PAGE: 1

<PAGE>

[Reserved]

<PAGE>

B.3.2    MANAGED CARE REGISTER FILE

<PAGE>

                              STATE OF NEW JERSEY
                           DEPARTMENT OF THE TREASURY
                        OFFICE OF INFORMATION TECHNOLOGY
                                  FILE LAYOUT

FILE NAME MANAGED CARE REGISTER FILE                       EFFECTIVE DATE 4/2002

DATASET NAME NX20AMCR            RECORD SIZE 297                      BLOCK SIZE

<TABLE>
<CAPTION>
                                                                         COBOL
ELEM          FIELD NAME         CHARS   BYTES     REL TO 1     FMT     PICTURE              DESCRIPTIONS AND REMARKS
-----------------------------------------------------------------------------------------------------------------------------------
<S>      <C>                     <C>     <C>       <C>        <C>       <C>        <C>
 1 - 31  NX-TR-MC-RECORD         297     297        1 - 297   GROUP     X(297)
-----------------------------------------------------------------------------------------------------------------------------------
 1 - 2   NX-TR-MEDICAID-ID        12      12        1 - 12    GROUP      X(12)
-----------------------------------------------------------------------------------------------------------------------------------
  1      NX-TR-CASE-NUMBER        10      10        1 - 10     AN        X(10)
-----------------------------------------------------------------------------------------------------------------------------------
  2      NX-TR-RECIP-NUMBER        2       2       11 - 12     AN         X(2)
-----------------------------------------------------------------------------------------------------------------------------------
  3      NX-TR-CHANGE-TYPE         1       1       13 - 13     AN         X(1)     A = NEW ENROLLMENT (ADD); C = CHANGE; D = DELETE
-----------------------------------------------------------------------------------------------------------------------------------
  4      NX-TR-CHANGE-DATE         8       8       14 - 21     NU         9(8)     FORMAT   YYYYMMDD
-----------------------------------------------------------------------------------------------------------------------------------
  5      NX-TR-SOURCE              4       4       22 - 25     AN         X(4)
-----------------------------------------------------------------------------------------------------------------------------------
  6      NX-TR-MC-HMO              3       3       26 - 28     AN         X(3)
-----------------------------------------------------------------------------------------------------------------------------------
  7      NX-TR-LST-NAME           12      12       29 - 40     AN        X(12)
-----------------------------------------------------------------------------------------------------------------------------------
  8      NX-TR-FST-NAME            7       7       41 - 47     AN         X(7)
-----------------------------------------------------------------------------------------------------------------------------------
  9      NX-TR-DOB                 8       8       48 - 55     NU         9(8)     FORMAT   YYYYMMDD
-----------------------------------------------------------------------------------------------------------------------------------
  10     NX-TR-SEX                 1       1       56 - 56     AN         X(1)     F = FEMALE  M = MALE
-----------------------------------------------------------------------------------------------------------------------------------
  11     NX-TR-SSN                 9       9       57 - 65     AN         X(9)
-----------------------------------------------------------------------------------------------------------------------------------
12 - 19   NX-TR-ADDRESS          141     141       66 - 206   GROUP     X(141)
-----------------------------------------------------------------------------------------------------------------------------------
  12     NX-TR-ADDRESS-LINE-1     22      22       66 - 87     AN        X(22)
-----------------------------------------------------------------------------------------------------------------------------------
  13     NX-TR-ADDRESS-LINE-2     22      22       88 - 109    AN        X(22)
-----------------------------------------------------------------------------------------------------------------------------------
  14     NX-TR-ADDRESS-LINE-3     22      22      110 - 131    AN        X(22)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

FORMAT   BI = BINARY  PD = PACKED DECIMAL  ED = EXTENDED DECIMAL
         AN = ALPHANUMERIC NU = NUMERIC

LAST UPDATED: 3/28/03                                                    PAGE: 1

<PAGE>

                              STATE OF NEW JERSEY
                           DEPARTMENT OF THE TREASURY
                        OFFICE OF INFORMATION TECHNOLOGY
                                  FILE LAYOUT

FILE NAME MANAGED CARE REGISTER FILE                       EFFECTIVE DATE 4/2002

DATASET NAME NX20AMCR            RECORD SIZE 297                      BLOCK SIZE

<TABLE>
<CAPTION>
                                                                        COBOL
ELEM          FIELD NAME         CHARS   BYTES     REL TO 1    FMT     PICTURE      DESCRIPTIONS AND REMARKS
----------------------------------------------------------------------------------------------------------------------
<S>      <C>                     <C>     <C>       <C>         <C>      <C>        <C>
 15      NX-TR-ADDRESS-LINE-4      22     22        132-153     AN      X(22)
----------------------------------------------------------------------------------------------------------------------
 16      NX-TR-ADDRESS-LINE-5      22     22        154-175     AN      X(22)
----------------------------------------------------------------------------------------------------------------------
 17      NX-TR-ADDRESS-LINE-6      22     22        176-197     AN      X(22)
----------------------------------------------------------------------------------------------------------------------
 18      NX-TR-ZIP-CODE             5      5        198-202     AN       X(5)
----------------------------------------------------------------------------------------------------------------------
 19      NX-TR-ZIP-SUFFIX           4      4        203-206     AN       X(4)
----------------------------------------------------------------------------------------------------------------------
 20      NX-TR-PR-ENROLL-DTE        8      8        207-214     AN       X(8)      FORMAT YYYYMMDD   OR SPACES
----------------------------------------------------------------------------------------------------------------------
 21      NX-TR-PR-DISENROLL-DTE     8      8        215-222     AN       X(8)      FORMAT YYYYMMDD   OR SPACES
----------------------------------------------------------------------------------------------------------------------
 22      NX-TR-PR-HMO-CAP-CDE       5      5        223-227     AN       X(5)
----------------------------------------------------------------------------------------------------------------------
 23      NX-TR-PR-BENEFIT-IND       5      5        228-232     AN       X(5)
----------------------------------------------------------------------------------------------------------------------
 24      NX-TR-CUR-ENROLL-DTE       8      8        233-240     AN       X(8)      FORMAT YYYYMMDD   OR SPACES
----------------------------------------------------------------------------------------------------------------------
 25      NX-TR-CUR-DISENROL-DTE     8      8        241-248      A       X(8)      FORMAT YYYYMMDD   OR SPACES
----------------------------------------------------------------------------------------------------------------------
 26      NX-TR-CUR-HMO-CAP-CDE      5      5        249-253     AN       X(5)
----------------------------------------------------------------------------------------------------------------------
 27      NX-TR-CUR-BENEFIT-IND      5      5        254-258     AN       X(5)
----------------------------------------------------------------------------------------------------------------------
 28      NX-TR-BATCH-NUM            4      4        259-262     AN       X(4)
----------------------------------------------------------------------------------------------------------------------
 29      NX-TR-PGM-STAT-CDE         3      3        263-265     AN       X(3)
----------------------------------------------------------------------------------------------------------------------
</TABLE>

FORMAT   BI = BINARY  PD = PACKED DECIMAL  ED = EXTENDED DECIMAL
         AN = ALPHANUMERIC NU = NUMERIC

LAST UPDATED: 3/28/03                                                    PAGE: 2

<PAGE>

                              STATE OF NEW JERSEY
                           DEPARTMENT OF THE TREASURY
                        OFFICE OF INFORMATION TECHNOLOGY
                                  FILE LAYOUT

FILE NAME MANAGED CARE REGISTER FILE                      EFFECTIVE DATE 4/2002

DATASET NAME NX20AMCR            RECORD SIZE 297                      BLOCK SIZE

<TABLE>
<CAPTION>
                                                                           COBOL
ELEM            FIELD NAME          CHARS   BYTES     REL TO 1    FMT     PICTURE    DESCRIPTIONS AND REMARKS
--------------------------------------------------------------------------------------------------------------
<S>      <C>                        <C>     <C>       <C>         <C>     <C>        <C>
 30      NX-TR-PR-DISENROLL-RSN       2      2        266-267     AN        X(2)
--------------------------------------------------------------------------------------------------------------
 31      NX-TR-CURR-DISENROLL-RSN     2      2        268-269     AN        X(2)
--------------------------------------------------------------------------------------------------------------
 32      NX-TR-EXT-TYPE-CDE           1      1          270       AN        X(1)
--------------------------------------------------------------------------------------------------------------
 33      NX-TR-CNTY-RESID             2      2        271-272     AN        X(2)
--------------------------------------------------------------------------------------------------------------
 34      NX-TR-PR-SOURCE-CHNG         4      4        273-276     AN        X(4)
--------------------------------------------------------------------------------------------------------------
 35      NX-TR-PR-PAY-CODE            1      1          277       AN        X(1)
--------------------------------------------------------------------------------------------------------------
 36      NX-TR-CUR-PAY-CODE           1      1          278       AN        X(1)
--------------------------------------------------------------------------------------------------------------
 37      NX-TR-RACE                   1      1          279       AN        X(1)
--------------------------------------------------------------------------------------------------------------
 38      FILLER                       7      7        280-286     AN        X(7)
--------------------------------------------------------------------------------------------------------------
 39      NX-TR-PHONE                 10     10        287-296     AN       X(10)
--------------------------------------------------------------------------------------------------------------
 40      NX-TR-LANG-CDE               1      1          297       AN        X(1)
--------------------------------------------------------------------------------------------------------------
</TABLE>

FORMAT   BI = BINARY  PD = PACKED DECIMAL  ED = EXTENDED DECIMAL
         AN = ALPHANUMERIC  NU = NUMERIC

LAST UPDATED: 3/28/03                                                    PAGE: 3

<PAGE>

                              STATE OF NEW JERSEY
                           DEPARTMENT OF THE TREASURY
                        OFFICE OF INFORMATION TECHNOLOGY
                                  FILE LAYOUT

FILE NAME MANAGED CARE REGISTER FILE                       EFFECTIVE DATE 4/2002

DATASET NAME NX20AMCR            RECORD SIZE 297                      BLOCK SIZE

<TABLE>
<CAPTION>
                                                                           COBOL
ELEM         FIELD NAME             CHARS   BYTES     REL TO 1    FMT     PICTURE    DESCRIPTIONS AND REMARKS
--------------------------------------------------------------------------------------------------------------
<S>      <C>                        <C>     <C>       <C>         <C>     <C>        <C>
 1       NX-TR-TRAILER              297     297        GROUP                         REDEFINES NXOTR-MC-RECORD
--------------------------------------------------------------------------------------------------------------
 2       NX-TR-TRAILER-NUM           12      12         1-12       AN      X(12)     VALUE '999999999999'
--------------------------------------------------------------------------------------------------------------
 3       NX-TR-TRAILER- IND           1       1         13         AN       X(1)     VALUE 'Z'
--------------------------------------------------------------------------------------------------------------
 4       NX-TR-TAPE-DATE              8       8        14-21       AN       X(8)     YYYYMMDD FORMAT
--------------------------------------------------------------------------------------------------------------
 5       NX-TR-FREQUENCY-IND          1       1         22         AN       X(1)     VALUE 'W' OR  'M'
--------------------------------------------------------------------------------------------------------------
 6       FILLER                       3       3        23-25       AN       X(3)
--------------------------------------------------------------------------------------------------------------
 7       NX-TR-MC-HMO                 3       3        26-28       AN       X(3)
--------------------------------------------------------------------------------------------------------------
 8       NX-TR-HMO-NAME              19      19        29-47       AN      X(19)
--------------------------------------------------------------------------------------------------------------
 9       FILLER                       9       9        48-56       AN       X(9)
--------------------------------------------------------------------------------------------------------------
 10      NX-TR-TOTAL-COUNT            9       9        57-65       AN       X(9)
--------------------------------------------------------------------------------------------------------------
 11      FILLER                     232     232       66-297       AN     X(232)
--------------------------------------------------------------------------------------------------------------
</TABLE>

FORMAT   BI = BINARY  PD = PACKED DECIMAL  ED = EXTENDED DECIMAL
         AN = ALPHANUMERIC  NU = NUMERIC

LAST UPDATED: 3/28/03                                                    PAGE: 4

<PAGE>

B.3.3    [Reserved] RESERVED

<PAGE>

B.4.0    PROVISION OF HEALTH CARE SERVICES

<PAGE>

B.4.1    BENEFIT PACKAGES

The services delineated on the following pages must be provided by the
contractor.

<PAGE>

             NEW JERSEY CARE 2000+BENEFIT PACKAGE FOR MEDICAID AND
                        NJ FAMILYCARE PLANS A, B, AND C

1.       PRIMARY CARE

         a.       all physician services, primary and specialty. "Physicians'
                  services," whether furnished in the office, the enrollee's
                  home, a hospital, a nursing facility, or elsewhere, means
                  services furnished by a physician (M.D. or D.O.):

                  i.       within the scope of practice of medicine or
                           osteopathy as defined by New Jersey State law or laws
                           of the state in which the service is being provided;
                           and

                  ii.      by and under the personal supervision of an
                           individual licensed under State law to practice
                           medicine or osteopathy.

         b.       in accordance with State certification/licensure requirements,
                  standards, and practices, primary care may also include:

                  i.       certified nurse midwife -- a registered professional
                           nurse who meets the following requirements:

                           -    is currently licensed to practice in New Jersey
                                as a registered professional nurse;

                           -    is legally authorized under New Jersey State law
                                or regulations to practice as a nurse-midwife;

                           -    except as provided in Subsection a.iv., has
                                completed a program of study and clinical
                                experience for nurse-midwives, as specified by
                                the State.

                  ii.      certified nurse practitioner -- a licensed
                           professional nurse who meets New Jersey's advanced
                           educational and clinical practice requirements beyond
                           the two to four years of basic nursing education
                           required of all registered nurses and is certified by
                           the State Board of Nursing.

                  iii.     clinical nurse specialist -- a licensed professional
                           nurse who meets New Jersey's advanced educational and
                           clinical practice requirements beyond the two to four
                           years of basic nursing education required of all
                           registered nurses and meets the specific
                           qualifications for the designated nursing specialty
                           and is certified by the State Board of Nursing; and

                  iv.      physician assistant. A person who holds a current
                           valid license issued by the New Jersey Board of
                           Medical Examiners to practice as a physician
                           assistant in New Jersey pursuant to N.J.A.C.
                           12:35-2B.

         c.       services rendered at independent clinics. "Clinic Services"
                  means preventive, diagnostic, therapeutic, rehabilitative, or
                  palliative services that are furnished by a

<PAGE>

                  facility that is not part of a hospital but is organized and
                  operated to provide medical care to outpatients. The term
                  includes the following services furnished to outpatients:

                  i.       services furnished at the clinic by or under the
                           direction of a physician or dentist;

                  ii.      services furnished outside the clinic, by clinic
                           personnel under the direction of a physician, to an
                           eligible individual who does not reside in a
                           permanent dwelling or does not have a fixed home or
                           mailing address; or

                  iii.     services furnished at the clinic that are
                           nurse-midwife services.

2.       PREVENTIVE HEALTH CARE AND COUNSELING and health promotion including
         referrals to WIC programs

3.       EARLY AND PERIODIC SCREENING, DIAGNOSIS, AND TREATMENT (EPSDT) PROGRAM
         SERVICES means:

         a.       preventive pediatric health care;

         b.       screening and diagnostic services to determine physical or
                  mental defects in beneficiaries under age 21; and

         c.       health care, treatment, and other measures to correct or
                  ameliorate any defects and conditions discovered.

         See Article 4.2 for program requirements. EPSDT program services also
         include non-legend drugs, ventilator services in the home, and private
         duty nursing when indicated as a result of EPSDT screening. "Private
         Duty Nursing" means nursing services for enrollees who require more
         individual and continuous care than is available from a visiting nurse
         or routinely provided by the nursing staff of the hospital. These
         services are provided:

         a.       by a registered nurse or a licensed practical nurse;

         b.       under the direction of the enrollee's physician; and

         c.       to an enrollee in one or more of the following locations:

                  i.       his or her own home; or

                  ii.      a hospital.

4.       EMERGENCY MEDICAL CARE - 24 hours/day, 7 days/week

5.       INPATIENT HOSPITAL SERVICES, including Rehabilitation Hospitals and
         Post-acute Care Facilities. The contractor shall be responsible for
         inpatient hospital costs of enrollees with a dual diagnosis (physical
         plus mental health/substance abuse condition) whose primary diagnosis
         is not mental health or substance abuse related. "Inpatient hospital
         services" means services that:

         a.       are ordinarily furnished in a hospital for the care and
                  treatment of inpatients;

<PAGE>

         b.       except in the case of nurse midwife and podiatric services,
                  are furnished under the direction of a physician;

         c.       are furnished in an institution that:

                  i.       is maintained primarily for the care and treatment of
                           patients with disorders other than mental diseases;

                  ii.      is licensed or formally approved as a hospital by an
                           officially designated authority in the State in which
                           the hospital is located;

                  iii.     except in the case of medical supervision of
                           nurse-midwife services, meets the requirements for
                           participation in Medicare as a hospital; and

                  iv.      has in effect a utilization review plan, applicable
                           to all Medicaid patients.

         A rehabilitation hospital facility licensed by New Jersey to provide
         medical rehabilitation services means a facility that:

         a.       provides therapy services for the primary purpose of assisting
                  in the habilitation/rehabilitation of disabled individuals
                  through an integrated program of:

                  i.       medical evaluation and services; and

                  ii.      psychological, social or vocational evaluation and
                           services; and

         b.       is operated under competent medical supervision.

6.       OUTPATIENT HOSPITAL SERVICES is defined as preventive, diagnostic,
         therapeutic, or palliative services that:

         a.       are furnished to outpatients;

         b.       except in the case of nurse-midwife services, are furnished by
                  or under the direction of a physician or dentist;

         c.       are furnished by an institution that:

                  i.       is licensed or formally approved as a hospital by an
                           officially designated authority for State
                           standard-setting; and

                  ii.      except in the case of medical supervision of
                           nurse-midwife services, meets the requirements for
                           participation in Medicare as a hospital.

7.       LABORATORY SERVICES means professional and technical laboratory
         services:

         a.       ordered and provided by or under the direction of a physician
                  or other licensed practitioner of the healing arts within the
                  scope of his or her practice as defined by State law or
                  ordered by a physician but provided by an independent
                  laboratory;

         b.       provided in an office or similar facility other than a
                  hospital outpatient department or clinic; and

         c.       furnished by a laboratory that meets the requirements of CLIA
                  and the requirements for participation in Medicare.

<PAGE>

         All laboratory testing sites providing services under this contract
         have either a Clinical Laboratory Improvement Act (CLIA) certificate of
         waiver or a certificate of registration along with a CLIA
         identification number. Those providers with certificates of waiver will
         provide only the types of tests permitted under the terms of their
         waiver. Laboratories with certificates of registration may perform a
         full range of laboratory services.

8.       RADIOLOGY SERVICES - diagnostic and therapeutic means professional and
         technical radiological services

9.       PRESCRIPTION DRUGS

         -        legend drugs

         -        non-legend drugs covered by the Medicaid program

         "Prescription drugs" means simple or compound substances or mixtures of
         substances prescribed for the cure, mitigation, or prevention of
         disease, or for health maintenance, that are:

         a.       prescribed by a physician or other licensed practitioner of
                  the healing arts within the scope of his or her professional
                  practice as defined and limited by federal and State law;

         b.       dispensed by licensed pharmacists and licensed authorized
                  practitioners in accordance with the State Medical Practice
                  Act; and

         c.       dispensed by the licensed pharmacist or practitioner on a
                  written prescription that is recorded and maintained in the
                  pharmacist's or practitioner's records.

10.      FAMILY PLANNING SERVICES means those services necessary for the delay
         or prevention of pregnancy, pregnancy testing and counseling and
         follow-up care for complications associated with contraceptive methods
         issued by the family planning provider. Also includes, but is not
         limited to sterilizations, defined as any medical procedures,
         treatments, or operations for the purpose of rendering an individual
         permanently incapable of reproducing.

         Elective induced abortions (and related services) and infertility
         treatment services are excluded;

11.      AUDIOLOGY SERVICES, including diagnostic, screening, preventive,
         corrective services, and any necessary supplies and equipment, provided
         by an audiologist, for which a patient is referred by a physician or
         other licensed practitioner of the healing arts within his or her
         practice under State law.

12.      PODIATRIST SERVICES: excludes routine hygienic care of the feet,
         including the treatment of corns and calluses, the trimming of nails,
         and other hygienic care such as cleaning or soaking feet, in the
         absence of a pathological condition.

<PAGE>

13.      CHIROPRACTOR SERVICES includes only services that:

         a.       are provided by a chiropractor who is licensed in New Jersey
                  or in the state in which he/she practices; and

         b.       consists of treatment by means of manual manipulation of the
                  spine that the chiropractor is legally authorized by the State
                  Medicaid program to perform and meets standards issued under
                  42 CFR 405.232(b).

14.      OPTOMETRIST SERVICES -- an optometrist is an individual who is licensed
         by the New Jersey State Board of Optometry to engage in the practice of
         optometry, or licensed to engage in the practice of optometry in the
         state in which he/she performs such functions.

15.      OPTICAL APPLIANCES - Artificial eyes, lenses, frames, and other aids to
         vision prescribed by a physician skilled in diseases of the eye or an
         optometrist.

16.      HEARING AID SERVICES - The provision of hearing aids, hearing aid
         accessories, ear mold impressions, routine follow-ups and adjustments,
         and repairs after warranty expiration.

17.      HOME HEALTH AGENCY SERVICES means services that are provided to an
         enrollee:

         a.       at his or her place of residence, excluding a hospital,
                  nursing facility, or intermediate care facility; and

         b.       on his or her physician's orders as part of a written plan of
                  care that the physician reviews every 60 days.

         Services include: nursing services by a registered nurse and/or
         licensed practical nurse; home health aide service; medical supplies
         and equipment, and appliances suitable for use in the home; and
         audiology services.

         Home Health Agency Services must be provided by a home health agency
         that is licensed through the Department of Health and Senior Services
         as a home health agency and meets Medicare participation requirements.

18.      HOSPICE AGENCY SERVICES: Provided by an agency that meets Medicare
         certification requirements.

19.      DURABLE MEDICAL EQUIPMENT (DME)/Assistive Technology Devices in
         accordance with existing Medicaid regulations.

20.      MEDICAL SUPPLIES

21.      PROSTHETICS AND ORTHOTICS (delivered by licensed and/or ABC accredited
         providers) including certified shoe provider services. "Prosthetic
         devices" means replacement, corrective, or supportive devices
         prescribed by a physician or other licensed practitioner of the healing
         arts within the scope of his or her practice as defined by State law
         to:

<PAGE>

         a.       artificially replace a missing portion of the body;

         b.       prevent or correct physical deformity or malfunction; or

         c.       support a weak or deformed portion of the body.

         "Orthotic appliances" means a device or brace prescribed by a physician
         or other licensed practitioner within the scope of his/her practice as
         defined by State law for the purpose of providing support, increased
         function, and overcoming physical impairment or defects.

         a.       a brace includes rigid and semi-rigid devices used for the
                  purpose of supporting a weak or deformed body member or
                  restricting or eliminating motion in a diseased or injured
                  part of the body.

22.      DENTAL SERVICES:

         These include preventive, diagnostic, major and minor restorative,
         endodontic, surgical, and adjunctive services, orthodontia, and
         periodontia, and prosthodontia, provided by or under the supervision of
         a dentist in the practice of his or her profession, including treatment
         of:

         a.       the teeth and associated structures of the oral cavity; and

         b.       disease, injury, or impairment that may affect the oral or
                  general health of the enrollee.

         Medical and surgical services of a dentist provided by a doctor of
         dental medicine or dental surgery are services that:

         a.       if furnished by a physician, would be considered physician's
                  services;

         b.       may be furnished either by a physician or by a doctor of
                  dental medicine or dental surgery; and

         c.       are furnished by a doctor of dental medicine or dental surgery
                  who is authorized to furnish those services in New Jersey or
                  in the state where he/she practices.

23.      ORGAN TRANSPLANTS--medically necessary organ transplants including,
         liver, lung, heart, heart-lung, pancreas, kidney, cornea, intestine,
         and bone marrow including autologous bone marrow transplants.

24.      TRANSPORTATION SERVICES including ambulance, medical intensive care
         units (MICUs), and invalid coach (including lift equipped vehicles) for
         any in-plan service or out-of-plan service. Transportation includes
         expenses for transportation and other related travel expenses
         determined to be necessary by DMAHS to secure medical examinations and
         treatment for an enrollee. Lower mode/livery transportation will be the
         financial responsibility of the contractor if the contractor refers a
         patient to an out of county or out of State provider when the services
         could have been rendered in-county/in-State within the contractor's
         network.

<PAGE>

         Note: for SSI individuals requiring transportation by invalid coach who
         choose to see a provider outside of their county of residence, the
         contractor will not be responsible for furnishing transportation in
         such situations.

25.      POST-ACUTE CARE - rendered at acute care hospital or nursing facility
         for 30 days or less for inpatient rehabilitation services. Must be a
         Medicaid participating provider.

26.      MH/SA SERVICES - Mental health services include but are not limited to
         comprehensive intake evaluation; off-site crisis intervention; family
         therapy; family conference; psychological testing; and medication
         management. See Medicaid provider manuals for detailed service list.

<PAGE>

B.4.2   HEALTHSTART GUIDELINES

<PAGE>

                                   HEALTHSTART

                     COMPREHENSIVE MATERNITY CARE SERVICES

                               PROGRAM GUIDELINES

NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES
NEW JERSEY DEPARTMENT OF HUMAN SERVICES                            JANUARY, 1996

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                              Page
<S>                                                           <C>
INTRODUCTION                                                    1

HEALTHSTART COMPREHENSIVE MATERNITY CARE SERVICES               3

    Overview                                                    4
    Organization Structure                                      6

HEALTHSTART OBSTETRICAL SERVICES                                8

    Introduction                                                8

    Acknowledgment                                              8

    Frequency of Prenatal Visits                                8

    Initial Prenatal Visit                                      8
       History                                                  8
       Comprehensive Physical Examination                       9
       Risk Assessment                                          9
       Risk Management                                          9
       Routine Laboratory Tests                                10
       Procedures                                              10
       Screening Tests                                         10

    Subsequent Prenatal Visits                                 10
       Review of Plan                                          11
       Interim History                                         11
       Physical Examination                                    11
       Laboratory Tests                                        11

    Delivery Services                                          11

    Postpartum Visit                                           11
       History                                                 11
       Physical Examination                                    11
       Laboratory Tests                                        11
       Parent/Infant Assessment                                11
       Referral/Consultation                                   11
</TABLE>

<PAGE>

<TABLE>
<S>                                                            <C>
HEALTHSTART HEALTH SUPPORT SERVICES                            12

    Introduction                                               13

    Criteria                                                   15
       Case Coordination Services                              15
       Plan of Care                                            15
       Health Education Services                               15
       Childbirth Education                                    15
       Nutrition Services                                      15
       Social/Psychological Services                           15
       Home Visit Services                                     15
       Outreach Services                                       15
       Evaluation, Monitoring and Quality Assurance            15
       Maternity Services Summary Data Form (MSSD)             16

    Staffing (Required minimum qualifications)                 16
       Case Coordination                                       16
       Health Education                                        16
       Nutrition Services                                      16
       Social/Psychological Services                           16
       Home Visit Services                                     16
       Outreach Services                                       16
       Evaluation, Monitoring and Quality Assurance            16

    Follow-up (Prenatal, Postpartum)                           17

    Referrals (Prenatal, Postpartum)                           17

    Plan of Care                                               17

HEALTH SUPPORT PRENATAL ACTIVITIES AND ASSESSMENTS             18

    Case Coordination                                          18

    Health Education                                           19

    Nutrition                                                  19
       Basic-Initial/Subsequent                                20
       Guidance                                                20
       Specialized                                             20
       Extensive                                               20
    Social/Psychological                                       20
    Basic-Initial/Subsequent                                   20
    Guidance                                                   21
    Specialized                                                21
</TABLE>

<PAGE>

<TABLE>
<S>                                                            <C>
    Extensive                                                  21
    Home Visits                                                22
       High Risk Care                                          22
       Preventive Health Care                                  23
       Skilled Nursing Care                                    23

COMMUNITY OUTREACH                                             23

HEALTH SUPPORT POSTPARTUM ACTIVITIES                           24

    Case Coordination                                          24
    Health Education                                           25
    Nutrition                                                  25
    Social/Psychological                                       25
    Home Visit                                                 26

HEALTHSTART EVALVAUTION MONITORING AND QUALITY ASSURANCE       27

    Overview                                                   27

    Evaluation Activities                                      28
       Collection                                              28
       Monitoring Activities                                   30
           Site/Visit                                          30
           Self Audit                                          31
           Technical Assistance                                31
           Certification                                       31

    Outcome Evaluation Activities                              32

    APPENDIX

    Appendix Listing
</TABLE>

<PAGE>

INTRODUCTION

In 1985. Governor Kean directed his Office of Policy and Planning to develop a
series of initiatives capable of addressing New Jersey's most pressing health
problems. Consistent with this directive, a new health care program for
low-income women and children was conceptualized and presented in the Governor's
1986 State of the State message. Enabling state legislation for the new services
program. HealthStart. was signed into law on May 4, 1987 and first implemented
in February 1988, The goal of HealthStart is to reduce the incidence of - low
birthweight and infant mortality and to improve child health status by offering
unique comprehensive packages of maternal and child health services for pregnant
women and children throughout New Jersey who are eligible for Medicaid.

HealthStart is a Medicaid program. However, as specified in the legislation, the
planning and implementation of HealthStart is a joint effort of the Department
of Health and Senior Services and the Department of Human Services. The
Department of Health and Senior Services is delegated responsibility for
development and updating of program standards and guidelines, issuance of
provider certificates, and evaluation and quality assurance.

Two expanded, enriched Medicaid service programs are offered through
HealthStart: comprehensive maternity care and preventive pediatric care.

Only the Comprehensive Maternity Care, a cohesive package of services, will be
described, herein, the features are:

         -        presumptive eligibility by those providers who are eligible
                  and approved;

         -        initial, subsequent, and postpartum comprehensive assessment;

         -        development and maintenance of a Plan of Care for each
                  patient;

         -        medical care services including 15 prenatal and 1 postpartum
                  ambulatory care visits recommended by the American College of
                  Obstetricians and Gynecologists (ACOG) and the American
                  College of Nurse Midwives (ACNM) standards, medical delivery
                  and postpartum in-patient services, and admission arrangements
                  for delivery;

         -        case coordination services including identifying a case
                  coordinator for each patient and vigorous follow-up, support
                  and advocacy;

         -        nutrition assessment, basic guidance, and counseling;

         -        social/psychological assessment, basic guidance, and
                  counseling;

         -        health education assessment and instruction;

         -        home visits (as needed), for preventive health care and high
                  risk;

         -        24 hour access to emergency medical and case coordination
                  services; and

<PAGE>

         -        linkage with pediatric care, WIC for mother and baby, future
                  family planning and other needed services.

HealthStart is the result of the cumulative efforts of many diverse groups and
individuals who participated in the planning and development process. The
HealthStart regulations and guidelines are the product of the work of staff from
the HealthStart Project, Department of Human Services, Department of Health and
Senior Services, and health care professionals throughout New Jersey and in
other states. Special appreciation is due to the New Jersey health care
professionals who participated on the Services and Providers Technical Advisory
Panel and its sub-groups. Another special note of thanks is due to the
out-of-state experts who provided valuable ideas, commentary and service
manuals. The guidelines are designed to assist providers with implementation of
the regulations, and should be read and utilized in conjunction with the
regulations.

During 1994 and 1995, a subcommittee of the Department of Health and Senior
Services Parental and Child Health Advisory Committee was convened to review the
"HealthStart Guidelines 1989." The subcommittee was comprised of a cross section
of HealthStart provider's professional staff, and HealthStart Program staff from
the Department of Health and Senior Services and Department of Human Services.
Revisions recommended by the subcommittee have been incorporated into this
document.

<PAGE>

               HEALTHSTART COMPREHENSIVE MATERNITY CARE SERVICES

<PAGE>

HEALTHSTART COMPREHENSIVE MATERNITY CARE SERVICES

OVERVIEW

The primary objective of HealthStart comprehensive maternity care services is to
provide Women in New Jersey with comprehensive package of care which addresses
all areas of their lives likely to affect their pregnancy outcomes and the
health of their infants. In order to assure that the HealthStart program meets
this objective, regulations and guidelines have been developed which emphasize
that services be structured and function as a single package.

The services are a "package" in the sense that ONE primary provider, (individual
or organizational entity) is responsible for coordinating all of the services
and ensuring that they are delivered in the appropriate fashion. When the
maternity care package is offered by two or more providers, they will designate
one of them as having primary responsibility.

The services are also a "package" in the sense that mechanisms for coordination
among them and continuity over time are built into the program requirements and
guidelines. These mechanisms include case coordination; comprehensive initial,
periodic, and postpartum assessment; development and implementation of a written
Plan of Care; and an initial orientation for all patients concerning the process
and content of prenatal care and their rights and responsibilities. Case
coordination refers to activities designed to provide the client with care that
is continuous, well-integrated, and tailored to her individual needs, and
includes active follow-up activities designed to insure that the plan of care is
being followed and revised as needed.

The service package contains two major components: medical and health support
services. The medical component includes obstetrical prenatal, intrapartum and
postpartum care services. Health support services include: case coordination,
health education, nutrition and social/psychological services and home visits.

Certain principles have guided development of the program regulations and
guidelines. Stating these principles will assist the provider to implement the
spirit as well as the requirements of the maternity care package.

    1.  The primary provider carries the RESPONSIBILITY for insuring that
        services are available, accessible, and that the client understands the
        need for and is supported to receive early and continuous maternity
        care. In keeping with the principle, the provider is responsible for
        minimizing all potential barriers to services such as, but not limited
        to, waiting time, financial, language barriers, physical distance,
        and/or fragmentation, etc.

    2.  The services are to be delivered in a manner which encourages the client
        to take a more ACTIVE ROLE in her own health care. All efforts to inform
        the client about the content and process of maternity care, related
        health matters, and her rights and responsibilities serve this
        objective, as do any efforts to help her improve her planning,
        communication, and problem solving skills. Vigorous outreach and
        follow-up provides crucial social support necessary for behavior change
        towards a more active role as an informed health care consumer.

<PAGE>

    3.  The services are to be COMPREHENSIVE so that any aspect of the woman's
        life that is likely to Impact on birth outcomes and infant health status
        is assessed and appropriate services provided or obtained.

    4.  The services need to be well COORDINATED and CONTINUOUS.

    5.  Services are to be delivered in a manner recognizing and supporting the
        INDIVIDUAL CHARACTERISTICS of the client, such as age and cultural
        background. Implementation of this principle includes but is not limited
        to assessment of the client's characteristics, lowering of language
        barriers, and adapting health education, nutrition and
        social/psychological services, whenever possible, to fit the client's
        particular values, abilities, and family social structures.

The guidelines for the maternity care service package include these sections:
Obstetrical Care, Case Coordination Services, Health Education Services,
Nutrition Services, Social/Psychological Services, Plan of Care, Home Visits,
Outreach and Evaluation.

The comprehensive assessment of the maternity patient includes all service areas
and has features common to all areas. In each service area, an outline of
topics/information to be collected is provided for each phase of the assessment.

All information to be collected in each service area is to be recorded in the
patient's record using the same tool for all patients. The record should be
legible and include information necessary to fully disclose the kind and extent
of service provided, signed with the provider credentials and dated. It is the
provider's responsibility to decide on an assessment tool(s),

THE MAIN PURPOSE OF THE ASSESSMENT IS TO IDENTIFY THE PATIENT'S LEVEL OF RISK
FOR A POOR BIRTH OUTCOME SO THAT APPROPRIATE PROACTIVE MANAGEMENT CAN BE
INITIATED.

Risk criteria are included in the obstetrical, social/psychological,
nutritional, and health education assessments, most criteria being found in the
obstetrical assessment.

THE PATIENT'S OVERALL LEVEL OF RISK MUST BE ASSESSED BASED ON ALL RISK FACTORS
IDENTIFIED AND THE PLAN OF CARE WRITTEN AND IMPLEMENTED ACCORDINGLY.

Below is a summary of the service package, including which basic services must
be provided for all patients as opposed to which specialized services must be
provided only to patients who need them.

Basic Services:
       Medical:            Initial prenatal, 14 subsequent prenatal and 1
                           postpartum visit (including level of risk assessment)
    Case Coordination:     All services for all patients;
    Health Education:      Assessment, including level of risk, (initial,
                           subsequent and postpartum) and basic instructions;

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    Nutrition:             Assessment, including level of risk, (initial,
                           subsequent, and postpartum) and basic guidance;
    Social/Psychological:  Assessment, including level of risk, (initial,
                           subsequent, and postpartum) and basic guidance;

    Plan of Care:          Initiated during first visit and maintained (ongoing)
                           for each patient.

Specialized Services:
    Medical:               Additional visits that are medically indicated.
    Health Education:      Instruction guidance-decision making,
    Nutrition:             Specialized assessment and counseling as needed,
    Social Psychological:  Specialized assessment and counseling as needed.
    Home Visit:            If indicated, at least one prenatal and one
                           postpartum, to patients identified as high risk,
                           needing skilled nursing care or preventive health
                           care,

ORGANIZATIONAL STRUCTURE

The organizational requirements permit many models for structuring HealthStart
services (see Appendix for figures).

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                        HEALTHSTART OBSTETRICAL SERVICES

<PAGE>

                        HEALTHSTART OBSTETRICAL SERVICES

INTRODUCTION

The program guidelines for maternity obstetrical services Include the following
sections: Frequency of Prenatal Visits, Initial Prenatal Visit, routine
laboratory tests, Subsequent Prenatal Visits, Special Screening tests, Delivery
Services, and Postpartum Visits.

Obstetrical services shall be provided and coordinated by a physician and/or a
certified nurse midwife and/or, when physician collaboration exists, a certified
nurse practitioner/clinical nurse specialist (CNP/CNS). All services are to be
recorded in the patient chart.

ACKNOWLEDGMENT

Initial and ongoing assessment of the patient status and attention to risk
factors are the key components of the antepartum care.

These program guidelines are based on medical services recommended by the
American College of Obstetricians and Gynecologists (ACOG) and the American
College of Nurse Midwives (ACNM) standards, and are printed with the permission
of the respective College.

FREQUENCY OF PRENATAL VISITS:

The frequency of prenatal visits should be determined by a woman's individual
needs and risk factors. Generally, for an uncomplicated pregnancy the frequency
should be every four weeks during the first twenty-eight weeks; then every two
to three weeks until thirty-six weeks of gestation; and weekly thereafter; or in
accordance with standards recommended by the American College of Obstetrics and
Gynecologists (ACOG) and/or the American College of Nurse Midwives (ACNM).
Additional prenatal visits for medical and/or obstetrical complications should
be scheduled as needed.

During the Initial Prenatal Visit an obstetrical data base should be established
for the patient that includes a comprehensive health history, information on the
current pregnancy, a family and social history, the findings of a physical
examination, the results of laboratory procedures, and RISK ASSESSMENT. The
content shall include:

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HISTORY - FAMILY: major medical problems, diseases, genetic disorders, multiple
births; PERSONAL: medical, surgical, diseases, hospitalizations, surgery,
chronic illnesses, allergies, transfusions, hepatitis B;
REPRODUCTIVE/GYNECOLOGICAL: disorders, menstrual history, listing of all
pregnancies and their outcomes/complications, DES exposure, contraceptive and
sexual history, confirmation of present pregnancy and gestational status;
SUBSTANCE USE: alcohol, tobacco, drugs, medications (OTC, prescription);
BEHAVIORAL/ENVIRONMENTAL: occupation, employment history, exposure to chemicals,
physical activity; NUTRITIONAL: review of nutrition assessment, pre-pregnant
weight, change in diet, eating of non-food items, supplements, deficiencies;
SOCIAL/PSYCHOLOGICAL: review of social/psychological assessment, history of
mental disorder, environment, family, support person, presence of support from
significant other, emotional state concerning pregnancy.

COMPREHENSIVE PHYSICAL EXAMINATION - weight, blood pressure and other vital
signs: head and neck: chest-lungs. Heart, breasts, nipples: abdomen - fundal
height, fetal presentation, fetal heart location and rate after 1st trimester,
extremities - edema, peripheral circulation, skeletal abnormality: pelvic
examination - cervix, pelvic configuration and capacity, uterine size and shape,
rectum.

RISK ASSESSMENT - ASSESSMENT OF RISK FACTORS SHOULD BE COMPLETED ON INITIAL
VISIT AND SUBSEQUENT VISITS, THROUGHOUT THE PREGNANCY. BASED ON THE FINDINGS OF
THE HISTORY AND PHYSICAL EXAMINATION A RISK ASSESSMENT TOOL (SEE APPENDIX FOR
SAMPLE TOOL) SHOULD BE UTILIZED FOR INDICATING ANY RISK FACTORS AND TO IDENTIFY
PATIENTS "AT RISK" OF POOR-PREGNANCY OUTCOMES THAT MAY REQUIRE SPECIAL
MANAGEMENT. MEDICAL "AT RISK" SHOULD BE DETERMINED BY THE OBSTETRICAL CARE
PROVIDER BASED UPON RECOGNIZED PROFESSIONAL STANDARDS OF CARE AND SOUND CLINICAL
JUDGEMENT.

These factors must include but are not limited to:

         Obstetrical History: Age under 18 or over 34: two (2) or more
         spontaneous or induced abortions; fetal/neonatal/post neonatal
         death(s); SIDS death(s); previous preterm labor or premature births;
         previous SGA or low birth weight infant: previous birth nine (9) pounds
         or more; previous gestation of 42 weeks or more; previous personal or
         family history of multiple births; previous obstetrical complications
         (antepartum hemorrhage, pregnancy induced hypertension, cesarean birth,
         PROM, thromboembolic, incompetent cervix); previous operations on the
         uterus or cervix (other than routine D&C); pelvic, uterine or cervical
         abnormality affecting positive pregnancy/delivery outcomes; previous
         infant with major congenital or chromosomal anomaly; previous
         isoimmunization; previous infertility.

         Medical History: Pre-existing conditions such as: diabetes; renal or
         lung disease: heart disease; hypertension; metabolic disorder; seizure
         or other neurologic disorder: autoimmune condition; hemoglobinopathy;
         neoplastic disease; personal or sexual partners history of sexually
         transmitted disease(s) or multiple sexual partners; history of other
         non-GYN surgery; history of potential hereditary disorder.

<PAGE>

         Current Pregnancy Status: Interpregnancy interval less than (1) year:
         inadequate prenatal care: multiple pregnancy: maternal use of
         prescription drugs early in pregnancy: maternal use of drugs, alcohol,
         tobacco; maternal exposure to radiation, organic solvents, heavy
         metals: gestational diabetes; pregnancy induced hypertension/eclampsia;
         sexually transmitted disease(s); poor or excessive weight gain:
         hyperemesis: abnormal uterine bleeding; spontaneous premature rupture
         of membranes: oligo or poly hydramnios: decreased uterine size: anemia:
         potential for Rh or ABO incompatibility: rubella negative titer.

RISK MANAGEMENT - IDENTIFICATION OF HIGH RISK FACTORS MAY REQUIRE SPECIAL
MANAGEMENT. THE OBSTETRICAL CARE PROVIDER SHALL DETERMINE THE APPROPRIATE
MANAGEMENT OF CARE INCLUDING SPECIALIZED CONSULTATION AND/OR TRANSFERRING THE
PATIENT'S CARE TO ANOTHER FACILITY AND/OR PROVIDER. THIS SHALL BE DOCUMENTED IN
THE PATIENT'S RECORD. THE OBSTETRICAL CARE PROVIDER SHALL INFORM THE
PEDIATRICIAN OF IDENTIFIED RISK FACTORS THAT MAY HAVE SIGNIFICANT IMPACT ON THE
FETUS.

ROUTINE LABORATORY TESTS -

NOTE: Human Immunodeficiency Virus (HIV) information, counsel and testing shall
be offered to ALL pregnant women on a routine basis (Public Laws of 1995,
Chapter 174, July 7, 1995). A Department of Health and Senior Services "inform
consent" form (see appendix) must be completed for each patient and retained as
a permanent part of patient's medical record. Also: FYI - Many recent studies
have found bacterial vaginosis (a condition resulting from a major shift from
the normal lactobacilli of the vagina, to a high concentration of mixed
bacteria) to be a risk factor for increased infant mortality. Bacterial
vaginosis has long been considered as a nuisance problem and has been associated
with preterm delivery of low birth weight infants independently of other risk
factors.

         Complete urinalysis, cultures, sensitivity, as indicated;
         Complete blood count;
         Rh factor, blood typing (Rh negative patients require additional
         screening);
         Antibody screening for irregular antibodies;
         Serological test for syphilis;
         Culture for gonorrhea;
         Papanicolaou smear;
         Hepatitis (HBs Ag);
         Rubella antibody screen, as indicated;
         Tuberculin test for high-risk populations (i.e., close contact with a
         diagnosed case or from Department of Health designated high-risk
         areas).

PROCEDURES - (at initial or subsequent visits as indicated)

Ultrasonography;
Amniocentesis;
Appropriate genetic counseling and testing;
Non-stress test/Contraction stress test;
X-ray pelvimetry;
Other procedures as medically indicated.

<PAGE>

SCREENING TESTS - As medically indicated:

       Hepatitis B surface antigen (at 28 weeks);
       Toxoplasmosis titer;
       Herpes culture;
       Chlamydia culture;
       Group B Beta hemolytic - Strep culture;
       Cytomegalovirus test;
       HIV ANTIBODY SCREENING (AS RECOMMENDED BY THE DEPARTMENT OF HEALTH AND
       SENIOR SERVICES), WITH PRE-COUNSELING AND POST-COUNSELING AND A
       DEPARTMENT OF HEALTH AND SENIOR SERVICES "INFORMED CONSENT" FORM. (SEE
       APPENDIX);
       Maternal serum alpha fetaprotein (at 16-18 weeks);
       Culture for gonorrhea (at 36 weeks);
       Sickle cell (Hemoglobin electrophoresis or equivalent).

Subsequent Prenatal Visits

NOTE: Chorionic villi testing and/or amniocentesis shall be offered to all women
thirty-five (35) years of age or over. These tests shall be provided or arranged
for as indicated by risk and maternal consent.

       REVIEW OF PLAN - support/provide maternal education on feeding of
       newborns with counseling and support for breast feeding; instruction on
       breast self examination; discussion of postpartum future family planning;
       status of referrals; instruction on admission for delivery; ARRANGEMENT
       FOR DELIVERY AT APPROPRIATE FACILITY (32-36 WEEKS NO LATER THAN 36
       WEEKS); introduction to labor and delivery unit; TRANSFER OF MEDICAL
       RECORD (32-36 WEEKS).

       INTERIM HISTORY - Signs/symptoms - bleeding, edema, headaches, dizziness,
       poor diet, activity/exertion/rest, signs of preterm labor;
       progress/changes -fetal movement; concerns/questions.

       PHYSICAL EXAMINATION Vital signs; weight gain/loss; varicosities/edema:
       FETAL PRESENTATION -TAPE MEASUREMENT OF FUNDAL HEIGHT, FETAL HEART RATE;
       pelvic examination (at 36 weeks or as indicated).

       LABORATORY TESTS - Urinalysis for glucose, acetone and/or nitrates,
       albumin (at each visit); Blood glucose (at 24-28 weeks);
       Hemoglobin/Hematocrit (at 28 weeks); Serological test for syphilis (at
       28-36 weeks); Rh titer (at 28-32 weeks, if indicated) (Note: Rhogam at 28
       weeks, if indicated]; Additional testing as medically indicated.

Delivery Services

Obstetrical delivery and patient treatment during postpartum stay provided
directly or by previous arrangement.

Postpartum Visit

The postpartum visit shall be provided within four-six (4-6) weeks after
delivery (or sooner if indicated).

<PAGE>

HISTORY - Review of prenatal, labor, and delivery record: bleeding, discharge,
bowel movements, urination, incision, breast infant feeding, activity test,
diet, headaches, dizziness.

PHYSICAL EXAMINATION - weight, blood pressure and other vital signs: breast
nipples; inspection and/or palpation as indicated; abdominal including incision;
pelvic: vaginal muscle tone, signs/symptoms of infection, uterine size and
tenderness, cervix, lochia. Perineum/epistotomy; lower extremities; edema,
varicosities: further examination as medically indicated.

LABORATORY TESTS - Hemoglobin/Hematocrit; Papanicolaou smear (if more than 9
months since the last test); other tests as medically indicated, based on
prenatal, labor, delivery and postpartum course.

PARENT/INFANT ASSESSMENT - Review social/psychological, health education, home
visit(s) reports; status of infant feeding with encouragement/support for breast
feeding; linkage with pediatric care: patient counseling and treatment -future
family planning (prescription for contraceptive device as indicated), sexual
activity, return to work, limitation(s) on activity.

REFERRAL/CONSULTATION - As indicated.

<PAGE>

                      HEALTHSTART HEALTH SUPPORT SERVICES

<PAGE>

HEALTHSTART HEALTH SUPPORT SERVICES

INTRODUCTION

Health Support services include:

         -        Case Coordination Services - a mechanism for providing the
                  patient with continuous, coordinated, and well integrated
                  comprehensive services to meet the individual's needs
                  throughout the prenatal and postpartum period.

         -        Health Education Services - a mechanism for providing
                  education instructions according to the content of a standard
                  "Curriculum Guide" basic to pregnancy, birth and infant care
                  and for providing basic guidance for making and implementing
                  decisions which are likely to affect birth outcomes and infant
                  health, growth and development.

         -        Childbirth Education - a mechanism for providing a course
                  which includes content in accordance with the standards of a
                  national organization devoted to childbirth education.

         -        Nutrition Services - a mechanism for providing nutrition
                  services at two levels. These levels: BASIC (assessment,
                  guidance, referral) and when needed, SPECIALIZED (assessment,
                  counseling and referral are provided for review and
                  reinforcement of nutrition and dietary needs and to identify
                  nutritional risk factors.

         -        Social/Psychological Services - a mechanism for providing
                  social/psychological services at two levels. These levels:
                  BASIC (assessment, guidance and referral) and when needed,
                  SPECIALIZED (assessment, counseling and referral) are provided
                  to identify those patients in need of additional services that
                  are most likely to be related to poor outcomes.

         -        Home Visit Services - a mechanism for assessing, supporting,
                  and advocating for receipt of preventive health care, high
                  risk care and skilled nursing care services (based on clinical
                  judgement of appropriate clinicians or staff) which can best
                  be delivered in the home setting.

         -        Outreach Services - a mechanism for providing services aimed
                  at individuals as well as those aimed at reducing system wide
                  barriers that affect the enrollment process to facilitate
                  early entry into maternity services and to encourage
                  continuity of care.

         -        Comprehensive Assessment - a mechanism for including all
                  service areas with features common to all areas. In each
                  service area an outline of topics/information to be collected
                  is provided. The Purpose of the assessment is to identify the
                  patient's level of risk for a poor birth outcome so that
                  appropriate proactive management can be initiated. Risk
                  criteria are included in the obstetrical,
                  social/psychological, nutritional, and health education,
                  assessments, with most criteria being found in the obstetrical
                  assessment. The patient's overall level of risk MUST be
                  assessed based on ALL risk factors identified and the Plan of
                  Care written and implemented accordingly.

<PAGE>

         -        Plan of Care - document with integrated sections (medical,
                  nutrition, social/psychological and health education) to
                  record identified level of risk(s) for a poor birth outcome so
                  that appropriate proactive management can be initiated by the
                  appropriate provider.

         -        Evaluation, Monitoring, and Quality Assurance - a mechanism
                  for three inter-related activities (that will be initiated at
                  the beginning of the program and continued on an ongoing
                  basis) to assess the degree and success of program
                  implementation, operation, conformance with established
                  standards, and impact throughout the State.

         -        Maternity Services Summary Data Form (MSSD) - an instrument
                  (form, see Appendix) that has been created specifically for
                  the program to capture information (collect data) on
                  HealthStart services.

         -        Documentation - a mechanism for writing, signing,
                  credentialing and dating care provided to the patient. Shall
                  be legible, adequate and sufficient as are necessary to fully
                  disclose the kind and extent of services provided (see
                  reimbursement rates in appendix).

All information collected is to be recorded (documented) in the patient's record
using the SAME tool for all patients. It is the provider's responsibility to
decide on a record and assessment tool(s).

<PAGE>

This section of the program guidelines for Health Support Services, include the
following: Criteria; Staffing; Follow-up; Referrals; Plan or Care; Health
Support Prenatal Activities with Assessments; Initial, Subsequent, Specialized,
Basic Guidance and Counseling; Home Visits; Outreach; Health Support Postpartum
Activities; Evaluation, Monitoring, and Quality Assurance.

CRITERIA

Case Coordination Services - A case coordinator is to be assigned to each
patient at the first/registration/enrollment visit and case coordination
services shall be provided throughout care. PARAPROFESSIONAL HEALTH WORKERS
(licensed practical nurse, LPN etc.) can effectively assist with case
coordination services under the supervision of the case coordinator.

Plan of Care - A document (see appendix) with integrated sections (medical,
nutrition, social/psychological, and health education) shall be developed no
later than one (1) month after the first enrollment visit and reviewed/updated
throughout care.

Health Education Services - Health education assessment and instruction shall be
provided to ALL patients (according to contents of a standard "Curriculum Guide"
(see appendix). Basic guidance for making and implementing decisions basic to
pregnancy, birth, and infant care shall be provided on an individual basis.

Childbirth Education - A childbirth education course shall be provided or
arranged for ALL patients. Patients who have received this education during a
previous pregnancy may be offered a "refresher" course.

Nutrition Services - BASIC nutrition services (assessment, guidance and
referral) shall be provided for ALL patients. SPECIALIZED nutrition services
(assessment, counseling and referral) shall be provided to those identified as
in need of additional services.

Social/Psychological Services - BASIC social/psychological services (assessment
guidance and referral) shall be provided for ALL patients. SPECIALIZED
social/psychological services (assessment, counseling and referral) shall be
provided to those patients identified as in need of additional services.

Home Visit Services - All patients must be assessed to determine the need for a
home visit. If it is determined that the visit would be effective and meet
agency's criteria for "preventive health care" and "high risk" a prenatal and/or
a postpartum home visit (at least one) should be provided. All visits are
subject to the clinical judgement of the case coordinator in conjunction with
the medical care provider and other appropriate clinicians.

Outreach Services - Outreach activities shall be focused at ensuring early entry
into maternity care and include efforts aimed at individuals as well as those
aimed at reducing system wide barriers that effect the enrollment and retention
process.

Evaluation, Monitoring, and Quality Assurance - These three inter-related
activities shall be initiated at the beginning of the program by the provider
and Department of Health and Senior Services staff and continue on an ongoing
basis to assess program implementation,

<PAGE>

operation, conformance with established standards, and impact throughout the
State. Appropriate tool(s) standard protocol should be utilized.

Maternity Services Summary Data Form (MSSD) - is to be submitted on each client
who has received any HealthStart services including those services provided
under code HFCA W9029 (see appendix). The form should be complete to the point
of termination of HealthStart services to the client. Staff must be trained by
the New Jersey Department of Health and Senior Services HealthStart staff.
Maternity Services Summary Data Forms are due in DHSS Program no later than
ninety (90) days after termination of HealthStart services.

STAFFING (Required minimum qualifications)

Case coordination - Individuals providing any phase of case coordination
activities shall have the following required minimum qualifications: a New
Jersey license as a medical care professional (physician, certified nurse
midwife, advance practice nurse (certified nurse practitioners/clinical nurse
specialists, CNP/CNS), a registered nurse, a social worker with a New Jersey
social work certificate/license, or a Bachelor's degree in a health, or
behavioral science, or in Nutrition/Dietetics which meets the American Dietetics
Associations R.D. educational requirements.

Health Education Services - Individuals providing the health education services
shall meet the same minimum requirements as indicated above for case
coordination and/or shall be a certified childbirth educator instructor.

Nutrition Services - Individuals providing the BASIC nutrition assessments
(initial, subsequent, postpartum and including risk assessment, guidance and
referral) shall meet the required minimum qualifications as indicated above for
case coordination. INDIVIDUALS SHALL BE REFERRED FOR SPECIALIZED ASSESSMENT AND
COUNSELING SERVICES TO AN INDIVIDUAL WITH A BACHELOR DEGREE IN
NUTRITION/DIETETICS THAT MEETS THE AMERICAN DIETETICS ASSOCIATION'S R.I
EDUCATIONAL REQUIREMENTS.

Social/Psychological Services - Individuals providing the BASIC
social/psychological assessment (initial, subsequent, postpartum, guidance, and
referral) shall meet the required minimum qualifications as indicated above for
case coordination. INDIVIDUALS SHALL BE REFERRED FOR SPECIALIZED
SOCIAL/PSYCHOLOGICAL ASSESSMENT AND COUNSELING SERVICES TO AN INDIVIDUAL WITH A
BACHELOR'S DEGREE AND A NEW JERSEY SOCIAL WORK LICENSE/CERTIFICATE.

Home Visit Services - Shall be provided by the appropriate clinicians or staff
with the required minimum qualifications as indicated above for case
coordination, or by written agreement, Home visit assessment can be done by a
referral to a Local Health Department or Certified Home Health Agency under
written agreement with the provider to complete home visits.

Outreach Services - Outreach can be provided by the HealthStart agency or
through linkage with community-based organizations like coalitions, churches,
local public and private organizations or various educational media.

Evaluation, Monitoring, and Quality Assurance - This component is conducted by
the HealthStart agency's staff and Department of Health and Senior Services
staff. However, staff

<PAGE>

who prepare the Maternity Services Summary Data (MSSD) form (see appendix) must
be trained by the Department of Health and Senior Services HealthStart staff.

FOLLOW-UP (Prenatal, Postpartum)

Follow-up on missed appointments (prenatal and postpartum is an important part
of provider-based case coordination activities. Providers are expected to make
every effort to follow-up with patients who miss appointments as long as there
is a reasonable chance of retaining the patient in maternity care.

At a minimum, the follow-up for any missed appointment(s) shall include but not
be limited to the following steps, AS NEEDED:

         -        send appointment reminders and/or;

         -        make attempts to reach the patient by phone;

         -        send letters (receipt requested if applicable); and/or

         -        make at least one home or community-based follow-up visit.

REFERRALS (Prenatal, Postpartum)

When a referral is initiated, the case coordinator shall assist the patient to
assure that the patient understands the nature and purpose of the referral.

To assure timely completion of referrals, the case coordinator or staff member
under her/his supervision should:

         -        know if the referral has been completed;

         -        assist the patient to identify barriers to completing the
                  referral; and

         -        provide support to the patient and advocacy with the referral
                  service unit(s) for reducing or eliminating the barriers to
                  completion.

To implement follow-up on referrals, activities include but not are limited to
the following steps, AS NEEDED:

         -        follow-up with the patient during prenatal visits;

         -        phone calls to the patient and/or referral service unit;

         -        letters to patient or referral service unit or where
                  appropriate community-based agency;

PLAN OF CARE

Development of an integrated (medical, nutrition, social/psychological, and
health education) plan of care, into ONE DOCUMENT, (see appendix) shall be
completed no later than one (1) month after the first/registration/enrollment
visit. The plan of care shall include: identification of risk
conditions/problems, need(s), planned intervention(s), time frame(s), outcome
objective(s), identification of care provider(s) responsible for the service(s)
and plans for referral and follow-up activities.

<PAGE>

Review and updating of the plan of care should be ongoing throughout the
prenatal period with the patient and in consultation with professional staff
involved in the patient's care.

The review includes but is not limited to examination of continuation of
maternity care services (e.g. timely occurrence of patient visits): patient's
health status (including medical, nutritional, and social/psychological status,
and health education needs) patient's receipt of ALL basic services, needed
specialized service, and initiation and timely completion of referrals: and
identification of and arrangements for appropriate home visits if indicated (see
home visit section).

HEALTH SUPPORT PRENATAL ACTIVITIES AND ASSESSMENTS

Case Coordination - (see appendix) Shall be provided to ALL HealthStart
patients, includes, but is not limited to:

         During the first/registration/enrollment visit, to orient the patient
         to content and process of the comprehensive maternity care services
         including, what services will be provided as part of comprehensive
         maternity care (prenatal, intrapartum, and postpartum), including
         medical, laboratory, nutrition, psychosocial, health education, case
         coordination, home visit and outreach; who will provide these services;
         e.g., physician, nurse, midwife, advance practice nurse, registered
         nurse, social worker, nutritionist, health educator; where to go for
         services; e.g. private office, private or hospital lab, independent
         clinic, hospital, local health department, WIC program, county welfare
         agency, family planning; when to go for services; e.g., timing of
         routine visits, childbirth education classes, prenatal health education
         classes, Medicaid determination, family planning, WIC; and if problems
         arise WHOM to contact and HOW to contact this person or avail herself
         of a service.

Additionally case coordination activities include:

         Informing the patient about her rights and responsibilities (see
         appendix) regarding maternity care, both verbally and in writing.
         Monitoring and facilitate the patient's entry into and continuation
         with Maternity Care Services. Assisting patient in obtaining
         presumptive eligibility determination and monitor application for final
         Medicaid eligibility, when applicable. Assisting the patient to
         identify and provide advocacy which will assist in the reduction of
         barriers to continued care including waiting time, and fragmentation of
         services. Vigorous, follow-up for missed appointments in order to
         assure that patients continue prenatal care as long as there is a
         reasonable chance of retaining the patient in maternity care. Contact
         information shall be compiled during the patient's
         first/registration/enrollment visit and updated at each subsequent
         visit. Reinforcement and supporting health teachings as needed, and
         coordinate professional and/or paraprofessional staff to provide these
         services.

         Coordinating: - development of the Plan of Care and ongoing
         reviews/updates; services with other agencies e.g. WIC, Local Health
         Department, Certified Home Health Agency, coalitions, etc.; the
         assessment to identify the need for home visit(s) and prepare a written
         referral for the home visit(s) which includes the general and specific
         purposes and objectives of the visit(s), client characteristics,
         timeframes, and other pertinent

<PAGE>

         information; obtain a written summary report (WITHIN TWO WEEK OF THE
         REFERRAL) on each home visit completed which includes date, provider
         agency title and name of visitor, activities conducted, outcome(s), and
         any pertinent information gained about the client, Infant and home
         environment. For ongoing home visiting, the case coordinator should
         confer with the home visitor(s) to review the case.

         Arranging case conferences and/or consultation with the obstetrical
         care provider and other professional staff as appropriate. Coordinating
         preparation of and completion of the Maternity Services Summary Data
         Form (MSSD) (see appendix). Reviewing, monitoring, and updating the
         individual records at each visit in order to assure that all services
         provided are legibly documented in the patient record, as necessary to
         fully disclose the kind and extent of services provided, signed,
         credentialed and dated and that pertinent copies, e.g. (referrals P.E.
         FD 334 form, consultations, laboratory, reports, etc.) are contained
         on the record.

Health Education - (see appendix) Shall be provided but not limited to:

         Completing, for ALL HealthStart patients, an INITIAL health education
         assessment by reviewing existing information from other areas of
         assessment, and/or compiling general educational information (e.g.
         spoken language(s), education level, topics/information of immediate
         interest, previous and/or other health education, information, or
         experience concerning pregnancy, birth, infant care, and parenting).

         Providing health education INSTRUCTION according to a standard
         "Curriculum Guide" (see appendix). All topics should be covered with
         modifications depending on the timing of the patient's entry into
         prenatal care.

         Providing or arranging for a full "Childbirth education" course (AT NO
         COST TO PATIENT) for all patients. This course shall include content in
         accordance with the standards of a national organization devoted to
         childbirth education. A "refresher" course can be provided for patients
         who have received childbirth education during a previous pregnancy.

         Provide individual guidance for making and implementing decisions basic
         to pregnancy, birth, and infant care including but not limited to:
         changes in activity level (work, exercise, sex), changes in lifestyles
         (smoking, alcohol, substance abuse, environmental/occupational
         hazards), preparations for admission, infant care, pediatric care, and
         future family planning.

         Plan for patient to see a/the specialist(s) if indicated.

Nutrition - (see appendix)

         BASIC nutrition assessment (initial, subsequent and postpartum) using
         the "WIC/HS" form (see appendix), and guidance shall be provided to ALL
         HealthStart patients and shall include but not limited to INITIAL
         Nutrition Basic Assessment (including "risk" assessment) review of data
         from other parts of the assessments (particularly the results of
         laboratory tests), nutritional history, prenatal weight (including
         maintaining the "weight gain chart" HS-17 4/95), dental, eating
         disorders, metabolic conditions, special diets,

<PAGE>

         medications, etc., nutritional inadequacies (24 hour dietary recall
         and/or assessment of food frequency for at least one week of time),
         appetite, fluid intake, pica, cravings, snacking, cultural, religious,
         myths, allergy, substance usage, alcohol, smoking, etc., GI
         discomforts, food preparation and refrigeration, household routine's
         and activity level, assess for participation in "Food Supplement
         Programs".

         All assessment information must be used (but is not limited to) in
         order to identify nutritional "risk factors", develop the "plan of
         care", and to identify the need for the nutrition specialists.

         Plan (if indicated) for patient to see the nutritionist specialist.

A "New Jersey State Department of Health and Senior Services WIC/HealthStart
Referral/Nutrition Assessment For Women Form" (see appendix), should be
completed for the basic nutrition assessment and used for the initial referral
to a WI agency on all patients. If the patient is currently participating in the
WIC program, maintain the completed form (all three copies) in the record.

         SUBSEQUENT Nutrition Basic Assessment -includes but is not limited to:
         review of nutrition of mother, ongoing review for referral to food
         supplementation programs, monitoring weight gain (using a standard
         weight gain grid, (see appendix) concerning adequate, inadequate, or
         excessive weight gain, review plans for infant nutrition and
         information patient has of myths, advice, etc. and specifics for
         implementing infant feeding (breast/bottle).

         Plan for patient to see the nutritionist specialist if needed.

         NUTRITION Guidance Basic -shall be composed of but not limited to,
         providing information on the general relationship of nutrition to
         positive pregnancy outcomes, instruction on food purchase, storage, and
         preparation, infant feeding and nutrition needs focused on assisting
         the patient to assess, choose and prepare to implement a feeding
         method, review a reinforcement of other nutrition and dietary
         counseling services, significance of referral to a participation in
         food supplementation programs.

         Plan for patient to see the nutritionist specialist if needed.

         SPECIALIZED Nutrition Assessment and Counseling -"Short term"
         specialized nutrition services shall be delivered by an appropriately
         credentialed nutritionist. The nutrition assessment and counseling
         shall be initiated (based on basic assessment and the patient
         individual needs and in consultation with the medical care provider) at
         least for those patient having an inadequate or excessive weight gain,
         diabetes, pre-eclampsia, pica, anemia of pregnancy, chronic diseases or
         disabilities which complicate present pregnancy, impair dietary intake,
         dental conditions, inadequate food supply, etc.

         EXTENSIVE -If the specialized nutrition services needed are extensive
         (e.g. highly complicated and/or intensive) they may be delivered by
         referral to the nutrition specialist on the provider's staff, or by
         referral, or by a combination of referral and the nutrition specialist.
         Referral for extensive specialized nutrition services must be initiated
         by the medical care, provider or the nutritionist under the supervision
         of the medical care

<PAGE>

         provider in coordination with the case coordinator based on clinical
         judgment and the following considerations:

         -        complexity and intensity of services needed;

         -        resources available at the HealthStart provider;

         -        availability of off-site specialized nutrition services, and

         -        accessibility of off-site specialized nutrition services.

Social Psychological - (see appendix)

         BASIC social/psychological assessments (initial - including risk
         assessment subsequent and postpartum and BASIC social/psychological
         guidance shall be provided to ALL HealthStart patients and shall
         include but not be limited to:

         INITIAL Social/psychological Basic Assessment (including "risk"
         assessment) -Review of existing information from other areas of
         assessment, client's perception of her IMMEDIATE needs or other needs,
         financial information and resources (DO NOT REPEAT THIS INFORMATION IF
         IT HAS ALREADY BEEN OBTAINED, e.g. THROUGH PRESUMPTIVE ELIGIBILITY (SEE
         APPENDIX) DETERMINATION, etc.), services currently received or applied
         for e.g. Medicaid, WIC, DYFS, other health or social services etc.;
         living conditions their perception), dwelling, neighborhood, clothing,
         food, furniture, supplies etc.; family, personal and social support
         system their perception) e.g. needs, children, father of baby, friends,
         parents, relatives, religious program(s), other organization(s), etc.;
         attitudes and concerns (perceptions/reactions to) view of this
         pregnancy, feelings positive/negative, overall status, hospitalization,
         mental status; major stress events within past year, e.g. death,
         illnesses substance abuse (self/someone close), abuse/neglect
         (physical/sexual); criminal justice system involvement; separation or
         divorce; other traumatic event of self or someone close; education and
         employment goals/needs/plans; work experience, status, occupation,
         environmental hazards/problems; child/care arrangements (current and
         planned).

All assessment information must be used (but not be limited to) in order to
identify social/psychological "risk factors", develop the "plan of care", and
identify the need for the social worker specialist.

Plan for patient to see the social worker specialist if needed.

SUBSEQUENT social/psychological (see appendix) Basic Assessment -This
assessment should utilize the same outline as the initial assessment. The focus
should be on any major areas that could not be assessed initially, obtaining
additional information needed, and updating the assessment of any major area. As
with the initial assessment, subsequent assessment should result in
identification of risk factors and a decision whether to provide further basic
guidance or specialized assessment and counseling.

Plan for patient to see the social worker specialist, if needed.

<PAGE>

Basic social/psychological GUIDANCE -includes: initial orientation and
information on available community resources based upon the individual's needs,
and should include specific information (names, telephone numbers) on emergency
and non-emergency services in the area of financial assistance, mental health,
housing, family violence and abuse, transportation, child care, education,
substance abuse rehabilitation, infant clothing/equipment/care, and parenting
education support etc, referral, follow-up, support and advocacy for basic
social services, orientation on stress and stress reduction and relationship of
stress to pregnancy outcomes.

Plan for patient to see the social worker specialist, if needed.

SPECIALIZED social/psychological (see appendix) assessment and counseling
-"Short term" specialized social/psychological services shall be delivered by an
appropriately credentialed social/psychological specialist. The
social/psychological assessment and counseling shall be initiated (based on
assessment and the patient's individual needs and in conjunction with the
medical care provider) at least for those patients having the following, but not
limited to situations: highly ambivalent, denying and/or rejecting of this
pregnancy; history or suspected, mental health problems, developmental delay,
handicaps or substance abuse, sexual/physical abuse or violence to/in patient or
household; involvement with criminal justice system; serious social conflicts;
weak or no social support system; other recent major (patient's perception)
stressful or life events; homelessness or pending or age 16 or less at time of
delivery.

EXTENSIVE -If the specialized social/psychological services needed are
extensive (see appendix) (e.g. highly complicated and/or intensive) they may be
delivered by referral to an appropriately credentialed social/psychological
specialist on the provider's staff, or by referral, or by a combination of
referral and the social/psychological specialist. Referral for extensive
specialized social/psychological services must be initiated by the medical care
provider or the social/psychological specialist under the supervision of the
medical care provider and in coordination with the case coordinator and shall be
based on clinical judgement and the following consideration:

         -        complexity and intensity of services needed,

         -        resources available at the HealthStart provider.

         -        availability of off-site specialized social/psychological
                  services, and

         -        accessibility of off-site specialized social/psychological
                  services.

HOME VISITS (Preventive Health Care, High Risk Needs and/or Skilled Nursing
Care)

Home visits are an important and integral part of maternity care, particularly
when serving a low- income population. Home visits should only be used to
provide services which can best be delivered in the home setting and are
particularly useful for patients who have special needs/risks which require
assessment and intervention in the home, who have difficulty remaining involved
in maternity care services, and/or who have difficulty implementing and adhering
to health instructions and advice. Home visits are most effective when conducted
by a visitor who is already familiar to the patient and who provides continuity
across visits and should be coordinated with other services being delivered by
the provider or by other community service settings.

<PAGE>

Visits can be by an appropriately credentialed professional or paraprofessional
team members, depending on the following consideration:

         -        the specific purpose of the visit;

         -        the skill and characteristics of professional and
                  paraprofessional staff available; and

         -        the characteristics of the client and her level of rapport
                  with various staff.

The provider shall provide or arrange for at least one prenatal home visit for
patients IDENTIFIED as needing preventive health care: with specific need(s)
and/or skilled nursing care during the initial or subsequent prenatal
assessment.

Additional home visit(s) shall be provided or arranged for the patients with
specific need(s), risk(s) if it is determined that visit(s) would be effective
based on the clinical judgement or the case coordinator in conjunction with the
medical care provider and other appropriate clinicians.

IF A PATIENT IS RECEIVING THESE SERVICES IN HER HOME FROM ANOTHER AGENCY(IES),
THE CASE COORDINATOR MAY SUBSTITUTE THOSE SERVICES FOR THE REQUIRED HOME VISIT.
THE CASE COORDINATOR SHALL THEN COORDINATE SERVICES WITH THE OTHER AGENCY(IES)
AND DOCUMENT THE INFORMATION IN THE PATIENT'S RECORD.

"HIGH RISK CARE" HOME VISIT(S)

Patients shall be identified as high risk for the purpose of determining a
prenatal home visit based on (but not limited to) the following criteria and
subject to the clinical judgement of the case coordinator in conjunction with
the medical care provider and other appropriate clinicians; inability and/or
lack of motivation to follow the prescribed plan of care; significant
handicapping condition which effects ability to comply with the plan of care;
new, persistent, and/or chronic, uncontrolled medical problem(s) which affect
the pregnancy; identified current nutritional problems not responding to
treatment; social high risk such as: alcohol or substance abuse, patient
involvement with abuse/neglect, weak or no social supports, unstable or chaotic
home environment; serious parenting inadequacies exhibited or suspected; current
mental health problems; maternal age of 16 or less at the time of delivery with
additional risk factor(s).

"PREVENTIVE HEALTH CARE" HOME VISITS

Home visits for preventive health care may be provided directly by a
professional HealthStart provider staff or may be implemented by written
agreement between the HealthStart provider and a local health Department or
independent, perinatal outreach team. A team approach consisting of health
professionals and paraprofessional outreach workers is an effective way to
provide continued preventive care home visits. However, it is important that
staff continuity be maintained for home visits to any one patient.

Patients may benefit from a prenatal "Preventive Health Care" home visit
indicators may include: inability and/or lack of motivation to follow the
prescribed plan of care; patients who exhibit or are suspected of serious
parenting inadequacies; patients who demonstrate significant difficulty
understanding and following instructions and/or linking with needed services;
consecutive missed appointments and/or chronic missed appointment; the need to
further assess to gain valuable information about the client's home environment,
family/household system, the client, and the newborn infant; provide support and

<PAGE>

reinforcement of health teachings and advice to help the client assimilate and
understand previous instructions and advice, and to assist the patient to
practice and implement new health practices in her home environment; provide
support and advocacy for social/psychological and other service needs and to
establish linkages with services, arrangements for transportation and/or child
care; accompany the patient as her advocate/supporter, act as an interpreter,
provide informal counseling, and information and referrals on community
resources to meet those need; the need to

Increase trust, rapport and communication with the patient to increase the
willingness and ability to utilize maternity care services and adhere to the
plan of care.

"Skilled Nursing" Care Home Visits

These visits are for patients with diagnosed, documented medical needs that are
best met in the home setting, need skilled nursing services and health teaching.

Home visits for skilled nursing care arranged through referral to certified home
health agencies. These visits must receive prior authorization from the Medicaid
District Office and are reimbursable under the current Medicaid system, separate
from HealthStart. Skilled nursing care visits must meet the criteria set by the
New Jersey Medicaid program. The case coordinator should arrange and coordinate
these visits and facilitate obtaining the required written medical orders.

COMMUNITY OUTREACH

The general purpose of "Community" outreach is to facilitate early entry into
maternity services and to encourage continuity of care. Community outreach
services include efforts aimed at individuals as well as those aimed at reducing
system wide barriers that effect the enrollment process. Also, community-based
individuals could provide information on the importance of prenatal care and
encourage early client enrollment.

HealthStart providers who are in private practice settings are likely to benefit
from becoming involved in outreach through linkage with community-based
organizations that have established outreach services, or formalized assessment
and planning for agency-based outreach. Outreach efforts include the following
activities: Assessing socio-demographic characteristics of client population,
educational levels, age, cultural and ethnic backgrounds and primary language
spoken and/or read. Developing an outreach plan that will be culturally
sensitive in order to effectively communicate with community groups.
Identifying community resources and develop appropriate linkages with
coalitions. Being aware (knowledgeable) of various local public, private, and
social organizations and health agencies, e.g. churches, teen groups, women's
organizations and business groups, etc. Distribute and display HealthStart
informational materials and identifying information HealthStart certificate,
posters, etc.) in such a way, the clients are aware that the provider is
certified as a HealthStart provider. Distribute give-aways that are donated by
local business community.

Form a local speaker's bureau of key individuals from private and public
organizations to publicize maternity care services. These presentations could
include "testimonials" from maternity clients on the value of prenatal care.
Develop partnerships with community-based organizations, coalitions and churches
in planning various maternity care outreach activities

<PAGE>

such as volunteer community action campaigns, educational sessions, "Health
Fairs", "Bring a Friend to Prenatal Care", "Baby Showers", etc. and develop ways
to work cooperatively in the areas of outreach.

HEALTH SUPPORT POSTPARTUM ACTIVITIES

Case Coordination

The case coordinator shall arrange and coordinate one contact preventive health
care activity for ALL patients during the time after hospital discharge and
prior to the required four - six (4 - 6) weeks medical visit after delivery.

This postpartum activity shall be documented (see appendix for sample tool) in
patient's record, include but not be limited to:

         Review of mother's health status; review of infant's health status;
         review of mother-infant interaction; assess the need for any additional
         services; assess the need for a home visit(s) and as appropriate
         provide or arrange for a home visit for mothers or infants IDENTIFIED
         as high risk; arrange for one regular medical provider/clinic visit at
         four - six (4-6) weeks after delivery; arrange to obtain the "Labor,
         Delivery, and postpartum Hospital Summary" record no later than two (2)
         weeks after hospital discharge, review and then incorporate into the
         patient's record; arrange linkage/referral of the patient to the
         appropriate service agencies, e.g. WIC, pediatric care, family
         planning, and other social and health services, such as Special Child
         Health Services Case Management Units, etc; arrange for the transfer of
         pertinent information or records to continuing service providers
         notable pediatric care and family planning service providers; vigorous
         follow-up on missed appointments (same guidelines as for the prenatal
         period), reinforce and support health teachings for mother and baby
         (same guidelines as for the prenatal period; review, completion and
         CLOSE of the plan of care; submit if applicable, the Maternity
         Services Summary Data Form (MSSD), (see Evaluation, Monitoring and
         Quality Assurance section and appendix) within the required time frame
         to the Department of Health and Senior Services, Maternal Child Health,
         Epidemiology program, HealthStart program.

HEALTH EDUCATION

This postpartum activity shall include but not limited to:

         Review of previous assessments and patient record; review of health
         education curriculum; identify and answer patient's questions
         concerning infant care and development and postpartum maternal care;
         identification of patient's remaining needs; address remaining needs by
         referral or direct provision of services; follow-up on decisions from
         third trimester e.g. preparations for basic infant care, pediatric care
         for infant, future family planning services, and other continuing
         Medical and Dental care; review, completion and CLOSE of the plan of
         care.

<PAGE>

NUTRITION

This postpartum activity shall include but not limited to:

         Review of MOTHER'S current nutritional status and needs, ideal
         perceived body weight, nutrient inadequacies (24 hour recall and/or
         assessment of food frequency for at least one week of time, fluid
         intake, pica cravings/consumption, snacking patterns, appetite as
         described by patient/appetite changes, allergy/food intolerance,
         typical seasoning and condiment/food avoidance, food preferences,
         cultural/religious food practices, type of nutrient supplements,
         prescribed or self-prescribed, nutrient/drug interactions and
         nutrient/nutrient interactions, gastrointestinal discomforts, e.g.
         nausea, vomiting, heartburn, constipation, diarrhea, flatus, substance
         usage (alcohol, caffeine, prescription medications, over the counter
         drugs, illegal drugs, smoking) activity level exercise, work, family),
         household routines for food purchases, meal preparation and
         consumption, including takeout food, cooking and refrigeration
         facilities.

         Review, of INFANT'S current nutritional status and needs, linkage with
         WIG and pediatric care infant feeding, method(s) of feeding and
         specifics of implementing methods) e.g. frequency of feedings, food
         intake (including bottle contents) feeding positions, person(s)
         responsible for feedings, any problems, mother's reactions to method
         and feeding, infant's reactions and health indicators, household's
         member's responsibilities and reactions to feeding, advice, myths,
         information, and support from family/friends, nursing bottle mouth and
         fluoridation supplementation; and review, completion and CLOSE of the
         plan of care.

SOCIAL/PSYCHOLOGICAL

This postpartum activity shall include but not be limited to:

         Review of other postpartum assessment and patient record concerning
         pregnancy, labor, delivery, postpartum course and infant's health;
         client's perception of her IMMEDIATE needs; client's perception of
         other needs; relationship of mother and baby; assessment of
         mother/infant interaction including emotional and verbal responsivity
         of mother and realistic expectations toward infant and signs of
         postpartum depression; family/household acceptance of baby and other
         family household dynamics; mother's perception of father's acceptance
         of infant, siblings reactions to infant, reactions of other household
         members and close family to infant, impact of infant on mother/father
         relationship, impact of infant on mother/sibling relationship, views of
         infant care and rearing in her family and household; mother's
         goals/needs; general coping/emotional status; school/work (including
         childcare arrangements); identification of need for additional social
         and psychological services e.g. parenting education and support, infant
         equipment and supplies, financial assistance, food, clothing, housing,
         utilities, transportation, mental health services, drug or alcohol
         rehabilitation, AIDS counseling and support systems, other; referral
         for identified need; and review, completion and CLOSE of the plan of
         care.

<PAGE>

HOME VISIT

This postpartum activity shall include but not be limited to:

         Providing or arrangement for a postpartum home visit for preventive
         health care, high risk care, or skilled nursing care where it is
         determined that visit would be effective based on the clinical
         judgement of the case coordinator in conjunction with the medical care
         provider and other appropriate clinicians.

If the patient is receiving the necessary services in her home from another
agency, the case coordinator may substitute those services for the required home
visit. The case coordinator shall then coordinate services with the other agency
and document the information in the patient's record. Patients shall be
identified as needing high risk care for the purpose of determining a postpartum
home visit based on the following criteria:

         Patients IDENTIFIED as high risk prenatally with unresolved medical,
         nursing, health education, nutritional, and/or social/psychological
         problems; patients developing risk factors AFTER delivery, or when
         hospital discharge e.g. postpartum infections, depression, or other
         crisis situations; those that maternity or nursery staff request
         postpartum follow-up prior to hospital discharge; patients who have
         infants with continuing health problems, e.g. premature delivery, very
         low birth weight, NICU placement, feeding problems, and/or other needs.

Patients shall be identified as needing preventive health care for the purpose
of determining postpartum home visit based on the following criteria:

         Patients who exhibit or are suspected of serious parenting
         inadequacies; patients who demonstrate significant difficulty
         understanding and following instructions and/or linking with needed
         services-

         HEALTHSTART EVALUATION, MONITORING, AND QUALITY ASSURANCE

OVERVIEW

The purposes of the evaluation are twofold:

         1)       to determine, both on a short-term and long- term basis: how
                  successful the state has been in providing the program to the
                  population of pregnant women and children up to the age of two
                  who are eligible for Medicaid benefits; whether providers are
                  delivering the services that they have agreed to provide; what
                  the barriers are in delivering the HealthStart comprehensive
                  services; and for those who receive services in the
                  HealthStart program, whether the program is or is not
                  effective.

         2)       To use information as it is acquired through evaluation
                  activities to reinforce aspects of the comprehensive maternity
                  services that are functioning well; and correct problems that
                  are hampering the achievement of program goals.

<PAGE>

Together, monitoring and quality assurance make up the process component of the
evaluation. Through the monitoring function the program's progress, strengths,
and weaknesses will be assessed. This information will be used to address
problems in program operations. The majority of information will be obtained
from routinely collected sources of data, e.g. Medicaid eligibility, claims and
encounter data, the electronic birth certificate (EBC) and the HealthStart
Maternity Services Summary Data Form (MSSD), etc.

Through the quality assurance function direct training of providers, review with
feedback, programmatic modifications, and retraining of personnel involved with
HealthStart will be conducted. Due to the interactive nature of the quality
assurance function, the majority of the activities will take place at
HealthStart provider sites and regional meetings.

The long-range outcome component of the evaluation will focus on determining
whether, and to what extent, the program has had an impact on improving both
access to services and health outcomes. Measures include, but are not limited
to, trends in the timeliness of prenatal care, the percent of low birthweight
and very low birthweight infants, the number of days of care provided to infants
in neonatal intensive care units, the infant mortality rate, the frequency of
emergency room visits for child health problems, the immunization status of
children enrolled in the program, the rehospitalization of children, and the
cost effectiveness of the program. These represent some examples of appropriate
outcome indicators of program performance that will be used. Much of this
information will be obtained from the linkage of vital statistics data
(linked-birth and death and fetal death records), Medicaid eligibility, claims
data and encounter data, hospital data, and the HealthStart MSSD form.

To evaluate the Health Start comprehensive maternity services, a
quasi-experimental research design will be used. The research will be both
cross-relational, enabling snapshot examinations of a cohort of clients or
providers at given points in time, (e.g. percent of pregnant women receiving
first trimester prenatal care in 1985, 1986, 1987, 1988, 1989, etc.), and
longitudinal, allowing follow-up of clients and providers (e.g. onset of
prenatal care through birth and infant outcomes and linkage of children with
pediatric providers).

The study population will include pregnant women and children up to the age of
two who are residents of the State of New Jersey. In general, comparisons will
be made between low income pregnant women and children who are at or below 185%
of the Federal poverty who receive HealthStart comprehensive services. Trends in
health outcomes will be made among all pregnant women, infants, and children up
to the age of two in the State of New Jersey. This would include those who were
Medicaid-HealthStart, Medicaid non-HealthStart, and non-Medicaid clients. The
effectiveness of HealthStart services under the managed care system will also be
evaluated. This will be done by comparing outcomes of those who receive
HealthStart services through a managed care provider with the outcomes of those
who did not.

Providers will be most directly involved with the process component of the
evaluation. Though monitoring and quality assurance activities will be conducted
for both pediatric and comprehensive, maternity care services, the emphases of
the activities are somewhat different.

<PAGE>

EVALUATION ACTIVITIES

Collection:

Analysis of data includes the areas of eligibility, reimbursement, provider
agreements, specific service arrangements, client utilization of services,
content of services delivered, barriers to service delivery, and client outcomes
at the termination of service delivery.
These areas will be analyzed on an annual basis. For years in which data are
available, trends will be examined prior to program start-up, at program
start-up, and yearly thereafter. In general, data will be analyzed in the
aggregate by provider site, county, major municipality, and/or state totals.

The "source" areas for the data area:

Eligibility:

Department of Human Services/Medicaid eligibility files, (both presumptive and
standard).

Reimbursement:

Medicaid claims files (HCFA 1500; New Jersey 1500 (electronic only); MC 19) and
managed care capitation encounter data.

Provider participation:

Department of Health and Senior Services Comprehensive Maternity Care and
Pediatric Provider Applications, and Certificates; Department of Human Services
Medicaid claims and encounter data and contracting HMOs for the managed care
services.

Client utilization of services:

Department of Human Services, Medicaid claims, Department of Health and Senior
Services inpatient hospital (UB 92 claims), HealthStart Maternity Services
Summary Data and MC 19 claims files and Medicaid managed care data.

Content of service delivered:

HealthStart Maternity Services Summary Data; Department of Human
Services/Medicaid claims and eligibility data; Department of Health and Senior
Services hospital discharge, UB files and Medicaid managed care data.

Barriers to service delivery:

HealthStart Maternity Services Summary Data; staff site visit reports and
Medicaid managed care focus reports.

Client outcomes at termination of services

HealthStart Maternity Services Summary Data; Department of Health and Senior
Services vital statistics data (linked birth-death and fetal death records)
linked with Department of Health Hospital Discharge Data, and with Medicaid
eligibility, claims and encounter data.

<PAGE>

Data Collection Form (HealthStart Maternity Services Summary Data -MSSD)

The HealthStart Maternity Services Summary Data Form is a form that has been
created specifically to capture information on HealthStart comprehensive
maternity services. A copy of the form has been included in the appendix.

The Maternity Services Summary Data Form is the instrument used to collect
information on the content of medical and health support services rendered to
clients from the initial contact registration visit throughout the pregnancy and
postpartum period. Providers are to submit a HealthStart Maternity Services
Summary Data Form on each client who has received any HealthStart comprehensive
maternity services including those for which providers would bill using a W9029
code. The form should be complete to the point of termination of HealthStart
services to the client. Providers shall have policies that protect the client's
information. Each client shall sign an informed consent release of information
form (see appendix sample).

The case coordinator is responsible for the completion and submission of the
form. All staff who complete any part of the form must be trained in MSSD form
completion by the DHSS HealthStart staff.

The HealthStart Maternity Services Summary Data Forms will be submitted within
90 days after the expected date of confinement (EDC) or actual delivery or
termination of services at the agency. FAILURE TO SUBMIT DATA FORMS COMPLETE TO
THE POINT OF TERMINATION OF SERVICES TO CLIENTS WILL JEOPARDIZE A PROVIDER'S
HEALTHSTART CERTIFICATION STATUS.

The HealthStart Maternity Services Summary Data Form has been developed as a
tool to monitor all aspects of the comprehensive maternity care as defined in
the HealthStart Standards, to guide field quality assurance activities, and to
determine risk factors, and appropriateness of service provided to clients who
have received comprehensive services. The MSSD is a summary of the client's
entire course or maternity' care and is not intended to replace a medical
record.

         PAGE 1 of the form includes demographic information of the client's
         reason if care began late; and presumptive eligibility information.

         PAGE 2 covers the clients final estimated date of confinement, measures
         of the client's height and weight; prenatal risk factors and or risk
         conditions in this pregnancy; the client's course of care and services
         provided in the HealthStart program; whether the client required
         hospitalization other than for delivery, and if so, the number of times
         and reasons; the date of hospitalization resulting in delivery; and the
         client's hospital medical record number at delivery.

         PAGE 3 includes information on whether the client was transferred to
         another prenatal medical provider; whether the client was seen by a
         specialist in maternal-fetal medicine; whether the client missed any
         prenatal appointments; whether the client had any special procedures;
         what barriers to delivery of services to the client were present; what
         complications of labor and delivery occurred; the method of delivery;
         whether the client was transferred prior to delivery; pregnancy
         outcomes; whether arrangements for future family planning services were
         made; whether any postpartum problems/conditions were present at the
         four to six week postpartum visit; and dates of service and clinic type
         if

<PAGE>

         the client received care at more than one clinic within the same agency
         or another agency.

         PAGE 4 contains information on the birth, (liveborn infant or fetal
         death), including identifying information, birthweight, pediatric
         assessment of gestational age, and hospital of birth medical record
         number and facility identifying information. For live births, PAGE 4
         also includes neonatal course of care information; whether the infant
         was transferred after delivery, nurseries in which the infant received
         care after delivery, problems which developed during the hospital stay
         in the nursery(ies), infant outcomes at the client's six week
         postpartum visit, linkage of the infant with a pediatric preventive
         health services provider and the funding source(s) of client's care,

Provider training sessions on the use of the MSSD forms will be held by the DHSS
HealthStart staff and to insure the quality of data collected, a codebook with
instructions for filling out the forms will be issued at the session. The most
recent version of the HealthStart Maternity Services Summary Data Form is
included in the appendices of this document.

Providers should anticipate that the form will be modified over time.
Furthermore, providers should expect to receive feedback on aggregate
information obtained from the data that they have submitted.

Monitoring Activities:

Random site visits will be conducted by the New Jersey Department of Health and
Senior Services HealthStart staff and may include peer consultants, (i.e. other
HealthStart providers or colleagues). The site visit will be a comprehensive
review of HealthStart activities, with feedback of both prior and current
HealthStart services provided. The following activities will be included:

         -        Review of both general and HealthStart specific agency
                  policies, procedures, and other administrative aspects of
                  service delivery within the agency.

         -        Observation of clinic office visits which may include physical
                  examinations, patient care consultations on new or problem
                  clients, sessions on nutrition, health education,
                  social/psychological, case coordination or other aspects of
                  HealthStart comprehensive services.

         -        Interviews with clients in terms of their participation in and
                  satisfaction with HealthStart services;

         -        Audits on a random sample of client charts using an
                  established protocol. (This will include all areas of
                  HealthStart comprehensive maternity care services. (e.g.
                  medical, case coordination, nutrition, social/psychological,
                  health education, home visits, assessments, follow-up,
                  referral, plan of care, etc.).

         -        Interviews and discussions with staff which cover strengths,
                  weaknesses, and barriers to delivery of services to clients,
                  and provide suggestions for overcoming obstacles in delivering
                  HealthStart comprehensive services to clients

<PAGE>

         -        Written review of the organization, delivery, progress, and
                  overall ability of the site in delivering HealthStart
                  comprehensive maternity care services will be completed after
                  a site visit by the DHSS HealthStart staff.

Self-audit:

This quality assurance mechanism is recommended rather than a mandatory
activity. However, it will be required for those sites from which a number of
clients have been identified as having unmet health care needs. It will be used
as one of the methods to assist the sites to improve their delivery of
HealthStart services.

Self-audit consists of a review of charts on a monthly basis by members of the
comprehensive maternity care sites' HealthStart team, according to an
established protocol. Among the recommendations are the following:

         -        A minimum of 5 percent of current HealthStart client charts
                  should be reviewed on a monthly basis for completeness and
                  accuracy;

         -        The review should cover all aspects of service delivery as
                  defined in the HealthStart standards and guidelines; it also
                  should include mechanisms for feedback to providers
                  responsible for clients whose charts were reviewed,
                  recommended actions to improve content/service delivery, and
                  follow-up on improvements in the content of medical records;

         -        The review should include charts for both new and previously
                  enrolled clients:

         -        A staff member who audits/review the charts should provide the
                  staff member responsible for the clients with feedback about
                  the quality and completeness of the clients records;

         -        A log containing the completed review protocols on the audited
                  charts should be maintained at the HealthStart site: this
                  should include strengths and deficiencies identified, actions
                  taken, and completeness of records at follow-up review.

Technical Assistance:

For sites that are currently HealthStart comprehensive maternity care providers,
every effort will be made to assist in working through problematic aspects of
service delivery. Technical assistance may be given at the site visits or at
other times, depending on providers need and availability of the Department of
Health and Senior Services HealthStart staff and consultants. The need for
assistance may be identified either by the provider or by DHSS\HealthStart
staff.

Certification, Renewal of certification, and Decertification Procedures:

Certification: This includes the decision-making process to be used to determine
which providers are qualified to deliver HealthStart comprehensive services. It
begins with the receipt and review of applications for comprehensive maternity
care services and may involve telephone calls and/or site visits for
clarification of information before final decisions are made.

<PAGE>

Renewal of certification: This may/may not involve the same process depending
upon the decision making process of DHSS HealthStart staff.

ALL PROVIDER CERTIFICATES WILL BE RENEWED EVERY 18 MONTHS.

Decertification: This includes the decision-making process to be used to
determine infractions leading to loss of the privilege of delivering HealthStart
comprehensive maternity services.

Outcome Evaluation Activities:

Evaluation of the health support activities, maternal and infant health outcomes
will be conducted by the DHSS Maternal and Child Health Epidemiology staff.
Findings will be reported and shared with HealthStart providers.

A.       1985 through program start-up and subsequent years:

         Assessment of annual trends (pre/post HealthStart comparisons), for
         state, counties, and major municipalities of New Jersey will be made.
         Outcomes to be examined include but are limited to the following:

         -        Percent low birthweight and very low birthweight infants
                  overall and by client characteristics, location in the state,
                  etc.;

         -        Birthweight-specific mortality (infant, perinatal, neonatal,
                  postneonatal) overall and by client characteristics, location
                  in the state.

B.       Outcome comparisons by year:

         Comparisons will be made of HealthStart Medicaid, non-HealthStart
         Medicaid, and all other non- Medicaid clients, Department of Health and
         Senior Services vital statistics, matched birth and death files linked
         to DHSS Hospital Discharge UB files, Department of Human Services
         Medicaid eligibility, claims and encounter files. The comparisons will
         be analyzed for the state overall, and by client characteristics,
         county and municipality of residence and services, etc. Outcomes to be
         examined with these data include, but are not limited to the following:

         -        Birthweight-specific mortality ( infant, perinatal, neonatal,
                  postneonatal, and early childhood);

         -        Birthweight-specific length of stay at birth and use of
                  neonatal intensive care units;

         -        Birthweight-specific rehospitalizations in the first and
                  second years of life;

         -        Emergency room use in the first and second years of life;

         -        Cost effectiveness of the HealthStart comprehensive maternity
                  care program.

<PAGE>

                                   APPENDICES

<PAGE>

                                   APPENDICES

1.   Comprehensive Organizational Structure Models.

2.   Obstetrical Services Risk Assessment Tool Sample.

3.   Plan of Care Sample Tool.

4.   Health Education Curriculum Guide Sample.

5.   Health Education Instruction Check List Sample Tool.

6.   Case Coordinator Activities.

7.   Health Education Services.

8.   Nutrition Services.

9.   Social Psychological Services.

10.  Patient Rights/Responsibilities.

11.  Postpartum Health Support Service/Preventive Health Care Contact Tool.

12.  Release Of Information Consent Form Sample.

13.  New Jersey Department of Health and Senior Services HIV "REQUIRED" Consent
     Form.

14.  Presumptive Eligibility (PE) FD 334 revised 5/94. See file HSAPI416.DOC.

15.  WIC HealthStart Forms Number H4383 "HS-8 3/95. See file HSAP 15.DOC.

16.  Weight Change Form Number H4388 "HS-7 4/95. See file HSAPI416.DOC.

17.  Recertification Forms (3 Pages "HS-12", 1 Page "HS-9"). See file HSAP
     17.DOC.

18.  Health Support Reimbursement Rates.

19.  Obstetrical Care Reimbursement Rates.

20.  Maternity Services Summary Data Forms (MSSD) Form "HS-2" Revision dates
     5/94 and 12/94). See file HSAP20.DOC.

<PAGE>

              MODEL 1: COMPREHENSIVE MATERNITY CARE - ONE PROVIDER

SINGLE SITE PROVIDER

PATIENT       ---              PRENATAL MEDICAL
                                  CARE DELIVERY
                                 HEALTH SUPPORT
                                    SERVICES

ONE PROVIDER PROVIDES THE MEDICAL AND HEALTH SUPPORT SERVICES. THIS IS THE BASIC
MODEL INVOLVING ONE PROVIDER WHO DELIVERS THE ENTIRE MATERNITY CARE SERVICES
PACKAGE. THIS PROVIDER CAN BE AGENCY BASED OR PRIVATE PRACTICE BASED.

<PAGE>

        MODEL 2: TWO (2) PROVIDERS AGREE TO JOINTLY PROVIDE COMPREHENSIVE
                               MATERNITY SERVICES

                                 LINKAGE MODEL

PATIENT   ---       PRENATAL
                    MEDICAL
                     CARE

                                             HEALTH
                                            SUPPORT
                                           SERVICES

                      DELIVERY

ONE PROVIDER AGREES TO PROVIDE THE MEDICAL COMPONENT AND THE OTHER PROVIDES THE
HEALTH SUPPORT SERVICES COMPONENT. FOR EXAMPLE, A PRIVATE PRACTICE (PHYSICIAN,
CERTIFIED NURSE MIDWIFE, NURSE-PRACTITIONER OR GROUP OF PRACTITIONERS) MAY
PROVIDE THE MEDICAL COMPONENT AT ONE SITE ACCESSIBLE TO THE PATIENT POPULATION,
AND THE HEALTH SUPPORT SERVICES MAY BE PROVIDED AT ANOTHER SITE SUCH AS A
HOSPITAL OUTPATIENT CLINIC, LOCAL HEALTH DEPARTMENT, COMMUNITY HEALTH CENTER,
HEALTH MAINTENANCE ORGANIZATION, ETC.

<PAGE>

                MODEL 3: ONE PROVIDER WITH AGREEMENT FOR REFERRAL

                                 REFERRAL MODEL

                                    PRENATAL
                                     MEDICAL
                                      CARE                     HEALTH
                                                               SUPPORT
PATIENT       ---                                   ---       SERVICES

                                    DELIVERY

A PROVIDER REFERS TO ANOTHER PROVIDER FOR PROVISION OF EITHER THE MEDICAL
COMPONENT OR THE HEALTH SUPPORT SERVICES COMPONENT. ALL PROVIDERS MUST BE
RECOGNIZED AND APPROVED MEDICAID PROVIDERS IN NEW JERSEY.

<PAGE>

             MODEL 4: ONE PROVIDER WITH MULTIPLE REFERRAL AGREEMENTS

                             MULTIPLE REFERRAL MODEL

                                    PRENATAL
PATIENT                              MEDICAL
               ---                    CARE
                                                       ---       DELIVERY
                                      ---
                                    HEALTH
                                    SUPPORT
                                   SERVICES

THIS IS A COMBINATION OF MODELS 1, 2, 3 AND HOSPITAL OF DELIVERY SERVICES AND
HEALTH SUPPORT SERVICES. THE DIFFERENCE IS THAT THE MEDICAL CARE PROVIDER FOR
PRENATAL CARE SERVICES IS ENTIRELY DIFFERENT THAN THE ONE PROVIDING THE DELIVERY
SERVICE. FOR EXAMPLE, A FAMILY PRACTICE PHYSICIAN MAY PROVIDE PRENATAL CARE AND
REFER FOR HEALTH SUPPORT SERVICES. THE OBSTETRICAL CARE PROVIDER FOR THE
DELIVERY MAY BE A PHYSICIAN (HOUSE RESIDENT COVERING, AN ATTENDING, AND/OR
ON-CALL PHYSICIAN) OR A CERTIFIED NURSE MIDWIFE OF THE HOSPITAL GENERALLY, BUT
NECESSARILY, USED FOR DELIVERY.

<PAGE>

                         MODEL 5: CORE REFERRAL PROVIDER
                        MULTIPLE PROVIDER REFERRAL MODEL

                                    PRENATAL
                                    MEDICAL
                                    CARE

                                     DELIVERY
                                      ---
                                    HEALTH
                                    SUPPORT                     PRENATAL
   PRENATAL                         SERVICES                    MEDICAL
   MEDICAL      ---                                    ---      CARE
   CARE                               ---

                                     DELIVERY

Providers of both prenatal medical care and delivery services refer to one
specific provider for health support services.

<PAGE>

                                                                      APPENDIX 4

Health Education Curriculum (all topics listed should be covered with
modifications depending on the timing of the patient's entry into prenatal
care.)

First Trimester

Normal physical and emotional changes during pregnancy.

Fetal growth and development

Normal discomforts during pregnancy, such as nausea, breast changes, frequent
urination, tiredness

Examples of warning signs, such as vaginal bleeding, heavy discharge, painful
urination, frequent headaches, blurred vision, signs and symptoms of preterm
labor

Personal hygiene care including perineal care

Level of activity, such as continuing work and/or education, sexual activity,
exercise, and rest

Lifestyle habits, including car safety and avoidance of alcohol, caffeine,
tobacco, illegal drugs, and self-prescribed medications

Possible occupational and environmental hazards, such as toxoplasmosis, rubella,
x-ray, chemicals

Need for continuing medical and dental care; for minor illnesses and for
pre-existing major illnesses, such as diabetes, hypertension

Second Trimester

Readiness for childbirth preparation: including the concept of prepared
childbirth, birth partners, identifying tension/stress, exercises for
relaxation,

Normal physical and emotional changes during pregnancy

Fetal growth and development

Normal discomforts of pregnancy, such as disrupted sleep patterns, weight
gain/loss, muscle cramps, constipation, heartburn, lower abdominal pain

Examples of warning signs, such as: vaginal bleeding, heavy discharge, painful
urination, frequent headaches, blurred vision, signs and symptoms of preterm
labor, absence of fetal activity

Personal hygiene care including perineal care

Level of activity, including continuing work and/or school, sexual activity,
exercise and rest

<PAGE>

Lifestyle habits, including, car safety and avoidance of alcohol, caffeine,
tobacco, illegal drugs, self-prescribed medications

Possible occupational and environmental hazards, such as toxoplasmosis, rubella,
x-ray, chemicals,

Need for continuing medical and prenatal care

Third Trimester

Child birth education course including:

         -        Labor process, including signs of onset of labor (2-4 weeks
                  before, 2-3 days before, 3 cardinal signs), vaginal delivery
                  and cesarean section

         -        Management of labor, including prepared childbirth methods,
                  medications, and different types of anesthesia/analgesia
                  during delivery ,

         -        Visit to hospital where delivery is to be performed

Preparation for hospital admission, including care for older children during
hospital stay, hospital routine, what to take to the hospital, and planning for
the trip home

Newborn needs and development, including infant crying, sleeping patterns,
eating patterns, pediatric care, circumcision, routine newborn screening tests

Preparations for the basic care of the infant including bathing, layette, car
seat,

Preparation of the family/household for the infant

Continuing medical care, including the importance of the postpartum visit

Future family planning service needs

Normal physical and emotional changes during pregnancy

Fetal growth and development

Normal discomforts during pregnancy, such as disrupted sleep patterns, weight
gain, muscle cramps, constipation, heartburn, lower abdominal or back pain,
tiredness

Examples of warning signs such as signs and symptoms of preterm labor, frequent
headaches, blurred vision, painful urination, heavy discharge, absence of fetal
activity

Level of activity, such as continuing work and/or education, sexual activity,
exercise, and rest

Lifestyle habits, including car safety and avoidance of alcohol, caffeine,
tobacco, illegal drugs and self -prescribed medications

<PAGE>

Postpartum

Review of labor and delivery

Normal physical and emotional changes after the birth, including adjustments to
the role of mother, postpartum depression, physical changes of the puerperium,
and resumption of menstrual cycle,

Normal discomforts of the mother after the birth
Level of activity after giving birth, including postpartum sexual activity

Lifestyle habits, including avoidance of alcohol, caffeine, tobacco, illegal
drugs, and self-prescribed medication

Future family planning information and services

Infant growth and development during the first three months of life

Basic care of the infant including feeding, bathing/diapering, safety, sleeping

Adjustment of the family/household to the new infant

Examples of warning signs for mother and infant which need medical attention

Need for continuing medical care for mother and infant including pediatric care,
care of circumcision, prescribed medications-

<PAGE>

                           CASE COORDINATION SERVICES

      IDENTIFIED AS                EXTENSIVE
      NEEDED                    PROVIDER/ADVOCATE
                                   ARRANGE FOR            QUALIFIED
                                   ADDITIONAL             PROVIDER
                                                           STAFF

                          Vigorous follow-up on missed
                                  appointments

                        Assure referral completions and
                            follow-ups and linkages

                                                                  QUALIFIED
ALL PATIENTS            Provide/arrange for home visit            PROVIDER
                                                                   STAFF

                 Case Coordinator/Coordination services ongoing
   Monitor/facilitate patient entry into and continuation with comprehensive
                                 maternity care
             Assist for presumptive eligibility/Medicaid eligibility
         Orientation content/process of comprehensive maternity services
                    Development of plan o care/review/update
                       Reinforce/support health teachings
       Home visit assessment/preventive health support postpartum contact
         Review/monitor/update patient record for required services and
                                  documentation
                 MSSD form completion/submit to DHSS evaluation

<PAGE>
                                                                      APPENDIX 7

                            HEALTH EDUCATION SERVICES

IDENTIFIED AS
NEEDED                           Extensive Health
                                 Education needs       QUALIFIED PROVIDER
                                                       STAFF SPECIALIST
                                                       AND/OR REFERRAL

                      Instructional and Individual Guidance
                                  (Short Term)
                               For Decision Making

ALL PATIENTS

                                                                    QUALIFIED
                                                                    PROVIDER
                                                                    STAFF

                  Basic Assessments (including Risk Assessment)
                         Initial, Subsequent, Postpartum

                     Health Education Instruction/Curriculum

                       Plan for Specialist as or if needed

                              Childbirth Education

<PAGE>

                                                                      APPENDIX 8

                               NUTRITION SERVICES

           IDENTIFIED                                  QUALIFIED PROVIDER
           AS NEEDED                                   STAFF SPECIALIST
                                                       AND/OR REFERRAL

                                    Extensive
                                   Nutritional
                                    Services

                       Specialized (Short Term) Nutrition
                            Assessment and Counseling

ALL PATIENTS

                                                                    QUALIFIED
                                                                    PROVIDER
                                                                    STAFF

 Basic Assessments (including Risk Assessment, Initial, Subsequent, Postpartum)

               Referral to WIC using Form HS-8 on Enrollment Day

                            Basic Nutrition Guidance

                         Plan for Specialist, if Needed

<PAGE>

                                                                      APPENDIX 9

                          SOCIAL PSYCHOLOGICAL SERVICES

                                                       QUALIFIED PROVIDER
                                                       STAFF SPECIALIST
                                                       AND/OR REFERRAL

           IDENTIFIED             Extensive
           AS NEEDED        Social/Psychological
                                  Services

                            Specialized (Short Term)
                 Social/Psychological Assessment and Counseling

ALL PATIENTS

                                                                    QUALIFIED
                                                                    PROVIDER
                                                                    STAFF

 Basic Assessments (including Risk Assessment, Initial, Subsequent, Postpartum)

                       Basic Social/Psychological Guidance

                         Plan for Specialist, if needed

<PAGE>

                                                                     APPENDIX 10

SAMPLE                                                                    SAMPLE

              MATERNITY CARE PATIENTS RIGHTS AND RESPONSIBILITIES(1)

RIGHTS:

         -        To be treated with dignity and respect.

         -        To maintain your privacy and confidentiality.

         -        To receive explanations about any tests or clinical procedures
                  and answers to any questions you have.

         -        To receive education and counseling.

         -        To review the medical record with the medical care
                  professional providing treatment

         -        To consent or refuse any care or treatment.

         -        To participate in making any plans and decisions about your
                  care during pregnancy, labor and delivery and the postpartum
                  period.

RESPONSIBILITIES:

         -        To be honest about your medical history and lifestyle which
                  may affect you or your unborn baby's health.

         -        To ask questions whenever you do not understand.

         -        To follow health advice and instructions.

         -        To keep appointments and complete referrals.

         -        To report any changes in your health.

1 The Comprehensive Perinatal Services Program. California Department of
Health Services, March, 1987

<PAGE>

                                                                     APPENDIX 11

         SAMPLE

AGENCY______________________________________________________________
        POSTPARTUM HEALTH SUPPORT SERVICES/PREVENTIVE HEALTH CARE CONTACT

Date____________________________
Patient's name__________________  Problems in Hospital________________________
Baby's name_____________________  Problems in Hospital________________________
Birth Date______________________  Birth Weight________________________________
Discharge Date__________________  Discharge Weight____________________________
Length__________________________  Head Circumference__________________________
Gestation_______________________  Apgar Score_________________________________

How does your baby feed?       Breast [ ]   Bottle [ ]
How often?______________    Any problems?_____________________________________
How does your baby soothe or calm itself?_____________________________________
How has your baby changed since birth?________________________________________

Does your baby sleep a lot?___________________________________________________
Who is your baby's health care provider?______________________________________
When is (or was) the first appointment?_______________________________________
Were there any problems?______________________________________________________

Do you have any special questions/concerns about yourself, your baby, father of
baby, siblings, or other household members?___________________________________

Mothers Goals/Needs (i.e. finance, Emotional, food, housing, clothing, etc.)__

Referral for identified needs, as appropriate.________________________________

Plan of Care_____________________ Completed____________Reviewed_______________

Nurse Signature/Case Coordinator________________________ Date_________________
Social Worker___________________________________________ Date_________________
Other___________________________________________________ Date_________________
Health Education/See Health Education Checksheet
Signature_______________________________________________ Date_________________
Nutrition/See HealthStart/WIC Form
Signature_______________________________________________ Date_________________

6 Week Doctor Appointment        Date__________________Yes    [ ]    No    [ ]
Family Planning Appointment      Date__________________Yes    [ ]    No    [ ]
WIC Appointment                  Date__________________Yes    [ ]    No    [ ]

<PAGE>

                                                                     APPENDIX 12

           New Jersey State Department of Health and Senior Services
                              HealthStart Program

                             RELEASE OF INFORMATION

I authorize __________________________________________(agency name) to release
any medical and other information about me to the State Department of Health and
Senior Services which is needed for the HealthStart program for evaluation under
Statute PI1987 c.115 and NJAC 10:54 requiring the Department of Health and
Senior Services to collect these data to perform the evaluation of the
HealthStart program.

I know that the disclosure of my Social Security Number is voluntary and will be
kept in strict confidentiality. It will be used only for purposes of evaluation
and research by the Department.

Signed ___________________________________ Date _______________________________

<PAGE>

                                                                     APPENDIX 13

               NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES

Name: ________________________________________________________________________

                   IN ACCORDANCE WITH CHAPTER 174. P.L. 1995:

I acknowledge that_____________________________________________has counseled and
provided me with:     (Name of-physician or other provider)

         A.       Information concerning how HIV is transmitted.

         B.       The benefits of voluntary testing.

         C.       The benefits of knowing if I have HIV virus or not.

         D.       The treatments which are available to me and my unborn child
                  should I test positive, and

         E.       That I have a right to refuse the test and I will not be
                  denied treatment.

I have consented to be tested for infection with HIV.     [ ]

I have decided not to be tested for infection with HIV.   [ ]

This record shall be retained as a permanent part of the patient's medical
record.

Date _______________________             Signature _____________________________

                                         Witness _______________________________

<PAGE>

B.4.3          RESERVED

<PAGE>

[RESERVED]

<PAGE>

[RESERVED]
<PAGE>

[RESERVED]
<PAGE>
B.4.4          RESERVED
<PAGE>

B.4.5          Head Start Programs
<PAGE>

                              HEAD START PROGRAMS
<PAGE>

ATLANTIC/CAPE MAY
Atlantic Human Resources, Inc.
Carolyn H. Atherly, Director
One South New York Ave.
Atlantic City, NJ 08401
Phone 609-348-4166
Fax 609-449-1327

ATLANTIC/CUMBERLAND COUNTIES
Rural Opportunities, Inc.
Ramona Merlina, Director
510 East Landis Ave.
Vineland, NJ 08360-3101
Phone 609-696-180 x 31
Fax 609-696-4892

BERGEN COUNTY HEAD START
Vivian Fergy, Acting Director
C/O St. Cecilia High School
65 West Demarest Ave.
Englewood, NJ 07631
Phone 201-969-0200
Fax 201-968-0240

BURLINGTON
Burlington County Head Start
Carolyn E. Henderson, Director
718 South Route 130
Burlington, NJ 08016
Phone 609-261-2323
Fax 609-261-8520

CAMDEN
Giants House Parent Child Center
Gladys Adximah, Director
3201 Federal Street
Camden, NJ 08103
Phone 609-541-2846
Fax 609-541-5332

CAMDEN
Camden County CEO Head Start
Barbara Dempsey, Director
500 Pine Street
Camden, NJ 08103
Phone 609-964-2100 x 11
Fax 609-964-0428

CUMBERLAND/GLOUCESTER/SALEM
Tri-County Head Start
Cynthia Wythe-Mosley, Director
30 Giles Street
Bridgeton, NJ 08302-1816
Phone 609-453-0804
Fax 609-453-8016

EAST ORANGE CHILD DEVELOPMENT
Sarah Masaford, Executive Director
50 Washington Street
PO Box 890
East Orange, NJ 07019
Phone 973-676-1110
Fax 973-676-8026

ESSEX
Babyland Nursery, Inc.
Mary Smith, Director
755 South Orange Ave.
Newark, NJ 07108
Phone 973-399-3400
Fax 973-399-2076

ESSEX
Newark Preschool Council;
Audrey West, Executive Director
10 Park Place
Newark, NJ 07102
Phone 973-621-5980
Fax 973-621-6051

ESSEX
Montclair Child Development
Audrey Fletcher, Executive Director
272 Baldwin Street
Glen Ridge, NJ 07028
Phone 973-783-0220
Fax 973-680-0059

<PAGE>

ESSEX
Leagury Head Start
Veronica Ray, Executive Director
1020 Broad Street
Newark, NJ 07102
Phone 973-643-8357
Fax 973-624-1268

ESSEX
Friendly Fuld Head Start
Kim Baldwin, Director
71 Boyd Street
Newark, NJ 07103
Phone 973-642-3143
Fax 973-623-2080

HUDSON
North Hudson Head Start
Lorraine C. Johnson, Director
533-535 41st Street
Union City, NJ 07087
Phone 201-617-0901
Fax 201-5 01-0272

HUDSON COUNTY
Jersey City Child Development
Esther Lee, Executive Director
93-103 Nelson Ave.
Jersey City, NJ 07037
Phone 201-656-1500
Fax 201-656-4468

HUDSON
HOPES Head Start
Ora Welch, Executive Director
301 Garden Street
Hoboken, NJ 07030
Phone 201-656-3711
Fax 201-656-8213

HUDSON COUNTY
Bayonne Head Start
Lauretta Allston, Director
20 West 8th Street
Bayonne, NJ 07002
Phone 201-437-7702
Fax 201-437-2810

MERCER COUNTY
Trenton Head Start
Jeri Smith, Executive Director
222 East State Street
Trenton, NJ 08618
Phone 609-392-2113
Fax 609-695-0359

MERCER COUNTY
Mercer County Head Start
Consuelo Me Damlet, Executive Director
2238 Hamilton Ave.
Trenton, NJ 08619
Phone 609-563-5894
Fax 609-588-5885

MIDDLESEX COUNTY
Middlesex County Head Start
Carol Kempner, Director
1215 Livingston Avenue
North Brunswick, NJ 08902
Phone 732-646-4600x222
Fax 732-646-3728

MONMOUTH COUNTY
ICCC Head Start
Angeline Harris, Executive Director
36 Ridge Road
Neptune, NJ 07753
Phone 732-988-7736
Fax 732-988-4511

MORRIS COUNTY
Morris County Head Start
Ellenn Jambonis, Executive Director
18 Thompson Ave.
Dover, NJ 07801
Phone 973-328-3882
Fax 973-328-3386

OCEAN COUNTY
Ocean County Head Start

<PAGE>

Barbara Brown, Director
40 Washington Street
Toms River, NJ 08754
Phone 732-244-6333
Fax 732-349-4227

OCEAN COUNTY
LEAP, Inc.
Orest Nadrags, Executive Director
30 Eighth Street
Lakewood, NJ 08701
Phone 973-364-4333
Fax 973-364-4236

PASSAIC COUNTY
Center For Family Resources
Sharon Weln, Executive Director
12 Morris Road
Ringwood, NJ 07456
Phone 973-962-8055
Fax 973-962-1129

PASSAIC COUNTY
Passaic City Head Start
Passaic Mala, Director
68-72 Third Street, 2nd Floor
Passaic City, NJ 07055
Phone 973-365-5780
Fax 973-458-9380

PASSAIC COUNTY
Concerned Parents for Head Start
Cecile Dickey, Executive Director
90 Martin Street
Paterson, NJ 07302
Phone 973-345-9555
Fax 973-345-6719

UNION COUNTY
Second Street Youth Center
Yvonne Thomas, Executive Director
933 South Second
Plainfield, NJ 07063
Phone 973-361-0161
Fax 973-756-6570

SOMERSET COUNTY
Somerset County Child Development
Gloria Strickland, Executive Director
429 Lewis Street PO Box 119
Somerset, NJ 08893
Phone 732-945-5886
Fax 732-846-7569

UNION COUNTY
Twp. Of Union Public Schools Head Start
Jean Denrew, Director
C/O Hamilton School
1231 Burnet Ave.
Union, NJ 07083
Phone 973-851-8563
Fax 973-851-6784

UNION COUNTY
Union Twp. CAO Head Start
Jennifer Alford, Director
333 North Broad
Elizabeth, NJ 07201
Phone 973-629-9199
Fax 973-629-5190

WARREN/SUSSEX/HUNTERDON
NORWESCAP Head Start
Linda Kane, Director
481 Memorial Pkwy, Parkview Building
Phillipsburg, NJ 08865
Phone 973-654-3830
Fax 973-454-0362

<PAGE>

B.4.6    SCHOOL-BASED YOUTH SERVICES PROGRAM

<PAGE>

                 NEW JERSEY SCHOOL BASED YOUTH SERVICES PROGRAM

GOAL:               The School based Youth Services Program (SBYSP), developed
                    by the New Jersey Department of Human Services, provides
                    adolescents and children, especially those with problems,
                    with the opportunity to complete their education, to obtain
                    skills that lead to employment or additional education, and
                    to lead a mentally and physically healthy life.

SERVICES:           The SBYSP links the education and human services health and
                    employment systems.

                    The SBYSP meets local needs, the Department of Human
                    Services imposes no single statewide model. However, all
                    SBYSP projects must provide mental health and family
                    counseling, health and employment services. All services
                    must be provided at one site.

                    SBYSP sites primarily serve adolescents between ages 13-19,
                    many of whom are at risk of dropping out of school, becoming
                    pregnant, using drugs, developing mental illness, or being
                    unemployed. SBYSP sites also serve those most at risk of
                    being dependent for long periods on state assistance
                    programs.

                    Each site offers a comprehensive range of services,
                    including:

                    -   crisis intervention;

                    -   individual and family counseling;

                    -   primary and preventive health services;

                    -   drug and alcohol abuse counseling;

                    -   employment counseling, training and placement;

                    -   summer and part-time job development;

                    -   referrals to health and social services; and

                    -   recreation.

                    Some sites offer day care, teen parenting, training, special
                    vocational programs, family planning, transportation and hot
                    lines.

                    Parental consent is required for all SBYSP services.

<PAGE>

                    SBYSP augments and coordinates services for teenagers; it
                    does not supplant or duplicate currently existing services.

SITES:              SBYSP operates in 30 urban, rural and suburban school
                    districts, with at least one site per county. The program
                    provides teenagers with a comprehensive set of services on a
                    "one-stop shopping" basis. In 1990 the program was expanded
                    to elementary and middle schools in one urban and one rural
                    community.

<PAGE>

                                PROGRAM DIRECTORS

                       SCHOOL BASED YOUTH SERVICES PROGRAM

ATLANTIC

Dan Carter                            Atlantic City Teen Services Center
                                      Atlantic City High School
(609) 345-8336                        1400 Albany Ave.
FAX (609) 345-8373                    Atlantic City, NJ 08401

Trish Helms                           Pleasantville School Based Program
(609) 383-6900 X-240                  701 Mill Rd.
or (609) 407-4929                     Pleasantville, NJ 08232
FAX (609) 383-6952

BERGEN

Dominic Polifrone                     Hackensack High School
(201)646-0722                         First and Beech Streets
FAX (201) 646-1558                    Hackensack, NJ 07601
Hackmc@idt.net

BURLINGTON

Shaun Stem                            Pemberton School Based Program
                                      P.O. Box 246
(609) 894-0170                        Pemberton High School
FAX (609) 894-0153                    Ameys Mount Rd.
                                      Pemberton, NJ 08068

CAMDEN

Sharon Shields                        Camden High Vocational Annex
Office (856) 541-0253                 Park & Baird Boulevards
FAX (856) 541-198:                    Camden, NJ 08103
Camden H.S. Site (856) 614-7680
FAX (856) 966-5282
Woodrow Wilson Site (856) 966-4282
East Camden Middle

CAPE MAY

Caren Maene                           Cape Counseling Service, Inc.
                                      ATTN: SBYSP
(609) 884-8641                        128 Crest Haven Road

<PAGE>

FAX (609) 884-4840                    Cape May Court House, NJ 08210

CUMBERLAND

Robert Gondolf                        CHCI SBYSP Teen Center
(856)451-4440                         Bridgeton High School
                                      111 N. West Ave.
                                      Bridgeton, NJ 08302
FAX (856) 451-5815

ESSEX

Mary Ellen Mess                       Teen Powerhouse
MEM's Office (973) 972-6353           91 West Market Street
Site (973) 622-1100X4080/1            Newark, NJ 07103
FAX (973) 623-2010 (School)
        ***972-6378 (Office)

Beverly Canady, Site Manager          Irvington School Based Program
(973)399-7797                         c/o Irvington High School
FAX (973) 372-6545                    1253 Clinton Avenue
                                      Irvington, NJ 07111

Catherine DeLellis                    14 Park Ave.
(973) 228-3000                        Caldwell, NJ 07006
FAX (973) 228-2742

GLOUCESTER

Frankie Lamborne                      Gloucester Co. Institute of Technology
(856) 468-1445                        P.O. Box 800
Ext. 2151                             1360 Tanyard Road
Flamborne@gcit.og                     Sewell, NJ 08080
FAX (856) 468-0522

Wayne Copeland                        Clayton Place
                                      457 North Delsea Drive
(856) 863-9090                        P.O. Box 85
FAX (856) 863-8326                    Clayton, NJ 08312

<PAGE>

HUDSON

Richard Quagliariello                 Union City Board of Education
Program Director                      3912 Bergen Turnpike
                                      Union City, NJ 07087
(201)392-3646
FAX (201) 348-1810

Nivia Rojas                           Emerson High School
Human Services Coordinator            318 18th Street
(201)392-3621                         Union City, NJ 07087
FAX (201)348-1283
Nrojas@union-city.klz.nj.us

Agnes Gillespie                       Bayonne School Based Program
                                      Bayonne Board of Education
(201) 858-7885                        Student Center, Room 124
FAX (201)436-3931                     Avenue A & 29th St.
                                      Bayonne, NJ:07002

HUNTERDON

Gary Piscitelli                       Hunterdon Medical Center-HBH
(908) 788-6401                        2100 Wescott Drive
FAX (908) 788-6584                    Flemington, NJ 08822
David Eichlin, Coordinator

MERCER

Pam Lackey                            Trenton School Based Program
                                      Trenton Central High School
(609) 989-2964                        400 Chambers St., Portable Unit
FAX (609) 989-2499                    Trenton, NJ 08609

MIDDLESEX

Gail Reynolds                         New Brunswick High School
(732) 745-5306                        School Based Program
                                      1125 Livingston Avenue
FAX (732) 418-4329                    New Brunswick, NJ 08901

Marilyn Green                         Roosevelt School
                                      83 Livingston Ave.
(732) 235-8438                        New Brunswick, NJ 08901
FAX (732) 418-4310

<PAGE>

Leslie Hodes                          South Brunswick High School Based Youth
                                      Services Program
                                      South Brunswick High SBYSP
(732) 329-4044 X-3224                 750 Ridge Rd., P.O. Box 183
FAX (732) 274-1237                    Monmouth Junction, NJ 08852
Hodes@umdnj.edu

MONMOUTH

Pamela Zern-Coviello                  Long Branch High School
(732) 728-9533                        391 Westwood Avenue
FAX (732) 728-9670                    Long Branch, NJ 07740

MORRIS

Linda Seeley                          Dover High School
(973) 989-0540 (Site)                 100 Grace Street
(973) 989-0045                        Dover, NJ 07801
FAX (973) 442-1779

OCEAN

Dominick Riggi                        Preferred Children's Services
(732) 363-7272                        CN 2036
FAX (732) 905-5644                    Lakewood, NJ 08701

Ginny Galaro                          Pinelands Regional High School
                                      Nugentown Road
(609) 296-3106 Ext. 283               P.O. Box 248
FAX (609) 294-9519                    Tuckerton, NJ 08087-0248

PASSAIC

Paula Howe                            School Based Youth Services Program
(973) 881-3333                        Kennedy High School
(97:) 881-3350/52                     62-127 Preakness Ave.
FAX (973) 881-9532                    Paterson, NJ 07522
Or (973) 720-9553

Susan Proietti                        Passaic School Based Program
(973) 470-5595                        185 Paulison Ave.
(973) 473-2408                        Passaic, NJ 07055
FAX (973) 473-6883

<PAGE>

SALEM

Joan Hoolahan                         Salem County School Based Youth Services
                                      Program
                                      Salem County Vocational-Technical Schools
(856)935-7365                         166 Salem-Woodstown Road
FAX (856) 935-5027                    Salem, NJ 08079

SOMERSET

Pam Brink                             Somerset County Vocational - Technical
                                      High School
                                      P.O. Box 6350
(908) 526-8900 Ext. 7286              North Bridge St. & Vogt Drive
FAX (908) 526-9212                    Bridgewater, NJ 08807
Pbrink(2)scette.comorg

SUSSEX

Sharon Hosking                        Sussex County Vocational-Technical School
(973) 383-6700 X-329                  105 North Church Road
(973) 579-7725                        Sparta, NJ 07871
FAX (973) 579-7493

UNION

Stacy Greene                          Elizabeth SBYSP YES Program
                                      Social Service Department
(908) 527-5387                        St. Elizabeth Hospital
FAX (908) 527-5184                    225 Williamson Street
                                      Elizabeth, NJ 07207

Louise Yohalem                        Plainfield School Based Youth Services
(908)753-3192                         Program
FAX (908) 226-2551                    925 Arlington Ave.
Lvohalem@plainfield.klz.nj            Plainfield, NJ 07060

WARREN

Sue Pappas                            Phillipsburg SBYSP
(908)213-2596                         Board of Education
(908) 859-2127                        575 Elder Ave.
FAX (908) 213-2062                    Phillipsburg, NJ 08865
spappas@server.pburg.k12.nj.us

****************

<PAGE>

Sallie Gorohoff
Coordinator of the Children and Family Initiative
  in Atlantic City
Shore View Building
101 S. Shore Road
Northfield, NJ 08225
(609) 645-7700, Ext. 4332
FAX (609) 645-5809

Essex

Rose Smith
SBYSP
Children's Hospital of NJ
201 Lyons Ave., H-l
Newark, NJ 07112
(973) 926-4805
FAX (973) 923-3908

Monmouth

Therese T. Hendrickson
School Based Health & Social Service Clinic
Keansburg School District
140 Port Monmouth Rd.
Keansburg, NJ 07734
(732) 787-7575

Hudson

Marilyn Cintron
Horizon Health Center
Program Administrator for School Based Clinics
714 Bergen Ave.
Jersey City, NJ 07306
Mc@horizonhealth.org
(201) 451-6300 Ext. 121
FAX (201) 451-0619

Kelly Gleason
District Service Broker
Division of Community & Support Services
Jersey City Public Schools
346 Clarement Ave., 6th floor
Jersey City, NJ 07305
(201)413-5762
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
             SITE                              SERVICES RENDERED                                        STAFFING
                                                                                                  (with degrees noted)
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                                                   <C>
Bridgeton SBYSP                 Comprehensive adolescent health care, including       2 Registered Nurses (full time) who are
                                - Physicals (school, work, sports)                    shared by high school, middle school and
MAJOR HEALTH PROVIDER           - HIV, STD, pregnancy screenings and treatment        elementary School
                                - Emergency care and referrals
Community Health, Center,       - Well and sick care for infants and toddlers in      2 Nurse Practitioners-one full time at
Inc.(FQHC)                        child care centers                                  Bridgeton High School, one at the middle
                                - Chronic Illness oversight                           school
                                - Immunizations
                                - EPSDTs                                              One MD (medical doctor) part time (4
                                - Connect children and families to NJ FamilyCare      hours/week plus phone supervision and
                                                                                      referrals as needed)
------------------------------------------------------------------------------------------------------------------------------------
Atlantic City High SBYSP        Comprehensive Adolescent Health                       1 Registered Nurse (full time)
                                - Physical exams
MAJOR HEALTH PROVIDER           - Immunizations                                       1 MD (Pediatrician) part time for 6
                                - Primary and preventive health services              hours/week
AtlantiCare                     - Emergency care/referrals
                                - Health Education
                                - Substance Abuse
                                - Connect children and families to NJ FamilyCare
------------------------------------------------------------------------------------------------------------------------------------
Elizabeth High SBYSP            Comprehensive Adolescent Health                       1 Doctor (MD) (at hospital clinic) part time
                                Services focused on maturational issues:              for 4 hours/week on site and referrals as
MAJOR HEALTH PROVIDER           - Pregnancy screens, counseling, prenatal care,       needed
                                  nutrition education, pregnancy prevention
St. Elizabeth Hospital through    education with special attention to immigrant       1 BSN Registered Nurse full time
SBYSP funding                     youth;
                                - Emergency care and referrals                        1 BSN Registered Nurse part time
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
             SITE                              SERVICES RENDERED                                        STAFFING
                                                                                                  (with degrees noted)
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                                                   <C>
                                - Referrals & follow up for chronic illness, using
                                  hospital services & previous prescriptions by
                                  doctors in other countries;
                                - Some sports and school re-admission physicals
                                - Teen Only clinic at hospital (one day/week)
                                Note: Hospital is across the street from the high
                                school
                                - Connect children and families to NJ FamilyCare
------------------------------------------------------------------------------------------------------------------------------------
Long Branch High SBYSP          Primary health care (12-13 protocols)-asthma          1 NP MSN (Nurse Practitioner with Masters
                                support group, diabetes support group, health         Degree) full time
MAJOR HEALTH PROVIDER           education, pregnancy testing and family planning
                                information, community health referrals, nutrition    1 RN (Registered Nurse) part time-16
SBYSP                           counseling, teen parenting support and pregnant teen  hours/week
                                counseling.
Lead Agency (Board of Ed) and                                                         1 MD (Pediatrician) part time-6 hours/week
SBYSP Director higher           Connect children and families to NJ FamilyCare.
personnel
------------------------------------------------------------------------------------------------------------------------------------
Camden SBYSP                    Comprehensive Adolescent Health Care, including:      1 NP (Nurse Practitioner) full time at Camden
                                - Physicals (jobs, sports)                            High School
MAJOR HEALTH PROVIDER           - Tests (e.g. anemia, sickle cell, HBP, STDs,
                                  pregnancy)                                          1 RN (Registered Nurse) full time
CamCare through $60,000         - Follow up on chronic problems (e.g. diabetes,
subcontract-SBYSP funds           anemia, asthma, allergies, eating disorders)        1 MD (Medical Doctor) part time (4
                                - Substance abuse counseling, family therapy,         hours/week) at Camden H.S., Referrals as
                                  referrals                                           needed
                                - Psychotic symptoms referred to mental health
                                  clinicians                                          1 NP (Nurse Practitioner) part time (20
                                - Sexuality: counsel, education, some treatment       hours/week) at Woodrow Wilson High School
                                  (e.g. STDs), prenatal care
                                - Emergency care and referrals
                                                                                      1 NP part time (10 hours/week) at East
                                                                                      Camden Middle School
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
             SITE                              SERVICES RENDERED                                    STAFFING
                                                                                              (with degrees noted)
--------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                                               <C>
                                - Immunization referrals
                                - Well and sick care for infants in child care
                                  centers
--------------------------------------------------------------------------------------------------------------------------------
Plainfield SBYSP                Comprehensive adolescent health care, including   1 Pediatrician (MD) full time
                                - Physicals (school, work, sports)
MAJOR HEALTH PROVIDER           - HIV, STD, pregnancy screenings and treatment    1 RNNP (Registered Nurse Practitioner) full time
                                - Emergency care ad referrals
The Cardinal Health Center, a   - Well and sick care for infants and toddlers in
satellite of Plainfield Health    child care centers
Center (FQHC)                   - Chronic illness oversight
                                - Immunizations
                                - EPSDTs
                                - Connect children and families to NJ FamilyCare

</TABLE>

<PAGE>

B.4.7 LOCAL HEALTH DEPARTMENTS

<PAGE>

                     LOCAL HEALTH DEPARTMENTS IN NEW JERSEY
                                  JANUARY 1999

ATLANTIC COUNTY

Atlantic City Health Department
Ronald L. Cash, M.P.P., M.P.A.
Director, Division of Health
City Hall
1301 Bacharach Blvd.
Atlantic City, New Jersey 08401-6903
(609) 347-5663 Fax #(609) 347-5662

ATLANTIC CITY

Atlantic County Health Department
Tracye M. McArdle, M.P.H.
Health Officer
Department of Health
201 South Shore Road
Northfield, New Jersey 08225-2370
(609)645-5935 Fax #(609) 645-5931
E-mail address: mcardle_tracye@aclink.org
Website: http://commlink.atlantic.county.lib.nj.us

ABSECON                          FOLSOM                         NORTHFIELD
BRIGANTINE                       GALLOWAY                       PLEASANTVILLE
BUENA                            HAMILTON                       PORT REPUBLIC
BUENA VISTA                      HAMMONTON                      SOMERS POINT
CORBIN                           LINWOOD                        VENTNOR
EGG HARBOR CITY                  LONGPORT                       WEYMOUTH
EGG HARBOR TWP                   MARGATE
ESTELLE MANOR                    MULLICA

BERGEN COUNTY

Bergen County Department of Health Services
Mark Guarino, M.P.H.
Director
327 Ridgewood Avenue
Paramus, New Jersey 07652-4895
(201)599-6100 Fax #(201) 986-1068
E-mail address: bchealth@carroll.com
                bclincs@carroll.com
Website: http://www.bergen.org/bergen/countygov/healthserv.hti

<PAGE>

ALLENDALE                        LITTLE FERRY                  RIDGEWOOD
ALPINE                           LODI                          ROCHELLE PARK
CLIFFSIDE PARK                   LYNDHURST                     RUTHERFORD
EAST RUTHERFORD                  MAYWOOD                       SADDLE BROOK
EDGEWATER                        NORTH ARLINGTON               TETERBORO
FAIRVIEW                         NORWOOD                       WESTWOOD
FRANKLIN LAKES                   OAKLAND                       WOODCLIFF LAKE
GLEN ROCK                        ORADELL                       WOOD-RIDGE
HAWORTH                          PARK RIDGE
HO-HO-KUS

Bergenfield Health Department
David Volpe, M.A., B.S.
Health Officer
Borough Hall
198 N. Washington Ave.
Bergenfield, New Jersey 07621-1395
(201)387-4060 Fax #(201) 385-7386
E-mail address: dvolpel@juno.com

BERGENFIELD

Closter Health Department
Louis S. Apa
Health Officer
Municipal Building
295 Closter Dock Road
Closter, New Jersey 07624-2697
(201) 784-0752 Fax #(201) 784-9721

CLOSTER
ROCKLEIGH

DuRidge Regional Health Commission
Guy Stark, B.S., M.A., Ph.D.
Health Officer
50 Washington Avenue
Dumont, New Jersey 07628-3694
(201) 387-5028 Fax #(201) 387-5065

DUMONT                             RIDGEFIELD
GARFIELD                           RIDGEFIELD PARK TWP.
MOONACHIE                          SADDLE RIVER

<PAGE>

Elmwood Park Department of Health
Deborah Ricci, M.P.A.
Health Officer
Municipal Building
182 Market Street
Elmwood Park, New Jersey 07407-1497
(201)796-1072 Fax #(201) 796-0292
E-mail address: 72054.705@compuserve.com

ELMWOOD PARK
HASBROUCK HEIGHTS

Englewood Health Department
Violet P. Cherry, A.C.S.W., M.P.H., C.H.E.S.
Health Officer
73 South Van Brunt Street
Englewood, New Jersey 07631-3485
(201)568-3450 Fax #(201) 568-5738

ENGLEWOOD

Fair Lawn Health Department
Denise A. DePalma-Farr, M.A., C.H.E.S.
Health Officer
8-01 Fairlawn Avenue, P.O. Box 376
Fair Lawn, New Jersey 07410-1800
(201) 794-5327 Fax #(201) 475-2975
E-mail address: ddepalma@superlink.net

FAIR LAWN

Fort Lee Health Department
Stephen S. Wielkocz, M.A.
Health Officer
Memorial Health Building
309 Main Street
Fort Lee, New Jersey 07024-4799
(201)592-3590 Fax #(201) 585-1901
E-mail address: flhealth@superlink.net

FORT LEE
Hackensack Health Department
John G. Christ, M.P.A.
Health Officer
215 State Street
Hackensack, New Jersey 07601-5582
(201)646-3966 Fax #(201) 646-3989

HACKENSACK

Mid-Bergen Regional Health Commission

<PAGE>

Carol Wagner, M.S.
Director
705 Kinderkamack Road
River Edge, New Jersey 07661-2499
(201)599-6290 Fax #(201) 599-0997

BOGOTA
CARLSTADT
ENGLEWOOD CLIFFS
LEONIA
NEW MILFORD
RAMSEY
RIVER EDGE
SOUTH HACKENSACK TWP
TENAFLY
WALLINGTON

N.W. Bergen Regional Health Commission
Rod W. Preiss
Health Officer
22 West Prospect Street
Waldwick, New Jersey 07463-1739
(201)445-7217 Fax #(201) 445-7219

HILLSDALE
MIDLAND PARK
MONTVALE
NORTHVALE
OLD TAPPAN
UPPER SADDLE RIVER
WALDWICK

Palisades Park Health Department
Jad Mihalinec, M.A.
Health Officer
Municipal Building
275 Broad Avenue
Palisades Park, New Jersey 07650-1578
(201)585-4106 Fax #(201) 585-4107

PALISADES PARK

Paramus Board of Health
John Hopper
Health Officer
Borough Hall, Jockish Square
Paramus, New Jersey 07652-2771
(201) 265-2100 Fax #(201) 225-9014

PARAMUS
MAHWAH

<PAGE>

Teaneck Department of Health & Human Services
Wayne A. Fisher, M.A.
Health Officer
Municipal Building
818 Teaneck Road
Teaneck, New Jersey 07666-9998
(201)837-4824 Fax #(201) 837-1222

TEANECK

Township of Washington Local Health Agency
Daniel G. Levy, M.P.A.
Health Officer
350 Hudson Avenue
Twp. of Washington, New Jersey 07675-4798
(201) 666-8512 Fax #(201) 664-8281

CRESSKILL
DEMAREST
EMERSON
HARRINGTON PARK
RIVER VALE
WASHINGTON

BURLINGTON COUNTY

Burlington County Health Department
Walter Trommelen, M.P.H.
Public Health Coordinator
Raphael Meadow Health Center
15 Pioneer Blvd., P.O. Box 6000
Westampton, New Jersey 08060-1384
(609) 265-5548 Fax #(609) 265-5541
E-mail address: bchd@msn.com

BASS RIVER TWP                FLORENCE               PEMBERTON
BEVERLY                       HAINESPORT             PEMBERTON TWP
BORDENTOWN                    LUMBERTON              RIVERSIDE
BORDENTOWN TWP                MANSFIELD              RIVERTON
BURLINGTON                    MAPLE SHADE            SHAMONG
BURLINGTON TWP                MEDFORD LK             SOUTHHAMPTON
CHESTERFIELD TWP              MEDFORD TWP            SPRINGFIELD
CINNAMINSON TWP               MORRESTOWN             TABERNACLE
DELANCO TWP                   MT HOLLY               WASHINGTON TWP
DELRAN TWP                    MT LAUREL              WESTHAMPTON
EASTHAMPTON                   NEW HANOVER            WILLINGBORO
EDGEWATER PK                  NORTH HANOVER          WOODLAND
EVESHAM TWP                   PALMYRA                WRIGHTSTOWN
FIELDSBORO

<PAGE>

CAMDEN COUNTY

Camden County Division of Health
Jung H. Cho, V.M.D., Dr.P.H.
Health Officer
Jefferson House, Lakeland Road
P.O. Box 9
Blackwood, New Jersey 08012-0009
(609) 374-6037 Fax #(609) 374-6034
E-mail address: ccho@co.camden.nj.us

AUDUBON                 GIBBSBORO               MT EPHRAIM
AUDUBON PARK            GLOUCESTER CITY         OAKLYN
BARRINGTON              GLOUCESTER TWP          PENNSAUKEN
BELLMAWR                HADDON HEIGHTS          PINE HILL
BERLIN BORO             HADDON TWP              PINE VALLEY
BERLIN TWP              HADDONFIELD             RUNNEMEDE
BROOKLAWN               HI-NELLA                SOMERDALE
CAMDEN                  LAUREL SPRINGS          STRATFORD
CHERRY HILL             LAWNSIDE                TAVISTOCK
CHESILHURST             LINDENWOLD              VOORHEES TWP
CLEMENTON               MAGNOLIA                WATERFORD TWP
COLLINGSWOOD            MERCHANTVILLE           WINSLOW TWP
                                                WOODLYNNE

CAPE MAY COUNTY

Cape May County Health Department
Louis Lamanna, M.A., H.O.
Public Health Coordinator
4 Moore Road, DN 601
Cape May Court House, New Jersey 08210-1601
(609) 465-1187 Fax # (609)465-3933
E-mail address:      lamann@co.cape-may.nj.us

AVALON                  SEA ISLE
CAPE MAY                STONE HARBOR
CAPE MAY POINT          UPPER TWP
DENNIS TWP              WEST CAPE MAY
LOWER TWP               WEST WILDWOOD
MIDDLE TWP              WILDWOOD
NORTH WILDWOOD          WILDWOOD CREST
OCEAN CITY              WOODBINE

CUMBERLAND COUNTY

Cumberland County Health Department
<PAGE>

Manuel Ostroff, M.A.                            (Louis Cresci, HO, Vineland HD
Public Health Coordinator                       is providing health officer
790 East Commerce Street                        coverage during Mr. Ostroff's
Bridgeton, New Jersey 08302-2293                illness)
(609)453-2150 Fax # (609) 453-0338
E-mail address: healthbd@cumberland.county.lib.nj.us

BRIDGETON                        GREENWICH                   SHILOH
COMMERCIAL TWP                   HOPEWELL                    STOW CREEK
DEERFIELD                        LAWRENCE                    UPPER DEERFIELD
DOWNE TWP                        MAURICE RIVER
FAIRFIELD                        MILLVILLE

City of Vineland Department of Health
Louis F. Cresci, Jr., B.A.
Health Officer
City Hall
640 E. Wood Street
P.O.Box 1508
Vineland, New Jersey 08360-0978
(609)794-4131 Fax # (609) 794-1159

VINELAND

ESSEX COUNTY

Roseland - see East Hanover Board of Health (MORRIS CO.)
South Orange - see Little Falls Health Dept. (PASSAIC CO.)

Belleville Health Department
Thomas Longo
Health Officer
50 Newark Avenue, Suite 207
Belleville, New Jersey 07109-3252
(973) 450-3389 Fax #(973) 450-4550

BELLEVILLE

Bloomfield Department of Health
Richard B. Proctor, M.S.MGT
Director of Health
1 Municipal Plaza
Bloomfield, New Jersey 07003-3488
(973) 680-4024 Fax #(973) 680-0134

BLOOMFIELD                         GLEN RIDGE
CALDWELL                           NORTH CALDWELL
East Orange Health Department
VACANT
Health Officer

<PAGE>

City Hall
143 New Street
East Orange, New Jersey 07017-4918
(973) 266-5480 Fax #(973) 266-5402

EAST ORANGE

Essex County Department of Health
Michael Festa, Ph.D.
Health Officer
120 Fairview Avenue
Cedar Grove, NJ 07009
(973)228-8152 Fax # (973) 403-1754

Irvington Department of Health & Welfare
Sandra M. Harris, M.S.
Health Officer
Civic Square, Municipal Building
Irvington, New Jersey 07111-2497
(973)399-6645 Fax # (973) 371-1489

IRVINGTON

Livingston Health Department
Louis E. Anello, M.E.S.
Director of Health
357 South Livingston Avenue
Livingston, New Jersey 07039-3994
(973) 535-7961 Fax # (973) 535-3234

LIVINGSTON

Maplewood Health Department
Robert D. Roe, M.P.A.
Health Officer
574 Valley Street
Maplewood, New Jersey 07040-2691
(973)762-8120 Fax # (973) 762-1934

MAPLEWOOD

Millburn Township Health Department
William R. Faitoute
Health Officer
Town Hall
375 Millburn Ave.
Millburn, New Jersey 07041-1379
(973) 564-7087 Fax # (973) 564-7468

MILLBURN

<PAGE>

Montclair Health Department
Thomas A. Restaino
Director of Health & Human Services
205 Claremont Avenue
Montclair, New Jersey 07042-3401
(973) 509-4967 Fax # (973) 509-1479

CEDAR GROVE
MONTCLAIR
NUTLEY
VERONA
WAYNE (PASSAIC CO.)

Newark Department of Health
Marsha McGowan, M.P.H., M.A.
Health Officer
110 William Street
Newark, New Jersey 07102-1316
(973) 733-7592 Fax # (973) 733-5614

NEWARK

West Caldwell Health Department
Peter N. Tabbot, M.P.H.Health Officer
Boro Hall
30 Clinton Road
West Caldwell, New Jersey 07006-6774
(973) 226-2303 Fax # (973) 226-2396
E-mail address: PTabbot@aol.com.

FAIRFIELDWEST
CALDWELL
West Orange Health Department
Joseph A. Fonzino, M.S.Health Officer
Municipal Building
66 Main Street
West Orange, New Jersey 07052-5404
(973) 325-4124 Fax # (973) 325-4005

ESSEX FELLS
ORANGE
WEST ORANGE

GLOUCESTER COUNTY

Gloucester County Department of Health
Donald Benedik
Health Officer
160 Fries Mill Road
turnersville, New Jersey 08012
(609)262-4101 Fax # 609-629-0469
<PAGE>

CLAYTON                          LOGAN                         SWEDESBORO
DEPTFORD                         MANTUA                        WASHINGTON
EAST GREENWICH                   MONROE                        WENONAH
ELK                              NATIONAL PARK                 WEST DEPTFORD
FRANKLIN                         NEWFIELD                      WESTVILLE
GLASSBOR                         PAULSBORO                     WOODBURY
GREENWICH                        PITMAN                        WOODBURY HEIGHTS
HARRISON                         SOUTH HARRISON                WOOLWICH

HUDSON COUNTY

Bayonne Department of Health
Brigid Breivogel, R.N., M.S.
Health Officer
Municipal Building
630 Avenue C
Bayonne, New Jersey 07002-3878
(201)858-6112 Fax #(201) 858-6111

BAYONNE

Harrison Board of Health
Karen Comer, M.S., C.H.E.S.
Health Officer
318 Harrison Ave.
Harrison, New Jersey 07029-1752
(973) 268-2441 Fax # (973) 482-2924

HARRISON

Hoboken Health Department
Frank S. Sasso, M.S., M.S.W.
Health Officer
124 Grand Street
Hoboken, New Jersey 07030-4297
(201)420-2365 Fax # (201) 420-7862

HOBOKEN

Jersey City Division of Health
Joseph Castagna, M.S.
Health Officer
586 Newark Avenue
Jersey City, New Jersey 07306-2302
(201) 547-5545 Fax # (201) 547-4848

JERSEY CITY

Kearny Department of Health
John P. Sarnas, M.A.

<PAGE>

Health Officer
645 Kearny Avenue
Kearny, New Jersey 07032-2998
(201)997-0600 Fax # (201) 997-9703

EAST NEWARK       KEARNY
HUDSON CO. DIV. OF ENVIRONMENTAL HEALTH

North Bergen Health Department
Richard J. Censullo, M.P.H.
Health Officer
1116 43rd Street
North Bergen, New Jersey 07047
(201)392-2084 Fax# (201) 392-2153

NORTH BERGEN
UNION CITY
Secaucus Health Department
VACANT
Health Officer
20 Centre Avenue
Secaucus, New Jersey 07094
(201)330-2032 Fax # (201) 330-8352

SECAUCUS
West New York Health Department
Vincent A. Rivelli, M.S.
Health Officer
428 - 60th Street, Room 31
West New York, New Jersey 07093
(201)295-5070 Fax # (201) 869-1715

GUTTENBERG
WEEHAWKEN
WEST NEW YORK

HUNTERDON COUNTY

Hunterdon County Department of Health
John Beckley, M.P.H.
Health Officer
County Administration Bldg.
71 Main Street
Flemington, New Jersey 08822-1396
(908)788-1351 Fax #(908) 782-7510
E-mail address: jbeckley@co.hunterdon.nj.us

ALEXANDRIA TWP.                   FRANKLIN TWP.                 LEBANON TWP.
BETHLEHEM TWP.                    FRENCHTOWN                    MILFORD
BLOOMSBURY                        GLEN GARDNER                  RARITAN TWP.
CALIFON                           HAMPTON                       READINGTON TWP.

<PAGE>

CLINTON TOWN                     HIGH BRIDGE                    STOCKTON
CLINTON TWP.                     HOLLAND                        TEWKSBURY
DELAWARE TWP.                    KINGWOOD TWP.                  UNION TWP.
EAST AMWELL TWP.                 LAMBERTVILLE                   WEST AMWELL TWP.
FLEMINGTON                       LEBANON

MERCER COUNTY

East Windsor Township Health Department
Patricia A. Hart, R.S., M.P.H.
Health Officer
Municipal Building
16 Lanning Boulevard
East Windsor, New Jersey 08520-1999
(609) 443-4000 Fax # (609) 443-8303

EAST WINDSOR TWP
HIGHTSTOWN BORO

Ewing Township Health Department
Albert Leff, B.S.
Health Officer
Municipal Building
2 Municipal Drive
Ewing, New Jersey 08628-1544
(609) 883-2900 ext. 7691 Fax # (609) 883-0215

EWING TWP

Hamilton Township Division of Health
Jeffrey J. Plunkett, B.A., M.Ed.
Health Officer
2100 Greenwood Avenue
P.O. Box 00150
Hamilton, New Jersey 08650-1050
(609) 890-3820 Fax # (609) 890-6093

HAMILTON TWP

Hopewell Township Health Department
Gary A. Guarino
Health Officer
201 Washington Crossing-Pennington Road
Titusville, New Jersey 08560-1410
(609) 737-0120 Fax # (609) 737-1022

HOPEWELL BORO
HOPEWELL TWP.
PENNINGTON BORO

<PAGE>

Princeton Regional Health Commission
William J. Hinshillwood, M.A.
Health Officer
Borough Hall
1 Monument Drive, P.O. Box 390
Princeton, New Jersey 08540-0390
(609)497-7608 Fax # (609) 924-9714
E-mail address: bhinshill@aol.com

PRINCETON BORO
PRINCETON TWP

Lawrence Township Health Department
Carol Chamberlain
Health Officer
P.O. Box 6006
2207 Lawrenceville Road
Lawrenceville, New Jersey 08648-3198
(609)844-7089 Fax # (609) 896-0412

LAWRENCE TWP

City of Trenton Department of Health & Human Services, Division of Health
Richard D. Salter, M.A.
Health Officer
City of Trenton
222 East State Street
Trenton, New Jersey 08608-1866
(609) 989-3244 Fax # (609) 989-3590

TRENTON

West Windsor Township Health Department
Robert Hary, M.A. M.B.A.
Health Officer
P.O. Box 38
271 Clarksville Road
Princeton Junction, New Jersey 08550-0038
(609) 799-2400 Fax # (609) 799-2044

WASHINGTON TWP.
WEST WINDSOR TWP

MIDDLESEX COUNTY

Edison Department of Health & Human Resources
John O. Grun, M.S.
Health Officer
Municipal Complex
100 Municipal Boulevard
Edison, New Jersey 08817-3353

<PAGE>

(732)248-7290 Fax # (732) 248-0494
E-mail address: health@edison.nj.org
Website: http://www.edison.nj.org

EDISON

Middle-Brook Regional Health Commission
Ronald Cohen, M.P.H., Ph.D.
Health Officer
Boro Hall
1200 Mountain Ave.
Middlesex, New Jersey 08846-1200
(732) 356-8090 Fax # (732) 356-7954

BOUND BROOK (SOMERSET CO.)
GREEN BROOK TWP (SOMERSET CO.)
MIDDLESEX BORO
SOUTH BOUND BROOK (SOMERSET CO.)
WARREN TWP (SOMERSET CO.)
WATCHUNG (SOMERSET CO.)

Middlesex County Public Health Department
Bernard G. Mihalko
Director
35 Oakwood Avenue
Edison, New Jersey 08837-2408
(732)494-6742 Fax # (732) 494-7771

CARTERET                          JAMESBURG                     PERTH AMBOY
CRANBURY                          METUCHEN                      PLAINSBORO
DUNELLEN                          MILLTOWN                      SAYREVILLE
EAST BRUNSWICK                    MONROE                        SOUTH AMBOY
HELMETTA                          NEW BRUNSWICK                 SOUTH PLAINFIELD
HIGHLAND PARK                     NORTH BRUNSWICK               SOUTH RIVER
                                  OLD BRIDGE                    SPOTSWOOD

Piscataway Township Health Department
Andrew C. Simpf, Jr., M.A.
Health Officer
455 Hoes Lane
Piscataway, New Jersey 08854-5097
(732) 562-2323 Fax # (732) 743-2500

PISCATAWAY

South Brunswick Health Department
Stephen J. Papenberg
Health Officer
Ridge Road/Route 522, P.O. Box 190
Monmouth Junction, New Jersey 08852-0190
(732) 329-4000 ext. 237 Fax # (732) 329-0627

<PAGE>

ROCKY HILL (SOMERSET CO.)
SOUTH BRUNSWICK

Woodbridge Township Department of Health & Human Services
Patrick O. Hanson
Health Officer
2 George Frederick Plaza
Woodbridge, New Jersey 07095
(732) 855-0600 ext. 5025 Fax # (732) 855-0944
Website: woodbridgenj.com

WOODBRIDGE

MONMOUTH COUNTY

Colts Neck Township Health Department
William McBride
Health Officer
124 Cedar Drive
Colts Neck, New Jersey 07722-0249
(732)462-5470 Fax #(732) 431-3173

COLTS NECK

Freehold Area Health Department
R. Chadwick Taylor, M.B.A.
Health Officer
1 Municipal Plaza
Freehold, New Jersey 07728-3099
(732) 294-2060 Fax # (732) 462-2340

FREEHOLD BORO
FREEHOLD TWP
MILLSTONE
UPPER FREEHOLD

Hazlet-Aberdeen Health Department
Robert N. Scapicio, M.A.
Health Officer
3400 State Highway 35
Suite 9
Hazlet, New Jersey 07730-0371
(732)264-5541 Fax # (732) 264-5724
E-mail address: susanhahd@juno.com

ABERDEEN
HAZLET

Long Branch Department of Health
David Roach, M.P.H.

<PAGE>
Health Officer
344 Broadway
Long Branch, New Jersey 07740-6938
(732)222-2086 Fax # (732) 222-1516

LONG BRANCH

Manalapan Township Department of Health
W. David Richardson, M.P.H.
Health Officer
120 Route 522
Manalapan, New Jersey 07726-3497
(732)446-8345 Fax #(732) 446-1576
E-mail address: health@twp.manalapan.nj.us

MANALAPAN

Matawan Regional Department of Health
Alan C. Hopper
Health Officer
145 Broad Street
Matawan, New Jersey 07748
(732) 566-0740 Fax # (732) 566-7283

HOLMDEL
KEANSBURG
KEYPORT
MATAWAN

Middletown Township Health Department
Stephen L. McKee
Health Officer
Johnson Gill Annex Building
1 Kings Highway
Middletown, New Jersey 07748-2594
(732) 615-2095 Fax # (732) 671-8697
E-mail address: health@exit109

MIDDLETOWN

Monmouth County Health Department
Lester W. Jargowsky, M.P.H.
Public Health Coordinator
3435 Highway 9
Freehold, New Jersey 07728-2850
(732) 431-7456 Fax # (732) 409-7579
E-mail address: jargoswl@shore.co.monmouth.ni

ALLENTOWN BORO                  FARMINGDALE BORO      OCEANPORT
ASBURY PARK CITY                HOWELL TWP            ROOSEVELT BORO
ATLANTIC HIGHLANDS BORO         MANASQUAN BORO        SEA GIRT BORO

<PAGE>

AVON-BY-THE-SEA BORO                MARLBORO TWP              SOUTH BELMAR
BORO
BELMAR BORO                         NEPTUNE CITY              SPRING LAKE BORO
BRADLEY BEACH BORO                  NEPTUNE TWP               UNION BEACH
ENGLISHTOWN BORO                                              WALL TWP

Monmouth County Regional Health Commission No. 1
Sidney B. Johnson, Jr., M.S., M.B.A.
Health Officer
20 Meridian Road
Eatontown, New Jersey 07724-2241
(732)935-0325 Fax # (732) 935-0384
E-mail address: ippy3@ix.netcom.com

ALLENHURST                  INTERLAKEN                        SHREWSBURY
BRIELLE                     LOCH ARBOR VILLAGE                SHREWSBURY TWP
DEAL
MONMOUTH BEACH              SPRING LAKE HEIGHTS
EATONTOWN                   OCEAN TWP                         TINTON FALLS
HIGHLANDS                   SEA BRIGHT                        WEST LONG
BRANCH

Red Bank Health Department
Frederick A. Richart
Health Officer
90 Monmouth Street, Box 868
Red Bank, New Jersey 07701-0868
(732) 530-2754 Fax # (732) 530-2757

FAIR HAVEN                        RED BANK
LITTLE SILVER                     RUMSON

MORRIS COUNTY

Chatham Boro - see Millburn (ESSEX CO.)
Chester Boro - see Bernards Twp. (SOMERSET CO.)
Mendham Boro - see Bernards Twp. (SOMERSET CO.)
Mendham Twp. - see Bernards Twp. (SOMERSET CO.)

Denville Division of Health
Herbert J. Yardley, M.A.
Health Officer
1 Saint Mary's Place
Denville, New Jersey 07834-2199
(973)625-8305 Fax # (973) 627-8371

DENVILLE

Dover Health Department
Donald N. Costanzo, M.A., M.P.A.
Health Officer

<PAGE>

37 North Sussex Street, Box 798
Dover, New Jersey 07801-3991
(973) 366-2200 ext. 120 Fax # (973) 328-6604

DOVER

East Hanover Health Department
Peter B. Summers, M.A.
Health Officer
411 Ridgedale Avenue
East Hanover, New Jersey 07936-1487
(973) 428-3035 Fax # (973) 428-3026
E-mail address: ehanover@interactive.net
Website: http://www.interactive.net/~ehanover

EAST HANOVER TWP
ROSELAND BORO (ESSEX CO.)

Township of Hanover Health Department
George Van Orden, Ph.D
Health Officer
1000 Route 10, P.O. Box 250
Whippany, New Jersey 07981-0250
(973) 428-2484 Fax # (973) 428-4374
E-mail address: vanl122w@wonder.em.cdc.gov

HARDING TWP MORRIS TWP
HANOVER TWP

Jefferson Township Health Department
Cindee DeGennaro, M.A.
Health Officer
1033 Weldon Road
Lake Hopatcong, New Jersey 07849-0367
(973)697-1500 Fax # (973) 697-8090

JEFFERSON TWP

Borough of Kinnelon Health Department
Calliope C. Alexander, M.A., B.S.
Health Officer
Municipal Building, 130 Kinnelon Road
Kinnelon, New Jersey 07405-2392
(973)838-5403 Fax # (973) 838-1862

KINNELON

Lincoln Park Health Department
Pasquale A. Pignatelli, Jr., M.P.A.
Health Officer 34
Chapel Hill Road

<PAGE>

Lincoln Park, New Jersey 07035-1998
(973)694-6306 Fax # (973) 628-9512

BOONTON TWP
LINCOLN PARK
RIVERDALE

Madison Boro Board of Health
John Theese, M.S.
Health Officer
22 Central Avenue
Madison, New Jersey 07940-2592
(973) 593-3073 Fax # (973) 593-0125

CHATHAM BORO (MORRIS CO.)                   MORRIS PLAINS BORO
CHATHAM TWP                                 MOUNT ARLINGTON BORO
FLORHAM PARK BORO                           NETCONG BORO
MADISON BORO                                PASSAIC TWP
MINE HILL TWP                               VICTORY GARDEN BORO

Montville Township Health Department
John A. Wozniak, Jr., M.E.H.
Health Officer
195 Changebridge Road
Montville, New Jersey 07045-9498
(973)331-3316 Fax # (973) 402-0787

MONTVILLE
MOUNTAIN LAKES

Morristown Division of Health
Howard Steinberg
Health Officer
200 South Street
Morristown, New Jersey 07963-0914
(973) 292-6700 Fax # (973) 292-6730

MORRISTOWN

Mt. Olive Township Health Department
Frank P. Wilpert
Director, Health, Welfare & Sanitation
Route 46, P.O. Box 450
Budd Lake, New Jersey 07828-3200
(973) 691-0900 ext. 330 Fax # (973) 691-7681

MT OLIVE

Parsippany Health Department
P. Wayne Croughn
Health Officer

<PAGE>

Municipal Building
1001 Parsippany Boulevard
Parsippany, New Jersey 07054-1222
(973)263-7160 Fax # (973) 299-1349

PARSIPPANY-TROY HILLS

Pequannock Township Board of Health
Peter Correale
Health Officer
530 Newark-Pompton Turnpike
Pompton Plains, New Jersey 07444-1799
(973) 835-1916 Fax # (973) 835-2472
E-mail address: 103153.2247@compuserve.com

BLOOMINGDALE (PASSAIC CO.)
BUTLER BORO
PEQUANNOCK

Randolph Township Board of Health
Clement R. Ferdinando, M.P.H.
Health Officer
502 Millbrook Avenue
Randolph, New Jersey 07869-3799
(973) 989-7050 Fax # (973) 989-7076
Website: http://www.gti.net.randolph

RANDOLPH                          ROCKAWAY BORO

Rockaway Township Health Department
Steven C. Levinson, M.S.
Health Officer
65 Mt. Hope Road
Rockaway, New Jersey 07866-1699
(973)983-2848 Fax #(973) 627-1081

BOONTON BORO                      ROCKAWAY TWP
CHESTER TWP

Roxbury Township Board of Health
Frank A. Grisi
Health Officer
72 Eyland Avenue
Succasunna, New Jersey 07876-1622
(973)448-2028 Fax # (973) 448-2059
E-Mail address: roxburynjhealth@nac.net

ROXBURY                           WHARTON BOROUGH

<PAGE>

Washington Township Health Department
Cristianna Cooke-Gibbs, M.P.H.
Health Officer
43 Schooley's Mountain Road, P.O. Box 216
Long Valley, New Jersey 07853-0216
(908) 876-3650 Fax # (908) 876-5138

WASHINGTON TWP

OCEAN COUNTY

Long Beach Island Health Department
Timothy J. Hilferty
Health Officer
11601 Long Beach Boulevard
Beach Haven, New Jersey 08008-3661
(609)492-1212 Fax #(609) 492-9215

BARNEGAT LIGHT                    LONG BEACH
BEACH HAVEN                       SHIP BOTTOM
HARVEY CEDARS                     SURF CITY

Ocean County Health Department
Joseph Przywara, B.A.
Public Health Coordinator
175 Sunset Avenue
P.O. Box 2191
Toms River, New Jersey 08754-2191
(732) 341-9700 Fax # (732) 341-4467
E-mail address: ochd@americom.net
Website: http://www.ochd.org

BARNEGAT TWP             LAKEHURST                         PT. PLEASANT BEACH
BAY HEAD                 LAKEWOOD                          PT. PLEASANT
BEACHWOOD                LAVALLETTE                        SEASIDE HEIGHTS
BERKELEY TWP             LITTLE EGG HARBOR TWP             SEASIDE PARK
BRICK TWP                MANCHESTER                        S. TOMS RIVER
DOVER TWP                MANTOLOKING                       STAFFORD
EAGLESWOOD TWP           OCEAN GATE                        TUCKERTON
ISLAND HEIGHTS           OCEAN TWP
JACKSON TWP              PINE BEACH
LACEY TWP                PLUMSTED

PASSAIC COUNTY

Bloomingdale - see Pequannock (MORRIS CO.)
Wanaque - see Pequannock (MORRIS CO.)
Wayne - see Montclair (ESSEX CO.)

Clifton Board of Health

<PAGE>

Albert Greco, M.A.
Health Officer
900 Clifton Avenue
Clifton, New Jersey 07013-2705
(973) 470-5758 Fax # (973) 470-5768
E-mail address: agreco@worldnet.att.net

CLIFTON

Township of Little Falls Health Department
John M. Festa, M.A.
Health Officer
Municipal Annex
35 Stevens Avenue
Little Falls, New Jersey 07424
(973)256-0170 Fax # (973) 890-4501

LITTLE FALLS
SOUTH ORANGE (ESSEX CO.)

PASSAIC

Passaic City Health Department
Henry G. McCafferty
Health Officer
City Hall
330 Passaic Street
Passaic, New Jersey 07055-5814
(973) 365-5603 Fax # (973) 365-5582

PASSAIC

Passaic County Department of Health
John J. Ferraioli
Health Officer
Administration Bldg. Annex, Rm. 201
311 Pennsylvania Avenue
Paterson, New Jersey 07503-1788
(973) 881-4396 Fax # (973) 225-0222
E-mail address: jfpcdh@intercall.com

Paterson Division of Health
Joseph J. Surowiec
Health Officer
176 Broadway
Paterson, New Jersey 07505-1198
(973)881-6922 Fax #(973) 279-7511
E-mail address: moses@interactive.net

HALEDON                           PROSPECT PARK
HAWTHORNE                         TOTOWA

<PAGE>

NORTH HALEDON                      WEST PATERSON
PATERSON

Ringwood Health Department
Christopher Chapman, M.P.H.
Health Officer
60 Margaret King Avenue
Ringwood, New Jersey 07456-1703
(973) 962-7079 Fax # (973) 962-6028

RINGWOOD
WANAQUE

West Milford Township Health Department
Kenneth R. Hawkswell, M.P.H.
Health Officer
1480 Union Valley Road
West Milford, New Jersey 07480-1303
(973) 728-2720 Fax # (973) 728-2704

POMPTON LAKES
WEST MILFORD

SALEM COUNTY

Salem County Department of Health
Laurence P. Devlin, Jr., M.P.A., R.S., C.S.W.
Health Officer
98 Market Street
Salem, New Jersey 08079-1995
(609) 935-7510 Fax # (609) 935-8483

ALLOWAY                          PENNSVILLE
CARNEYS POINT                    PILESGROVE
ELMER                            PITTSGROVE
ELSINBORO                        QUINTON
LOWER ALLOWAYS                   SALEM
MANNINGTON                       UPPER PITTSGROVE
OLDMANS                          WOODSTOWN
PENNS GROVE

SOMERSET COUNTY

Bound Brook - see Middle-Brook (MIDDLESEX CO.)
Green Brook - see Middle-Brook (MIDDLESEX CO.)
Rocky Hill- see S. Brunswick (MIDDLESEX CO.)
South Bound Brook - see Middle-Brook (MIDDLESEX CO.)
Warren Twp - see Middle-Brook (MIDDLESEX CO.)
Watchung - see Middle-Brook (MIDDLESEX CO.)

Bernards Township Health Department
<PAGE>

Lucy A. Forgione, M.S.
Health Officer
262 South Finley Avenue
Basking Ridge, New Jersey 07920-1418
(908) 204-3070 Fax # (908) 204-3075

CHESTER BORO (MORRIS CO.)                          FAR HILLS
BEDMINSTER                                         MENDHAM BORO (MORRIS CO.)
BERNARDS                                           MENDHAM TWP (MORRIS CO.)
BERNARDSVILLE                                      PEAPACK-GLADSTONE

Branchburg Township Health Department
Leonard H. Williams, M.P.A., R.E.H.S./R.S.
Health Officer
Municipal Annex
34 Kenbury Road
Somerville, New Jersey 08876-3936
(908) 526-1300 ext. 215 Fax # (908) 704-1214
E-mail address: bburg@superlink.com

BRANCHBURG

Bridgewater Township Health Department
Richard N. Martini, M.P.H.
Health Officer
700 Garretson Road, Box 6300
Bridgewater, New Jersey 08807-0300
(908) 725-6300 Fax # (908) 707-1235
Website: http://www.webex.net/bridgewater

BRIDGEWATER

Franklin Township Health Department
Walter P. Galanowsky, M.P.H.
Health Officer
935 Hamilton Street
Somerset, New Jersey 08873-3697
(732) 873-2500 ext. 250 Fax # (732) 214-0969

FRANKLIN TWP

Hillsborough Township Health Department
Glen Belnay, Ph.D.
Health Officer
555 Amwell Road
Neshanic, New Jersey 08853-1201
(908)369-4313 Fax # (908) 369-8565

HILLSBOROUGH                       MILLSTONE BORO
Montgomery Township Health Department
David A. Henry, M.P.H.

<PAGE>

Health Officer
Municipal Building
2261 Route 206
Belle Mead, New Jersey 08502-4012
(908) 359-8211 ext. 245 Fax # (908) 359-4308
E-mail address: monthealth@aol.com

MONTGOMERY

North Plainfield Health Department
Herbert W. Roeschke, Sr., M.S.
Health Officer
263 Somerset Street
North Plainfield, New Jersey 07060
(908) 769-2907 Fax # (908) 769-6499

NORTH PLAINFIELD

Somerset County Health Department
John A. Horensky, M.S.
Health Officer
P.O. Box 3000, 20 Grove Street
County Administration Building
Somerville, New Jersey 08876-1262
(908)231-7155 Fax # (908) 704-8042

Somerville Health Department
Steve Krajewski, M.P.H.
Health Officer
25 West End Avenue
Municipal Building
Somerville, New Jersey 08876-0399
(908) 704-6996 Fax # (908) 725-2859
E-mail address: skraj@njpha.org
Website: http://www.njpha.org

MANVILLE                          RARITAN                   SOMERVILLE

SUSSEX COUNTY

Hopatcong Board of Health
Carl Seber, B.A.
Health Officer
Municipal Building
111 River Styx Road
Hopatcong, New Jersey 07843-7843
(973)770-1200 Fax # (973) 398-3650

HOPATCONG
<PAGE>

Sparta Health Department
Ralph I. D'Aries, R.S., M.A.
Health Officer
65 Main Street
Sparta, New Jersey 07871-1986
(973)729-6174 Fax # (973) 729-0063

FRANKLIN BORO
HARDYSTON
OGDENSBURG
SPARTA
STANHOPE

Sussex County Department of Health, Public Safety & Senior Services
Philip Morlock
Administrator
127 Morris Turnpike
Newton, New Jersey 07860-7860
(973) 948-4545 Fax # (973) 948-2593

ANDOVER BORO                      LAFAYETTE
ANDOVER TWP                       MONTAGUE
BRANCHVILLE                       NEWTON
BYRAM                             SANDYSTON
FRANKFORD                         STILLWATER
FREDON                            SUSSEX
GREEN TWP                         WALPACK
HAMBURG                           WANTAGE
HAMPTON

Vernon Township Board of Health
Gene S. Osias, M.S.W.
Health Officer
Municipal Center, 21 Church Street
P.O. Box 340
Vernon, New Jersey 07462-0340
(973) 764-4055 Fax # (973) 764-4291

VERNON

UNION COUNTY

Clark Health Department
Nancy A. Ogonowski, M.P.H.
Health Officer
430 Westfield Avenue
Clark, New Jersey 07066
(732) 388-3600 ext. 3045 Fax # (732) 388-3839

<PAGE>

CLARK

Township of Cranford Department of Health
Warren J. Hehl, M.P.A.
Health Officer
8 Springfield Avenue
Cranford, New Jersey 07016-2199
(908) 709-7238 Fax # (908) 276-7664

CRANFORD

Elizabeth Department of Health & Human Services
John N. Surmay
Health Officer
City Hall of Elizabeth G-12
50 Winfield Scott Plaza
Elizabeth, New Jersey 07201-2462
(908) 820-4060 Fax # (908) 820-4290

ELIZABETH
Linden Board of Health
Nancy Koblis
Health Officer
City Hall
301 North Wood Avenue
Linden, New Jersey 07036-4296
(908)474-8409 Fax # (908) 474-8418

LINDEN                             ROSELLE

City of Plainfield Health Department
Ruby Hodge, M.S., M.A.
Health Officer
510 Watchung Avenue, P.O. Box 431
Plainfield, New Jersey 07061-0431
(908) 753-3084 Fax # (908) 753-3679
E-mail address: jdipane@plainfield.com
Website: http://www.plainfield.com

PLAINFIELD

Rahway Health Department
Anthony D. Deige
Health Officer
1 City Hall Plaza
Rahway, New Jersey 07065-3930
(732)827-2081 Fax # (732) 381-7668

HILLSIDE
RAHWAY
SCOTCH PLAINS
<PAGE>

WINFIELD TWP

Summit Health Department
Stuart B. Palfreyman, B.S.E.H., M.S.E.H., R.S.
Health Officer
512 Springfield Avenue
Summit, New Jersey 07901-3682
(908)522-3614 Fax # (908) 277-0185

BERKELEY HEIGHTS
NEW PROVIDENCE
SUMMIT

Township of Union Department of Health
Dennis V. SanFilippo, M.P.A.
Health Officer
Municipal Building
1976 Morris Avenue
Union, New Jersey 07083-1894
(908)851-8507 Fax # (908) 851-4673

UNION
KENILWORTH

Westfield Regional Health Department
Robert M. Sherr, M.A.
Health Officer
Municipal Building
425 East Broad Street
Westfield, New Jersey 07090-2197
(908) 789-4070 Fax # (908) 789-4076
E-mail address: health@westfieldnj.net
Website address: http: //www.westfieldnj.net/health

FANWOOD
GARWOOD
MOUNTAINSIDE
ROSELLE PARK
SPRINGFIELD
WESTFIELD

WARREN COUNTY

Warren County Health Department
John A. Hawk, M.P.A.
Health Officer
319 W. Washington Ave. - Suite 1
Washington, New Jersey 07882-2153
(908) 689-6693 Fax # (908) 689-3832
E-mail address: warrenhd@nac.net

<PAGE>

ALLAMUCHY                        HARDWICK                      OXFORD
ALPHA                            HARMONY                       PHILLIPSBURG
BELVIDERE                        HOPE                          POHATCONG
BLAIRSTOWN                       INDEPENDENCE                  WASHINGTON BORO
FRANKLIN TWP                     KNOWLTON                      WASHINGTON TWP
FRELINGHUYSEN                    LIBERTY                       WHITE TWP
GREENWICH                        LOPATCONG
HACKETTSTOWN                     MANSFIELD
<PAGE>

B.4.8 WIC REFERRAL FORMS

<PAGE>

NEW JERSEY STATE DEPARTMENT OF HEALTH    REFERRAL/NUTRITION ASSESSMENT FOR WOMEN
        WIC/HEALTHSTART

                      Please see instructions on last page

<TABLE>
<S>                               <C>                         <C>
NAME OF CLIENT                    TELEPHONE NUMBER            DATE OF BIRTH

------------------------------------------------------------------------------------------
ADDRESS OF CLIENT                 CHECK ONE:
                                    :. Pregnant    Breastfeeding     [ ] Non-Breastfeeding
</TABLE>

    REFERRAL (To be completed bv Health Professional, including second page)

<TABLE>
<S>                   <C>                  <C>                      <C>                      <C>                    <C>
ANTHROPOMETRIC AND LABORATORY DATE (One Blood Test is Required)
    FIRST PRENATAL                         # Weeks                  Weight                   Pre-Preg               Usual Wt
    CHECK-UP:         Date:__/___/___      Gestation____            (pounds)________         (pounds)_________      (pounds)______

    CURRENT                                # Weeks                  Weight                   Height
    CHECK-UP:         Date:__/___/___      Gestation____            (pounds)________         (inches)_________

    BLOOD TEST:       Date:__/___/___      Hb(mg/dl)____            Hct_______%   EP(ug/dl)_____   Lead______       Other________
</TABLE>

MEDICAL HISTORY

<TABLE>
<S>                               <C>             <C>                   <C>          <C>
Gravida_________  Para_________   Ab/Misc______   Stillbirth__________  EDC________  ADC________  [ ] Vag   [ ] "C" Section
Past Med/Surg History_________________________________________________________________________________________________________
Current Medical Problem(s)____________________________________________________________________________________________________
Previous Preg Complications__________________________________________________________Date Last Preg Ended________/______/_____
Physician/Clinic______________________________________________________________________Phone___________________________________
Signature of Health Professional_______________________________________________________Date:__________/________/______________
</TABLE>

WIC APPOINTMENT:  Date:_______/________/_________     Time:____________________

          ASSESSMENT (To be completed by Client or Health Professional)

<TABLE>
===============================================================================================================================
<S>   <C>                                  <C>       <C>                  <C>                        <C>       <C>
 1)    Are you taking any of the following?
       Vitamins/Minerals                   [ ] Yes   [ ] No               Amount:____________________          Type:____________
       Iron                                [ ] Yes   [ ] No               Amount:____________________          Type:____________
       Over-the-Counter Medicines          [ ] Yes   [ ] No               Amount:____________________          Type:____________
       Special Medicines                   [ ] Yes   [ ] No               Amount:____________________          Type:____________
       "Street" Drugs                      [ ] Yes   [ ] No               Amount:____________________          Type:____________

 2)   How much did you smoke before you were pregnant?                   Amount:____________________
      How much do you smoke now?                                         Amount:____________________

 3)   How much beer, wine cooler, or liquor do you drink per week?       Amount:____________________

 4)   Are you on a special diet now?       [ ] Yes   [ ] No               Prior to pregnancy?        [ ] Yes   [ ] No

 5)    Are you experiencing?
       Nausea                              [ ] Yes   [ ] No               Heartburn                  [ ] Yes   [ ] No
       Frequent Vomiting                   [ ] Yes   [ ] No               Flatus ("Gas")             [ ] Yes   [ ] No
       Diarrhea                            [ ] Yes   [ ] No               Dental Problems            [ ] Yes   [ ] No
       Constipation                        [ ] Yes   [ ] No               Bleeding Gums              [ ] Yes   [ ] No

 6)   Do you eat?
       Paint Chips                         [ ] Yes   [ ] No               Dirt                       [ ] Yes   [ ] No
       Laundry Starch                      [ ] Yes   [ ] No               Clay                       [ ] Yes   [ ] No
       Corn Starch                         [ ] Yes   [ ] No               Plaster                    [ ] Yes   [ ] No
       Ice                                 [ ] Yes   [ ] No               Other Cravings             [ ] Yes   [ ] No

 7)   Do you have a working?
       Stove                               [ ] Yes   [ ] No               Sink with  water supply    [ ] Yes   [ ] No
       Refrigerator                        [ ] Yes   [ ] No

 8)   Are you on any program?
       WIC                                 [ ] Yes   [ ] No               HealthStart/               [ ] Yes   [ ] No
       Child Support Enf                   [ ] Yes   [ ] No                 Presumptively Eligible   [ ] Yes   [ ] No
       Food Stamps                         [ ] Yes   [ ] No               AFDC/Medicaid              [ ] Yes   [ ] No

 9)   How do you plan to or presently feed your baby?
       Breastmilk     [ ] Yes [ ]  No      Formula   [ ] Yes [ ] No                Undecided?        [ ] Yes   [ ] No

10)   Do you do the following daily?
       Work                                [ ] Yes   [ ] No               Type: ____________________
       Care for Children                   [ ] Yes   [ ] No               How Many: ________________
       Exercise                            [ ] Yes   [ ] No               Type: ____________________

11) If pregnant, how much weight (pounds) do you plan to gain?__________________

12) Where do you plan to or presently take your child for medical care?
===============================================================================================================================
</TABLE>

<PAGE>

NEW JERSEY STATE DEPARTMENT OF HEALTH    REFERRAL/NUTRITION ASSESSMENT FOR WOMEN
         WIC/HEALTHSTART

INSTRUCTIONS

    -- AGENCY USE ONLY --   REFERRAL SECTION (Complete by Health Professional)

                             1) Fill in client's name, address, phone number,
                                date of birth, or use addressograph stamp.

                             2) Check status of woman being referred.

                             3) Fill in data on first prenatal check-up and
                                current check-up, if applicable.

                             4) One blood test is required prior to submitting
                                this form to WIC. Pregnant women need blood test
                                that was done during pregnancy. Postpartum women
                                (breastfeeding and non-breastfeeding) need blood
                                test that was done after delivery.

                             5) Complete Gravida, Para, Abortions, Miscarriages.

                             6) Fill in EDC (Estimated Date of Confinement) for
                                prenatal clients.

                             7) Fill in ADC (Actual Date of Confinement),
                                vaginal or "C" Section delivery for postpartum
                                clients.

                             8) Complete past medical/surgical history based on
                                client's record.

                             9) Fill in any pertinent current medical problems
                                diagnosed.

                             Information in this section should NOT include
                             most recent pregnancy for postpartum women.

                            10) Complete previous pregnancy complications,
                                referring to list below:

                                Write approximate letter or letters on space
                                provided.

                                a)   Hx of low birth weight infant(s) [<5.5
                                     pounds]

                                b)   Hx of premature infant(s) [<37 weeks
                                     gestation)

                                c)   Hx of infant(s) > 10 pounds at birth

                                d)   Hx of or planned C-section

                                e)   Multiple pregnancy or recent multiple birth

                                f)   Medical problems (e.g., diabetes,
                                     hypertension, preeclampsia, eclampsia)

                                g)   Disability that may compromise adequacy of
                                     diet

                                h)   Social or environmental condition that may
                                     compromise adequacy of diet

                                i)   Substance use (e.g., alcohol, drugs,
                                     cigarettes, pica)

                                j)   Vitamin/mineral supplement or medicine
                                     prescription

                                k)   Special formula prescription and medical
                                     reason for its necessity

                                1)   Other pertinent health/medical data

                             1) Fill in physician's name or clinic and phone
                                number.

                             2) Signature of referring health professional IS
                                REQUIRED, with current date.

                             ASSESSMENT SECTION/FOOD FREQUENCY (Page 1 and 2)

                             1) This section may be completed by the client or a
                                health professional.

                             2) If completed by client, it must be reviewed by
                                the health professional for accuracy and
                                completeness. Check the appropriate answer for
                                questions 1-18. Any responses that do NOT meet
                                WIC and/or HealthStart standards demand further
                                clarification.

                             3) The health professional should compare the food
                                frequency with the recommended servings needed
                                daily for pregnant/postpartum women and
                                formulate a nutrition plan of care accordingly.

                             4) The Nutrition Assessment and Plan of Care must
                                be written according to the hospital/HealthStart
                                Agency/WIC State policy and procedure.

                             5) Upon completion of nutrition education, the
                                health professional must circle the appropriate
                                Nutrition Education Topic and record the date.
                                (More topics below) If materials are provided,
                                write the appropriate Topic Code in the space
                                labeled "Other".

<TABLE>
<S>                          <C>                          <C>
05 - Child Nutrition         11 - Mealtime Psychology     18 - Sugar in Diet
06 - Dental Health           12 - Nutrients in WIC Foods  19 - Vitamin A in Diet
07 - Fat in Diet             15 - Salt in Diet            20 - Vitamin C in Diet
08 - Food Budget/Consumer    16 - Smoking & Pregnancy     44 - Now Show
     Awareness/Meal Planning 17 - Snacking                45 - Client Refused
09 - Fruit and Vegetables
</TABLE>

<TABLE>
<S>                                                                           <C>
NAME AND ADDRESS OF WIC PROGRAM, HEALTHSTART AGENCY, PHYSICIAN OR CLIIC:       TELEPHONE NUMBER
</TABLE>

<PAGE>

NEW JERSEY STATE DEPARTMENT OF HEALTH    REFERRAL/NUTRITION ASSESSMENT FOR WOMEN
         WIC/HEALTHSTART

                                  INSTRUCTIONS

                ASSESSMENT SECTION/FOOD FREQUENCY (Page 1 and 2)

1)       This section may be completed by the client or a health professional.

2)       If completed by the client, it must be reviewed by the health
         professional for accuracy and completeness. Check the appropriate
         answer for questions 1-18. Any responses that do NOT meet WIC and/or
         HealthStart standards demand further clarification.

3)       The health professional should compare the food frequency with the
         recommended servings needed daily for pregnant/postpartum women and
         formulate a nutrition plan accordingly.

4)       The Nutrition Assessment and Plan of Care must be written according to
         the hospital/HealthStart Agency/WIC State policy and procedure.

5)       Upon completion of nutrition education, the health professional must
         circle the appropriate Nutrition Education Topic Code and write the
         date education was provided.

6)       Listed below are a continuation of nutrition Education Topics. If
         materials are provided, write the appropriate Topic Code the space
         labeled "Other".

                           05 - Child Nutrition

                           06 - Dental Health

                           07 - Fat in the Diet

                           08 - Food Budgeting/Consumer Awareness/Meal Planning

                           09 - Fruit and Vegetables

                           11 - Mealtime Psychology

                           12 - Nutrients in WIC Foods

                           15 - Salt in the Diet

                           16 - Smoking and Pregnancy

                           17 - Snacking

                           18 - Sugar in Diet

                           19 - Vitamin A in Diet

                           20 - Vitamin C in Diet

                           44 - No Show

                           45 - Client Refused

<PAGE>

B.4.9 MENTAL HEALTH/SUBSTANCE ABUSE SCREENING TOOLS
<PAGE>

[ ] AMERICHOICE [ ] AMERIGROUP  [ ] HORIZON    [ ] HEALTH NET  [ ] UNIVERSITY
                                    MERCY                          HEALTH PLANS

                            WELL-BEING SCREENING TOOL
                            FOR ADOLESCENTS & ADULTS
                          PATIENT PROBLEM QUESTIONNAIRE

PATIENT NAME:_________________________  DATE COMPLETED:________________________
MEMBER ID#:___________________________  PCP NAME:______________________________

The purpose of this questionnaire is to identify problems your doctor may be
able to help you with. Please answer all questions by checking one box per
question.

<TABLE>
<CAPTION>
         DURING THE PAST MONTH GENERALLY (questions 1-11):                                   YES     NO
<S>      <C>                                                                                 <C>     <C>
1.       Have you been feeling tired or have low energy?
                                                                                             ---     ---
2.       Have you been having trouble sleeping? (Too much or too little)
                                                                                             ---     ---
3.       Have you been feeling sad, hopeless, or unusually happy?
                                                                                             ---     ---
4.       Have you been feeling bad about yourself that you are a failure or have
         let yourself or your family down?
                                                                                             ---     ---
5.       Have you been having trouble concentrating on things, such as watching
         TV, reading the newspaper, or reading a book?
                                                                                             ---     ---
6.       Have you been feeling on edge, nervous?
                                                                                             ---     ---
7.       Have your eating patterns or appetite changed?
                                                                                             ---     ---
8.       Have you been trying not to gain weight (making yourself vomit, taking
         excessive laxatives, or exercising more than an hour per day)?
                                                                                             ---     ---
9.       Have you felt sudden fear or panic for no obvious reason?
                                                                                             ---     ---
10.      Have you been having thoughts that you would be better off dead, or of
         hurting yourself?
                                                                                             ---     ---
11.      Are you troubled by being unable to control your anger or by having
         thoughts about hurting others?
                                                                                             ---     ---
12.      Have you

         a.  Ever felt you ought to cut down on your drinking or drug use?
                                                                                             ---     ---
         b.  Ever felt annoyed by people who comment on your drinking or drug
             use?
                                                                                             ---     ---
         c.  Ever felt bad or guilty about your drinking or drug use?
                                                                                             ---     ---
         d.  Ever had a drink or used drugs first thing in the morning to steady
             your nerves or get rid of a hangover (eye opener)?
                                                                                             ---     ---
13.      Do you have any other concerns about your well-being? Please explain.

         _______________________________________________________________________             ---     ---

14.      Have you ever sought treatment for any of the above problems for which
         you checked yes?
                                                                                             ---     ---
15.      If you checked off yes to any of the above questions, how difficult
         have these problems made it for you to do your work, go to school, take
         care of things at home or get along with other people?

         Not Difficult At All   Somewhat Difficult   Very Difficult   Extremely Difficult
                [ ]                    [ ]                [ ]                [ ]
</TABLE>

<PAGE>

B.4.10 CENTERS OF EXCELLENCE

The table on the following pages lists centers of excellence.

Amended as of July 1, 2003

<PAGE>

                              CENTERS OF EXCELLENCE

                      PEDIATRIC AMBULATORY TERTIARY CENTERS

William Sharrar, M.D., Medical Director
Cooper Hospital/University Medical Center
Three Cooper Plaza
Camden, New Jersey 08103-1489
Phone: (609)342-2298

Averil Jones, Nurse Manager
Children's Hospital of New Jersey at Newark Beth Israel
Tertiary Services
201 Lyons Avenue
Newark, New Jersey 07112
Phone: (973)926-7328

Mary Lotze, RN, Administrator
UMDNJ/Robert Wood Johnson Medical School
Tertiary Services
97 Paterson Street
New Brunswick, New Jersey 08903
Phone: (908)235-7080

            REGIONAL CLEFT LIP/PALATE CRANIOFACIAL ANOMALLES CENTERS

Marilyn Cohen, Coordinator
Cooper Hospital/University Medical Center
Cleft Palate Services
900 Centennial Blvd
Voorhees, New Jersey 08043
Phone: (609)325-6720

Beryl Chassen, Coordinator
Monmouta Medical Center
Cleft Palate Services
300 Second Avenue
Long Branch, New Jersey 07740-6565
Phone: (732)870-5695

<PAGE>

Tena Turner, RN, MA., Coordinator
Bipin Patel, M.D., Medical Director
St. Peter's Medical Center
Cleft Palate Services
254 Easton Avenue
New Brunswick, New Jersey 08901-1780
Phone: (732)745-7943

William Roche, Coordinator, Craniofacial Center
St. Joseph's Medical Center
703 Main Street
Paterson, New Jersey 07503
Phone: (973)754-2924

         NEW JERSEY STATEWIDE NETWORK OF PEDIATRIC HIV TREATMENT CENTERS

FXB Center
University of Medicine & Dentistry of New Jersey
ADMC #4
30 Bergen St.
Newark, NJ 07107
(973) 972-0400 FAX (973) 972-0396

Newark Beth Israel Medical Center
Family Treatment Center, G3
201 Lyons Ave.
Newark, NJ 07112
(973) 926-8004 FAX (973) 926-4584 or 6452

Department of Pediatrics
Cooper Hospital/University Medical Center
3 Cooper Plaza, Suite 200, Rm. 202
Camden, NJ 08103
(856) 342-2089 FAX (856) 968-8414

Jersey City Medical Center
AIDS Health Services
50 Baldwin Ave.
Jersey City, NJ 07304
(201)915-2295 FAX (201) 915-2213

<PAGE>

Robert Wood Johnson Medical School
Department of Pediatrics
Division of Immunology, Allergy & Infectious Diseases
1 Robert Wood Johnson Place, PO BOX 19
New Brunswick, NJ 08903
(732)235-7894 FAX (732) 235-7419

St. Joseph's Hospital & Medical Center
Department of Community Medicine
703 Main St.
Paterson, NJ 07503
(973)754-4713 FAX (973) 279-3618

                                AFFILIATE CENTER

Jersey Shore Medical Center
Department of Pediatrics A-240
1945 Corlies Ave.
Neptune, NJ 07754
(732)776-4271 FAX (732) 776-4648

     COMPREHENSIVE REGIONAL SICKLE CELL/HEMOGLOBINOPATHIES TREATMENT CENTERS

Jersey City Medical Center
Department of Pediatrics
50 Baldwin Avenue
Clinic Building, 5th Floor
Jersey City, New Jersey 07304-3199
Renuka B. Nigam, M.D., Chief
Pediatric Hematology/Oncology
(201)915-2455

Newark Beth Israel Medical Center
201 Lyons Avenue
Newark, New Jersey 07112-2094
Peri Kamalaker, M.D., Director
Pediatric Hematology/Oncology
(973)926-7161

The Institute for Children with Cancer and Blood Disorders
The Cancer Institute of New Jersey
195 Little Albany St.
New Brunswick, NJ 08901
Richard Drachtman, M.D.
Division of Pediatric Hematology/Oncology
Phone: (732)235-7898

<PAGE>

University Hospital/UMDNJ
Division of Pediatric Hematology/Oncology
UH Room F342
150 Bergen Street
Newark, NJ 07013-2406
Phone: (973) 972-1011 or 972-0658

Medical Center
Tomorrow's Children Institute
Hackensack University Medical Center
30 Prospect Avenue
Hackensack, New Jersey 07601-1991
Frances Plug, M.D.
Pediatric Hematology/Oncology
(201)996-5437

Children's Hospital of Philadelphia
New Jersey Section of Hematology/Oncology
Specialty Care Center
1012 Laurel Oak Road
Voorhees, NJ 08043
Susan F. Travis, M.D., Director
Phone: (856)435-7502

UMDNJ/NJ Medical School
Comprehensive Sickle Cell Program
185 South Orange Ave.
Newark, NJ 07103
Anne Hurlet, M.D.
Phone: (973)972-1061

St. Joseph's Hospital and Medical Center
703 Main Street
Paterson, NJ 07503
Jill Manell, M.D.
Chief, Pediatric Hematology/Oncology
Phone: (973)754-3229 or 754-2500

St. Barnabas Medical Center
101 Old Short Hills Road
Livingston, NJ 07039
Anne G. Nepo, M.D.
Pediatric Hematology/Oncology
Phone: (973)325-6700

<PAGE>

                              PKU TREATMENT CENTERS

Barbara Marcelo Evans, M.D., Medical Director
Cooper Hospital/University Medical Center
Southern New Jersey Regional PKU Program
Three Cooper Plaza - Suite 200
Camden, New Jersey 08103-1489
Phone: (609)963-3689

Carol Gernat, Coordinator
Anna Haratounian, M.D., Medical Director
Children's Hospital of New Jersey at Newark Beth Israel
Regional PKU Program
201 Lyons Avenue
Newark, New Jersey 07112
Phone: (973)926-6898

                                 GENETIC CENTERS

Patricia Griggs, RNC
ATLANTIC CITY MEDICAL CENTER
Genetic Services
1925 Pacific Avenue
Atlantic City, NJ 08401
Phone:(609)441-8156
FAX:(609) 441-8157

Lynn Howard, Coordinator
Genetics Program
THE CHILDREN'S REGIONAL HOSPITAL
Three Cooper Plaza, Suite 309

Camden, NJ 08103
Phone: (856) 968-7248
FAX: (856) 968-7257

Carolyn Lieber, Manager
Genetics Services
Don Imus WFAN Ped. Ctr., 2nd Fl.
HACKENSACK UNIVERSITY MEDICAL CENTER
Suite 258
30 Prospect Avenue
Hackensack, NJ 07601
Phone:(201)996-5264
FAX: (201) 996-0827

<PAGE>

Jane Murphy, MS Coordinator
Genetic Services
JERSEY CITY MEDICAL CENTER
50 Baldwin Avenue, 8th Floor Clinic Bldg.
Jersey City, NJ 07304-3199
Phone:(201)915-2095
FAX: (201) 915-2481

Carolee Watkins, M.S., MA, CGC
Coordinator, Genetics Services
CAPITOL HEALTH SYSTEM AT MERCER
446 Bellevue Avenue
P.O.Box 1658
Trenton, NJ 08607-1658
Phone: (609) 394-4072
FAX: (609) 394-4148

Judith Rokeach, RN, BSN
Coordinator, Genetic Services
MONMOUTH MEDICAL CENTER
300 Second Avenue
Long Branch, NJ 07740
Phone: (732) 923-6526
FAX: (732) 923-6528

Joan Atkin, M.D. (SC)
MORRISTOWN MEMORIAL HOSPITAL
Genetic Center (Box 120)
100 Madison Avenue
Morristown, New Jersey 07962-1956
Phone:(973)971-5636
FAX: (973) 290-7365

Loraine Suslack, MS
Genetic Counselor
Center for Human & Molecular Genetics
UMDNJ-NEW JERSEY MEDICAL SCHOOL
Doctors Office Center
90 Bergen StreetNewark, NJ 07103
Phone:(973)972-3311
FAX: (973) 972-3310

<PAGE>

Debra Day-Salvatore, M.D., Ph.D.
Director, Division of Clinical Services
ST. PETER'S MEDICAL CENTER
Department of Genetics
254 Easton Avenue, MOB 2190
New Brunswick, New Jersey 08903-0591
Phone: (732) 745-6678
FAX: (732) 249-2687

                               HEMOPHILIA PROGRAM

Cooper Hospital/University Medical Center
3 Cooper Plaza - Room 220
Camden, New Jersey 08103
Jack Goldberg, M.D.
Division Head Hematology/Oncology
Phone: (856) 963-3572
FAX: (856) 338-9211

St. Michael's Medical Center
Regional Hemophilia Center
268 Dr. Martin Luther King Jr. Blvd
Newark, New Jersey 07102-2094
Franklin Desposito, M.D.
Phone: (973) 877-5347
Nancy Gonzalez, Coordinator
Phone:(973)877-4512
FAX:(973) 877-2823

University of Medicine and Dentistry of New Jersey/
Robert Wood Johnson Medical School
One Robert Wood Johnson Place, PO Box 19
New Brunswick, New Jersey 08903-0019
Parvin Saidi, M.D., Director
NJ Regional Hemophilia Program
Phone:(732) 235-7679
Ann Lerner, Administrator
Phone:(732)235-7681
FAX: 732-235-7115

Barbara Marcello Evans, MD
Medical Director
Child Evaluation Center
Cooper Hospital/University Medical Center
Three Cooper Plaza
Camden, NJ 08103-1489
Phone: (609) 342-2257

<PAGE>

Norma Altreche, LCSW
Jersey City Medical Center
50 Baldwin Ave.
Jersey City, NJ 07304
Phone:(201)915-2577

Janice Grebler, MSW, Coordinator
Anthony DeSpirito MD, Medical Director

Jersey Shore Medical Center
1945 Corlio Ave.
Neptune, NJ 07753-4896
Phone:(732) 776-4178

Patricia Munday, Director of Child Evaluations
John F. Kennedy Medical Center
James Street
Edison. NJ 07962-1956
Phone (973) 971-4235

Teri Criscone, Administrative Director
Morristown Memorial Hospital
Child Evaluation Center Box 100
100 Madison Ave.
Morristown, NJ 07960-6095
Phone:(973)971-4235

Roberta DiHoff, Ph.D., Director

Newcomb Medical Center
Child Evaluation Center
65 South State Street
Vineland, NJ 08360-4893
Phone:(609) 696-1014 or 1035

Joan Ferraer, Admministrative Director
Dept. of Pediatrics
St. Joseph's Medical Center
703 Main Street
Paterson, NJ 07503
Phone (973) 754-2505

Barbara Caspi, Program Administrator
Child Evaluation Center
Children's Hospital of New Jersey at Newark Beth Israel
201 Lyons Ave.
Newark, NJ 07112
Phone:(973) 926-6688

<PAGE>

B.4.11 SPECIAL CHILD HEALTH SERVICES NETWORK

The following pages list special child health services network agencies by
provider type.

<PAGE>

               NEW JERSEY DEPARTMENT OF HEALTH AND SENIOR SERVICES
              SPECIAL CHILD, ADULT AND EARLY INTERVENTION SERVICES
                          COUNTY CASE MANAGEMENT UNITS

ATLANTIC COUNTY SCHS-Case Management Unit
Dept. of Intergenerational Services
101 South Shore Road
Northfield, NJ 08225-2320
(609) 645-7700 Ext. 4358
Fax # (609) 645-5907

BERGEN COUNTY SCHS-Case Management Unit
Bergen County Dept. of Health Services
327 Ridgewood Avenue, Second Floor
Paramus, NJ 07652-4895
(201)599-6153
Fax #(201) 599-8947

BURLINGTON COUNTY SCHS-Case Management Unit
Community Nursing Services
Raphael Meadow Health Center
P.O. Box 287 Woodlane Road
Mount Holly, NJ 08060-0287
(609)267-1950
Fax # (609) 702-0541

CAMDEN COUNTY SCHS-Case Management Unit
Camden County Division of Health
Jefferson House - Lakeland Road, PO Box 9
Blackwood, NJ 08012-0009
(856) 374-6021 or (800) 999-9045
Fax # (856) 374-9734

CAPE MAY COUNTY SCHS-Case Management Unit
Cape May Dept. of Health
6 Moore Rd. Crest Haven Complex
Cape May Court House, NJ 08210-3067
(609)465-1203
Fax # (609) 463-3527

CUMBERLAND COUNTY SCHS-Case Management Unit
Cumberland County Dept. of Health
790 East Commerce Street
Bridgeton, NJ 08302-2293
(856)453-2154
Fax # (856) 453-0338

<PAGE>

ESSEX COUNTY SCHS-Case Management Unit
Essex County Dept. of Health and Rehabilitation
Division of Community Health Services
Unit of Special Child Health Services
160 Fairview Ave. Rawson Hall, Bldg. #37
Cedar Grove, NJ 07009
(973) 857-4663
Fax #(973)857-2842

GLOUCESTER COUNTY SCHS-Case Management Unit
Gloucester County Health Department
160 Fries-Mill Road
Turnersville, NJ 08012-2496
(856) 262-4100 (Ext. 4157)
Fax # (856) 629-0469)

HUDSON COUNTY SCHS-Case Management Unit
Jersey City Medical Center
114 Clifton Place, Murdoch Hall
Jersey City, NJ 07304-3199
(201)915-2514
Fax #(201)915-2565

HUNTERDON COUNTY SCHS-Case Management Unit
Hunterdon Medical Center
2100 Wescott Drive
Flemington, NJ 08822-9238
(908) 788-6398
Fax #(908) 788-6581

MERCER COUNTY SCHS-Case Management Unit
Sypek Center
129 Bull Run Road
Pennington, NJ 08534
(609) 730-4152 or 730-4151
Fax #(609) 730-4154

MIDDLESEX COUNTY SCHS-Case Management Unit
Middlesex County Department of Health
75 Bayard Street - 5th Floor
New Brunswick, NJ 08901
(732) 745-3100
Fax # (732) 745-2568

MONMOUTH COUNTY SCHS-Case Management Unit
Visiting Nurse Assoc. of Central Jersey Foundation
1100 Wayside Rd.

<PAGE>

Tinton, NJ 07712
(732) 224-6950
Fax # (732) 747-4404

MORRIS COUNTY SCHS-Case Management Unit
Morristown Memorial Hospital
100 Madison Avenue, Box 99
Morristown, NJ 07960-6095
(973)971-4155
Fax # (973) 290-7358

OCEAN COUNTY SCHS-Case Management Unit
Ocean County Department of Health
PO Box 2191
Sunset Avenue
Toms River, NJ 08754-2191
(732) 341-9700 Ext. 7602
Fax #(732) 341-5461

PASSAIC COUNTY SCHS-Case Management Unit
Catholic Family and Community Services
26 DeGrasse Street
Paterson, NJ 07505
(973) 523-6778
Fax #(973) 523-7715

SALEM COUNTY SCHS-Case Management Unit
Salem County Department of Health
98 Market Street
Salem, NJ 08079-1911
(856) 935-7510 Ext. 8479
Fax # (856) 935-8483

SOMERSET COUNTY SCHS-Case Management Unit
Somerset Handicapped Children's Treatment Center
377 Union Avenue
P.O. Box 6824
Bridgewater, NJ 08807-0824
(908) 725-2366
Fax # (908) 725-3945

SUSSEX COUNTY SCHS-Case Management Unit
Sussex County Health Department
Division of Public Health Nursing
129 Morris Turnpike
Newton, NJ 07860
(973) 948-5400 Ext. 62
Fax # (973) 948-2270

<PAGE>

UNION COUNTY SCHS-Case Management Unit
328 South Avenue
Fanwood, NJ 07023
(908) 889-0950
Fax #(908) 889-7535

WARREN COUNTY SCHS-Case Management Unit
Warren County Health Department
Special Child Health Services
162 East Washington Avenue
Washington, NJ 07882-2196
(908) 689-6000 Ext. 258
Fax #(908) 835-1172

<PAGE>

B.4.12 CARE MANAGEMENT FLOW CHART

<PAGE>

                                CARE MANAGEMENT

[CARE MANAGEMENT FLOW CHART]

<PAGE>

B.4.13 RYAN WHITE CARE ACT GRANTEES

<PAGE>

                               RYAN WHITE HIV CARE
                           CONSORTIA/RESOURCE CENTERS

The Consortia/Resource Centers provide regional planning and coordination of
comprehensive HIV-related services: information and referral, prevention
education, and a network of care and treatment based on community-based case
management.

AIDS COALITION OF SOUTHERN NEW JERSEY
Resource Center
100 Essex Road, Suite 300
Bellmawr, NJ 08031
(609)933-9500 FAX (609)933-9515

GOOD SHEPHERD COMMUNITY SERVICES, INC.
1576 Palisade Avenue
Ft. Lee, NJ 07024
(201)461-7241 FAX (201)461-2307

MERCER COUNTY HIV CONSORTIUM
447 Bellevue Avenue
Trenton, NJ 08618
(609)278-9555 or (800)550-6755 FAX (609)278-0553

MIDDLESEX COUNTY HIV RESOURCE CENTER
Visiting Nurse Association of Central Jersey
275 Hobart Street
Perth Amboy,NJ 08861
(732)442-6225 FAX (732)442-4285

MONMOUTH-OCEAN HIV CARE CONSORTIUM
VNA of Central Jersey Foundation, Inc.
625 Bangs Avenue
Asbury Park, NJ 07712
(732)502-5122 or (800) 947-0020 FAX (732)774-6006
Resource Center: (732)502-5128

PASSAIC COUNTY AIDS RESOURCE CENTER
Coalition on AIDS in Passaic County, Inc.
100 Hamilton Plaza, Room 707
Paterson, NJ 07505
(973)742-6742 FAX (973)742-6750

<PAGE>

SOMERSET-HUNTERDON HIV CARE CONSORTIUM
Women's Health and Counseling Center
95 Veteran's Memorial Drive
Somerville, NJ 08876
(800)313-2335 FAX (908)526-7023
Resource Center: (908)704-9641

SOUTH JERSEY AIDS ALLIANCE
Resource Center-Atlantic/Cape May HIV Case Consortium
19 Gordon's Alley
Atlantic City, NJ 08101
(609)347-1085 FAX (609)348-8775

SOUTH JERSEY COUNCIL ON AIDS
(serving Burlington, Camden, Salem and Gloucester)
120 White Horse Pike, Suite 110
Haddon Heights, NJ 08035
(609)547-6600 FAX (609)547-6656

THE HIV CARE CONSORTIUM/RESOURCE CENTER
Atlantic City Medical Center
16b South Ohio Avenue
Atlantic City, NJ 08401
(609)441-8181 or (800)281-2437 FAX (609)441-8938

UNION COUNTY HIV CONSORTIUM
Union County HIV Resource Center
80 West Grand Street-Lower Level
Elizabeth, NJ 07202
(908)352-770 or (800)279-2437 FAX (908)352-7727

<PAGE>

B.4.14 NEW JERSEY MODIFIED QARI/QISMC STANDARDS

<PAGE>

STANDARD I: WRITTEN QAPI DESCRIPTION - The organization has a written
description of its Quality Assessment and Performance Improvement Program
(QAPI). This written description meets the following criteria:

         A.       GOALS AND OBJECTIVES - The written description contains a
                  detailed set of QA objectives which are developed annually and
                  include a timetable for implementation and accomplishment. The
                  QAPI includes performance improvement projects that achieve,
                  through ongoing measurement and intervention, demonstrable and
                  sustained improvement in significant aspects of clinical care
                  and non-clinical services that can be expected to have a
                  beneficial effect on health outcomes and enrollee
                  satisfaction.

          B.      SCOPE -

                  1.       The scope of the QAPI is comprehensive, addressing
                           both the quality of clinical care and the quality of
                           non-clinical aspects of service, such as and
                           including: availability, accessibility, coordination,
                           and continuity of care.

                  2.       The QAPI methodology provides for review of the
                           entire range of care provided by the organization, by
                           assuring that all demographic groups, care settings,
                           (e.g., inpatient, ambulatory, [ including care
                           provided in private practice offices] and home care),
                           and types of services (e.g., preventive, primary,
                           specialty care, and ancillary) are included in the
                           scope of the review. (This review of the entire range
                           of care is expected to be carried out over multiple
                           review periods and not on a concurrent basis).

                  3.       The QAPI describes how it will meet the outcomes and
                           performance standards specified in the contract.

         C.       SPECIFIC ACTIVITIES - The written description specifies
                  quality of care studies and performance improvement projects
                  and other activities to be undertaken over a prescribed period
                  of time, and methodologies and organizational arrangements to
                  be used to accomplish them. Individuals responsible for the
                  studies and other activities are clearly identified and are
                  appropriate.

         D.       CONTINUOUS ACTIVITY - The written description provides for
                  continuous performance of the activities, including tracking
                  of issues over time.

         E.       PROVIDER REVIEW - The QAPI provides for:

                  1.       review by physician and other health professionals of
                           the process followed in the provision of health
                           services; and

                  2.       feedback to health professionals and HMO staff
                           regarding performance and patient results.

<PAGE>

         F.       FOCUS ON HEALTH OUTCOMES - The QAPI methodology addresses
                  health outcomes to the extent consistent with existing
                  technology.

STANDARD II: SYSTEMATIC PROCESS OF QUALITY ASSESSMENT AND IMPROVEMENT - The QAPI
objectively and systematically monitors and evaluates the quality and
appropriateness of care and service to enrollees, through quality of care
studies and related activities, and pursues opportunities for improvement on an
ongoing basis.

The QAPI has written guidelines for its quality of care studies and related
activities which include:

         A.       SPECIFICATION OF CLINICAL OR HEALTH SERVICES DELIVERY AREAS TO
                  BE MONITORED

                  1.       The monitoring and evaluation of care reflects the
                           population serviced by the managed care organization
                           in terms of age groups, disease categories, and
                           special risk status.

                  2.       For the Medicaid population, the QAPI monitors and
                           evaluates, at a minimum, care and services in certain
                           priority areas of concern selected by the State.
                           Clinical focus areas applicable to all enrollees are
                           as follows:

                           a)       Primary, secondary, and/or tertiary
                                    prevention of acute conditions;

                           b)       Primary, secondary, and/or tertiary
                                    prevention of chronic conditions;

                           c)       Care of acute conditions;

                           d)       Care of chronic conditions;

                           e)       High-volume services

                           f)       High-risk services; and

                           g)       Continuity and coordination of care

                  3.       The State may require an organization to conduct
                           particular projects that are specific to the
                           organization and that relate to topics and involve
                           quality indicators of the State choosing.

                  4.       Organizations may collaborate with one another,
                           subject to the approval of the State.

                  5.       If a project is conducted over a period of more than
                           one review year the project will be considered as
                           achieving improvement in each year for which it
                           achieves an improvement meeting the requirements
                           specified or a project may be considered as achieving
                           improvement in each year for which it achieves an
                           improvement that does not meet the requirements
                           specified but that constitutes an intermediate target
                           specified in a project work plan developed in
                           consultation with the State.

<PAGE>

                  6.       At its discretion and/or as required by the State
                           Medicaid agency, the organization's QAPI also
                           monitors and evaluates other important aspects of
                           care and service.

                           a)       Non-clinical focus areas applicable to all
                                    enrollees are as follows:

                                    i)       Availability, accessibility, and
                                             cultural competency of services;

                                    ii)      Interpersonal aspects of care,
                                             e.g., quality of provider/patient
                                             encounters; and

                                    iii)     Appeals, grievances, and other
                                             complaints.

                           b)       Within each required focus area, the
                                    organization selects a specific topic or
                                    topics to be addressed by a project. Topics
                                    should be selected and prioritized to
                                    achieve the greatest practical benefit for
                                    enrollees.

         B.       USE OF QUALITY INDICATORS - Quality indicators are measurable
                  variables relating to a specified clinical or health services
                  delivery area, which are reviewed over a period of time to
                  monitor the process or outcomes of care delivered in that
                  area.

                  1.       The organization identifies and uses quality
                           indicators that are objective, measurable, and based
                           on current knowledge and clinical experience, or
                           health services research.

                  2.       All indicators measure changes in health status,
                           functional status, or enrollee satisfaction, or valid
                           proxies of these outcomes. Measures of processes are
                           used as a proxy for outcomes only when those
                           processes have been established through published
                           studies or a consensus of relevant practitioners to
                           be significantly related to outcomes.

                  3.       Indicators selected for a topic in a clinical focus
                           area include at least some measure of change in
                           health status or functional status or process of care
                           proxies for these outcomes. Indicators may also
                           include measures of satisfaction.

                  4.       For the priority areas selected by the State from the
                           [Reserved] CMS Medicaid Bureau's list of priority
                           clinical and health services delivery areas of
                           concern, the organization monitors and evaluates
                           quality of care through studies which include, but
                           are not limited to, the quality indicators also
                           specified by the [Reserved] CMS's Medicaid Bureau.

                  5.       Methods and frequency of data collection are
                           appropriate and sufficient to detect need for program
                           change. Assessment of the organization's performance
                           on the selected indicators is based on systematic,
                           ongoing collection and analysis of valid and reliable
                           data.

<PAGE>

                           a)       The organization establishes a baseline
                                    measure of its performance on each
                                    indicator, measures changes in performance,
                                    and continues measurement for at least one
                                    year after a desired level of performance
                                    is achieved.

                           b)       When sampling is used, sampling methodology
                                    for assessment of the organization's
                                    performance shall be such as to ensure that
                                    the data collected validly reflect:

                                    i)       The performance of all
                                             practitioners and providers who
                                             serve Medicaid/NJ FamilyCare
                                             enrollees and whose activities are
                                             the subject of the indicator; and

                                    ii)      The care given to the entire
                                             population (including special
                                             populations with complex care
                                             needs) to which the indicator is
                                             relevant.

         C.       USE OF CLINICAL CARE STANDARDS/PRACTICE GUIDELINES -

                  1.       The QAPI studies and other activities monitor quality
                           of care against clinical care or health service
                           delivery standards or practice guidelines specified
                           for each area identified in "A," above.

                  2.       Guidelines are based on reasonable medical evidence
                           or a consensus of health care professionals in the
                           particular field, consider the needs of the enrolled
                           population, are developed in consultation with
                           contracting health care professionals, and are
                           reviewed and updated periodically. Guidelines,
                           including any admission, continued stay, and
                           discharge criteria used by the organization, are
                           communicated to all providers and enrollees when
                           appropriate, and to individual enrollees when
                           requested.

                  3.       The standards/guidelines focus on the process and
                           outcomes of health care delivery, as well as access
                           to care.

                  4.       A mechanism is in place for continuously updating the
                           standards/guidelines.

                  5.       The standards/guidelines shall be included in
                           provider manual developed for use by HMO providers or
                           otherwise disseminated to providers as they are
                           adopted.

                  6.       The standards/guidelines address preventive health
                           services.

                  7.       Standards/guidelines are developed for the full
                           spectrum of populations enrolled in the plan.

<PAGE>

                  8.       The QAPI shall use these standards/guidelines to
                           evaluate the quality of care provided by the managed
                           care organization's providers, whether the providers
                           are organized in groups, as individuals, as IPAs,
                           or in combination thereof.

                  9.       The organization implements written policies and
                           procedures for evaluating new medical technologies
                           and new uses of existing technologies. The
                           evaluations take into account coverage decisions by
                           Medicare intermediaries and carriers, national
                           Medicare coverage decisions, and federal and state
                           Medicaid coverage decisions, as appropriate.

         D.       ANALYSIS OF CLINICAL CARE AND RELATED SERVICES -

                  1.       Appropriate clinicians monitor and evaluate quality
                           through review of individual cases where there are
                           questions about care, and through studies analyzing
                           patterns of clinical care and related service. For
                           quality issues identified in the QAPI's targeted
                           clinical areas, the analysis includes the identified
                           quality indicators and uses clinical care standards
                           or practice guidelines.

                  2.       Multidisciplinary teams are used, where indicated, to
                           analyze and address systems issues.

                  3.       From 1. and 2., clinical and related service areas
                           requiring improvement are identified.

         E.       IMPLEMENTATION OF REMEDIAL/CORRECTIVE ACTIONS -

                  The QAPI includes written procedures for taking appropriate
                  remedial action whenever, as determined under the QAPI,
                  inappropriate or substandard services are furnished, or
                  services that should have been furnished were not.

                  These written remedial/corrective action procedures include:

                  1.       specification of the types of problems requiring
                           remedial/corrective action;

                  2.       specification of the person(s) or body responsible
                           for making the final determinations regarding quality
                           problems;

                  3.       specific actions to be taken;

                  4.       provision of feedback to appropriate health
                           professionals, providers and staff;

<PAGE>

                  5.       the schedule and accountability for implementing
                           corrective actions;

                  6.       the approach to modifying the corrective action if
                           improvements do not occur;

                  7.       procedures for terminating the affiliation with the
                           physician, or other health professional or provider.

         F.       ASSESSMENT OF EFFECTIVENESS OF CORRECTIVE ACTIONS -

                  1.       As actions are taken to improve care, there is
                           monitoring and evaluation of corrective actions to
                           assure that appropriate changes have been made. In
                           addition, changes in practice patterns are tracked.

                  2.       The managed care organization assures follow-up on
                           identified issues to ensure that actions for
                           improvement have been effective.

         G.       EVALUATION OF CONTINUITY AND EFFECTIVENESS OF THE QAPI -

                  1.       The managed care organization conducts a regular and
                           periodic examination of the scope and content of the
                           QAPI to ensure that it covers all types of services
                           in all settings, as specified in STANDARD I-B-2.

                  2.       At the end of each year, a written report on the QAPI
                           is prepared, which addresses: QA studies and other
                           activities completed; trending of clinical and
                           service indicators and other performance data;
                           demonstrated improvements in quality; areas of
                           deficiency and recommendations for corrective action;
                           and an evaluation of the overall effectiveness of the
                           QAPI.

                  3.       There is evidence that QA activities have contributed
                           to significant improvements in the care delivered to
                           members.

                  4        The organization's interventions result in
                           significant demonstrable improvement in its
                           performance as evidenced in repeat measurements of
                           the quality indicators specified for each performance
                           improvement project undertaken by the organization.

                           a)       When a project measures performance on
                                    quality indicators by collecting data on all
                                    units of analysis in the population to be
                                    studied (i.e., a census), significant
                                    improvement is demonstrated by achieving:

                                    i)       In the case of a statewide Medicaid
                                             project, a benchmark level of
                                             performance defined in advance by
                                             the State Medicaid agency; or

<PAGE>

                                    ii)      In the case of a project developed
                                             by the organization itself, a
                                             benchmark level of performance that
                                             is defined in advance by the
                                             organization. The organization's
                                             benchmark must reduce the
                                             performance gap (the percent of
                                             cases in which the measure is
                                             failed) by at least 10 percent.

                                    iii)     In the case of a project developed
                                             by the organization to reduce
                                             disparities between minorities and
                                             other members, a reduction of at
                                             least 10 percent in the number of
                                             minority enrollees (or the
                                             specified unit of analysis) that do
                                             not achieve the desired outcome as
                                             defined by the quality indicators.

                           b)       When a project measures performance on
                                    quality indicators by collecting data on a
                                    subset (sample) of the units of analysis in
                                    the population to be studied, significant
                                    improvement is demonstrated by achieving the
                                    benchmarks specified in a) above and the
                                    quantitative improvement demonstrated in the
                                    repeated measurements is statistically
                                    significant with a "p value" of less than or
                                    equal to .10.

                                    i)       The sample or subset of the study
                                             population shall be obtained
                                             through random sampling.

                                    ii)      The samples used for the baseline
                                             and repeat measurements of the
                                             performance indicators shall be
                                             chosen using the same sampling
                                             frame and methodology.

                           c)       The improvement is reasonably attributable
                                    to interventions undertaken by the
                                    organization (i.e., a project and its
                                    results have face validity).

                  5.       The organization sustains the improvements in
                           performance for at least one year after the
                           improvement in performance is first achieved.
                           Sustained improvement is documented through the
                           continued measurement of quality indicators for at
                           least one year after the performance improvement
                           project is completed.

STANDARD III: ACCOUNTABILITY TO THE GOVERNING BODY - The Governing Body of the
organization is the Board of Directors or, where the Board's participation with
quality improvement issues is not direct, a designated committee of the senior
management of the managed care organization. Responsibilities of the Governing
Body for monitoring, evaluating, and making improvements to care include:

         A.       OVERSIGHT OF QAPI - There is documentation that the Governing
                  Body has

<PAGE>

                  approved the overall QAPI and an annual QA plan.

         B.       OVERSIGHT ENTITY - The Governing Body has formally designated
                  an accountable entity or entities within the organization to
                  provide oversight of QA, or has formally decided to provide
                  such oversight as a committee of the whole.

         C.       QAPI PROGRESS REPORTS - The governing Body routinely receives
                  written reports from the QAPI describing actions taken,
                  progress in meeting QA objectives, and improvements made.

         D.       ANNUAL QAPI REVIEW - The Governing Body formally reviews on a
                  periodic basis (but no less frequently than annually) a
                  written report on the QAPI which includes: studies undertaken,
                  results, subsequent actions, and aggregate data on utilization
                  and quality of services rendered, to assess the QAPI's
                  continuity, effectiveness and current acceptability.

         E.       PROGRAM MODIFICATION - Upon receipt of regular written reports
                  from the QAPI delineating actions taken and improvements made,
                  the Governing Body takes action when appropriate and directs
                  that the operational QAPI be modified on an ongoing basis to
                  accommodate review findings and issues of concern within the
                  managed care organization (MCO). This activity is documented
                  in the minutes of the meetings of the Governing Board in
                  sufficient detail to demonstrate that it has directed and
                  followed up on necessary actions pertaining to Quality
                  Assurance.

STANDARD IV: ACTIVE QA COMMITTEE - The QAPI delineates an identifiable structure
responsible for performing QA functions within the MCO. This committee or other
structure has:

         A.       REGULAR MEETINGS - The structure/committee meets on a regular
                  basis with specified frequency to oversee QAPI activities.
                  This frequency is sufficient to demonstrate that the
                  structure/committee is following-up on all findings and
                  required actions, but in no case are such meetings less
                  frequent that quarterly.

         B.       ESTABLISHED PARAMETERS FOR OPERATING - The role, structure and
                  function of the structure/committee are specified.

         C.       DOCUMENTATION - There are records documenting the
                  structure's/committee's activities, findings, recommendations
                  and actions.

         D.       ACCOUNTABILITY - The QAPI committee is accountable to the
                  Governing Body and reports to it (or its designee) on a
                  scheduled basis on activities, findings, recommendations and
                  actions.

         E.       MEMBERSHIP - There is active participation in the QA committee
                  from health plan providers, who are representative of the
                  composition of the health plan's providers.

<PAGE>

STANDARD V: QAPI SUPERVISION - There is a designated senior executive who is
responsible for program implementation. The organization's Medical Director has
substantial involvement in QA activities.

STANDARD VI: ADEQUATE RESOURCES - The QAPI has sufficient material resources;
and staff with the necessary education, experience, or training; to effectively
carry out its specified activities.

STANDARD VII: PROVIDER PARTICIPATION IN THE QAPI -

         A.       Participating physicians and other providers are kept informed
                  about the written QA plan.

         B.       The MCO includes in all its provider contracts and employment
                  agreements, for both physicians and non-physician providers, a
                  requirement securing cooperation with the QAPI.

         C.       Contracts specify that hospitals and other contractors will
                  allow the managed care organization access to the medical
                  records of its members.

         D.       Includes a provider appeals process.

         E.       Description of how providers are to be involved in the design,
                  implementation, review and follow-up of quality activities.

         F.       Description of how needed changes will be instituted.

STANDARD VIII: DELEGATION OF QAPI ACTIVITIES - The MCO remains accountable for
health services management and all QAPI functions, even if certain functions are
delegated to other entities. If the managed care organization delegates any
activities to other entities:

         A.       There is a written agreement describing: the delegated
                  activities; the delegate's accountability for these
                  activities; the frequency of reporting to the managed care
                  organization; and provides for revocation of the delegation or
                  other remedies for inadequate performance.

         B.       The MCO has written procedures for monitoring and evaluating
                  the implementation of the delegated functions and for
                  verifying the actual quality of care being provided.

         C.       There is evidence of continuous and ongoing evaluation of
                  delegated activities at least annually, including approval of
                  quality improvement plans and regular specified reports.

<PAGE>

         D.       The organization evaluates the entity's ability to perform the
                  delegated activities prior to delegation.

         E.       If the organization delegates selection of providers to
                  another entity, the organization retains the right to approve,
                  suspend, or terminate any provider selected by that entity.

STANDARD IX: CREDENTIALING AND RECREDENTIALING - The QAPI contains the following
provisions to determine whether physicians and other health care professionals,
who are licensed by the State and who are under contract to the MCO, are
qualified to perform their services.

         A.       WRITTEN POLICIES AND PROCEDURES - The managed care
                  organization has written policies and procedures for the
                  credentialing process, which includes the organization's
                  initial credentialing of practitioners, as well as its
                  subsequent recredentialing, recertifying and/or reappointment
                  of practitioners.

         B.       OVERSIGHT BY GOVERNING BODY - The Governing Body, or the group
                  or individual to which the Governing Body has formally
                  delegated the credentialing function, has reviewed and
                  approved the credentialing policies and procedures.

         C.       CREDENTIALING ENTITY - The plan designates a credentialing
                  committee or other peer review body which makes
                  recommendations regarding credentialing decisions.

         D.       SCOPE - The plan identifies those practitioners who fall under
                  its scope of authority and action. This shall include, at a
                  minimum, all physicians, dentists, and other licensed
                  independent practitioners included in the review
                  organization's literature for members, as an indication of
                  those practitioners whose service to members is contracted or
                  anticipated.

         E.       PROCESS - The initial credentialing process obtains and
                  reviews verification of the following information, at a
                  minimum:

                  1.       the practitioner holds a current valid license to
                           practice;

                  2.       valid DEA [Reserved] AND CDS certificate, as
                           applicable;

                  3.       graduation from medical school and completion of a
                           residency, or other post-graduate training, as
                           applicable;

                  4.       work history;

                  5.       professional liability claims history;

<PAGE>

                  6.       good standing of clinical privileges at the hospital
                           designated by the practitioner as the primary
                           admitting facility; (This requirement may be waived
                           for practices which do not have or do not need access
                           to hospitals.)

                  7.       the practitioners holds current, adequate malpractice
                           insurance according to the plan's policy;

                  8.       any revocation or suspension of a State license or
                           DEA/BNDD number;

                  9.       any sanctions imposed by Medicare and/or Medicaid for
                           example, suspensions, debarment, or recovery action;
                           and

                  10.      any censure by the State or County Medical
                           Association.

                  11.      The organization requests information on the
                           practitioner from the National Practitioner Data Bank
                           and the State Board of Medical Examiners.

                  12.      The application process includes a statement by the
                           applicant regarding:

                           a)       any physical or mental health problems that
                                    may affect current ability to provide health
                                    care;

                           b)       any history of chemical dependency/substance
                                    abuse;

                           c)       history of loss of license and/or felony
                                    convictions;

                           e)       history of loss or limitation of hospital
                                    privileges or disciplinary activity; and

                           f)       an attestation to correctness/completeness
                                    of the applications.

                           This information should be used to evaluate the
                           practitioner's current ability to practice.

                  13.      There is an initial visit to each potential primary
                           care practitioner's office, including documentation
                           of a structured review of the site and medical
                           recordkeeping practices to ensure conformance with
                           the managed care organization's standards.

         F.       RECREDENTIALING - A process for the periodic reverification of
                  clinical credentials (recredentialing, reappointment, or
                  recertification) is described in the organization's policies
                  and procedures.

                  1.       There is evidence that the procedure is implemented
                           at least every three years.

<PAGE>

                  2.       The MCO conducts periodic review of information from
                           the National Practitioner Data Bank, along with
                           performance data, on all physicians, to decide
                           whether to renew the participating physician
                           agreement. At a minimum, the recredentialing,
                           recertification or reappointment process is organized
                           to verify current standing on items listed in "E-l"
                           through "E-7", above and item "E-l2" as well.

                  3.       The recredentialing, recertification or reappointment
                           process also includes review of data from:

                           a)       member complaints;

                           b)       results of quality reviews;

                           c)       performance indicators;

                           d)       utilization management;

                           e)       member satisfaction surveys; and

                           f)       reverifications of hospital privileges and
                                    current licensure.

         G.       DELEGATION OF CREDENTIALING ACTIVITIES - If the managed care
                  organization delegates credentialing (and recredentialing,
                  recertification, or reappointment) activities, there is a
                  written description of the delegated activities, and the
                  delegate's accountability for these activities. There is also
                  evidence that the delegate accomplished the credentialing
                  activities. The managed care organization monitors the
                  effectiveness of the delegate's credentialing and
                  reappointment or recertification process.

         H.       RETENTION OF CREDENTIALING AUTHORITY - The managed care
                  organization retains the right to approve new providers and
                  sites, and to terminate or suspend individual providers. The
                  organization has policies and procedures for the suspension,
                  reduction or termination of practitioner privileges.

         I.       REPORTING REQUIREMENT - There is a mechanism for, and evidence
                  of implementation of, the reporting of serious quality
                  deficiencies resulting in suspension or termination of a
                  practitioner, to the appropriate authorities.

         J.       APPEALS PROCESS - There is a provider appellate process for
                  instances where the managed care organization chooses to
                  reduce, suspend or terminate a practitioner's privileges with
                  the organization.

<PAGE>

                  1.       The contractor shall not terminate a contract with a
                           health care professional for participation in the
                           contractor's network unless the contractor provides
                           to the health care professional a written explanation
                           of the reasons for the proposed contract termination
                           and an opportunity for a review or hearing. This
                           section shall not apply in cases involving imminent
                           harm to patient care, a determination of fraud, or a
                           final disciplinary action by a State licensing board
                           or other governmental agency that impairs the health
                           care professional's ability to practice.

                  2.       No contractor shall terminate or refuse to renew a
                           contract for participation in the contractor's
                           network solely because the health care profession has
                           (1) advocated on behalf of the enrollee; (2) filed a
                           complaint against the contractor; (3) appealed a
                           decision of the contractor; or (4) requested a
                           hearing or review pursuant to this section.

                  3.       For each institutional provider or supplier, the
                           organization determines, and redetermines at
                           specified intervals, that the provider or supplier:

                           a)       Is licensed to operate in the state, and is
                                    in compliance with any other applicable
                                    state or federal requirements;

                           b)       Is reviewed and approved by an appropriate
                                    accrediting body or is determined by the
                                    organization to meet standards established
                                    by the organization itself; and

                           c)       In the case of a provider or supplier
                                    providing services to Medicare enrollees, is
                                    approved for participation in Medicare.
                                    (Note: This requirement does not apply to
                                    providers of additional or supplemental
                                    services for which Medicare has no approval
                                    standards.)

                  4.       The organization notifies licensing and/or
                           disciplinary bodies or other appropriate authorities,
                           including but not limited to, the Health Care
                           Integrity and Protection Data Bank, when a health
                           care professional's or institutional provider or
                           supplier's affiliation is suspended or terminated
                           because of quality deficiencies, or as required
                           pursuant to 45 CFR Part 61.

                  5.       The organization ensures compliance with federal
                           requirements prohibiting employment or contracts with
                           individuals excluded from participation under either
                           Medicare or Medicaid.

STANDARD X: ENROLLEE RIGHTS AND RESPONSIBILITIES - The organization demonstrates
a commitment to treating members in a manner that acknowledges their rights and
responsibilities.

<PAGE>

         A.       WRITTEN POLICY ON ENROLLEE RIGHTS - The organization has a
                  written policy that complies with federal and state laws
                  affecting the rights of enrollees and that recognizes the
                  following rights of members:

                  1.       to be treated with respect, dignity, and need for
                           privacy;

                  2.       to be provided with information about the
                           organization, its services, the practitioners
                           providing care, and members rights and
                           responsibilities and to be able to communicate and be
                           understood with the assistance of a translator if
                           needed.

                  3.       to be able to choose primary care practitioners,
                           within the limits of the plan network, including the
                           right to refuse care from specific practitioners;

                  4.       to participate in decision-making regarding their
                           health care, to be fully informed by the Primary Care
                           Practitioner, other health care provider or Care
                           Manager of health and functional status, and to
                           participate in the development and implementation of
                           a plan of care designed to promote functional ability
                           to the optimal level and to encourage independence;

                  5.       to voice grievances about the organization or care
                           provided and recommend changes in policies and
                           services to plan staff, providers and outside
                           representatives of the enrollee's choice, free of
                           restraint, interference, coercion, discrimination or
                           reprisal by the plan or its providers;

                  6.       to formulate advance directives; [Note: policies,
                           procedures, and information to enrollees must reflect
                           changes in State law no later than 90 days after the
                           effective date of the change.];

                  7.       to have access to his/her medical records in
                           accordance with applicable Federal and State laws.

                  8.       to be free from harm, including unnecessary physical
                           restraints or isolation, excessive medication,
                           physical or mental abuse or neglect;

                  9.       to be free of hazardous procedures;

                  10.      to receive information on available treatment options
                           or alternative courses of care;

                  11.      to refuse treatment and be informed of the
                           consequences of such refusal;

                  12.      to have services provided that promote a meaningful
                           quality of life and autonomy for members, independent
                           living in members' homes and other community settings
                           as long as medically and socially feasible, and
                           preservation and support of members' natural support
                           systems.

<PAGE>

                  13.      to request and receive a copy of his/her medical
                           records, and to request that they be amended or
                           corrected, as specified in 45 CFR Part 164.

         B.       WRITTEN POLICY ON ENROLLEE RESPONSIBILITIES - The organization
                  has a written policy that addressees members' responsibility
                  for cooperating with those providing health care services.
                  This written policy addresses members' responsibility for:

                  1.       providing, to the extent possible, information needed
                           by professional staff in caring for the member; and

                  2.       following instructions and guidelines given by those
                           providing health care services.

         C.       COMMUNICATION OF POLICIES TO PROVIDERS AND ORGANIZATION STAFF
                  - A copy of the organization's policies on members' rights and
                  responsibilities is provided to all participating providers
                  annually. The organization must monitor and promote compliance
                  with the policies by the contractor's staff and affiliated
                  providers.

         D.       COMMUNICATION OF POLICIES TO ENROLLEES/MEMBERS - Upon
                  enrollment and annually thereafter, members are provided a
                  written statement that includes information on the following:

                  1.       rights and responsibilities of members including the
                           specific informational requirements of this section;

                  2.       benefits and services included and excluded as a
                           condition of membership, and how to obtain them,
                           including a description of:

                           a)       procedures for obtaining services, including
                                    authorization requirements;

                           b)       any special benefit provisions (for example,
                                    co-payment, higher deductibles, rejection of
                                    claim) that may apply to service obtained
                                    outside the system;

                           c)       procedures for obtaining services covered by
                                    the Medicaid fee-for-service program;

                           d)       the procedures for obtaining out-of-area
                                    coverage; and

                           e)       policies on referrals for specialty and
                                    ancillary care.

                  3.       provisions for after-hours and emergency coverage;

<PAGE>

                  4.       the organization's policy and procedures on referrals
                           for specialty care and ancillary services;

                  5.       charges to members, if applicable, including:

                           a)       policy on payment of charges;

                           b)       co-payment and fees for which the member is
                                    responsible; and

                           c)       what to do if a member receives a bill for
                                    services.

                  6.       procedures for notifying those members affected by
                           the termination or change in any benefits, services,
                           service delivery office/site, or affiliated
                           providers.

                  7.       procedures for appealing decisions adversely
                           affecting the member's coverage, benefits, or
                           relationship to the organization.

                  8.       procedures for changing practitioners;

                  9.       procedures for disenrollment; and

                  10.      procedures for voicing complaints and/or grievances
                           and for recommending changes in policies and
                           services.

         E.       ENROLLEE/MEMBER GRIEVANCE PROCEDURES - The organization has,
                  and communicates to enrollees, staff, and providers, a
                  system(s), linked to the QAPI, for resolving members'
                  complaints and formal grievances. This system includes:

                  1.       procedures for registering and responding to
                           complaints and grievances in a timely fashion
                           (organizations should establish and monitor standards
                           for timeliness);

                  2.       documentation of the substance of complaints or
                           grievances, and actions taken;

                  3.       procedures to ensure a resolution of the complaint or
                           grievance;

                  4.       aggregation and analysis of complaint and grievance
                           data and use of the data for quality improvement; and

                  5.       an appeal process for grievances.

         F.       ENROLLEE/MEMBER SUGGESTIONS - Opportunity is provided for
                  members to offer suggestions for changes in policies and
                  procedures.

<PAGE>

         G.       STEPS TO ASSURE ACCESSIBILITY OF SERVICES - The managed care
                  organization takes steps to promote accessibility of all
                  services, both clinical and non-clinical, offered to members,
                  including those with limited English proficiency and reading
                  skills, with diverse cultural and ethnic backgrounds, the
                  homeless and individuals with physical and mental
                  disabilities. These steps include:

                  1.       The points of access to primary care, specialty care,
                           and hospital services are identified for members.

                  2.       At a minimum, members are given information about:

                           a)       how to obtain services during regular hours
                                    of operations;

                           b)       how to obtain emergency and after-hours
                                    care;

                           c)       how to obtain second opinions;

                           d)       how to obtain the names, qualifications, and
                                    titles of the professionals providing and/or
                                    responsible for their care;

                           e)       how to select a PCP from among those
                                    accepting new enrollees; and.

                           f)       physical accessibility.

         H.       WRITTEN INFORMATION FOR MEMBERS -

                  1.       Member information (for example, subscriber
                           brochures, announcements, handbooks) is written in
                           prose that is readable and easily understood.

                  2.       Written information is available, as needed, in the
                           languages of the major population groups served. A
                           "major" population is one which represents at least
                           5% of a plan's membership.

         I.       CONFIDENTIALITY OF PATIENT INFORMATION - The organization acts
                  to ensure that the confidentiality of specified patient
                  information and records is protected.

                  1.       The organization has established in writing, and
                           enforced, policies and procedures on confidentiality,
                           including confidentiality of medical records.

                  2.       Information from, or copies of, records may be
                           released only to authorized individuals, and the
                           organization must ensure that unauthorized
                           individuals cannot gain access to or alter patient
                           records. Original medical records must be released
                           only in accordance with federal or state laws, court
                           orders, or subpoenas.

<PAGE>

                  3.       The organization ensures that patient care
                           offices/sites have implemented mechanisms that guard
                           against the unauthorized or inadvertent disclosure of
                           confidential information to persons outside of the
                           medical care organization.

                  4.       The organization shall hold confidential all
                           information obtained by its personnel about enrollees
                           related to their examination, care and treatment and
                           shall not divulge it without the enrollee's
                           authorization, unless:

                           a)       it is required by law;

                           b)       it is necessary to coordinate the patient's
                                    care with physicians, hospitals, or other
                                    health care entities, or to coordinate
                                    insurance or other matters pertaining to
                                    payment;

                           c)       it is necessary in compelling circumstances
                                    to protect the health or safety of an
                                    individual.

                  5.       Any release of information in response to a court
                           order is reported to the patient in a timely manner.

                  6.       Enrollee records may be disclosed, whether or not
                           authorized by the enrollee, to qualified personnel
                           for the purpose of conducting scientific research,
                           but these personnel may not identify, directly or
                           indirectly, any individual enrollee in any report of
                           the research or otherwise disclose participant
                           identity in any manner.

         J.       TREATMENT OF MINORS AND INDIVIDUALS WITH DISABILITIES - The
                  organization has written policies regarding the appropriate
                  treatment of minors and individuals with disabilities.

         K.       ASSESSMENT OF MEMBER SATISFACTION - If the organization
                  conducts periodic surveys of member satisfaction with its
                  services, the following must be included in the surveys.

                  1.       The surveys include content on perceived problems in
                           the quality, availability, and accessibility of care
                           including difficulties experienced by people with
                           disabilities in finding primary care doctors or
                           specialists who are trained and experienced in
                           treating people with disabilities.

                  2.       The surveys assess at least a sample of:

                           a)       all Medicaid members;

                           b)       Medicaid member requests to change
                                    practitioners and/or facilities;

<PAGE>

                                    and

                           c)       disenrollment by Medicaid members.

                  3.       As a result of the surveys, the organization:

                           a)       identifies and investigates sources of
                                    dissatisfaction;

                           b)       outlines action steps to follow-up on the
                                    findings; and

                           c)       informs practitioners and providers of
                                    assessment results.

                  4.       The organization reevaluates the effects of the above
                           activities.

         L.       PRESERVATION AND SUPPORT OF MEMBERS' NATURAL SUPPORT SYSTEMS.

STANDARD XI: STANDARDS FOR AVAILABILITY AND ACCESSIBILITY - The MCO has
established standards for access (e.g., to routine, urgent and emergency care;
telephone appointments; advice; and member service lines). Performance on these
dimensions of access are assessed against the standards.

STANDARD XII: MEDICAL RECORDS STANDARDS

         A.       ACCESSIBILITY AND AVAILABILITY OF MEDICAL RECORDS -

                  1.       The MCO shall include provisions in provider
                           contracts for appropriate access to the medical
                           records of its enrollees for purposes of quality
                           reviews conducted by the Secretary, State Medicaid
                           agencies, or agents thereof.

                  2.       Records are available to health care practitioners at
                           each encounter.

                  3.       The MCO conducts ongoing programs to monitor
                           compliance with its policies and procedures for
                           medical records.

         B.       RECORDKEEPING - Medical records may be on paper or electronic.
                  The Plan takes steps to promote maintenance of medical records
                  in a legible, current, detailed, organized and comprehensive
                  manner that permits effective patient care and quality review
                  as follows:

                  1.       medical record standards - The organization sets
                           standards for medical records. The records reflect
                           all aspects of patient care, including ancillary
                           services. These standards shall, at a minimum,
                           include requirements for:

                           a)       patient identification information - Each
                                    page or electronic file in the record
                                    contains the patient's name or patient ID
                                    number.

<PAGE>

                           b)       personal/biographical data -
                                    Personal/biographical data includes: age;
                                    sex; address; employer; home and work
                                    telephone numbers; and marital status.

                           c)       entry date - All entries are dated.

                           d)       provider identification - All entries are
                                    identified as to author.

                           e)       legibility - The record is legible to
                                    someone other than the writer. Any record
                                    judged illegible by one physician reviewer
                                    should be evaluated by a second reviewer.

                           f)       allergies - Medication allergies and adverse
                                    reactions are prominently noted on the
                                    record. Absence of allergies (no known
                                    allergies -- NKA) is noted in an easily
                                    recognizable location.

                           g)       past medical history - (for patients seen 3
                                    or more times) Past medical history is
                                    easily identified including serious
                                    accidents, operations, illnesses. For
                                    children, past medical history related to
                                    prenatal care and birth.

                           h)       immunizations - for pediatric records (ages
                                    12 and under) there is a completed
                                    immunization record or a notation that
                                    immunizations are up-to-date.

                           i)       diagnostic information

                           j)       medication information

                           k)       identification of current problems -
                                    Significant illnesses, medical conditions
                                    and health maintenance concerns are
                                    identified in the medical record.

                           1)       smoking/ETOH/substance abuse - Notation
                                    concerning cigarettes and alcohol use and
                                    substance abuse is present. (For patients 12
                                    years and over and seen 3 or more times.)
                                    Abbreviations and symbols may be
                                    appropriate.

                           m)       consultations, referrals, and specialist
                                    reports - Notes from any consultations are
                                    in the record. Consultation, lab, and x-ray
                                    reports filed in the chart have the ordering
                                    physician's initials or other documentation
                                    signifying review. Consultation and
                                    significantly abnormal lab and imaging study
                                    results have an explicit notation in the
                                    record of follow-up plans.

<PAGE>

                           n)       emergency care

                           o)       hospital discharge summaries - discharge
                                    summaries are included as part of the
                                    medical record for: (1) all
                                    hospital-admissions which occur while the
                                    patient is enrolled in the MCO and (2) prior
                                    admissions as necessary.

                           p)       advance directive - For medical records of
                                    adults, the medical record documents whether
                                    or not the individual has executed an
                                    advance directive. An advance directive is a
                                    written instruction such as a living will or
                                    durable power of attorney for health care
                                    relating to the provision of health care
                                    when the individual is incapacitated.

                  2.       patient visit data - documentation of individual
                           encounters must provide adequate evidence of, at a
                           minimum:

                           a)       history and physical examination -
                                    Appropriate subjective and objective
                                    information is obtained for the presenting
                                    complaints;

                           b)       plan of treatment;

                           c)       diagnostic tests;

                           d)       therapies and other prescribed regimens;

                           e)       follow-up - Encounter forms or notes have a
                                    notation, when indicated, concerning
                                    follow-up care, call or visit. Specific time
                                    to return is noted in weeks, months, or PRN.
                                    Unresolved problems from previous visits are
                                    addressed in subsequent visits.

                           f)       referrals and results thereof; and

                           g)       all other aspects of patient care, including
                                    ancillary services.

         C.       RECORD REVIEW PROCESS -

                  1.       The MCO has a system (record review process) to
                           assess the content of medical records for legibility,
                           organization, completion and conformance to its
                           standards.

                  2.       The record assessment system addresses documentation
                           of the items list in B, above.

                  3.       The organization ensures appropriate and confidential
                           exchange of information among providers, such that:

<PAGE>

                           a)       A provider making a referral transmits
                                    necessary information to the provider
                                    receiving the referral;

                           b)       A provider furnishing a referral service
                                    reports appropriate information to the
                                    referring provider;

                           c)       Providers request information from other
                                    treating providers as necessary to provide
                                    care;

                           d)       If the organization offers a
                                    point-of-service benefit or other benefit
                                    providing coverage of services by
                                    non-network providers, the organization
                                    transmits information about services used by
                                    an enrollee under the benefit to the
                                    enrollee's primary care provider; and

                           e)       When an enrollee chooses a new primary care
                                    provider within the network, the enrollee's
                                    records are transferred to the new provider
                                    in a timely manner that ensures continuity
                                    of care.

                  4.       The organization has policies and procedures for
                           sharing enrollee information with any organization
                           with which the enrollee may subsequently enroll.

STANDARD XIII: UTILIZATION REVIEW -

         A.       WRITTEN PROGRAM DESCRIPTION - The organization has a written
                  utilization management program description which includes, at
                  a minimum, procedures to evaluate medical necessity, criteria
                  used, information sources and the process used to review and
                  approve the provision of medical services.

         B.       SCOPE - The program has mechanisms to detect underutilization
                  as well as overutilization.

         C.       PREAUTHORIZATION AND CONCURRENT REVIEW REQUIREMENTS - For
                  organizations with preauthorization or concurrent review
                  programs:

                  1.      The organization implements written policies and
                          procedures, reflecting current standards of medical
                          practice, for processing requests for initial
                          authorization of services or requests for continuation
                          of services.

                          a)       The policies specify time frames for
                                   responding to requests for initial and
                                   continued determinations, specify information
                                   required for authorization decisions, provide
                                   for consultation with the requesting provider
                                   when appropriate, and provide for expedited
                                   response to requests for authorization of
                                   urgently needed services.

<PAGE>

                           b)       Criteria for decisions on coverage and
                                    medical necessity are clearly documented,
                                    are based on reasonable medical evidence or
                                    a consensus of relevant health care
                                    professionals, and are regularly updated.

                           c)       Mechanisms are in place to ensure consistent
                                    application of review criteria and
                                    compatible decisions.

                           d)       A clinical peer reviews all decisions to
                                    deny authorization on grounds of medical
                                    appropriateness.

                           e)       The requesting provider and the enrollee are
                                    promptly notified of any decision to deny,
                                    limit, or discontinue authorization of
                                    services. The notice specifies the criteria
                                    used in denying or limiting authorization
                                    and includes information on how to request
                                    reconsideration of the decision pursuant to
                                    the procedures established. The notice to
                                    the enrollee must be in writing.

                           f)       Compensation to persons or organizations
                                    conducting utilization management activities
                                    shall not be structured so as to provide
                                    inappropriate incentives for denial,
                                    limitation or discontinuation of
                                    authorization of services.

                           g)       The organization does not prohibit providers
                                    from advocating on behalf of enrollees
                                    within the utilization management process.

                           h)       Mechanisms are in effect to detect both
                                    underutilization and overutilization of
                                    services.

                  2.       Preauthorization and concurrent review decisions are
                           supervised by qualified medical professionals.

                  3.       Efforts are made to obtain all necessary information,
                           including pertinent clinical information, and consult
                           with the treating physician as appropriate.

                  4.       The reasons for decisions are clearly documented and
                           available to the member.

                  5.       There are well-publicized and readily available
                           appeals mechanisms for both providers and patients.
                           Notification of a denial includes a description of
                           how to file an appeal.

                  6.       Decisions and appeals are made in a timely manner as
                           required by the exigencies of the situation.

<PAGE>

                  7.       There are mechanisms to evaluate the effects of the
                           program using data on member satisfaction, provider
                           satisfaction or other appropriate measures.

                  8.       If the organization delegates responsibility for
                           utilization management, it has mechanisms to ensure
                           that these standards are met by the delegate.

STANDARD XIV: CONTINUITY OF CARE SYSTEM - The MCO has put a basic system in
place which promotes continuity of care and case management including a
mechanism for tracking issues over time with an emphasis on improving health
outcomes, as well as preventive services and maintenance of function for people
with disabilities.

STANDARD XV: QAPI DOCUMENTATION -

         A.       SCOPE - The MCO shall document that it is monitoring the
                  quality of care across all services and all treatment
                  modalities, according to its written QAPI. (The review of the
                  entire range of care is expected to be carried out over
                  multiple review periods and not on a concurrent basis.)

         B.       MAINTENANCE AND AVAILABILITY OF DOCUMENTATION - The MCO must
                  maintain and make available to the State, and upon request to
                  the Secretary, studies, reports, protocols, standards,
                  worksheets, minutes, or such other documentation as may be
                  appropriate, concerning its QA activities and corrective
                  actions.

STANDARD XVI: COORDINATION OF QA ACTIVITY WITH OTHER MANAGEMENT ACTIVITY - The
findings, conclusions, recommendations, actions taken, and results of the
actions taken as a result of QA activity, are documented and reported to
appropriate individuals within the organization and through the established QA
channels.

         A.       QA information is used in recredentialing, recontracting
                  and/or annual performance evaluations.

         B.       QA activities are coordinated with other performance
                  monitoring activities, including utilization management, risk
                  management, and resolution and monitoring of member complaints
                  and grievances.

         C.       There is a linkage between QA and the other management
                  functions of the health plan such as:

                  1.       network changes;

                  2.       benefits redesign;

                  3.       medical management systems (e.g., pre-certification);

                  4.       practice feedback to physicians;

<PAGE>

                  5.       patient education; and

                  6.       member services.

<PAGE>

B.4.15 HYSTERECTOMY AND STERILIZATION PROCEDURES AND CONSENT FORMS

HYSTERECTOMY RECEIPT OF INFORMATION FORM
FD-189

Federally prescribed documentation regulations for hysterectomies are extremely
rigid. Specific Medicaid requirements must be met and documented on the
Hysterectomy Receipt of Information Form (FD-189). Any claim (hospital,
operating physician, anesthesiologist, clinic, etc) involving hysterectomy
procedures must have a properly completed FD-189 attached when submitted for
payment. Hysterectomy claims are hard copy restricted; electronic billing is not
permitted.

Additional information concerning Medicaid policy governing hysterectomy
procedures may be found in Title 10, Subchapter 54, Section V Physicians'
Services, included with your manual.

Providers may obtain additional copies of the FD-189 form from the Fiscal Agent;
however, photocopies of the FD-189 are acceptable.

A sample of the Hysterectomy Receipt of Information Form and instructions for
the form's proper completion are included for reference.

<PAGE>

                              STATE OF NEW JERSEY
                          DEPARTMENT OF HUMAN SERVICES
                         DIVISION OF MEDICAL ASSISTANCE
                              AND HEALTH SERVICES

HYSTERECTOMY RECEIPT OF INFORMATION FORM

A woman who has a hysterectomy can never again get pregnant. When you have a
hysterectomy, the doctor removes your uterus (womb). You can not have a baby
after your uterus is removed and you will not have menstrual periods anymore.

I received the above information orally and in writing
from____________________________________________ name of clinic or
_______________________________before my operation was performed.
physician

I talked to________________________________about a hysterectomy._______________
              name of responsible person(s)                       she/he/they
discussed it with me and gave me a chance to ask questions and answered them for
me before the operation.

I have read all of this notice. I agree that it is a true description of what
was explained to me by
___________________________of__________________________________________ and that
     name of staff member          clinic/hospital/physician
all my questions were answered to my satisfaction.

 I,_____________________________, hereby consent (or did consent) of my own free
          name of recipient
will to have a hysterectomy done by______________________________________ and/or
                                                 physician
associate(s) or assistant(s) of his or her choice.

I consent (or did consent) to any other medical treatment that the doctor thinks
is (was) necessary to preserve my health.

I also consent to the release of this form and other medical records about the
operation to representatives of the United States Department of Health and Human
Services or employees of programs or projects funded by that Department but only
for purposed of determining if Federal laws were observed.

______________________________                         ________________________
    RECIPIENT'S SIGNATURE                                DATE: MONTH/DAY/YEAR

FD-189 (Rev 7/83)                                                         7472 M
ED 7/83

<PAGE>

                  ITEM-BY-ITEM INSTRUCTIONS FOR COMPLETING THE
           HYSTERECTOMY RECEIPT OF INFORMATION FORM FD-189 (REV 3/91)

1)       NAME OF CLINIC OR PHYSICIAN: Enter the name of the clinic or physician
         who provided the information.

2)       NAME OF RESPONSIBLE PERSON(S): Enter the name of the individual who
         discussed the procedure with the recipient.

3)       SHE/HE/THEY: Enter appropriate selection.

4)       NAME OF STAFF MEMBER. Enter the name of the individual who explained
         the procedure to the recipient.

5)       CLINIC/HOSPITAL/PHYSICIAN: Enter the name of the clinic/hospital or
         physician's office in which the individual who explained the procedure
         is affiliated.

6)       RECIPIENT'S NAME: Copy the recipient's name as printed on the Medicaid
         Eligibility Identification Card. First name must be entered first.

7)       NAME OF PHYSICIAN: Enter the physician's name.

8)       RECIPIENT'S SIGNATURE AND DATE: Recipient must personally sign and hand
         date the completed form.

<PAGE>

                            CONSENT FORM - 7473 M ED

Federally prescribed documentation regulations for sterilization procedures are
extremely rigid. Specific Medicaid requirements must be met and documented on
the Consent Form prior to the sterilization of an individual.

The Consent Form is a replica of the form contained in the Federal Regulations
and must be utilized by providers when submitting claims for sterilization
procedures. Any claim (hospital, operating physician, anesthesiologist, clinic,
etc) involved in a sterilization procedure must have a properly completed
Consent Form attached when it is submitted for payment. Sterilization claims are
hard copy restricted; electronic billing is not permitted.

Additional information concerning Medicaid policy governing sterilization
procedures may be found in Title 10, Subchapter 54, Section V Physicians'
Services, included with you manual.

Providers may obtain additional copies of the Consent Form from the Fiscal
Agent; however, photocopies of the Consent Form are acceptable.

A sample of the Consent Form and instructions for the form's proper completion
are provided for reference.

<PAGE>

                                  CONSENT FORM

NOTICE:  YOUR DECISION, AT ANY TIME, NOT TO BE STERILIZED WILL NOT RESULT IN THE
         WITHDRAWAL OR WITHHOLDING OF ANY BENEFITS PROVIDED BY PROGRAMS OR
         PROJECTS RECEIVEING FEDERAL FUNDS.

                           -CONSENT TO STERILIZATION-
                    -STATEMENT OF PERSON OBTAINING CONSENT-

         I have asked for and received information about sterilization from
_______________________.
   doctor or clinic

When I first asked for the information, I was told that the decision to be
sterilized is completely up to me. I was told that I could decide not to be
sterilized. If I decide not to be sterilized, my decision will not affect my
right to future care or treatment. I will not lose any help or benefits from
programs receiving Federal funds, such as AFDC or Medicaid that I am now getting
or for which I may become eligible.

         I UNDERSTAND THAT THE STERILIZATION MUST BE CONSIDERED PERMANENT AND
NOT REVERSIBLE. I HAVE DECIDED THAT I DO NOT WANT TO BECOME PREGNANT, BEAR
CHILDREN OR FATHER CHILREN.

         I was told about those temporary methods of birth control that are
available and could be provided to me which will allow me to bear or father a
child in the future. I have rejected these alternatives and chosen to be
sterilized.

         I understand that I will be sterilized by an operation known as a
___________________________. The discomforts, risks and benefits associated with
specify type of operation the operation have been explained to me. All my
questions have been answered to my satisfaction.

         I understand that the operation will not be done until at least thirty
(30) days after I sign this form. I understand that I can change my mind at any
time and that my decision at any time not to be sterilized will not result in
the withholding of any benefits or medical services provided by federally funded
programs.

         I am at least 21 years of age and was born on_________________________.
                                                           month/day/year

I._________________ hereby consent of my own free will to be  sterilized by
     recipient
_______________________________ by a method called _____________________. My
           doctor
consent expires 180 days from the date of my signature below.

         I also consent to the release of this form and other medical records
about the operation to: Representatives of the Department of Health, Education,
and Welfare or Employees of programs or projects funded by that Department, but
only for determining if Federal laws were observed.

_________________________________     Date:_______________
          signature                         month/day/year

         You are requested to supply the following information, but it is not
required: Race and ethnicity designation Please check one:

[ ] American Indian or                [ ] Black (not of Hispanic origin)
    Alaska Native                     [ ] Hispanic
[ ] Asian or Pacific Islander         [ ] White (not of Hispanic origin)

                           -INTERPRETER'S STATEMENT-

         If an interpreter is provided to assist the individual to be
sterilized:

         I have translated the information and advice presented orally to the
individual to be sterilized by the person obtaining this consent. I have also
read him/her the consent form in______________language and explained its
contents to him/her. To the best of my knowledge and belief he/she understood
this explanation.

__________________________            Date:_________________
         interpreter                          month/day/year

7473-MED 3/81

Before_________________________________________signed the consent form. I
                 name of individual
explained to him/her the nature of the sterilization operation ________________,
the fact that it is intended to be a final and irreversible procedure and the
discomforts, risks and benefits associated with it.

         I counseled the individual to be sterilized that alternative methods of
birth control are available which are temporary. I explained that sterilization
is different because it is permanent.

         I informed the individual to be sterilized that his/her consent can be
withdrawn at any time and that he/she will not lose any health services or any
benefits provided by Federal funds.

         To the best of my knowledge and belief the individual to be sterilized
is at least 21 years old and appears mentally competent. He/She knowingly and
voluntarily requested to be sterilized and appears to understand the nature and
consequence of the procedure.

____________________________________________   Date:____________________
   signature of person obtaining consent               month/day/year

_________________________________________________________________________
                                  facility

_________________________________________________________________________
                                  address

                            -PHYSICIAN'S STATEMENT-

 Shortly before I performed a sterilization operation upon
__________________________________on__________________________________
name of individual to be sterilized  date of sterilization operation

I explained to him/her the nature of the sterilization operation
__________________, the fact that it is intended to be a final and irreversible
specify type of operation procedure and the discomforts, risks and benefits
associated with it.

         I counseled the individual to be sterilized that alternative methods of
birth control are available which are temporary. I explained that sterilization
is different because it is permanent.

         I informed the individual to be sterilized that his/her consent can be
withdrawn at any time and that he/she will not lose any health services or
benefits provided by Federal funds.

         To the best of my knowledge and belief the individual to be sterilized
is at least 21 years old and appears mentally competent. He/She knowingly and
voluntarily requested to be sterilized and appeared to understand the nature and
consequences of the procedure.

         (Instructions for use of alternative final paragraphs: Use the first
paragraph below except in the case of premature delivery or emergency abdominal
surgery where the sterilization is performed less than thirty (30) days after
the date of the individual's signature on the consent form. In those cases, the
second paragraph below must be used. Cross out the paragraph that is not used.)

1)       At least thirty (30) days have passed between the date of the
         individual's signature on this consent form and the date the
         sterilization was performed.

2)       This sterilization was performed less than thirty (30) days but more
         than 72 hours after the date of the individual's signature on this
         consent form because of the following circumstances (check applicable
         box and fill in information requested):

         [ ]  Premature deliver
         [ ]  Individual's expected date of delivery:
         [ ]  Emergency abdominal surgery:
                 (describe circumstances);

__________________________________________ Date:___________________________
             physician                                month/day/year

                                                                     B-185

<PAGE>

                  ITEM-BY-ITEM INSTRUCTIONS FOR COMPLETING THE
          STERILIZATION CONSENT FORM SECTION 1 CONSENT TO STERILIZATION

1)       DOCTOR OR CLINIC: Enter the name of the physician or clinic.

2)       STERILIZATION PROCEDURE: Enter the name of the sterilization procedure.

3)       RECIPIENT'S DATE OF BIRTH: Enter recipient's date of birth in month,
         day, and year sequence (mm/dd/yy).

4)       RECIPIENT'S NAME: Copy the recipient's name as printed on the Medicaid
         Eligibility Identification Card. First name must be entered first.

5)       DOCTOR: Enter physician's name who is performing the procedure

6)       TYPE OF STERILIZATION: Enter the method of sterilization chosen.

7)       RECIPIENT'S SIGNATURE AND DATE: Recipient must personally sign and hand
         date form at least thirty (30) days, but not more than 180 days prior
         to surgery.

Section II Race and Ethnicity Designation:

8)       RACE AND ETHNICITY DESIGNATION: OPTIONAL INFORMATION requested by the
         Federal Government, but is NOT required.

Section III Interpreter's Statement: To be used only when the Recipient does not
speak English

9)       LANGUAGE USED: Enter language used.

10)      INTERPRETER'S SIGNATURE: Interpreter must sign and date form at least
         thirty (30) days, but not more than 180 days prior to the sterilization
         procedure.

Section IV Statement of Person Obtaining Consent

11)      NAME OF INDIVIDUAL: Enter the name of the recipient as it appears in
         Section I, item 4.

12)      STERILIZATION/OPERATION: Enter the name of the sterilization procedure.

13)      SIGNATURE OF PERSON OBTAINING CONSENT: Signature and date of the person
         who explains the procedure to the recipient and obtains the recipient's
         consent. Must be completed at least thirty (30) days, but not more than
         180 days prior to the sterilization procedure.

14)      FACILITY'S NAME AND ADDRESS: Enter the name and address of the facility
         or physician's office with which the person obtaining the consent is
         affiliated.

<PAGE>

15)      NAME OF INDIVIDUAL TO BE STERILIZED: Enter the recipient's name as it
         appears in Section I, item 4.

16)      DATE OF STERILIZATION: Enter the date of the sterilization in month,
         day, and year sequence (mm/dd/yy).

17)      SPECIFY TYPE OF OPERATION: Enter the name of the sterilization
         procedure.

18)      PARAGRAPHS 1) AND 2): The physician must indicate the paragraph that
         applies to recipient's situation. Paragraph 1) states that at least
         thirty (30) days have passed between the date of the individual's
         signature on the consent form and the date the sterilization was
         performed. Paragraph 2) states that the sterilization was performed
         less than thirty (30) days, but more than 72 hours after the date of
         the individual's signature on the consent form. The circumstances are
         premature delivery (state the expected date of delivery) or emergency
         abdominal surgery (describe the emergency).

19)      PHYSICIAN'S SIGNATURE AND DATE: Physician must sign and date form after
         the surgery has been performed.

<PAGE>

B.4.16 REGIONAL CHILD ABUSE AND NEGLECT DIAGNOSTIC AND TREATMENT CENTERS

<PAGE>

               NEW JERSEY CHILD ABUSE REGIONAL DIAGNOSTIC CENTERS

Children's House (serving Bergen, Passaic, Morris, Sussex, Warren and Hudson
 counties)
Northern Regional Diagnostic Center for Child Abuse and Neglect
Hackensack University Medical Center
300 Atlantic Street
Hackensack, NJ 07601
(201)966-2271
Fax (201)996-4926
Clinical Coordinator and Director of Operations - Colleen Kearney, RN, BSN, SANE
Medical Director - Dr. Julia DeBellis
DYFS Contact Person - Deanna Ladas, MSW, LSW

Children's Hospital Abuse Management Program (CHAMP) (serving Essex County)
Children's Hospital of New Jersey at Newark Beth Israel Medical Center
201 Lyons Avenue at Osborne Terrace, 13
Newark, NJ 07112
(973) 926-5590
Fax (973) 923-6487
Program Co-Directors - Dr. Anna Haroutunian and Peggy Foster
Medical Director - Dr. Anna Haroutunian
Supervising Psychologist - Anthony D'Urso
DYFS Contact Person - Doris Chodoreoff, Coordinator; make referrals to her at
(973) 926-2266

Central Jersey Regional Child Abuse Center (serving Middlesex, Union, Somerset,
Hunterdon, Monmouth, Ocean, and Mercer counties)

Child Protection Center (physical abuse)
mailing address:
         Saint Peter's Medical Center
         254 Easton Avenue
         New Brunswick, NJ 08901
         Fax (732) 745-2344

site address:
         123 How Lane
         New Brunswick, NJ 08901
         (732) 745-9449

Program Director - Dr. Bipin Patel, Chairman of the Department of Pediatrics
Medical Co-Directors - Dr. Elizabeth Susan Hodgson and Dr. Cynthia Barabas
DYFS Contact Person - Patti Cizin, RN, CPNP, Program Coordinator

Child Sexual Abuse Program
Robert Wood Johnson Medical School
1 Robert Wood Johnson Place, CN 19

<PAGE>

New Brunswick, NJ 08903
(732)235-6146
Fax (732)235-6006
Program Director - Dr. Bipin Patel, Chairman, St. Peter's Medical Center Dept.
 of Peds.
Medical Director - Dr. Linda Shaw
DYFS Contact Persons - Mary Fierro, LCSW, Program Coordinator, Rachel Cohen,
 MSW, LCSW, or Liana Acosta, BA
clinical sites:
Clinical Academic Building
125 Paterson Street
New Brunswick, NJ 08903
Elizabeth General Medical Center
Elizabeth General East
655 East Jersey Avenue
Elizabeth, NJ 07206
Trenton Health Department
222 East State Street
Trenton, NJ 08608

Center for Children's Support (serving Atlantic, Burlington, Camden, Cape May,
 Cumberland, Gloucester, and Salem counties)
University of Medicine and Dentistry of New Jersey - School of Osteopathic
 Medicine
42 East Laurel Road
Suite 1100
Stratford, NJ 08084
(609) 566-7036
Fax (609) 566-6108
Program and Medical Director - Dr. Martin Finkel
Director of Mental Health Services - Dr. Esther Deblinger
Program Coordinator - Bob Raynor
DYFS Contact Person for medical examination - Gwen Barton, MSW, LCSW
DYFS Contact Person for mental health services - Gladys Rosario, MSEd

<PAGE>

B.4.17 DUR STANDARDS

<PAGE>

                                    TABLE 1
                            THERAPEUTIC DUPLICATION

                                  beta-blockers
                                 ace inhibitors
                               cardiac glycosides
                       sedative-hypnotics non-barbiturates
                                  anxiety drugs
                     selective serotonin reuptake inhibitor
                         intestinal motility stimulants
                                   lipotropics
                             proton pump inhibitors

<PAGE>

                                     TABLE 3
                              DRUG-DRUG INTERACTION

<TABLE>
<CAPTION>
------------------------------------------------------------------------
     DRUG ONE                                              DRUG TWO
------------------------------------------------------------------------
<S>                                                  <C>
   amphetamines                                              MAOIs
------------------------------------------------------------------------
azole antifungals                                        cisapride
------------------------------------------------------------------------
  Bartbiturates                                      oral anticoagulants
------------------------------------------------------------------------
     levodopa                                               MAOIs
------------------------------------------------------------------------
  metronidazole                                          barbiturates
------------------------------------------------------------------------
     Nitrates                                             sildenafil
------------------------------------------------------------------------
    selegiline                                              SSRIs
------------------------------------------------------------------------
      SSRIs                                                 MAOIs
------------------------------------------------------------------------
       TCAs                                                 MAOIs
------------------------------------------------------------------------
</TABLE>

<PAGE>

                                     TABLE 4
                         MAXIMUM DAILY DOSAGE STANDARDS
                         PHARMACEUTICAL INHALANTS ONLY

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                  NUMBER                   MAXIMUM
                                                ACTUATIONS                 DOSE/DAY                 MAXIMUM
 DRUG NAME*                      PKG. SIZE       PER UNIT                (ACTUATIONS)+             DAY SUPPLY
--------------------------------------------------------------------------------------------------------------
<S>                              <C>            <C>                      <C>                       <C>
AEROBID                             7 GM           100                         8                        13
--------------------------------------------------------------------------------------------------------------
AEROBID-M                           7 GM           100                         8                        13
--------------------------------------------------------------------------------------------------------------
AZMACORT                           20 GM           240                        16                        15
--------------------------------------------------------------------------------------------------------------
ATROVENT .03%                      30 CC           345                        12                        29
--------------------------------------------------------------------------------------------------------------
ATROVENT .06%                      15 CC           165                        16                        11
--------------------------------------------------------------------------------------------------------------
ATROVENT                           14 GM           200                        12                        17
--------------------------------------------------------------------------------------------------------------
ASTELIN                            34 CC           200                         8                        25
--------------------------------------------------------------------------------------------------------------
BECLOVENT                          17 GM           200                        20                        10
--------------------------------------------------------------------------------------------------------------
BECONASE                           17 GM           200                         6                        34
--------------------------------------------------------------------------------------------------------------
BECONASE AQ                        25 GM           200                         8                        25
--------------------------------------------------------------------------------------------------------------
COMBIVENT                          15 GM           200                        12                        17
--------------------------------------------------------------------------------------------------------------
DDAVP                               5 CC            50                         4                        13
--------------------------------------------------------------------------------------------------------------
FLONASE                            16 GM           120                         4                        30
--------------------------------------------------------------------------------------------------------------
FLOVENT 44UG                       13 GM           120                        40                         3
--------------------------------------------------------------------------------------------------------------
FLOVENT 110UG                      13 GM           120                        16                         8
--------------------------------------------------------------------------------------------------------------
FLOVENT 220UG                      13 GM           120                         8                        15
--------------------------------------------------------------------------------------------------------------
INTAL                              14 GM           200                         8                        25
--------------------------------------------------------------------------------------------------------------
MAXAIR                             26 GM           300                        12                        25
--------------------------------------------------------------------------------------------------------------
MAXAIR AUTO                        14 GM           400                        12                        34
--------------------------------------------------------------------------------------------------------------
NASACORT                           10 GM           100                         8                        13
--------------------------------------------------------------------------------------------------------------
NASACORT AQ                        17 GM           120                         4                        30
--------------------------------------------------------------------------------------------------------------
NASAREL                            25 CC           200                        16                        13
--------------------------------------------------------------------------------------------------------------
NASALIDE                           25 CC           200                        12                        13
--------------------------------------------------------------------------------------------------------------
NASONEX                            17 GM           120                         4                        30
--------------------------------------------------------------------------------------------------------------
PULMICORT                         200 MCG          200                         8                        25
--------------------------------------------------------------------------------------------------------------
RHINOCORT                           7 GM           200                         8                        25
--------------------------------------------------------------------------------------------------------------
SEREVENT                           13 GM           120                         4                        30
--------------------------------------------------------------------------------------------------------------
TILADE                             16 GM           104                         8                        13
--------------------------------------------------------------------------------------------------------------
TORNALATE                          16 GM           300                        12                        25
--------------------------------------------------------------------------------------------------------------
VANCENASE AQ                       19 GM           120                         4                        30
--------------------------------------------------------------------------------------------------------------
VANCENASE PKT                       7 GM           200                         8                        25
--------------------------------------------------------------------------------------------------------------
PROVENTIL                          17 GM           200                        12                        17
--------------------------------------------------------------------------------------------------------------
VANCERIL                           17 GM           200                        20                        10
--------------------------------------------------------------------------------------------------------------
VENTOLIN                           17 GM           200                        12                        17
--------------------------------------------------------------------------------------------------------------
PROVENTIL HFA                       7 GM           200                        12                        17
--------------------------------------------------------------------------------------------------------------
VANCERIL DS                        12 GM           120                        10                        12
--------------------------------------------------------------------------------------------------------------
</TABLE>

*ALL PRODUCTS TRADEMARK PROTECTED

+ 12 YEARS OF AGE AND OLDER

<PAGE>

                     TABLE 5 MAXIMUM DAILY DOSAGE STANDARDS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                      Maximum Daily Dosage      Maximum Daily
                      Standards Ages 18 to     Dosage Standards                                     Effective
Generic Name                  65                 Over Age 65            Drug Class                    Date
-------------------------------------------------------------------------------------------------------------
<S>                   <C>                      <C>                 <C>                              <C>
Benazepril                   80mg                    80mg          ACE Inhibitor                    5/15/2000
-------------------------------------------------------------------------------------------------------------
Captopril                   450mg                   450mg          ACE Inhibitor                    5/15/2000
-------------------------------------------------------------------------------------------------------------
Enalapril                    40mg                    40mg          ACE Inhibitor                    5/15/2000
-------------------------------------------------------------------------------------------------------------
Fosinopril                   80mg                    80mg          ACE Inhibitor                    5/15/2000
-------------------------------------------------------------------------------------------------------------
Lisinopril                   40mg                    40mg          ACE Inhibitor                    5/15/2000
-------------------------------------------------------------------------------------------------------------
Quinapril                    40mg                    40mg          ACE Inhibitor                    5/15/2000
-------------------------------------------------------------------------------------------------------------
Ramipril                     20mg                    20mg          ACE Inhibitor                    5/15/2000
-------------------------------------------------------------------------------------------------------------
Acebutolol                 1200mg                   800mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Atenolol                    200mg                   200mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Betaxolol                    20mg                    20mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Bisoprolol                   20mg                    20mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Labetalol                  2400mg                  2400mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Metoprolol                  450mg                   450mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Metoprolol XR               400mg                   400mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Nadolol                     320mg                   320mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Pindolol                     60mg                    60mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Propanolol                  640mg                   640mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Propranol SR                640mg                   640mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Sotalol                     640mg                   640mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Timolol                     120mg                   120mg          beta-blocker                     5/15/2000
-------------------------------------------------------------------------------------------------------------
Amlodipine                   10mg                    10mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Diltiazem                   480mg                   480mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Diltiazem CD                480mg                   480mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Diltiazem SR                360mg                   360mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Diltiazem XR                540mg                   540mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Felodipine                   10mg                    10mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Isradipine                   20mg                    20mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Nicardipine                 120mg                   120mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Nifedipine                  180mg                   180mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Nifedipine CC               120mg                   120mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Nifedipine XL               120mg                   120mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Verapamil                   720mg                   720mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Verapamil HS                540mg                   540mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Verapamil SR                480mg                   480mg          calcium channel blocker          5/15/2000
-------------------------------------------------------------------------------------------------------------
Digitoxin                   0.1mg                   0.1mg          Cardiotonic                      5/15/2000
-------------------------------------------------------------------------------------------------------------
Digoxin                     0.5mg                   0.5mg          Cardiotonic                      5/15/2000
-------------------------------------------------------------------------------------------------------------
Atorvastatin                 80mg                    80mg          HMG CoA Rl                       5/15/2000
-------------------------------------------------------------------------------------------------------------
Cerivastatin                0.8mg                   0.8mg          HMG CoA Rl                        3/1/2001
-------------------------------------------------------------------------------------------------------------
Fluvastatin                  80mg                    80mg          HMG CoA Rl                       5/15/2000
-------------------------------------------------------------------------------------------------------------
Lovastatin                   80mg                    80mg          HMG CoA Rl                       5/15/2000
-------------------------------------------------------------------------------------------------------------
Pravastatin                  40mg                    40mg          HMG CoA Rl                       5/15/2000
-------------------------------------------------------------------------------------------------------------
Simvastatin                  80mg                    80mg          HMG CoA Rl                       5/15/2000
-------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                       TABLE 5 MAXIMUM DAILY DOSAGE STANDARDS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                      Maximum Daily          Maximum Daily
                    Dosage Standards        Dosage Standards                                        Effective
Generic Name         Ages 18 to 65            Over Age 65             Drug Class                      Date
-------------------------------------------------------------------------------------------------------------
<S>                 <C>                     <C>                    <C>                              <C>
Amobarbital and
Secobarbital          200mg/200mg               200/200mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Butabarbital                120mg                   120mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Chloral Hydrate            2000mg                  2000mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Estazolam                     2mg                     2mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Ethchlorvynal              1000mg                  1000mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Flurazepam                   30mg                    15mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Pentobarbital               200mg                   200mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Quazepam                     15mg                    15mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Secobarbital                200mg                   200mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Temazepam                    30mg                    15mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Triazolam                   0.5mg                  0.25mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Zolpidem                     10mg                    10mg          sedative-hypnotic                5/30/2000
-------------------------------------------------------------------------------------------------------------
Alprazolam                   10mg                 0.375mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Chlordiazepoxide            300mg                   300mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Clonazepam                   20mg                    20mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Clorazepate                  90mg                    90mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Diazepam                     30mg                    30mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Diazepam SR                  30mg                    30mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Halazepam                    40mg                    40mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Lorazepam                    10mg                    10mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Oxazepam                     60mg                    60mg          Anxiolytic                       6/15/2000
-------------------------------------------------------------------------------------------------------------
Cisapride                    80mg                    80mg          Gastrointestinal                 6/15/2000
                                                                   agent
-------------------------------------------------------------------------------------------------------------
Metoclopramide               60mg                    40mg          Gastrointestinal                 6/15/2000
                                                                   agent
-------------------------------------------------------------------------------------------------------------
Misoprostol                800mcg                  800mcg          Gastrointestinal                 6/15/2000
                                                                   agent
-------------------------------------------------------------------------------------------------------------
Sucralfate                    4gm                     4gm          Gastrointestinal                 6/15/2000
                                                                   agent
-------------------------------------------------------------------------------------------------------------
Cimetidine                 2400mg                   900mg          H2 antagonist                    6/15/2000
-------------------------------------------------------------------------------------------------------------
Famotidine                  640mg                   640mg          H2 antagonist                    6/15/2000
-------------------------------------------------------------------------------------------------------------
Nizatidine                  300mg                   300mg          H2 antagonist                    6/15/2000
-------------------------------------------------------------------------------------------------------------
Ranitidine                  600mg                   3OOmg          H2 antagonist                    6/15/2000
-------------------------------------------------------------------------------------------------------------
Celecoxib                   400mg                   400mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Choline Mg Sulfate          7.2gm                   7.2gm          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Diclofenac                  200mg                   200mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Diclofenac Potassium        200mg                   200mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Diclofenac XR               225mg                   225mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Diflunsil                   1.5gm                   1.5gm          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Etodolac                   1200mg                  1200mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Etodolac XL                1200mg                  1200mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Fenoprofen                 3200mg                  3200mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Flurbiprofen                300mg                   300mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                       TABLE 5 MAXIMUM DAILY DOSAGE STANDARDS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                Maximum Daily
                      Maximum Daily Dosage     Dosage Standards
 Generic Name       Standards Ages 18 to 65      Over Age 65         Drug Class                   Effective Date
----------------------------------------------------------------------------------------------------------------
<S>                 <C>                        <C>                 <C>                            <C>
Ibuprofen                  3200mg                  3200mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Indomethacin                200mg                   200mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Indomethacin SR             150mg                   150mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Ketoprofen                  300mg                   300mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Ketorolac                    40mg                    40mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Meclofenmate                500mg                   500mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Nabumetone                 2000mg                  2000mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Naproxen                   15OOmg                  1500mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Naproxen Sodium            1100mg                   440mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Naproxen SR                15OOmg                  1000mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Oxaprozin                  18OOmg                  18OOmg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Piroxicam                    20mg                    20mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Rofecoxib                    5Omg                    5Omg          NSAID                              Changed
                                                                                                       3/1/02
-------------------------------------------------------------------------------------------------------------
Salsalate                  4000mg                  4000mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Sulindac                    400mg                   400mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Tolmetin                   2000mg                  2000mg          NSAID                            6/15/2000
-------------------------------------------------------------------------------------------------------------
Lansoprazole                180mg                   180mg          PPI                              6/15/2000
-------------------------------------------------------------------------------------------------------------
Omeprazole                  360mg                   360mg          PPI                              6/15/2000
-------------------------------------------------------------------------------------------------------------
Amitriptyline               300mg                   3OOmg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Amoxapine                   400mg                   400mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Bupropion                   450mg                   450mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Bupropion CR                400mg                   400mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Citalopram                   60mg                    40mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Clomipramine                250mg                   250mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Desipramine                 200mg                   150mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Doxepin                     3OOmg                   150mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Fluoxetine                   8Omg                    8Omg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Fluvoxamine                 3OOmg                   3OOmg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Imipramine                  3OOmg                   150mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Maprotiline                 225mg                   125mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Nefazodone                  600mg                   600mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Nortriptyline               150mg                   150mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Paroxetine                   50mg                    40mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Phenelzine                   90mg                    90mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Protriptyline                60mg                    30mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Sertraline                  200mg                   200mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Tranylcypromine              60mg                     0mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Trazadone                   400mg                   400mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Trimipramine                200mg                   200mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Venlafaxine                 375mg                   375mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Venlafaxine SR              225mg                   225mg          Antidepressant                   6/30/2000
-------------------------------------------------------------------------------------------------------------
Chlorpromazine             1000mg                   200mg          Antipsychotic                    6/30/2000
-------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                     TABLE 5 MAXIMUM DAILY DOSAGE STANDARDS

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
                      Maximum Daily          Maximum Daily
                    Dosage Standards        Dosage Standards                        Effective
Generic Name         Ages 18 to 65            Over Age 65        Drug Class            Date
---------------------------------------------------------------------------------------------
<S>                 <C>                     <C>                 <C>                 <C>
Chlorpromazine          1000mg                   200mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Clozapine                900mg                   900mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Fluphenazine              40mg                    40mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Haloperidol              100mg                   100mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Loxapine                 250mg                   250mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Mesoridazine             400mg                   400mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Olanzapine                20mg                    20mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Perphenazine              64mg                    48mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Risperidone                6mg                     3mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Thioridazine             800mg                   800mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Thiothixene               60mg                    30mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
Trifluoperazine           80mg                    60mg          Antipsychotic       6/30/2000
---------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                    TABLE 6
                             THERAPY DURATION TABLE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                       Daily             Days                     Non- Covered
      Generic Name                           Age                       Dosage          Duration                     Interval
------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                          <C>             <C>                       <C>
cimetidine 200mg tablet                   18 to 999                       8                90                          90
------------------------------------------------------------------------------------------------------------------------------
cimetidine 300mg tablet                   18 to 999                       5                90                          90
------------------------------------------------------------------------------------------------------------------------------
cimetidine 400mg tablet                   18 to 999                       4                90                          90
------------------------------------------------------------------------------------------------------------------------------
cimetidine 800mg tablet                   18 to 999                       2                90                          90
------------------------------------------------------------------------------------------------------------------------------
cimetidine 300mg/5ml solution             18 to 999                      26                90                          90
------------------------------------------------------------------------------------------------------------------------------
famotidine 20mg tablet                    18 to 999                       4                90                          90
------------------------------------------------------------------------------------------------------------------------------
famotidine 40mg tablet                    18 to 999                       2                90                          90
------------------------------------------------------------------------------------------------------------------------------
famotidine 40mg/5ml                       18 to 999                      10                90                          90
 suspension
------------------------------------------------------------------------------------------------------------------------------
lansoprazole 15mg capsule                 18 to 999                       2                90                          90
------------------------------------------------------------------------------------------------------------------------------
lansoprazole 30mg capsule                 18 to 999                       1                90                          90
------------------------------------------------------------------------------------------------------------------------------
nizatidine 150mg capsule                  18 to 999                       2                90                          90
------------------------------------------------------------------------------------------------------------------------------
nizatidine 300mg capsule                  18 to 999                       1                90                          90
------------------------------------------------------------------------------------------------------------------------------
omeprazole 10mg capsule                   18 to 999                       4                90                          90
------------------------------------------------------------------------------------------------------------------------------
omeprazole 20mg capsule                   18 to 999                       2                90                          90
------------------------------------------------------------------------------------------------------------------------------
omeprazole 40mg capsule                   18 to 999                       1                90                          90
------------------------------------------------------------------------------------------------------------------------------
ranitidine 15mg/ml syrup                  18 to 999                      40                90                          90
------------------------------------------------------------------------------------------------------------------------------
ranitidine 150mg tablet                   18 to 999                       4                90                          90
------------------------------------------------------------------------------------------------------------------------------
ranitidine 150mg efferdose gel            18 to 999                       4                90                          90
------------------------------------------------------------------------------------------------------------------------------
ranitidine 300mg gel tablet               18 to 999                       2                90                          90
------------------------------------------------------------------------------------------------------------------------------
ranitidine 300mg tablet                   18 to 999                       2                90                          90
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                    TABLE 7
             BROAD SPECTRUM ANTIBIOTICS THAT INTERACT WITH WARFARIN

<TABLE>
<CAPTION>
------------------------------------------------------------
      INCREASE WARFARIN                    DECREASE WARFARIN
------------------------------------------------------------
<S>                                        <C>
         Amoxicillin                         dicloxacillin
------------------------------------------------------------
          Ampicillin                           Nafcillin
------------------------------------------------------------
         Azithromycin                          rifamipin
------------------------------------------------------------
          Cefazolin
------------------------------------------------------------
         Cefpodoxine
------------------------------------------------------------
          Cephalexin
------------------------------------------------------------
       Chloramphenicol
------------------------------------------------------------
        Ciprofloxacin
------------------------------------------------------------
        Clarithromycin
------------------------------------------------------------
         Doxycycline
------------------------------------------------------------
         Drithromycin
------------------------------------------------------------
         Erythromycin
------------------------------------------------------------
          Loracarbef
------------------------------------------------------------
        Metronidazole
------------------------------------------------------------
         minocycline
------------------------------------------------------------
         Norfloxacin
------------------------------------------------------------
          Ofloxacin
------------------------------------------------------------
         Sparfloxacin
------------------------------------------------------------
sulfamethoxazole/trimethoprim
------------------------------------------------------------
         Tetracycline
------------------------------------------------------------
          vancomycin
------------------------------------------------------------
         levofloxacin
------------------------------------------------------------
</TABLE>

Levaquin (levofloxacin) recommended at 1/16/02 DURB

<PAGE>

                                    TABLE 8
           THERAPY DURATION STANDARDS RECOMMENDED BY THE DURB 4/25/01

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                                                                                      Non-
                                                                        Daily         Days          Covered
 GCN         Brand Name            Generic Name           Age           Dosage      Duration        Interval
------------------------------------------------------------------------------------------------------------
<S>      <C>                       <C>                 <C>              <C>         <C>             <C>
13840    Restoril 15mg cap         Temazepam           65 to 999         0.53          90              90
------------------------------------------------------------------------------------------------------------
13841    Restoril 30mg cap         Temazepam           65 to 999          .26          90              90
------------------------------------------------------------------------------------------------------------
13845    Restoril 7.5mg cap        Temazepam           65 to 999            1          90              90
------------------------------------------------------------------------------------------------------------
14282    Halcion 0.125mg tab       Triazolam           65 to 999         0.18          90              90
------------------------------------------------------------------------------------------------------------
14260    Halcion 0.25mg tab        Triazolam           65 to 999         0.09          90              90
------------------------------------------------------------------------------------------------------------
14261    Halcion 0.5mg tab         Triazolam           65 to 999         0.04          90              90
------------------------------------------------------------------------------------------------------------
27901    Zyban 150mg SA tab        Bupropion           18 to 999            2          98              30
------------------------------------------------------------------------------------------------------------
32531    Toradol 10mg tab          Ketoralac           18 to 999            4           5             275
------------------------------------------------------------------------------------------------------------
49100    Sporanox 10mg/ml          Itraconazole        65 to 999           20          84             281
          soln
------------------------------------------------------------------------------------------------------------
49101    Sporanox 150mg cap        Itraconazole        65 to 999            2          84             281
------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

         TABLE 9 APAP CONTAINING NARCOTICS RECOMMENDED BY THE DURB FOR
                   THERAPEUTIC DUPLICATION STANDARDS 4/25/01

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
 GCN                     DRUG NAME                                 STRENGTH
-----------------------------------------------------------------------------
<S>      <C>                                                     <C>
12486    Norco                                                   5-325mg
-----------------------------------------------------------------------------
50756    Percocet                                                7.5-500mg
-----------------------------------------------------------------------------
50766    Percocet                                                10-650mg
-----------------------------------------------------------------------------
55401    Tlyenol W/Codeine                                       12-120mg/5ml
-----------------------------------------------------------------------------
70103    Phenaphen W/Codeine                                     30-325mg
-----------------------------------------------------------------------------
70105    Phenaphen W/Codeine                                     60-325mg
-----------------------------------------------------------------------------
70110    Capital W/Codeine                                       12-120mg/5ml
-----------------------------------------------------------------------------
70131    Tylenol #2                                              15-300mg
-----------------------------------------------------------------------------
70134    Tylenol #3                                              30-300mg
-----------------------------------------------------------------------------
70136    Tylenol #4                                              60-300mg
-----------------------------------------------------------------------------
70140    Fioricet W/Codeine                                      30mg
-----------------------------------------------------------------------------
70320    Hydrocet, Lorcet - HD                                   5-500mg
-----------------------------------------------------------------------------
70330    Hydrocodone / Acetaminophen, Norco                      10-325mg
-----------------------------------------------------------------------------
70331    Hydrocodone / APAP, Anexsia, Lortab, Vicodin            5-500mg
-----------------------------------------------------------------------------
70332    Hydrocodone / APAP, Lorcet 10/650,                      10-650mg
-----------------------------------------------------------------------------
70333    Hydrocodone / APAP, Anexsia, Lorcet Plus                7.5-650mg
-----------------------------------------------------------------------------
70334    Hydrocodone /Acetaminophen, Lortab                      10-500mg
-----------------------------------------------------------------------------
70335    Hydrocodone / APAP, Vicodin ES                          7.5-750mg
-----------------------------------------------------------------------------
70338    Hydrocodone /APAP, Lortab                               2.5-500mg
-----------------------------------------------------------------------------
70339    Hydrocodone / APAP, Lortab                              7.5-500mg
-----------------------------------------------------------------------------
70361    Hydrocodone W/Acetaminophen, Lortab                     2.5-167/5ml
-----------------------------------------------------------------------------
70363    Hydrocodone W/Acetaminophen, Vicodin HP                 10-660mg
-----------------------------------------------------------------------------
70401    Zydone                                                  5-400mg
-----------------------------------------------------------------------------
70402    Zydone                                                  7.5-400mg
-----------------------------------------------------------------------------
70403    Zydone                                                  10-400mg
-----------------------------------------------------------------------------
70470    Roxicet                                                 5-325mg/15ml
-----------------------------------------------------------------------------
70490    Roxicet                                                 5-500mg
-----------------------------------------------------------------------------
70491    Oxycodone W/ Acetaminophen, Percocet, Endocet,          5-325mg
         Roxicet
-----------------------------------------------------------------------------
70492    Percocet                                                2.5-325mg
-----------------------------------------------------------------------------
70500    Oxycodone W/Acetaminophen, Roxilox, Tylox               5-500mg
-----------------------------------------------------------------------------
70925    Propoxyphene Hcl W/APAP, Wygesic                        65-650mg
-----------------------------------------------------------------------------
70931    Propox Napsylate/APAP, Darvocet N 100                   100-650mg
-----------------------------------------------------------------------------
70931    Propoxyphene Napsylate W/AP                             100-650mg
-----------------------------------------------------------------------------
70933    Darvocet-N 50                                           50-325mg
-----------------------------------------------------------------------------
71050    Pentazocine/Acetaminophen, Talacen                      25-650mg
-----------------------------------------------------------------------------
85319    Maxidone                                                10-750mg
-----------------------------------------------------------------------------
13909    Ultracet                                                37.5-325mg
-----------------------------------------------------------------------------
</TABLE>

<PAGE>

                                    TABLE 10
                       ADVAIR LIMITATIONS ADOPTED 6/28/01

<TABLE>
<CAPTION>
STRENGTH               MAXIMUM DOSE
<S>              <C>
 500/50          ONE INHALATION TWICE DAILY
 250/50          ONE INHALATION TWICE DAILY
 100/50          ONE INHALATION TWICE DAILY
</TABLE>

<PAGE>

                                    TABLE 11
                         NON-WEIGHT BASED CHEMOTHERAPY

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
 Brand Drug Name              Generic Name                Adult Maximum Dose
----------------------------------------------------------------------------
<S>                         <C>                           <C>
Arimidex tablet             anastrozole                         1 mg/d
----------------------------------------------------------------------------
Aromasin tablet             exemestane                          25 mg/d
----------------------------------------------------------------------------
Casodex tablet              bicalutamide                        50 mg/d
----------------------------------------------------------------------------
Droxia capsule              hydroxyurea                       2,450 mg/d
----------------------------------------------------------------------------
EMCYT capsule               estramustine                      1,280 mg/d
----------------------------------------------------------------------------
Eulexin capsule             flutamide                          750 mg/d
----------------------------------------------------------------------------
Fareston tablet             toremifene                          60 mg/d
----------------------------------------------------------------------------
Femara tablet               letrozole                          2.5 mg/d
----------------------------------------------------------------------------
Gleevac capsules            imatinib                           800 mg/d
----------------------------------------------------------------------------
Lysodren tablet             mitotane                            20 gm/d
----------------------------------------------------------------------------
Matulane capsule            procarbazine                       200 mg/d
----------------------------------------------------------------------------
Megace liquid               megestrol acetate                 1,600 mg/d
----------------------------------------------------------------------------
Megace tablet               megestrol acetate                  320 mg/d
----------------------------------------------------------------------------
Nolvadex tablet             tamoxifen                           40 mg/d
----------------------------------------------------------------------------
Targretin capsule           bexarotene                         680 mg/d
----------------------------------------------------------------------------
Thioguanine tablet          thioguanine                        140 mg/d
----------------------------------------------------------------------------
Lysodren                    mitotane                            16 gm/d
----------------------------------------------------------------------------
</TABLE>

*Lysodren recommended at 1/16/02 DURB

<PAGE>

                                    TABLE 12
                           NJ DURB HIV DRUG STANDARDS
                              MAXIMUM DAILY DOSAGE

<TABLE>
<CAPTION>
-------------------------------------------------------
                                            Max Daily
      Drug                      Class         Dose
-------------------------------------------------------
<S>                             <C>        <C>
AGENERASE(TM)                   PI         2400mg
(amprenavir)                               (cap)
Glaxo
                                           2800mg
                                           (solution)
-------------------------------------------------------
COMBIVIR(TM)                    NRTI       2 tabs/day
(zidovudine
300mg and
lamuvidine
150mg)
Glaxo
-------------------------------------------------------
CRIXIVAN(TM)(indinivir)         PI         2400mg
Merck                                      (3gm/day
                                           w/Sustiva(TM)
                                           Efavirenz)
-------------------------------------------------------
EPIVIR (TM)(Lamuvidine)         NRTI       300mg
Glaxo
-------------------------------------------------------
FORTOVASE(TM)                   PI         3.6gm
(saquinavir)
Roche
-------------------------------------------------------
HIVID (TM)                      NRTI       2.25mg
(zalcitabine)
Roche
-------------------------------------------------------
INVIRASE(TM)                    PI         1800mg
(saquinavir)
Roche
-------------------------------------------------------
KALETRA(TM)                     PI         6 caps (8
(lopinovir/                                caps with
ritonavir)                                 Sustiva(TM)
Abbott                                     Efavirenz)
                                           Liq 13ml
-------------------------------------------------------
NORVIR(TM)(ritonavir)           PI         1200mg
Abbott
-------------------------------------------------------
</TABLE>

<PAGE>

                                    TABLE 12
                           NJ DURB HIV DRUG STANDARDS
                              MAXIMUM DAILY DOSAGE
                                   (CONTINUED)
<TABLE>
<CAPTION>
-------------------------------------------------------
                                            Max Daily
     Drug                       Class         Dose
-------------------------------------------------------
<S>                             <C>        <C>
RESCRIPTOR(TM)                  NNRTI      1200mg
(delavirdine)
Agouron
-------------------------------------------------------
RETROVIR(TM)                    NRTI       2000mg
(zidovudine)
Glaxo
-------------------------------------------------------
SUSTIVA(TM)                     NNRTI      600mg
(efavirenz)
DuPont
-------------------------------------------------------
TRIZIVIR(TM)(zidovudine         NRTI       2 tabs/day
300mg, lamuvidine
150mg, & abacavir 300
mg)
Glaxo
-------------------------------------------------------
VIDEX(TM)                       NRTI       400mg
(didanosine)
BMS
-------------------------------------------------------
VIRACEPT(TM)                    PI         2500mg
(nelfinavir)
Agouron
-------------------------------------------------------
VIRAMUNE(TM)                    NNRTI      400mg
(nevirapine)
Roxane
-------------------------------------------------------
ZERIT(TM)                       NRTI       80mg
(Stavudine)
BMS
-------------------------------------------------------
ZIAGEN(TM)                      NRTI       600mg
(abacavir)
Glaxo
-------------------------------------------------------
</TABLE>

<PAGE>

                                    TABLE 13
                           NJ DURB HIV DRUG STANDARDS
                        DRUG-DRUG INTERACTION (EDIT 869)

<TABLE>
<CAPTION>
-------------------------------------------------------
                                           Severe Rx-Rx
      Drug                      Class      Interaction
-------------------------------------------------------
<S>                             <C>        <C>
AGENERASE(TM)                   PI         Bepridil
(amprenavir)                               Rifampin
Glaxo                                      Zocor
                                           Mevacor
                                           Versed
                                           Triazolam
                                           Ergomar
                                           Viagra
-------------------------------------------------------
COMBIVIR(TM)                    NRTI       Stavudine
(zidovudine
300mg and
lamuvidine
150mg)
Glaxo
-------------------------------------------------------
CRIXIVAN(TM)(indinivir)         PI         Zocor
Merck                                      Mevacor
                                           Versed
                                           Triazolam
                                           Ergomar
                                           Viagra
-------------------------------------------------------
EPIVIR (TM) (Lamuvidine)        NRTI
Glaxo
-------------------------------------------------------
FORTOVASE(TM)                   PI         Rifampin
(saquinavir)                               Rifabutin
Roche                                      Mycobutin
                                           Zocor
                                           Mevacor
                                           Versed
                                           Triazolam
                                           Ergomar
                                           Viagra
-------------------------------------------------------
HIVID(TM)                       NRTI       pentamidine
(zalcitabine)
Roche
-------------------------------------------------------
INVIRASE(TM)                    PI         Zocor
(saquinavir)                               Mevacor
Roche                                      Versed
                                           Triazolam
                                           Ergomar
                                           Viagra
-------------------------------------------------------
</TABLE>

<PAGE>

                                    TABLE 13
                           NJ DURB HIV DRUG STANDARDS
                        DRUG-DRUG INTERACTION (EDIT 869)
                                   (CONTINUED)

<TABLE>
<CAPTION>
---------------------------------------------------------
                                           Severe Rx-Rx
     Drug                       Class      Interaction
---------------------------------------------------------
<S>                             <C>        <C>
KALETRA(TM)                     PI         Flecainide
(lopinovir/                                Rifampin
ritonavir)                                 Pimozide
Abbott                                     Propafenone
                                           Zocor
                                           Mevacor
                                           Versed
                                           Triazolam
                                           Ergomar
                                           Viagra
---------------------------------------------------------
NORVIR(TM)                      PI         Amiodarone
(ritonavir) Abbott                         Bepridil
                                           Bupropion
                                           Flecainide
                                           Meperidine
                                           Quinidine
                                           Pimozide
                                           Zocor
                                           Mevacor
                                           Versed
                                           Triazolam
                                           Ergomar
                                           Viagra
---------------------------------------------------------
RESCRIPTOR(TM)                  NNRTI      Rifampin
(delavirdine)                              Versed
Agouron                                    Triazolam
                                           Ergomar
                                           rifabutin
                                           Sildenafil
                                           PPIs
                                           H2 antagonists
---------------------------------------------------------
RETROVIR(TM)                    NRTI       Stavudine
(zidovudine)
Glaxo
---------------------------------------------------------
SUSTIVA(TM)                     NNRTI      Versed
(efavirenz)                                Triazolam
DuPont                                     Ergomar
---------------------------------------------------------
TRIZIVIR(TM)                    NRTI       stavudine
(zidovudine
300mg,
lamuvidine
150mg, &
abacavir 300 mg)
Glaxo
---------------------------------------------------------
</TABLE>

<PAGE>

                                    TABLE 13
                           NJ DURB HIV DRUG STANDARDS
                        DRUG-DRUG INTERACTION (EDIT 869)
                                   (CONTINUED)

<TABLE>
<CAPTION>
---------------------------------------------------------
                                           Severe Rx-Rx
     Drug                       Class      Interaction
---------------------------------------------------------
<S>                             <C>        <C>
VIDEX(TM)                       NRTI       Allopurinol
(didanosine)                               Pentamidine
BMS                                        hydroxyurea
---------------------------------------------------------
VIRACEPT(TM)                    PI         Rifampin
(nelfinavir)                               Amiodarone
Agouron                                    Zalcitabine
                                           Zocor
                                           Mevacor
                                           Versed
                                           Triazolam
                                           Ergomar
                                           Viagra
---------------------------------------------------------
VIRAMUNE(TM)                    NNRTI      Ketoconazole
(nevirapine)
Roxane
---------------------------------------------------------
ZERIT(TM)                       NRTI       Zidovudine
(Stavudine)
BMS
---------------------------------------------------------
ZIAGEN(TM)                      NRTI
(abacavir)
Glaxo
---------------------------------------------------------
</TABLE>

<PAGE>

                                    TABLE 14
                           NJ DURB HIV DRUG STANDARDS
                         RETROSPECTIVE WARNING REGARDING
                        DRUG-DRUG INTERACTION (EDIT 870)

<TABLE>
<CAPTION>
----------------------------------------
                            Severe Rx-Rx
 Drug                       Interaction
----------------------------------------
<S>                         <C>
Cytovene                    Retrovir
----------------------------------------
Zerit                       Videx
----------------------------------------
Videx                       Hydroxyurea
----------------------------------------
Videx                       Pentamidine
----------------------------------------
Hivid                       Pentamidine
----------------------------------------
</TABLE>

<PAGE>

                                    TABLE 15
                 ACE I AND ACE II THERAPEUTIC DUPLICATION TABLE

<TABLE>
<CAPTION>
--------------------------------------------------------------------
    BRAND NAME                GENERIC NAME                  CLASS
--------------------------------------------------------------------
<S>                           <C>                           <C>
Accupril                      Quinapril                     ACE I
--------------------------------------------------------------------
Altace                        Ramipril                      ACE I
--------------------------------------------------------------------
Avapro                        Irbesartan                    ACE II
--------------------------------------------------------------------
Capoten                       Captopril                     ACE I
--------------------------------------------------------------------
Cozaar                        Losartan                      ACE II
--------------------------------------------------------------------
Diovan                        Valasartan                    ACE II
--------------------------------------------------------------------
Lotensin                      Benazepril                    ACE I
--------------------------------------------------------------------
Mavix                         tradolapril                   ACE I
--------------------------------------------------------------------
Micardis                      Telmisartan                   ACE II
--------------------------------------------------------------------
Monopril                      Fosinopril                    ACE II
--------------------------------------------------------------------
Prinivil or Zestril           Lisinopril                    ACE II
--------------------------------------------------------------------
Tevetan                       Candesartan                   ACE II
--------------------------------------------------------------------
Univasc                       Moexipril                     ACE I
--------------------------------------------------------------------
Vasotec                       Enalapril                     ACE I
--------------------------------------------------------------------
Vasotec I.V.                  Enalaprilat                   ACE I
--------------------------------------------------------------------
</TABLE>

<PAGE>

B.5.0 ENROLLEE SERVICES

<PAGE>

B.5.1 NOTIFICATION OF NEWBORNS

<PAGE>

                              STATE OF NEW JERSEY
               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES
                          OFFICE OF MANAGED HEALTH CARE

NOTIFICATION OF NEWBORNS

HMO:

DATE OF SUBMISSION:                               ACCT. COORDINATOR:

Mother's HSP   Mother's Name HMO Effective Date   Newborn's Name  DOB   Sex___

Signature:
Print Name:
Phone:
Date:

<PAGE>

B.5.2    COST-SHARING REQUIREMENTS FOR NJ FAMILYCARE PLAN C, AND PLAN D
         [RESERVED] BENEFICIARIES

<PAGE>

                          COST-SHARING REQUIREMENTS FOR
                       NJ FAMILYCARE PLAN C BENEFICIARIES

PERSONAL CONTRIBUTION TO CARE (PCC) FOR NJ FAMILYCARE-PLAN C

For beneficiaries solely eligible through NJ FamilyCare-Plan C, PCCs will be
required for certain services provided to individuals whose family income is
above 150% and up to and including 200% of the federal poverty level. Exception
- Both Eskimos and native American Indian children under the age of 19,
identified by Race Code 3, shall not be required to pay a personal contribution
to care.

The total family (regardless of family size) limit on all cost-sharing may not
exceed 5% of the annual family income.

Below is listed the services requiring PCCs and the amount of each PCC.

<TABLE>
<CAPTION>
                 SERVICE                                       AMOUNT OF PCC
                 -------                                       -------------
<S>                                                <C>
1.   Outpatient Hospital Clinic Visits             $5 PCC for each outpatient visit that is not
                                                   for preventive services

2.   Emergency Room Services Covered for           $10 PCC
     Emergency Services only. [Note: Triage
     and medical screenings must be
     covered in all situations.]

3.   Physician Services                            $5 PCC for each visit (except for well-child
                                                   visits in accordance with the recommended
                                                   schedule of the American Academy of
                                                   Pediatrics; lead screening and treatment'
                                                   age appropriate immunizations; prenatal
                                                   care; and pap smears, when appropriate.

4.   Independent Clinic Services                   $5 PCC for each practitioner visit (except
                                                   for preventive care services)

5.   Podiatrist Services                           $5 PCC for each visit

6.   Optometrist Services                          $5 PCC for each visit

7.   Chiropractor Services                         $5 PCC for each visit

8.   Drugs                                         $1 for generic drugs; $5 for brand name drugs
</TABLE>

<PAGE>

<TABLE>
<S>                                                <C>
9.   Nurse Midwives                                $5 PCC for each visit (except for prenatal
                                                   care visits)

10.  Dentist                                       $5 PCC for each visit (except for
                                                   preventive dentistry services)

11.  Nurse Practitioners                           $5 PCC for each visit (except for
                                                   preventive care services
</TABLE>

<PAGE>

                         COST-SHARING REQUIREMENTS FOR
                        NJ FAMILYCARE PLAN D [RESERVED]

COPAYMENTS FOR NJ FAMILYCARE - PLAN D AND [RESERVED]

Copayments will be required of parents/caretakers solely eligible through NJ
FamilyCare Plan D whose family income is between 151% and up to including 200%
of the federal poverty level. The same copayments will be required of children
solely eligible through NJ FamilyCare Plan D whose family income is between 201%
and up to and including 350% of the federal poverty level. Exception - Both
Eskimos and Native American Indians under the age of 19 are not required to pay
copayments.

The total family limit (regardless of family size) on all cost-sharing may not
exceed 5% of the annual family income.

Below is listed the services requiring copayments and the amount of each
copayment.

<TABLE>
<CAPTION>
                 SERVICE                                AMOUNT OF COPAYMENT
                 -------                                -------------------
<S>                                           <C>
1.   Outpatient Hospital Clinic Visits,       $5 copayment for each outpatient clinic visit
     including Diagnostic Testing             that is not for preventive services

2.   Hospital Outpatient Mental Health        $25 copayment for each visit
     Visits

3    Outpatient Substance Abuse Services      $5 copayment for each visit
     for Detoxification

4.   Hospital Outpatient Emergency Services   $35 copayment; no copayment is required if
     Covered for Emergency Services only,     the member was referred to the Emergency
     including services provided in an        Room by his/her primary care provider for
     outpatient hospital department or an     services that should have been rendered in
     urgent care facility. [Note: Triage      the primary care provider's office or if the
     and medical screenings must be covered   member is admitted into the hospital.
     in all situations.]

5.   Primary Care Provider Services           $5 copayment for each visit (except for
     provided during normal office hours      well-child visits in accordance with the
                                              recommended schedule of the American Academy
                                              of Pediatrics; lead screening and treatment;
                                              age-appropriate immunizations; prenatal
                                              care; or preventive dental services). The $5
                                              copayment shall only apply to the first
                                              prenatal visit.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                     SERVICE                                     AMOUNT OF COPAYMENT
                     -------                                     -------------------
<S>                                                  <C>
6.   Primary Care Provider Services during            $10 copayment for each visit
     non-office hours and for home visits

7.   Podiatrist Services                             $5 copayment for each visit

8.   Optometrist Services                            $5 copayment for each visit, except for
                                                     newborns covered under fee-for-service.

9.   Outpatient Rehabilitation Services,             $5 copayment for each visit
     including Physical Therapy, Occupational
     Therapy, and Speech Therapy

10.  Prescription Drugs                              $5 copayment. If greater than a 34-day
                                                     supply of a prescription drug is
                                                     dispensed, a $10 copayment applies.

11.  Nurse Midwives                                  $5 copayment for the first prenatal visit;
                                                     $10 for services rendered during non-office
                                                     hours and for home visits. No copayment for
                                                     preventive services or newborns covered
                                                     under fee-for-service.

12.  Physician specialist office visits during       $5 copayment per visit
     normal office hours

13.  Physician specialist office visits during       $10 copayment per visit
     non-office hours or home visits

14.  Nurse Practitioners                             $5 copayment for each visit (except for
                                                     preventive care services) $10 copayment per
                                                     non-office hour visits

15.  Psychologist Services                           $5 copayment for each visit

16.  Laboratory and X-ray Services                   $5 copayment for each visit that is not
                                                     part of an office visit
</TABLE>

[RESERVED]

<PAGE>

[RESERVED]

<PAGE>

B.7.0 TERMS AND CONDITIONS

<PAGE>

B.7.1 PHYSICIAN INCENTIVE PLAN PROVISIONS

The following provides information on the physician incentive payment
provisions.

<PAGE>

                       PHYSICIAN INCENTIVE PLAN PROVISIONS

I.       GENERAL PROVISIONS

         A.       In accordance with 42 CFR 417, the contractor may operate a
                  physician incentive plan only if:

                  1.       No specific payment is made directly or indirectly
                           under the plan to a physician or physician group as
                           an inducement to reduce or limit medically necessary
                           services furnished to an individual enrollee; and

                  2.       The stop-loss protection, enrollee survey, and
                           disclosure requirements of 42 CFR 41 are met.

         B.       The requirements apply to physician incentive plans between
                  the contractor and individual physicians or physician groups
                  with whom they contract to provide medical services to
                  Medicaid enrollees. The requirements also apply to
                  subcontracting arrangements. These requirements apply only to
                  physician incentive plans that base compensation (in whole or
                  in part) on the use or cost of services furnished to Medicaid
                  recipients.

II.      PROHIBITED PHYSICIAN PAYMENTS

         No specific payment of any kind may be made directly or indirectly
         under the incentive plan to a physician or physician group as an
         inducement to reduce or limit covered medically necessary services
         covered under the contractor's contract furnished to an individual
         enrollee. Indirect payments include offerings of monetary value (such
         as stock options or waivers of debt) measured in the present or future.

III.     DETERMINATION OF SUBSTANTIAL FINANCIAL RISK

         Substantial financial risk occurs when the incentive arrangements place
         the physician or physician group at risk for amounts beyond the risk
         threshold, if the risk is based on the use or costs of referral
         services. Amounts at risk based solely on factors other than a
         physician's or physician group's referral levels do not contribute to
         the determination of substantial financial risk. The risk threshold is
         25 percent.

IV.      ARRANGEMENTS THAT CAUSE SUBSTANTIAL FINANCIAL RISK

         For purposes of this contract, potential payments means the maximum
         anticipated total payments (based on the most recent year's utilization
         and experience and any current or anticipated factors that may affect
         payment amounts) that could be received if use or costs of referral
         services were low enough. The following physician incentive plans

<PAGE>

         cause substantial financial risk if risk is based (in whole or in part)
         on use or costs of referral services and the patient panel size is not
         greater than 25,000 patients:

         A.       Withholds greater than 25 percent of potential payments.

         B.       Withholds less than 25 percent of potential payments if the
                  physician or physician group is potentially liable for amounts
                  exceeding 25 percent of potential payments.

         C.       Bonuses that are greater than 33 percent of potential payments
                  minus the bonus.

         D.       Withholds plus bonuses if the withholds plus bonuses equal
                  more than 25 percent of potential payments. The threshold
                  bonus percentage for a particular withhold percentage may be
                  calculated using the formula:

                       Withhold % = -0.75 (Bonus %) + 25%

         E.       Capitation arrangements, if:

                  1.       The difference between the maximum potential payments
                           and minimum potential payments is more than 25
                           percent of the maximum potential payments; or

                  2.       The maximum and minimum potential payments are not
                           clearly explained in the physician's or physician
                           group's contract.

         F.       Any other incentive arrangements that have the potential to
                  hold a physician or physician group liable for more than 25
                  percent of potential payments.

V.       REQUIREMENTS FOR PHYSICIAN INCENTIVE PLANS THAT PLACE PHYSICIANS AT
         SUBSTANTIAL FINANCIAL RISK

         A contractor that operates incentive plans that place physicians or
         physician groups at substantial financial risk must do the following:

         A.       Conduct enrollee surveys. These surveys must:

                  1.       Include either all current Medicaid enrollees in the
                           contractor's plan and those who have disenrolled
                           (other than because of loss of eligibility in
                           Medicaid or relocation outside the contractor's
                           service area) in the past 12 months, or a sample of
                           these same enrollees and disenrollees;

                  2.       Be designed, implemented, and analyzed in accordance
                           with commonly accepted principles of survey design
                           and statistical analysis;

                  3.       Address enrollees/disenrollees satisfaction with the
                           quality of the services provided and their degree of
                           access to the services; and

<PAGE>

                  4.       Be conducted no later than one year after the
                           effective date of this contract, and at least
                           annually thereafter.

         B.       Ensure that all physicians and physician groups at substantial
                  financial risk have either aggregate or per-patient stop-loss
                  protection in accordance with the following requirements:

                  1.       If aggregate stop-loss protection is provided, it
                           must cover 90 percent of the costs of referral
                           services (beyond allocated amounts) that exceed 25
                           percent of potential payments.

                  2.       If the stop-loss protection provided is based on a
                           per-patient limit, the stop-loss limit per patient
                           must be determined based on the size of the patient
                           panel and may be a single combined limit or consist
                           of separate limits for professional services and
                           institutional services. In determining patient panel
                           size, the patients may be pooled, in accordance with
                           Section VI. Stop-loss protection must cover 90
                           percent of the costs of referral services that exceed
                           the per-patient limit. The per-patient stop-loss
                           limit is as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
                                                                     SEPARATE
                                      SINGLE COMBINED           INSTITUTIONALIZED                 SEPARATE
   PANEL SIZE                               LIMIT                      LIMIT                PROFESSIONAL LIMIT
--------------------------------------------------------------------------------------------------------------
<S>                                   <C>                       <C>                         <C>
 Less than 1,000                          $  6,000                   $ 10,000                      $ 3,000
--------------------------------------------------------------------------------------------------------------
 1,001 - 5,000                            $ 30,000                   $ 40,000                      $10,000
--------------------------------------------------------------------------------------------------------------
 5,001 - 8,000                            $ 40,000                   $ 60,000                      $15,000
--------------------------------------------------------------------------------------------------------------
 8,001 - 10,000                           $ 75,000                   $100,000                      $20,000
--------------------------------------------------------------------------------------------------------------
 10,001 - 25,000                          $150,000                   $200,000                      $25,000
--------------------------------------------------------------------------------------------------------------
 25,001 +                                     None                       None                         None
--------------------------------------------------------------------------------------------------------------
</TABLE>

VI.      DISCLOSURE REQUIREMENTS

         A.       What must be disclosed to the Department.

                  1.       Information concerning physician incentive plans as
                           required or requested in detail sufficient to enable
                           the Department to determine whether the incentive
                           plan complies with the requirements specified in this
                           Article.

                           a.       Whether services not furnished by the
                                    physician or physician group are covered by
                                    the incentive plan. If only the services
                                    furnished by the physician or physician
                                    group are covered by the incentive plan,
                                    disclosure of other aspects of the plan need
                                    not be made.

<PAGE>

                           b.       The type of incentive arrangement (e.g.,
                                    withhold, bonus, capitation).

                           c.       If the incentive plan involves a withhold or
                                    bonus, the percent of the withhold or bonus.

                           d.       Proof that the physician or physician group
                                    has adequate stop-loss protection, including
                                    the amount, coinsurance and type of
                                    stop-loss protection.

                           e.       The panel size and, if patients are pooled,
                                    the method used. Pooling is permitted only
                                    if: it is otherwise consistent with the
                                    relevant contracts governing the
                                    compensation arrangements for the physician
                                    or physician group; the physician or
                                    physician group is at risk for referral
                                    services with respect to each of the
                                    categories of patients being pooled; the
                                    terms of the compensation arrangements
                                    permit the physician or physician group to
                                    spread the risk across the categories of
                                    patients being pooled; the distribution of
                                    payments to physicians from the risk pool is
                                    not calculated separately by patient
                                    category; and the terms of the risk borne by
                                    the physician or physician group are
                                    comparable for all categories of patients
                                    being pooled. If these conditions are met,
                                    the physician or physician group may u se
                                    either or both of the following to pool
                                    patients:

                                    (1)      Pooling any combination of
                                             commercial, Medicare, or Medicaid
                                             patients enrolled in a specific HMO
                                             or CMP in the calculation of the
                                             panel size.

                                    (2)      Pooling together, by a physician
                                             group that contracts with more than
                                             one HMO, CMP, or health insuring
                                             organization (as defined in 42 CFR
                                             434.2), or prepaid health plan (as
                                             defined in 42 CFR 434,2) the
                                             patients of each of those entities.

                           f.       In the case of capitated physicians or
                                    physician groups, capitation payments paid
                                    to primary care physicians for the most
                                    recent year broken down by percent for
                                    primary care services, referral services to
                                    specialists, and hospital and other types of
                                    provider (for example, home health agency)
                                    services.

                           g.       In the case of those prepaid plans that are
                                    required to conduct beneficiary surveys, the
                                    survey results.

         B.       When disclosure must be made to the Department.

<PAGE>

                  1.       An organization must provide the information required
                           by Section IV.A to the Department.

                           a.       Prior to approval of its contract:
                                    [[Reserved]CMS will not approve an HMO's or
                                    CMP's contract unless the HMO or CMP has
                                    provided the information required in this
                                    Section]

                           b.       Upon the contract anniversary or renewal
                                    effective date or on request by [Reserved]
                                    CMS.

                           c.       Survey results are due three (3) months
                                    after the end of the contract year or upon
                                    request by [Reserved]CMS.

         C.       Disclosure to Medicaid enrollees. The contractor must provide
                  the following information to any Medicaid enrollee who
                  requests it:

                  1.       Whether the prepaid plan uses a physician incentive
                           plan that affects the use of referral services.

                  2.       The type of incentive arrangement.

                  3.       Whether stop-loss protection is provided.

                  4.       If the prepaid plan was required to conduct a survey,
                           a summary of the survey results.

VII.     REQUIREMENTS RELATED TO SUBCONTRACTING ARRANGEMENTS

         A.       Physician groups. A contractor that contracts with a physician
                  group that places the individual physician members at
                  substantial risk for services they do not furnish must do the
                  following:

                  1.       Disclose to the Department any incentive plan between
                           the physician group and its individual physicians
                           that bases compensation to the physician on the use
                           or cost of services furnished to Medicaid enrolles
                           The disclosure must include the information specified
                           in this Section and be made at the times specified
                           herein.

                  2.       Provide adequate stop-loss protection to the
                           individual physicians.

                  3.       Conduct enrollee surveys as specified in Section V.A.

         B.       Intermediate entities. A contractor that contracts with an
                  entity (other than a physician group and may include an
                  individual practice association and a

<PAGE>

                  physician hospital organization) for the provision of services
                  to Medicaid enrollees must do the following:

                  1.       Disclose to the Division any incentive plan between
                           the contractor and a physician or physician group
                           that bases compensation to the physician or physician
                           group on the use or cost of services furnished to
                           Medicaid enrollees. The disclosure must include the
                           information required to be disclosed under this
                           Section and be made at times specified herein.

                  2.       If the physician incentive plan puts a physician or
                           physician group at substantial financial risk for the
                           cost of services the physician or physician group
                           does not furnish:

                           a.       meet the stop-loss protection requirements
                                    of this section; and

                           b.       conduct enrollee surveys as specified
                                    Section V.A.

         C.       For purposes of this Section, an entity includes, but is not
                  limited to, an individual practice association that contracts
                  with one or more physician groups and a physician hospital
                  organization.

VIII.    SANCTIONS AGAINST THE CONTRACTOR

         [Reserved]CMS may apply intermediate sanctions, or the Office of
         Inspector General may apply civil money penalties described in Article
         7.15 if [Reserved] CMS determines that the contractor fails to comply
         with the requirements of this section.

<PAGE>

B.7.2 PROVIDER CONTRACT/SUBCONTRACT PROVISIONS

<PAGE>

PROVIDER CONTRACT/SUBCONTRACT PROVISIONS

1.       ITEMS TO BE ADDRESSED - ALL PROVIDER CONTRACTS/SUBCONTRACTS

         The State is not specifying verbatim language for the following items,
         but they must be addressed in all provider contracts/subcontracts, as
         applicable:

         A.       Term. The provider contract/subcontract must specify the term
                  of the agreement, including the beginning and ending dates, as
                  well as methods of extension, re-negotiation and termination.

         B.       Scope of Service. The provider contract/subcontract must
                  define the provider/subcontractor's scope of service (more
                  specific requirements in this area are outlined for FQHC and
                  hospital providers - see Sections 3 and 4 below).

         C.       Subcontractor Qualifications. A subcontractor performing a
                  specific part of the contractor's obligations shall meet all
                  of the requirements related to the services that the
                  subcontractor is contracting to perform.

         D.       Reimbursement. The provider contract/subcontract must include
                  a reimbursement schedule and payment policy in compliance with
                  federal and State statutes. The payment description must make
                  clear whether there is financial risk or incentive payments
                  and, if so, what they are specifically. Physician incentive
                  payment plans must comply with the provisions of 42 CFR 417.
                  Reimbursement for FQHCs must be in accordance with Article
                  8.10.

         E.       Insurance. The provider contract/subcontract must require
                  appropriate insurance coverage, including professional
                  malpractice insurance, comprehensive general liability
                  insurance, and automobile liability insurance. The minimum
                  coverage for malpractice shall be $1,000,000 per
                  incident/53,000,000 aggregate. In addition, the
                  provider/subcontractor must agree that any insurance obtained
                  by the provider/subcontractor shall not limit the
                  provider/subcontractor's indemnification of the State and
                  enrollees.

         F.       Cooperation. The provider contract/subcontract must require
                  the provider/subcontractor's cooperation and participation in
                  the contractor's quality management and utilization management
                  system, including credentialing/recredentialing; appointment
                  standards; and enrollee and provider complaint and grievance
                  system.

         G.       Encounter Data. In addition to the requirement in 2.N. below
                  to provide encounter data, the provider contract/subcontract
                  must include an incentive system for providers/subcontractors
                  to assure submission of encounter data. At a minimum, the
                  system shall include:

<PAGE>

                  1.       Mandatory provider/subcontractor profiling that
                           includes complete and timely submissions of encounter
                           data. Contractor must set specific requirements for
                           profile elements based on data from encounter
                           submissions.

                  2.       Contractor must set up data submission specifications
                           and requirements based on encounter data elements for
                           which compliance performance will be both rewarded
                           and/or sanctioned.

         H.       Monitoring by Contractor. The provider contract/subcontract
                  shall acknowledge that the responsibilities performed by the
                  provider/subcontractor are monitored on an ongoing basis and
                  that the contractor is ultimately responsible to the
                  Department for the performance of all services. It must
                  include provisions for monitoring the performance of its
                  providers/subcontractors and ensuring that performance is
                  consistent with the contract between the contractor and the
                  Department. This shall include the contractor's right to
                  revoke the provider contract/subcontract if the
                  provider/subcontractor does not perform satisfactorily. If the
                  provider contract/subcontract provides for the selection of
                  providers, the provider contract/subcontract must state that
                  the contractor retains the right to approve, suspend, or
                  terminate any such arrangement.

         I.       Monitoring/Enforcement by State. The provider
                  contract/subcontract shall provide that the Department may
                  require the contractor to terminate the provider
                  contract/subcontract if performance is not consistent with the
                  contract between the contractor and the Department.

         J.       Notice. The provider contract/subcontract must require the
                  provider/subcontractor to notify the contractor of any change
                  in licensing or hospital admitting status.

         K.       Equality of Access. Unless a higher standard is required by
                  the contractor's contract with the State, the
                  provider/subcontractor shall provide the same level of medical
                  care and health service to DMAHS enrollees as it does to
                  enrollees under private or group contracts.

         L.       Severability. The provider contract/subcontract must include a
                  severability clause.

         M.       Amendments. The provider contract/subcontract must include
                  provisions regarding contract amendments and modifications.

         N.       Termination. The provider contract/subcontract must specify
                  procedures and criteria for terminating the contract,
                  including suspension, termination, or exclusion from a state
                  or federal health care program and the requirements in 2.G.
                  and H. below

<PAGE>

         O.       Such other information as may be required for provider
                  contracts/subcontracts by other sections in this contract.

2.       REQUIRED LANGUAGE - ALL PROVIDER CONTRACTS AND SUBCONTRACTS

         The following text must be included verbatim in all provider contracts
         and subcontracts (to the extent applicable to the provider
         contract/subcontract). The language either may be included in the body
         of the provider contract/subcontract or as an amendment.

         The provider/subcontractor agrees to serve enrollees in New Jersey Care
         2000+ and NJ FamilyCare and, in doing so, to comply with all of the
         following provisions:

         A.       SUBJECTION OF PROVIDER CONTRACT/SUBCONTRACT

                  This provider contract/subcontract shall be subject to the
                  applicable material terms and conditions of the contract
                  between the contractor and the State and shall also be
                  governed by and construed in accordance with all laws,
                  regulations and contractual obligations incumbent upon the
                  contractor.

         B.       COMPLIANCE WITH FEDERAL AND STATE LAWS AND REGULATIONS

                  The provider/subcontractor agrees that it shall carry out its
                  obligations as herein provided in a manner prescribed under
                  applicable federal and State laws, regulations, codes, and
                  guidelines including New Jersey licensing board regulations,
                  the Medicaid, NJ KidCare, and NJ FamilyCare State Plans, and
                  in accordance with procedures and requirements as may from
                  time to time be promulgated by the United States Department of
                  Health and Human Services.

         C.       APPROVAL OF PROVIDER CONTRACTS/SUBCONTRACTS AND AMENDMENTS

                  The provider/subcontractor understands that the State reserves
                  the right in its sole discretion to review and approve or
                  disapprove this provider contract/subcontract and any
                  amendments thereto.

         D.       EFFECTIVE DATE

                  This provider contract/subcontract shall become effective only
                  when the contractor's agreement with the State takes effect.

<PAGE>

         E.       NON-RENEWAL/TERMINATION OF PROVIDER CONTRACT/SUBCONTRACT

                  The provider/subcontractor understands that the contractor
                  shall notify DMAHS at least [Reserved]45 days prior to the
                  effective date of the suspension, termination, or voluntary
                  withdrawal of the provider/subcontractor from participation in
                  the contractor's network. If the termination was "for cause,"
                  the contractor's notice to DMAHS shall include the reasons for
                  the termination. Provider resource consumption patterns shall
                  not constitute "cause" unless the contractor can demonstrate
                  it has in place a risk adjustment system that takes into
                  account enrollee health-related differences when comparing
                  across providers.

         F.       ENROLLEE-PROVIDER COMMUNICATIONS

                  1.       The contractor shall not prohibit or restrict the
                           provider/subcontractor from engaging in medical
                           communications with the provider's/subcontractor's
                           patient, either explicit or implied, nor shall any
                           provider manual, newsletters, directives, letters,
                           verbal instructions, or any or other form of
                           communication prohibit medical communication between
                           the provider/subcontractor and the
                           provider's/subcontractor's patient.
                           Providers/subcontractors shall be free to communicate
                           freely with their patients about the health status of
                           their patients, medical care or treatment options
                           regardless of whether benefits for that care or
                           treatment are provided under the provider
                           contract/subcontract, if the professional is acting
                           within the lawful scope of practice.
                           Providers/subcontractors shall be free to practice
                           their respective professions in providing the most
                           appropriate treatment required by their patients and
                           shall provide informed consent within the guidelines
                           of the law including possible positive and negative
                           outcomes of the various treatment modalities.

                  2.       Nothing in section F.1 shall be construed:

                           a.       To prohibit the enforcement, including
                                    termination, as part of a provider
                                    contract/subcontract or agreement to which a
                                    health care provider is a party, of any
                                    mutually agreed upon terms and conditions,
                                    including terms and conditions requiring a
                                    health care provider to participate in, and
                                    cooperate with, all programs, policies, and
                                    procedures developed or operated by the
                                    contractor to assure, review, or improve the
                                    quality and effective utilization of health
                                    care services (if such utilization is
                                    according to guidelines or protocols that
                                    are based on clinical or scientific evidence
                                    and the professional judgment of the
                                    provider), but only if the guidelines or
                                    protocols under such utilization do not
                                    prohibit or restrict medical communications
                                    between providers/subcontractors and their
                                    patients; or

<PAGE>

                           b.       To permit a health care provider to
                                    misrepresent the scope of benefits covered
                                    under this provider contract/subcontractor
                                    or to otherwise require the contractor to
                                    reimburse providers/subcontractors for
                                    benefits not covered.

         G.       RESTRICTION ON TERMINATION OF PROVIDER CONTRACT/SUBCONTRACT
                  BY CONTRACTOR

                  The contractor shall not terminate this provider
                  contract/subcontract for either of the following reasons:

                  1.       Because the provider/subcontractor expresses
                           disagreement with the contractor's decision to deny
                           or limit benefits to a covered person or because the
                           provider/subcontractor assists the covered person to
                           seek reconsideration of the contractor's decision; or
                           because the provider/subcontractor discusses with a
                           current, former, or prospective patient any aspect of
                           the patient's medical condition, any proposed
                           treatments or treatment alternatives, whether covered
                           by the contractor or not, policy provisions of the
                           contractor, or the provider/subcontractor's personal
                           recommendation regarding selection of a health plan
                           based on the provider/subcontractor's personal
                           knowledge of the health needs of such patients.

                  2.       Because the provider/subcontractor engaged in medical
                           communications, either explicit or implied, with a
                           patient about medically necessary treatment options,
                           or because the provider/subcontractor practiced its
                           profession in providing the most appropriate
                           treatment required by its patients and provided
                           informed consent within the guidelines of the law,
                           including possible positive and negative outcomes of
                           the various treatment modalities.

         H.       TERMINATION OF PROVIDER CONTRACT/SUBCONTRACT - STATE

                  The provider/subcontractor understands and agrees that the
                  State may order the termination of this provider
                  contract/subcontract if it is determined that the
                  provider/subcontractor:

                           1.       Takes any action or fails to prevent an
                                    action that threatens the health, safety or
                                    welfare of any enrollee, including
                                    significant marketing abuses;

                           2.       Takes any action that threatens the fiscal
                                    integrity of the Medicaid program;

                           3.       Has its certification suspended or revoked
                                    by DOBI, DHSS, Division of Consumer Affairs,
                                    and/or any State or federal agency

<PAGE>

                                    or is federally debarred or excluded from
                                    federal procurement and non-procurement
                                    contracts;

                           4.       Becomes insolvent or falls below minimum net
                                    worth requirements; where applicable

                           5.       Brings a proceeding voluntarily or has a
                                    proceeding brought against it involuntarily,
                                    under the Bankruptcy Act;

                           6.       Materially breaches the provider
                                    contract/subcontract; or

                           7.       Violates state or federal law.

         I.       NON-DISCRIMINATION

                  The provider/subcontractor shall comply with the following
                  requirements regarding nondiscrimination:

                  1.       The provider/subcontractor shall accept assignment of
                           an enrollee and not discriminate against eligible
                           enrollees because of race, color, creed, religion,
                           ancestry, marital status, sexual orientation,
                           national origin, age, sex, physical or mental
                           handicap in accordance with Title VI of the Civil
                           Rights Act of 1964, 42 USC Section 2000d, Section 504
                           of the Rehabilitation Act of 1973, 29 USC Section
                           794, the Americans with Disabilities Act of 1990
                           (ADA), 42 USC Section [Reserved]12131, and rules and
                           regulations promulgated pursuant thereto, or as
                           otherwise provided by law or regulation.

                  2.       ADA Compliance. The provider/subcontractor shall
                           comply with the requirements of the Americans with
                           Disabilities Act (ADA). In providing health care
                           benefits, the provider/subcontractor shall not
                           directly or indirectly, through contractual,
                           licensing, or other arrangements, discriminate
                           against Medicaid/NJ FamilyCare beneficiaries who are
                           "qualified individuals with a disability" covered by
                           the provisions of the ADA. The contractor shall
                           supply a copy of its ADA compliance plan to the
                           provider/subcontractor.

                           A "qualified individual with a disability" as defined
                           pursuant to 42 U.S.C. 12131 is an individual with a
                           disability who, with or without reasonable
                           modifications to rules, policies, or practices, the
                           removal of architectural, communication, or
                           transportation barriers, or the provision of
                           auxiliary aids and services, meets the essential
                           eligibility requirements for the receipt of services
                           or the participation in programs or activities
                           provided by a public entity.

<PAGE>

                           The provider/subcontractor shall submit to the
                           [Reserved]contractor a written certification that it
                           is conversant with the requirements of the ADA, that
                           it is in compliance with the law, and that it has
                           assessed its provider network and certifies that the
                           providers meet ADA requirements to the best of the
                           provider/subcontractor's knowledge. The
                           provider/subcontractor warrants that it will hold the
                           State harmless and indemnify the State from any
                           liability which may be imposed upon the State as a
                           result of any failure of the provider/subcontractor
                           to be in compliance with the ADA. Where applicable,
                           the provider/subcontractor must abide by the
                           provisions of section 504 of the federal
                           Rehabilitation Act of 1973, as amended, regarding
                           access to programs and facilities by people with
                           disabilities.

                  3.       The provider/subcontractor shall not discriminate
                           against eligible persons or enrollees on the basis of
                           their health or mental health history, health or
                           mental health status, their need for health care
                           services, amount payable to the
                           provider/subcontractor on the basis of the eligible
                           person's actuarial class, or pre-existing
                           medical/health conditions.

                  4.       The provider/subcontractor shall comply with the
                           Civil Rights Act of 1964 (42 USC 2000d), Title IX of
                           the Education Amendments of 1972 (regarding education
                           programs and activities), the Age Discrimination Act
                           of 1975, the Rehabilitation Act of 1973, the
                           regulations (45 CFR Parts 80 & 84) pursuant to that
                           Act, and the provisions of Executive Order 11246,
                           Equal Opportunity, dated September 24, 1965, the New
                           Jersey anti-discrimination laws including those
                           contained within N.J.S.A. 10: 2-1 through N.J.S.A.
                           10: 2-4, N.J.S.A. 10: 5-1 et seq. and N.J.S.A. 10:
                           5-38, and all rules and regulations issued
                           thereunder, and any other laws, regulations, or
                           orders which prohibit discrimination on grounds of
                           age, race, ethnicity, mental or physical disability,
                           sexual or affectional orientation or preference,
                           marital status, genetic information, source of
                           payment, sex, color, creed, religion, or national
                           origin or ancestry. The provider/subcontractor shall
                           not discriminate against any employee engaged in the
                           work required to produce the services covered by this
                           provider contract/subcontract, or against any
                           applicant for such employment because of race, creed,
                           color, national origin, age, ancestry, sex, marital
                           status, religion, disability or sexual or affectional
                           orientatior or preference.

                  5.       The contractor and provider/subcontractor shall not
                           discriminate with respect to participation,
                           reimbursement, or indemnification as to any provider
                           who is acting within the scope of the
                           provider's/subcontractor's license or certification
                           under applicable State law, solely on the basis of
                           such license or certification, or against any
                           provider that serves high-risk populations or
                           specializes in conditions that require costly
                           treatment. This paragraph shall not be construed to
                           prohibit an organization from including
                           providers/subcontractors only to the extent

<PAGE>

                           necessary to meet the needs of the organization's
                           enrollees or from establishing any measure designed
                           to maintain quality and control costs consistent with
                           the responsibilities of the organization.

                  6.       Scope. This non-discrimination provision shall apply
                           to but not be limited to the following: recruitment,
                           recruitment advertising, hiring, employment
                           upgrading, demotion, transfer, lay-off or
                           termination, rates of pay or other forms of
                           compensation, and selection for training, including
                           apprenticeship included in PL 1975, Chapter 127.

                  7.       Grievances. The provider/subcontractor agrees to
                           forward to the [Reserved]contractor copies of all
                           grievances alleging discrimination against enrollees
                           because of race, color, creed, sex, religion, age,
                           national origin, ancestry, marital status, sexual or
                           affectional orientation, physical or mental handicap
                           for review and appropriate action within three (3)
                           business days of receipt by the provider/
                           subcontractor.

         J.       OBLIGATION TO PROVIDE SERVICES AFTER THE PERIOD OF THE
                  CONTRACTOR'S INSOLVENCY AND TO HOLD ENROLLEES AND FORMER
                  ENROLLEES HARMLESS

                  1.       The provider/subcontractor shall remain obligated to
                           provide all services for the duration of the period
                           after the contractor's insolvency, should insolvency
                           occur, for which capitation or other payments have
                           been made and, for any hospitalized enrollee, until
                           the enrollee has been discharged from the inpatient
                           facility.

                  2.       The provider/subcontractor agrees that under no
                           circumstances, (including, but not limited to,
                           nonpayment by the contractor or the state, insolvency
                           of the contractor, or breach of agreement) will the
                           provider/subcontractor bill, charge, seek
                           compensation, remuneration or reimbursement from, or
                           have recourse against, enrollees, or persons acting
                           on their behalf, for covered services other than
                           provided in section 2.P.

                  3.       The provider/subcontractor agrees that this provision
                           shall survive the termination of this provider
                           contract/subcontract regardless of the reason for
                           termination, including insolvency of the contractor,
                           and shall be construed to be for the benefit of the
                           contractor or enrollees.

                  4.       The provider/subcontractor agrees that this provision
                           supersedes any oral or written contrary agreement now
                           existing or hereafter entered into between the
                           provider/subcontractor and enrollees, or persons
                           acting on their behalf, insofar as such contrary
                           agreement relates to liability for payment for or
                           continuation of covered services provided under the
                           terms and conditions of this continuation of benefits
                           provisions.

<PAGE>

                  5.       The provider/subcontractor agrees that any
                           modification, addition, or deletion to this provision
                           shall become effective on a date no earlier than
                           thirty (30) days after the approval by the State.

                  6.       The provider/subcontractor shall comply with the
                           prohibition against balance billing as described
                           within the payment in-full provision of N.J.S.A.
                           30:4D-6(c).

         K.       INSPECTION

                  The provider/subcontractor shall allow the New Jersey
                  Department of Human Services, the U.S. Department of Health
                  and Human Services (DHHS), and other authorized State
                  agencies, or their duly authorized representatives, to inspect
                  or otherwise evaluate the quality, appropriateness, and
                  timeliness of services performed under the provider
                  contract/subcontract, and to inspect, evaluate, and audit any
                  and all books, records, financial records, and facilities
                  maintained by the provider/subcontractor pertaining to such
                  services, at any time during normal business hours (and after
                  business hours when deemed necessary by DHS or DHHS) at a New
                  Jersey site designated by the State. Inspections may be
                  unannounced for cause.

                  The subcontractor shall also permit the State, at its sole
                  discretion, to conduct onsite inspections of facilities
                  maintained by the provider/subcontractor, prior to approval of
                  their use for providing services to enrollees.

                  Books and records include, but are not limited to, all
                  physical records originated or prepared pursuant to the
                  performance under this provider contract/subcontract,
                  including working papers, reports, financial records and books
                  of account, medical records, dental records, prescription
                  files, provider contracts and subcontracts, credentialing
                  files, and any other documentation pertaining to medical,
                  dental, and nonmedical services to enrollees. Upon request, at
                  any time during the period of this provider
                  contract/subcontract, the provider/subcontractor shall furnish
                  any such record, or copy thereof, to the Department or the
                  Department's External Review Organization within 30 days of
                  the request. If the Department determines, however, that there
                  is an urgent need to obtain a record, the Department shall
                  have the right to demand the record in less than 30 days, but
                  no less than 24 hours.

         L.       RECORD MAINTENANCE

                  The provider/subcontractor shall agree to maintain all of its
                  books and records in accordance with the general standards
                  applicable to such book or record keeping.

         M.       RECORD RETENTION

                  The provider/subcontractor hereby agrees to maintain an
                  appropriate

<PAGE>

                  recordkeeping system for services to enrollees. Such system
                  shall collect all pertinent information relating to the
                  medical management of each enrolled beneficiary and make that
                  information readily available to appropriate health
                  professionals and the Department. Records must be retained
                  for the later of:

                  1.       Five (5) years from the date of service, or

                  2.       Three (3) years after final payment is made under the
                           provider contract/subcontract and all pending matters
                           are closed.

                  If an audit, investigation, litigation, or other action
                  involving the records is started before the end of the
                  retention period, the records shall be retained until all
                  issues arising out of the action are resolved or until the end
                  of the retention period, whichever is later. Records shall be
                  made accessible at a New Jersey site and on request to
                  agencies of the State of New Jersey and the federal
                  government. For enrollees who are eligible through the
                  Division of Youth and Family Services, records shall be kept
                  in accordance with the provisions under N.J.S.A. 9:6-8.l0a and
                  9:6-8:40 and consistent with need to protect the enrollee's
                  confidentiality.

                  If an enrollee disenrolls from the contractor, the
                  provider/subcontractor shall release medical records of the
                  enrollee as may be directed by the enrollee, authorized
                  representatives of the Department and appropriate agencies of
                  the State of New Jersey and of the federal government. Release
                  of records shall be consistent with the provision of
                  confidentiality expressed in Section 2.R., Confidentiality,
                  and at no cost to the enrollee.

         N.       DATA REPORTING

                  The provider/subcontractor agrees to provide all necessary
                  information to enable the contractor to meet its reporting
                  requirements, including specifically with respect to encounter
                  reporting. The encounter data shall be in a form acceptable to
                  the State.

         O.       DISCLOSURE

                  1.       The provider/subcontractor further agrees to comply
                           with the Prohibition On Use Of Federal Funds For
                           Lobbying provisions of the contractor's agreement
                           with the State.

                  2.       The provider/subcontractor shall comply with
                           financial disclosure provision of 42 CFR 434,1903 (m)
                           of the S.S.A., and N.J.A.C. 10:49-19.

         P.       LIMITATIONS ON COLLECTION OF COST-SHARING

                  The provider/subcontractor shall not impose cost-sharing
                  charges of any kind upon Medicaid or NJ FamilyCare A and B
                  enrollees. Personal contributions to

<PAGE>

                  care for NJ FamilyCare C enrollees and copayments for certain
                  NJ FamilyCare Plan D enrollees shall be collected in
                  accordance with the attached schedule.

         Q.       INDEMNIFICATION BY PROVIDER/SUBCONTRACTOR

                  1.       The provider/subcontractor agrees to indemnify and
                           hold harmless the State, its officers, agents and
                           employees, and the enrollees and their eligible
                           dependents from any and all claims or losses accruing
                           or resulting from its negligence in furnishing or
                           supplying work, services, materials, or supplies in
                           connection with the performance of this provider
                           contract/subcontract.

                  2.       The provider/subcontractor agrees to indemnify and
                           hold harmless the State, its officers, agents, and
                           employees, and the enrollees and their eligible
                           dependents from liability deriving or resulting from
                           its insolvency or inability or failure to pay or
                           reimburse any other person, firm, or corporation
                           furnishing or supplying work, services, materials, or
                           supplies in connection with the performance of this
                           provider contract/subcontract. Further, the
                           contractor agrees that its enrollees are not held
                           liable for payments for covered services furnished
                           under contract, referral, or other arrangement, to
                           the extent that those payments are in excess of the
                           amount that the enrollee would owe if the contractor
                           provided the services directly.

                  3.       The provider/subcontractor agrees further that it
                           will indemnify and hold harmless the State, its
                           officers, agents, and employees, and the enrollees
                           and their eligible dependents from any and all claims
                           for services for which the provider/subcontractor
                           receives payment.

                  4.       The provider/subcontractor agrees further to
                           indemnify and hold harmless the State, its officers,
                           agents and employees, and the enrollees and their
                           eligible dependents, from all claims, damages, and
                           liability, including costs and expenses, for
                           violation of any proprietary rights, copyrights, or
                           rights of privacy arising out of the publication,
                           translation, reproduction, delivery, performance,
                           use, or disposition of any data furnished to it under
                           this provider contract/subcontract, or for any
                           libelous or otherwise unlawful matter contained in
                           such data that the provider/subcontractor inserts.

                  5.       The provider/subcontractor shall indemnify the State,
                           its officers, agents and employees, and the enrollees
                           and their eligible dependents from any injury, death,
                           losses, damages, suits, liabilities judgments, costs
                           and expenses and claim of negligence or willful acts
                           or omissions of the provider/subcontractor, its
                           officers, agents, and employees arising out of
                           alleged violation of any State or federal law or
                           regulation. The provider/subcontractor shall also
                           indemnify and hold the State harmless

<PAGE>

                           from any claims of alleged violations of the
                           Americans with Disabilities Act by the
                           subcontractor/provider.

         R.       CONFIDENTIALITY

                  1.       General. The provider/subcontractor hereby agrees and
                           understands that all information, records, data, and
                           data elements collected and maintained for the
                           operation of the provider/subcontractor and the
                           contractor and Department and pertaining to enrolled
                           persons, shall be protected from unauthorized
                           disclosure in accordance with the provisions of 42
                           U.S.C. 1396(a)(7)(Section 1902(a)(7) of the Social
                           Security Act), 42 CFR Part 431, subpart F, 45 CFR
                           Parts 160 and 164, Subparts A and E, N.J.S.A. 30:4D-7
                           (g) and N.J.A.C. 10:49-9.4. Access to such
                           information, records, data and data elements shall be
                           physically secured and safeguarded and shall be
                           limited to those who perform their duties in
                           accordance with provisions of this provider
                           contract/subcontract including the Department of
                           Health and Human Services and to such others as may
                           be authorized by DMAHS in accordance with applicable
                           law. For enrollees covered by the contractor's plan
                           that are eligible through the Division of Youth and
                           Family Services, records shall be kept in accordance
                           with the provisions under N.J.S.A. 9:6-8. lOa and
                           9:6-8:40 and consistent with the need to protect the
                           enrollee's confidentiality.

                  2.       Enrollee-Specific Information. With respect to any
                           identifiable information concerning an enrollee that
                           is obtained by the provider/subcontractor, it: (a)
                           shall not use any such information for any purpose
                           other than carrying out the express terms of this
                           provider contract/subcontract; (b) shall promptly
                           transmit to the Department all requests for
                           disclosure of such information; (c) shall not
                           disclose except as otherwise specifically permitted
                           by the provider contract/subcontract, any such
                           information to any party other than the Department
                           without the Department's prior written authorization
                           specifying that the information is releasable under
                           42 CFR, Section 431.300 et seq., and (d) shall, at
                           the expiration or termination of the provider
                           contract/subcontract, return all such information to
                           the Department or maintain such information according
                           to written procedures sent by the Department for this
                           purpose.

                  3.       Employees. The provider/subcontractor shall instruct
                           its employees to keep confidential all information,
                           records, data, and data elements pertaining to
                           enrolled persons. The provider/subcontractor shall
                           further instruct its employees to keep confidential
                           information concerning the business of the State, its
                           financial affairs, its relations with its enrollees
                           and its employees, as well as any other information
                           which may be specifically classified as confidential
                           by law.

<PAGE>

                  4.       Medical Records and management information data
                           concerning enrollees shall be confidential and shall
                           be disclosed to other persons within the
                           provider's/subcontractor's organization only as
                           necessary to provide medical care and quality, peer,
                           or grievance review of medical care under the terms
                           of this provider contract/subcontract.

                  5.       The provisions of this article shall survive the
                           termination of this provider contract/subcontract and
                           shall bind the provider/subcontractor so long as the
                           provider/subcontractor maintains any individually
                           identifiable information relating to Medicaid/NJ
                           FamilyCare beneficiaries.

         S.       CLINICAL LABORATORY IMPROVEMENT

                  The provider/subcontractor shall ensure that all laboratory
                  testing sites providing services under this provider
                  contract/subcontract have either a Clinical Laboratory
                  Improvement Amendment (CLIA) certificate of waiver or a
                  certificate of registration along with a CLIA identification
                  number. Those laboratory service providers with a certificate
                  of waiver shall provide only those tests permitted under the
                  terms of their waiver. Laboratories with certificates of
                  registration may perform a full range of laboratory tests.

         T.       FRAUD AND ABUSE

                  1.       The provider/subcontractor agrees to assist the
                           contractor as necessary in meeting its obligations
                           under its contract with the State to identify,
                           investigate, and take appropriate corrective action
                           against fraud and/or abuse (as defined in 42 CFR
                           455.2) in the provision of health care services.

                  2.       If the State has withheld payment and/or initiated a
                           recovery action against the provider/subcontractor,
                           or withheld payments pursuant to 42 CFR 456.23 and
                           NJAC 10:49-9.10(a), the contractor shall have the
                           right to withhold payments from the
                           provider/subcontractor and/or forward those payments
                           to the State.

         U.       THIRD PARTY LIABILITY

                  1.       The provider/subcontractor shall utilize, whenever
                           available, and report any other public or private
                           third party sources of payment for services rendered
                           to enrollees.

                  2.       Except as provided in subsection 3. below, if the
                           provider/subcontractor is aware of third party
                           coverage, it shall submit its claim first to the
                           appropriate third party before submitting a claim to
                           the contractor.

<PAGE>

                  3.       In the following situations, the provider/
                           subcontractor may bill the contractor first and then
                           coordinate with the liable third party, unless the
                           contractor has received prior approval from the State
                           to take other action.

                           a.       The coverage is derived from a parent whose
                                    obligation to pay support is being enforced
                                    by the Department of Human Services.

                           b.       The claim is for prenatal care for a
                                    pregnant woman or for preventive pediatric
                                    services (including EPSDT services) that are
                                    covered by the Medicaid program.

                           c.       The claim is for labor, delivery, and
                                    post-partum care and does not involve
                                    hospital costs associated with the inpatient
                                    hospital stay.

                           d.       The claim is for a child who is in a DYFS
                                    supported out of home placement.

                           e.       The claim involves coverage or services
                                    mentioned in 3.a, 3.b, 3.c, or 3.d, above in
                                    combination with another service.

                  4.       If the provider/subcontractor knows that the third
                           party will neither pay for nor provide the covered
                           service, and the service is medically necessary, the
                           provider/subcontractor may bill the contractor
                           without having received a written denial from the
                           third party.

                  5.       Sharing of TPL Information by the Provider/
                           Subcontractor.

                           a.       The provider/subcontractor shall notify the
                                    contractor within thirty (30) days after it
                                    learns that an enrollee has health insurance
                                    coverage not reflected in the health
                                    insurance provided by the contractor, or
                                    casualty insurance coverage, or of any
                                    change in an enrollee's health insurance
                                    coverage.

                           b.       When the provider/subcontractor becomes
                                    aware that an enrollee has retained counsel,
                                    who either may institute or has instituted a
                                    legal cause of action for damages against a
                                    third party, me provider/subcontractor shall
                                    notify the contractor in writing, including
                                    the enrollee's name and Medicaid
                                    identification number, date of
                                    accident/incident, nature of injury, name
                                    and address of enrollee's legal
                                    representative, copies of pleadings, and any
                                    other documents related to the action in the
                                    provider's/subcontractor's possession or
                                    control. This shall include, but not be
                                    limited to (for each service date on or
                                    subsequent to the date of the
                                    accident/incident), the enrollee's diagnosis
                                    and the nature of the service provided to
                                    the enrollee.

<PAGE>

                           c.       The provider/subcontractor shall notify the
                                    contractor within thirty (30) days of the
                                    date it becomes aware of the death of one of
                                    its Medicaid enrollees age 55 or older,
                                    giving the enrollee's full name, Social
                                    Security Number, Medicaid identification
                                    number, and date of death.

                           d.       The provider/subcontractor agrees to
                                    cooperate with the contractor's and the
                                    State's efforts to maximize the collection
                                    of third party payments by providing to the
                                    contractor updates to the information
                                    required by this section.

3.       FQHC PROVIDER CONTRACTS/SUBCONTRACTS

         In addition to the provisions described in Sections 1 and 2, FQHC
         provider contract/subcontracts must:

                  A.       List each specific service to be covered.

                  B.       Include the credentialing requirements for individual
                           practitioners.

                  C.       Include an assurance that continuation of the FQHC
                           contract is contingent on maintaining quality
                           services and maintaining the Primary Care Evaluation
                           Review (PCER) by the federal government at a good
                           quality level. FQHCs must make available to the
                           contractor the PCER results annually which shall be
                           considered in the contractor's QM reviews for
                           assessing quality of care.

4.       HOSPITAL PROVIDER CONTRACT/SUBCONTRACTS

         In addition to the provisions described in Sections 1 and 2, hospital
         provider contract/subcontracts must comply with all of the following:

         A.       Hospital contracts shall list each specific service to be
                  covered including:

                  1.       Inpatient services;

                  2.       Anesthesia and whether professional services of
                           anesthesiologists and nurse anesthetists are
                           included;

                  3.       Emergency room services

                           a.       Triage fee - whether facility and
                                    professional fees are included;

                           b.       Medical screening fee - whether facility and
                                    professional fees are included;

                           c.       Specific treatment rates for:

                                    (1)      Emergent services

                                    (2)      Urgent services

                                    (3)      Non-urgent services

<PAGE>

                                    (4)      Other

                           d.       Other - must specify

                  4.       Neonatology - facility and professional fees

                  5.       Radiology

                           a.       Diagnostic

                           b.       Therapeutic

                           c.       Facility fee

                           d.       Professional services

                  6.       Laboratory - facility and professional services

                  7.       Outpatient/clinic services must be specific and
                           address

                           a.       School based service programs

                           b.       Audiology therapy and therapists

                  8.       AIDS Centers

                  9.       Any other specialized service or center of excellence

                  10.      Hospice services if the hospital has an approved
                           hospice agency which is Medicare certified.

                  11.      Home Health agency services if hospital has an
                           approved home health agency license from the
                           Department of Health and Senior Services which meets
                           licensing and Medicare certification participation
                           requirements.

                  12.      Any other service.

         B.       The contractor shall pay for all medical screening services
                  rendered to its enrollees by hospitals and emergency room
                  physicians. The amount and method of reimbursement for medical
                  screenings shall be subject to negotiation between the
                  contractor and the hospital and directly with
                  non-hospital-salaried emergency room physicians and shall
                  include reimbursement for urgent care and non-urgent care
                  rates. Non-participating hospitals may be reimbursed for
                  hospital costs at Medicaid rates or other mutually agreeable
                  rates for medical screening services. Additional fees for
                  additional services may be included at the discretion of the
                  contractor and the hospital.

         C.       Prior authorization for medical screenings, emergency care, or
                  urgent care situations at the hospital emergency room shall
                  not be required. The hospital emergency room physician may
                  determine the necessity for contacting the PCP or the
                  contractor for information about a patient who presents with
                  an urgent condition.

5.       PCP PROVIDER CONTRACTS/SUBCONTRACTS

         In addition to the provisions in 1 and 2, PCP provider
         contracts/subcontracts shall include the responsibilities of the PCP,
         including that the PCP shall:

         A.       Supervise, coordinate, and manage enrollee's care

         B.       Maintain the enrollee's medical record

<PAGE>

         C.       Provide 24 hour/7 day a week access

         D.       Make referrals for specialty care

<PAGE>

B.7.3 FINANCIAL GUIDE FOR REPORTING MEDICAID/NJ FAMILYCARE RATE CELL GROUPING
COSTS

<PAGE>

HMO FINANCIAL GUIDE

FOR REPORTING

MEDICAID/NJ FAMILYCARE

RATE CELL GROUPING COSTS

STATE OF NEW JERSEY

[Reserved]

[Reserved]

<PAGE>

CONTENTS

<TABLE>
<S>                                                                                             <C>
1.   Introduction............................................................................            1

2.   General Instructions....................................................................            6

3.   Report Guidelines.......................................................................            8

     -    Report #1: Lag Report (Table 20, Parts A-D)........................................            8

     -    Report #2: Income Statements by Rate Cell Grouping (Table 19, Parts A-S)...........           11

          -    Table 19, Part T: Non-State Plan Services

          -    Table 19, Parts U - AF: Annual Supplemental Exhibits by Region

     -    Report #3, Table 21: Maternity Outcome Counts......................................           19

4.   Incurred-But-Not-Reported (IBNR) Methodology............................................   Appendix A

5.   Report Forms............................................................................   Appendix B
</TABLE>

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       i
<PAGE>

INTRODUCTION

PURPOSE

The objective of this Guide is to ensure uniformity, accuracy and completeness
in reporting Medicaid rate cell groupings. In addition, the provision of this
Guide to the HMOs will help to eliminate inconsistencies, as reports can vary in
the presentation of items such as allocation of expenses, accrual of
INCURRED-BUT-NOT-REPORTED (IBNR) claims, handling of maternity claims, and other
items. All reports should be submitted as outlined in the general instructions.
The financial reports submitted from this Guide will be used in future rate
setting and to better assess the financial performance of HMOs.

The reports in this Guide are to supplement, not replace, the reporting
requirements currently required in the Division of Medical Assistance and Health
Services (DMAHS) Managed Care Contract (please refer to Section A of the
contract). Key differences between this Guide and the reports currently
submitted to the State are as follows:

-    Rate cell grouping detail;

-    Regional detail;

-    IBNR calculation detail; and

-    Timing of submissions.

RATE CELL GROUPINGS

This Guide requires key cost reporting by rate cell grouping. Rate cells have
been combined into [Reserved] FIFTEEN rate cell groupings for these reporting
purposes. Please note where Acquired Immunodeficiency Syndrome (AIDS)
individuals are included or excluded in the rate cell groupings. Also note that
maternity costs are reported as a separate rate cell grouping and should be
excluded from other rate cell groupings. The rate cell groupings are as follows:

<TABLE>
<CAPTION>
RATE CELL GROUPING   CAPITATION CODE                 DESCRIPTION
--------------------------------------------------------------------------------
                                  AFDC/SSI/DDD
--------------------------------------------------------------------------------
<S>                  <C>               <C>
 AFDC/NJCPW/ NJ       113R1 - 113R3    Individuals eligible for Aid to Families
 KidCare A            114R1 - 114R3    with Dependent Children (AFDC), New
(Excluding AIDS)      123R1 - 123R3    Jersey Care Pregnant Women (NJCPW), or NJ
                      124R1 - 124R3    KidCare A (children below the age of 19
                      131R1 - 131R3    with family incomes up to and including
                      134R1 - 134R3    133% of the federal poverty level (FPL)),
                      142R1 - 142R3    excluding individuals with AIDS.
                      144R1 - 144R3
                      151R1 - 151R3
                      153R1 - 153R3
                      172R1 - 172R3
                      183R1 - 183R3
--------------------------------------------------------------------------------
</TABLE>

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       2
<PAGE>

INTRODUCTION

<TABLE>
<CAPTION>
RATE CELL GROUPING   CAPITATION CODE                 DESCRIPTION
--------------------------------------------------------------------------------
<S>                  <C>               <C>
DYFS Clients         31399, 32399,     Individuals eligible through the
(Excluding AIDS)     34399             Division of Youth and Family
                                       Services (DYFS), also known as
                                       Foster Care children and children
                                       with Adoption Assistance, excluding
                                       individuals with AIDS.
--------------------------------------------------------------------------------
ABD with Medicare    48399             ABD (Aged, Blind, and/or Disabled)
- DDD                                  individuals who receive Medicare
(Excluding AIDS)                       and are eligible for services through
                                       the Division of Developmental
                                       Disabilities (DDD), excluding
                                       individuals with AIDS.
--------------------------------------------------------------------------------
ABD with Medicare -  711R1-711R3       ABD individuals who receive
Non-DDD              813R1-813R3       Medicare and are not eligible for
(Excluding AIDS)     823R1 - 823R3     services through the DDD, excluding
                                       individuals with AIDS.
--------------------------------------------------------------------------------
Non-ABD - DDD        47399             Non-ABD individuals eligible for
(Excluding AIDS)                       services through the DDD, excluding
                                       individuals with AIDS.
--------------------------------------------------------------------------------
ABD without          49399             ABD individuals not receiving
Medicare - DDD                         Medicare and eligible for services
(Including AIDS)                       through the DDD, including
                                       individuals with AIDS.
--------------------------------------------------------------------------------
ABD without          71099, 81099      ABD individuals not receiving
Medicare - Non-DDD                     Medicare and not eligible for
(Including AIDS)                       services through the DDD, including
                                       individuals with AIDS.
--------------------------------------------------------------------------------

                            NJ FamilyCare/NJ KidCare

--------------------------------------------------------------------------------
NJ KidCare B&C       61399, 62399,     Eligible children under age 19 with
(Excluding AIDS)     63399             family income above 133% and up
                                       to and including 200% FPL,
                                       excluding individuals with AIDS.
--------------------------------------------------------------------------------
NJ KidCare D         91399, 92399,     Eligible children under age 19 with
(Excluding AIDS)     93399             family income between 201% and up
                                       to and including 350% FPL,
                                       excluding individuals with AIDS.
--------------------------------------------------------------------------------
NJ FamilyCare        [Reserved]        Parents with dependent children with
Parents 0-133% FPL   [Reserved] 15599, family income between 0% and
(Excluding AIDS)     17599,18599       133% FPL, excluding individuals with
                                       AIDS.
--------------------------------------------------------------------------------
</TABLE>

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       3

<PAGE>

INTRODUCTION

<TABLE>
<CAPTION>
RATE CELL GROUPING   CAPITATION CODE                 DESCRIPTION
--------------------------------------------------------------------------------
<S>                  <C>               <C>
[Reserved]           [Reserved]        [Reserved]

[Reserved]           [Reserved]        [Reserved]
--------------------------------------------------------------------------------

                            Special Populations/Data

--------------------------------------------------------------------------------
ABD with Medicare    28499, 48499      ABD individuals with AIDS who receive
-AIDS                                  Medicare, including those eligible for
                                       DDD, excluding the risk-adjusted
                                       populations.
--------------------------------------------------------------------------------
Non-ABD-AIDS         27499, 47499,     Non-ABD individuals with AIDS including
                     27599,            AFDC, NJCPW, NJ KidCare, DYFS, and NJ
                     [Reserved] 27699  FamilyCare, excluding the risk-adjusted
                                       populations.
--------------------------------------------------------------------------------
Maternity            N/A               Please refer to criteria outlined in the
                                       instruction for Report #2, [Reserved]
                                       below.
--------------------------------------------------------------------------------
</TABLE>

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       4

<PAGE>

INTRODUCTION

GEOGRAPHIC REGIONS

Some of the reports in this Guide request information from the three geographic
regions corresponding to those used in rate setting. Listed below are the
counties included in each geographic region:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
NORTHERN (REGION 1)   CENTRAL (REGION 2)           SOUTHERN (REGION 3)
--------------------------------------------------------------------------------
<S>                   <C>                  <C>
 Bergen               Essex                Atlantic
--------------------------------------------------------------------------------
 Hudson               Mercer               Burlington
--------------------------------------------------------------------------------
 Hunterdon            Middlesex            Camden
--------------------------------------------------------------------------------
 Morris               Union                Cape May
--------------------------------------------------------------------------------
 Passaic                                   Cumberland
--------------------------------------------------------------------------------
 Somerset                                  Gloucester
--------------------------------------------------------------------------------
 Sussex                                    Monmouth
--------------------------------------------------------------------------------
 Warren                                    Ocean
--------------------------------------------------------------------------------
                                           Salem
--------------------------------------------------------------------------------
</TABLE>

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       5

<PAGE>

GENERAL INSTRUCTIONS

The following are general guidelines for completing the various reports required
to be submitted by the HMOs to the State. These instructions are designed to
promote uniformity in reporting.

DUE DATES

All Medicaid revenues and expenses must be reported using the accrual basis of
accounting. Reports shall be submitted quarterly, and are due 45 days following
each quarter end:

<TABLE>
<CAPTION>
Quarter Ending:                         Due Date:
<S>                                     <C>
March 31                                May 15
June 30                                 August 15
September 30                            November 15
December 31                             February 15.
</TABLE>

If a due date falls on a weekend or state holiday, reports will be due the next
business day. Please submit the completed reports to:

                           State of New Jersey
                           Bureau of Financial Reporting
                           [Reserved]
                           Building 5, 2nd Floor
                           5 QuakerBridge Plaza
                           Trenton, NJ 08691
                           [Reserved]

                           and
                           [Reserved]
                           Mercer Government Human Services Consulting
                           Attn: Mike Nordstrom
                           3131 East Camelback Road, Suite 300
                           Phoenix, AZ 85016
                           mike.nordstrom@mercer.com

FORMAT

The HMO will submit one hard copy of these reports to the STATE OF NEW JERSEY AT
THE address listed above and an electronic version to the e-mail addresses
listed above in the formats specified. Copies of the reports are included in
Appendix B.

ANNUAL AUDIT REQUIREMENT

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       6
<PAGE>

GENERAL INSTRUCTIONS

Please refer to Section 7.27 for the audit requirements in the current DMAHS
managed care contract.

OTHER INSTRUCTIONS

Line titles and columnar headings of the various reports are, in general,
self-explanatory. Specific instructions are provided for items that may have
some question as to content. Any entry for which no specific instructions are
included should be made in accordance with sound accounting principles and in a
manner consistent with related items covered by specific instructions.

Incorporate adjustments to prior data in the current reporting period.
Adjustments for prior period IBNR estimates should be included on Report #2 Part
S, in Line 40. Information about any adjustments that pertain to prior periods
should be explained in a note to the reports. However, if there was material
error in preparation of the prior period report, a revised report should be
submitted.

Unanswered questions or blank lines on any report or schedule will render the
report or schedule incomplete and may result in a resubmission request. Any
resubmission must be clearly identified as such. If no answers or entries are to
be made, write "None", "Not Applicable (N/A)", or "-0-" in the space provided.
Always use predefined categories or classifications before reporting an amount
as "Other".

Dollar amounts should be reported to the nearest dollar. Per member per month
(PMPM) amounts, however, should be shown with two digits to the right of the
decimal point.

Additional sheets referencing the applicable reports can be attached for further
explanation. You may also use "Notes to Financial Reports" in Appendix B for
write-ins and explanations.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       7
<PAGE>

REPORT GUIDELINES

REPORT #1: LAG REPORTS (PARTS A-D)

Analyzing the accuracy of historical medical claims liability estimates is
helpful in assessing the adequacy of current liabilities. In addition, valid
IBNR liability estimates are crucial when utilizing financial statements in the
managed care rate setting process. This schedule provides the necessary
information to make this analysis.

Information is provided on Inpatient Hospital, Physician, Pharmacy, and Other
Medical Payments on Parts A through D, respectively, with all rate cell
groupings combined. See below for services that are included in each Medical
Cost Grouping.

<TABLE>
<CAPTION>
----------------------------------------------------------------------
  CATEGORY OF                                             MEDICAL COST
    SERVICE                  DESCRIPTION                    GROUPING
----------------------------------------------------------------------
<S>               <C>                                     <C>
Inpatient         Inpatient hospital costs including      Inpatient
Hospital          ancillary services for enrollees while  Hospital
                  confined to an acute care hospital,
                  including out of area (OOA)
                  hospitalization.
----------------------------------------------------------------------
Primary Care      All costs associated with medical
                  services provided in any setting by a   Physician
                  primary care provider, including
                  physicians and other practitioners.
----------------------------------------------------------------------
Physician         All costs associated with medical
Specialty         services provided by a physician other  Physician
Services          than a primary care physician (PCP).
----------------------------------------------------------------------
Pharmacy          Expenses for legend and non-legend
                  drugs provided that includes both       Pharmacy
                  ingredient costs and dispensing fees.
                  Exclude expenses reported as Human
                  Immunodeficiency Virus (HIV)/AIDS
                  Reimbursable Drugs.
----------------------------------------------------------------------
HIV/AIDS          Specifically, protease inhibitors and
Reimbursable      certain other anti-retrovirals and      Pharmacy
Drugs             factor VIII and IX blood clotting
                  factors.
----------------------------------------------------------------------
Outpatient        The facility component of the
Hospital          outpatient visit. The visit can be      Other
                  free standing or a hospital outpatient
                  department.
----------------------------------------------------------------------
Other             Compensation paid by the HMO to
Professional      non-physician providers engaged in the  Other
Services          delivery of medical services.
----------------------------------------------------------------------
Emergency Room    The facility component of the
                  emergency room visit as well as OOA     Other
                  emergency room costs.
----------------------------------------------------------------------
DME/Medical       The cost of durable medical equipment
Supplies          (DME) and supplies.                     Other
----------------------------------------------------------------------
Prosthetics and   The cost of Prosthetics and Orthotics.  Other
Orthotics
----------------------------------------------------------------------
Dental            Expenses for all dental services
                  provided.                               Other
----------------------------------------------------------------------
</TABLE>

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       8

<PAGE>

REPORT GUIDELINES

<TABLE>
<CAPTION>
----------------------------------------------------------------------
  CATEGORY OF                                             MEDICAL COST
    SERVICE                  DESCRIPTION                    GROUPING
----------------------------------------------------------------------
<S>               <C>                                     <C>
Home Health       Expenses for home health services       Other
Care              provided including nurses, aides,
                  hospice costs, and private duty
                  nursing.
----------------------------------------------------------------------
Transportation    Expenses for all ambulance, medical
                  intensive care units (MICUs) and        Other
                  invalid coach services.
----------------------------------------------------------------------
Lab & X-ray       The cost of all laboratory and
                  radiology (diagnostic and therapeutic)  Other
                  services for which the HMO is
                  separately billed.
----------------------------------------------------------------------
Vision Care       The cost of routine exams (by
including         non-physicians) and dispensing glasses  Other
Eyeglasses        to correct eye defects. This category
                  includes the cost of eyeglasses but
                  excludes ophthalmologist costs related
                  to the treatment of disease or injury
                  to the eye.
----------------------------------------------------------------------
                  The cost of all mental health and
Mental Health/    substance abuse services including      Other
Substance         inpatient, physician services,
Abuse             outpatient hospital, other
                  professional services, and other
                  services associated with mental health
                  or substance abuse treatment.
----------------------------------------------------------------------
Other Medical     Medical expenses not included above.    Other
----------------------------------------------------------------------
</TABLE>

The schedules are arranged with the month of service horizontally and the month
of payment vertically. Therefore, payments made during the current month for
services rendered during the current month would be reported in Line 1, Column
3, while payments made during the current month for services rendered in prior
months would be reported on Line 1, Columns 4 through 39. Please note that
columns 13 through 38 and rows 11 through 36 are hidden in the sample worksheet.
Lines 1 through [Reserved]3 contain data for payments made in the current
period. Earlier data on Lines [Reserved]4 through 37 should match data on
appropriate lines on the prior period's submission. If Lines 4 through 37 change
from the prior period's submission, include an explanation. The current month is
the last month of the period that is being reported. For example, in the report
for the period ended June 30, [Reserved] 2003, the current month would be June
[Reserved] 2003, and the first prior month would be May [Reserved] 2003. Do not
include risk pool distributions as payments in this schedule.

Report #1 must provide data for the period beginning with the first month the
HMO is responsible for providing medical benefits to Medicaid recipients, and
ending with the current month.

Line 39 - Subcapitation payments should be reported here, by month of payment.
They should not be included above Line 39. For the current period, Line 39
should contain new data in Columns 3 through 5. Data in columns 6 through 38
should match data in appropriate columns on the prior period's submission. If
columns 6 through 38 change from the prior period's submission, include an
explanation.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       9

<PAGE>

REPORT GUIDELINES

Line 40 - Report pharmacy rebates anticipated for drugs dispensed this period.
Adjust as appropriate any adjustment applicable to a prior period. Only complete
for the Pharmacy Payment report, Part C.

Line 41 - The HMO should report payments on Lines 1-36. If the HMO makes a
settlement or other payment that cannot be reported on Lines 1-36 due to lack of
data, the amount should be reported on Line 41 with the payment month used as a
substitute for the service month. If an amount is shown on Line 41 in columns 3
through 5, include an explanation. If columns 6 and greater change from the
prior submission, also include an explanation.

Line 42 - This line is the total amount paid to date for services rendered. Line
42 should equal the sum of Lines 38, 39 and 41. For the Pharmacy Payment report,
Part C, also include Line 40.

Line 43 - This line provides the current estimate of remaining liability for
unpaid claims for each month of service. The amount in each column on this line
must be updated each period. The amount in Column 40 is the sum of amounts in
Columns 3 through 39. The sum of the amounts in Column 40, in parts A through D,
is the unpaid claim liability (IBNR and reported-but-unpaid-claims (RBUC)).
Please refer to Attachment A for a methodology for calculating IBNR.

Line 44 - The total incurred claims is the sum of Lines 42 (the amounts paid to
date) and Line 43 (estimate of unpaid claims liability). Amounts on Line 44 are
shown for each month.

The State recognizes that claims liabilities may include the administrative
portion of claim settlement expenses. Any liability for future claim settlement
expense must be disclosed in the notes to the Guide.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       10
<PAGE>

REPORT GUIDELINES

REPORT #2: INCOME STATEMENT BY RATE CELL GROUPING (PARTS A - S)

This report is meant to provide detailed summary information on revenues and
expenses. A separate report is to be completed for each of the [Reserved]
fourteen rate cell groupings and for Maternity, with Report #2 Part S being the
summation of Parts A-R. For reporting purposes, AIDS revenues and expenses are
included or excluded from the rate cell groupings as indicated on the report
forms and in the chart defining the rate cell groupings provided on page 2.

Do not include maternity revenues or expenses in Parts A - Q. Only include
Maternity and newborn revenues and expenses on the Income Statement for
Maternity, Part R, and for All Rate Cell Groupings, Part S. Include Maternity
costs associated with the following codes for still births or live births after
the twelfth week of gestation, excluding elective abortions:

ICD-9 DIAGNOSIS CODES:

-    640.01, 640.81, 640.91

-    641.01, 641.11, 641.21, 641.31, 641.81, 641.91,

-    642.01, 642.11, 642.21, 642.31, 642.41, 642.51, 642.61, 642.71, 642.91,
     642.02, 642.12, 642.22, 642.32, 642.42, 642.52, 642.62, 642.72, 642.92

-    643.01, 643.11, 643.21, 643.81, 643.91,

-    645.01

-    646.01, 646.11, 646.12, 646.21, 646.22, 646.31, 646.41, 646.42, 646.51,
     646.52, 646.61, 646.62, 646.71, 646.81, 646.82, 646.91

-    647.01, 647.11, 647.21, 647.31, 647.41, 647.51, 647.61, 647.81, 647.91,
     647.02, 647.12, 647.22, 647.32, 647.42, 647.52, 647.62, 647.82, 647.92

-    648.01, 648.11, 648.21, 648.31, 648.41, 648.51, 648.61, 648.71, 648.81,
     648.91, 648.02, 648.12, 648.22, 648.32, 648.42, 648.52, 648.62, 648.72,
     648.82, 648.92

-    650 (and any or no trailing characters)

-    651.01, 651.11, 651.21, 651.31, 651.41, 651.51, 651.61, 651.81, 651.91

-    652.01, 652.11, 652.21, 652.31, 652.41, 652.51, 652.61, 652.71, 652.81,
     652.91

-    653.01, 653.11, 653.21, 653.31, 653.41, 653.51, 653.61, 653.71, 653.81,
     653.91

-    654.01, 654.11, 654.21, 654.31, 654.41, 654.51, 654.61, 654.71, 654.81,
     654.91, 654.02, 654.12, 654.22, 654.32, 654.42, 654.52, 654.62, 654.72,
     654.82, 654.92

-    655.01, 655.11, 655.21, 655 31, 655.41, 655.51, 655.61, 655.71, 655.81,
     655.91

-    656.01, 656.11, 656.21, 656.31, 656.41, 656.51, 656.61, 656.71, 656.81,
     656.91

-    657.01

-    658.01, 658.11, 658.21, 658.31, 658.41, 658.81, 658.91

-    659.01, 659.11, 659.21, 659.31, 659.41, 659.51, 659.61, 659.71, 659.81,
     659.91

-    660.01, 660.11, 660.21, 660.31, 660.41, 660.51, 660.61, 660.71, 660.81,
     660.91

-    661.01, 661.11, 661.21, 661.31, 661.41, 661.91

-    662.01, 662.11, 662.21, 662.31

-    663.01, 663.11, 663.21, 663.31, 663.41, 663.51, 663.61, 663.81, 663.91

-    664 (and any or no trailing characters)

-    665.01, 665.11, 665.31, 665.41, 665.51, 665.61, 665.71, 665.81, 665.91,
     665.22, 665.72, 665.82, 665.92

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       11

<PAGE>

REPORT GUIDELINES

-    666.02, 666.12, 666.22, 666.32

-    667.02, 667.12

-    668.01, 668.11, 668.21, 668.81, 668.02, 668.12, 668.22, 668.82

-    669.01, 669.11, 669.21, 669.31, 669.41, 669.51, 669.61, 669.71 669.81,
     669.91, 669.02, 669.12, 669.22, 669.32, 669.42, 669.82, 669.92

-    670.02

-    671.01, 671.11, 671.21, 671.31, 671.42, 671.51, 671.81, 671.91, 671.02,
     671.12, 671.22, 671.52, 671.82, 671.92

-    672.02

-    673.01, 673.11, 673.21, 673.31, 673.81, 673.02, 673.12, 673.22, 673.32,
     673.82

-    674.01, 674.02 674.12, 674.22, 674.32, 674.42, 674.82, 674.92

-    675.01, 675.11, 675.21, 675.81, 675.91, 675.02, 675.12, 675.22, 675.82,
     675.92

-    676.01, 676.11, 676.21, 676.31, 676.41, 676.51, 676.61, 676.81, 676.91,
     676.02, 676.12, 676.22, 676.32, 676.42, 676.52, 676.62, 676.82, 676.92, 677
     (no other characters)

-    V27, V27.0, V27.1, V27.2, V27.3, V27.4, V27.5, V27.6, V27.7, V27.9

CPT-4 CODES

-    59400, 59409, 59410, 59412, 59414, 59430, 59510, 59514, 59515, 59525,
     59610, 59612, 59614, 59618, 59620, 59622, 59821

REVENUE CODES

-    720, 722, 724, 729

Additionally, for July 1, 2003 and later births, [reserved] maternity costs will
include the first two (2) months of newborn claims previously reported in the
AFDC/NJCPW/KidCare A, NJ FamilyCare B and C, and DYFS rate cell groupings. Age
should be determined by counting the child's age as of their last birthday, on
the first of the month in which the claim is incurred. Newborn claims for births
prior to July 1, 2003, should not be reported in Part R, but rather in Parts
such as A, B, or C.

Except for non-State Plan services (Part T),[Reserved] all revenues and expenses
must be reported on Report #2 using the accrual basis of accounting for the
[Reserved] requested period of the calendar year. Cumulative YTD revenues and
expenses are also required in this report. Each report is based on statewide
reporting except for the rate cell grouping AFDC/NJCPW/NJ KidCare A, which is to
be reported for each of the Northern, Central and Southern regions (Report #2
Parts A-C). The supplemental exhibits for AFDC Youth (Report #2 Parts U-W),
[Reserved] ABD (including AIDS) without [Reserved] Medicare (Report #2 Parts
X-Z), NJ KidCare B & C Youth (Report #2 Parts AA-AC), and NJ FamilyCare Parents
0-133% FPL 19-44 Female (Report #2 Parts AD-AF) -are also to be reported for
each of the Northern, Central, and Southern regions. -Each report must provide
total dollar amounts and PMPM amounts. Cells shaded are not to be filled out.
Report #2 Part S must reconcile to reports #6A and #6B.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       12

<PAGE>

REPORT GUIDELINES

The non-State Plan services (see: Supplemental Benefits, Article 4.1.7 of the
contract) report (Part T) has been created to provide information on
benefits/services reported within Report #2, Parts A-S in excess of the State
Plan. All medical and administrative expenses must be reported using actual
incurred and paid data for the current period of the calendar year. Unit cost
expenses for the non-State Plan services must also be provided. Examples of
non-State Plan approved medical expenses include additional vision care
benefits [Reserved] or over-the-counter drugs.

MEMBER MONTHS

A member month is equivalent to the one member for whom the HMO has recognized
capitation-based revenue for the entire month. Where the revenue is recognized
for only part of a month for a given individual, a partial, pro-rated member
month should be counted. A partial member month is pro-rated based on the actual
number of days in a particular month. The member months should be reported on a
cumulative basis by the rate cell grouping as shown on the report. Enter the
number of member months for the current period in the second column of the
Member Months line and the member months for the year-to-date in the fourth
column.

The Maternity Income Statement, Part R, should list number of deliveries, rather
than member months.

REVENUE

Line 1--Capitated Premiums--Revenue recognized on a prepaid basis for enrollees
for provision of a specified range of health services over a defined period of
time, normally one month. If advance payments are made to the HMO, for more than
one reporting period, the portion of the payment that has not been earned must
be treated as a liability (Unearned Premiums).

Line 2--Supplemental Premiums--Revenue paid to the HMO in addition to capitated
premiums for certain services provided. See Lines 2a through 2d below.

Line 2a--Maternity(1)--Supplemental payment per pregnancy outcome. This line
item should only be included in Part R (Maternity) and Part S (All Rate Cell
Groupings).

---------------------------
(1)  Because costs for pregnancy outcomes were not included in the capitation
     rates, a separate maternity premium is paid for pregnancy outcomes (each
     live birth, still birth, or miscarriage occurring after the twelfth (12th)
     week of gestation). This supplemental payment reimburses HMOs for its
     inpatient hospital, antepartum, and postpartum costs incurred in connection
     with delivery. Costs for care of the baby are [Reserved] included only for
     the first two months of newborn claims in the AFDC/NJCPW/KidCareA, NJ
     FamilyCare B and C, and DYFS rate cell groupings.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       13

<PAGE>

REPORT GUIDELINES

Line 2b--Reimbursable HIV/AIDS Drugs and Blood Products--Supplemental payment
for HIV/AIDS Drugs (protease inhibitors and, effective 7/1/01 other
anti-retrovirals) and clotting factor VIII and IX blood products.

Line 2c--Early and Periodic Screening, Diagnosis and Treatment (EPSDT) Incentive
Payment--Supplemental payment for EPSDT services.

Line 2d--Other--Any other revenue paid by DMAHS to the HMO in addition to
capitation for covered services that is not included in Lines 2a, 2b or 2c
above.

Line 3--Total Premiums--All Medicaid premiums paid to the HMO reported on lines
1, 2a, 2b, 2c, and 2d.

Line 4--Interest--Interest earned from all sources including escrow and reserve
accounts.

Line 5--C.O.B.--Income from Coordination of Benefits (COB) and Subrogation.

Line 6--Reinsurance Recoveries--Income from the settlement of claims resulting
from a policy with a private reinsurance carrier.

Line 7--Other Revenue--Revenue from sources not covered in the previous revenue
accounts.

Line 8--Total Revenue--Total revenue (the sum of lines 3 through 7).

EXPENSES

MEDICAL AND HOSPITAL

Line 9--Inpatient Hospital--Inpatient hospital costs including ancillary
services for enrollees while confined to an acute care hospital, including OOA
hospitalization.

Line 10--Primary Care--Includes all costs associated with medical services
provided in any setting by a primary care provider, including physicians and
other practitioners.

Line 11--Physician Specialty Services--All costs associated with medical
services provided by a physician other than a PCP.

Line 12--Outpatient Hospital--Includes the facility component of the outpatient
visit. The visit can be free standing or a hospital outpatient department. The
professional component should be billed separately and reported in the
appropriate service category line item, e.g. physician specialty services.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       14

<PAGE>

REPORT GUIDELINES

Line 13--Other Professional Services--Compensation paid by the HMO to
non-physician providers engaged in the delivery of medical services.

Line 14--Emergency Room--Includes the facility component of the emergency room
visit as well as OOA emergency room costs. Professional components that are
billed separately should be reported in the appropriate service category line
item.

Line 15--DME/Medical Supplies--Includes the cost of DME and supplies.

Line 16--Prosthetics and Orthotics--Includes the cost of Prosthetics and
Orthotics.

Line 17--Dental--Expenses for all covered dental services provided. [Reserved]

Line 18--Pharmacy--Expenses for legend and non-legend drugs provided that
includes both ingredient costs and dispensing fees. Exclude expenses reported as
HIV/AIDS Reimbursable Drugs on line 19.

Line 19--Reimbursable HIV/AIDS Drugs-- HIV/AIDS Drugs (protease inhibitors and
other anti-retrovirals) and clotting factor VIII and IX blood products. This
expense should equal the amount on Revenue Line 2b.

Line 20--Home Health Care--Expenses for home health services provided including
nurses, aides, hospice costs, and private duty nursing.

Line 21--Transportation--Expenses for all ambulance, MICUs, and invalid coach
services.

Line 22--Lab & X-ray--The cost of all laboratory and radiology (diagnostic and
therapeutic) services for which the HMO is separatelY billed.

Line 23--Vision Care including Eyeglasses--The cost of routine exams (by
non-physicians) and dispensing glasses to correct eye defects. This category
includes the cost of eyeglasses but excludes ophthalmologist costs related to
the treatment of disease or injury to the eye; the latter should be included in
physician specialty or Other Professional Services.

Line 24--Mental Health/Substance Abuse--Include the cost of all mental health
and substance abuse services including inpatient, physician services, outpatient
hospital, other professional services, and other services associated with mental
health or substance abuse treatment.

Line 25--Reinsurance Expenses--Expenses for reinsurance or "stop-loss" insurance
made to a contracted reinsurer.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       15

<PAGE>

REPORT GUIDELINES

Line 26--Incentive Pool Adjustment--A reduction to medical expenses for
adjusting the full medical expenses reported. For example, physician withholds
retained by the HMO should be included here.

Line 27--Other Medical--Medical Expenses not included in lines 9 through
[Reserved] 26.

Line 28--Total Medical and Hospital--The total of all medical and hospital
expenses. (sum of lines 9 through 27)

ADMINISTRATION

Administrative expenses should only be reported on the form for all rate cell
groupings (Part S) in order to eliminate the need to allocate these costs across
the rate cell groupings. Administration must also be reported on Part T if the
HMO provides any non-State Plan services. Costs associated with the overall
management and operation of the HMO including the following components:

Line 29--Compensation--All expenses for administrative services including
compensation and fringe benefits for personnel time devoted to or in direct
support of administration. Include expenses for management contracts. Do not
include marketing expenses here.

Line 30--Interest expense--Interest paid during the period on loans.

Line 31--Occupancy, Depreciation, and Amortization.

Line 32--Education and Outreach--Expenses incurred for education and outreach
activities for enrollees.

Line 33--Marketing--Expenses directly related to marketing activities including
advertising, printing, marketing salaries and fringe benefits, commissions,
broker fees, travel, occupancy, and other expenses allocated to the marketing
activity.

Line 34--Other--Costs which are not appropriately assigned to the health plan
administration categories defined above. Any sanctions and/or penalties incurred
by the health plan should be reported on this line, and separately identified in
Appendix B, Notes to Financial Reports.

Line 35--Total Administration--The total of costs of administration (the sum of
lines 29 through 34).

Line 36--Total Expenses--The sum of Total Medical and Hospital Expenses (line
28) and Total Administration (line 35).

Line 37--Operation Income (Loss)--Excess or deficiency of Total Revenue (line 8)
minus Total Expenses (line 36).

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       16

<PAGE>

REPORT GUIDELINES

Line 38--Extraordinary Item--A non-recurring gain or loss.

Line 39--Provision for Taxes--All income taxes for the period.

Line 40--Adjustment for prior period IBNR estimates--Should include a
reconciliation and explanation of prior period IBNR estimates. A centra-expense
would be reported if IBNR estimates exceeded actual expenses.

In the explanation below, the term "IBNR" (Incurred But Not Reported) is used to
represent all claims incurred but unpaid. In statutory accounting for HMOs the
incurred claims for a period are calculated as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
                                         EXAMPLE FOR CALENDAR YEAR    EXAMPLE USING
                                           2001 REPORTING PERIOD         DOLLARS
-----------------------------------------------------------------------------------
<S>                                      <C>                          <C>
  Claims paid in the period                Claims paid in 2001          $48,000,000
-----------------------------------------------------------------------------------
+ IBNR at the end of the period          + IBNR as of 12/31/2001      + $11,000,000
-----------------------------------------------------------------------------------
- IBNR at the end of the prior period    - IBNR as of 12/31/2000      - $ 9,000,000
-----------------------------------------------------------------------------------
  Claims incurred in the period            Claims incurred in 2001      $50,000,000
-----------------------------------------------------------------------------------
</TABLE>

The above calculation can be split into two components - the first for services
rendered in the period and the second for services rendered prior to the period,
as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
                           INCURRED IN    INCURRED IN 2000 &
                              2001              PRIOR              TOTAL
----------------------------------------------------------------------------
<S>                        <C>            <C>                   <C>
  Claims Paid in 2001      $39,500,000      $      8,500,000    $ 48,000,000
----------------------------------------------------------------------------
+ IBNR as of 12/31/2001    $10,900,000      $        100,000    $ 11,000,000
----------------------------------------------------------------------------
- IBNR as of 12/31/2000           None      $      9,000,000    $  9,000,000
----------------------------------------------------------------------------
  Recognized in 2001       $50,400,000    - $        400,000    $ 50,000,000
----------------------------------------------------------------------------
</TABLE>

In the example, claims incurred in 2001 are $50.4 million. This is the amount
that would be shown on Report #2S line 28; the Statewide Total Hospital and
Medical Expense for the 12 months ended 12/31/2001. The negative $0.4 million
would be reported on line 40 Adjustment for prior period IBNR estimates. This is
the effect of the estimation error for the prior year-end IBNR. Such estimation
errors are to be expected, since the actual amount of unpaid claims will never
exactly match the estimate made earlier.

The sum of the amounts on lines 28 and 40 should be consistent with the
statutory accounting amount of claims recognized as incurred in the period, $50
million in the example above. Information about any non-claim adjustments for
prior periods which are grouped into Line 40, but not in Report #1, should be
explained in a note to the reports.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       17

<PAGE>

REPORT GUIDELINES

Line 41--Net Income (Loss)--Operation Income (Loss) (line 37) minus Lines 38,
39, and 40.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       18

<PAGE>

REPORT GUIDELINES

REPORT #3: MATERNITY OUTCOME COUNTS

This report provides counts of second and third trimester maternity outcomes(2)
for the current period and year-to-date.

The HMO will provide counts for the following:

-    Live births

     -    Cesarean Section deliveries

     -    Vaginal deliveries

-    Non-live births

These counts will be reported for the following rate cell groupings and
geographic areas:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
  RATE CELL GROUPING                                              GEOGRAPHIC AREA
----------------------------------------------------------------------------------------
<S>                                                       <C>
AFDC/NJCPW/NJ KidCare A                                   [Reserved] Northern [Reserved]
                                                                     [Reserved]
----------------------------------------------------------------------------------------
AFDC/NJCPW/NJ KidCare A                                         [Reserved] Central
[Reserved]
----------------------------------------------------------------------------------------
AFDC/NJCPW/NJ KidCare A                                               Southern
----------------------------------------------------------------------------------------
All Other                                                             Statewide
----------------------------------------------------------------------------------------
</TABLE>

Multiple births should be counted as one maternity outcome.

-------------------------
(2)  Still or live births after the twelfth week of gestation, excluding
     elective abortions.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       19

<PAGE>

APPENDIX A - IBNR METHODOLOGY

IBNR METHODOLOGY

IBNRs are difficult to estimate because the quantity of service and exact
service cost are not always known until claims are actually received. Since
medical claims are the major expenses incurred by the HMOs, it is extremely
important to accurately identify costs for outstanding unbilled services. To
accomplish this, a reliable claims system and a logical IBNR methodology are
required.

Selection of the most appropriate system for estimating IBNR claims expense
requires judgment based on an HMO's own circumstances, characteristics, and the
availability and reliability of various data sources. A primary estimation
methodology along with supplementary analysis usually produces the most accurate
IBNR estimates. Other common elements needed for successful IBNR systems are:

-    An IBNR system must function as part of the overall financial management
     and claims system. These systems combine to collect, analyze, and share
     claims data. They require effective referral, prior authorization,
     utilization review, and discharge planning functions. Also, the HMO must
     have a full accrual accounting system. Full accrual accounting systems help
     properly identify and record the expense, together with the related
     liability, for all unpaid and unbilled medical services provided to HMO
     members.

-    An effective IBNR system requires the development of reliable lag tables
     that identify the length of time between provision of service, receipt of
     claims, and processing and payment of claims by major provider type
     (inpatient hospital, physician, pharmacy and other medical). Reliable
     claims/cash disbursement systems generally produce most of the necessary
     data. Lag tables, and the projections developed from them, are most useful
     when there is sufficient, accurate claims history, which show stable claims
     lag patterns. Otherwise, the tables will need modification, on a pro forma
     basis, to reflect corrections for known errors or skewed payment patterns.
     The data included in the lag schedules should include all information
     received to date in order to take advantage of all known amounts (i.e.,
     RBUCs and paid claims).

-    Accurate, complete, and timely claims data should be monitored, collected,
     compiled, and evaluated as early as possible. Whenever practical, claims
     data collection and analysis should begin BEFORE the service is provided
     (i.e., prior authorization records). This prospective claims data, together
     with claims data collected as the services are provided, should be used to
     identify claims liabilities. Claims data should also be segregated to
     permit analysis by major rate code, region/county, and category of service.

Subcontractor agreements should clearly state each party's responsibility for
claims/encounter submission, prior notification, authorization, and
reimbursement rates. These agreements should be in writing, clearly understood
and followed consistently by each party.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       20

<PAGE>

APPENDIX A - IBNR METHODOLOGY

The individual IBNR amounts, once established, should be monitored for adequacy
and adjusted as needed. If IBNR estimates are subsequently found to be
significantly inaccurate, analysis should be performed to determine the reasons
for the inaccuracy. Such an analysis should be used to refine an HMO's IBNR
methodology if applicable.

There are several different methods that can be used to determine the amount of
IBNRs. The HMO should employ the one that best meets its needs and accurately
estimates its IBNRs. IF AN HMO IS UTILIZING A METHOD DIFFERENT FROM THE METHODS
INCLUDED HEREIN, A DETAILED DESCRIPTION OF THE PROCESS MUST BE SUBMITTED TO THE
STATE FOR APPROVAL. This process may be described in the "Notes to Financial
Reports" section. The IBNR methodology used by the HMO must be evaluated by the
HMO's independent accountant or actuary for reasonableness.

CASE BASIS METHOD

Accruals are based on estimates of INDIVIDUAL claims and/or episodes. This
method is generally used for those types of claims where the amount of the cost
will be large, requiring prior authorization. The final estimated cost could be
made after the services have been authorized by the HMO. For example, if an HMO
knows how many hospital days were authorized for a certain time period, and can
incorporate the contracted reimbursement arrangement(s) with the hospital(s), a
reasonable estimate should be attainable. This is also the most common and can
be the most accurate method for small and medium sized organizations.

AVERAGE COST METHOD

As the name suggests, average costs of services are used to estimate total
expense. The expenses estimated using average costs. Two primary average cost
methods are discussed below. It is important to note that each method may be
used by an HMO to estimate different categories of IBNRs (i.e., hospitalization
vs. other medical). Also, either method may be utilized in conjunction with
other IBNR methodologies discussed in this document.

PMPM AVERAGES

Under this method the average costs are based on the population of each rate
code (or group of homogenous rate codes) over a given time period, in this case
one month. The average cost may cover one or more service categories and is
multiplied by the number of members in the specific population to estimate the
total expense of the service category. Any claims paid are subtracted from the
expense estimate that results in the IBNR liability estimate for that service
category.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       21

<PAGE>

APPENDIX A - IBNR METHODOLOGY

PER DIEM OR PER SERVICE AVERAGES

Averages for this method are of specific occurrences known by the HMO at the
time of the estimation. Therefore, it is first necessary to know how many
hospital days, procedures or visits were authorized as of the date for which the
IBNR is being estimated. Again, once the total expense has been estimated, the
amount of related paid claims should be subtracted to get the IBNR liability.
This method is primarily used for hospitalization IBNRs as HMOs know the amount
of hospital days authorized at any given time.

LAG TABLES

Lag tables are used to track historical payment patterns. When a sufficient
history exists and a regular claims submission pattern has been established,
this methodology can be employed. All HMOs should use lag information as a
validation test for accruals calculated using other methods, if it is not the
primary methodology employed. Typically, the information on the schedules is
organized according to the month claims are incurred on the horizontal axis and
the month claims are paid by the HMO on the vertical axis.

Once a number of months becomes "fully developed" (i.e. claims submissions are
thought to be complete for the month of service), the information can be
utilized to effectively estimate IBNRs. Computing the average period over which
claims are submitted historically and applying this information to months that
are not yet fully developed does this.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       22

<PAGE>

APPENDIX B - REPORT FORMS

QUARTERLY REPORT FORMS

This section includes copies of the forms to be completed electronically by the
HMO for each quarter.

-    Quarterly Certification Statement

-    Report #1: Lag Report

     -    Part A: Lag Report for Inpatient Hospital Payments

     -    Part B: Lag Report for Physician Payments

     -    Part C: Lag Report for Pharmacy Payments

     -    Part D: Lag Report for Other Medical Payments

-    Report #2: Income Statement by Rate Cell Grouping

     -    Part A: AFDC/NJCPW/NJ KidCare A - Northern Region

     -    Part B: AFDC/NJCPW/NJ KidCare A - Central Region

     -    Part C: AFDC/NJCPW/NJ KidCare A - Southern Region

     -    Part D: DYFS - Statewide

     -    Part E: ABD with Medicare - DDD - Statewide

     -    Part F: ABD with Medicare - Non-DDD - Statewide

     -    Part G: Non-ABD - DDD - Statewide

     -    Part H: ABD without Medicare - DDD - Statewide

     -    Part I: ABD without Medicare - Non-DDD - Statewide

     -    Part J: NJ KidCare B&C - Statewide

     -    Part K: NJ KidCare D - Statewide

     -    Part L: [Reserved] (Reserved)

     -    Part M: NJ FamilyCare Parents 0-133% FPL - Statewide

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       23

<PAGE>

APPENDIX B - REPORT FORMS

     -    Part N: [Reserved] (Reserved)

     -    Part O: [Reserved] (Reserved)

     -    Part P: ABD with Medicare - AIDS - Statewide

     -    Part Q: Non-ABD - AIDS - Statewide

     -    Part R: Maternity - Statewide

     -    Part S: All Rate Cell Groupings - Statewide

     -    Part T: Non-State Plan Services

     -    Part U: AFDC - Youth - Northern Region

     -    Part V: AFDC - Youth - Central Region

     -    Part W: AFDC - Youth - Southern Region

     -    Part X: ABD (Including AIDS) w/o Medicare - Northern Region

     -    Part Y: ABD (Including AIDS) w/o Medicare - Central Region

     -    Part Z: ABD (Including AIDS) w/o Medicare - Southern Region

     -    Part AA: NJ KidCare B&C - Youth - Northern Region

     -    Part AB: NJ KidCare B&C - Youth - Central Region

     -    Part AC: NJ KidCare B&C - Youth - Southern Region

     -    Part AD: NJ FamilyCare Parents 0-133% FPL -19-44 Female - Northern
          Region

     -    Part AE: NJ FamilyCare Parents 0-133% FPL -19-44 Female - Central
          Region

     -    Part AF: NJ FamilyCare Parents 0-133% FPL - 19-44 Female - Southern
          Region

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       24

<PAGE>

APPENDIX B - REPORT FORMS

Supplemental exhibits T-AF are not used in calculating Part S.

Parts U through AF cover an annual period, and[Reserved] are to be completed
electronically by the HMO once a year with the August 15 submission (quarter
ending June 30). These parts are considered supplemental exhibits[Reserved]
and are not to be used in calculating Parts S. [Reserved] All expenses are to be
reported for claims incurred and paid during the July 1 through June 30 current
State Fiscal Year.

-    Report #3: Maternity Outcome Counts

-    Notes to Financial Reports

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       25

<PAGE>

APPENDIX B - REPORT FORMS

                        QUARTERLY CERTIFICATION STATEMENT

                                       OF
                       __________________________________
                                   (HMO Name)

                                     TO THE

                     NEW JERSEY DEPARTMENT OF HUMAN SERVICES
               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                              FOR THE PERIOD ENDED
                         ______________________________
                                (Month/Day/Year)

NAME OF PREPARER _________________________________________

TITLE            _________________________________________

PHONE NUMBER     _________________________________________

            PLEASE CHECK WHICH REPORTS ARE INCLUDED WITH THIS PACKET:

            [ ] Report #1        [ ] Report #2         [ ] Report #3

I hereby attest that the information submitted in the reports herein is current,
complete and accurate to the best of my knowledge. I understand that whoever
knowingly and willfully makes or causes to be made a false statement or
representation on the reports may be prosecuted under applicable state laws. In
addition, knowingly and willfully failing to fully and accurately disclose the
information requested may result in denial of a request to participate, or where
the entity already participates, a termination of an HMO's agreement or contract
with the State.
_________________      _____________________________      ______________________
Date                   Chief Financial Officer            Signature

HMO Financial Guide For Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       26
<PAGE>

APPENDIX B - REPORT FORMS

                           NOTES TO FINANCIAL REPORTS

Any notes or further explanations of any items contained in any of the reports
or in the reporting of financial disclosures are to be noted here. Appropriate
references and attachments are to be used as necessary. Space is provided below
or you may use a separate page as necessary.

HMO Financial Guide for Reporting                            State of New Jersey
Medicaid Rate Cell Grouping Costs

                                       27
<PAGE>

B.7.4 AGREED UPON PROCEDURES - FOR RATE CELL COST REPORTS

<PAGE>

                             AGREED UPON PROCEDURES

                           For Rate Cell Cost Reports

The following agreed upon procedures between the plan and its independent public
accountant are required to meet audit requirements of Rate Cell Grouping Cost
Reports as further explained in Article 7.27.1B of the contract.

Procedures contained herein are established as minimum requirements. Additional
procedures may be added and performed as agreed to by the contractor and the
accountant performing them without DMAHS approval. However, changes, deletions
or variations to the procedures specified herein will require prior approval of
DMAHS.

<PAGE>

Report #1 - Claim Lag Triangles

Step 1: Validate the mathematical accuracy of Report #1.

Step 2: Validate the accuracy of the amounts paid for each month.

     a.   Trace and agree each monthly amount to the supporting documentation
          used by the contractor to complete the report.

     b.   Trace and agree each monthly amount to the monthly check register or
          claims system monthly summary.

Step 3: Validate the accuracy of the amounts paid in the individual cells.

     a.   For the claims paid and incurred on Report #1, trace and agree 4 cells
          to the supporting documentation used by the contractor to complete the
          report.

Step 4: Validate the accuracy of the amounts that comprise the individual cells.

     a.   Select 8 claims from each lag triangle.

     b.   Verify the claim is reported in the correct month of service by
          tracing and agreeing to the date of service on the claim.

     c.   Verify the claim is reported in the correct month of payment by
          tracing and agreeing to bank statements.

     d.   Verify the claim is reported in the appropriate lag schedule by
          tracing and agreeing type of service to the hard/electronic copy of
          the claim.

     e.   Verify the claim is related to a New Jersey Medicaid or NJ Family Care
          beneficiary by tracing and agreeing to the member eligibility system.

Step 5: Validate the accuracy of the subcapitation payments reported

     a.   Select 2 cells from each of the applicable lag triangles

     b.   Trace and agree selected cells to the supporting documentation used by
          the contractor to complete the report.

Step 6: Validate the accuracy of the amounts that comprise subcapitation
payments

     a.   Verify that the transaction is recorded in the correct month of
          service by tracing and agreeing to the invoice or check request that
          substantiates the check.

<PAGE>

     b.   Verify that the check has cleared the bank by tracing and agreeing to
          the bank statement.

     c.   Verify the transaction is accurately reported in Report #1 by tracing
          and agreeing to the contract provider type and covered services.

Step 7: Validate the accuracy of amounts reported as Pharmacy Rebates.

     a.   Select 2 cells from each of the applicable lag triangles.

     b.   Trace and agree selected cells to the supporting documentation used by
          the contractor to complete the report.

     c.   Trace and agree each monthly amount to the monthly check register or
          claims system monthly summary.

Report #2 - Income Statement by Rate Cell Groupings

Step 1: Verify that amounts reported as Medicaid/NJ Family Care expense are
consistent with amounts reported in statutory filings

     a.   Trace and agree total amounts reported as Medicaid/NJ Family Care
          expense to statutory filings as of December 31.

Step 2: Verify member months reported is accurate

     a.   Confirm member months with the State of New Jersey

Step 3: Verify the accuracy of dollar amounts reported as capitated premiums

     a.   Select 5 income statement categories, by Rate Cell Grouping (IS).

     b.   Trace and agree selected cells to the supporting documentation used by
          the contractor to complete the IS.

     c.   Select 4 months of capitated premiums and trace and agree amounts to
          remittance advices received from the DMAHS.

Step 4: Verify the accuracy of dollar amounts reported as HIV/AIDS Reimbursable
Drugs Revenue.

     a.   Select 5 income statement categories by Rate Cell Grouping (IS).

     b.   Trace and agree selected cells to the supporting documentation used by
          the contractor to complete the IS.

<PAGE>

     c.   Select 4 months of capitated premiums and trace and agree amounts to
          remittance advices received from the DMAHS.

Step 5: Verify the accuracy of dollar amounts reported as EPSDT Incentive
Payment Revenue.

     a.   Select 5 income statement categories by Rate Cell Grouping (IS).

     b.   Trace and agree selected cells to the supporting documentation used by
          the contractor to complete the IS.

     c.   Select 4 months of capitated premiums and trace and agree amounts to
          remittance advices received from the DMAHS

Step 6: Verify the accuracy of dollar amounts reported as Interest Revenue.

         a.   Select 5 income statement categories by Rate Cell Grouping (IS).

         b.   Trace and agree selected cells to the supporting documentation
              used by the contractor to complete the IS.

Step 7: Verify the accuracy of dollar amounts reported as COB.

         a.   Select 5 income statement categories by Rate Cell Grouping (IS).

         b.   Trace and agree selected cells to the supporting documentation
              used by the contractor to complete the IS.

Step 8: Verify the accuracy of dollar amounts reported as Reinsurance
Recoveries.

         a.   Select 5 income statement categories by Rate Cell Grouping (IS).

         b.   Trace and agree selected cells to the supporting documentation
              used by the contractor to complete the IS.

Step 9: Verify the accuracy of amounts reported as Medical and Hospital
Expenses.

         a.   Select at least one type of Medical and Hospital Expense from each
              of the income statement categories by Rate Cell Groupings.

         b.   Trace and agree selected cells to the supporting documentation
              used by the contractor to complete the IS.

         c.   Select one claim from each of the rate cell groupings selected in
              step 9a.

<PAGE>

         d.   Trace and agree amount reported in each cell to actual claims paid
              and an allocation of expenses incurred but not paid.

         e.   For the claim selected in step 9c, recalculate the allocation of
              incurred but not reported to each income statement to determine if
              they are in same proportional amounts as claims paid.

         f.   For the claim selected in step c, trace and agree the
              classification of the medical expense to the classification
              prescribed by DMAHS in the "HMO Guide for Reporting Medicaid/NJ
              Family Care Rate Cell Grouping Costs." Determine the claims
              selected from step 9a are included in the appropriate IS by Rate
              Cell Grouping and that all Medical and Hospital Expenses are
              classified appropriately in lines 9-27.

Step 10: Verify the accuracy of the amounts reported in Part S - Income.

         a.   Trace and agree total amounts reported in Part S to amounts
              reported in the individual income statements by Rate Cell
              Groupings.

Report #3 - Maternity Outcomes

Step 1: Verify the accuracy of amounts reported in Report 3.

         a.   Trace and agree amounts reported as maternity outcomes to the
              supporting documentation used by the contractor to complete the
              report.

         b.   Select 5 outcomes from step a.

         c.   Verify the outcome is reported in the correct region by tracing
              and agreeing back to supporting documentation.

         d.   Verify the outcome is reported in the correct eligibility category
              by tracing and agreeing back to supporting documentation.

         e.   Verify the outcome is reported in the correct category (c-section,
              vaginal, or non-live birth) by tracing and agreeing back to
              supporting documentation.

         f.   Verify the outcome is not an elected abortion by tracing and
              agreeing back to supporting documentation.

         g.   Verify the outcome was reported for outcomes after 12 weeks of
              gestation by tracing and agreeing back to supporting
              documentation.

<PAGE>

                                    SECTION C
                                CAPITATION RATES

<PAGE>

                                    SECTION D
                           CONTRACTOR'S DOCUMENTATION

<PAGE>

D.1      CONTRACTOR'S QAPI/UTILIZATION MANAGEMENT PLANS
         (TO BE INSERTED)

<PAGE>

D.2      CONTRACTOR'S GRIEVANCE PROCESS
         (TO BE INSERTED)

<PAGE>

D.3      CONTRACTOR'S PROVIDER NETWORK
         (TO BE INSERTED)

<PAGE>

D.4      CONTRACTOR'S LIST OF SUBCONTRACTORS
         (TO BE INSERTED)

<PAGE>

D.5      CONTRACTOR'S SUPPLEMENTAL BENEFITS
         (TO BE INSERTED)

<PAGE>

D.6      CONTRACTOR'S REPRESENTATIVE
         (TO BE INSERTED)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00056-of-00352.parquet"}]]