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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the last reported sale price of the common stock on the Nasdaq National Market on June 30, 2003, was $404,751,936.

As of February 10, 2004, the registrant had 20,166,981 shares of common stock outstanding.

Portions of the Proxy Statement for the registrant’s 2004 annual meeting of stockholders are incorporated by reference in Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14.

“CENTENE,” “NURSEWISE” and “START SMART FOR YOUR BABY” are our registered service marks, and “CONNECTIONS” is our trademark. This filing also contains trademarks, service marks and trade names of other companies.

We are a multi-line managed care organization that provides Medicaid and Medicaid-related programs to organizations and individuals through government subsidized programs, including Medicaid, Supplemental Security Income (SSI) and the State Children’s Health Insurance Program (SCHIP). In addition, we provide specialty services including behavioral health, nurse triage and pharmacy compliance to our own and other healthcare organizations. We have health plans in Wisconsin, Texas, Indiana, New Jersey and Ohio and provide specialty services in Texas, California, Arizona, Colorado, Wisconsin and Indiana. We believe our local approach to managing our subsidiaries, including provider and member services, enables us to provide accessible, high quality, culturally-sensitive healthcare services to our communities. Our disease management, educational and other initiatives are designed to help members best utilize the healthcare system to ensure they receive appropriate, medically necessary services and effective management of routine, severe and chronic health problems. We combine our decentralized local approach for care with a centralized infrastructure of support functions such as finance, information systems and claims processing.

We were organized in Wisconsin in 1993 and reincorporated in Delaware in 2001. We initially were formed to serve as a holding company for a Medicaid managed care line of business that has been operating in Wisconsin since 1984. Our corporate office is located at 7711 Carondelet Avenue, Suite 800, St. Louis, Missouri 63105, and our telephone number is (314) 725-4477.

We maintain a website with the address www.centene.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this filing. We make available, free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

Established in 1965, Medicaid is the largest publicly funded program in the United States, providing health insurance to low-income families and individuals with disabilities. Authorized by Title IXX of the Social Security Act, Medicaid is an entitlement program funded jointly by the federal and state governments and administered by the states. Each state establishes its own eligibility standards, benefit packages, payment rates and program administration within federal standards. As a result, there are 56 Medicaid programs — one for each state, each territory and the District of Columbia. The Congressional Budget Office (CBO) estimates the total Medicaid market was approximately $270 billion in 2003 and the federal Centers for Medicare and Medicaid Services (CMS) estimate the market will grow to over $400 billion by fiscal year 2007. Medicaid eligibility is based on a combination of income and asset requirements subject to federal guidelines, often determined by an income level relative to the federal poverty level. The number of persons covered by Medicaid increased from 23 million in 1989 to 51 million in 2003. Historically, children have represented the largest eligibility group.

SSI covers low-income aged, blind and disabled persons. SSI beneficiaries represent a growing portion of all Medicaid recipients. In addition, SSI recipients typically utilize more services because of their more critical health issues.

The Balanced Budget Act of 1997 created SCHIP to help states expand coverage primarily to children whose families earn too much to qualify for Medicaid, yet not enough to afford private health insurance. SCHIP is the single largest expansion of health insurance coverage for children since the enactment of Medicaid and some states are expanding their SCHIP coverage to include adults.

Costs related to the largest eligibility group, children, are primarily composed of pediatrics, OB/ GYN and family care. These costs tend to be more predictable than other healthcare issues which predominantly affect the adult population. Additionally, behavioral health issues represent a growing component of total Medicaid expenditures.

While Medicaid programs have directed funds to many individuals who could not afford or otherwise maintain health insurance coverage, they did not initially address the inefficient and costly manner in which the Medicaid population tends to access healthcare. Medicaid recipients typically have not sought preventive care or routine treatment for chronic conditions, such as asthma and diabetes. Rather, they have sought healthcare in hospital emergency rooms, which tend to be more expensive. As a result, many states have found that the costs of providing Medicaid benefits have increased while the medical outcomes for the recipients remained unsatisfactory.

Since the early 1980s, increasing healthcare costs, combined with significant growth in the number of Medicaid recipients, have led many states to establish Medicaid managed care initiatives. In recent years, a growing number of states, including each of the five states in which we operate, have mandated that their Medicaid recipients enroll in managed care plans. Currently, 37 states have mandated managed care for some or all of their Medicaid recipients and other states are considering moving to a mandated managed care approach.

In addition, several states have initiated specialized programs that focus on specific, chronic diseases. Often, chronic diseases like diabetes and asthma can be treated more successfully and efficiently when a comprehensive treatment plan is properly executed. Such a plan includes not only timely and appropriate medical care, but requires that the patient maintain an appropriate diet and exercise regimen, take medicines as prescribed, keep appointments with doctors, and monitor their health status.

Historically, commercial managed care organizations contracted with states to provide healthcare benefits to Medicaid enrollees. Many of these organizations encountered difficulties in adapting their commercial approaches and infrastructures to address the Medicaid market in a cost-effective manner. Some commercial plans have chosen to exit all or a portion of their Medicaid markets. As a result, a significant market opportunity exists for managed care organizations with operations and programs focused on the distinct socio-economic, cultural and healthcare needs of the Medicaid, including SSI, and SCHIP populations. We believe our approach and strategy enable us to be a growing participant in this market.

Our approach to our multi-line managed care organization is based on the following key attributes:


	•	Multi-Business Lines. We have provided benefits to Medicaid recipients for over 20 years. In the last few years, we have begun to broaden our service offerings to address areas that we believe have been traditionally underserved by Medicaid managed care organizations. In 2003 we acquired Group Practice Affiliates, LLC (GPA), a behavioral health services company, and purchased assets of ScriptAssist, a medication compliance company. In 2002 we incorporated NurseWise, our 24-hour triage program. We believe these and other business lines will allow us to expand our services and diversify our sources of revenue.

	•	Medicaid Expertise. Over the last 20 years, we have developed a specialized Medicaid expertise that has helped us establish and maintain strong relationships with our constituent communities of members, providers and state governments. We have implemented programs developed to achieve savings for state governments and improve medical outcomes for members by reducing inappropriate emergency room use, inpatient days and high cost interventions, as well as by managing care of chronic illnesses. We do this primarily by providing nurse case managers who support our provider network in implementing disease management programs and by providing incentives for our provider network to provide preventive care on a regular basis. We recruit and train staff and providers who are attentive to the needs of our members and who are experienced in working with culturally diverse, low-income Medicaid populations. Our experience in working with


		state regulators helps us to implement and deliver our programs and services efficiently and affords us opportunities to provide input regarding Medicaid industry practices and policies in the states in which we operate.

	•	Localized Services, Support and Branding. We provide access to services through local networks of providers and staff that focus on the cultural norms of their individual communities. Our systems and procedures have been designed to address these community-specific challenges through outreach, education, transportation and other member support activities. For example, our community outreach programs employ several former Medicaid recipients to work with our members and their communities to promote health and self-improvement through employment and education. Our behavioral health company has school programs in Arizona which provide special education programs directly in local schools. We use locally recognized company names, and we tailor our materials and processes to meet the needs of the communities we serve. Our approach to community-based service results in local accountability and improved access.

	•	Collaborative Approach with States. Our approach is to work with state agencies on redefining benefits, eligibility requirements and provider fee schedules in order to maximize the number of uninsured individuals covered through Medicaid and SCHIP and expand the types of benefits offered. Our approach is to do this while maintaining adequate levels of provider compensation and protecting our margins.

	•	Physician-Driven Approach Within Our Health Plans. We have implemented a physician-driven approach in which our contracted physicians are actively engaged in developing and implementing our healthcare delivery policies and strategies. Our local boards of directors, which help shape the character and quality of our organization, have significant provider representation in each of our principal geographic markets. This approach is designed to eliminate unnecessary costs, improve service to our members and simplify the administrative burdens on our providers. It has enabled us to strengthen our provider networks through improved physician recruitment and retention that, in turn, have helped to increase our membership base.

	•	Efficiency of Business Model. We have designed our business model to allow us to readily add new members in our existing markets, expand into new regions in which we choose to operate and more fully develop our services. The combination of our decentralized local approach to operating our subsidiaries and our centralized finance, information systems and claims processing allows us to quickly and economically integrate new business opportunities in both Medicaid and specialty services.

	•	Specialized Systems and Technology. Through our specialized information systems we are able to strengthen our relationships with providers and states which helps us to grow our membership base. These systems also help us identify needs for new healthcare and specialty programs. Physicians can use our claims, utilization and membership data to manage their practices more efficiently, and they also benefit from our timely and accurate payments. State agencies can use data from our information systems to demonstrate that their Medicaid populations receive quality healthcare in an efficient manner. Our ScriptAssist program uses specialized software and psychology-based tools to predict medication compliance in an efficient and scalable manner.

Our objective is to become the leading multi-line Medicaid and Medicaid-related managed care organization. We intend to achieve this objective by implementing the following key components of our strategy:


	•	Diversify Our Business Lines. We seek to broaden our business lines into areas that complement our business to enable us to grow our revenue stream. In 2003 we acquired GPA, a behavioral health services company, and purchased assets of ScriptAssist, a medication compliance company. In addition to the services provided through these acquisitions and NurseWise, our 24-hour


		telephone triage service, we are considering services such as disease management and other Medicaid related, fee-for-service lines of business that would complement our core business. We believe we have opportunities to offer these services to other managed care organizations and states.

	•	Address Emerging State Needs. We are working to assist the states in which we operate in addressing the challenges they face in these difficult economic times. We seek to assist the states in balancing premium rates, benefit levels, member eligibility, policies and practices, and provider compensation. By helping states structure an appropriate level and range of Medicaid, SCHIP and specialty services, we seek to ensure that we are able to continue to provide those services on terms that protect our targeted gross margins, provide an acceptable return to our stockholders and grow our business.

	•	Increase Penetration of Existing State Markets. We intend to continue to increase our Medicaid membership in states in which we currently operate through alliances with key providers, outreach efforts, development and implementation of community-specific products and acquisitions. For example, in Indiana, where the state assigns members to physicians, we increased our membership in 2003 by recruiting additional physicians. We may also increase membership by acquiring Medicaid businesses, contracts and other related assets from our competitors in our existing markets. For example, we purchased Medicaid-related contracts from HMO Blue Texas in 2003 and purchased Texas Universities Health Plan’s SCHIP contracts in 2002.

	•	Develop and Acquire Additional State Markets. We continue to leverage our experience to identify and develop new markets by seeking both to acquire existing businesses and to build our own operations. We expect to focus our expansion on states where Medicaid recipients are mandated to enroll in managed care organizations. For example, we entered the Ohio market effective January 1, 2004 through our acquisition of Medicaid-related assets from Family Health Plan, Inc. (FHP). In 2002 we entered the New Jersey market through our acquisition of University Health Plans, Inc. (UHP).

	•	Leverage Our Established Infrastructure to Enhance Operating Efficiencies. We intend to continue to invest in our infrastructure to further drive efficiencies in our operations and to add functionality to improve the service we provide to our members and other organizations at a low cost. Our centralized functions enable us to add members and markets quickly and economically. For example, we began paying claims out of our centralized claims facility within the first week after we acquired the Medicaid related contract rights of HMO Blue Texas in August 2003. Additionally, functionality upgrades to our information systems improve the service we provide to our members and their providers.

We have five health plan subsidiaries offering healthcare services in Wisconsin, Texas, Indiana, New Jersey and Ohio. We have never been denied a contract renewal from a state in which we do business. The table below provides summary data for the markets we currently serve.

Our ability to establish and maintain a leadership position in the markets we serve results primarily from our demonstrated success in providing quality care while reducing and managing costs for, and our customer-focused approach to working with, state governments. Among the benefits we are able to provide to the states with which we contract are:

We recognize the importance of member-focused services in the delivery of quality managed care services. Our locally based staff assist members in accessing care, coordinating referrals to related health and social services and addressing member concerns and questions. While covered healthcare benefits vary from state to state, our health plans generally provide the following services:

We also provide the following education and outreach programs to inform and assist members in accessing quality, appropriate healthcare services in an efficient manner:


	•	CONNECTIONS is designed to create a link between the member and the provider and help identify potential challenges or risk elements to a member’s health, such as abuse risks, nutritional challenges and health education shortcomings. CONNECTIONS representatives, some of whom are former Medicaid enrollees, also contact new members by phone or mail to discuss managed care, the Medicaid program and our services. Our CONNECTIONS representatives make home visits, conduct educational programs and represent our health plans at community events such as health fairs.

	•	Start Smart For Your Baby is a prenatal and infant health program designed to increase the percentage of pregnant women receiving early prenatal care, reduce the incidence of low birth weight babies, identify high risk pregnancies, increase participation in the federal Women, Infant and Children program, and increase well-child visits. The program includes risk assessments, education through face-to-face meetings and materials, behavior modification plans, assistance in selecting a provider for the infant and scheduling newborn follow-up visits.


	•	EPSDT Case Management is a preventive care program designed to educate our members on the benefits of Early and Periodic Screening, Diagnosis and Treatment, or EPSDT, services. We have a systematic program of communicating, tracking, outreach, reporting and follow-through that promotes state EPSDT programs.

	•	Disease Management Programs are designed to help members understand their disease and treatment plan, and improve or maintain their quality of life. These programs address medical conditions that are common within the Medicaid population such as asthma, diabetes and prenatal care.

For each of our service areas, we establish a provider network consisting of primary and specialty care physicians, hospitals and ancillary providers. As of January 31, 2004, our health plans had the following numbers of physicians and hospitals:

The primary care physician is a critical component in care delivery, management of costs and the attraction and retention of new members. Primary care physicians include family and general practitioners, pediatricians, internal medicine physicians and OB/GYNs. Specialty care physicians provide medical care to members generally upon referral by the primary care physicians.

We work with physicians to help them operate efficiently by providing financial and utilization information, physician and patient educational programs and disease and medical management programs. In addition, we adhere to a prompt payment policy. Our programs are also designed to help the physicians coordinate care outside of their offices.

We believe our collaborative approach with physicians gives us a competitive advantage in entering new markets. Our physicians serve on local committees that assist us in implementing preventive care programs, managing costs and improving the overall quality of care delivered to our members. The following are among the services we provide to support physicians:


	•	Customized Utilization Reports provide our contracted physicians with information that enables them to run their practices more efficiently and focuses them on specific patient needs. For example, quarterly fund detail reports update physicians on their status within their risk pools. Equivalency reports provide physicians with financial comparisons of capitated versus fee-for-service arrangements.

	•	Case Management Support helps the physician coordinate specialty care and ancillary services for patients with complex conditions and direct members to appropriate community resources to address both their health and socio-economic needs.

	•	Web-based Claims and Eligibility Resources have been implemented in selected markets to provide physicians with on-line access to perform claims and eligibility inquiries.

Our contracted physicians also benefit from several of the services offered to our members, including the CONNECTIONS, EPSDT case management and disease management programs. For example, the CONNECTIONS staff facilitate doctor/patient relationships by connecting members with physicians, the EPSDT programs encourage routine checkups for children with their physicians and the disease management programs assist physicians in managing their patients with chronic disease.

We provide access to healthcare services for our members primarily through contracts with our providers. Our contracts with primary and specialty care physicians and hospitals usually are for one to two-year periods and renew automatically for successive one-year terms, but generally are subject to

termination by either party upon 90 to 120 days’ prior written notice. In the absence of a contract, we typically pay providers at state Medicaid reimbursement levels. We pay physicians under a capitated or fee-for-service arrangement.


	•	Under our capitated contracts, primary care physicians are paid a monthly capitation rate for each of our members assigned to his or her practice and are at risk for all costs related to primary and specialty physician and emergency room services. In return for this payment, these physicians provide all primary care and preventive services, including primary care office visits and EPSDT services. If these physicians also provide non-capitated services to their assigned members, they may bill and be paid under fee-for-service arrangements at Medicaid rates.

	•	Under our fee-for-service contracts with physicians, particularly specialty care physicians, we pay the physicians a negotiated fee for covered services. This model is characterized as having no financial risk for the physician.

Some of our health plans utilize GPA to provide behavioral health services. We also contract with ancillary providers on a negotiated fee arrangement for physical therapy, mental health and chemical dependency care, home healthcare, vision care, diagnostic laboratory tests, x-ray examinations, ambulance services and durable medical equipment. Additionally, we contract with dental vendors in markets where routine dental care is a covered benefit. In our healthplans, where prescription and limited over-the-counter drugs are a covered benefit, we have a fee-for-service arrangement with a national pharmacy vendor that provides a pharmacy network.

Our medical management programs focus on improving quality of care in areas that have the greatest impact on our members. We employ strategies, including disease management and complex case management, that are fine-tuned for implementation in our individual markets by a system of physician committees chaired by local physician leaders. This process promotes physician participation and support, both critical factors in the success of any clinical quality improvement program.

We have implemented specialized information systems to support our medical quality management activities. Information is drawn from our data warehouse, clinical databases and AMISYS as sources to identify opportunities to improve care and to track the outcomes of the interventions implemented to achieve those improvements. Some examples of these intervention programs include:


	•	a prenatal case management program to help women with high-risk pregnancies deliver full-term, healthy infants;

	•	a program to reduce the number of inappropriate emergency room visits; and

	•	a disease management program to improve the ability of those with asthma and their families to control their disease and thereby reduce the need for emergency room visits and hospitalizations.

Additionally, we provide reporting on a regular basis using our data warehouse. State and Health Employer Data and Information Set, or HEDIS, reporting constitutes the core of the information base that drives our clinical quality performance efforts. This reporting is monitored by Plan Quality Improvement Committees and our corporate medical management team.

In order to ensure the quality of our provider networks, we verify the credentials and background of our providers using standards that are supported by the National Committee for Quality Assurance.

The ability to access data and translate it into meaningful information is essential to operating across a multi-state service area in a cost-effective manner. Our centralized information systems located in St. Louis, Missouri, support our core processing functions under a set of integrated databases and are designed to be both replicable and scalable to accommodate internal growth and growth from acquisitions.

We have the ability to leverage the platform we have developed for one state for configuration into new states or health plan acquisitions.

This integrated approach helps to assure that consistent sources of claim and member information are provided across all of our health plans. Our AMISYS production system is capable of supporting over one million members.

We have a disaster recovery and business resumption plan developed and implemented in conjunction with a third party. This plan allows us complete access to the business resumption centers and hot-site facilities provided by the plan.

In 2003 we entered the specialty services market. Our specialty services are provided primarily through the following interrelated businesses:


	•	GPA manages behavioral healthcare for members via a combination of owned clinics and a contracted network of providers. GPA works with providers to determine the best course of treatment for a given diagnosis and helps ensure members and their providers are aware of the full array of services available. GPA’s networks feature a range of services so that patients can be treated at an appropriate level of care. GPA also runs school-based programs in Arizona that focus on students with special education needs.

	•	ScriptAssist is a medication adherence program that uses psychology-based tools to predict which patients are likely to cease taking their medications, and then to motivate those at-risk patients to adhere to their doctors’ advice. Patients with chronic medical conditions frequently fail to take their medications properly, if at all. This generally results in increased hospital costs and poor outcomes for the patients. ScriptAssist uses registered nurses to educate patients about the reasons for the medications they were prescribed, to provide accurate information about side effects and risks of such medications, and to keep the doctors informed of the patients’ progress between visits.

	•	NurseWise provides a toll-free nurse triage line 24 hours per day, 7 days per week, 52 weeks per year. Our members call one number and reach customer service representatives and bilingual nursing staff who provide health education, triage advice and offer continuous access to health plan functions. Additionally, our representatives verify eligibility, confirm primary care provider assignments and provide benefit and network referral coordination for members and providers after business hours. Our staff can arrange for urgent pharmacy refills, transportation and qualified behavioral health professionals for crisis stabilization assessments. Call volume is based on membership levels and seasonal variation. In recent months, NurseWise has received from 12,000 to 19,000 inbound calls per month and has made over 3,000 outbound calls per month.

Currently, approximately 6% of our ambulatory care is behavioral health related and will increase as our SSI membership increases. Our entry into the behavioral health field allows us to continue to offer solutions to the states in which we have health plans as well as other states where behavioral health for Medicaid recipients has been underserved.

Our Corporate Ethics and Compliance Programs were first established in 1998 and provide methods by which we further enhance operations, safeguard against fraud and abuse, improve access to quality care and help assure that our values are reflected in everything we do.

The two primary standards by which corporate compliance programs in the healthcare industry are measured are the 1991 Federal Organizational Sentencing Guidelines and the “Compliance Program Guidance” series issued by the Office of the Inspector General, or OIG, of the Department of Health and Human Services.

Our program contains each of the seven elements suggested by the Sentencing Guidelines and the OIG guidance. These key components are:


	•	written standards of conduct;

	•	designation of a corporate compliance officer and compliance committee;

	•	effective training and education;

	•	effective lines for reporting and communication;

	•	enforcement of standards through disciplinary guidelines and actions;

	•	internal monitoring and auditing; and

	•	prompt response to detected offenses and development of corrective action plans.

Our internal Corporate Compliance website, accessible by all employees, contains our Business Ethics and Conduct Policy; our Mission, Values and Philosophies and Compliance Programs; a company-wide policy and procedure database and our toll-free hotline to allow employees or other persons to report suspected incidents of fraud, abuse or other violations of our corporate compliance program.

In the Medicaid business, our principal competitors for state contracts, members and providers consist of the following types of organizations:


	•	Primary Care Case Management Programs are programs established by the states through contracts with primary care providers. Under these programs, physicians provide primary care services to Medicaid recipients, as well as limited medical management oversight.

	•	National and Regional Commercial Managed Care Organizations have Medicaid or Medicare members in addition to members in private commercial plans.

	•	Medicaid Managed Care Organizations focus solely on providing healthcare services to Medicaid recipients. The vast majority of these operate in one city or state and are owned by providers, primarily hospitals. Their membership is small relative to the infrastructure that is required for them to do business. There are a few multi-state Medicaid-only organizations that tend to be larger in size and, therefore, are able to leverage their infrastructure over larger memberships.

We will continue to face varying levels of competition as we expand in our existing service areas or enter new markets as federal regulations require at least two competitors in each service area. Healthcare reform proposals may cause a number of commercial managed care organizations already in our service areas to decide to enter or exit the Medicaid market. The licensing requirements and bidding and contracting procedures in some states, however, present barriers to entry into the Medicaid managed healthcare industry.

We compete with other managed care organizations for state contracts. In order to grant a contract, state governments consider many factors. These factors include quality of care, financial requirements, an ability to deliver services and establish provider networks and infrastructure.

We also compete to enroll new members and retain existing members. People who wish to enroll in a managed healthcare plan or to change healthcare plans typically choose a plan based on the quality of care and services offered, ease of access to services, a specific provider being part of the network and the availability of supplemental benefits. In certain markets, where recipients select a physician instead of a health plan, we are able to grow our membership by adding new physicians to our provider base.

We also compete with other managed care organizations to enter into contracts with physicians, physician groups and other providers. We believe the factors that providers consider in deciding whether to

contract with us include existing and potential member volume, reimbursement rates, medical management programs, speed of reimbursement and administrative service capabilities.

Specialized programs that focus on specific chronic diseases are often administered by companies that developed comprehensive care guidelines and patient support services appropriate to each specific disease or disorder. High cost and high risk conditions offer the best return on investment in these programs and a number of companies compete for these contracts. Managed care organizations have long had disease specific initiatives, but such programs are now offered by pharmacy benefit managers, pharmaceutical makers and a number of specialty companies.

All of our revenue is derived from operations within the United States. Our managed care subsidiaries in Wisconsin, Texas, Indiana and New Jersey have revenues from their respective state governments that each exceeded 10% of consolidated revenues in 2003. Our operations in Ohio began on January 1, 2004. Other financial information about our segments is found in Note 20 of our Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

Our healthcare and specialty operations are regulated at both state and federal levels. Government regulation of the provision of healthcare products and services is a changing area of law that varies from jurisdiction to jurisdiction. Regulatory agencies generally have discretion to issue regulations and interpret and enforce laws and rules. Changes in applicable laws and rules also may occur periodically.

Our five health plan subsidiaries are licensed to operate as health maintenance organizations in each of Wisconsin, Texas, Indiana, New Jersey and Ohio. In each of the jurisdictions in which we operate, we are regulated by the relevant health, insurance and/or human services departments that oversee the activities of managed care organizations providing or arranging to provide services to Medicaid enrollees.

The process for obtaining authorization to operate as a managed care organization is lengthy and involved and requires demonstration to the regulators of the adequacy of the health plan’s organizational structure, financial resources, utilization review, quality assurance programs, complaint procedures, provider network adequacy and procedures for covering emergency medical conditions. Under both state managed care organization statutes and state insurance laws, our health plan subsidiaries must comply with minimum statutory capital requirements and other financial requirements, such as deposit and reserve requirements. Insurance regulations may also require prior state approval of acquisitions of other managed care organizations’ businesses and the payment of dividends, as well as notice for loans or the transfer of funds. Our subsidiaries are also subject to periodic reporting requirements. In addition, each health plan must meet criteria to secure the approval of state regulatory authorities before implementing operational changes, including the development of new product offerings and, in some states, the expansion of service areas.

The state of Texas recently adopted a number of new regulations that may affect our business and results of operations. Under these regulations:


	•	premium and maintenance taxes apply to Medicaid and SCHIP programs;

	•	stringent prompt-pay laws may become applicable to Medicaid and SCHIP programs;

	•	disclosure requirements regarding provider fee schedules and coding procedures may become applicable to Medicaid and SCHIP programs; and

	•	programs may be required to monitor and supervise the activities and financial solvency of provider groups.

In order to be a Medicaid managed care organization in each of the states in which we operate, we must operate under a contract with the state’s Medicaid agency. States generally use either a formal proposal process, reviewing a number of bidders, or award individual contracts to qualified applicants that apply for entry to the program.

We have entered into a contract with the Wisconsin Department of Health and Family Services to provide Medicaid services. The contract commenced January 1, 2002 and has been extended to April 30, 2004. We expect to renew this contract for an additional term ending December 31, 2005. The contract can be terminated if a change in state or federal laws, rules or regulations materially affects either party’s rights or responsibilities under the contract. We have held a contract with the State of Wisconsin for 20 years. We receive monthly payments under the contract based on specified capitation rates determined on an actuarial basis.

We have also entered into an agreement with Network Health Plan of Wisconsin, Inc. pursuant to which Network Health Plan subcontracts to us their Medicaid services under its contract with the State of Wisconsin. The agreement commenced January 1, 2001 and has a scheduled termination of December 31, 2006. The agreement renews automatically for successive five-year terms and can be terminated by either party upon two-years notice prior to the end of the then current term. The agreement may also be terminated if a change in state or federal laws, rules or regulations materially affects either party’s rights or responsibilities under the contract, or if Network Health Plan’s contract with the State of Wisconsin is terminated. We receive a monthly payment based on a percentage of all premium and supplemental payments and other compensation received by Network Health Plan from the State of Wisconsin.

We presently are party to several contracts with the Texas Health and Human Services Commission to provide Medicaid and SCHIP managed care services in our Texas markets through our Superior HealthPlan, Inc. subsidiary. Our Texas Medicaid contracts commenced September 1, 2001 and have scheduled termination dates of August 31, 2004. Each Medicaid contract is renewable for an additional one-year period. Our SCHIP contract began on October 1, 2002 and is scheduled to end on August 31, 2004. The contracts generally may be terminated upon any event of default or in the event state or federal funding for Medicaid programs is no longer available. We have held a contract with the State of Texas since 1999. We receive monthly payments under each of our Texas contracts based on specified capitation rates determined on an actuarial basis.

We have entered into a contract with the Indiana Office of Medicaid Policy and Planning and Office of the Children’s Health Insurance Program to provide Indiana Medicaid and Indiana Children’s Health Insurance Program services. The contract commenced January 1, 2003 and has a scheduled termination date of December 31, 2004. This contract may be terminated by the State without cause upon sixty days prior written notice. We have held a contract with the State of Indiana since 1993. We are paid based on specified capitation rates for our services.

As part of the acquisition of UHP, we obtained a contract with the State of New Jersey Department of Human Services to provide Medicaid and SCHIP services. The contract commenced on July 1, 2002 and had an initial scheduled termination date of June 30, 2003, but has been renewed through June 30, 2004. The agreement is renewable annually for successive twelve-month periods. The contract may be terminated by the State for event of default or significant change in circumstances. UHP has held a contract with the State of New Jersey since 1994. We receive monthly payments based on specified capitation rates for our services.

In conjunction with the asset purchase from FHP, we entered into a contract with the Ohio Department of Job and Family Services to provide Medicaid services. The contract commenced January 1, 2004 and has a scheduled termination date of June 30, 2004. The agreement is renewable annually for successive twelve-month periods. The contract may be terminated by the State for event of default. We are paid based on specified capitation rates for our services.

Our contracts with the states and regulatory provisions applicable to us generally set forth in great detail the requirements for operating in the Medicaid sector, including provisions relating to:


	•	eligibility, enrollment and disenrollment processes

	•	covered services

	•	eligible providers

	•	subcontractors

	•	record-keeping and record retention

	•	periodic financial and informational reporting

	•	quality assurance

	•	financial standards

	•	timeliness of claims payment

	•	health education and wellness and prevention programs

	•	safeguarding of member information

	•	fraud and abuse detection and reporting

	•	grievance procedures

	•	organization and administrative systems

A health plan’s compliance with these requirements is subject to monitoring by state regulators and by CMS. A health plan is also subject to periodic comprehensive quality assurance evaluations by a third party reviewing organization and generally by the insurance department of the jurisdiction that licenses the health plan. A health plan must also submit many reports to various regulatory agencies, including quarterly and annual statutory financial statements and utilization reports.

In 1996, Congress enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA. The Act is designed to improve the portability and continuity of health insurance coverage and simplify the administration of health insurance claims. One of the main requirements of HIPAA is the implementation of standards for the processing of health insurance claims and for the security and privacy of individually identifiable health information.

In August 2000, the Department of Health and Human Services, or HHS, issued new standards for submitting electronic claims and other administrative healthcare transactions. The new standards were designed to streamline the processing of claims, reduce the volume of paperwork and provide better service. The administrative and financial healthcare transactions covered include:


	•	health claims and equivalent encounter information

	•	enrollment and disenrollment in a health plan

	•	eligibility for a health plan

	•	healthcare payment and remittance advice

	•	health plan premium payments

	•	coordination of benefits

	•	healthcare claim status

	•	referral certification and authorization

Health plans other than certain smaller health plans were required to comply with the new standards by October 2002, but the deadline was extended to October 2003 for health plans that submitted a written compliance plan to CMS by October 2002. The regulation’s requirements apply to transactions conducted using “electronic media.” Since “electronic media” is defined broadly to include “transmissions that are physically moved from one location to another using magnetic tape, disk or compact disk media,” many communications are considered electronically transmitted. Under the regulations, health plans are required to have the capacity to accept and send all covered transactions in a standardized electronic format. The regulation sets forth other rules that apply specifically to health plans as follows:


	•	a plan may not delay processing of a standard transaction (that is, it must complete transactions using the new standards at least as quickly as it had prior to implementation of the new standards);


	•	there should be “no degradation in the transmission of, receipt of, processing of, and response to” a standard transaction as compared to the handling of a non-standard transaction;

	•	if a plan uses a healthcare clearinghouse to process a standard request, the other party to the transaction may not be charged more or otherwise disadvantaged as a result of using the clearinghouse;

	•	a plan may not reject a standard transaction on the grounds that it contains data that is not needed or used by the plan;

	•	a plan may not adversely affect (or attempt to adversely affect) the other party to a transaction for requesting a standard transaction; and

	•	if a plan coordinates benefits with another plan, then upon receiving a standard transaction, it must store the coordination of benefits data required to forward the transaction to the other plan.

On December 28, 2000, HHS published final regulations setting forth new standards for protecting the privacy of individually identifiable health information in any medium. These regulations were modified by additional regulations published on August 14, 2002, in which HHS addressed some of the implementation concerns on the part of the healthcare industry that had been raised by the initial final rule. The regulations are designed to protect medical records and other personal health information maintained and used by healthcare providers, health plans and healthcare clearinghouses. Compliance with the privacy regulations was required by April 2003, except for certain small health plans which have until April 2004. We have implemented processes, policies and procedures to comply with the HIPAA privacy regulations. All employees received education and training regarding the new privacy requirements. In addition, the corporate privacy officer and health plan privacy officials serve as resources to employees to address any questions or concerns they may have. Among numerous other requirements, the new standards:


	•	limit certain uses and disclosures of private health information, and require patient authorizations for such uses and disclosures of private health information;

	•	give patients new rights to access their medical records and to know who else has accessed them;

	•	limit most disclosure of health information to the minimum needed for the intended purpose;

	•	establish procedures to ensure the protection of private health information;

	•	establish new requirements for access to records by researchers and others; and

	•	establish new criminal and civil sanctions for improper use or disclosure of health information.

The preemption provisions of HIPAA provide that the federal standards will not preempt state laws that are more stringent than the related federal requirements. In addition, the Secretary of HHS may grant exceptions allowing state laws to prevail if one or more of a number of conditions are met, including but not limited to the following:


	•	the state law is necessary to prevent fraud and abuse related to the provision of and payment for healthcare;

	•	the state law is necessary to ensure appropriate state regulation of insurance and health plans;

	•	the state law is necessary for state reporting on healthcare delivery or costs; or

	•	the state law addresses controlled substances.

In February 2003, HHS published final regulations relating to the security of electronic individually identifiable health information. These rules require healthcare providers, health plans and healthcare clearinghouses to implement administrative, physical and technical safeguards to ensure the privacy and confidentiality of such information when it is electronically stored, maintained or transmitted through such

devices as user authentication mechanisms and system activity audits. The compliance deadline for the security regulations is April 21, 2005.

The United States Senate and House of Representatives passed different versions of patients’ rights legislation in June and August 2001, respectively. Both versions included provisions that specifically apply protections to participants in federal healthcare programs, including Medicaid beneficiaries. Although no version of this type of federal legislation has yet to become law, patients’ rights proposals are currently pending in Congress. If enacted, this type of legislation could expand our potential exposure to lawsuits and increase our regulatory compliance costs. Depending on the final form of any patients’ rights legislation, such legislation could, among other things, expose us to liability for economic and punitive damages for making determinations that deny benefits or delay beneficiaries’ receipt of benefits as a result of our medical necessity or other coverage determinations. We cannot predict when or whether patients’ rights legislation will be enacted into law or, if enacted, what final form such legislation might take.

Investigating and prosecuting healthcare fraud and abuse became a top priority for law enforcement entities in the last decade. The focus of these efforts has been directed at participants in public government healthcare programs such as Medicaid. The laws and regulations relating to Medicaid fraud and abuse and the contractual requirements applicable to plans participating in these programs are complex and changing and will require substantial resources.

As of January 31, 2004, we had approximately 950 employees. Our employees are not represented by a union. We believe our relationships with our employees are good.

In 2003, we acquired the building in St. Louis, Missouri which houses our corporate headquarters. We purchased the building in order to ensure the continuity of our operations. The building contains approximately 98,000 square feet of office space, of which we occupy approximately 58,000 square feet. The remaining space is either leased to third parties or available to support our expansion.

We lease space in each of the areas where our health plans and specialty companies operate. We are required by various insurance and Medicaid regulatory authorities to have offices in the service areas where we provide Medicaid benefits. We believe our current facilities are adequate to meet our operational needs for the foreseeable future.

Aurora Health Care, Inc. (Aurora) provides medical professional services to our Wisconsin health plan subsidiary. In May 2003, Aurora filed a lawsuit in the Milwaukee County Circuit Court claiming we had failed to adequately reimburse Aurora for services rendered during the period from 1998 to 2003. The claim seeks damages totaling $9.4 million. We dispute the claim, have filed answer and discovery requests against Aurora, and plan to vigorously defend against the matter.

We are routinely subject to legal proceedings in the normal course of business. While the ultimate resolution of such matters are uncertain, we do not expect the result of these matters to have a material effect on our financial position or results of operations.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock has been traded and quoted on the New York Stock Exchange under the symbol “CNC” since October 16, 2003. From December 13, 2001 until October 15, 2003 our common stock was traded and quoted on the Nasdaq National Market under the symbol “CNTE”. All share and per share information presented below has been adjusted for a three-for-two stock split effected in the form of a 50% stock dividend paid July 11, 2003 to stockholders of record on June 20, 2003.

We have never declared any cash dividends on our capital stock and currently anticipate that we will retain any future earnings for the development, operation and expansion of our business.

Information concerning our equity compensation plans will appear in our Proxy Statement for our 2004 annual meeting of stockholders under “Equity Compensation Plan Information.” This portion of our Proxy Statement is incorporated herein by reference.

In our initial public offering, we sold an aggregate of 4,875,000 shares of our common stock at $9.33 per share in December 2001. Our net proceeds after deduction of underwriting discounts and commissions of $3.2 million and expenses of $1.3 million, were $41.0 million. In 2001, we used $4.0 million of our net proceeds to repay the entire principal amount of our outstanding subordinated notes. In 2002, we used $10.6 million to purchase 80% of the equity of UHP, $3.9 million on capital expenditures to support our growth and $0.6 million to purchase SCHIP contracts in three Texas service areas. In 2003, we used $2.6 million to purchase the remaining 20% of the equity of UHP, $1.8 million for our purchase of GPA, $1.0 million for the Medicaid-related contract rights of HMO Blue Texas and $0.6 million for certain assets of ScriptAssist. Additionally, in 2003, we used $11.2 million, net of mortgage proceeds, on capital expenditures which included the purchase of our corporate headquarters building. In January 2004, we used $6.8 million to acquire the Medicaid-related assets of FHP, Inc.

The following selected consolidated financial data should be read in connection with, and are qualified by reference to, the consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this filing. The data for the years ended December 31, 2003, 2002 and 2001 and as of December 31, 2003 and 2002 are derived from consolidated financial statements included elsewhere in this filing. The data for the years ended December 31, 2000 and 1999 and as of December 31, 2001, 2000 and 1999 are derived from audited consolidated financial statements not included in this filing.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this filing. The discussion contains forward-looking statements that involve known and unknown risks and uncertainties, including those set forth below under “Factors That May Affect Future Results and The Trading Price of Our Common Stock.”

We have organized this Management’s Discussion and Analysis to address the following:


	•	Recent Acquisitions;

	•	Critical Accounting Policies;

	•	Revenue and Expense Discussion and Key Metrics;

	•	Results of Operations;

	•	Liquidity and Capital Resources;

	•	Contractual Commitments; and

	•	Regulatory Capital and Dividend Restrictions.

Effective January 1, 2004, we commenced operations in Ohio through the acquisition of the Medicaid-related assets of Family Health Plan, Inc., a subsidiary of Mercy Health Partners, for a purchase price of $6.8 million. This transaction includes the right to serve up to 24,000 of FHP’s Medicaid members in Toledo, Ohio, a new market for us. While we did incur start-up cost in 2003, the results of operations of this entity will be included in our consolidated financial statements beginning January 1, 2004.

Effective August 1, 2003, we acquired the Medicaid-related contract rights of HMO Blue Texas in the San Antonio, Texas market. This transaction allows us to serve approximately 17,000 additional members in the State. Our purchase price was $1.0 million. We allocated the entire purchase price to acquired contracts. The contracts are being amortized on a straight-line basis over a period of five years, the expected period of benefit.

During 2003, we acquired a 100% ownership interest in Group Practice Affiliates, LLC (63.7% in March 2003 and 36.3% in August 2003). GPA, a behavioral healthcare services company, serves over 700,000 individuals in five states through a combination of networks, groups and schools, including a portion of our membership. This acquisition is consistent with our strategy to provide diversified medical services to the managed Medicaid population. We paid an aggregate purchase price of $1.8 million for GPA, resulting in goodwill of $3.9 million.

In March 2003, we purchased certain assets of ScriptAssist, a medication compliance company. We are administering the purchased contracts under the ScriptAssist name. ScriptAssist uses various approaches and medical expertise to promote adherence to prescription drugs. The asset acquisition is consistent with our strategy to provide diversified medical services to the managed Medicaid population.

The purchase price of $563,000 was allocated to acquired contracts. We are amortizing the contracts on a straight-line basis over five years, the expected period of benefit.

On December 1, 2002, we acquired 80% of the outstanding capital stock of University Health Plans, Inc. from University of Medicine and Dentistry of New Jersey. In October 2003 we exercised our option to purchase the remaining 20%. UHP is a managed health plan operating in 20 counties in New Jersey. We paid an aggregate purchase price of $13.3 million for our interest in UHP. The purchase price allocation resulted in intangible assets of $3.8 million representing provider contracts and purchased contract rights, which are being amortized over 10 years, and goodwill of $7.9 million.

In June 2002, we entered into an agreement with Texas Universities Health Plan Inc. to purchase the SCHIP contracts in three Texas service areas, thereby adding approximately 24,000 members to our Texas health plan. The cash purchase price of $595,000 was recorded as purchased contract rights, which are being amortized on a straight-line basis over five years, the expected period of benefit.

With our acquisition of GPA and our purchase of ScriptAssist assets, we began operating in two segments: Medicaid Managed Care and Specialty Services. The Medicaid Managed Care segment consists of our health plans, including all of the functions needed to operate them. The Specialty Services segment consists of our specialty services, including our behavioral health, nurse triage and pharmacy compliance functions.

Our significant accounting policies are more fully described in Note 3 to our annual consolidated financial statements included elsewhere herein. Two of our accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management. As a result they are subject to an inherent degree of uncertainty.

Our medical costs include claims paid, claims adjudicated but not yet paid, estimates for claims received but not yet adjudicated, estimates for claims incurred but not reported and estimates for the costs necessary to process unpaid claims. We, together with our independent actuaries, estimate medical claims liabilities using actuarial methods based upon historical data for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services and other relevant factors. These estimates are continually reviewed and adjustments, if necessary, are reflected in the period known.

In applying this policy, our management uses its judgment to determine the assumptions to be used in the determination of the required estimates. While we believe these estimates are appropriate, it is possible future events could require us to make significant adjustments for revisions to these estimates. For example, a 1% increase or decrease in our health benefits ratio would have affected net earnings by $4.7 million for the year ended December 31, 2003. The estimates are based on our historical experience, terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.

The change in medical claims liabilities is summarized as follows (in thousands):

Acquisitions in 2003 and 2002 include reserves acquired in connection with our acquisition of UHP. Acquisitions in 2001 include reserves acquired in connection with our acquisition of the remaining shares of Superior HealthPlan.

Changes in estimates of incurred claims for prior years were attributable to favorable development in all of our markets, including lower than anticipated utilization of medical services.

We have made several acquisitions since 2001 that have resulted in our recording of intangible assets. These intangible assets primarily consist of purchased contract rights, provider contracts and goodwill. Purchased contract rights are amortized using the straight-line method over periods ranging from 60 to 120 months. Provider contracts are amortized using the straight-line method over 120 months.

Our management evaluates whether events or circumstances have occurred that may affect the estimated useful life or the recoverability of the remaining balance of goodwill and other identifiable intangible assets. Impairment of an intangible asset is triggered when the estimated future undiscounted cash flows do not exceed the carrying amount of the intangible asset and related goodwill. If the events or circumstances indicate that the remaining balance of the intangible asset and goodwill may be permanently impaired, the potential impairment will be measured based upon the difference between the carrying amount of the intangible asset and goodwill and the fair value of such asset determined using the estimated future discounted cash flows generated from the use and ultimate disposition of the respective acquired entity. Our management must make assumptions and estimates, such as the discount factor, in determining the estimated fair values. While we believe these assumptions and estimates are appropriate, other assumptions and estimates could be applied and might produce significantly different results.

Goodwill is reviewed at least annually for impairment. In addition, we will perform an impairment analysis of intangible assets more frequently based on other factors. These factors would include significant changes in membership, state funding, medical contracts and provider networks and contracts. We did not recognize any impairment losses during the years ended December 31, 2003, 2002 or 2001.

We are providing certain non-GAAP financial measures in this discussion of revenues and expenses which exclude the impact of a newly enacted premium tax which totaled $1.4 million in 2003. We believe that these figures are helpful in allowing the reader to more accurately assess the ongoing nature of our

operations and measure our performance more consistently. We use the presented non-GAAP financial measures internally to focus management on period-to-period changes in our business. Therefore, we believe that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

We generate revenues in our Medicaid Managed Care segment primarily from premiums we receive from the states in which we operate to provide health benefits to our members. We receive a fixed premium per member per month pursuant to our state contracts. We generally receive premiums during the month we provide services and recognize premium revenue during the period in which we are obligated to provide services to our members.

Our Specialty Services companies generate revenues from a variety of sources. Our behavioral health company generates revenue via capitation payments from our health plans and others. It also receives fees for the direct provision of care and certain school programs in Arizona. Our pharmacy compliance program receives fee income from the manufacturers of pharmaceuticals. NurseWise receives fees from health plans, physicians and other organizations for providing continuous access to nurse advisors.

Premiums collected in advance are recorded as unearned revenue. Premiums due to us are recorded as premium and related receivables and are recorded net of an allowance based on historical trends and our management’s judgment on the collectibility of these accounts. As we generally receive premiums during the month in which services are provided, the allowance is typically not significant in comparison to total premium revenue and does not have a material impact on the presentation of our financial condition, changes in financial position or results of operations.

The primary drivers of our increasing revenue have been membership growth in our Medicaid Managed Care segment and our entry into the Specialty Services segment. We have increased our membership through internal growth and acquisitions. From December 31, 2001 to December 31, 2003, we increased our membership by 108%. The following table sets forth our membership by state:

In 2003, our membership increased by 17,000 members in Texas due to the purchase of contract rights from HMO Blue Texas. Our membership increased in all our markets from additions to our provider network, increases in counties served and growth in the number of Medicaid beneficiaries.

In 2002, our membership increased by 24,000 members in Texas due to the purchase of SCHIP contract rights from Texas Universities Health Plan. In addition, two smaller plans exited the Austin, Texas market. As a result, our Texas plan increased its membership by 28,000 lives. This increase includes 12,000 lives that we are managing for the state of Texas on an interim basis and that will become part of a reprocurement process scheduled for mid-2004. We entered the New Jersey market through our acquisition of UHP. Membership increases in our Wisconsin and Indiana markets resulted from additions to our provider network and growth in the number of Medicaid beneficiaries.

Our operating expenses include medical costs, cost of services, and general and administrative expenses.

Our medical costs include payments to physicians, hospitals, and other providers for healthcare and specialty product claims. Medical costs also include estimates of medical expenses incurred but not yet reported, or IBNR. Monthly, we estimate our IBNR based on a number of factors, including inpatient hospital utilization data and prior claims experience. As part of this review, we also consider the costs to process medical claims and estimates of amounts to cover uncertainties related to fluctuations in physician billing patterns, membership, products and inpatient hospital trends. These estimates are adjusted as more information becomes available. We utilize the services of independent actuaries who are contracted to review our estimates quarterly. While we believe that our process for estimating IBNR is actuarially sound, we cannot assure you that healthcare claim costs will not materially differ from our estimates.

Our results of operations depend on our ability to manage expenses related to health benefits and to accurately predict costs incurred. Our health benefits ratio represents medical costs as a percentage of premium revenues and reflects the direct relationship between the premium received and the medical services provided. The table below depicts our health benefits ratios by member category and in total:

Our Medicaid and SCHIP ratio decreased in 2003 from 2002 due primarily to initiatives to reduce inappropriate emergency department usage and to establish preferred drug lists such as generics. The addition of the SSI members in New Jersey in December 2002 has caused our total health benefits ratio to increase slightly. The health benefits ratio for SSI is affected by a low membership base and is subject to greater volatility as a percentage of premiums (although relatively immaterial in total dollars to total medical costs). We expect the health benefits ratio for SSI to decrease as these members become fully integrated into our medical management programs, as our membership base grows within the State of New Jersey and as our membership base grows in other markets.

Our cost of services expenses include all direct costs to support the local functions responsible for generation of our services revenues. These expenses primarily consist of the salaries and wages of the physicians, clinicians, therapists and teachers who provide the services and expenses related to the clinics and supporting facilities and equipment used to provide services.

Our general and administrative expenses primarily reflect wages and benefits and other administrative costs related to health plans, specialty companies and our centralized functions that support all of our business units. The major centralized functions are claims processing, information systems and finance. In September 2003, concurrent with a rate increase received in one state, we began to be charged premium taxes by that state. Premium taxes are classified as general and administrative expenses. Our general and administrative expense ratio represents general and administrative expenses as a percentage of total revenues and reflects the relationship between revenues earned and the costs necessary to drive those

The improvement in the Medicaid Managed Care general and administrative expenses ratio reflects growth in membership and leveraging of our overall infrastructure. This ratio decreased in 2003 from 2002 despite 1) the levying of the premium tax from one of our states which resulted in $1.4 million additional general and administrative expense, 2) increased spending on tax planning initiatives and 3) start-up costs, primarily in the fourth quarter, related to our new health plan in Ohio. The Specialty Services ratio may vary depending on the various contracts and nature of the service provided and will have a higher general and administrative expense ratio than the Medicaid Managed Care segment.

Other income (expense) consists principally of investment and other income and interest expense.


	•	Investment income is derived from our cash, cash equivalents and investments. Information about our investments is included below under “Liquidity and Capital Resources.”

	•	Interest expense reported in 2003 reflects mortgage interest on our corporate headquarters’ building and fees paid to a bank in conjunction with our credit facility. Interest expense reported in 2002 reflected fees paid to a bank in conjunction with our credit facility. Interest expense reported in 2001 primarily reflected interest paid on our subordinated notes, which we repaid in full in December 2001.

Summarized comparative financial data for 2003 and 2002 are as follows ($ in millions):

Premiums for the year ended December 31, 2003 increased 64.8% from the comparable period in 2002. This increase was due to organic growth in our existing markets, changes in our member mix by product category, the purchase of the Texas contracts and the addition of our New Jersey membership through our acquisition of UHP. In addition, we received premium rate increases ranging from 1.0% to 7.5%, or 4.6% on a composite basis across our markets.

Services revenues increased due to an increase in our non-risk SSI membership in our Texas market and the addition of services revenues of GPA beginning March 1, 2003.

Medical costs increased 65.0% due to the growth in our membership as discussed above. Our Medicaid and SCHIP health benefits ratio decreased to 81.7% from 82.2% due in part to our initiatives to reduce emergency department usage and to establish preferred drug lists as previously discussed.

Cost of services increased due to the inclusion of direct costs related to the services revenues of GPA beginning March 1, 2003.

General and administrative expenses increased 76.3% primarily due to expenses for additional staff to support our membership growth and expansion into the Specialty Services segment. Additionally, general and administrative expenses increased as a result of the institution of a premium tax, tax planning costs incurred during the year and Ohio start-up costs previously discussed.

Other income (expense) in 2002 included a one-time dividend of $5.1 million from a captive insurance company in which we maintained an investment. Excluding this one-time gain, other income increased from 2002 with higher investment balances in 2003 partially offset by a lower interest rate environment and interest expense on our corporate headquarters’ mortgage.

Our effective tax rate in 2003 was 37.6%, compared to 38.0% in 2002. The decrease was primarily due to increased levels of tax-exempt interest income and a lower effective state tax rate.

Our earnings per share calculations reflect an increase in the weighted average shares outstanding in 2003 primarily resulting from the follow-on offering of 3,450,000 shares sold in August 2003.

Summarized comparative financial data for 2002 and 2001 are as follows ($ in millions):

Premiums for the year ended December 31, 2002 increased 41.3% due to organic growth in our existing markets, the purchase of the Texas SCHIP contracts and the inclusion of one month of revenues of UHP. In addition, we received premium rate increases ranging from 1.5% to 10.7%, or 5.1% on a composite basis across our markets.

Services revenues for the year ended December 31, 2002 increased due to increases in our non-risk SSI membership in our Texas market.

Medical costs for the year ended December 31, 2002 increased 40.5% reflecting the growth in our membership.

Cost of services increased $12,000 from the comparable period in 2001. While the non-risk SSI membership increased between periods, the cost of services remained flat as we leveraged existing systems to support the increased membership.

General and administrative expenses for the year ended December 31, 2002 increased 33.1% reflecting a higher level of wages and related expenses for additional staff to support our membership growth.

Other income for the year ended December 31, 2002 increased $6.0 million from 2001. A majority of the increase was due to the receipt of a one-time dividend of $5.1 million from a captive insurance company in which we maintained an investment. In addition, investment income increased due to a larger

amount of dollars invested, and interest expense decreased year over year due to the repayment of our subordinated debt in December 2001.

For the year ended December 31, 2002 we recorded income tax expense at an effective tax rate of 38.0%. This compares to an effective tax rate of 41.5% for the year ended December 31, 2001. Our effective tax rate decreased year over year due to increased levels of tax-exempt interest income and a lower effective state tax rate.

Our earnings per share calculations reflect an increase in the weighted average shares outstanding in 2002 resulting from the follow-on offering of 705,743 shares sold in June 2002 and 4,875,000 shares sold in our initial public offering in December 2001.

In August 2003, we closed our follow-on public offering of 3,450,000 shares of common stock at $25.00 per share. We received net proceeds totaling $81.3 million from this offering. We intend to use our net proceeds for working capital and other general corporate purposes, which may include acquisitions of businesses, assets and technologies that are complementary to our business. We may use proceeds to acquire Medicaid and SCHIP businesses, specialty services businesses and contract rights in order to increase our membership and to expand our business into new service areas.

In June 2002, we closed our follow-on public offering, whereby 7,919,258 shares were sold by selling stockholders and 705,743 shares were sold by us at $16.50 per share. We received net proceeds of $10.3 million from this offering.

In December 2001, we closed our initial public offering of 4,875,000 shares of common stock at $9.33 per share. We received net proceeds of $41.0 million. Prior to this offering, we financed our operations and growth through private equity and debt financings and internally generated funds.

Our operating activities provided cash of $56.0 million in 2003, $39.7 million in 2002 and $30.2 million in 2001. The increases in 2003 and 2002 were due to continued profitability, increases in membership, increases in medical claims liabilities and the timing of premium receipts.

Our investing activities used cash of $140.7 million in 2003 and $79.7 million in 2002 and provided cash of $2.7 million in 2001. The largest component of investing activities related to increases in our investment portfolio. Our investment policies are designed to provide liquidity, preserve capital and maximize total return on invested assets within our investment guidelines. Net cash provided by and used in investing activities will fluctuate from year to year due to the timing of investment purchases, sales and maturities. As of December 31, 2003, our investment portfolio consisted primarily of fixed-income securities with an average duration of 3.6 years. Cash is invested in investment vehicles such as municipal bonds, commercial paper and instruments of the U.S. Treasury. The states in which we operate prescribe the types of instruments in which our regulated subsidiaries may invest their cash. The average annualized portfolio yield was 3.7% for the year ended December 31, 2003 and 6.9% for 2002 (exclusive of a one-time dividend of $5.1 million from a captive insurance company in which we maintained an investment). Our yield decreased due to our investment in tax-advantaged securities beginning in the fourth quarter of 2002, as well as a decrease in the overall interest rate environment.

Our financing activities provided cash of $89.4 million in 2003, $10.8 million in 2002 and $37.0 million in 2001. Cash provided by financing activities for the year ended December 31, 2003 was primarily due to the proceeds from the issuance of common stock through our public offering completed in August 2003. During 2002, financing cash flows primarily consisted of the issuance of common stock through our offering completed in June 2002. During 2001, financing cash flows primarily consisted of the issuance of common stock through our initial public offering net of the repayment of subordinated notes with $4.0 million of our proceeds.

We spent $6.6 million and $3.9 million in 2003 and 2002, respectively, on capital assets consisting primarily of new software, software and hardware upgrades, and furniture, equipment and leasehold improvements related to office and market expansions. In 2001, we purchased $3.6 million of furniture, equipment and leasehold improvements due to the addition of the Austin and San Antonio markets and the expansion of the Wisconsin market. We anticipate spending $10.5 million on additional capital expenditures in 2004 related to office and market expansions and system upgrades.

In July 2003, we purchased the building in which our corporate headquarters in St. Louis, Missouri is located for an aggregate purchase price of $12.6 million. We financed a portion of the purchase price through an $8.0 million non-recourse mortgage loan arrangement. The mortgage bears interest at the prevailing prime rate less .25%. At December 31, 2003, our mortgage bore interest at 3.75%.

At December 31, 2003, we had working capital, defined as current assets less current liabilities, of $(18.5) million as compared to $(8.8) million at December 31, 2002. Our working capital is negative due to our efforts to increase investment returns through purchases of investments that have maturities of greater than one year and, therefore, are classified as long-term. Our investment policies are also designed to provide liquidity and preserve capital. We manage our short-term and long-term investments to ensure that a sufficient portion is held in investments that are highly liquid and can be sold to fund working capital as needed.

Cash, cash equivalents and short-term investments were $79.5 million at December 31, 2003 and $69.2 million at December 31, 2002. Long-term investments were $205.2 million at December 31, 2003 and $95.4 million at December 31, 2002, including restricted deposits of $20.4 million and $15.8 million, respectively. Cash and investments held by our unregulated entities totaled $126.7 million and $52.0 million at December 31, 2003 and 2002, respectively. Based on our operating plan, we expect that our available cash, cash equivalents and investments, cash from our operations and cash available under our credit facility will be sufficient to finance our operations and capital expenditures for at least 12 months from the date of this filing.

Our principal contractual obligations at December 31, 2003 consisted of obligations under operating leases and mortgage obligations for our corporate headquarters. The non-cancelable lease and mortgage payments over the next five years and beyond are as follows (in thousands):

We have a $25 million revolving line of credit facility with LaSalle Bank N.A. (LaSalle) which expires in May 2004. The facility has interest rates based on LaSalle’s prime rate or LIBOR. The line is secured by the common stock of our subsidiaries. The facility includes financial covenants, including requirements of minimum EBITDA and minimum tangible net worth. We are required to obtain LaSalle’s consent to any proposed acquisition that would result in a violation of any of the covenants contained in the facility. As of December 31, 2003, we were in compliance with all covenants and no funds were outstanding on the facility.

Our Medicaid Managed Care operations are conducted through our subsidiaries. As managed care organizations, these subsidiaries are subject to state regulations that, among other things, require the maintenance of minimum levels of statutory capital, as defined by each state, and restrict the timing, payment and amount of dividends and other distributions that may be paid to us. Generally, the amount of

dividend distributions that may be paid by a regulated subsidiary without prior approval by state regulatory authorities is limited based on the entity’s level of statutory net income and statutory capital and surplus.

Our subsidiaries are required to maintain minimum capital requirements prescribed by various regulatory authorities in each of the states in which we operate. As of December 31, 2003, our subsidiaries had aggregate statutory capital and surplus of $64.7 million, compared with the required minimum aggregate statutory capital and surplus requirements of $30.9 million.

The National Association of Insurance Commissioners has adopted rules which set minimum risk-based capital requirements for insurance companies, managed care organizations and other entities bearing risk for healthcare coverage. As of December 31, 2003, our Wisconsin, Texas and Ohio health plans were in compliance with risk-based capital requirements. Indiana has adopted risk-based capital rules that will take effect as of December 31, 2004. If adopted by New Jersey, risk-based capital may increase the minimum capital required for our health plan in New Jersey. We continue to monitor the requirements in Indiana and New Jersey and do not expect that they will have a material impact on our results of operations, financial position or cash flows.

A discussion of recent accounting pronouncements and their effect on our financial position and results of operations can be found in Note 3 to our annual consolidated financial statements under the caption Recent Accounting Pronouncements included elsewhere herein.

This filing contains forward-looking statements that relate to future events or our future financial performance. We have attempted to identify these statements by terminology including “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “seek,” “goal,” “may,” “will,” “should,” “can,” “continue” or the negative of these terms or other comparable terminology. These statements include statements about our market opportunity, our growth strategy, competition, expected activities and future acquisitions, investments and the adequacy of our available cash resources. These statements may be found in the sections of this filing entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Readers are cautioned that matters subject to forward-looking statements involve known and unknown risks and uncertainties, including economic, regulatory, competitive and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions.

Actual results may differ from projections or estimates due to a variety of important factors. Our results of operations and projections of future earnings depend in large part on accurately predicting and effectively managing health benefits and other operating expenses. A variety of factors, including competition, changes in health care practices, changes in federal or state laws and regulations or their interpretations, inflation, provider contract changes, new technologies, government-imposed surcharges, taxes or assessments, reduction in provider payments by governmental payers, major epidemics, disasters and numerous other factors affecting the delivery and cost of healthcare, such as major healthcare providers’ inability to maintain their operations, may in the future affect our ability to control our medical costs and other operating expenses. Governmental action or business conditions could result in premium revenues not increasing to offset any increase in medical costs and other operating expenses. Once set, premiums are generally fixed for one-year periods and, accordingly, unanticipated costs during such periods cannot be recovered through higher premiums. The expiration, cancellation or suspension of our Medicaid managed care contracts by the state governments would also negatively impact us. Due to these factors and risks, we cannot give assurances with respect to our future premium levels or our ability to control our future medical costs.

You should carefully consider the risks described below before making an investment decision. The trading price of our common stock could decline due to any of these risks, in which case you could lose all or part of your investment. You should also refer to the other information in this filing, including our consolidated financial statements and related notes. The risks and uncertainties described below are those that we currently believe may materially affect our company. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial also may become important factors that affect our company.

Most of our revenues come from Medicaid and SCHIP premiums. The base premium rate paid by each state differs, depending on a combination of factors such as defined upper payment limits, a member’s health status, age, gender, county or region, benefit mix and member eligibility categories. Future levels of Medicaid and SCHIP premium rates may be affected by continued government efforts to contain medical costs and may further be affected by state and federal budgetary constraints. Changes to Medicaid and SCHIP programs could reduce the number of persons enrolled or eligible, reduce the amount of reimbursement or payment levels, or increase our administrative or healthcare costs under those programs. States periodically consider reducing or reallocating the amount of money they spend for Medicaid and SCHIP. We believe that reductions in Medicaid and SCHIP payments could substantially reduce our profitability. Further, our contracts with the states are subject to cancellation by the state after a short notice period in the event of unavailability of state funds.

We provide managed care programs and selected services to individuals receiving benefits under federal assistance programs, including Medicaid, SSI and SCHIP. We provide those healthcare services under contracts with regulatory entities in the areas in which we operate. The contracts expire on various dates between April 30, 2004 and December 31, 2004. Our contracts may be terminated if we fail to perform up to the standards set by state regulatory agencies. In addition, the Indiana contract under which we operate can be terminated by the state without cause. Our contracts are generally intended to run for two years and may be extended for one or two additional years if the state or its contractor elects to do so. When our contracts expire, they may be opened for bidding by competing healthcare providers. There is no guarantee that our contracts will be renewed or extended. If any of our contracts are terminated, not renewed, or renewed on less favorable terms, our business will suffer, and our operating results may be materially affected.

Our business is extensively regulated by the states in which we operate and by the federal government. The applicable laws and regulations are subject to frequent change and generally are intended to benefit and protect health plan providers and members rather than stockholders. Changes in existing laws and rules, the enactment of new laws and rules or changing interpretations of these laws and rules could, among other things:


	•	force us to restructure our relationships with providers within our network;

	•	require us to implement additional or different programs and systems;

	•	mandate minimum medical expense levels as a percentage of premiums revenues;

	•	restrict revenue and enrollment growth;


	•	require us to develop plans to guard against the financial insolvency of our providers;

	•	increase our healthcare and administrative costs;

	•	impose additional capital and reserve requirements; and

	•	increase or change our liability to members in the event of malpractice by our providers.

For example, Congress has considered various forms of patient protection legislation commonly known as the Patients’ Bill of Rights and patient protection legislation is currently pending in Congress. We cannot predict the impact of this legislation, if adopted, on our business.

Our Texas plan is required to pay a rebate to the state in the event profits exceed established levels. Similarly, our New Jersey plan is required to pay a rebate to the state in the event its health benefits ratio is less than 80%. These regulatory requirements, changes in these requirements or the adoption of similar requirements by our other regulators may limit our ability to increase our overall profits as a percentage of revenues. The states of Texas, Indiana and New Jersey have implemented prompt-payment laws and are enforcing penalty provisions for failure to pay claims in a timely manner. Failure to meet these requirements can result in financial fines and penalties. In addition, states may attempt to reduce their contract premium rates if regulators perceive our health benefits ratio as too low. Any of these regulatory actions could harm our operating results.

Also, on January 18, 2002, CMS published a final rule that removed a provision contained in the federal Medicaid reimbursement regulations permitting states to reimburse non-state government-owned or operated hospitals for inpatient and outpatient hospital services at amounts up to 150% of a reasonable estimate of the amount that would be paid for the services furnished by these hospitals under Medicaid payment principles. The upper payment limit was reduced to 100% of Medicare payments for comparable services. This development in federal regulation decreased the profitability of our health plans.

Federal and state governments have enacted fraud and abuse laws and other laws to protect patients’ privacy and access to healthcare. Violation of these and other laws or regulations governing our operations or the operations of our providers could result in the imposition of civil or criminal penalties, the cancellation of our contracts to provide services, the suspension or revocation of our licenses or our exclusion from participating in the Medicaid, SSI and SCHIP programs. If we were to become subject to these penalties or exclusions as the result of our actions or omissions, or our inability to monitor the compliance of our providers, it would negatively impact our ability to operate our business. For example, failure to pay our providers promptly could result in the imposition of fines and other penalties. In some states, we may be subject to regulation by more than one governmental authority, which may impose overlapping or inconsistent regulations.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, broadened the scope of fraud and abuse laws applicable to healthcare companies. HIPAA created civil penalties for, among other things, billing for medically unnecessary goods or services. HIPAA established new enforcement mechanisms to combat fraud and abuse. Further, HIPAA imposes civil and, in some instances, criminal penalties for failure to comply with specific standards relating to the privacy, security and electronic transmission of most individually identifiable health information. It is possible that Congress may enact additional legislation in the future to increase penalties and to create a private right of action under HIPAA, which could entitle patients to seek monetary damages for violations of the privacy rules.

On August 17, 2000, the United States Department of Health and Human Services, or HHS, issued a new regulation under HIPAA requiring the use of uniform electronic data transmission standards for

healthcare claims and payment transactions submitted or received electronically. We were originally required to comply with this regulation by October 16, 2003. On July 24, 2003, CMS issued guidance allowing covered entities to implement contingency plans and accept legacy transaction formats if they were not able to meet the October 16th, 2003 compliance date. The objective of the guidance was to “ensure the smooth flow of payments” within the health care industry. Many of the states that we operate in implemented contingency plans, which resulted in staggered compliance dates for the organization from October 16, 2003 to April 16, 2004.

In December 2000, HHS issued a new regulation mandating heightened privacy and confidentiality protections under HIPAA that became effective on April 14, 2001 and for which compliance was required by April 14, 2003. We have begun to integrate GPA into our privacy program. GPA’s privacy policies and procedures are being updated to align with our policies and procedures and all GPA employees are receiving job specific education and training on our privacy practices. Full integration of our privacy program at GPA is expected by the second quarter of 2004.

On February 20, 2003 HHS published the final HIPAA health data security regulations. The security regulations became effective on April 21, 2003. Compliance with the security regulations is required by April 21, 2005. These regulations will require covered entities to implement administrative, physical and technical safeguards to protect electronic health information maintained or transmitted by the organization.

The issuance of future judicial or regulatory guidance regarding the interpretation of regulations, the states’ ability to promulgate stricter rules, and continuing uncertainty regarding many aspects of the regulations’ implementation may make compliance with the relatively new regulatory landscape difficult. For example, our existing programs and systems may not enable us to comply in all respects with the new security regulations. In order to comply with the regulatory requirements, we will be required to employ additional or different programs and systems, the costs of which were $310,000 in 2003 and are not expected to exceed $500,000 in 2004. Further, compliance with these regulations would require changes to many of the procedures we currently use to conduct our business, which may lead to additional costs that we have not yet identified. We do not know whether, or the extent to which, we will be able to recover from the states our costs of complying with these new regulations. The new regulations and the related compliance costs could have a material adverse effect on our business.

Numerous proposals relating to changes in healthcare law have been introduced, some of which have been passed by Congress and the states in which we operate or may operate in the future. Changes in applicable laws and regulations are continually being considered, and interpretations of existing laws and rules may also change from time to time. We are unable to predict what regulatory changes may occur or what effect any particular change may have on our business. For example, these changes could reduce the number of persons enrolled or eligible for Medicaid and reduce the reimbursement or payment levels for medical services. More generally, we are unable to predict whether new laws or proposals will favor or hinder the growth of managed healthcare. Legislation or regulations that require us to change our current manner of operation, provide additional benefits or change our contract arrangements may seriously harm our operations and financial results.

In February 2003, the Bush Administration proposed a major long-term change in the way Medicaid and SCHIP are funded. The proposal, if adopted, would allow states to elect to receive combined Medicaid-SCHIP “allotments” for acute and long-term health care for low-income, uninsured persons. Participating states would be given flexibility in designing their own health insurance programs, subject to federally-mandated minimum coverage requirements. It is uncertain whether this proposal will be enacted, or if so, how it may change from the initial proposal. Accordingly, it is unknown whether or how many states might elect to participate or how their participation may affect the net amount of funding available for Medicaid and SCHIP programs. If such a proposal is adopted and decreases the number of persons

enrolled in Medicaid or SCHIP in the states in which we operate or reduces the volume of healthcare services provided, our growth, operations and financial performance could be adversely affected.

SCHIP is a federal initiative designed to provide coverage for low-income children not otherwise covered by Medicaid or other insurance programs. The programs vary significantly from state to state. Participation in SCHIP programs is an important part of our growth strategy. If states do not allow us to participate or if we fail to win bids to participate, our growth strategy may be materially and adversely affected.

We principally operate through our health plan subsidiaries. If funds normally available to us become limited in the future, we may need to rely on dividends and distributions from our subsidiaries to fund our operations. These subsidiaries are subject to regulations that limit the amount of dividends and distributions that can be paid to us without prior approval of, or notification to, state regulators. If these regulators were to deny our subsidiaries’ request to pay dividends to us, the funds available to our company as a whole would be limited, which could harm our ability to implement our business strategy.

Nearly all of our revenues are generated by premiums consisting of fixed monthly payments per member. These premiums are fixed by contract, and we are obligated during the contract periods to provide healthcare services as established by the state governments. We use a large portion of our revenues to pay the costs of healthcare services delivered to our customers. If premiums do not increase when expenses related to medical services rise, our earnings will be affected negatively. In addition, our actual medical services costs may exceed our estimates, which would cause our health benefits ratio, or our expenses related to medical services as a percentage of premium revenues, to increase and our profits to decline. In addition, it is possible for a state to increase the rates payable to the hospitals without granting a corresponding increase in premiums to us. If this were to occur in one or more of the states in which we operate, our profitability would be harmed.

Our profitability depends, to a significant degree, on our ability to predict and effectively manage expenses related to health benefits. We have less control over the costs related to medical services than we do over our general and administrative expenses. Historically, our health benefits ratio has fluctuated. For example, our health benefits ratio was 82.4% for the year ended December 31, 2003, 82.3% for 2002, 82.8% for 2001 and 84.3% for 2000, but was 88.9% for 1999 and 88.4% for 1998. Because of the narrow margins of our health plan business, relatively small changes in our health benefits ratio can create significant changes in our financial results. Changes in healthcare regulations and practices, the level of use of healthcare services, hospital costs, pharmaceutical costs, major epidemics, new medical technologies and other external factors, including general economic conditions such as inflation levels, are beyond our control and could reduce our ability to predict and effectively control the costs of providing health benefits. We may not be able to manage costs effectively in the future. If our costs related to health benefits increase, our profits could be reduced or we may not remain profitable.

Our medical expenses include estimates of IBNR medical expenses. We estimate our IBNR medical expenses monthly based on a number of factors. Adjustments, if necessary, are made to medical expenses

in the period during which the actual claim costs are ultimately determined or when criteria used to estimate IBNR change. We cannot be sure that our IBNR estimates are adequate or that adjustments to those estimates will not harm our results of operations. From time to time in the past, our actual results have varied from our estimates, particularly in times of significant changes in the number of our members. Our failure to estimate IBNR accurately may also affect our ability to take timely corrective actions, further harming our results.

Historically, the acquisition of Medicaid businesses, contract rights and related assets of other health plans both in our existing service areas and in new markets has accounted for a significant amount of our growth. For example, our acquisition of 80% of the equity of UHP on December 1, 2002, accounted for 30.3% of the increase in our membership for the year ended December 31, 2002 compared to 2001. Many of the other potential purchasers of Medicaid assets have greater financial resources than we have. In addition, many of the sellers are interested either in (a) selling, along with their Medicaid assets, other assets in which we do not have an interest or (b) selling their companies, including their liabilities, as opposed to the assets of their ongoing businesses.

We generally are required to obtain regulatory approval from one or more state agencies when making acquisitions. In the case of an acquisition of a business located in a state in which we do not currently operate, we would be required to obtain the necessary licenses to operate in that state. In addition, even if we already operate in a state in which we acquire a new business, we would be required to obtain additional regulatory approval if the acquisition would result in our operating in an area of the state in which we did not operate previously and we could be required to renegotiate provider contracts of the acquired business. We cannot assure you that we would be able to comply with these regulatory requirements for an acquisition in a timely manner, or at all. In deciding whether to approve a proposed acquisition, state regulators may consider a number of factors outside our control, including giving preference to competing offers made by locally owned entities or by not-for-profit entities. Furthermore, our credit facility may prohibit some acquisitions without the consent of our bank lender.

In addition to the difficulties we may face in identifying and consummating acquisitions, we will also be required to integrate and consolidate any acquired business or assets with our existing operations. This may include the integration of:


	•	additional personnel who are not familiar with our operations and corporate culture;

	•	existing provider networks, that may operate on different terms than our existing networks;

	•	existing members, who may decide to switch to another healthcare plan; and

	•	disparate administrative, accounting and finance, and information systems.

Accordingly, we may be unable to identify, consummate and integrate future acquisitions successfully or operate acquired businesses profitably. We also may be unable to obtain sufficient additional capital resources for future acquisitions. If we are unable to effectively execute our acquisition strategy, our future growth will suffer and our results of operations could be harmed.

We are seeking to diversify our business lines into areas that complement our Medicaid business in order to grow our revenue stream and balance our dependence on Medicaid risk reimbursement. In 2003, for example, we acquired GPA, a behavioral health services company, and purchased contract and name rights of ScriptAssist, a medication compliance company. In order to diversify our business, we must succeed in selling the services of GPA, ScriptAssist and any other specialty subsidiaries not only to our managed care plans, but to programs operated by third-parties. Some of these third-party programs may compete with us in some markets, and they therefore may be unwilling to purchase specialty services from

us. In any event, the offering of these services will require marketing activities that differ significantly from the manner in which we seek to increase revenues from our Medicaid programs. Our inability to market specialty services to other programs may impair our ability to execute our business strategy.

Start-up costs associated with a new business can be substantial. For example, in order to obtain a certificate of authority in most jurisdictions, we must first establish a provider network, have systems in place and demonstrate our ability to obtain a state contract and process claims. If we were unsuccessful in obtaining the necessary license, winning the bid to provide service or attracting members in numbers sufficient to cover our costs, any new business of ours would fail. We also could be obligated by the state to continue to provide services for some period of time without sufficient revenue to cover our ongoing costs or recover start-up costs. The expenses associated with starting up a new business could have a significant impact on our results of operations if we are unable to achieve profitable operations in a timely fashion.

Operations in Wisconsin, Texas, Indiana, New Jersey and Ohio account for a majority of our premium revenues. If we were unable to continue to operate in each of those states or if our current operations in any portion of one of those states were significantly curtailed, our revenues would decrease materially. Our reliance on operations in a limited number of states could cause our revenue and profitability to change suddenly and unexpectedly, depending on legislative actions, economic conditions and similar factors in those states. Our inability to continue to operate in any of the states in which we operate would harm our business.

We compete for members principally on the basis of size and quality of provider network, benefits provided and quality of service. We compete with numerous types of competitors, including other health plans and traditional state Medicaid programs that reimburse providers as care is provided. Subject to limited exceptions by federally approved state applications, the federal government requires that there be choices for Medicaid recipients among managed care programs. Voluntary programs and mandated competition may limit our ability to increase our market share.

Some of the health plans with which we compete have greater financial and other resources and offer a broader scope of products than we do. In addition, significant merger and acquisition activity has occurred in the managed care industry, as well as in industries that act as suppliers to us, such as the hospital, physician, pharmaceutical, medical device and health information systems businesses. To the extent that competition intensifies in any market that we serve, our ability to retain or increase members and providers, or maintain or increase our revenue growth, pricing flexibility and control over medical cost trends may be adversely affected.

In addition, in order to increase our membership in the markets we currently serve, we believe that we must continue to develop and implement community-specific products, alliances with key providers and localized outreach and educational programs. If we are unable to develop and implement these initiatives, or if our competitors are more successful than we are in doing so, we may not be able to further penetrate our existing markets.

Our profitability depends, in large part, upon our ability to contract favorably with hospitals, physicians and other healthcare providers. Our provider arrangements with our primary care physicians,

specialists and hospitals generally may be cancelled by either party without cause upon 90 to 120 days’ prior written notice. We cannot assure you that we will be able to continue to renew our existing contracts or enter into new contracts enabling us to service our members profitably.

From time to time providers assert or threaten to assert claims seeking to terminate noncancelable agreements due to alleged actions or inactions by us. Even if these allegations represent attempts to avoid or renegotiate contractual terms that have become economically disadvantageous to the providers, it is possible that in the future a provider may pursue such a claim successfully. In addition, we are aware that other managed care organizations have been subject to class action suits by physicians with respect to claim payment procedures, and we may be subject to similar claims. Regardless of whether any claims brought against us are successful or have merit, they will still be time-consuming and costly and could distract our management’s attention. As a result, we may incur significant expenses and may be unable to operate our business effectively.

We will be required to establish acceptable provider networks prior to entering new markets. We may be unable to enter into agreements with providers in new markets on a timely basis or under favorable terms.

If we are unable to retain our current provider contracts or enter into new provider contracts timely or on favorable terms, our profitability will be harmed.

We are highly dependent on our ability to attract and retain qualified personnel to operate and expand our business. If we lose one or more members of our senior management team, including our chief executive officer, Michael F. Neidorff, who has been instrumental in developing our business strategy and forging our business relationships, our business and operating results could be harmed. We do not have an employment agreement with Mr. Neidorff, and we cannot assure you that we will be able to retain his services. Our ability to replace any departed members of our senior management or other key employees may be difficult and may take an extended period of time because of the limited number of individuals in the Medicaid managed care and specialty services industry with the breadth of skills and experience required to operate and successfully expand a business such as ours. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these personnel.

Recently, the managed care industry has received negative publicity. This publicity has led to increased legislation, regulation, review of industry practices and private litigation in the commercial sector. These factors may adversely affect our ability to market our services, require us to change our services, and increase the regulatory burdens under which we operate. Any of these factors may increase the costs of doing business and adversely affect our operating results.

Our providers and employees involved in medical care decisions may be subject to medical malpractice claims. In addition, some states, including Texas, have adopted legislation that permits managed care organizations to be held liable for negligent treatment decisions or benefits coverage determinations. Claims of this nature, if successful, could result in substantial damage awards against us and our providers that could exceed the limits of any applicable insurance coverage. Therefore, successful malpractice or tort claims asserted against us, our providers or our employees could adversely affect our financial condition and profitability. Even if any claims brought against us are unsuccessful or without merit, they would still be time-consuming and costly and could distract our management’s attention. As a result, we may incur significant expenses and may be unable to operate our business effectively.

Our providers routinely purchase insurance to help protect themselves against medical malpractice claims. In recent years, the costs of maintaining commercially reasonable levels of such insurance have increased dramatically, and these costs are expected to increase to even greater levels in the future. As a result of the level of these costs, providers may decide to leave the practice of medicine or to limit their practice to certain areas, which may not address the needs of Medicaid participants. We rely on retaining a sufficient number of providers in order to maintain a certain level of service. If a significant number of our providers exit our provider networks or the practice of medicine generally, we may be unable to replace them in a timely manner, if at all, and our business could be adversely affected.

Less favorable economic conditions may cause our membership to increase as more people become eligible to receive Medicaid benefits. During such economic downturns, however, state and federal budgets could decrease, causing states to attempt to cut healthcare programs, benefits and rates. We cannot predict the impact of changes in the United States economic environment or other economic or political events, including acts of terrorism or related military action, on federal or state funding of healthcare programs or on the size of the population eligible for the programs we operate. If federal funding decreases or remains unchanged while our membership increases, our results of operations will suffer.

Historically, the number of persons eligible to receive Medicaid benefits has increased more rapidly during periods of rising unemployment, corresponding to less favorable general economic conditions. Conversely, this number may grow more slowly or even decline if economic conditions improve. Therefore, improvements in general economic conditions may cause our membership levels to decrease, thereby causing our operating results to suffer, which could lead to decreases in our stock price during periods in which stock prices in general are increasing.

We expect to continue to focus our business in states in which Medicaid enrollment in managed care is mandatory. Currently, approximately two-thirds of the states require health plan enrollment for Medicaid eligible participants in all or a portion of their counties. The programs are voluntary in other states. Because we concentrate on markets with mandatory enrollment, we expect the geographic expansion of our Medicaid Managed Care segment to be limited to those states.

Our operations depend significantly on effective information systems. The information gathered and processed by our information systems assists us in, among other things, monitoring utilization and other cost factors, processing provider claims, and providing data to our regulators. Our providers also depend upon our information systems for membership verifications, claims status and other information.

Our information systems and applications require continual maintenance, upgrading and enhancement to meet our operational needs. Moreover, our acquisition activity requires frequent transitions to or from, and the integration of, various information systems. We regularly upgrade and expand our information systems capabilities. If we experience difficulties with the transition to or from information systems or are unable to properly maintain or expand our information systems, we could suffer, among other things, from operational disruptions, loss of existing members and difficulty in attracting new members, regulatory problems and increases in administrative expenses. In addition, our ability to integrate and manage our

information systems may be impaired as the result of events outside our control, including acts of nature, such as earthquakes or fires, or acts of terrorists.

We maintain liability insurance, subject to limits and deductibles, for claims that could result from providing or failing to provide managed care and related services. These claims could be substantial. We believe that our present insurance coverage and reserves are adequate to cover currently estimated exposures. We cannot assure you that we will be able to obtain adequate insurance coverage in the future at acceptable costs or that we will not incur significant liabilities in excess of policy limits.

As of December 31, 2003, we had short-term investments of $15.2 million and long-term investments of $205.2 million, including restricted deposits of $20.4 million. The short-term investments consist of highly liquid securities with maturities between three and 12 months. The long-term investments consist of municipal bonds and U.S. Treasury investments and have original maturities greater than one year. Restricted deposits consist of investments required by various state statutes to be deposited or pledged to state agencies. These investments are classified as long-term regardless of the contractual maturity date due to the nature of the states’ requirements. These investments are subject to interest rate risk and will decrease in value if market rates increase. We have the ability to hold these short-term investments to maturity which would mitigate the risk of a significant increase in market rates. Assuming a hypothetical and immediate 1% increase in market interest rates at December 31, 2003, the fair value of our fixed income investments would decrease by approximately $5.8 million. Declines in interest rates over time will reduce our investment income.

Although the general rate of inflation has remained relatively stable and healthcare cost inflation has stabilized in recent years, the national healthcare cost inflation rate still exceeds the general inflation rate. We use various strategies to mitigate the negative effects of healthcare cost inflation. Specifically, our health plans try to control medical and hospital costs through contracts with independent providers of healthcare services. Through these contracted care providers, our health plans emphasize preventive healthcare and appropriate use of specialty and hospital services.

While we currently believe our strategies to mitigate healthcare cost inflation will continue to be successful, competitive pressures, new healthcare and pharmaceutical product introductions, demands from healthcare providers and customers, applicable regulations or other factors may affect our ability to control the impact of healthcare cost increases.

Federal and state regulations governing standards for electronic transactions, data security and confidentiality of patient information have been issued recently. Due to the uncertainty surrounding the regulatory requirements, we cannot be sure that the systems and programs that we have implemented will comply adequately with the regulations that are ultimately adopted. Implementation of additional systems and programs will be required, the cost of which we estimate not to exceed $500,000 in 2004. Further, compliance with these regulations would require changes to many of the procedures we currently use to conduct our business, which may lead to additional costs that we have not yet identified. We do not know whether, or the extent to which, we will be able to recover our costs of complying with these new regulations from the states.

Our consolidated financial statements and related notes required by this item are set forth on the pages indicated in Item 15.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2003. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2003, our disclosure controls and procedures were (1) designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Information concerning our directors will appear in our Proxy Statement for our 2004 annual meeting of stockholders under “Election of Directors.” This portion of the Proxy Statement is incorporated herein by reference.

The following table sets forth information regarding our executive officers and key employees, including their ages at January 31, 2004:

Michael F. Neidorff has served as our President, Chief Executive Officer and as a member of our board of directors since May 1996. From May 1996 to November 2001, Mr. Neidorff also served as our Treasurer. From 1995 to 1996, Mr. Neidorff served as a Regional Vice President of Coventry Corporation, a publicly traded managed care organization, and as the President and Chief Executive Officer of one of its subsidiaries, Group Health Plan, Inc. From 1985 to 1995, Mr. Neidorff served as the President and Chief Executive Officer of Physicians Health Plan of Greater St. Louis, a subsidiary of United Healthcare Corp., a publicly traded managed care organization now known as UnitedHealth Group Incorporated.

Joseph P. Drozda, Jr., M.D. has served as our Executive Vice President, Operations since September 2003. Dr. Drozda served as our Senior Vice President, Medical Affairs from November 2000 through August 2003 and as our part-time Medical Director from January 2000 through October 2000. From June 1999 to October 2000, Dr. Drozda was self-employed as a consultant to managed care organizations, physician groups, hospital networks and employer groups on a variety of managed care delivery and financing issues. From 1996 to April 1999, Dr. Drozda served as the Vice President of Medical Management of SSM Health Care, a health services network.

Carol E. Goldman has served as Senior Vice President, Chief Administration Officer since July 2002. From September 2001 to June 2002, Ms. Goldman served as our Plan Director of Human Resources.

From 1998 to August 2001, Ms. Goldman was Human Resources Manager at Mallinckrodt Inc., a medical device and pharmaceutical company. From 1996 to 1998, Ms. Goldman served as Compensation Analyst for Mallinckrodt.

Cary D. Hobbs has served as our Senior Vice President of Strategy and Business Implementation since January 2004, as our Vice President of Strategy and Business Implementation from September 2002 to December 2003 and as our Director of Business Implementation from 1997 to August 2002. From 1995 to 1996, Ms. Hobbs was responsible for the development and implementation of the corporate Community Relations department of Group Health Plan, a St. Louis-based subsidiary of Coventry Corporation.

Daniel R. Paquin has served as our Senior Vice President, New Plan Implementation and Development since September 2003. From January 2003 through August 2003, Mr. Paquin served as our Senior Vice President, Health Plan Business Group. In 2002, Mr. Paquin served as Regional President, Midwest/ Medicaid for UnitedHealth Group. From 1999 to 2002, Mr. Paquin served as Senior Vice President, Operations at AmeriChoice Health Services, a managed care organization. From 1997 to 1999, Mr. Paquin was the Regional Vice President, Northeast Region of Comprehensive Care Corporation, a managed care organization.

William N. Scheffel has served as our Senior Vice President and Controller since December 2003. From July 2002 to October 2003, Mr. Scheffel was a partner with Ernst & Young LLP. From 1975 to July 2002, Mr. Scheffel was with Arthur Andersen LLP, where he was admitted as a partner in 1987. Mr. Scheffel is a Certified Public Accountant.

Brian G. Spanel has served as our Senior Vice President and Chief Information Officer since December 1996. From 1988 to 1996, Mr. Spanel served as President of GBS Consultants, a healthcare consulting and help desk software developer. From 1987 to 1988, Mr. Spanel was Director of Information Services for CompCare, a managed care organization. From 1984 to 1987, Mr. Spanel was Director of Information Services for Peak Health Care, a managed care organization.

John D. Tadich has served as our Senior Vice President, Specialty Companies since November 2002. From 1997 to October 2002, Mr. Tadich was a private investor and consultant in the healthcare industry. From 1992 to 1997, Mr. Tadich served as President of United Behavioral Health, a specialty company within UnitedHealth Group.

Karey L. Witty has served as our Senior Vice President and Chief Financial Officer since August 2000, as our Secretary since February 2000 and as our Treasurer since November 2001. From March 1999 to August 2000, Mr. Witty served as our Vice President of Health Plan Accounting. From 1996 to March 1999, Mr. Witty was Controller of Heritage Health Systems, Inc., a healthcare company in Nashville, Tennessee. From 1994 to 1996, Mr. Witty served as Director of Accounting for Healthwise of America, Inc., a publicly traded managed care organization. Mr. Witty is a Certified Public Accountant.

Christopher D. Bowers has served as the President and Chief Executive Officer of Superior HealthPlan, our health plan in Texas, since April 2002. From October 2000 to March 2002, Mr. Bowers was the Vice President of Operations for Physicians Health Plan of Southwest Michigan, Inc. and IBA Health & Life Assurance Company, which are wholly owned subsidiaries of the Bronson Healthcare Group. From 1996 to September 2000, Mr. Bowers served as the Director of Government Programs, Kalamazoo, Michigan, for UnitedHealth Group. While directly working for Bronson Healthcare Group, Mr. Bowers served as the Assistant Vice President of Community Relations and the Assistant Vice President of Strategic Planning and Development.

Kathleen R. Crampton has served as the President and Chief Executive Officer of Managed Health Services Insurance Corp., our health plan in Wisconsin, since June 2000. From November 1999 to May 2000, Ms. Crampton was a Senior Consultant for PricewaterhouseCoopers LLC. From June 1996 to October 1999, Ms. Crampton served as Vice President of the Patterson Group, a private consulting firm serving health maintenance organizations and their service providers and medical manufacturers. From 1993 to 1996, Ms. Crampton served as Vice President of Marketing for Healthtech Services Corporation, a home care robotics and telemedicine information systems company.

Rita Johnson-Mills has served as the President and Chief Executive Officer of Coordinated Care Corporation, our health plan in Indiana, since April 2001. From September 2000 to April 2001, Ms. Johnson-Mills served as the Chief Operating Officer of Coordinated Care Corporation. From 1999 to 2000, Ms. Johnson-Mills was a Senior Vice President and the Chief Operating Officer of Medical Diagnostic Management, Inc. From 1995 to 1999, Ms. Johnson-Mills served as Senior Vice President and Chief Operating Officer of DC Chartered Health Plan, Inc., a health maintenance organization.

Alexander H. McLean has served as the President and Chief Executive Officer of University Health Plans, a health plan in New Jersey of which we acquired control in December 2002, since May 1999. From 1997 to May 1999, Mr. McLean served as the Chief Operating Officer of UHP. From 1995 to 1997, Mr. McLean was employed by Ernst & Young LLP as a Senior Consultant in its healthcare practice.

Information concerning our executive officers’ compliance with Section 16(a) of the Securities Exchange Act will appear in our Proxy Statement for our 2004 annual meeting of stockholders under “Section 16(a) Beneficial Ownership Reporting Compliance.” This portion of our Proxy Statement is incorporated herein by reference.

Information concerning executive compensation will appear in our Proxy Statement for our 2004 annual meeting of stockholders under “Information About Executive Compensation” and “Stock Performance Graph.” These portions of the Proxy Statement are incorporated herein by reference.

Information concerning the security ownership of certain beneficial owners and management and our equity compensation plans will appear in our Proxy Statement for our 2004 annual meeting of stockholders under “Principal Stockholders” and “Equity Compensation Plan Information.” These portions of the Proxy Statement are incorporated herein by reference.

Information concerning certain relationships and related transactions will appear in our Proxy Statement for our 2004 annual meeting of stockholders under “Related Party Transactions.” This portion of our Proxy Statement is incorporated herein by reference.

Information concerning principal accountant fees and services will appear in our Proxy Statement for our 2004 annual meeting of stockholders under “Principal Accountant Fees and Services.” This portion of our Proxy Statement is incorporated herein by reference.


	The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this filing.


	On October 27, 2003, we furnished a current report on Form 8-K under Item 12 announcing our operating results for the quarter ended September 30, 2003.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, of stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of Centene Corporation and its subsidiaries (the Company) at December 31, 2003 and December 31, 2002, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The financial statements of the Company for the year ended December 31, 2001, prior to the revisions discussed in Notes 1 and 3, were audited by other independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on those financial statements in their report dated February 1, 2002.

As discussed above, the financial statements of the Company for the year ended December 31, 2001 were audited by other independent accountants who have ceased operations. As described in Notes 1 and 3, these financial statements have been restated to reflect the three-for-two stock split that was declared by the Company’s Board of Directors on May 27, 2003 and have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. We audited the adjustments described in Note 1 that were applied to restate the 2001 financial statements and the transitional disclosures described in Note 3. In our opinion, such adjustments are appropriate and have been properly applied and the transitional disclosures for 2001 in Note 3 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 financial statements of the Company other than with respect to such adjustments and disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 financial statements taken as a whole.

The following report is a copy of the report previously issued by Arthur Andersen LLP and has not been reissued by Arthur Andersen LLP. The Financial Statements to which this report relates have been restated to reflect the three-for-two stock split which was declared by Centene Corporation’s board of directors on May 27, 2003 and have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. This copy of the Arthur Andersen report does not cover the adjustments to restate the Financial Statements which is further discussed in Note 1, or the transitional disclosures which are presented in Note 3. The adjustments and transitional disclosures were reported on by PricewaterhouseCoopers LLP.

We have audited the accompanying consolidated balance sheets of Centene Corporation (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of earnings, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Centene Corporation and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

Centene Corporation (Centene or the Company) provides multi-line managed care programs and related services to individuals receiving benefits under government subsidized programs including Medicaid, Supplemental Security Income (SSI), and the State Children’s Health Insurance Program (SCHIP). Centene’s Medicaid Managed Care segment operates under its own state licenses in Wisconsin, Texas, Indiana and New Jersey, and contracts with other managed care organizations to provide risk and nonrisk management services. As of January 1, 2004, the Company commenced operations under its own state license in Ohio. Centene’s Specialty Services segment contracts with other healthcare organizations, as well as Centene owned companies, to provide specialty services including behavioral health, nurse triage and pharmacy compliance.

In May 2003, the Company declared a three-for-two stock split effected in the form of a 50% stock dividend, payable July 11, 2003 to shareholders of record on June 20, 2003. All share, per share and stockholders’ equity amounts have been restated to reflect this stock split.

In August 2003, the Company closed a follow-on public offering of 3,450,000 shares of common stock at $25.00 per share. Centene received net proceeds of $81,313 from this offering.

In June 2002, the Company closed a follow-on public offering whereby 7,919,258 shares were sold by selling stockholders and 705,743 shares were sold by the Company at $16.50 per share. Centene received net proceeds of $10,318 from this offering.

In December 2001, the Company completed an initial public offering (IPO) of 4,875,000 shares of its common stock at $9.33 per share. The net proceeds to the Company were $41,042. In conjunction with the IPO, all outstanding shares of preferred stock were converted into shares of common stock in accordance with their terms.

The accompanying consolidated financial statements include the accounts of Centene Corporation and all majority owned subsidiaries. All material intercompany balances and transactions have been eliminated.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investments with original maturities of three months or less are considered to be cash equivalents. Cash equivalents consist of commercial paper, money market funds and bank savings accounts.

Short-term investments include securities with maturities between three months and one year. Long-term investments include securities with maturities greater than one year.

Short-term and long-term investments are classified as available for sale and are carried at fair value based on quoted market prices. Unrealized gains and losses on investments available for sale are excluded from earnings and reported as a separate component of stockholders’ equity, net of income tax effects. Premiums and discounts are amortized or accreted over the life of the related security using the effective interest method. The Company monitors the difference between the cost and fair value of investments. Investments that experience a decline in value that is judged to be other than temporary are written down to fair value and a realized loss is recorded in investment and other income. To calculate realized gains and losses on the sale of investments, the Company uses the specific amortized cost of each investment sold. Realized gains and losses are recorded in investment and other income.

Restricted deposits consist of investments required by various state statutes to be deposited or pledged to state agencies. These investments are classified as long-term, regardless of the contractual maturity date, due to the nature of the states’ requirements. The Company is required to annually adjust the amount of the deposit pledged to certain states. These adjustments are funded from cash and investment balances and are expected to total $629 in 2004.

Property, software and equipment is stated at cost less accumulated depreciation. Depreciation is calculated principally by the straight-line method over estimated useful lives ranging from 40 years for buildings, three years for software and computer equipment and five to seven years for furniture and equipment. Leasehold improvements are depreciated using the straight-line method over the shorter of the expected useful life or the remaining term of the lease ranging between two and ten years.

Intangible assets represent assets acquired in purchase transactions and consist of purchased contract rights, provider contracts and goodwill. Purchased contract rights are amortized using the straight-line method over periods ranging from 60 to 120 months. Provider contracts are amortized using the straight-line method over 120 months.

Effective January 1, 2002, the Company ceased to amortize goodwill in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Goodwill is reviewed at least annually for impairment. In addition, the Company will perform an impairment analysis of intangible assets more frequently based on other factors. Such factors would include, but are not limited to, significant changes in membership, state funding, medical contracts and provider networks and contracts. An impairment loss is recognized if the carrying value of goodwill exceeds the implied fair value. The Company did not recognize any impairment losses for the periods presented.

The effect of this adjustment on net earnings, as well as basic and diluted earnings per share, for the year ended December 31, 2001 follows:

Medical services costs include claims paid, claims adjudicated but not yet paid, estimates for claims received but not yet adjudicated, estimates for claims incurred but not yet received and estimates for the costs necessary to process unpaid claims.

The estimates of medical claims liabilities are developed using standard actuarial methods based upon historical data for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services and other relevant factors including product changes. These estimates are continually reviewed and adjustments, if necessary, are reflected in the period known. Management did not change actuarial methods during the years presented. Management believes the amount of medical claims payable is reasonable and adequate to cover the Company’s liability for unpaid claims as of December 31, 2003; however, actual claim payments may differ from established estimates.

The majority of the Company’s Medicaid Managed Care premium revenue is received monthly based on fixed rates per member as determined by the state contracts. Some contracts allow for additional premium related to certain supplemental services provided such as maternity deliveries. The revenue is recognized as earned over the covered period of services. Premiums collected in advance are recorded as unearned revenue.

The Specialty Services segment generates revenue from capitation payments to our behavioral health company from our health plans and others. It also receives fees for the direct provision of care and school programs in Arizona. The Company’s medication compliance program receives fee income from the manufacturers of pharmaceuticals. The Company’s nurse line product receives fees from health plans, physicians and other organizations for providing continuous access to nurse advisors.

Revenues due to the Company are recorded as premium and related receivables and recorded net of an allowance for uncollectible accounts based on historical trends and management’s judgement on the collectibility of these accounts.

Centene receives the majority of its revenues under contracts or subcontracts with state Medicaid managed care programs. The contracts, which expire on various dates between April 30, 2004 and December 31, 2004 are expected to be renewed. Contracts with the states of Wisconsin, Texas, Indiana and New Jersey each accounted for over 10% of the Company’s revenues for the year ended December 31, 2003.

Centene’s Medicaid Managed Care subsidiaries have purchased reinsurance from third parties to cover eligible healthcare services. The current reinsurance agreements generally cover 90% of inpatient healthcare expenses in excess of annual deductibles of $75 to $150 per member, up to a lifetime maximum of $2,000. The subsidiaries are responsible for inpatient charges in excess of an average daily per diem.

Reinsurance recoveries were $5,345, $1,542 and $3,958 in 2003, 2002 and 2001, respectively. Reinsurance expenses were approximately $6,185, $3,981 and $10,252 in 2003, 2002 and 2001, respectively. Reinsurance recoveries, net of expenses, are included in medical costs.

Other income (expense) consists principally of investment income and interest expense. Investment income is derived from the Company’s cash, cash equivalents, restricted deposits and investments. For the year ended December 31, 2002, investment income included a $5,100 one-time dividend from a captive insurance company in which the Company maintained an investment.

Deferred tax assets and liabilities are recorded for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of the tax rate change.

The Company accounts for stock based compensation plans in accordance with the intrinsic value based method of Accounting Principles Board Opinion No. 25 as permitted by SFAS No. 123 and SFAS No. 148. Compensation cost related to stock options issued to employees is calculated on the date of grant only if the current market price of the underlying stock exceeds the exercise price. Compensation expense is then recognized on a straight-line basis over the vesting period, generally five years. The Company recognized $188, $270 and $6 during the years ended December 31, 2003, 2002 and 2001, respectively, for stock based compensation expense. Had compensation cost for the plans been determined based on the fair value method at the grant dates as specified in SFAS No. 123, the Company’s net earnings would have been reduced to the following pro forma amounts:

Certain 2002 and 2001 amounts in the consolidated financial statements have been reclassified to conform to the 2003 presentation. These reclassifications have no effect on net earnings or stockholders’ equity as previously reported.

In July 2001, Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” was issued which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested at least annually for impairment. The Company has adopted SFAS No. 142 effective January 1, 2002 and goodwill amortization was discontinued. Goodwill is reviewed at least annually for impairment. In addition, the Company will perform an impairment analysis of intangible assets more frequently based on other factors. Such factors would include, but are not limited to, significant changes in membership, state funding, medical contracts and provider networks and contracts. The Company did not recognize any impairment losses for the periods presented.

In June 2002, SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” was issued. It requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of the provisions of SFAS No. 146 did not have a material impact on the Company’s results of operations, financial position or cash flows.

In December 2002, SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” was issued. This Statement provides alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. In addition, this statement requires prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for fiscal years ending after December 15, 2002 and for interim periods beginning after December 15, 2002. The adoption of the provisions of SFAS No. 148 did not have a material impact on the Company’s results of operations, financial position or cash flows.

In November 2002, FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others an interpretation of SFAS No. 5, 57, and 107 and rescission of FASB Interpretation No. 34,” was issued. This interpretation clarifies the requirements of SFAS No. 5, “Accounting for Contingencies,” relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. The adoption of FASB Interpretation No. 45 did not have a significant impact on the net income or equity of the Company.

In January 2003, FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB 51,” was issued. The primary objectives of this interpretation, as amended, are to provide guidance on the identification and consolidation of variable interest entities, or VIE’s, which are entities for which control is achieved through means other than through voting rights. The Company has completed an analysis of this Interpretation and has determined that it does not have any VIEs.

Effective January 1, 2004, the Company commenced operations in Ohio through the acquisition from Family Health Plan, Inc. of certain Medicaid-related assets for a purchase price of approximately $6,800. The cost to acquire the Medicaid-related assets will be allocated to the assets acquired and liabilities assumed according to estimated fair values.

Effective August 1, 2003, the Company acquired certain Medicaid-related contract rights of HMO Blue Texas in the San Antonio, Texas market for $1,045. The purchase price was allocated to acquired contracts, which are being amortized on a straight-line basis over a period of five years, the expected period of benefit.

During 2003, the Company acquired a 100% ownership interest in Group Practice Affiliates, LLC, a behavioral healthcare services company (63.7% in March 2003 and 36.3% in August 2003). The consolidated financial statements include the results of operations of GPA since March 1, 2003. The Company paid $1,800 for its purchase of GPA. The cost to acquire the ownership interest has been allocated to the assets acquired and liabilities assumed according to estimated fair values and is subject to adjustment when additional information concerning asset and liability valuations are finalized. The preliminary allocation has resulted in goodwill of approximately $3,895. The goodwill is not amortized and is not deductible for tax purposes. Pro forma disclosures related to the acquisition have been excluded as immaterial.

In March 2003, the Company purchased contract and name rights of ScriptAssist, LLC (ScriptAssist), a medication compliance company. The purchase price of $563 was allocated to acquired contracts, which are being amortized on a straight-line basis over a period of five years, the expected period of benefit. The investor group who held membership interests in ScriptAssist included one of the Company’s executive officers.

On December 1, 2002, the Company purchased 80% of the outstanding capital stock of University Health Plans, Inc. (UHP) in New Jersey. In October 2003, the Company exercised its option to purchase the remaining 20% of the outstanding capital stock. Centene paid a total purchase price of $13,258. The results of operations for UHP are included in the consolidated financial statements since December 1, 2002.

The acquisition of UHP resulted in identified intangible assets of $3,800, representing purchased contract rights and provider network. The intangibles are being amortized over a ten-year period. Goodwill of $7,940 is not amortized and is not deductible for tax purposes. Changes during 2003 to the preliminary purchase price allocation primarily consisted of the purchase of the remaining 20% of the outstanding stock and the recognition of intangible assets and related deferred tax liabilities.

The following unaudited pro forma information presents the results of operations of Centene and subsidiaries as if the UHP acquisition described above had occurred as of January 1, 2001. These pro forma results may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations.

In June 2002, the Company purchased SCHIP contracts in three Texas service areas. The cash purchase price of $595 was recorded as purchased contract rights, which are being amortized on a straight-line basis over five years, the expected period of benefit.

In March 2002, the Company acquired Bankers Reserve Life Insurance Company of Wisconsin for a cash purchase price of $3,527. The Company allocated the purchase price to net tangible and identifiable intangible assets based on their fair value. Centene allocated $479 to identifiable intangible assets, representing the value assigned to acquired licenses, which are being amortized on a straight-line basis over a period of ten years. The Company accounted for this acquisition under the purchase method of accounting and accordingly, the consolidated results of operations include the results of the acquired Bankers Reserve business from the date of acquisition. Pro forma disclosures related to the acquisition have been excluded as immaterial.

As part of the acquisition, the Company acquired $5,200 of Separate Account assets and $5,200 of Separate Account liabilities. The acquired Separate Account assets and liabilities represent fixed rate annuity contracts with various maturity dates. Concurrent with the acquisition of Bankers Reserve, the Company entered into a 100% coinsurance reinsurance agreement with an unaffiliated party to reinsure the guaranteed cash value, annuity benefit, surrender benefit and death benefits associated with these contracts. The reinsurance premiums paid for this coverage equal the net administrative fee earned and received by the Company on the annuity contracts. Accordingly, there is no income statement impact to the Company as a result of acquiring the Separate Account assets and liabilities. The Separate Account balances, which are being liquidated and paid to insureds as annuities mature, do not have a minimum guarantee benefit beyond the cash surrender value of the policy. At December 31, 2003 Separate Account balances of $3,866 are included in Other assets and Other liabilities in the consolidated balance sheets.

In February 2001, the Company acquired certain contract rights in Wisconsin and Texas for a cash purchase price of $1,250. The purchase price was allocated to purchased contract rights which are being amortized on a straight-line basis over five years, the period expected to be benefited.

Short-term and long-term investments and restricted deposits available for sale by investment type consist of the following:

The contractual maturity of short-term and long-term investments and restricted deposits as of December 31, 2003, are as follows:

Actual maturities may differ from contractual maturities due to call or prepayment options. The Company has the option to redeem within the next five years all of the securities included in the after ten years category listed above.

The Company recorded realized gains and losses on the sale of investments for the years ended December 31 as follows:

Various state statutes require the Company’s managed care subsidiaries to deposit or pledge minimum amounts of investments to state agencies. Securities with an amortized cost of $20,201 and $15,561 were deposited or pledged to state agencies by Centene’s managed care subsidiaries at December 31, 2003 and 2002, respectively. These investments are classified as long-term restricted deposits in the consolidated financial statements due to the nature of the states’ requirements.

Depreciation expense for the years ended December 31, 2003, 2002 and 2001 was $3,469, $1,887 and $1,199, respectively.

Amortization expense was $986, $367 and $648 for the years ended December 31, 2003, 2002 and 2001, respectively. The estimated amortization expense for 2004, 2005, 2006, 2007 and 2008, excluding the acquisition of the Medicaid-related assets in Ohio and assuming no further acquisitions, is approximately $1,100, $1,100, $900, $800 and $600, respectively.

The consolidated income tax expense consists of the following for the years ended December 31:

The following is a reconciliation of the expected income tax expense at U.S. Federal statutory rates to Centene’s actual income tax expense for the years ended December 31:

Temporary differences that give rise to deferred tax assets and liabilities are presented below for the years ended December 31:

Changes in estimates of incurred claims for prior years were attributable to favorable development in all of our markets, including lower than anticipated utilization of medical services.

The Company had reinsurance recoverables related to medical claims liabilities of $1,590 and $2,738 at December 31, 2003 and 2002, respectively, included in premiums and other receivables.

The Company has a $25,000 revolving line of credit facility with LaSalle Bank N.A. (LaSalle) which expires in May 2004. The line of credit has interest rates based on prime, floating or LIBOR rates. The line is secured by an interest in the common stock of the Company’s subsidiaries. The facility includes financial covenants, including requirements of minimum EBITDA and minimum tangible net worth. The

Company is required to obtain LaSalle’s consent of any proposed acquisition that would result in a violation of any of the covenants contained in the line of credit. As of December 31, 2003, the Company was in compliance with all covenants and no funds were outstanding on the facility.

In August 2003, the Company borrowed $8,000 under a non-recourse mortgage loan arrangement to finance a portion of its purchase of its corporate headquarters’ building. The mortgage bears interest at the prevailing prime rate less .25%. During 2003 and at December 31, 2003, the mortgage bore interest at 3.75%. This mortgage is collateralized by our corporate headquarters’ building, which had a net book value of $12,575 at December 31, 2003. The loan includes a financial covenant requiring a minimum rolling twelve-month debt service coverage ratio. As of December 31, 2003, the Company was in compliance with this covenant. Maturities on the mortgage are as follows:

The Company issued a $581 promissory note payable as part of the acquisition of GPA. The outstanding balance at December 31, 2003 was $291.

As of December 31, 2002 and 2001, the Company had no outstanding debt. During 2001, the Company had subordinate promissory notes with principal balances due ranging from $0 to $4,000. Interest was due and payable annually in September at a rate of 8.5%. In December 2001, all of the promissory notes and related accrued interest were paid in full.

Upon completion of the Company’s IPO in December 2001, each outstanding share of Class A and B common stock and Series A,B,C and D preferred stock was converted into one share of a single class of common stock.

Effective November 2001, the Company changed its state of incorporation from Wisconsin to Delaware. Under the Delaware Certificate of Incorporation, the Company has 10,000,000 authorized shares of preferred stock at $.001 par value and 40,000,000 authorized shares of common stock at $.001 par value. At December 31, 2003, there were no preferred shares outstanding.

Various state laws require Centene’s regulated subsidiaries to maintain minimum capital requirements as required by each state and restrict the amount of dividends that may be paid without prior regulatory approval. At December 31, 2003 and 2002, Centene’s subsidiaries had aggregate statutory capital and surplus of $64,700 and $38,600, respectively, compared with the required minimum aggregate statutory capital and surplus of $30,900 and $22,100, respectively. The Company received dividends from its managed care subsidiaries of $6,000, $4,000 and $0 during the years ended December 31, 2003, 2002 and 2001, respectively.

The Company’s stock option plans allow for the granting of restricted stock awards and options to purchase common stock for key employees and other contributors to Centene. Both incentive options and nonqualified stock options can be awarded under the plans. Further, no option will be exercisable for longer than ten years after date of grant. The Plans have reserved 5,175,000 shares for option grants. Options granted generally vest over a five-year period beginning on the first anniversary of the date of grant and annually thereafter.

The following table summarizes information about options outstanding as of December 31, 2003:

The fair value of each option grant is estimated on the date of the grant using an option pricing model with the following assumptions: no dividend yield; expected volatility of 1% through the date of the IPO, 50% through the end of 2001, 54% for 2002 and 53% for 2003; risk-free interest rate of 3.1%, 3.6% and 4.9% and expected lives of 6.0, 7.4 and 7.6 for the years ended December 31, 2003, 2002 and 2001, respectively.

During 2002, Centene implemented an employee stock purchase plan. The Company has reserved 450,000 shares of common stock and issued 9,210 shares and 2,688 shares in 2003 and 2002, respectively, related to the employee stock purchase plan.

Centene has a defined contribution plan which covers substantially all employees who work at least 1,000 hours in a twelve consecutive month period and are at least twenty-one years of age. Under the plan, eligible employees may contribute a percentage of their base salary, subject to certain limitations. Centene may elect to match a portion of the employee’s contribution. Company contributions to the plan were $581, $312 and $306 during the years ended December 31, 2003, 2002 and 2001, respectively.

Centene and its subsidiaries lease office facilities and various equipment under non-cancelable operating leases. Rental expense was $3,144, $2,637 and $2,109 for the years ended December 31, 2003, 2002 and 2001, respectively. Annual non-cancelable minimum lease payments over the next five years and thereafter are as follows:

Aurora Health Care, Inc., or Aurora, provides medical professional services to the Company’s Wisconsin health plan subsidiary. In May 2003, Aurora filed a lawsuit in the Milwaukee County Circuit Court claiming the Company had failed to adequately reimburse Aurora for services rendered during the period from 1998 to 2003. The claim seeks damages totaling $9,400. The Company disputes the claim, has filed answer and discovery requests against Aurora, and plans to vigorously defend against the matter.

The Company is routinely subject to legal proceedings in the normal course of business. While the ultimate resolution of such matters are uncertain, the Company does not expect the results of these matters to have a material effect on its financial position or results of operations.

The Company’s profitability depends in large part on accurately predicting and effectively managing medical services costs. The Company continually reviews its premium and benefit structure to reflect its underlying claims experience and revised actuarial data; however, several factors could adversely affect the medical services costs. Certain of these factors, which include changes in healthcare practices, inflation, new technologies, major epidemics, natural disasters and malpractice litigation, are beyond any health plan’s control and could adversely affect the Company’s ability to accurately predict and effectively control healthcare costs. Costs in excess of those anticipated could have a material adverse effect on the Company’s results of operations.

Financial instruments that potentially subject the Company to concentrations of credit and interest rate risks consist primarily of cash and cash equivalents, investments in marketable securities and accounts receivable. The Company invests its excess cash in interest bearing deposits with major banks, commercial paper, government and agency securities and money market funds. Investments in marketable securities

are managed within guidelines established by the Company’s board of directors. The Company carries these investments at fair value.

Concentrations of credit risk with respect to accounts receivable are limited due to significant customers paying as services are rendered. Significant customers include the federal government and the states in which Centene operates. The Company has a risk of incurring loss if its allowance for doubtful accounts is not adequate.

As discussed in Note 3 to the consolidated financial statements, the Company has reinsurance agreements with insurance companies. The Company monitors the insurance companies’ financial ratings to determine compliance with standards set by state law. The Company has a credit risk associated with these reinsurance agreements to the extent the reinsurers are unable to pay valid reinsurance claims of the Company.

The following table sets forth the calculation of basic and diluted net earnings per share for the years ended December 31:

The calculation of diluted earnings per common share in 2003 excludes the impact of 658,910 shares related to stock options which are antidilutive.

With the acquisition of GPA and the purchase of ScriptAssist assets on March 1, 2003, Centene began operating in two segments: Medicaid Managed Care and Specialty Services. The Medicaid Managed Care segment consists of Centene’s health plans including all of the functions needed to operate them. The Specialty Services segment consists of Centene’s specialty companies including behavioral health, nurse triage and pharmacy compliance functions.

Factors used in determining the reportable business segments include the nature of operating activities, existence of separate senior management teams, and the type of information presented to the Company’s chief operating decision maker to evaluate all results of operations.

The Company evaluates performance and allocates resources based on earnings before income taxes. The accounting policies are the same as those described in the “Summary of Significant Accounting Policies” included in Note 3.

Differences between net earnings and total comprehensive earnings resulted from changes in unrealized gains on investments available for sale, as follows:

Our audits of the consolidated financial statements of Centene Corporation referred to in our report dated February 9, 2004 included in this Form 10-K also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.


†	Confidential treatment has been granted for a portion of this exhibit pursuant to Rule 406 promulgated under the Securities Act.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of February 25, 2004.


	By:	/s/ MICHAEL F. NEIDORFF



	Michael F. Neidorff
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on behalf of the registrant and in the capacities and indicated, as of February 25, 2004.

71 EX-10.2A 3 c83064exv10w2a.txt AMENDMENTS TO CONTRACT INCLUDED AS EXHIBIT 10.2 EXHIBIT 10.2a CONTRACT AMENDMENT FOR MEDICAID SERVICES BETWEEN HMO AND WISCONSIN DEPARTMENT OF HEALTH AND FAMILY SERVICES The agreement entered into for the period of January 1, 2002 through December 31, 2003, between the State of Wisconsin acting by or through the Department of Health and Family Services, hereinafter referred to as the "Department" and HMO, an insurer with a certificate of authority to do business in Wisconsin is amended, effective August 13, 2003, as follows: 1. In Article III, B.5, amended to read: "The Department will give the HMO at least 30 days notice before the intended effective date of any such change that reflects service increases, and the HMO may elect to accept or rejects the service increases for the remainder of that contract year. The Department will give the HMO 60 days notice of any such change that reflects service decreases, with a right of the HMO to dispute the amount of the decrease within that 60 days." 2. In Article III, D, amended to read: "The HMOs must promptly provide or pay for needed contract services for emergency medical conditions and post-stabilization services as defined in Article I, regardless of whether the provider that furnishes the service has a contract with the entity." 3. In Article III, K, (added a second paragraph to this section) to read: "The HMO must ensure that the services are sufficient in amount, duration, or scope to reasonably be expected to achieve the purpose for which the services are furnished," 4. In Article III, L, (added a second paragraph to this section) to read: The HMO will not discriminate against individuals eligible to enroll on the basis of race, color, or national origin and will not use any policy or practice that has the effect of discriminating on the basis of race, color, or national origin." 5. In Article III, T.4, amended to read: "Any activities must occur in its entire service area and only as indicated in the agreement." 6. In Article III, W.6.a, (added a second paragraph to this section) to read: "The HMO may not employ or contract with providers excluded in Federal Health Care programs under either Section 1128 or Section 1128A of the Social Security Act." 7. In Article III, W.6.d, (added a second paragraph to this section) to read: "If the HMO declines to include individual groups of providers in its network, the HMO must give the affected provider written notice of the reason for its decision." 8. In Article III, W.9, d, (added a paragraph at the end of section) to read: "On the date that the timeframes expire, HMO gives notice that service authorization decisions are not reached. Untimely service authorizations constitute a denial and are thus adverse actions. 9. Article III, Z, amended to read: "In the provision of services under this agreement, the Contractor and its subcontractors shall comply with all applicable federal and state statutes and regulations, and all amendments thereto, that are in effect when the agreement is signed, or that come into effect during the term of the agreement. This includes, but is not limited to Title XIX of the Social Security Act and Title 42 of the CFR." Federal funds have not been used for lobbying. 10. In Article III, II, amended to read: "Maintain written policies and procedures related to advance directives, (Written information provided must reflect changes in state law as soon as possible, but no later than 90 days after effective date of change.)" 11. In Article V, A, delete the following language: "The Department shall have the right to make separate payments to subcontractors directly on a monthly basis when the Department determines it is necessary to assure continued access to quality care. Such separate payment will be made only to subcontractors that receive more than 90 percent of the contracted monthly capitation rate from the Department to the HMO." 12. In Article VII, K, amended to read: "A voluntary disenrollment shall be effective no later than the first day of the second month following the month in which the enrollee requests termination." 13. In Article VII, K, (added paragraph at end of this section) to read: "If the entity or State agency fails to make a disenrollment determination within the timeframes specified, the disenrollment is considered approved." 14. In Article VII, O, amended to read: "The first 90 days of the 12-month lock-in period will be an open enrollment period in which the enrollee may change their HMO without cause." 15. In Article VIII, A, 3, amended to read: "Operate an informal, oral grievance process which enrollees can use to get problems resolved without going through the formal, written grievance process." 16. In Article VIII, B, 3rd paragraph amended to read: "For an expedited grievance, the HMO must resolve all issues within two business days of receiving the written request for an expedited grievance. The HMO must make reasonable effort to provide oral notice, in addition to written notice for the resolution." 17. In Article VIII, B, (added paragraph at the end of this section) to read: "The HMO must ensure that punitive action is not taken against anyone who either requests an expedited resolution or submits an appeal." 18. In Article VIII, C, 1, amended to read: "When an HMO, its gatekeepers,* or its IPAs discontinues, terminates, suspends, limits or reduces a service (including services authorized by an HMO and the enrollee was previously enrolled in or services received by the enrollee on a Medicaid FFS basis), the HMO shall notify the affected enrollee(s), at least 10 days before the date of action, in writing of ..." 19. In Article VIII, C, 1, i, amended to read: "The process for requesting an oral or written expedited grievance." 20. In Article VIII, C, 2, amended to read: "If the enrollee files a request for a hearing with the Division of Hearings and Appeals on or before the later of the effective date or within 10 days of the MCO mailing the notice of action to reduce, terminate, or suspend benefits, upon notification by the Division of Hearings and Appeals ..." 21. In Article VIII, C, 2, (added a "c" to this section) to read: "Under FFS status the benefits must be continued until one of the following occurs; - The enrollee withdraws the appeal. - A state fair hearing decision adverse to the enrollee is made. - The authorization expires or the authorization service is met. 22. In Addendum I, 4, g, amended to read: "The HMO must send written notification not less than 30 days prior to the effective date of the termination, to enrollees whose PCP, mental health provider, gatekeeper or dental clinic terminates a contract with the HMO." All terms and conditions in the agreement that are not affected by this amendment shall remain in full force and effect. In WITNESS WHEREOF, the State of Wisconsin and the HMO has executed this agreement: HMO ORGANIZATION DEPARTMENT OF HEALTH AND FAMILY SERVICES Official Signature Official Signature /s/ Kathleen R. Crampton /s/ Pris Baroniec - -------------------------- -------------------------- Title Title Chief Executive Officer Associate Administrator Division of Health Care Financing Date Date 8/18/03 9/9/03 CONTRACT AMENDMENT FOR MEDICAID AND BADGERCARE HMO SERVICES MANAGED HEALTH SERVICES INS. CORP. The Contract entered into for the period January 1, 2002, through December 31, 2003, between the State of Wisconsin acting by or through the Department of Health and Family Services, hereinafter referred to as "Department," and Managed Health Services Ins. Corp., 1205 South 70th Street, Suite 500, West Allis, WI 53214, hereinafter referred to as the "Contractor," is hereby amended as follows: 1. Article XV, HMO SPECIFIC CONTRACT TERM, is amended as follows: a. The initial contract period is extended through April 30, 2004. b. The capitation rate for the four-month extension period will be the rate identified in Addendum VII for CY 2003. The Department will not make retroactive capitation payment adjustments for the extension period. 2. All terms and conditions of the January 1, 2002, through December 31, 2003, contract and any prior amendments that are not affected by this Amendment shall remain in full force and effect through the extension period. Managed Health Services Ins. Corp, State of Wisconsin Department of Health and Family Services By: /s/ Kathleen R. Crampton By: /s/ Mark B. Moody --------------------------- ----------------------------- --------------------------- ----------------------------- --------------------------- ----------------------------- Date: 12/23/03 Date:---------------------------- EX-10.4A 4 c83064exv10w4a.txt AMENDMENT 11 TO CONTRACT INCLUDED AS EXHIBIT 10.4 EXHIBIT 10.4a AMENDMENT 11 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE MEDICAID STAR PROGRAM IN THE EL PASO SERVICE DELIVERY AREA AMENDMENT 14 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE MEDICAID STAR PROGRAM IN THE EL PASO SERVICE DELIVERY AREA TABLE OF CONTENTS ARTICLE 1. PURPOSE ....................................................................... 1 SECTION 1.01 AUTHORIZATION ............................................................... 1 SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES ........................................... 1 ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES ................................... 1 SECTION 2.01 GENERAL ..................................................................... 1 SECTION 2.02 MODIFICATION OF ARTICLE 2, DEFINITIONS ...................................... 1 SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS ...................... 3 SECTION 2.04 MODIFICATION TO SECTION 3.5, RECORDS REQUIREMENTS AND RECORDS RETENTION ..... 3 SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS ................ 3 SECTION 2.06 ADDITION TO ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE REQUIREMENTS ..... 4 SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES .............................................. 4 SECTION 2.08 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK PROVIDERS .... 5 SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES ............................. 5 SECTION 2.10 MODIFICATION OF SECTION 6.13, PEOPLE WITH DISABILITIES, SPECIAL HEALTH CARE NEEDS OR CHRONIC OR COMPLEX CONDITIONS ........................................... 7 SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS ........... 10 SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS ............................. 10 SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL .............. 10 SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS ......................... 13 SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK ................................ 13 SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS .............................. 14 SECTION 2.17 DELETION OF SECTION 8.6, MEMBER NOTICE, APPEALS AND FAIR HEARINGS ........... 21 SECTION 2.18 MODIFICATION OF SECTION 9.01, MARKETING MATERIAL MEDIA AND DISTRIBUTION ..... 21 SECTION 2.19 MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT SUBSYSTEM ..... 21 SECTION 2.20 MODIFICATION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA) COMPLIANCE ............................................ 22 SECTION 2.21 MODIFICATION OF SECTION 11.1, QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM .............................................................. 22 SECTION 2.22 MODIFICATION TO ARTICLE 11, QUALITY ASSURANCE AND QUALITY IMPROVEMENT PROGRAM .......................................................................... 22 SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS .......................... 23 SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS .................. 23 SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS ............................ 24 SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES ........................ 24 SECTION 2.27 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT PROVISIONS ....................................................................... 25 SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION ..................... 25 SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS .............................. 25 SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO ................................ 25 SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES ...................... 26 SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM ............................................ 26 SECTION 2.33 MODIFICATION TO APPENDIX A, STANDARDS FOR QUALITY IMPROVEMENT PROGRAMS ...... 26 SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS ............................... 26 SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES ........................... 26 SECTION 2.36 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS .................... 26 SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES .......................... 26 ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES .................................. 27

i HHSC CONTRACT NO. 529-03-044-K STATE OF TEXAS COUNTY OF TRAVIS AMENDMENT 14 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE STAR PROGRAM IN THE TRAVIS SERVICE DELIVERY AREA THIS CONTRACT AMENDMENT (the "Amendment") is entered into between the HEALTH & HUMAN SERVICES COMMISSION ("HHSC"), an administrative agency within the executive department of the State of Texas, and Superior HealthPlan, Inc. ("CONTRACTOR"), a health maintenance organization organized under the laws of the State of Texas, possessing a certificate of authority issued by the Texas Department of Insurance to operate as a health maintenance organization, and having its principal office at 2100 S. IH 35, Suite 202, Austin, Texas 78704. HHSC and CONTRACTOR may be referred to in this Amendment individually as a "Party" and collectively as the "Parties." The Parties hereby agree to amend their Agreement as set forth in Article 2 of this Amendment. ARTICLE 1. PURPOSE. SECTION 1.01 AUTHORIZATION. This Amendment is executed by the Parties in accordance with Article 15.2 of the Agreement. SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES. This Amendment is effective August 13, 2003. ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES SECTION 2.01 GENERAL This Amendment is to incorporate Federal regulations pertaining to recent amendments to the Balanced Budget Act. These regulations are found in 42 C.F.R. Parts 400, 430, 431, 434, 435, 438, 440, and 447. SECTION 2.02 MODIFICATION OF ARTICLE 2, DEFINITIONS The following provisions amend, modify and add to the definitions set forth in Article 2: "ACTION means the denial or limited authorization of a requested service, including the type or level of service; the reduction, suspension, or termination of a previously authorized service; the denial in whole or in part of payment for service; failure to provide services in a timely manner, the failure of an HMO to act within the timeframes set forth in this agreement and 42 C.F.R.Section 438.408(b); or HHSC Contract 529-03-044-K 1 of 27 for a resident of a rural area with only one HMO, the denial of a Medicaid Members' request to obtain services outside of the network. APPEAL means the formal process by which a Member or his or her representative request a review of an HMO's action, as defined above. COLD-CALL MARKETING means any unsolicited personal contact by the HMO with a potential Member for the purpose of marketing. MEMBER COMPLAINT or GRIEVANCE means an expression of dissatisfaction about any matter other than an action, as defined above. As provided by 42 C.F.R. Section 438.400, possible subjects for complaints or grievances include, but are not limited to, the quality of care of services provided, and aspects of interpersonal relationships such as rudeness of a provider or employee, or failure to respect the Member's rights. EMERGENCY MEDICAL CONDITION, means a medical condition manifesting itself by acute symptoms of recent onset and sufficient severity (including severe pain), such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical care could result in: (a) placing the patient's health in serious jeopardy; (b) serious impairment to bodily functions; (c) serious dysfunction of any bodily organ or part; (d) serious disfigurement; or (e) in the case of a pregnant women, serious jeopardy to the health of a woman or her unborn child. EXPERIENCE REBATE means the portion of the HMO's net income before taxes (financial Statistical Report, Part 1, Line 14) that is returned to the state in accordance with Section 13.2. EXPEDITED APPEAL means an appeal to the HMO in which the decision is required quickly based on the Member's health status and taking the time for a standard appeal could jeopardize the Member's life or health or ability to attain, maintain, or regain maximum function. MARKETING means any communication from an HMO to a Medicaid recipient who is not enrolled with the HMO that can reasonably be interpreted as intended to influence the recipient to enroll in that particular HMO's Medicaid product, or either to not enroll in, or to disenroll from another HMO's Medicaid product. MARKETING MATERIALS means materials that are produced in any medium by or on behalf of an HMO and can reasonably be interpreted as intended to market to potential enrollees. MEMBER or ENROLLEE, means a person who: is entitled to benefits under Title XIX of the Social Security Act and the Texas Medical Assistance Program (Medicaid), is in a Medicaid eligibility category included in the STAR Program, and is enrolled in the STAR Program. POST-STABILIZATION CARE SERVICES means covered services, related to an emergency medical condition that are provided after an Member is HHSC Contract 529-03-044-K 2 of 27 stabilized in order to maintain the stabilized condition, or, under the circumstances described in 42 C.F.R.Section 438.114(b)&(e) and 42 C.F.R.Section 422.113(c)(iii) to improve or resolve the Member's condition. SPECIAL HEALTH CARE NEEDS means Member with an increased prevalence of risk of disability, including but not limited to: chronic physical or developmental condition; severe and persistent mental illness; behavioral or emotional condition that accompanies the Member's physical or developmental condition. STABILIZE means to provide such medical care as to assure within reasonable medical probability that no deterioration of the condition is likely to result from, or occur from, or occur during discharge, transfer, or admission of the Member." SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS Section 3.2 is modified to amend Section 3.2.4.3 add new Sections 3.2.6 and 3.2.7, as follows: "3.2.4.3 [Contractor] understands and agrees that neither HHSC, nor the HMO's Medicaid Members, are liable or responsible for payment for any services authorized and provided under this contract. 3.2.6 In accordance with 42 C.F.R. Section 438.230(b)(3), all subcontractors must be subject to a written monitoring plan, for any subcontractor carrying out a major function of the HMO's responsibility under this contract. For all subcontractors carrying out a major function of the HMO's contract responsibility, the HMO must prepare a formal monitoring process at least annually. HHSC may request copies of written monitoring plans and the results of the HMO's formal monitoring process. 3.2.7 In accordance with 42 C.F.R. Section 438.210(e), HMO may not structure compensation to utilization management subcontractors or entities to provide incentives to deny, limit, reduce, or discontinue medically necessary services to any Member." SECTION 2.04 MODIFICATION TO SECTION 3.5, RECORDS REQUIREMENTS AND RECORDS RETENTION Section 3.5.5, Medical Records, is modified as follows: "3.5.5 Medical Records. HMO must require, through contractual provisions or provider manual, providers to create and keep medical records in compliance with the medical records standards contained in Appendix O, Standards for Medical Records. All medical records must be kept for at least five (5) years, except for records of rural health clinics, which must be kept for a period of six (6) years from the date of service." SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS Section 4.10.8 is modified as follows: "4.10.8 HMO must comply with the standards adopted by the U.S. Department of Health and Human Services under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191, regarding submitting and receiving claims information through electronic data interchange (EDI) that allows for automated HHSC Contract 529-03-044-K 3 of 27 processing and adjudication of claims within the federally mandated timeframes (see 45 C.F.R. parts 160 through 164)." SECTION 2.06 ADDITION TO ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE REQUIREMENTS Section 5.11 is added as follows: "5.11 DATA CERTIFICATION 5.11.1 In accordance with 42 C.F.R. Sections 438.604 and 438.606, HMO must certify in writing: (a) encounter data; (b) delivery supplemental data and other data submitted pursuant to this agreement or State or Federal law or regulation relating to payment for services. 5.11.2 The certification must be submitted to HHSC concurrently with the certified data or other documents. 5.11.3 The certification must: (a) be signed by the HMO's Chief Executive Officer; Chief Financial Officer; or an individual with delegated authority to sign for, and who reports directly to, either the Chief Executive Officer or Chief Financial Officer; and (b) contain a statement that to the best knowledge, information and belief of the signatory, the HMO's certified data or information are accurate, complete, and truthful." SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES Section 6.1 is modified to add new section 6.1.9 as follows: "6.1.9 In accordance with 42 C.F.R. Section 438.102, HMO may file an objection to provide, reimburse for, or provide coverage of, counseling or referral service for a covered benefit, based on moral or religious grounds. 6.1.9.1 HMO must work with HHSC to develop a work plan to complete the necessary tasks to be completed and determine an appropriate date for implementation of the requested changes to the requirements related to covered services. The work plan will include timeframes for completing the necessary contract and waiver amendments, adjustments to capitation rates, identification of HMO and enrollment materials needing revision, and notifications to Members. 6.1.9.2 In order to meet the requirements of Section 6.1.9.1, HMO must notify HHSC of grounds for and provide detail concerning its moral or religious objections and the specific services covered under the objection, no less than 120 days prior to the proposed effective date of the policy change. HHSC Contract 529-03-044-K 4 of 27 6.1.9.3 HMO must notify all current Members of the intent to change covered services at least 30 days prior to the effective date of the change in accordance with 42 C.F.R. Section 438.102(b)(ii)(B). 6.1.9.4 HHSC will provide information to all current Members on how and where to obtain the service that has been discontinued by the HMO in accordance with 42 C.F.R. Section 438.102(c)." SECTION 2.08 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK PROVIDERS Section 6.4 is modified to add new Sections 6.4.6 and 6.4.7 as follows: "6.4.6 HMO must provide Members with timely and adequate access to out-of-network services for as long as those services are necessary and covered benefits not available within the network, in accordance with 42 C.F.R. Section 438.206(b)(4). HMO will not be obligated to provide a Member with access to out-of-network services if such services become available from a network provider. 6.4.7 HMO must require through contract provisions or the provider manual that each Member have access to a second opinion regarding the use of any health care service. A Member must be allowed access to a second opinion from a network provider or out-of-network provider if a network provider is not available, at no additional cost to the Member, in accordance with 42 C.F.R. Section 438.206(b)(3)." SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES Section 6.5 is deleted in its entirety and replaced with the following language: "6.5.1 HMO policy and procedures, covered benefits, claims adjudication methodology, and reimbursement performance for emergency services must comply with all applicable state and federal laws and regulations including 42 C.F.R. Section 438.114, whether the provider is in network or out of network. 6.5.2 HMO must pay for the professional, facility, and ancillary services that are medically necessary to perform the medical screening examination and stabilization of HMO Member presenting as an emergency medical condition or an emergency behavioral health condition to the hospital emergency department, 24 hours a day, 7 days a week, rendered by either HMO's in-network or out-of-network providers. 6.5.2.1 For all out-of-network emergency services providers, HMO will pay a reasonable and customary amount for emergency services. HMO policies and procedures must be consistent with this agreement's prudent lay person definition of an emergency medical condition and claims adjudication processes required under Section 7.6 of this agreement and 42 C.F.R. Section 438.114. HMO will pay a reasonable and customary amount for services for all out-of-network emergency services provider claims with dates of service between September 1, 2002 and November 30, HHSC Contract 529-03-044-K 5 of 27 2002. HMO must forward any complaints submitted by out-of-network emergency services providers during this time to HHSC. HHSC will review all complaints and determine whether payments were reasonable and customary. HHSC will direct the HMO to pay a reasonable and customary amount, as determined by HHSC, if it concludes that the payments were not reasonable and customary for the provider. 6.5.2.2 For all out-of-network emergency services provider claims with dates of service on or after December 1, 2002, HMO must pay providers a reasonable and customary amount consistent with a methodology approved by HHSC. HMO must submit its methodology, along with any supporting documentation, to HHSC by September 30, 2002. HHSC will review and respond to the information by November 15, 2002. HMO must forward any complaints by out-of-network emergency services providers to HHSC, which will review all complaints. If HHSC determines that payment is not consistent with the HMO's approved methodology, the HMO must pay the emergency services provider a rate, using the approved reasonable and customary methodology, as determined by HHSC. Failure to comply with this provision constitutes a default under Article 16, Default and Remedies. 6.5.3 HMO must ensure that its network primary care providers (PCPs) have after-hours telephone availability that is consistent with Section 7.8.10 of this contract. This telephone access must be available 24 hours a day, 7 days a week throughout the service area. 6.5.4 HMO cannot require prior authorization as a condition for payment for an emergency medical condition, an emergency behavioral health condition, or labor and delivery. HMO cannot limit what constitutes an emergency medical condition on the basis of lists of diagnoses or symptoms. HMO cannot refuse to cover emergency services based on the emergency room provider, hospital, or fiscal agent not notifying the Member's primary care provider or HMO of the Member's screening and treatment within 10 calendar days of presentation for emergency services. HMO may not hold the Member who has an emergency medical condition liable for payment of subsequent screening and treatment needed to diagnose the specific condition or stabilize the patient. HMO must accept the emergency physician or provider's determination of when the Member is sufficiently stabilized for transfer or discharge. 6.5.5 Medical Screening Examination for emergency services. A medical screening examination needed to diagnose an emergency medical condition shall be provided in a hospital based emergency department that meets the requirements of the Emergency Medical Treatment and Active Labor Act (EMTALA) 42 C.F.R. Section 489.20, Section 489.24 and Section 438.114(b)&(c). HMO must pay for the emergency medical screening examination, as required by 42 U.S.C. Section 1395dd. HMOs must reimburse for both the physician's services and the hospital's emergency services, including the emergency room and its ancillary services. 6.5.6 Stabilization Services. When the medical screening examination determines that an emergency medical condition exists, HHSC Contract 529-03-044-K 6 of 27 HMO must pay for emergency services performed to stabilize the Member. The emergency physician must document these services in the Member's medical record. HMOs must reimburse for both the physician's and hospital's emergency stabilization services including the emergency room and its ancillary services. 6.5.7 Post-stabilization Care Services. HMO must cover and pay for post-stabilization care services in the amount, duration, and scope necessary to comply with 42 C.F.R. Section 438.114(b)&(e) and 42 C.F.R. 422.113(c)(iii). The HMO is financially responsible for post-stabilization care services obtained within or outside the network that are not pre-approved by a plan provider or other HMO representative, but administered to maintain, improve, or resolve the Member's stabilized condition if: (a) the HMO does not respond to a request for preapproval within 1 hour; (b) the HMO cannot be contacted; (c) or the HMO representative and the treating physician cannot reach an agreement concerning the Member's care and a plan physician is not available for consultation. In this situation, the HMO must give the treating physician the opportunity to consult with a plan physician and the treating physician may continue with care of the patient until an HMO physician is reached or the HMO's financial responsibility ends as follows: the HMO physician with privileges at the treating hospital assumes responsibility for the Member's care; the HMO physician assumes responsibility for the Member's care through transfer; the HMO representative and the treating physician reach an agreement concerning the Member's care; or the Member is discharged. 6.5.8 HMO must provide access to the HHSC-designated Level I and Level II trauma centers within the State or hospitals meeting the equivalent level of trauma care. HMOs may make out-of-network reimbursement arrangements with the HHSC-designated Level I and Level II trauma centers to satisfy this access requirement." SECTION 2.10 MODIFICATION OF SECTION 6.13, PEOPLE WITH DISABILITIES, SPECIAL HEALTH CARE NEEDS OR CHRONIC OR COMPLEX CONDITIONS Section 6.13 is deleted in its entirety and replaced with the following: "6.13.1 HMO shall provide the following services to persons with disabilities, special health care needs, or chronic or complex conditions. These services are in addition to the covered services described in detail in the Texas Medicaid Provider Procedures Manual (Provider Procedures Manual) and the Texas Medicaid Bulletin, which is the bi-monthly update to the Provider Procedures Manual. Clinical information regarding covered services is published by the Texas Medicaid program in the Texas Medicaid Service Delivery Guide. 6.13.2 HMO must develop and maintain a system and procedures for identifying Members who have disabilities, special health care needs or chronic or complex medical and behavioral health HHSC Contract 529-03-044-K 7 of 27 conditions. Once identified, HMO must have effective health delivery systems to provide the covered services to meet the special preventive, primary acute, and specialty health care needs appropriate for treatment of the individual's condition. The guidelines and standards established by the American Academy of Pediatrics, the American College of Obstetrics/Gynecologists, the U.S. Public Health Service, and other medical and professional health organizations and associations' practice guidelines whose standards are recognized by HHSC must be used in determining the medically necessary services, assessment and plan of care for each individual. 6.13.2.1 In accordance with 42 C.F.R. 438.208(b)(3), HMO shall provide information that identifies Members who the HMO has assessed as special health care needs Members to the State's enrollment broker. The information will be provided in a format to be specified by HHSC and updated by the 10th day of each month. In the event that a special health care needs Member changes health plans, HMO will work with receiving HMO to provide information concerning the results of the HMO's identification and assessment of that Member's needs, to prevent duplication of those activities. 6.13.3 HMO must require that the PCP for all persons with disabilities, special health care needs or chronic or complex conditions develop a plan of care to meet the needs of the Member. The plan of care must be based on health needs, specialist(s) recommendations, and periodic reassessment of the Member's developmental and functional status and service delivery needs. HMO must require providers to maintain record keeping systems to ensure that each Member who has been identified with a disability or chronic or complex condition has an initial plan of care in the primary care provider's medical records, that Member agrees to that plan of care, and that the plan is updated as often as the Member's needs change, but at least annually. 6.13.4 HMO must provide a primary care and specialty care provider network for persons with disabilities, special health care needs, or chronic or complex conditions. Specialty and subspecialty providers serving all Members must be Board Certified/Board Eligible in their specialty. HMO may request exceptions from HHSC for approval of traditional providers who are not board-certified or board-eligible but who otherwise meet HMO's credentialing requirements. 6.13.5 HMO must have in its network PCPs and specialty care providers that have documented experience in treating people with disabilities, special health care needs, or chronic or complex conditions, including children. For services to children with disabilities, special health care needs, or chronic or complex conditions, HMO must have in its network PCPs and specialty care providers that have demonstrated experience with children with disabilities, special health care needs, or chronic or complex conditions in pediatric specialty centers such as children's hospitals, medical schools, teaching hospitals and tertiary center levels. 6.13.6 HMO must provide information, education and training programs to Members, families, PCPs, specialty physicians, and community agencies about the care and treatment available in HHSC Contract 529-03-044-K 8 of 27 HMO's plan for Members with disabilities, special health care needs, or chronic or complex conditions. HMO must ensure Members with disabilities, special health care needs, or chronic or complex conditions have direct access to a specialist. 6.13.7 HMO must coordinate care and establish linkages, as appropriate for a particular Member, with existing community-based entities and services, including but not limited to: Maternal and Child Health, Children with Special Health Care Needs (CSHCN), the Medically Dependent Children Program (MDCP), Community Resource Coordination Groups (CRCGs), Interagency Council on Early Childhood Intervention (ECI), Home and Community-based Services (HCS), Community Living Assistance and Support Services (CLASS), Community Based Alternatives (CBA), In Home Family Support, Primary Home Care, Day Activity and Health Services (DAHS), Deaf/Blind Multiple Disabled waiver program and Medical Transportation Program (MTP). 6.13.8 HMO must include TDH approved pediatric transplant centers, TDH designated trauma centers, and TDH designated hemophilia centers in its provider network (see Appendices E, F, and G for a listing of these facilities). 6.13.9 HMO must ensure Members with disabilities or chronic or complex conditions have access to treatment by a multidisciplinary team when determined by the Member's PCP to be medically necessary for effective treatment, or to avoid separate and fragmented evaluations and service plans. The teams must include both physician and non-physician providers determined to be necessary by the Member's PCP for the comprehensive treatment of the Member. The team must: 6.13.9.1 Participate in hospital discharge planning; 6.13.9.2 Participate in pre-admission hospital planning for non-emergency hospitalizations; 6.13.9.3 Develop specialty care and support service recommendations to be incorporated into the primary care provider's plan of care; 6.13.9.4 Provide information to the Member and the Member's family concerning the specialty care recommendations; and 6.13.9.5 HMO must develop and implement training programs for primary care providers, community agencies, ancillary care providers, and families concerning the care and treatment of a Member with a disability or chronic or complex conditions. 6.13.10 HMO must identify coordinators of medical care to assist providers who serve Members with disabilities and chronic or complex conditions and the Members and their families in locating and accessing appropriate providers inside and outside HMO's network. HHSC Contract 529-03-044-K 9 of 27 6.13.11 HMO must assist, through information and referral, eligible Members in accessing providers of non-capitated Medicaid services listed in Article 6.1.8, as applicable. 6.13.12 HMO must ensure that Members who require routine or regular laboratory and ancillary medical tests or procedures to monitor disabilities, special health care needs, or chronic or complex conditions are allowed by HMO to receive the services from the provider in the provider's office or at a contracted lab located at or near the provider's office." SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS Section 7.1.3 is amended to add new Section 7.1.3.5, as follows: "7.1.3.5 Prenatal Care within 2 weeks of request." SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS Section 7.2.8.2.1 is added and Section 7.2.9.2 is modified, as follows: "7.2.8.2.1 [Provider] understands and agrees that the HMO's Medicaid enrollees are not to be held liable for the HMO's debts in the event of the entity's insolvency in accordance with 42 C.F.R.Section 438.106(a). 7.2.9.2 A provider who is terminated is entitled to an expedited review process by HMO on request by the provider. HMO must make a good faith effort to provide written notice of the provider's termination to HMO's Members receiving primary care from, or who were seen on a regular basis by, the terminated provider within 15 days after receipt or issuance of the termination notice, in accordance with 42 C.F.R. Section 438.10(f)(5). If a provider is terminated for reasons related to imminent harm to patient health, HMO must notify its Members immediately of the provider's termination. 7.2.12 Notice to Rejected Providers. In accordance with 42 C.F.R. Section 438.129(a)(2), if an HMO 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." SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL The qualifications for a "Hospital" in Section 7.7 is replaced with the following language. Section 7.7 is retitled Section 7.7.1 and new Section 7.7.2, Provider Credentialing and Recredentialing is added to Section 7.7: "7.7.1 PROVIDER QUALIFICATIONS - GENERAL
PROVIDER QUALIFICATION - -------- ------------- Hospital An institution licensed as a general or special hospital by the State of Texas under Chapter 241 of the Health and Safety Code, which is enrolled as a provider in the Texas Medicaid Program. HMO will require that all facilities in the network used for acute inpatient specialty care for people under age 21 with disabilities, special health care needs, or chronic or complex conditions will have a designated pediatric unit; 24 hour laboratory and blood bank
HHSC Contract 529-03-044-K 10 of 27
PROVIDER QUALIFICATION - -------- ------------- availability; pediatric radiological capability; meet JCAHO standards; and have discharge planning and social service units. HMO may request exceptions to this requirement for specific hospitals within their networks, from HHSC."
"7.7.2 PROVIDER CREDENTIALING AND RECREDENTIALING In accordance with 42 C.F.R. Section 438.214, HMO's standard credentialing and recredentialing process must include the following provisions to determine whether physicians and other health care professionals, who are licensed by the State and who are under contract with HMO, are qualified to perform their services. 7.7.2.1 Written Policies and Procedures. MCO has written policies and procedures for the credentialing process that includes MCO's initial credentialing of practitioners as well as its subsequent recredentialing, recertifying and/or reappointment of practitioners. 7.7.2.2 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. 7.7.2.3 Credentialing Entity. The plan designates a credentialing committee or other peer review body, which makes recommendations regarding credentialing decisions. 7.7.2.4 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 health practitioners included in the review organization's literature for Members, as an indication of those practitioners whose service to Members is contracted or anticipated. 7.7.2.5 Process. The initial credentialing process obtains and reviews verification of the following information, at a minimum: a) The practitioner holds a current valid license to practice; b) Valid DEA or CDS certificate, as applicable; c) Graduation from medical school and completion of a residency or other post-graduate training, as applicable; d) Work history; e) Professional liability claims history; f) The practitioner holds current, adequate malpractice insurance according to the plan's policy; g) Any revocation or suspension of a state license or DEA/BNDD number; HHSC Contract 529-03-044-K 11 of 27 h) Any curtailment or suspension of medical staff privileges (other than for incomplete medical records); i) Any sanctions imposed by Medicaid and/or Medicare; j) Any censure by the State or County Medical Association; k) MCO requests information on the practitioner from the National Practitioner Data Bank and the State Board of Medical Examiners; l) The application process includes a statement by the Applicant regarding: (This information should be used to evaluate the practitioner's current ability to practice.) m) Any physical or mental health problems that may affect current ability to provide health care; n) Any history of chemical dependency/substance abuse; o) History of loss of license and/or felony convictions; p) History of loss or limitation of privileges or disciplinary activity; and q) An attestation to correctness/completeness of the application. 7.2.2.6 There is an initial visit to each potential primary care practitioner's office, including documentation of a structured review of the site and medical record keeping practices to ensure conformance with MCO's standards. 7.7.2.7 Recredentialing. A process for the periodic reverification of clinical credentials (recredentialing, reappointment, or recertification) is described in MCO's policies and procedures. 7.7.2.8 There is evidence that the procedure is implemented at least every three years. 7.7.2.9 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-1" through "E-7" and item "E-13" above. 7.7.2.10 The recredentialing, recertification or reappointment process also includes review of data from: a) Member complaints and b) results of quality reviews. 7.7.2.11 Delegation of Credentialing Activities. If MCO 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. MCO monitors the effectiveness of the delegate's credentialing and reappointment or recertification process. 7.7.2.12 Retention of Credentialing Authority. MCO retains the right to approve new providers and sites and to terminate or HHSC Contract 529-03-044-K 12 of 27 suspend individual providers. MCO has policies and procedures for the suspension, reduction or termination of practitioner privileges. 7.7.2.13 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. MCO will implement and maintain policies and procedures for disciplinary actions including reducing, suspending, or terminating a practitioner's privileges. 7.7.2.14 Appeals Process. There is a provider appellate process for instances where MCO chooses to reduce, suspend or terminate a practitioner's privileges with the organization. SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS Section 7.8.1.1 is added and Sections 7.8.8 and 7.8.11.4 are modified with the following language: "7.8.1.1 HMO must provide supporting documentation, as specified and requested by the State, to verify that their provider network meets the requirements of this contract at the time the HMO enters into a contract and at the time of a significant change as required by 42 C.F.R. Section 438.207(b). A significant change can be, but is not limited to, change in ownership (purchase, merger, acquisition), new start-up, bankruptcy, and/or a major subcontractor change directly affecting a provider network such as (IPA's, BHO, medical groups, etc.). 7.8.8 The PCP for a Member with disabilities, special health care needs, or chronic or complex conditions may be a specialist who agrees to provide PCP services to the Member. The specialty provider must agree to perform all PCP duties required in the contract and PCP duties must be within the scope of the specialist's license. Any interested person may initiate the request for a specialist to serve as a PCP for a Member with disabilities, special health care needs, or chronic or complex conditions. 7.8.11.4 HMO must require PCPs for children under the age of 21 to provide or arrange to have provided all services required under Section 6.8 relating to Texas Health Steps, Section 6.9 relating to Perinatal Services, Section 6.10 relating to Early Childhood Intervention, Section 6.11 relating to WIC, Section 6.13 relating to People With Disabilities, special health care needs, or chronic or complex conditions, and Section 6.14 relating to Health Education and Wellness and Prevention Plans. PCP must cooperate and coordinate with HMO to provide Member and the Member's family with knowledge of and access to available services." SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK Section 8.2.4 is added with the following language: "8.2.4 In accordance with 42 C.F.R.Section 438.100, HMO must maintain written policies and procedures for informing Members of their rights and responsibilities. HMO must notify its Members of their right to request a copy of these rights and responsibilities." HHSC Contract 529-03-044-K 13 of 27 SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS Section 8.5 is deleted in its entirety and replaced with the following language: "8.5 MEMBER COMPLAINT AND APPEAL SYSTEM HMO must develop, implement and maintain a Member complaint and appeal system that complies with the requirements in applicable federal and state laws and regulations, including 42 C.F.R. Section 431.200 and 42 C.F.R. Part 483, Subpart F, "Grievance System;" and the provisions of 1 T.A.C. Chapter 357 relating to managed care organizations. The complaint and appeal system must include a complaint process, an appeal process, and access to HHSC's Fair Hearing System. The procedures must be reviewed and approved in writing by HHSC. Modifications and amendments to the Member complaint and appeal system must be submitted to HHSC at least 30 days prior to the implementation of the modification or amendment. For purposes of Section 8.5., an "authorized representative" is any person or entity acting on behalf of the Member and with the Member's written consent. A provider may be an "authorized representative." 8.5.1 MEMBER COMPLAINT PROCESS 8.5.1.1 HMO must have written policies and procedures for receiving, tracking, responding to, reviewing, reporting and resolving complaints by Members or their authorized representatives. 8.5.1.2 HMO must resolve complaints within 30 days from the date that the complaint was received. The complaint procedure must be the same for all Members under this contract. The Member or Member's authorized representative may file a complaint either orally or in writing. HMO must also inform Members how to file a complaint directly with HHSC. 8.5.1.3 HMO must designate an officer of HMO who has primary responsibility for ensuring that complaints are resolved in compliance with written policy and within the time required. An "officer" of HMO means a president, vice president, secretary, treasurer, or chairperson of the board for a corporation, the sole proprietor, the managing general partner of a partnership, or a person having similar executive authority in the organization. 8.5.1.4 HMO must have a routine process to detect patterns of complaints. The process must involve management, supervisory, and quality improvement staff in the development of policy and procedural improvements to address the complaints. 8.5.1.5 HMO's complaint procedures must be provided to Members in writing and through oral interpretive services. A written description of HMO's complaint procedures must be available in prevalent non-English languages identified by HHSC, at a 4th to 6th grade reading level. HMO must include a written description of the complaint process in the Member Handbook. HMO must maintain and HHSC Contract 529-03-044-K 14 of 27 publish in the Member Handbook, at least one local and one toll-free telephone number with TeleTypewriter/Telecommunications Device for the Deaf (TTY/TTD) and interpreter capabilities for making complaints. 8.5.1.6 HMO's process must require that every complaint received in person, by telephone or in writing must be acknowledged and recorded in a written record and logged with the following details: date; identification of the individual filing the complaint; identification of the individual recording the complaint; nature of the complaint; disposition of the complaint (i.e., how the HMO resolved the complaint); corrective action required; and date resolved. 8.5.1.7 HMO is prohibited from discriminating or taking punitive action against a Member or his or her representative for making a complaint. 8.5.1.8 If the Member makes a request for disenrollment, the HMO shall give the Member information on the disenrollment process and direct the Member to the Enrollment Broker. If the request for disenrollment includes a complaint by the Member, the complaint will be processed separately from the disenrollment request, through the complaint process. 8.5.1.9 HMO will cooperate with the Enrollment Broker, HHSC, and HHSC's Member resolution service contractors to resolve all Member complaints. Such cooperation may include, but is not limited to, providing information or assistance to internal complaint committees. 8.5.1.10 HMO must provide designated staff to assist Members in understanding and using HMO's complaint system. HMO's designated staff must assist Members in writing or filing a complaint and monitoring the complaint through the HMO's complaint process until the issue is resolved. 8.5.2 STANDARD MEMBER APPEAL PROCESS 8.5.2.1 HMO must develop, implement and maintain an appeal procedure that complies with the requirements in federal laws and regulations, including 42 C.F.R. Section 431.200 and 42 C.F.R. Part 438, Subpart F, "Grievance System." An appeal is a disagreement with an "action" as defined in Article 2 of the Contract. The appeal procedure must be the same for all Members. When a Member or his or her authorized representative expresses orally or in writing any dissatisfaction or disagreement with an action, the HMO must regard the expression of dissatisfaction as a request to appeal an action. 8.5.2.2 A Member must file a request for an internal appeal within 30 days from receipt of the notice of the action. To ensure continuation of currently authorized services, however, the Member must file the appeal on or before the later of: 10 days following the HMO's mailing of the notice of the action or the intended effective date of the proposed action. HHSC Contract 529-03-044-K 15 of 27 8.5.2.3 HMO must designate an officer who has primary responsibility for ensuring that appeals are resolved in compliance with written policy and within the time required. An "officer" of HMO means a president, vice president, secretary, treasurer, or chairperson of the board for a corporation, the sole proprietor, the managing general partner of a partnership, or a person having similar executive authority in the organization. 8.5.2.4 The provisions of Article 21.58A, Texas Insurance Code, relating to a Member's right to appeal an adverse determination made by HMO or a utilization review agent by an independent review organization, do not apply to a Medicaid recipient. Federal fair hearing requirements (Social Security Act Section 1902a(3), codified at 42 C.F.R. section 431.200 et. seq.) require the agency to make a final decision after a fair hearing, which conflicts with the State requirement that the IRO make a final decision. Therefore, Article 21.58A is pre-empted by the federal requirement. 8.5.2.5 HMO must have policies and procedures in place outlining the role of HMO's Medical Director for an appeal of an action. The Medical Director must have a significant role in monitoring, investigating and hearing appeals. In accordance with 42 C.F.R. Section 438.406, the HMO's policies and procedures must require that individuals who make decisions on appeals were not involved in any previous level of review or decision-making, and, are health care professionals who have the appropriate clinical expertise, as determined by HHSC, in treating the Member's condition or disease. 8.5.2.6 HMO must provide designated staff to assist Members in understanding and using HMO's appeal process. HMO's designated staff must assist Members in writing or filing an appeal and monitoring the appeal through the HMO's appeal process until the issue is resolved. 8.5.2.7 HMO must have a routine process to detect patterns of appeals. The process must involve management, supervisory, and quality improvement staff in the development of policy and procedural improvements to address the appeals. 8.5.2.8 HMO's appeal procedures must be provided to Members in writing and through oral interpretive services. A written description of HMO's appeal procedures must be available in prevalent non-English languages identified by HHSC, at a 4th to 6th grade reading level. HMO must include a written description in the Member Handbook. HMO must maintain and publish in the Member Handbook at least one local and one toll-free telephone number with TTY/TTD and interpreter capabilities for requesting an appeal of an action. 8.5.2.9 HMO's process must require that every oral appeal received must be confirmed by a written, signed appeal by the Member or his or her representative, unless the Member or his or her representative requests an expedited resolution. All appeals must be recorded in a written record and logged with the following details: date notice is sent; effective date of the action; date the Member or his or her representative requested the appeal; date the appeal was followed HHSC Contract 529-03-044-K 16 of 27 up in writing; identification of the individual filing; nature of the appeal; disposition of the appeal; notice of disposition to Member. 8.5.2.10 HMO must send a letter to the Member within 5 business days acknowledging receipt of the appeal request. Except as provided in Section 8.5.3.2, HMO must complete the entire appeal process within 30 calendar days after receipt of the initial written or oral request for appeal. The timeframe may be extended up to 14 calendar days if the Member requests an extension; or the HMO shows that there is a need for additional information and how the delay is in the Member's interest. If the timeframe is extended, the HMO must give the Member written notice of the reason for delay if the Member had not requested the delay. 8.5.2.11 During the appeal process, HMO must provide the Member a reasonable opportunity to present evidence, any allegations of fact or law, in person as well as in writing. The HMO must inform the Member of the time available for providing this information, and in the case of an expedited resolution, that limited time will be available (see Section 8.5.3.2). 8.5.2.12 HMO must provide the Member and his or her representative opportunity, before and during the appeals process, to examine the Member's case file, including medical records and any other documents considered during the appeal process. HMO must include, as parties to the appeal, the Member and his or her representative or the legal representative of a deceased Member's estate. 8.5.2.13 In accordance with 42.C.F.R. Section 438.420, HMO must continue the Member's benefits currently being received by the Member, including the benefit that is the subject of the appeal, if all of the following criteria are met: 1) the Member or his or her representative files the appeal timely (as defined in Section 8.5.2.2); 2) the appeal involves the termination, suspension, or reduction of a previously authorized course of treatment; 3) the services were ordered by an authorized provider; 4) the original period covered by the original authorization has not expired; and 5) the Member requests an extension of the benefits. If, at the Member's request, the HMO continues or reinstates the Member's benefits while the appeal is pending, the benefits must be continued until one of the following occurs: the Member withdraws the appeal; 10 days pass after the HMO mails the notice, providing the resolution of the appeal against the Member, unless the Member, within the 10-day timeframe, has requested a State fair hearing with continuation of benefits until a State fair hearing decision can be reached; a state fair hearing office issues a hearing decision adverse to the Member; the time period or service limits of a previously authorized service has been met. 8.5.2.14 In accordance with 42 C.F.R. Section 438.420(d), if the final resolution of the appeal is adverse to the Member, and upholds the HMO's action, then to the extent that the services were furnished to comply with Section 8.5.2.13, the HMO may recover such costs from the Member. HHSC Contract 529-03-044-K 17 of 27 8.5.2.15 If the HMO or state fair hearing officer reverses a decision to deny, limit, or delay services that were not furnished while the appeal was pending, the HMO must authorize or provide the disputed services promptly, and as expeditiously as the Member's health condition requires. 8.5.2.16 If the HMO or state fair hearing officer reverses a decision to deny authorization of services and the Member received the disputed services while the appeal was pending, the HMO will be responsible for the payment of services. 8.5.2.17 HMO is prohibited from discriminating against a Member or his or her representative for making an appeal. 8.5.3 EXPEDITED HMO APPEALS 8.5.3.1 In accordance with 42 C.F.R. Section 438.410, HMO must establish and maintain an expedited review process for appeals, when the HMO determines (for a request from a Member) or the provider indicates (in making the request on the Member's behalf or supporting the Member's request) that taking the time for a standard resolution could seriously jeopardize the Member's life or health. HMO must follow all appeal requirements for standard Member appeals, as set forth in Section 8.5.2, except where differences are specifically noted. Requests for expedited appeals must be accepted orally or in writing. 8.5.3.2 HMO must complete investigation and resolution of an appeal relating to an ongoing emergency or denial of continued hospitalization: (1) in accordance with the medical or dental immediacy of the case; and (2) not later than one business day after the complainant's request for appeal is received. 8.5.3.3 Members must exhaust the HMO's expedited appeal process before making a request for an expedited state fair hearing. After HMO receives the request for an expedited appeal, it must hear an approved requests for a Member to have an expedited appeal and notify the Member of the outcome of the appeal within 3 business days, except as stated in 8.5.3.2. This timeframe may be extended up to 14 calendar days if the Member requests an extension; or the HMO shows (to the satisfaction of HHSC, upon HHSC's request) that there is a need for additional information and how the delay is in the Member's interest. If the timeframe is extended, the HMO must give the Member written notice of the reason for delay if the Member had not requested the delay. 8.5.3.4 If the decision is adverse to the Member, procedures relating to the notice in Section 8.5.5 must be followed. The HMO is responsible for notifying the Member of their rights to access an expedited state fair hearing. HMO will be responsible for providing documentation to the State and the Member, indicating how the decision was made, prior to state's expedited fair hearing. 8.5.3.5 The HMO must ensure that punitive action is neither taken against a provider who requests an expedited resolution or supports a Member's request. HHSC Contract 529-03-044-K 18 of 27 8.5.3.6 If the HMO denies a request for expedited resolution of an appeal, it must: (1) transfer the appeal to the timeframe for standard resolution set forth in Section 8.5.2, and (2) make a reasonable effort to give the Member prompt oral notice of the denial, and follow up within two calendar days with a written notice. 8.5.4 ACCESS TO STATE FAIR HEARING 8.5.4.1 HMO must inform Members that they generally have the right to access the state fair hearing process in lieu of the internal appeal system provided by HMO procedures set forth in Sections 8.5.2 and 8.5.3. The notice must comply with the requirements of 1 T.A.C. Chapter 357. In the case of an expedited State Fair Hearing Process, the HMO must inform the Member that he or she must first exhaust the HMO's internal expedited appeal process. 8.5.4.2 HMO must notify Members that they may be represented by an authorized representative in the state fair hearing process. 8.5.5 NOTICES OF ACTION AND DISPOSITION OF APPEALS 8.5.5.1 NOTICE OF ACTION. HMO must notify the Member, in accordance with 1 T.A.C. Chapter 357, whenever HMO takes an action as defined in Article 2 of this contract. The notice must contain the following information: (a) the action the HMO or its contractor has taken or intends to take; (b) the reasons for the action; (c) the Member's right to access the HMO internal appeal process, as set forth in Sections 8.5.2 and 8.5.3, and/or to access to the State Fair Hearing Process as provided in Section 8.5.4; (d) the procedures by which Member may appeal HMO's action; (e) the circumstances under which expedited resolution is available and how to request it; (f) the circumstances under which a Member can continue to receive benefits pending resolution of the appeal (see Section 8.5.2.13), how to request that benefits be continued, and the circumstances under which the Member may be required to pay the costs of these services; (g) the date the action will be taken; (h) a reference to the HMO policies and procedures supporting the HMO's action; (i) an address where written requests may be sent and a toll-free number that the Member can call to request the assistance of a Member representative, file an appeal, or request a Fair Hearing; HHSC Contract 529-03-044-K 19 of 27 (j) an explanation that Members may represent themselves, or be represented by a provider, a friend, a relative, legal counsel or another spokesperson; (k) a statement that if the Member wants a HHSC Fair Hearing on the action, Member must make, in writing, the request for a Fair Hearing within 90 days of the date on the notice or the right to request a hearing is waived; (l) a statement explaining that HMO must make its decision within 30 days from the date the appeal is received by HMO, or 3 business days in the case of an expedited appeal; and a statement explaining that the hearing officer must make a final decision within 90 days from the date a Fair Hearing is requested; and (m) any other information required by 1 T.A.C. Chapter 357 that relates to a managed care organization's notice of action. 8.5.5.2 TIMEFRAME FOR NOTICE OF ACTION In accordance with 42 C.F.R. Section 438.404(c), the HMO must mail a notice of action within the following timeframes: (1) For termination, suspension, or reduction of previously authorized Medicaid-covered services, within the timeframes specified in 42 C.F.R. Sections 431.211, 431.213, and 431.214. (2) For denial of payment, at the time of any action affecting the claim. (3) For standard service authorization decisions that deny or limit services, within the timeframe specified in 42 C.F.R. Section 438.210(d)(1). (4) If the HMO extends the timeframe in accordance with 42 C.F.R. Section 438.210(d)(1), it must-- (a) Give the Member written notice of the reason for the decision to extend the timeframe and inform the Member of the right to file a grievance if he or she disagrees with that decision; and (b) Issue and carry out its determination as expeditiously as the Member's health condition requires and no later than the date the extension expires. (5) For service authorization decisions not reached within the timeframes specified in 42 C.F.R. Section 438.210(d) (which constitutes a denial and is thus an adverse action), on the date that the timeframes expire. (6) For expedited service authorization decisions, within the timeframes specified in 42 C.F.R. Section 438.210(d). 8.5.5.3. NOTICE OF DISPOSITION OF APPEAL. In accordance with 42 C.F.R. Section 438.408(e), HMO must provide written HHSC Contract 529-03-044-K 20 of 27 notice of disposition of all appeals including expedited appeals. The written resolution notice must include the results and date of the appeal resolution. For decisions not wholly in the Members favor, the notice must contain: (a) the right to request a fair hearing, (b) how to request a state fair hearing, (c) the circumstances under which the Member can continue to receive benefits pending a hearing (see Section 8.5.2.13), (d) how to request the continuation of benefits, (e) if the HMO's action is upheld in a hearing, the Member may be liable for the cost of any services furnished to the Member while the appeal is pending; and (f) any other information required by 1 T.A.C. Chapter 357 that relates to a managed care organization's notice of disposition of an appeal." 8.5.5.4 TIMEFRAME FOR NOTICE OF RESOLUTION OF APPEALS. In accordance with 42 C.F.R. Section 438.408, HMO must provide written notice of resolution of appeals, including expedited appeals, as expeditiously as the Member's health condition requires, but the notice must not exceed the timelines as provided in 8.5.2 or 8.5.3. For expedited resolution of appeals, HMO must make reasonable efforts to give the Member prompt oral notice of resolution of the appeal, and follow up with a written notice within the timeframes set forth in Section 8.5.3. If the HMO denies a request for expedited resolution of an appeal, HMO must transfer the appeal to the timeframe for standard resolution as provided in Section 8.5.2. and make reasonable efforts to give the Member prompt oral notice of the denial, and follow up within two calendar days with a written notice." SECTION 2.17 DELETION OF SECTION 8.6, MEMBER NOTICE, APPEALS AND FAIR HEARINGS Section 8.6 is deleted in its entirety. (Information concerning Member appeals and fair hearings is now located in Section 8.5 above.) 8.6 [deleted] SECTION 2.18 MODIFICATION OF SECTION 9.01, MARKETING MATERIAL MEDIA AND DISTRIBUTION New Section 9.1.1 is added as follows: "9.1.1 HMO may not make any assertion or statement (orally or in writing) it is endorsed by the CMS, a Federal or State government or agency, or similar entity." SECTION 2.19 MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT SUBSYSTEM In Section 10.7, requirements 5 and 9 from the "Functions and Features" provision are deleted. HHSC Contract 529-03-044-K 21 of 27 SECTION 2.20 MODIFICATION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA) COMPLIANCE Section 10.12 is modified to add new Section 10.12.1 as follows: "10.12.1 HMO must provide its Members with a privacy notice as required by HIPAA. The 4th to 6th grade reading level has been waived for the notices and are allowable at a 12th grade reading level. The HMO is not required to send the notice out in Spanish but must reference on their English notice, in Spanish, where to call to obtain a copy. HMO must provide HHSC with a copy of their privacy notice for filing, but does not need to have HHSC approval." SECTION 2.21 MODIFICATION OF SECTION 11.1, QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM Sections 11.1, and 11.5 are deleted and replaced with the following language: "11.1 QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM HMO must develop, maintain, and operate a quality assessment and performance improvement program consistent with the requirements of 42 C.F.R. Section 438.240 and Sections 10.7, 12.10 and Appendix A of this agreement. 11.5 Behavioral Health Integration into QIP. If an HMO provides behavioral health services, it must integrate behavioral health into its quality assessment and performance improvement program and include a systematic and on-going process for monitoring, evaluating, and improving the quality and appropriateness of behavioral health care services provided to Members. HMO must collect data, monitor and evaluate for improvements to physical health outcomes resulting from behavioral health integration into the overall care of the Member." SECTION 2.22 MODIFICATION TO ARTICLE 11, QUALITY ASSURANCE AND QUALITY IMPROVEMENT PROGRAM Article 11 is modified to add new Section 11.7, Practice Guidelines. "11.7 PRACTICE GUIDELINES In accordance with 42 C.F.R. Section 438.236, HMO must adopt practice guidelines, that are based on valid & reliable clinical evidence or a consensus of health care professionals in the particular field; consider the needs of the HMO's Members; are adopted in consultation with contracting health care professionals; and are reviewed and updated periodically as appropriate. The HMO must disseminate the guidelines to all affected providers and, upon request to Members and potential Members. The HMO's decisions regarding utilization management, member education, coverage of services, and other areas included in the guidelines, must be consistent with the HMO's guidelines." HHSC Contract 529-03-044-K 22 of 27 SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS Section 12.6, Member Complaints is replaced with the following language. Sections 12.8, Utilization Management Reports - Behavioral Health and 12.9, Utilization Management Reports - Physical Health are deleted and replaced with new Section 12.8, Utilization Management Reports, as follows: "12.6 MEMBER COMPLAINTS & APPEALS HMO must submit a quarterly summary report of Member complaints and appeals. HMO must also report complaints and appeals submitted to its subcontracted risk groups (e.g., IPAs). The complaint and appeals report must be submitted not later than 45 days following the end of the state fiscal quarter in a format specified by HHSC. 12.8 UTILIZATION MANAGEMENT REPORTS 12.8.1 Written Program Description. MCO 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. 12.8.2 Scope. The program has mechanisms to detect underutilization as well as overutilization, including but not limited to generation of provider profiles. 12.8.3 Preauthorization and Concurrent Review Requirements. For MCOs with preauthorization or concurrent review program: 12.8.4 Qualified medical professionals supervise preauthorization and concurrent review decisions. 12.8.5 Efforts are made to obtain all necessary information, including pertinent clinical information, and consult with the treating physician as appropriate. 12.9 [deleted]" SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS Sections 12.10.1 through 12.10.3 are deleted. Sections 12.10.5 and 12.10.6 are added as follows: "12.10.1 [deleted] 12.10.2 [deleted] 12.10.3 [deleted] 12.10.5 Written Annual Report. HMO must file a written annual report with HHSC describing the HMO's quality assessment and performance improvement projects. HHSC Contract 529-03-044-K 23 of 27 12.10.6 Encounter Data. In accordance with 42 C.F.R. 438.240(c)(2), HMO must submit the encounter data identified in Section 10.5 of this agreement at least monthly to HHSC, so that HHSC may complete a performance measurement report." SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS Section 13.1.2 is modified as follows: 13.1.2 The monthly capitation amounts and the Delivery Supplemental Payment (DSP) amount, effective as of September 1, 2003, are listed below.
EL PASO SDA MONTHLY ___HMO RISK GROUP CAPITATION AMOUNTS ___HHSC ---------- ------------------ TANF Children (> 1 year of age) $ 90.20 TANF Adults $180.72 Pregnant Women $272.11 Newborns* (up to 12 Months of Age) $369.15 Expansion Children (> 1 year of Age) $ 77.35 Federal Mandate Children $ 53.78 Disabled/Blind Administration $ 14.00
* Includes TANF Child & Expansion Children up to 12 months of Age. Delivery Supplemental Payment. A one-time per pregnancy supplemental payment for each delivery shall be paid to HMO as provided below in the following amount: $2,992.02. SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES Section 13.3.1 is amended as follows,, and Sections 13.3.2 - 13.3.10 are deleted in their entirety. 13.3.1 Performance Objectives. Performance Objectives are contained in Appendix K of this contract. HMO must meet the benchmarks established by HHSC for each objective. 13.3.2 [deleted] 13.3.3 [deleted] 13.3.4 [deleted] 13.3.5 [deleted] 13.3.6 [deleted] 13.3.7 [deleted] 13.3.8 [deleted] 13.3.9 [deleted] 13.3.10 [deleted] HHSC Contract 529-03-044-K 24 of 27 13.3.10.1 [deleted] SECTION 2.27 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT PROVISIONS Section 13.5.5 is modified to comply with HIPAA requirements, as follows: "13.5.5 The Enrollment Broker will provide a daily enrollment file, which will list all TP40 Members who received State-issued Medicaid I.D. numbers, for each HMO. HHSC will guarantee capitation payments to the HMOs for all TP40 Members who appear on the capitation and capitation adjustment files. The Enrollment Broker will provide a pregnant women exception report to the HMOs, which can be used to reconcile the pregnant women daily enrollment file with the monthly enrollment, capitation and capitation adjustment files." SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION Section 14.1.2.8 is modified as follows and 14.1.2.9 is deleted: "14.1.2.8 FEDERAL MANDATE CHILDREN (MAO) - Children aged 6-18 whose families' income is below 100% Federal Poverty Income Limit. 14.1.2.9 [deleted]" SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS Article 15 is modified to add new Section 15.14, Global Drafting Conventions, as follows: "15.14 GLOBAL DRAFTING CONVENTIONS. 15.14.1 The terms "include," "includes," and "including" are terms of inclusion, and where used in the Agreement, are deemed to be followed by the words "without limitation." 15.14.2 Any references to "Sections," "Exhibits," or "Attachments" are deemed to be references to Sections, Exhibits, or Attachments to the Agreement. 15.14.3 Any references to agreements, contracts, statutes, or administrative rules or regulations in the Agreement are deemed references to these documents as amended, modified, or supplemented from time to time during the term of the Agreement." SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO Section 16.3.4, Failure to Comply with Federal Laws and Regulations, is modified to add Section 16.3.4.7 with the following language: "16.3.4.7 HMO's failure to comply with requirements related to Members with special health care needs in Section 6.13 of this Contract, pursuant to 42 C.F.R. Section 438.208(c). 16.3.4.8 HMO's failure to comply with requirement in Sections 7.2.6 and 7.2.8.7 of this Contract, pursuant to 42 C.F.R. 438.102(a). HHSC Contract 529-03-044-K 25 of 27 SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES Sections 18.8.2 and 18.8.7 are modified as follows: "18.8.2 For a default under 16.3.4.2, for each default HHSC may assess double the excess amount charged in the violation of the federal requirements or $25,000, whichever is greater. HHSC will deduct from the penalty the amount of the overcharge and return it to the affected Member(s) 18.8.7 HMO may be subject to civil monetary penalties under the provisions of 42 C.F.R. Part 1003 and 42 C.F.R. Part 438, Subpart I in addition to or in place of withholding payments for a default under Section 16.3.4" SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM Section 19.1 is modified as follows: "19.1 The effective date of this contract is September 1, 1999. This contract and all amendments thereto will terminate on August 31, 2004, unless extended or terminated earlier as provided for elsewhere in this contract." SECTION 2.33 MODIFICATION TO APPENDIX A, STANDARDS FOR QUALITY IMPROVEMENT PROGRAMS Appendix A is replaced with the attached Appendix A and Attachment A-A. SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS Appendix D is replaced with the attached Appendix D. SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES Appendix E is replaced with the attached Appendix E. SECTION 2.36 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS New Appendix O is added to the contract with the attached Appendix O. SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES Appendix K is replaced with the attached Appendix K HHSC Contract 529-03-044-K 26 of 27 ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES The Parties contract and agree that the terms of the Agreement will remain in effect and continue to govern except to the extent modified in this Amendment. By signing this Amendment, the Parties expressly understand and agree that this Amendment is hereby made a part of the Agreement as though it were set out word for word in the Agreement. IN WITNESS HEREOF, HHSC AND THE CONTRACTOR HAVE EACH CAUSED THIS AMENDMENT TO BE SIGNED AND DELIVERED BY ITS DULY AUTHORIZED REPRESENTATIVE. SUPERIOR HEALTHPLAN, INC. HEALTH & HUMAN SERVICES COMMISSION By: /s/ Christopher Bowers By: /s/ Albert Hawkins ----------------------------------- ---------------------------------- Christopher Bowers Albert Hawkins President and CEO Commissioner Date: Date: --------------------------------- -------------------------------- HHSC Contract 529-03-044-K 27 of 27 EX-10.5A 5 c83064exv10w5a.txt AMENDMENT 14 TO CONTRACT INCLUDED AS EXHIBIT 10.5 EXHIBIT 10.5a AMENDMENT 14 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE MEDICAID STAR PROGRAM IN THE TRAVIS SERVICE DELIVERY AREA AMENDMENT 14 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE MEDICAID STAR PROGRAM IN THE TRAVIS SERVICE DELIVERY AREA TABLE OF CONTENTS ARTICLE 1. PURPOSE ....................................................................... 1 SECTION 1.01 AUTHORIZATION ............................................................... 1 SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES ........................................... 1 ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES ................................... 1 SECTION 2.01 GENERAL ..................................................................... 1 SECTION 2.02 MODIFICATION OF ARTICLE 2, DEFINITIONS ...................................... 1 SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS ...................... 3 SECTION 2.04 MODIFICATION TO SECTION 3.5, RECORDS REQUIREMENTS AND RECORDS RETENTION ..... 3 SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS ................ 3 SECTION 2.06 ADDITION TO ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE REQUIREMENTS ..... 4 SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES .............................................. 4 SECTION 2.08 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK PROVIDERS .... 5 SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES ............................. 5 SECTION 2.10 MODIFICATION OF SECTION 6.13, PEOPLE WITH DISABILITIES, SPECIAL HEALTH CARE NEEDS OR CHRONIC OR COMPLEX CONDITIONS ........................................... 7 SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS ........... 10 SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS ............................. 10 SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL .............. 10 SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS ......................... 13 SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK ................................ 13 SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS .............................. 14 SECTION 2.17 DELETION OF SECTION 8.6, MEMBER NOTICE, APPEALS AND FAIR HEARINGS ........... 21 SECTION 2.18 MODIFICATION OF SECTION 9.01, MARKETING MATERIAL MEDIA AND DISTRIBUTION ..... 21 SECTION 2.19 MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT SUBSYSTEM ..... 21 SECTION 2.20 MODIFICATION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA) COMPLIANCE ............................................ 22 SECTION 2.21 MODIFICATION OF SECTION 11.1, QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM .............................................................. 22 SECTION 2.22 MODIFICATION TO ARTICLE 11, QUALITY ASSURANCE AND QUALITY IMPROVEMENT PROGRAM .......................................................................... 22 SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS .......................... 23 SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS .................. 23 SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS ............................ 24 SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES ........................ 24 SECTION 2.27 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT PROVISIONS ....................................................................... 25 SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION ..................... 25 SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS .............................. 25 SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO ................................ 25 SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES ...................... 26 SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM ............................................ 26 SECTION 2.33 MODIFICATION TO APPENDIX A, STANDARDS FOR QUALITY IMPROVEMENT PROGRAMS ...... 26 SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS ............................... 26 SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES ........................... 26 SECTION 2.36 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS .................... 26 SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES .......................... 26 ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES .................................. 27

i HHSC CONTRACT NO. 529-03-043-N STATE OF TEXAS COUNTY OF TRAVIS AMENDMENT 14 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE STAR PROGRAM IN THE TRAVIS SERVICE DELIVERY AREA THIS CONTRACT AMENDMENT (the "Amendment") is entered into between the HEALTH & HUMAN SERVICES COMMISSION ("HHSC"), an administrative agency within the executive department of the State of Texas, and Superior HealthPlan, Inc. ("CONTRACTOR"), a health maintenance organization organized under the laws of the State of Texas, possessing a certificate of authority issued by the Texas Department of Insurance to operate as a health maintenance organization, and having its principal office at 2100 S. IH 35, Suite 202, Austin, Texas 78704. HHSC and CONTRACTOR may be referred to in this Amendment individually as a "Party" and collectively as the "Parties." The Parties hereby agree to amend their Agreement as set forth in Article 2 of this Amendment. ARTICLE 1. PURPOSE. SECTION 1.01 AUTHORIZATION. This Amendment is executed by the Parties in accordance with Article 15.2 of the Agreement. SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES. This Amendment is effective August 13, 2003. ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES SECTION 2.01 GENERAL This Amendment is to incorporate Federal regulations pertaining to recent amendments to the Balanced Budget Act. These regulations are found in 42 C.F.R. Parts 400, 430, 431, 434, 435, 438, 440, and 447. SECTION 2.02 MODIFICATION OF ARTICLE 2, DEFINITIONS The following provisions amend, modify and add to the definitions set forth in Article 2: "ACTION means the denial or limited authorization of a requested service, including the type or level of service; the reduction, suspension, or termination of a previously authorized service; the denial in whole or in part of payment for service; failure to provide services in a timely manner, the failure of an HMO to act within the timeframes set forth in this agreement and 42 C.F.R.Section 438.408(b); or HHSC Contract 529-03-043-N 1 of 27 for a resident of a rural area with only one HMO, the denial of a Medicaid Members' request to obtain services outside of the network. APPEAL means the formal process by which a Member or his or her representative request a review of an HMO's action, as defined above. COLD-CALL MARKETING means any unsolicited personal contact by the HMO with a potential Member for the purpose of marketing. MEMBER COMPLAINT or GRIEVANCE means an expression of dissatisfaction about any matter other than an action, as defined above. As provided by 42 C.F.R. Section 438.400, possible subjects for complaints or grievances include, but are not limited to, the quality of care of services provided, and aspects of interpersonal relationships such as rudeness of a provider or employee, or failure to respect the Member's rights. EMERGENCY MEDICAL CONDITION, means a medical condition manifesting itself by acute symptoms of recent onset and sufficient severity (including severe pain), such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical care could result in: (a) placing the patient's health in serious jeopardy; (b) serious impairment to bodily functions; (c) serious dysfunction of any bodily organ or part; (d) serious disfigurement; or (e) in the case of a pregnant women, serious jeopardy to the health of a woman or her unborn child. EXPERIENCE REBATE means the portion of the HMO's net income before taxes (financial Statistical Report, Part 1, Line 14) that is returned to the state in accordance with Section 13.2. EXPEDITED APPEAL means an appeal to the HMO in which the decision is required quickly based on the Member's health status and taking the time for a standard appeal could jeopardize the Member's life or health or ability to attain, maintain, or regain maximum function. MARKETING means any communication from an HMO to a Medicaid recipient who is not enrolled with the HMO that can reasonably be interpreted as intended to influence the recipient to enroll in that particular HMO's Medicaid product, or either to not enroll in, or to disenroll from another HMO's Medicaid product. MARKETING MATERIALS means materials that are produced in any medium by or on behalf of an HMO and can reasonably be interpreted as intended to market to potential enrollees. MEMBER or ENROLLEE, means a person who: is entitled to benefits under Title XIX of the Social Security Act and the Texas Medical Assistance Program (Medicaid), is in a Medicaid eligibility category included in the STAR Program, and is enrolled in the STAR Program. POST-STABILIZATION CARE SERVICES means covered services, related to an emergency medical condition that are provided after an Member is HHSC Contract 529-03-044-N 2 of 27 stabilized in order to maintain the stabilized condition, or, under the circumstances described in 42 C.F.R.Section 438.114(b)&(e) and 42 C.F.R.Section 422.113(c)(iii) to improve or resolve the Member's condition. SPECIAL HEALTH CARE NEEDS means Member with an increased prevalence of risk of disability, including but not limited to: chronic physical or developmental condition; severe and persistent mental illness; behavioral or emotional condition that accompanies the Member's physical or developmental condition. STABILIZE means to provide such medical care as to assure within reasonable medical probability that no deterioration of the condition is likely to result from, or occur from, or occur during discharge, transfer, or admission of the Member." SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS Section 3.2 is modified to amend Section 3.2.4.3 add new Sections 3.2.6 and 3.2.7, as follows: "3.2.4.3 [Contractor] understands and agrees that neither HHSC, nor the HMO's Medicaid Members, are liable or responsible for payment for any services authorized and provided under this contract. 3.2.6 In accordance with 42 C.F.R. Section 438.230(b)(3), all subcontractors must be subject to a written monitoring plan, for any subcontractor carrying out a major function of the HMO's responsibility under this contract. For all subcontractors carrying out a major function of the HMO's contract responsibility, the HMO must prepare a formal monitoring process at least annually. HHSC may request copies of written monitoring plans and the results of the HMO's formal monitoring process. 3.2.7 In accordance with 42 C.F.R. Section 438.210(e), HMO may not structure compensation to utilization management subcontractors or entities to provide incentives to deny, limit, reduce, or discontinue medically necessary services to any Member." SECTION 2.04 MODIFICATION TO SECTION 3.5, RECORDS REQUIREMENTS AND RECORDS RETENTION Section 3.5.5, Medical Records, is modified as follows: "3.5.5 Medical Records. HMO must require, through contractual provisions or provider manual, providers to create and keep medical records in compliance with the medical records standards contained in Appendix O, Standards for Medical Records. All medical records must be kept for at least five (5) years, except for records of rural health clinics, which must be kept for a period of six (6) years from the date of service." SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS Section 4.10.8 is modified as follows: "4.10.8 HMO must comply with the standards adopted by the U.S. Department of Health and Human Services under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191, regarding submitting and receiving claims information through electronic data interchange (EDI) that allows for automated HHSC Contract 529-03-043-N 3 of 27 processing and adjudication of claims within the federally mandated timeframes (see 45 C.F.R. parts 160 through 164)." SECTION 2.06 ADDITION TO ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE REQUIREMENTS Section 5.11 is added as follows: "5.11 DATA CERTIFICATION 5.11.1 In accordance with 42 C.F.R.Sections 438.604 and 438.606, HMO must certify in writing: (a) encounter data; (b) delivery supplemental data and other data submitted pursuant to this agreement or State or Federal law or regulation relating to payment for services. 5.11.2 The certification must be submitted to HHSC concurrently with the certified data or other documents. 5.11.3 The certification must: (a) be signed by the HMO's Chief Executive Officer; Chief Financial Officer; or an individual with delegated authority to sign for, and who reports directly to, either the Chief Executive Officer or Chief Financial Officer; and (b) contain a statement that to the best knowledge, information and belief of the signatory, the HMO's certified data or information are accurate, complete, and truthful." SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES Section 6.1 is modified to add new section 6.1.9 as follows: "6.1.9 In accordance with 42 C.F.R. Section 438.102, HMO may file an objection to provide, reimburse for, or provide coverage of, counseling or referral service for a covered benefit, based on moral or religious grounds. 6.1.9.1 HMO must work with HHSC to develop a work plan to complete the necessary tasks to be completed and determine an appropriate date for implementation of the requested changes to the requirements related to covered services. The work plan will include timeframes for completing the necessary contract and waiver amendments, adjustments to capitation rates, identification of HMO and enrollment materials needing revision, and notifications to Members. 6.1.9.2 In order to meet the requirements of Section 6.1.9.1, HMO must notify HHSC of grounds for and provide detail concerning its moral or religious objections and the specific services covered under the objection, no less than 120 days prior to the proposed effective date of the policy change. HHSC Contract 529-03-043-N 4 of 27 6.1.9.3 HMO must notify all current Members of the intent to change covered services at least 30 days prior to the effective date of the change in accordance with 42 C.F.R. Section 438.102(b)(ii)(B). 6.1.9.4 HHSC will provide information to all current Members on how and where to obtain the service that has been discontinued by the HMO in accordance with 42 C.F.R.Section 438.102(c)." SECTION 2.08 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK PROVIDERS Section 6.4 is modified to add new Sections 6.4.6 and 6.4.7 as follows: "6.4.6 HMO must provide Members with timely and adequate access to out-of-network services for as long as those services are necessary and covered benefits not available within the network, in accordance with 42 C.F.R. Section 438.206(b)(4). HMO will not be obligated to provide a Member with access to out-of-network services if such services become available from a network provider. 6.4.7 HMO must require through contract provisions or the provider manual that each Member have access to a second opinion regarding the use of any health care service. A Member must be allowed access to a second opinion from a network provider or out-of-network provider if a network provider is not available, at no additional cost to the Member, in accordance with 42 C.F.R. Section 438.206(b)(3)." SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES Section 6.5 is deleted in its entirety and replaced with the following language: "6.5.1 HMO policy and procedures, covered benefits, claims adjudication methodology, and reimbursement performance for emergency services must comply with all applicable state and federal laws and regulations including 42 C.F.R. Section 438.114, whether the provider is in network or out of network. 6.5.2 HMO must pay for the professional, facility, and ancillary services that are medically necessary to perform the medical screening examination and stabilization of HMO Member presenting as an emergency medical condition or an emergency behavioral health condition to the hospital emergency department, 24 hours a day, 7 days a week, rendered by either HMO's in-network or out-of-network providers. 6.5.2.1 For all out-of-network emergency services providers, HMO will pay a reasonable and customary amount for emergency services. HMO policies and procedures must be consistent with this agreement's prudent lay person definition of an emergency medical condition and claims adjudication processes required under Section 7.6 of this agreement and 42 C.F.R. Section 438.114. HMO will pay a reasonable and customary amount for services for all out-of-network emergency services provider claims with dates of service between September 1, 2002 and November 30, HHSC Contract 529-03-043-N 5 of 27 2002. HMO must forward any complaints submitted by out-of-network emergency services providers during this time to HHSC. HHSC will review all complaints and determine whether payments were reasonable and customary. HHSC will direct the HMO to pay a reasonable and customary amount, as determined by HHSC, if it concludes that the payments were not reasonable and customary for the provider. 6.5.2.2 For all out-of-network emergency services provider claims with dates of service on or after December 1, 2002, HMO must pay providers a reasonable and customary amount consistent with a methodology approved by HHSC. HMO must submit its methodology, along with any supporting documentation, to HHSC by September 30, 2002. HHSC will review and respond to the information by November 15, 2002. HMO must forward any complaints by out-of-network emergency services providers to HHSC, which will review all complaints. If HHSC determines that payment is not consistent with the HMO's approved methodology, the HMO must pay the emergency services provider a rate, using the approved reasonable and customary methodology, as determined by HHSC. Failure to comply with this provision constitutes a default under Article 16, Default and Remedies. 6.5.3 HMO must ensure that its network primary care providers (PCPs) have after-hours telephone availability that is consistent with Section 7.8.10 of this contract. This telephone access must be available 24 hours a day, 7 days a week throughout the service area. 6.5.4 HMO cannot require prior authorization as a condition for payment for an emergency medical condition, an emergency behavioral health condition, or labor and delivery. HMO cannot limit what constitutes an emergency medical condition on the basis of lists of diagnoses or symptoms. HMO cannot refuse to cover emergency services based on the emergency room provider, hospital, or fiscal agent not notifying the Member's primary care provider or HMO of the Member's screening and treatment within 10 calendar days of presentation for emergency services. HMO may not hold the Member who has an emergency medical condition liable for payment of subsequent screening and treatment needed to diagnose the specific condition or stabilize the patient. HMO must accept the emergency physician or provider's determination of when the Member is sufficiently stabilized for transfer or discharge. 6.5.5 Medical Screening Examination for emergency services. A medical screening examination needed to diagnose an emergency medical condition shall be provided in a hospital based emergency department that meets the requirements of the Emergency Medical Treatment and Active Labor Act (EMTALA) 42 C.F.R. Section 489.20, Section 489.24 and Section 438.114(b)&(c). HMO must pay for the emergency medical screening examination, as required by 42 U.S.C. Section 1395dd. HMOs must reimburse for both the physician's services and the hospital's emergency services, including the emergency room and its ancillary services. 6.5.6 Stabilization Services. When the medical screening examination determines that an emergency medical condition exists, HHSC Contract 529-03-043-N 6 of 27 HMO must pay for emergency services performed to stabilize the Member. The emergency physician must document these services in the Member's medical record. HMOs must reimburse for both the physician's and hospital's emergency stabilization services including the emergency room and its ancillary services. 6.5.7 Post-stabilization Care Services. HMO must cover and pay for post-stabilization care services in the amount, duration, and scope necessary to comply with 42 C.F.R. Section 438.114(b)&(e) and 42 C.F.R. 422.113(c)(iii). The HMO is financially responsible for post-stabilization care services obtained within or outside the network that are not pre-approved by a plan provider or other HMO representative, but administered to maintain, improve, or resolve the Member's stabilized condition if: (a) the HMO does not respond to a request for preapproval within 1 hour; (b) the HMO cannot be contacted; (c) or the HMO representative and the treating physician cannot reach an agreement concerning the Member's care and a plan physician is not available for consultation. In this situation, the HMO must give the treating physician the opportunity to consult with a plan physician and the treating physician may continue with care of the patient until an HMO physician is reached or the HMO's financial responsibility ends as follows: the HMO physician with privileges at the treating hospital assumes responsibility for the Member's care; the HMO physician assumes responsibility for the Member's care through transfer; the HMO representative and the treating physician reach an agreement concerning the Member's care; or the Member is discharged. 6.5.8 HMO must provide access to the HHSC-designated Level I and Level II trauma centers within the State or hospitals meeting the equivalent level of trauma care. HMOs may make out-of-network reimbursement arrangements with the HHSC-designated Level I and Level II trauma centers to satisfy this access requirement." SECTION 2.10 MODIFICATION OF SECTION 6.13, PEOPLE WITH DISABILITIES, SPECIAL HEALTH CARE NEEDS OR CHRONIC OR COMPLEX CONDITIONS Section 6.13 is deleted in its entirety and replaced with the following: "6.13.1 HMO shall provide the following services to persons with disabilities, special health care needs, or chronic or complex conditions. These services are in addition to the covered services described in detail in the Texas Medicaid Provider Procedures Manual (Provider Procedures Manual) and the Texas Medicaid Bulletin, which is the bi-monthly update to the Provider Procedures Manual. Clinical information regarding covered services is published by the Texas Medicaid program in the Texas Medicaid Service Delivery Guide. 6.13.2 HMO must develop and maintain a system and procedures for identifying Members who have disabilities, special health care needs or chronic or complex medical and behavioral health HHSC Contract 529-03-043-N 7 of 27 conditions. Once identified, HMO must have effective health delivery systems to provide the covered services to meet the special preventive, primary acute, and specialty health care needs appropriate for treatment of the individual's condition. The guidelines and standards established by the American Academy of Pediatrics, the American College of Obstetrics/Gynecologists, the U.S. Public Health Service, and other medical and professional health organizations and associations' practice guidelines whose standards are recognized by HHSC must be used in determining the medically necessary services, assessment and plan of care for each individual. 6.13.2.1 In accordance with 42 C.F.R. 438.208(b)(3), HMO shall provide information that identifies Members who the HMO has assessed as special health care needs Members to the State's enrollment broker. The information will be provided in a format to be specified by HHSC and updated by the 10th day of each month. In the event that a special health care needs Member changes health plans, HMO will work with receiving HMO to provide information concerning the results of the HMO's identification and assessment of that Member's needs, to prevent duplication of those activities. 6.13.3 HMO must require that the PCP for all persons with disabilities, special health care needs or chronic or complex conditions develop a plan of care to meet the needs of the Member. The plan of care must be based on health needs, specialist(s) recommendations, and periodic reassessment of the Member's developmental and functional status and service delivery needs. HMO must require providers to maintain record keeping systems to ensure that each Member who has been identified with a disability or chronic or complex condition has an initial plan of care in the primary care provider's medical records, that Member agrees to that plan of care, and that the plan is updated as often as the Member's needs change, but at least annually. 6.13.4 HMO must provide a primary care and specialty care provider network for persons with disabilities, special health care needs, or chronic or complex conditions. Specialty and subspecialty providers serving all Members must be Board Certified/Board Eligible in their specialty. HMO may request exceptions from HHSC for approval of traditional providers who are not board-certified or board-eligible but who otherwise meet HMO's credentialing requirements. 6.13.5 HMO must have in its network PCPs and specialty care providers that have documented experience in treating people with disabilities, special health care needs, or chronic or complex conditions, including children. For services to children with disabilities, special health care needs, or chronic or complex conditions, HMO must have in its network PCPs and specialty care providers that have demonstrated experience with children with disabilities, special health care needs, or chronic or complex conditions in pediatric specialty centers such as children's hospitals, medical schools, teaching hospitals and tertiary center levels. 6.13.6 HMO must provide information, education and training programs to Members, families, PCPs, specialty physicians, and community agencies about the care and treatment available in HHSC Contract 529-03-043-N 8 of 27 HMO's plan for Members with disabilities, special health care needs, or chronic or complex conditions. HMO must ensure Members with disabilities, special health care needs, or chronic or complex conditions have direct access to a specialist. 6.13.7 HMO must coordinate care and establish linkages, as appropriate for a particular Member, with existing community-based entities and services, including but not limited to: Maternal and Child Health, Children with Special Health Care Needs (CSHCN), the Medically Dependent Children Program (MDCP), Community Resource Coordination Groups (CRCGs), Interagency Council on Early Childhood Intervention (ECI), Home and Community-based Services (HCS), Community Living Assistance and Support Services (CLASS), Community Based Alternatives (CBA), In Home Family Support, Primary Home Care, Day Activity and Health Services (DAHS), Deaf/Blind Multiple Disabled waiver program and Medical Transportation Program (MTP). 6.13.8 HMO must include TDH approved pediatric transplant centers, TDH designated trauma centers, and TDH designated hemophilia centers in its provider network (see Appendices E, F, and G for a listing of these facilities). 6.13.9 HMO must ensure Members with disabilities or chronic or complex conditions have access to treatment by a multidisciplinary team when determined by the Member's PCP to be medically necessary for effective treatment, or to avoid separate and fragmented evaluations and service plans. The teams must include both physician and non-physician providers determined to be necessary by the Member's PCP for the comprehensive treatment of the Member. The team must: 6.13.9.1 Participate in hospital discharge planning; 6.13.9.2 Participate in pre-admission hospital planning for non-emergency hospitalizations; 6.13.9.3 Develop specialty care and support service recommendations to be incorporated into the primary care provider's plan of care; 6.13.9.4 Provide information to the Member and the Member's family concerning the specialty care recommendations; and 6.13.9.5 HMO must develop and implement training programs for primary care providers, community agencies, ancillary care providers, and families concerning the care and treatment of a Member with a disability or chronic or complex conditions. 6.13.10 HMO must identify coordinators of medical care to assist providers who serve Members with disabilities and chronic or complex conditions and the Members and their families in locating and accessing appropriate providers inside and outside HMO's network. HHSC Contract 529-03-043-N 9 of 27 6.13.11 HMO must assist, through information and referral, eligible Members in accessing providers of non-capitated Medicaid services listed in Article 6.1.8, as applicable. 6.13.12 HMO must ensure that Members who require routine or regular laboratory and ancillary medical tests or procedures to monitor disabilities, special health care needs, or chronic or complex conditions are allowed by HMO to receive the services from the provider in the provider's office or at a contracted lab located at or near the provider's office." SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS Section 7.1.3 is amended to add new Section 7.1.3.5, as follows: "7.1.3.5 Prenatal Care within 2 weeks of request." SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS Section 7.2.8.2.1 is added and Section 7.2.9.2 is modified, as follows: "7.2.8.2.1 [Provider] understands and agrees that the HMO's Medicaid enrollees are not to be held liable for the HMO's debts in the event of the entity's insolvency in accordance with 42 C.F.R.Section 438.106(a). 7.2.9.2 A provider who is terminated is entitled to an expedited review process by HMO on request by the provider. HMO must make a good faith effort to provide written notice of the provider's termination to HMO's Members receiving primary care from, or who were seen on a regular basis by, the terminated provider within 15 days after receipt or issuance of the termination notice, in accordance with 42 C.F.R. Section 438.10(f)(5). If a provider is terminated for reasons related to imminent harm to patient health, HMO must notify its Members immediately of the provider's termination. 7.2.12 Notice to Rejected Providers. In accordance with 42 C.F.R. Section 438.129(a)(2), if an HMO 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." SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL The qualifications for a "Hospital" in Section 7.7 is replaced with the following language. Section 7.7 is retitled Section 7.7.1 and new Section 7.7.2, Provider Credentialing and Recredentialing is added to Section 7.7: "7.7.1 PROVIDER QUALIFICATIONS - GENERAL
PROVIDER QUALIFICATION - -------- ------------- Hospital An institution licensed as a general or special hospital by the State of Texas under Chapter 241 of the Health and Safety Code, which is enrolled as a provider in the Texas Medicaid Program. HMO will require that all facilities in the network used for acute inpatient specialty care for people under age 21 with disabilities, special health care needs, or chronic or complex conditions will have a designated pediatric unit; 24 hour laboratory and blood bank
HHSC Contract 529-03-043-N 10 of 27 PROVIDER QUALIFICATION availability; pediatric radiological capability; meet JCAHO standards; and have discharge planning and social service units. HMO may request exceptions to this requirement for specific hospitals within their networks, from HHSC." "7.7.2 PROVIDER CREDENTIALING AND RECREDENTIALING In accordance with 42 C.F.R. Section 438.214, HMO's standard credentialing and recredentialing process must include the following provisions to determine whether physicians and other health care professionals, who are licensed by the State and who are under contract with HMO, are qualified to perform their services. 7.7.2.1 Written Policies and Procedures. MCO has written policies and procedures for the credentialing process that includes MCO's initial credentialing of practitioners as well as its subsequent recredentialing, recertifying and/or reappointment of practitioners. 7.7.2.2 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. 7.7.2.3 Credentialing Entity. The plan designates a credentialing committee or other peer review body, which makes recommendations regarding credentialing decisions. 7.7.2.4 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 health practitioners included in the review organization's literature for Members, as an indication of those practitioners whose service to Members is contracted or anticipated. 7.7.2.5 Process. The initial credentialing process obtains and reviews verification of the following information, at a minimum: a) The practitioner holds a current valid license to practice; b) Valid DEA or CDS certificate, as applicable; c) Graduation from medical school and completion of a residency or other post-graduate training, as applicable; d) Work history; e) Professional liability claims history; f) The practitioner holds current, adequate malpractice insurance according to the plan's policy; g) Any revocation or suspension of a state license or DEA/BNDD number; HHSC Contract 529-03-043-N 11 of 27 h) Any curtailment or suspension of medical staff privileges (other than for incomplete medical records); i) Any sanctions imposed by Medicaid and/or Medicare; j) Any censure by the State or County Medical Association; k) MCO requests information on the practitioner from the National Practitioner Data Bank and the State Board of Medical Examiners; l) The application process includes a statement by the Applicant regarding: (This information should be used to evaluate the practitioner's current ability to practice.) m) Any physical or mental health problems that may affect current ability to provide health care; n) Any history of chemical dependency/substance abuse; o) History of loss of license and/or felony convictions; p) History of loss or limitation of privileges or disciplinary activity; and q) An attestation to correctness/completeness of the application. 7.2.2.6 There is an initial visit to each potential primary care practitioner's office, including documentation of a structured review of the site and medical record keeping practices to ensure conformance with MCO's standards. 7.7.2.7 Recredentialing. A process for the periodic reverification of clinical credentials (recredentialing, reappointment, or recertification) is described in MCO's policies and procedures. 7.7.2.8 There is evidence that the procedure is implemented at least every three years. 7.7.2.9 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-1" through "E-7" and item "E-13" above. 7.7.2.10 The recredentialing, recertification or reappointment process also includes review of data from: a) Member complaints and b) results of quality reviews. 7.7.2.11 Delegation of Credentialing Activities. If MCO 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. MCO monitors the effectiveness of the delegate's credentialing and reappointment or recertification process. 7.7.2.12 Retention of Credentialing Authority. MCO retains the right to approve new providers and sites and to terminate or HHSC Contract 529-03-043-N 12 of 27 suspend individual providers. MCO has policies and procedures for the suspension, reduction or termination of practitioner privileges. 7.7.2.13 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. MCO will implement and maintain policies and procedures for disciplinary actions including reducing, suspending, or terminating a practitioner's privileges. 7.7.2.14 Appeals Process. There is a provider appellate process for instances where MCO chooses to reduce, suspend or terminate a practitioner's privileges with the organization. SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS Section 7.8.1.1 is added and Sections 7.8.8 and 7.8.11.4 are modified with the following language: "7.8.1.1 HMO must provide supporting documentation, as specified and requested by the State, to verify that their provider network meets the requirements of this contract at the time the HMO enters into a contract and at the time of a significant change as required by 42 C.F.R. Section 438.207(b). A significant change can be, but is not limited to, change in ownership (purchase, merger, acquisition), new start-up, bankruptcy, and/or a major subcontractor change directly affecting a provider network such as (IPA's, BHO, medical groups, etc.). 7.8.8 The PCP for a Member with disabilities, special health care needs, or chronic or complex conditions may be a specialist who agrees to provide PCP services to the Member. The specialty provider must agree to perform all PCP duties required in the contract and PCP duties must be within the scope of the specialist's license. Any interested person may initiate the request for a specialist to serve as a PCP for a Member with disabilities, special health care needs, or chronic or complex conditions. 7.8.11.4 HMO must require PCPs for children under the age of 21 to provide or arrange to have provided all services required under Section 6.8 relating to Texas Health Steps, Section 6.9 relating to Perinatal Services, Section 6.10 relating to Early Childhood Intervention, Section 6.11 relating to WIC, Section 6.13 relating to People With Disabilities, special health care needs, or chronic or complex conditions, and Section 6.14 relating to Health Education and Wellness and Prevention Plans. PCP must cooperate and coordinate with HMO to provide Member and the Member's family with knowledge of and access to available services." SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK Section 8.2.4 is added with the following language: "8.2.4 In accordance with 42 C.F.R. Section 438.100, HMO must maintain written policies and procedures for informing Members of their rights and responsibilities. HMO must notify its Members of their right to request a copy of these rights and responsibilities." HHSC Contract 529-03-043-N 13 of 27 SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS Section 8.5 is deleted in its entirety and replaced with the following language: "8.5 MEMBER COMPLAINT AND APPEAL SYSTEM HMO must develop, implement and maintain a Member complaint and appeal system that complies with the requirements in applicable federal and state laws and regulations, including 42 C.F.R. Section 431.200 and 42 C.F.R. Part 483, Subpart F, "Grievance System;" and the provisions of 1 T.A.C. Chapter 357 relating to managed care organizations. The complaint and appeal system must include a complaint process, an appeal process, and access to HHSC's Fair Hearing System. The procedures must be reviewed and approved in writing by HHSC. Modifications and amendments to the Member complaint and appeal system must be submitted to HHSC at least 30 days prior to the implementation of the modification or amendment. For purposes of Section 8.5., an "authorized representative" is any person or entity acting on behalf of the Member and with the Member's written consent. A provider may be an "authorized representative." 8.5.1 MEMBER COMPLAINT PROCESS 8.5.1.1 HMO must have written policies and procedures for receiving, tracking, responding to, reviewing, reporting and resolving complaints by Members or their authorized representatives. 8.5.1.2 HMO must resolve complaints within 30 days from the date that the complaint was received. The complaint procedure must be the same for all Members under this contract. The Member or Member's authorized representative may file a complaint either orally or in writing. HMO must also inform Members how to file a complaint directly with HHSC. 8.5.1.3 HMO must designate an officer of HMO who has primary responsibility for ensuring that complaints are resolved in compliance with written policy and within the time required. An "officer" of HMO means a president, vice president, secretary, treasurer, or chairperson of the board for a corporation, the sole proprietor, the managing general partner of a partnership, or a person having similar executive authority in the organization. 8.5.1.4 HMO must have a routine process to detect patterns of complaints. The process must involve management, supervisory, and quality improvement staff in the development of policy and procedural improvements to address the complaints. 8.5.1.5 HMO's complaint procedures must be provided to Members in writing and through oral interpretive services. A written description of HMO's complaint procedures must be available in prevalent non-English languages identified by HHSC, at a 4th to 6th grade reading level. HMO must include a written description of the complaint process in the Member Handbook. HMO must maintain and HHSC Contract 529-03-043-N 14 of 27 publish in the Member Handbook, at least one local and one toll-free telephone number with TeleTypewriter/Telecommunications Device for the Deaf (TTY/TTD) and interpreter capabilities for making complaints. 8.5.1.6 HMO's process must require that every complaint received in person, by telephone or in writing must be acknowledged and recorded in a written record and logged with the following details: date; identification of the individual filing the complaint; identification of the individual recording the complaint; nature of the complaint; disposition of the complaint (i.e., how the HMO resolved the complaint); corrective action required; and date resolved. 8.5.1.7 HMO is prohibited from discriminating or taking punitive action against a Member or his or her representative for making a complaint. 8.5.1.8 If the Member makes a request for disenrollment, the HMO shall give the Member information on the disenrollment process and direct the Member to the Enrollment Broker. If the request for disenrollment includes a complaint by the Member, the complaint will be processed separately from the disenrollment request, through the complaint process. 8.5.1.9 HMO will cooperate with the Enrollment Broker, HHSC, and HHSC's Member resolution service contractors to resolve all Member complaints. Such cooperation may include, but is not limited to, providing information or assistance to internal complaint committees. 8.5.1.10 HMO must provide designated staff to assist Members in understanding and using HMO's complaint system. HMO's designated staff must assist Members in writing or filing a complaint and monitoring the complaint through the HMO's complaint process until the issue is resolved. 8.5.2 STANDARD MEMBER APPEAL PROCESS 8.5.2.1 HMO must develop, implement and maintain an appeal procedure that complies with the requirements in federal laws and regulations, including 42 C.F.R. Section 431.200 and 42 C.F.R. Part 438, Subpart F, "Grievance System." An appeal is a disagreement with an "action" as defined in Article 2 of the Contract. The appeal procedure must be the same for all Members. When a Member or his or her authorized representative expresses orally or in writing any dissatisfaction or disagreement with an action, the HMO must regard the expression of dissatisfaction as a request to appeal an action. 8.5.2.2 A Member must file a request for an internal appeal within 30 days from receipt of the notice of the action. To ensure continuation of currently authorized services, however, the Member must file the appeal on or before the later of: 10 days following the HMO's mailing of the notice of the action or the intended effective date of the proposed action. HHSC Contract 529-03-043-N 15 of 27 8.5.2.3 HMO must designate an officer who has primary responsibility for ensuring that appeals are resolved in compliance with written policy and within the time required. An "officer" of HMO means a president, vice president, secretary, treasurer, or chairperson of the board for a corporation, the sole proprietor, the managing general partner of a partnership, or a person having similar executive authority in the organization. 8.5.2.4 The provisions of Article 21.58A, Texas Insurance Code, relating to a Member's right to appeal an adverse determination made by HMO or a utilization review agent by an independent review organization, do not apply to a Medicaid recipient. Federal fair hearing requirements (Social Security Act Section 1902a(3), codified at 42 C.F.R. Section 431.200 et. seq.) require the agency to make a final decision after a fair hearing, which conflicts with the State requirement that the IRO make a final decision. Therefore, Article 21.58A is pre-empted by the federal requirement. 8.5.2.5 HMO must have policies and procedures in place outlining the role of HMO's Medical Director for an appeal of an action. The Medical Director must have a significant role in monitoring, investigating and hearing appeals. In accordance with 42 C.F.R. Section 438.406, the HMO's policies and procedures must require that individuals who make decisions on appeals were not involved in any previous level of review or decision-making, and, are health care professionals who have the appropriate clinical expertise, as determined by HHSC, in treating the Member's condition or disease. 8.5.2.6 HMO must provide designated staff to assist Members in understanding and using HMO's appeal process. HMO's designated staff must assist Members in writing or filing an appeal and monitoring the appeal through the HMO's appeal process until the issue is resolved. 8.5.2.7 HMO must have a routine process to detect patterns of appeals. The process must involve management, supervisory, and quality improvement staff in the development of policy and procedural improvements to address the appeals. 8.5.2.8 HMO's appeal procedures must be provided to Members in writing and through oral interpretive services. A written description of HMO's appeal procedures must be available in prevalent non-English languages identified by HHSC, at a 4th to 6th grade reading level. HMO must include a written description in the Member Handbook. HMO must maintain and publish in the Member Handbook at least one local and one toll-free telephone number with TTY/TTD and interpreter capabilities for requesting an appeal of an action. 8.5.2.9 HMO's process must require that every oral appeal received must be confirmed by a written, signed appeal by the Member or his or her representative, unless the Member or his or her representative requests an expedited resolution. All appeals must be recorded in a written record and logged with the following details: date notice is sent; effective date of the action; date the Member or his or her representative requested the appeal; date the appeal was followed HHSC Contract 529-03-043-N 16 of 27 up in writing; identification of the individual filing; nature of the appeal; disposition of the appeal; notice of disposition to Member. 8.5.2.10 HMO must send a letter to the Member within 5 business days acknowledging receipt of the appeal request. Except as provided in Section 8.5.3.2, HMO must complete the entire appeal process within 30 calendar days after receipt of the initial written or oral request for appeal. The timeframe may be extended up to 14 calendar days if the Member requests an extension; or the HMO shows that there is a need for additional information and how the delay is in the Member's interest. If the timeframe is extended, the HMO must give the Member written notice of the reason for delay if the Member had not requested the delay. 8.5.2.11 During the appeal process, HMO must provide the Member a reasonable opportunity to present evidence, any allegations of fact or law, in person as well as in writing. The HMO must inform the Member of the time available for providing this information, and in the case of an expedited resolution, that limited time will be available (see Section 8.5.3.2). 8.5.2.12 HMO must provide the Member and his or her representative opportunity, before and during the appeals process, to examine the Member's case file, including medical records and any other documents considered during the appeal process. HMO must include, as parties to the appeal, the Member and his or her representative or the legal representative of a deceased Member's estate. 8.5.2.13 In accordance with 42.C.F.R. Section 438.420, HMO must continue the Member's benefits currently being received by the Member, including the benefit that is the subject of the appeal, if all of the following criteria are met: 1) the Member or his or her representative files the appeal timely (as defined in Section 8.5.2.2); 2) the appeal involves the termination, suspension, or reduction of a previously authorized course of treatment; 3) the services were ordered by an authorized provider; 4) the original period covered by the original authorization has not expired; and 5) the Member requests an extension of the benefits. If, at the Member's request, the HMO continues or reinstates the Member's benefits while the appeal is pending, the benefits must be continued until one of the following occurs: the Member withdraws the appeal; 10 days pass after the HMO mails the notice, providing the resolution of the appeal against the Member, unless the Member, within the 10-day timeframe, has requested a State fair hearing with continuation of benefits until a State fair hearing decision can be reached; a state fair hearing office issues a hearing decision adverse to the Member; the time period or service limits of a previously authorized service has been met. 8.5.2.14 In accordance with 42 C.F.R. Section 438.420(d), if the final resolution of the appeal is adverse to the Member, and upholds the HMO's action, then to the extent that the services were furnished to comply with Section 8.5.2.13, the HMO may recover such costs from the Member. HHSC Contract 529-03-043-N 17 of 27 8.5.2.15 If the HMO or state fair hearing officer reverses a decision to deny, limit, or delay services that were not furnished while the appeal was pending, the HMO must authorize or provide the disputed services promptly, and as expeditiously as the Member's health condition requires. 8.5.2.16 If the HMO or state fair hearing officer reverses a decision to deny authorization of services and the Member received the disputed services while the appeal was pending, the HMO will be responsible for the payment of services. 8.5.2.17 HMO is prohibited from discriminating against a Member or his or her representative for making an appeal. 8.5.3 EXPEDITED HMO APPEALS 8.5.3.1 In accordance with 42 C.F.R. Section 438.410, HMO must establish and maintain an expedited review process for appeals, when the HMO determines (for a request from a Member) or the provider indicates (in making the request on the Member's behalf or supporting the Member's request) that taking the time for a standard resolution could seriously jeopardize the Member's life or health. HMO must follow all appeal requirements for standard Member appeals, as set forth in Section 8.5.2, except where differences are specifically noted. Requests for expedited appeals must be accepted orally or in writing. 8.5.3.2 HMO must complete investigation and resolution of an appeal relating to an ongoing emergency or denial of continued hospitalization: (1) in accordance with the medical or dental immediacy of the case; and (2) not later than one business day after the complainant's request for appeal is received. 8.5.3.3 Members must exhaust the HMO's expedited appeal process before making a request for an expedited state fair hearing. After HMO receives the request for an expedited appeal, it must hear an approved requests for a Member to have an expedited appeal and notify the Member of the outcome of the appeal within 3 business days, except as stated in 8.5.3.2. This timeframe may be extended up to 14 calendar days if the Member requests an extension; or the HMO shows (to the satisfaction of HHSC, upon HHSC's request) that there is a need for additional information and how the delay is in the Member's interest. If the timeframe is extended, the HMO must give the Member written notice of the reason for delay if the Member had not requested the delay. 8.5.3.4 If the decision is adverse to the Member, procedures relating to the notice in Section 8.5.5 must be followed. The HMO is responsible for notifying the Member of their rights to access an expedited state fair hearing. HMO will be responsible for providing documentation to the State and the Member, indicating how the decision was made, prior to state's expedited fair hearing. 8.5.3.5 The HMO must ensure that punitive action is neither taken against a provider who requests an expedited resolution or supports a Member's request. HHSC Contract 529-03-043-N 18 of 27 8.5.3.6 If the HMO denies a request for expedited resolution of an appeal, it must: (1) transfer the appeal to the timeframe for standard resolution set forth in Section 8.5.2, and (2) make a reasonable effort to give the Member prompt oral notice of the denial, and follow up within two calendar days with a written notice. 8.5.4 ACCESS TO STATE FAIR HEARING 8.5.4.1 HMO must inform Members that they generally have the right to access the state fair hearing process in lieu of the internal appeal system provided by HMO procedures set forth in Sections 8.5.2 and 8.5.3. The notice must comply with the requirements of 1 T.A.C. Chapter 357. In the case of an expedited State Fair Hearing Process, the HMO must inform the Member that he or she must first exhaust the HMO's internal expedited appeal process. 8.5.4.2 HMO must notify Members that they may be represented by an authorized representative in the state fair hearing process. 8.5.5 NOTICES OF ACTION AND DISPOSITION OF APPEALS 8.5.5.1 NOTICE OF ACTION. HMO must notify the Member, in accordance with 1 T.A.C. Chapter 357, whenever HMO takes an action as defined in Article 2 of this contract. The notice must contain the following information: (a) the action the HMO or its contractor has taken or intends to take; (b) the reasons for the action; (c) the Member's right to access the HMO internal appeal process, as set forth in Sections 8.5.2 and 8.5.3, and/or to access to the State Fair Hearing Process as provided in Section 8.5.4; (d) the procedures by which Member may appeal HMO's action; (e) the circumstances under which expedited resolution is available and how to request it; (f) the circumstances under which a Member can continue to receive benefits pending resolution of the appeal (see Section 8.5.2.13), how to request that benefits be continued, and the circumstances under which the Member may be required to pay the costs of these services; (g) the date the action will be taken; (h) a reference to the HMO policies and procedures supporting the HMO's action; (i) an address where written requests may be sent and a toll-free number that the Member can call to request the assistance of a Member representative, file an appeal, or request a Fair Hearing; HHSC Contract 529-03-043-N 19 of 27 (j) an explanation that Members may represent themselves, or be represented by a provider, a friend, a relative, legal counsel or another spokesperson; (k) a statement that if the Member wants a HHSC Fair Hearing on the action, Member must make, in writing, the request for a Fair Hearing within 90 days of the date on the notice or the right to request a hearing is waived; (l) a statement explaining that HMO must make its decision within 30 days from the date the appeal is received by HMO, or 3 business days in the case of an expedited appeal; and a statement explaining that the hearing officer must make a final decision within 90 days from the date a Fair Hearing is requested; and (m) any other information required by 1 T.A.C. Chapter 357 that relates to a managed care organization's notice of action. 8.5.5.2 TIMEFRAME FOR NOTICE OF ACTION In accordance with 42 C.F.R. Section 438.404(c), the HMO must mail a notice of action within the following timeframes: (1) For termination, suspension, or reduction of previously authorized Medicaid-covered services, within the timeframes specified in 42 C.F.R. Sections 431.211, 431.213, and 431.214. (2) For denial of payment, at the time of any action affecting the claim. (3) For standard service authorization decisions that deny or limit services, within the timeframe specified in 42 C.F.R. Section 438.210(d)(1). (4) If the HMO extends the timeframe in accordance with 42 C.F.R. Section 438.210(d)(1), it must-- (a) Give the Member written notice of the reason for the decision to extend the timeframe and inform the Member of the right to file a grievance if he or she disagrees with that decision; and (b) Issue and carry out its determination as expeditiously as the Member's health condition requires and no later than the date the extension expires. (5) For service authorization decisions not reached within the timeframes specified in 42 C.F.R. Section 438.210(d) (which constitutes a denial and is thus an adverse action), on the date that the timeframes expire. (6) For expedited service authorization decisions, within the timeframes specified in 42 C.F.R. Section 438.210(d). 8.5.5.3. NOTICE OF DISPOSITION OF APPEAL. In accordance with 42 C.F.R. Section 438.408(e), HMO must provide written HHSC Contract 529-03-043-N 20 of 27 notice of disposition of all appeals including expedited appeals. The written resolution notice must include the results and date of the appeal resolution. For decisions not wholly in the Members favor, the notice must contain: (a) the right to request a fair hearing, (b) how to request a state fair hearing, (c) the circumstances under which the Member can continue to receive benefits pending a hearing (see Section 8.5.2.13), (d) how to request the continuation of benefits, (e) if the HMO's action is upheld in a hearing, the Member may be liable for the cost of any services furnished to the Member while the appeal is pending; and (f) any other information required by 1 T.A.C. Chapter 357 that relates to a managed care organization's notice of disposition of an appeal." 8.5.5.4 TIMEFRAME FOR NOTICE OF RESOLUTION OF APPEALS. In accordance with 42 C.F.R. Section 438.408, HMO must provide written notice of resolution of appeals, including expedited appeals, as expeditiously as the Member's health condition requires, but the notice must not exceed the timelines as provided in 8.5.2 or 8.5.3. For expedited resolution of appeals, HMO must make reasonable efforts to give the Member prompt oral notice of resolution of the appeal, and follow up with a written notice within the timeframes set forth in Section 8.5.3. If the HMO denies a request for expedited resolution of an appeal, HMO must transfer the appeal to the timeframe for standard resolution as provided in Section 8.5.2. and make reasonable efforts to give the Member prompt oral notice of the denial, and follow up within two calendar days with a written notice." SECTION 2.17 DELETION OF SECTION 8.6, MEMBER NOTICE, APPEALS AND FAIR HEARINGS Section 8.6 is deleted in its entirety. (Information concerning Member appeals and fair hearings is now located in Section 8.5 above.) 8.6 [deleted] SECTION 2.18 MODIFICATION OF SECTION 9.01, MARKETING MATERIAL MEDIA AND DISTRIBUTION New Section 9.1.1 is added as follows: "9.1.1 HMO may not make any assertion or statement (orally or in writing) it is endorsed by the CMS, a Federal or State government or agency, or similar entity." SECTION 2.19 MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT SUBSYSTEM In Section 10.7, requirements 5 and 9 from the "Functions and Features" provision are deleted. HHSC Contract 529-03-043-N 21 of 27 SECTION 2.20 MODIFICATION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA) COMPLIANCE Section 10.12 is modified to add new Section 10.12.1 as follows: "10.12.1 HMO must provide its Members with a privacy notice as required by HIPAA. The 4th to 6th grade reading level has been waived for the notices and are allowable at a 12th grade reading level. The HMO is not required to send the notice out in Spanish but must reference on their English notice, in Spanish, where to call to obtain a copy. HMO must provide HHSC with a copy of their privacy notice for filing, but does not need to have HHSC approval." SECTION 2.21 MODIFICATION OF SECTION 11.1, QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM Sections 11.1, and 11.5 are deleted and replaced with the following language: "11.1 QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM HMO must develop, maintain, and operate a quality assessment and performance improvement program consistent with the requirements of 42 C.F.R. Section 438.240 and Sections 10.7, 12.10 and Appendix A of this agreement. 11.5 Behavioral Health Integration into QIP. If an HMO provides behavioral health services, it must integrate behavioral health into its quality assessment and performance improvement program and include a systematic and on-going process for monitoring, evaluating, and improving the quality and appropriateness of behavioral health care services provided to Members. HMO must collect data, monitor and evaluate for improvements to physical health outcomes resulting from behavioral health integration into the overall care of the Member." SECTION 2.22 MODIFICATION TO ARTICLE 11, QUALITY ASSURANCE AND QUALITY IMPROVEMENT PROGRAM Article 11 is modified to add new Section 11.7, Practice Guidelines. "11.7 PRACTICE GUIDELINES In accordance with 42 C.F.R. Section 438.236, HMO must adopt practice guidelines, that are based on valid & reliable clinical evidence or a consensus of health care professionals in the particular field; consider the needs of the HMO's Members; are adopted in consultation with contracting health care professionals; and are reviewed and updated periodically as appropriate. The HMO must disseminate the guidelines to all affected providers and, upon request to Members and potential Members. The HMO's decisions regarding utilization management, member education, coverage of services, and other areas included in the guidelines, must be consistent with the HMO's guidelines." HHSC Contract 529-03-043-N 22 of 27 SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS Section 12.6, Member Complaints is replaced with the following language. Sections 12.8, Utilization Management Reports - Behavioral Health and 12.9, Utilization Management Reports - Physical Health are deleted and replaced with new Section 12.8, Utilization Management Reports, as follows: "12.6 MEMBER COMPLAINTS & APPEALS HMO must submit a quarterly summary report of Member complaints and appeals. HMO must also report complaints and appeals submitted to its subcontracted risk groups (e.g., IPAs). The complaint and appeals report must be submitted not later than 45 days following the end of the state fiscal quarter in a format specified by HHSC. 12.8 UTILIZATION MANAGEMENT REPORTS 12.8.1 Written Program Description. MCO 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. 12.8.2 Scope. The program has mechanisms to detect underutilization as well as overutilization, including but not limited to generation of provider profiles. 12.8.3 Preauthorization and Concurrent Review Requirements. For MCOs with preauthorization or concurrent review program: 12.8.4 Qualified medical professionals supervise preauthorization and concurrent review decisions. 12.8.5 Efforts are made to obtain all necessary information, including pertinent clinical information, and consult with the treating physician as appropriate. 12.9 [deleted]" SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS Sections 12.10.1 through 12.10.3 are deleted. Sections 12.10.5 and 12.10.6 are added as follows: "12.10.1 [deleted] 12.10.2 [deleted] 12.10.3 [deleted] 12.10.5 Written Annual Report. HMO must file a written annual report with HHSC describing the HMO's quality assessment and performance improvement projects. HHSC Contract 529-03-043-N 23 of 27 12.10.6 Encounter Data. In accordance with 42 C.F.R. 438.240(c)(2), HMO must submit the encounter data identified in Section 10.5 of this agreement at least monthly to HHSC, so that HHSC may complete a performance measurement report." SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS Section 13.1.2 is modified as follows: 13.1.2 The monthly capitation amounts and the Delivery Supplemental Payment (DSP) amount, effective as of September 1, 2003, are listed below.
TRAVIS SDA MONTHLY _____ HMO RISK GROUP CAPITATION AMOUNTS _____ HHSC ---------- ------------------ TANF Children (> 1 year of age) $ 82.80 TANF Adults $170.86 Pregnant Women $342.49 Newborns* (up to 12 Months of Age) $349.61 Expansion Children (> 1 year of Age) $ 82.18 Federal Mandate Children $ 68.23 Disabled/Blind Administration $ 14.00
* Includes TANF Child & Expansion Children up to 12 months of Age. Delivery Supplemental Payment. A one-time per pregnancy supplemental payment for each delivery shall be paid to HMO as provided below in the following amount: $2,817.90. SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES Section 13.3.1 is amended as follows,, and Sections 13.3.2 - 13.3.10 are deleted in their entirety. 13.3.1 Performance Objectives. Performance Objectives are contained in Appendix K of this contract. HMO must meet the benchmarks established by HHSC for each objective. 13.3.2 [deleted] 13.3.3 [deleted] 13.3.4 [deleted] 13.3.5 [deleted] 13.3.6 [deleted] 13.3.7 [deleted] 13.3.8 [deleted] 13.3.9 [deleted] 13.3.10 [deleted] HHSC Contract 529-03-043-N 24 of 27 13.3.10.1 [deleted] SECTION 2.27 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT PROVISIONS Section 13.5.5 is modified to comply with HIPAA requirements, as follows: "13.5.5 The Enrollment Broker will provide a daily enrollment file, which will list all TP40 Members who received State-issued Medicaid I.D. numbers, for each HMO. HHSC will guarantee capitation payments to the HMOs for all TP40 Members who appear on the capitation and capitation adjustment files. The Enrollment Broker will provide a pregnant women exception report to the HMOs, which can be used to reconcile the pregnant women daily enrollment file with the monthly enrollment, capitation and capitation adjustment files." SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION Section 14.1.2.8 is modified as follows and 14.1.2.9 is deleted: "14.1.2.8 FEDERAL MANDATE CHILDREN (MAO) - Children aged 6-18 whose families' income is below 100% Federal Poverty Income Limit. 14.1.2.9 [deleted]" SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS Article 15 is modified to add new Section 15.14, Global Drafting Conventions, as follows: "15.14 GLOBAL DRAFTING CONVENTIONS. 15.14.1 The terms "include," "includes," and "including" are terms of inclusion, and where used in the Agreement, are deemed to be followed by the words "without limitation." 15.14.2 Any references to "Sections," "Exhibits," or "Attachments" are deemed to be references to Sections, Exhibits, or Attachments to the Agreement. 15.14.3 Any references to agreements, contracts, statutes, or administrative rules or regulations in the Agreement are deemed references to these documents as amended, modified, or supplemented from time to time during the term of the Agreement." SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO Section 16.3.4, Failure to Comply with Federal Laws and Regulations, is modified to add Section 16.3.4.7 with the following language: "16.3.4.7 HMO's failure to comply with requirements related to Members with special health care needs in Section 6.13 of this Contract, pursuant to 42 C.F.R. Section 438.208(c). 16.3.4.8 HMO's failure to comply with requirement in Sections 7.2.6 and 7.2.8.7 of this Contract, pursuant to 42 C.F.R. 438.102(a). HHSC Contract 529-03-043-N 25 of 27 SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES Sections 18.8.2 and 18.8.7 are modified as follows: "18.8.2 For a default under 16.3.4.2, for each default HHSC may assess double the excess amount charged in the violation of the federal requirements or $25,000, whichever is greater. HHSC will deduct from the penalty the amount of the overcharge and return it to the affected Member(s) 18.8.7 HMO may be subject to civil monetary penalties under the provisions of 42 C.F.R. Part 1003 and 42 C.F.R. Part 438, Subpart I in addition to or in place of withholding payments for a default under Section 16.3.4" SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM Section 19.1 is modified as follows: "19.1 The effective date of this contract is September 1, 1999. This contract and all amendments thereto will terminate on August 31, 2004, unless extended or terminated earlier as provided for elsewhere in this contract." SECTION 2.33 MODIFICATION TO APPENDIX A, STANDARDS FOR QUALITY IMPROVEMENT PROGRAMS Appendix A is replaced with the attached Appendix A and Attachment A-A. SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS Appendix D is replaced with the attached Appendix D. SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES Appendix E is replaced with the attached Appendix E. SECTION 2.36 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS New Appendix O is added to the contract with the attached Appendix O. SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES Appendix K is replaced with the attached Appendix K HHSC Contract 529-03-043-N 26 of 27 ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES The Parties contract and agree that the terms of the Agreement will remain in effect and continue to govern except to the extent modified in this Amendment. By signing this Amendment, the Parties expressly understand and agree that this Amendment is hereby made a part of the Agreement as though it were set out word for word in the Agreement. IN WITNESS HEREOF, HHSC AND THE CONTRACTOR HAVE EACH CAUSED THIS AMENDMENT TO BE SIGNED AND DELIVERED BY ITS DULY AUTHORIZED REPRESENTATIVE. SUPERIOR HEALTHPLAN, INC. HEALTH & HUMAN SERVICES COMMISSION By: /s/ Christopher Bowers By: /s/ Albert Hawkins ----------------------------------- ------------------------------- Christopher Bowers Albert Hawkins President and CEO Commissioner Date: Date: --------------------------------- ----------------------------- HHSC Contract 529-03-043-N 27 of 27 EX-10.6A 6 c83064exv10w6a.txt AMENDMENT 14 TO CONTRACT INCLUDED AS EXHIBIT 10.6 EXHIBIT 10.6a AMENDMENT 14 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE MEDICAID STAR PROGRAM IN THE BEXAR SERVICE DELIVERY AREA AMENDMENT 14 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE MEDICAID STAR PROGRAM IN THE BEXAR SERVICE DELIVERY AREA TABLE OF CONTENTS ARTICLE 1. PURPOSE..................................................................................... 1 SECTION 1.01 AUTHORIZATION............................................................................ 1 SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES......................................................... 1 ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES................................................ 1 SECTION 2.01 GENERAL.................................................................................. 1 SECTION 2.02 MODIFICATION OF ARTICLE 2, DEFINITIONS................................................... 1 SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS................................... 3 SECTION 2.04 MODIFICATION TO SECTION 3.5, RECORDS REQUIREMENTS AND RECORDS RETENTION.................. 3 SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS............................. 3 SECTION 2.06 ADDITION TO ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE REQUIREMENTS.................. 4 SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES........................................................... 4 SECTION 2.08 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK PROVIDERS................. 5 SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES.......................................... 5 SECTION 2.10 MODIFICATION OF SECTION 6.13, PEOPLE WITH DISABILITIES, SPECIAL HEALTH CARE NEEDS OR CHRONIC OR COMPLEX CONDITIONS.............................................................. 7 SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS........................ 10 SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS.......................................... 10 SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL........................... 10 SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS...................................... 13 SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK............................................. 13 SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS........................................... 14 SECTION 2.17 DELETION OF SECTION 8.6, MEMBER NOTICE, APPEALS AND FAIR HEARINGS........................ 21 SECTION 2.18 MODIFICATION OF SECTION 9.01, MARKETING MATERIAL MEDIA AND DISTRIBUTION.................. 21 SECTION 2.19 MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT SUBSYSTEM.................. 21 SECTION 2.20 MODIFICATION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA) COMPLIANCE............................................................... 22 SECTION 2.21 MODIFICATION OF SECTION 11.1, QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM................................................................................. 22 SECTION 2.22 MODIFICATION TO ARTICLE 11, QUALITY ASSURANCE AND QUALITY IMPROVEMENT PROGRAM............................................................................................. 22 SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS....................................... 23 SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS............................... 23 SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS......................................... 24 SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES..................................... 24 SECTION 2.27 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT PROVISIONS.......................................................................................... 25 SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION.................................. 25 SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS........................................... 25 SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO............................................. 25 SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES................................... 26 SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM......................................................... 26 SECTION 2.33 MODIFICATION TO APPENDIX A, STANDARDS FOR QUALITY IMPROVEMENT PROGRAMS................... 26 SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS............................................ 26 SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES........................................ 26 SECTION 2.36 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS................................. 26 SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES....................................... 26 ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES................................................ 27

i HHSC CONTRACT NO. 529-03-042-N STATE OF TEXAS COUNTY OF TRAVIS AMENDMENT 14 TO THE AGREEMENT BETWEEN THE HEALTH & HUMAN SERVICES COMMISSION AND SUPERIOR HEALTHPLAN, INC. FOR HEALTH SERVICES TO THE STAR PROGRAM IN THE BEXAR SERVICE DELIVERY AREA THIS CONTRACT AMENDMENT (the "Amendment") is entered into between the HEALTH & HUMAN SERVICES COMMISSION ("HHSC"), an administrative agency within the executive department of the State of Texas, and Superior HealthPlan, Inc. ("CONTRACTOR"), a health maintenance organization organized under the laws of the State of Texas, possessing a certificate of authority issued by the Texas Department of Insurance to operate as a health maintenance organization, and having its principal office at 2100 S. IH 35, Suite 202, Austin, Texas 78704. HHSC and CONTRACTOR may be referred to in this Amendment individually as a "Party" and collectively as the "Parties." The Parties hereby agree to amend their Agreement as set forth in Article 2 of this Amendment. ARTICLE 1. PURPOSE. SECTION 1.01 AUTHORIZATION. This Amendment is executed by the Parties in accordance with Article 15.2 of the Agreement. SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES. This Amendment is effective August 13, 2003. ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES SECTION 2.01 GENERAL This Amendment is to incorporate Federal regulations pertaining to recent amendments to the Balanced Budget Act. These regulations are found in 42 C.F.R. Parts 400, 430, 431, 434, 435, 438, 440, and 447. SECTION 2.02 MODIFICATION OF ARTICLE 2, DEFINITIONS The following provisions amend, modify and add to the definitions set forth in Article 2: "ACTION means the denial or limited authorization of a requested service, including the type or level of service; the reduction, suspension, or termination of a previously authorized service; the denial in whole or in part of payment for service; failure to provide services in a timely manner, the failure of an HMO to act within the timeframes set forth in this agreement and 42 C.F.R. Section 438.408(b); or HHSC Contract 529-03-042-N 1 of 27 for a resident of a rural area with only one HMO, the denial of a Medicaid Members' request to obtain services outside of the network. APPEAL means the formal process by which a Member or his or her representative request a review of an HMO's action, as defined above. COLD-CALL MARKETING means any unsolicited personal contact by the HMO with a potential Member for the purpose of marketing. MEMBER COMPLAINT or GRIEVANCE means an expression of dissatisfaction about any matter other than an action, as defined above. As provided by 42 C.F.R. Section 438.400, possible subjects for complaints or grievances include, but are not limited to, the quality of care of services provided, and aspects of interpersonal relationships such as rudeness of a provider or employee, or failure to respect the Member's rights. EMERGENCY MEDICAL CONDITION, means a medical condition manifesting itself by acute symptoms of recent onset and sufficient severity (including severe pain), such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical care could result in: (a) placing the patient's health in serious jeopardy; (b) serious impairment to bodily functions; (c) serious dysfunction of any bodily organ or part; (d) serious disfigurement; or (e) in the case of a pregnant women, serious jeopardy to the health of a woman or her unborn child. EXPERIENCE REBATE means the portion of the HMO's net income before taxes (financial Statistical Report, Part 1, Line 14) that is returned to the state in accordance with Section 13.2. EXPEDITED APPEAL means an appeal to the HMO in which the decision is required quickly based on the Member's health status and taking the time for a standard appeal could jeopardize the Member's life or health or ability to attain, maintain, or regain maximum function. MARKETING means any communication from an HMO to a Medicaid recipient who is not enrolled with the HMO that can reasonably be interpreted as intended to influence the recipient to enroll in that particular HMO's Medicaid product, or either to not enroll in, or to disenroll from another HMO's Medicaid product. MARKETING MATERIALS means materials that are produced in any medium by or on behalf of an HMO and can reasonably be interpreted as intended to market to potential enrollees. MEMBER or ENROLLEE, means a person who: is entitled to benefits under Title XIX of the Social Security Act and the Texas Medical Assistance Program (Medicaid), is in a Medicaid eligibility category included in the STAR Program, and is enrolled in the STAR Program. POST-STABILIZATION CARE SERVICES means covered services, related to an emergency medical condition that are provided after an Member is HHSC Contract 529-03-042-N 2 of 27 stabilized in order to maintain the stabilized condition, or, under the circumstances described in 42 C.F.R. Section 438.114(b)&(e) and 42 C.F.R. Section 422.113(c)(iii) to improve or resolve the Member's condition. SPECIAL HEALTH CARE NEEDS means Member with an increased prevalence of risk of disability, including but not limited to: chronic physical or developmental condition; severe and persistent mental illness; behavioral or emotional condition that accompanies the Member's physical or developmental condition. STABILIZE means to provide such medical care as to assure within reasonable medical probability that no deterioration of the condition is likely to result from, or occur from, or occur during discharge, transfer, or admission of the Member." SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS Section 3.2 is modified to amend Section 3.2.4.3 add new Sections 3.2.6 and 3.2.7, as follows: "3.2.4.3 [Contractor] understands and agrees that neither HHSC, nor the HMO's Medicaid Members, are liable or responsible for payment for any services authorized and provided under this contract. 3.2.6 In accordance with 42 C.F.R. Section 438.230(b)(3), all subcontractors must be subject to a written monitoring plan, for any subcontractor carrying out a major function of the HMO's responsibility under this contract. For all subcontractors carrying out a major function of the HMO's contract responsibility, the HMO must prepare a formal monitoring process at least annually. HHSC may request copies of written monitoring plans and the results of the HMO's formal monitoring process. 3.2.7 In accordance with 42 C.F.R. Section 438.210(e), HMO may not structure compensation to utilization management subcontractors or entities to provide incentives to deny, limit, reduce, or discontinue medically necessary services to any Member." SECTION 2.04 MODIFICATION TO SECTION 3.5, RECORDS REQUIREMENTS AND RECORDS RETENTION Section 3.5.5, Medical Records, is modified as follows: "3.5.5 Medical Records. HMO must require, through contractual provisions or provider manual, providers to create and keep medical records in compliance with the medical records standards contained in Appendix O, Standards for Medical Records. All medical records must be kept for at least five (5) years, except for records of rural health clinics, which must be kept for a period of six (6) years from the date of service." SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS Section 4.10.8 is modified as follows: "4.10.8 HMO must comply with the standards adopted by the U.S. Department of Health and Human Services under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191, regarding submitting and receiving claims information through electronic data interchange (EDI) that allows for automated HHSC Contract 529-03-042-N 3 of 27 processing and adjudication of claims within the federally mandated timeframes (see 45 C.F.R. parts 160 through 164)." SECTION 2.06 ADDITION TO ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE REQUIREMENTS Section 5.11 is added as follows: "5.11 DATA CERTIFICATION 5.11.1 In accordance with 42 C.F.R. Sections 438.604 and 438.606, HMO must certify in writing: (a) encounter data; (b) delivery supplemental data and other data submitted pursuant to this agreement or State or Federal law or regulation relating to payment for services. 5.11.2 The certification must be submitted to HHSC concurrently with the certified data or other documents. 5.11.3 The certification must: (a) be signed by the HMO's Chief Executive Officer; Chief Financial Officer; or an individual with delegated authority to sign for, and who reports directly to, either the Chief Executive Officer or Chief Financial Officer; and (b) contain a statement that to the best knowledge, information and belief of the signatory, the HMO's certified data or information are accurate, complete, and truthful." SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES Section 6.1 is modified to add new section 6.1.9 as follows: "6.1.9 In accordance with 42 C.F.R.Section 438.102, HMO may file an objection to provide, reimburse for, or provide coverage of, counseling or referral service for a covered benefit, based on moral or religious grounds. 6.1.9.1 HMO must work with HHSC to develop a work plan to complete the necessary tasks to be completed and determine an appropriate date for implementation of the requested changes to the requirements related to covered services. The work plan will include timeframes for completing the necessary contract and waiver amendments, adjustments to capitation rates, identification of HMO and enrollment materials needing revision, and notifications to Members. 6.1.9.2 In order to meet the requirements of Section 6.1.9.1, HMO must notify HHSC of grounds for and provide detail concerning its moral or religious objections and the specific services covered under the objection, no less than 120 days prior to the proposed effective date of the policy change. HHSC Contract 529-03-042-N 4 of 27 6.1.9.3 HMO must notify all current Members of the intent to change covered services at least 30 days prior to the effective date of the change in accordance with 42 C.F.R. Section 438.102(b)(ii)(B). 6.1.9.4 HHSC will provide information to all current Members on how and where to obtain the service that has been discontinued by the HMO in accordance with 42 C.F.R. Section 438.102(c)." SECTION 2.08 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK PROVIDERS Section 6.4 is modified to add new Sections 6.4.6 and 6.4.7 as follows: "6.4.6 HMO must provide Members with timely and adequate access to out-of-network services for as long as those services are necessary and covered benefits not available within the network, in accordance with 42 C.F.R. Section 438.206(b)(4). HMO will not be obligated to provide a Member with access to out-of-network services if such services become available from a network provider. 6.4.7 HMO must require through contract provisions or the provider manual that each Member have access to a second opinion regarding the use of any health care service. A Member must be allowed access to a second opinion from a network provider or out-of-network provider if a network provider is not available, at no additional cost to the Member, in accordance with 42 C.F.R. Section 438.206(b)(3)." SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES Section 6.5 is deleted in its entirety and replaced with the following language: "6.5.1 HMO policy and procedures, covered benefits, claims adjudication methodology, and reimbursement performance for emergency services must comply with all applicable state and federal laws and regulations including 42 C.F.R. Section 438.114, whether the provider is in network or out of network. 6.5.2 HMO must pay for the professional, facility, and ancillary services that are medically necessary to perform the medical screening examination and stabilization of HMO Member presenting as an emergency medical condition or an emergency behavioral health condition to the hospital emergency department, 24 hours a day, 7 days a week, rendered by either HMO's in-network or out-of-network providers. 6.5.2.1 For all out-of-network emergency services providers, HMO will pay a reasonable and customary amount for emergency services. HMO policies and procedures must be consistent with this agreement's prudent lay person definition of an emergency medical condition and claims adjudication processes required under Section 7.6 of this agreement and 42 C.F.R. Section 438.114. HMO will pay a reasonable and customary amount for services for all out-of-network emergency services provider claims with dates of service between September 1, 2002 and November 30, HHSC Contract 529-03-042-N 5 of 27 2002. HMO must forward any complaints submitted by out-of-network emergency services providers during this time to HHSC. HHSC will review all complaints and determine whether payments were reasonable and customary. HHSC will direct the HMO to pay a reasonable and customary amount, as determined by HHSC, if it concludes that the payments were not reasonable and customary for the provider. 6.5.2.2 For all out-of-network emergency services provider claims with dates of service on or after December 1, 2002, HMO must pay providers a reasonable and customary amount consistent with a methodology approved by HHSC. HMO must submit its methodology, along with any supporting documentation, to HHSC by September 30, 2002. HHSC will review and respond to the information by November 15, 2002. HMO must forward any complaints by out-of-network emergency services providers to HHSC, which will review all complaints. If HHSC determines that payment is not consistent with the HMO's approved methodology, the HMO must pay the emergency services provider a rate, using the approved reasonable and customary methodology, as determined by HHSC. Failure to comply with this provision constitutes a default under Article 16, Default and Remedies. 6.5.3 HMO must ensure that its network primary care providers (PCPs) have after-hours telephone availability that is consistent with Section 7.8.10 of this contract. This telephone access must be available 24 hours a day, 7 days a week throughout the service area. 6.5.4 HMO cannot require prior authorization as a condition for payment for an emergency medical condition, an emergency behavioral health condition, or labor and delivery. HMO cannot limit what constitutes an emergency medical condition on the basis of lists of diagnoses or symptoms. HMO cannot refuse to cover emergency services based on the emergency room provider, hospital, or fiscal agent not notifying the Member's primary care provider or HMO of the Member's screening and treatment within 10 calendar days of presentation for emergency services. HMO may not hold the Member who has an emergency medical condition liable for payment of subsequent screening and treatment needed to diagnose the specific condition or stabilize the patient. HMO must accept the emergency physician or provider's determination of when the Member is sufficiently stabilized for transfer or discharge. 6.5.5 Medical Screening Examination for emergency services. A medical screening examination needed to diagnose an emergency medical condition shall be provided in a hospital based emergency department that meets the requirements of the Emergency Medical Treatment and Active Labor Act (EMTALA) 42 C.F.R. Section 489.20, Section 489.24 and Section 438.114(b)&(c). HMO must pay for the emergency medical screening examination, as required by 42 U.S.C. Section 1395dd. HMOs must reimburse for both the physician's services and the hospital's emergency services, including the emergency room and its ancillary services. 6.5.6 Stabilization Services. When the medical screening examination determines that an emergency medical condition exists, HHSC Contract 529-03-042-N 6 of 27 HMO must pay for emergency services performed to stabilize the Member. The emergency physician must document these services in the Member's medical record. HMOs must reimburse for both the physician's and hospital's emergency stabilization services including the emergency room and its ancillary services. 6.5.7 Post-stabilization Care Services. HMO must cover and pay for post-stabilization care services in the amount, duration, and scope necessary to comply with 42 C.F.R. Section 438.114(b)&(e) and 42 C.F.R. 422.113(c)(iii). The HMO is financially responsible for post- stabilization care services obtained within or outside the network that are not pre-approved by a plan provider or other HMO representative, but administered to maintain, improve, or resolve the Member's stabilized condition if: (a) the HMO does not respond to a request for preapproval within 1 hour; (b) the HMO cannot be contacted; (c) or the HMO representative and the treating physician cannot reach an agreement concerning the Member's care and a plan physician is not available for consultation. In this situation, the HMO must give the treating physician the opportunity to consult with a plan physician and the treating physician may continue with care of the patient until an HMO physician is reached or the HMO's financial responsibility ends as follows: the HMO physician with privileges at the treating hospital assumes responsibility for the Member's care; the HMO physician assumes responsibility for the Member's care through transfer; the HMO representative and the treating physician reach an agreement concerning the Member's care; or the Member is discharged. 6.5.8 HMO must provide access to the HHSC-designated Level I and Level II trauma centers within the State or hospitals meeting the equivalent level of trauma care. HMOs may make out-of-network reimbursement arrangements with the HHSC-designated Level I and Level II trauma centers to satisfy this access requirement." SECTION 2.10 MODIFICATION OF SECTION 6.13, PEOPLE WITH DISABILITIES, SPECIAL HEALTH CARE NEEDS OR CHRONIC OR COMPLEX CONDITIONS Section 6.13 is deleted in its entirety and replaced with the following: "6.13.1 HMO shall provide the following services to persons with disabilities, special health care needs, or chronic or complex conditions. These services are in addition to the covered services described in detail in the Texas Medicaid Provider Procedures Manual (Provider Procedures Manual) and the Texas Medicaid Bulletin, which is the bi-monthly update to the Provider Procedures Manual. Clinical information regarding covered services is published by the Texas Medicaid program in the Texas Medicaid Service Delivery Guide. 6.13.2 HMO must develop and maintain a system and procedures for identifying Members who have disabilities, special health care needs or chronic or complex medical and behavioral health HHSC Contract 529-03-042-N 7 of 27 conditions. Once identified, HMO must have effective health delivery systems to provide the covered services to meet the special preventive, primary acute, and specialty health care needs appropriate for treatment of the individual's condition. The guidelines and standards established by the American Academy of Pediatrics, the American College of Obstetrics/Gynecologists, the U.S. Public Health Service, and other medical and professional health organizations and associations' practice guidelines whose standards are recognized by HHSC must be used in determining the medically necessary services, assessment and plan of care for each individual. 6.13.2.1 In accordance with 42 C.F.R. 438.208(b)(3), HMO shall provide information that identifies Members who the HMO has assessed as special health care needs Members to the State's enrollment broker. The information will be provided in a format to be specified by HHSC and updated by the 10th day of each month. In the event that a special health care needs Member changes health plans, HMO will work with receiving HMO to provide information concerning the results of the HMO's identification and assessment of that Member's needs, to prevent duplication of those activities. 6.13.3 HMO must require that the PCP for all persons with disabilities, special health care needs or chronic or complex conditions develop a plan of care to meet the needs of the Member. The plan of care must be based on health needs, specialist(s) recommendations, and periodic reassessment of the Member's developmental and functional status and service delivery needs. HMO must require providers to maintain record keeping systems to ensure that each Member who has been identified with a disability or chronic or complex condition has an initial plan of care in the primary care provider's medical records, that Member agrees to that plan of care, and that the plan is updated as often as the Member's needs change, but at least annually. 6.13.4 HMO must provide a primary care and specialty care provider network for persons with disabilities, special health care needs, or chronic or complex conditions. Specialty and subspecialty providers serving all Members must be Board Certified/Board Eligible in their specialty. HMO may request exceptions from HHSC for approval of traditional providers who are not board-certified or board-eligible but who otherwise meet HMO's credentialing requirements. 6.13.5 HMO must have in its network PCPs and specialty care providers that have documented experience in treating people with disabilities, special health care needs, or chronic or complex conditions, including children. For services to children with disabilities, special health care needs, or chronic or complex conditions, HMO must have in its network PCPs and specialty care providers that have demonstrated experience with children with disabilities, special health care needs, or chronic or complex conditions in pediatric specialty centers such as children's hospitals, medical schools, teaching hospitals and tertiary center levels. 6.13.6 HMO must provide information, education and training programs to Members, families, PCPs, specialty physicians, and community agencies about the care and treatment available in HHSC Contract 529-03-042-N 8 of 27 HMO's plan for Members with disabilities, special health care needs, or chronic or complex conditions. HMO must ensure Members with disabilities, special health care needs, or chronic or complex conditions have direct access to a specialist. 6.13.7 HMO must coordinate care and establish linkages, as appropriate for a particular Member, with existing community-based entities and services, including but not limited to: Maternal and Child Health, Children with Special Health Care Needs (CSHCN), the Medically Dependent Children Program (MDCP), Community Resource Coordination Groups (CRCGs), Interagency Council on Early Childhood Intervention (ECI), Home and Community-based Services (HCS), Community Living Assistance and Support Services (CLASS), Community Based Alternatives (CBA), In Home Family Support, Primary Home Care, Day Activity and Health Services (DAHS), Deaf/Blind Multiple Disabled waiver program and Medical Transportation Program (MTP). 6.13.8 HMO must include TDH approved pediatric transplant centers, TDH designated trauma centers, and TDH designated hemophilia centers in its provider network (see Appendices E, F, and G for a listing of these facilities). 6.13.9 HMO must ensure Members with disabilities or chronic or complex conditions have access to treatment by a multidisciplinary team when determined by the Member's PCP to be medically necessary for effective treatment, or to avoid separate and fragmented evaluations and service plans. The teams must include both physician and non-physician providers determined to be necessary by the Member's PCP for the comprehensive treatment of the Member. The team must: 6.13.9.1 Participate in hospital discharge planning; 6.13.9.2 Participate in pre-admission hospital planning for non-emergency hospitalizations; 6.13.9.3 Develop specialty care and support service recommendations to be incorporated into the primary care provider's plan of care; 6.13.9.4 Provide information to the Member and the Member's family concerning the specialty care recommendations; and 6.13.9.5 HMO must develop and implement training programs for primary care providers, community agencies, ancillary care providers, and families concerning the care and treatment of a Member with a disability or chronic or complex conditions. 6.13.10 HMO must identify coordinators of medical care to assist providers who serve Members with disabilities and chronic or complex conditions and the Members and their families in locating and accessing appropriate providers inside and outside HMO's network. HHSC Contract 529-03-042-N 9 of 27 6.13.11 HMO must assist, through information and referral, eligible Members in accessing providers of non-capitated Medicaid services listed in Article 6.1.8, as applicable. 6.13.12 HMO must ensure that Members who require routine or regular laboratory and ancillary medical tests or procedures to monitor disabilities, special health care needs, or chronic or complex conditions are allowed by HMO to receive the services from the provider in the provider's office or at a contracted lab located at or near the provider's office." SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS Section 7.1.3 is amended to add new Section 7.1.3.5, as follows: "7.1.3.5 Prenatal Care within 2 weeks of request." SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS Section 7.2.8.2.1 is added and Section 7.2.9.2 is modified, as follows: "7.2.8.2.1 [Provider] understands and agrees that the HMO's Medicaid enrollees are not to be held liable for the HMO's debts in the event of the entity's insolvency in accordance with 42 C.F.R. Section 438.106(a). 7.2.9.2 A provider who is terminated is entitled to an expedited review process by HMO on request by the provider. HMO must make a good faith effort to provide written notice of the provider's termination to HMO's Members receiving primary care from, or who were seen on a regular basis by, the terminated provider within 15 days after receipt or issuance of the termination notice, in accordance with 42 C.F.R. Section 438.10(f)(5). If a provider is terminated for reasons related to imminent harm to patient health, HMO must notify its Members immediately of the provider's termination. 7.2.12 Notice to Rejected Providers. In accordance with 42 C.F.R.Section 438.129(a)(2), if an HMO 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." SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL The qualifications for a "Hospital" in Section 7.7 is replaced with the following language. Section 7.7 is retitled Section 7.7.1 and new Section 7.7.2, Provider Credentialing and Recredentialing is added to Section 7.7: "7.7.1 PROVIDER QUALIFICATIONS - GENERAL
PROVIDER QUALIFICATION Hospital An institution licensed as a general or special hospital by the State of Texas under Chapter 241 of the Health and Safety Code, which is enrolled as a provider in the Texas Medicaid Program. HMO will require that all facilities in the network used for acute inpatient specialty care for people under age 21 with disabilities, special health care needs, or chronic or complex conditions will have a designated pediatric unit; 24 hour laboratory and blood bank
HHSC Contract 529-03-042-N 10 of 27
PROVIDER QUALIFICATION availability; pediatric radiological capability; meet JCAHO standards; and have discharge planning and social service units. HMO may request exceptions to this requirement for specific hospitals within their networks, from HHSC."
"7.7.2 PROVIDER CREDENTIALING AND RECREDENTIALING In accordance with 42 C.F.R. Section 438.214, HMO's standard credentialing and recredentialing process must include the following provisions to determine whether physicians and other health care professionals, who are licensed by the State and who are under contract with HMO, are qualified to perform their services. 7.7.2.1 Written Policies and Procedures. MCO has written policies and procedures for the credentialing process that includes MCO's initial credentialing of practitioners as well as its subsequent recredentialing, recertifying and/or reappointment of practitioners. 7.7.2.2 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. 7.7.2.3 Credentialing Entity. The plan designates a credentialing committee or other peer review body, which makes recommendations regarding credentialing decisions. 7.7.2.4 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 health practitioners included in the review organization's literature for Members, as an indication of those practitioners whose service to Members is contracted or anticipated. 7.7.2.5 Process. The initial credentialing process obtains and reviews verification of the following information, at a minimum: a) The practitioner holds a current valid license to practice; b) Valid DEA or CDS certificate, as applicable; c) Graduation from medical school and completion of a residency or other post-graduate training, as applicable; d) Work history; e) Professional liability claims history; f) The practitioner holds current, adequate malpractice insurance according to the plan's policy; g) Any revocation or suspension of a state license or DEA/BNDD number; HHSC Contract 529-03-042-N 11 of 27 h) Any curtailment or suspension of medical staff privileges (other than for incomplete medical records); i) Any sanctions imposed by Medicaid and/or Medicare; j) Any censure by the State or County Medical Association; k) MCO requests information on the practitioner from the National Practitioner Data Bank and the State Board of Medical Examiners; l) The application process includes a statement by the Applicant regarding: (This information should be used to evaluate the practitioner's current ability to practice.) m) Any physical or mental health problems that may affect current ability to provide health care; n) Any history of chemical dependency/substance abuse; o) History of loss of license and/or felony convictions; p) History of loss or limitation of privileges or disciplinary activity; and q) An attestation to correctness/completeness of the application. 7.2.2.6 There is an initial visit to each potential primary care practitioner's office, including documentation of a structured review of the site and medical record keeping practices to ensure conformance with MCO's standards. 7.7.2.7 Recredentialing. A process for the periodic reverification of clinical credentials (recredentialing, reappointment, or recertification) is described in MCO's policies and procedures. 7.7.2.8 There is evidence that the procedure is implemented at least every three years. 7.7.2.9 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-1" through "E-7" and item "E-13" above. 7.7.2.10 The recredentialing, recertification or reappointment process also includes review of data from: a) Member complaints and b) results of quality reviews. 7.7.2.11 Delegation of Credentialing Activities. If MCO 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. MCO monitors the effectiveness of the delegate's credentialing and reappointment or recertification process. 7.7.2.12 Retention of Credentialing Authority. MCO retains the right to approve new providers and sites and to terminate or HHSC Contract 529-03-042-N 12 of 27 suspend individual providers. MCO has policies and procedures for the suspension, reduction or termination of practitioner privileges. 7.7.2.13 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. MCO will implement and maintain policies and procedures for disciplinary actions including reducing, suspending, or terminating a practitioner's privileges. 7.7.2.14 Appeals Process. There is a provider appellate process for instances where MCO chooses to reduce, suspend or terminate a practitioner's privileges with the organization. SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS Section 7.8.1.1 is added and Sections 7.8.8 and 7.8.11.4 are modified with the following language: "7.8.1.1 HMO must provide supporting documentation, as specified and requested by the State, to verify that their provider network meets the requirements of this contract at the time the HMO enters into a contract and at the time of a significant change as required by 42 C.F.R. Section 438.207(b). A significant change can be, but is not limited to, change in ownership (purchase, merger, acquisition), new start-up, bankruptcy, and/or a major subcontractor change directly affecting a provider network such as (IPA's, BHO, medical groups, etc.). 7.8.8 The PCP for a Member with disabilities, special health care needs, or chronic or complex conditions may be a specialist who agrees to provide PCP services to the Member. The specialty provider must agree to perform all PCP duties required in the contract and PCP duties must be within the scope of the specialist's license. Any interested person may initiate the request for a specialist to serve as a PCP for a Member with disabilities, special health care needs, or chronic or complex conditions. 7.8.11.4 HMO must require PCPs for children under the age of 21 to provide or arrange to have provided all services required under Section 6.8 relating to Texas Health Steps, Section 6.9 relating to Perinatal Services, Section 6.10 relating to Early Childhood Intervention, Section 6.11 relating to WIC, Section 6.13 relating to People With Disabilities, special health care needs, or chronic or complex conditions, and Section 6.14 relating to Health Education and Wellness and Prevention Plans. PCP must cooperate and coordinate with HMO to provide Member and the Member's family with knowledge of and access to available services." SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK Section 8.2.4 is added with the following language: "8.2.4 In accordance with 42 C.F.R. Section 438.100, HMO must maintain written policies and procedures for informing Members of their rights and responsibilities. HMO must notify its Members of their right to request a copy of these rights and responsibilities." HHSC Contract 529-03-042-N 13 of 27 SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS Section 8.5 is deleted in its entirety and replaced with the following language: "8.5 MEMBER COMPLAINT AND APPEAL SYSTEM HMO must develop, implement and maintain a Member complaint and appeal system that complies with the requirements in applicable federal and state laws and regulations, including 42 C.F.R. Section 431.200 and 42 C.F.R. Part 483, Subpart F, "Grievance System;" and the provisions of 1 T.A.C. Chapter 357 relating to managed care organizations. The complaint and appeal system must include a complaint process, an appeal process, and access to HHSC's Fair Hearing System. The procedures must be reviewed and approved in writing by HHSC. Modifications and amendments to the Member complaint and appeal system must be submitted to HHSC at least 30 days prior to the implementation of the modification or amendment. For purposes of Section 8.5., an "authorized representative" is any person or entity acting on behalf of the Member and with the Member's written consent. A provider may be an "authorized representative." 8.5.1 MEMBER COMPLAINT PROCESS 8.5.1.1 HMO must have written policies and procedures for receiving, tracking, responding to, reviewing, reporting and resolving complaints by Members or their authorized representatives. 8.5.1.2 HMO must resolve complaints within 30 days from the date that the complaint was received. The complaint procedure must be the same for all Members under this contract. The Member or Member's authorized representative may file a complaint either orally or in writing. HMO must also inform Members how to file a complaint directly with HHSC. 8.5.1.3 HMO must designate an officer of HMO who has primary responsibility for ensuring that complaints are resolved in compliance with written policy and within the time required. An "officer" of HMO means a president, vice president, secretary, treasurer, or chairperson of the board for a corporation, the sole proprietor, the managing general partner of a partnership, or a person having similar executive authority in the organization. 8.5.1.4 HMO must have a routine process to detect patterns of complaints. The process must involve management, supervisory, and quality improvement staff in the development of policy and procedural improvements to address the complaints. 8.5.1.5 HMO's complaint procedures must be provided to Members in writing and through oral interpretive services. A written description of HMO's complaint procedures must be available in prevalent non-English languages identified by HHSC, at a 4th to 6th grade reading level. HMO must include a written description of the complaint process in the Member Handbook. HMO must maintain and HHSC Contract 529-03-042-N 14 of 27 publish in the Member Handbook, at least one local and one toll-free telephone number with TeleTypewriter/Telecommunications Device for the Deaf (TTY/TTD) and interpreter capabilities for making complaints. 8.5.1.6 HMO's process must require that every complaint received in person, by telephone or in writing must be acknowledged and recorded in a written record and logged with the following details: date; identification of the individual filing the complaint; identification of the individual recording the complaint; nature of the complaint; disposition of the complaint (i.e., how the HMO resolved the complaint); corrective action required; and date resolved. 8.5.1.7 HMO is prohibited from discriminating or taking punitive action against a Member or his or her representative for making a complaint. 8.5.1.8 If the Member makes a request for disenrollment, the HMO shall give the Member information on the disenrollment process and direct the Member to the Enrollment Broker. If the request for disenrollment includes a complaint by the Member, the complaint will be processed separately from the disenrollment request, through the complaint process. 8.5.1.9 HMO will cooperate with the Enrollment Broker, HHSC, and HHSC's Member resolution service contractors to resolve all Member complaints. Such cooperation may include, but is not limited to, providing information or assistance to internal complaint committees. 8.5.1.10 HMO must provide designated staff to assist Members in understanding and using HMO's complaint system. HMO's designated staff must assist Members in writing or filing a complaint and monitoring the complaint through the HMO's complaint process until the issue is resolved. 8.5.2 STANDARD MEMBER APPEAL PROCESS 8.5.2.1 HMO must develop, implement and maintain an appeal procedure that complies with the requirements in federal laws and regulations, including 42 C.F.R. Section 431.200 and 42 C.F.R. Part 438, Subpart F, "Grievance System." An appeal is a disagreement with an "action" as defined in Article 2 of the Contract. The appeal procedure must be the same for all Members. When a Member or his or her authorized representative expresses orally or in writing any dissatisfaction or disagreement with an action, the HMO must regard the expression of dissatisfaction as a request to appeal an action. 8.5.2.2 A Member must file a request for an internal appeal within 30 days from receipt of the notice of the action. To ensure continuation of currently authorized services, however, the Member must file the appeal on or before the later of: 10 days following the HMO's mailing of the notice of the action or the intended effective date of the proposed action. HHSC Contract 529-03-042-N 15 of 27 8.5.2.3 HMO must designate an officer who has primary responsibility for ensuring that appeals are resolved in compliance with written policy and within the time required. An "officer" of HMO means a president, vice president, secretary, treasurer, or chairperson of the board for a corporation, the sole proprietor, the managing general partner of a partnership, or a person having similar executive authority in the organization. 8.5.2.4 The provisions of Article 21.58A, Texas Insurance Code, relating to a Member's right to appeal an adverse determination made by HMO or a utilization review agent by an independent review organization, do not apply to a Medicaid recipient. Federal fair hearing requirements (Social Security Act Section 1902a(3), codified at 42 C.F.R. Section 431.200 et. seq.) require the agency to make a final decision after a fair hearing, which conflicts with the State requirement that the IRO make a final decision. Therefore, Article 21.58A is pre-empted by the federal requirement. 8.5.2.5 HMO must have policies and procedures in place outlining the role of HMO's Medical Director for an appeal of an action. The Medical Director must have a significant role in monitoring, investigating and hearing appeals. In accordance with 42 C.F.R. Section 438.406, the HMO's policies and procedures must require that individuals who make decisions on appeals were not involved in any previous level of review or decision-making, and, are health care professionals who have the appropriate clinical expertise, as determined by HHSC, in treating the Member's condition or disease. 8.5.2.6 HMO must provide designated staff to assist Members in understanding and using HMO's appeal process. HMO's designated staff must assist Members in writing or filing an appeal and monitoring the appeal through the HMO's appeal process until the issue is resolved. 8.5.2.7 HMO must have a routine process to detect patterns of appeals. The process must involve management, supervisory, and quality improvement staff in the development of policy and procedural improvements to address the appeals. 8.5.2.8 HMO's appeal procedures must be provided to Members in writing and through oral interpretive services. A written description of HMO's appeal procedures must be available in prevalent non-English languages identified by HHSC, at a 4th to 6th grade reading level. HMO must include a written description in the Member Handbook. HMO must maintain and publish in the Member Handbook at least one local and one toll-free telephone number with TTY/TTD and interpreter capabilities for requesting an appeal of an action. 8.5.2.9 HMO's process must require that every oral appeal received must be confirmed by a written, signed appeal by the Member or his or her representative, unless the Member or his or her representative requests an expedited resolution. All appeals must be recorded in a written record and logged with the following details: date notice is sent; effective date of the action; date the Member or his or her representative requested the appeal; date the appeal was followed HHSC Contract 529-03-042-N 16 of 27 up in writing; identification of the individual filing; nature of the appeal; disposition of the appeal; notice of disposition to Member. 8.5.2.10 HMO must send a letter to the Member within 5 business days acknowledging receipt of the appeal request. Except as provided in Section 8.5.3.2, HMO must complete the entire appeal process within 30 calendar days after receipt of the initial written or oral request for appeal. The timeframe may be extended up to 14 calendar days if the Member requests an extension; or the HMO shows that there is a need for additional information and how the delay is in the Member's interest. If the timeframe is extended, the HMO must give the Member written notice of the reason for delay if the Member had not requested the delay. 8.5.2.11 During the appeal process, HMO must provide the Member a reasonable opportunity to present evidence, any allegations of fact or law, in person as well as in writing. The HMO must inform the Member of the time available for providing this information, and in the case of an expedited resolution, that limited time will be available (see Section 8.5.3.2). 8.5.2.12 HMO must provide the Member and his or her representative opportunity, before and during the appeals process, to examine the Member's case file, including medical records and any other documents considered during the appeal process. HMO must include, as parties to the appeal, the Member and his or her representative or the legal representative of a deceased Member's estate. 8.5.2.13 In accordance with 42.C.F.R. Section 438.420, HMO must continue the Member's benefits currently being received by the Member, including the benefit that is the subject of the appeal, if all of the following criteria are met: 1) the Member or his or her representative files the appeal timely (as defined in Section 8.5.2.2); 2) the appeal involves the termination, suspension, or reduction of a previously authorized course of treatment; 3) the services were ordered by an authorized provider; 4) the original period covered by the original authorization has not expired; and 5) the Member requests an extension of the benefits. If, at the Member's request, the HMO continues or reinstates the Member's benefits while the appeal is pending, the benefits must be continued until one of the following occurs: the Member withdraws the appeal; 10 days pass after the HMO mails the notice, providing the resolution of the appeal against the Member, unless the Member, within the 10-day timeframe, has requested a State fair hearing with continuation of benefits until a State fair hearing decision can be reached; a state fair hearing office issues a hearing decision adverse to the Member; the time period or service limits of a previously authorized service has been met. 8.5.2.14 In accordance with 42 C.F.R. Section 438.420(d), if the final resolution of the appeal is adverse to the Member, and upholds the HMO's action, then to the extent that the services were furnished to comply with Section 8.5.2.13, the HMO may recover such costs from the Member. HHSC Contract 529-03-042-N 17 of 27 8.5.2.15 If the HMO or state fair hearing officer reverses a decision to deny, limit, or delay services that were not furnished while the appeal was pending, the HMO must authorize or provide the disputed services promptly, and as expeditiously as the Member's health condition requires. 8.5.2.16 If the HMO or state fair hearing officer reverses a decision to deny authorization of services and the Member received the disputed services while the appeal was pending, the HMO will be responsible for the payment of services. 8.5.2.17 HMO is prohibited from discriminating against a Member or his or her representative for making an appeal. 8.5.3 EXPEDITED HMO APPEALS 8.5.3.1 In accordance with 42 C.F.R. Section 438.410, HMO must establish and maintain an expedited review process for appeals, when the HMO determines (for a request from a Member) or the provider indicates (in making the request on the Member's behalf or supporting the Member's request) that taking the time for a standard resolution could seriously jeopardize the Member's life or health. HMO must follow all appeal requirements for standard Member appeals, as set forth in Section 8.5.2, except where differences are specifically noted. Requests for expedited appeals must be accepted orally or in writing. 8.5.3.2 HMO must complete investigation and resolution of an appeal relating to an ongoing emergency or denial of continued hospitalization: (1) in accordance with the medical or dental immediacy of the case; and (2) not later than one business day after the complainant's request for appeal is received. 8.5.3.3 Members must exhaust the HMO's expedited appeal process before making a request for an expedited state fair hearing. After HMO receives the request for an expedited appeal, it must hear an approved requests for a Member to have an expedited appeal and notify the Member of the outcome of the appeal within 3 business days, except as stated in 8.5.3.2. This timeframe may be extended up to 14 calendar days if the Member requests an extension; or the HMO shows (to the satisfaction of HHSC, upon HHSC's request) that there is a need for additional information and how the delay is in the Member's interest. If the timeframe is extended, the HMO must give the Member written notice of the reason for delay if the Member had not requested the delay. 8.5.3.4 If the decision is adverse to the Member, procedures relating to the notice in Section 8.5.5 must be followed. The HMO is responsible for notifying the Member of their rights to access an expedited state fair hearing. HMO will be responsible for providing documentation to the State and the Member, indicating how the decision was made, prior to state's expedited fair hearing. 8.5.3.5 The HMO must ensure that punitive action is neither taken against a provider who requests an expedited resolution or supports a Member's request. HHSC Contract 529-03-042-N 18 of 27 8.5.3.6 If the HMO denies a request for expedited resolution of an appeal, it must: (1) transfer the appeal to the timeframe for standard resolution set forth in Section 8.5.2, and (2) make a reasonable effort to give the Member prompt oral notice of the denial, and follow up within two calendar days with a written notice. 8.5.4 ACCESS TO STATE FAIR HEARING 8.5.4.1 HMO must inform Members that they generally have the right to access the state fair hearing process in lieu of the internal appeal system provided by HMO procedures set forth in Sections 8.5.2 and 8.5.3. The notice must comply with the requirements of 1 T.A.C. Chapter 357. In the case of an expedited State Fair Hearing Process, the HMO must inform the Member that he or she must first exhaust the HMO's internal expedited appeal process. 8.5.4.2 HMO must notify Members that they may be represented by an authorized representative in the state fair hearing process. 8.5.5 NOTICES OF ACTION AND DISPOSITION OF APPEALS 8.5.5.1 NOTICE OF ACTION. HMO must notify the Member, in accordance with 1 T.A.C. Chapter 357, whenever HMO takes an action as defined in Article 2 of this contract. The notice must contain the following information: (a) the action the HMO or its contractor has taken or intends to take; (b) the reasons for the action; (c) the Member's right to access the HMO internal appeal process, as set forth in Sections 8.5.2 and 8.5.3, and/or to access to the State Fair Hearing Process as provided in Section 8.5.4; (d) the procedures by which Member may appeal HMO's action; (e) the circumstances under which expedited resolution is available and how to request it; (f) the circumstances under which a Member can continue to receive benefits pending resolution of the appeal (see Section 8.5.2.13), how to request that benefits be continued, and the circumstances under which the Member may be required to pay the costs of these services; (g) the date the action will be taken; (h) a reference to the HMO policies and procedures supporting the HMO's action; (i) an address where written requests may be sent and a toll-free number that the Member can call to request the assistance of a Member representative, file an appeal, or request a Fair Hearing; HHSC Contract 529-03-042-N 19 of 27 (j) an explanation that Members may represent themselves, or be represented by a provider, a friend, a relative, legal counsel or another spokesperson; (k) a statement that if the Member wants a HHSC Fair Hearing on the action, Member must make, in writing, the request for a Fair Hearing within 90 days of the date on the notice or the right to request a hearing is waived; (l) a statement explaining that HMO must make its decision within 30 days from the date the appeal is received by HMO, or 3 business days in the case of an expedited appeal; and a statement explaining that the hearing officer must make a final decision within 90 days from the date a Fair Hearing is requested; and (m) any other information required by 1 T.A.C. Chapter 357 that relates to a managed care organization's notice of action. 8.5.5.2 TIMEFRAME FOR NOTICE OF ACTION In accordance with 42 C.F.R. Section 438.404(c), the HMO must mail a notice of action within the following timeframes: (1) For termination, suspension, or reduction of previously authorized Medicaid-covered services, within the timeframes specified in 42 C.F.R. Sections 431.211, 431.213, and 431.214. (2) For denial of payment, at the time of any action affecting the claim. (3) For standard service authorization decisions that deny or limit services, within the timeframe specified in 42 C.F.R. Section 438.210(d)(1). (4) If the HMO extends the timeframe in accordance with 42 C.F.R. Section 438.210(d)(1), it must-- (a) Give the Member written notice of the reason for the decision to extend the timeframe and inform the Member of the right to file a grievance if he or she disagrees with that decision; and (b) Issue and carry out its determination as expeditiously as the Member's health condition requires and no later than the date the extension expires. (5) For service authorization decisions not reached within the timeframes specified in 42 C.F.R. Section 438.210(d) (which constitutes a denial and is thus an adverse action), on the date that the timeframes expire. (6) For expedited service authorization decisions, within the timeframes specified in 42 C.F.R. Section 438.210(d). 8.5.5.3. NOTICE OF DISPOSITION OF APPEAL. In accordance with 42 C.F.R. Section 438.408(e), HMO must provide written HHSC Contract 529-03-042-N 20 of 27 notice of disposition of all appeals including expedited appeals. The written resolution notice must include the results and date of the appeal resolution. For decisions not wholly in the Members favor, the notice must contain: (a) the right to request a fair hearing, (b) how to request a state fair hearing, (c) the circumstances under which the Member can continue to receive benefits pending a hearing (see Section 8.5.2.13), (d) how to request the continuation of benefits, (e) if the HMO's action is upheld in a hearing, the Member may be liable for the cost of any services furnished to the Member while the appeal is pending; and (f) any other information required by 1 T.A.C. Chapter 357 that relates to a managed care organization's notice of disposition of an appeal." 8.5.5.4 TIMEFRAME FOR NOTICE OF RESOLUTION OF APPEALS. In accordance with 42 C.F.R. Section 438.408, HMO must provide written notice of resolution of appeals, including expedited appeals, as expeditiously as the Member's health condition requires, but the notice must not exceed the timelines as provided in 8.5.2 or 8.5.3. For expedited resolution of appeals, HMO must make reasonable efforts to give the Member prompt oral notice of resolution of the appeal, and follow up with a written notice within the timeframes set forth in Section 8.5.3. If the HMO denies a request for expedited resolution of an appeal, HMO must transfer the appeal to the timeframe for standard resolution as provided in Section 8.5.2. and make reasonable efforts to give the Member prompt oral notice of the denial, and follow up within two calendar days with a written notice." SECTION 2.17 DELETION OF SECTION 8.6, MEMBER NOTICE, APPEALS AND FAIR HEARINGS Section 8.6 is deleted in its entirety. (Information concerning Member appeals and fair hearings is now located in Section 8.5 above.) 8.6 [deleted] SECTION 2.18 MODIFICATION OF SECTION 9.01, MARKETING MATERIAL MEDIA AND DISTRIBUTION New Section 9.1.1 is added as follows: "9.1.1 HMO may not make any assertion or statement (orally or in writing) it is endorsed by the CMS, a Federal or State government or agency, or similar entity." SECTION 2.19 MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT SUBSYSTEM In Section 10.7, requirements 5 and 9 from the "Functions and Features" provision are deleted. HHSC Contract 529-03-042-N 21 of 27 SECTION 2.20 MODIFICATION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA) COMPLIANCE Section 10.12 is modified to add new Section 10.12.1 as follows: "10.12.1 HMO must provide its Members with a privacy notice as required by HIPAA. The 4th to 6th grade reading level has been waived for the notices and are allowable at a 12th grade reading level. The HMO is not required to send the notice out in Spanish but must reference on their English notice, in Spanish, where to call to obtain a copy. HMO must provide HHSC with a copy of their privacy notice for filing, but does not need to have HHSC approval." SECTION 2.21 MODIFICATION OF SECTION 11.1, QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM Sections 11.1, and 11.5 are deleted and replaced with the following language: "11.1 QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM HMO must develop, maintain, and operate a quality assessment and performance improvement program consistent with the requirements of 42 C.F.R. Section 438.240 and Sections 10.7, 12.10 and Appendix A of this agreement. 11.5 Behavioral Health Integration into QIP. If an HMO provides behavioral health services, it must integrate behavioral health into its quality assessment and performance improvement program and include a systematic and on-going process for monitoring, evaluating, and improving the quality and appropriateness of behavioral health care services provided to Members. HMO must collect data, monitor and evaluate for improvements to physical health outcomes resulting from behavioral health integration into the overall care of the Member." SECTION 2.22 MODIFICATION TO ARTICLE 11, QUALITY ASSURANCE AND QUALITY IMPROVEMENT PROGRAM Article 11 is modified to add new Section 11.7, Practice Guidelines. "11.7 PRACTICE GUIDELINES In accordance with 42 C.F.R. Section 438.236, HMO must adopt practice guidelines, that are based on valid & reliable clinical evidence or a consensus of health care professionals in the particular field; consider the needs of the HMO's Members; are adopted in consultation with contracting health care professionals; and are reviewed and updated periodically as appropriate. The HMO must disseminate the guidelines to all affected providers and, upon request to Members and potential Members. The HMO's decisions regarding utilization management, member education, coverage of services, and other areas included in the guidelines, must be consistent with the HMO's guidelines." HHSC Contract 529-03-042-N 22 of 27 SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS Section 12.6, Member Complaints is replaced with the following language. Sections 12.8, Utilization Management Reports - Behavioral Health and 12.9, Utilization Management Reports - Physical Health are deleted and replaced with new Section 12.8, Utilization Management Reports, as follows: "12.6 MEMBER COMPLAINTS & APPEALS HMO must submit a quarterly summary report of Member complaints and appeals. HMO must also report complaints and appeals submitted to its subcontracted risk groups (e.g., IPAs). The complaint and appeals report must be submitted not later than 45 days following the end of the state fiscal quarter in a format specified by HHSC. 12.8 UTILIZATION MANAGEMENT REPORTS 12.8.1 Written Program Description. MCO 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. 12.8.2 Scope. The program has mechanisms to detect underutilization as well as overutilization, including but not limited to generation of provider profiles. 12.8.3 Preauthorization and Concurrent Review Requirements. For MCOs with preauthorization or concurrent review program: 12.8.4 Qualified medical professionals supervise preauthorization and concurrent review decisions. 12.8.5 Efforts are made to obtain all necessary information, including pertinent clinical information, and consult with the treating physician as appropriate. 12.9 [deleted]" SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS Sections 12.10.1 through 12.10.3 are deleted. Sections 12.10.5 and 12.10.6 are added as follows: "12.10.1 [deleted] 12.10.2 [deleted] 12.10.3 [deleted] 12.10.5 Written Annual Report. HMO must file a written annual report with HHSC describing the HMO's quality assessment and performance improvement projects. HHSC Contract 529-03-042-N 23 of 27 12.10.6 Encounter Data. In accordance with 42 C.F.R. 438.240(c)(2), HMO must submit the encounter data identified in Section 10.5 of this agreement at least monthly to HHSC, so that HHSC may complete a performance measurement report." SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS Section 13.1.2 is modified as follows: 13.1.2 The monthly capitation amounts and the Delivery Supplemental Payment (DSP) amount, effective as of September 1, 2003, are listed below.
BEXAR SDA MONTHLY ____ HMO RISK GROUP CAPITATION AMOUNTS ____ HHSC ---------- ------------------ TANF Children (> 1 year of age) $ 71.40 TANF Adults $189.24 Pregnant Women $335.46 Newborns* (up to 12 Months of Age) $408.23 Expansion Children (> 1 year of Age) $ 73.46 Federal Mandate Children $ 64.53 Disabled/Blind Administration $ 14.00
* Includes TANF Child & Expansion Children up to 12 months of Age. Delivery Supplemental Payment. A one-time per pregnancy supplemental payment for each delivery shall be paid to HMO as provided below in the following amount: $2,834.10. SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES Section 13.3.1 is amended as follows,, and Sections 13.3.2 - 13.3.10 are deleted in their entirety. 13.3.1 Performance Objectives. Performance Objectives are contained in Appendix K of this contract. HMO must meet the benchmarks established by HHSC for each objective. 13.3.2 [deleted] 13.3.3 [deleted] 13.3.4 [deleted] 13.3.5 [deleted] 13.3.6 [deleted] 13.3.7 [deleted] 13.3.8 [deleted] 13.3.9 [deleted] 13.3.10 [deleted] HHSC Contract 529-03-042-N 24 of 27 13.3.10.1 [deleted] SECTION 2.27 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT PROVISIONS Section 13.5.5 is modified to comply with HIPAA requirements, as follows: "13.5.5 The Enrollment Broker will provide a daily enrollment file, which will list all TP40 Members who received State- issued Medicaid I.D. numbers, for each HMO. HHSC will guarantee capitation payments to the HMOs for all TP40 Members who appear on the capitation and capitation adjustment files. The Enrollment Broker will provide a pregnant women exception report to the HMOs, which can be used to reconcile the pregnant women daily enrollment file with the monthly enrollment, capitation and capitation adjustment files." SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION Section 14.1.2.8 is modified as follows and 14.1.2.9 is deleted: "14.1.2.8 FEDERAL MANDATE CHILDREN (MAO) - Children aged 6-18 whose families' income is below 100% Federal Poverty Income Limit. 14.1.2.9 [deleted]" SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS Article 15 is modified to add new Section 15.14, Global Drafting Conventions, as follows: "15.14 GLOBAL DRAFTING CONVENTIONS. 15.14.1 The terms "include," "includes," and "including" are terms of inclusion, and where used in the Agreement, are deemed to be followed by the words "without limitation." 15.14.2 Any references to "Sections," "Exhibits," or "Attachments" are deemed to be references to Sections, Exhibits, or Attachments to the Agreement. 15.14.3 Any references to agreements, contracts, statutes, or administrative rules or regulations in the Agreement are deemed references to these documents as amended, modified, or supplemented from time to time during the term of the Agreement." SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO Section 16.3.4, Failure to Comply with Federal Laws and Regulations, is modified to add Section 16.3.4.7 with the following language: "16.3.4.7 HMO's failure to comply with requirements related to Members with special health care needs in Section 6.13 of this Contract, pursuant to 42 C.F.R.Section 438.208(c). 16.3.4.8 HMO's failure to comply with requirement in Sections 7.2.6 and 7.2.8.7 of this Contract, pursuant to 42 C.F.R. 438.102(a). HHSC Contract 529-03-042-N 25 of 27 SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES Sections 18.8.2 and 18.8.7 are modified as follows: "18.8.2 For a default under 16.3.4.2, for each default HHSC may assess double the excess amount charged in the violation of the federal requirements or $25,000, whichever is greater. HHSC will deduct from the penalty the amount of the overcharge and return it to the affected Member(s) 18.8.7 HMO may be subject to civil monetary penalties under the provisions of 42 C.F.R. Part 1003 and 42 C.F.R. Part 438, Subpart I in addition to or in place of withholding payments for a default under Section 16.3.4" SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM Section 19.1 is modified as follows: "19.1 The effective date of this contract is August 31, 1999. This contract and all amendments thereto will terminate on August 31, 2004, unless extended or terminated earlier as provided for elsewhere in this contract." SECTION 2.33 MODIFICATION TO APPENDIX A, STANDARDS FOR QUALITY IMPROVEMENT PROGRAMS Appendix A is replaced with the attached Appendix A and Attachment A-A. SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS Appendix D is replaced with the attached Appendix D. SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES Appendix E is replaced with the attached Appendix E. SECTION 2.36 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS New Appendix O is added to the contract with the attached Appendix O. SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES Appendix K is replaced with the attached Appendix K HHSC Contract 529-03-042-N 26 of 27 ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES The Parties contract and agree that the terms of the Agreement will remain in effect and continue to govern except to the extent modified in this Amendment. By signing this Amendment, the Parties expressly understand and agree that this Amendment is hereby made a part of the Agreement as though it were set out word for word in the Agreement. IN WITNESS HEREOF, HHSC AND THE CONTRACTOR HAVE EACH CAUSED THIS AMENDMENT TO BE SIGNED AND DELIVERED BY ITS DULY AUTHORIZED REPRESENTATIVE. SUPERIOR HEALTHPLAN, INC. HEALTH & HUMAN SERVICES COMMISSION By: /s/ Christopher Bowers By: /s/ Albert Hawkins ----------------------------------- ------------------------------- Christopher Bowers Albert Hawkins President and CEO Commissioner Date: Date: --------------------------------- ----------------------------- HHSC Contract 529-03-042-N 27 of 27 EX-10.18 7 c83064exv10w18.txt EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.18 EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into as of the 28th day of May 2001, by and between CENTENE CORPORATION, a Wisconsin corporation (hereinafter called the "Company"), and Cary Hobbs (hereinafter called the "Executive"), 1. EMPLOYMENT. Company hereby employs Executive as Director of Business Implementation with such other or additional titles or positions as Company's President, Vice Presidents, or Board of Directors may, from time to time, determine. 2. DUTIES. During the employment period, Executive shall faithfully perform her duties to the best of her ability and in accordance with the directions and orders (and to the satisfaction) of the Company's President, Vice Presidents, and Board of Directors of Company, and she shall devote her full working time, attention and energy to the performance of her duties. In addition to the duties assigned to her by the Company's President and/or Vice Presidents and/or Board of Directors of Company, Executive shall perform such other duties as are commensurate with her position and responsibilities, including without limitation, exercising her best judgment; safeguarding and saving from waste the assets of Company; and following, maintaining, and implementing the business plans, budgets, business procedures and directives established and promulgated by Company, as modified or amended from time to time. Except as otherwise provided herein, Executive shall not render services, directly or indirectly, to any other person or organization without her Supervisor's prior written consent and shall not engage in any activity that would interfere significantly with the faithful performance of her duties thereunder. Executive may perform minor services for which she does not receive compensation, provided that the activity does not conflict with the provisions of her duties, without written consent. 3. COMPENSATION. As compensation for all services rendered by Executive under this agreement, company shall pay to Executive, in accordance with its then prevailing payroll practices, a salary at the annualized rate of Eighty Thousand Dollars ($80,000.00), less applicable payroll deductions. This salary may be adjusted from time to time as directed by the Executive's immediate supervisor or the Company's or Plan's President. 4. OTHER EMPLOYMENT BENEFITS. During the Employment Period: (a) Company shall reimburse Executive monthly for actual, reasonable, and necessary out-of-pocket expenses she incurs on Company's business in compliance with company policies and procedures. (b) Executive shall participate in such of Company's Executive plans or fringe benefit arrangements as provided for all Executives, subject to their terms and conditions. (c) Vacation Leave. During the Employment Term, Executive shall be entitled to a number of vacation days as established in the standard company policy. Executive shall accrue and receive full compensation and benefits during her vacation leave periods. Vacation leave shall be taken at such times as do not have an adverse effect on the operations or transactions of the Company or otherwise as Executive and her immediate supervisor shall agree. (d) Bonus Plan. The annual target bonus is 20% of base salary with potential to exceed that if and when the company exceeds its Annual Operating Plan criteria. This award is at the discretion of the Company's President. The Bonus Plan may be adjusted from time to time as directed by the Company's President. 5. TERMINATION OF EMPLOYMENT. (a) Termination for Cause. If the Company terminates Executive's employment For Cause, or if Executive resigns from her employment pursuant to Subsection 5(b), Executive shall be entitled only to payment of that portion of her Salary earned through and including the Termination Date or the Resignation Date at the rate of Salary in effect at that time. (b) Resignation. Executive may resign from her employment with the Company at any time by providing written notice of her resignation to her immediate supervisor at least thirty (30) days before the Resignation Date, in which case she shall be entitled to compensation as provided in Subsection 5(a). (c) Death. If Executive dies during her employment, or Executive is entitled to receive payments from the Company pursuant to Section 5(a) at the time of her death, Executive's estate or personal representative shall be entitled to receive that portion of the Salary, at the rate in effect at Executive's death, that Executive earned through and including the date of Executive's death. (d) Disability. If Executive becomes Permanently Disabled, the Board may terminate Executive's employment by providing written notice to Executive at least 72 hours before the Termination Date. If Executive resigns from employment with the Company as a result of a Permanent Disability, or the Company terminates Executive's employment as a result of a Permanent Disability, Executive shall be entitled to receive that portion of her Salary, at the rate in effect at the time she became Permanently Disabled, that she earned through and including the Termination Date or Resignation Date, as applicable; provided, however, the amount due and payable for the period on and after the date on which Executive became Permanently Disabled shall not be less than the portion of the Salary that would have been paid to her if she had continued in the other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation. 6. COVENANTS. (a) Non-competition by Executive. The Executive acknowledges that the list of the Company's customers and customer contacts as it may exist from time to time are valuable, special, and unique assets of the Company's business. During the period of six (6) months immediately after the termination of Executive's employment with the Company for any cause whatsoever, Executive will not, either directly or indirectly, either for Executive or for any other person, firm, Company or corporation, call upon, solicit, divert, or take away, or attempt to solicit, divert or take away any of the Executives, customers, prospective customers, or business, of the Company upon whom Executive called, solicited, catered, or became acquainted during Executive's employment with the Company. (b) Return of Company Records and Property. Executive agrees that upon termination of Executive's employment, for any cause whatsoever, Executive will surrender to the Company in good condition all property and equipment belonging to Company and all records kept by Executive containing the names, addresses or any other information with regard to customers or customer contacts of the Company, or concerning any operational, financial or other documents given to Executive during Executive's employment with Company. (c) Non-disclosure by Executive. The Executive acknowledges and agrees that any information obtained by Executive while employed by the Company, including but not limited to customer lists and customer contacts, financial, promotional, marketing, training or operational information, and employment data is highly confidential, and is important to the Company and to the effective operation of the Company's business. Executive, therefore, agrees that while employed by the Company, and at any time thereafter, Executive will make no disclosure of any kind, directly or indirectly, concerning any such confidential matters relating to the Company or any of its activities. (d) Enforcement. In the event of a breach or threatened breach by the Executive of the provisions of this Agreement, the Company shall be entitled to a restraining order and/or an injunction restraining the Executive from contacting, servicing or soliciting Company's customers, Company's employment for the 180 day period following the date on which she became Permanently Disabled. (e) Compensation Following Termination. If the Company terminates Executive's employment other than For Cause the Company shall pay Executive that portion of her Salary earned through and including the Termination Date or the Resignation Date at the rate of Salary in effect at that time, plus an amount equal to twenty six (26) weeks of her annualized Salary paid as salary continuance in accordance with the then current payroll practices, and conditioned upon Executive's signing, and not revoking, a complete Release of any and all claims. In such case, Company shall pay for six (6) of the eighteen (18) months health and dental insurance continuation coverage to which Executive is entitled under the Consolidated Omnibus Budget Reconciliation Act of 1985, Public Law 99-272, Title X (COBRA). (f) Change of Control: In the event of a Change in Control which results in (a) the termination of Executive's position or in the reduction of Executive's compensation, or (b) a request by the Company or the surviving entity of the transaction that resulted in the Change in Control that Executive relocate outside of the Metropolitan St. Louis area which relocation Executive refuses, then Executive shall receive severance equal to thirty six (36) weeks pay either as a lump sum payment or salary continuance, rather than the severance paid pursuant to paragraph 5(e) above, but conditioned upon Executive's signing, and not revoking, a complete Release of any and all claims. In such case, Company shall pay for nine (9) of the eighteen (18) months health and dental insurance continuation coverage to which Executive is entitled under the Consolidated Omnibus Budget Reconciliation Act of 1985, Public Law 99-272, Title X (COBRA) In addition, the Company agrees to pay for reasonable outplacement services arranged by the Company. Notwithstanding the foregoing, no payment or payments shall be made under this Agreement which would be an "excess parachute payment" as defined in Section 280G(b) of the Internal Revenue Code of 1986, as amended, Payments which would be "excess parachute payments" shall be proportionately reduced so that no portion of any payment shall constitute an "excess parachute payment." For purposes hereof a "Change in Control" of the Company shall be deemed to occur if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other man (A) persons who, at the date of this Agreement, are the beneficial owners of 25% or more of the Company's Shares, or (B) a group including Shareholder, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities, or (ii) the Shareholders of the Company approve a merger or consolidation of the Company with any or customer contacts, or utilizing or disclosing, in whole or in part, the list of the Company's customers, customer contacts, employees, or financial, operational, promotional, marketing, or training information, or from rendering any services to any persons, firm, corporation, association, or other entity to whom such list or information, in whole or in part, has been disclosed or is threatened to be disclosed. In the event the Company is successful in any suit or proceeding brought or instituted by the Company to enforce any of the provisions of this agreement on account of any damages sustained by the Company by reason of the violation by the Executive of any of the terms and/or provisions of this agreement to be performed by the Executive, the Executive agrees to pay the Company reasonable attorney's fees to be fixed by the Court. 7. INVENTIONS. (a) Executive shall promptly communicate and disclose in writing to Company all those inventions and developments including software, whether patentable or not, as well as patents and patent applications (hereinafter collectively called "Inventions"), made, conceived, developed, or purchased by her, or under which she acquires the right to grant licenses or to become licensed, alone or jointly with others, which have arisen or jointly with others, which have arisen or may arise out of her employment, or relate to any matters pertaining to, or useful in connection therewith, the business or affairs of Company or any of its subsidiaries. Included herein as if developed during the employment period is any specialized equipment and software developed for use in the business of Company. All of Executive's right, title and interest in, to, and under all such inventions, licenses, and right to grant licenses shall be the sole property of Company. Any such inventions disclosed to anyone by Executive within one (1) year after the termination of employment for any cause whatsoever shall be deemed to have been made or conceived by Executive during the Employment Period. (b) As to all such invention, Executive shall, upon request of Company: i. Execute all documents which Company shall deem necessary or proper to enable it to establish title to such inventions or other rights, and to enable it to file and prosecute applications for letters patent of the United States and any foreign country; and ii. Do all things (including the giving of evidence in suits and other proceedings) which Company shall deem necessary or proper to obtain, maintain, or assert patents for any and all such inventions or to assert its rights in any inventions not patented. 8. LITIGATION. Executive agrees that during her employment or thereafter, she shall do all things, including the giving of evidence in suits and other proceedings, which Company shall deem necessary or proper to obtain, maintain or assert rights accruing to Company during the employment period and in connection with which Executive has knowledge, information or expertise. All reasonable expenses incurred by Executive in fulfilling the duties set forth in this paragraph 8 shall be reimbursed by Company to the full extent legally appropriate, including, without Imitation, a reasonable payment for Executive's time. 9. MODIFICATION. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless made in writing specifically referring to this Agreement and signed by all parties therefore. 10. ENTIRE AGREEMENT. This instrument constitutes the entire agreement of the parties hereto with respect to Executive's employment and her compensation therefore. 11. WAIVER. The failure to enforce at any time any of the provisions of this agreement or to require at any time performance by any party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of each party thereafter to enforce each and every provision in accordance with the terms of this Agreement. 12. SEVERABILITY. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 13. PRONOUNS. As used herein, the term "Executive" and the pronouns therefore have been used for convenience only, and corresponding terms reflecting the proper gender of Executive shall be deemed substituted by the parties hereto where appropriate. 14. SUCCESSORS. This Agreement shall be binding upon and shall inure to the benefit of Company and any successor or assign of Company. For the purposes of this Agreement, the terms "successor or assign" shall mean any person, firm, corporation, or other business entity which, at any time, whether by merger, purchase, assignment or otherwise, shall acquire the assets or business of Company in part or as a whole. This Agreement shall also be binding upon and shall inure to the benefit of Executive and her legal representatives and assigns, except that Executive's obligations to perform such future services and rights to receive payment therefore are hereby expressly declared to be non-assignable and non-transferable. 15. GOVERNING LAW. This Agreement shall be interpreted and executed in accordance with the laws of the State of Missouri. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the day and year first above written. CENTENE CORPORATION By /s/ Michael Neidorff ------------------------ "Company" By /s/ Cary Hobbs ------------------------ "Executive" Date EX-10.19 8 c83064exv10w19.txt EXECUTIVE EMPLOYMENT AGREEMENT EXHIBIT 10.19 EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into as of the 1st day of December, 2003, by and between CENTENE CORPORATION, a Wisconsin corporation (hereinafter called the "Company"), and William Scheffel (hereinafter called the "Executive"). 1. EMPLOYMENT. Company hereby employs Executive as Senior Vice President & Controller with such other or additional titles or positions as your supervisor, the Company's President or Board of Directors may, from time to time, determine. 2. DUTIES. During the employment period, Executive shall faithfully perform his duties to the best of his ability and in accordance with the directions and orders (and to the satisfaction) of your supervisor, the Company's President and Board of Directors of Company, and he shall devote his full working time, attention and energy to the performance of his duties. In addition to the duties assigned to his by your supervisor, the Company's President and/or Board of Directors of Company, Executive shall perform such other duties as are commensurate with his position and responsibilities, including without limitation, exercising his best judgment; safeguarding and saving from waste the assets of Company; and following, maintaining, and implementing the business plans, budgets, business procedures and directives established and promulgated by Company, as modified or amended from time to time. Except as otherwise provided herein, Executive shall not render services, directly or indirectly, to any other person or organization without his Supervisor's prior written consent and shall not engage in any activity that would interfere significantly with the faithful performance of his duties thereunder. Executive may perform minor services for which he does not receive compensation, provided that the activity does not conflict with the provisions of his duties, without written consent. 3. COMPENSATION. As compensation for all services rendered by Executive under this agreement, company shall pay to Executive, in accordance with its then prevailing payroll practices, a salary at the annualized rate of Two Hundred Fifty Thousand Dollars ($250,000), less applicable payroll deductions. This salary may be adjusted from time to time as directed by the Executive's immediate supervisor, the Company's President and/or Board of Directors of Company. 4. OTHER EMPLOYMENT BENEFITS. During the Employment Period: (a) Company shall reimburse Executive monthly for actual, reasonable, and necessary out-of-pocket expenses he incurs on Company's business in compliance with company policies and procedures. (b) Executive shall participate in such of Company's Executive plans or fringe benefit arrangements as provided for all Executives, subject to their terms and conditions. (c) Vacation Leave. During the Employment Term, Executive shall be entitled to a number of vacation days as established in the standard company policy for executives. Executive shall accrue and receive full compensation and benefits during his vacation leave periods. Vacation leave shall be taken at such times as do not have an adverse effect on the operations or transactions of the Company or otherwise as Executive and his immediate supervisor shall agree. (d) Bonus Plan. The annual target bonus is 30% of base salary with potential to exceed that if and when the company exceeds its Annual Operating Plan criteria. This award is at the discretion of the Company's President. The Bonus Plan may be adjusted from time to time as directed by the Company's President. 5. TERMINATION OF EMPLOYMENT. (a) Termination for Cause. If the Company terminates Executive's employment For Cause, or if Executive resigns from his employment pursuant to Subsection 5(b), Executive shall be entitled only to payment of that portion of his Salary earned through and including the Termination Date or the Resignation Date at the rate of Salary in effect at that time. (b) Resignation. Executive may resign from his employment with the Company at any time by providing written notice of his resignation to his immediate supervisor at least thirty (30) days before the Resignation Date, in which case he shall be entitled to compensation as provided in Subsection 5(a). (c) Death. If Executive dies during his employment, or Executive is entitled to receive payments from the Company pursuant to Section 5 (a) at the time of his death, Executive's estate or personal representative shall be entitled to receive that portion of the Salary, at the rate in effect at Executive's death, that Executive earned through and including the date of Executive's death. (d) Disability. If Executive becomes Permanently Disabled, the Board may terminate Executive's employment by providing written notice to Executive at least 72 hours before the Termination Date. If Executive resigns from employment with the Company as a result of a Permanent Disability, or the Company terminates Executive's employment as a result of a Permanent Disability, Executive shall be entitled to receive that portion of his Salary, at the rate in effect at the time he became Permanently Disabled, that he earned through and including the Termination Date or Resignation Date, as applicable; provided, however, the amount due and payable for the period on and after the date on which Executive became Permanently Disabled shall not be less than the portion of the Salary that would have been paid to him if he had continued in the Company's employment for the 180 day period following the date on which he became Permanently Disabled. (e) Compensation Following Termination. If the Company terminates Executive's employment other than For Cause the Company shall pay Executive that portion of his Salary earned through and including the Termination Date or the Resignation Date at the rate of Salary in effect at that time, plus an amount equal to twenty six (26) weeks of his annualized Salary paid in accordance with the then current payroll practices, and conditioned upon Executive's signing, and not revoking, a complete Release of any and all claims. In such case, Company shall pay for six (6) months of the eighteen (18) months health and dental insurance continuation coverage to which Executive is entitled under the Consolidated Omnibus Budget Reconciliation Act of 1985, Public Law 99-272, Title X (COBRA). (f) Change of Control. In the event of a "Change in Control" which, within 24 months from and after such Change in Control results in (a) the involuntary termination of Executive's employment by the Company, or (b) the voluntary resignation of employment by Executive because of (i) the reduction of Executive's compensation, (ii) a material adverse change in Executive's position with the Company or the nature or scope of Executive's duties or (iii) a request by the Company or the surviving entity of the transaction that resulted in the Change of Control that Executive relocate outside of the Metropolitan St. Louis area which Executive refuses, then Executive shall receive severance equal to thirty six (36) weeks pay paid at his choice (which choice shall be irrevocably made and set forth as part of the Release described below) either as a lump sum payment or salary continuance, rather than the severance paid pursuant to paragraph 5(c) above, but conditioned upon Executive's signing, and not revoking, a complete Release of any and all claims. In such case, Company shall pay for nine (9) of the eighteen (18) months health and dental insurance continuation coverage to which Executive is entitled under the Consolidated Omnibus Budget Reconciliation Act of 1985, Public Law 99-272, Title X (COBRA). In addition, the Company agrees to pay for reasonable outplacement services arranged by the Company. Notwithstanding the foregoing, no payment or payments shall be made under this Agreement which would be an "excess parachute payment" as defined in Section 280G(b) of the Internal Revenue Code of 1986, as amended. Payments which would be "excess parachute payments" shall be proportionately reduced so that no portion of any payment shall constitute an "excess parachute payment." For purposes hereof a "Change in Control" of the Company shall be deemed to occur if (i) any "person" (as such term is used in Sections 13 (d)and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (A) persons who, at the date of this Agreement, are the beneficial owners of 25% or more of the Company's voting securities or (B) a group including Executive, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities, or (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation. Further, for purposes hereof, a "Change in Control" also shall be deemed to occur if individuals who, as the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board) cease for any reason to constitute at least a majority of the Board of Directors of the Company; provided, however, that an individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by at least a majority of the directors then comprising the Incumbent Board shall be included within the definition of Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual election contest (or such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board. 6. COVENANTS. (a) Non-competition by Executive. The Executive acknowledges that the list of the Company's customers and customer contacts as it may exist from time to time are valuable, special, and unique assets of the Company's business. During the period of six (6) months immediately after the termination of Executive's employment with the Company for any cause whatsoever, Executive will not, either directly or indirectly, either for Executive or for any other person, firm, Company or corporation, call upon, solicit, divert, or take away, or attempt to solicit, divert or take away any of the Executives, customers, prospective customers, or business, of the Company upon whom Executive called, solicited, catered, or became acquainted during Executive's employment with the Company. (b) Return of Company Records and Property. Executive agrees that upon termination of Executive's employment, for any cause whatsoever, Executive will surrender to the Company in good condition all property and equipment belonging to Company and all records kept by Executive containing the names, addresses or any other information with regard to customers or customer contacts of the Company, or concerning any operational, financial or other documents given to Executive during Executive's employment with Company. (c) Non-disclosure by Executive. The Executive acknowledges and agrees that any information obtained by Executive while employed by the Company, including but not limited to customer lists and customer contacts, financial, promotional, marketing, training or operational information, and employment data is highly confidential, and is important to the Company and to the effective operation of the Company's business. Executive, therefore, agrees that while employed by the Company, and at any time thereafter, Executive will make no disclosure of any kind, directly or indirectly, concerning any such confidential matters relating to the Company or any of its activities. (d) Enforcement. In the event of a breach or threatened breach by the Executive of the provisions of this Agreement, the Company shall be entitled to a restraining order and/or an injunction restraining the Executive from contacting, servicing or soliciting Company's customers, or customer contacts, or utilizing or disclosing, in whole or in part, the list of the Company's customers, customer contacts, employees, or financial, operational, promotional, marketing, or training information, or from rendering any services to any persons, firm, corporation, association, or other entity to whom such list or information, in whole or in part, has been disclosed or is threatened to be disclosed. In the event the Company is successful in any suit or proceeding brought or instituted by the Company to enforce any of the provisions of this agreement on account of any damages sustained by the Company by reason of the violation by the Executive of any of the terms and/or provisions of this agreement to be performed by the Executive, the Executive agrees to pay the Company reasonable attorney's fees to be fixed by the Court. 7. INVENTIONS. (a) Executive shall promptly communicate and disclose in writing to Company all those inventions and developments including software, whether patentable or not, as well as patents and patent applications (hereinafter collectively called "Inventions"), made, conceived, developed, or purchased by him, or under which he acquires the right to grant licenses or to become licensed, alone or jointly with others, which have arisen or jointly with others, which have arisen or may arise out of his employment, or relate to any matters pertaining to, or useful in connection therewith, the business or affairs of Company or any of its subsidiaries. Included herein as if developed during the employment period is any specialized equipment and software developed for use in the business of Company. All of Executive's right, title and interest in, to, and under all such inventions, licenses, and right to grant licenses shall be the sole property of Company. Any such inventions disclosed to anyone by Executive within one (1) year after the termination of employment for any cause o whatsoever shall be deemed to have been made or conceived by Executive during the Employment Period. (b) As to all such invention, Executive shall, upon request of Company: i. Execute all documents which Company shall deem necessary or proper to enable it to establish title to such inventions or other rights, and to enable it to file and prosecute applications for letters patent of the United States and any foreign country; and ii. Do all things (including the giving of evidence in suits and other proceedings) which Company shall deem necessary or proper to obtain, maintain, or assert patents for any and all such inventions or to assert its rights in any inventions not patented. 8. LITIGATION. Executive agrees that during his employment or thereafter, he shall do all things, including the giving of evidence in suits and other proceedings, which Company shall deem necessary or proper to obtain, maintain or assert rights accruing to Company during the employment period and in connection with which Executive has knowledge, information or expertise. All reasonable expenses incurred by Executive in fulfilling the duties set forth in this paragraph 8 shall be reimbursed by Company to the full extent legally appropriate, including, without limitation, a reasonable payment for Executive's time. 9. MODIFICATION. No modification, amendment, or waiver of any of the provisions of this Agreement shall be effective unless made in writing specifically referring to this Agreement and signed by all parties therefore. 10. ENTIRE AGREEMENT. This instrument constitutes the entire agreement of the parties hereto with respect to Executive's employment and his compensation therefore. 11. WAIVER. The failure to enforce at any time any of the provisions of this agreement or to require at any time performance by any party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of each party thereafter to enforce each and every provision in accordance with the terms of this Agreement. 12. SEVERABILITY. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 13. PRONOUNS. As used herein, the term "Executive" and the pronouns therefore have been used for convenience only, and corresponding terms reflecting the proper gender of Executive shall be deemed substituted by the parties hereto where appropriate. 14. SUCCESSORS. This Agreement shall be binding upon and shall inure to the benefit of Company and any successor or assign of Company. For the purposes of this Agreement, the terms "successor or assign" shall mean any person, firm, corporation, or other business entity which, at any time, whether by merger, purchase, assignment or otherwise, shall acquire the assets or business of Company in part or as a whole. This Agreement shall also be binding upon and shall inure to the benefit of Executive and his legal representatives and assigns, except that Executive's obligations to perform such future services and rights to receive payment therefore are hereby expressly declared to be non-assignable and non-transferable. 15. GOVERNING LAW. This Agreement shall be interpreted and executed in accordance with the laws of the State of Missouri. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the day and year first above written. CENTENE CORPORATION By /s/ Michael Neidorff "Company" By /s/ William Scheffel "Executive" Date EX-10.26A 9 c83064exv10w26a.txt AMENDMENT TO CONTRACT INCLUDED AS EXHIBIT 10.26 EX. 10.26A THIRD AMENDMENT TO CONTRACT BETWEEN THE OFFICE OF MEDICAID POLICY AND PLANNING AND COORDINATED CARE CORPORATION INDIANA, INC. This THIRD AMENDMENT to the above-referenced Contact is made and entered into by and between the State of Indiana [hereinafter "State" of "State of Indiana"], through the Office of Medicaid Policy and Planning [hereinafter called "State" or "Office"], of the Indiana Family and Social Services Administration, 402 West Washington Street, Room W382, Indianapolis, Indiana 46204, and Coordinated Care Corporation Indiana, Inc., doing business as Managed Health Services, 1099 North Meridian, Suite 400, Indianapolis, Indiana 46204, [hereinafter called "Contractor"]. WHEREAS, the State of Indiana and Contractor have previously entered into a contract for a term beginning January 1, 2001, and ending December 31, 2004, [hereinafter "the original contract"] for services to arrange for and to administer a risk-based managed care program (RBMC) for certain Hoosier Healthwise enrollees in Packages A,B, and C as procured through BAA 01-28; WHEREAS, the parties have previously entered into a First Amendment for additional duties and the adjustment of capitation rates to the mandatory MCO enrollment of Hoosier Healthwise members residing in certain Indiana counties; WHEREAS, the Family and Social Services Administration (FSSA) issued new contract documents in lieu of a Second Amendment document so that FSSA may move its contract data into a single contract database the original contract was issued for the contract term starting January 1, 2001, through December 31, 2002, and provided for a renewal clause, exercised at the option of the State for two additional years. The State exercised this option and renewed the contract from January 1, 2003, through December 31, 2004; WHEREAS, this Contract contains the payment rates under which the Contractor shall be paid and that these rates have been determined to be actuarially sound for risk contracts, in accordance with applicable law; WHEREAS, the Office desires to further amend the contract with this THIRD AMENDMENT in order to bring the contract into compliance with applicable new federal regulations at 42 CFR 438 implementing the federal Balanced Budget Act of 1997. NOW THEREFORE, the parties enter into this THIRD AMENDMENT for the consideration set out below, all of which is deemed to be good and sufficient consideration in order to make this THIRD AMENDMENT a binding legal instrument. 1. The parties hereby ratify and incorporate herein each term and condition set out in the original Contract, First Amendment, Second Amendment (i.e., renewal contract), as well MCO Contract, Third Amendment Page 1 of 6 Managed Health Services as all written matters incorporated therein except as specifically provided for by this THIRD AMENDMENT. 2. The term of this amendment is August 1, 2003, through December 31, 2004. 3. The parties agree that BAA 01-28, Attachment A, Section 3.0, Requested Services, is amended, as required by 42 CFR 438, and is replaced with BAA 01-28, Attachment A, Section 3.0, Requested Services, dated July 29, 2003, which is incorporated herein by reference as Exhibit 1. 4. The parties agree that BAA 01-28, Appendix 2, Definition and Abbreviations, is amended, as required by 42 CFR 438, and is replaced with BAA 01-28, Appendix 2, Definitions and Abbreviations, dated July 10, 2003, which is incorporated herein by reference as Exhibit 2. 5. Paragraph VII.BB. of the Second Amendment (Renewal Contract) is deleted and replaced with the following concerning Security and Privacy of Health Information: The Contractor agrees to comply with all requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) in all activities related to this contract, to maintain compliance throughout the life of the contract, to operate any systems used to fulfill the requirements of this contract in full compliance with HIPAA and to take no action which adversely affects the State's HIPAA compliance. The parties acknowledge that the Department of Health and Human Services has issued the Final Rule, as amended from time to time on the Standards for Privacy of Individually Identifiable Health Information, as required by the Administrative Simplification Section of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"). The parties acknowledge that the Office is a Covered Entity within the meaning of HIPAA. To the extent required by the provisions of HIPAA and regulations promulgated thereunder, the Contractor assures that it will appropriately safeguard Protected Health Information (PHI), as defined by the regulations, which is made available to or obtained by the Contractor in the course of its work under the contract. The Contractor agrees to comply with applicable requirements of law, as they may be amended from time to time, relating to PHI with respect to any task or other activity it performs for the Office including, as required by the final regulations; A. Not using or further disclosing PHI other than as permitted or required by this Contract or by applicable law; B. Using appropriate safeguards to prevent use or disclosure of PHI other than as provided by this Contract or by applicable law; C. Mitigating, to the extent practicable, any harmful effect that is known to the Contractor and reporting to the Office any use or disclosure by the Contractor, its agent, employees, subcontractors or third parties, of PHI obtained under this Contract MCO Contract, Third Amendment Page 2 of 6 Managed Health Services in a manner not provided for by this Contact or by applicable law of which the Contractor becomes aware; D. Ensuring that any subcontractors or agents to whom the Contractor provides PHI received from, or created or received by the Contractor on behalf of the Office agree to the same restrictions, conditions and obligations applicable to such party regarding PHI; E. Making the Contractor's internal practices, books and records related to the use of disclosure of PHI received from, or created or received by the Contractor on behalf of the Office available to the Secretary of the United States Department of Health and Human Services tor purposes of determining the Office's compliance with applicable law. The Contractor shall immediately notify the Office upon receipt by the Contractor of any such request, and shall provide the Office with copies of any materials made available in response to such a request; F. In accordance with procedures established by the Office, documenting and making available the information required to provide an accounting of disclosures pursuant to applicable law, if the duties of the Contractor include disclosures that must be accounted for; G. In accordance with procedures established by the Office, making available PHI for amendment and incorporating any amendments to PHI in accordance with 45 CFR 164,526, if the Contractor maintains PHI subject to amendment; H. In accordance with procedures established by the Office, making PHI available to individuals entitled to access and requesting access in compliance with 45 CFR 164,524 and consistent with the duties of the Contractor; I. At the termination of this Contract, if feasible, return or destroy all PHI received or created under this Contract. If the Office determines return or destruction is not feasible, the protections in this agreement shall continue to be extended to any PHI maintained by the Contractor for as long as it is maintained. In order to fulfill the terms of this Contract, Contractor will utilize and interface with the State's electronic systems and will use them to perform certain electronic transactions that contain health information, and which are subject to the final rules for the Standards for Electronic Transactions, dated August 17, 2000, under the Administrative Simplification Section of HIPAA (the "Transaction Standards"). The Contractor shall comply with the Transaction Standards, as may be amended from time to time, and shall provide documentation of its compliance with them, including a summary of project plans for remediation, status reports of remediation efforts, summary of text results, copies of certifications, if any, and the Contractor's statement affirming completion of all requirements. Such compliance shall be maintained at no additional cost to the State. MCO Contract, Third Amendment Page 3 of 6 Managed Health Services Contractor will indemnify and hold the State harmless from any loss, damage costs, expense, judgment, sanction or liability, including, but not limited to, attorneys' fees and costs, that the State incurs or is subject to, as a result of Contractor's breach of this Paragraph. 6. The parties agree that Article IV. Payment, paragraph A, of the Second Amendment (renewal contract) is amended as follows:
CAPITATION RATES CATEGORY PACKAGES A/B PACKAGES C - ---------------- ------------ ---------- NORTH REGION Newborns $ 381.83 $ 208.22 Preschool $ 69.51 $ 83.33 Children $ 57.21 $ 63.26 Adolescents $ 87.11 $ 83.63 Adult Males $ 240.44 Adult Females $ 203.16 Deliveries $ 3,356.03 $ 3,356.03 CENTRAL REGION Newborns $ 390.49 $ 156.05 Preschool $ 77.35 $ 79.66 Children $ 55.18 $ 67.33 Adolescents $ 105.91 $ 80.43 Adult Males $ 234.59 Adult Females $ 206.70 Deliveries $ 3,482.86 $ 3,482.86 SOUTH REGION Newborns $ 360.16 $ 459.59 Preschool $ 71.36 $ 74.79 Children $ 55.88 $ 63.82 Adolescents $ 91.43 $ 84.24 Adult Males $ 234.85 Adult Females $ 219.44 Deliveries $ 3.543.58 $ 3,543.58
7. The parties agree that paragraph III.Q3.a. of the renewal contract is amended to read as follows: An informal claim resolution procedure which shall be available for the resolution of claims submitted to the Contractor by the provider within the allowable claims submission time limits under federal and state law. MCO Contract, Third Amendment Page 4 of 6 Managed Health Services 8. Contractor shall submit a network development plan to OMPP and to the monitoring contractor for the counties identified for Phase II of mandatory MCO enrollment by August 5, 2003. 9. The parties agree that Section 3.6.1.3 of the BAA is amended to require the Contractor to submit the "Transition Report (Phase II)," attached as Exhibit 3, monthly from August 2003 until August 2004, according to the schedule in Exhibit 3, or until the MCO has received written notification from OMPP that the report, or certain data elements in the report, is/are no longer required or may be reported less frequently. If Contractor fails to submit the Transition Report on time, or submits a Transition Report with incomplete data, OMPP may assess, and the MCO shall pay, liquidated damages in the amount of $200 per business day until a complete report is received. 10. The Contractor certifies and warrants that federal funds have not been used for lobbying. 11. The parties agree that this Third Amendment to the parties' original Contract has been duly prepared and executed pursuant to Paragraph VII.B of the original contract. 12. The undersigned attests, subject to the penalties for perjury, that he is the contracting party, or that he is the representative, agent, member or officer of me contracting party, that he has not, nor has any other member employee, representative, agent or officer of the firm, company, corporation or partnership represented by him, directly or indirectly, to the best of his knowledge, entered into or offered to enter into any combination, collusion or agreement to receive or pay, and that he has not received or paid, any sum of money or other consideration for the execution of this agreement other than that which appears upon the face of the agreement. //THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.// MCO Contract, Third Amendment Page 5 of 6 Managed Health Services WHEREOF, the parties have, through duly authorized representatives, entered into this agreement. The parties having read and understood the foregoing terms of the contract do by their respective signatures dated below hereby agree to the terms thereof. For the Contractor: For the State of Indiana: /s/ Rita Johnson-Mills /s/ Melanie Bella - ----------------------------------- ----------------------------------- Rita Johnson-Mills, CEO Melanie Bella, Assistant Secretary Coordinated Care Corporation Indiana, Inc. Office of Medicaid Policy Planning Date: 7/30/03 Date: 8/1/03 /s/ Kathryn H. Moses, ----------------------------------- Kathryn H. Moses, Director Children's Health Insurance Program Date: 8/4/03 APPROVED APPROVED: /s/ Marilyn Schultz /s/ David Penini - ----------------------------------- ----------------------------------- Marilyn Schultz, Director David Penini, Commissioner State Budget Agency Department of Administration Date: 8/15/03 Date: 8/13/03 APPROVED AS TO FORM AND LEGALITY /s/ Susan Gard - ----------------------------------- Stephen Carter Attorney General of Indiana Date: 9-3-03 MCO Contract, Third Amendment Page 6 of 6 Managed Health Services EX-10.28A 10 c83064exv10w28a.txt AMENDMENT TO CONTRACT INCLUDED AS EXHIBIT 10.28 EX 10.28a STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES Whereas University Health Plans, Inc. has been granted a Certificate of Authority from the New Jersey Department of Health and Senior Services and the New Jersey Department of Banking and Insurance to operate a Health Maintenance Organization (HMO) in the counties of Atlantic, Cumberland, Salem, Sussex and Warren in the State of New Jersey, and Whereas, the Department of Human Services, Division of Medical Assistance and Health Services (DMAHS) is desirous of permitting University Health Plans, Inc. to enroll Medicaid and NJ FamilyCare recipients in the counties of Atlantic, Cumberland, Salem, Sussex and Warren, and In accordance with Article 7 Section 7.11.2A of the Contract between University Health Plans, Inc. and the State of New Jersey, Department of Human Services, Division of Medical Assistance and Health Services (DMAHS), effective date . October 1 , 2000, it is hereby agreed that the contract be amended as follows: 1) Article 5; Enrollee Services, section 5.1. B, Enrollment Area shall include the counties of Atlantic, Cumberland, Salem, Sussex and Warren (see attached Article 5, section 5. 1B.): 2) Appendices, section D.3, Contractor's Provider Network shall include the contractor's provider network for the counties of Atlantic, Cumberland, Salern, Sussex and Warren (see attached Appendix D.3); 3) Appendices, section D.4, Contractor's List of Subcontractors shall include the contractor's subcontractor network for the counties of Atlantic, Cumberland, Salem, Sussex and Warren (see attached Appendix D.4). All other terms and conditions of the initial contract and amendments remain unchanged. The contracting parties indicate their agreement by their signatures. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY:/s/ Alexander McLean BY:/s/ Matthew D'oria - ----------------------------------- ----------------------------------- MATTHEW D. D'ORIA TITLE: PRESIDENT AND CEO TITLE: ACTING DIRECTOR, DMAHS DATE: 7/31/03 DATE: 8/13/03 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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 certain sections of the contract shall be amended to take effect November 1, 2003, as follows: 1. ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES, " Sections 4.1.5(C), 4.1.5(D), 4.1.6(A)3 and 4.1.7(C)13 shall be amended as reflected in Article 4, Sections 4.1.5(C), 4,1.5(D), 4.1.6(A)3 and 4,1,7(C)13 attached hereto and incorporated herein. 2. ARTICLE 5, "ENROLLEE SERVICES," Sections 5.B.2(M) and 5.8.2(U) shall be amended as reflected in Article 5, Sections 5.8.2(M) and 5,8.2(U) attached hereto and incorporated herein. 3. ARTICLE 8, "FINANCIAL PROVISIONS," Section B.5.6 shall be amended as reflected in Section 8.5.6 attached hereto and incorporated herein. 4. APPENDIX, SECTION B, "COST-SHARING REQUIREMENTS FOR NJ FAMILYCARE PLAN C, PLAN D AND PLAN H BENEFICIARIES", B.5.2, Plan H co-pays shall be amended as reflected in Section B, B.5.2 attached hereto and incorporated herein. 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY:/s/ Alexander McLean BY:/s/ Ann Clemency Kohler - ----------------------------------- ----------------------------------- ANN CLEMENCY KOHLER TITLE: PRESIDENT AND CEO TITLE: DIRECTOR, DMAHS DATE: 10/28/03 DATE: [ILLIGIBLE] APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: /s/ [ILLEGIBLE] - ----------------------------------- DEPUTY ATTORNEY GENERAL DATE: 11/05/03 an enrollee's 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. 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 Amended as of November 1, 2003 I-4 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. COVERED FOR NJ FAMILYCARE PLAN A ONLY. D. Waiver (except Division of Developmental Disabilities Community Care Waiver) 1 and demonstration program services, COVERED FOR NJ FAMILYCARE PLAN A ONLY. 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 Amended as of November 1, 2003 IV-10 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 teats, 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, EXCEPT FOR THOSE PLAN D ENROLLEES WITH PROGRAM STATUS CODE 380. 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 Amended as of November 1, 2003 IV-11 12. Durable Medical Equipment - excludes any equipment not listed in Appendix, Section B.4,1, and not covered if not part of inpatient hospital discharge plan 13. Early and Periodic Screening, Diagnosis and Treatment (EPSDT) services. 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 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. Inpatient hospital services for mental health 35. Inpatient and outpatient services for substance abuse 36. Partial hospitalization IV-17 Amended as of November 1, 2003 IV-17 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 (EXCEPT PSC 380) 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 twelve (12) months thereafter without cause and that the lock-in period does not apply to ABD, DDD or DYFS individuals; Amended as of November 1, 2003 V - 14 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 o 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 PLAN; 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; Y. Provision of information to enrollees or, where applicable, an authorized person, to assist THEM in the selection of a PCP; Amended as of November 1, 2003 V - 15 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 authorized person, to schedule an appointment for a complete, age/sex SPECIFIC 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; 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 QAJU/QISMC in Section B.4.14 of the Appendices. Amended as of November 1, 2003 V-17 Individuals eligible through NJ FamilyCare PLANS A, B, C, AND ONLY THOSE PLAN D ENROLLEES with a program status code of 380 and all children groups shall receive protease inhibitors and other anti-retroviral agents under the contractor's plan. All other individuals eligible through NJ FamilyCare with program status codes of 497498, 300-301, 700-701, and 763, AND ALL PLAN H INDIVIDUALS shall receive protease inhibitors and other anti-retrovirals (First Data Bank Specific Therapeutic Class Codes W5C, W5B, W51, W5J, W5K, W5L, W5M and W5N).through Medicaid fee for service and/or the AIDS Drug Distribution Program (ADDP). 8.5.7 EPSDT INCENTIVE PAYMENT The contractor shall be paid separately, $10 for every documented encounter record for a 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, 2003,. recognize costs for anticipated contractor administrative expenditures due to Balanced Budget Act regulations. 8.5.9 NJ FAMILYCARE PLAN H ADULTS The contractor shall be paid an administrative fee for NJ FamilyCare Plan H adults without dependent .children, and restricted alien parents excluding pregnant women, as defined in Article One. 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: Amended as of November 1, 2003 VIII-9 COST-SHARING REQUIREMENTS FOR NJ FAMILYCARE PLAN D AND PLAN H COPAYMENTS FOR NJ FAMILYCARE - PLAN D Copayments will be required of parents/caretakers solely eligible through NJ FamilyCare Plan D whose family income is between 151(degree)/o 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. o
SERVICE AMOUNT OF COPAYMENT ------- ------------------- 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 Visits $25 copayment for each visit 3 Outpatient Substance Abuse Services for $5 copayment for each visit 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 Room by including service provided in an outpatient his/her primary care provider for service hospital department or an urgent care facility that should have been rendered in the primary care [Note:Triage and medical screening must be covered provider's office or if the members is admitted in all situation. into hospital 5. Primary Care Provider Services provided $5 copayment for each visit (except for 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
Amended as of November 1, 2003
SERVICE AMOUNT OF COPAYMENT ------- ------------------- 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 normal office hours or home visit 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
COPAYMENTS FOR NJ FAMILYCARE - PLAN H COPAYMENTS WILL BE REQUIRED OF INDIVIDUALS ELIGIBLE THROUGH NJ FAMILYCARE PLAN H WHOSE FAMILY INCOME IS BETWEEN 151% AND UP TO INCLUDING 250% OF THE FEDERAL POVERTY LEVEL. THE TOTAL FAMILY LIMIT (REGARDLESS OF FAMILY SIZE) ON ALL COST-SHARING MAY NOT EXCEED 5% OF THE ANNUAL FAMILY INCOME. Amended as of November 1, 2003 Below is listed the services requiring copayments and the amount of each copayment.
SERVICE AMOUNT OF COPAYMENT ------- ------------------- 1. Outpatient Hospital Clinic Visits,including $5 copayment for each outpatient clinic visit that is not Diagnostic Testing for preventive services 2. Independent Clinic Visits $5 copayment for each visit except for preventive services 3 Hospital outpatient Emergency Services covered $35 copayment; no copayment is required if the member for the Emergency Services only including services was referred to the Room by his/her primary care provided in an outpatient hospital department or provider for services that should have been rendered an urgent care facility. [Note: Triage and medical in the primary care provider's office or if the screenings must be covered in all situations.] member is admitted into the hospital 4. Primary Care Provider Services provided during $5 copayment for each visit normal office hours 5. Primary Care Provider Services during non-office $10 copayment for each visit hours and for home visits 6. Prescription Drugs $5 copayment. If greater than a 34-day supply of a prescription drug is dispensed, a $10 copayment applies. 7. Nurse Midwives, non-maternity 55 copayment except $5 copayment except for preventive services render for preventive services; certified nurse during non-office hour and for home visit practitioner, services;specialist non-office hours and for home visits. 8. Physician specialist office visits during normal $5 copyment per visit office hours 9. Physician specialist office visits during S10 copayment per visit non-office hours or home visits 10. Laboratory and X-ray Services $5 copayment for each visit that is not part of an office visit
Amended as of November 1, 2003 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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 certain sections of the contract shall be amended to be effective October 1, 2003, as follows: NJ FamilyCare Extension - October 1, 2003 1. ARTICLE 1, "DEFINITIONS" section - for the following definition: - NJ FamilyCare Plan H shall be amended as reflected in the relevant pages of Article 1 attached hereto and incorporated herein. 2. ARTICLE 8, "FINANCIAL PROVISIONS," Sections 8.5.1 and 8.7(F)4 shall be amended as reflected in Article 8, Sections 8.5.1 and 8.7(F)4 attached hereto and incorporated herein. 3. APPENDIX, SECTION C, "CAPITATION RATES," shall be revised as reflected in SFY 2004 Capitation Rates attached hereto and incorporated herein. NJ FamilyCare Extension -October 1, 2003 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY: /s/ Alexander McLean BY: /s/ Mathew D. D'Oria -------------------------- ----------------------------- MATHEW D. D'ORIA TITLE: President & CEO TITLE: ACTING DIRECTOR, DMAHS DATE: 9/5/03 DATE: 9/12/03 APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: /s/ [ILLEGIBLE] ---------------------------- DEPUTY ATTORNEY GENERAL DATE: 9.12.03 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 200 percent of the federal poverty level; and - Parents/caretakers with children below the age of 23 years and children from the age of 19 through 22 years who are full time students who do not qualify for AFDC Medicaid with family incomes up to and including 250 percent of the federal poverty level; and - 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.
PSC PSC Race Code Cost Sharing No Cost Sharing No Cost Sharing - -------------------------------------------------------------------------- ~~301 300 3 493 380 494 497 495 498~~
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. NJ FAMILY CARE PLAN H--means the State-operated program which provides managed care coverage to uninsured: - Adults and couples without dependent children under the age of 19 with family incomes up to and including 100 percent of the federal poverty level; - Adults and couples without dependent children under the age of 23 years, who do not qualify for AFDC Medicaid, with family incomes up to and including 250 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. These groups are identified by the program status code (PSC) indicated below. For clarity, the program status codes related to Plan H non-cost sharing groups are also listed. Amended as of October 1, 2003 I-l9 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: 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 mis 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. Violates state or federal law; 6. Fails to carry out the substantive terms of this contract; 7. Becomes insolvent; 8. Fails to meet applicable requirements in sections 1932, 1903 (m) and 1905(t)of the SSA;or 9. Brings a proceeding voluntarily, or has a proceeding brought against it involuntarily, under the Bankruptcy Act 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 Amended as of November 1, 2003 VII-13 Rates for DYFS, NJ FamilyCare Plans B, C, D, AND PLAN H and the non risk-adjusted rates for AIDS and clients of DDD are statewide. Rates for all other premium groups are regional in each of the following regions; - 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, NJC PREGNANT WOMEN, AND NJ FAMILYCARE PLAN A CHILDREN This grouping includes capitation rates for Aid to Families with Dependent Children (AFDC)/Temporary Assistance for Needy Families (TANF), New Jersey Care Pregnant Women and Children, and NJ FamilyCare Plan A children (includes individuals under 21 in PSC 380), but excludes individuals who have AIDS or are clients of DDD. 8.5.2.2 NJ FAMILYCARE PLANS B & C This grouping includes capitation rates for NJ FamilyCare Plans B and C enrollees, excluding individuals with AIDS and/or DDD clients. 8.5.2.3 NJ FAMILYCARE PLAN D CHILDREN This grouping includes capitation rates for NJ FamilyCare Plan D children, excluding individuals with AIDS. 8.5.2.4 NJ FAMILYCARE PLAN D PARENTS/CARETAKERS This grouping includes capitation rates for NJ FamilyCare Plan D parents/caretakers, excluding individuals with AIDS, and include only enrollees 19 years of age or older. Amended as of October 1, 2003 VIII-6 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 included (See Section 8.5.3). Regional payment shall be made by the State to the contractor based on submission of appropriate encounter data 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) 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 12.5% 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, WSJ, W5K, W5L, W5M, W5N). Payment for protease inhibitors shall be made by DMAHS to the contractor based on: 1) submission of appropriate encounter data; and 2) 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 12.5% and 2) rates paid by the contractor. Individuals eligible through NJ FamilyCare with a program status code of 380 and all children groups shall receive protease inhibitors and other anti-retroviral agents under the contractor's plan. All other individuals eligible through NJ FamilyCare with program status codes of 497-498, 300-301, 700-701, and 763 shall receive protease inhibitors and other anti-retrovirals (First Data Bank Specific Therapeutic Class Codes W5C, W5B, W5I, W5J, W5K, W5L, W5M and W5N) through Medicaid fee for service and/or the AIDS Drug Distribution Program (ADDP). 8.5.7 EPSDT INCENTIVE PAYMENT Amended as of October 1, 2003 VIII-8 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. IN CERTAIN CIRCUMSTANCES, AND WITH THE PRIOR APPROVAL OF THE DMAHS, THE CONTRACTOR SHALL RETAIN THE ABILITY TO INITIATE TPL RECOVERY ACTIONS AGAINST HEALTH INSURANCE, AS DEFINED IN SECTION 8.7.D.1. THESE CIRCUMSTANCES INCLUDE, BUT ARE NOT LIMITED TO, INFORMATION SYSTEM FAILURES, CLAIMS SETTLEMENTS, AND APPEAL RESOLUTIONS. IN THESE CASES, ALL RECOVERED FUNDS SHALL BE RETAINED BY THE CONTRACTOR; A SUMMARY LEVEL OF THE RECOVERY EXPERIENCE, NET OF ANY VENDOR FEES DIRECTLY RELATED TO THE SPECIFIC RECOVERY ACTIVITY, WILL BE REPORTED TO THE STATE ON A QUARTERLY BASIS; AND THE RECOVERIES WILL BE REFLECTED IN CLAIMS ADJUSTMENTS THAT ARE SUBMITTED TO THE STATE WITH THE MONTHLY CLAIMS FILES, REFERENCED IN SECTION 8.7.D.1.A. THE STATE WILL TAKE INTO ACCOUNT THESE NET RECOVERIES IN SETTING CAPITATION RATES AND DETERMINING THE PAYMENT AMOUNTS. G. Sharing of TPL Information by the State. 1. By the fifteenth (15th) day after the close of the month during which the State learns of such information, 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. This information will be in the format of the State's TPL Resource File. Amended as of October 1, 2003 VIII-13 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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 certain sections of the contract amendment which were to be effective October 1, 2003 shall be amended to take effect November 1, 2003, as follows: Managed Care Service Administrator - November 1, 2003 1. PREFACE section shall be changed to include risk, non-risk and managed care service administrator language; 2. ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1.7(A)11 (NEW) and 4.1.7(C)12 shall be amended as reflected in Article 4, Sections 4.1.7(A)11 and 4.1.7(C)12 attached hereto and incorporated herein. 3. ARTICLE 7, "TERMS AND CONDITIONS," Section 7.13(A) shall be amended as reflected in Article 7, Section 7.13(A) attached hereto and incorporated herein. 4. ARTICLE 8, "FINANCIAL PROVISIONS," Section 8.8(P) shall be amended as reflected in Section 8.8(P) attached hereto and incorporated herein. 5. APPENDIX, SECTION B, "PROVISION OF HEALTH CARE SERVICES," B.4.1, Plan H Covered Durable Medical Equipment (new) shall be amended as reflected in Section B, B.4.1 attached hereto and incorporated herein. 6. APPENDIX, SECTION E, "MANAGED CARE SERVICE ADMINISTRATOR," shall be revised as reflected in SFY 2004 Managed Care Service Administrator administrative fees attached hereto and incorporated herein. Managed Care Service Administrator - November 1, 2003 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY: /s/ Alexander McLean BY: Mathew D. D'Oria ---------------------- ------------------------ MATTHEW D. D'Oria TITLE: President & CEO TITLE: ACTING DIRECTOR, DMAHS DATE: 9/5/03 DATE: 9/17/03 APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: /s/ [ILLEGIBLE] ----------------------- DEPUTY ATTORNEY GENERAL DATE: 9/16/03 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND CONTRACT TO PROVIDE SERVICES This comprehensive RISK AND NON-RISK contract is entered into this____________day of ___________, and is effective on the__________day of________between the Department of Human Services, which is in the executive branch of state government, the state agency designated to administer the Medicaid program under Title XIX of the Social Security Act, 42 U.S.C. 1396 et seq. pursuant to the New Jersey Medical Assistance Act, N.J.S.A. 30:4D-1 et seq. and the State Child Health Insurance Program under Title XXI of the Social Security Act, 42 U.S.C. 1397aa et seq., pursuant to the Children's Health Care Coverage Act, PL 1997, c,272 (also known as "NJ KidCare"), pursuant to Family Care Health Coverage Act, P.L. 2000, c,71 (also known as "NJ FamilyCare") whose principal office is located at P.O. Box 712, in the City of Trenton, New Jersey hereinafter referred to as the "Department" and______________________________, a federally qualified/ state defined health maintenance organization (HMO) which is a New Jersey, profit/non-profit corporation, certified to operate as an HMO by the State of New Jersey Department of Banking and Insurance and the State of New Jersey Department of Health and Senior Services, and whose principal corporate office is located at ___________________ ________________ in the City of _____________________, County of_________ , New Jersey, hereinafter referred to as the "contractor". WHEREAS, the contractor is engaged in the business of providing prepaid, capitated comprehensive health care services pursuant to N.J.S.A. 26;2J-1 et seq. as well as non-risk administrative services for certain beneficiary groups; and WHEREAS, the Department, as the state agency designated to administer a program of medical assistance for eligible persons under Title XIX of the Social Security Act (42 U.S.C. Sec. 1396, et seq., also known as "Medicaid"), for eligible persons under the Family Care Health Coverage Act (P.L. 2000, c.71) and for children under Title XXI of the Social Security Act (42 U.S.C. Sec. 1397aa, et seq., also known as "State Child Health Insurance Program"), is authorized pursuant to the federal regulations at 42 C.F.R. 434 to provide such a program through an HMO and is desirous of obtaining the contractor's services for the benefit of persons eligible for Medicaid/NJ FamilyCare; and WHEREAS, the Division of Medical Assistance and Health Services (DMAHS), is the Division within the Department designated to administer the medical assistance program, and the Department's functions as regards all Medicaid/NJ FamilyCare program benefits 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. 7. Radiology Services -- Diagnostic and therapeutic 8. Prescription drugs, excluding over-the-counter drugs Exception: See Article 8 regarding Protease Inhibitors and other antiretrovirals. 9. Transportation Services -- Limited to ambulance for medical emergency only 10. Diabetic supplies and equipment 11. DME - limited benefit, only covered when medically necessary part of inpatient hospital discharge plan - (see appendix, Section B.4.1 for list of covered items) B. Services Available To NJ FamilyCare Plan H Under Fee-For-Service. The following services are available to NJ FamilyCare Plan H enrollees under fee-for-service: 1. Outpatient mental health services, limited to 60 days per calendar year. 2. Abortion services C. Exclusions. The following services not covered for NJ FamilyCare Plan H participants either by the contractor or the Department include, but are not limited to: 1. Non-medically necessary services. 2. Intermediate Care Facilities/Mental Retardation 3. Private duty nursing 4. Personal Care Assistant Services 5. Medical Day Care Services 6. Chiropractic Services 7. Dental services 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 Amended as of November 1, 2003 IV-16 12. Durable Medical Equipment - excludes any equipment not listed in Appendix, Section B.4.1, and not covered if not part of inpatient hospital discharge plan 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 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. Inpatient hospital services for mental health 35. Inpatient and outpatient services for substance abuse 36. Partial hospitalization Amended as of November 1, 2003 IV-17 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: 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. Violates state or federal law; 6. Fails to carry out the substantive terms of this contract; 7. Becomes insolvent; 8. Fails to meet applicable requirements in sections 1932, 1903 (m) and 1905(t) of the SSA; or 9. Brings a proceeding voluntarily, or has a proceeding brought against it involuntarily, under the Bankruptcy Act 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 Amended as of November 1, 2003 VII-13 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 coverage of specific beneficiary groups or 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; Amended as of November 1, 2003 VII-15 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. 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. M. Drug Carve-Out Report. The DMAHS will provide the contractor with a monthly electronic file of paid drug claims data for non-dually eligible, ABD enrollees. N. MCSA Administrative Fee. The Contractor shall receive a monthly administrative fee, PMPM, for its MCSA enrollees, by the fifteenth (15th) day of any month during which health care services will be available to an enrollee. O. Reimbursement for MCSA Enrollee Paid Claims. The contractor shall submit to DMAHS a financial summary report of claims paid on behalf of MCSA enrollees on a weekly basis. The report shall be summarized by category of service corresponding to the MCSA benefits and payment dates, accompanied by an electronic file of all individual claim numbers for which the State is being billed. P. MCSA Claims Payment Audits. The contractor shall monitor and audit claims payments to providers to identify payment errors, including duplicate payments, overpayments, underpayments, and excessive payments. For such payment errors (excluding underpayments), the contractor shall refund DMAHS the overpaid amounts. The contractor shall report the dollar amount of claims with payment errors on a monthly basis, which is subject to verification by the State. The contractor is responsible for collecting funds due to the State from providers, either through cash payments or through offsets to payments due the providers. Amended as of November 1, 2003 VIII-18 PLAN H COVERED DURABLE MEDICAL EQUIPMENT Alternating Pressure Pada Bed Pans Bladder Irrigation Supplies Blood Glucose Monitors and Supplies Canes Commodes NOTE: BATHROOM DEVICES PERMANENTLY ATTACHED ARE NOT COVERED Crutches and Related Attachments Fracture Frames Gastrostomy Supplies Hospital Beds (Manual, Semi-Electric, Full Electric) and Related Equipment Ileostomy Supplies Infusion Pumps Intermittent Positive Pressure Breathing (IPPB) Treatments and Related Supplies IV Poles Jejunostomy Supplies Lancets and Related Devices Loop Heals/Loop Toe Devices Lymphedema Pumps Manual Wheelchairs and Related Equipment NOTE: MOTORIZED WHEELCHAIRS ARE NOT COVERED NOTE: TYPES OF COVERED WHEELCHAIRS INCLUDE FULL-RECLINING; HEMI; HIGH-STRENGTH LIGHTWEIGHT; HIGH-STRENGTH LIGHTWEIGHT; HEAVY DUTY; AND SEMI-RECLINING. Mattrass Overlays Note: LOW AIR LOSS AND AIR FLUIDIZED BED SYSTEMS NOT COVERED Nasogastric Tubing Nebulizers and Related Supplies Needles Ostomy Supplies Over-Bed Tables Oxygen and Related Equipment and Supplies NOTE: LIQUID AND GAS SYSTEMS AND OXYGEN CONCENTRATORS ARE COVERED NOTE: VENTILATION SYSTEMS ARE NOT COVERED Pacemaker Monitors Parenteral Nutrition Patient Lifts Pneumatic Appliances Sitz Bath Suction Machines and Related Supplies Syringes Tracheostomy Supplies Traction/Trapeze Apparatus Urinals Urinary Pouches and Related Supplies Urine Glucose Tests Walkers and Related Attachments Wheelchair Seating/Support Systems 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. 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, or for the provision of Amended as of October 1, 2003 I-5 administrative services for a specified benefits package to specified enrollees on a non-risk, reimbursement 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" Amended as of October 1, 2003 I-6 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)(l)(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. MANAGED CARE SERVICE ADMINISTRATOR (MCSA) - AN ENTITY IN A NON-RISK BASED FINANCIAL ARRANGEMENT THAT CONTRACTS TO PROVIDE A DESIGNATED SET OF SERVICES FOR AN ADMINISTRATIVE fee. Services PROVIDED MAY INCLUDE, BUT ARE NOT LIMITED TO: MEDICAL MANAGEMENT, CLAIMS PROCESSING, PROVIDER NETWORK MAINTENANCE. 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. Amended as of October 1,2003 I-14 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 200-133 percent of the federal poverty level; and - Parents/caretakers with children below the age of 23 years and children from the age of 19 through 22 years who are full time students who do not qualify for AFDC Medicaid with family incomes up to and including 250 percent of the federal poverty level; and - 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.
PSC PSC Race Code Cost Sharing No Cost Sharing No Cost Sharing - ------------------ ------------------- ------------------ ~~301 300 3 493 380 494 497 495 498~~
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. nj familycare plan h--means the State-operated program which provides managed care administrative services coverage to uninsured: - Adults and couples without dependent children under the age of 19 with family incomes up to and including 100 percent of the federal poverty level; - Adults and couples without dependent children under the age of 23 years, who do not qualify for AFDC Medicaid, with family incomes up to and including 250 percent of the federal poverty level. - Restricted alien parents not including pregnant women. Plan h eligibles will be identified by a Capitation code. Capitation codes drive the service package. the Program Status Code drives the cost-sharing requirements. Any of the Program status codes listed below can include restricted alien parents. therefore, it is necessary to rely on the capitation code to identify Plan h eligibles. Amended as of October 1, 2003 I-19 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, These groups are identified by the program status code (PSC) indicated below. For clarity, the program status codes related to Plan H non-cost sharing groups are also listed.
PSC PSC COST SHARING NO COST SHARING ------------ ---------------- 498 (W/CORRESPONDING 380, 310, 320, 330,410, 420, CAP CODE) 430,470,497 (with 701 CORRESPONDING CAP CODES) 700 763
NJ FAMILYCARE PLAN I -means the State-operated program mat 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. NON-RISK CONTRACT- a contract under which the contractor 1) is not at financial risk for changes in utilization or for costs incurred under the contract; and 2) may be reimbursed by the State on the basis of the incurred costs. 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. Amended as of October 1, 2003 I-20 REFERRAL SERVICE -- 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. restricted alien -An individual who would qualify for Medicaid or nj FamilyCare, but for immigration status. RISK CONTRACT -- A contract under which the contractor assumes risk for the cost of the services covered under the contract, and may incur a loss if the cost of providing services exceeds the payments made by the Department to the contractor for services covered under the contract. 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. 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. Amended as of October 1, 2003 I-24 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/NJ FamilyCare 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 contractor shall provide a periodic file of updates to other coverage back to the State as specified in Article 8.7. Amended as of October 1, 2003 III-10 ARTICLE FOUR: PROVISION OF HEALTH CARE SERVICES 4.1 COVERED SERVICES A. 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; Part 438 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. B. All provisions of this article shall apply to enrollees of the contractor's comprehensive risk contract as well as to beneficiaries under the managed care service administrator arrangement unless specifically stated otherwise. 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 Amended as of October 1, 2003 IV-1 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 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. For mcsa Enrollees,the contractor shall case manage these services. 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. Amended as of October 1, 2003 IV-2 2. Dental services 3. DME 4. Hearing aids 5. Medical supplies 6. Orthotics 7. TMJ treatment 4,1.7 BENEFIT PACKAGE FOR NJ FAMILYCARE PLAN H A. SERVICES INCLUDED IN THE CONTRACTOR'S BENEFITS PACKAGE FOR NJ FAMILYCARE PLAN H. THE FOLLOWING SERVICES SHALL BE PROVIDED AND CASE MANAGED BY THE CONTRACTOR: 1. PRIMARY CARE 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 MIDWIVES - NON-MATERNITY, 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. HOME HEALTH CARE SERVICES--LIMITED TO SKILLED NURSING FOR A HOME BOUND BENEFICIARY WHICH IS PROVIDED OR SUPERVISED BY A Amended as of October 1, 2003 IV-15 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. 4. INPATIENT HOSPITAL SERVICES, INCLUDING GENERAL HOSPITALS, SPECIA HOSPITALS, AND REHABILITATION HOSPITALS. THE CONTRACTOR SHALL NOT BE RESPONSIBLE WHEN THE PRIMARY ADMITTING DIAGNOSIS IS MENTAL HEALTH OR SUBSTANCE ABUSE RELATED. 5. OUTPATIENT HOSPITAL SERVICES, INCLUDING OUTPATIENT SURGERY 6. LABORATORY SERVICES -- ALL LABORATORY TESTING SITES PROVIDING SERVICES UNDER THIS CONTRACT MUST 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 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. 7. RADIOLOGY SERVICES - DIAGNOSTIC AND THERAPEUTIC 8. PRESCRIPTION DRUGS, EXCLUDING OVER-THE-COUNTER DRUGS EXCEPTION: SEE ARTICLE 8 REGARDING PROTEASE INHIBITORS AND OTHER ANTIRETROVIRALS. Amended as of October 1, 2003 IV-16 9. TRANSPORTATION SERVICES - LIMITED TO AMBULANCE FOR MEDICAL EMERGENCY ONLY 10. DIABETIC SUPPLIES AND EQUIPMENT B. SERVICES AVAILABLE TO NJ FAMILYCARE PLAN H UNDER FEE-FOR-SERVICE. THE FOLLOWING SERVICES ARE AVAILABLE TO NJ FAMILYCARE PLAN H ENROLLEES UNDER FEE-FOR-SERVICE: 1. OUTPATIENT MENTAL HEALTH SERVICES, LIMITED TO 60 DAYS PER CALENDAR YEAR. 2. ABORTION SERVICES C. Exclusions. The following services not covered for NJ FamilyCare Plan H participants either by the contractor or the Department include, but are not limited to; 1. Non-medically necessary services. 2. Intermediate Care Facilities/Mental Retardation 3. Private duty nursing 4. Personal Care Assistant Services 5. Medical Day Care Services 6. Chiropractic Services 7. Dental services 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) Amended as of October 1,2003 IV-17 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 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. Inpatient hospital services for mental health 35. Inpatient and outpatient services for substance abuse 36. Partial hospitalization 37. Skilled nursing facility services 38. FAMILY PLANNING SERVICES 39. HOSPICE SERVICES 40. OPTOMETRIST SERVICES 41. OPTICAL APPLIANCES 42. ORGAN TRANSPLANT SERVICES 43. PODIATRIST SERVICES 44. PROSTHETIC APPLIANCES 45. OUTPATIENT REHABILITATION SERVICES 46. MATERNITY AND RELATED NEWBORN CARE 4.1.8 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. Amended as of October 1, 2003 IV-18 4.1.9 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. 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. Amended as of October 1, 2003 IV-19 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. 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 MCO 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, Amended as of October 1, 2003 IV-24 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. 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 formularyon 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. FOR MCSA ENROLLEES, THE CONTRACTOR SHOULD IMPLEMENT A MANDATORY GENERIC DRUG SUBSTITUTION PROGRAM CONSISTENT WITH MEDICAID PROGRAM REQUIREMENTS. 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 FOR MCO ENROLLEES AND MUST IMPLEMENT FOR MCSA ENROLLEES a pharmacy lock-in program including policies, procedures and criteria for establishing the need for the lock-in Amended as of October 1, 2003 IV-27 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; 8. UNINSURED ADULTS AND COUPLES WITHOUT DEPENDENT CHILDREN UNDER THE AGE OF 23 WHO ARE COVERED UNDER NJ FAMILYCARE. 9. RESTRICTED ALIEN PARENTS, EXCLUDING PREGNANT WOMEN. B. The contractor shall enroll the entire Medicaid case, i.e., all individuals included under the ten digit Medicaid identification number. C. DYPS. 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 5.3.1 A) shall not be eligible to enroll in the contractor's plan. Persons falling into the categories under Article 5.3. IB 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. Amended as of October 1, 2003 V-2 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, D, AND H [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, Plan D (EXCEPT PARENTS/CARETAKERS WITH PSC 380), AND PLAN H 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 on a case by case basis. Amended as of October 1, 2003 V-4 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 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, Plan D, AND PLAN H 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 Medical ASSISTANCE CUSTOMER CENTERS) 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, ABD, 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 Amended as of October 1, 2003 V - 6 (other than "liveborn infant"). The contractor shall be responsible for notifying DMAHS when a newborn who has been hospitilized and has not been accreted to its enrollment roster after 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 ill 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, D, AND H 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. Amended as of October 1, 2003 V - 9 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 1; 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, D, AND H; 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; ZZ. Inform enrollees of the availability of care management services; AAA. Enrollee right to adequate and timely information related to physician incentives; Amended as of October 1, 2003 V - 18 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, D, AND H the Amended as of October 1, 2003 V - 19 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, D, AND H enrollees will be subject to a twelve (12)-month Lock-In period. a. 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: i. Failure of the contractor to provide services including physical access to the enrollee in accordance with the terms of this contract; Amended as of October 1, 2003 V - 24 through NJ FamilyCare Plans B, C, D, (except for individuals with a program status code of 380), AND H 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 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 (IUKO) 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 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. B. Written information to enrollees regarding the grievance/appeal process shall include at a minimum: Amended as of October 1, 2003 V - 36 The contractor shall have the right to request an informal heading 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. THE CONTRACTOR SHALL SUBMIT SEPARATE FINANCIAL REPORTS FOR MCSA ENROLLEES IN ACCORDANCE WITH THE RATE CELL GROUPING FOR THIS POPULATION. 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 Amended as of October 1, 2003 VII-37 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. K. MCSA PAID CLAIMS RECONCILIATION. ON A QUARTERLY BASIS, THE CONTRACTOR SHALL PROVIDE PAID CLAIMS DATA, VIA AN ENCOUNTER DATA FILE OR SEPARATE PAID CLAIMS FILE, THAT MEET THE HIPAA FORMAT REQUIREMENTS FOR AUDIT AND RECONCILIATION PURPOSES. THE CONTRACTOR SHALL PROVIDE DOCUMENTATION THAT DEMONSTRATES A 100% RECONCILIATION OF THE AMOUNTS PAID TO THE AMOUNTS BILLED TO THE DMAHS. THE PAID CLAIMS DATA SHALL INCLUDE AT A MINIMUM, CLAIM TYPE, PROVIDER TYPE, CATEGORY OF SERVICE, DIAGNOSIS CODE (5 DIGITS), PROCEDURE/REVENUE CODE, INTERNAL CONTROL NUMBER OR PATIENT ACCOUNT NUMBER UNDER HIPAA, PROVIDER ID, DATES OF SERVICES, THAT WILL ALLOW THE DMAHS TO PRICE CLAIMS IN COMPARISON TO MEDICAID FEE SCHEDULES FOR EVALUATION PURPOSES. 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. B. Audit of Rate Cell Grouping Costs The 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 337.3). 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 Amended as of October 1, 2003 VII-39 8.5.1 REGIONS CAPITATION Rates for DYFS, NJ FamilyCare Plans B, C, and D and the non risk-adjusted rates for AIDS and clients of DDD are statewide. Rates for all other premium groups are regional in each of the following regions: - 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, NJC PREGNANT WOMEN, AND NJ FAMILYCARE PLAN A CHILDREN This grouping includes capitation rates for Aid to Families with Dependent Children (AFDC)/Temporary Assistance for Needy Families (TANF), New Jersey Care Pregnant Women and Children, and NJ FamilyCare Plan A children (includes individuals under 21 in PSC 380), but excludes individuals who have AIDS or are clients of DDD. 8.5.2.2 NJ FAMILYCARE PLANS B & C This grouping includes capitation rates for NJ FamilyCare Plans B and C enrollees, excluding individuals with AIDS and/or DDD clients. 8.5.2.3 NJ FAMILYCARE PLAN D CHILDREN This grouping includes capitation rates for NJ FamilyCare Plan D children, excluding individuals with AIDS. 8.5.2.4 NJ FAMILYCARE PLAN D PARENTS/CARETAKERS This grouping includes capitation rates for NJ FamilyCare Plan D parents/caretakers, excluding individuals with AIDS, and include only enrollees 19 years of age or older. Amended as of October 1, 2003 VIII-6 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 included (See Section 8.5.3). Regional payment shall be made by the State to the contractor based on submission of appropriate encounter data as specified by DMAHS. 8.5.5 PAYMENT FOR CERTAIN BLOOD CLOTTING FACTORS The contractor shall be paid separately for factor VIII and DC blood clotting factors. Payment will be made by DMAHS to the contractor based on: 1) submission of appropriate encounter data; and 2) 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 12,5% 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, W5M, W5N). Payment for protease inhibitors shall be made by DMAHS to the contractor based on: 1) submission of appropriate encounter data; and 2) 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 12.5% and 2) rates paid by the contractor. Individuals eligible through NJ FamilyCare with a program status code of 380 and all children groups shall receive protease inhibitors arid other anti-retroviral agents under the contractor's plan. All other individuals eligible through NJ FamilyCare with program status codes of 497-498, 300-301, 700-701, and 763 shall receive protease inhibitors and other anti-retrovirals (First Data Bank Specific Therapeutic Class Codes W5C, W5B, W51, W5J, W5K, W5L, W5M and W5N) through Medicaid fee for service and/or the AIDS Drug Distribution Program (ADDP). 8.5.7 EPSDT INCENTIVE PAYMENT Amended as of October 1, 2003 VIII-8 The contractor shall be paid separately, $10 for every documented encounter record for a 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, 2003, recognize costs for anticipated contractor administrative expenditures due to Balanced Budget Act regulations, 8.5.9 NJ FAMILYCARE PLAN H ADULTS THE CONTRACTOR SHALL BE PAID AN ADMINISTRATIVE FEE FOR NJ FAMILYCARE PLAN H ADULTS WITHOUT DEPENDENT CHILDREN, AND RESTRICTED ALIEN PARENTS EXCLUDING PREGNANT WOMEN, AS DEFINED IN ARTICLE ONE. 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 Amended as of October 1, 2003 VIII-9 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. M. Drug Carve-Out Report. The DMAHS will provide the contractor with a monthly electronic file of paid drug claims data for non-dually eligible, ABD enrollees, N. MCSA Administrative Fee. The Contractor shall receive a monthly administrative fee, PMPM, for its MCSA enrollees, by the fifteenth (15th) day of any month during which health care services will be available to an enrollee. O. Reimbursement for MCSA Enrollee Paid Claims. The contractor shall submit to DMAHS a financial summary report of claims paid on behalf of MCSA enrollees on a weekly basis. The report shall be summarized by category of service corresponding to the MCSA benefits and payment dates, accompanied by an electronic file of all individual claim numbers for which the state is being billed. P. Claims Payment Audits. The contractor shall monitor and audit claims payments to providers to identify payment errors, including duplicate payments, overpayments, underpayments, and excessive payments. for such payment errors (excluding underpayments), the contractor shall refund DMAHS the overpaid amounts. The contractor shall report the dollar amount of claims with payment errors on a monthly basis, which is subject to verification by the state. The contractor is responsible for collecting funds due to the state from providers, either through cash payments or through offsets to payments due the providers. 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. Amended as of October 1, 2003 VIII-18 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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 October 1,2003, as follows: Managed Care Service Administrator - October 1, 2003 1. ARTICLE 1, "DEFINITIONS" section - for the following definitions: - Contractor; - Copayment; - Managed Care Service Administrator (NEW); - NJ FamilyCare Plan D; - NJ FamilyCare Plan H; - Non-Risk Contract (NEW); - Restricted Alien (NEW) shall be amended as reflected in the relevant pages of Article 1 attached hereto and incorporated herein. 2. ARTICLE 3, "MANAGED CARE MANAGEMENT INFORMATION SYSTEM" Section 3.4.2 shall be amended as reflected in Article 3, Section 3.4.2 attached hereto and incorporated herein. 3. ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1(B) (NEW); 4.1.1(E); 4.1.7; renumbered remaining sections; 4.2.2(A); 4.2.4(B)7; 4.2.4(C) shall be amended as reflected in Article 4, Sections 4.1(B) (NEW); 4.1.1(E); 4.1.7; renumbered remaining sections; 4.2.2(A); 4.2.4(B)7; 4.2.4(C) attached hereto and incorporated herein. 4. ARTICLE 5, "ENROLLEE SERVICES," Sections 5.2(A)8 (RESTORED); 5.2(A)9 (NEW); 5.3.1(C)2; 5.3.2; 5.4(B); 5.4(C); 5.5.(G)1(d); 5.8.2(WW); 5.8.5(B); 5.10.2(A)1; 5.15.1 (A) shall be amended as reflected in Article 5, 5.2(A)8 (RESTORED); 5.2(A)9 (NEW); 5.3.1(C)2; 5.3.2; 5.4(B); 5.4(C); 5.5.(G)1(d); 5.8.2(WW); 5.8.5(B); 5.10.2(A)1; 5.15.1 (A) attached hereto and Incorporated herein. Managed Care Service Administrator - October 1, 2003 5. ARTICLE 7, "TERMS AND CONDITIONS," Sections 7.26(C) and 7.26(K) (NEW) shall be amended as reflected in Article 7, Sections 7.26(C) and 7.26(K) (NEW) attached hereto and incorporated herein. 6. ARTICLE 8, "FINANCIAL PROVISIONS," Sections 8.5.1; 8.5.6; 8.5.9 (NEW); 8.8(N) (NEW); 8,8(O) (NEW); 8.8(P) (NEW) shall be amended as reflected in Sections 8.5.1; 8.5.6; 8.5.9 (NEW); 8.8(N) (NEW); 8.8(O) (NEW); 8.8(P) (NEW) attached hereto and incorporated herein. 7. APPENDIX, SECTION E, "MANAGED CARE SERVICE ADMINISTRATOR," (NEW) shall be revised as reflected in SFY 2004 Managed Care Service Administrator administrative fees attached hereto and incorporated herein. Managed Care Service Administrator - October 1, 2003 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY: /s/ Alexander McLean BY: /s/ MATTHEW D. D'ORIA ------------------------- ----------------------- MATTHEW D. D'ORIA TITLE: PRESIDENT & CEO TITLE: ACTING DIRECTOR, DMAHS DATE: 8/9/03 DATE: 9/17/03 APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: /s/ [ILLEGIBLE] ------------------------ DEPUTY ATTORNEY GENERAL DATE: 9/16/03 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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 certain sections of the contract shall be amended to be effective September 1, 2003, as follows: NJ FamilyCare Extension - September 1, 2003 1. Article 1, "Definitions" section - for the following definitions: - Copayment; - NJ Family Care Plan D; - NJ FamilyCare Plan H (RESTORED) shall be amended as reflected in the relevant pages of Article 1 attached hereto and incorporated herein. 2. ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1.2(A)9; 4.1.3(A)10 and 4.1.7 (RESTORED); renumber remaining sections, shall be amended as reflected in Article 4, Sections 4.1.2(A)9, 4.1.3(A)10, and 4.1,7 (RESTORED) attached hereto and incorporated herein. 3. ARTICLE 5, "ENROLLEE SERVICES," Section 5.2(A)8 (RESTORED); 5.3.1(C)2; 5.3.2; 5.4(B); 5.4(C); 5.5(G)1(d); 5.8.2(WW); 5.8.5(B); 5,10.2(A)1 and 5.15.1(A) shall be amended as reflected in Article 5, Section 5.2(A)8, 5.3.1(C)2, 5.3.2, 5.4(B), 5.4(C), 5.5(G)1(d), 5.8.2(WW), 5.8.5(B), 5.10.2(A)1 and 5.15.1(A) attached hereto and incorporated herein. 4. ARTICLE 6, "PROVIDER INFORMATION," Section 6.5(B)1 shall be amended as reflected in Article 6, Section 6.5 (B)1, attached hereto and incorporated herein. 5. ARTICLE 8, "FINANCIAL PROVISIONS," SECTIONS 8.5.6; 8.7(A)1; 8.7(A)2 (NEW); 8.7(B); 8.7(C); 8.7(D)1; 8.7(D)1 (a); 8.7(D)2; 8.7(D)2(a); 8.7(E)1; 8.7(E)3 (NEW); 8.7(F)4 (DELETED); 8.7(G)1; 8.7(G)2; 8.7(H)1 and 8.8(M) shall be amended as reflected in Article 8, Sections 8.5,6, 8.7(A)1, 8.7(A)2, 8.7(B), 8.7(C), 8.7(D)1, 8.7(D)1 (a), 8.7(D)2, 8.7(D)2(a), 8.7(E)1, 8.7(E)3, 8.7(F)4, 8.7(G)1, 8.7(G)2, 8.7(H)1 and 8.8(M), attached hereto and incorporated herein. 6. APPENDIX, SECTION A, "THIRD PARTY LIABILITY" A.8.2; A.8.3 (NEW) shall be amended as reflected in Appendix A, A.8.2 and A.8.3 attached hereto and incorporated herein. NJ FamilyCare Extension - September 1, 2003 7. APPENDIX, SECTION B, "REFERENCE MATERIALS" B.5.2 - Cost-Sharing Requirements for NJ FamilyCare Plan D and Plan H Beneficiaries; Plan H (RESTORED); shall be amended as reflected in Appendix, Section B, B.5.2, attached hereto and incorporated herein. 8. APPENDIX, SECTION C, "CAPITATION RATES," shall be revised as reflected in SFY 2004 Capitation Rates attached hereto and incorporated herein. NJ FamilyCare Extension - September 1, 2003 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY : Alexander McLean BY: [ILLEGIBLE] _________________________ _________________________ MATTHEW D. D'ORIA TITLE: President & CEO TITLE: ACTING DIRECTOR, DMAHS DATE: 8/4/03 DATE: 8/27/03 APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: [ILLEGIBLE] _________________________ DEPUTY ATTORNEY GENERAL DATE: 8.20.03 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" DELIVERABLE--a document/report/manual to be submitted to the Department by the contractor pursuant to this contract. Amended as of September 1, 2003 I-6 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 200 percent of the federal poverty level; and - PARENTS/CARETAKERS WITH CHILDREN BELOW THE AGE OF 23 YEARS AND CHILDREN FROM THE AGE OF 19 THROUGH 22 YEARS WHO ARE FULL TIME STUDENTS WHO DO NOT QUALIFY FOR AFDC MEDICAID WITH FAMILY INCOMES UP TO AND INCLUDING 250 PERCENT OF THE FEDERAL POVERTY LEVEL; AND - 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.
PSC Cost Sharing PSC No Cost Sharing Race Code No Cost Sharing - ---------------- ------------------- ------------------------- ~~301 300 3 493 380 494 497 495 498~~
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. NJ FAMILYCARE PLAN H--MEANS THE STATE-OPERATED PROGRAM WHICH PROVIDES MANAGED CARE ADMINISTRATIVE SERVICES COVERAGE TO UNINSURED: - ADULTS AND COUPLES WITHOUT DEPENDENT CHILDREN UNDER THE AGE OF 19 WITH FAMILY INCOMES UP TO AND INCLUDING 100 PERCENT OF THE FEDERAL POVERTY LEVEL; - ADULTS AND COUPLES WITHOUT DEPENDENT CHILDREN UNDER THE AGE OF 23 YEARS, WHO DO NOT QUALIFY FOR AFDC MEDICAID, WITH FAMILY INCOMES UP TO AND INCLUDING 250 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. These groups are identified by the program status code (PSC) indicated below. For clarity, the program status codes related to Plan H non-cost sharing groups are also listed. Amended as of September 1, 2003 I-19
PSC PSC COST SHARING NO COST SHARING - ------------ --------------- ~~701 763 700~~
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. 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. Amended as of September 1, 2003 I-20 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-nerwork 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, rehabilitation 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 9. Prescription Drugs (legend and non-legend covered by the Medicaid program) - For payment method for Protease Inhibitors, certain other anti- Amended as OF SEPTEMBER 1, 2003 IV-4 retrovirals, blood clotting factors VIII and IX, and coverage of protease inhibitors and certain other anti-retrovirals under NJ FamilyCare, see Article 8. EXCEPTION: NOT A CONTRACTOR-COVERED BENEFIT FOR THE NON-DUALLY ELIGIBLE ABD POPULATION. 10. Family Planning Services and Supplies 11. Audiology 12. Inpatient Rehabilitation Services 13. Podiatrist Services 14. Chiropractor Services 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 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 24. Organ Transplants - includes donor and recipient costs, Exception: The contractor will not be responsible for transplant-related donor and 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. Amended as of SEPTEMBER 1, 2003 IV-5 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. 10. PRESCRIPTION DRUGS (LEGEND AND NON-LEGEND COVERED BY THE MEDICAID PROGRAM) FOR 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

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 Amended as of SEPTEMBER 1, 2003 IV-8 4.1.7 BENEFIT PACKAGE FOR NJ FAMILYCARE PLAN H A. SERVICES INCLUDED IN THE CONTRACTOR'S BENEFITS PACKAGE FOR NJ FAMILYCARE PLAN H. THE FOLLOWING SERVICES SHALL BE PROVIDED AND CASE MANAGED BY THE CONTRACTOR: 1. PRIMARY CARE A. AH 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 MIDWIVES - NON-MATERNITY, 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 H 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 Amended as of SEPTEMBER 1, 2003 IV-15 6. INPATIENT HOSPITAL SERVICES, INCLUDING GENERAL HOSPITALS, SPECIAL HOSPITALS, AMI 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 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. 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 15. 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. 16. PRIVATE DUTY NURSING - ONLY WHEN AUTHORIZED BY THE CONTRACTOR. 17. TRANSPORTATION SERVICES - LIMITED TO AMBULANCE FOR MEDICAL EMERGENCY ONLY. Amended as of SEPTEMBER 1, 2003 IV-16 18. MATERNITY AND RELATED NEWBORN CARE. 19. DIABETIC SUPPLIES AND EQUIPMENT B. SERVICES AVAILABLE TO NJ FAMILYCARE PLAN H UNDER FEE-FOR-SERVICE. THE FOLLOWING SERVICES ARE AVAILABLE TO NJ FAMILYCARE PLAN H ENROLLEES UNDER FEE-FOR-SERVICE: 1. OUTPATIENT MENTAL HEALTH SERVICES, LIMITED TO 60 DAYS PER CALENDAR YEAR. 2. ABORTION SERVICES. 3. 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 OF INJURY, BEGINNING WITH THE FIRST DAY OF TREATMENT PER CONTRACT YEAR. SPEECH THERAPY SERVICES RENDERED FOR TREATMENT DELAYS IN SPEECH DEVELOPMENT, UNLESS RESULTING FROM DISEASE, INJURY, OR CONGENITAL DEFECTS ARE NOT COVERED. C. Exclusions. The following services not covered for NJ FamilyCare Plan H participants either by the contractor or the Department include, but are not limited to: 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 5. Medical Day Care Services 6. Chiropractic Services 7. Dental services 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. Amended as of SEPTEMBER 1, 2003 IV-17 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 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. Inpatient hospital services for mental health 35. Inpatient and outpatient services for substance abuse 36. Partial hospitalization 37. Skilled nursing facility services 4.1.8 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. 4.1.9 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. Amended as of SEPTEMBER 1, 2003 IV-18 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; 8. UNINSURED ADULTS AND COUPLES WITHOUT DEPENDENT CHILDREN UNDER THE AGE OF 23 WHO ARE COVERED UNDER NJ FAMILYCARE. 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. Amended as of SEPTEMBER 1, 2003 V-2 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, D, AND H [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, Plan D (EXCEPT PARENTS/CARETAKERS WITH PSC 380), AND PLAN H 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 on a case by case basis. Amended as of SEPTEMBER 1, 2003 V - 4 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 may request an application via a toll-tree 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, Plan D, AND PLAN H 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 MEDICAL ASSISTANCE CUSTOMER CENTERS) 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, ABD, 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 Amended as of SEPTEMBER 1, 2003 V - 6 (other than "liveborn infant"). The contractor shall be responsible for notifying DMAHS when a newborn who has been hospitilized and has not been accreted to its enrollment roster after 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, D, AND H 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. Amended as of SEPTEMBER 1, 2003 V - 9 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, D, and H; 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; ZZ. Inform enrollees of the availability of care management services; AAA. Enrollee right to adequate and timely information related to physician incentives; Amended as of September 1, 2003 V - 18 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 ED 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, D, and H the Amended as of September 1, 2003 V -19 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, D, and H enrollees will be subject to a twelve (12)-month Lock-In period. a. 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: i. Failure of the contractor to provide services including physical access to the enrollee in accordance with the terms of this contract; Amended as of September 1,2003 V-24 through NJ FamilyCare Plans B, C, D (except for individuals with a program status code of 380), and H 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 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 me 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 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. B. Written information to enrollees regarding the grievance/appeal process shall include at a minimum: Amended as of September 1, 2003 V - 36 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. Amended as of September 1,2003 VI-4 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 Included (See Section 8.5.3). Regional payment shall be made by the State to the contractor based on submission of appropriate encounter data as specified by DMAHS, 8.5.5 PAYMENT FOR CERTAIN BLOOD CLOTTING FACTORS The contractor shall be paid separately for factor VIII and DC blood clotting factors. Payment will be made by DMAHS to the contractor based on: 1) submission of appropriate encounter data; and 2) 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 (AW?) minus 12.5% 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, W5M, W5N) for all eligibility groups, Payment for protease inhibitors shall be made by DMAHS to the contractor based on: 1) submission of appropriate encounter data; and 2) 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 12.5% and 2) rates paid by the contractor. Individuals eligible through NJ FamilyCare with a program status code of 380 and all children groups shall receive protease inhibitors and other anti-retroviral agents under the contractor's plan. All other individuals eligible through NJ FamilyCare with program status codes of 497-498, 300-301, 700-701, and 763 shall receive protease inhibitors and other anti-retrovirals (First Data Bank Specific Therapeutic Class Codes W5C, W5B, W51, W5J, W5K, W5L, W5M and W5N) through Medicaid fee for service and/or the AIDS Drug Distribution Program (ADDP). 8.5.7 EPSDT INCENTIVE PAYMENT Amended as of September 1, 2003 VIII-8 - 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. 8.7 THIRD PARTY LIABILITY A. General. The contractor, and by extension its providers and subcontractors, hereby agree to: 1. Utilize, WITHIN SIXTY (60) DAYS OF LEARNING OF SUCH SOURCES, FOR CLAIMS COST AVOIDANCE PURPOSES other AVAILABLE 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. 2. REPORT SUCH INFORMATION TO THE STATE BY NO LATER THAN THE FIFTEENTH (15th) DAY AFTER THE CLOSE OF THE MONTH DURING WHICH THE CONTRACTOR LEARNS OF SUCH INFORMATION USING THE TPL-1 FORM (FOUND IN THE APPENDIX, SECTION A.8.1) BARD COPY OR DISKETTE USING STANDARD SOFTWARE (I.E. MICROSOFT EXCEL OR ACCESS) OR A DELIMITED TEXT FILE. 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 BY THE CONTRACTOR and postpayment recovery WILL be initiated by the State. C. Capitation Rates. The State WILL NOT TAKE into account historical and/or anticipated cost avoidance and recovery due to the existence of liable third parties in setting capitation rates. ADDITIONALLY, 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. State ALL WILL TPL RECOVERIES, AND RETAIN ALL MONIES DERIVED THEREFROM FOR CLAIMS NOT COST-AVOIDED BY THE CONTRACTOR. Amended as of September 1, 2003 VIII-10 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 STATE shall pursue and collect payments from health insurers when health insurance coverage is available. "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 SOLELY by the THE CONTRACTOR SHALL COOPERATE WITH THE STATE IN ALL COLLECTION EFFORTS, AND SHALL ALSO DIRECT ITS PROVIDERS AND SUBCONTRACTORS TO DO SO. STATE COLLECTIONS RESULTING FROM SUCH RECOVERY ACTIONS WILL BE RETAINED BY THE STATE. a. THE CONTRACTOR SHALL SUBMIT, ON A ONE-TIME BASIS, AN ELECTRONIC FILE OF ALL PAID, PENDED, AND DENIED CLAIMS FOR THE PREVIOUS TWO (2) YEARS, INCLUDING THOSE OF ITS SUBCONTRACTORS TO THE STATE, OR ITS DESIGNEE, BY NO LATER THAN THE THIRTIETH (30TH) DAY AFTER THE EFFECTIVE DATE OF THIS AMENDMENT THEREAFTER, THE CONTRACTOR SHALL SUBMIT, AN ELECTRONIC FILE OF ALL PAID, PENDED, AND DENIED CLAIMS FOR THE MONTH, INCLUDING THOSE OF ITS SUBCONTRACTORS, TO TBE I STATE, OR ITS DESIGNEE, BY NO LATER THAN THE FIFTEENTH (15TH) DAY AFTER THE CLOSE OF THE MOUTH DURING WHICH TBE CONTRACTOR PAYS, PENDS, OR DENIES THE CLAIMS. IF THE CONTRACTOR FAILS TO PROVIDE THE DATA, THE CONTRACTOR SHALL PAY AN ASSESSMENT EQUAL TO ONE HUNDRED PERCENT (100%) OF THE COST OF THE SERVICES PROVIDED FOR WHICH COST AVOIDANCE COULD HAVE BEEN EFFECTED. 2. Casualty Insurance. The STATE shall pursue and collect payment from casualty insurance available to the enrollee. "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 SOLELY by the STATE. THE CONTRACTOR SHALL COOPERATE WITH Amended as of September 1, 2003 VIII-11 THE STATE IN ALL COLLECTION EFFORTS, AND SHALL ALSO DIRECT ITS PROVIDERS AND SUBCONTRACTORS TO DO SO. STATE COLLECTIONS RESULTING FROM SUCH RECOVERY ACTION WILL BE RETAINED BY THE STATE. a. THE CONTRACTOR SHALL SUBMIT, ON A ONE-TIME BASIS, AN ELECTRONIC FILE OF ALL PAID, PENDED, AND DENIED CLAIMS FOR THE PREVIOUS TWO (2) YEARS, INCLUDING THOSE OF ITS SUBCONTRACTORS TO THE STATE, OR ITS DESIGNEE, BY NO LATER THAN THE THIRTIETH (30TH) DAY AFTER THE EFFECTIVE DATE OF THIS AMENDMENT THEREAFTER, THE CONTRACTOR SHALL SUBMIT, AN ELECTRONIC FILE OF ALL PAID, PENDED, AND DENIED CLAIMS FOR THE MONTH, INCLUDING THOSE OF ITS SUBCONTRACTORS, TO THE STATE, OR ITS DESIGNEE, BY NO LATER THAN THE FIFTEENTH (15TH) DAY AFTER THE CLOSE OF THE MONTH DURING WHICH THE CONTRACTOR PAYS, PENDS, OR DENIES THE CLAIMS. IF THE CONTRACTOR FAILS TO PROVIDE THE DATA, THE CONTRACTOR SHALL PAY AN ASSESSMENT EQUAL TO ONE HUNDRED PERCENT (100%) OF THE COST OF THE SERVICES PROVIDED FOR WHICH COST AVOIDANCE COULD HAVE BEEN EFFECTED. 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 SUBCONTRACTOR to withhold payments to a PROVIDER FOR THE SAME PURPOSE, Amended as of September 1, 2003 VIII-12 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. 3. IF THE CONTRACTOR FAILS TO COST AVOID CLAIMS SUBJECT TO TPL ACCORDING TO THE PROVISIONS OF 8,7-E & 8.7.F AND TIME FRAMES IN 8.7.A OR FAILS TO NOTIFY THE STATE OF TPL WITHIN THE TIME FRAMES STATED IN 8.7.A AND THE STATE MUST RECOVER-THE COST OF THE CLAIM THROUGH ITS TPL AGENT, THE STATE SHALL LEVY THE AMOUNT OF THE COLLECTION FEE ASSESSED BY THE AGENT FOR SUCH RECOVERY, IN ADDITION TO THE COST OF THE CLAIM AS DESCRIBED IN 8.7.D. 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, 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 l.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. Amended as of September 1, 2003 VIII-13 G. Sharing of TPL Information by the State. 1. By the fifteenth (15th) day AFTER THE CLOSE OF THE month DURING WHICH THE STATE LEARNS OF SUCH INFORMATION, 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. THIS INFORMATION WILL BE IN THE FORMAT OF THE STATE'S TPL RESOURCE FILE. 2. Additionally, BY THE FIFTEENTH (15TH) DAY ALTER THE CLOSE OF THE CALENDAR QUARTER the State may provide a COPY OF THE STATE'S health insurer file to the contractor that will contain all of the health insurers that the State has on file AS OF THE CLOSE OF THE PREVIOUS CALENDAR QUARTER 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 BY THE FIFTEENTH (15TH) DAY AFTER THE CLOSE OF THE MONTH DURING WHICH THE CONTRACTOR 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 USING THE FORMAT OF THE TPL-1 FORM, HARD COPY OR DISKETTE. (See Section A.8.1 of the Appendices.) The contractor shall impose a, corresponding requirement upon its SUBCONTRACTORS AND 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. Amended as of September 1, 2003 VIII-14 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. 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. M. DRUG CARVE-OUT REPORT THE DMAHS WILL PROVIDE THE CONTRACTOR WITH A MONTHLY ELECTRONIC FILE OF PAID DRUG CLAIMS DATA FOR NON-DUALLY ELIGIBLE, ABD ENROLLEES. 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 Amended as of September 1, 2003 VIII-18 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#___________________________ SOCIAL SECURITY #___________________________________________________________ DATE OF ACCIDENT/INCIDENT __________________________________________________ NATURE OF INJURY __________________________________________________ TYPE OF ACCIDENT __________________________________________________ (auto - fall - med. malpractice, etc.) ATTORNEY FOR CLIENT __________________________________________________ (NAME-ADDRESS-PHONE) __________________________________________________ __________________________________________________ Please attach: (1) 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; (2) HMO CLAIM/PAYMENT INFORMATION FROM DATE OF ACCIDENT TO PRESENT. PART B: SERVICES
DIAGNOSIS PROCEDURE SERVICE PROVIDER CODE & CODE & PROVIDER HMO DATE(S) NAME DESCRIP DESCRIP CHARGES PAYMENT ------- ---- ------- ------- ------- ------- ___________ _________ __________ ___________ __________ _________ ___________ _________ __________ ___________ __________ _________ ___________ _________ __________ ___________ __________ _________ ___________ _________ __________ ___________ __________ _________ ___________ _________ __________ ___________ __________ _________ ___________ _________ __________ ___________ __________ _________ ___________ _________ __________ ___________ __________ _________
_______________________________________ NAME OF PERSON COMPLETING FORM - DATE A-93 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES ESTATE REFERRAL FORM HMO NOTIFICATION OF DECEASED MEMBERS AGE 55 AND OLDER QUARTER ENDING___________ HMO________________________________ HMO ID#_____________________________________ THIS WILL SERVE AS NOTIFICATION THAT THE FOLLOWING MEMBERS OF OUR HEALTH CARE PLAN AGE 55 OR OLDER HAVE DIED.
MEMBER NAME DOB SS# DATE OF DEATH MEDICAID ID# _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________ _______________ ____________ ___________ _______________ _______________
A-105 COST-SHARING REQUIREMENT FOR NJ FAMILYCARE PLAN D AND PLAN H COPAYMENTS FOR NJ FAMILYCARE - PLAN D AND PLAN H 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 me 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.
SERVICE AMOUNT OF COPAYMENT ------- ------------------- 1. Outpatient Hospital Clinic Visits, clinic $5 .copayment for each outpatient that is visit including Diagnostic Testing not for preventive services 2. Hospital Outpatient Mental Health Visits $25 copayment for each visit 3. Outpatient Substance Abuse Services for $5 copayment for each visit Detoxification 4. Hospital Outpatient Emergency Services $35 copayment; no copayment is required if the Covered for Emergency Services only, member was referred to the Emergency Room by including services provided in an his/her primary care provider for services outpatient hospital department or an urgent that should have been rendered in the primary care care facility. [Note: Triage and medical provider's office or if the member is admitted into screenings must be covered in all the hospital, situations.] 5. Primary Care Provider Services provided $5 copayment for each visit (except for well- during normal office hours 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.
Amended as of July 1, 2003 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.28 of the contract between University Health Plans, 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 August 1,2003, as follows: Dental/Chiropractic Extension - August 1, 2003 1. ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1; 4.1.1(G)3; 4.1.2(A)14; 4.1.2(A)23; 4.1.4(B); 4.1.9(S); 4.1.9(T); 4.2.1(B)3; 4.5.4(D); 4.6.2(P); 4.6.5(D); 4.8.8(I) and 4.8.8(M)2 shall be amended as reflected in Article 4, Sections 4.1; 4.1,1(G)3; 4.1.2(A)14; 4.1.2(A)23; 4.1.4(B); 4.1.9(S); 4.1.9(T); 4.2,1(B)3; 4.5.4(D); 4.6.2(P); 4.6,5(D); 4.8.8(I) and 4.8.8(M)2 attached hereto and incorporated herein. 2. ARTICLE. 5, "ENROLLEE SERVICES," Sections 5.10.2(A)2(a)vi, vii (new); 5.15.2(B)6; 5.15.2(6)7 and 5.16.1(K) shall be amended as reflected in Article 5, Sections 5.10.2(A)2(a)vi, vii; 5.15.2(B)6; B.15.2(8)7 and 5.16.1(K) attached hereto and incorporated herein. 3. ARTICLE 6, "PROVIDER INFORMATION," Section 6.5(B)1 shall be amended as reflected in Article 6, Section 6.5(B)1 attached hereto and incorporated herein. 4. ARTICLE 7, "TERMS AND CONDITIONS," Sections 7.16.8.1(E) and 7,38 shall be amended as reflected in Article 7, Sections 7.18.8.1(E) and 7.38 attached hereto and incorporated herein. 5. ARTICLE 8, "FINANCIAL PROVISIONS," Sections 8.5.1; 8.5.2.1; 8.5.2.2; 8.5.2.4; 8.5.2.6; 8.5.2.8; 8.5.2.9; 8.5.2.10(deleted); 6.5.4; 8.5.5 and 8.5.6 shall be amended as reflected in Sections 8.5.1; 8.5.2.1; 8.5.2.2; 8.5.2.4; 8.5.2,6; 8,5.2.8; 8.5.2.9; 8.5.2.10; 8.5.4; 8.5.5 and 8,5.6 attached hereto and incorporated herein. 6. APPENDIX, SECTION A, "REPORTS" A.4.1 - Provider Network File Electronic Media Provider Files, Attachment A, Attachment B and Attachment D, shall be amended as reflected in Appendix, Section A, A.4.1, Attachments A, B and D attached hereto and incorporated herein. 7. APPENDIX, SECTION C, "CAPITATION RATES," shall be revised as reflected in SFY 2004 Capitation Rates attached hereto and incorporated herein Dental/Chiropractic Extension - August 1, 2003 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES By: Alexander McLean BY: /s/ David C. Heins -------------------------- ------------------------------- DAVID C. HEINS TITLE: PRESIDENT & CEO TITLE: ACTING DIRECTOR, DMAHS DATE: 7/18/03 DATE: 7/18/03 APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: [ILLEGIBLE] -------------------------- DEPUTY ATTORNEY GENERAL DATE: 7/25/03 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 FarnilyCare, 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; PART 438 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 Amended as of August 1, 2003 IV-I 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 eurollee 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 the cost to the enrollee is no greater than it would be if the services were furnished within the network. Amended as of August 1, 2003 IV-2 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 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 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 24. Organ Transplants - includes donor and recipient costs. Exception: The contractor will not be responsible for transplant-related donor and 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. Amended as of August 1, 2003 IV-5` 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: - ATYPICAL ANTIPSYCHOTIC DRUGS WITHIN THE SPECIFIC THERAPEUTIC DRUG CLASSES H7T AND H7X - 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. C. Up to twelve (12) inpatient hospital days required for social necessity in accordance with Medicaid regulations. Amended as of August 1, 2003 IV-9 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 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. 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; Amended as of August 1, 2003 IV-20 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. 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 422.113(c). 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. Amended as of August 1, 2003 IV-21 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. 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, CONSULTATION WITH ANY SPECIALISTS CARING FOR THE ENROLLEE, 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, Amended as of August 1, 2003 IV-55 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 etvidence 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. 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:
HEDIS Report Period Reporting Set Measures by Contract Year ---------------------- ---------------- 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
CHILDHOOD & ADOLESCENT IMMUNIZATION HEDIS DATA FOR NJ FAMILYCARE ENROLLEES UP TO THE AGE OF 19 YEARS MUST BE REPORTED SEPARATELY. 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 Amended as of August 1, 2003 IV-64 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; 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, CONSULTATION WITH ANY SPECIALISTS CARING FOR THE ENROLLEE, 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 Amended as of August 1, 2003 IV-85 I. Provider Network Access Standards and Ratios
A -Miles per 2 B- Miles per 1 Min. No Per County Capacity Limit Specialty Urban Non-Urban Urban Non-urban Except Where Noted Per Provider - ------------------------------------------------------------------------------------------------------------ PCP Children GP 6 15 2 10 2 1: 1,500 - ------------------------------------------------------------------------------------------------------------ FP 6 I5 2 10 2 1: 1500 - ------------------------------------------------------------------------------------------------------------ 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: 1.000 - ------------------------------------------------------------------------------------------------------------ CNM 12 25 6 15 2 1: 1,500 - ------------------------------------------------------------------------------------------------------------ Dentist, Pruniry 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 IS 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 - ------------------------------------------------------------------------------------------------------------ Endodonria 15 25 10 15 1 (where available) 1: 30,000 - ------------------------------------------------------------------------------------------------------------ Gastroenterology 15 25 10 15 2 1: 100,000 - ------------------------------------------------------------------------------------------------------------ General Surgery 15 25 10 15 2 1: 30,000 - ------------------------------------------------------------------------------------------------------------ Genatric Medicine 15 25 10 15 1 1: 10,000 - ------------------------------------------------------------------------------------------------------------ Hermatology 15 25 10 15 2 1: 100,000 - ------------------------------------------------------------------------------------------------------------ Infections Disease 15 25 10 15 2 1: 125,000 - ------------------------------------------------------------------------------------------------------------ Neonarology 15 25 10 15 2 1: 100,000 - ------------------------------------------------------------------------------------------------------------ Nephralogy 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 - ------------------------------------------------------------------------------------------------------------ ELIGIBLE 15 25 10 15 2 l: 8,000 - ------------------------------------------------------------------------------------------------------------ Oral Surgery I5 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 (where available) 1: 30,000 - ------------------------------------------------------------------------------------------------------------ Physical Medicine 15 25 10 15 3 (where applicable) 1: 75,000 - ------------------------------------------------------------------------------------------------------------ Plastic Surgery 15 25 10 15 2 1: 2,50,000 - ------------------------------------------------------------------------------------------------------------ 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 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 1 1: 150,000 - ------------------------------------------------------------------------------------------------------------ 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 Qual Health Cn 1 I/country available - ------------------------------------------------------------------------------------------------------------ Hospital 20 35 10 15 2 2 per county (where applicable) - ------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------ Hewing Aid 12 25 6 15 1 1: 50,000 - ------------------------------------------------------------------------------------------------------------ Optical Appliance 12 25 6 15 2 1: 50,000 - ------------------------------------------------------------------------------------------------------------
Amended as of August 1, 2003 IV-107 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 providresers 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 i 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 provides as an alternative for the following: a) Colon & Rectal surgeon - A general surgeon with privileges to perform this surgery may be substituted for a certified subspecialist in this field Amended as of August 1, 2003 IV-112 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, VI. POOR QUALITY OF CARE. VII. OTHER FOR CAUSE REASONS PURSUANT TO 42 CFR 438.56 B. Voluntary Disenrolhnsnt. The contractor shall assure that enrollees who disenroll voluntarily are provided with an opportunity to identify, in writing, their reasons for disenrolhnent. 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 disenrollrnent 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. Amended as of August 1, 2003 V - 25 1. Information to enrollees on how to file complaints/grievances/appeals 2. Identification of who is responsible for processing and reviewing grievances/appeals 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 timefirames 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 438.408 7. Extensions of the grievance/appeal process if needed and time frames in accordance with N.J.A.C. 8:38 et seq. and 432 CFR.408 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 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. Amended as of August 1, 2003 V - 37 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-l, 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 438.56. 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 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 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. Amended as of August 1, 2003 V - 43 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, TO REQUEST MEDICAL NECESSITY REVIEWS FOR ADMINISTRATIVE DENIALS, 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. Amended as of July 1, 2003 VI - 4 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 38.6(h), 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 325,000 for each determination above; or, Amended as of August 1. 2003 VII-31 7.38 FRAUD AND ABUSE THE CONTRACTOR SHALL HAVE ARRANGEMENTS AND PROCEDURES THAT COMPLY WITH ALL STATE AND FEDERAL STATUTES AND REGULATIONS, INCLUDING 42 CFR 438,608, GOVERNING FRAUD AND ABUSE REQUIREMENTS. 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. 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. Specifications of, and reports generated by, the contractor's prepayment and postpayment surveillance and utilization review systems, including prepayment and postpayment edits. Amended as of August 1, 2003 VII-47 Rates for DYFS, NJ FamilyCare Plans B, C, D, AND H and the non risk-adjusted rates for AIDS and clients of DDD are statewide. Rates for ALL OTHER premium groups ARE REGIONAL in each of the following regions: - 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, NJC PREGNANT WOMEN, AND NJ FAMILYCARE PLAN A CHILDREN This grouping includes capitation rates for Aid to Families with Dependent Children (AFDC/Temporary Assistance for Needy Families (TANF), New Jersey Care Pregnant Women and Children, and NJ FamilyCare Plan A children INCLUDES INDIVIDUALS UNDER 21 IN PSC 380), but excludes individuals who have AIDS or are clients of DDD. 8.5.2.2 NJ FAMILYCARE PLANS B & C This grouping includes capitation rates for NJ FamilyCare Plans B and C enrollees, excluding individuals with AIDS AND/OR DDD CLIENTS. 8.5.2.3 NJ FAMILYCARE PLAN D CHILDREN This grouping includes capitation rates for NJ FamilyCare Plan D children, excluding individuals with AIDS. 8.5.2.4 NJ FAMILYCARE PLAN D PARENTS/CARETAKERS This grouping includes capitation rates for NJ FamilyCare Plan D parents/caretakers, excluding individuals with AIDS, AND INCLUDE ONLY ENROLLEES 19 YEARS OF AGE OR OLDER,: Amended as of August 1, 2003 VIII-6 8.5.2.5 DYFS AND AGING OUT FOSTER CHILDREN This grouping includes capitation rates for Division of Youth and Family Services, excluding individuals with AIDS and clients of DDD. 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. 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. 8.5.2.7 ABD WITH MEDICARE This grouping includes capitation rates for the ABD with Medicare population, excluding individuals with AIDS and clients of DDD. 8.5.2.8 CLIENTS OF DDD THIS GROUPING INCLUDES ALL ENROLLEES EXCEPT ABD INDIVIDUALS WITHOUT MEDICARE. THE contractor shall be paid separate, statewide rates for subgroups of the DDD population, excluding individuals with ADDS, These rates include MH/SA services. 8.5.2.9 ENROLLEES WITH AIDS THIS GROUPING INCLUDES ALL ENROLLEES EXCEPT ABD INDIVIDUALS WITHOUT MEDICARE. A. The contractor shall be paid special statewide capitation rates for enrollees with AIDS: 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~mernber payment, regardless of MCE. 8.5.2.10 RESERVED Amended as of August 1, 2003 VIII-7 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 included (See Section 8.5.3). REGIONAL PAYMENT shall be made by the State to the contractor based on submission of appropriate encounter data as specified by DMAHS. 8.5.5 PAYMENT FOR CERTAIN BLOOD CLOTTING FACTORS The contractor shall be paid separately for factor VII and IX blood clotting factors. Payment will be made by DMAHS to the contractor based on: 1) submission of appropriate encounter data; and 2) 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 12.5% 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, W5M, W5N) for all eligibility groups. Payment for protease inhibitors shall be made by DMAHS to the contractor based on: 1) submission of appropriate encounter data; and 2) 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 12.5% and 2) rates paid by the contractor. Amended as of August 1, 2003 VIII-8 ATTACHMENT A New Jersey Department of Human Services, Division of Medical Assistance, Office of Managed Health Care HMO Non-Institutional Provider Network File Specifications
When Field Field Name Size Required Definition Example - ----------------------------------------------------------------------------------------------------------------------------- 1 Last Name 22 A Individual Provider's Surname; may include Jr. or III Jones, Jr. - ----------------------------------------------------------------------------------------------------------------------------- 2 First Name 15 A Provider's First Name; should include middle initial Tom T. - ----------------------------------------------------------------------------------------------------------------------------- 3 SSN 9 A Provider's Social Security Number 150999999 - ----------------------------------------------------------------------------------------------------------------------------- 4 Tax ID 9 B Provider's Tax ID Number 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 Y N) 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. - ----------------------------------------------------------------------------------------------------------------------------- 9 Address 2 30 B Building Name, PO Box etc. Suite 3 - ----------------------------------------------------------------------------------------------------------------------------- 10 City 22 A Proper Name for Municipality in which practice office South Orange is 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 patienis can be seen at this site. M9-5, T1-5, Th1-7, - ----------------------------------------------------------------------------------------------------------------------------- 16 Specialty Code 30 A See list List all that apply. Include one for each Record 123 Type "s" per provider. No Spaces, Commas, Slashes, etc. - ----------------------------------------------------------------------------------------------------------------------------- 17 Age 40 B 4 spaces per specialty in sequence with specialty code in 234 Restrictions suing field 16, 1st 2= min, age, 2nd 2 = max. age, 0000 if none for a specialty. Omit if no specialty is limited. - ----------------------------------------------------------------------------------------------------------------------------- 18 Hosp Aff11 35 B Hospital where provider has admitting privileges. Newark- Beth Israel Required for PhysiciansPodiatrists & Oral Surgeons. - ----------------------------------------------------------------------------------------------------------------------------- 19 Hosp Aff12 35 B If more than One - ----------------------------------------------------------------------------------------------------------------------------- 20 HospAff13 35 B If more than Two - ----------------------------------------------------------------------------------------------------------------------------- 21 HospAff14 35 B If more than Three - ----------------------------------------------------------------------------------------------------------------------------- 22 Hosp Aff15 35 B If more than Four - ----------------------------------------------------------------------------------------------------------------------------- 23 Languages A Must be at least one even if English; Sec code list. EFG9 10 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 - ----------------------------------------------------------------------------------------------------------------------------- 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 File was submitted to OMHC mm/dd/yyyy. - ----------------------------------------------------------------------------------------------------------------------------- 31 2 B If other man actual county; include a record for each Servicing county served. Out-of-county physicians may not be County considered in applications except in rural counties - ----------------------------------------------------------------------------------------------------------------------------- 32 Total Hours 2 A Total number of hours for record. Round down. 20 - ----------------------------------------------------------------------------------------------------------------------------- 33 Medicaid ID 7 B Provider's Medicaid ID 1234567 - ----------------------------------------------------------------------------------------------------------------------------- 34 Special Needs 5 A Indicates provider has expertise serving specific Indicator populations. Use all OMHC special needs codes that apply to provider. - -----------------------------------------------------------------------------------------------------------------------------
A-15 ATTACHMENT B New Jersey Department of Human. Services, Division of Medical Assistance, Office of Managed Health Care HMO Institutional Provider Network File Specifications
When Field Field Name Size Required Definition Example - ------------------------------------------------------------------------------------------------------------- 1 Provider Name 45 A Doc's Drugs - ------------------------------------------------------------------------------------------------------------- 2 Provider Type 30 A Pharmacy - ------------------------------------------------------------------------------------------------------------- 3 Provider Tax ID 9 A Provider's Tax ED 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. - ------------------------------------------------------------------------------------------------------------- 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 2 B If other than actual county; include a record for County each county served. - ------------------------------------------------------------------------------------------------------------- 14 Date 10 A Fill with date Network Update File or Application 06/01/2000 Network File was submitted to OMHC 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 35 B Unique Hospital Code 99999 - -------------------------------------------------------------------------------------------------------------
A = Always Required B = Required When Applicable A-17 ATTACHMENT D NJDHS, DMAHS, OMHC Provider Network File Codes
Language Codes County Codes A Arabic 01 Atlantic B Hebrew 02 Bergen C Chinese 03 Burlington D Greek 04 Camden E English 05 Cape May F French 06 Cumberland G German 07 Essex H Hindi 08 Gloucesrer I Italian 09 Hudson J Hungarian 10 Hunterdon K Korean 11 Mercer L Polish 12 Middlesex M Tagalog 13 Monmouth N Japanese 14 Morris O Pakistani 15 Ocean P Portuguese 16 Passaic Q Indian 17 Salem R Filipino 18 Somerset S Persian 19 Sussex T Russian 20 Union U Danish 21 Warren V Spanish/No English 99 OUT OF STATE W Turkish X Vietnamese Y Yugoslavian Z Other 0 American Sign Language 1 Swedish 2 Spanish/Understands English 3 Ukraman 4 Dutch 5 Urdu 6 Romanian 7 Mandann 8 Iranian 9 Thai
A-21 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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 October 1,2003, as follows: Managed Care Service Administrator - October 1, 2003 1. ARTICLE 1, "DEFINITIONS" section - for the following definitions: - Contractor; - Copayment; - Managed Care Service Administrator (NEW); - NJ FamilyCare Plan D; - NJ FamilyCare Plan H; - Non-Risk Contract (NEW); - Restricted Alien (NEW) shall be amended as reflected in the relevant pages of Article 1 attached hereto and incorporated herein. 2. ARTICLE 3, "MANAGED CARE MANAGEMENT INFORMATION SYSTEM" Section 3.4.2 shall be amended as reflected in Article 3, Section 3.4.2 attached hereto and incorporated herein. 3. ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1(B) (NEW); 4.1.1(E); 4.1.7; renumbered remaining sections; 4.2.2(A); 4.2.4(B)7; 4.2.4(C) shall be amended as reflected in Article 4, Sections 4.1(B) (NEW); 4.1.1(E); 4.1.7; renumbered remaining sections; 4.2.2(A); 4.2.4(B)7; 4.2.4(C) attached hereto and incorporated herein. 4. ARTICLE 5, "ENROLLEE SERVICES," Sections 5.2(A)8 (RESTORED); 5.2(A)9 (NEW); 5.3.1(C)2; 5.3.2; 5.4(B); 5.4(C); 5.5.(G)1(d); 5.8.2(WW); 5.8.5(B); 5.10.2(A)1; 5.15.1(A) shall be amended as reflected in Article 5, 5.2(A)8 (RESTORED); 5.2(A)9 (NEW); 5.3.1(C)2; 5.3.2; 5.4(B); 5.4(C); 5.5.(G)1(d); 5.8.2(WW); 5.8.5(B); 5.10.2(A)1; 5.15.1(A) attached hereto and incorporated herein. Managed Care Service Administrator - October 1, 2003 5. ARTICLE 7, "TERMS AND CONDITIONS," Sections 7.26(C) and 7.26(K) (NEW) shall be amended as reflected in Article 7, Sections 7.26(C) and 7.26(K) (NEW) attached hereto and incorporated herein. 6. ARTICLE 8, "FINANCIAL PROVISIONS," Sections 8.5.1; 8.5.6; 8.5.9 (NEW); 8.8(N)(NEW); 8.8(O)(NEW); 8.8(P)(NEW) shall be amended as reflected in Sections 8.5.1; 8.5.6; 8.5.9 (NEW); 8.8(N) (NEW); 8.8(O)(NEW); 8.8(P) (NEW) attached hereto and incorporated herein. 7. APPENDIX, SECTION E, "MANAGED CARE SERVICE ADMINISTRATOR," (NEW) shall be revised as reflected in SFY 2004 Managed Care Service Administrator administrative fees attached hereto and incorporated herein. Managed Care Service Administrator - October 1, 2003 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY: /s/ Alexander McLean BY: /s/ [ILLEGIBLE] -------------------- ------------------------- MATTHEW D. D'ORIA TITLE: PRESIDENT & CEO TITLE: ACTING DIRECTOR, DMAHS --------------- DATE: [ILLEGIBLE] DATE:_______________________ --------------- APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: /s/ [ILLEGIBLE] --------------- DEPUTY ATTORNEY GENERAL DATE:___________________ 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. 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, or for the provision of Amended as of October 1, 2003 I-5 administrative services for a specified benefits package to specified enrollees on a non-risk, reimbursement 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" Amended as of October 1, 2003 I-6 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. MANAGED CARE SERVICE ADMINISTRATOR (MCSA) - an entity in a non-risk based financial arrangement that contracts to provide a designated set of services for an administrative fee. Services provided may include, but are not limited to: medical management, claims processing, provider network maintenance. 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. Amended as of October 1, 2003 I-14 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 200 percent of the federal poverty level; and - PARENTS/CARETAKERS WITH CHILDREN BELOW THE AGE OF 23 YEARS AND CHILDREN FROM THE AGE OF 19 THROUGH 22 YEARS WHO ARE FULL TIME STUDENTS WHO DO NOT QUALIFY FOR AFDC MEDICAID WITH FAMILY INCOMES UP TO AND INCLUDING 250 PERCENT OF THE FEDERAL POVERTY LEVEL; AND - 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.
PSC PSC Race Code Cost Sharing No Cost Sharing No Cost Sharing - ------------ --------------- --------------- ~~301 300 3 493 380 494 497 495 498~~
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. NJ FAMILYCARE PLAN H--MEANS THE STATE-OPERATED PROGRAM WHICH PROVIDES MANAGED CARE ADMINISTRATIVE SERVICES COVERAGE TO UNINSURED: - ADULTS AND COUPLES WITHOUT DEPENDENT CHILDREN UNDER THE AGE OF 19 WITH FAMILY INCOMES UP TO AND INCLUDING 100 PERCENT OF THE FEDERAL POVERTY LEVEL; - ADULTS AND COUPLES WITHOUT DEPENDENT CHILDREN UNDER THE AGE OF 23 YEARS, WHO DO NOT QUALIFY FOR AFDC MEDICAID, WITH FAMILY INCOMES UP TO AND INCLUDING 250 PERCENT OF THE FEDERAL POVERTY LEVEL. - RESTRICTED ALIEN PARENTS NOT INCLUDING PREGNANT WOMEN. PLAN H ELIGIBLES WILL BE IDENTIFIED BY A CAPITATION CODE. CAPITATION CODES DRIVE THE SERVICE PACKAGE. THE PROGRAM STATUS CODE DRIVES THE COST-SHARING REQUIREMENTS. ANY OF THE PROGRAM STATUS CODES LISTED BELOW CAN INCLUDE RESTRICTED ALIEN PARENTS. THEREFORE, IT IS NECESSARY TO RELY ON THE CAPITATION CODE TO IDENTIFY PLAN H ELIGIBLES. Amended as of October 1, 2003 I-19 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. These groups are identified by the program status code (PSC) indicated below. For clarity, the program status codes related to Plan H non-cost sharing groups are also listed.
PSC PSC COST SHARING NO COST SHARING ------------ --------------- 498 (w/CORRESPONDING 380, 310, 320, 330, 410, 420, CAP CODE) 430, 470, 497 (WITH 701 CORRESPONDING CAP CODES) 700 763
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. NON-RISK CONTRACT - A CONTRACT UNDER WHICH THE CONTRACTOR 1) IS NOT AT FINANCIAL RISK FOR CHANGES IN UTILIZATION OR FOR COSTS INCURRED UNDER THE CONTRACT; AND 2) MAY BE REIMBURSED BY THE STATE ON THE BASIS OF THE INCURRED COSTS. 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. Amended as of October 1, 2003 I-20 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. RESTRICTED ALIEN--An individual who would qualify for Medicaid or NJ FamilyCare, but for immigration status. RISK CONTRACT--a contract under which the contractor assumes risk for the cost of the services covered under the contract, and may incur a loss if the cost of providing services exceeds the payments made by the Department to the contractor for services covered under the contract. 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. 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. Amended as of October 1,2003 I-24 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/NJ FAMILYCARE 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 contractor shall provide a periodic file of updates to other coverage back to the State as specified in Article 8.7. Amended as of October 1, 2003 III-10 ARTICLE FOUR: PROVISION OF HEALTH CARE SERVICES 4.1 COVERED SERVICES A. 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; Part 438 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. B. All provisions of this article shall apply to enrollees of the contractor's comprehensive risk contract as well as to beneficiaries under the managed care service administrator arrangement unless specifically stated otherwise. 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 Amended as of October 1, 2003 IV-1 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 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. For MCSA enrollees, the contractor Shall case manage these services, 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. Amended as of October 1, 2003 IV-2 2. Dental services 3. DME 4. Hearing aids 5. Medical supplies 6. Orthotics 7. TMJ treatment 4.1.7 BENEFIT PACKAGE FOR NJ FAMILYCARE PLAN H A. Services Included In The Contractor's Benefits Package for NJ FamilyCare Plan H. The following services shall be provided and case managed by the contractor: 1. Primary Care 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 midwives - non-maternity, 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. Home Health Care Services -- Limited to skilled nursing for a home bound beneficiary which is provided or supervised by a Amended as of October 1, 2003 IV-15 registered nurse, and borne 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. 4. 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. 5. Outpatient Hospital Services, including outpatient surgery 6. LABORATORY SERVICES -- All laboratory testing sites providing services under this contract must 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 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. 7. RADIOLOGY SERVICES -- Diagnostic and therapeutic 8. Prescription drugs, excluding over-the-counter drugs Exception: See Article 8 regarding Protease Inhibitors and other antiretrovirals. Amended as of October 1, 2003 IV-16 9. TRANSPORTATION SERVICES - Limited to ambulance for medical emergency only 10. Diabetic supplies and equipment B. Services Available To NJ FamilyCare Plan H Under Fee-For-Service. The following services are available to NJ FamilyCare Plan H enrollees under fee-for-service: 1. Outpatient mental health services, limited to 60 days per calendar year. 2. Abortion services C. Exclusions. The following services not covered for NJ FamilyCare Plan H participants either by the contractor or the Department include, but are not limited to: 1. Non-medically necessary services. 2. Intermediate Care Facilities/Mental Retardation 3. Private duty nursing 4. Personal Care Assistant Services 5. Medical Day Care Services 6. Chiropractic Services 7. Dental services 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) Amended as of October 1, 2003 IV-17 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 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. Bio feedback 32. Radial keratotomy 33. Respite Care 34. Inpatient hospital services for mental health 35. Inpatient and outpatient services for substance abuse 36. Partial hospitalization 37. Skilled nursing facility services 38. Family Planning Services 39. Hospice Services 40. Optometrist Services 41. Optical Appliances 42. Organ Transplant Services 43. Podiatrist Services 44. Prosthetic Appliances 45. Outpatient Rehabilitation Services 46. Maternity and related newborn care 4.1.78 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. Amended as of October 1, 2003 IV-18 4.1.89 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. 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, Amended as of October 1, 2003 IV-19 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 enrpllee'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. 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 MCO 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 o 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. Amended as of October 1, 2003 IV-24 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 presenter'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. 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 prescribes to use when medically necessary. For MCSA enrollees, the contractor should implement a mandatory generic drug substitution program consistent with Medicaid program requirements. 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 for MCO enrollees and must implement for MCSA enrollees a pharmacy lock-in program including policies, procedures and criteria for establishing the need for the lock-in Amended as of October 1,2003 IV-27 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; 8. Uninsured adults and couples without dependent children under the age of 23 who are covered under NJ FamilyCare. 9. Restricted alien parents, excluding pregnant women. 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 DYPS 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 eniollee. 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 5.3.1 A) shall not be eligible to enroll in the contractor's plan. Persons falling into the categories unde\r Article 5.3.IB are eligible to enroll on a voluntary basis. Persons falling into a category under Article 5.3.2 maybe eligible for enrollment exemption, subject to the Department's review. Amended as of October 1,2003 V-2 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 Cafe 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 meinber(s) are exempt. 2. Individuals participating in NJ FamilyCare Plans B, C, D, and H [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, Plan D (except Parents/Caretakers -with PSC 380), and Plan H 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 on a case by case basis. Amended as of October 1, 2003 V-4 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 . 1 6, the contractor, shall not directly market to or assist managed care eligibles in completing enrollment forms. The duties of the BBC 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 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, Plan D, and Plan H 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 Medical Assistance Customer Ceuters) 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, ABD,, 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 Amended as of October 1, 2003 V-6 (other than "liveborn infant"). The contractor shall be responsible for notifying DMAHS when a newborn who has been hospitilized and has not been accreted to its enrollment roster after 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 axe 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 bom to NJ Family Care 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, D, and H 1 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. Amended as of October 1, 2003 V - 9 TT. An explanation of the enrollee's rights and responsibilities which should include, at a minimum, the follo wing, 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. P articipation 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, D and H; 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; ZZ. Inform enrollees of the availability of care management services; AAA. Enrollee right to adequate and timely information related to physician incentives; Amended as of October 1, 2003 V-18 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 me 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 PGP. 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, D, and H the Amended as of October 1, 2003 V-19 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 dunng 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, D, and H enrollees will be subject to a twelve (12)-month Lock-In period, a. 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: i. Failure of the contractor to provide services including physical access to the enrollee in accordance with the terms of this contract; Amended as of October 1, 2003 V-24 through. NJ FamilyCare Plans B, C, D, (except for individuals with a program status code of 380), and H 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 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, authorised 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 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. B. Written information to enrollees regarding the grievance/appeal process shall include at a minimum: Amended as of October 1,2003 V-36 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 Medicares-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. The contractor shall submit separate financial reports for MCSA enrollees in accordance with the rate cell grouping for this population. 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 Amended as of October 1, 2003 VII-37 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. K. MCSA Paid Claims Reconciliation. On a quarterly basis, the contractor shall provide paid claims data, via an encounter data file or separate paid claims file, that meet the HIPAA format requirements for audit and reconciliation purposes. The contractor shall provide documentation that demonstrates a 100% reconciliation of the amounts paid to the amounts billed to the DMAHS. The paid claims data shall include at a minimum, claim type, provider type, category of service, diagnosis code (5 digits), procedure/revenue code, Internal Control Number or Patient Account Number under HIPAA, provider ID, dates of services, that will allow the DMAHS to price claims in comparison to Medicaid fee schedules for evaluation purposes. 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. B. Audit of Rate Cell Grouping Costs The 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 Amended as of October 1, 2003 VII-39 8.5.1 REGIONS Capitation Rates for DYFS, NJ FamilyCare Plans B, C, and D and the non risk-adjusted rates for AIDS and clients of DDD are statewide. Rates for all other premium groups are regional in each of the following regions: - 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, NJC PREGNANT WOMEN, AND NJ FAMILYCARE PLAN A CHILDREN This grouping includes capitation rates for Aid to Families with Dependent Children (AFDC)/Temporary Assistance for Needy Families (TANF), New Jersey Care Pregnant Women and Children, and NJ FamilyCare Plan A children (includes individuals under 21 in PSC 380), but excludes individuals who have AIDS or are clients of DDD. 8.5.2.2 NJ FAMILYCARE PLANS B & C This grouping includes capitation rates for NJ FamilyCare Plans B and C enrollees, excluding individuals with AIDS and/or DDD clients. 8.5.2.3 NJ FAMILYCARE PLAN D CHILDREN This grouping includes capitation rates for NJ FamilyCare Plan D children, excluding individuals with AIDS. 8.5.2.4 NJ FAMILYCARE PLAN D PARENTS/CARETAKERS This grouping includes capitation rates for NJ FamilyCare Plan D parents/caretakers, excluding individuals with AIDS, and include only enrollees 19 years of age or older, Amended as of October 1, 2003 VIII-6 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 included (See Section 8.5.3). Regional payment shall be made by the State to the contractor based on submission of appropriate encounter data 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) 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 12.5% 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, W5M, W5N). Payment for protease inhibitors shall be made by DMAHS to the contractor based on; 1) submission of appropriate encounter data; and 2) 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 12.5% and 2) rates paid by the contractor. Individuals eligible through NJ FamilyCare with a program status code of 380 and all children groups shall receive protease inhibitors and other anti-retroviral agents under the contractor's plan. All other individuals eligible through NJ FamilyCare with program status codes of 497-498, 300-301, 700-701 and 763 shall receive protease inhibitors and other anti-retrovirals (First Data Bank Specific Therapeutic Class Codes W5C, W5B, W51, W5J, W5K, W5L, W5M and W5N) through Medicaid fee for service and/or the AIDS Drug Distribution Program (ADDP). 8.5.7 EPSDT INCENTIVE PAYMENT Amended as of October 1, 2003 VIII-8 The contractor shall be paid separately, $10 for every documented encounter record for a 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, 2003, recognize costs for anticipated contractor administrative expenditures due to Balanced Budget Act regulations. 8.5.9 NJ FAMILYCARE PLAN H ADULTS The contractor shall be paid an administrative fee for NJ FamilyCare Plan H adults without dependent children, and restricted alien parents excluding pregnant women, as defined in Article One. 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 Amended as of October 1, 2003 VIII-9 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. M, Drug Carve-Out Report. The DMAHS will provide the contractor with a monthly electronic file of paid drag claims data for non-dually eligible, ABD enrollees. N. MCSA ADMINISTRATIVE FEE. THE CONTRACTOR SHALL RECEIVE A MONTHLY ADMINISTRATIVE FEE, PMPM, FOR ITS MCSA ENROLLEES, BY THE FIFTEENTH (15TH) DAY OF ANY MONTH DURING WHICH HEALTH CARE SERVICES WILL BE AVAILABLE TO AN ENROLLEE. O. REIMBURSEMENT LOR MCSA ENROLLEE PAID CLAIMS. THE CONTRACTOR SHALL SUBMIT TO DMAHS A FINANCIAL SUMMARY REPORT OF CLAIMS PAID ON BEHALF OF MCSA ENROLLEES ON A WEEKLY BASIS. THE REPORT SHALL BE SUMMARIZED BY CATEGORY OF SERVICE CORRESPONDING TO THE MCSA BENEFITS AND PAYMENT DATES, ACCOMPANIED BY AN ELECTRONIC FILE OF ALL INDIVIDUAL CLAIM NUMBERS FOR WHICH THE STATE IS BEING BILLED. P. CLAIMS PAYMENT AUDITS. THE CONTRACTOR SHALL MONITOR AND AUDIT CLAIMS PAYMENTS TO PROVIDERS TO IDENTIFY PAYMENT ERRORS, INCLUDING DUPLICATE PAYMENTS, OVERPAYMENTS, UNDERPAYMENTS, AND EXCESSIVE PAYMENTS. FOR SUCH PAYMENT ERRORS (EXCLUDING UNDERPAYMENTS), THE CONTRACTOR SHALL REFUND DMAHS THE OVERPAID AMOUNTS. THE CONTRACTOR SHALL REPORT THE DOLLAR AMOUNT OF CLAIMS WITH PAYMENT ERRORS ON A MONTHLY BASIS, WHICH IS SUBJECT TO VERIFICATION BY THE STATE. THE CONTRACTOR IS RESPONSIBLE FOR COLLECTING FUNDS DUE TO THE STATE FROM PROVIDERS, EITHER THROUGH CASH PAYMENTS OR THROUGH OFFSETS TO PAYMENTS DUE THE PROVIDERS. 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, Amended as of October 1, 2003 VIII-18 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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 certain sections of the contract amendment, which were to be effective August 1, 2003 shall be amended to take effect September 1, 2003, as set out below; 1. ARTICLE 1, "DEFINITIONS" section - for the following definitions; - Copayment; - NJ FamilyCare Plan D; - NJ FamilyCare Plan H (DELETED) shall be amended as reflected in the relevant pages of Article 1 attached hereto and incorporated herein. (NJ FamilyCare Extension through 8/31/03) 2. ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES" Section 4.1.7 (DELETED), renumber remaining sections, shall be amended as reflected in Article 4, Section 4.1.7 attached hereto and incorporated herein. 3. ARTICLE 5, "ENROLLEE SERVICES" Section 5.2(A)8 (DELETED) shall be amended as reflected in Article 5, Section 5.2(A)8 attached hereto and incorporated herein. 4. ARTICLE 8, "FINANCIAL PROVISIONS" Sections 8.5.1; 8.5.4(deleted); 8.5.6; 8.5.8- Reserved (deleted) and 8.7(J)1 shall be amended as reflected in Article 8, Sections 8.5.1, 8.5.4, 8.5.6, 8.5.8-Reserved and 8.7(J)1 attached hereto and incorporated herein. 5. APPENDIX, SECTION B, "REFERENCE MATERIALS" B.5.2 - Cost-Sharing Requirements for NJ FamilyCare Plan C and Plan D Beneficiaries: Title; Plan H (DELETED); "No copayments shall be charged for the following services" (DELETED) shall be amended as reflected in Appendix, Section B, B.5.2 attached hereto and incorporated herein. 6. APPENDIX, SECTION C, "CAPITATION RATES" shall be revised as reflected in SFY 2004 Capitation Rates attached hereto and incorporated herein. (NJ FamilyCare Extension through 8/31/03) 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY: /s/ Alexander McLean BY: /s/ Kathryn A. Plant ----------------------- ---------------------------- KATHRYN A. PLANT TITLE: PRESIDENT & CEO TITLE: DIRECTOR, DMAHS DATE: 6/20/03 DATE: 6/26/03 APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: /s/ [ILLEGIBLE] ------------------------- DEPUTY ATTORNEY GENERAL DATE: 6/26/03 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 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" Amended as of September 1, 2003 I-6 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 133 percent of the federal poverty level; AND - 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.
PSC PSC Race Code Cost Sharing No Cost Sharing No Cost Sharing - ------------ --------------- --------------- ~~493 380 3 494 495~~
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. Amended as of September 1, 2003 I-19 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. Amended as of September 1, 2003 I-20 2. Dental services 3. DME 4. Hearing aids 5. Medical supplies 6. Orthotics 7. TMJ treatment Amended as of September 1, 2003 IV-15 Amended as of September 1, 2003 IV-16 Amended as of September 1, 2003 IV-17 4.1.7 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. 4.1.8 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. Amended as of September 1, 2003 IV-18 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; 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 maybe eligible for enrollment exemption, subject to the Department's review. Amended as of September 1,2003 V-2 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:
ACTUAL MCR 1ST OFFENSE 2ND OFFENSE ---------- ----------- ----------- 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
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 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: Amended as of September 1, 2003 VIII-5 Amended as of September 1, 2003 VIII-7 Amended as of September 1, 2003 VIII-8 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 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) 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 15% 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, W5M, W5N) for all eligibility groups. Payment for protease inhibitors shall be made by DMAHS to the contractor based on: 1) submission of appropriate encounter data; and 2) Amended as of September 1, 2003 VIII- 11 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 15% and 2) rates paid by the contractor. 8.5.7 EPSDT INCENTIVE PAYMENT Amended as of September 1, 2003 VIII-12 7. Any references to Medicare coverage in this Article shall apply to both Medicare/Medicaid duel eligibles and Qualified Medicare Beneficiaries. J. Other Protections for Medicaid Enrollees. 1. The contractor shall not impose, or allow Its participating providers or sub contractors to impose,cost-sharing charge of any kind upon Medicaid beneficiaries enrolled in the contractor's plan pursuant to this contract. This Article does note apply to individuals eligible solely through the NJ FamilyCare Program Plan C, or D, 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. Amended as of September 1, 2003 VIII-20 B.5.2 COST-SHARING REQUIREMENTS FOR NJ FAMILY CARE PLAN C AND PLAN D BENEFICIARIES B-195 COST-SHARING REQUIREMENTS FOR NJ FAMILYCARE PLAN D COPAYMENTS FOR NJ FAMILY CARE - PLAN D 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 Family Care 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.
SERVICE AMOUNT OF COPAYMENT ------- ------------------- 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 Visits $25 copayment for each visit 3 Outpatient Substance. Abuse Services for $5 copayment for each visit 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 urgent services that should have been rendered in the care facility. [Note: Triage and medical primary care provider's office or if the screenings must be covered in all member is admitted into the hospital. situations.] 5. Primary Care Provider Services provided $5 copayment for each visit (except for well- during normal office hours 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
B-198 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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 certain sections of the contract amendment, which were to be effective July 1, 2003 shall be amended to take effect August 1, 2003, as set out below: 1. ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES" Section 4.1.2(A)14; 4.1.2(A)23; 4.1.8(S) and 4.1.8(T) shall be amended as reflected in Article 4, Section 4.1.2(A)14, 4.1.2(A)23, 4.1.8(S) and 4.1.8(T) attached hereto and incorporated herein. 2. APPENDIX, SECTION C, "CAPITATION RATES" shall be revised as reflected in SFY 2004 Capitation Rates attached hereto and incorporated herein. Extension of Dental and Chiropractic Services - August 1, 2003 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. UNIVERSITY HEALTH PLANS, INC. STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES BY: Alexander McLean BY: /s/ Kathryn A. Plant ----------------------------- ---------------------------- KATHRYN A. PLANT Title: PRESIDENT & CEO Title: DIRECTOR, DMAHS DATE: 6/20/03 DATE: 6/26/03 APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: [ILLEGIBLE] ------------------------- DEPUTY ATTORNEY GENERAL DATE: 6/26/03 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 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 recipient inpatient hospital costs for an individual placed on a transplant Amended as of August 1, 2003 IV-5 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. Amended as of August 1, 2003 IV-20 STATE OF NEW JERSEY DEPARTMENT OF HUMAN SERVICES DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES AND UNIVERSITY HEALTH PLANS, INC. AGREEMENT TO PROVIDE HMO SERVICES In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract between University Health Plans, 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: 1. ARTICLE 1, "DEFINITIONS" section - for the following definitions: - Actuarially Sound Capitation Rates (NEW DEFINITION); - Adjustments to Smooth Data (NEW DEFINITION); - Appeal (NEW DEFINITION); - Complaint Resolution (NEW DEFINITION); - Comprehensive Risk Contract (NEW DEFINITION); - Copayment (DELETE REFERENCE TO PLAN H); - Cost Neutral (NEW DEFINITION); - Existing Provider-recipient relationship (NEW DEFINITION); - Federally Qualified HMO; - Grievance; - Grievance System (NEW DEFINITION); - Health Care Professional; - HIPAA (NEW DEFINITION); - Managed Care Organization (NEW DEFINITION); - Marketing; - Marketing Materials (NEW DEFINITION); - NJ FamilyCare Plan A; - NJ FamilyCare Plan D; - NJ FamilyCare Plan H (DELETED); - Poststabilization Care Services (NEW DEFINITION); - Potential Enrollee (NEW DEFINITION); - Prevalent Language (NEW DEFINITION); - Primary Care (NEW DEFINITION); - Risk Contract (NEW DEFINITION); - Risk Comprehensive Contract (DELETED); and - Service Authorization Request (NEW DEFINITION) shall be amended as reflected in the relevant pages of Article 1 attached hereto and incorporated herein. 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.(6)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); 4.6.4(B)8(i); 4.6.4(B)8(J) (NEW); 4.6.4(C)2; 4.6.4(C)2(h); 4.6.4(C)2(i) (NEW); 4.6.4(C)2(j) (NEW); 4.6.4(C)2(k) (NEW); 4.6.4(C)2(l) (NEW); 4.6.4(C)4; 4.6.4(C)6 (NEW); 4.6.4(C)7 (NEW); 4.6.4(C)8 (NEW); 4.6.4(C)9 (NEW); Sections 4.8.1(B)1; 4.8.1(D); 4.8.3; 4.8.4; 4.8.6(A)3; 4,8.7(B); 4.8.7(C); 4.8.7(D); 4.8.7(E); 4.8.8; 4.8.8(A)1; 4.8.8(0); 4.8.8(C)4; 4.8.8(C)5; 4.8.8(C)14; 4.8.8(C)16; 4.8.8(C)22; 4.8.8(C)23 (DELETED); renumber remaining sections; 4.8.8(D)2; 4.8.8(D)6 (DELETED); 4.8.8(E); 4.8.8(E)16; 4.8.8(F); 4.8.8(F)1 (NEW); 4.8.8(F)2; 4.8.8(F)3; 4.8.8(F)4; renumber remaining sections; 4.8.8(G); 4.8.8(H)8 (NEW); 4.8.8(H)9 (NEW); 4.8.8(H)10 (NEW); 4.8.8(H)11 (NEW); 4.8.8(I); 4.8.8(J)8; 4.8.8(M) (NEW); 4.9.1 (F); 4.9.1(F)5 (NEW); 4.9.3(A); 4.9.4(A); 4.9.5 and 4.10(E) shall be amended as reflected in Article 4, Sections 4.1, 4.1.1(G)3, 4.1.1(P), 4.1.2(A)14, 4.1.2(A)19, 4.1.2(A)23, 4.1.2(B)3; 4.1.2(B)4, 4.1.2(B)5, 4.1.2(B)6, 4.1.2(B)7, 4.1.2(B)8, 4.1.2(B)9, 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, 4.1.2(B)21, 4.1.2(B)25, 4.1.2(B)26, 4.1.2(B)27, 4.1.2(B)28, 4.1.2(B)29; 4.1.4(B), 4.1.4(C), 4.1.7, 4.1.8(S), 4.1.8(T), Sections 4.2.1(D)2, 4.2.1(F), 4.2.1(G), 4.2.1(B)1, 4.2.1(H)1, 4.2.1(H)3, 4.2.1(I), 4.2.1(K)2, 4.2.3, 4.2.3(C), 4.2.4(C)8, 4.2.7(A), 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), 4.6.4(B)8(i), 4.6.4(B)8(j), 4.6.4(C)2, 4.6.4(C)2(h), 4.6.4(C)2(i), 4.6.4(C)2(j), 4.6.4(C)2(k), 4.6.4(C)2(l), 4.6.4(C)4, 4.6.4(C)6, 4.6.4(C)7, 4.6.4(C)8, 4.6.4(C)9, Sections 4.8.1(B)1, 4.8.1(D), 4.8.3, 4.8.4, 4.8.6(A)3, 4.8.7(B), 4.8.7(C), 4.8.7(D), 4.8.7(E), 4.8.8, 4.8.8(A)1, 4.8.8(C), 4.8.8(C)4, 4.8.8(C)5, 4.8.8(C)14, 4.8.8(C)16, 4.8.8(C)22, 4.8.8(C)23, 4.8.8(D)2, 4.8.8(D)6, 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(1), 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 shall be amended as reflected in Article 6, Sections 6.2(A)18, 6.5(D), 6.5(D)1 and 6.5(D)2 attached hereto and incorporated herein. 7. ARTICLE 7, "TERMS AND CONDITIONS," Section 7.2(B)3; 7.2(B)5 (NEW) (renumber remaining items); 7.2(F); 7.2(G); 7.3(A); 7.4(E)1; 7.8(D); 7.8(E); 7.11.2(A); 7.12(C)6 (NEW); 7.12(C)8 (NEW); 7.15(B); Sections 7.16.8.1 (F) (NEW); 7.16.8.1(6) (NEW); 7.16.8.1 (H) (NEW); 7.16.8.2(A)1; 7.20.1 (B) (NEW); 7.20.2(B) (NEW); 7.20.2(C) (NEW); Sections 7.26(F); 7.27.1(8) (DELETED AND REPLACED WITH NEW SECTION); 7.33(B)1 (NEW); 7.38.2(A)3 (NEW); 7.38.2(B); 7.38.2(D)3 and 7.40(A) shall be amended as reflected in Article 7, 7.2(8)3, 7.2(B)5, 7.2(F), 7.2(G), Sections 7.3(A), 7.4(E)1, 7.8(D), 7.8(E), 7.11.2(A), 7.12(C)6, 7.12(C)8, 7.15(B), 7.16.8.1(F), 7.16.8.1(G), 7.16.8.1(H), 7.16.8.2(A)1, Sections 7.20.1(B), 7.20.2(B), 7.20.2(C), 7.26(F), 7.27.1(B), 7.33(B)1, 7.38.2(A)3, 7.38.2(B), 7.38.2(0)3 and 7.40(A) attached hereto and incorporated herein. 8. ARTICLE 8, "FINANCIAL PROVISIONS," Section 8.3.1; 8.5.1; 8.5.2 (NEW); 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 (NEW); 8,5.3 (NEW); 8.5.4; 8.5.5; 8.5.6; 8.5.7; 8.5.8; Sections 8.6 (DELETED AND REPLACED WITH NEW SECTION); 8.7(J)1; 8.8(C) and 8.8(D) 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.7.2 - Fraud and Abuse (ADDED SECTION C); - 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); - B.4.14 - New Jersey Modified QARI/QISMC Standards: Standard IX, E2; Standard X, A6, A13 (NEW); - B.5.2 - Cost-Sharing Requirements for NJ FamilyCare Plan C and Plan D Beneficiaries: Title; Plan H (DELETED); "No copayments shall be charged for the following services" (DELETED); - B.7.1 - Physician Incentive Plan Provisions: VI.B.1(a), (b), (c); VIII; - B.7.2 - Provider Contract/Subcontract Provisions: 2; 2E; 2H(3), (4); 21(1), (2), (4), (5), (6), (7); 2J(1); 2K; 2Q(2); 2R(1), (3); 4B; - B.7.3 - Financial Guide for Reporting Medicaid/NJ FamilyCare Rate Cell Grouping Costs; and - B.7.4 Agreed Upon Procedures For Rate Cell Cost Reports (NEW); shall be amended as reflected in Appendix, Section B, B.2.2, B.3.3, B.4,3; B.4.14, B.5.2, B.7.1, B.7.2, B.7.3, and B.7.4 attached hereto and incorporated herein. 11. APPENDIX, SECTION C, "CAPITATION RATES," shall be revised as reflected in SFY 2004 Capitation Rates attached hereto and incorporated herein Ail 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. UNIVERSITY HEALTH STATE OF NEW JERSEY PLANS, INC. DEPARTMENT OF HUMAN SERVICES BY: Alexander McLean BY: /S/ Kathryn A. Plant -------------------------------- KATHRYN A. PLANT TITLE: President & CEO TITLE: DIRECTOR, DMAHS DATE: 4/30/03 DATE: 5/4/03 APPROVED AS TO FORM ONLY ATTORNEY GENERAL STATE OF NEW JERSEY BY: [ILLEGIBLE] ------------------------ DEPUTY ATTORNEY GENERAL DATE: 5/4/03 EX-10.30 11 c83064exv10w30.txt 2003 STOCK INCENTIVE PLAN EXHIBIT 10.30 CENTENE CORPORATION 2003 STOCK INCENTIVE PLAN 1. Purpose The purpose of this 2003 Stock Incentive Plan (the "Plan") of Centene Corporation, a Delaware corporation (the "Company"), is to advance the interests of the Company's stockholders by enhancing the Company's ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company's stockholders. Except where the context otherwise requires, the term "Company" shall include any of the Company's present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the "Code") and any other business venture (including joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the "Board"). 2. Eligibility All of the Company's employees, officers, directors, consultants and advisors are eligible to be granted options or restricted stock awards (each, an "Award") under the Plan. Each person who has been granted an Award under the Plan shall be deemed a "Participant." 3. Administration and Delegation (a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board's sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith. (b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a "Committee"). All references in the Plan to the "Board" shall mean the Board or a Committee of the Board or the executive officers referred to in Section 3(c) to the extent that the Board's powers or authority under the Plan have been delegated to such Committee or executive officers. (c) Delegation to Executive Officers. To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company the power to grant Awards to employees or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of the Awards to be granted by such executive officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to Awards that the executive officers may grant; provided further, however, that no executive officer shall be authorized to grant Awards to any "executive officer" of the Company, as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or to any "officer" of the Company (as defined by Rule 16a-1 under the Exchange Act). 4. Stock Available for Awards (a) Number of Shares. Subject to adjustment under Section 7, Awards may be made under the Plan for up to 1,250,000 shares of common stock, $.001 par value per share, of the Company ("Common Stock"). If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan, subject, however, in the case of Incentive Stock Options (as hereinafter defined), to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) Per-Participant Limit. Subject to adjustment under Section 7, the maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 500,000 per calendar year. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code ("Section 162(m)"). 5. Stock Options (a) General. The Board may grant options to purchase Common Stock (each, an "Option") and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option that is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock Option." (b) Incentive Stock Options. An Option that the Board intends to be an "incentive stock option" as defined in Section 422 of the Code (an "Incentive Stock Option") shall only be granted to employees of Centene Corporation, any of Centene Corporation's present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option. (c) Exercise Price. The Board shall establish the exercise price at the time each Option is granted and specify it in the applicable option agreement, provided, however, that the exercise price shall be not less than 100% of the fair market value of the Common Stock, as determined by the Board, at the time the Option is granted. (d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement, provided, however, that no Option will be granted for a term in excess of 10 years. (e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised. (f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows: -2- (1) in cash or by check, payable to the order of the Company; (2) except as the Board may, in its sole discretion, otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding; (3) when the Common Stock is registered under the Exchange Act, by delivery of shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board in good faith ("Fair Market Value"), provided (i) such method of payment is then permitted under applicable law and (ii) such Common Stock, if acquired directly from the Company was owned by the Participant at least six months prior to such delivery; (4) to the extent permitted under applicable law and permitted by the Board, in its sole discretion, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board or (ii) payment of such other lawful consideration as the Board may determine, provided in either such case that at least an amount equal to the par value of the Common Stock being purchased shall be paid in cash; or (5) by any combination of the above permitted forms of payment. (g) Substitute Options. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section 5 or in Section 2. 6. Restricted Stock (a) Grants. The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a "Restricted Stock Award"). (b) Terms and Conditions. The Board shall determine the terms and conditions of any such Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any. (c) Stock Certificates. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant's death (the "Designated Beneficiary"). In -3- the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate. 7. Adjustments for Changes in Common Stock and Certain Other Events (a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, (i) the number and class of securities available under the Plan, (ii) the per-Participant limit set forth in Section 4(b), (iii) the number and class of securities and exercise price per share subject to each outstanding Option, and (iv) the repurchase price per share subject to each outstanding Restricted Stock Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate. If this Section 7(a) applies and Section 7(c) also applies to any event, Section 7(c) shall be applicable to such event, and this Section 7(a) shall not be applicable. (b) Liquidation or Dissolution. In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that all then unexercised Options will (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (ii) terminate effective upon such liquidation or dissolution, except to the extent exercised before such effective date. The Board may specify the effect of a liquidation or dissolution on any Restricted Stock Award granted under the Plan at the time of the grant. (c) Reorganization Events. (1) Definition. A "Reorganization Event" shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or (b) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction. (2) Consequences of a Reorganization Event on Options. Upon the occurrence of a Reorganization Event, or the execution by the Company of any agreement with respect to a Reorganization Event, the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event. Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, then the Board shall, upon written -4- notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by the Participants before the consummation of such Reorganization Event; provided, however, that in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the "Acquisition Price"), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Reorganization Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. To the extent all or any portion of an Option becomes exercisable solely as a result of the first sentence of this paragraph, upon exercise of such Option the Participant shall receive shares subject to a right of repurchase by the Company or its successor at the Option exercise price. Such repurchase right (1) shall lapse at the same rate as the Option would have become exercisable under its terms and (2) shall not apply to any shares subject to the Option that were exercisable under its terms without regard to the first sentence of this paragraph. (3) Consequences of a Reorganization Event on Restricted Stock Awards. Upon the occurrence of a Reorganization Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company's successor and shall apply to the cash, securities or other property that the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. 8. General Provisions Applicable to Awards (a) Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. (b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan. (c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly. (d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant's legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award. (e) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Board may otherwise provide in an Award, when the Common Stock is registered under the Exchange Act, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, -5- including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company's minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant. (f) Amendment of Award. The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. (g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations. (h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be. 9. Miscellaneous (a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend. (c) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board, but no Award granted to a Participant that is intended to comply with Section 162(m) shall become exercisable, vested or realizable, as applicable to such Award, unless and until the Plan has been approved by the Company's stockholders to the extent stockholder approval is required by Section 162(m) in the manner required under Section 162(m), including the vote required under Section 162(m). No Awards shall be granted under the Plan after the completion of ten years from -6- the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company's stockholders, but Awards previously granted may extend beyond that date. (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company's stockholders if required by Section 162(m), including the vote required under Section 162(m). (e) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law. -7- EX-10.31 12 c83064exv10w31.txt LEASE AGREEMENT EXHIBIT 10.31 *AIRC1998* AIRCRAFT LEASE AGREEMENT dated as of ______________("Agreement") This Agreement (together with all supplements, annexes, exhibits and schedules hereto hereinafter referred to as the "LEASE") is between AVN AIR, LLC, with an office at 44 OLD RIDGEBURY ROAD, DANBURY, CONNECTICUT 06810 (together with its successors and assigns, if any "LESSOR") and MHS CONSULTING CORPORATION, a corporation organized and existing under the laws of the State of Wisconsin with its mailing address and chief place of business at 7711 CARONDELET AVENUE, SUITE 800, ST. LOUIS, MO 63105 (hereinafter called "LESSEE"). 1. LEASING: (a)Subject to the terms and conditions set forth below, Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the aircraft, including the airframe, engines, and all appurtenant equipment (together hereinafter the "AIRCRAFT") described in Annex A. (b)Lessor shall purchase the Aircraft from the manufacturer or supplier thereof ("SUPPLIER") and lease it to Lessee if on or before the Last Delivery Date (specified in Annex B) Lessor receives each of the following documents in form and substance reasonably satisfactory to Lessor: (i) a copy of this Lease executed by Lessee, (ii) unless Lessor shall have delivered its purchase order for the Aircraft or received a bill of sale for the Aircraft in the name of Lessor (and in form and substance satisfactory to Lessor), the Purchase Document(s) Assignment and Consent in the form of Annex C, with copies of the purchase order or other purchase documents attached thereto; (iii) copies of insurance policies or such other evidence of insurance which complies with the requirements of Section 10, (iv) evidence that the Aircraft has been duly certified as to type and airworthiness by the Federal Aviation Administration ("FAA"); (v) evidence that Insured Aircraft Title Service, or such other escrow agent reasonable acceptable to Lessor, has received in escrow the executed bill of sale and AC Form 8050-1 Aircraft Registration Form (except for the pink copy which shall be available to be placed on the Aircraft upon acceptance thereof), and an executed duplicate of this Lease all in proper form for filing with the FAA; (vi) a copy of a resolution of Lessee's board of directors authorizing this Lease in the form of Annex D; (vii) a completed inspection and/or survey with respect to the Aircraft in accordance with the requirements set forth in the Certificate of Acceptance; and (viii) such other documents as Lessor may reasonably request. Lessor's obligation to lease the Aircraft hereunder is further conditioned upon (1) the cost to Lessor of the acquisition of the Aircraft not exceeding the Capitalized Lessor's Cost stated on Annex A; (2) upon delivery of the Aircraft, Lessee's execution and delivery to Lessor of a Certificate of Acceptance in the form of Annex E; and (3) successful filing of all necessary documents with the FAA. (c)Lessor hereby appoints Lessee its agent for inspection and acceptance of the Aircraft from the Supplier. Once the Certificate of Acceptance has been signed, and the Commencement Date has occurred, the Aircraft shall be deemed to have been delivered to, and accepted by, Lessee for lease hereunder, 2. TERM, RENT AND PAYMENT: (a) The rent ("RENT") payable under this Lease and Lessee's right to use the Aircraft shall commence on the date Insured Aircraft Title Service files with the FAA the executed bill of sale and Aircraft Registration Form and Lessee executes the Certificate of Acceptance ("COMMENCEMENT DATE"). The term ("TERM") of this Lease shall commence on the Commencement Date and shall continue, unless earlier terminated pursuant to the provisions of this Lease, until and including the Expiration Date stated in Annex B. If any Term is extended or renewed, the word "Term" shall be deemed to refer to all extended or renewal Terms, and all provisions of this Lease shall apply during any such extension or renewal Terms, except as may be otherwise specifically provided in writing. (b) Rent shall be paid to Lessor by Lessee at its address stated above, except as otherwise directed by Lessor. Rent payments shall be in the amount, payable at such intervals and due in accordance with the provisions of Annex B. (Each payment of Rent is hereinafter referred to as a "RENT PAYMENT".) If one or more Advance Rent is payable, such Advance Rent shall be (i) set forth on Annex B and due in accordance with the provisions of Annex B, and (ii) when received by Lessor, applied to the first Basic Term for Rent Payment as set forth on Annex B and the balance, if any, to the final Rent Payment(s), in inverse order of maturity. In no event shall any Advance Rent or any other Rent Payment be refunded to Lessee. If Rent is hot paid within ten (10) days of its due date, Lessee agrees to pay a late charge of four cents ($.04) per dollar on, and in addition to, the amount of such Rent but not exceeding the lawful maximum, if any. 3. RENT ADJUSTMENT: Intentionally left blank 4. TAXES AND FEES: (a) If permitted by law, Lessee shall report and pay promptly all taxes, fees and assessments due, imposed, assessed or levied against the Aircraft (or purchase, ownership, delivery, leasing, possession, use or operation thereof), this Agreement (or any rents or receipts hereunder), Lessor or Lessee, by any domestic or foreign governmental entity or taxing authority during or related to the term of this Agreement, including, without limitation, all license and registration fees, and all sales, use, personal property, excise, gross receipts, stamp, value added, custom duties, landing fees, airport charges, navigation service charges, route navigation charges or other taxes, imposts, duties and charges, together with any penalties, fines or interest thereon (collectively "TAXES"). Notwithstanding the foregoing, Lessee shall have no liability for Taxes imposed by any domestic or foreign governmental entity or political subdivision thereof which are on or measured by the net income, capital, net worth or franchise of Lessor or similar conduct of business taxes, except as provided in Section 14(c) hereof. Lessee shall (i) reimburse Lessor upon receipt of written request for reimbursement for any Taxes charged to or assessed against Lessor, (ii) on request of Lessor, submit to Lessor written evidence of Lessee's payment of Taxes, (iii) on all tax reports or returns show Lessor as the owner of the Aircraft, and (iv) send a copy to Lessor of any tax reports or returns showing Lessor as the owner. Notwithstanding anything in this Lease to the contrary, Lessee shall have no liability with respect to: Taxes imposed as a result of the transfer or other disposition of the Aircraft by Lessor to anyone other than Lessee; Lessor's gross negligence or willful misconduct; any act or omission of Lessor in breach of this Lease; Lessor's failure to avail itself of any applicable exemption - 2 - reasonably and timely requested by Lessee (and provided that Lessee has provided Lessor with such information that Lessor needs in order to assert such exemption); or Lessor's failure to file any return or report in a timely or proper manner. (b) To the extent any taxing jurisdiction makes a claim with respect to any Tax for which the Lessee would be liable under this Section 4, Lessee may contest in its own name such claim only so long as there is no continuing Event of Default by Lessee under the Lease and taking such action does not subject the Aircraft to attachment, foreclosure, or repossession by the taxing authority. In any event, if Lessee wishes to contest the tax, then at such time during such contest that the tax is required to be paid, Lessee shall agree to indemnify Lessor for all sums Lessor may be obligated to pay in the event that Lessee does not prevail in such contest. (c) To the extent it is not possible for Lessee to contest the tax in its own name, Lessee may request Lessor to contest such claim and Lessor shall be obligated to contest said claim, provided that (1) in the opinion of independent tax counsel selected by Lessor and approved by Lessee the basis in law and fact makes it more probably than not that the Lessee will prevail, (2) Lessee shall have agreed to pay Lessor on demand all out of pocket costs and expenses (including the fees and disbursements of independent tax counsel) incurred by Lessor in connection with taking such action, (3) Lessee shall have agreed to indemnify Lessor for all sums Lessor may be obligated to pay in the event that Lessor does not prevail in such contest, and (4) Lessor shall have no obligation to appeal any adverse ruling with respect to the tax contest. (d) Notwithstanding anything to the contrary contained herein, if at any time during the tax contest the Aircraft becomes subject to attachment, foreclosure or repossession by the taxing authority due to non-payment of the tax and associated charges for which Lessee is responsible hereunder, Lessee shall promptly pay such tax and charges. 5. REPORTS: Lessee will provide Lessor with the following in writing within the time periods specified: (a) notice of any tax or other lien which attaches to the Aircraft (other than a Permitted Lien as defined in Section 8(a)), within ten (10) days after Lessee becomes aware of the lien and the full particulars of the lien forthwith upon request of Lessor, (b) complete consolidated financial statements for the group of companies of which Lessee is a member, certified by a recognized firm of certified public accountants, promptly after the filing of such financial statements with the Securities and Exchange Commission for each fiscal year of Lessee; (c) notice to Lessor of the Aircraft's location, and the location of all information, logs, documents and records relating to the Aircraft and its use, maintenance and/or condition, immediately upon request; (d) notice to Lessor of the relocation of the Aircraft's primary hangar location, prior to any relocation; (e) notice of loss or damage to the Aircraft which would cost more than ten percent (10%) of the original Capitalized Lessor's Cost to repair or replace, within fifteen (15) days of such loss or damage; (f) notice of any accident involving the Aircraft causing personal injury or property damage, within fifteen (15) days of such accident; (g) copies of the insurance policies or other evidence of insurance required by the terms hereof, promptly upon request by Lessor; (h) copies of all information, logs, documents and records relating to the Aircraft and its use, maintenance and/or condition, within fifteen (15) days of such request; (i) beginning on the first anniversary of the Commencement Date of this Lease and on each anniversary date thereafter, a certificate of the authorized officer of Lessee stating that such officer has reviewed the - 3 - activities of Lessee and that, to the best of such officer's knowledge, there exists no Event of Default or event which with notice or lapse of time (or both) would become an Event of Default; (j) such information as may be reasonably required to enable Lessor to file any reports required by any governmental authority as a result of Lessor's ownership of the Aircraft, promptly upon request of Lessor; (k) copies of any manufacturer's maintenance service program contract for the airframe or engines, promptly upon request by Lessor; (1) evidence of Lessee's compliance with applicable FAA airworthiness directives and of compliance with other maintenance provisions of Section 7 hereof, promptly upon request of Lessor; and (m) notice of any change in Lessee's state of incorporation or organization, within thirty (30) days of such change and (n) such other reports or information as Lessor may reasonably request. 6. DELIVERY, REGISTRATION, USE AND OPERATION: (a) Physical possession of the Aircraft shall be delivered directly from the Supplier to Lessee unless the Aircraft is being leased pursuant to a sale leaseback transaction in which case Lessee acknowledges that it is in possession of the Aircraft as of the Lease Commencement Date. (b) Lessee shall not take any action, or omit to take any action for which Lessee has a duty to act, which would cause the Aircraft not to be registered in the name of Lessor under the Title 49, Subtitle VII of the United States Code, as amended (the "FAA ACT"), and shall not register the Aircraft under the laws of any other country. (c) The possession, use and operation of the Aircraft shall be at the sole risk and expense of Lessee. Lessee acknowledges that it accepts full "operational control" of the Aircraft (as defined in the Federal Aviation Regulations ("FAR")), Lessee agrees that the Aircraft will be used and operated; (i) in compliance with any and all statutes, laws, ordinances, regulations and standards or directives issued by any governmental agency applicable to the use or operation thereof; (ii) in compliance with any airworthiness certificate, license or registration relating to the Aircraft issued by any agency; (iii) in compliance with all safety and security directives of the FAA and similar government regulations relating to aircraft security; and (iv) in a manner that does not modify or impair any existing warranties on the Aircraft or any part thereof. Lessee will operate the Aircraft predominantly in the conduct of its business and will not use or operate, or permit the Aircraft to be used or operated, (aa) in violation of any United States export control law, (bb) in a manner wherein the predominant use during any consecutive twelve month period would be for a purpose other than transportation for Lessee, or in a manner, for any time period, such that Lessor or a third party shall be deemed to have "operational control" of the Aircraft except as otherwise permitted under this Lease, or (cc) for the carriage of persons or property for hire except as permitted under subsections 91.501(b)(3), (4), (5), (6) (but excluding therefrom a "joint ownership agreement"), (7), (8) and (9) of the FAR and section 91.321 of the FAR or otherwise permitted under this Lease or the transport of mail or contraband. The Aircraft will, at all times be operated by duly qualified pilots holding at least a valid commercial pilot certificate and instrument rating and any other certificate, rating, type rating or endorsement appropriate to the Aircraft, purpose of flight, condition of flight or as otherwise required by the FAR. The Aircraft's pilots shall be employed and/or paid and contracted for by Lessee or by a third party retained by Lessee to provide pilot services with respect to the Aircraft, shall meet all applicable recency of flight requirements and shall meet the requirements established and specified by the insurance policies required under this Lease and the FAA. The primary hangar location of the Aircraft shall be as - 4 - stated in Annex B, Lessee shall not relocate the primary hangar location to a hangar location outside the United States. Provided that Lessor and its representatives comply with all security directives of the FAA and similar governmental and airport regulations relating to aircraft and airport security, Lessor may, at its expense, examine and inspect the Aircraft, wherever located, on the ground, after giving Lessee reasonable prior notice. (d) (i) AT ALL TIMES DURING THE TERM OF THE LEASE, LESSEE AGREES NOT TO OPERATE OR LOCATE THE AIRCRAFT, OR ALLOW THE AIRCRAFT TO BE OPERATED OR LOCATED, IN OR OVER (1) ANY AREA OF HOSTILITIES; OR (2) ANY GEOGRAPHIC AREA WHICH IS NOT COVERED BY THE INSURANCE POLICIES REQUIRED BY THIS LEASE; OR (3) ANY COUNTRY OR JURISDICTION FOR WHICH EXPORTS OR TRANSACTIONS ARE SUBJECT TO SPECIFIC RESTRICTIONS UNDER ANY UNITED STATES EXPORT OR OTHER LAW, OR UNITED NATIONS SECURITY COUNCIL DIRECTIVE, INCLUDING WITHOUT LIMITATION, THE TRADING WITH THE ENEMY ACT, 50 U.S.C. APP. SECTIONS 1 ET SEQ., THE INTERNATIONAL EMERGENCY ECONOMIC POWERS ACT, 50 U.S.C. APP. SECTIONS 1701 ET SEQ., AND THE EXPORT ADMINISTRATION ACT, 50 U.S.C. APP. SECTIONS 2401 ET SEQ., IF IN SO DOING LESSEE WOULD VIOLATE, OR PERMIT THE VIOLATION OF, SUCH LAWS OR DIRECTIVES. LESSEE ALSO AGREES TO PROHIBIT ANY NATIONAL OF SUCH RESTRICTED NATIONS FROM OPERATING THE AIRCRAFT. (ii) Lessee represents and warrants that it does not on this date hold a contract or other obligation to operate the Aircraft in any of the following countries; Cuba, Iraq, Iran, Libya, Myanmar, North Korea, and Sudan. (e) The engines set forth on Annex A shall be used only on the airframe described in Annex A and shall only be removed for maintenance in accordance with the provisions of this Lease. (f) Lessor shall not disturb Lessee's quiet enjoyment of the Aircraft during the Term of this Lease unless an Event of Default has occurred and is continuing under this Lease. (g) During the Term of this Lease, Lessee expressly assumes sole and exclusive responsibility for the determination and implementation of all security measures and systems required by law or regulation having jurisdiction over the Lessee or the Aircraft and otherwise as a reasonably prudent lessee of an aircraft would so do, for the proper protection of the Aircraft (whether on the ground or in flight) against theft, vandalism, hijacking, destruction, bombing, terrorism or similar acts directly or indirectly affecting the Aircraft, any part thereof, or any persons who (whether or not on board the Aircraft) may sustain any injury or damage as a result of any such acts. Lessee expressly acknowledges that during the Term of this Lease, Lessee's implementation of such security measures and systems is a material obligation of Lessee under this Lease, and that Lessor shall have absolutely no responsibility therefor. Upon request by Lessor from time to time, and subject to Lessee's obligation first to comply with all applicable laws and regulations, Lessee shall provide Lessor with such evidence as is reasonably requested by Lessor regarding Lessee's compliance with its obligations under this section. However, in no event shall Lessor have any right, duty or obligation to monitor, review or assess any security measures maintained by Lessee or Lessee's compliance with the provisions of this Section. Any review by Lessor of such evidence as is provided pursuant to Lessor's request hereunder shall be at Lessor's expense and for Lessor's informational. - 5 - purposes only, and there shall be no inference or implication therefrom that Lessor has reviewed or approved the adequacy or sufficiency of such recommendations or of the actual security measures or systems employed by Lessee. Without limiting the generality of the foregoing, it is expressly understood and acknowledged that Lessee, being in "operational control" of the Aircraft, is uniquely in a position to identify and implement those security measures necessary to comply with this section and that in doing so, Lessee has not relied upon, and shall not rely upon, any statement, act, or omission of Lessor. 7. MAINTENANCE: (a) Lessee agrees that the Aircraft will be maintained in compliance with any and all statutes, laws, ordinances, regulations and standards or directives issued by any governmental agency applicable to the maintenance thereof, in compliance with any airworthiness certificate, license or registration relating to the Aircraft issued by any agency and in a manner that does not modify or impair any existing warranties on the Aircraft or any part thereof. (b) Lessee shall maintain, inspect, service, repair, overhaul and test the Aircraft (including each engine) in accordance with (i) all applicable maintenance manuals published by the manufacturer, including any subsequent amendments or supplements to such manuals issued by the manufacturer from time to time, (ii) all mandatory or otherwise required "SERVICE BULLETINS" issued, supplied, or available by or through the manufacturer and/or the manufacturer of any engine or part with respect to the Aircraft, (iii) all airworthiness directives applicable to the Aircraft issued by the FAA or similar regulatory agency having jurisdictional authority, and, to the extent reasonably possible, causing compliance to such directives to be completed through corrective modification in lieu of operating manual restrictions, and (iv) all maintenance requirements set forth in Annex G hereto. Lessee shall maintain all records, logs and other materials required by the FAA or by the manufacturer for enforcement of any warranties. All maintenance procedures required hereby shall be undertaken and completed in accordance with the manufacturer's recommended procedures, and by properly trained, licensed, and certificated maintenance sources and maintenance personnel, so as to keep the Aircraft and each engine in as good operating condition as when delivered to Lessee hereunder, ordinary wear and tear excepted, and so as to keep the Aircraft in such operating condition as may be necessary to enable the airworthiness certification of such Aircraft to be maintained in good standing at all times. (c) Lessee agrees, at its own cost and expense, to (i) cause the Aircraft and each engine thereon to be kept numbered with the identification and serial number therefor as specified in Annex A; (ii) prominently display on the Aircraft that registration number, and only that registration number, specified in Annex A except the Aircraft's registration number may be changed with Lessor's consent which shall not be unreasonably withheld, delayed or conditioned; and (iii) notify Lessor in writing thirty (30) days prior to making any change in the configuration (other than changes in configuration mandated by the FAA), appearance and coloring of the Aircraft from that in effect at the time the Aircraft is accepted by Lessee hereunder, and in the event of such change or modification of configuration, coloring or appearance, to restore the Aircraft to the configuration, coloring or appearance in effect on the Commencement Date upon request of Lessor at the expiration or earlier termination of this Lease (unless such change or modification of configuration, coloring or appearance is or has been approved in writing by Lessor which approval shall not be unreasonably withheld, delayed or conditioned) or, at Lessor's option to pay to Lessor an amount - 6 - equal to the reasonable cost of such restoration. Lessee will not place the Aircraft in operation or exercise any control or dominion over the same until such Aircraft markings have been placed thereon. Lessee will replace promptly any such Aircraft marking which may be removed, defaced or destroyed. (d) Lessee shall be entitled from time to time during the Term of this Lease to acquire and install on the Aircraft at Lessee's expense, any additional accessory, device or equipment as Lessee may desire (each such accessory, device or equipment, an "ADDITION"), but only so long as such Addition (i) is ancillary to the Aircraft; (ii) is not required to render the Aircraft complete for its intended use by Lessee; (iii) does not alter or impair the originally intended function or use of the Aircraft; and (iv) can be readily removed without causing material damage. Title to each Addition which is not removed by Lessee prior to the return of the Aircraft to Lessor shall vest in Lessor upon such return. Lessee shall repair all damage to the Aircraft resulting from the installation or removal of any Addition so as to restore the Aircraft to its condition prior to installation, ordinary wear and tear excepted. (e) Any alteration or modification with respect to the Aircraft that may at any time during the Term of this Lease be required to comply with any applicable law or any governmental rule or regulation (each an "ALTERATION") shall be made at the expense of Lessee. Any repair made by Lessee of or upon the Aircraft or replacement parts, including any replacement engine installed thereon in the course of repairing or maintaining the Aircraft (but excluding any "loaner" engine temporarily installed on the Aircraft while an engine has been removed for repair), or any Alteration, shall be deemed an accession, and title thereto shall be immediately vested in Lessor without cost or expense to Lessor. (f) Except as permitted under this Section 7, Lessee will not modify the Aircraft or affix or remove any accessory to the Aircraft leased hereunder. (g) If the Aircraft is to be operated at any time under Part 135 of the FAR with the prior written consent of Lessor, then the Aircraft shall be maintained and operated in accordance with the applicable Part 135 standards. 8. LIENS, SUBLEASE AND ASSIGNMENT: (a) LESSEE SHALL NOT SELL, TRANSFER, ASSIGN OR ENCUMBER THE AIRCRAFT, ANY ENGINE OR ANY PART THEREOF, LESSOR'S TITLE OR ITS RIGHTS UNDER THIS LEASE. LESSEE SHALL NOT, EXCEPT AS EXPRESSLY PERMITTED UNDER THIS LEASE OR WITH THE PRIOR WRITTEN CONSENT OF LESSOR, SUBLET, CHARTER OR PART WITH POSSESSION OF THE AIRCRAFT OR ANY ENGINE OR PART THEREOF. Lessee shall not permit any engine to be used on any other Aircraft. Lessee shall keep the Aircraft each engine and any part thereof free and clear of all liens and encumbrances other than those which result from (i) the respective rights of Lessor and Lessee as herein provided; (ii) liens arising from the acts or omissions of Lessor; (iii) liens for taxes not yet due; and (iv) inchoate materialmen's, mechanics', workmen's, repairmen's, employees' or other like liens arising in the ordinary course of business for sums not yet delinquent or being contested in good faith (and for the payment of which adequate assurances in Lessor's reasonable judgment have been provided Lessor)(each, a "PERMITTED LIEN"). - 7 - (b) Lessor and any assignee of Lessor may assign this Lease, or any part hereof and/or the Aircraft subject hereto provided that (a) such assignment shall in no way impair Lessee's right and interests in the Aircraft and this Lease, (b) such assignment shall not increase any indemnity or other obligation of Lessee hereunder, and Lessee shall have no greater obligations hereunder whether by an increase in the amount of any indemnity payable hereunder or otherwise and (c) Lessor shall reimburse Lessee for all costs and expenses it incurs in connection with such assignment. Lessee hereby waives and agrees not to assert against any such assignee, or assignee's assigns, any defense, set-off, recoupment claim or counterclaim which Lessee has or may at any time have against Lessor for any reason whatsoever. 9. LOSS, DAMAGE AND STIPULATED LOSS VALUE: Lessee hereby assumes and shall bear the entire risk of any loss, theft, confiscation, expropriation, requisition, damage to, or destruction of, the Aircraft, any engine or part thereof from any cause whatsoever. If for any reason the Aircraft, or any engine thereto becomes worn out, lost, stolen, confiscated, expropriated, requisitioned, destroyed, irreparably damaged, or unusable ("CASUALTY OCCURRENCES") Lessee shall promptly and fully notify Lessor in writing. If, in the reasonable opinion of Lessor, a Casualty Occurrence has occurred which affects only the engine(s) of the Aircraft, then Lessee, at its own cost and expense subject to Lessor paying over to Lessee (provided no Event of Default has occurred and is continuing), any insurance proceeds received by Lessor as a result of claims for damages, loss, destruction, confiscation, expropriation or war risk, shall replace such engine(s) within a reasonable period of time after such loss with an engine(s) reasonably acceptable to Lessor and shall cause title to such engine(s) to be transferred to Lessor for lease to Lessee under this Lease. Upon transfer of title to Lessor of such engine(s), such engine(s) shall be subject to the terms and conditions of this Lease, and Lessee shall execute whatever documents or filings Lessor reasonably deems necessary and appropriate in connection with the substitution of such replacement engine(s) for the original engine(s). Provided such engine has been so replaced and provided no Event of Default has occurred and is continuing, Lessee shall, as between Lessee and Lessor only, be entitled to recover possession of the salvage of the original engine(s) and Lessor will transfer to or at the direction of Lessee all of Lessor's right, title and interest in any such original engine(s) free and clear of any lien or encumbrance arising through Lessor and Lessee will be subrogated to all claims of Lessor against third parties (other than Lessor's insurer under policies independently maintained at its own cost and expense) in connection with the Casualty Occurrence provided that the value of the replacement engine is equal to or greater than the fair market value of the salvaged engine measured after the time of the Casualty Occurrence. If, in the reasonable opinion of Lessor, a Casualty Occurrence has occurred with respect to the Aircraft in its entirety, on the Rent Payment Date next succeeding a Casualty Occurrence (the "Payment Date"), Lessee shall pay Lessor the sum of (i) the Stipulated Loss Value as set forth in Annex F calculated as of the Rent Payment Date immediately preceding such Casualty Occurrence; and (ii) all Rent and other amounts which are due under this Lease as of the Payment Date minus any insurance proceeds actually received in goods funds by Lessor as a result of claims for damages, loss, destruction, confiscation, expropriation or war risk. Upon payment of all sums due hereunder and compliance by Lessee with all of its other Lease termination obligations, as provided herein, the Term of this Lease as to the Aircraft shall terminate, and then, as between Lessee and Lessor only, Lessee shall be entitled to recover possession of the salvage thereof, Lessor will transfer to or at the direction of Lessee all of Lessor's right, title and interest in the Aircraft and any engine constituting part of the Aircraft whether or not installed on the Aircraft when the Casualty Occurrence occurred, free and clear of any lien or encumbrance arising through Lessor (provided the Stipulated Loss Value actually received by Lessor for the Aircraft is equal to or greater than the Fair Market - 8 - Value (as defined in section 19 herein) of such salvaged Aircraft), and Lessee will be subrogated to all claims of Lessor against third parties (other than Lessor's insurer under policies independently maintained at its own cost and expense) in connection with the Casualty Occurrence. 10. INSURANCE: Lessee shall secure and maintain in effect at its own expense throughout the Term of the Lease (i) liability insurance covering public liability and property, cargo, and sudden accidental pollution coverage (as provided is such policies) in amounts not less than fifty million (50,000,000) United States dollars for any single occurrence, (ii) all-risk aircraft hull and engine insurance (including, without limitation, with respect to engine or part thereof while removed from the aircraft and foreign object damage insurance) in an amount which is not less than the then Stipulated Loss Value (but the minimum amount of such insurance for engines and parts removed from the Aircraft shall be the replacement cost of such engines and parts, to the extent available); and (iii) confiscation, expropriation and war risk, hijacking and allied perils insurance (which insurance shall include coverage against acts of terrorism and similar criminal acts) in an amount which is (x) for physical damage, not less than the then Stipulated Loss Value and (y) for liability coverage, not less than fifty million (50,000,000) United States dollars for any single occurrence. All insurance shall: (1) name Lessor as owner of the Aircraft and as loss payee, as its interest may appear, and additional insured (without responsibility for premiums), (2) provide that any cancellation or substantial change in coverage shall not be effective as to the Lessor for thirty (30) days (except (i) in the case of war risk insurance, (a) seven days or such shorter period as may be reasonably available and (b) without any notice upon (x) the outbreak of war between any two of: France, the People's Republic of China, the Russian Federation the United Kingdom or the United States of America, or (y) the hostile detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force; or (z) the requisitioning of the Aircraft by a governmental authority or agency; and (ii) ten days with respect to cancellation for failure to pay a premium) after receipt by Lessor of written notice from such insurer(s) of such cancellation or change, (3) insure Lessor's interest regardless of any breach of warranty or other act or omission by Lessee (in circumstances where Lessee has a duty to act), or violation by Lessee of any warranties, declarations or conditions in such policies (excluding, if so excluded from such insurance policies, conversion or embezzlement), (4) include a severability of interest clause providing that such policy shall operate in the same manner as if there were a separate policy covering each insured (except as to the limits of liability), (5) waive any right of set-off against Lessee or Lessor, and any rights of subrogation against Lessor, (6) be primary and not be subject to any offset by any other insurance carried by Lessor or Lessee, (7) consist of such other insurance as Lessor shall reasonably require in accordance with industry standards, and (8) be with company(ies) reasonably satisfactory to Lessor. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make proof of loss and claim for and to receive payment of and to execute or endorse all documents, checks or drafts in connection with all policies of insurance in respect of the Aircraft. Lessor shall not act as Lessee's attorney-in-fact unless there has occurred and is continuing an Event of Default by Lessee. Any reasonable expense of Lessor in adjusting or collecting insurance proceeds as Lessee's attorney-in-fact shall be borne by Lessee. Upon the occurrence and continuation of an Event of Default hereunder, Lessor may, at its option, apply proceeds of insurance, in whole or in part, to (A) repair the Aircraft, or repair or replace any part thereof, or (B) satisfy any obligation of Lessee to Lessor under this Lease, and any balance remaining shall be paid to Lessee. Notwithstanding the foregoing if any of the events described in item 2(i)(b)(x), (y) or (z) of the second sentence of the above paragraph occur (each of the foregoing being hereinafter referred to as a "GROUNDING - 9 - EVENT"), the Aircraft shall, unless Lessee is otherwise so directed in writing by Lessor, be immediately grounded and the Lessee shall, to the extent the above described insurances do not already cover such risks, at its own expense, obtain ground insurance until such time as the above Grounding Event is remedied or the obligations to Lessor hereunder are paid in full. In addition, upon the occurrence of such a Grounding Event, Lessor shall have the right to impose such other restrictions on the use and operation of the Aircraft as Lessor deems prudent, in its sole and complete discretion. 11. RETURN OF AIRCRAFT: (a) On the date of expiration or termination of this Lease other than by reason or a Casualty Occurrence (the "RETURN DATE"), Lessee shall return the Aircraft to Lessor, at a location Lessor shall direct that shall be within the continental United States no greater than 1,500 miles from the primary hangar location of the Aircraft at the expiration or termination of this Lease. Lessee shall also return all logs, loose equipment, manuals and data associated with the Aircraft, including without limitation, inspection, modification and overhaul records required to be maintained with respect to the Aircraft under this Lease or under the applicable rules and regulations of the FAA or under the manufacturer's recommended maintenance program, along with a currently effective FAA airworthiness certificate. Lessee shall, upon request, assign to Lessor its rights under any manufacturer's maintenance service contract or extended warranty for the Aircraft, any engine or part thereof. All costs and expenses for return of the Aircraft and delivery of the aforementioned logs, manuals and data shall be borne by Lessee. The Aircraft shall be returned in the condition in which the Aircraft is required to be maintained pursuant to Section 7, but with all logos or other identifying marks of Lessee removed. Additionally, Lessee shall ensure that the Aircraft complies with all requirements and conditions set forth on Annex G hereto. (b) Lessor may arrange for the inspection of the Aircraft on the Return Date to determine if the Aircraft has been maintained and returned in accordance with the provisions of this Lease. Lessor shall be responsible for the cost of such inspection. If the results of such inspection indicate that the Aircraft, any engine thereto or part thereof, has not been maintained or returned in accordance with the provisions of this Lease, Lessee shall pay to Lessor within fifteen (15) days of demand, as liquidated damages, the estimated cost ("ESTIMATED COST") of servicing or repairing the Aircraft, engine or part. The Estimated Cost shall be determined by Lessor and Lessee each obtaining one quote for such service or repair work and taking the average of the two quotes. (c) If Lessee fails to return the Aircraft on the Return Date, Lessor shall be entitled to damages equal to the higher of (i) Rent for the Aircraft, pro-rated on a per diem basis, for each day the Aircraft is retained beyond the Return Date; or (ii) the daily fair market rental for the Aircraft at the Return Date. Such damages for retention of the Aircraft shall not be interpreted as an extension or reinstatement of the Term. (d) All of Lessor's rights contained in this Section shall survive the expiration or other termination of this Lease. - 10 - 12. EVENTS OF DEFAULT AND REMEDIES: (a) The term "Event of Default", wherever used herein, shall mean any of the following events under this Lease: (i) Lessee breaches its obligation to pay Rent or any other sum when due and fails to cure the breach within ten (10) days; or (ii) Lessee breaches any of its insurance obligations under Section 10; or (iii) Lessee breaches any of its other obligations and fails to cure that breach within thirty (30) days after written notice from Lessor to Lessee; or (iv) any representation or warranty made by Lessee in this Lease shall prove to have been false or misleading in any material respect when any such representation or warranty was made or given (or, if a continuing representation, at any material time); or (v) Lessee or any guarantor or other obligor for any of the obligations hereunder (collectively "GUARANTOR") becomes insolvent or ceases to do business as a going concern; or (vi) a petition is filed by or against Lessee or any Guarantor under any bankruptcy, insolvency or similar laws and in the event of an involuntary petition, the petition is not dismissed within ninety (90) days of the filing date; or (viii) Lessee breaches or is in default under any other agreement by and between Lessor and Lessee for the lease of property or the financing of equipment. (b) Upon the occurrence of any Event of Default and so long as the same shall be continuing, Lessor may, at its option, at any time thereafter, exercise one or more of the following remedies, as Lessor in its sole discretion shall lawfully elect: (i) demand that Lessee immediately pay as liquidated damages, for loss of a bargain and not as a penalty, an amount equal to the Stipulated Loss Value of the Aircraft, computed as of the Basic Term Rent Date immediately preceding such demand together with all Rent and other amounts due and payable for all periods up to and including the Basic Term Rent Date following the date on which Lessor made its demand for liquidated damages; (ii) demand that Lessee pay all amounts due for failure to maintain or return the Aircraft as provided herein and cause Lessee to assign to Lessor (to the extent assignable) Lessee's rights under any manufacturer's service program contract or any extended warranty contract in force for the Aircraft; (iii) proceed by appropriate court action, either at law or in equity, to enforce the performance by Lessee of the applicable covenants of this Lease or to recover damages for breach hereof; (iv) by notice in writing terminate this Lease, whereupon all rights of Lessee to use of the Aircraft or any part thereof shall absolutely cease and terminate, and Lessee shall immediately return the Aircraft in accordance with Section 11, but Lessee shall remain liable as provided in Section 11; (v) request Lessee to return the Aircraft to a designated location in accordance with Section 11 ; (vi) peacefully enter the premises where the Aircraft may be and take possession of the Aircraft; (vii) sell or otherwise dispose of the Aircraft at private or public sale, in bulk or in parcels, with or without notice, and without having the Aircraft present at the place of sale; (viii) lease or keep idle all or part of the Aircraft; (ix) use Lessee's premises for storage pending lease or sale or for holding a sale without liability for rent or costs; (x) collect from Lessee all costs, charges and expenses, including reasonable legal fees and disbursements, incurred by Lessor by reason of the occurrence of any Event of Default or the exercise of Lessor's remedies with respect thereto; and/or (xi) declare any Event of Default under the terms of this Lease to be a default under any other agreement between Lessor and Lessee for the lease of property or the financing of equipment. (c) Lessor shall have the right to any proceeds of sale, lease or other disposition of the Aircraft, if any, and shall apply same in the following order of priorities: (i) to pay all of Lessor's costs, charges and expenses incurred in enforcing its rights under this Lease or in taking, removing, holding, repairing, selling, leasing or otherwise disposing of the Aircraft; then, (ii) to the extent not previously paid by Lessee, to pay Lessor all sums due from Lessee under this Lease; then (iii) to reimburse to Lessee any sums previously - 11 - paid by Lessee as liquidated damages; and (iv) any surplus shall be retained by Lessor. Lessee shall pay any deficiency in (i) and (ii) immediately. (d) The foregoing remedies are cumulative, and any or all thereof may be exercised instead of or in addition to each other or any remedies at law, in equity, or under statute. Notwithstanding anything herein to the contrary, Lessor agrees to mitigate its damages hereunder, as so required under applicable law. Waiver of any Event of Default shall not be a waiver of any other or subsequent Event of Default. 13. NET LEASE: Lessee is unconditionally obligated to pay all rent and other amounts due for the entire Term of this Lease no matter what happens, even if the Aircraft is damaged or destroyed, if it is defective or if Lessee no longer can use it except as provided in section 9 of this Lease. Lessee is not entitled to reduce or set-off against rent or other amounts due to Lessor or to anyone to whom Lessor assigns this Lease whether Lessee's claim arises out of this Lease, any statement by Lessor, Lessor's liability or any Supplier's liability, strict liability, negligence or otherwise. 14. INDEMNIFICATION: (a) Lessee hereby agrees to indemnify (on an after tax basis) Lessor and any other entity which has an ownership interest in, is owned by or is under common ownership with, Lessor, and the respective or collective officers, directors, agents, employees, successors and assigns of each (each, an "INDEMNIFIED PARTY") from and against any and all losses, damages, penalties, injuries, claims, demands, actions and suits, (collectively "CLAIMS") whether in law or equity, or in contract, tort, or otherwise, including reasonable attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal, arising out of or relating to the Aircraft or this Lease, except to the extent the Claims result from Indemnified Party's gross negligence or willful misconduct. This indemnity shall include, but is not limited to, Lessor's strict liability in tort and Claims that may be imposed on, incurred by or asserted against an Indemnified Party in any way arising out of (i) the selection, manufacture, purchase, acceptance or rejection of the Aircraft, the ownership of the Aircraft during the term of this Lease, and the delivery, lease, possession, maintenance, use, condition, return or operation of the Aircraft (including, without limitation, latent and other defects, whether or not discoverable by Lessor, any Indemnified Party or Lessee and any claim for patent, trademark or copyright infringement or environmental damage), (ii) the condition of the Aircraft sold or disposed of immediately after use by Lessee, any sublessee or employees of Lessee to the extent that the damages are the result of acts or omissions (in circumstances where Lessee has a duty to act) of Lessee, any sublessee or employees of Lessee; (iii) any breach of Lessee's obligations under the Lease or the failure by Lessee to comply with any term, provision or covenant contained in this Lease or any other agreement executed by Lessee in connection with this Lease or the Aircraft or with any applicable law, rule or regulation with respect to the Aircraft, or the nonconformity of the Aircraft or its operation with any applicable law; (iv) vandalism, hijacking, destruction, bombing, terrorism or similar acts directly or indirectly affecting the Aircraft, any part thereof, or any persons who (whether or not on board the Aircraft) may sustain any injury or damage as a result of any such acts, regardless of whether or not Lessee was at the time of such use, complying with the security requirements of the Lease or applicable - 12 - law; (v) any actions brought against any Indemnified Party that arise out of Lessee's actions (or actions of Lessee's agents) in connection with this Lease or the Aircraft; or (vi) Lessor's reliance on any representation or warranty made by Lessee (or any of its officers) under or in connection with this Lease or any report or other information delivered by Lessee pursuant hereto which shall have been incorrect in any material respect when made or deemed made or delivered, Lessee shall pay on demand to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any of the foregoing. Lessee shall, upon request, defend any actions based on, or arising out of, any of the foregoing. Notwithstanding anything herein to the contrary, Lessee shall have no obligation to indemnify an Indemnified Party against any Claims that are caused by the gross negligence or willful misconduct of any Indemnified Party, by any Indemnified Party's breach of this Lease, or any Indemnified Party's assignment or transfer of this Lease or the Aircraft. (b) Lessee hereby represents, warrants and covenants that (i) the Aircraft will not be used predominantly outside of the United States within the meaning of Section 168(g)(l)(A), (ii) the Aircraft will not become "tax-exempt use property" within the meaning of IRC Section 168(g)(l)(B), (iii) the Aircraft will not become "limited use property" within the meaning of Rev. Proc. 75-21 and 76-30, (iv) the Lessee will not make substantial non-severable improvements to the Aircraft unless required to by law in order to operate the Aircraft. In connection with and in reliance upon Lessee's observance of the foregoing representations, warranties and covenants, Lessee acknowledges that Lessor will be taking certain tax benefits set forth in Annex B Section C (the "Tax Benefits") in respect of the Aircraft (all references to Lessor in this Section 14 include Lessor and the consolidated taxpayer group of which Lessor is a member), and at no time during the Term of this Lease will Lessee take nor will it permit any sublessee or assignee to take any action (whether or not such act is otherwise permitted by Lessor or the provisions of this Lease), which will result in the breach of the foregoing representations, warranties and covenants set forth in this Section 14 (b) and the subsequent disqualification of the Aircraft for, or recapture of, all or any portion of such Tax Benefits; provided, however, that Lessee shall not be in breach of the representations, warranties or covenants contained in Section 14(b) if such breach is caused by the Lessor or by Lessee's exercise (provided no Event of Default has occurred and is continuing), of any purchase option or termination option exercised under the terms and conditions of this Lease. For the purposes of this Section 14(b), taking the Aircraft outside the United States and failing to bring it back to the United States in time to avoid having the Aircraft used predominantly outside the United States within the meaning of Section 168(g)(l)(A) will be considered an action in violation of the foregoing. (c) If as a direct result of a breach of any representation, warranty or covenant of the Lessee contained in this Lease (i) tax counsel of Lessor shall determine that Lessor is not entitled to claim on its Federal income tax return all or any portion of the Tax Benefits with respect to the Aircraft, or (ii) any Tax Benefit claimed on the Federal income tax return of Lessor is disallowed or adjusted by the Internal Revenue Service, or (iii) any Tax Benefit is recalculated or recaptured (any determination, disallowance, adjustment, recalculation or recapture being a "Loss"), then Lessee shall pay to Lessor, as an indemnity and as additional rent, an amount that shall cause Lessor's after-tax economic yields and cash flows to equal the Net Economic Return that would have been realized by Lessor if such Loss had not occurred. Such amount shall be payable upon demand accompanied by a statement describing in reasonable detail such Loss and the computation of such amount. The economic yields and cash flows shall be computed on the same assumptions, other than tax rates, as were used by Lessor in originally evaluating the transaction ("Net Economic Return"). - 13 - (d) Intentionally left blank. (e) All references to Lessor in this Section 14 include Lessor and the consolidated taxpayer group of which Lessor is a member. All of Lessor's rights, privileges and indemnities contained in this Section 14 shall survive the expiration or other termination of this Lease, and the rights, privileges and indemnities contained herein are expressly made for the benefit of, and shall be enforceable by Lessor, its successors and assigns. 15. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE AIRCRAFT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES AND THAT LESSOR IS LEASING THE AIRCRAFT IN AN "AS IS" CONDITION SUBJECT TO ANY SUPPLIER OR OUTFITTER WARRANTIES (THE BENEFITS OF WHICH LESSOR HEREBY ASSIGNS TO LESSEE). LESSOR DOES NOT MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE AIRCRAFT LEASED UNDER THIS LEASE OR ANY COMPONENT THEREOF, OR ANY ENGINE INSTALLED THEREON, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO CONDITION, AIRWORTHINESS, DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All such risks, as between Lessor and Lessee, are to be borne by Lessee. Without limiting the foregoing, Lessor shall have no responsibility or liability to Lessee or any other person with respect to any of the following: (i) any liability, loss or damage caused or alleged to be caused directly or indirectly by the Aircraft, any inadequacy thereof, any deficiency or defect (latent or otherwise) of the Aircraft, or any other circumstance in connection with the Aircraft; (ii) the use, operation or performance of the Aircraft or any risks relating to it; (iii) any interruption of service, loss of business or anticipated profits or consequential damages; or (iv) the delivery, operation, servicing, maintenance, repair, improvement or replacement of the Aircraft. If, and so long as, no Event of Default exists under this Lease, Lessee shall be, and hereby is, authorized during the Term of this Lease to assert and enforce, at Lessee's sole cost and expense, in the name of and for the account of Lessor and/or Lessee, as their interests may appear, whatever claims and rights Lessor may have against any Supplier of the Aircraft. Nothing in this paragraph shall be deemed to disclaim or waive the responsibility or liability of Lessor caused by its gross negligence or willful misconduct or its breach of this Lease. 16. REPRESENTATIONS AND WARRANTIES OF LESSEE AND LESSOR: 16.1 Lessee hereby represents and warrants to Lessor that on the date of this Lease and at all times during the Term of this Lease: (a) On the date hereof, Lessee has adequate power and capacity to enter into, and perform under, this Lease and all related documents (together, the "DOCUMENTS") and is duly qualified to do business wherever - 14 - necessary to carry on its present business and operations, including, if necessary, the jurisdiction(s) where the Aircraft is or is to have its primary hangar location. (b) On the date hereof, the Documents have been duly authorized, executed and delivered by Lessee and constitute valid, legal and binding agreements, enforceable against Lessee in accordance with their terms, except to the extent that the enforcement of remedies therein provided may be limited under applicable bankruptcy and insolvency laws. (c) On the date hereof, no approval, consent or withholding of objections is required from any governmental authority or instrumentality with respect to the entry into or performance by Lessee of the Documents except such as have already been obtained. (d) On the date hereof, the entry into and performance by Lessee of the Documents will not: (i) violate any judgment, order, law or regulation applicable to Lessee or any provision of Lessee's Certificate of Incorporation or By-Laws; or (ii) result in any breach of, constitute a default under or result in the creation of any lien, charge, security interest or other encumbrance upon any Aircraft pursuant to any indenture, mortgage, deed of trust, bank loan or credit agreement or other instrument (other than this Lease) to which Lessee is a party. (e) There are no suits or proceedings pending or threatened in court or before any commission, board or other administrative agency against or affecting Lessee, which will have a material adverse effect on the ability of Lessee to fulfill its obligations under this Lease. (f) Each financial statement delivered to Lessor has been prepared in accordance with generally accepted accounting principles consistently applied, and there has been no material adverse change between the date Lessee provided the most recent financial statement prior to the Commencement Date and the Commencement Date of this Lease. (g) Lessee's exact legal name is as set forth in the first sentence of this Lease and Lessee is and will be at all times validly existing and in good standing under the laws of the State of its incorporation (specified in the first sentence of this Lease) and Lessee is and will continue to be a "CITIZEN OF THE UNITED STATES" within the meaning of Section 40102(a)(15) of Title 49 of the United States Code. Lessee shall not consolidate, reorganize or merge with any other corporation or entity or sell, convey, transfer or lease all or substantially all of its property during the Term of this Lease without Lessor's consent, which shall not be unreasonably withheld, delayed or conditioned. (h) The chief executive office or chief place of business (as either of such terms is used in Article 9 of the Uniform Commercial Code) of Lessee is located at the address set forth above, and Lessee agrees to give Lessor prior written notice of any relocation of said chief executive office or chief place of business from its present location. (i) A copy of this Lease, and a current and valid Aircraft Registration Certificate will be kept on the Aircraft at all times during the Term of this Lease. - 15 - (j) Lessee has selected the Aircraft, manufacturer and vendor thereof, and all maintenance facilities required hereby. (k) Lessee shall maintain all logs, books and records (including any computerized maintenance records) pertaining to the Aircraft and engines and their maintenance during the Term in accordance with FAA rules and regulations. (l) Lessee shall not operate the Aircraft under Part 135 of the FAR without the prior written approval of Lessor. (m) Lessee shall notify the local Flight Standards District Office of the FAA forty-eight (48) hours prior to the first flight of the Aircraft under this Lease. (n) Throughout the Term of this Lease, Lessee will not use or operate and will not permit the Aircraft to be used or operated "predominately" outside the United States as that phrase is used in Section 168(g)(l)(A)of the Code. (o) Lessee is and will remain in full compliance with all laws and regulations applicable to it including, without limitation, (i) ensuring that no person who owns a controlling interest in or otherwise controls Lessee is or shall be (Y) listed on the Specially Designated Nationals and Blocked Person List maintained by the Office of Foreign Assets Control ("OFAC"), Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation or (Z) a person designated under Section 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders, and (ii) compliance with all applicable Bank Secrecy Act ("BSA") laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations. 16.2 Lessor hereby represents and warrants to Lessee that: (a) On the date hereof, Lessor has adequate power and capacity to enter into, and perform under, this Lease and all related Documents and is duly qualified to do business wherever necessary to carry on its present business and operations. (b) On the date hereof, the Documents have been duly authorized, executed and delivered by Lessor and constitute valid, legal and binding agreements, enforceable against Lessor in accordance with their terms, except to the extent that the enforcement of remedies therein provided may be limited under applicable bankruptcy and insolvency laws. (c) On the date hereof, no approval, consent or withholding of objections is required from any governmental authority or instrumentality with respect to the entry into or performance by Lessor of the Documents except such as have already been obtained. (d) On the date hereof, the entry into and performance by Lessor of the Documents will not: (i) violate any judgment, order, law or regulation applicable to Lessor or any provision of Lessor's Certificate of Incorporation or By-Laws; or (ii) result in any breach of, constitute a default under any indenture, - 16 - mortgage, deed of trust, bank loan or credit agreement or other instrument (other than this Lease) to which Lessor is a party. (e) On the date of this Lease and at all times during the Term of this Lease, so long as no Event of Default has occurred and is continuing, (i) Lessor, and anyone claim by or through Lessor, shall not interfere with Lessee's quiet enjoyment and use of the Aircraft, (ii) Lessor authorizes Lessee to assert for Lessor's account all rights and powers of Lessor under any manufacturer's or vendor's warranty with respect to the Aircraft or its components and (iii) to the extent permitted by such manufacturer's or vendor's warranty, Lessor assigns such warranty to Lessee. (f) On the date of this Lease and at all times during the Term of this Lease, Lessor is and will remain in full compliance with all laws and regulations applicable to it including, without limitation, (i) ensuring that no person who owns a controlling interest in or otherwise controls Lessor is or shall be (Y) listed on the Specially Designated Nationals and Blocked Person List maintained by the OFAC, Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation or (Z) a person designated under Section l(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders, and (ii) compliance with all applicable BSA laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations. 17. EARLY TERMINATION: (a) Lessee may, so long as no Event of Default by Lessee exists and is continuing under this Lease, terminate this Lease upon at least ninety (90) days prior written notice to Lessor effective on the Rent Payment Date ("TERMINATION DATE") specified in such notice which may be any Rent Payment Date on or after the First Termination Date (as specified in Annex B). (b) Lessee shall, and Lessor may, solicit cash bids for the Aircraft on an AS IS, WHERE IS basis without recourse to or warranty from Lessor, express or implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall (i) certify to Lessor any bids received by Lessee; and (ii) pay to Lessor, (a) the Termination Value (calculated as of the Termination Date) for the Aircraft; and (b) all Rent and other sums due and unpaid as of the Termination Date. Neither Lessee nor its agents shall be permitted to bid. (c) Provided that all amounts due hereunder have been paid on the Termination Date, Lessor shall (i) sell the Aircraft on an AS IS BASIS for cash to the highest bidder and (ii) refund the proceeds of such sale (net of any related expenses) to Lessee up to the amount of the Termination Value paid by Lessee. If such sale is not consummated, no termination shall occur and Lessor shall refund the Termination Value (less any expenses incurred by Lessor) to Lessee. (d) Notwithstanding the foregoing, Lessor may elect by written notice, at any time prior to the Termination Date, not to sell the Aircraft. In that event, on the Termination Date Lessee shall: (i) return the Aircraft (in accordance with Section 11); and (ii) pay to Lessor all amounts required under Section 17(b) less the amount of the highest bid certified by Lessee to Lessor. -17- 18. EARLY PURCHASE OPTION: (a) On the Early Purchase Option Date (specified in Annex B), Lessee may, so long as no Event of Default by Lessee exists hereunder and is continuing and this Lease has not been earlier terminated, purchase the Aircraft on an AS IS BASIS for cash equal to the Early Purchase Option Price (specified on Annex B), plus all applicable sales taxes, Lessee must give Lessor at least thirty (30) days, but not more than ninety (90) days, prior written notice of the purchase. Lessor and Lessee agree that the Option Price is a reasonable prediction of the price that a willing buyer (who is neither a lessee in possession nor a used aircraft dealer) would pay for the Aircraft on the Early Purchase Option Date in an arm's length transaction to a willing seller under no compulsion to sell. (b) If Lessee has elected to purchase the Aircraft, then on the Early Purchase Option Date Lessee shall pay to Lessor the Early Purchase Option Price (plus all applicable sales taxes) together with any rent and other sums due and unpaid on the Early Purchase Option Date. 19. END OF LEASE PURCHASE OPTION: (a) On the Expiration Date (specified in Annex B), Lessee may, so long as no Event of Default by Lessee exists hereunder and is continuing and this Lease has not been earlier terminated, purchase the Aircraft on an AS IS BASIS for cash equal to its then Fair Market Value (plus all applicable sales taxes). Lessee must give Lessor at least ninety (90) days, but not more than one hundred eighty (180) days, prior written notice of its intent to purchase. (b) "FAIR MARKET VALUE" shall mean the price which a willing buyer (who is neither a lessee in possession nor a used equipment dealer) would pay for the Aircraft in an arm's-length transaction to a willing seller under no compulsion to sell. In determining the Fair Market Value: (i) the Aircraft shall be assumed to be in the condition in which it is required to be maintained and returned under this Lease, (ii) any installed additions to the Aircraft shall be valued on an installed basis; and (iii) costs of removal of the Aircraft from the current location shall not be a deduction from the value of the Aircraft. If Lessor and Lessee are unable to agree on the Fair Market Value at least sixty (60) days before Lease expiration, Lessor shall appoint an independent appraiser (reasonably acceptable to Lessee) to determine Fair Market Value. The independent appraiser's determination shall be final, binding and conclusive. Lessee and Lessor shall each bear one-half of the costs associated with any such appraisal. (c) Lessee shall be deemed to have waived this purchase option unless it provides Lessor with written notice of its irrevocable election to exercise the option within fifteen (15) days after the Fair Market Value is finally determined in accordance with the preceding section. 20. MISCELLANEOUS: (a) LESSEE AND LESSOR HEREBY UNCONDITIONALLY WAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS -18- LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. (b) As between Lessor and Lessee, the Aircraft shall remain Lessor's property unless Lessee purchases the Aircraft from Lessor, and, until such time, Lessee shall only have the right to use the Aircraft pursuant to this Lease. Any cancellation or termination of this Lease, pursuant to the provisions of this Lease, shall not release either party from any then outstanding obligations to the other party hereunder. (c) Time is of the essence of this Lease. Lessee agrees, upon Lessor's request, to execute, any instrument reasonably necessary or expedient for filing, recording or perfecting the interest of Lessor, In addition, Lessee hereby authorizes Lessor to file a financing statement and amendments thereto describing the Aircraft and any engines, equipment and/or accessories described in any Annex attached hereto and containing any other information required by the applicable Uniform Commercial Code, All notices required to be given hereunder shall be deemed adequately given if delivered in hand or sent by registered or certified mail, postage prepaid, to the addressee at its address stated herein, or at such other place as such addressee may have designated in writing. This Lease and any Annexes hereto constitute the entire agreement of the parties with respect to the subject matter hereof, and all Annexes referenced herein are incorporated herein by reference. NO VARIATION OR MODIFICATION OF THIS LEASE OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF EACH PARTY TO THIS LEASE. (d) If Lessee does not comply with any provision of this Agreement, Lessor shall have the right, but shall not be obligated, to, upon the occurrence and during the continuance of an Event of Default, effect such compliance, in whole or in part. All reasonable amounts spent and obligations incurred or assumed by Lessor in effecting such compliance shall constitute additional Rent due to Lessor. Lessee shall pay the additional Rent within ten days after the date Lessor sends notice to Lessee requesting payment. Lessor's effecting such compliance shall not be a waiver of any Event of Default. (e) Any Rent or other amount not paid to Lessor when due shall bear interest from the due date until paid, at the lesser of twelve percent (12%) per annum or the maximum rate allowed by law. Any provisions in this Lease which are in conflict with any statute, law or applicable rule shall be deemed omitted, modified or altered to conform thereto. -19- (f) THIS LEASE AND THE FIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE AIRCRAFT. (g) This Lease may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and either of the parties hereto may execute this Lease by signing any such counterpart. (h) Each party hereto agrees to keep confidential, the terms and provisions of the Documents and the transactions contemplated hereby and thereby (collectively, the "TRANSACTIONS"). Notwithstanding the foregoing, the obligations of confidentiality contained herein, as they relate to the Transactions, shall not apply to the federal tax structure or federal tax treatment of the Transactions, and each party hereto (and any employee, representative, or agent of any party hereto) may disclose to any and all persons, without limitation of any kind, the federal tax structure and federal tax treatment of the Transactions. The preceding sentence is intended to cause each Transaction to be treated as not having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations promulgated under Section 601 1 of the Internal Revenue Code of 1986, as amended, and shall be construed in a manner consistent with such purpose. In addition, each party hereto acknowledges that it has no proprietary or exclusive rights to the federal tax structure of the Transactions or any federal tax matter or federal tax idea related to the Transactions. 21. TRUTH-IN-LEASING: (a) LESSEE HAS REVIEWED THE AIRCRAFT'S MAINTENANCE RECORDS AND OPERATING LOGS AND HAS FOUND THAT DURING THE PRECEDING 12 MONTHS OR, IF SHORTER, THE PERIOD FROM THE DATE THE AIRCRAFT WAS REGISTERED IN THE UNITED STATES UNTIL THE COMMENCEMENT DATE OF THIS LEASE, THE AIRCRAFT HAS BEEN MAINTAINED AND INSPECTED UNDER PART 14 CFR 91.409(f) OF THE FEDERAL AVIATION REGULATIONS. LESSEE CERTIFIES THAT THE AIRCRAFT PRESENTLY COMPLIES WITH THE APPLICABLE MAINTENANCE AND INSPECTION REQUIREMENTS OF PART 14 CFR 9l.409(f) OF THE FEDERAL AVIATION REGULATIONS. (b) LESSEE CERTIFIES THAT LESSEE, AND NOT LESSOR, IS RESPONSIBLE FOR OPERATIONAL CONTROL OF THE AIRCRAFT UNDER THIS LEASE DURING THE TERM HEREOF. EACH PARTY FURTHER CERTIFIES THAT IT UNDERSTANDS ITS RESPONSIBILITY FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS. -20- (c) LESSEE CERTIFIES THAT THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER PART 14 CFR 91.409(f) OF THE FEDERAL AVIATION REGULATIONS FOR OPERATIONS TO BE CONDUCTED UNDER THIS LEASE, EACH PARTY UNDERSTANDS THAT AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FEDERAL AVIATION REGULATIONS CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. IN WITNESS WHEREOF, Lessee and Lessor have caused this Lease to be executed by their duly authorized representatives as of the date first above written. LESSOR: LESSEE: AVN AIR, LLC BY: GENERAL ELECTRIC CAPITAL CORPORATION, MHS CONSULTING CORPORATION ITS MANAGER By:/s/ Connie Iatrides By: /S/ Karey L. Witty ------------------------------ --------------------------- Name: Connie Iatrides Name: KAREY L. WITTY ------------------------------ Title : Title: SECRETARY ------------------------------ -21- ANNEX A (FOR FAA FILING PURPOSES ONLY) DESCRIPTION OF AIRCRAFT, LESSOR'S COST, AND AIRCRAFT MARKINGS I. DESCRIPTION COST: $ INTENTIONALLY OMITTED Bombardier Aerospace, Model Challenger 604 Aircraft which consists of the following components: (a) Airframe bearing FAA Registration Mark N145DL and Manufacturer's Serial No, 5367; (b) two, (2) General Electric engines Model CF-34 3B bearing Manufacturer's Serial Nos. 872289 and 872290 respectively (each of which has 750 or more rated takeoff horsepower or the equivalent of such horsepower); (c) N/A, (_______________, ) N/A propellers bearing, respectively bearing, Manufacturer's Serial Nos. _______________________and __________________________________, each being rated as follows:__________________________________ (d) Standard accessories and optional equipment and such other items fitted or installed on the Aircraft and set forth on Exhibit A to Annex A attached hereto. (e) Those items of Lessee Furnished Equipment described in a bill of sale or bills of sale therefor (copies of which arc appended hereto), delivered by Lessee to Lessor which constitute appliances and equipment which will be installed on the Aircraft; (f) Sales Tax - to be paid on rental stream (g) Other -- APU: Garrett Model GTCP 36-100E, S/N P559 CAPITALIZED LESSOR'S COST $ INTENTIONALLY OMITTED II. AIRCRAFT MARKINGS (REFERENCED IN THE MAINTENANCE SECTION OF LESSOR) (a) Four-by-six inch plaque to be maintained in cockpit and affixed in conspicuous position stating: AVN Air, LLC Owner and Lessor. MHS Consulting Corporation Lessee under a certain Lease dated as of_________________, has operational control of this aircraft. (b) Similar markings shall be permanently affixed to each engine. Initials; Lessee: /s/ Karey L. Witty Lessor /s/ Connie Iatrides ------------------------ --------------------------- ANNEX A DESCRIPTION OF AIRCRAFT, LESSOR'S COST, AND AIRCRAFT MARKINGS I. DESCRIPTION COST; Bombardier Aerospace, Model Challenger 604 Aircraft which $17,286,000-00 consists Of the following components; (a) Airframe bearing FAA Registration Mark N145DL and Manufacturer's Serial No. 5367; (b) two, (2) General Electric engines Model CF-34 3B bearing Manufacturer's Serial Nos. 8722B9 and 872290 respectively (each of which has 750 or more rated takeoff horsepower or the equivalent of such horsepower); (c) N/A, (______________________) N/A propellers bearing, respectively bearing, Manufacturer's Serial Nos, _____________________________________________AND each being rated as follows: (d) Standard accessories and optional equipment and such other items fitted or installed on the Aircraft and set forth on Exhibit A to Annex A attached hereto. (e) Those items of Lessee Furnished Equipment described in a bill of sale or bills of sale therefor (copies of which we appended hereto), delivered by Lessee to Lessor which constitute appliances and equipment which will be installed on the Aircraft; (f) Sales Tax - To be paid on rental stream (g) Other - APU: GARRETT MODEL GTCP 36-100E, S/N PS59 CAPITALIZED LESSOR'S COST $ 17,286,000.00 II. AIRCRAFT MARKINGS (REFERENCED IN THE MAINTENANCE SECTION OF LEASE) (a) Four-by-six inch plaque TO be maintained in cockpit and affixed in conspicuous position stating: AVN Air, LLC Owner and Lessor. MHS Consulting Corporation Lessee under a certain Lease dated as of_______________________, has operational control of this aircraft. (b) Similar markings shall be permanently affixed to each engine. Initials: Lessee: /s/ KW Lessor /s/ CI ------------------------------- ------------------------- Exhibit A to Annex A Description of Aircraft, Lessor's Cost, and Aircraft markings One (1) 1998 Bombardier Challenger 604 S/N 5367 and FAA Registration #N145DL powered by Qty (2) General Electric Engines Model CF34-3B S/N 872289 and 872290 and equipped with an APU Garrett GTCP 36-100E S/N P-559 along with following avionics: Collins ProLine 4 System: Dual Collins FCC-4006 Digital Flight Control Computers Dual Collins ADC-850(E) Digital Air Data Computers Dual Collins FMS-6000 Flight Management Systems Dual Collins DCU-4000 series Data Concentrator Units Dual IRS with Dual Mode Select Unit Single Dual Channel Collins Integrated Avionics Processing Systems (IAPS) Six (7 1/4 " x 7 1/4) EFIS display tubes with EICAS (EFD-4077) Collins MDC-4000 Maintenance Diagnostic Computer Collins TRW-850 Weather Radar System w/ Turbulence Detection Collins Radio Altimeter (ALT 55B) Dual Collins HF-9000 HF Communications System Coltech CSD-714 Selcal Decoder System Dual Collins VHF-422C Comms with 8.33 kHz spacing and FM Immunity Dual Collins VIR432A Nav Receivers Dual Collins DME-442 Distance Measuring Equipment Dual Collins ADF-462 Automatic Direction Finders Dual Collins TDR-94D Mode S Transponders Dual Collins RTU-4200 Color Liquid Crystal Radio Tuning displays Solid State Fairchild A100S Cockpit Voice Recorder 8.33 Spacing/FM Immunity Sundstrand Mk-V EGPWS RVSM Compliant (LOA) ADDITIONAL EQUIPMENT Fairchild F-l000 Flight Data Recorder - S/B 604-31 -005 Increased Max Take-Off Weight - S/B 604-11-001. Second Weather Radar control panel - S/B 604-34-006 Collins TCAS II w/ Change 7 - S/B 604-34-017 Dual Collins GPS-4000 - S/B 604-34-018 Additional Cabin Windows - S/B 604-56-001 Interior Soundproofing Package 10 Gallon Water System Iridum Telephone System ADDITIONAL EQUIPMENT Continued Extended Duration Oxygen System Electronic Locator Transmitter Artex 110-4 Fwd and Aft Bulkhead mounted Monitors Audio International DVD Player Audio International 10 Disc CD Changer Air-Stair Lighting Cabin Page and Call System Sharp Microwave Convection Oven Aft Bay Storage, Towbar and ladder Pylon Lights Nespresso Machine Performance Plus Avionics upgrade INTERIOR Configuration; 10 passengers and one jumpseat. Four executive club chairs forward with foldout executive table. One four place berthable divan aft with life raft and life vest storage. Opposite two executive club chairs with foldout executive table. INTERIOR FIRE-BLOCKED. Colors: The veneer is Medium High Gloss Walnut. The Side Walls and Headliner are finished in Dark Brown. The cabin chairs are finished in Brown Leather, accented by a four color 100% wool carpet and beautiful Divan. EXTERIOR Colors: The Exterior is base coated Matterhom white with medium green, starlight sliver and Dusk grey accent stripes. Lessee Initials /s/ KW Lessor Initials /s/ CI ------------------------- -------------------- *AIR C0006* ANNEXE B DATED THIS ____________________________ TO AIRCRAFT LEASE AGREEMENT DATED AS OF ___________________________ Lessor & Mailing Address. Lessee & Mailing Address; AVN Air, LLC MHS Consulting Corporation 44 Old Ridgebury Road 711 CARONDKLET AVENUE Danbury, CT 06810 SAINT LOUIS, MO 63105 Capitalized terms not defined herein shall have the meanings assigned to them in the Aircraft Lease Agreement identified Above. A. AIRCRAFT. Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to Lessee the Aircraft described on Annex A to the Lease. B. FINANCIAL TERMS. 1. Advance Rent (if any): (a) Amount: $ 87,170.18 (b) Due Date: January 2, 2004 2. Capitalized Lessor's Cost: $ 17,286,000.00. 3. Basic Term Commencement Date: January 2, 2004 4. Basic Term: 120 months. 5. First Basic Term Rent Date: January 2, 2004 6. Basic Term Rent Dates: Second day of each month. 7. First Termination Dale: (36 ) months after the Basic Term Commmencement Date. 8. Last Basic Term Rent Date: December 2, 2013 9. Last Delivery Date: December __ ,2003. 10. Primary Hangar Location: Spirit of St. Louis Airport, Chesterfield, MO 11. Supplier: Bombardier Aerospace Corporation. 12. Lesser Federal Tax ID No,: 431795436. 13. Early Purchase Option: Option Date No. 1) January 2, 2007. Option Date No. 2) January 2, 2011) Option Price No. 1) $16,596,634.32 Option Price No. 2) $ 14,009,092.98 14. Expiration Date: January 2, 2014 15. Daily Lease Rate Factor: ,01681. 16. Basic Term Lease Rate Factor: The Unadjusted Basic Term Lease Rate Factor (as shown below) increased or decreased by any Adjustment Amount as provided below. 17. Unadjusted Basic Term Lease Rate Factor (s): Factor Rental No. .504282% PAYMENTS 1 THROUGH 60 .616345% PAYMENTS 61 THROUGH 120 18. Base Index Rate: 3.18% 19. INDEX RATE: A variable per annum interest rate which shall be equal to the rate listed for "5 Year" Treasury ("CURRENT INDEX"), constant maturity, under the column indicating the daily rate as Slated in the Federal Reserve Statistical Release H.15 (519) published on the first Business Day of the prior month in which the Adjustment Period commences. If, for any reason whatsoever, the Federal Reserve Statistical Release H.15 (519) is no longer published, the Current Index shall be equal to the latest annualized interest rate for "five year" U.S. Treasury Bills as reported by the Federal Reserve Board on a weekly-average basis, adjusted for constant maturity as indicated in the "Money Rates" column of the Wall Street Journal, Eastern Edition, published on the first Business Day of the calendar month in which the Adjustment Period commences. As used herein, the term "Business Day" shall mean and include any calendar day other than a day on which all commercial banks in the City of New York, New York arc required or authorized U3 be closed. 20. Calculation of Unadjusted Basic Term Rent: The calculation of the Unadjusted Basic Term Rent (as defined below) is based on an assumption that the Index Rate in effect from time to time throughout the Basic Term would be equal to the Base Index Rate. 21. Adjustment for the Basic Term: The Unadjusted Basic Term Rent (as defined below) shall be adjusted once every fifth year following the Basic Term Commencement Date, and such adjustment shall be effective during the adjustment period ("ADJUSTMENT PERIOD") as hereinafter defined provided Lessor provides Lessee no less than ten (10) business days notice of the Adjustment Amount calculated in accordance with this paragraph. The first Adjustment Period shall commence at the close of business on the fifth anniversary of the Basic Term Commencement Dale and shall continue through the same day of the next succeeding 5 year period. Each Adjustment Period thereafter shall commence at the close of business on the last day of the previous Adjustment Period and shall continue through the same day of the next succeeding 5 year period. The adjustment to the Unadjusted Basic Term Rent ("ADJUSTMENT AMOUNT") shall be calculated by multiplying the respective Basis Point increase or decrease (rounded up to the nearest whole number of a basis point, when necessary) between the Base Index Rate and the Index Rate for each Adjustment Period by the applicable adjustment factor set forth on Exhibit 1 attached hereto and multiplying ihe product by a fraction equal to the Capitalized Lessor's Cost divided by one million. The resulting Adjustment Amount shall then be added or subtracted, as the case may be, to the Unadjusted Basic Term Rent. C. TAX BENEFITS. DEPREDATION DEDUCTIONS: a. Depreciation Method: 200% declining balance method, switching 10 straight line method for the 1st taxable year for which using the straight line method with respect to ihe adjusted basis as of the beginning of such year would yield a larger allowance. b. Recovery Period: 5 years. c. Basis; 100 % of Capitalized Lessor's Cost. D. TERM AND RENT. 1. Interim Rent. For the period from and including the Commencement Date 10 the Basic Term Commencement Date ("INTERIM PERIOD"), Lessee shall pay as Rent ("INTERIM RENT") for each unit of Aircraft, the product of the Daily Lease Rate Fatter times the Capitalized Lessor's Cost of such unit times ihe number of days in the Interim Period. Interim Rent shall be due On lease commencement. 2. Unadjusted Basic Term Rent. Commencing on the First Basic Term Rent Date and on the same day of each month thereafter (each, a "RENT PAYMENT DATE") during the Basic Term, Lessee shall pay as Rent ("UNADJUSTED BASIC TERM RENT") as adjusted pursuant to Section B(21) above, if applicable, the product of ihe Basic Term Lease Rate Factor, as adjusted pursuant to Section B( 16) above, Times the Capitalized Lessor's Cost of the Aircraft. E. INSURANCE. 1. Public Liability: $ 50,000,000.00 total liability per occurrence. 2. Casualty and Property Damage: An amount equal to ihe higher of the Stipulated Loss Value or the full replacement cost of the Aircraft. F. Additional Maintenance Requirements. None. G. Amendments to Lease. Except as expressly modified hereby, all terms and provisions of the Lease shall remain in full force and effect. This Annex B is not binding or effective with respect to the Lease or the Aircraft until executed on behalf of Lessor and Lessee by authorized representatives of Lessor and Lessee, respectively. IN WITNESS WHEREOF, Lessee and Lessor have caused this Annex B to be executed by their duly authorized representatives as of the date first Above written. LESSOR: LESSEE: AVN AIR, LLC MHS CONSULTING CORPORATION BY ITS MANAGER GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Connie Iatrides By: /s/ Karey L Witty -------------------------------- -------------------------------- Name: Connie Iatrides Name: KAREY L WITTY ------------------------------ Title: _____________________________ Title: SECRETARY ATTEST BY: /s/ Sherry L Ebenreck -------------------------------- Name: SHERRY L EBENRECK *AIR C0006* FOR FAA FILING PURPOSES ONLY ANNEX B DATED THIS ________________ TO AIRCRAFT LEASE AGREEMENT DATED AS OF________________ Lessor & Mailing Address: Lessee & Mailing Address: AVN Air, LLC MHS Consulting Corporation 44 Old Ridgebury Road 711 CARONDELET AVENUE Dinbury, CT 06810 SAINT LOUIS, MO 63105 Capitalized terms not defined herein shall have the meanings assigned to them in ihe Aircraft Lease Agreement identified above. A. AIRCRAFT. Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to Lessee the Aircraft described on Annex A to the Lease. B. FINANCIAL TERMS. 1. Advance Rent (if any): (a) Amount: $ INTENTIONALLY OMITTED (b) DUE DATE: JANUARY 2, 2004 2. Capitalized Lessor's Cost: $INTENTIONALLY OMITTED 3. Basic Term 120 Commencement Date: January 2, 2004 4. Basic Term: 120 months 5. First Basic Term Rent Date: January 2, 2004 6. Basic Term Rent Dales: Second day of each month. 7. First Termination Date: (36) months after the Basic terms Commencement Date. 8. Last Basic Term Rent Date: December 2, 2014 9. Last Delivery Date: December____, 2003. 10. Primary Hangar Locution: Spirit of St. Louis Airport, Chesterfield, MO 11. SUPPLIER: BOMBARDIER AEROSPACE CORPORATION. 12. Lessee Federal Tin ID No.: 431795436. 13. Early Purchase Option: Option Date No. 1) January 2,2007 Option Date No. 2) January 2,2011 Option Price No. 1) INTENTIONALLY OMITTED Option Price No. 2) $ INTENTIONALLY OMITTED 14. Expiration Date: 15. Daily Lease Rate Factor: INTENTIONALLY OMITTED. 16. Basic Term Lease Rate Factor: The Unadjusted Basis Terra Lease Rate Factor (as shown below) increased or decreased by any Adjustment Amount as provided below. 17. Unadjusted Basic Term Lease Rate Factor(s): Factor Rental No. INTENTIONALLY OMITTED% PAYMENTS 1 THROUGH 60 INTENTIONALLY OMITTED% PAYMENTS 61 THROUGH 120 18. Base Index Rate: INTENTIONALLY OMITTED% 19. INDEX RATE: A variable per annum interest rate which shall be equal to the rate listed for "5 Year" Treasury ("CURRENT INDEX"), constant maturity, under the column indicating the daily rate as stated in the Federal Reserve Statistical Release H.15 (519) published on the final Business Day of the prior month in which ihe Adjustment Period commences, if, for any reason whatsoever, the Federal Reserve Statistical Release H.15 (519) is no longer published, the Current Index shall be equal 10 ihe latest annualized interest rate for "five year" U.S. Treasury Bills as reported by the Federal Reserve Board or a weekly-average basis, adjusted for constant maturity as indicated in the "Money Rates" column of the Wall Street Journal, Eastern Edition, published on the first Business Day of the calendar month in which the Adjustment Period commences, As used herein, the term "Business Day" shall mean and include any calendar day other than a day on which all commercial tanks in the City of New York, New York are required or authorized to be closed. 20. Calculation of Unadjusted Basic Term Rent: The calculation of the Unadjusted Basic Tenn Rent (as defined below) is based on an assumption that ihe Index Rate in effect from time to lime throughout the Basic Term would be equal to the Base Index Rate. 21. Adjustment for the Basic Tern: The Unadjusted Basic Term Rent (as defined below) shall be adjusted once every fifth year following the Basic Terra Commencement Date, and such adjustment shall be effective during the adjustment period ("ADJUSTMENT PERIOD") as hereinafter defined provided Lessor provides Lessee no less than ten (10) business days notice of the Adjustment Amount calculated in accordance with this paragraph. The first Adjustment Period shall commence at the close of business on the fifth anniversary of the Basic Term Commencement Data and shall continue through the same day of the next succeeding 5 year period. Each Adjustment Period thereafter shall commence at the close of business on the last day of the previous Adjustment Period and shall continue through the same day of the next succeeding 5 year period. The adjustment to the Unadjusted Basic Term Rent ("ADJUSTMENT AMOUNT") shall be calculated by multiplying the respective Basis Point increase or decrease (rounded up 10 the nearest whole number of a basis point, when necessary) between the Base Index Rate and the Index Rate for each Adjustment Period by the applicable adjustment factor set forth on Exhibit I attached hereto and multiplying the product by a fraction equal to the Capitalized Lessor's Cost divided by one million. The resulting Adjustment Amount shall then be added or subtracted, as the case may be, to the Unadjusted Basic Term Rent. C. TAX BENEFITS. DEPRECIATION DEDUCTIONS: a. Depreciation Method: 200% declining balance method, switching to straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of such year would yield a larger allowance. b. Recovery Period: 5 years. c. Basis: 100% of Capitalized Lessor's Cost. D. TERM AND RENT. 1. Interim Rent. For the period from and including the Commencement Date to the Basic Term Commencement Date ("INTERIM PERIOD"), Lessee shall pay as Rent ("INTERIM RENT") for each unit Of Aircraft, the product of the Daily Lease Rate Factor times the Capitalized Lessor's Cost of such unit limes the number of days in the Interim Period. Interim Rent shall be due on lease commencement. 2. Unadjusted Basic Term Rent. Commencing on the First Basic Term Rent Date and on the same day of each month thereafter (each, a "RENT PAYMENT DATE") during the Basic Term, Lessee shall pay as Rent ("UNADJUSTED BASIC TERM RENT") as adjusted pursuant to Section B(21) above, if applicable. the product of the Basic Term Lease Rate Factor, as adjusted pursuant to Section B(16) above, times the Capitalized Lessor's Cost of the Aircraft. E. INSURANCE. 1. Public Liability; $ 50,000,000.00 total liability per occurrence. 2. Casualty and Property Damage: An amount equal to the higher of the Stipulated Loss Value or the full replacement coal of the Aircraft. F. ADDITIONAL MAINTENANCE REQUIREMENTS. None. G. AMENDMENTS TO LEASE. Except as expressly modified hereby, all terms and provisions of the Lease shall remain in full force and effect. This Annex B is not binding or effective with respect to the Lease or the Aircraft until executed on behalf of Lessor and Lessee by authorized representatives of Lessor and Lessee, respectively. IN WITNESS WHEREOF, Lessee and Lessor have caused this Annex B to be executed by their duly authorized representatives as of the date first above written. LESSOR: LESSEE: AVN AIR, LLC MHS CONSULTING CORPORATION BY ITS MANAGER GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Connie Iatrides BY: /s/ K. L. Witty --------------------------------- -------------------------------- NAME: Connie Iatrides Name: KAREY L. WITTY ------------------------------- TITLE: ______________________________ Title: SECRETARY ATTEST By: /s/ Sherri L Erenreck -------------------------------- Name: SHERRI L ERENRECK *AIR C0008* ANNEX C PURCHASE DOCUMENT(S) ASSIGNMENT AND CONSENT THIS PURCHASE DOCUMENT(S) ASSIGNMENT ("ASSIGNMENT") is dated as of _____________________________ by and between AVN Air, LLC (The "LESSOR") and MHS CONSULTING CORPORATION (the "LESSEE"). WITNESSETH: Lessor and Lessee have entered into an Aircraft Lease Agreement dated as of _____ (the "LEASE") pursuant to which Lessee has agreed to lease from Lessor the Aircraft referred to therein. (All terms used herein which are not otherwise defined shall have the meaning ascribed to them in the Lease.) Lessee desires to lease rather than purchase the Aircraft and Lessor is wiling to acquire certain of Lessee's rights and interests under the purchase order(s) or purchase contracts (hereinafter either referred to as the "PURCHASE DOCUMENTS") which Lessee has heretofore issued to the Supplier(s) of such Aircraft. NOW THEREFORE, in consideration of the mutual covenants herein contained, Lessor and Lessee hereby agree as follows: SECTION 1. ASSIGNMENT: (a) Lessee does hereby assign and set over to Lessor all of Lessee's rights and interests in and to such Aircraft and the Purchase Documents, a description of such Purchase Documents is attached hereto as Schedule 1, as the same relate to such Aircraft including, without limitation, in such assignment (i) the right to purchase the Aircraft pursuant to the Purchase Documents, and the right to take title to such Aircraft and to be named the purchaser in the bill of sale for such Aircraft, (ii) all claims for damages in respect of the Aircraft purchased by Lessor arising as a result of any default by the Supplier thereof under the related Purchase Documents, including, without limitation, all warranty and indemnity provisions contained in such Purchase Documents, and all claims arising thereunder, in respect of such Aircraft, and (iii) any and all rights of Lessee to compel performance of the terms of such Purchase Documents. (b) If, and so long as, no default, Event of Default or event which, with notice and the lapse of lime or both, would constitute a default under the Lease Has occurred and is continuing, Lessee shall be, and is hereby authorized on behalf of Lessor in the name of Lessee to exercise all rights and powers of the purchaser under all Purchase Documents with respect to such Aircraft and to retain any recovery or benefit resulting from the enforcement of any warranty, indemnity or right to damages or other compensation under the Purchase Documents or otherwise existing against the Supplier in respect of such Aircraft. SECTION 2. CONTINUING LIABILITY OF LESSEE: It is expressly agreed that, anything herein contained to the contrary notwithstanding: (a) Lessee shall at all times remain liable to the Supplier to perform all of the duties and obligations of the purchaser under the Purchase Documents to the same extent as if this Agreement had not been executed, (b) the execution of this Agreement shall not modify any contractual rights of the Supplier under the Purchase Documents and the liabilities of the Supplier under the Purchase Document shall be to the same extent and continue as if this Agreement had not been executed, (c) the exercise by the Lessor of any of the rights assigned hereunder shall not release Lessee from any of its duties or obligations to the Supplier under the Purchase Documents, and (d) Lessor shall not have any obligation or liability under the Purchase Documents by reason of, or arising out of, this Agreement or be obligated to perform any of the obligations or duties of Lessee under the Purchase Documents or to make any payment (other than under the terms and conditions set forth in the Lease) or to make any inquiry of the sufficiency of or authorization for any payment received by any Supplier or to present or file any claim or to take any other action to collect or enforce any claim for any payment assigned hereunder. IN WITNESS WHEREOF, Lessee has caused this Assignment to be executed this ____ day of December, 2003 by its duly authorized representative. LESSEE: MHS CONSULTING CORPORATION By: /s/ K. L. Witty ------------------------ Name: KAREY L. WITTY Title: SECRETARY The foregoing Assignment is hereby accepted this_______ day of December, 2003. LESSOR: AVN Air, LLC BY ITS MANAGER: GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Connie Iatrides ------------------------------ Name: Connie Iatrides ---------------------------- Title:___________________________ SCHEDULE NO. 1 TO ANNEX C TO AIRCRAFT LEASE AGREEMENT PURCHASE DOCUMENTS: 1. Order or Purchase Agreement between Bombardier Aerospace Corporation and MHS Consulting Corporation dated as of October 8, 2003 2. Warranty Agreement (if any) between___________________ and _____________________________ dated__________________ 3. Manufacturer's Full Warranty Bill of Sale to Lessor dated_____________ 4. FAA Bill of Sale. Additional Maintenance Contracts and Other Purchase Documents: NONE *AIR C0011* ANNEX E CERTIFICATE OF ACCEPTANCE AIRCRAFT LEASE AGREEMENT dated as of ________________ (the "LEASE"). between AVN Air, LLC together with its successors and assigns, if any, as lessor (the "LESSOR"), and MHS Consulting Corporation is lessee (the "LESSEE"). A. The Aircraft: Lessee hereby certifies that the Aircraft as set forth and described in Annex A hereto has been delivered 10 Lessee, inspected by Lessee, and is, on the date set forth below, fully and finally accepted under the Lease. B. Representations by Lessee: Lessee hereby represents and warrants to Lessor that on the date hereof: (1) The representations and warranties of Lessee set forth in the Lease and all certificates and opinions delivered in connection therewith were true and correct in all respects when made and are true and correct as of the date hereof. (2) Lessee has satisfied or complied with all conditions precedent and requirements set forth in the Lease which are required to be or to have been satisfied or complied with on or prior to the date hereof. (3) No Default or Event of Default under the Lease has occurred and is continuing on the date hereof. (4) There are in full force and effect, such insurance policies with respect to the Aircraft, as are required to be obtained under the terms of the Lease. (5) Lessee has furnished no equipment for the Aircraft other than as sold to Lessor and as stated on Annex A hereto or permitted as an addition thereto pursuant to the Lease. (6) The Lessee has caused the records of the Aircraft and all pertinent records therefor to be inspected and the Aircraft has no damage history. (7) Lessee will promptly, following the commencement of the Lease, affix the nameplates required to be affixed to the Aircraft and to each engine pursuant to the MAINTENANCE Section of the Lease have been duly affixed. Date of Delivery of Acceptance: ______________________ IN WITNESS WHEREOF, Lessee has caused this Certificate of Acceptance to be duly executed by its officers thereunto duly authorized. Lessee: MHS CONSULTING CORPORATION BY: /S/ K. L. Witty -------------------------------- Name: KAREY L. WITTY Title: SECRETARY Date: 12/23/03 *AIRC0012* ANNEX F STIPULATED LOSS AND TERMINATION VALUES The Stipulated Loss and Termination Value of the Aircraft shall be the percentage of Capitalized Lessor's Cost of the aircraft set forth opposite the applicable rent payment. CAPITALIZED LESSOR'S COST $17,286,000.00
Termination Stipulated Termination Stipulated Rental Value Loss Value Value Loss Value Basic Percentage Percentage Rental Percentage Percentage - ----- ---------- ---------- ------ ---------- ---------- 1 103.433 107.384 61 92.292 94.767 2 103.401 107.328 62 91.918 94.368 3 103.349 107.251 63 91.541 93.968 4 103.271 107.148 64 91.165 93.566 5 103.184 107.037 65 90.788 93.165 6 103.09 106.913 66 90.41 92.762 7 102.988 106.791 67 90.032 92.36 8 102.885 106.663 68 89.652 91.955 9 102.773 106.527 69 89.271 91.55 10 102.654 106.384 70 88.89 91.144 11 102.534 106.239 71 88.507 90.737 12 102.405 106.086 72 88.124 90.328 13 102.269 105.925 73 87.74 89.92 14 102.131 105.763 74 87.353 89.509 15 101.992 105.599 75 86.965 89.096 16 101.848 105.43 76 86.576 88.683 17 101.699 105.256 77 86.187 88.269 18 101.545 105.078 78 85.797 87.855 19 101.387 104.895 79 65.407 87.44 20 101.227 104.711 80 85.015 87.023 21 101.062 104.521 81 84.623 86.606 22 100.B93 104.327 82 84.23 86.189 23 100.722 104.132 83 83.834 85.769 24 100.546 103.931 84 83.439 85.349 25 100.366 103.726 85 83.043 84.928 26 100.183 103.519 86 82.644 84.505 27 100 103.311 87 82.244 84.08 28 99.813 103.1 88 81.843 83.655 29 99.623 102.885 89 81.442 83.229 30 99.431 102.668 90 81.04 82.803 31 99.235 102.448 91 80.638 82.376 32 99.038 102.227 92 80.234 81.947 33 98.838 102.002 93 79.829 81.518 34 98.635 101.774 94 79.424 81.088
35 98.43 101.545 95 79.017 80.656 36 98.223 101.313 96 78.609 80.224 37 98.012 101.078 97 78.201 79.791 38 97.8 100.841 98 77.791 79.357 39 97.587 100.603 99 77.379 78.92 40 97.37 100.362 100 76.966 78.482 41 97.151 100.118 101 76.552 78.044 42 96.928 99.871 102 76.139 77.606 43 96.703 99.621 103 75.725 77.167 44 96.476 99.369 104 75.308 76.726 45 96.246 99.115 105 74.892 76.285 46 96.013 98.857 106 74.474 75.843 47 95.778 98.598 107 74.055 75.399 48 95.541 98.336 108 73.635 74.955 49 95.301 98.071 109 73.215 74.51 50 95.059 97.805 110 72.793 74.063 51 94.815 97.536 111 72.368 73.614 52 94.57 97.267 112 71.944 73.165 53 94.323 96.995 113 71.518 72.715 54 94.075 96.722 114 71.093 72.265 55 93.825 96.448 115 70.666 71.814 56 93.573 96.172 116 70.238 71.361 57 93.32 95.894 117 69.809 70.908 58 93.066 95.615 118 69.38 70.454 59 92.81 95.334 119 68.949 69.998 60 92.552 95.052 120 68.517 69.542

INITIALS: [ILLEGIBLE] __________________________ -------------------------- Lessor Lessee *LEAS9991* EXHIBIT I TO ANNEX B DATED AS OF ______________ TO AIRCRAFT LEASE AGREEMENT DATED AS OF _______________
floating rate payment adjustment number factor ~~61 3.8424~~
INITIALS: [ILLEGIBLE] ____________________ ------------------- Lessor Lessee *AIRC0019* ANNEX G TO AIRCRAFT LEASE DATED____________________ ADDITIONAL MAINTENANCE AND RETURN CONDITIONS 1. In addition to the requirement set forth in the MAINTENANCE Section and the RETURN OF AIRCRAFT Section of the Lease, the Lessee shall comply with the following terms and conditions: (a) On the Return Date, Lessee (i) shall have completed the next required 800 hour and 24 month inspections on the Aircraft, and the next periodic inspection on each engine; (ii) shall ensure that each engine shall have available operating hours until both the next scheduled "hot section" inspection and next scheduled major Overhaul of not less than 50% of the total operating hours respectively available between such hot section inspections or major overhauls; and (iii) shall ensure that the airframe shall have at least: (aa) one-half the available operating hours; and (bb) one-half the available operating months until the next scheduled major airframe inspection allowable between major airframe inspections.; and (iii) shall ensure that the life limited components as detailed in chapter five of the Aircraft's maintenance manual. Time Limits and Maintenance Checks, have at least one-half the available hours/cycles/months until next scheduled replacement. (b) In the event that any of such engines or airframe does not meet the conditions set forth in paragraph (a) above, Lessee shall pay Lessor an amount equal to the sum of (i) for each engine, the product of: the current estimated cost of the next scheduled the section inspection (including in such estimated cost, all required replacement of life limited parts) multiplied by the fraction wherein the numerator shall be the remainder (0 if negative) of (x) the actual number of hours of operation since the previous hot section inspection, minus (y) 50% of the total operating hours allowable between hot section inspections, and the denominator shall be the total operating hours allowable between hot section inspections, plus (ii) for each engine, the product of: the current estimated cost of the next scheduled major overhaul (including in such estimated cost, all required replacement of life limited parts) multiplied by the fraction wherein the numerator shall be the remainder (0 if negative) of (x) the actual number of hours of operation since the previous major overhaul minus (y) 50% of the total operating hours allowable between major overhauls, and the denominator shall be the total operating hours allowable between major overhauls, plus (iii) the product of: the current estimated cost of the next scheduled major airframe and pressure vessel inspection (including in such estimated cost, all required replacement of life limited pans) multiplied by the greater fraction wherein the number shall be the remainder (0 if negative) of (x) the actual number of respective operating hours or months of operation since previous major airframe and pressure vessel inspection, minus (y) 50% of the respective total operating hours or months of operation allowable between scheduled major airframe and pressure vessel inspections, and the denominator shall be the respective total operating hours or months of operation between scheduled major airframe and pressure vessel inspections. All prorated inspection and/or overhaul charges, if any, shall be payable as supplemental rent and shall be due upon presentation to Lessee of an invoice setting forth in reasonable detail the calculation of such amounts due including the names of all sources used for the required cost estimates. (Unless both Lessor and Lessee agree to alternative source(s), the manufacturers of the airframe and engines shall be used as the sources for all cost estimates.) Initials: Lessee [ILLEGIBLE] Lessor: ____________________ ----------------------- *AIRC0014* December , 2003 MHS Consulting Corporation 7711 CARONDELET AVENUE SAINT LOUIS, MO 63105 Attn.: Mr. Karey Witty Dear Mr. Witty: AVN Air, LLC (together with its successors and assigns, if any) is entering into an Aircraft Lease Agreement dated __________________ (the "AGREEMENT") with MHS CONSULTING CORPORATION for the lease of a certain Aircraft as more particularly described in Annex* A (the "AIRCRAFT") to the Agreement, In accordance with the requirements of Article 2A of the Uniform Commercial Code, Lessor hereby makes the following disclosures to Lessee prior to execution of the Agreement, (a) the person supplying the Aircraft is BOMBIRDIER AEROSPACE CORPORATION, tax identification number __________________________(the "SUPPLIER"), (b) Lessee is entitled to the promises and warranties, including those of any third party, provided to the Lessor by Supplier, which is supplying the Aircraft in connection with or as part of the contract by which Lessor acquired the Aircraft and (c) with respect to the Aircraft, Lessee may communicate with Supplier and receive an accurate and complete statement of such promises and warranties, including any disclaimers and limitations of them or of remedies. AVN AIR, LLC BY ITS MANAGER GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Connie Iatrides ---------------------------- Name: Connie Iatrides -------------------------- Title:_________________________ ACKNOWLEDGED AND AGREED TO: MHS CONSULTING CORPORATION By: /s/ K L Witty --------------------------- Name: KAREY L. WITTY Title: SECRETARY Date: 12/23/03 *AIRC0017* Date: ___________________ AVN Air, LLC 44 Old Ridgebury Road Danbury,CT06810 Gentlemen: You are hereby irrevocably authorized and directed to deliver and apply the proceeds due the undersigned in connection with a lease to the undersigned evidenced by that Aircraft, Lease Agreement dated _________ and Annex B dated________________ as follows: Bombardier Aerospace Corporation $17,286,000.00 This authorization and direction is given pursuant to the same authority authorizing the above-mentioned financing. Very truly yours, MHS CONSULTING CORPORATION By: /s/ K L Witty ---------------------------------- Name: KAREY L. WITTY Title: SECRETARY EX-10.32 13 c83064exv10w32.txt ASSET SALE AND PURCHASE AGREEMENT EXHIBIT 10.32 EXECUTION COPY ASSET SALE AND PURCHASE AGREEMENT BY AND AMONG CENTENE CORPORATION, BUCKEYE COMMUNITY HEALTH PLAN, MERCY HEALTH PARTNERS AND FAMILY HEALTH PLAN, INC. SEPTEMBER 23, 2003 TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS............................................................................................. 1 ARTICLE II SALE OF ASSETS.......................................................................................... 6 2.1 Sale and Purchase of Assets.................................................................... 6 2.2 Excluded Assets................................................................................ 7 2.3 Exclusion of Certain Contracts................................................................. 8 2.4 Liabilities.................................................................................... 8 2.5 Purchase Price................................................................................. 10 2.6 Closing and Closing Date....................................................................... 12 2.7 Actions to be Taken at Closing................................................................. 12 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER..................................................... 14 3.1 Representations and Warranties of Parent and Seller............................................ 14 3.2 Representations and Warranties True and Correct at Closing Date; Breaches...................... 23 3.3 Representations and Warranties True and Correct at Effective Date; Breaches.................... 24 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CENTENE AND BUYER..................................................... 24 4.1 Representations and Warranties of Buyer........................................................ 24 4.2 Representations and Warranties True and Correct at Closing Date; Breaches...................... 26 4.3 Representations and Warranties True and Correct at Effective Date; Breaches.................... 26 ARTICLE V SURVIVAL................................................................................................ 27 ARTICLE VI BUYER'S CONDITIONS PRECEDENT TO CLOSING................................................................. 27 6.1 Instruments of Transfer........................................................................ 27 6.2 Assignment of Provider Agreements.............................................................. 27 6.3 Performance of Conditions Precedent............................................................ 27 6.4 Good Standing Certificate...................................................................... 27 6.5 Buyer's Medicaid Contract...................................................................... 28 6.6 Secretary's Certificates....................................................................... 28 6.7 Opinion of Seller's Counsel.................................................................... 28 6.8 Incumbency Certificate......................................................................... 28 6.9 Third Party Approvals and Consents............................................................. 28
i TABLE OF CONTENTS (continued)
PAGE 6.10 Seller's Representations and Warranties True and Correct....................................... 28 6.11 Governmental Consents and Approvals............................................................ 28 6.12 IBNR Expense Certification..................................................................... 29 6.13 Litigation..................................................................................... 29 6.14 Membership..................................................................................... 29 6.15 Closing Medical Claims Estimate................................................................ 29 6.16 Certain Covenants.............................................................................. 30 6.17 Deliveries..................................................................................... 30 ARTICLE VII SELLER'S CONDITIONS PRECEDENT TO CLOSING................................................................ 30 7.1 Agreements..................................................................................... 30 7.2 Performance of Conditions Precedent............................................................ 30 7.3 Good Standing Certificates..................................................................... 30 7.4 Secretary's Certificates....................................................................... 30 7.5 Incumbency Certificate......................................................................... 30 7.6 Buyer's Representations and Warranties True and Correct........................................ 31 7.7 Litigation..................................................................................... 31 7.8 Termination/Release of Seller's Medicaid Contract.............................................. 31 7.9 Governmental Consents and Approvals............................................................ 31 7.10 Opinion of Buyer's Counsel..................................................................... 32 7.11 Miscellaneous.................................................................................. 32 7.12 Deliveries..................................................................................... 32 ARTICLE VIII JOINT CONDITIONS PRECEDENT TO CLOSING................................................................... 32 8.1 Closing of Transactions Under Related Agreements............................................... 32 8.2 MHP Hospital Contract.......................................................................... 32 8.3 PHO Provider Agreement......................................................................... 32 ARTICLE IX ADDITIONAL AGREEMENTS OF SELLER......................................................................... 33 9.1 Conduct of Business Pending Closing............................................................ 33 9.2 Access to Documents and Premises............................................................... 35 9.3 Noncompetition and Nonsolicitation............................................................. 35 9.4 Seller's Employment Issues..................................................................... 36 9.5 Additional Financial Information............................................................... 37 9.6 Supplements to Schedules....................................................................... 37 9.7 Payment of Excluded Liabilities................................................................ 37 9.8 Credentialing.................................................................................. 38 9.9 Joinder in Litigation.......................................................................... 38 9.10 Termination of Incentive Pools/Funds........................................................... 38
ii TABLE OF CONTENTS (continued)
PAGE ARTICLE X ADDITIONAL AGREEMENTS OF BUYER.......................................................................... 38 10.1 Maintenance of Records......................................................................... 38 10.2 Local Boards................................................................................... 39 ARTICLE XI ADDITIONAL AGREEMENTS OF BUYER AND SELLER............................................................... 39 11.1 Regulatory Milestones Prior to Closing......................................................... 39 11.2 Ohio Department of Insurance................................................................... 39 11.3 Ohio Department for Job and Family Services.................................................... 40 11.4 Ohio Attorney General.......................................................................... 40 11.5 Transition Issues.............................................................................. 40 11.6 Public Information Releases.................................................................... 41 11.7 Cooperation.................................................................................... 42 11.8 ODJFS and Other Required Reporting............................................................. 42 11.9 On-Site Presence............................................................................... 42 11.10 Securities Law Compliance...................................................................... 42 11.11 Trademark License Agreement.................................................................... 42 11.12 MHP Hospital Contract and PHO Provider Agreement............................................... 43 ARTICLE XII INDEMNIFICATION......................................................................................... 43 12.1 Indemnification by Parent and Seller........................................................... 43 12.2 Indemnification by Centene and Buyer........................................................... 44 12.3 Limitations.................................................................................... 45 12.4 Notice and Right to Defend..................................................................... 45 12.5 Right of Set-Off............................................................................... 47 12.6 Covenant Breach................................................................................ 47 ARTICLE XIII TERMINATION............................................................................................. 47 13.1 Termination.................................................................................... 47 13.2 Effect of Termination.......................................................................... 48 13.3 Waiver......................................................................................... 49 ARTICLE XIV ARBITRATION............................................................................................. 49 14.1 Conciliation and Mediation..................................................................... 49 14.2 Arbitration.................................................................................... 49 14.3 Equitable Relief............................................................................... 50 ARTICLE XV MISCELLANEOUS........................................................................................... 50 15.1 Notices........................................................................................ 50 15.2 Waiver......................................................................................... 51
iii TABLE OF CONTENTS (continued)
PAGE 15.3 Counterparts................................................................................... 51 15.4 Headings....................................................................................... 51 15.5 Severability................................................................................... 51 15.6 Entire Agreement............................................................................... 51 15.7 Successors and Assigns......................................................................... 52 15.8 Governing Law.................................................................................. 52 15.9 HIPAA Compliance............................................................................... 52 15.10 Cost of Transaction............................................................................ 52 15.11 Further Assurances............................................................................. 53 15.12 Construction................................................................................... 53 15.13 Third Parties.................................................................................. 53 15.14 Time is of the Essence......................................................................... 53 15.15 Confidentiality................................................................................ 53 15.16 Rights Cumulative.............................................................................. 54 15.17 Amendments..................................................................................... 54
iv EXECUTION COPY ASSET SALE AND PURCHASE AGREEMENT THIS ASSET SALE AND PURCHASE AGREEMENT ("Agreement") is made and entered into as of this 23th day of September, 2003 ("Execution Date"), by and among Buckeye Community Health Plan, a Ohio health insuring corporation and wholly-owned subsidiary of Centene ("Buyer"), Centene Corporation, a Delaware corporation ("Centene"), Mercy Health Systems - Northern Region d/b/a Mercy Health Partners, an Ohio non-profit corporation ("Parent") and Family Health Plan, Inc., an Ohio non-profit corporation and wholly-controlled subsidiary of Parent ("Seller"). RECITALS: A. Seller is a second tier subsidiary of Parent, recognized as income tax-exempt under Code Section 501(c)(3), organized to develop, promote, maintain and operate as a health maintenance organization and to provide services as a third party administrator of claims for various affiliated entities, in accordance with applicable law and regulation. B. Seller is licensed as a health insuring corporation ("HIC") by the Ohio Department of Insurance ("ODI"). As part of the transactions contemplated herein, Buyer is applying to be licensed as an HIC by ODI. C. Seller's HIC operations are comprised of several business segments, including a commercial HIC business, which was recently sold, and a managed-care business pursuant to the Seller's Medicaid Contract with the Ohio Department for Job and Family Services ("ODJFS"). D. Seller desires to sell, assign, and deliver to Buyer, and Buyer desires to purchase, accept assignment of, and accept delivery from Seller of, the Medicaid Business with the Medicaid Members being re-enrolled with Buyer, as well as other related assets described herein. E. Buyer and Seller executed a Confidentiality Agreement dated June 23, 2003 (the "Confidentiality Agreement") and Letter of Intent dated August 15, 2003 (the "Letter of Intent") relating to the transactions set forth in this Agreement. F. Buyer and Seller wish to set forth the terms and conditions under which Buyer will buy and Seller will sell, or cause to be sold, the assets of the Medicaid Business. NOW, THEREFORE, for and in consideration of the above recitals and the representations, warranties, mutual covenants, and agreements herein expressed, and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereby agree as follows: ARTICLE I DEFINITIONS In addition to certain terms defined elsewhere in this Agreement, the following terms shall be defined as set forth below. 1.1 "Affiliates" means (i) any Person directly or indirectly controlling, controlled by or under common control with another person where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise; and (ii) any Person owning or controlling 10% or more of the outstanding voting securities of such other Person. 1.2 "Applicable Rate" means the Prime Rate plus 1%. 1.3 "Assets" means the assets of Seller that are being acquired by Buyer as set forth in Section 2.1 of this Agreement. 1.4 "Benefit Plan" means any (i) nonqualified deferred compensation or retirement plan or arrangement, whether or not funded and whether or not terminated, (ii) qualified defined contribution retirement plan or arrangement that is an employee pension benefit plan under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not funded and whether or not terminated, (iii) qualified defined benefit retirement plan or arrangement which is an employee pension benefit plan under ERISA, whether or not funded and whether or not terminated, or (iv) employee welfare benefit plan under ERISA or material fringe benefit or other retirement, bonus or incentive plan or program, whether or not funded and whether or not terminated. 1.5 "Books and Records" has the meaning ascribed to in Section 2.1(d). 1.6 "Buyer's Medicaid Contract" means the contract executed on the Closing Date by and between ODJFS and Buyer for the Service Area. 1.7 "Closing" means the closing of the purchase and sale of the Assets occurring on the Closing Date. 1.8 "Closing Date" means the date of Closing as determined pursuant to Section 2.6. 1.9 "Code" means the Internal Revenue Code of 1986, as amended. 1.10 "Competing Business" means any health insurance or health benefit program, including, without limitation, any health maintenance organization, health care preferred provider organization (or a similar or related business or expansion into related lines of business because of an expansion of the State of Ohio Medicaid managed care program) provided by Seller or any of Seller's Affiliates to Medicaid beneficiaries in the Service Area through the State of Ohio Medicaid managed care program or any successor program thereto; provided that any business that Buyer affirmatively elects in writing not to enter into shall not be considered a competing business. 1.11 "Confidentiality Agreement" has the meaning ascribed to it in the recitals. 1.12 "Effective Date" has the meaning ascribed to it in Section 2.6.1. 1.13 "Excluded Assets" means those assets of Seller that are excluded from the transaction that is the subject of this Agreement pursuant to Section 2.2. 2 1.14 "Excluded Liabilities" means those liabilities of Seller that are excluded from the transaction that is the subject of this Agreement pursuant to Section 2.4.2. 1.15 "Financial Statements" has the meaning set forth in Section 3.1.5 of this Agreement. 1.16 "First Capitation Date" means the date one (1) day after the date upon which Buyer receives the First Capitation Payment. 1.17 "First Capitation Payment" means the first capitation payment which is received by Buyer directly from ODJFS as a payment for Buyer's own account. 1.18 "GAAP" means United States generally accepted accounting principles as in effect from time to time, consistently applied throughout the specified period and in the immediately prior comparable period. 1.19 "Governmental Entity" has the meaning set forth in Section 3.1.4 of this Agreement. 1.20 "Hired Employee" has the meaning set forth in Section 9.4(b) of this Agreement. 1.21 "HIC" has the meaning ascribed to it in the recitals. 1.22 "IBNR Expenses" means the actuarial estimate of medical expenses that have been incurred by Medicaid Members but not reported. 1.23 "In-Scope Employee" has the meaning set forth in Section 9.4(b) of this Agreement. 1.24 "Intellectual Property" means any of the following in any jurisdiction throughout the world: patents and patent applications and patent disclosures, trademarks, trade names, service marks, brand names, Internet domain names, inventions, copyrights and copyrightable works (including software), processes, formulae, trade dress, business and product names, logos, slogans, trade secrets and confidential information, industrial models, designs, methodologies, computer programs (including all source code) and related documentation, technical information, manufacturing, engineering and technical drawings, know-how and all pending applications for and registrations of patents, trademarks, service marks and copyrights. 1.25 "Interim Financial Statements" has the meaning set forth in Section 3.1.5 of this Agreement. 1.26 "Letter of Intent" has the meaning ascribed to it in the recitals. 1.27 "Licensed Trademark" means the mark "FAMILY HEALTH PLAN." 1.28 "Lien" means any interest in property securing an obligation owed to, or a claim by, a person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from 3 a mortgage, charge, pledge, assignment, hypothecation, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or other encumbrance of any nature whatsoever on or with respect to any cash, property, right to receive income or other assets of any nature whatsoever. 1.29 "Medicaid" means medical assistance provided under a state plan approved under Title XIX of the Social Security Act. 1.30 "Medicaid Business" means the business of providing managed care services to Medicaid Members in the Service Area and of receiving from the State the corresponding premium and other revenue as payment for such services pursuant to the terms of the Seller's Medicaid Contract. 1.31 "Medicaid Members" means the persons enrolled under Seller's Medicaid Contract. 1.32 "Medicaid Providers" means the physicians, hospitals and other health care providers that have contracted with Seller and/or Seller's Affiliates to provide covered health care services to Medicaid Members. 1.33 "Medical Claim" has the meaning ascribed to it in the Section 11.5.3. 1.34 "Medical Claims Adjustment Amount" has the meaning set forth in Section 2.5.2 of this Agreement. 1.35 "Medical Claims Cap" shall be 88.82% of premium revenues as set forth in the Medical Claims Schedule. 1.36 "Closing Medical Claims Estimate" shall have the meaning ascribed to it in Section 2.5.1(b). 1.37 "Medical Claims Final Amount" has the meaning set forth in Section 2.5.2 of this Agreement. 1.38 "Medical Claims Schedule" means the schedule attached hereto as Exhibit A. 1.39 "Medical Claims Threshold Amount" shall be $16,671,825. 1.40 "MHP Hospital Contract" shall mean the agreement by and between Buyer and Parent dated as of the date hereof. 1.41 "OAG" has the meaning ascribed to it in Section 6.11. 1.42 "ODI" has the meaning ascribed to it in the recitals. 1.43 "ODJFS" has the meaning ascribed to it in the recitals. 1.44 "Person" means an individual, a partnership, a corporation, an association, a limited liability company, a joint stock company, a trust, a joint venture, an unincorporated 4 organization, a governmental entity or any department, agency or political subdivision thereof or any other entity. 1.45 "PHO Provider Agreement" shall mean the agreement by and between Mercy Health Systems PHO, Inc. and Buyer dated as of the date hereof. 1.46 "Prime Rate" shall mean the rate that is published in the Wall Street Journal from time to time as the prime lending rate as in effect from time to time. 1.47 "Provider Agreements" means the written agreements for the provision of health care services to Medicaid Members that have been executed by and between providers, including, without limitation, those with physicians, hospitals, ancillary and other institutional providers, laboratories, vision providers, behavioral health providers, durable medical equipment services providers, and provider HICs, and Seller. 1.48 "Purchase Price" has the meaning ascribed to it in Section 2.5.1. 1.49 "Regulations" means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations are amended from time to time. 1.50 "Seller's Medicaid Contract" means the contract(s) executed by and between ODJFS and Seller in effect as of the date of this Agreement for the Service Area. 1.51 "Seller's Permits" has the meaning ascribed to it in Section 3.1.7. 1.52 "Service Area" means the Lucas County, Ohio, service area designated by ODJFS, for purposes of the Medicaid program. 1.53 "State" means the State of Ohio. 1.54 "Taxes" means all federal, state, local and foreign income, employment, franchise, capital stock, excise, gross receipts, sales, use, property, real estate and stamp taxes, license, occupation, premium, windfall profits, environmental (including under Code Section 59A), withholding, social security (or similar), unemployment, disability, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner; payments in lieu of taxes, levies, duties, assessments and fees of any nature or other taxes of any kind whatsoever, together with all related penalties, fines or additions to tax or interest thereon, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person. 1.55 "Tax Returns" means any returns, reports, forms, declarations, claims for refund, information reports, amended returns or other documents (including any related or supporting schedules, supporting statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Person or the administration of any laws or regulations or, administrative requirements relating to any Taxes. 5 ARTICLE II SALE OF ASSETS 2.1 Sale and Purchase of Assets. Seller hereby agrees to sell transfer, convey, assign and deliver to Buyer, or cause to be sold, transferred, conveyed, assigned and delivered to Buyer, free and clear of all Liens and encumbrances of any kind, and Buyer hereby agrees to purchase and accept assignment from Seller or Seller's Affiliates, for payment of the Purchase Price specified in Section 2.5, all of the legal and beneficial right, title and interest in, to and under Assets of every kind and description that are owned and used by Seller in the operation of or necessary and/or material to the Medicaid Business in the Service Area, or owned by Seller's Affiliates including, without limitation, the following: (a) All of Seller's rights to continue to operate the Medicaid Business under the Seller's Medicaid Contract, including but not limited to all rights to provide ODJFS prescribed health services to Medicaid Members and the corresponding right to receive capitation payments, premium payments, delivery supplemental payments, and any other revenues payable by ODJFS with respect to such members from and after the Effective Date; (b) Seller's rights, title and interests in the Provider Agreements that are listed on Schedule 2.1(b) (the "Purchased Provider Agreements"), as may be amended prior to the Closing through terminations, expirations, and additions made in the ordinary course of business, but to the extent that there are parties to any particular Provider Agreement other than Seller and the provider, Seller shall arrange to have the Provider Agreement amended or otherwise restructured as necessary for Buyer to receive substantially all of the benefits and to assume substantially all of the performance obligations accruing or arising with respect to periods after the Effective Date previously assumed by Seller under such Provider Agreement. To the extent the Medicaid Providers will continue to provide services to Seller for other products on and after the Effective Date, the acquisition of the Provider Agreements shall be pursuant to a partial assignment only, solely with respect to the Medicaid portion of such Provider Agreements; (c) All of Seller's rights, title and interests in all other contracts of Seller which relate to the Medicaid Business and are listed on Schedule 2.1(c), as may be amended prior to the Closing through terminations, expirations, and additions made in the ordinary course of business (the "Other Contracts", and collectively with the Provider Agreements and the Seller's Medicaid Contract, the "Business Contracts"); (d) Originals of or true and correct copies of financial and other books, records, information and title documents necessary for Buyer to operate the Medicaid Business (the "Books and Records"); 6 (e) Books and Records pertaining to transferred Medicaid Members, including lists of all names, addresses, identification numbers, provider data, and copies (electronic and/or hard copy) of all books and records maintained for such members, including medical and claim histories; (f) Books and Records pertaining to Providers, including without limitation lists of all of Seller's Medicaid Providers for the Medicaid Members, the Purchased Provider Agreements, containing names, addresses, and other data maintained for each provider; (g) Originals of or true and correct copies of all of the credentialing files and supporting or related documentation for any non-PHO Medicaid Provider; (h) Medical management materials, including copies of policies and procedures used in connection with the Medicaid Business; (i) Rights and interests of every kind relating to the Assets and/or the ownership of the Medicaid Business that arise or accrue after the Effective Date, including payments of any kind by or on behalf of Medicaid Members, refunds, causes of action, and rights of recovery, except to the extent such claims and rights relate exclusively to an Excluded Liability; (j) All Intellectual Property (including goodwill and other intangibles) used in connection with the Medicaid Business, including without limitation all software service code and object code and the Licensed Trademark, along with all income, royalties, damages and payments arising therefrom that are due and payable to Seller on or after the Effective Date; (k) All rights to Medicaid Member outreach programs, including but not limited to the procedures, methods, and materials for member outreach utilized by Seller in the Service Area prior to the Effective Date; and (l) Seller's existing stock of pre-printed advertising brochures, marketing materials, literature, form contracts, form certificates of coverage, membership handbooks and other pre-printed materials related to the Medicaid Business, to be utilized by Buyer consistent with Section 11.5.2 of this Agreement. 2.2 Excluded Assets. The following assets of Seller are not included in the defined term "Assets," and they are not being transferred or assigned to Buyer under this Agreement. They are considered "Excluded Assets." (a) Seller's rights, title and interests in the real property owned or leased by Seller or Seller's Affiliates; (b) Seller's rights, title and interests in its contracts of employment; 7 (c) Right, title and interests in Seller's Medicaid Contract (including retroactive additions (net of deductions)), including accounts receivable; (d) Except as otherwise set forth in this Agreement, Seller's rights, title and interests in contracts not assigned pursuant to the terms of this Agreement ("Excluded Contracts"); (e) Seller's rights, title and interests in the insurance policies or programs covering Seller, its officers, directors, employees and agents, and any claims for refunds or recoveries under any insurance policies or programs; (f) Seller's rights, title and interests in claims against third parties arising with respect to acts and omissions occurring on dates prior to the Effective Date, if any; (g) All cash, cash equivalents, and statutory deposits of Seller relating to the Medicaid Business; and (h) All other assets listed on Schedule 2.2(h). Exclusion of Certain Contracts. Notwithstanding anything to the contrary contained in this Agreement, Buyer shall have the right, in its sole discretion, from the date hereof until seven (7) days prior to the Effective Date, to specifically exclude any Business Contract, as Buyer shall specify in a written notice to Seller, whereupon such contract or contracts shall, to the extent excluded, cease to be "Assets" hereunder and shall become "Excluded Assets" and thereby be excluded from the Assets; provided that such exclusions shall not result in an adjustment to the Purchase Price. 2.4 Liabilities. 2.4.1 Assumed Liabilities. As of the Effective Date, Buyer shall assume the direct obligation to pay, discharge, and perform, as appropriate, only those liabilities specifically identified herein (collectively, the "Assumed Liabilities") which are as follows: any and all liabilities and obligations arising with respect to periods after the Effective Date under the Buyer's Medicaid Contract, including, without limitation, all obligations to pay and administer payment under the Provider Agreements for covered services rendered to Medicaid Members after the Effective Date, excepting, however any obligation for claims for payment for services rendered to Medicaid Members who, subject to Section 2.4.4 hereof, have been admitted, on or prior to the Effective Date and continuing through such Medicaid Members' discharge. 2.4.2 Liabilities Not to be Assumed. Buyer shall not assume and shall not be obligated to pay, discharge or perform any obligations and liabilities of Seller or Seller's Affiliates relating to the Medicaid Business or any other business not listed in Section 2.4.1 of this Agreement, regardless of whether such 8 obligation arises before or after the Effective Date, including, without limitation, the following (collectively, "Excluded Liabilities"): (a) Any and all liabilities or obligations of Seller or Seller's Affiliates in connection with the Medicaid Business, whether reported or unreported, arising or accruing prior to the Effective Date, including without limitation, any liability for contractual obligations under the Seller's Medicaid Contract arising prior to the Effective Date, which shall include but not be limited to, Medical Claims (whether incurred under a Provider Agreement or otherwise) for services rendered to Medicaid Members on or prior to the Effective Date and claims of Medicaid Members who are hospitalized, or, subject to Section 2.4.4 hereof, whose admission has been authorized (which admissions Seller will list on Schedule 2.4.2(a) to this Agreement to be provided to Buyer one (1) Business Day prior to Effective Date) and which Seller represents, prior to the Effective Date through the date of discharge for such members; (b) Any and all liabilities of Seller, Seller's Affiliates or any third party, whether currently known or unknown, with respect to claims or potential claims for medical malpractice or professional liability with respect to the Medicaid Business arising out of or accruing from or relating to the Medicaid Business prior to the Effective Date in each case regardless of when the claim is asserted; (c) Any and all liabilities of Seller, Seller's Affiliates or any third party, whether currently known or unknown, relating to litigation or claims of any kind or nature with respect to the Medicaid Business arising out of or accruing from or relating to the Medicaid Business prior to the Effective Date, in each case regardless of when the claim is asserted; (d) Liabilities arising from relating to or in connection with the Excluded Assets; (e) Liabilities that do not relate to the Medicaid Business; (f) Liabilities which are not otherwise directly related to the Assets and Assumed Liabilities; (g) Liabilities arising from, related to or in connection with any of Seller's expenses related to the transactions contemplated by this Agreement; (h) Liabilities arising from, related to or in connection with any cure or other amount payable with respect to the assignment of any contractual obligation to Buyer hereunder; (i) Any liability of any kind to, or with respect to, Seller's employees, including without limitation, salaries or compensation of any kind, continued employment, vacation or severance pay, or with respect to the Benefit Plans of Seller (including all obligations pursuant to the continuation coverage rules of ERISA Sections 601-608 and Code Section 4980B); 9 (j) Any and all Taxes or assessments arising from or related to ownership of the Assets or the conduct of the Medicaid Business prior to the Effective Date, including without limitation (i) any personal property or sales or use taxes, (ii) any liability of Seller for unpaid Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise; (iii) any liability of Seller for income, transfer, sales, use, and other Taxes arising in connection with the consummation of the transactions contemplated hereby (including any income Taxes arising because Seller is transferring the assets); or (iv) any other Taxes or assessments payable by Seller; (k) Any and all retroactive subtractions to premium earned by Seller for periods prior to Effective Date and related to the Medicaid Business; and (l) Any and all Losses against which Seller agrees to indemnify Buyer pursuant to Article XII of this Agreement. 2.4.3 Transfer Taxes; Recording Fees. Seller and Buyer share the burden equally of all of the cost of any and all sales, use, transfer or other similar taxes imposed as a result of the consummation of the transactions between Buyer and Seller contemplated by this Agreement. 2.4.4 Authorized Admissions. With respect to claims for payment for services rendered to Medicaid Members whose in-patient hospital admission has been authorized by Seller prior to the Effective Date (and regardless of date of discharge), Seller shall be responsible for all admissions occurring prior to the Effective Date. Buyer shall have the right to review authorizations within 30 days of the Effective Date to determine whether the requested treatment or services are medically necessary and appropriate and consistent with the policies and procedures developed under Section 11.5.1 Seller and Buyer agree that all such admissions, whether pre-Closing or post-Closing shall be handled in the ordinary course of business and consistent with the policies and procedures developed under Section 11.5.1. 2.5 Purchase Price. 2.5.1 Determination of Purchase Price. (a) Subject to the terms and conditions of this Agreement, in consideration of the sale, transfer, assignment, conveyance and delivery of the Assets and the covenants and conditions contained herein, Buyer or Centene shall (i) assume the Assumed Liabilities; (ii) subject to delivery of the certificate described in Section 3.3, pay to Seller at the later of the First Capitation Date or the Effective Date by wire transfer of immediately available funds to an account specified to Buyer by Seller in writing at least two (2) Business Days before the Effective Date, an amount equal to the sum of (1) number of Medicaid Members enrolled with Seller on the Effective Date multiplied by $203, plus (2) $1,500,000 to be paid directly 10 to Parent for the MHP Provider Agreement and the non-compete provisions of this Agreement, (subject to adjustment as provided herein for the Medical Claims Adjustment Amount)(the "Purchase Price"). (b) Within five (5) Business Days prior to the Closing Date, Buyer and Seller shall in good faith jointly prepare an estimate of the actual year-to-date Medical Claims as of the most recent month, as available, prior to the Closing Date (the "Closing Medical Claims Estimate"). Such amount shall be calculated in the same manner and consistent with the methodology used in calculating the amounts set forth in the Medical Claims Schedule (which shall include premium revenue details). 2.5.2 Medical Claims Adjustment. As of the nine-month anniversary of May 31, 2003, the Buyer shall determine actual Medical Claims incurred with respect to the Medicaid Business for the year to date ending on May 31, 2003 (the "Buyer Final Medical Claims Estimate"). Buyer shall prepare, with the participation of Seller, and send to Seller within 60 days following the end of such period its computation as to the Buyer Final Medical Claims Estimate together with any and all working papers used in making such computations. Such computation shall be made in the same manner and consistent with the methodology used in calculating the Medical Claims Schedule. Seller agrees to provide to Buyer all information necessary (as determined in Buyer's sole reasonable discretion) for such computation. Within 30 days following the receipt of such report, Seller must provide Buyer with written objection to such report detailing what specific parts of the Buyer Final Medical Claims Estimate are being disputed. To the extent such written notice is not delivered within such time-frame, the Buyer Final Medical Claims Estimate shall become final and binding upon both parties. Any disagreement between Buyer and Seller that cannot be resolved by the parties within 30 days after the receipt of Seller's written objections will be resolved by the Seattle office of Milliman USA (the "Actuarial Firm"). The parties shall have an opportunity to present their position to the Actuarial Firm and shall cooperate with the Actuarial Firm in making available to them any records or work papers requested by the Actuarial Firm. The decision of the Actuarial Firm shall be set forth in writing and will be conclusive and binding on the parties and subject to judicial enforcement. Each party shall bear one-half of the cost of the Actuarial Firm. The final amount determined pursuant to this Section shall be deemed the "Medical Claims Final Amount." Upon the final determination of the Medical Claims Final Amount, to the extent that such amount exceeds the Medical Claims Threshhold Amount (such excess defined as the "Medical Claims Adjustment Amount"), Seller shall be liable for and shall deliver an amount equal to 150% of the Medical Claims Adjustment Amount to the Buyer by wire transfer of immediately available funds; provided that such amount shall be payable only if the Medical Claims Final Amount (when presented as a percentage of premium revenues) exceeds 88.82%. 2.5.3 Allocation. Buyer shall prepare an allocation of the Purchase Price (and all other capitalized costs) among the Assets in accordance with Code Section 1060 and the Regulations thereunder (and any similar provision of state, local or foreign law, as appropriate), which allocation shall be 11 binding upon Seller. Buyer shall deliver such allocation to Seller and Parent within 60 days after the Closing Date. Buyer shall report, act and file Tax Returns (including, but not limited to, Internal Revenue Service Form 8594) in all respects and for all purposes consistent with such allocation prepared by Buyer. Seller shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as Buyer may reasonably request to prepare such allocation. Neither Buyer nor Seller shall take any position (whether in audits, Tax Returns or otherwise) which is inconsistent with such allocation unless required to do so by the applicable law. 2.6 Closing and Closing Date 2.6.1 Closing Subject to the satisfaction of the conditions set forth herein, the actions contemplated to consummate the transactions under this Agreement shall take place on the date of the execution of the Buyer's Medicaid Contract (the "Closing Date"). The Closing shall take place on the Closing Date at the offices of Kirkland & Ellis LLP, located at 200 East Randolph Drive, Chicago, Illinois 60601, or at such other location as may be agreed upon by the parties. Subject to the terms hereof the risk of loss for the Medicaid Business shall pass from Seller to Buyer, at 12:01 a.m. (Eastern Standard Time, adjusted for daylight savings time, if applicable) on the first date of enrollment of Medicaid members under the Buyer's Medicaid Contract (the "Effective Date"). 2.7 Actions to be Taken at Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing: 2.7.1 Buyer's Deliveries. Buyer, and Centene, as applicable, shall deliver to Seller: (a) The Bill of Sale, Assignment and Assumption Agreement, substantially in the form of Exhibit C relating to the Assets conveyed to Buyer hereunder, and such other instruments and agreements, duly executed by Buyer, as may be reasonably necessary to effect Buyer's assumption of the Assumed Liabilities; (b) All necessary consents, estoppels, approvals, authorizations or other documents from third parties in a form reasonably satisfactory to Seller required to be obtained by Buyer under the terms of this Agreement; (c) Copies of the resolutions duly adopted by the Board of Directors of Buyer authorizing Buyer's execution, delivery and performance of this Agreement and of all documents related hereto or contemplated herein; (d) Such other documents as reasonably required by Seller to complete the transactions contemplated hereunder; and (e) Each of the items required under Article VII. 12 2.7.2 Seller's Deliveries. Seller, and Parent, as applicable, shall deliver to Buyer, or to the extent any Assets are owned by Seller's Affiliates, shall cause Seller's Affiliates to deliver to Buyer: (a) The Bill of Sale, Assignment and Assumption Agreement, substantially in the form of Exhibit C, conveying all right, title and interest in, to and under the Assets to be conveyed to Buyer hereunder free and clear of all Liens, and such other instruments and agreements, duly executed by Seller, as may be reasonably necessary to effect Seller's assignment of the Assumed Liabilities; (b) All necessary consents, estoppels, approvals, authorizations or other documents from third parties in a form reasonably satisfactory to Buyer required to be obtained by Seller or Seller's Affiliates hereunder; (c) All necessary consents, estoppels, approvals, authorizations or other documents executed by Seller's Affiliates in a form reasonably satisfactory to Buyer which are necessary to convey to Buyer the Assets owned by Seller's Affiliates; (d) A true and correct list of all Medicaid Members who have been authorized by Seller to be admitted for hospitalization on a date following Closing, plus documentation utilized by Seller to make such authorization; (e) Copies of the resolutions duly adopted by the Board of Directors of Seller or Parent authorizing Seller's or Parent's execution, delivery and performance of this Agreement and of all documents related hereto or contemplated herein; (f) Such other documents reasonably required by Buyer to transfer fully the Assets and Assumed Liabilities to Buyer or to complete the transactions contemplated hereunder; and (g) Each of the items required under Article VI. 2.7.3 Third Party Consents. To the extent that Seller's rights under any contracts relating to the Medicaid Business may not be assigned without the consent of a third party, which consent has not been obtained prior to Closing, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful. Seller, at its expense, shall use its commercially reasonable efforts to obtain any such required consent as promptly as possible after Closing. If any such consents are not obtained or if any attempted assignment would be ineffective or would impair Buyer's rights so that Buyer would not in effect acquire the benefit of all such rights, Seller, to the maximum extent permitted by law and by the terms of the applicable contract(s), at Seller's expense, shall use its reasonable best efforts in acting as Buyer's agent in order to obtain for Buyer the benefits thereunder, and shall cooperate, to the maximum extent permitted by law and by the terms of the applicable contract(s), with Buyer in any other reasonable arrangement designed to provide the benefits of such contracts to Buyer. Seller shall, without further consideration therefor, pay and remit to the Buyer promptly all monies, rights, 13 and other considerations received in respect of the Buyer's performance of any obligations, and, at the Buyer's request, shall direct that such payments be made directly to the Buyer. Without limiting the foregoing, Sellers shall not terminate any such contract without the prior written consent of Buyer. Buyer may, from time to time, upon five (5) Business Days' written notice to Seller, terminate any arrangements which are the subject of this Section 2.7.3 with respect to periods after such notice, without liability or further obligation to Seller or any third party. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER 3.1 Representations and Warranties of Parent and Seller. As of the Execution Date, Parent and Seller jointly and severally represent and warrant to Buyer as follows: 3.1.1 Organization and Good Standing. Seller is a non-profit corporation duly organized, validly existing and in good standing under the laws of the State of Ohio and has all requisite corporate power and corporate authority to own, lease and operate the Assets and to carry on the Medicaid Business as it is now being conducted by Seller. Except as disclosed on Schedule 3.1.1, Seller has no Subsidiary and does not own any shares of capital stock or other equity of any other Person. 3.1.2 Authority. Each of Parent and Seller has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Seller and Parent, respectively, and, as necessary, their respective Affiliates. This Agreement constitutes a valid and binding obligation of both Parent and Seller, enforceable against Parent and Seller in accordance with its terms, except insofar as enforcement may be limited by insolvency or similar laws affected the enforcement of creditors' rights in general, and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.1.3 No Violations. Except as disclosed a Schedule 3.1.3 (and subject to the receipt of the governmental authorizations described in Section 6.20 below), the execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (i) conflict with, or result in, any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of any benefit under, or the creation of a Lien with respect to, any portion of the Assets or Assumed Liabilities (any such conflict, violation, default, right of termination, cancellation or acceleration, loss or creation, a "Violation"), pursuant to any provision of the Articles of Incorporation or Bylaws or regulations of Seller or Parent, (ii) result in any Violation of any contract which constitutes part of the Assets or Assumed Liabilities, (iii) result in any Violation 14 of any judgment, order or decree entered with respect to Seller or Parent or to which the Assets or the Assumed Liabilities are subject, (iv) result in any Violation of any statute, law, ordinance, rule or regulation applicable to the Assets or the Assumed Liabilities or (v) provide any Governmental Entity (as defined below) or Person the right to withdraw, revoke, suspend, cancel, terminate or modify any consent, license, permit, waiver or other authorization issued or originated previously. 3.1.4 No Consents. Except as disclosed on Schedule 3.1.4, no other consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign ("Governmental Entity"), is required by or with respect to Seller in connection with the execution and delivery of this Agreement by Seller, or the consummation by Seller of the transactions contemplated hereby. 3.1.5 Seller's Financial Statements. Seller has delivered to Buyer, complete and correct copies of (i) the audited balance sheets of Seller as of December 31, 2001 and 2002 and those related audited statements of income and cash flows, for the fiscal years ended on those dates, together with all footnotes (the "Financial Statements") and (ii) the unaudited balance sheet and statement of income of Seller for the period ended on May 31, 2003 (the "Interim Financial Statements"). All of such financial statements fairly present, in all material respects, as of and for the periods then ended, as the case may be (subject, in the case of the unaudited balance sheet and income statement, to normal, recurring adjustments and the absence of footnotes), the financial position, results of operations and cash flows of Seller in conformity with GAAP or where inconsistent with GAAP in conformity with statutory or other accounting practices prescribed or permitted by the insurance regulatory authorities in the State of Ohio, in each case applied on a basis consistent throughout the reported periods. Such financial statements (i) do not contain, as the case may be, any item of extraordinary or non-recurring income or expense (except as specified therein); and (ii) reflect all write-offs or necessary revaluation of assets (except as specified therein). The reserves recorded in the accounting records of Seller for HIC contract benefits, losses, claims and expenses and any other reserves (i) were prepared in accordance with the statutory or other actuarial and accounting practices prescribed or permitted by the insurance regulatory authorities of the State of Ohio, (ii) make sufficient provisions for all insurance obligations of Seller; (iii) meet the requirements of any law, rule or regulation applicable to such reserves and the requirements of Seller's Permits (as defined below); and (iv) are computed on the basis of assumptions consistent with those used in computing the corresponding reserves in the prior fiscal year. All payments to and/or settlements with Medicaid Providers have been accounted for in the appropriate medical expense reserve account (by category of medical expense) and have been reflected as a medical expense of Seller. 3.1.6 Litigation. Except as set forth on Schedule 3.1.6, there are no (i) actions, suits, proceedings, of any kind pending, or governmental investigations of any kind now pending or threatened in a delivered writing and involving the Assets, the Medicaid Business, or the Assumed Liabilities, 15 (ii) actions, suits, demands, investigations or proceedings which is pending or threatened which questions the validity or propriety of this Agreement or any action taken or to be taken by Seller or Parent in connection with this Agreement or (iii) to Seller's or Parent's knowledge, events have occurred or circumstances exist that are reasonably likely to give rise to or serve as a basis for the commencement of either (i) or (ii). Seller is not subject to any judicial injunction or mandate or any administrative order or administrative restriction directed to or against it as a result of its ownership of the Assets or its conduct of the Medicaid Business as now or heretofore conducted by it, and no governmental agency has at any time challenged or questioned in writing, or commenced or given notice of intention to commence any investigation relating to, the legal right of Seller to conduct the Medicaid Business or any part thereof as now or heretofore conducted by it. 3.1.7 Compliance With Applicable Laws. Except as set forth on Schedule 3.1.7, the Medicaid Business is being conducted in compliance with all applicable laws, rules, ordinances, regulations, licenses, or judgments, or orders, rules, regulations, licenses, judgments, or decrees of Governmental Entities, and no condition exists which with or without notice or passage of time or both shall cause Seller not to remain in such compliance, nor has Seller received notification from any Governmental Entity asserting that, with respect to the Medicaid Business, it is not in compliance with any of the statutes, regulations or ordinances which such governmental authority enforces, or that the governmental agency or department is threatening to revoke, suspend or modify any governmental authorization applicable to the Medicaid Business. Seller has not utilized and does not utilize brokers or agents in the conduct of the Medicaid Business. Seller holds all certificates of authority, permits, licenses, consents, certificates, orders and approvals from all Governmental Entities which are necessary to own or lease the Assets and operate the Medicaid Business in the manner heretofore conducted (collectively, "Seller's Permits"), and Seller's Permits are in full force and effect. Schedule 3.1.7 sets forth a complete and accurate listing of the Seller's Permits. Seller has filed all statements and reports with insurance regulatory authorities required by the law, regulations, licensing requirements and orders administered or issued by such regulatory authorities. No event has occurred with respect to any of such Seller's Permits which would cause revocation, termination or suspension of any of such Seller's Permits or give rise to any obligation on the part of Seller (pre-Closing) or Buyer (post-Closing) to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. Seller has not, and none of its executive officers, directors or employees (in their respective capacities as such) has, engaged in any activity constituting fraud or abuse under the laws relating to health care or insurance. Schedule 3.1.7 lists all examinations of Seller related to the Medicaid Business conducted by a Governmental Entity since January 1, 2002 and identifies by date any correspondence between such a Governmental Entity and Seller regarding sanctions, conclusions made and/or corrective action required or suggested based on such examination. 3.1.8 Title and Condition of Properties. Seller does not own any real property that is used in the Medicaid Business. 16 3.1.9 Absence of Undisclosed Liabilities. Except (i) as set forth on Schedule 3.1.9 hereto, (ii) as reflected or reserved against on the face of the Interim Financial Statements, or (iii) for obligations or liabilities incurred in the ordinary course of business after the date of the Interim Financial Statements (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law), Seller has no obligations or liabilities of any nature whatsoever relating to the Medicaid Business (whether absolute, accrued, contingent, disputed or otherwise and including, without limitation, deferred Tax liabilities, vacation time or pay, severance pay, and any other liabilities relating to or arising out of any act, omission, transaction, circumstance, sale of services, or other condition which occurred or existed on or before such date); nor does there exist a set of circumstances relating to the Medicaid Business resulting from transactions effected or events occurring on or prior to the Closing Date or from any action omitted to be taken during such period that could reasonably be expected to result in any such obligation or liability relating to the Medicaid Business. 3.1.10 Absence of Certain Changes. Since December 31, 2002, except (i) as set forth on Schedule 3.1.10, (ii) for the execution and delivery of this Agreement and changes in Seller's properties or Medicaid Business attributable to the transactions contemplated or necessitated by this Agreement, and (iii) as disclosed in Seller's Interim Financial Statements as previously delivered or to be delivered to Buyer: (b) Seller has not made any material change in its accounting methods or practices or its present fiscal year with respect to its condition, operations, the Medicaid Business, the Assets, or the Assumed Liabilities, except as may be required by statutory accounting principles, in which case Seller has promptly notified Buyer in writing of the nature of and reason for the change; (c) Seller has not executed, amended, or terminated any contract which would affect (either in the aggregate or individually) the Medicaid Business in any material respect to which it is or was a party or by which any of the Assets are bound or affected; amended, terminated or waived any of its rights thereunder; or received notice of termination, amendment, or waiver of any contract or any material rights thereunder; (d) Seller has not permitted any Lien on the Assets; (e) Seller has (i) conducted its Medicaid Business in a commercially prudent manner, as a going concern and in the ordinary course and consistent with the requirements of a non-profit federally tax-exempt organization, and consistent with such operation, complied in all material respects with applicable legal and contractual obligations, consistent with past practice; (ii) used commercially reasonable efforts, consistent with past practice, to preserve the goodwill of its Medicaid Members and its employees; and (iii) not taken any action outside of the 17 ordinary course of business which would tend to cause Medicaid Members to cease their respective affiliations with Seller. (f) Seller has not made or granted any increase in the compensation payable or to become payable by Seller (or for which Seller may have any liability) to any Medicaid Provider with respect to the Medicaid Business; (g) Seller has not failed to use best efforts to pay any medical claim liability or indebtedness relating to the Medicaid Business when due and all such claim liabilities have been properly recorded on the books of Seller; (h) Seller has not suffered (involuntarily or voluntarily), with respect to the Medicaid Business, any adverse changes in condition (financial or otherwise), results of operations, earnings, properties, prospects, or business (including, without limitation, any change in its premium or other revenues, claims or other costs (including IBNR Expenses), or relations with governmental authorities, Medicaid Members, Medicaid Providers, or any of its employees, agents, underwriters, or others); (i) Seller has not incurred or paid any indebtedness, obligation or other liability (contingent or otherwise) relating to the Medicaid Business, except in the ordinary course of its business, consistent with its past practice and in any event not in excess of $125,000 in the aggregate, and there does not exist a set of circumstances that could reasonably be expected to result in any such indebtedness, obligation or liability; (j) Seller has not suffered any strike, dispute, grievance, controversy or other similar labor trouble with respect to employees serving the Medicaid Business; (k) Seller has not instituted, settled, or agreed to settle, any litigation, action or proceeding before any court or Governmental Entity relating to the Medicaid Business; (l) Seller has not made any changes in servicing, billing or collection operations or policies of the Medicaid Business except for outsourcing such operations to Antares Management Solutions under the Agreement dated July 2, 2003; (m) Seller has not merged or consolidated with any other corporation or other entity or permitted any other entity to merge into it (unless the surviving entity is bound by the terms of this Agreement and prepared to perform its obligations hereunder); (n) Seller has not taken or omitted to take any action, or permitted the occurrence of any change or event, which would render any of its representations and warranties contained herein untrue at and as of the Closing Date with the same effect as though such representations and warranties had been made at and as of the Closing Date; and 18 (o) Seller has not entered into any agreement or made any commitment to take any of the types of action described in Section 3.1.10(b) through Section 3.1.10(n) above. 3.1.11 Contracts. Schedule 3.1.11 contains a complete and accurate listing of all of the Business Contracts (including the Provider Agreements and the Seller's Medicaid Contract). Each of the Business Contracts is in full force and effect and is valid and enforceable by Seller in accordance with its terms, except insofar as enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights in general, and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Seller is not in default in the observance or the performance of any term or obligation to be performed by it under any such contract. To Seller's knowledge, no other person is in material default in the observance or the performance of any term or obligation to be performed by it under any such contract. Seller has provided originals or true and correct copies of all such contracts constituting part of the Assets or Assumed Liabilities. 3.1.12 Title to and Condition of Assets. Seller has good and valid title to the Assets, whether owned or leased, in each case subject to no right of possession in favor of any third party, claim or Liens, and except with respect to leased property, the provisions of the applicable leases. Except as set forth on Schedule 3.1.12, all of the Assets are useable in the ordinary course of business. Except as described on Schedule 3.1.12, the Assets are suited for and include all assets necessary for the conduct of the Medicaid Business in a manner consistent with the past custom and practices of the Seller. 3.1.13 No Broker or Finders. No broker or finder is involved on behalf of Seller or an Affiliate of Seller in connection with the sale of the Assets, nor may any broker or finder involved on behalf of Seller claim any commission on account of the sale of the Assets. 3.1.14 Operating Data. On or prior to the date hereof, Seller has delivered to Buyer certain of its operating data and certain performance data for the Medicaid Business, including, without limitation, information with respect to the list of the Seller's revenue per Medicaid Member and IBNR Expense, all as set forth in the Schedule 3.1.14 attached hereto; such data accurately and fairly presents the operations of the Medicaid Business including the income, expenses or liabilities of the Medicaid Business, and is consistent with the information contained in the Books and Records (which, in turn, are accurate and complete), and fairly present the financial condition and results of operations of the Medicaid Business as of the times and for the periods referred to therein and has been prepared in accordance with accounting principles consistently applied throughout the Seller's operation of the Medicaid Business. 19 3.1.15 Tax Returns and Tax Liabilities. (a) Seller has timely filed all Tax Returns that it was required to file (including, without limitation, all real and personal property, informational, franchise and withholding Taxes and other Returns); all such Tax Returns were correct and complete in all respects and based on the applicable measure of Seller's operations or Assets during the period in question; and true and correct copies of all such Tax Returns are included in Seller's files. (b) All Taxes owed by Seller (whether or not shown or required to be shown on any Tax Return) have been paid. Seller is not currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where Seller does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are not liens on any of the assets of Seller that arose in connection with any failure (or alleged failure) to pay any Tax. (c) Seller has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party, an all Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed. (d) Seller has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (e) None of the Assumed Liabilities is an obligation to make a payment that is not deductible under Code Section 280G. Seller is not a party to any Tax allocation or sharing agreement. Seller (i) has not been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was Seller) and (ii) has no liability for the Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract or otherwise. 3.1.16 No Untrue Representation or Warranty. No representation or warranty by Seller in this Agreement, nor any statement or certificate furnished or to be furnished to Buyer pursuant hereto or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact. 3.1.17 Employees and Employee Benefits. Schedule 3.1.17 sets forth, with respect to each employee of Seller who is primarily assigned to the Medicaid Business (a "Medicaid Business Employee"), such employee's name and position as of July 31, 2003. Seller is not a party to any written or oral employment contract or agreement with any of such employees which precludes their termination at will. Except as set forth on Schedule 3.1.17, none of such employees is now, or will by the passage of time hereafter become, entitled to receive any vacation time, vacation pay or severance pay attributable to services rendered prior to the Closing Date. There has been no change of, or 20 agreement to change, any terms of employment for such employees, including without limitation, salary, wage rates, commission formulae, or other compensation, except for normal "merit" raises given in the ordinary course of business. No such employee has indicated any intention to terminate his or her employment. There is no union contract or other collective bargaining agreement in existence affecting Seller or the Medicaid Business, and Seller has not received notice from the National Labor Relations Board that a petition for recognition for a collective bargaining unit has been filed by or on behalf of any of the Medicaid Business Employees, nor is Seller aware of any attempts by any union to obtain recognition as a bargaining agent in respect thereof and there have been no grievance disputes or slowdowns. Except as listed in Schedule 3.1.17 Seller does not maintain or contribute to any Benefit Plans on behalf of Medicaid Business Employees. 3.1.18 Providers and Provider Agreements. (a) Schedule 3.1.18(a) lists each physician, group, IPA, hospital, PHO, ancillary service provider or other health care service provider that participates in the Medicaid Business as a Medicaid Provider and states their respective effective dates. Each such Medicaid Provider has been credentialed in accordance with Seller's policies and procedures and applicable State regulatory requirements and has entered into a written Provider Agreement with Seller and/or Seller's Affiliates. (b) Except for payment reconciliation disputes in the ordinary course of business, Seller has paid and continues to pay each applicable Medicaid Provider in accordance with the compensation terms that have been, or are, in effect, as applicable, with respect to each Medicaid Provider's contract and in the time required by the Provider Agreements and applicable state law. (c) Schedule 3.1.18(c) lists each Medicaid Provider to whom administrative functions have been delegated and describes all function(s) so delegated. Each agreement for the delegation of administrative functions complies with the requirements of applicable law. Seller has complied and continues to comply with all applicable requirements of law, including those set forth in the Seller's Medicaid Contract, relating to oversight and monitoring of the entities to which Seller has delegated administrative functions. (d) Except as described on Schedule 3.1.18(d), each of the Provider Agreements (i) is, or will be at Closing, freely assignable to Buyer, and (ii) is terminable on less than 180 days notice. (e) Except as described on Schedule 3.1.18(e), none of the Provider Agreements (i) requires either Seller or Seller's Affiliates to pay the provider on a most-favored provider basis, (ii) obligates either Seller or Seller's Affiliates to pay access or administrative fees, (iii) requires (or may require) either Seller or Seller's Affiliates to pay bonuses from an incentive compensation pool or fund, or (iv) has a profit-sharing component. 21 (f) Except as described on Schedule 3.1.18(f), none of the Provider Agreements limit the rights of either Seller or Seller's Affiliates to engage in, or to compete with any person in, the Medicaid Business, contains an exclusivity provision restricting either Seller or Seller's Affiliates ability to do business in certain geographical areas, or obligates or binds either Seller or Seller's Affiliates to use, or offer to use, the services of a Medicaid Provider in preference to any other provider. (g) If any of the "physicians" or "physician groups" contracted under the Provider Agreements are placed at "substantial financial risk," as each such term is defined by 42 C.F.R. Section 422.208 et seq. (the "PIP Regulation") in connection with services provided to Medicaid Members, Seller and/or Seller's Affiliates have complied in all material respects with the reporting and enrollee survey requirements of the PIP Regulation. (h) Schedule 3.1.18(h) describes each written complaint received after January 1, 2002 by Seller from a Medicaid Provider and generally describes the nature and disposition of such complaint. (i) Schedule 3.1.18(i) lists each monetary settlement or pending settlement with a health care provider in respect of the Medicaid Business for the periods after January 1, 2002 that is not reflected in Seller's IBNR Expense, as provided to Buyer. 3.1.19 Status of Provider Agreements. With respect to each of the Provider Agreements: (a) the agreement is legal, valid, binding, enforceable and in full force and effect; (b) upon obtaining any required third party consents, the agreement will continue to be legal, valid, binding, enforceable by Seller, and in full force and effect following the consummation of the Transaction, (c) no party is in breach or default beyond any applicable grace period, and no event has occurred which with notice or lapse of time would constitute a breach or default, or permit termination, modification or suspension under the agreement (without limiting the foregoing, Seller is not in breach or default of any provision of the Seller's Medicaid Contract beyond any applicable grace period, and the Provider Agreements comply with the terms of the Seller's Medicaid Contract and ODJFS regulations in all material respects), and (d) no party has repudiated any provision of the agreements. With respect to the Provider Agreements, Seller is in full compliance with the applicable provisions of the prompt payment of claims laws. 3.1.20 Medicaid Members. Schedule 3.1.20 describes each written complaint received by Seller from a Medicaid Member since January 1, 2002. 3.1.21 Intellectual Property. (a) Schedule 3.1.21 sets forth a complete and correct list of all of the following owned or used (whether pursuant to a written license or otherwise) by Seller in connection with the Medicaid Business: (i) all patented or registered Intellectual 22 Property and all pending patent applications or other applications for registration of Intellectual Property; (ii) all trade names and material unregistered trademarks or service marks; (iii) all material unregistered copyrights, mask works and computer software; and (iv) all licenses or similar agreements or arrangements with respect to Intellectual Property, whether Seller is licensee or licensor of such rights, in each case identifying the subject Intellectual Property and nature of the licensing relationship. All Intellectual Property owned or used by Parent or Seller with respect to the Assets immediately prior to the Closing hereunder will be owned or available for use by Buyer on identical terms and conditions immediately subsequent to the Closing hereunder. (b) Except as set forth in Schedule 3.1.21, (i) Seller owns and possesses all right, title and interest in and to, or has a valid and enforceable right to use via a written license identified on Schedule 3.1.21, all of the Intellectual Property listed on Schedule 3.1.21 and all other Intellectual Property owned or used in connection with the Medicaid Business, free and clear of all Liens, and no claim by any third party contesting the validity, enforceability, use or ownership of any such Intellectual Property has been made, is currently outstanding or, to the Knowledge of Seller, is threatened, and there are no grounds for same, (ii) the Intellectual Property transferred to Buyer in the Assets comprise all Intellectual Property necessary to the Medicaid Business, including without limitation the operation of the Medicaid Business currently conducted and as currently proposed to be conducted, (iii) the loss or expiration of any Intellectual Property owned by, issued to or licensed to Seller with respect to the Medicaid Business has not and would not have an adverse effect, and no such loss or expiration is pending, threatened or reasonably foreseeable, (iv) Seller has not received any notices of, nor is Seller aware of any facts which indicate a likelihood of, any infringement or misappropriation by, or conflict with, any third party with respect to any Intellectual Property owned or used by Seller in connection with the Assets (including, without limitation, any demand or request that Seller license rights from a third party), (v) neither the Seller nor its operation of the Medicaid Business infringes, misappropriates or otherwise conflicts with any rights of any third parties, and Seller is not aware of any infringement, misappropriation or conflict which may occur as a result of the continued operation of such business as currently proposed to be conducted, and (vi) the Intellectual Property owned or licensed to Seller with respect to the Medicaid Business has not been infringed, misappropriated or otherwise misused by any third party. 3.2 Representations and Warranties True and Correct at Closing Date; Breaches. Seller shall execute and deliver to Buyer a certificate signed by an authorized representative of Seller, dated as of the Closing Date, stating that each of the representations and warranties of Seller made herein are true and correct in all material respects as of the Closing Date (provided that representations and warranties that are as of a specific date shall speak only as of such date; and provided further that any representation or warranty that is already modified by "materiality" or "material" or similar words of that nature shall be true and correct in all respects), or describing the manner in which such representations and warranties are not true and 23 correct. If any of the representations and warranties of Seller are not true and correct in all material respects as of the Closing Date, then Buyer shall be entitled to indemnification for any and all Losses as provided in Article XII. If any of the representations and warranties of Seller contained herein are not true and correct in all material respects as of the Closing Date (provided that representations and warranties that are as of a specific date shall speak only as of such date; and provided further that any representation or warranty that is already modified by "materiality" or "material" or similar words of that nature shall be true and correct in all respects), then Buyer may terminate this Agreement without further obligation pursuant to Article XIII. The consummation of the transactions under this Agreement by Buyer shall not constitute a waiver of Buyer's rights to indemnification for a breach of a representation or warranty provided for in this Section. 3.3 Representations and Warranties True and Correct at Effective Date; Breaches. Seller shall execute and deliver to Buyer a certificate signed by an authorized representative of Seller, dated as of the Effective Date, stating that each of the representations and warranties of Seller made herein are true and correct in all material respects as of the Effective Date (provided that representations and warranties that are as of a specific date shall speak only as of such date; and provided further that any representation or warranty that is already modified by "materiality" or "material" or similar words of that nature shall be true and correct in all respects), or describing the manner in which such representations and warranties are not true and correct. If any of the representations and warranties of Seller are not true and correct in all material respects as of the Effective Date, then Buyer shall be entitled to indemnification for any and all Losses as provided in Article XII. The consummation of the transactions under this Agreement by Buyer shall not constitute a waiver of Buyer's rights to indemnification for a breach of a representation or warranty provided for in this Section. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF CENTENE AND BUYER 4.1 Representations and Warranties of Buyer. As of the Execution Date, Centene and Buyer jointly and severally represent and warrant to Seller as follows: 4.1.1 Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and shall be authorized as of the Closing Date to do business in Ohio as a foreign corporation, and has all requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. 4.1.2 Buyer's Authority. Each of Centene and Buyer has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Centene and Buyer, respectively. 24 This Agreement constitutes a valid and binding obligation of both Centene and Buyer, enforceable against Centene and Buyer in accordance with its terms, except insofar as enforcement may be limited by insolvency or similar laws affected the enforcement of creditors' rights in general, and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.1.3 No Brokers or Finders. No broker or finder is involved on behalf of Buyer or Centene in connection with the sale of the Assets, nor may any broker or finder involved on behalf of Buyer claim any commission on account of the sale of the Assets. 4.1.4 No Consents. Except as disclosed on Schedule 4.1.4, no other consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity, is required by or with respect to Buyer in connection with the execution and delivery of this Agreement by Buyer or Centene, or the consummation by Buyer or Centene of the transactions contemplated hereby. 4.1.5 Sufficient Funds. Buyer will have, when necessary, funds sufficient to enable Buyer make the payments required under Section 2.5. 4.1.6 Regulatory Status. Except as set forth on Schedule 4.1.6, Buyer has not received notice that it is the subject of any investigations or disputes with any Governmental Entity. 4.1.7 Litigation. Except as set forth on Schedule 4.1.7, there are no actions, suits, demands, investigations or proceedings which is pending or threatened which questions the validity or propriety of this Agreement or any action taken or to be taken by Buyer or Centene in connection with this Agreement 4.1.8 No Untrue Representation or Warranty. No representation or warranty by Buyer in this Agreement, nor any statement or certificate furnished or to be furnished to Seller pursuant hereto or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact. 4.1.9 No Legal Bar. Except as set forth on Schedule 4.1.9 (and subject to the receipt of the Closing governmental authorizations described in Section 6.11 below), the execution and delivery by Buyer of this Agreement does not, and the consummation of the transactions contemplated 25 hereby will not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of Centene or Buyer, or (ii) result in a breach of, result in or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the cancellation or unilateral modification or amendment of, or accelerate the performance required by, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, agreement, lease or other instrument, obligation or arrangement to which Centene or Buyer is a party or to which Centene or Buyer or any of their respective assets or properties may be subject, or (iii) conflict with or violate any order, writ, judgment, injunction, decree, award, ruling, statute, rule or regulation applicable to Centene or Buyer, or any of their respective material assets, except where any such violation, conflict or default would not have a material adverse effect on the business of either Centene or Buyer, taken as a whole. 4.2 Representations and Warranties True and Correct at Closing Date; Breaches. Buyer shall execute and deliver to Seller a certificate signed by an authorized representative of Buyer, dated as of the Closing Date, stating that each of the representations and warranties of Buyer made herein are true and correct in all material respects as of the Closing Date (provided that representations and warranties that are as of a specific date shall speak only as of such date; and provided further that any representation or warranty that is already modified by "materiality" or "material" or similar words of that nature shall be true and correct in all respects), or describing the manner in which such representations and warranties are not true and correct in all material respects. If any of the representations and warranties of Buyer contained herein are not true and correct in all material respects as of the Closing Date then Seller shall be entitled to indemnification for any and all Losses as provided in Article XII. If any of the representations and warranties of Buyer contained herein are not true and correct in all material respects as of the Closing Date (provided that representations and warranties that are as of a specific date shall speak only as of such date; and provided further that any representation or warranty that is already modified by "materiality" or "material" or similar words of that nature shall be true and correct in all respects), then Seller may terminate this Agreement without further obligation pursuant to Article XIII. The consummation of the transactions under this Agreement by Seller shall not constitute a waiver of Seller's rights to indemnification for a breach of a representation or warranty provided for in this Section. 4.3 Representations and Warranties True and Correct at Effective Date; Breaches. Buyer shall execute and deliver to Seller a certificate signed by an authorized representative of Buyer, dated as of the Effective Date, stating that each of the representations and warranties of Buyer made herein are true and correct in all material respects as of the Effective Date (provided that representations and warranties that are as of a specific date shall speak only as of such date; and provided further that any representation or warranty that is already modified by "materiality" or "material" or similar words of that nature shall be true and correct in all respects), or describing the manner in which such representations and warranties are not true and correct in all material respects. If any of the representations and warranties of Buyer contained herein are not true and correct in all material respects as of the Effective Date then Seller shall be entitled to indemnification for any and all Losses as provided in Article XII. The consummation of the transactions under this Agreement by Seller shall not constitute a 26 waiver of Seller's rights to indemnification for a breach of a representation or warranty provided for in this Section. ARTICLE V SURVIVAL Unless otherwise limited by this Agreement, all of the covenants and agreements made by the parties to this Agreement shall survive the Closing Date and continue in full force and effect after the Closing Date without any time limitation. Subject to the limitations set forth in this Agreement, all of the representations and warranties of of the parties contained in this Agreement shall survive the Closing Date. ARTICLE VI BUYER'S CONDITIONS PRECEDENT TO CLOSING Buyer's agreement to purchase and to pay for the Assets and to assume the Assumed Liabilities hereunder is subject to compliance with and the occurrence of each of the following conditions on or before Closing, except as any thereof may be waived in writing by Buyer: 6.1 Instruments of Transfer. Seller shall have delivered to Buyer on the Closing Date such bills of sale, endorsements, assignments, deeds and other good and sufficient instruments of conveyance and transfer as are provided for herein, and any other instruments in form and substance reasonably satisfactory to Buyer and their counsel as shall be effective to vest in Buyer all of the right, title and interest of Seller in, to and under the Assets, free and clear of all Liens. 6.2 Assignment of Provider Agreements. Seller shall have caused the assignment to Buyer of those Provider Agreements with Medicaid Providers identified by Buyer in Schedule 2.1(b) hereto; or execution of a contract between Buyer and the relevant third party Medicaid Provider in a form and substance substantially similar to the relevant Provider Agreements and reasonably satisfactory to Buyer. 6.3 Performance of Conditions Precedent. All covenants, agreements and conditions contained in this Agreement to be performed or complied with by Seller on or prior to the Closing Date shall have been performed or complied with in all material respects. 6.4 Good Standing Certificate. Seller and Parent shall have delivered to Buyer a certificate, executed by the proper state official, as to the good standing of Seller and Parent in their respective jurisdiction of incorporation. 27 6.5 Buyer's Medicaid Contract. Buyer shall have entered into the Buyer's Medicaid Contract. 6.6 Secretary's Certificates. Seller and Parent shall have delivered to Buyer certificates from their respective secretary or assistant secretary attaching copies of resolutions authorizing the execution, delivery and performance of this Agreement and all other documents and the taking of all action required thereunder or in connection therewith on behalf of Seller and Parent. 6.7 Opinion of Seller's Counsel. Seller shall have furnished the Purchaser with a favorable opinion of Seller's counsel in the form attached as Exhibit D. 6.8 Incumbency Certificate. Seller and Parent shall have delivered to Buyer certificates of their respective secretary or assistant secretary certifying the incumbency of each of Seller's and Parent's officers and their genuine signatures. 6.9 Third Party Approvals and Consents. Seller shall have delivered to Buyer all such written approvals, consents and waivers of third parties which are required to be obtained in connection with the transactions contemplated by this Agreement and which are necessary for the operation of the Business and/or the ownership by Buyer of any of the Assets, free and clear of all Liens, including, without limitation, consents for Provider Agreements which are listed on Schedule 3.1.18(d) as non-assignable or which have not been amended as required hereunder. 6.10 Seller's Representations and Warranties True and Correct. Each and all of representations and warranties (when considered individually and/or collectively) of Seller set forth in Article III of this Agreement shall be true and correct in all material respects as of the Execution Date and as of the Closing Date as though made on and as of the Closing Date (provided that representations and warranties that are as of a specific date shall speak only as of such date; and provided further that any representation or warranty that is already modified by "materiality" or "material" or similar words of that nature shall be true and correct in all respects). Buyer shall have received a certificate signed on behalf of Seller by an authorized officer of Seller to such effect. 6.11 Governmental Consents and Approvals. Buyer and Seller shall have obtained from any and all Governmental Entities all appropriate and necessary approvals or consents required, or exemptions thereof to effect the transactions set forth in this Agreement and to enable Buyer to operate the Medicaid Business. Each of the parties shall use its best efforts to obtain such approvals, consents or exemptions 28 without any term or condition that would materially impair the value of the Medicaid Business or Assets to Buyer. All conditions required to be satisfied prior to the Closing Date by the terms of such Closing shall have been satisfied, and all statutory waiting periods in respect of approvals or consents from Governmental Entities shall have expired or been terminated. The Closing governmental authorizations shall include, without limitation, the following: (a) Buyer shall have been approved (and to the extent applicable, licensed) by ODI and ODJFS (and any other necessary approval from any other required Government Entity shall have been received), in the Service Areas, and such licensure, where applicable, and approval shall authorize Buyer to acquire the Assets and to provide health care services to the Medicaid Members in the Service Area; and (b) ODI, ODJFS, the Ohio Attorney General ("OAG") and any other required Government Entity shall have consented to ODJFS's execution and delivery to Buyer of a replacement Buyer's Medicaid Contract so as to permit Buyer to have all of the benefits, and provide the services to the Medicaid Members required, under the Seller's Medicaid Contract on substantially similar terms as provided under the Seller's Medicaid Contract prior to the Effective Date. 6.12 IBNR Expense Certification. A detailed schedule of IBNR Expenses for the year to date as of the last day of the most recent month prior to the Closing for which numbers are available and, certified by Seller and in form and substance satisfactory to Buyer, shall be prepared in the same manner and consistent with the methodology used in calculating the Medical Claims Schedule and delivered at least ten (10) Business Days prior to Closing. 6.13 Litigation. There shall not have been instituted and be pending any action or proceeding before any court, governmental agency or other regulatory or administrative agency or commission, which seeks to restrain, prevent or change the transactions contemplated hereby or questions the validity of such transactions. 6.14 Membership. Membership in the Service Area must be equal to or exceed 23,500 Medicaid Members (as determined by ODJFS) as of the Closing Date. 6.15 Closing Medical Claims Estimate. The Closing Medical Claims Estimate as determined in accordance with Section 2.5.1(b) shall not exceed the Medical Claims Cap. 29 6.16 Certain Covenants. Seller shall have complied with its obligations in Sections 9.1 and 9.2 in all material respects. 6.17 Deliveries. Seller shall have delivered to Buyer all items set forth in Section 2.7.2. On the Closing Date, Seller shall deliver to Buyer a certificate executed by a duly authorized officer of Seller to the effect that the conditions set forth in Articles VI and VIII have been satisfied or waived. ARTICLE VII SELLER'S CONDITIONS PRECEDENT TO CLOSING Seller's agreement to sell and to deliver the Assets to be sold hereunder is subject to compliance with and the occurrence of each of the following conditions on or before Closing, except as any thereof may be waived in writing by Seller. 7.1 Agreements. Buyer shall have executed and delivered to Seller all agreements, instruments, certificates and other documents to be delivered by Buyer in form and substance reasonably satisfactory to Seller and their counsel. 7.2 Performance of Conditions Precedent. All covenants, agreements and conditions contained in this Agreement to be performed or complied with by Buyer on or prior to the Closing Date shall have been performed or complied with in all material respects. 7.3 Good Standing Certificates. Good standing certificates for Buyer, dated no earlier than 30 days before the Closing Date, from its state of incorporation and certificate of license to do business as a foreign corporation in the State of Ohio; 7.4 Secretary's Certificates. Buyer shall have delivered to Seller a certificate from the secretary or assistant secretary of Buyer attaching copies of resolutions authorizing the execution, delivery and performance of this Agreement and all other documents and the taking of all action required thereunder or in connection therewith on behalf of Buyer. 7.5 Incumbency Certificate. Buyer shall have delivered to Seller a certificate of the secretary or assistant secretary of Buyer certifying the incumbency of officers of Buyer and their genuine signatures. 30 7.6 Buyer's Representations and Warranties True and Correct. Each and all of the representations and warranties (when considered individually and/or collectively) of Buyer set forth in Article IV of this Agreement shall be true and correct in all material respects as of the Execution Date and as of the Closing Date as though made on and as of the Closing Date (provided that representations and warranties that are as of a specific date shall speak only as of such date; and provided further that any representation or warranty that is already modified by "materiality" or "material" or similar words of that nature shall be true and correct in all respects). Seller shall have received a certificate signed on behalf of Buyer by an authorized officer of Buyer to such effect. 7.7 Litigation. There shall not have been instituted and be pending any action or proceeding before any court, governmental agency or other regulatory or administrative agency or commission, which seeks to restrain, prevent or change the transactions contemplated hereby or questions the validity of such transactions. 7.8 Termination/Release of Seller's Medicaid Contract Seller shall have obtained evidence from ODJFS as to the termination or release from obligations under the Seller's Medicaid Contract as of the effective date of Buyer's Medicaid Contract. 7.9 Governmental Consents and Approvals. Buyer and Seller shall have obtained from any and all Governmental Entities all appropriate and necessary approvals or consents required, or exemptions thereof to effect the transactions set forth in this Agreement and to enable Buyer to operate the Medicaid Business. Each of the parties shall use its best efforts to obtain such approvals, consents or exemptions without any term or condition that would materially impair the value of the Medicaid Business or Assets to Buyer. All conditions required to be satisfied prior to the Closing Date by the terms of such Closing shall have been satisfied, and all statutory waiting periods in respect of approvals or consents from Governmental Entities shall have expired or been terminated. The Closing governmental authorizations shall include, without limitation, the following: (a) Buyer shall have been approved (and to the extent applicable, licensed) by ODI and ODJFS (and any other necessary approval from any other required Government Entity shall have been received), in the Service Areas, and such licensure, where applicable, and approval shall authorize Buyer to acquire the Assets and to provide health care services to the Medicaid Members in the Service Area; and (b) ODI and ODJFS and any other required Government Entity (including OAG, but only to the extent such failure to obtain such a consent is not due in any material respect to any act or omission of Seller) and any other required Government Entity shall have consented to ODJFS's execution and delivery to Buyer of a replacement Buyer's Medicaid Contract so as to permit Buyer to have all of the 31 benefits, and provide the services to the Medicaid Members required, under the Seller's Medicaid Contract on the same terms as provided under the Seller's Medicaid Contract prior to the Effective Date. 7.10 Opinion of Buyer's Counsel. Buyer shall have furnished the Seller with a favorable opinion of Buyer's counsel in the form attached as Exhibit E. 7.11 Miscellaneous. Buyer shall provide details of the structure and compensation of the local management, local operating boards and committees to Seller prior to or on the Closing. 7.12 Deliveries. Buyer shall have delivered to Seller all items set forth in Section 2.7.1. On the Closing Date, Buyer shall deliver to Seller a certificate executed by a duly authorized officer of Buyer to the effect that the conditions set forth in Articles VII and VIII have been satisfied or waived. ARTICLE VIII JOINT CONDITIONS PRECEDENT TO CLOSING In addition to the matters set forth in Articles VI and VII, the Closing hereunder is subject to the occurrence of the following conditions: 8.1 Closing of Transactions Under Related Agreements. Buyer and Seller shall have executed the Bill of Sale, Assignment and Assumption Agreement, in the form of such agreements attached hereto as Exhibit C. 8.2 MHP Hospital Contract. Buyer and Parent shall have entered into the MHP Hospital Contract in form and substance satisfactory to Buyer and Parent. 8.3 PHO Provider Agreement. Buyer and Mercy Health System PHO, Inc. shall have entered into the PHO Provider Agreement in form and substance satisfactory to Buyer and Parent. 32 ARTICLE IX ADDITIONAL AGREEMENTS OF SELLER 9.1 Conduct of Business Pending Closing. From the Execution Date until the Effective Date, Seller and Buyer acknowledge and agree that Seller retains control of the Medicaid Business until the Effective Date and as such Seller agrees that, with respect to the operation and maintenance of the Medicaid Business, except as otherwise provided under this Agreement or consented to by Buyer in writing, Seller will: (a) Conduct the Medicaid Business in a commercially prudent manner, as a going concern and in the ordinary course and consistent with the requirements of a non-profit federally tax-exempt organization, and consistent with such operation, comply in all respects with applicable legal and contractual obligations, consistent with past practice; (b) Maintain their cash management practices and their policies, practices and procedures with respect to collection of trade accounts receivable, establishment of reserves for uncollectible accounts, accrual of accounts receivable, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue, and acceptance of customer deposits in accordance with past custom and practice and applicable accounting principles consistently applied; (c) Seller will modify the medical management policy related to referrals and authorizations that was implemented on January 1, 2003 to the satisfaction of Centene and ODJFS. Centene will provide input to Seller regarding the modifications to the referral and authorization policy. Notice of the policy modifications will be sent with the ODJFS member notice and implemented not later than five (5) days prior to the Effective Date; (d) Cause their current insurance policies not to be canceled or terminated or any of the coverage thereunder to lapse, unless, simultaneously with such termination, cancellation or lapse, replacement policies providing coverage equal to or greater than the coverage under the canceled, terminated or lapsed policies to the extent practicable for market premiums are in full force and effect; (e) Maintain the books, accounts, and records of the Medicaid Business in accordance with past accounting practices and GAAP and where inconsistent with GAAP, in conformity with statutory or other accounting practices prescribed or permitted by the insurance regulatory authorities in the State of Ohio and consistent with the custom and practice as used in the preparation of the Financial Statements; (f) Use commercially reasonable efforts, consistent with past practice, to preserve the goodwill of its relationships with Medicaid Members, Medicaid Providers, ODJFS and other regulatory bodies, suppliers, employees and others having business relations with it related to the Medicaid Business; 33 (g) Not intentionally take any action outside of the ordinary course of business which would tend to cause Medicaid Members to cease their affiliation with Seller; (h) Administer, pay and discharge all of its medical claim liabilities related to the dates of service prior to the Effective Date, as well as any Excluded Liabilities, and perform all reporting obligations under the Seller's Medicaid Contract; (i) Maintain all contracts including those within the Provider Agreements except for any terminations, expirations and additions occurring in the ordinary course of business, consistent with past practices and in accordance with the terms of the Provider Agreements and with prior written notice to Buyer; (j) Comply in all respects with all regulations and laws applicable to it in the conduct of the Medicaid Business; (k) Maintain, in accordance with past practice, its network of Medicaid Providers, and credential and recredential such providers in accordance with Seller's policies and procedures and NCQA requirements; (l) Maintain in full force and effect all Seller's Permits; (m) Maintain in full force and effect all Intellectual Property used in, related to or necessary to the Medicaid Business; (n) Not permit any Lien, charge or encumbrance on the Assets; (o) Not take any action (or omit to take any action), which action or omission would cause any representation or warranty contained herein to be untrue in any respect at any time through the Effective Date, as if such representation or warranty were made at and as of such time; (p) Not enter into or materially amend any contract, including without limitation the Seller's Medicaid Contract except in the ordinary course of business and consistent with past practices and with prior notice to Buyer; (q) Not intentionally take any action outside of the ordinary course of business which would tend to cause Medicaid Members to cease their affiliation with Seller; or (r) Not take any action which would result in a disclosure under Section 3.1.10(h). Seller shall promptly advise Buyer in writing of any material change in (i) the financial conditions, business or affairs of the Medicaid Business or Seller, or (ii) the accuracy of the representations and warranties made by Seller herein. 34 9.2 Access to Documents and Premises. 9.2.1 Inspection of Books and Records. From the Execution Date through the Effective Date, Buyer, its counsel, accountants, and other representatives shall, subject to confidentiality covenants made by Seller to third parties and state and federal antitrust laws, have the right to inspect the books and records of Seller relating to the Medicaid Business and the Assets, including inspection (without photocopying) by Buyer's representatives to the extent possible without waiving any privileges with respect to information regarding all actions, suits, proceedings or investigations of any kind, now pending or threatened in writing, involving Seller or Seller's Affiliates with respect to the Medicaid Business. Any such inspection shall occur during normal business hours and shall be scheduled by Buyer and Seller following request for inspection made to Seller. All inspections shall be conducted by Buyer and Seller in such a manner as to maximize all applicable privileges. Buyer and its representatives shall use their best efforts to conduct their inspection in such a manner as not to be disruptive to Seller's employees or business operations. 9.2.2 After the Effective Date. From and after the Effective Date, Seller shall provide to the authorized representatives of Buyer at all reasonable times access to the books, records, information and contracts included within the Assets, as well as books and records of Seller with respect to the operations of the Medicaid Business prior to the Closing Date. Seller agrees to deliver to Buyer, not later than thirty (30) days following the Closing Date, any copies of the books, records, information and contracts related to the Assets and the Medicaid Business which are not delivered at Closing. From and after the Closing Date, Buyer shall provide to the authorized representatives of Seller at all reasonable times access to the books, records and information transferred to Buyer as part of the Assets which Seller requires for legal or regulatory purposes. 9.3 Noncompetition and Nonsolicitation. (a) For a period of five (5) years from and after the Effective Date, neither Parent nor Seller nor their Affiliates will engage directly or indirectly in a Competing Business (which includes the Medicaid Business) in the Service Area; provided, however, that no owner of less than 1% of the outstanding stock of any publicly-traded corporation shall be deemed to engage solely by reason thereof in any such businesses. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. 35 (b) On and after the date hereof and prior to Effective Date, neither Parent nor Seller nor their Affiliates shall, directly or indirectly, solicit, encourage, facilitate, entertain, or accept (nor permit any of their respective officers, directors, employees, or agents directly or indirectly to solicit, encourage, facilitate, entertain, or accept), including by way of furnishing information, any inquiries or proposals concerning the management or sale of all or any material part of the Medicaid Business or Seller or Parent (but in the case of Parent, only to the extent such a transaction would include the Medicaid Business). Each Party acknowledges and agrees that any remedy at law for breach of the foregoing covenant may be inadequate, and in addition to any other relief which may be available, the non-breaching party shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages, posting bond or providing surety, and without regard to the adequacy of any remedy at law. Parent and Seller jointly and severally represent and warrant that as of the date hereof there is no stand-by agreement or back-up contract with respect to the sale of the Medicaid Business and it has terminated any discussions with third parties with respect to such proposed sale. (c) Seller acknowledges that the rights and compensation provided in this Agreement are adequate consideration for the agreements made by Seller in this Section 9.3 and in the non-competition provisions of this Agreement, and that such covenants, and the territorial, time and other limitations with respect thereto, are reasonable and properly required for the adequate protection of Buyer's acquisition of the Assets and the Medicaid Business, and Seller and Parent agrees that such limitations are reasonable with respect to their business activities and do not impose undue hardship on them. 9.4 Seller's Employment Issues. (a) To the extent required of Seller by applicable law, Seller shall provide all notices relating to the termination of any of its employees, including, without limitation, the notice obligations arising under the Workers Adjustment and Retraining Notification Act ("WARN") and any comparable Ohio laws, the Consolidated Omnibus Budget and Reconciliation Act of 1985 ("COBRA") and the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"). WARN-related liabilities with respect to terminated employees which result from any delay in providing WARN notices to such terminated employees shall be the responsibility of Seller. (b) Seller agrees that, prior to the Effective Date, Buyer shall have the right, but not the obligation, to interview for employment with Buyer any of the Medicaid Business Employees. As of the Effective Date, Buyer shall be permitted to offer employment (and Seller hereby consents to such offer) to such employees as Buyer may, in its sole discretion, choose to hire (and each such Medicaid Business Employee to whom Buyer has made an offer of employment shall be referred to herein as an "In-Scope Employee"). If hired by Buyer, Seller shall terminate all In-Scope Employees as of the Effective Date and shall pay all 36 vacation and severance obligations, if any, to all In-Scope Employees. Each such In-Scope Employee who accepts Buyer's offer of employment shall be referred to herein as a "Hired Employee". Nothing herein shall be deemed to create or to grant to the Hired Employees any third party beneficiary rights or claims or causes of action of any kind or nature. The Hired Employees shall be deemed "new hires, at will" of the Buyer. Buyer shall have no obligation or liability of any kind to any employee of Seller (including any Hired Employee) for employment compensation or benefits of any kind arising or accruing prior to the Effective Date, including, without limitation, any liability or obligation with respect to vacation or severance pay, any Benefit Plans, any EEOC claim or any sexual harassment claim by or against said employee, and Seller shall hold Buyer harmless with respect to any such liability or obligation. 9.5 Additional Financial Information. Seller shall furnish to Buyer within thirty days of the end of each month prior to Effective Date, unaudited statements of operations and run rate reports for each such month as well as such management, cost, and utilization reports (including claims logs and experience reports) that Seller generates and uses in the normal course of business. 9.6 Supplements to Schedules. Between the date of execution of this Agreement and the Closing Date, each party shall provide the other party with supplementary information on any matters previously disclosed on the schedules hereto or otherwise reported to the other party (including, without limitation, providing Buyer with information concerning any Medicaid Provider that has terminated, or indicated an intent to terminate, a Provider Agreement), and each party hereby represents and warrants that such supplements shall be true, correct and complete in all material respects as of the date or dates thereof. Such supplements shall constitute additional representations and warranties and shall be in no way deemed or construed to modify any representations or warranties previously made, unless accepted by Buyer and Seller, all of which shall continue in full force and effect, nor, unless accepted by Buyer and Seller, shall the provision of such supplements be deemed or construed to cure or otherwise excuse any breach of a representation or warranty by in the case of Seller under Article III of this Agreement and in the case of Buyer under Article IV of this Agreement. Nothing in any schedule attached hereto shall be adequate to disclose an exception to a representation or warranty made in this Agreement unless such schedule identifies the exception with particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be adequate to disclose an exception to a representation or warranty made in this Agreement, unless the representation or warranty has to do with the existence of such document or such other item itself. 9.7 Payment of Excluded Liabilities. Seller shall pay, perform and discharge in due course all of its obligations with respect to the Seller's Medicaid Contract for periods prior to the Effective Date and any of the Excluded Liabilities including, without limitation, all liabilities under the Benefit Plans, that, if unpaid, 37 could subject Buyer to transferee liability or create a Lien on the Assets. Without limiting the generality of the preceding sentence, Seller shall specifically administer, pay and run out all of its medical claim liabilities described in Section 2.4.2(a) hereof and perform all reporting obligations (including obligations imposed as part of report corrections, responses to State audits and governmental inquiries) under the Seller's Medicaid Contract (or imposed as part of the Closing governmental authorizations) in connection with the performance by Seller of its obligations with respect to the Medicaid Business for periods prior to the Effective Date. In connection with the discharge of such claims, to the extent any of the claims payment information for such claims is received by Buyer after the Effective Date, Buyer shall promptly forward such information to Seller. 9.8 Credentialing. At Closing, Seller shall deliver to Buyer a schedule which lists on a month-by-month basis for the twenty-four months following the Effective Date the Medicaid Providers who are scheduled for recredentialing in such months. 9.9 Joinder in Litigation. If Buyer institutes any action or proceeding (whether in a court of law, equity, or administrative or arbitrative forum) to enforce its rights under a Purchased Provider Agreement and Seller is deemed a necessary party, Seller agrees to join with Buyer, at Buyer's sole cost and expense, in such action or proceeding so that Buyer may be subrogated to Seller's rights with respect to the Medicaid services procured under such contract. 9.10 Termination of Incentive Pools/Funds. Seller shall use its reasonable best efforts to ensure that none of its Purchased Provider Agreements requires any periodic incentive payments from a shared risk or referral services pool/fund and, to the extent, any such contract contains such a pool/fund as of the Effective Date, Seller shall be responsible to reconcile and settle such pools through the Effective Date and shall pay any required bonuses. ARTICLE X ADDITIONAL AGREEMENTS OF BUYER 10.1 Maintenance of Records. Buyer shall retain all business and other records and documents relating to the Medicaid Business and the Assets which are transferred to Buyer pursuant to this Agreement in accordance with Buyer's own record retention policies for the longer of five years or the time required by applicable law. Buyer shall make such records available for Seller's review and copying upon request of Seller or its agents, at a reasonable time and place, and Buyer shall be entitled to its reasonable costs of such copying; provided, however, that Seller shall keep all such records confidential to the extent required by law. 38 10.2 Local Boards. Buyer agrees to develop with Seller details of the structure of the local management and local operating boards and operating committees relating to Buyer's Medicaid Business in the Service Area prior to the Closing Date. ARTICLE XI ADDITIONAL AGREEMENTS OF BUYER AND SELLER 11.1 Regulatory Milestones Prior to Closing. (a) Seller and Buyer shall diligently and timely prepare and file the applications and submissions as may be required with respect to the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including, without limitation, the filings set forth below. Buyer and Seller shall take all reasonable actions required or requested by such authorities for the expeditious consideration and rendering of all such approvals, consents and authorizations. Seller and Buyer shall diligently and timely cooperate with each other and with all other parties in the submission of applications and of any and all such additional information or documentation requested by any such regulatory authorities. (b) Seller acknowledges that (i) Buyer is not currently licensed as an HIC in the Service Area but agrees to use commercially reasonable efforts to obtain a HIC license for the Service Area, (ii) the approval of Buyer's service area application (and ODJFS's entry into the Buyer's Medicaid Contract) will be based, among other things, on the adequacy of Buyer's provider network, and (iii) to the extent Buyer does not independently build a provider network in the Service Area, Buyer may rely upon the ability of Seller to effectively assign the Provider Agreements. Promptly after execution of this Agreement, Seller agrees to use its reasonable best efforts to effectively assign the Provider Agreements (including, without limitation, any such contracts listed on Schedule 2.1(b)) to Buyer. The parties agree to work collaboratively on the form of any such consent. Seller further acknowledges and agrees to be responsible for, and to promptly supply to Buyer when requested, all information and materials (including, without limitation, specific answers or responses) reasonably required in connection with Buyer's service area application and the other Closing governmental authorizations (in a form satisfactory for filing with the applicable regulatory authorities) which relate to the provider network, its adequacy, accessibility or otherwise and the Provider Agreements. 11.2 Ohio Department of Insurance. Seller and Buyer shall use their best efforts to file all submissions required by the Ohio Department of Insurance to approve the transactions contemplated hereby, including, without limitation, this Agreement and a service area application, as necessary, and such other submissions as may be required by the Ohio Department of Insurance, as soon as practicable 39 after the Execution Date. Seller shall use its best efforts to cooperate with and assist Buyer in such filing. Buyer shall its best efforts to cooperate with and assist Seller in such filing. 11.3 Ohio Department for Job and Family Services. Buyer and Seller acknowledge and agree that Seller's Medicaid Contract with ODJFS are not assignable. Seller shall take any actions reasonably required by Buyer or ODJFS to transfer beneficiaries under the Seller's Medicaid Contract to Buyer. 11.4 Ohio Attorney General Seller represents that it is a federally tax-exempt charitable organization and as such requires approval from the Ohio Attorney General prior to consummation of this transaction. To the extent not filed prior to the date hereof, Seller shall file all submissions required by the Ohio Attorney General, including a valuation, officer and direct affidavits of Buyer and Seller and a description of the transaction, within ten (10) days of the date of this Agreement. Buyer shall use reasonable efforts to cooperate and assist Seller in such filings, including preparing and filing the necessary affidavits and other material requested by the Ohio Attorney General. 11.5 Transition Issues. 11.5.1 Coordination/Continuity of Care Upon execution of the Buyer's Medicaid Contract, both Seller and Buyer shall establish, at least 30 days prior to the Effective Date, processes to transfer information relative to Medicaid Members whose care is being coordinated through Seller's case management, Emergency Department Diversion, and Children with Special Health Care Needs programs and who will be transitioning their membership to Buyer's plan. Seller and Buyer shall work together to define continuity of care processes so as to integrate Buyer's continuity of care policy in such a way as to replace Seller's existing referral and authorization procedures as of and from the date five (5) days prior to the Effective Date forward. 11.5.2 Use of Materials. Buyer shall have the right to use all existing stock of any and all pre-printed advertising brochures, marketing materials, literature, form contracts, form certificates of coverage, membership handbooks and other pre-printed material relating to the Medicaid Business, as authorized by law, until six (6) months after the Effective Date or for some other shorter time limitation as may be required by law. Buyer shall make a commercially reasonable effort to "sticker" such materials with Buyer's name and to remove or cover up Seller's name to avoid confusion. 11.5.3 Claims Administration. Subject to State regulatory guidelines, except as otherwise provided in this Agreement, Seller shall be responsible for the administration and payment of all claims, liabilities or other obligations (including without limitation IBNR Expenses) (collectively referred to herein as "Medical Claims") pertaining to the Medicaid Business that are incurred prior to the Effective 40 Date, and Buyer shall be responsible for the administration and payment of all Medical Claims pertaining to the Medicaid Business that are incurred after the Effective Date. Each party agrees to forward to the other, within five (5) business days of receipt, any Medical Claim that is the responsibility of the other and to promptly provide notice to the applicable provider that such Medical Claim has been forwarded to such party. Each party agrees that it will not deny Medical Claims solely on the basis that the provider submitted the Medical Claim to the incorrect party. Notwithstanding the foregoing, at the conclusion of the six (6) calendar months following the Effective Date, Buyer shall reject any Medical Claims that are sent to Buyer in error after such period. 11.6 Public Information Releases. (a) Seller and Buyer shall use reasonable efforts to consult with the other party on any initial press release, public announcement or publicly disseminated communication concerning this transaction, and prior to any press release, public announcement or publicly disseminated communication concerning this transaction, to discuss the content of any such announcement. Thereafter, between the Execution Date and the Effective Date, Seller shall and Buyer agree to use reasonable efforts to consult with each other prior to any press release, public announcement or publicly disseminated communication concerning this transaction, to discuss the content of any such announcement and to refrain from making any such press releases or public announcements without first receiving the other's prior written consent, which shall not be unreasonably withheld. Seller shall be deemed to have given such consent if Seller has not provided written notice of objection to Buyer within two (2) business days following Buyer's notice to Seller of such proposed communication. In no event shall either party cause any oral or written communication to be issued relating to this transaction which disparages any other party or its Affiliates, unless required by law. The provisions of this Section shall survive the termination of this Agreement. (b) When, as and if required by ODJFS, Seller and Buyer shall, at Seller's or Buyer's expense, as applicable, take such action as may be reasonably necessary to disseminate all provider and/or member notices and mailings that are a condition to the Closing governmental authorizations or are required for the enrollment of the Medicaid Members with Buyer. Seller or Buyer, as applicable, shall promptly provide ODJFS with such affidavit(s) concerning the discharge of such obligation as may reasonably be requested. (c) Between the Execution Date and the Effective Date, Seller agrees to consult with Buyer prior to any written communication to any Medicaid Member or Medicaid Provider concerning this transaction, to discuss the content of any such communication and to refrain from making any such communication without first receiving Buyer's prior written consent. (d) With regard to the foregoing communications and any other public communications between the Execution Date and the Effective Date, such 41 communications shall not be disseminated without Buyer's prior written consent or subject to Section 11.6(a), the Seller's prior written consent. 11.7 Cooperation. Buyer and Seller agree to cooperate reasonably with each other, from the Execution Date up through and following the Effective Date, and use their respective reasonable best efforts in good faith, to satisfy all conditions, undertakings and agreements contained in this Agreement. 11.8 ODJFS and Other Required Reporting. Seller shall be responsible for all required reports to ODJFS, ODI and other Government Entity required reporting for periods prior to the Effective Date, and Buyer shall be responsible for all required reports to ODJFS, ODI and other Government Entity required reporting for periods following the Effective Date. 11.9 On-Site Presence. Seller and Buyer acknowledge and agree that upon execution of this Agreement, Buyer shall be allowed to have Buyer employees on-site of Seller to assist and coordinate the transition and integration of the Medicaid Business and the Assets to Buyer. Seller covenants that Seller shall provide all reasonably necessary cooperation and consultation reasonably necessary to allow for such on-site presence, including, but not limited to, providing access to support functions, including office space, computer, phone and printer and Seller's employees and management. 11.10 Securities Law Compliance. Parent and Seller understand that they may be in possession of non-public information about Buyer, and agree that they will not purchase or sell shares of common stock of Buyer during period between the Execution Date and the Effective Date or any other period of time in which information disclosed in connection with the transactions contemplated herein may be reasonably deemed to constitute material non-public information. 11.11 Trademark License Agreement. (a) On the Effective Date, Buyer grants through on or about December 31, 2004 but in not event shall such license extend beyond December 31, 2005, to Seller a nonexclusive, nontransferable and limited license in the Service Area to use the Licensed Trademark solely in connection with the wind-up activities related to the both the commercial HIC business and the Medicaid Business ("Trademark License Agreement"). (b) Any and all right, title or interest in or to the Licensed Trademark and all the goodwill associated therewith that may accrue to the benefit of, or be acquired by, Seller as a result of its exercise of the rights and licenses granted pursuant to the license in this Section 11.11 or otherwise shall be assigned to and shall inure to the sole benefit of Buyer, and Seller hereby agrees to assign and assigns to Buyer 42 any and all such right, title and interest. Seller shall not assert any claim of ownership of, or any claim to, any goodwill associated with the Licensed Trademark by reason of the Seller's use thereof or otherwise. (c) During the term of this Trademark License Agreement, (i) Seller shall not take and, to the extent reasonably within the Seller's power to control, shall not permit any action or omission in derogation of any of the rights of Buyer in the Licensed Trademark, and (ii) except as permitted in this Section 11.11, Seller shall not make any use of the Licensed Trademark or any term, phrase or design that is confusingly similar to, or a colorable imitation or translation of, the Licensed Trademark, or any portion of the Licensed Trademark in any manner whatsoever. (d) Seller recognizes the importance of uniformity of the goods and services offered in connection with the Licensed Trademark. Seller agrees that it will offer goods and services in connection with the Licensed Trademark strictly in accordance with quality standards that are substantially equivalent to or stricter than those standards used by Buyer for the goods and services offered by it in connection with the Licensed Trademark as advised by Buyer to Seller from time to time. Buyer shall have the right, at any time, to modify or supplement the quality standards to be maintained by the Seller by providing written notice thereof to the Seller. 11.12 MHP Hospital Contract and PHO Provider Agreement. Buyer and Seller acknowledge and agree that the financial terms and exclusivity provisions of the MHP Hospital Contract and PHO Provider Agreement when executed shall be consistent with the financial terms and exclusivity provision for such agreements that were described in the Letter of Intent or as otherwise negotiated prior to the delivery of this Agreement to the relevant regulatory authorities; provided, that to the extent such agreements are executed by the relevant parties this provision is null and void and shall not be enforceable against either party. ARTICLE XII INDEMNIFICATION 12.1 Indemnification by Parent and Seller. Subject to the limitations of Section 12.3, Seller and Parent shall jointly and severally indemnify and hold harmless Buyer and Centene and their respective officers, directors, employees, agents and Affiliates and successors and assigns of any of the foregoing against any and all actual damages resulting from claims, obligations, losses, costs, expenses, fees, liabilities and damages, whenever arising or incurred, including interest, penalties and reasonable attorneys' fees and disbursements (including amounts paid in settlement and costs of investigation) (each individually a "Loss," and collectively, "Losses"), arising out of, in connection with or otherwise relating to: (a) The Excluded Assets; 43 (b) The Excluded Liabilities; (c) The breach by Seller or inaccuracy of any representation or warranty made by Seller in this Agreement, or in any other agreement executed in connection herewith; (d) The breach or non-performance by Seller of any covenant or agreement made by Seller in this Agreement, or in any other agreement executed in connection herewith; and (e) Any Employee Benefit Plan, program, policy or other arrangement currently or any previously maintained or contributed to by members of the controlled group of companies (as defined in Code Section 414) which includes Seller; (f) Any liabilities arising from, attributable or related to any misstatements or inaccuracies in the IBNR Expense as determined in Section 6.12; and (g) Any claim, obligation or other liability arising from the Medicaid Business with respect to any period prior to the Closing Date other than to the extent such claims, obligations or liabilities constitute part of the Assumed Liabilities. Notwithstanding anything herein to the contrary, any breach of clauses 12.1(c) and (d) shall be determined without regard to any qualifications therein referencing the terms "materiality," "material," "material adverse change," "material adverse effect" or other terms of similar import or effect. 12.2 Indemnification by Centene and Buyer. After the Closing Date and subject to the limitations of Section 12.3, Buyer and Centene shall jointly and severally indemnify and hold harmless Seller and Parent and their respective officers, directors, employees, agents and Affiliates, and successors and assigns of any of the foregoing against any and all Losses, arising out of, in connection with or otherwise relating to: (a) The Assets; (b) The Assumed Liabilities; (c) The breach by Buyer or inaccuracy of any representation or warranty, made by Buyer in this Agreement, or in any other agreement executed in connection herewith; (d) The breach or non-performance of any covenants or agreements made by Buyer in this Agreement or any other agreement executed in connection herewith; and (e) Any claim, obligation or other liability arising from Buyer's operation of the Medicaid Business, Assets or the Assumed Liabilities with respect to any period after the Closing Date. 44 Notwithstanding anything herein to the contrary, any breach of clauses 12.2(c) and (d) shall be determined without regard to any qualifications therein referencing the terms "materiality," "material," "material adverse change," "material adverse effect" or other terms of similar import or effect. 12.3 Limitations. The indemnification rights and obligations set forth in (a) Section 12.1(c) shall survive the Closing for a period of two (2) years except for claims arising from breaches of representations and warranties (i) set forth in Sections 3.1.1, 3.1.2, 3.1.3, or 3.1.4, which shall survive on the Closing Date and continue in full force and effect after the Closing Date without any time limitation, or (ii) set forth in Section 3.1.15 or 3.1.17 as to which claims must be made prior to the date that is sixty (60) days after the expiration of the applicable statute of limitation with respect thereto or (b) Section 12.2(c) shall survive the Closing for a period of two (2) years except for claims arising from breaches of representations and warranties set forth in Sections 4.1.1, 4.1.2, 4.1.4 or 4.1.9 which shall survive on the Closing Date and continue in full force and effect after the Closing Date without any time limitation. Except with respect to any breach of the representations and warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.6, 3.1.15, 3.1.17, 4.1.1, 4.1.2, and 4.1.4 no party to this Agreement shall have any liability, whether pursuant to this Article XII or otherwise, for breach of any representation or warranty, for misrepresentation, or otherwise, unless the aggregate amount of all claims for which such party would, but for this Article XII, be liable, exceeds $125,000 on a cumulative basis. If such party's aggregate liability for such claims exceeds $125,000 on a cumulative basis, then such party shall be liable for all claims, including claims which are part of the $125,000 minimum. Notwithstanding anything in this Section 12.3 to the contrary, in the event of any breach of a representation or warranty by a party that is constitutes common law fraud, the representation or warranty shall survive consummation of the transactions contemplated in this Agreement and continue in full force and effect forever thereafter without time limitation. 12.4 Notice and Right to Defend. (a) Should any claim or action by a third party arise after the Closing Date for which Buyer, Centene, Parent or Seller may be liable to any other party under the indemnity provisions of this Agreement, the indemnitee shall notify the indemnitor in writing and in reasonable detail as soon as practicable after the indemnitee receives notice of such claim or action in the manner provided for the giving of notices under this Agreement, provided, that failure to notify in such manner shall relieve the indemnitor from liability under this Agreement with respect to such claim only if, and only to the extent that, such failure to notify the indemnitor results in the forfeiture by the indemnitor of material rights and defenses otherwise available to the indemnitor with respect to such claim. The expenses of all proceedings, contests, lawsuits, or investigations of claims with respect to such claims or actions, shall be borne by the indemnitor. If an indemnitor wishes to assume the defense of such claim or action, it shall give 45 written notice to the indemnitee within ten (10) days after notice from the indemnitee of such claim or action of its intention to assume the defense, and the indemnitor shall thereafter assume the defense of any such claim or liability through counsel reasonably satisfactory to the indemnitee, provided that the indemnitee may also participate in such defense at its own expense; (b) If the indemnitor shall not assume the defense of, or if after so assuming it shall fail to defend, any such claim or action, or such action involves a claim with (a) the indemnitee reasonably believes could be materially detrimental to or materially injure the indemnitee's reputation, customer relations or future business prospects, (b) seeks non-monetary relief (except where non-monetary relief is merely incidental to a primary claim or claims for monetary damages), (c) involves criminal allegations, (d) is one in which the indemnitor is also a party and joint representation would be inappropriate or there may be legal defenses available to the indemnitee which are different from or additional to those available to the indemnitor, or (e) involves a claim which, upon petition by the indemnitee, the appropriate court rules that the indemnitor failed or is failing to vigorously prosecute or defend. In any action or proceeding with respect to which indemnification is being sought hereunder, the indemnitee or the indemnitor, whichever is not assuming the defense of such action, shall have the right to participate in such litigation and to retain its own counsel at such party's own expense. The indemnitee may defend against any such claim or action in such manner as it may reasonably deem appropriate and the indemnitee may settle such claim or litigation on such terms as it may reasonably deem appropriate, and the indemnitor shall promptly reimburse the indemnitee for the amount of all reasonable expenses, legal and otherwise, incurred by the indemnitee in connection with the defense and/or settlement of such claim or action. If no settlement of such claim or action is made, the indemnitor shall satisfy any judgment rendered with respect to such claim or in such action before indemnitee is required to do so, and pay all expenses, legal or otherwise, incurred by the indemnitee in the defense against such claim or litigation. (c) An indemnitor may not, without the prior written consent of the indemnitee, settle or compromise any claim or consent to the entry of any judgment with respect to which indemnification is being sought hereunder unless (i) simultaneously with the effectiveness of such settlement, compromise or consent, the indemnitor pays in full any obligation imposed on the indemnitee by such settlement, compromise or consent and obtain releases of the indemnitee in full from such third party claim and (ii) such settlement, compromise or consent does not contain any equitable order, judgment or term that in any manner affects, restrains or interferes with the business of the indemnitee or any of the indemnitee's Affiliates. (d) In the event an indemnitee shall claim a right to payment pursuant to this Agreement not involving a third party claim covered by Section 12.4(a), such indemnitee shall send written notice of such claim to the appropriate indemnitor. Such notice shall specify the basis for such claim. As promptly as possible after 46 the indemnitee has given such notice, such indemnitee and the appropriate indemnitor shall establish the merits and amount of such claim (by mutual agreement or pursuant to the arbitration provisions herein). Except as otherwise provided in this Agreement, any indemnification of Centene or Buyer or Parent or Seller pursuant to this Article XII shall be effected by wire transfer of immediately available funds from Seller or Buyer, as the case may be, to an account(s) designated by the applicable Buyer or Seller, as the case may be, within ten (10) days after the determination thereof. Any such indemnification payments shall include interest at the Applicable Rate calculated on the basis of the actual number of days elapsed over 360, from the date any such Loss is suffered or sustained to the date of payment. All indemnification payments under this Section 12.4 shall be deemed adjustments to the Purchase Price set forth in Section 2.4.2(a) above. 12.5 Right of Set-Off. In addition to any other remedies available to Buyer hereunder, to the extent that MHP does not pay for any Loss when due and payable in accordance with the provisions hereunder, Buyer shall, at its election, have the right to apply the amount of all or any portion of any Buyer Losses for which it is indemnified pursuant to this Article XII above to offset and reduce the payments. 12.6 Covenant Breach. Notwithstanding any provision to the contrary herein and in addition to any other remedies available hereunder, for any breach of the covenants and agreements under Article IX between the date of the Closing Date and the Effective Date, Seller shall be liable for and shall pay an amount equal to the Losses resulting or arising from or related to such breach multiplied by two. ARTICLE XIII TERMINATION 13.1 Termination. This Agreement may be terminated at any time prior to the Closing Date: (a) by mutual written consent of Buyer and Seller; (b) by Buyer or Seller at either's option, if the Closing Date shall not have occurred on or before January 1, 2004, provided, that such date shall be extended until February 28, 2004 if required regulatory approval has not been received; provided, however, that the right to terminate this Agreement under this paragraph, shall not be available to any party whose failure to fulfill any obligation under this Agreement has substantially contributed to, or resulted in, the failure of the Closing to have occurred on or before such date; 47 (c) if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use all reasonable efforts to lift), in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable; (d) by Seller in the event of a breach by Buyer of a representation, warranty or covenant contained in this Agreement, provided that Buyer has received ten (10) business days' written notice of the breach indicated therein and has failed to effect a cure thereof to the reasonable satisfaction of Seller prior to the expiration of such period; (e) by Buyer in the event of a breach by Seller of a representation, warranty, or covenant contained in this Agreement, provided that Seller has received ten (10) business days' written notice of the breach indicated therein and has failed to effect a cure thereof to the reasonable satisfaction of Buyer prior to the expiration of such period; (f) by Buyer if any of the conditions set forth in Article VI shall have become incapable of fulfillment prior to the Termination Date and shall not have been waived by Buyer; (g) by Seller if any of the conditions set forth in Article VII shall have become incapable of fulfillment prior to the Termination Date and shall not have been waived by Seller; (h) by Buyer if, subsequent to the date hereof and prior to the Closing Date, there is any material adverse change in the condition (financial or otherwise), business, operations, prospects or obligations of the Medicaid Business, the Assets or the Assumed Liabilities; (i) by Buyer if, Seller has not delivered disclosure schedules satisfactory to Buyer by September 29, 2003; or (j) by Buyer or Seller if, either the MHP Hospital Contract or the PHO Provider Agreement has not been executed by September 29, 2003. 13.2 Effect of Termination. Except as otherwise specified in this Agreement, including but not limited to in Article XII, upon the termination of this Agreement pursuant to Section 13.1, this Agreement shall forthwith become null and void, except that nothing herein shall relieve any party from liability for any breach of this Agreement prior to such termination. 48 13.3 Waiver. At any time prior to the Closing Date, any term, provision or condition of this Agreement may be waived in writing (or the time for performance of any of the obligations or other acts of the parties hereto may be extended) by the party that is entitled to the benefits thereof. Such an election shall not be deemed a waiver of any rights or remedies of the waiving party with respect to the matter which gave rise to such right to terminate. ARTICLE XIV ARBITRATION 14.1 Conciliation and Mediation. If a dispute between Buyer and Seller relating to this Agreement, or under any other agreement executed and delivered in connection herewith, is not resolved within fifteen (15) days from the date that either party has notified the other that such dispute exists, then such dispute shall be submitted jointly for conciliation to the president or his designee of each party. If such senior executive officers or their designees are unable to resolve the dispute within thirty (30) days from the date that it is first presented to them, then such dispute shall be referred to binding arbitration. 14.2 Arbitration. Any dispute submitted to arbitration pursuant to this Section shall be determined by the decision of a board of arbitration consisting of three members who are members of and certified by the American Arbitration Association ("AAA") ("Board of Arbitration") selected as hereinafter provided. Buyer shall select an arbitrator and Seller shall select an arbitrator, each of whom shall be a member of the Board of Arbitration who is independent of the parties. A third Board of Arbitration member, independent of the parties, shall be selected by mutual agreement of the other two Board of Arbitration members. If the other two Board of Arbitration members fail to reach agreement on such third member within twenty (20) days after their selection, such third member shall thereafter be selected by the AAA upon application made to it for such purpose by any party to the arbitration. The Board of Arbitration shall meet in Chicago, Illinois, or such other place as a majority of the members of the Board of Arbitration determines more appropriate, and shall reach and render a decision in writing (which shall state the reasons for its decisions in writing and shall make such decisions entirely on the basis of the substantive law governing the Agreement and which shall be concurred in by a majority of the members of the Board of Arbitration) with respect to the items in dispute. In connection with rendering its decisions, the Board of Arbitration shall adopt and follow the Commercial Rules of Arbitration of the AAA in effect as of the date of the arbitration. To the extent practical, decisions of the Board of Arbitration shall be rendered no more than thirty (30) calendar days following commencement of proceedings with respect thereto. The Board of Arbitration shall cause its written decision to be delivered to Buyer and Seller. Any decision made by the Board of Arbitration (either prior to or after the expiration of such thirty (30) calendar day period) shall be final, binding and conclusive on Buyer and Seller and each party to the arbitration shall be entitled to enforce such decision to the fullest extent permitted by law and entered in any court of competent jurisdiction. Subject to the terms of Article XII, the fees and expenses of the Board of 49 Arbitration shall be shared equally by the parties. Subject to the terms of Article XII, each party shall be responsible for the fees and expenses of its attorneys and consultants. 14.3 Equitable Relief. Notwithstanding any other provision of this Agreement, any party shall have the right to seek equitable relief (including specific performance and/or other injunctive relief), in a court of competent jurisdiction, to the extent that equitable relief is available to a party hereto. If a party chooses to pursue equitable relief, such conduct shall not constitute a waiver of or be deemed inconsistent with the provisions set forth in this Article XIV or in Article XII. ARTICLE XV MISCELLANEOUS 15.1 Notices. All notices and other communications hereunder shall be in writing and shall be either (i) deposited in first class United States mail, certified, with postage prepaid, (ii) delivered by messenger, (iii) sent by overnight courier, or (iv) sent by fully completed and confirmed facsimile transmission (with a written confirmation simultaneously sent in first class United States mail), as follows: If to Seller: Copies of Notices to Seller or Parent: Family Health Plan, Inc. General Counsel 2200 Jefferson Avenue Mercy Health Partners Toledo, OH 43624 2200 Jefferson Avenue Attention: President/CEO Toledo, OH 43624 Fax: (419) 251-7559 Attention: H. Terrene Smith, Esq. Fax: (419) 251-0733 If to Parent: And Mercy Health Partners Chief Financial Officer 2200 Jefferson Avenue Mercy Health Partners Toledo, OH 43624 2200 Jefferson Avenue Attention: President/CEO Toledo, OH 43624 Fax: (419) 251-0722 Attention: Samantha Platzke Fax: (419) 251-0722 If to Buyer or Parent: Copy to: Centene Corporation Kirkland & Ellis LLP 7711 Carondelet, Suite 800 200 East Randolph Drive St. Louis, MO 63105 Chicago, IL 60601 Attention: Michael F. Neidorff Attention: Gerald T. Nowak, Esq. Fax: (314) 725-5180 Fax: (312) 861-2200

50 or such other address or fax number as any party may request by notice given as aforesaid. Notices sent as provided herein shall be deemed given on the date received by the recipient. If a recipient rejects or refuses to accept a notice given pursuant to this Section, or if a notice is not deliverable because of a changed address or fax number of which no notice was given in accordance with the provisions hereof, such notice shall be deemed to be received two days after such notice was mailed (whether as the actual notice or as the confirmation of a faxed notice) in accordance with the terms hereof. The foregoing shall not preclude the effectiveness of actual written notice given to a party at any address or by any means. 15.2 Waiver. No waiver by either Buyer or Seller hereto of its rights under any provision of this Agreement shall constitute a waiver of such party's rights under such provision at any other time or a waiver of such party's rights under any other provision of this Agreement. 15.3 Counterparts. This Agreement may be executed in any number of counterparts (including by means of telecopied signature pages), each of which shall be deemed an original but all of which together shall constitute one and the same instrument. An executed faxed copy of this Agreement shall be deemed an original executed copy of this Agreement. 15.4 Headings. The headings contained in this Agreement have been inserted for convenience of reference only and shall in no way restrict or modify any of the terms or provisions hereof. 15.5 Severability. If any provision of this Agreement is held by final judgment of a court of competent jurisdiction to be invalid, illegal or unenforceable, such invalid, illegal or unenforceable provision shall be severed from the remainder of this Agreement, and the remainder of this Agreement shall be enforced. In addition, the invalid, illegal or unenforceable provision shall be deemed to be automatically modified, and, as so modified, to be included in this Agreement, such modification being made to the minimum extent necessary to render the provision valid, legal and enforceable. Notwithstanding the foregoing, if the severed or modified provision concerns all or a portion of the essential consideration to be delivered under this Agreement by one party to the other, the remaining provisions of this Agreement shall also be modified to the extent necessary to adjust equitably the parties' respective rights and obligations hereunder. 15.6 Entire Agreement. This Agreement and the other agreements, certificates and documents of Seller and Buyer contemplated herein constitute the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements or understandings between the parties, except the Confidentiality Agreement, which will continue in effect until terminated pursuant to the terms set forth therein. The exhibits, schedules and attachments attached to this 51 Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions in this Agreement shall control. Each party is responsible for the accuracy of its respective schedules regardless of any assistance provided by the other party in connection with the preparation of the schedules. 15.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. Notwithstanding the foregoing, this Agreement shall not be assignable by any party without the prior written consent of the other, and any attempt at an assignment in violation of this Section shall be void ab initio. Notwithstanding the foregoing statement, Buyer may assign its rights and obligations hereunder to anyone or more of its Affiliates. 15.8 Governing Law. The terms and conditions of this Agreement is to be governed by and interpreted under the laws of the State of Delaware, without resort to choice of law or conflict of law principles which direct the application of the laws of a different state. 15.9 HIPAA Compliance. Each party represents and warrants to the other party that it will comply with the provisions of HIPAA including the effective dates of regulations adopted to implement HIPAA. Each of the parties represents and warrants to the other party in particular, with respect to all protected health information (as that term is defined under the Standards for Privacy of Individually Identifiable Health Information (December 28, 2000; 65 F. Reg. 82462), that it is a covered entity (and not a business associate of the other party) under the HIPAA Privacy Regulations and that it shall protect the privacy, integrity, security, confidentiality and availability of the protected health information disclosed to, used by, or exchanged by the parties by implementing appropriate privacy and security policies, procedures, and practices and physical and technological safeguards and security mechanisms, all as required by, and set forth more specifically in, the HIPAA Privacy Regulations and the HIPAA Security Regulations. The parties agree that, upon the request of the other party, it shall provide written verification of compliance with all applicable federal and State laws and confirm its full licensure and certification to the extent appropriate to its then current operations. Notwithstanding any other provisions of this Agreement to the contrary, either party may notify the other of any modifications it believes necessary to bring this Agreement into compliance with the final HIPAA regulations and/or HIPAA. Such modifications shall be incorporated as an addendum to this Agreement. 15.10 Cost of Transaction. Whether or not the transactions contemplated hereby are consummated: (a) Buyer shall pay the fees, expenses, and disbursements of Buyer and its agents, representatives, accountants, and counsel. 52 (b) Seller shall pay the fees, expenses and disbursements of Seller and its agents, representatives, accountants and counsel. (c) Seller shall absorb or pay, as applicable, all costs and expenses (including wages, overhead and professional fees) relating to all notices or other communications to the Medicaid Providers and Medicaid Members required in connection with this transaction, except that Buyer shall reimburse Seller for the costs of printing and mailing such notices. 15.11 Further Assurances. Each party hereto agrees for the benefit of the other parties hereto to execute and deliver any necessary documents, instruments or agreements, and to take any and all necessary actions, in order to (i) fully vest in Buyer all right, title and interest to the Assets, and (ii) carry out the terms of this Agreement and the transactions contemplated by this Agreement. 15.12 Construction. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine, and neuter, and the number of all words herein shall include the singular and plural. All references to section numbers in this Agreement shall be references to sections in this Agreement, unless otherwise specifically indicated. All parties to this Agreement have been represented by counsel and, accordingly, this Agreement shall not be construed strictly for or against any party hereto. This Agreement shall not be construed more strictly against one party than the other by virtue of the fact that it may have been prepared by counsel for one of the parties, it being recognized that each party has contributed substantially and materially to the preparation of this Agreement. 15.13 Third Parties. None of the provisions of this Agreement shall confer rights or benefits as third party beneficiaries or otherwise upon any third party that is not expressly a party to this Agreement including, without limitation, the Medicaid Members, and the provisions of this Agreement shall not be enforceable by any such third party. 15.14 Time is of the Essence. Time is of the essence with regard to all of the provisions of this Agreement. The parties acknowledge and agree that strict compliance with all of the deadlines set forth in this Agreement, including, without limitation, the deadlines for filings pursuant to Article XI. 15.15 Confidentiality. The parties acknowledge and agree that this Agreement is within the scope of the Confidentiality Agreement. Notwithstanding the Confidentiality Agreement, which shall survive the execution of this Agreement, the parties may disclose any terms or conditions of this Agreement to any third parties to comply with securities laws or HIC or insurance laws, and as needed to meet prudent business requirements of shareholders, investors, bondholders, members 53 and other creditors. Notwithstanding anything herein or in the Confidentiality Agreement to the contrary, you and each other party to the transaction (and each affiliate and person acting on behalf of any such party) agree that each party (and each employee, representative, and other agent of such party) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to such party or such person relating to such tax treatment and tax structure, except to the extent necessary to comply with any applicable federal or state securities laws. This authorization is not intended to permit disclosure of any other information including (without limitation) (i) any portion of any materials to the extent not related to the tax treatment or tax structure of the transaction, (ii) the identities of participants or potential participants in the transaction, (iii) the existence or status of any negotiations, (iv) any pricing or financial information (except to the extent such pricing or financial information is related to the tax treatment or tax structure of the transaction), or (v) any other term or detail not relevant to the tax treatment or the tax structure of the transaction. Notwithstanding any provision to the contrary herein, neither Parent nor Seller shall disclose any Medicaid Member enrollment information to Buyer until ODJFS has provided notice to either Seller or Parent that Buyer has met all of the program requirements of ODJFS. Buyer agrees to be bound by any and all of the member confidentiality requirements of the ODJFS program. 15.16 Rights Cumulative. Except as set forth herein, all rights, powers and remedies herein given to each party are cumulative and not alternative, and are in addition to all statutes or rules of law. Any forbearance or delay by such party in exercising the same shall not be deemed to be a waiver thereof, and the exercise of any right or partial exercise thereof shall not preclude the further exercise thereof, and the same shall continue in full force and effect until specifically waived by an instrument in writing executed by such party. 15.17 Amendments. No amendment, modification, termination or waiver of any provision of this Agreement shall be effective unless the same shall be set forth in a writing signed by each party, and then only to the extent specifically set forth therein. * * * [SIGNATURE PAGE FOLLOWS] 54 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. CENTENE: CENTENE CORPORATION By: /s/ Michael Neidorff --------------------------------- President & CEO ------------------------ ------------------------ BUYER: BUCKEYE COMMUNITY HEALTH PLAN: By: /s/ Michael Neidorff --------------------------------- President & CEO ------------------------ ------------------------ PARENT: MERCY HEALTH PARTNERS By: /s/ Steve Mickus --------------------------------- President & CEO ------------------------ ------------------------ SELLER: FAMILY HEALTH PLAN, INC. By: /s/ Samantha Platzke --------------------------------- Executive Director ------------------------ ------------------------ EXHIBIT C BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT THIS BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is made and entered into as of ______________, 2003, by and among Buckeye Community Health Plan, a Ohio health insuring corporation and wholly-owned subsidiary of Centene ("Buyer") and Family Health Plan Inc., an Ohio non-profit corporation ("Seller") and evidences the sale, conveyance, assignment, and transfer of all of the rights, title and interest of every type in and to the Assets, as described herein. RECITALS A. Buyer and Seller are parties to that certain Asset Sale and Purchase Agreement ("Purchase Agreement"), dated September __, 2003. B. The Purchase Agreement provides for the transfer from Seller to Buyer of certain assets as more particularly described and defined in the Purchase Agreement and the exhibits and schedules attached thereto ("Assets"). C. Buyer and Seller are closing the transaction set forth in the Purchase Agreement effective as of the date of this Agreement. NOW, THEREFORE, for and in consideration of the above recitals, and for other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereby agree as follows. 1. All capitalized terms used in this Agreement not otherwise defined in this Agreement shall have the meanings set forth for those terms in the Purchase Agreement. 2. Subject to the terms of the Purchase Agreement, Seller hereby agrees to sell, transfer, convey, assign and deliver to Buyer, or cause to be sold, transferred, conveyed, assigned and delivered to Buyer, free and clear of all Liens and encumbrances of any kind, and Buyer hereby agrees to purchase and accept assignment from Seller or Seller's Affiliates, all of the legal and beneficial right, title and interest in, to and under Assets of every kind and description that are owned and used by Seller in the operation of or necessary and/or material to the Medicaid Business in the Service Area, or owned by Seller's Affiliates. In particular, but without limiting the generality of the foregoing statement, Seller specifically grants, conveys, assigns, transfers, sells and delivers to Buyer, its successors, assigns and legal representatives, as of the date of this Agreement, (i) Seller's rights to continue to operate the Medicaid Business under the Seller's Medicaid Contract, including but not limited to all rights to provide ODJFS prescribed health services to Medicaid Members and the corresponding right to receive capitation payments, premium payments, delivery supplemental payments, and any other revenues payable by ODJFS with respect to such members from and after the Effective Date; (ii) all of Seller's rights, title and interest in the Provider Agreements identified in Schedule 2.1(b) of the Purchase Agreement; and (iii) all of Seller's rights, title and interest in the books, records, and other assets of Seller related to the Seller's Medicaid Contract, as identified in the Purchase Agreement, to have and to hold, together with all and singular the rights and appurtenances thereto belonging to Seller. 3. Buyer hereby assumes the Assumed Liabilities, as defined in the Purchase Agreement, and all of the duties, obligations and liabilities related to the Assumed Liabilities. Seller retains full responsibility for the Excluded Liabilities and all of the duties, obligations and liabilities related to the Excluded Liabilities. 4. The representations, warranties, covenants and agreements found in the Purchase Agreement are incorporated herein by reference, the same as if set forth herein in their entirety. 5. Nothing in this Agreement is intended to modify, amend, or alter in any respect the rights and obligations of the parties under the Purchase Agreement, which will remain in full force and effect notwithstanding the execution and delivery of this Agreement. 6. Buyer and Seller agree to take or cause to be taken such further action to execute, deliver and file or cause to be executed, delivered and filed, such further documents and instruments, and to obtain such further consents, as may be necessary or as may be reasonably requested in order to effectuate fully the purposes, terms and conditions of this Agreement. 7. This Agreement is binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except for the parties to this Agreement, a successor in interest, or assignee of a party, no person or entity is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties. 8. If there is a conflict between the terms of the Purchase Agreement and this Agreement, the terms of the Purchase Agreement shall control. 9. This Agreement shall be governed and construed in accordance with the internal laws of the State of Ohio without regard to principles of choice of law or conflicts of law which would direct the application of the laws of a different jurisdiction. [SIGNATURE PAGE FOLLOWS] A-2 EXECUTION COPY IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. BUCKEYE COMMUNITY HEALTH PLAN: By: /s/ Michael Neidorff --------------------------------- President & CEO ------------------------ ------------------------ FAMILY HEALTH PLAN, INC. By: /s/ Samantha Platzke --------------------------------- Executive Director ------------------------ ------------------------ A-3 EX-10.33 14 c83064exv10w33.txt MIDWEST BANKCENTRE LOAN TO CMC REAL ESTATE COMPANY EXHIBIT 10.33 CLOSING INDEX MIDWEST BANKCENTRE LOAN TO CMC REAL ESTATE COMPANY LLC $8,000,000.00 RE: 7711 CARONDELET, CLAYTON, MISSOURI AUGUST 8,2003 Promissory Note............................................................... 1 Deed of Trust................................................................. 2 Absolute Assignment of Rents and Leases....................................... 3 Tenant Estoppel and Subordination, Nondisturbance and Attornment Agreement.... 4 UCC-1 Financing Statement - Missouri Secretary of State....................... 5 UCC-1 Financing Statement - St. Louis County, Missouri........................ 6 Environmental Indemnity Agreement............................................. 7 Secretary's Certificate of CMC Real Estate Company, LLC....................... 8

(a) Certificate of Formation (b) Certificates of Good Standing - Delaware and Missouri (c) Operating Agreement (d) Resolutions THIS PROMISSORY NOTE IS SECURED BY A DEED OF TRUST CONTAINING FUTURE ADVANCE PROVISIONS GOVERNED BY SECTION 443.055 R.S.MO., AS AMENDED PROMISSORY NOTE $8,000,000.00 August 8, 2003 St. Louis County, Missouri CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC ("Borrower"), for value received, hereby promises to pay on the Maturity Date (hereinafter defined) to the order of MIDWEST BANKCENTRE (hereinafter called "Bank") at 8020 Forsyth Boulevard, St. Louis, Missouri 63105 or any other holder hereof, the principal sum of up to Eight Million and 00/100 Dollars ($8,000,000.00) or so much thereof as shall have been advanced hereunder by Bank to Borrower from time to time in lawful money of the United States of America and to pay interest monthly on said principal sum (computed on the basis of a 360 day year counting the actual number of days elapsed), at a floating rate per annum equal to the Prime Rate (as hereinafter defined) minus one-fourth of one percent (.25%) (any change in interest resulting from the change in such Prime Rate to be effective at the beginning of the business day on which each such change in the Prime Rate is effective), but in no event to exceed the maximum rate permitted by law. For purposes hereof, the term "Prime Rate" means, as of any date, a floating per annum rate of interest which at any time, and from time to time, shall be most recently announced by Bank as its Prime Rate, which is not intended to be Bank's lowest or most favorable rate of interest at any one time. From and after the maturity of this Note, whether by acceleration or otherwise, to the extent permitted by law interest on the unpaid principal and interest of this Note shall accrue at an annual rate equal to three (3) percent over the rate of interest that would otherwise then be payable On this Note. Notwithstanding anything contained herein to the contrary, Bank shall not be required to accept any payment that is tendered more than ten (10) days from the date when due, but if Bank does accept such payment, Borrower shall also pay a late charge equal to the greater of (i) $25.00, or (ii) five percent (5%) of the amount past due. If any payment of principal or interest on this note shall become due on a Saturday, Sunday or public holiday under the laws of the State of Missouri on which Bank is not open for business, such payment shall be made on the next succeeding business day of Bank, and any such extension or reduction of time shall hi such case be included in computing interest in connection with such payment. The principal of this Note shall be due and payable in installments of Twenty Four Thousand and 00/100 Dollars ($24,000.00) each commencing on September 1, 2003 and continuing on the first day of each succeeding month thereafter until this Note shall have been paid in full and accrued unpaid interest on this Note shall be due and payable on September 1, 2003 and on the first day of each succeeding month thereafter until all principal and accrued interest owing on this Note shall have been fully paid; provided, however, that on September 1, 2008 (the "Maturity Date") the final maturity of this Note, the entire principal balance of this Note then unpaid and all accrued interest then unpaid shall be finally due and payable. This Note is secured by a Deed of Trust, Assignment and Security Agreement, an Absolute Assignment of Rents and Leases and an Environmental Indemnity Agreement all of even date herewith which, together with this Note, are hereinafter sometimes referred to collectively as the "Loan Documents". Borrower may, at Borrower's option, repay without premium or penalty either the full amount of this promissory note or any lesser sum which is $1,000.00 or an integral multiple thereof. All payments hereunder shall be applied first against fees and charges payable hereunder, then to interest and then to reduction of principal. Partial prepayments will not excuse any scheduled payments due hereunder- No amounts prepaid or repaid hereunder may be reborrowed. At the option of the holder hereof the entire unpaid principal balance hereof and accrued interest hereon shall be immediately due and payable upon the occurrence of any "Default" under any of the Loan Documents which has not been timely cured within any applicable cure period. Borrower and each maker, surety, endorser and guarantor of this promissory note hereby agree that: (i) this promissory note may, at the sole option of Bank, be extended or renewed one or more times and the time for payment of this promissory note or any renewal note may be extended without notice to or consent of any person obligated on this promissory note; (ii) Bank may elect to enforce this promissory note against less than all of the persons directly or indirectly obligated hereon; (iii) Bank is not obligated to foreclose upon or exhaust any collateral or pursue any guaranties given for or in connection with this promissory note before proceedings against any person directly or indirectly obligated hereon; and (iv) presentment, demand for payment, notice of non-payment, protest, notice of protest, notice of dishonor, and all other notices in connection with this promissory note, filing of suit and diligence in collecting this promissory note, are waived other than as provided in the Loan Documents. All waivers by Bank shall be in writing. Bank reserves the right to waive or refrain from waiving any right or remedy under this promissory note. No delay or omission on the part of Bank in exercising any right or remedy shall operate as a waiver of such right or remedy. A waiver on one occasion shall not be a waiver on any future occasion. Borrower also promises to pay, in addition to the full amount due hereon, all reasonable expenses incurred by the holder in enforcing this promissory note, including without limitation, the reasonable fees and expenses of any attorney to whom this promissory note is referred for collection (whether or not litigation is commenced) or for representation in proceedings under any bankruptcy, receivership or insolvency law. Notwithstanding anything to the contrary herein, Borrower's liability hereunder is limited as provided in Section 6.28 of the Deed of Trust, Assignment and Security Agreement This promissory note is made in the State of Missouri and is governed by the internal Laws of the State of Missouri. BORROWER AND BANK HEREBY SUBMIT AND CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED IN THE CITY OR COUNTY OF ST. LOUIS, MISSOURI FOR THE PURPOSE OF LITIGATION INVOLVING THIS PROMISSORY NOTE AND ANY OTHER AGREEMENT EXECUTED IN CONNECTION WITH THIS PROMISSORY NOTE. BORROWER AND BANK WAIVE ANY AND ALL RIGHTS TO CONTEST SAID JURISDICTION AND VENUE AND WAIVE ANY RIGHTS TO COMMENCE ANY ACTION AGAINST EACH OTHER IN ANY JURISDICTION EXCEPT THE SITUS SPECIFIED ABOVE. BORROWER AND BANK HEREBY MUTUALLY WAIVE THEIR RIGHT TO A TRIAL BY JURY IN THE EVENT THAT LITIGATION IS COMMENCED BY EITHER PARTY WITH RESPECT HERETO. "ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING PAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT." "BORROWER" CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC By: /s/ Michael F. Neidorff ---------------------------------------------- Michael F. Neidorff, Manager Tax I.D. Number: 20-005-7283 2 - -------------------------------------------------------------------------------- (Space above reserved for Recorder of Deeds) Title of Document: Deed of Trust, Assignment and Security Agreement Date of Document: August 8th, 2003 Grantor: CMC Real Estate Company, LLC d/b/a CMC Real Estate Management Company, LLC Grantor's Address: c/o Centene Corporation 7711 Carondelet St. Louis, Missouri 63105 Grantee: Midwest BankCentre Grantee's Address: 8020 Forsyth Boulevard Clayton, Missouri 63105 Legal Description: See Exhibit A on Page 32. AFTER RECORDING, PLEASE MAIL DOCUMENT TO: ROBERT T. WEST PASTER, WEST & KRANER, P.C. 100 S. BRENTWOOD BLVD., SUITE 401 CLAYTON, MISSOURI 63105 [MISSOURI FORM] DEED OF TRUST, ASSIGNMENT AND SECURITY AGREEMENT NAME OF THE NOTEHOLDER SECURED BY THIS DEED OF TRUST: MIDWEST BANKCENTRE ADDRESS AT WHICH COMMUNICATIONS TO THE NOTEHOLDER MAY MIDWEST BANKCENTRE BE MAILED OR DELIVERED: 8020 FORSYTH BOULEVARD ST. LOUIS, MISSOURI 63105 THIS DEED OF TRUST, ASSIGNMENT AND SECURITY AGREEMENT (this "Deed of Trust") is made this_______day of August, 2003, by CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC, Grantor, with its main office at 7711 Carondelet, Clayton, Missouri 63105 in favor of TIMOTHY REEVES, Trustee, for the benefit of MIDWEST BANKCENTRE, Lender, with its main offices at 8020 Forsyth Boulevard, St. Louis, Missouri 63105. ARTICLE 1 - CERTAIN DEFINITIONS; GRANTING CLAUSES: SECURED INDEBTEDNESS SECTION 1.1. PRINCIPAL SECURED. This Deed of Trust secures the aggregate principal amount of Eight Million and 00/100 Dollars ($8,000,000-00). SECTION 1.2. CERTAIN DEFINITIONS AND REFERENCE TERMS. In addition to other terms defined herein, each of the following terms shall have the meaning assigned to it: "GRANTOR": CMC Real Estate Company, LLC d/b/a CMC Real Estate Management Company, LLC and its permitted successors and assigns. "LENDER" or "HOLDER": Midwest BankCentre, a state banking company, its successors and assigns. "NOTE": Promissory Note dated August__________, 2003 made by Grantor payable to the order of Lender in the principal face amount of $8,000,000,00, bearing interest as therein provided, containing a provision for, among other things, the payment of attorneys' fees. "TRUSTEE": Timothy Reeves, of the County of St. Louis, Missouri, or any successor or substitute appointed and designated as herein provided from time to time acting hereunder. SECTION 1.3. PROPERTY. Grantor does hereby GRANT, BARGAIN, SELL, CONVEY, TRANSFER, ASSIGN and SET OVER to Trustee the following: (a) the real estate (herein called the "Land") described in Exhibit A which is attached hereto and incorporated herein by reference, and (i) all improvements now or hereafter situated or to be situated on the Land (herein together called the "Improvements"): and (ii) all right, title and interest of Grantor in and to (I) all streets, roads, alleys, sidewalks, easements, rights-of-way, -2- licenses, rights of ingress and egress, vehicle parking rights and public places, existing or proposed, abutting, adjacent, used in connection with or pertaining to the Land or the Improvements; (2) any appendage or appurtenance and any strips or gores between the Land and abutting or adjacent properties; and (3) all water and water rights, timber, crops and mineral interests on or pertaining to the Land (the Land, Improvements and other rights, titles and interests referred to in this clause (a) being herein sometimes collectively called the "Premises"); (b) all fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies, and articles of persona! property, of every kind and character, now owned or hereafter acquired by Grantor, which are now or hereafter attached to or situated in, on or about the Land or the Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or the Improvements, and all renewals and replacements of, substitutions for and additions to the foregoing (the properties referred to in this clause (b) being herein sometimes collectively called the "Accessories," all of which are hereby declared to be permanent accessions to the Land); (c) all (i) plans and specifications for the Improvements; (ii) Grantor's rights, but not liability for any breach by Grantor, under all commitments (including any commitment for financing to pay any of the secured indebtedness, as defined below), insurance policies and other contracts and general intangibles (including but not limited to trademarks, trade names and symbols) related to the Premises or the Accessories or the operation thereof; (iii) deposits (including but not limited to Grantor's rights in tenants' security deposits, deposits with respect to utility services to the Premises, and any deposits or reserves hereunder or under any other Loan Document for taxes, insurance or otherwise), money, accounts, instruments, documents, notes and chattel paper arising from or by virtue of any transactions related to the Premises or the Accessories; (iv) permits, licenses, franchises, certificates, development rights, commitments and rights for utilities, and other rights and privileges obtained in connection with the Premises or the Accessories; (v) leases, rents, royalties, bonuses, issues, profits, revenues and other benefits of the Premises and the Accessories (without derogation of Article 3 hereof); (vi) oil, gas and coal and other minerals produced from or allocated to the Land and all products processed or obtained therefrom, and the proceeds thereof; and (vii) engineering, accounting, title, legal, and other technical or business data concerning the Premises which are in the possession of Grantor or in which Grantor can otherwise grant a security interest; and (d)all (i) proceeds (cash or non-cash) of or arising from the properties, rights, titles and interests referred to above in this Section 1.3, including but not limited to proceeds of any sale, lease or other disposition thereof, proceeds of each policy of insurance relating thereto (including premium refunds), proceeds of the taking thereof or of any rights appurtenant thereto, including change of grade of streets, curb cuts or other rights of access, by condemnation, eminent domain or transfer in lieu thereof for public or quasi-public use under any law, and proceeds arising out of any damage thereto or destruction thereof; and (ii) other interests of every kind and character which Grantor now has or hereafter acquires in, to or for the benefit of the properties, rights, titles and interests referred to above in this Section 1.3 and all property used or useful in connection therewith, including but not limited to rights of ingress and egress and hereditaments, remainders, reversions and reversionary rights or interests; this conveyance shall include, and the Hen and security interest created hereby shall encumber and extend to, all other or additional title, estates, interests or rights which are now owned or may hereafter be acquired by Grantor in or to the property demised; TO HAVE AND TO HOLD the foregoing rights, interests and properties, and all rights, estates, powers and privileges appurtenant thereto (herein collectively called the "Property"), unto Trustee, and his successors or substitutes in this trust, and to his or their successors and assigns, in trust, forever however, upon the terms, provisions and conditions herein set forth, to secure the Note and Loan Documents (as hereinafter defined) and all other indebtedness and matters defined as "secured indebtedness" in Section 1-5 of this Deed of Trust. SECTION 1.4. SECURITY INTEREST. Grantor hereby grants to Holder (as hereinafter defined) a security interest in all of the Property which constitutes personal property or fixtures (herein sometimes collectively called the "Collateral"). In addition to its rights hereunder or otherwise, Holder shall have all of the rights of a secured party under the Missouri Uniform Commercial Code, or under the Uniform Commercial Code in force in any other state to the extent the same is applicable law. -3- SECTION 1.5. NOTE, LOAN DOCUMENTS, OTHER OBLIGATIONS. This Deed of Trust is made to secure and enforce the payment and performance of the following promissory notes, obligations, indebtedness, duties and liabilities and all renewals, extensions, supplements, increases, and modifications thereof in whole or in part from time to time: (a) the Promissory Note dated August ___ , 2003, in the original principal amount of $8,000,000.00, from Grantor payable to Lender, bearing other things, the payment of attorneys' fees, and all other notes given in substitution therefor or in modification, supplement, increase, renewal or extension thereof, in whole or in part (such note or notes, whether one or more, as from time to time renewed, extended, supplemented, increased or modified and all other notes given in substitution therefor, or in modification, renewal or extension thereof, in whole or in part, being hereinafter called the "Note", and Lender, or the subsequent holder at the time in question of the Note or any of the secured indebtedness, as hereinafter defined, being herein called "Holder"): (b) all indebtedness and oilier obligations and duties owed by Grantor to Holder now or hereafter incurred or arising pursuant to or permitted by the provisions of the Note, this Deed of Trust, or any other document now or hereafter evidencing, governing, guaranteeing, securing or otherwise executed in connection with the loan evidenced by the Note, including but not limited to any loan or credit agreement, letter of credit or reimbursement agreement, tri-party financing agreement, interest rate protection agreement or other agreement between Grantor and Holder, or among Grantor, Holder and any other party or parties, pertaining to the repayment or use of the proceeds of the loan evidenced by the Note (the Note, this Deed of Trust and such other documents, as they or any of them may have been or may be from time to time renewed, extended, supplemented, increased or modified, being herein sometimes collectively called the "Loan Documents"). The indebtedness referred to in this Section 1-5 is hereinafter sometimes referred to as the "secured indebtedness" or the "indebtedness secured hereby." ARTICLE 2 - REPRESENTATIONS, WARRANTIES AND COVENANTS SECTION 2.1. Grantor represents, warrants, and covenants as follows: (a) PAYMENT AND PERFORMANCE. Grantor will make due and punctual payment of the secured indebtedness. Grantor will timely and properly perform and comply with all of the covenants, agreements, and conditions imposed upon it by this Deed of Trust and the other Loan Documents and will not permit a default to occur hereunder or thereunder. Time shall be of the essence in this Deed of Trust (b) TITLE AND PERMITTED ENCUMBRANCES. Grantor has, in Grantor's own right, and Grantor covenants to maintain, lawful, good and marketable title to the Property, free and clear of all liens, charges, claims, security interests, and encumbrances except for (i) the matters, if any, set forth under the heading "Permitted Encumbrances" in Exhibit B hereto, which are Permitted Encumbrances only to the extent the same are valid and subsisting and affect the Property, (ii) the liens and security interests evidenced by this Deed of Trust, (iii) statutory liens for real estate taxes and assessments on the Property which are not yet delinquent, and (iv) other liens and security interests (if any) in favor of Lender (the matters described in the foregoing clauses (i), (ii), (iii) and (iv) being herein called the "permitted Encumbrances"). Grantor, and Grantor's successors and assigns, will warrant generally and forever defend title to the Property, subject as aforesaid, to Trustee and Trustee's successors or substitutes and assigns, against the claims and demands of all persons claiming or to claim the same or any part thereof. Grantor will punctually pay, perform, observe and keep all covenants, obligations and conditions in or pursuant to any Permitted Encumbrance and will not modify or permit modification of any Permitted Encumbrance without the prior written consent of Holder. Inclusion of any matter as a Permitted Encumbrance does not constitute approval or waiver by Holder of any existing or future violation or other breach thereof by Grantor, by the Property or otherwise. If any right or interest of Holder in the Property or any part thereof shall be endangered or questioned or shall be attacked directly or indirectly, Trustee and Holder, or either of them (whether or not named as parties to legal proceedings with respect thereto), are hereby authorized and empowered to take such steps as in their discretion may be proper for the defense of any such legal proceedings or the protection of such right or -4- interest of Holder, including but not limited to the employment of independent counsel, the prosecution or defense of litigation, and the compromise or discharge of adverse claims. All expenditures so made of every kind and character shall be a demand obligation (which obligation Grantor hereby promises to pay) owing by Grantor to Holder or Trustee (as the case may be), and the party (Holder or Trustee, as the case may be) making such expenditures shall be subrogated to all rights of the person receiving such payment. (c) TAXES AND OTHER IMPOSITIONS. Grantor will pay, or cause to be paid, all taxes, assessments and other charges or levies imposed upon or against or with respect to the Property or the ownership, use, occupancy or enjoyment of any portion thereof, or any utility service thereto, as the same become due and payable, including but not limited to all real estate taxes assessed against the Property or any part thereof, and shall deliver promptly to Holder such evidence of the payment thereof as Holder may require. (d) INSURANCE. Grantor shall obtain and maintain at Grantor's sole expense: (1) mortgagee title insurance issued to Holder covering the Premises as required by Holder, without exception for mechanics' Hens; (2) all-risk insurance with respect to all insurable Property, against loss or damage by fire, lightning, windstorm, explosion, hail, tornado and such hazards as are presently included in so-called "all-risk" coverage and against such other insurable hazards as Holder may require, in an amount not less than 100% of the full replacement cost, including the cost of debris removal, without deduction for depreciation and sufficient to prevent Grantor and Holder from becoming a coinsurer, such insurance to be in Builder's Risk (non-reporting) form during and with respect to any construction on the Premises; (3) if and to the extent any portion of the Premises is in a special flood hazard area, a flood insurance policy in an amount equal to the lesser of the principal face amount of the Note or the maximum amount available; (4) comprehensive general public liability insurance, on an "occurrence" basis, for the benefit of Grantor and Holder as named insureds; (5) statutory workers' compensation insurance with respect to any work on or about the Premises; and (6) such other insurance on the Property as may from time to time be required by Holder (including but not limited to business interruption insurance, boiler and machinery insurance, earthquake insurance, and war risk insurance) and against other insurable hazards or casualties which ai the time are commonly insured against in the case of premises similarly situated, due regard being given to the height, type, construction, location, use and occupancy of buildings and improvements. All insurance policies shall be issued and maintained by insurers, in amounts, with deductibles, and in form satisfactory to Holder, and shall require not less than thirty (30) days' prior written notice to Holder of any cancellation or change of coverage. All insurance policies maintained, or caused to be maintained, by Grantor with respect to the Property, except for public liability insurance, shall provide that each such policy shall be primary without right of contribution from any other insurance that may be carried by Grantor or Holder and that all of the provisions thereof, except the limits of liability, shall operate in the same manner as if there were a separate policy covering each insured. If any insurer which has issued a policy of title, hazard, liability or other insurance required pursuant to this Deed of Trust or any other Loan Document becomes insolvent or the subject of any bankruptcy, receivership or similar proceeding or if in Holder's reasonable opinion the financial responsibility of such insurer is or becomes inadequate, Grantor shall, in each instance promptly upon the request of Holder and at Grantor's expense, obtain and deliver to Holder a like policy (or, if and to the extent permitted by Holder, a certificate of insurance) issued by another insurer, which insurer and policy meet the requirements of this Deed of Trust or such other Loan Document, as the case may be. Without limiting the discretion of Holder with respect to required endorsements to insurance policies, all such policies for loss of or damage to the Property shall contain a standard mortgagee clause (without contribution) naming Holder as mortgagee with loss proceeds payable to Holder notwithstanding (i) any act, failure to act or negligence of or violation of any warranty, declaration or condition contained in any such policy by any named insured; (ii) the occupation or use of the Property for purposes more hazardous than permitted by the terms of any such policy; (iii) any foreclosure or other action by Holder under the Loan Documents; or (iv) any change in title to or ownership of the Property or any portion thereof, such proceeds to be held for application as provided in the Loan Documents. The originals of each initial insurance policy (or to the extent permitted by Holder, a copy of the original policy and a satisfactory certificate of insurance) shall be delivered to Holder at the time of execution of this Deed of -5- Trust, with premiums fully paid, and each renewal or substitute policy (or certificate) shall be delivered to Holder, with premiums fully paid, at least ten (10) days before the termination of the policy it renews or replaces. Grantor shall pay all premiums on policies required hereunder as they become due and payable and promptly deliver to Holder evidence satisfactory to Holder of the timely payment thereof. If any loss occurs at any time when Grantor has failed to perform Grantor's covenants and agreements in this paragraph, Holder shall nevertheless be entitled to the benefit of all insurance covering the loss and held by or for Grantor, to the same extent as if it had been made payable to Holder. Upon any foreclosure hereof or transfer of title to the .Property in extinguishment of the whole or any part of the secured indebtedness, all of Grantor's right, title and interest in and to the insurance policies referred to in this Section (including unearned premiums) and all proceeds payable thereunder shall thereupon vest in the purchaser at foreclosure or other such transferee, to the extent permissible under such policies. Holder shall have the right (but not the obligation) to make proof of loss for, settle and adjust any claim under, and receive the proceeds of, all insurance for loss of or damage to the Property, and the expenses incurred by Holder in the adjustment and collection of insurance proceeds shall be a part of the secured indebtedness and shall be due and payable to Holder on demand. Holder shall not be, under any circumstances, liable or responsible for failure to collect or exercise diligence in the collection of any of such proceeds or for the obtaining, maintaining or adequacy of any insurance or for failure to see to the proper application of any amount paid over to Grantor. Any such proceeds received by Holder shall, after deduction therefrom of all reasonable expenses actually incurred by Holder, including attorneys' fees, at Holder's option be (1) released to Grantor, or (2) applied (upon compliance with such terms and conditions as may be required by Holder) to repair or restoration, either partly or entirely, of the Property so damaged, or (3) applied to the payment of the secured indebtedness in such order and manner as Holder, in its sole discretion, may elect, whether or not due. In any event, the unpaid portion of the secured indebtedness shall remain in full force and effect and the payment thereof shall not be excused. Grantor shall at all times comply with the requirements of the insurance policies required hereunder and of the issuers of such policies and of any board of fire underwriters or similar body as applicable to or affecting the Property. (e) RESERVE FOR INSURANCE, TAXES AND ASSESSMENTS. Upon request of Holder, to secure certain of Grantor's obligations in paragraphs (c) and (d) above, but not in lieu of such obligations, Grantor will deposit with Holder a sum equal to real estate taxes, assessments and charges (which charges for the purpose of this paragraph shall include without limitation any recurring charge which could result in a lien against the Property) against the Property for the current year, the premiums for such policies of insurance for the current year, and sewer usage charges, all as estimated by Holder and prorated to the end of the calendar month following the month during which Holder's request is made, and thereafter will deposit with Holder, on each date when an installment of principal and/or interest is due on the Note, sufficient funds (as estimated from time to time by Holder) to permit Holder to pay at least forty-five (45) days prior to the due date thereof, the next maturing real estate taxes, assessments and charges and premiums for such policies of insurance. Holder shall have the right to rely upon tax information furnished by applicable taxing authorities in the payment of such taxes or assessments and shall have no obligation to make any protest of any such taxes or assessments. Any excess over the amounts required for such purposes shall be held by Holder for future use, applied to any secured indebtedness or refunded to Grantor, at Holder's option, and any deficiency in such funds so deposited shall be made up by Grantor upon demand of Holder All such funds so deposited shall bear no interest, may be mingled with the general funds of Holder and shall be applied by Holder toward the payment of such taxes, assessments, charges and premiums when statements therefor are presented to Holder by Grantor (which statements shall be presented by Grantor to Holder a reasonable time before the applicable amount is due); provided, however, that, if a default shall have occurred hereunder, such funds may at Holder's option be applied to the payment of the secured indebtedness in the order determined by Holder in its sole discretion, and that Holder may (but shall have no obligation) at any time, in its discretion, apply all or any part of such funds toward the payment of any such taxes, assessments, charges or premiums which are past due, together with any penalties or late charges with respect thereto. The conveyance or transfer of Grantor's interest in the Property for any reason (including without limitation the foreclosure of a subordinate lien or security interest or a transfer by operation of law) shall constitute an assignment or transfer of -6- Grantor's interest in and rights to such funds held by Holder under this paragraph but subject to the rights of Holder hereunder. (f) CONDEMNATION. Grantor shall notify Holder immediately of ray threatened or pending proceeding for condemnation affecting the Property or arising out of damage to the Property, and Grantor shall, at Grantor's expense, diligently prosecute any such proceedings. Holder shall have the right (but not the obligation) to participate in any such proceeding and to be represented by counsel of its own choice. Holder shall be entitled to receive all sums which may be awarded or become payable to Grantor for the condemnation of the Property, or any pan thereof, for public or quasi-public use, or by virtue of private sale in lieu thereof, and any sums which may be awarded or become payable to Grantor for injury or damage to the Property. Grantor shall, promptly upon request of Holder, execute such additional assignments and other documents as may be necessary from time to time to permit such participation and to enable Holder to collect and receipt for any such sums. All such sums are hereby assigned to Holder, and shall, after deduction therefrom of all reasonable expenses actually incurred by Holder, including attorneys' fees, at Holder's option be (1) released to Grantor, or (2) applied (upon compliance with such terms and conditions as may be required by Holder) to repair or restoration of the Property so affected, or (3) applied to the payment of the secured indebtedness in such order and manner as Holder, in its sole discretion, may elect, whether or not due. In any event the unpaid portion of the secured indebtedness shall remain in full force and effect and the payment thereof shall not be excused. Holder shall not be, under any circumstances, liable or responsible for failure to collect or to exercise diligence in the collection of any such sum or for failure to see to the proper application of any amount paid over to Grantor, Holder is hereby authorized, in the name of Grantor, to execute and deliver valid acquittances for, and to appeal from, any such award, judgment or decree. All costs arid expenses (including but not limited to attorneys' fees) incurred by Holder in connection with any condemnation shall be a demand obligation owing by Grantor (which Grantor hereby promises to pay) to Holder pursuant to this Deed of Trust. (g) COMPLIANCE WITH LEGAL REQUIREMENTS. The Property and the use, operation and maintenance thereof and all activities thereon do and shall at all times comply with all applicable Legal Requirements (hereinafter defined). The Property is not, and shall not be, dependent on any other property or premises or any interest therein other than the Property to fulfill any requirement of any Legal Requirement. Grantor shall not, by act or omission, permit any building or other improvement not subject to the lien of this Deed of Trust to rely on the Property or any interest therein to fulfill any requirement of any Legal Requirement. No part of the Property constitutes a nonconforming use under any zoning law or similar law or ordinance. Grantor has obtained and shall preserve in force all requisite zoning, utility, building, health and operating permits from the governmental authorities having jurisdiction over the Property. If Grantor receives a notice or claim from any person that the Property, or any use, activity, operation or maintenance thereof or thereon, is not in compliance with any Legal Requirement, Grantor will promptly furnish a copy of such notice or claim to Holder. Grantor has received no notice and has no knowledge of any such noncompliance. As used in this Deed of Trust: (i) the term "Legal Requirement" means any Law (hereinafter defined), agreement, covenant, restriction, easement or condition (including, without limitation of the foregoing, any condition or requirement imposed by any insurance or surety company), as any of the same now exists or may be changed or amended or come into effect in the future; and (ii) the term "Law" means any federal, state or local law, statute, ordinance, code, rule, regulation, license, permit, authorization, constitution, treaty, judgment, award, writ, decision, order, injunction or decree, domestic or foreign. (h) MAINTENANCE, REPAIR AND RESTORATION. Grantor will keep the Property in first class order, repair, operating condition and appearance, causing all necessary repairs, renewals, replacements, additions and improvements to be promptly made, and will not allow any of the Property to be misused, abused or wasted or to deteriorate. Notwithstanding the foregoing, Grantor will not, without the prior written consent of Holder, (i) remove from the Property any fixtures or personal property covered by this Deed of Trust except -7- such as is replaced by Grantor by an article of equal suitability and value, owned by Grantor, free and clear of any lien or security interest (except that created by this Deed of Trust), or (ii) make any structural alteration to the Property or any other alteration thereto which impairs the value thereof. if any act or occurrence of any kind or nature (including any condemnation or any casualty for which insurance was not obtained or obtainable) shall result in damage to or loss or destruction of the Property, Grantor shall give prompt notice thereof to Holder and Grantor shall promptly, at Grantor's sole cost and expense and regardless of whether insurance or condemnation proceeds (if any) shall be available or sufficient for the purpose, commence and continue diligently to completion to restore, repair, replace and rebuild the Property as nearly as possible to its value, condition and character immediately prior to the damage, loss or destruction. (i) NO OTHER LIENS. Grantor will not, without the prior written consent of Holder, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any deed of trust, mortgage, voluntary or involuntary lien, whether statutory, constitutional or contractual, security interest, encumbrance or charge, or conditional sale or other title retention document, against or covering the Property, or any part thereof, other than the Permitted Encumbrances, regardless of whether the same are expressly or otherwise subordinate to the lien or security interest created in this Deed of Trust, and should any of the foregoing become attached hereafter in any manner to any part of the Property without the prior written consent of Holder, Grantor will cause the same to be promptly discharged and released. Grantor will own all parts of the Property and will not acquire any fixtures, equipment or other property forming a part of the Property pursuant to a lease, license, security agreement or similar agreement, whereby any party has or may obtain the right to repossess or remove same, without the prior written consent of Holder. (j) OPERATION OF PROPERTY. Grantor will operate the Property in a good and workmanlike manner and in accordance with all Legal Requirements and will pay all fees or charges of any kind in connection therewith. Grantor will keep the Property occupied so as not to impair the insurance carried thereon. Grantor will not use or occupy or conduct any activity on, or allow the use or occupancy of or the conduct of any activity on, the Property in any manner which violates any Legal Requirement or which constitutes a public or private nuisance or which makes void, voidable or cancelable, or increases the premium of, any insurance then in force with respect thereto. Grantor will not initiate or permit any zoning reclassification of the Property or seek any variance under existing zoning ordinances applicable to the Property or use or permit the use of the Property in such a manner which would result in such use becoming a nonconforming use under applicable zoning ordinances or other Legal Requirement. Grantor will not impose any easement, restrictive covenant or encumbrance upon the Property, execute or file any subdivision plat or condominium declaration affecting the Property or consent to the annexation of the Property to any municipality, without the prior written consent of Holder. Grantor will not do or suffer to be done any act whereby the value of any part of the Property may be lessened. Grantor will preserve, protect, renew, extend and retain all material rights and privileges granted for or applicable to the Property. Without the prior written consent of Holder, there shall be no drilling or exploration for or extraction, removal or production of any mineral, hydrocarbon, gas, natural element, compound or substance (including sand and gravel) from the surface or subsurface of the Land regardless of the depth thereof or the method of mining or extraction thereof. Grantor will cause all debts and liabilities of any character (including without limitation all debts and liabilities for labor, material and equipment and all debts and charges for utilities servicing the Property) incurred in the construction, maintenance, operation and development of the Property to be promptly paid. (k) FINANCIAL MATTERS. Grantor is solvent after giving effect to all borrowings contemplated by the Loan Documents and no proceeding under any Debtor Relief Law (hereinafter defined) is pending (or, to Grantor's knowledge, threatened) by or against Grantor, or any affiliate of Grantor, as a debtor. All reports, statements, plans, budgets, applications, agreements and other data and information heretofore furnished or hereafter to be furnished by or on behalf of Grantor to Holder in connection with the loan or loans evidenced by the Loan Documents (including, without limitation, all financial statements and financial information) are -8- and will be true, correct and complete in all material respects as of their respective dates and do not and will not omit to state any fact or circumstance necessary to make the statements contained therein not misleading. No material adverse change has occurred since the dates of such reports, statements and other data in the financial condition of Grantor or, to Grantor's knowledge, of any tenant under any lease described therein. For the purposes of this paragraph, "Grantor" shall also include any person liable directly or indirectly for the secured indebtedness or any part thereof and any joint venturer or general partner of Grantor. (i) STATUS OF GRANTOR; SUITS AND CLAIMS; LOAN DOCUMENTS. If Grantor is a corporation, partnership, limited liability company, or other legal entity, Grantor is and will continue to be (i) duly organized, validly existing and in good standing under the laws of its state of organization, (ii) authorized to do business in, and in good standing in, each state in which the Property is located, and (iii) possessed of all requisite power and authority to carry on its business and to own and operate the Property. Each Loan Document executed by Grantor has been duly authorized, executed and delivered by Grantor, and the obligations thereunder and the performance thereof by Grantor in accordance with their terms are and will continue to be within Grantor's power and authority (without the necessity of jointer or consent of any other person), are not and will not be in contravention of any Legal Requirement or any other document or agreement to which Grantor or the Property is subject, and do not and will not result in the creation of any encumbrance against any assets or properties of Grantor, or any other person liable, directly or indirectly, for any of the secured indebtedness, except as expressly contemplated by the Loan Documents. There is no suit, action, claim, investigation, inquiry, proceeding or demand pending (or, to Grantor's knowledge, threatened) which affects the Property (including, without limitation, any which challenges or otherwise pertains to Grantor's title to the Property) or the validity, enforceability or priority of any of the Loan Documents. There is no judicial or administrative action, suit or proceeding pending (or, to Grantor's knowledge, threatened) against Grantor, or against any other person liable directly or indirectly for the secured indebtedness, except as has been disclosed in writing to Holder in connection with the loan evidenced by the Note. The Loan Documents constitute legal, valid and binding obligations of Grantor (and of each guarantor, if any) enforceable in accordance with their terms, except as the enforceability thereof may be limited by Debtor Relief Laws (hereinafter defined) and except as the availability of certain remedies may be limited by general principles of equity. Grantor is not a "foreign person" within the meaning of the Internal Revenue Code of 1986, as amended, Sections 1445 and 7701 (i. e. Grantor is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined therein and in any regulations promulgated thereunder). The loan evidenced by the Note is solely for business and/or investment purposes, and is not for personal, family, household or agricultural purposes. Grantor will not cause or permit any change to be made in its name, identity, or corporate or partnership structure, unless Grantor shall have notified Holder of such change prior to the effective date of such change, and shall have first taken all action required by Holder for the purpose of further perfecting or protecting the lien and security interest of Holder in the Property. Grantor's principal place of business and chief executive office, and the place where Grantor keeps its books and records concerning the Property, has for the preceding four months been and will continue to be (unless Grantor notifies Holder of any change in writing prior to the date of such change) the address of Grantor set forth at the end of this Deed of Trust. (m) CERTAIN ENVIRONMENTAL MATTERS. Grantor shall comply with the terms and covenants of that certain Environmental Indemnity Agreement dated of even date herewith (the "Environmental Agreement"). (n) FURTHER ASSURANCES. Grantor will, promptly on request of Holder, (i) correct any defect, error or omission which may be discovered in the contents, execution or acknowledgment of this Deed of Trust or any other Loan Document; (ii) execute, acknowledge, deliver, procure and record and/or file such further documents (including, without limitation, further deeds of trust, security agreements, financing statements, continuation statements, and assignments of rents or leases) and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Deed of Trust and the other Loan Documents, to more fully identify and subject to the liens and security interests hereof any property -9- intended to be covered hereby (including specifically, but without limitation, any renewals, additions, substitutions, replacements, or appurtenances to the Property) or as deemed advisable by Holder to protect the lien or the security interest hereunder against the rights or interests of third persons; and (iii) provide such certificates, documents, reports, information, affidavits and other instruments and do such further acts as may be necessary, desirable or proper in the reasonable determination of Holder to enable Holder to comply with the requirements or requests of any agency having jurisdiction over Holder or any examiners of such agencies with respect to the indebtedness secured hereby, Grantor or the Property. Grantor shall pay all costs connected with any of the foregoing, which shall be a demand obligation owing by Grantor (which Grantor hereby promises to pay) to Holder pursuant to this Deed of Trust. (o) FEES AND EXPENSES. Without limitation of any other provision of this Deed of Trust or of any other Loan Document and to the extent not prohibited by applicable law, Grantor will pay, and will reimburse to Holder and/or Trustee on demand to the extent paid by Holder and/or Trustee: (i) all appraisal fees, recordation, transfer and other filing, registration and recording fees, taxes, brokerage fees and commissions, abstract fees, title search or examination fees, title policy and endorsement premiums and fees, uniform commercial code search fees, judgment and tax Hen search fees, escrow fees, attorneys' fees, architect fees, construction consultant fees, environmental inspection fees, survey fees, and all other out-of-pocket costs and expenses of every character incurred by Grantor or Holder and/or Trustee in connection with the preparation of the Loan Documents, the evaluation, closing and funding of the loan evidenced by the Loan Documents, and any and all amendments and supplements to this Deed of Trust, the Note or any other Loan Documents or any approval, consent, waiver, release or other matter requested or required hereunder or thereunder, or otherwise attributable or chargeable to Grantor as owner of the Property; and (ii) all costs and expenses, including attorneys' fees and expenses, incurred or expended in connection with the exercise of any right or remedy, or the defense of any right or remedy or the enforcement of any obligation of Grantor, hereunder or under any other Loan Document. (p) INDEMNIFICATION. (i) Grantor will indemnify and hold harmless Holder and Trustee from and against, and reimburse them on demand for, any and all Indemnified Matters (defined below). For purposes of this paragraph (p), the terms "Holder" and "Trustee" shall include the directors, officers, partners, employees and agents of Trustee and Holder, respectively, and any persons owned or controlled by, owning or controlling, or under common control or affiliated with Holder or Trustee, respectively. Without limitation, the foregoing indemnities shall apply to each indemnified person with respect to matters which in whole or in part are caused by or arise out of the negligence of any other indemnified person. However, such indemnities shall not apply to a particular indemnified person to the extent that the subject of the indemnification is caused by or arises out of the gross negligence or willful misconduct of that indemnified person. Any amount to be paid under this paragraph (p) by Grantor to Holder and/or Trustee shall be a demand obligation owing by Grantor (which Grantor hereby promises to pay) to Holder arid/or Trustee pursuant to this Deed of Trust. Nothing in this paragraph, elsewhere in this Deed of Trust or in any other Loan Document shall limit or impair any rights or remedies of Holder and/or Trustee (including without limitation any rights of contribution or indemnification) against Grantor or any other person under any other provision of this Deed of Trust, any other Loan Document, any other agreement or any applicable Legal Requirement. (ii) As used herein, the term "Indemnified Matters" means any and all claims, demands, liabilities (including strict liability), losses, damages (including consequential damages), causes of action, judgments, penalties, costs and expenses (including without limitation, reasonable fees and expenses of attorneys and other professional consultants and experts, and of the investigation and defense of any claim, whether or not such claim is ultimately defeated, and the settlement of any claim or judgment including all value paid or given in settlement) of every kind, known or unknown, -10- foreseeable or unforeseeable, which may be imposed upon, asserted against or incurred or paid by Holder and/or Trustee at any time and from time to time, whenever imposed, asserted or incurred because of, resulting from, in connection with, or arising out of any transaction, act, omission event or circumstance in any way connected with the Property or with this Deed of Trust or any other Loan Document, including but not limited to any bodily injury or death or property damage occurring in or upon or in the vicinity of the Property through any cause whatsoever, any act performed or omitted to be performed hereunder or under any other Loan Document, any breach by Grantor of any representation, warranty, covenant, agreement or condition contained in this Deed of Trust or in any other Loan Document, any default as defined herein, any claim under or with respect to any Lease (hereinafter defined), or arising under the Environmental Agreement. The indemnities in this paragraph (p) shall not terminate upon the release, foreclosure or other termination of this Deed of Trust but will survive the Release Date, foreclosure of this Deed of Trust or conveyance in lieu of foreclosure, the repayment of the secured indebtedness, the discharge and release of this Deed of Trust and the other Loan Documents, any bankruptcy or other debtor relief proceeding, and any other event whatsoever. (q) RECORDS AND FINANCIAL REPORTS. Grantor will keep accurate books and records in accordance with sound accounting principles in which full, true and correct entries shall be promptly made with respect to the Property and the operation thereof, and will permit all such books and records to be inspected and copied, and the Property to be inspected and photographed, by Holder and its representatives during normal business hours and at any other reasonable times. Without limitation of other or additional requirements in any of the other Loan Documents, (ii) Grantor's an income statement of Grantor within one hundred twenty (120) days after the one-year anniversary of the date of the most recent financial statement delivered to Holder in the case of an individual, otherwise in all other cases, for each fiscal year of Grantor as soon as reasonably practicable following the end of such fiscal year, but in any event within ninety (90) days after the end thereof; and (Hi) Grantor's tax returns within thirty (30) days after the due date therefore including extensions. Each financial statement submitted pursuant to this paragraph shall be prepared in accordance with generally accepted accounting principles, consistently applied, and be certified in writing as true and correct by Grantor (or if Grantor is not a natural person, by a representative of Grantor acceptable to Holder). Grantor will furnish to Holder at Grantor's expense all evidence which Holder may from time to time reasonably request as to compliance with all provisions of the Loan Documents. Any inspection or audit of the Property or the books and records of Grantor, or the procuring of documents and financial and other information, by or on behalf of Holder shall be for Holder's protection only, and shall not constitute any assumption of responsibility to Grantor or anyone else with regard to the condition, construction, maintenance or operation of the Property nor Holder's approval of any certification given to Holder nor relieve Grantor of any of Grantor's obligations. Holder may from time to time assign or grant participations in the secured indebtedness and Grantor consents to the delivery by Holder to any acquirer or prospective acquirer of any interest or participation in or with respect to all or part of the secured indebtedness such information as Holder now or hereafter has relating to the Property, Grantor, any party obligated for payment of any part of the secured indebtedness, any tenant or guarantor under any lease affecting any part of the Property and any agent or guarantor under any management agreement affecting any part of the Property. (r) TAXES ON NOTE OR PEED OF TRUST. Grantor will promptly pay all income, franchise and other taxes owing by Grantor and any stamp, documentary, recordation and transfer taxes or other taxes (unless such payment by Grantor is prohibited by law) which may be required to be paid with respect to the Note, this Deed of Trust or any other instrument evidencing or securing any of the secured indebtedness. In the event of -11- the enactment after this date of any law of any governmental entity applicable to Holder, the Note, the Property or this Deed of Trust deducting from the value of property for the purpose of taxation any lien or security interest thereon, or imposing upon Holder the payment of the whole or any part of the taxes or assessments or charges or hens herein required to be paid by Grantor, or changing in any way the laws relating to the taxation of deeds of trust or mortgages or security agreements or debts secured by deeds of trust or mortgages or security agreements or the interest of the mortgagee or secured party in the property covered thereby, or the manner of collection of such taxes, so as to affect this Deed of Trust or the indebtedness secured hereby or Holder, then, and in any such event, Grantor, upon demand by Holder, shall pay such taxes, assessments, charges or liens, or reimburse Holder therefore; provided, however, that if in the opinion of counsel for Holder (i) it might be unlawful to require Grantor to make such payment or (ii) the making of such payment might result in the imposition of interest beyond the maximum amount permitted by law, then and in such event, Holder may elect, by notice in writing given to Grantor, to declare all of the indebtedness secured hereby to be and become due and payable sixty (60) days from the giving of such notice. (s) STATEMENT CONCERNING NOTE OR DEED OF TRUST. Grantor shall at any time and from time to time furnish within seven (7) days of request by Holder a written statement in such form as may be required by Holder stating that (i) the Note, this Deed of Trust and the other Loan Documents are valid and binding obligations of Grantor, enforceable against Grantor in accordance with their terms; (ii) the unpaid principal balance of the Note; (iii) the date to which interest on the Note is paid; (iv) the Note, this Deed of Trust and the other Loan Documents have not been released, subordinated or modified; and (v) there are no offsets or defenses against the enforcement of the Note, this Deed of Trust or any other Loan Document. If any of the foregoing statements are untrue, Grantor shall, alternatively, specify the reasons therefor. (t) DEBT SERVICE COVERAGE RATIO. (2) month period (or such shorter period of time as Grantor has owned the Property), which Debt Service Coverage Ratio shall be Such Ratio shall be For purposes hereof, "Net Operating Income" shall be defined as (A) excluding income from early cancellation penalties or other nontypical sources) for the applicable period for the applicable period, including, but not limited to, real estate taxes, insurance premiums and a management fee, but specifically excluding depreciation and capital expenditures. SECTION 2.2. PERFORMANCE BY HOLDER ON GRANTOR'S BEHALF. Grantor agrees that, if Grantor fails to perform any act or to take any action which under any Loan Document Grantor is required to perform or take, or to pay any money which under any Loan Document Grantor is required to pay, and whether or not the failure then constitutes a default hereunder or thereunder, and whether or not there has occurred any default or defaults hereunder or the secured indebtedness has been accelerated, Holder, in Grantor's name or its own name, may, but shall not be obligated to, perform or cause to be performed such act or take such action or pay such money, and any expenses so incurred by Holder and any money so paid by Holder shall be a demand obligation owing by Grantor to Holder (which obligation Grantor hereby promises to pay), shall be a part of the indebtedness secured hereby, and Holder, upon making such payment, shall be subrogated to all of the rights of the person, entity or body politic receiving such payment. Holder and its designees shall have the right to enter upon the Property at any time and from time to time for any such purposes. No such payment or performance by Holder shall waive or cure any default or waive any right, remedy or recourse of Holder. Any such payment may be made by Holder in reliance on any statement, invoice or claim without inquiry into the validity or accuracy thereof. Each amount due and owing by Grantor to Holder pursuant to this Deed of Trust shall bear interest, from the date such amount becomes due until paid, at the rate per annum provided in the Note for interest on past due principal owed on the Note but never in excess of the maximum no usurious amount permitted by applicable law, which interest shall be payable to Holder on demand; and all such -12- amounts, together with such interest thereon, shall automatically and without notice be a part of the indebtedness secured hereby. The amount and nature of any expense by Holder hereunder and the time when paid shall be fully established by the certificate of Holder or any of Holder's officers or agents. ARTICLE 3 - ASSIGNMENT OF RENTS AND LEASES SECTION 3.1. ASSIGNMENT. Grantor hereby assigns to Holder all Rents (hereinafter defined) and all of Grantor's rights in and under all Leases (hereinafter defined). So long as no Default (hereinafter defined) has occurred, Grantor shall have a license (which license shall terminate automatically and without further notice upon the occurrence of a Default) to collect, but not prior to accrual, the Rents under the Leases and, where applicable, subleases, such Rents to be held in trust for Holder, and to otherwise deal with all Leases as permitted by this Deed of Trust. Each month, provided no Default has occurred, Grantor may retain such Rents as were collected that month and held in trust for Holder, Upon the revocation of such license, all rents shall be paid directly to Holder and not through Grantor, all without the necessity of any further action by Holder, including, without limitation, any action to obtain possession of the Land, Improvements or any other portion of the Property or any action for the appointment of a receiver. Grantor hereby authorizes and directs the tenants under the Leases to pay Rents to Holder upon written demand by Holder, without further consent of Grantor, without any obligation of such tenants to determine whether a Default has in fact occurred and regardless of whether Holder has taken possession of any portion of the Property, and the tenants may rely upon any written statement delivered by Holder to the tenants. Any such payments to Holder shall constitute payments to Grantor under the Leases, and Grantor hereby irrevocably appoints Holder as its attorney-in-fact to do all things which Grantor might otherwise do with respect to the Property and the Leases thereon, including, without limitation, (i) collecting Rents with or without suit and applying the same, less expenses of collection, to any of the obligations secured hereunder or to expenses of operating and maintaining the Property (including reasonable reserves for anticipated expenses), at the option of Holder, all in such manner as may be determined by Holder, or, at the option of Holder, holding the same as security for the payment of all obligations secured hereunder, (ii) leasing, in the name of Grantor, the whole or any part of the Property which may become vacant, and (iii) employing agents therefore and paying such agents reasonable compensation for their services; provided, however, that Grantor shall exercise such rights until there occurs a Default under the terms of the Note or this Deed of Trust. The curing of such Default, unless other Defaults also then exist, shall entitle Grantor to recover its aforesaid license to do any such things which Grantor might otherwise do with respect to the Property and the Leases thereon and to again collect such Rents. The powers and rights granted in this paragraph shall be in addition to the other remedies herein provided for upon the occurrence of an event of default and may be exercised independently of or concurrently with any of said remedies. Nothing in the foregoing shall be construed to impose any obligation upon Holder to exercise any power or right granted in this paragraph or to assume any liability under any Lease of any part of the Property and no liability shall attach to Holder for failure or inability to collect any Rents under any such Lease, The assignment contained in this Section shall become null and void upon the release of this Deed of Trust, As used herein: (i) "Lease" means each existing or future lease, sublease (to the extent of Grantor's rights thereunder) or other agreement under the terms of which any person has or acquires any right to occupy or use the Property, or any part thereof, or interest therein, and each existing or future guaranty of payment or performance thereunder, and all extensions, renewals, modifications and replacements of each such lease, sublease, agreement or guaranty; and (ii) "Rents" means all of the rents, revenue, income, profits and proceeds derived and to be derived from the Property or arising from the use or enjoyment of any portion thereof or from any Lease, including but not limited to liquidated damages following default under any such Lease, all proceeds payable under any policy of insurance covering loss of rents resulting from untenantability caused by damage to any part of the Property, all of Grantor's rights to recover monetary amounts from any tenant in bankruptcy including, without limitation, rights of recovery for use and occupancy and damage claims arising out of Lease defaults, including rejections, under any applicable Debtor Relief Law (hereinafter defined), together with any sums of money that may now or at any time hereafter be or become due and payable to Grantor by virtue of any and all royalties, overriding royalties, bonuses, delay rentals and any other amount of -13- any kind or character arising under any and all present and all future oil, gas, mineral and mining leases covering the Property or any part thereof, and all proceeds and other amounts paid or owing to Grantor under or pursuant to any and all contracts and bonds relating to the construction or renovation of the Property. SECTION 3.2. COVENANTS. REPRESENTATIONS AND WARRANTIES CONCERNING LEASES AND RENTS. Grantor covenants, represents and warrants that: (a) Grantor has good title to, and is the owner of the entire landlord's interest in, the Leases and Rents hereby assigned and authority to assign them; (b) all Leases are valid and enforceable, and in full force and effect, and are unmodified except as stated therein; (c) neither Grantor nor, to the knowledge of Grantor, any tenant in the Property is in default under its Lease (and no event has occurred which with the passage of time or notice or both would result in a default under its Lease) or is the subject of any bankruptcy, insolvency or similar proceeding; (d) unless otherwise stated in a Permitted Encumbrance, no Rents or Leases have been or will be assigned, mortgaged, pledged or otherwise encumbered and no other person has or will acquire any right, title or interest in such Rents or Leases; (e) no Rents have been waived, released, discounted, set off or compromised; (f) except as stated in the Leases, Grantor has not received any funds or deposits from any tenant for which credit has not already been made on account of accrued Rents; (g) Grantor shall perform all of its obligations under the Leases and enforce the tenants' obligations under the Leases to the extent enforcement is prudent under the circumstances; (h) except as permitted below, Grantor will not without the prior written consent of Holder, enter into any Lease after the date hereof, or waive, release, discount, set off, compromise, reduce or defer any Rent, receive or collect Rents more than one (1) month in advance, grant any rent-free period to any tenant, reduce any Lease term or waive, release or otherwise modify any other material obligation under any Lease, renew or extend any Lease except in accordance with a right of the tenant thereto in such Lease, approve or consent to an assignment of a Lease or a subletting of any part of the premises covered by a Lease, or settle or compromise any claim against a tenant under a Lease in bankruptcy or otherwise provided that Grantor may perform any of the foregoing (other than receipt or collection of rents more than one (1) month in advance) in tine ordinary course of operating the Property as a commercial office building, provided that the Lease in question is for premises containing not more than 10, 000 square feet; (i) Grantor will not, except in good faith where the tenant is in material default thereunder, terminate or consent to the cancellation or surrender of any Lease having an unexpired term of one year or more unless promptly after the cancellation or surrender a new Lease of such premises is made with a new tenant having a credit standing, in Holder's judgment, at least equivalent to that of the tenant whose Lease was canceled, on substantially the same terms as the terminated or canceled Lease; 0) Grantor will not execute any Lease except for actual occupancy by the tenant thereunder; (k) Grantor shall give prompt notice to Holder, as soon as Grantor first obtains notice, of any claim, or the commencement of any action, by any tenant. or subtenant under or with respect to a Lease regarding any claimed damage, default, diminution of or offset against Rent, cancellation of the Lease, or constructive eviction, and Grantor shall defend, at Grantor's expense, any proceeding pertaining to any Lease, including, if Holder so requests, any such proceeding to which Holder is a party; (1) Grantor shall as often as reasonably requested by Holder, within ten (10) days of each request, deliver to Holder a complete rent roll of the Property in such detail as Holder may require and financial statements of the tenants, subtenants and guarantors under the Leases to the extent available to Grantor, and deliver to such of the tenants and others obligated under the Leases specified by Holder written notice of the assignment in Section 3. I hereof in form and content satisfactory to Holder; (m) promptly upon request by Holder, Grantor shall deliver to Holder executed originals of all Leases and copies of all records relating thereto; (n) there shall be no merger of the leasehold estates, created by the Leases, with the fee estate of the Land without the prior written consent of Holder; and (o) Holder may at any time and from time to time by specific written instrument intended for the purpose, unilaterally subordinate the lien of this Deed of Trust to any Lease, without joinder or consent of, or notice to, Grantor, any tenant or any other person, and notice is hereby given to each tenant under a Lease of such right to subordinate. No such subordination shall constitute a subordination to any lien or other encumbrance, whenever arising, or improve the right of any junior lienholder; and nothing herein shall be construed as subordinating this Deed of Trust to any Lease. -14- SECTION 3.3. ESTOPPEL CERTIFICATES. All Leases entered into after the date hereof shall require the tenant to execute and deliver to Holder an estoppel certificate in form and substance acceptable to Holder within ten (10) days after notice from Holder. SECTION 3.4. NO LIABILITY OF HOLDER. Holder's acceptance of this assignment shall not be deemed to constitute Holder a "mortgage in possession," nor obligate Holder to appear in or defend any proceeding relating to any Lease or to the Property, or to take any action hereunder, expend any money, incur any expenses, or perform any obligation or liability under any Lease, or assume any obligation for any deposit delivered to Grantor by any tenant and not as such delivered to and accepted by Holder. Holder shall not be liable for any injury or damage to person or property in or about the Property, or for Holder's failure to collect or to exercise diligence in collecting Rents, but shall be accountable only for Rents that it shall actually receive. Neither the assignment of Leases and Rents nor enforcement of Holder's rights regarding Leases and Rents (including collection of Rents) nor possession of the Property by Holder nor Holder's consent to or approval of any Lease (nor all of the same), shall render Holder liable on any obligation under or with respect to any Lease or constitute affirmation of, or any subordination to, any Lease, occupancy, use or option. If Holder seeks or obtains any judicial relief regarding Rents or Leases, the same shall in no way prevent the concurrent or subsequent employment of any other appropriate rights or remedies nor shall same constitute an election of judicial relief for any foreclosure or any other purpose. Holder neither has nor assumes any obligations as lessor or landlord with respect to any Lease. The rights of Holder under this Article 3 shall be cumulative of all other rights of Holder under the Loan Documents or otherwise. ARTICLE 4 - DEFAULT SECTION 4.1. EVENTS OF DEFAULT. The occurrence of any one of the following shall be a default under this Deed of Trust ("default" or "Default"): (a) FAILURE TO PAY INDEBTEDNESS. Any of the secured indebtedness is not paid when due, regardless of how such amount may have become due and such nonpayment is not cured within five (5) days after written notice to Grantor, provided that in no event shall Grantor be entitled to receive more than two (2) such notices in any twelve (12) month period of time, nor shall Grantor be entitled to receive any such notice in the event the secured indebtedness is not paid upon maturity, (b) NONPERFORMANCE OF COVENANTS. Any covenant, agreement or condition herein or in any other Loan Document (other than covenants otherwise addressed in another paragraph of this Section, such as covenants to pay the secured indebtedness) is not fully and timely performed, observed or kept, and such failure is not cured within thirty (30) days after written notice to Grantor. (c) REPRESENTATIONS. Any statement, representation or warranty in any of the Loan Documents, or in any financial statement or any other writing heretofore or hereafter delivered to Holder in connection with the secured indebtedness is false, misleading or erroneous in any material respect on the date hereof or on the date as of which such statement, representation or warranty is made, and such statement, representation or warranty is not made true and correct (as of the time such corrective action is taken) within the applicable grace period (if any) provided for in such Loan Document. (d) BANKRUPTCY OR INSOLVENCY. The owner of the Property or any person liable, directly or indirectly, for any of the secured indebtedness (or any general partner or joint venturer of such owner or other person): (i) (A) Executes an assignment for the benefit of creditors, or takes any action in furtherance thereof; or (B) admits in writing its inability to pay, or fails to pay, its debts generally as they -15- become due; or (C) as a debtor, files a petition, case, proceeding or other action pursuant to, or voluntarily seeks the benefit or benefits of, Title 11 of the United States Code as now or hereafter in effect or any other law, domestic or foreign, as now or hereafter in effect relating to bankruptcy, insolvency, liquidation, receivership, reorganization, arrangement, composition, extension or adjustment of debts, or similar laws affecting the rights of creditors (Title 11 of the United States Code and such other laws being herein called "Debtor Relief Laws"), or takes any action in furtherance thereof; or (D) seeks the appointment of a receiver, trustee, custodian or liquidator of the Property or any part thereof or of any significant portion of its other property; or (ii) Suffers the filing of a petition, case, proceeding or other action against it as a debtor under any Debtor Relief Law or seeking appointment of a receiver, trustee, custodian or liquidator of the Property or any part thereof or of any significant portion of its other property, and (A) admits, acquiesces in or fails to contest diligently the material allegations thereof, or (B) the petition, case, proceeding or other action results in entry of any order for relief or order granting relief sought against it, or (C) in a proceeding under the Federal Bankruptcy Code, the case is converted from one chapter to another, or (D) fails to have the petition, case, proceeding or other action permanently dismissed or discharged on or before the earlier of trial thereon or sixty (60) days next following the date of its filing; or (iii) Conceals, removes, or permits to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them, or makes or suffers a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or makes any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or suffers or permits, while insolvent, any creditor to obtain a lien (other than as described in subparagraph (iv) below) upon any of its property through legal proceedings which are not vacated and such lien discharged prior to enforcement thereof and in any event within sixty (60) days from the date thereof; or (iv) Fails to have discharged within a period of ten (10) days any attachment, sequestration, or similar writ levied upon any of its property; or (v) Fails to pay immediately any final money judgment against it. (e) TRANSFER OF THE PROPERTY. Any sale, lease, conveyance, assignment, pledge, encumbrance, or transfer of all or any part of the Property or any interest therein, voluntarily or involuntarily, whether by operation of law or otherwise, except: (i) sales or transfers of items of the Accessories which have become obsolete or worn beyond practical use and which have been replaced by adequate substitutes, owned by Grantor, having a value equal to or greater than the replaced items when new; and (ii) the grant, in the ordinary course of business, of a leasehold interest in a part of the Improvements to a tenant for occupancy, not containing a right or option to purchase and not in contravention of any provision of this Deed of Trust or of any other Loan Document. Holder may, in its sole discretion, waive a default under this paragraph, but it shall have no obligation to do so, and any waiver maybe conditioned upon such one or more of the following (if any) which Holder may require: the grantee's integrity, reputation, character, creditworthiness and management ability being satisfactory to Holder in its sole judgment and grantee executing, prior to such sale or transfer, a written assumption agreement containing such terms as Holder may require, a principal paydown on the Note, an increase in the rate of interest payable under the Note, a transfer fee, a modification of the term of the Note, and any other modification of the Loan Documents which Holder may require. (f) TRANSFER OF OWNERSHIP OF GRANTOR. The sale, pledge, encumbrance, assignment or transfer, voluntarily or involuntarily, whether by operation of law or otherwise, of any interest in Grantor (if Grantor is not a natural person but is a corporation, partnership, limited liability company, trust or other legal entity), without the prior written consent of Holder (including, without limitation, if Grantor is a partnership or joint venture, the withdrawal from or admission into it of any general partner or joint venturer), except: the -16- conversion of Grantor's sole member to a limited liability company or sales or transfers of stock in Grantor if Grantor is a corporation, or sales or transfers of limited partnership interests in Grantor if Grantor is a limited partnership, or sales or transfers of member interests in Grantor if Grantor is a limited liability company, provided that such sales or transfers, together with any prior sales or transfers of interests in Grantor, do not result in more than 49% of the total beneficial interests in Grantor having been sold or transferred since the date of this Deed of Trust. (g) GRANT OF EASEMENT, ETC. Without the prior written consent of Holder, Grantor grants any easement or dedication, files any plat, condominium declaration, or restriction, or otherwise encumbers the Property, or seeks or permits any zoning reclassification or variance, unless such action is expressly permitted by the Loan Documents or does not affect the Property. (h) ABANDONMENT. The owner of the Property abandons any of the Property. (i) DEFAULT UNDER OTHER LIEN. A default or event of default occurs under any lien, security interest or assignment covering the Property or any part thereof (whether or not Holder has consented, and without hereby implying Holder's consent, to any such lien, security interest or assignment not created hereunder), or the holder of any such lien, security interest or assignment declares a default or institutes foreclosure or other proceedings for the enforcement of its remedies thereunder. (j) DESTRUCTION. The Property is so demolished, destroyed or damaged that, in the reasonable opinion of Holder, it cannot be restored or rebuilt with available funds to a profitable condition prior to the final maturity date of the Note. (k) CONDEMNATION. (i) Any governmental authority shall require, or commence any proceeding for, the demolition of any building or structure comprising a part of the Premises, or (ii) there is commenced any proceeding to condemn or otherwise take pursuant to the power of eminent domain, or a contract for sale or a conveyance in lieu of such a taking is executed which provides for the transfer of, a material portion of the Premises, including but not limited to the taking (or transfer in lieu thereof) of any portion which would result in the blockage or substantial impairment of access or utility service to the Improvements or which would cause the Premises to fail to comply with any Legal Requirement. (l) LIQUIDATION, ETC. The liquidation, termination, dissolution, merger, consolidation or failure to maintain good standing in the State of Missouri and/or the state of incorporation or organization, if different, and such failure to maintain good standing is not corrected within thirty (30) days after notice from the State of Missouri and/or the state of organization, as the case may be (or in the case of an individual, the death or legal incapacity) of Grantor, any owner of the Property or any person obligated to pay any part of the secured indebtedness. (m) ENFORCEABILITY; PRIORITY. Any Loan Document shall for any reason without Holder's specific written consent cease to be in full force and effect, or shall be declared null and void or unenforceable in whole or in part, or the validity or enforceability thereof, in whole or in part, shall be challenged or denied by any party thereto other than Holder; or the liens, mortgages or security interests of Holder in any of the Property become unenforceable in whole or in part, or cease to be of the priority herein required, or the validity or enforceability thereof, in whole or in part, shall be challenged or denied by Grantor or any person obligated to pay any part of the secured indebtedness. (n) OTHER LOAN DOCUMENTS; OTHER INDEBTEDNESS. A default or event of default occurs under any Loan Document, other than this Deed of Trust, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document. -17- (o) ENCUMBRANCE. If Grantor shall, without prior written consent of Holder, mortgage, pledge, hypothecate or otherwise encumber all or any portion of the Property, even if such pledge or mortgage is subordinate to Holder's lien position. SECTION 4.2. NOTICE AND CURE. If any provision of this Deed of Trust or any other Loan Document provides for Holder to give to Grantor any notice regarding a default or incipient default, then if Holder shall fail to give such notice to Grantor as provided, the sole and exclusive remedy of Grantor for such failure shall be to seek appropriate equitable relief to enforce the agreement to give such notice and to have any acceleration of the maturity of the Note and the secured indebtedness postponed or revoked and foreclosure proceedings in connection therewith delayed or terminated pending or upon the curing of such default in the manner and during the period of time permitted by such agreement, if any, and Grantor shall have no right to damages or any other type of relief not herein specifically set out against Holder, all of which damages or other relief are hereby waived by Grantor. Nothing herein or in any other Loan Document shall operate or be construed to add on or make cumulative any cure or grace periods specified in any of the Loan Documents. ARTICLE 5 - REMEDIES SECTION 5.1. CERTAIN REMEDIES. If a default shall occur, Holder may (but shall have no obligation to) exercise any one or more of the following remedies, without notice (unless notice is required by applicable statute): (a) ACCELERATION. Holder may at any time and from time to time declare any or all of the secured indebtedness immediately due and payable and such secured indebtedness shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, notice of acceleration or of intention to accelerate or any other notice or declaration of any kind, all of which are hereby expressly waived by Grantor. Without limitation of the foregoing, upon the occurrence of a default described in clauses (A), (C) or (D) of subparagraph (i) of paragraph (d) of Section 4, 1, hereof, all of the secured indebtedness shall thereupon be immediately due and payable, without presentment, demand, protest, notice of protest, declaration or notice of acceleration or intention to accelerate, or any other notice, declaration or act of any kind, all of which are hereby expressly waived by Grantor. (b) ENFORCEMENT OF ASSIGNMENT OF RENTS. In addition to the rights of Holder under Article 3 hereof, prior or subsequent to taking possession of any portion of the Property or taking any action with respect to such possession, Holder may: (1) collect and/or sue for the Rents in Holder's own name, give receipts and releases therefore, and after deducting all expenses of collection, including attorneys' fees and expenses, apply the net proceeds thereof to the secured indebtedness in such manner and order as Holder may elect and/or to the operation and management of the Property, including the payment of management, brokerage and attorney's fees and expenses; and (2) require Grantor to transfer all security deposits and records thereof to Holder together with original counterparts of the Leases. (c) FORECLOSURE; POWER OF SALE. Grantor hereby authorizes and empowers Trustee, or Trustee's successor or substitute, and it shall be Trustee's special duty at the request of Holder to sell (or in the case of any default of any purchaser to resell) the Property or any part thereof. Prior to any sale of the Property by Trustee, Trustee shall notify Grantor in accordance with all applicable laws. In the event of a postponement of any sale of the Property, which may be done in the sole discretion of Trustee, no new or additional notice need be given by Trustee to Grantor for the next scheduled sale of the Property. Any sale made by Trustee hereunder may be as an entirety or in such parcels as Holder may request at such time and place, and after such previous public advertisement as Trustee shall deem advantageous and proper and at such times and containing such information as required by applicable laws and rules, without regard to any right of Grantor or any other person to the marshaling of assets. Except as may be required by applicable law, no purchaser of the Property shall be required to see to the proper application of the purchase money. To the extent permitted -18- by applicable law, any sale may be adjourned by announcement at the time and place appointed for such sale without further notice except as may be required by law. The sale by Trustee of less than the whole of the Property shall not exhaust the power of sale herein granted, and Trustee is specifically empowered to make successive sale or sales under such power until the whole of the Property shall be sold; and, if the proceeds of such sale of less than the whole of the Property shall be less than the aggregate of the indebtedness secured hereby and the expense of executing this trust as provided herein, this Deed of Trust and the lien hereof shall remain in full force and effect as to the unsold portion of the Property just as though no sale had been made; provided, however, that Grantor shall never have any right to require the sale of less than the whole of the Property but Holder shall have the right, at its sole election, to request Trustee to sell less than the whole of the Property. Trustee may, after any request or direction by Holder, sell not only the real property but also the Collateral and other interests which are a part of the Property, or any part thereof, as a unit and as a part of a single sale, or may sell any part of the Property separately from the remainder of the Property. It shall not be necessary for Trustee to have taken possession of any part of the Property or to have present or to exhibit at any sale any of the Collateral. After each sale, Trustee shall make to the purchaser or purchasers at such sale good and sufficient conveyances, conveying the property so sold to the purchaser or purchasers in fee simple, subject to all restrictions and encumbrances of record, and shall receive the proceeds of said sale or sales and apply the same as herein provided. Payment of the purchase price to Trustee shall satisfy the obligation of purchaser at such sale therefore, and such purchaser shall not be responsible for the application thereof. The power of sale granted herein shall not be exhausted by any sale held hereunder by Trustee or Trustee's substitute or successor, and such power of sale may be exercised from time to time and as many times as Holder may deem necessary until all of the Property has been duly sold or all secured indebtedness has been fully paid. In the event any sale hereunder is not completed or is defective in the opinion of Holder, such sale shall not exhaust the power of sale hereunder and Holder shall have the right to cause a subsequent sale or sales to be made hereunder. Any and all statements of fact or other recitals made in any deed or deeds or other conveyances given by Trustee or any successor or substitute appointed hereunder as to nonpayment of the secured indebtedness or as to the occurrence of any default, or as to Holder's having declared all of said indebtedness to be due and payable, or as to the request to sell, or as to notice of time, place and terms of sale and the properties to be sold having been duly given, or as to the refusal, failure or inability to act of Trustee or any substitute or successor trustee, or as to the appointment of any substitute or successor trustee, or as to any other act or thing having been duly done by Holder or by such Trustee, substitute or successor, shall be taken as prima facie evidence of the truth of the facts so stated and recited. Trustee or Trustee's successor or substitute may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Trustee, including the posting of notices and the conduct of sale, but in the name and on behalf of Trustee, Trustee's successor or substitute. If Trustee or Trustee's successor or substitute shall have given notice of sale hereunder, any successor or substitute Trustee thereafter appointed may complete the sale and the conveyance of the property pursuant thereto as if such notice had been given by the successor or substitute Trustee conducting the sale. (d) UNIFORM COMMERCIAL CODE. Without limitation of Holder's rights of enforcement with respect to the Collateral or any part thereof in accordance with the procedures for foreclosure of real estate, Holder may exercise its rights of enforcement with respect to the Collateral or any part thereof under the Missouri Uniform Commercial Code, as amended (or under the Uniform Commercial Code in force in any other state to the extent the same is applicable law) and in conjunction with, in addition to or in substitution for those rights and remedies: (1) Holder may enter upon Grantor's premises to take possession of, assemble and collect the Collateral or, to the extent and for those items of the Collateral permitted under applicable law, to render it unusable; (2) Holder may require Grantor to assemble the Collateral and make it available at a place Holder designates which is mutually convenient to allow Holder to take possession or dispose of the Collateral; (3) written notice mailed to Grantor as provided herein at least five (5) days prior to the date of public sale of the Collateral or prior to the date after which private sale of the Collateral will be made shall constitute reasonable notice; (4) any sale made pursuant to the provisions of this paragraph shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with and -19- upon the same notice as required for the sale of the Property under power of sale as provided in paragraph (c) above in this Section 5.1; (5) in the event of a foreclosure sale, whether made by Trustee under the terms hereof, or under judgment of a court, the Collateral and the other Property may, at the option of Holder, be sold as a whole; (6) it shall not be necessary that Holder take possession of the Collateral or any part thereof prior to the time that any sale pursuant to the provisions of this Section is conducted and it shall not be necessary that the Collateral or any part thereof be present at the location of such sale; (7) with respect to application of proceeds of disposition of the Collateral under Section 5.3 hereof, the costs and expenses incident to disposition shall include the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing and the like and the reasonable attorneys' fees and legal expenses incurred by Holder; (8) any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of the secured indebtedness or as to the occurrence of any default, or as to Holder having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given, or as to any other act or thing having been duly done by Holder, shall be taken as primaw facie evidence of the truth of the facts so stated and recited; and (9) Holder may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Holder, including the sending of notices and the conduct of the sale, but in the name and on behalf of Holder. (e) LAWSUITS. Holder may proceed by a suit or suits in equity or at law, whether for collection of the indebtedness secured hereby, the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or for any foreclosure hereunder or for the sale of the Property under the judgment or decree of any court or courts of competent jurisdiction. Grantor hereby assents to the passage of a decree for the sale of the Property by any equity court having jurisdiction. (f) ENTRY ON PROPERTY. Holder is authorized, prior or subsequent to the institution of any foreclosure proceedings, to the fullest extent permitted by applicable law, to enter upon the Property, or any part thereof, and to take possession of the Property and all books and records relating thereto, and to exercise without interference from Grantor any and all rights which Grantor has with respect to the management, possession, operation, protection or preservation of the Property. Holder shall not be deemed to have taken possession of the Property or any part thereof except upon the exercise of its right to do so, and then only to the extent evidenced by its demand and overt act specifically for such purpose. All costs, expenses and liabilities of every character incurred by Holder in managing, operating, maintaining, protecting or preserving the Property shall constitute a demand obligation of Grantor (which obligation Grantor hereby promises to pay) to Holder pursuant to this Deed of Trust. If necessary to obtain the possession provided for above, Holder may invoke any and all legal remedies to dispossess Grantor. In connection with any action taken by Holder pursuant to this Section, Holder shall not be liable for any loss sustained by Grantor resulting from any failure to let the Property or any part thereof, or from any act or omission of Holder in managing the Property unless such loss is caused by the willful misconduct and bad faith of Holder, nor shall Holder be obligated to perform or discharge any obligation, duty or liability of Grantor arising under any lease or other agreement relating to the Property or arising under any Permitted Encumbrance or otherwise arising. Grantor hereby assents to, ratifies and confirms any and all actions of Holder with respect to the Property taken under this Section. (g) RECEIVER. Holder shall as a matter of right be entitled to the appointment of a receiver or receivers for all or any part of the Property, whether such receivership be incident to a proposed sale (or sales) of such property or otherwise, and without regard to the value of the Property or the solvency of any person or persons liable for the payment of the indebtedness secured hereby, and Grantor does hereby irrevocably consent to the appointment of such receiver or receivers, waives notice of such appointment, of any request therefore or hearing in connection therewith, and any and all defenses to such appointment, agrees not to oppose any application therefore by Holder, and agrees that such appointment shall in no manner impair, prejudice or otherwise affect the rights of Holder to application of Rents as provided in this Deed of Trust. -20- Nothing herein is to be construed to deprive Holder of any other right, remedy or privilege it may have under the law to have a receiver appointed. Any money advanced by Holder in connection with any such receivership shall be a demand obligation (which obligation Grantor hereby promises to pay) owing by Grantor to Holder pursuant to this Deed of Trust. (h) TERMINATION OF COMMITMENT TO LEND. Holder may terminate any commitment or obligation to lend or refuse to disburse funds under any Loan Document. (i) OTHER RIGHTS AND REMEDIES. Holder may exercise any and all other rights and remedies which Holder may have under the Loan Documents, or at law or in equity or otherwise. (j) RIGHT OF SETOFF. Holder may, to the fullest extent permitted by applicable law, without notice, setoff and apply any and all deposits, funds or assets at any time held and other indebtedness at any time owing by Holder to or for the credit or the account of Grantor against any and all indebtedness secured hereby. SECTION 5.2. PROCEEDS OF FORECLOSURE. The proceeds of any sale held by Trustee or Holder or any receiver or public officer in foreclosure of the liens and security interests evidenced hereby shall be applied: FIRST, to the payment of all necessary costs and expenses incident to such foreclosure sale, including but not limited to all attorneys' fees and legal expenses, advertising costs, auctioneer's fees, costs of title rundowns and lien searches, inspection fees, appraisal costs, fees for professional services, environmental assessment and remediation fees, all court costs and charges of every character, and a reasonable fee (not exceeding five percent (5%) of the gross proceeds of such sale) to Trustee acting under the provisions of paragraph (c) of Section 5.1 hereof if foreclosed by power of sale as provided in said paragraph, and to the payment of the other secured indebtedness, including specifically without limitation the principal, accrued interest and attorneys' fees due and unpaid on the Note and the amounts due and unpaid and owed to Holder under this Deed of Trust, the order and manner of application to the items in this clause FIRST to be in Holder's sole discretion; SECOND, to the holders or beneficiaries of any Subordinate Deeds of Trust or other inferior lien, as they may be entitled thereto by law; and THIRD, the remainder, if any there shall be, shall be paid to Grantor, or to Grantor's heirs, devisees, representatives, successors or assigns, or such other persons as may be entitled thereto by law; provided, however, that if Holder is uncertain which person or persons are so entitled, Holder may interplead such remainder in any court of competent jurisdiction, and the amount of any attorneys' fees, court costs and expenses incurred in such action shall be a part of the secured indebtedness and shall be reimbursable (without limitation) from such remainder. SECTION 5.3. HOLDER AS PURCHASER. Holder shall have the right to become the purchaser at any sale held by Trustee or substitute or successor or by any receiver or public officer or at any public sale, and Holder shall have the right to credit upon the amount of Holder's successful bid, to the extent necessary to satisfy such bid, all or any part of the secured indebtedness in such manner and order as Holder may elect. SECTION 5.4. FORECLOSURE AS TO MATURED DEBT. Upon the occurrence of a default, Holder shall have the right to proceed with foreclosure (judicial or nonjudicial) of the liens and security interests hereunder without declaring the entire secured indebtedness due, and in such event any such foreclosure sale may be made subject to the unmatured part of the secured indebtedness; and any such sale shall not in any manner affect the unmatured part of the secured indebtedness, but as to such unmatured part this Deed of Trust shall remain in full force and effect just as though no sale had been made. The proceeds of such sale shall be applied as provided in Section 5.3 hereof except that the amount paid under clause FIRST thereof shall be only the matured portion of the secured indebtedness and any proceeds of such sale in excess of those provided for in clause FIRST (modified as provided above) shall be applied to the prepayment (without penalty) of any other secured indebtedness in such manner and order and to such extent as Holder deems advisable, and the remainder, if any, shall be applied as provided in clauses SECOND and THIRD of Section -21- 5.3 hereof, Several sales may be made hereunder without exhausting the right of sale for any unmatured part of the secured indebtedness. SECTION 5.5. REMEDIES CUMULATIVE. All rights and remedies provided for herein and in any other Loan Document are cumulative of each other and of any and all other rights and remedies existing at law or in equity, and Trustee and Holder shall, in addition to the rights and remedies provided herein or in any other Loan Document, be entitled to avail themselves of all such other rights and remedies as may now or hereafter exist at law or in equity for the collection of the secured indebtedness and the enforcement of the covenants herein and the foreclosure of the liens and security interests evidenced hereby, and the resort to any right or remedy provided for hereunder or under any such other Loan Document or provided for by law or in equity shall not prevent the concurrent or subsequent employment of any other appropriate right or rights or remedy or remedies. SECTION 5.6. HOLDER'S DISCRETION AS TO SECURITY. Holder may resort to any security given by this Deed of Trust or to any other security now existing or hereafter given to secure the payment of the secured indebtedness, in whole or in part, and in such portions and in such order as may seem best to Holder in its sole and uncontrolled discretion, and any such action shall not in any way be considered as a waiver of any of the rights, benefits, liens or security interests evidenced by this Deed of Trust. Section 5.7. GRANTOR'S WAIVER OF CERTAIN RIGHTS. To the full extent Grantor may do so, Grantor agrees that Grantor will not at any time insist upon, plead, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension or redemption, and Grantor, for Grantor, Grantor's heirs, devisees, representatives, successors and assigns, and for any and all persons ever claiming any interest in the Property, to the extent permitted by applicable law, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, notice of intention to mature or declare due the whole of the secured indebtedness, notice of election to mature or declare due the whole of the secured indebtedness and all rights to a marshaling of assets of Grantor, including the Property, or to a sale in inverse order of alienation in the event of foreclosure of the liens and/or security interests hereby created. Grantor shall not have or assert any right under any statute or rule of law pertaining to the marshaling of assets, sale in inverse order of alienation, the exemption of homestead, the administration of estates of decedents, or other matters whatever to defeat, reduce or affect the right of Holder under the terms of this Deed of Trust to a sale of the Property for the collection of the secured indebtedness without any prior or different resort for collection, or the right of Holder under the terms of this Deed of Trust to the payment of the secured indebtedness out of the proceeds of sale of the Property in preference to every other claimant whatever. Grantor waives any right or remedy which Grantor may have or be able to assert pursuant to any provision of Missouri law, pertaining to the rights and remedies of sureties. If any law referred to in this Section and now in force, of which Grantor or Grantor's heirs, devisees, representatives, successors or assigns or any other persons claiming any interest in the Property might take advantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of this Section. SECTION 5.8. LEASE TO GRANTOR; DELIVERY OF POSSESSION AFTER FORECLOSURE. The Property is hereby leased to Grantor for a term ending at the earlier of the time when this Deed of Trust is released and satisfied or the Property is sold as provided in this Deed of Trust, for a rental of one cent (1(C)) per month, payable monthly upon demand. Grantor will, without notice or demand therefore, immediately surrender peaceable possession of the Property to the purchaser thereof at any non-judicial sale or judicial foreclosure. The purchaser will be entitled to institute summary proceedings for possession of the Property if possession is not so surrendered. After any such sale or foreclosure, any Leases to tenants or subtenants that are subject to this Deed of Trust (either by their date, their express terms, or by agreement of the tenant or subtenant) shall, at the sole option of Holder or any purchaser at such sale or foreclosure, either (i) continue in full force and effect, and the tenant(s) or subtenant(s) thereunder will, upon request, attorn to and acknowledge in writing to -22- the purchaser or purchasers at such sale or foreclosure as landlord thereunder, or (ii) terminate such leases. In the event the tenant fails to surrender possession of the Property upon demand, the purchaser shall be entitled to institute and maintain a summary action for possession of the Property (such as an action for unlawful detainer) in any court having jurisdiction. ARTICLE 6 - MISCELLANEOUS SECTION 6.1. SCOPE OF DEED OF TRUST. This Deed of Trust is a deed of trust of real property, a security agreement, an assignment of rents and leases, a financing statement and a collateral assignment of personal property, and also covers proceeds and fixtures. SECTION 6.2. EFFECTIVE AS A FINANCING STATEMENT. This Deed of Trust shall be effective as a financing statement filed as a fixture filing with respect to all fixtures included within the Property and is to be filed for record in the real estate records of each county where any part of the Property (including said fixtures) is situated. This Deed of Trust shall also be effective as a financing statement covering minerals or the like (including oil and gas) and accounts subject to 400.9-101 of the Missouri Uniform Commercial Code, as amended, and similar provisions (if any) of the Uniform Commercial Code as enacted in any other state where the Property is situated which will be financed at the wellhead or minehead of the wells or mines located on the Property and is to be filed for record in the real estate records of each county where any part of the Property is situated. This Deed of Trust shall also be effective as a financing statement covering any other Property and may be filed in any other appropriate filing or recording office. The mailing address of Grantor and Holder are set forth in the preamble of this Deed of Trust and the address of Holder from which information concerning the security interests hereunder may be obtained is the address of Holder set forth at the end of this Deed of Trust, A carbon, photographic or other reproduction of this Deed of Trust or of any financing statement relating to this Deed of Trust shall be sufficient as a financing statement for any of the purposes referred to in this Section. SECTION 6.3. NOTICE TO ACCOUNT DEBTORS. In addition to the rights granted elsewhere in this Deed of Trust, Holder may at any time notify the account debtors or obligors of any accounts, chattel paper, negotiable instruments or other evidences of indebtedness included in the Collateral to pay Holder directly. SECTION 6.4. WAIVER BY HOLDER. Holder may at any time and from time to time by a specific writing intended for the purpose: (a) waive compliance by Grantor with any covenant herein made by Grantor to the extent and in the manner specified in such writing; (b) consent to Grantor's doing any act which hereunder Grantor is prohibited from doing, or to Grantor's failing to do any act which hereunder Grantor is required to do, to the extent and in the manner specified in such writing; (c) release any part of the Property or any interest therein from the lien and security interest of this Deed of Trust, without the joinder of Trustee; or (d) release any party liable, either directly or indirectly, for the secured indebtedness or for any covenant herein or in any other Loan Document, without impairing or releasing the liability of any other party. No such act shall in any way affect the rights or powers of Holder or Trustee hereunder except to the extent specifically agreed to by Holder in such writing. SECTION 6.5. NO IMPAIRMENT OF SECURITY. The lien, security interest and other security rights of Holder hereunder or under any other Loan Document shall not be impaired by any indulgence, moratorium or release granted by Holder including, but not limited to, any renewal, extension or modification which Holder may grant with respect to any secured indebtedness, or any surrender, compromise, release, renewal, extension, exchange or substitution which Holder may grant in respect of the Property, or any part thereof or any interest therein, or any release or indulgence granted to any endorser, guarantor or surety of any secured indebtedness. The taking of additional security by Holder shall not release or impair the lien, security interest or other security rights of Holder hereunder or affect the liability of Grantor or of any endorser, guarantor or -23- surety, or improve the right of any junior lienholder in the Property (without implying hereby Holder's consent to any junior lien). SECTION 6.6. ACTS NOT CONSTITUTING WAIVER BY HOLDER. Holder may waive any default without waiving any other prior or subsequent default. Holder may remedy any default without waiving the default remedied. Neither failure by Holder to exercise, nor delay by Holder in exercising, nor discontinuance of the exercise of any right, power or remedy (including but not limited to the right to accelerate the maturity of the secured indebtedness or any part thereof) upon or after any default shall be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at a later date. No single or partial exercise by Holder of any right, power or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy hereunder may be exercised at any time and from time to time. No modification or waiver of any provision hereof nor consent to any departure by Grantor therefore shall in any event be effective unless the same shall be in writing and signed by Holder and then such waiver or consent shall be effective only in the specific instance, for the purpose for which given and to the extent therein specified. No notice to nor demand on Grantor in any case shall of itself entitle Grantor to any other or further notice or demand in similar or other circumstances. Remittances in payment of any part of the secured indebtedness other than in the required amount in immediately available U. S. funds shall not, regardless of any receipt or credit issued therefore, constitute payment until the required amount is actually received by Holder in immediately available U. S. funds and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance by Holder of any payment in an amount less than the amount then due on any secured indebtedness shall be deemed an acceptance on account only and shall not in any way excuse the existence of a default hereunder. SECTION 6.7. GRANTOR'S SUCCESSORS. If the ownership of the Property or any part thereof becomes vested in a person other than Grantor, Holder may, without notice to Grantor, deal with such successor or successors in interest with reference to this Deed of Trust and to the indebtedness secured hereby in the same manner as with Grantor, without in any way vitiating or discharging Grantor's liability hereunder or for the payment of the indebtedness or performance of the obligations secured hereby. No transfer of the Property, no forbearance on the part of Holder, and no extension of the time for the payment of the indebtedness secured hereby given by Holder shall operate to release, discharge, modify, change or affect, in whole or in part, the liability of Grantor hereunder for the payment of the indebtedness or performance of the obligations secured hereby or the liability of any other person hereunder for the payment of the indebtedness secured hereby. Each Grantor agrees that it shall be bound by any modification of this Deed of Trust or any of the other Loan Documents made by Holder and any subsequent owner of the Property, with or without notice to such Grantor, and no such modifications shall impair the obligations of such Grantor under this Deed of Trust or any other Loan Document. Nothing in this Section or elsewhere in this Deed of Trust shall be construed to imply Holder's consent to any transfer of the Property. SECTION 6.8. PLACE OF PAYMENT. All secured indebtedness which may be owing hereunder at any time by Grantor shall be payable at the place designated in the Note (or if no such designation is made, at the address of Holder indicated at the end of this Deed of Trust). SECTION 6.9. SUBROGATION TO EXISTING LIENS; VENDOR'S LIEN. To the extent that proceeds of the Note are used to pay indebtedness secured by any outstanding lien, security interest, charge or prior encumbrance against the Property, such proceeds have been advanced by Holder at Grantor's request, and Holder shall be subrogated to any and all rights, security interests and liens owned by any owner or holder of such outstanding liens, security interests, charges or encumbrances, however remote, irrespective of whether said liens, security interests, charges or encumbrances are released, and all of the same are recognized as valid and subsisting and are renewed and continued and merged herein to secure the secured indebtedness, but the terms and provisions of this Deed of Trust shall govern and control the manner and terms of enforcement of -24- the liens, security interests, charges and encumbrances to which Holder is subrogated hereunder. It is expressly understood that, in consideration of the payment of such indebtedness by Holder, Grantor hereby waives and releases all demands and causes of action for offsets and payments in connection with the said indebtedness. If all or any portion of the proceeds of the loan evidenced by the Note or of any other secured indebtedness has been advanced for the purpose of paying the purchase price for all or a part of the Property, no vendor's lien is waived; and Holder shall have, and is hereby granted, a vendor's lien on the Property as cumulative additional security for the secured indebtedness. Holder may foreclose under this Deed of Trust or under the vendor's lien without waiving the other or may foreclose under both. SECTION 6.10. APPLICATION OF PAYMENTS TO CERTAIN INDEBTEDNESS. If any part of the secured indebtedness cannot be lawfully secured by this Deed of Trust or if any part of the Property cannot be lawfully subject to the lien and security interest hereof to the full extent of such indebtedness, then all payments made shall be applied on said indebtedness first in discharge of that portion thereof which is not secured by this Deed of Trust. SECTION 6.11. NATURE OF LOAN; COMPLIANCE WITH USURY LAWS. The Loan evidenced by the Note is being made solely for the purpose of carrying on or acquiring a business or commercial enterprise. It is the intent of Grantor and Holder and all other parties to the Loan Documents to conform to and contract in strict compliance with applicable usury law from time to time in effect. All agreements between Holder and Grantor (or any other party liable with respect to any indebtedness under the Loan Documents) are hereby limited by the provisions of this Section which shall override and control all such agreements, whether now existing or hereafter arising. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, chargeable, or received under this Deed of Trust, the Note or any other Loan Document or otherwise, exceed the maximum nonusurious amount permitted by applicable law (the "Maximum Amount"). If, from any possible construction of any document, interest would otherwise be payable in excess of the Maximum Amount, any such construction shall be subject to the provisions of this Section and such document shall ipso facto be automatically reformed and the interest payable shall be automatically reduced to the Maximum Amount, without the necessity of execution of any amendment or new document. If Holder shall ever receive anything of value which is characterized as interest under applicable law and which would apart from this provision be in excess of the Maximum Amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the secured indebtedness in the inverse order of its maturity and not to the payment of interest, or refunded to Grantor or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal. The right to accelerate maturity of the Note or any other secured indebtedness does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Holder does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to Holder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the Maximum Amount. As used in this Section, the term "applicable Law" shall mean the laws of the State of Missouri or the federal laws of the United States applicable to mistranslation, whichever laws allow the greater interest, as such laws now exist or may be changed or amended or come into effect in the future. SECTION 6.12. SUBSTITUTE TRUSTEE. The Trustee may resign by an instrument in writing addressed to Holder, or Trustee may be removed at any time with or without cause by an instrument in writing executed by Holder. In case of the death, resignation, removal, or disqualification of Trustee, or if for any reason Holder shall deem it desirable to appoint a substitute or successor trustee to act instead of the herein named trustee or any substitute or successor trustee, then Holder shall have the right and is hereby authorized and empowered to appoint a successor trustee or trustees, or a substitute trustee(s), without other formality than appointment -25- and designation in writing executed by Holder and the authority hereby conferred shall extend to the appointment of other successor and substitute trustees successively until the indebtedness secured hereby has been paid in full, or until the Property is fully and finally sold hereunder. If Holder is a corporation or association and such appointment is executed on its behalf by an officer of such corporation or association; such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the board of directors or any superior officer of the corporation or association. Upon the making of any such appointment and designation, all of the estate and title of Trustee in the Property shall vest in the named successor or substitute Trustee(s) and such successor or substitute shall thereupon succeed to, and shall hold, possess and execute, all the rights, powers, privileges, immunities and duties herein conferred upon Trustee. All references herein to "Trustee" shall be deemed to refer to Trustee (including any successor(s) or substitute(s) appointed and designated as herein provided) from time to time acting hereunder. SECTION 6.13. NO LIABILITY OF TRUSTEE. Trustee shall not be liable for any error of judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever (including Trustee's negligence), except for Trustee's gross negligence or willful misconduct. Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by Trustee hereunder, believed by Trustee in good faith to be genuine. All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by law), and Trustee shall be under no liability for interest on any moneys received by Trustee hereunder. Grantor hereby ratifies and confirms any and all acts which the herein named Trustee or Trustee's successor or successors, substitute or substitutes, in this trust, shall do lawfully by virtue hereof. Grantor will reimburse Trustee for, and save Trustee harmless against, any and all liability and expenses which may be incurred by Trustee in the performance of Trustee's duties. The foregoing indemnity shall not terminate upon discharge of the secured indebtedness or foreclosure, or release or other termination, of this Deed of Trust. SECTION 6.14. RELEASES. (a) RELEASE OF DEED OF TRUST. If all of the secured indebtedness be paid as the same becomes due and payable and all of the covenants, warranties, undertakings and agreements made in this Deed of Trust are kept and performed, and all obligations, if any, of Holder for further advances have been terminated, then, and in that event only, all rights under this Deed of Trust shall terminate (except to the extent expressly provided herein with respect to indemnifications, representations and warranties and other rights which are to continue following the release hereof) and the Property shall become wholly clear of the liens, security interests, conveyances and assignments evidenced hereby, and such liens and security interests shall be released by Holder in due form at Grantor's cost. Without limitation, all provisions herein for indemnity of Holder or Trustee shall survive discharge of the secured indebtedness and any foreclosure, release or termination of this Deed of Trust. (b) EFFECT OF PARTIAL RELEASE. Holder may, regardless of consideration, cause the release of any part of the Property from the lien of this Deed of Trust without in any manner affecting or impairing the lien or priority of this Deed of Trust as to the remainder of the Property. SECTION 6.15. NOTICES. All notices, requests, consents, demands and other communications required or which any party desires to give hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided in such other Loan Document, shall be deemed sufficiently given or furnished if delivered by personal delivery, by courier, or by registered or certified United States mail, postage prepaid, addressed to the party to whom directed at the addresses specified in this Deed of Trust (unless changed by similar notice in writing given by the particular party whose address is to be changed) or -26- by telegram, telex, or facsimile. Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of courier or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of telegram, telex or facsimile, upon receipt; provided, however, that any notice required by Section 443.310 and Section 443.320 of the Revised Statutes of Missouri, as amended, shall be considered complete when the requirements of such statutory provisions are met. Notwithstanding the foregoing, no notice of change of address shall be effective except upon receipt. This Section shall not be construed in any way to affect or impair any waiver of notice or demand provided in any Loan Document or to require giving of notice or demand to or upon any person in any situation or for any reason. SECTION 6.16. INVALIDITY OF CERTAIN PROVISIONS. A determination that any provision of this Deed of Trust is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Deed of Trust to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. SECTION 6.17. GENDER; TITLES; CONSTRUCTION. Within this Deed of Trust, words of any gender shall be held and construed to include any other gender, and words in the singular number shall be held and construed to include the plural, unless the context otherwise requires. Titles appearing at the beginning of any subdivisions hereof are for convenience only, do not constitute any part of such subdivisions, and shall be disregarded in construing the language contained in such subdivisions. The use of the words "herein," "hereof," "hereunder" and other similar compounds of the word "here" shall refer to this entire Deed of Trust and not to any particular Article, Section, paragraph or provision. The term "person" and words importing persons as used in this Deed of Trust shall include firms, associations, partnerships (including limited partnerships), joint ventures, trusts, corporations, limited liability companies and other legal entities, including public or governmental bodies, agencies or instrumentalities, as well as natural persons. SECTION 6.18. HOLDER'S CONSENT. Except where otherwise expressly provided herein, in any instance hereunder where the approval, consent or the exercise of judgment of Holder is required or requested, (a) the granting or denial of such approval or consent and the exercise of such judgment shall be within the sole discretion of Holder, and Holder shall not, for any reason or to any extent, be required to grant such approval or consent or exercise such judgment in any particular manner, regardless of the reasonableness of either the request or Holder's judgment, and (b) no approval or consent of Holder shall be deemed to have been given except by a specific writing intended for the purpose and executed by an authorized representative of Holder. SECTION 6.19. GRANTOR. Unless the context clearly indicates otherwise, as used in this Deed of Trust, "Grantor" means the grantors named in Section 1.2 hereof or any of them. The obligations of Grantor hereunder shall be joint and several. If any Grantor, or any signatory who signs on behalf of any Grantor, is a corporation, partnership or other legal entity, Grantor and any such signatory, and the person or persons signing for it, represent and warrant to Holder that this instrument is executed, acknowledged and delivered by Grantor's duly authorized representatives. If Grantor is an individual, no power of attorney granted by Grantor herein shall terminate on Grantor's disability. SECTION 6.20. EXECUTION; RECORDING. This Deed of Trust may be executed in several counterparts, with all such counterparts being identical, and all of which counterparts together constituting one and the same instrument. The date or dates reflected in the acknowledgments hereto indicate the date or dates of actual execution of this Deed of Trust, but such execution is as of the date shown on the first page hereof, and for purposes of identification and reference the date of this Deed of Trust shall be deemed to be the date reflected on the first page hereof. Grantor will cause this Deed of Trust and all amendments and supplements thereto and substitutions therefore and all financing statements and continuation statements relating thereto to be recorded, filed, re-recorded and refilled in such manner and in such places as Trustee or Holder shall -27- reasonably request and will pay all such recording, filing, re-recording and refiling taxes, fees and other charges. SECTION 6.21. SUCCESSORS AND ASSIGNS. The terms, provisions, covenants and conditions hereof shall be binding upon Grantor, and the heirs, devisees, representatives, successors and assigns of Grantor, and shall inure to the benefit of Trustee and Holder and shall constitute covenants running with the Land. All references in this Deed of Trust to Grantor shall be deemed to include all such heirs, devisees, representatives, successors and assigns of Grantor. SECTION 6.22. MODIFICATION OR TERMINATION. The Loan Documents may only be modified or terminated by a written instrument or instruments intended for that purpose and executed by the party against which enforcement of the modification or termination is asserted. Any alleged modification or termination which is not so documented shall not be effective as to any party. SECTION 6.23. NO PARTNERSHIP. ETC. The relationship between Holder and Grantor is solely that of lender and borrower. Holder has no fiduciary or other special relationship with Grantor. Nothing contained in the Loan Documents is intended to create any partnership, joint venture, association or special relationship between Grantor and Holder or in any way make Holder a co-principal with Grantor with reference to the Property. All agreed contractual duties between or among Holder, Grantor and Trustee are set forth herein and in the other Loan Documents and any additional implied covenants or duties are hereby disclaimed. Any inferences to the contrary of any of the foregoing are hereby expressly negated. SECTION 6.24. APPLICABLE LAW. THIS DEED OF TRUST, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH AND PURSUANT TO THE LAWS OF THE STATE OF MISSOURI AND APPLICABLE UNITED STATES FEDERAL LAW. IN THE EVENT THAT THE "CHOICE OF LAW" RULES OF THE STATE OF MISSOURI CAN BE CONSTRUED OR INTERPRETED TO REQUIRE THE LAWS OF ANOTHER JURISDICTION TO GOVERN, THE "CHOICE OF LAW" RULES OF THE STATE OF MISSOURI SHALL NOT APPLY. SECTION 6.25. WAIVER OF JURY TRIAL. In the event any dispute between Grantor and Lender is not resolved pursuant to the arbitration provision above, Grantor waives trial by jury in any court action or proceeding to which Grantor and Lender may be parties, arising out of, in connection with or in any way pertaining to, this instrument or any other documents evidencing or securing the loan transaction herein involved. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such action or proceedings, including claims against parties who are not parties to this instrument, in each case whether now existing or hereafter arising, and whether sounding in contract or tort or otherwise. This waiver is knowingly, willingly and voluntarily made by Grantor, and Grantor hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. Grantor further represents and warrants that it has been represented in the signing of this Note and in the making of this waiver by independent legal counsel, or has had the opportunity to be represented by independent legal counsel selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel. Grantor agrees and consents that Lender may file an original counterpart or a copy of this document with any court as written evidence of the consent of Grantor to the waiver of its right to trial by jury. Grantor hereby waives personal service and consents to process being served in any suit, action, or proceeding instituted in connection with the Note or Loan Documents by the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to Grantor at its address set forth on the signature page hereof and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U. S. Mail. Grantor irrevocably agrees that such service shall be deemed to be service of -28- process upon Grantor in any such suit, action, or proceeding. Nothing in this document shall affect the right of Lender to serve process in any manner otherwise permitted by law and nothing in this Note will limit the right of Lender otherwise to bring proceedings against Grantor in the courts of any jurisdiction or jurisdictions. SECTION 6.26. INSURANCE NOTICE. The following notice is given pursuant to Section 427.120 of the Revised Statutes of Missouri, as amended; nothing contained in such notice shall be deemed to limit or modify the terms of this Deed of Trust or any other document or agreement executed and delivered in connection with the Note and the transactions contemplated hereunder: "UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS. THE COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL. YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT. IF WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN." SECTION 6.27. ENTIRE AGREEMENT. The Loan Documents constitute the entire understanding and agreement between Grantor and Holder with respect to the transactions arising in connection with the indebtedness secured hereby and supersede all prior written or oral understandings and agreements between Grantor and Holder with respect to the matters addressed in the Loan Documents. Grantor hereby acknowledges that, except as incorporated in writing in the Loan Documents, there are not, and were not, and no persons are or were authorized by Holder to make, any representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents. SECTION 6.28. LIMITATION OF LIABILITY. Subject to the qualifications below, Holder shall not enforce the liability and obligation of Grantor to perform and observe the obligations contained in the Note, or the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Grantor, except that Holder may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Holder to enforce and realize upon its interest under the Note and the other Loan Documents, or in the Property, the Rents or any other collateral given to Holder pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Grantor only to the extent of Grantor's interest in the Property, in the Rents and in any other collateral given to Holder, and Holder, by accepting the Note and the other Loan Documents, shall not sue for, seek or demand any deficiency judgment against Grantor in any such action or proceeding under or by reason of or under or in connection with the Note, or the other Loan Documents. The provisions of this Section 6.28 shall not, however (a) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (b) impair the right of Holder to name Grantor as a party defendant in any action or suit for foreclosure and sale hereunder; (c) impair the right of Holder to obtain the appointment of a receiver; (d) impair the rights of Holder under the Environmental Indemnity Agreement; or (e) constitute a waiver of the right of Holder to enforce the liability -29- and obligation of Grantor, by money judgment or otherwise, to the extent of any and all liabilities, costs, losses (including any reduction in value of the Property or any other collateral or the loss of Holder's security interest therein), damages, expenses (including reasonable attorneys' fees and disbursements, and court costs, if any), or claims suffered or incurred by Holder by reason of or in connection with any of the following: (i) any fraud committed by Grantor or any affiliate of Grantor in connection with the Loan; (ii) any material representation contained in any of the Loan Documents or any report furnished pursuant to any of the Loan Documents by or on behalf of Grantor; (iii) the misappropriation of any proceeds of insurance or condemnation awards by Grantor; (iv) to the extent the security deposits are subject to their respective control, the failure of Grantor or any affiliate of Grantor, to properly apply any and all security deposits held by Grantor, or any affiliate of Grantor, or said person's failure to properly return same to tenants when due, or failure to deliver security deposits to Holder, any receiver or any person purchasing the Property or any part thereof at a foreclosure sale or upon the taking of possession of the Property or any part thereof by Holder, such receiver or other person. IN WITNESS WHEREOF, Grantor has executed this Deed of Trust under seal as of the date first written on page 1 hereof. The address and federal tax GRANTOR: identification number of Grantor are: Federal Tax No. CMC REAL ESTATE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY d/b/a CMC REAL c/o Centene Corporation ESTATE MANAGEMENT COMPANY, LLC 7711 Carondelet Clayton, Missouri 63105 BY: /S/ Michael F. Neidorff ------------------------------ ID# 20-005-7283 MICHAEL F. NEIDORFF, MANAGER -30- STATE OF MISSOURI ) ) SS. COUNTY OF ST. LOUIS ) On this 8th day of August, 2003, before me appeared MICHAEL F. NEIDORFF, to me personally known, who, being by me duly sworn, did say that he is the Manager of CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC, and that said instrument was signed on behalf of said limited liability company, by authority of its Members; and said MICHAEL F. NEIDORFF acknowledged said instrument to be the free act and deed of said limited liability company. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal at my office in the County and State aforesaid, the day and year first above written. /s/ Kay M. Baker ----------------------------- Notary Public My commission expires: 11/02/06 [SEAL OF NOTARY PUBLIC] KAY M. BAKER, NOTARY PUBLIC St. Louis County, State of Missouri My Commission Expires 11-02-2006 -31- EXHIBIT A LAND The parcel or parcels of real property located in the County of St. Louis, State of Missouri and more particularly described as follows: A tract of land being Lots 8, 9 and 10 in Block 13 of the TOWN (NOW CITY) OF CLAYTON, according to the plat thereof recorded in Plat Book I, page 11 (now 7) of the St. Louis County Records, Township 45 North-Range 6 East, St. Louis County, Missouri, and being more particularly described as: Beginning at the Southeast corner of said Lot 10, said corner being the intersection of the North line of Carondelet Avenue, 80 feet wide, and the West line of a 20 foot wide North-South alley in said Block 13; thence along said North line of Carondelet Avenue, North 84 degrees 32 minutes 23 seconds West 160.00 feet to the Southeast corner of Lot 7 in said Block 13; thence along the East line of said Lot 7, North 05 degrees 27 minutes 17 seconds East 190.10 feet to the South line of a 20 foot wide East-West alley in said Block 13; thence along said South line of the 20 foot wide East-West alley, South 84 degrees 32 minutes 16 seconds (record) 23 seconds (measured) East 160.00 feet to said West line of the 20 foot wide North-South alley; thence along said West line of the 20 foot wide North-South alley, South 05 degrees 27 minutes 17 seconds West 190.10 feet to the point of beginning, according to a survey by Volz, Inc., dated May 9, 2003. 32 EXHIBIT B PERMITTED ENCUMBRANCES NONE 33 - -------------------------------------------------------------------------------- (Space above reserved for Recorder of Deeds) Title of Document: Absolute Assignment Of Rents And Leases Date of Document: August 8, 2003 Grantor: CMC Real Estate Company, LLC d/b/a CMC Real Estate Management Company, LLC Grantor's Address: c/o Centene Corporation 7711 Carondelet St. Louis, Missouri 63105 Grantee: Midwest BankCentre Grantee's Address: 8020 Forsyth Boulevard Clayton, Missouri 63105 Legal Description: See Exhibit A on Page 7. AFTER RECORDING, PLEASE MAIL DOCUMENT TO: ROBERT T. WEST PASTER, WEST & KRANER, P.C. 100 S. BRENTWOOD BLVD., SUITE 401 CLAYTON, MISSOURI 63105 ABSOLUTE ASSIGNMENT OF RENTS AND LEASES KNOW ALL PERSONS BY THESE PRESENTS: THAT THIS ABSOLUTE ASSIGNMENT OF RENTS AND LEASES ("Assignment") is made and entered into to be effective the 8th day of August, 2003, and is given by CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC, with its principal place of business and registered office located at 7711 Carondelet, St. Louis, Missouri 63105 ("Assignor"), in favor of MIDWEST BANKCENTRE, a state banking company, with offices located at 8020 Forsyth Boulevard, Clayton, Missouri 63105 ("Assignee"). WITNESSETH: THAT FOR GOOD AND VALUABLE CONSIDERATION and the debt hereinafter mentioned, the receipt and sufficiency of which are hereby acknowledged, Assignor does hereby presently bargain, grant, sell, set over, transfer, assign, convey, deliver, confirm and warrant unto the Assignee, its successors and assigns, as an absolute assignment and not merely one for security, all of the right, title and interest of the Assignor in, under and to all leases, rental agreements, and occupancy agreements, together with all amendments and modifications thereof, now or hereafter entered into, whether oral or written (collectively referred to as the "Leases"), which demise any portion of the real property located in St. Louis County, Missouri, and more particularly described in EXHIBIT A attached hereto (hereinafter referred to as the "Premises"), which is incorporated herein by reference, together with any and all amendments, modifications, extensions and renewals thereof; together with any guarantees of the tenant's obligations thereunder, together with the immediate and continuing right to collect and receive all rents, earnings, issues, revenues, income, payments and profits arising out of said Leases or out of the Premises or any part thereof, together with the right to all proceeds payable to the Assignor pursuant to any purchase options on the part of the tenants under the Leases, together with all payments derived there from including but not limited to claims for recovery of damages done to the Premises by any tenants or subtenants or for the abatement of any nuisance existing thereon as the result of the conduct of any tenant or subtenant, claims for damages resulting from default under said Leases whether resulting from acts of insolvency or acts of bankruptcy or otherwise, and lump sum payments for the cancellation of said Leases or the waiver of any obligation or term thereof prior to the expiration date (hereinafter collectively referred to as the "Rents"). This Assignment is a perfected, present, absolute, direct and unconditional assignment and transfer of all Assignor's right, title and interest in and to the Leases and the Rents made in consideration of the $8,000,000.00 loan made by Assignee to Assignor and as additional security for the repayment of the indebtedness and other obligations set forth in the Mortgage (defined herein). AND THE ASSIGNOR FURTHER AGREES, COVENANTS AND ASSIGNS AS FOLLOWS: 1. Performance of Leases: To faithfully abide by, perform and discharge each and every obligation, covenant and agreement of said Leases by the lessor to be performed; to use its best efforts to enforce or secure the performance of each and every obligation, covenant, condition and agreement of said Leases by the tenants to be performed; not to borrow against, pledge or assign any rentals due under the Leases, nor consent to a subordination or assignment of the interests of the tenants thereunder to any party other than Assignee, nor anticipate the rents thereunder for more than one (1) month in advance or reduce the amount of the Rents and other payments, thereunder. Assignor will, at the Assignee's request, assign and transfer to the Assignee a confirmatory assignment of leases as the Assignee may from time to time require. Assignor will promptly (but in any event within five (5) business days from the time Assignor has actual knowledge thereof) notify Assignee if Assignor has reason to believe it will be unable to fulfill its obligations as landlord under any lease, or if Assignor has knowledge of any set of facts which, with the giving of notice or the passage of time or both, would constitute a default on the part of Assignor under any of the Leases. 2. Protect Security. At the Assignor's sole cost and expense, to appear in and defend any action or proceeding arising under, growing out of or in any manner connected with the Leases or the obligations, duties or -2- liabilities of the lessor thereunder and to pay all costs and expenses of the Assignee, including attorney's fees in a reasonable sum, at any such action or proceeding in which the Assignee in its sole discretion may appear. 3. Representations and Warranties: The Assignor hereby represents and warrants that the Assignor has full right and title to assign said Leases and Rents; that Assignor has presented Assignee with true and complete copies of all of the Leases; that no other assignment of any interest therein has been made by the Assignor, that there are no existing defaults of a material nature under the provisions of said Leases; and that the tenants under the Leases have no defenses, setoffs or counterclaims against the Assignor. 4. Absolute and Present Assignment: It is understood and agreed that the Assignment granted herein shall constitute a perfected, absolute, and present assignment from Assignor to Assignee and not an assignment for security purposes only. Notwithstanding the foregoing, unless and until a Default should exist under the terms of: (a) that certain Promissory Note of even date herewith in the principal amount of $8,000,000.00, executed by Assignor in favor of Assignee (the "Note"), (b) that certain Deed of Trust, Assignment and Security Agreement (the "Mortgage") of even date herewith executed by Assignor in favor of Assignee, that certain Environmental Indemnification Agreement of even date herewith executed by Assignor in favor of Assignee (the "Indemnity") (the Mortgage and the Indemnity are sometimes collectively referred to herein as the "Security Documents"); Assignor shall have the right to collect, but not prior to accrual, all of the Rents and to retain, use and enjoy the same. 5. No Obligation Upon. Assignee. Assignee's acceptance of the assignment of Leases and Rents provided for herein shall not obligate Assignee to appear in nor defend any proceeding relating to any of the Leases or to the Premises, take any action hereunder, expend any money, incur any expenses or perform any obligation or liability under the Leases, or assume any obligation for any deposits delivered to Assignor by any tenant, except as is set forth in paragraph 8 hereof. Notwithstanding the foregoing, should the Assignor fail to perform, comply with or discharge any obligations of Assignor under any Lease, or should the Assignee become aware of or be notified by any tenant under any Lease of a failure on the part of Assignor to so perform, comply with or discharge its obligations under said Lease, Assignee may, at its sole discretion, and without waiving or releasing Assignor from any obligation contained in this Assignment, the Note, or any of the Security Documents, remedy such failure, and the Assignor hereby agrees to repay upon demand all sums incurred by the Assignee in remedying any such failure together with interest at the rate then in effect under the terms of the Note (which may be the Default Rate set forth in the Note or the Mortgage). All such sums, together with interest as aforesaid, shall become additional indebtedness due under die Note and secured by the Security Documents, but no such event shall be deemed to relieve the Assignor from any default hereunder or thereunder. 6. Remedies: Upon or at any time after the occurrence of a Default under the Note or one of the Security Documents, or a default in the performance of any obligation, covenant or agreement contained herein, taking into account any applicable grace or cure periods, the Assignee may declare all indebtedness evidenced by the Note and secured by the Security Documents immediately due and payable, may revoke the privilege granted Assignor hereunder to collect the Rents, and may, at its option, without notice, either in person or by agent, with or without taking possession of or entering the Premises, with or without bringing any action or proceeding, or by receiver to be appointed by the Court, collect all the Rents payable under the Leases and enforce the payment thereof and exercise all the rights of Assignor under the Leases and all of the rights of the Assignee hereunder, any may enter upon, take possession of, manage and operate the Premises, or any part thereof; may cancel, enforce or modify the Leases and fix or modify the Rents, and do any acts which the Assignee deems proper to protect the security hereof with or without taking possession of the Premises, and may apply the same to the costs and expenses of operation, management and collection, including attorneys' fees, to the payment of the expenses of any agent appointed by the Assignee, to the payment of taxes, assessments, insurance premiums and expenditures for the upkeep of the Premises, to the performance of the lessor's obligations under the Leases and to any indebtedness evidenced by the Note or due pursuant to any of the Security Documents, all in such order as the Assignee may determine. The entering upon and taking possession of the Premises, the collection of such Rents and the application thereof as aforesaid, shall not cure or waive any default or waive, modify or affect notice of default in any of the Security Documents or invalidate any act pursuant to such notice or in any way operate to prevent the Assignee from pursuing any remedy which it now or hereafter may have under the terms or conditions of the Note, of the Mortgage or any other instrument securing the Note. -3- 7. Assignor to Hold Assignee Harmless: The Assignor shall and does hereby agree to defend (with counsel acceptable to Assignee) indemnify and hold the Assignee harmless of and from any and all liability, loss or damage which it may or might incur under said Leases or by reason of this Assignment and of and from any and all claims and demands whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in said Leases. Should the Assignee incur any such liability, or any costs or expenses in the defense of any such claims or demands, the amount thereof, including costs, expenses and attorneys' fees and expenses, shall be added to the indebtedness evidenced by the Note and secured by the Security Documents and the Assignor shall reimburse the Assignee therefore immediately upon demand, and the continuing failure of the Assignor to do so shall constitute a default hereunder and a Default under the Security Documents. 8. Security Deposits: The Assignor agrees, upon a Default under the Note or the Security Documents, to transfer to the Assignee any security deposits held by the Assignor under the terms of the Leases. The Assignor agrees that such security deposits may be held by the Assignee without any allowance of interest thereon, and shall become the absolute property of the Assignee upon a Default under the Note or the Security Documents to be applied in accordance with the provisions of the Leases. Until the Assignee makes such demand and the deposits are paid over to Assignee, the Assignee assumes no responsibility to the tenants for any such security deposits. 9. Authorization to Tenants: The tenants under the Leases are hereby irrevocably authorized and directed to recognize the claims of the Assignee or any receiver appointed hereunder without investigating the reason for any action taken by the Assignee or such receiver, or the validity or the amount of indebtedness owing to the Assignee, or the existence of any Default under the Note or the Security Documents, or under or by reason of this Assignment, or the application to be made by the Assignee or receiver. The Assignor hereby irrevocably directs and authorizes the tenants to pay to the Assignee or such receiver all sums due under the Leases and consents and directs that said sums shall be paid to the Assignee or any such receiver in accordance with the terms of its receivership without the necessity for a judicial determination that a default has occurred hereunder, under the Note or under any of the Security Documents, or that the Assignee is entitled to exercise its rights hereunder, and to the extent such sums are paid to the Assignee for the same. The sole signature of the Assignee or such receiver shall be sufficient for the exercise of any rights under this Assignment, and the sole receipt of the Assignee or such receiver for any sums received shall be a full discharge and release therefore to any such tenants or occupants of the Premises. Checks for all or any part of the Rents collected under this Assignment shall upon notice from the Assignee or such receiver be drawn to the exclusive order of the Assignee or such receiver. 10. No Additional Leases: Assignor shall not enter into any lease of the Premises, or any portion thereof, without the prior written approval of Assignee, except leases of 10,000 square feet or less and otherwise in the normal course of Assignor's operation of the Premises as a first class office building. 11. Satisfaction: Upon the payment in full of the indebtedness evidenced by the Note and secured by the Security Documents, this Assignment shall without the need for any further satisfaction or release become null and void and shall be of no further effect 12. Assignee Creditor of the Tenants: Upon or at any time during the continuance of a default in payment of the indebtedness evidenced by the Note or in the performance of any obligation, covenant or agreement contained in this Assignment, the Note, or any of the Security Documents, and following the expiration of any applicable grace and/or cure period, the Assignor agrees that the Assignee, not the Assignor, shall be and be deemed to be the creditor of the tenants in respect of assignments for the benefit of creditors and bankruptcy, reorganization, insolvency, dissolution or receivership proceedings affecting such tenants (without obligation on the part of the Assignee, however, to file or make timely filings of claims of such proceedings or otherwise to pursue creditor's rights therein and reserving the right to the Assignor to make such filing in such event) with an option to the Assignee to apply any money received by the Assignee as such creditor in reduction of the indebtedness evidenced by the Note. 13. Assignee Attorney In Fact: The Assignor hereby irrevocably appoints the Assignee and its successors and assigns as its agent and attorney in fact, which appointment is coupled with an interest, to exercise -4- any rights or remedies hereunder and execute and deliver during the term of this Assignment such instruments as the Assignee may deem necessary to make this Assignment and any further assignment effective. 14. No Mortgage in Possession: Nothing herein contained and no actions taken pursuant to this Assignment shall be construed as constituting the Assignee a "mortgage in possession." 15. Continuing Rights: The rights and powers of the Assignee or any receiver hereunder shall continue and remain in full force and effect until the indebtedness evidenced by the Note or secured by the Security Documents is paid in full, and shall continue after commencement of a foreclosure action and after foreclosure sale and until expiration of the equity of redemption if the Assignee shall be purchaser at the foreclosure sale. 16. Successors and Assigns: This Assignment and each and every covenant, agreement and provision hereof shall be binding upon the Assignor and their heirs, successors and assigns, including without limitation each and every record owner of the Premises or any other person having an interest therein and shall inure to the benefit of the Assignee and its successors and assigns. As used herein, the words "successors and assigns" shall also be deemed to mean the heirs, executors, representatives and administrators of any natural person who is a party to this Assignment. 17. Governing Law: This Assignment is intended to be governed by the laws of the state of Missouri. 18. Validity Clause: It is the intent of this Assignment to confer to the Assignee the rights and benefits hereunder to the full extent allowable by law. The unenforceability or invalidity of any provisions hereof shall not render any other provision or provisions herein contained unenforceable or invalid. Any provisions found to be unenforceable shall be severable from this Assignment. 19. Notices: Any notice that any party hereto may desire or may be required to give to any other party shall be in writing given in the manner prescribed in the Loan Agreement. 20. Cumulative with Other Documents: This Assignment, and the covenants, agreements, obligations and liabilities of Assignor hereunder, are cumulative with, and shall not supersede or be superseded by any of the Security Documents or by any other instrument, agreement or other document executed by the Assignor in connection with the Note, the Security Documents or otherwise. 21. Limitation of Liability. Notwithstanding anything to the contrary herein, Assignor's liability hereunder is limited as provided in Section 6.28 of the Deed of Trust, Assignment and Security Agreement, IN WITNESS WHEREOF, the Assignor has executed or has caused this Absolute Assignment of Rents and Leases to be executed as of the date first above written. ASSIGNOR: CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC By: /s/ Michael F. Neidorff ------------------------------ Michael F. Neidorff -5- STATE OF MISSOURI ) ) SS. COUNTY OF ST. LOUIS ) On this 8th day of August, 2003, before me appeared MICHAEL F. NEIDORFF, to me personally known, who, being by me duly sworn, did say that he is the Manager of CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC, and that said instrument was signed on behalf of said limited liability company, by authority of its Members; and said MICHAEL F. NEIDORFF acknowledged said instrument to be the free act and deed of said limited liability company. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal at my office in the County and State aforesaid, the day and year first above written. /s/ Kay M. Baker ----------------------------------- Notary Public My commission expires: 11/02/06 [SEAL OF NOTARY PUBLIC] KAY M. BAKER, NOTARY PUBLIC St. Louis County, State of Missouri My Commission Expires 11-02-2006 -6- EXHIBIT A LAND The parcel or parcels of real property located in the County of St. Louis, State of Missouri and more particularly described as follows: A tract of land being Lots 8, 9 and 10 in Block 13 of the TOWN (NOW CITY) OF CLAYTON, according to the plat thereof recorded in Plat Book I, page 11 (now 7) of the St. Louis County Records, Township 45 North-Range 6 East, St. Louis County, Missouri, and being more particularly described as: Beginning at the Southeast corner of said Lot 10, said corner being the intersection of the North line of Carondelet Avenue, 80 feet wide, and the West line of a 20 foot wide North-South alley in said Block 13; thence along said North line of Carondelet Avenue, North 84 degrees 32 minutes 23 seconds West 160.00 feet to the Southeast corner of Lot 7 in said Block 13; thence along the East line of said Lot 7, North 05 degrees 27 minutes 17 seconds East 190.10 feet to the South line of a 20 foot wide East-West alley in said Block 13; thence along said South line of the 20 foot wide East-West alley, South 84 degrees 32 minutes 16 seconds (record) 23 seconds (measured) East 160.00 feet to said West line of the 20 foot wide North-South alley; thence along said West line of the 20 foot wide North-South alley, South 05 degrees 27 minutes 17 seconds West 190.10 feet to the point of beginning, according to a survey by Volz, Inc., dated May 9, 2003. - -------------------------------------------------------------------------------- (Space above reserved for Recorder of Deeds) Title of Document: Tenant Estoppel and Subordination, Nondisturbance and Attornment Agreement Date of Document: August 8th, 2003 Grantor: CMC Real Estate Company, LLC d/b/a CMC Real Estate Management Company, LLC Grantor's Address: c/o Centene Corporation 7711 Carondelet St. Louis, Missouri 63105 Grantee: Midwest BankCentre Grantee's Address: 8020 Forsyth Boulevard Clayton, Missouri 63105 Legal Description: See Exhibit A on Page 11. AFTER RECORDING, PLEASE MAIL DOCUMENT TO: ROBERT T. WEST PASTER, WEST & KRANER, P.C. 100 S. BRENTWOOD BLVD., SUITE 401 CLAYTON, MISSOURI 63105 TENANT ESTOPPEL AND SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT THIS AGREEMENT is made this_____day of August, 2003 by and among MIDWEST BANKCENTRE, a state banking company with an office at 8020 Forsyth Blvd., Clayton, Missouri 63105 ("Mortgagee"), CENTENE CORPORATION, a Delaware corporation (being the same party identified as Centene Corporation, a Wisconsin corporation, in the "Lease" described below) with an office at 7711 Carondelet, Clayton, Missouri 63105 ("Tenant"), and CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC with an office at 7711 Carondelet, Clayton, Missouri 63105 ("Borrower"), WITNESSETH; WHEREAS, Mortgage is the holder of a Promissory Note from Borrower dated August ___, 2003, which Promissory Note is secured by a Deed of Trust, Assignment and Security Agreement recorded or to be recorded in the St. Louis County Records (the "Mortgage"). The Mortgage encumbers certain property known as 7711 Carondelet, Clayton, Missouri, as more fully described in EXHIBIT "A" attached hereto (the "Mortgaged Property"); and WHEREAS, by virtue of that certain lease (as modified through the date hereof, the "Lease") dated February 22, 1999 between Clayton Investors Associates LLC and Tenant, as amended by that certain First Amendment to Lease Agreement dated November 10, 2000, by that certain Second Amendment to Lease dated January 30, 2001, by that certain Third Amendment to Lease dated April 17, 2001, by that certain Fourth Amendment to Lease dated August 21, 2001, by that certain Fifth Amendment to Lease dated May 25, 2002, and by that certain Sixth Amendment to Lease dated August 1, 2003 between Tenant and Borrower as successor in interest to Clayton Investors Associates, LLC, Tenant has leased approximately 59,248 rentable square feet of space (the "Demised Premises") within the Mortgaged Property, as more particularly described in the Lease; and WHEREAS, Tenant desires to be assured of continued occupancy of the Demised Premises under the terms of the Lease and subject to the terms of the Mortgage; NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) by each party in hand paid to the other, receipt of which is hereby acknowledged, and in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto, intending to be legally bound hereby, hereby agree as follows: 1. Tenant hereby agrees that: (a) subject to this Agreement, the Lease and Tenant's leasehold estate and any and all estates, rights, options, liens and charges therein contained or created thereby are, and shall be and remain, subject and subordinate in all respects to the lien and effects of the Mortgage and to all of the terms, conditions and provisions thereof, to all advances made or to be made thereunder, and to any renewals, extensions, modifications, consolidations or replacements thereof, with the same force and effect as if the Mortgage had been executed, delivered and duly recorded prior to the execution and delivery of the Lease; (b) Tenant shall provide to Mortgagee, within 10 days of request, an estoppel certificate certifying that no defaults, claims, offsets or events, or situations which, with the passage of time, could become a default or the basis for a claim or offset against Borrower by Tenant, exist under the Lease or, if the same exist, describing such claimed defaults, claims or offsets; (c) Tenant will forward to Mortgagee copies of any notice, claim or demand given or made by Tenant to or on Borrower, in all cases concurrently with forwarding same to Borrower, such copies to be provided to Mortgagee at the address of Mortgagee set forth above by the same method of mailing as the statement, notice, claim or demand was made or given to or on Borrower; (d) without the prior written consent of Mortgagee (such consent not to be unreasonably withheld, conditioned or delayed): (i) no rent or other sums due under the Lease shall be paid more than 30 days in advance of the due date therefor established by the Lease, except the security deposit, if any, identified in the Lease; (ii) no modification or amendment shall be made to the terms of the Lease; (iii) the term of the Lease shall not be extended or renewed, except as otherwise provided therein; (iv) the Lease shall not be terminated by Tenant, nor shall Tenant tender a surrender of the Lease; and (v) Tenant shall only sublet the Demised Premises or assign Tenant's interest in the Lease in accordance with the provisions of the Lease; (e) in the event of any act or omission by Borrower which would give Tenant the right to terminate the Lease or to claim a partial or total eviction, reduce rents or to credit, abatement or offset any amounts against future rents, Tenant will not exercise such right until (i) it shall have given written notice of such act or omission to Mortgagee, and (ii) a reasonable period of time for remedying such act or omission shall have elapsed following such notice to Mortgagee (during which period Tenant shall give access to the Demised Premises to enable Mortgagee, if it so elects, to cure such default); and if it so elects, Mortgagee shall have the right, but not the obligation, to cure any default by Borrower under the Lease within said reasonable period of time, including, if necessary to cure such defaults, the period of time necessary to enable Mortgagee to gain access to and control over the Demised Premises; 2 (f) notices required to be given to Mortgagee under this Agreement will be given to any successor-in-interest of Mortgagee provided that, prior to the event for which notice is required to be given to Mortgagee, such successor-in-interest of Mortgagee shall have given written notice to Tenant of its acquisition of the Mortgagee's interest under the Mortgage, and designated the address to which such notice is to be directed; (g) if Mortgagee or any subsequent holder of the Mortgagee (as now or hereafter constituted), or anyone claiming from or through any such holder, shall enter into and lawfully become possessed of the Mortgaged Property, or shall succeed to the rights of Borrower under the Lease, either through foreclosure of the Mortgage or otherwise, Tenant shall attorn to, and recognize, such holder or anyone claiming from or through such holder as "landlord" under the Lease for the unexpired balance of the term of the Lease and any extension or renewal thereof, subject to all of the terms and conditions of the Lease; (h) Tenant has no right or option, whether under the Lease or otherwise, to purchase any portion of the Mortgaged Property or any interest therein, and to the extent that Tenant has or hereafter acquires any such right or option, the same is hereby subordinated to the Mortgage; (i) Mortgagee shall have no responsibility, liability or obligation to cure any defaults by any prior "landlord" (including Borrower) under the Lease, nor be subject to claims, defenses or offsets under the Lease or against any prior "landlord" (including Borrower) possessed by Tenant and which arose or existed prior to vesting of title to the Mortgaged Property in Mortgagee via actual foreclosure of the Mortgage or recording of a deed-in-lieu of foreclosure or entry under and taking actual possession of the Mortgaged Property by Mortgagee. If Mortgagee forecloses the Mortgage or takes title to the Mortgaged Property pursuant to a deed-in-lieu of foreclosure or enters upon and takes actual possession of the Mortgaged Property, Mortgagee or any other purchaser at such foreclosure sale shall do so free and clear of all such prior defaults, claims, or offsets and shall not: (1) be liable or responsible to Tenant for any act or omission of any prior "landlord" (including Borrower), (2) be liable or responsible to Tenant for any deposit or security which was delivered by Tenant to any prior "landlord" (including Borrower) but which was not subsequently delivered to Mortgagee, (3) be bound by any provision in the Lease relating to the application of insurance or condemnation proceeds, (4) be bound by any modification to the Lease made after the date hereof without Mortgagee's prior written consent, (5) be obligated or liable to Tenant with respect to the construction, completion or renovation of any improvements in the Demised Premises (other than renovation obligations that arise after vesting of title to the Mortgaged Property in Mortgagee via 3 actual foreclosure of the Mortgage or recording of a deed-in-lieu of foreclosure or entry under and taking actual possession of the Mortgaged Property by Mortgagee), (6) be bound by any obligation to repair or restore the Demised Premises or Mortgaged Property (other than repair or restoration obligations that arise after vesting of title to the Mortgaged Property in Mortgagee via actual foreclosure of the Mortgage or recording of a deed-in-lieu of foreclosure or entry under and taking actual possession of the Mortgaged Property by Mortgagee), (7) be bound by any restriction on competition beyond the Demised Premises contained in the Lease, (8) be subject to any claims, defenses or offsets which Tenant might have against any prior "landlord" (including Borrower), or (9) be liable for any costs or expenses related to any indemnification or representation provided by any prior landlord (including, but not limited to, Borrower) with respect to the Demised Premises or the Mortgaged Property, which indemnification obligations are based upon events occurring or conditions existing prior to vesting of title to the Mortgaged Property in Mortgagee via actual foreclosure of the Mortgage or recording of a deed-in-lieu of foreclosure or entry under and taking actual possession of the Mortgaged Property by Mortgagee; (j) the institution of any action or other proceedings by Mortgagee under the Mortgage in order to realize upon Borrower's interest in the Mortgaged Property shall not result in the cancellation or termination of the Lease or Tenant's obligations thereunder; if, however, by operation of law, or otherwise, the institution of any action or other proceedings by the holder of the Mortgage or the entry into and taking possession of the Demised Premises shall result in the cancellation or termination of the Lease or Tenant's obligations thereunder, Tenant shall, upon request of the holder of the Mortgage, execute and deliver a new lease of the Demised Premises containing the same terms and conditions as the Lease, except that the term and any extension thereof shall be the unexpired term and unexpired extended term or terms of the Lease as of the date of execution and delivery of said new lease; (k) any right of Tenant to make any claim or receive any proceeds arising out of a taking by eminent domain shall be subject and subordinate to the rights of Mortgagee under the Mortgage; and (l) Tenant agrees that except for ordinary cleaning supplies and other office products stored in compliance with law, no hazardous or toxic substances, waste or materials (including, without limitation, PCB's or asbestos) will be used or stored in the Demised Premises and that no such substances, waste or materials will be released, discharged or disposed of from the Demised Premises. 2. Mortgagee hereby agrees that: 4 (a) so long as Tenant is not in default under any of its duties and obligations under the Lease (beyond all applicable grace or cure periods given Tenant under the Lease), (i) Tenant's possession and occupancy of the Demised Premises and Tenant's rights and privileges under the Lease, or any extension or renewal thereof which may be effected in accordance with the terms of the Lease, shall not be disturbed by Mortgagee or any successor-in-interest to the Mortgagee; (ii) Mortgagee shall not join Tenant as party to any action or proceeding brought as a result of a default under the Mortgage for the purposes of terminating Tenant's interest and estate under the Lease (subject to paragraph 1 above); and (b) if the interest of Borrower shall vest in Mortgage by reason of foreclosure, deed-in-lieu of foreclosure or in any other manner, Mortgage and its successors-in-interest agree to be bound by all of the undischarged obligations of "landlord" under the Lease occurring and arising after title to the Mortgaged Property vests in Mortgage. 3. Tenant hereby represents and warrants that: (a) the Lease is in full force and effect, the initial term of the Lease commenced on April 1, 1999, and Tenant commenced payment of rent on April 1, 1999; (b) neither Tenant nor, to Tenant's knowledge, Borrower or any predecessor landlord is in default in the performance of or compliance with any provision of the Lease, and no facts or circumstances exist that, with the passage of time, will or could constitute a default or breach or notice thereof under the Lease; (c) Tenant has not received any notice of default or termination of the Lease; (d) the Lease is a complete statement of the agreement of the parties thereto with respect to the leasing of the Demised Premises and has not been amended or modified (except as indicated in the third "WHEREAS" paragraph set forth above); (e) Base rent in the amount of $84,966.92 has been paid to Borrower on August 1, 2003, and all additional rent and other charges have been paid to Borrower. There is no prepaid rent or other prepaid amounts to "landlord," and the amount of security deposit is $0.00, (f) The next rent increase will occur on December 31, 2003, at which time the monthly rent shall increase to $106,695.77. Rent changes will occur as of the following dates for the following amounts: January 1, 2004 a change to $20.50 per sq. ft.; January 1, 2005 an increase to $21.50 per sq. ft.; January 1, 2006 an increase to $22.50 per sq. ft.; and January 1, 2009 an increase to $23.50 per sq. ft. 5 (g) The Lease terminates on December 31, 2012, and Tenant has the following unexercised renewal/extension option(s): None; (h) All work to be performed by Borrower or any predecessor landlord under the Lease has been performed as required and has been accepted by Tenant, except as set forth in the Lease; (i) Tenant has not received notice of prior sale, transfer or assignment, hypothecation or pledge of the Lease or of the rents payable thereunder; (j) Tenant has not assigned the Lease or sublet all or any portion of the Demised Premises or any rights therein, to any party, nor does Tenant occupy the Demised Premises under assignment or sublease; (k) The undersigned representative of Tenant is duly authorized and fully qualified to execute this Agreement on behalf of Tenant, thereby binding Tenant; and (l) No actions, whether voluntary or otherwise, are pending against the undersigned under the bankruptcy laws of the United States or any state, and there are no claims or actions pending against Tenant which, if decided against Tenant, would materially and adversely affect Tenant's financial condition or Tenant's ability to perform it's obligation under the Lease. 4. Borrower hereby irrevocably authorizes and directs Tenant, upon receipt from Mortgagee of written notice to do so, to pay all rents and other monies payable by Tenant under the Lease to or at the direction of Mortgagee. Borrower irrevocably releases Tenant of any liability to Borrower for all payments so made, and Borrower agrees to defend, indemnify and hold Tenant harmless from and against any and all claims, demands, losses, or liabilities asserted by, through, or under Borrower (except by Mortgagee) for any and all payments so made. Tenant agrees that upon receipt of such notice it will pay all monies then due and becoming due from Tenant under the Lease to or at the direction of Mortgagee, notwithstanding any provision of the Lease to the contrary. Such payments shall continue until Mortgagee directs Tenant otherwise in writing. Tenant agrees that neither Mortgagee's demanding or receiving any such payments, nor Mortgagee's exercising any other right, remedy, privilege or power granted by the Lease or this Agreement, will operate to impose any liability upon Mortgagee for performance of any obligation of "landlord" under the Lease unless and until Mortgagee elects otherwise in writing or unless Mortgagee assumes complete, unopposed possession of the Mortgaged Property or title to the Mortgaged Property vests in Mortgagee. 5. Any notice, demand or consent hereunder shall be in writing and may be given or mailed by mailing the same by registered or certified mail, return receipt requested, at the addresses set forth in the introduction to this Agreement, and if intended for Tenant, with a copy to the Demised Premises. Any party may designate a new address by notice in writing to the other parties. Any notice given in accordance herewith shall be effective upon deposit in the United States mails in accordance herewith. 6 6. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of each of the parties hereto. The term "Mortgagee" shall include the respective holders from time to time of Mortgage (as now or hereafter constituted), the term "Borrower" shall be synonymous with the term "Landlord" during the term of the Mortgage and the terms "Landlord" and "Tenant" shall include the holder from time to time of the lessor's interest, and the holder from time to time of the lessee's interest, respectively, in the Lease. 7. Any claim by Tenant against Mortgagee under the Lease or this Agreement shall be satisfied solely out of the interest of Mortgagee in the Mortgaged Property, and Tenant shall not seek recovery against or out of any other assets of Mortgagee. 8. This Agreement shall be governed by, and construed under the laws of the State of Missouri. [SIGNATURE PAGE FOLLOWS] 7 IN WITNESS WHEREOF, the parties hereto have caused the execution hereof as a sealed instrument as of the day and year first above written. TENANT: CENTENE CORPORATION, a Delaware corporation By: -s- Karey L. Witty ------------------------------- Name: Karey L. Witty Title: Senior Vice President and Chief Financial Officer MORTGAGEE: MIDWEST BANKCENTRE, a state banking company By: -s- THOMAS R. COLLINS ------------------------------- Name: THOMAS R. COLLINS Title: REGIONAL PRESIDENT LANDLORD/BORROWER: CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC By: -s- Michael F. Neidorff ------------------------------- Michael F. Neidorff, Manager 8 STATE OF MISSOURI ) )SS. COUNTY OF ST. LOUIS ) On this 8th day of August, 2003, before me, a notary public, personally appeared KAREY L. WITTY, to me personally known, being by me duly sworn, did say that he is the Senior Vice President and Chief Financial Officer of CENTENE CORPORATION, a Delaware corporation, and that said instrument was signed on behalf of said corporation by authority of its Board of Directors and said KAREY L. WITTY acknowledged the foregoing instrument to be the free act and deed of said corporation. -s- KAY M. BAKER ----------------------------------- [SEAL OF NOTARY PUBLIC] Notary Public My Commission Expires 11/02/06 KAY M. BAKER, NOTARY PUBLIC St. Louis County, State of Missouri My Commission Expires 11-02-2006 STATE OF MISSOURI ) )SS. COUNTY OF ST. LOUIS ) On this 8th day of August, 2003, before me, a notary public, personally appeared THOMAS R. COLLINS, to me personally known, being by me duly sworn, did say that he/she is the REGIONAL PRESIDENT of MIDWEST BANKCENTRE, a state banking company, organized and existing under the laws of the State of Missouri, and that said instrument was signed in behalf of said Association by authority of its Board of Directors, and said THOMAS R. COLLINS acknowledged said instrument to be the free act and deed of said Association. -s- KAY M. BAKER ----------------------------------- [SEAL OF NOTARY PUBLIC] Notary Public My Commission Expires 11/02/06 KAY M. BAKER, NOTARY PUBLIC St. Louis County, State of Missouri My Commission Expires 11-02-2006 9 STATE OF MISSOURI ) )SS. COUNTY OF ST. LOUIS ) On this 8th day of August, 2003, before me appeared MICHAEL F. NEIDORFF, to me personally known, who, being by me duly sworn, did say that he is the Manager of CMC REAL ESTATE COMPANY, LLC, a Delaware limited liability company d/b/a CMC Real Estate Management Company, LLC, and that said instrument was signed on behalf of said limited liability company, by authority of its Members; and said MICHAEL F. NEIDORFF acknowledged said instrument to be the free act and deed of said limited liability company. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal at my office in the County and State aforesaid, the day and year first above written. -s- KAY M. BAKER ----------------------------------- [SEAL OF NOTARY PUBLIC] Notary Public My Commission Expires 11/02/06 KAY M. BAKER, NOTARY PUBLIC St. Louis County, State of Missouri My Commission Expires 11-02-2006 10 EXHIBIT A LAND The parcel or parcels of real property located in the County of St. Louis, State of Missouri and more particularly described as follows: A tract of land being Lots 8, 9 and 10 in Block 13 of the TOWN (NOW CITY) OF CLAYTON, according to the plat thereof recorded in Plat Book I, page 11 (now 7) of the St. Louis County Records, Township 45 North-Range 6 East, St. Louis County, Missouri, and being more particularly described as: Beginning at the Southeast corner of said Lot 10, said corner being the intersection of the North line of Carondelet Avenue, 80 feet wide, and the West line of a 20 foot wide North-South alley in said Block 13; thence along said North line of Carondelet Avenue, North 84 degrees 32 minutes 23 seconds West 160.00 feet to the Southeast corner of Lot 7 in said Block 13; thence along the East line of said Lot 7, North 05 degrees 27 minutes 17 seconds East 190.10 feet to the South line of a 20 foot wide East-West alley in said Block 13; thence along said South line of the 20 foot wide East-West alley, South 84 degrees 32 minutes 16 seconds (record) 23 seconds (measured) East 160.00 feet to said West line of the 20 foot wide North-South alley; thence along said West line of the 20 foot wide North-South alley, South 05 degrees 27 minutes 17 seconds West 190.10 feet to the point of beginning, according to a survey by Volz, Inc., dated May 9, 2003. UCC FINANCING STATEMENT FOLLOW INSTRUCTIONS (front and back) CAREFULLY - --------------------------------------------------- A. NAME & PHONE OF CONTACT AT FILER [optional] Robert T. West, Esq. (314) 721-7080 - --------------------------------------------------- B. SEND ACKNOWLEDGMENT TO: (Name and Address) Robert T. West, Esq. Paster, West & Kraner, p. c. 100 South Brentwood Boulevard, Suite 401 Clayton, Missouri 63105 THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY - ------------------------------------------------------------------------------------------------------------------------------------ 1. DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name(1a or 1b) - do not abbreviate or combine names -------------------------------------------------------------------------------------------------------------------------------- 1a. ORGANIZATION'S NAME CMC REAL ESTATE COMPANY, LLC OR -------------------------------------------------------------------------------------------------------------------------------- 1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 1c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY 7711 CARONDELET AVENUE CLAYTON MO 63105 USA - ------------------------------------------------------------------------------------------------------------------------------------ 1d. TAX ID #: ADD'L INFO RE 1e. TYPE OF 1f. JURISDICTION OF 1g. ORGANIZATIONAL ID #, if any SSN OR EIN ORGANIZATION ORGANIZATION ORGANIZATION DEBTOR LIMITED LIABILITY CO. DELAWARE 030414644-3673665 [ ] NONE - ------------------------------------------------------------------------------------------------------------------------------------ 2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name(2a or 2b)-do not abbreviate or combines name -------------------------------------------------------------------------------------------------------------------------------- 2a. ORGANIZATION'S NAME OR -------------------------------------------------------------------------------------------------------------------------------- 2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 2c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY - ------------------------------------------------------------------------------------------------------------------------------------ 2d. TAX ID #: ADD'L INFO RE 2e. TYPE OF 2f. JURISDICTION OF 2g. ORGANIZATIONAL ID #, if any SSN OR EIN ORGANIZATION ORGANIZATION ORGANIZATION DEBTOR [ ] NONE - ------------------------------------------------------------------------------------------------------------------------------------ 3. SECURED PARTY'S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P - insert only one secured party name (3a or 3b) -------------------------------------------------------------------------------------------------------------------------------- 3a. ORGANIZATION'S NAME MIDWEST BANKCENTRE OR -------------------------------------------------------------------------------------------------------------------------------- 3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 3c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY 8020 FORSYTH BOULEVARD CLAYTON MO 63105 USA - ------------------------------------------------------------------------------------------------------------------------------------ 4. This FINANCING STATEMENT covers the following [ILLEGIBLE] SEE EXHIBIT B ATTACHED HERETO. - ------------------------------------------------------------------------------------------------------------------------------------ 5. ALTERNATIVE DESIGNATION [If applicable]:[ ] LESSEE/LESSOR [ ] CONSIGNEE/CONSIGNOR [ ] BAILEE/BAILOR [ ] SELLER/BUYER [ ]AG. LIEN [ ] NON-UCC FILING - ------------------------------------------------------------------------------------------------------------------------------------ 6. [X] This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS Attach Addendum [If applicable] - ------------------------------------------------------------------------------------------------------------------------------------ 7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE] [optional] [ ] All Debtors [ ] Debtor 1 [ ] Debtor 2 - ------------------------------------------------------------------------------------------------------------------------------------ 8. OPTIONAL FILER REFERENCE DATA - ------------------------------------------------------------------------------------------------------------------------------------

FILING OFFICE COPY -- NATIONAL UCC FINANCING STATEMENT (FORM UCC1) (REV. 07/29/98) UCC FINANCING STATEMENT ADDENDUM FOLLOW INSTRUCTIONS (front and back) CAREFULLY - ------------------------------------------------------------------- 9. NAME OF FIRST DEBTOR (1a or 1b) ON RELATED FINANCING STATEMENT 9a. ORGANIZATIONS NAME CMC REAL ESTATE COMPANY, LLC OR ---------------------------------------------------------------- 9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME, SUFFIX - ------------------------------------------------------------------- 10. MISCELLANEOUS: THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY - ------------------------------------------------------------------------------------------------------------------------------------ 11. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - Insert only one name (11a or 11b) - do not abbreviate or combine names -------------------------------------------------------------------------------------------------------------------------------- 11a. ORGANIZATION'S NAME OR -------------------------------------------------------------------------------------------------------------------------------- 11b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 11c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY - ------------------------------------------------------------------------------------------------------------------------------------ 11d. TAX ID #: ADD'L INFO RE 11e. TYPE OF 11f. JURISDICTION OF 11g. ORGANIZATIONAL ID #, if any SSN OR EIN ORGANIZATION ORGANIZATION ORGANIZATION DEBTOR [ ] NONE - ------------------------------------------------------------------------------------------------------------------------------------ 12 [ ] ADDITIONAL SECURED PARTY'S OR [ ] ASSIGNOR S/P'S NAME - Insert only one name (12a or 12b) -------------------------------------------------------------------------------------------------------------------------------- 12a. ORGANIZATION'S NAME OR -------------------------------------------------------------------------------------------------------------------------------- 12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 12c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY - ------------------------------------------------------------------------------------------------------------------------------------ 13. This FINANCING STATEMENT covers [ ] [illegible] to be [illegible] 16. Additional collateral description: [illegible] or [ ] as-extracted collateral of is filed as a [X] fixture filling. 14. Description of real estate: SEE EXHIBIT A ATTACHED HERETO. 15. Name and address of a RECORD OWNER of above- described real estate (if Debtor does not have a record interest): ------------------------------------------------------------------------------ 17. Check only if applicable and check only one box. Debtor is a [ ] Trust or [ ] Trustee acting with respect to property held in trust or [ ] Decadent's Estate ------------------------------------------------------------------------------ 18. Check only, if applicable and check only one box. [ ] Debtor is a TRANSMITTING UTILITY [ ] Filed in connection with a Manufactured-Home Transaction -- effective 30 years [ ] Filed in connection with a Public-Finance Transaction -- effective 30 years - ------------------------------------------------------------------------------------------------------------------------------------

FILING OFFICE COPY -- NATIONAL UCC FINANCING STATEMENT ADDENDUM (FORM UCC1AD) (REV. 07/29/98) EXHIBITA TO UCC-1 FINANCING STATEMENT (DESCRIPTION OF PREMISES) The parcel or parcels of real property located in the County of St. Louis, State of Missouri and more particularly described as follows: A tract of land being Lots 8,9 and 10 in Block 13 of the TOWN (NOW CITY) OF CLAYTON, according to the plat thereof recorded in Plat Book I, page 11 (now 7) of the St. Louis County Records, Township 45 North-Range 6 East, St. Louis County, Missouri, and being more particularly described as: Beginning at the Southeast corner of said Lot 10, said comer being the intersection of the North line of Carondelet Avenue, 80 feet wide, and the West line of a 20 foot wide North-South alley in said Block 13; thence along said North line of Carondelet Avenue, North 84 degrees 32 minutes 23 seconds West 160.00 feet to the Southeast corner of Lot 7 in said Block 13; thence along the East line of said Lot 7, North 05 degrees 27 minutes 17 seconds East 190.10 feet to the South line of a 20 foot wide East-West alley in said Block 13; thence along said South line of the 20 foot wide East-West alley, South 84 degrees 32 minutes 16 seconds (record) 23 seconds (measured) East 160.00 feet to said West line of the 20 foot wide North-South alley; thence along said West line of the 20 foot wide North-South alley, South 05 degrees 27 minutes 17 seconds West 190.10 feet to the point of beginning, according to a survey by Volz, Inc., dated May 9, 2002. EXHIBIT B TO UCC-1 FINANCING STATEMENT As used in this Financing Statement, the term "Premises" means (a)the real estate (herein called the "Land") described in ExhibitA which is attached hereto and incorporated herein by reference, and (i)improvements now or hereafter situated or to be situated on the Land (herein together called the "Improvements"); and (ii)all right, title and interest of Grantor in and to (1)all streets, roads, alleys, easements, rights-of-way, licenses, rights of ingress and egress, vehicle parking rights and public places, existing or proposed, abutting, adjacent, used in connection with or pertaining to the Land or the Improvements; (2)any strips or gores between the Land and abutting or adjacent properties; and (3)all water and water rights, timber, crops and mineral interests on or pertaining to the Land. Collateral. This Financing Statement covers and the Debtor hereby grants the Secured Party a security interest in the following types (or items) of property (the "Collateral"): (a) All fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies, and articles of personal property, of every kind and character, now owned or hereafter acquired by Debtor, which are now or hereafter attached to or situated in, on or about the Land or the Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or the Improvements, and all renewals and replacements of, substitutions for and additions to the foregoing (the properties referred to in this clause(a) being herein sometimes collectively called the "Accessories." (b) All (i)plans and specifications for the Improvements; (ii)Debtor's rights, but not liability for any breach by Debtor, under all commitments (including any commitment for financing to pay any of the secured indebtedness, as defined in the deed of trust to the Secured Party), insurance policies and other contracts and general intangibles (including but not limited to trademarks, trade names and symbols) related to the Premises or the Accessories or the operation thereof; (iii)deposits (including but not limited to Debtor's rights in tenants' security deposits, deposits with respect to utility services to the Premises, and any deposits or reserves for taxes, insurance or otherwise under the deed of trust or other document securing or pertaining to the indebtedness of Debtor to Secured Party), money, accounts, instruments, documents, notes and chattel paper arising from or by virtue of any transactions related to the Premises or the Accessories; (iv)permits, licenses, franchises, certificates, development rights, commitments and rights for utilities, and other rights and privileges obtained in connection with the Premises or the Accessories; (v)leases, rents, royalties, bonuses, issues, profits; revenues and other benefits of the Premises and the Accessories; (vi) oil, gas and other hydrocarbons and other minerals produced from or allocated to the Land and all products processed or obtained therefrom, and the proceeds thereof; and (vii)engineering, accounting, title, legal, and other technical or business data concerning the Premises which are in the possession of Debtor or in which Debtor can otherwise grant a security interest. (c) All (i)proceeds of or arising from the properties, rights, titles and interests referred to above in this section, including but not limited to proceeds of any sale, lease or other disposition thereof, proceeds of each policy of insurance relating thereto (including premium refunds), proceeds of the taking thereof or of any rights appurtenant thereto, including change of grade of streets, curb cuts or other rights of access, by condemnation, eminent domain or transfer in lieu thereof for public or quasi-public use under any law, and proceeds arising out of any damage thereto; and (ii)other interests of every kind and character which Debtor now has or hereafter acquires in, to or for the benefit of the properties, rights, titles and interests referred to above in this section and all property used or useful in connection therewith, including but not limited to rights of ingress and egress and remainders, reversions and reversionary rights or interests. If the interest of Debtor in any of the property referred to above in this section is a leasehold estate, this Financing Statement shall include, and the security interest created hereby shall encumber and extend to, all other or additional title, estates, interests or rights which are now owned or may hereafter be acquired by Debtor in or to the property demised under the lease creating the leasehold estate. UCC FINANCING STATEMENT FOLLOW INSTRUCTIONS (front and back) CAREFULLY - --------------------------------------------------- A. NAME & PHONE OF CONTACT AT FILER [optional] Robert T. West, Esq. (314) 721-7080 - --------------------------------------------------- B. SEND ACKNOWLEDGMENT TO: (Name and Address) Robert T. West, Esq. Paster, West & Kraner, p. c. 100 South Brentwood Boulevard, Suite 401 Clayton, Missouri 63105 THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY - ------------------------------------------------------------------------------------------------------------------------------------ 1. DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name (1a or 1b) - do not abbreviate or combine names -------------------------------------------------------------------------------------------------------------------------------- 1a. ORGANIZATION'S NAME CMC REAL ESTATE COMPANY, LLC OR -------------------------------------------------------------------------------------------------------------------------------- 1b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 1c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY 7711 CARONDELET AVENUE CLAYTON MO 63105 USA - ------------------------------------------------------------------------------------------------------------------------------------ 1d. TAX ID #: ADD'L INFO RE 1e. TYPE OF 1f. JURISDICTION OF 1g. ORGANIZATIONAL ID #, if any SSN OR EIN ORGANIZATION ORGANIZATION ORGANIZATION DEBTOR LIMITED LIABILITY CO. DELAWARE 030414644-3673665 [ ] NONE - ------------------------------------------------------------------------------------------------------------------------------------ 2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - Insert only one debtor name (2a or 2b)- do not abbreviate or combine names -------------------------------------------------------------------------------------------------------------------------------- 2a. ORGANIZATION'S NAME OR -------------------------------------------------------------------------------------------------------------------------------- 2b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 2c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY - ------------------------------------------------------------------------------------------------------------------------------------ 2d. TAX ID #: ADD'L INFO RE 2e. TYPE OF 2f. JURISDICTION OF 2g. ORGANIZATIONAL ID #, if any SSN OR EIN ORGANIZATION ORGANIZATION ORGANIZATION DEBTOR [ ] NONE - ------------------------------------------------------------------------------------------------------------------------------------ 3. SECURED PARTY'S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - insert only one secured party name (3a or 3b) -------------------------------------------------------------------------------------------------------------------------------- 3a. ORGANIZATION'S NAME MIDWEST BANKCENTRE OR -------------------------------------------------------------------------------------------------------------------------------- 3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 3c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY 8020 FORSYTH BOULEVARD CLAYTON MO 63105 USA - ------------------------------------------------------------------------------------------------------------------------------------ 4. This FINANCING STATEMENT covers the following [illegible] SEE EXHIBIT B ATTACHED HERETO. - ------------------------------------------------------------------------------------------------------------------------------------ 5. ALTERNATIVE DESIGNATION [If applicable]:[ ] LESSEE/LESSOR [ ] CONSIGNEE/CONSIGNOR [ ] BAILEE/BAILOR [ ] SELLER/BUYER [ ]AG. LIEN [ ] NON-UCC FILING - ------------------------------------------------------------------------------------------------------------------------------------ 6. [X] This FINANCING STATEMENT is to be filed [or record] (or recorded) in the REAL ESTATE RECORDS Attach Addendum [If applicable] - ------------------------------------------------------------------------------------------------------------------------------------ 7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE] [optional] [ ] All Debtors [ ] Debtor 1 [ ] Debtor 2 - ------------------------------------------------------------------------------------------------------------------------------------ 8. OPTIONAL FILER REFERENCE DATA - ------------------------------------------------------------------------------------------------------------------------------------

FILING OFFICE COPY -- NATIONAL UCC FINANCING STATEMENT (FORM UCC1) (REV. 07/29/98) UCC FINANCING STATEMENT ADDENDUM FOLLOW INSTRUCTIONS (front and back) CAREFULLY - ------------------------------------------------------------------- 9. NAME OF FIRST DEBTOR (1a or 1b) ON RELATED FINANCING STATEMENT 9a. ORGANIZATIONS NAME CMC REAL ESTATE COMPANY, LLC OR ---------------------------------------------------------------- 9b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME, SUFFIX - ------------------------------------------------------------------- 10. MISCELLANEOUS: THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY - ------------------------------------------------------------------------------------------------------------------------------------ 11. ADDITIONAL DEBTOR'S EXACT FULLEGAL NAME - Insert only one name (11a or 11b) - do not abbreviate or combine names -------------------------------------------------------------------------------------------------------------------------------- 11a. ORGANIZATION'S NAME OR -------------------------------------------------------------------------------------------------------------------------------- 11b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 11c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY - ------------------------------------------------------------------------------------------------------------------------------------ 11d. TAX ID #: ADD'L INFO RE 11e. TYPE OF 11f. JURISDICTION OF 11g. ORGANIZATIONAL ID #, if any, SSN OR EIN ORGANIZATION ORGANIZATION ORGANIZATION DEBTOR [ ] NONE - ------------------------------------------------------------------------------------------------------------------------------------ 12 [ ] ADDITIONAL SECURED PARTY'S OR [ ] ASSIGNOR S/P'S NAME - insert only one name (12a or 12b) -------------------------------------------------------------------------------------------------------------------------------- 12a. ORGANIZATION'S NAME OR -------------------------------------------------------------------------------------------------------------------------------- 12b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX - ------------------------------------------------------------------------------------------------------------------------------------ 12c. MAILING ADDRESS CITY STATE POSTAL CODE COUNTRY - ------------------------------------------------------------------------------------------------------------------------------------ 13. This FINANCING STATEMENT covers [ ] [illegible] to be [illegible] 16. Additional collateral description: [illegible] or [ ] as-extracted collateral, or is filled as a [X] fixture filing. 14. Description of real estate: SEE EXHIBIT A ATTACHED HERETO. 15. Name and address of a RECORD OWNER above- described real estate (if Debtor does not have a record Interest): ------------------------------------------------------------------------------ 17. Check only if applicable and check only one box. Debtor is a [ ] Trust or [ ] Trustee acting with respect to property held in trust or [ ] Decadent's Estate ------------------------------------------------------------------------------ 18. Check only if applicable and check only one box. [ ] Debtor is a TRANSMITTING UTILITY [ ] Filed in connection with a Manufactured-Home Transaction -- effective 30 years [ ] Filed in connection with a Public-finance Transaction -- effective 30 years - ------------------------------------------------------------------------------------------------------------------------------------

FILING OFFICE COPY -- NATIONAL UCC FINANCING STATEMENT ADDENDUM (FORM UCC1AD) (REV. 07/29/98) EXHIBITA TO UCC-1 FINANCING STATEMENT (DESCRIPTION OF PREMISES) The parcel or parcels of real property located in the County of St. Louis, State of Missouri and more particularly described as follows: A tract of land being Lots 8, 9 and 10 in Block 13 of the TOWN (NOW CITY) OF CLAYTON, according to the plat thereof recorded in Plat Book I, page 11 (now 7) of the St. Louis County Records, Township 45 North-Range 6 East, St. Louis County, Missouri, and being more particularly described as: Beginning at the Southeast corner of said Lot 10, said corner being the intersection of the North line of Carondelet Avenue, 80 feet wide, and the West line of a 20 foot wide North-South alley in said Block 13; thence along said North line of carondelet Avenue, North 84 degrees 32 minutes 23 seconds West 160.00 feet to the Southeast corner of Lot 7 in said Block 13; thence along the East line of said Lot 7, North 05 degrees 27 minutes 17 seconds East 190.10 feet to the South line of a 20 foot wide East-West alley in said Block 13; thence along said South line of the 20 foot wide East-West alley, South 84 degrees 32 minutes 16 seconds (record) 23 seconds (measured) East 160.00 feet to said West line of the 20 foot wide North-South alley; thence along said West line of the 20 foot wide North-South alley, South 05 degrees 27 minutes 17 seconds West 190.10 feet to the point of beginning, according to a survey by Volz, Inc., dated May 9, 2002. EXHIBIT B TO UCC-1 FINANCING STATEMENT As used in this Financing Statement, the term "Premises" means (a)the real estate (herein called the "Land") described in ExhibitA which is attached hereto and incorporated herein by reference, and (i)improvements now or hereafter situated or to be situated on the Land (herein together called the "Improvements"); and (ii)all right, title and interest of Grantor in and to (1)all streets, roads, alleys, easements, rights-of-way, licenses, rights of ingress and egress, vehicle parking rights and public places, existing or proposed, abutting, adjacent, used in connection with or pertaining to the Land or the Improvements; (2)any strips or gores between the Land and abutting or adjacent properties; and (3)all water and water rights, timber, crops and mineral interests on or pertaining to the Land. Collateral: This Financing Statement covers and the Debtor hereby grants the Secured Party a security interest in the following types (or items) of property (the "Collateral"): (a) All fixtures, equipment, systems, machinery, furniture, furnishings, appliances, inventory, goods, building and construction materials, supplies, and articles of personal property, of every kind and character, now owned or hereafter acquired by Debtor, which are now or hereafter attached to or situated in, on or about the Land or the Improvements, or used in or necessary to the complete and proper planning, development, use, occupancy or operation thereof, or acquired (whether delivered to the Land or stored elsewhere) for use or installation in or on the Land or the Improvements, and all renewals and replacements of, substitutions for and additions to the foregoing (the properties referred to in this clause(a) being herein sometimes collectively called the "Accessories." (b) All (i)plans and specifications for the Improvements; (ii)Debtor's rights, but not liability for any breach by Debtor, under all commitments (including any commitment for financing to pay any of the secured indebtedness, as defined in the deed of trust to the Secured Party), insurance policies and other contracts and general intangibles (including but not limited to trademarks, trade names and symbols) related to the Premises or the Accessories or the operation thereof; (iii)deposits (including but not limited to Debtor's rights in tenants' security deposits, deposits with respect to utility services to the Premises, and any deposits or reserves for taxes, insurance or otherwise under the deed of trust or other document securing or pertaining to the indebtedness of Debtor to Secured Party), money, accounts, instruments, documents, notes and chattel paper arising from or by virtue of any transactions related to the Premises or the Accessories; (iv)permits, licenses, franchises, certificates, development rights, commitments and rights for utilities, and other rights and privileges obtained in connection with the Premises or the Accessories; (v)leases, rents, royalties, bonuses, issues, profits, revenues and other benefits of the Premises and the Accessories; (vi) oil, gas and other hydrocarbons and other minerals produced from or allocated to the Land and all products processed or obtained therefrom, and the proceeds thereof; and (vii)engineering, accounting, title, legal, and other technical or business data concerning the Premises which are in the possession of Debtor or in which Debtor can otherwise grant a security interest. (c) All (i)proceeds of or arising from the properties, rights, titles and interests referred to above in this section, including but not limited to proceeds of any sale, lease or other disposition thereof, proceeds of each policy of insurance relating thereto (including premium refunds), proceeds of the taking thereof or of any rights appurtenant thereto, including change of grade of streets, curb cuts or other rights of access, by condemnation, eminent domain or transfer in lieu thereof for public or quasi-public use under any law, and proceeds arising out of any damage thereto; and (ii)other interests of every kind and character which Debtor now has or hereafter acquires in, to or for the benefit of the properties, rights, titles and interests referred to above in this section and all property used or useful in connection therewith, including but not limited to rights of ingress and egress and remainders, reversions and reversionary rights or interests. If the interest of Debtor in any of the property referred to above in this section is a leasehold estate, this Financing Statement shall include, and the security interest created hereby shall encumber and extend to all other or additional title, estates, interests or rights which are now owned or may hereafter be acquired by Debtor in or to the property demised under the lease creating the leasehold estate. ENVIRONMENTAL INDEMNITY AGREEMENT THIS AGREEMENT, which is dated as of August 8th, 2003, is executed by CMC REAL ESTATE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY d/b/a CMC REAL ESTATE MANAGEMENT COMPANY, LLC ("Borrower") as a condition to, and to induce MIDWEST BANKCENTRE, A STATE BANKING COMPANY ("Lender") to make a Joan (the "Loan") to Borrower evidenced or to be evidenced by a Promissory Note of even date herewith made by Borrower payable to the order of Lender in the principal face amount of $8,000,000.00, which Loan is secured or to be secured by a Deed of Trust and Security Agreement (the "Mortgage") of even date herewith, encumbering certain real and personal property as therein described (collectively, the "Property") including the land described in Exhibit A, which is attached hereto and made a part hereof. The term "Loan Documents" is used herein as defined in the Mortgage. This Agreement is one of the Loan Documents. 1. CERTAIN DEFINITIONS. As used in this Agreement: (a) "ENVIRONMENTAL CLAIM" means any investigative, enforcement, cleanup, removal, containment, remedial or other private or governmental or regulatory action at any time threatened, instituted or completed pursuant to any applicable Environmental Requirement (hereinafter defined), against Borrower against or with respect to the Property or any condition, use or activity on the Property (including any such action against Lender), and any claim at any time threatened or made by any person against Borrower or against or with respect to the Property or any condition, use or activity on the Property (including any such claim against Lender), relating to damage, contribution, cost recovery, compensation, loss or injury resulting from or in any way arising in connection with any Hazardous Material (hereinafter defined) or any Environmental Requirement. (b) "ENVIRONMENTAL REQUIREMENT" means any Environmental Law (hereinafter defined), agreement or restriction (including but not limited to any condition or requirement imposed by any insurance or surety company), as the same now exists or may be changed or amended or come into effect in the future, which pertains to health, safety, any Hazardous Material, or the environment, including but not limited to ground or air or water or noise pollution or contamination, and underground or aboveground tanks. (c) "HAZARDOUS MATERIAL" means any substance, whether solid, liquid or gaseous which is listed, defined or regulated as a "hazardous substance", "hazardous waste" or "solid waste", or otherwise classified as hazardous or toxic, in or pursuant to any Environmental Requirement; or which is or contains asbestos, radon, any polychlorinated biphenyl, urea formaldehyde foam insulation, explosive or radioactive material, or motor fuel or other petroleum hydrocarbons; or which causes or poses a threat to cause a contamination or nuisance on the Property or any adjacent property or a hazard to the environment or to the health or safety of persons on the Property. (d) "ENVIRONMENTAL LAW" means any federal, state or local law, statute, ordinance, code, rule, regulation, license, authorization, decision, order, injunction, decree, or rule of common law, and any judicial interpretation of any of the foregoing, which pertains to health, safety, any Hazardous Material, or the environment (including but not limited to ground or air or water or noise pollution or contamination, and underground or aboveground tanks) and shall include without limitation, the Solid Waste Disposal Act, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq. ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"); the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 etseq.; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and any other state or federal environmental statutes, and all rules, regulations, orders and decrees now or hereafter promulgated under any of the foregoing, as any of the foregoing now exist or may be changed or amended or come into effect in the future. (e) "ON" or "ON", when used with respect to the Property or any property adjacent to the Property, means "on, in, under, above or about". 2. REPRESENTATIONS AND WARRANTIES. Borrower, after due inquiry and investigation in accordance with good commercial or customary practices to determine whether contamination is present on the Property or elsewhere in connection with any activity on the Property, hereby represents and warrants to, and covenants with, Lender, without regard to whether Lender has or hereafter obtains any knowledge or report of the environmental condition of the Property, as follows: (a) During the period of Borrower's ownership of the Property, the Property has not been used for industrial or manufacturing purposes, for landfill, dumping or other waste disposal activities or operations, for generation, storage, use, sale, treatment, processing, recycling or disposal of any Hazardous Material, for underground or aboveground storage tanks, or for any other use that could give rise to the release of any Hazardous Material on the Property; to the best of Borrower's knowledge, no such use of the Property occurred at any time prior to the period of Borrower's ownership of the Property; and to the best of Borrower's knowledge and except as set forth in that certain Phase I Environmental Assessment dated September, 2002 and prepared by URS Corporation, no such use on any adjacent property occurred at any time prior to the date hereof; (b) To the best of Borrower's knowledge and except as set forth in that certain Phase I Environmental Assessment dated September, 2002 and prepared by URS Corporation, there is no Hazardous Material, storage tank (or similar vessel) whether underground or otherwise, sump or well currently on the Property; (c) Borrower has received no notice and has no knowledge of any Environmental Claim or any completed, pending or proposed or threatened investigation or inquiry concerning the presence or release of any Hazardous Material on the Property or any adjacent property or concerning whether any condition, use or activity on the Property or any adjacent property is in violation of any Environmental Requirement; (d) The present conditions, uses and activities on the Property by Borrower (and to the knowledge of Borrower, each tenant and subtenant) do not violate any Environmental Requirement and the use of the Property which Borrower (and to the knowledge of Borrower, each tenant and subtenant, if any) makes and intends to make of the Property complies and will comply with all applicable Environmental Requirements; (e) The Property does not appear on and to the best of Borrower's knowledge has never been on the National Priorities List, any federal or state "superfund" or "superlien" list, or any other list or database of properties maintained by any local, state or federal agency or department showing properties which are known to contain or which are suspected of containing a Hazardous Material; (f) Borrower has never applied for and been denied environmental impairment liability insurance coverage relating to the Property; and 2 (g) Neither Borrower, nor to Borrower's knowledge any tenant or subtenant, has obtained or is required to obtain any permit or authorization to construct, occupy, operate, use or conduct any activity on any of the Property by reason of any Environmental Requirement. 3. VIOLATIONS. Borrower will not cause, commit, permit or allow to continue (i) any violation of any Environmental Requirement (a) by Borrower or by any person or entity (b) by or with respect to the Property or any use of or condition or activity on the Property, or (ii) the attachment of any environmental lien to the Property. Borrower will not place, install, dispose of or release, or cause, permit, or allow the placing, installation, disposal, spilling, leaking, dumping or release of, any Hazardous Material or storage tank (or similar vessel) on the Property and will keep the Property free of Hazardous Material. Notwithstanding the foregoing provisions of this Section 3, Borrower shall not be in Default under this Section 3 should Borrower store minimal quantities of substances on the Property which technically could be considered Hazardous Material, PROVIDED THAT: such substances are of a type and are held only in a quantity normally used in connection with the construction, occupancy or operation of comparable buildings (such as cleaning fluids, and supplies normally used in the day to day operation of business offices), such substances are being held, stored and used in complete and strict compliance with all applicable Environmental Requirements, and the indemnity in Section 7 of this Agreement shall always apply to such substances, and it shall be and continue to be the responsibility of Borrower to take all remedial action required under and in accordance with Section 6 of this Agreement in the event of any unlawful release of any such substance. 4. NOTICE TO LENDER. Borrower shall promptly deliver to Lender a copy of each report pertaining to the Property or to Borrower prepared by or on behalf of Borrower pursuant to any Environmental Requirement. Borrower shall immediately advise Lender in writing of any Environmental Claim or of the discovery of any Hazardous Material on the Property, as soon as Borrower first obtains knowledge thereof, including a full description of the nature and extent of the Environmental Claim and/or Hazardous Material and all relevant circumstances. 5. SITE ASSESSMENTS AND INFORMATION. If Lender shall ever have reason to believe that any Hazardous Material affects the Property, or if any Environmental Claim is made or threatened, or if a Default (as defined in the Mortgage) shall have occurred under the Documents, or upon the occurrence of the Release Date (hereinafter defined) if requested by Lender, Borrower shall at its expense, provide to Lender from time to time, in each case within thirty (30) days after Lender's request or such longer time as is reasonably required for such consulting firm to complete such Assessment, an Environmental Assessment (hereinafter defined) made after the date of Lender's request. Notwithstanding the foregoing, unless a Default has occurred or an Environmental Claim is made or threatened, if Lender requests an Environmental Assessment within twelve ( 12) months from receipt of a prior Environmental Assessment and such new Environmental Assessment does not disclose the existence or probable existence of Hazardous Material on the Property, then Lender shall pay for the cost of such new Environmental Assessment. As used in this Agreement, the term "Environmental Assessment" means a report (including all drafts thereof) of an environmental assessment of the Property of such scope (including but not limited to the taking of soil borings and air and groundwater samples and other above and below ground testing) as Lender may request, by a consulting firm acceptable to Lender and made in accordance with Lender's established guidelines. Borrower will cooperate with each consulting firm making any such Environmental Assessment and will supply to the consulting firm, from time to time and promptly on request, all information available to Borrower to facilitate the completion of the Environmental Assessment. If Borrower fails to furnish Lender within ten (10) days after Lender's request with a copy of an agreement with an acceptable environmental consulting firm to provide such Environmental Assessment, or if Borrower fails to furnish to Lender such Environmental Assessment within thirty (30) days after Lender's request, Lender may cause any such Environmental Assessment to be made at 3 Borrower's expense and risk. Lender and its designees are hereby granted access to the Property at any time or times, upon reasonable notice (which may be written or oral), and a license which is coupled with an interest and irrevocable, to make or cause to be made such Environmental Assessments, Lender may disclose to interested parties any information Lender ever has about the environmental condition or compliance of the Property, but shall be under no duty to disclose any such information except as may be required by law. Lender shall be under no duty to make any Environmental Assessment of the Property, and in no event shall any such Environmental Assessment by Lender be or give rise to a representation that any Hazardous Material is or is not present on the Property, or that there has been or shall be compliance with any Environmental Requirement, nor shall Borrower or any other person be entitled to rely on any Environmental Assessment made by Lender or at Lender's request. Lender owes no duty of care to protect Borrower or any other person against, or to inform it of, any Hazardous Material or other adverse condition affecting the Property. 6. REMEDIAL ACTIONS. (a) If any Hazardous Material is discovered on the Property at any time and regardless of the cause, (i) Borrower shall promptly at Borrower's sole risk and expense remove, treat, and dispose of the Hazardous Material in compliance with all applicable Environmental Requirements and solely under Borrower's name (or if removal is prohibited by any Environmental Requirement, take whatever action is required by any Environmental Requirement), in addition to taking such other action as is necessary to have the full use and benefit of the Property as contemplated by the Documents, and provide Lender with satisfactory evidence thereof; and (ii) if requested by Lender, provide to Lender within thirty (30) days of Lender's request a bond, letter of credit or other financial assurance evidencing to Lender's satisfaction that all necessary funds are readily available to pay the costs and expenses of the actions required by clause (i) preceding and to discharge any assessments or liens established against the Property as a result of the presence of the Hazardous Material on the Property. Within fifteen (15) days after completion of such remedial actions, Borrower shall obtain and deliver to Lender an Environmental Assessment of the Property made after such completion and confirming to Lender's satisfaction that all required remedial action as stated above has been taken and successfully completed and that there is no evidence or suspicion of any contamination or risk of contamination on the Property or any adjacent property, or of violation of any Environmental Requirement, with respect to any such Hazardous Material. (b) Lender may, but shall never be obligated to, remove or cause the removal of any Hazardous Material from the Property (or if removal is prohibited by any Environmental Requirement, take or cause the taking of such other action as is required by any Environmental Requirement) if Borrower fails to promptly commence such remedial actions following discovery and thereafter diligently prosecute the same to the satisfaction of Lender (without limitation of Lender's rights to declare a default under any of the Documents and to exercise all rights and remedies available by reason thereof); and Lender and its designees are hereby granted access to the Property at any time or times, upon reasonable notice (which may be written or oral), and a license which is coupled with an interest and irrevocable, to remove or cause such removal or to take or cause the taking of any such other action. 7. INDEMNITY. (a) Borrower hereby agrees to protect, indemnity, defend and hold (i) Lender; (ii) the Trustee(s) under the Mortgage (the "Trustee"); (iii) any persons or entities owned or controlled by, controlling, or under common control or affiliated with Lender and/or Trustee; (iv) any participants in the Loan; (v) the directors, officers, partners, employees and agents of Lender and/or Trustee, and/or such persons or entities; and (vi) the heirs, personal representatives, successors and assigns of each of the foregoing persons or entities (each an "Indemnified Party") harmless from and against, and if and to the extent paid, reimburse them on demand for, any and all Environmental Damages (hereinafter defined). 4 Without limitation, the foregoing indemnity shall apply to each Indemnified Party with respect to Environmental Damages which in whole or in part are caused by or arise out of the negligence of such (and/or any other) Indemnified Party. However, such indemnity shall not apply to a particular Indemnified Party to the extent that the subject of the indemnification is caused by or arises out of the gross negligence or willful misconduct of that particular Indemnified Party. Upon demand by Lender, Borrower shall diligently defend any Environmental Claim which affects the Property or is made or commenced against Lender, whether alone or together with Borrower or any other person, all at Borrower's own cost and expense and by counsel to be approved by Lender in the exercise of its reasonable judgment. In the alternative, at any time Lender may elect to conduct its own defense through counsel selected by Lender and at the cost and expense of Borrower. (b) As used in this Agreement, the term "Environmental Damages" means all claims, demands, liabilities (including strict liability), losses, damages (including consequential damages), causes of action, judgments, penalties, fines, costs and expenses (including fees, costs and expenses of attorneys, consultants, contractors, experts and laboratories), of any and every kind or character, contingent or otherwise, matured or unmatured, known or unknown, foreseeable or unforeseeable, made, incurred, suffered, brought, or imposed at any time and from time to time, whether before or after the Release Date (hereinafter defined) and arising in whole or in part from: (1) the presence of any Hazardous Material on the Property, or any escape, seepage, leakage, spillage, emission, release, discharge or disposal of any Hazardous Material on or from the Property, or the migration or release or threatened migration or release of any Hazardous Material to, from or through the Property, on or before the Release Date; or (2) any act, omission, event or circumstance existing or occurring in connection with the handling, treatment, containment, removal, storage, decontamination cleanup, transport or disposal of any Hazardous Material which is at any time on or before the Release Date present on the Property; or (3) the breach of any representation, warranty, covenant or agreement contained in this Agreement because of any event or condition occurring or existing on or before the Release Date; or (4) any violation on or before the Release Date, of any Environmental Requirement in effect on or before the Release Date, regardless of whether any act, omission, event or circumstance giving rise to the violation constituted a violation at the time of the occurrence or inception of such act, omission, event or circumstance; or (5) any Environmental Claim, or the filing or imposition of any environmental lien against the Property, because of, resulting from, in connection with, or arising out of any of the matters referred to in subparagraphs (1) through (4) preceding; and regardless of whether any of the foregoing subparagraphs (1) through (5) was caused by Borrower or a tenant or subtenant, or a prior owner of the Property or its tenant or subtenant, or any third party, including but not limited to (i) injury or damage to any person, property or natural resource occurring on or off the Property, including but not limited to, the cost of demolition and rebuilding of any improvements on real property; (ii) the investigation or remediation of any such Hazardous Material or violation of Environmental Requirement, including but not limited to the preparation of any feasibility studies or reports and the performance of any cleanup, remediation, removal, response, abatement, containment, closure, restoration, monitoring or similar work required by any Environmental Requirement or necessary to have full use and benefit of the Property as contemplated by the Documents (including any of the same in connection with any 5 foreclosure action or transfer in lieu thereof); (iii) all liability to pay or indemnify any person or governmental authority for costs expended in connection with any of the foregoing; (iv) the investigation and defense of any claim, whether or not such claim is ultimately defeated; and (v) the settlement of any claim or judgment. (c) As used in this Agreement, the term "Release Date" means the earlier of the following two dates: (i) the date on which the indebtedness and obligations secured by the Mortgage have been paid and performed in full and the Mortgage has been released; or (ii) the date on which the lien of the Mortgage is fully and finally foreclosed or a conveyance by deed in lieu of such foreclosure is fully and finally effective and possession of the Property has been given to and accepted by the Purchaser or grantee free of occupancy and claims to occupancy by Borrower and its successors and assigns; provided that, if such payment, performance, release, foreclosure or conveyance is challenged, in bankruptcy proceedings or otherwise, the Release Date shall be deemed not to have occurred until such challenge is validly released, dismissed with prejudice or otherwise barred by law from further assertion. 8. CONSIDERATION; SURVIVAL; CUMULATIVE RIGHTS. Borrower acknowledges that Lender has relied and will rely on the representations, warranties, covenants and agreements herein in closing and funding the Loan and that the execution and delivery of this Agreement is an essential condition but for which Lender would not close or fund the Loan. The representations, warranties, covenants and agreements in this Agreement shall be binding upon Borrower and its successors, assigns and legal representatives and shall inure to the benefit of Lender and its successors, assigns and legal representatives and participants in the Loan; and shall not terminate on the Release Date or upon the release, foreclosure or other termination of the Mortgage, but will survive the Release Date, the payment in full of the indebtedness secured by the Mortgage, foreclosure of the Mortgage or conveyance in lieu of foreclosure, the release or termination of the Mortgage and any and all of the other Documents, any investigation by or on behalf of the Lender, any bankruptcy or other debtor relief proceeding, and any other event whatsoever. Any amount to be paid under this Agreement by Borrower shall be a demand obligation owing by Borrower (which Borrower hereby promises to pay). Lender's rights under this Agreement shall be in addition to all rights of Lender under the Documents or at law or in equity, under this Agreement shall be in addition to all rights of Lender under the Documents or at law or in equity, and payments by Borrower under this Agreement shall not reduce Borrower's obligation and liabilities under any of the Documents. The liability of Borrower or any other person under this Agreement shall not be limited or impaired in any way by any provision in the Documents or applicable law limiting Borrower or such other person's liability or Lender's recourse or rights to a deficiency judgment, or by any change, extension, release, inaccuracy, breach or failure to perform by any party under the Documents, Borrower's (and, if applicable, such other person's) liability hereunder being direct and primary and not as a guarantor or surety. Borrower hereby assigns and irrevocably transfers to Lender any and all rights of subrogation, contribution, indemnification, reimbursement or similar rights it may have against Borrower or any other person for Environmental Damages. Nothing in this Agreement or in any other Loan Document shall limit or impair any rights or remedies of Lender, Trustee and/or any other Indemnified Party against Borrower or any other person under any Environmental Requirement or otherwise at law or in equity, including without limitation, any rights of contribution or indemnification. 9. NO WAIVER. No delay or omission by Lender to exercise any right under this Agreement shall impair any such right nor shall it be construed to be a waiver thereof. No waiver of any single breach or Default under this Agreement shall be deemed a waiver of any other breach or Default. Any waiver, consent or approval under this Agreement must be in writing to be effective. 10. NOTICES. All notices required or permitted to be given hereunder shall be in writing and may be given in person or by United States mail, by delivery service or by electronic transmission. Any notice directed to a party to this Agreement shall become effective upon the earliest of the following: (i) actual receipt by that party; (ii) delivery to the designated address of that party, addressed to that party; 6 or (iii) if given by certified or registered United States mail, seventy-two (72) hours after deposit with the United States Postal Service, postage prepaid, addressed to that party at its designated address. No communication from or concerning Borrower shall be deemed for any purpose to have been received by Lender unless it is in writing and actually received by an executive officer of Lender. The designated address of a party shall be the address as of that party as shown below or such other address as that party, from time to time, may specify by notice to the other parties. Notices to Borrower: CMC Real Estate Company, LLC d/b/a CMC Real Estate Management Company, LLC 7711 Carondelet Clayton, Missouri 63105 Notices to Lender: Midwest BankCentre 8020 Forsyth Blvd Clayton, Missouri 63105 11. INVALID PROVISIONS. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision and a determination that the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. 12. CONSTRUCTION. Whenever in this Agreement the singular number is used, the same shall include plural where appropriate, and vice versa; and words of any gender in this Agreement shall include each other gender where appropriate. The headings in this Agreement are for convenience only and shall be disregarded in the interpretation hereof. Reference to "person" or "entity" means firms, associations, partnerships, joint ventures, trusts, limited liability companies, corporations and other legal entities, including public or governmental bodies, agencies or instrumentalities, as well as natural persons. 13. WAIVER OF JURY TRIAL. In the event any dispute between Borrower and Lender is not resolved pursuant to the arbitration provision above, Borrower waives trial by jury in any court action or proceeding to which Borrower and Lender may be parties, arising out of, in connection with or in any way pertaining to, this instrument or any other documents evidencing or securing the loan transaction herein involved. It is agreed and understood that this waiver constitutes a waiver of trial by jury of all claims against all parties to such action or proceedings, including claims against parties who are not parties to this instrument, in each case whether now existing or hereafter arising, and whether sounding in contract or tort or otherwise. This waiver is knowingly, willingly and voluntarily made by Borrower, and Borrower hereby represents that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. Borrower further represents and warrants that it has been represented in the signing of this instrument and in the making of this waiver by independent legal counsel, or has had the opportunity to be represented by independent legal counsel selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel. Borrower agrees and consents that Lender may file an original counterpart or a copy of this document with any court as written evidence of the consent of Borrower to the waiver of its right to trial by jury. 7 14. SERVICE OF PROCESS. Obligor hereby waives personal service and consents to process being served in any suit, action, or proceeding instituted in connection with this instrument or the Documents by the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to Obligor at its address set forth on the signature page hereof and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. Mail. Borrower irrevocably agrees that such service shall be deemed to be service of process upon Borrower in any such suit, action, or proceeding. Nothing in this document shall affect the right of Lender to serve process in any manner otherwise permitted by law and nothing in this Note will limit the right of Lender otherwise to bring proceedings against Borrower in the courts of any jurisdiction or jurisdictions. 15. EXECUTION; MODIFICATION. This Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement. This Agreement may be amended only by an instrument in writing intended for that purpose executed jointly by an authorized representative of each party hereof. 16. ENTIRE AGREEMENT. THE DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR. CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS TO THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. Executed and dated as of the date first written above. BORROWER: CMC REAL ESTATE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY d/b/a CMC REAL ESTATE MANAGEMENT COMPANY, LLC By: -s- Michael F. Neidorff ------------------------------- Michael F. Neidorff, Manager LENDER: MIDWEST BANKCENTRE BY: -s- THOMAS R. COLLINS ------------------------------- NAME: THOMAS R. COLLINS TITLE: REGIONAL PRESIDENT 8 EXHIBIT A LAND The parcel or parcels of real property located in the County of St. Louis, State of Missouri and more particularly described as follows: A tract of land being Lots 8, 9 and 10 in Block 13 of the TOWN (NOW CITY) OF CLAYTON, according to the plat thereof recorded in Plat Book I, page 11 (now 7) of the St. Louis County Records, Township 45 North-Range 6 East, St. Louis County, Missouri, and being more particularly described as: Beginning at the Southeast corner of said Lot 10, said corner being the intersection of the North line of Carondelet Avenue, 80 feet wide, and the West line of a 20 foot wide North-South alley in said Block 13; thence along said North line of Carondelet Avenue, North 84 degrees 32 minutes 23 seconds West 160. 00 feet to the Southeast corner of Lot 7 in said Block 13; thence along the East line of said Lot 7, North 05 degrees 27 minutes 17 seconds East 190. 10 feet to the South line of a 20 foot wide East-West alley in said Block 13; thence along said South line of the 20 foot wide East-West alley, South 84 degrees 32 minutes 16 seconds (record) 23 seconds (measured) East 160. 00 feet to said West line of the 20 foot wide North-South alley; thence along said West line of the 20 foot wide North-South alley, South 05 degrees 27 minutes 17 seconds West 190. 10 feet to the point of beginning, according to a survey by Volz, Inc., dated May 9, 2003. CMC REAL ESTATE COMPANY, LLC $8,000,000.00 LOAN FROM MIDWEST BANKCENTRE TO CMC REAL ESTATE COMPANY, LLC SECRETARY'S CERTIFICATE I, Karey L. Witty, Secretary of CMC Real Estate Company, LLC d/b/a CMC Real Estate Management Company, LLC, a Delaware limited liability company (the "Company"), hereby certify as follows: 1. Attached hereto as Exhibit A is a true and complete copy of the Certificate of Formation of the Company, certified by the Secretary of State of the State of Delaware. 2. Attached hereto as Exhibit B are Certificates of Good Standing of the Company, issued by the Secretary of State of the State of Delaware and the Secretary of State of the State of Missouri. 3. Attached hereto as Exhibit C is a true and complete copy of the Operating Agreement of Company, as now in effect. 4. Attached hereto as Exhibit D are authorizing resolutions duly and unanimously adopted by the members of the Company, which resolutions are now in effect. IN WITNESS WHEREOF, I have executed this Certificate this [ILLEGIBLE] day of August, 2003. /s/ Karey L. Witty --------------------------- Karey L. Witty, Secretary EXHIBIT A CERTIFICATE OF FORMATION [DELAWARE LOGO] PAGE 1 THE FIRST STATE I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF FORMATION OF "CMC REAL ESTATE COMPANY, LLC", FILED IN THIS OFFICE ON THE TWENTY-FOURTH DAY OF JUNE, A.D. 2003, AT 9:57 O'CLOCK A.M. [SEAL] /s/ Harriet Smith Windsor ----------------------------------------- Harriet Smith Windsor, Secretary of State 3673665 8100 AUTHENTICATION: 2490648 030414644 DATE: 06-24-03 State of Delaware Secretary of State Division of Corporations Delivered 10:06 AM 06/24/2003 FILED 09:57 AM 06/24/2003 SRV 030414644 - 3673665 FILE CERTIFICATE OF FORMATION OF CMC REAL ESTATE COMPANY, LLC I. The name of the limited liability company is CMC Real Estate Company, LLC. II. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. III. Management of CMC Real Estate Company, LLC is vested in one or more managers. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of CMC Real Estate Company, LLC this 24th day of June, 2003. /s/ Meredith M. Todd, Esq. ------------------------- Meredith M. Todd, Authorized Person EXHIBIT B CERTIFICATES OF GOOD STANDING [DELAWARE LOGO] PAGE 1 THE FIRST STATE I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY "CMC REAL ESTATE COMPANY, LLC" IS DULY FORMED UNDER THE LAWS OF THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL EXISTENCE SO FAR AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE FIFTEENTH DAY OF JULY, A. D. 2O03. AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL TAXES HAVE NOT BEEN ASSESSED TO DATE. [SEAL] /s/ Harriet Smith Windsor ----------------------------------------- Harriet Smith Windsor, Secretary of State 3673665 8300 AUTHENTICATION: 2528710 030463423 DATE: 07-15-03 STATE OF MISSOURI [SEAL OF THE SECRETARY OF STATE] Matt Blunt Secretary of State CORPORATION DIVISION CERTIFICATE OF GOOD STANDING I, MATT BLUNT, Secretary of the State of Missouri, do hereby certify that the records in my office and in my care and custody reveal that CMC REAL ESTATE COMPANY, LLC using in Missouri the name CMC REAL ESTATE MANAGEMENT COMPANY, LLC FL0529270 a DELAWARE entity was created under the laws of this State on the 1st day of July, 2003, and is in good standing, having fully complied with all requirements of this office. IN TESTIMONY WHEREOF, I have set my hand an imprinted the GREAT SEAL of the State of Missouri, on this, the 28th day of July, 2003 [SEAL OF THE STATE OF MISSOURI] /s/ Matt Blunt ---------------------- Secretary of State Certification Number: 5977994-1 Page 1 of 1 Reference: Verify this certificate online at http://www.sos.state.mo.us/businessentity/verification EXHIBIT C OPERATING AGREEMENT OPERATING AGREEMENT OF CMC REAL ESTATE COMPANY, LLC OPERATING AGREEMENT OF CMC REAL ESTATE COMPANY, LLC THIS OPERATING AGREEMENT of CMC Real Estate Company, LLC, a limited liability company organized pursuant to the Delaware Limited Liability Company Act, is entered into and shall be effective as of the 24th day of June, 2003, by and among the Company and the Persons executing this Operating Agreement as Members. ARTICLE I DEFINITIONS For purposes of this Agreement (as defined below), unless the context clearly indicates otherwise, the following terms shall have the following meanings: 1.1 ACT - The Delaware Limited Liability Company Act and all amendments to the Act. 1.2 ADDITIONAL MEMBER - A Member other than an Initial Member or a Substitute Member who has acquired an Ownership Interest in the Company. 1.3 AGREEMENT - This Operating Agreement and amendments adopted in accordance with this Agreement and the Act. 1.4 ASSIGNEE - A transferee of an Ownership Interest who has not been admitted as a Substitute Member. 1.5 BANKRUPT MEMBER - A Member who has admitted in writing its inability to pay its debts generally as they become due; filed a petition in bankruptcy or petition to take advantage of any insolvency act; made an assignment for the benefit of its creditors; commenced a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; filed a petition or answer seeking reorganization or arrangement or similar relief under the Federal bankruptcy laws or any other applicable law or statute of the United States or any State, or against which there is commenced any petition in bankruptcy or petition to take advantage of any insolvency act and such proceeding or petition remains undismissed for a period of thirty (30) days. 1.6 CAPITAL ACCOUNT - The account maintained for a Member determined in accordance with the Regulations under Code Section 704(b). 1.7 CAPITAL CONTRIBUTION - The amount of money and the fair market value of any Property (other than money) contributed to the Company by a Member. 1.8 CERTIFICATE - The Certificate of Formation of the Company as filed with the Delaware Secretary of State, as properly adopted and amended from time to time by the Members. 1.9 CODE - The Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). 1.10 COMPANY - CMC Real Estate Company, LLC, a limited liability company formed under the laws of the State of Delaware, and any successor limited liability company. 1.11. COMPANY PROPERTY - Any Property owned by the Company. 1.12 DISTRIBUTION - A transfer of Property to a Member on account of an Ownership Interest as described in Article IX hereof. 1.13 DISSOCIATION - Any action which causes a Person to cease to be Member as described in Article XII hereof. 1.14 DISSOLUTION EVENT - An event, the occurrence of which will result in the dissolution of the Company under Article XIV hereof. 1.15 INITIAL CAPITAL CONTRIBUTION - The Capital Contribution agreed to be made by the Initial Member as described in Article VIII hereof. 1.16 INITIAL MEMBER - The Person identified on Exhibit A attached hereto and made a part hereof by this reference who have executed this Agreement. 1.17 MANAGER - the Manager of the Company. 1.18 MEMBER - The Initial Member, an Additional Member or a Substitute Member. 1.19 NET PROFITS AND NET LOSSES - An amount equal to the Company's taxable income or loss, determined in accordance with Code Section 703 (a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), and any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Profits or Net Losses pursuant to this Section shall be added to such taxable income or loss, decreased by expenditures described in Section 704(a)(2)(B) of the Code. 1.20 NOTICE - Notice shall be in writing. Notice to the Company shall be considered given when mailed by first class mail postage prepaid addressed to the Manager in care of the Company at the address of the Principal Office. Notice to a Member shall be considered given when mailed by first class mail postage prepaid addressed to the Member at the address reflected in this Agreement unless the Member has given the Company notice of a different address. 1.21 OWNERSHIP INTEREST - With respect to any Member, a fraction (expressed as a percentage), the numerator of which is the total of the Member's Capital Account and the denominator is the total of all Capital Accounts of all Members and Assignees, such Ownership Interest representing the rights of a Member or, in the case of an Assignee, the rights of the assigning Member in Distributions (liquidating or otherwise) and allocations of the profits, losses, gains, deductions and credits of the Company. 1.22 PERSON - Any natural person, corporation, limited partnership, general partnership, limited liability partnership, limited liability company, joint venture, association, company, bank, trust company, vehicle trust, land trust, business trust, real estate investment trust, estate or any incorporated or unincorporated organization permitted to be a member of a limited liability company under the laws of the State of Delaware, and any governmental authority. 2 1.23 PROCEEDING - Any administrative, judicial, or other adversary proceeding, including, without limitation, litigation, arbitration, administrative adjudication, mediation and appeal or review of any of the foregoing. 1.24 PROPERTY - Any property real or personal, tangible or intangible, including money, and any legal or equitable interest in such property, but excluding services and promises to perform services in the future. 1.25 REGULATIONS - Except where the context indicates otherwise, the permanent, temporary, proposed or proposed and temporary regulations of Department of the Treasury under the Code, as such regulations may be lawfully adopted or changed from time to time. 1.26 SUBSTITUTE MEMBER - An Assignee who has been admitted to all of the rights of membership pursuant to this Agreement. 1.27 TAXABLE YEAR - The taxable year of the Company as determined pursuant to Section 706 of the Code. 1.28 TAXING JURISDICTION - Any state, local or foreign government that collects tax, interest or penalties, however designated, on any Member's share of the income or gain attributable to the Company. 1.29 TRANSFER - Any sale, assignment, disposition, exchange, mortgage, pledge, grant, hypothecation or, without limitation, other transfer, whether absolute or as security or as an encumbrance (including dispositions by operation of law). ARTICLE II FORMATION 2.1 ORGANIZATION - The Members hereby organize the Company as a Delaware limited liability company pursuant to the provisions of the Act. 2.2 AGREEMENT - For and in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Members executing this Agreement hereby agree to the terms and conditions of this Agreement, as it may from time to time be amended according to its terms. It is the express intention of the Members that this Agreement shall be the sole source of agreement of the parties, and except to the extent a provision of this Agreement expressly incorporates federal income tax rules by reference to sections of the Code or Regulations or is expressly prohibited or ineffective under the Act, this Agreement shall govern, even when inconsistent with, or different than, the provisions of the Act or any other law or rule. To the extent any provision of this Agreement is prohibited or ineffective under the Act, this Agreement shall be considered amended to the smallest degree possible in order to make the provision effective under the Act. In the event the Act is subsequently amended or interpreted in such a way to make any provision of this Agreement that was formerly invalid valid, such provision shall be considered to be valid from the effective date of such interpretation or amendment. 2.3 NAME - The name of the Company is CMC Real Estate Company, LLC, and all business of the Company shall be conducted under that name or under any other name approved by the Company. 2.4 TERM - The Company shall have perpetual duration, unless the Company shall be sooner dissolved and its affairs wound up in accordance with the Act or the Operating Agreement. 3 2.5 REGISTERED AGENT AND OFFICE - The registered agent for the service of process and the registered office shall be that Person, and location reflected in the Certificate as filed in the office of the Delaware Secretary of State. The Manager may, from time to time, change the registered agent or office through appropriate filings with the Delaware Secretary of State. The Registered Agent shall promptly give notice of any service of process to all the Members. 2.6 PRINCIPAL OFFICE - The Principal Office of the Company shall be located at Centene Corporation, 7711 Carondelet Avenue, Suite 800, Clayton, Missouri 63105. The Manager may, from time to time, change the location of the Principal Office of the Company. 2.7 OTHER BUSINESS VENTURES - Any Member and/or the Manager may engage in or possess an interest in other business ventures of every nature and description, independently or with others, and neither the Company nor the Members shall have any right by virtue of this Agreement in such other business ventures or to the income or profits derived therefrom; provided, however, that nothing contained in this Section 2.7 is intended to absolve any Member or the Manager from any liability to the Company or its Members arising as a result of any breach by such Member or the Manager of any fiduciary obligation to the Company or any of its Members. 2.8 TITLE TO COMPANY ASSETS - Title to all assets of the Company shall be held in the name of the Company. ARTICLE III PURPOSE The Company may engage in any lawful business permitted by the Act or the laws of any jurisdiction in which the Company may do business. The Company shall have the authority to do all things necessary or convenient to accomplish its purpose and operate its business. ARTICLE IV ACCOUNTING AND RECORDS 4.1 RECORDS TO BE MAINTAINED - The Company will keep or cause to be kept accurate and complete minutes and records of the meetings or consents in lieu of meeting of the Members and the Manager and books and records of account of the Company, which will be kept at the principal place of business of the Company or at such other places as the Manager will from time to time determine. 4.2 ACCESS TO RECORDS - Each Member (or such Member's designated representative) shall have the right during ordinary business hours and upon reasonable notice to inspect and copy (at such Member's own expense) the books and records of the Company required to be kept by Section 4.1 hereof. 4.3 TAX RETURNS AND ELECTIONS - The Company shall cause to be prepared and timely filed all federal, state and local income tax returns or other returns or statements required by applicable law. The Company shall claim all deductions and make such elections for federal or state income tax purposes which the Manager reasonably believes will produce the most favorable tax results for the Members. 4.4 BANK ACCOUNTS - All funds of the Company shall be deposited in a separate bank, money market or similar account or accounts approved by the Manager and in the name of the Company. Withdrawals therefrom shall be made only by the persons authorized to do so by the Manager, and only as follows: 4 4.4.1 for operating expenses within budgets that have been approved by the Manager; 4.4.2 for capital expenditures within budgets that have been approved by the Manager, subject to the review by the Manager of the percentage of completion of a given capital project; and 4.4.3 for other purposes as approved by the Manager. ARTICLE V NAMES AND ADDRESSES OF MEMBERS The name and address of the Initial Member is as reflected on Exhibit A attached hereto and by this reference made a part hereof as if set forth fully herein. ARTICLE VI RIGHTS AND DUTIES OF MEMBERS 6.1 MANAGEMENT RIGHTS - Notwithstanding anything to the contrary contained herein, the following actions require the unanimous vote of the Members: 6.1.1 Any amendment to the Certificate or this Agreement; or 6.1.2 The purchase or sale by the Company of a majority of the stock or assets of any business; or 6.1.3 The merger or consolidation of the Company with another entity; or 6.1.4 The sale of substantially all the assets of the Company; or 6.1.5 The dissolution and winding up of the Company. 6.2 LIABILITY OF MEMBERS - No Member shall be liable as such for the liabilities of the Company. 6.3 INDEMNIFICATION - The Company shall indemnify the Members, the Manager and any officers and employees of the Company from and against all costs, losses, liabilities and damages paid or accrued by such Member, officer, employee or the Manager in connection with the business of the Company, to the fullest extent provided or allowed by the laws of the State of Delaware. 6.4 NO PREEMPTIVE RIGHTS - No Member shall have any preemptive right to subscribe for, purchase and receive additional Ownership Interests which may be offered by the Company for sale, whether newly-issued or from treasury. ARTICLE VII MANAGEMENT 7.1 MANAGER. Subject to any limitations set forth herein, the business and affairs of the Company shall be managed by the Manager. The Manager shall direct, manage and control the business of the Company to the best of his or her ability and shall have full and complete authority, power, and discretion 5 to make all decisions regarding those matters, and to perform any and all other acts or activities customary or incident to the management of the Company's business and objectives. The Initial Member hereby selects Michael F. Neidorff as the initial Manager. 7.2 AUTHORITY OF MANAGERS TO BIND THE COMPANY - The Members hereby agree that only the Manager, and any authorized officer or agents of the Company shall have the authority to bind the Company (and with respect to officers and agents, only to the extent of the authority granted). No Member, other than a Member who is the Manager, shall take any action to bind the Company. The Manager has the power, on behalf of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company, except those conferred on or reserved to the Members by this Agreement, including, without limitation: 7.2.1 the institution, prosecution and defense of any proceeding in the Company's name; 7.2.2 the purchase, receipt, lease or other acquisition, ownership, holding, improvement, use and other dealing with Property, wherever located; 7.2.3 the sale, conveyance, mortgage, pledge, lease, exchange, refinance and other disposition of Property; 7.2.4 the entering into contracts and guaranties; incurring of liabilities; borrowing money, issuance of notes, bonds, and other obligations; and the securing of any of the Company's obligations by mortgage or pledge of any of the Company's Property or income; 7.2.5 the lending of money, investment and reinvestment of the Company's funds, and receipt and holding of property as security for repayment, including, without limitation, the loaning of money to Members, officers, employees, and agents; 7.2.6 the purchase by the Company of an interest in real property; and 7.2.7 the conduct of the Company's business, the establishment of Company offices, and the exercise of the powers of the Company within or without the State of Delaware. 7.3 OFFICERS. The Manager may appoint a president, chief financial officer, treasurer, secretary or such other officers ("Officers") of the Company as he deems necessary or appropriate, and may assign or delegate to such Officers the titles, duties, responsibilities, and authorities reflected in such resolutions. An Officer will serve until he or she resigns or is removed by the Manager, with or without cause, subject to contractual rights, if any, of such Officer. At all times, the actions of the Officers will be subject to the review, delegation, redetermination, direction, and control of the Manager. The initial Officers of the Company shall be Michael F. Neidorff, President, and Karey L. Witty, Secretary and Treasurer. 7.4 MANAGERS' STANDARD OF CARE - The Manager's duty of care in the discharge of the Manager's duties to the Company and the Members is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law. In discharging their duties, the Manager shall be fully protected in relying in good faith upon the records required to be maintained under Article IV hereof and upon such information, opinions, reports or statements by the Members, agents, or by any other person, as to matters the Manager reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of 6 the assets, liabilities, profits or losses of the Company or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid. 7.5 REIMBURSEMENT OF EXPENSES; FEES TO MANAGER - The Company shall reimburse the Manager for the Manager's reasonable out-of-pocket expenses incurred in the performance of the Manager's duties as Manager. 7.6 REMOVAL OF MANAGER; REPLACEMENT - The Manager may be removed, and such vacancy may be filled, by the vote of the majority of the Members. ARTICLE VIII CONTRIBUTIONS AND CAPITAL ACCOUNTS 8.1 INITIAL CAPITAL CONTRIBUTIONS - The Capital Contribution of the Initial Member, and such Member's corresponding Ownership Interest, shall be as set forth opposite the Initial Member's name and address on the attached Exhibit A. Hereafter, the names, addresses and Capital Contributions of the Members shall be reflected in the books and records of the Company. 8.2 ADDITIONAL CAPITAL CONTRIBUTIONS - Members shall not be required to make additional Capital Contributions. Notwithstanding the above, however, the Manager may determine from time to time that additional contributions are needed to enable the Company to conduct its business. Upon making such a determination, the Manager shall give notice to all Members in writing at least ten (10) days prior to the date on which such additional contribution is required. Each Member shall contribute a proportionate share of such additional contribution in accordance with that Member's Ownership Interest. In the event that any one or more Members do not make such additional contributions, the other Members shall be given the opportunity to make such contributions in place of those Members. Each contributing Member's Capital Account shall be adjusted accordingly for such contributions, as shall all Member's respective Ownership Interest. 8.3 MAINTENANCE OF CAPITAL ACCOUNTS - The Company shall maintain for each Member a Capital Account in accordance with the rules applicable to partnerships in Regulation Section 1.704-1(b)(2)(iv) or any successor Regulation which by its terms would be applicable to the Company. 8.4 CAPITAL WITHDRAWAL RIGHTS; INTEREST; PRIORITY 8.4.1 Except as expressly provided in this Agreement or as required by law, no Member shall be entitled to withdraw or reduce such Member's Capital Contribution or to receive any Distribution from the Company. 8.4.2 No member shall be entitled to receive or be credited with any interest on the balance of such Member's Capital Account at any time. ARTICLE IX ALLOCATIONS AND DISTRIBUTIONS 9.1 ALLOCATIONS OF NET PROFITS AND NET LOSSES - Except as otherwise provided herein, Net Profits and Net Losses, and items of income, gain, loss, deduction and credit for income tax purposes shall be apportioned among the Members in proportion to their Ownership Interests. 7 9.2 OTHER ALLOCATION RULES 9.2.1 For purposes of determining the Net Profits, Net Losses or any other items allocable to any period, Net Profits, Net Losses, and any such other items shall be determined on a daily, monthly or other basis, as determined by the Manager using any permissible method under Code Section 706 and the Regulations thereunder. 9.2.2 The Members are aware of the income tax consequences of the allocations made by this Article IX and hereby agree to be bound by the provisions of this Article IX in reporting their shares of Company income and loss for income tax purposes. 9.3 TAX ALLOCATIONS; CODE SECTION 704(c) - In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any Property contributed to the capital of the Company shall be allocated among the Members so as to take account of any variation between the adjusted basis of such Property at the time contributed to the Company and its value at the time of contribution. 9.4 INTERIM DISTRIBUTIONS - From time to time, the Manager shall determine in the Manager's reasonable judgment to what extent, if any, the Company's cash on hand exceeds the current and anticipated needs, including, without limitation, needs for operating expenses, debt service, acquisitions or reserves, if any. To the extent such excess exists, the Manager may, subject to any restraints contained in any financing or related agreements to which the Company is a party, make distributions to the Members in accordance with their Ownership Interests. Such distribution shall be in cash or Property (which shall be distributed proportionately) or partly in both, as determined by the Manager. Notwithstanding anything contained herein to the contrary, however, the Company, to the full extent allowed by law and subject to any restraints contained in any financing or related agreements to which the Company is a party, shall be required to make annual distributions to the Members in an amount sufficient to cover the tax liability of such Member for such taxable year resulting from the operations of the Company; provided, however, that all such Distributions shall be made to the Members in accordance with this Agreement. 9.5 LIMITATIONS ON DISTRIBUTIONS - No distribution shall be declared and paid unless, after the distribution is made, the assets of the Company are in excess of all liabilities of the Company, except liabilities to Members on account of their Capital Accounts. ARTICLE X TAXES 10.1 ELECTIONS - The Manager may make any tax elections for the Company allowed under the Code or the tax laws of any state or other jurisdiction having Taxing Jurisdiction over the Company. 10.2 TAXES OF TAXING JURISDICTIONS - To the extent that the laws of any Taxing Jurisdiction require, each Member requested to do so by the Manager will submit an agreement indicating that the Member will make timely income tax payments to the Taxing Jurisdiction and that the Member accepts personal jurisdiction of the Taxing Jurisdiction with regard to the collection of income taxes attributable to the Member's income, and interest and penalties assessed on such income. If the Member fails to provide such agreement, the Company may withhold and pay over to such Taxing Jurisdiction the amount of tax, penalty and interest determined under the laws of the Taxing Jurisdiction with respect to such income. Any such payments with respect to the income of a Member shall be treated as a distribution for purposes of Article IX hereof. The Manager may, where permitted by the rules of any Taxing Jurisdiction, file a 8 composite, combined or aggregate tax return reflecting the income of the Company and pay the tax, interest and penalties of some or all of the Members on such income to the Taxing Jurisdiction, in which case the Company shall inform the Members of the amount of such tax interest and penalties so paid. 10.3 TAX MATTERS MANAGER - Until changed by the Manager, the Manager hereby designates Karey L. Witty to act as a Tax Matters Manager of the Company pursuant to Section 623 1(a)(7) of the Code. The Tax Matters Manager may not take any action contemplated by Sections 6222 through 6232 of the Code without the consent of the Manager. For purposes of this provision, the term "Tax Matters Manager" shall have the same meaning as the term "tax matters partner" under the Code. ARTICLE XI TRANSFER OF OWNERSHIP INTERESTS 11.1 CERTIFICATE FOR OWNERSHIP INTEREST. The Ownership Interest may be evidenced by a certificate in a form approved by the Manager. Such certificate shall contain a restrictive legend prohibiting any transferability thereof without the express compliance with the terms and conditions of this Agreement, as may be amended from time to time. 11.2 TRANSFER - A Member may not voluntarily Transfer or permit the Transfer of all or any portion of the Member's Ownership Interest except as permitted by this Article XI or as may be required under the Act. No Ownership Interest may be voluntarily transferred: 11.2.1 if such transfer, alone or when combined with other transactions, would result in a termination of the Company within the meaning of Section 708 of the Code; 11.2.2 if such transfer would cause the Company to suffer any adverse tax consequences, as determined by the Tax Matters Partner in his sole discretion; 11.2.3 without evidence (which may include an opinion of counsel) satisfactory to the Manager that such transfer is subject to an effective exemption from the registration requirements of applicable state and federal securities laws; 11.2.4 unless and until the Company receives from the transferee such information and agreements as the Manager may reasonably require, including but not limited to, a written agreement to be bound by all of the provisions of this Agreement and any amendments hereto; and 11.2.5 unless such transfer is in compliance with any restrictions on the transfer of an Ownership Interest in the Company under any financing or related agreements to which the Company is a party. 11.3 TRANSFERS NOT IN COMPLIANCE WITH THIS ARTICLE VOID - Any attempted transfer of an Ownership Interest, or any part thereof, not in compliance with this Article XI is null and void ab initio and shall not be recognized by the Company for any purpose. ARTICLE XII DISSOCIATION OF A MEMBER; WITHDRAWAL 12.1 DISSOCIATION - A Person shall cease to be a Member upon the happening of any of the following events of Dissociation: 9 12.1.1 the withdrawal of such Member, which withdrawal shall require at least thirty (30) days advance written notice to the Company by such Member of such Member's intention to withdraw; 12.1.2 the Member becomes a Bankrupt Member; 12.1.3 any dissolution or termination of existence of such Member, or any merger or consolidation involving such Member, other than any merger in which such Member is the surviving entity; 12.1.4 the Member's death; or 12.1.5 the entry by a court of competent jurisdiction adjudicating the Member incompetent to manage his or her person or estate. 12.2 RIGHTS OF DISSOCIATING MEMBER - In the event any Member Dissociates: 12.2.1 If the Dissociation causes a dissolution and winding up of the Company under Article XIV hereof, the Member shall be entitled to participate in the winding up of the Company to the same extent as any other Member except that, if the Dissociation is in violation of this Agreement, any distributions to which the Dissociated Member would have been entitled shall be reduced by the damages sustained by the Company as a result of the dissolution and winding up. 12.2.2 If the Dissociation results from the events described in Sections 12.1 hereof and if the Dissociation does not cause a dissolution and winding up of the Company under Article XIV hereof, the Member, subject to any restrictions on the transfer of an Ownership Interest in the Company under any financing or related agreements to which the Company is a party, shall be entitled to have his, her or its Ownership Interest purchased by the Company or the remaining, for a purchase price equal to the fair market value of the Member's Ownership Interest as determined according to Section 12.3 hereof. 12.2.3 The Company, or another Member or Members, as the case may be, may, in its or their sole discretion, pay the amount due the Dissociated Member in annual installments with interest at the applicable federal funds rate over a period not to exceed two (2) years. 12.3 PURCHASE PRICE OF DISSOCIATED MEMBER'S OWNERSHIP INTEREST - The purchase price to be paid pursuant to Section 12.2 hereof shall be the fair market value of such Member's Ownership Interest. The fair market value of a Member's Ownership Interest shall be determined by agreement between the Dissociated Member (or the Assignee of the Dissociated Member's Ownership Interest, as the case may be) and the Company, which agreement is subject to approval by a majority of the remaining Members. For this purpose, the fair market value of the Dissociated Member's Ownership Interest shall be computed as the amount which could reasonably be expected to be realized by such Member upon the sale of the Company at the time of occurrence of the event of Dissociation. If the Dissociated Member (or the Assignee of the Dissociated Member's Ownership Interest, as the case may be) and the Company cannot agree upon the fair market value of such Ownership Interest within thirty (30) days, the fair market value thereof shall be determined by appraisal, the Company and the Dissociated Member each to choose one appraiser and the two appraisers so chosen to choose a third appraiser. The decision of a majority of the appraisers as to the fair market value of such Ownership Interest shall be final and binding and may be enforced by legal proceedings. The Dissociated Member and the Company shall each compensate the appraiser appointed by it and the compensation of the third appraiser shall be borne equally by such parties. 10 ARTICLE XIII ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS 13.1 RIGHTS OF ASSIGNEES - A transferee of an Ownership Interest shall be an Assignee until and unless such Assignee is admitted as a Substitute Member pursuant to Section 13.2 hereof. The Assignee of an Ownership Interest has no right to participate in the management of the business and affairs of the Company or to become a Member. The Assignee is only entitled to receive the Distributions and return of capital, and to be allocated the Net Profits and Net Losses attributable to the Ownership Interest. 13.2 ADMISSION OF SUBSTITUTE MEMBERS - An Assignee of an Ownership Interest shall be admitted as a Substitute Member and admitted to all the rights of the Member who initially assigned the Ownership Interest only with the approval of the majority of the Members. If so admitted, the Substitute Member has all the rights and powers and is subject to all the restrictions and liabilities of the Member originally assigning the Ownership Interest. The admission of a Substitute Member shall not release the Member originally assigning the Ownership Interest from any liability to the Company that may have existed prior to such approval. 13.3 ADMISSION OF ADDITIONAL MEMBERS - The Members may permit the admission of Additional Members and may determine the Capital Contributions of such Additional Members. ARTICLE XIV DISSOLUTION AND WINDING UP 14.1 DISSOLUTION - The Company shall be dissolved and its affairs wound up, upon the first to occur of the following events (which, unless the Members agree to continue the business, shall constitute Dissolution Events): 14.1.1 the written consent of the Members, by the approval of the Members as provided in Section 6.1; 14.1.2 the Dissociation of any Member, if a majority of the remaining Members agree within ninety (90) days after such Dissociation to dissolve the Company; or 14.1.3 the merger, consolidation, or transfer of all or a substantial part of the properties or assets of any Member with any other Person without the advance written consent of all of the other Members, unless a majority of the Members (with the subject Member not voting on such matter) agree within ninety (90) days after such action to continue the business. This provision shall not apply to mergers between Members. 14.2 EFFECT OF DISSOLUTION - Upon dissolution, the Company shall cease to carry on its business, except insofar as may be necessary or appropriate for the winding up of its business, but its separate existence shall continue until a Certificate of Cancellation has been filed with the Secretary of State of Delaware or until a decree terminating the Company has been entered by a court of competent jurisdiction. 14.3 DISTRIBUTION OF ASSETS ON DISSOLUTION - Upon the winding up of the Company, the Company Property shall be distributed: 14.3.1 first, to creditors, including Members who are creditors, to the extent permitted by law, in satisfaction of Company liabilities; and 11 14.3.2 second, to Members in accordance with positive Capital Account balances taking into account all Capital Account adjustments for the Company's taxable year in which the liquidation occurs. Such distributions shall be in cash or Property (which need not be distributed proportionately) or partly in both, as determined by the Manager. 14.4 WINDING UP AND CERTIFICATE OF CANCELLATION - The winding up of the Company shall be completed when all debts, liabilities and obligations of the Company have been paid and discharged or reasonably adequate provision therefor has been made, and all of the remaining property and assets of the Company have been distributed to the Members. Upon the completion of winding up of the Company, a Certificate of Cancellation shall be delivered to the Secretary of State of Delaware for filing. The Certificate of Cancellation shall set forth the information required by the Act. ARTICLE XV AMENDMENT This Agreement may be modified as provided in this Article XV (as the same may, from time to time be amended), by the approval of the Members as provided in Section 6.1. No Member shall have any vested rights in this Agreement which may not be modified through an amendment to this Agreement. ARTICLE XVI MISCELLANEOUS PROVISIONS 16.1 ENTIRE AGREEMENT - This Agreement represents the entire agreement among all the Members and between the Members and the Company. 16.2 NO PARTNERSHIP INTENDED FOR NONTAX PURPOSES - The Members have formed the Company under the Act, and expressly do not intend hereby to form a partnership under either the Delaware Revised Uniform Partnership Act or the Delaware Revised Uniform Limited Partnership Act. The Members do not intend to be partners one to another, or partners as to any third party. To the extent any Member, by word or action, represents to another person that any other Member is a partner or that the Company is a partnership, the Member making such wrongful representation shall be liable to any other Member who incurs personal liability by reason of such wrongful representation. 16.3 RIGHTS OF CREDITORS AND THIRD PARTIES UNDER AGREEMENT - This Agreement is entered into among the Company and the Members for the exclusive benefit of the Company, its Members and their successors and assignees. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other Person. Except and only to the extent provided by applicable statute, no such creditor or third party shall have any rights under this Agreement or any agreement between the Company and any Member with respect to any Capital Contribution or otherwise. 16.4 WAIVER. The waiver by any party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to constitute, a waiver of any subsequent breach of the same or another provision hereof. 16.5 ENFORCEMENT. In the event any party resorts to legal action to enforce or interpret any provision of this Agreement, the prevailing party or parties shall be entitled to recover the costs of such action so incurred, including, without limitation, reasonable attorney's fees. 12 16.6 GOVERNING LAW. This Agreement has been executed and delivered in, and shall be governed by and construed and enforced in accordance with, the laws of the State of Delaware. 16.7 SEVERABILITY. In the event any provision of this Agreement is held to be invalid, illegal or unenforceable for any reason and in any respect, such invalidity, illegality or unenforceability shall not affect the remainder of this Agreement, which shall be and remain in full force and effect, enforceable in accordance with its terms. 16.8 COUNTERPARTS. This Agreement may be signed in any number of counterparts, and signature to any one counterpart shall be deemed signature to all other counterparts, which when taken together shall constitute one agreement. 16.9 HEADINGS. Headings contained in this Agreement have been inserted herein only as a matter of convenience and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provisions hereof. 16.10 FACSIMILE AND TELECOPIER SIGNATURES. For purposes of executing this Agreement, a document (or signature page thereto) signed and transmitted by facsimile machine or telecopier is to be treated as an original document. The signature of any party thereon, for purposes hereof, is to be considered as an original signature, and the document transmitted is to be considered to have the same binding effect as an original signature on an original document. At the request of any party, any facsimile or telecopy document is to be reexecuted in original form by the parties who executed the facsimile or telecopy document. No party may raise the use of a facsimile machine or telecopier or the fact that any signature was transmitted through the use of a facsimile or telecopier machine as a defense to the enforcement of this Agreement or any amendment or other document executed in compliance with this Section. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGE TO FOLLOW] 13 EXHIBIT A
Initial Capital Ownership Member/Address Contribution Interest Membership Units ~~Centene Management Corporation $________ 100% 1,000 7711 Carondelet Avenue, Suite 800 Clayton, Missouri 63105~~
EXHIBIT D RESOLUTIONS WRITTEN CONSENT IN LIEU OF A SPECIAL MEETING OF THE MEMBER OF CMC REAL ESTATE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY The undersigned, being the sole member of CMC Real Estate Company, LLC, a Delaware limited liability company ("Company"), do hereby consent to and adopt the following action as the action of the sole member of said Company, and waive notice of any meeting and the holding of any meeting, it being intended that this Consent shall have the same force and effect as the vote of the member of the Company at a meeting duly called and held this date. This Consent shall be filed with the permanent records of the Company as the duly authorized act of the member of the Company. NOW THEREFORE, BE IT RESOLVED, that the Company is hereby authorized to obtain a loan in the amount of $8,000,000 (the "Loan") from Midwest BankCentre (the "Lender") to be secured by that certain real property and improvements thereon located at 7711 Carondelet Avenue, St. Louis, Missouri 63105 (the "Property"). FURTHER RESOLVED, that the undersigned hereby approves the form of the Deed of Trust, Assignment and Security Agreement, the Promissory Note, the Absolute Assignment of Rents and Leases and the Environmental Indemnity Agreement (collectively, the "Loan Documents"), and hereby authorizes the Manager, the President or Secretary of the Company to execute and deliver on behalf of the Company the Loan Documents and any other documents required by the Lender to be executed on behalf of the Company with such corrections, amendments and changes and additional documents (which corrections, amendments and changes and additional documents do not alter in any material way the basic economic terms set forth in the Loan Documents) as shall be approved by the Manager or officer of this Company who executes such documents, such execution to constitute conclusive evidence of the approval by the Manager or such officer and approval by the undersigned of such corrections, amendments, changes and additional documents. FURTHER RESOLVED, that the Manager, the President and the Secretary of this Company are each hereby authorized and directed to take all actions, including, without limitation, entering into, executing and delivering various binding agreements and documents, including, without limitation, the Loan Documents, on behalf of the Company, all as necessary or desirable to consummate and close the transactions contemplated in the Loan Documents. Any and all acts which the Manager or said officers may take, do or perform in conformity with the powers conferred on them by these resolutions are hereby expressly authorized, approved, ratified and confirmed. IN WITNESS WHEREOF, the undersigned has adopted this Consent to be effective on the______day of August, 2003. Centene Management Company LLC By: /s/ Michael F. Neidorff ------------------------------------- Name: Michael F. Neidorff Title: President Being the sole member of the Company. 2 EX-10.34 15 c83064exv10w34.txt CONTRACT EXHIBIT 10.34 OHIO DEPARTMENT OF JOB AND FAMILY SERVICES OHIO MEDICAL ASSISTANCE PROVIDER AGREEMENT FOR MANAGED CARE PLAN This provider agreement is entered into this first day of December, 2003, at Columbus, Franklin County, Ohio, between the State of Ohio, Department of Job and Family Services, (hereinafter referred to as ODJFS) whose principal offices are located in the City of Columbus, County of Franklin, State of Ohio, and Buckeye Community Health Plan, Inc., Managed Care Plan (hereinafter referred to as MCP), an Ohio for-profit corporation, whose principal office is located in the city of Toledo, County of Lucas, State of Ohio. MCP is an entity eligible to enter into a provider agreement in accordance with 42 CFR 438.6 and is engaged in the business of providing prepaid comprehensive health care services as defined in 42 CFR 438.2. MCP is licensed as a Health Insuring Corporation by the State of Ohio, Department of Insurance (hereinafter referred to as ODI), pursuant to Chapter 1751, of the Ohio Revised Code and is organized and agrees to operate as prescribed by Chapter 5101:3-26 of the Ohio Administrative Code (hereinafter referred to as OAC), and other applicable portions of the OAC as amended from time to time. ODJFS, as the single state agency designated to administer the Medicaid program under Section 5111.02 of the Ohio Revised Code and Title XIX of the Social Security Act, desires to obtain MCP services for the benefit of certain Medicaid recipients. In so doing, MCP has provided and will continue to provide proof of MCP's capability to provide quality services, efficiently, effectively and economically during the term of this agreement. Page 2 of 10 This provider agreement is a contract between the ODJFS and the undersigned Managed Care Plan (MCP), provider of medical assistance, pursuant to the federal contracting provisions of 42 CFR 434.6 in which the MCP agrees to provide comprehensive medical services as provided in Chapter 5101:3-26 of the Ohio Administrative Code, assuming the risk of loss, and complying with applicable state statutes, Ohio Administrative Code, and Federal statutes, rules, regulations and other requirements, including but not limited to title VI of the Civil Rights Act of 1964; title IX of the Education Amendments of 1972 (regarding education programs and activities); the Age Discrimination Act of 1975; the Rehabilitation Act of 1973; and the Americans with Disabilities Act. ARTICLE I - GENERAL A. MCP agrees to report to the Chief of Bureau of Managed Health Care (hereinafter referred to as BMHC) or their designee as necessary to assure understanding of the responsibilities and satisfactory compliance with this provider agreement. B. MCP agrees to furnish its support staff and services as necessary for the satisfactory performance of the services as enumerated in this provider agreement. C. ODJFS may, from time to time as it deems appropriate, communicate specific instructions and requests to MCP concerning the performance of the services described in this provider agreement.Upon such notice and within the designated time frame after receipt of instructions, MCP shall comply with such instructions and fulfill such requests to the satisfaction of the department. It is expressly understood by the parties that these instructions and requests are for the sole purpose of performing the specific tasks requested to ensure satisfactory completion of the services described in this provider agreement, and are not intended to amend or alter this provider agreement or any part thereof. ARTICLE II - TIME OF PERFORMANCE A. Upon approval by the Director of ODJFS this provider agreement shall be in effect from the date entered through June 30, 2004, unless this provider agreement is suspended or terminated pursuant to Article VIII prior to the termination date, or otherwise amended pursuant to Article IX. ARTICLE III - REIMBURSEMENT A. ODJFS will reimburse MCP in accordance with rule 5101:3-26-09 of the Ohio Administrative Code and the appropriate appendices of this provider agreement. Page 3 of 10 ARTICLE IV - MCP INDEPENDENCE A. MCP agrees that no agency, employment, joint venture or partnership has been or will be created between the parties hereto pursuant to the terms and conditions of this agreement. MCP also agrees that, as an independent contractor, MCP assumes all responsibility for any federal, state, municipal or other tax liabilities, along with workers compensation and unemployment compensation, and insurance premiums which may accrue as a result of compensation received for services or deliverables rendered hereunder. MCP certifies that all approvals, licenses or other qualifications necessary to conduct business in Ohio have been obtained and are operative. If at any time during the period of this provider agreement MCP becomes disqualified from conducting business in Ohio, for whatever reason, MCP shall immediately notify ODJFS of the disqualification and MCP shall immediately cease performance of its obligation hereunder in accordance with OAC Chapter 5101:3-26. ARTICLE V - CONFLICT OF INTEREST; ETHICS LAWS A. In accordance with the safeguards specified in section 27 of the Office of Federal Procurement Policy Act (41 U.S.C. 423) and other applicable federal requirements, no officer, member or employee of MCP, the Chief of BMHC, or other ODJFS employee who exercises any functions or responsibilities in connection with the review or approval of this provider agreement or provision of services under this provider agreement shall, prior to the completion of such services or reimbursement, acquire any interest, personal or otherwise, direct or indirect, which is incompatible or in conflict with, or would compromise in any manner or degree the discharge and fulfillment of his or her functions and responsibilities with respect to the carrying out of such services. For purposes of this article, "members" does not include individuals whose sole connection with MCP is the receipt of services through a health care program offered by MCP. B. MCP hereby covenants that MCP, its officers, members and employees of the MCP have no interest, personal or otherwise, direct or indirect, which is incompatible or in conflict with or would compromise in any manner of degree the discharge and fulfillment of his or her functions and responsibilities under this provider agreement. MCP shall periodically inquire of its officers, members and employees concerning such interests. C. Any person who acquires an incompatible, compromising or conflicting personal or business interest shall immediately disclose his or her interest to ODJFS in writing. Thereafter, he or she shall not participate in any action affecting the services under this provider agreement, unless ODJFS shall determine that, in the light of the personal interest disclosed, his or her participation in any such action would not be contrary to the public interest. The written disclosure of such interest shall be made to: Chief, Bureau of Managed Health Care, ODJFS. Page 4 of 10 D. No officer, member or employee of MCP shall promise or give to any ODJFS employee anything of value that is of such a character as to manifest a substantial and improper influence upon the employee with respect to his or her duties. No officer, member or employee of MCP shall solicit an ODJFS employee to violate any ODJFS rule or policy relating to the conduct of the parties to this agreement or to violate sections 102.03, 102.04, 2921.42 or 2921.43 of the Ohio Revised Code. E. MCP hereby covenants that MCP, its officers, members and employees are in compliance with section 102.04 of the Revised Code and that if MCP is required to file a statement pursuant to 102.04(D)(2) of the Revised Code, such statement has been filed with the ODJFS in addition to any other required filings. ARTICLE VI - EQUAL EMPLOYMENT OPPORTUNITY A. MCP agrees that in the performance of this provider agreement or in the hiring of any employees for the performance of services under this provider agreement, MCP shall not by reason of race, color, religion, sex, sexual orientation, age, disability, national origin, veteran's status, health status, or ancestry, discriminate against any citizen of this state in the employment of a person qualified and available to perform the services to which the provider agreement relates. B. MCP agrees that it shall not, in any manner, discriminate against, intimidate, or retaliate against any employee hired for the performance or services under the provider agreement on account of race, color, religion, sex, sexual orientation, age, disability, national origin, veteran's status, health status, or ancestry. C. In addition to requirements imposed upon subcontractors in accordance with OAC Chapter 5101:3-26, MCP agrees to hold all subcontractors and persons acting on behalf of MCP in the performance of services under this provider agreement responsible for adhering to the requirements of paragraphs (A) and (B) above and shall include the requirements of paragraphs (A) and (B) above in all subcontracts for services performed under this provider agreement, in accordance with rule 5101:3-26-05 of the Ohio Administrative Code. ARTICLE VII - RECORDS, DOCUMENTS AND INFORMATION A. MCP agrees that all records, documents, writings or other information produced by MCP under this provider agreement and all records, documents, writings or other information used by MCP in the performance of this provider agreement shall be treated in accordance with rule 5101:3-26-06 of the Ohio Administrative Code. MCP must maintain an appropriate record system for services provided to members. MCP must retain all records in accordance with 45 CFR 74. Page 5 of 10 B. All information provided by MCP to ODJFS that is proprietary shall be held to be strictly confidential by ODJFS. Proprietary information is information which, if made public, would put MCP at a disadvantage in the market place and trade of which MCP is a part [see Ohio Revised Code Section 1333.61(D)]. MCP is responsible for notifying ODJFS of the nature of the information prior to its release to ODJFS. ODJFS reserves the right to require reasonable evidence of MCP's assertion of the proprietary nature of any information to be provided and ODJFS will make the final determination of whether this assertion is supported. The provisions of this Article are not self-executing. C. MCP shall not use any information, systems, or records made available to it for any purpose other than to fulfill the duties specified in this provider agreement. MCP agrees to be bound by the same standards of confidentiality that apply to the employees of the ODJFS and the State of Ohio. The terms of this section shall be included in any subcontracts executed by MCP for services under this provider agreement. MCP must implement procedures to ensure that in the process of coordinating care, each enrollee's privacy is protected consistent with the confidentiality requirements in 45 CFR parts 160 and 164. ARTICLE VIII - SUSPENSION AND TERMINATION A. This provider agreement may be canceled by the department or MCP upon written notice in accordance with the applicable rule(s) of the Ohio Administrative Code, with termination to occur at the end of the last day of a month. B. MCP, upon receipt of notice of suspension or termination, shall cease provision of services on the suspended or terminated activities under this provider agreement; suspend, or terminate all subcontracts relating to such suspended or terminated activities, take all necessary or appropriate steps to limit disbursements and minimize costs, and furnish a report, as of the date of receipt of notice of suspension or termination describing the status of all services under this provider agreement. C. In the event of suspension or termination under this Article, MCP shall be entitled to reconciliation of reimbursements through the end of the month for which services were provided under this provider agreement, in accordance with the reimbursement provisions of this provider agreement. D. ODJFS may, in its judgment, suspend, terminate or fail to renew this provider agreement if the MCP or MCP's subcontractors violate or fail to comply with the provisions of this agreement or other provisions of law or regulation governing the Medicaid program. Where ODJFS proposes to suspend, terminate or refuse to enter into a provider agreement, the provisions of applicable sections of the Ohio Administrative Code with respect to ODJFS' suspension, termination or refusal to enter into a provider agreement shall apply, including the MCP's right to request a public hearing under Chapter 119, of the Revised Code. Page 6 of 10 E. When initiated by MCP, termination of or failure to renew the provider agreement requires written notice to be received by ODJFS at least 75 days in advance of the termination or renewal date, provided, however, that termination or non-renewal must be effective at the end of the last day of a calendar month. In the event of non-renewal of the provider agreement with ODJFS, if MCP is unable to provide notice to ODJFS 75 days prior to the date when the provider agreement expires, and if, as a result of said lack of notice, ODJFS is unable to disenroll Medicaid enrollees prior to the expiration date, then the provider agreement shall be deemed extended for up to two calendar months beyond the expiration date and both parties shall, for that time, continue to fulfill their duties and obligations as set forth herein. ARTICLE IX - AMENDMENT AND RENEWAL A. This writing constitutes the entire agreement between the parties with respect to all matters herein. This provider agreement may be amended only by a writing signed by both parties. Any written amendments to this provider agreement shall be prospective in nature. B. This provider agreement may be renewed one or more times by a writing signed by both parties for a period of not more than twelve months for each renewal. C. In the event that changes in State or Federal law, regulations, an applicable waiver, or the terms and conditions of any applicable federal waiver, require ODJFS to modify this agreement, ODJFS shall notify MCP regarding such changes and this agreement shall be automatically amended to conform to such changes without the necessity for executing written amendments pursuant to this Article of this provider agreement. ARTICLE X - LIMITATION OF LIABILITY A. MCP agrees to indemnify the State of Ohio for any liability resulting from the actions or omissions of MCP or its subcontractors in the fulfillment of this provider agreement. B. MCP hereby agrees to be liable for any loss of federal funds suffered by ODJFS for enrollees resulting from specific, negligent acts or omissions of the MCP or its subcontractors during the term of this agreement, including but not limited to the nonperformance of the duties and obligations to which MCP has agreed under this agreement. C. In the event that, due to circumstances not reasonably within the control of MCP or ODJFS, a major disaster, epidemic, complete or substantial destruction of facilities, war, riot or civil insurrection occurs, neither ODJFS nor MCP will have any liability or obligation on account of reasonable delay in the provision or the arrangement of covered services; provided that so long as MCP's certificate of authority remains in full force and effect, MCP shall be liable for the covered services required to be provided or arranged for in accordance with this agreement. Page 7 of 10 ARTICLE XI - ASSIGNMENT A. MCP shall not assign any interest in this provider agreement and shall not transfer any interest in the same (whether by assignment or novation) without the prior written approval of ODJFS and subject to such conditions and provisions as ODJFS may deem necessary. Any such assignments shall be submitted for ODJFS' review 120 days prior to the desired effective date. No such approval by ODJFS of any assignment shall be deemed in any event or in any manner to provide for the incurrence of any obligation by ODJFS in addition to the total agreed-upon reimbursement in accordance with this agreement. B. MCP shall not assign any interest in subcontracts of this provider agreement and shall not transfer any interest in the same (whether by assignment or novation) without the prior written approval of ODJFS and subject to such conditions and provisions as ODJFS may deem necessary. Any such assignments of subcontracts shall be submitted for ODJFS' review 30 days prior to the desired effective date. No such approval by ODJFS of any assignment shall be deemed in any event or in any manner to provide for the incurrence of any obligation by ODJFS in addition to the total agreed-upon reimbursement in accordance with this agreement. ARTICLE XII - CERTIFICATION MADE BY MCP A. This agreement is conditioned upon the full disclosure by MCP to ODJFS of all information required for compliance with federal regulations as requested by ODJFS. B. By executing this agreement, MCP certifies that no federal funds paid to MCP through this or any other agreement with ODJFS shall be or have been used to lobby Congress or any federal agency in connection with a particular contract, grant, cooperative agreement or loan. MCP further certifies compliance with the lobbying restrictions contained in Section 1352, Title 31 of the U.S.Code, Section 319 of Public Law 101-121 and federal regulations issued pursuant thereto and contained in 45 CFR Part 93, Federal Register, Vol. 55, No. 38, February 26, 1990, pages 6735-6756. If this provider agreement exceeds $100,000, MCP has executed the Disclosure of Lobbying Activities, Standard Form LLL, if required by federal regulations. This certification is material representation of fact upon which reliance was placed when this provider agreement was entered into. C. By executing this agreement, MCP certifies that neither MCP nor any principals of MCP (i.e., a director, officer, partner, or person with beneficial ownership of more than 5% of the MCP's equity) is presently debarred, suspended, proposed for debarment, declared ineligible, or otherwise excluded from participation in transactions by any Federal agency. The MCP also certifies that the MCP has no employment, consulting or any other arrangement with any such debarred or suspended person for the provision of items or services or services that are significant and material to the MCP's contractual obligation with ODJFS. This certification is a material representation of fact upon which reliance was placed when this provider agreement was entered into. Page 8 of 10 If it is ever determined that MCP knowingly executed this certification erroneously, then in addition to any other remedies, this provider agreement shall be terminated pursuant to Article VII, and ODJFS must advise the Secretary of the appropriate Federal agency of the knowingly erroneous certification. D. By executing this agreement, MCP certifies compliance with Article V as well as agreeing to future compliance with Article V. This certification is a material representation of fact upon which reliance was placed when this contract was entered into. E. By executing this agreement, MCP certifies compliance with the executive agency lobbying requirements of sections 121.60 to 121.69 of the Ohio Revised Code. This certification is a material representation of fact upon which reliance was placed when this provider agreement was entered into. F. By executing this agreement, MCP certifies that MCP is not on the most recent list established by the Secretary of State, pursuant to section 121.23 of the Ohio Revised Code, which identifies MCP as having more than one unfair labor practice contempt of court finding. This certification is a material representation of fact upon which reliance was placed when this provider agreement was entered into. G. By executing this agreement, MCP certifies compliance with section 4141.044 of the Ohio Revised Code which requires MCP to provide a listing of all available job vacancies to the ODJFS. This requirement does not apply when MCP is filling the vacancy from within the organization or pursuant to a customary and traditional employer-union hiring arrangement. H. By executing this agreement MCP agrees not to discriminate against individuals who have or are participating in any work program administered by a county Department of Job and Family Services under Chapters 5101 or 5107 of the Revised Code. I. By executing this agreement, MCP certifies and affirms that, as applicable to MCP, no party listed in Division (I) or (J) of Section 3517.13 of the Ohio Revised Code or spouse of such party has made, as an individual, within the two previous calendar years, one or more contributions in excess of $1,000.00 to the Governor or to his campaign committees. This certification is a material representation of fact upon which reliance was placed when this provider agreement was entered into. If it is ever determined that MCP's certification of this requirement is false or misleading, and not withstanding any criminal or civil liabilities imposed by law, MCP shall return to ODJFS all monies paid to MCP under this provider agreement. The provisions of this section shall survive the expiration or termination of this provider agreement. J. By executing this agreement, MCP certifies and affirms that HHS, US Comptroller General or representatives will have access to books, documents, etc. of MCP. Page 9 of 10 ARTICLE XIII - CONSTRUCTION A. This provider agreement shall be governed, construed and enforced in accordance with the laws and regulations of the State of Ohio and appropriate federal statutes and regulations. If any portion of this provider agreement is found unenforceable by operation of statute or by administrative or judicial decision, the operation of the balance of this provider agreement shall not be affected thereby; provided, however, the absence of the illegal provision does not render the performance of the remainder of the provider agreement impossible. ARTICLE XIV - INCORPORATION BY REFERENCE A. Ohio Administrative Code Chapter 5101:3-26 (Appendix A) is hereby incorporated by reference as part of this provider agreement having the full force and effect as if specifically restated herein. B. Appendices B through P and any additional appendices are hereby incorporated by reference as part of this provider agreement having the full force and effect as if specifically restated herein. C. In the event of inconsistence or ambiguity between the provisions of OAC 5101:3-26 and this provider agreement, the provision of OAC 5101:3-26 shall be determinative of the obligations of the parties unless such inconsistency or ambiguity is the result of changes in federal or state law, as provided in Article IX of this provider agreement, in which case such federal or state law shall be determinative of the obligations of the parties. In the event OAC 5101:3-26 is silent with respect to any ambiguity or inconsistency, the provider agreement (including Appendices B through P and any additional appendices), shall be determinative of the obligations of the parties. In the event that a dispute arises which is not addressed in any of the aforementioned documents, the parties agree to make every reasonable effort to resolve the dispute, in keeping with the objectives of the provider agreement and the budgetary and statutory constraints of ODJFS. Page 10 of 10 The parties have executed this agreement the date first written above. The agreement is hereby accepted and considered binding in accordance with the terms and conditions set forth in the preceding statements. BUCKEYE COMMUNITY HEALTH PLAN, INC.: BY: /s/ Michael F. Neidorff DATE: 11/24/03 ------------------------------------- ------------------ MICHAEL F. NEIDORFF,PRESIDENT OHIO DEPARTMENT OF JOB AND FAMILY SERVICES: BY: /s/ Thomas Hayes DATE: 11/24/03 ------------------------------------- ------------------ THOMAS J. HAYES, DIRECTOR PROVIDER AGREEMENT INDEX
APPENDIX TITLE - ---------- ------------------------------- APPENDIX A OAC RULES 5101:3-26 APPENDIX B MCP PROCUREMENT AND PRE- CONTRACTING REQUIREMENTS APPENDIX C MCP RESPONSIBILITIES APPENDIX D ODJFS RESPONSIBILITIES APPENDIX E RATE METHODOLOGY APPENDIX F COUNTY SPECIFICATIONS APPENDIX G COVERAGE AND SERVICES APPENDIX H PROVIDER PANEL SPECIFICATIONS APPENDIX I PROGRAM INTEGRITY APPENDIX J FINANCIAL PERFORMANCE APPENDIX K QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM APPENDIX L DATA QUALITY APPENDIX M PERFORMANCE EVALUATION APPENDIX N COMPLIANCE ASSESSMENT SYSTEM APPENDIX O PERFORMANCE INCENTIVES APPENDIX P MCP TERMINATIONS/NONRENEWALS/ AMENDMENTS
APPENDIX A OAC RULES 5101:3-26 The managed care program rules can be accessed electronically through the following website: http://dynaweb.odjfs.state.oh.us:6336/dynaweb/medicaid/MHC/@Generic_BookView;c s=default;ts=default APPENDIX B MCP PROCUREMENT AND PRE-CONTRACTING REQUIREMENTS The Ohio Department of Job and Family Services (ODJFS) has an open procurement process (pursuant to 45 CFR Section 74) whereby any qualifying entity may request consideration to receive a Managed Care Plan (MCP) provider agreement from ODJFS. Prospective MCPs interested in participating in Ohio's Medicaid managed care program must submit a formal letter of intent to the Chief of the Bureau of Managed Health Care (BMHC) which specifically states that the prospective MCP wishes to actively pursue a provider agreement with ODJFS. Upon receipt of this letter, BMHC staff will schedule a meeting with the prospective MCP, following which ODJFS will provide the prospective MCP with a follow-up letter further outlining the pre-contracting requirements specified in this Appendix and the projected timetable required for the MCP to receive a provider agreement. ODJFS may at its discretion allow a prospective MCP to begin the pre-contracting process prior to the receipt of their certificate of authority (COA) from the Ohio Department of Insurance. However, the MCP must have a valid COA prior to entering into a provider agreement with ODJFS. A prospective MCP that previously had a provider agreement with ODJFS must comply with all procurement and pre-contracting requirements prior to receiving a new provider agreement. If the prior provider agreement terminated more than two years prior to the effective date of any new provider agreement, such MCP will be considered a plan new to Ohio Medicaid Managed Care and in its first year of operation. Prior to ODJFS' issuance of a provider agreement, a prospective MCP must demonstrate the capability to meet all applicable program requirements specified in Chapter 5101:3-26 of the Ohio Administrative Code (OAC) and the ODJFS - MCP Provider Agreement. This demonstration will include a review of documentation and data submitted by the prospective MCP, and may also include an on-site review of the prospective MCP's administrative operations. The ODJFS' review and/or approval of submissions from the prospective MCP will include, but not be limited to the following: 1. Administrative submissions: a. a listing of the counties the prospective MCP initially proposes to serve; b. an Ohio Medicaid Provider Number Application, including a request for Taxpayer Identification Number and Certification (W-9) authorization agreement for state Medicaid payments and an electronic funds transfer (EFT) application; c. the designation of an individual who will serve as the primary point of contact between the prospective MCP and ODJFS. A different individual may be designated as the contact person for the prospective MCP's management information systems; d. a statement confirming the organization's willingness to accommodate on-site visits to their administrative offices, its participating provider facilities, and its subcontractors by ODJFS representatives and/or designees; e. a description of the prospective MCP in terms of practice model type (e.g.,group model, staff model, individual practice association, etc.); Appendix B Page 2 f. a table of organization; g. a statement of affirmative action that the prospective MCP does not discriminate in its employment practices with regard to race, color, religion, sex, sexual orientation, age, disability, national origin, veteran's status, ancestry, health status or need for health services; h. information including name, address, and association of any individual/ group/entity that will be assisting the prospective MCP with the submission of documentation to ODJFS; i. a signed copy of the ODJFS-required form guaranteeing compliance with noncompetitive bid provisions; and j. notification if the MCP elects not to provide, reimburse for, or provide coverage of, a counseling or referral service because of an objection on moral or religious grounds. 2. Completed personalized Model Medicaid Addendums as described in OAC rule 5101:3-26-05 and Appendix H of this provider agreement which incorporate all applicable Ohio Administrative Code rule requirements specific to provider subcontracting. 3. Completed MCP Delegation of Services form(s), as applicable. 4. Provider panel and subcontracting requirements: Prospective MCPs must submit documentation to verify compliance with provider panel and subcontracting requirements specified in OAC rule 5101:3-26-05 and Appendix H of this provider agreement. 5. MIS Requirements: Prospective MCPs must meet the Health Information Systems requirements and formats specified in Appendix C of this provider agreement and may be required to complete an information systems questionnaire. MCPs must allow adequate time to meet encounter data requirements (on average it has taken most MCPs approximately four months to successfully complete encounter data testing). ODJFS will not accept encounter data test tapes from the prospective MCP or their ODJFS-approved delegated entity(ies) until the prospective MCP has received an Ohio Medicaid Provider Number. Before ODJFS enters into a provider agreement, ODJFS or designee may review the information system capabilities of each prospective MCP as described in Appendix C of this provider agreement. In addition to encounter data testing, the prospective MCP will be required to demonstrate to ODJFS their capability to successfully provide the following required electronic file submissions in the specified formats: Screening Assessment and Case Management System (SACMS), appeals and grievances, newborn notification and member-designated primary care physician (PCP) files. 6. Verification of operational program requirements specified by ODJFS, including but not limited to, the following areas: Appendix B Page 3 a. Behavioral Health Services/Coordination requirements specified in Appendix G of this provider agreement; b. Call Center requirements specified in Appendix C of this provider agreement; c. Case Management requirements specified in OAC rule 5101:3-26-03.1 and Appendix G of this provider agreement; d. Children with Special Health Care needs requirements specified in Appendix G of this provider agreement; e. Program Integrity requirements specified in OAC rule 5101:3-26-06 and Appendix I of this provider agreement; f. Appeal, Grievance and State Hearings requirements specified in OAC rules 5101:3-26-08.3, 08.4, and 08.5. g. Interpreter Services requirements specified in Appendix C of this provider agreement; h. Requirements for marketing materials including marketing staff training (if applicable) and solicitation brochure as specified in OAC rule 5101:3-26-08.2; i. New member material requirements including Member Identification (ID) Card, Member Handbook, Provider Directory and Advance Directives Notification as specified in OAC rule 5101:3-26-08.2; j. Utilization Management and Prior Authorization requirements specified in OAC rule 5101:3-26-03.1 and Appendix G of this provider agreement; and k. Quality Assessment and Performance Improvement (QAPI) requirements specified in OAC rule 5101:3-26-07.1 and Appendix K of this provider agreement. 7. Prospective MCPs must attend and participate in mandatory technical assistance sessions provided by ODJFS. 8. Financial submissions: Prospective MCPs must submit the following documentation to verify compliance with the financial requirements specified in OAC rule 5101:3-26-09 and Appendix J of this provider agreement. a. Evidence of reinsurance coverage from a licensed commercial carrier to protect against catastrophic inpatient-related medical expenses incurred by Medicaid members; b. Quarterly, Annual and Independently Audited Annual National Association of Insurance Commissioners (NAIC) Financial Statements for the past three years for all lines of business. If the MCP has been operating for fewer than three years, then MCP should provide the referenced NAIC financial statements for the available years; and c. ODJFS-designated Physician Incentive Plan form. Appendix B Page 4 9. Membership Data and Reconciliation: Prospective MCPs must complete the Membership Data Maintenance and Reconciliation questionnaire and demonstrate the following membership data and reconciliation requirements: a. Capability to accept and utilize consumer contact record (CCR) data; b. Capability to accept and maintain membership data contained on the monthly member roster (MMR); c. Capability to accept and reconcile premium and delivery payments with the monthly remittance advice; d. Capability to reconcile membership data with remittance advice; e. Capability to accept and maintain pending member-provided information, such as PCP choice, hospitalization reporting, etc., prior to receiving and reconciling the CCR and MMR; and f. Identification of new members hospitalized prior to and remaining hospitalized on the effective date of MCP membership. APPENDIX C MCP RESPONSIBILITIES The MCP must meet on an ongoing basis, all program requirements specified in Chapter 5101:3-26 of the Ohio Administrative Code (OAC) and the Ohio Department of Job and Family Services (ODJFS) - MCP Provider Agreement. The following are MCP responsibilities that are not otherwise specifically stated in OAC rule provisions or elsewhere in the MCP provider agreement. SFY 2004 Program Provisions As specified by ODJFS, currently-contracting MCPs may be required to submit verification of any operational program requirements not already verified in order to demonstrate compliance and readiness with the SFY 2004 program provisions. General Provisions 1. The MCP agrees to implement program modifications in response to changes in applicable state and federal laws and regulations. 2. The MCP must submit a current copy of their Certificate of Authority (COA) to ODJFS within 30 days of issuance by the Ohio Department of Insurance. 3 The MCP must designate a primary contact person (the Medicaid Coordinator) who will dedicate a majority of their time to the Medicaid product line and coordinate overall communication between ODJFS and the MCP. ODJFS may also require the MCP to designate contact staff for specific program areas. The Medicaid Coordinator will be responsible for ensuring the timeliness, accuracy, completeness and responsiveness of all MCP submissions to ODJFS. 4. All MCP employees are to direct all day-to-day submissions and communications to their ODJFS-designated Contract Administrator unless otherwise notified by ODJFS. 5. The MCP must be represented at all meetings and events designated by ODJFS as requiring mandatory attendance. 6. The MCP must have an administrative office located in Ohio. 7. Upon request by ODJFS, the MCP must submit information on the current status of their company's operations not specifically covered under this provider agreement (for example, other product lines, Medicaid contracts in other states, NCQA accreditation, etc.) 8. The MCP must assure that all new employees are trained on applicable program requirements. Appendix C Page 2 9. If an MCP determines that it does not wish to provide, reimburse, or cover a counseling service or referral service due to an objection to the service on moral or religious grounds, it must immediately notify ODJFS to coordinate the implementation of this change. MCPs will be required to notify their members of this change at least 30 days prior to the effective date. The MCP's member handbook and provider directory, as well as all marketing materials, will need to include information specifying any such services that the MCP will not provide. 10. For any data and/or documentation that MCPs are required to maintain, ODJFS may request that MCPs provide analysis of this data and/or documentation to ODJFS in an aggregate format. 11. The MCP is responsible for determining medical necessity for services and supplies requested for their members as specified in OAC rule 5101:3-26-03. Notwithstanding such responsibility, ODJFS retains the right to make the final determination on medical necessity in specific member situations. 12. In addition to the timely submission of medical records at no cost for the annual external quality review as specified in OAC rule 5101:3-26-07, the MCP may be required for other purposes to submit medical records at no cost to ODJFS and/or designee upon request. 13. Upon request by ODJFS, MCPs may be required to provide written notice to members of any significant change(s) affecting contractual requirements, member services or access to providers. 14. MCPs must notify ODJFS, but are not required to obtain ODJFS prior approval, for services the MCP elects to cover that are in addition to those covered under the Ohio Medicaid fee-for-service program. 15. MCPs must comply with any applicable Federal and State laws that pertain to member rights and ensure that its staff and affiliated providers take those rights into account when furnishing services to members. 16. MCPs must comply with any other applicable Federal and State laws (such as Title VI of the Civil rights Act of 1964, etc.) and other laws regarding privacy and confidentiality. 17. Upon request, the MCP will provide members and potential members with a copy of their practice guidelines. Appendix C Page 3 18. The MCP is responsible for promoting the delivery of services in a culturally competent manner to all members, including those with limited English proficiency and diverse cultural and ethnic backgrounds. 19. Translations for Limited English Proficient (LEP) Members and Eligible Individuals In order to assure compliance with OAC rules 5101:3-26-08 and 5101-3-26-08.2, MCPs must provide written translations of certain MCP materials in the prevalent non-English languages of members and eligible individuals. When 10% or more of the eligible individuals in the MCP's service area have a common primary language other than English, the MCP must translate all ODJFS-approved marketing materials into the primary language of that group. The MCP must monitor, on an ongoing basis, changes in the eligible population in the service area to determine which, if any, primary language groups meet the 10% threshold. When 10% or more of an MCP's members in the MCP's service area have a common primary language other than English, the MCP must translate all ODJFS-approved member materials into the primary language of that group. The MCP must monitor, on an ongoing basis, changes in their membership to determine which, if any, primary language groups meet the 10% threshold. Additional requirements specific to providing assistance to hearing-impaired, vision-impaired, limited reading proficient, and LEP members and eligible individuals are found in OAC rules 5101:3-26-03.1, 5101:3-26-05(D), 5101:3-26-08 and 5101-3-26-08.2. 20. The MCP is responsible for ensuring that all member materials use easily understood language and format. 21. Advance Directives - All MCPs must comply with the requirements specified in 42 CFR 422.128. At a minimum, the MCP must: a. Maintain written policies and procedures that meet the requirements for advance directives, as set forth in 42 CFR Subpart I of part 489. b. Maintain written policies and procedures concerning advance directives with respect to all adult individuals receiving medical care by or through the MCP to ensure that the MCP: Appendix C Page 4 i. Provides written information to all adult members concerning: a. the member's rights under state law to make decisions concerning their medical care, including the right to accept or refuse medical or surgical treatment and the right to formulate advance directives. b. the MCP's policies concerning the implementation of those rights including a clear and precise statement of any limitation regarding the implementation of advance directives as a matter of conscience; c. any changes in state law regarding advance directives as soon as possible but no later than 90 days after the proposed effective date of the change; and d. the right to file complaints concerning noncompliance with the advance directive requirements with the Ohio Department of Health. ii. Provides for education of staff concerning the MCP's policies and procedures on advance directives; iii. Provides for community education regarding advance directives directly or in concert with other providers or entities; iv. Requires that the member's medical record document whether or not the member has executed an advance directive; and v. Does not condition the provision of care, or otherwise discriminate against a member, based on whether the member has executed an advance directive. 22. Call Center Standards The MCP must provide assistance to enrollees through a member services toll-free call-in system pursuant to OAC rule 5101:3-26-08.2(A)(1). MCP member services staff must be available at all times to provide assistance to members through the toll-free call-in system every Monday through Friday, 8:30 a.m. to 4:30 p.m., except for major holidays as specified in the MCP's member handbook. The MCP must also provide access to medical advice and direction through a centralized twenty-four-hour toll-free call-in system pursuant to OAC rule 5101:3-26-03.1(A)(6). The twenty-four hour call-in system must be staffed by appropriately trained medical personnel. For the purposes of meeting this requirement, trained medical professionals are defined as physicians, physician assistants, licensed practical nurses, and registered nurses. Appendix C Page 5 MCPs must meet the current American Accreditation HealthCare Commission/URAC-designed Health Call Center Standards (HCC) for call center abandonment rate, blockage rate and average speed of answer. By the 10th of each month, MCPs must self-report their prior month performance in these three areas for their member services and twenty-four-hour toll-free call-in systems to ODJFS. ODJFS will inform the MCPs of any changes/updates to these URAC call center standards. 23. HIPAA Privacy Compliance Requirements The Health Insurance Portability and Accountability Act (HIPAA) Privacy Regulations at 45 CFR. Section 164.502(e) and Section 164.504(e) require ODJFS to have agreements with MCPs as a means of obtaining satisfactory assurance that the MCPs will appropriately safeguard all personal identified health information. Protected Health Information (PHI) is information received from or on behalf of ODJFS that meets the definition of PHI as defined by HIPAA and the regulations promulgated by the United States Department of Health and Human Services, specifically 45 CFR 164.501, and any amendments thereto. MCPs must agree to the following: a. MCPs shall not use or disclose PHI other than is permitted by this agreement or required by law. b. MCPs shall use appropriate safeguards to prevent unauthorized use or disclosure of PHI. c. MCPs shall report to ODJFS any unauthorized use or disclosure of PHI of which it becomes aware. d. MCPs shall ensure that all its agents and subcontractors agree to these same PHI conditions and restrictions. e. MCPs shall make PHI available for access as required by law. f. MCP shall make PHI available for amendment, and incorporate amendments as appropriate as required by law. g. MCPs shall make PHI disclosure information available for accounting as required by law. h. MCPs shall make its internal PHI practices, books and records available to the Secretary of Health and Human Services (HHS) to determine compliance. Appendix C Page 6 i. Upon termination of their agreement with ODJFS, the MCPs, at ODJFS' option, shall return to ODJFS, or destroy, all PHI in its possession, and keep no copies of the information, except as requested by ODJFS or required by law. j. ODJFS will propose termination of the MCP's provider agreement if ODJFS determines that the MCP has violated a material breach under this section of the agreement, unless inconsistent with statutory obligations of ODJFS or the MCP. 24. MCP Membership acceptance, documentation and reconciliation a. Selection Services Contractor: The MCP shall provide to the selection services contractor (SSC) ODJFS prior-approved MCP materials and directories for distribution to eligible individuals who request additional information about the MCP. b. Monthly Reconciliation of Membership and Premiums: The MCP shall reconcile member data as reported on the SSC-produced consumer contact record (CCR) with the ODJFS-produced monthly member roster (MMR) and report to the ODJFS any difficulties in interpreting or reconciling information received. Membership reconciliation questions must be identified and reported to the ODJFS prior to the first of the month to assure that no member is left without coverage. The MCP shall reconcile membership with premium payments and delivery payments as reported on the monthly remittance advice (RA). The MCP shall work directly with the ODJFS, or other ODJFS-identified entity, to resolve any difficulties in interpreting or reconciling premium information. Premium reconciliation questions must be identified within 30 days of receipt of the RA. c. Monthly Premiums and Delivery Payments: The MCP must be able to receive monthly premiums and delivery payments in a method specified by ODJFS. (ODJFS monthly prospective premium and delivery payment issue dates are provided in advance to the MCPs.) Various retroactive premium payments (e.g., newborns), and recovery of premiums paid (e.g., retroactive terminations of membership for children in custody, deferments, etc.,) may occur via any ODJFS weekly remittance. Appendix C Page 7 d. Hospital Deferment Requests: When the MCP learns of a new member's hospitalization that is eligible for deferment prior to that member's discharge, the MCP shall notify the hospital and treating providers of the potential that the MCP may not be the payer. The MCP shall work with hospitals, providers and the ODJFS to assure that discharge planning assures continuity of care and accurate payment. Notwithstanding the MCP's right to request a hospital deferment up to six months following the member's effective date, when the MCP learns of a deferment-eligible hospitalization, the MCP shall make every effort to notify the ODJFS and request the deferment as soon as possible. e. Just Cause and Continuity of Care Deferment Requests: The MCP shall follow procedures as specified by ODJFS in assisting the ODJFS in resolving member requests for member-initiated requests affecting membership. f. Newborn Notifications: Effective December 1, 2003, the MCP is required to submit newborn notifications to ODJFS in accordance with the ODJFS Newborn Notification File and Submissions Specifications. g. Pending Member (i) If a pending member (i.e., an eligible individual subsequent to plan selection but prior to their membership effective date) contacts the selected MCP, the MCP must provide any membership information requested and ensure that any care coordination (e.g., PCP selection, continuity of care) information provided by the member is forwarded to the appropriate MCP staff for processing. Such communication does not constitute confirmation of membership. (ii) Upon receipt of the CCR, the MCP may contact pending members to confirm information provided on the CCR that is unrelated to health status and to inquire if the pending member has any membership questions. In the case of pending members who have actively selected membership (as opposed to assigned members), the MCP may also confirm any health status information provided on the CCR. 25. Health Information System Requirements The ability to develop and maintain information management systems capacity is crucial to successful plan performance. ODJFS therefore requires MCPs to demonstrate their ongoing capacity in this area by meeting several related specifications. Appendix C Page 8 a. Health Information System (i) As required by 42 CFR 438.242(a), each MCP must maintain a health information system that collects, analyzes, integrates, and reports data. The system must provide information on areas including, but not limited to, utilization, grievances and appeals, and MCP membership terminations for other than loss of Medicaid eligibility. (ii) As required by 42 CFR 438.242(b)(1), each MCP must collect data on member and provider characteristics and on services furnished to its members. (iii) As required by 42 CFR 438.242(b)(2), each MCP must ensure that data received from providers is accurate and complete by verifying the accuracy and timeliness of reported data; screening the data for completeness, logic, and consistency; and collecting service information in standardized formats to the extent feasible and appropriate. (iv) As required by 42 CFR 438.242(b)(3), each MCP must make all collected data available upon request by ODJFS or the Center for Medicare and Medicaid Services (CMS). b. Electronic Data Interchange and Claims Adjudication Requirements Claims Adjudication The MCP must have the capacity to electronically accept and adjudicate non-pharmacy claims to final status (payment or denial). Prior to implementing the Health Insurance and Portability and Accountability Act (HIPAA) of 1996 mandated electronic data interchange (EDI) transaction standards, formats used for non-pharmacy claims must be the UB-92 flat file version 4 for hospital providers and the National Standard Format for other providers. The MCP must demonstrate compliance or the ability to comply with these requirements in order to receive a provider agreement. At the discretion of the department, documentation of the capacity to process claims in these formats may be waived after the HIPAA regulations have become effective and the MCP has demonstrated the capacity to process claims in the HIPAA-mandated formats. Information on claims submission procedures must be provided to non-contracting providers within thirty days of a request. MCPs must inform providers of its ability to electronically process and adjudicate claims and the process for submission. Such information must be initiated by the MCP and not only in response to provider requests. Appendix C Page 9 The MCP must notify providers who have submitted claims of claims status (paid, denied, suspended) within one month of submission. Such notification may be in the form of a claim payment/remittance advice produced on a routine monthly, or more frequent, basis. Electronic Data Interchange The MCP shall comply with all applicable provisions of HIPAA including electronic data interchange (EDI) standards for code sets and the following electronic transactions: Health care claims; Health care claim status request and response; Health care payment and remittance status; and Standard code sets. Each EDI transaction processed by the MCP shall be implemented in conformance with the appropriate version of the transaction implementation guide, as specified by federal regulation. The MCP must have the capacity to accept the following transactions from the Ohio Department of Job and Family services consistent with EDI processing specifications in the transaction implementation guides and in conformance with the 820 and 834 Transaction Companion Guides issued by ODJFS: ASC X12 820 - Payroll Deducted and Other Group Premium Payment for Insurance Products; and ASC X12 834 - Benefit Enrollment and Maintenance. The MCP shall comply with the HIPAA mandated EDI transaction standards and code sets no later than the required compliance dates as set forth in the federal regulations. Documentation of Compliance with Mandated EDI Standards The capacity of the MCP and/or applicable trading partners and business associates to electronically conduct claims processing and related transactions in compliance with standards and effective dates mandated by HIPAA must be demonstrated as outlined below. Appendix C Page 10 Verification of Compliance with HIPAA (Health Insurance Portability and Accountability Act of 1995) MCPs shall submit written verification, prior to the compliance dates for transaction standards and code sets specified in 42 CFR Part 162 - Health Insurance Reform: Standards for Electronic Transactions (HIPAA regulations), that the MCP has established the capability of sending and receiving applicable transactions in compliance with the HIPAA regulations. The written verification shall specify the date that the MCP has: 1) achieved capability for sending and/or receiving the following transactions, 2) entered into the appropriate trading partner agreements, and 3) implemented standard code sets. If the MCP has obtained third-party certification of HIPAA compliance for any of the items listed below, that certification may be submitted in lieu of the MCP's written verification for the applicable item(s). 1. Trading Partner Agreements 2. Code Sets 3. Transactions a. Health Care Claims or Equivalent Encounter Information (ASC X12N 837 & NCPDP 5.1) b. Eligibility for a Health Plan (ASC X12N 270/271) c. Referral Certification and Authorization (ASC X12N 278) d. Health Care Claim Status (ASC X12N 276/277) e. Enrollment and Disenrollment in a Health Plan (ASC X12N 834) f. Health Care Payment and Remittance Advice (ASC X12N 835) g. Health Plan Premium Payments (ASC X12N 820) h. Coordination of Benefits Trading Partner Agreement with ODJFS MCPs must complete and submit an EDI trading partner agreement in a format specified by the ODJFS. Submission of the copy of the trading partner agreement prior to entering into the provider agreement may be waived at the discretion of ODJFS; if submission prior to entering into the provider agreement is waived, the trading partner agreement must be submitted at a subsequent date determined by ODJFS. Noncompliance with the EDI and claims adjudication requirements will result in the imposition of penalties, as outlined in Appendix N, Compliance Assessment System, of the Provider Agreement. Appendix C Page 11 c. Encounter Data Submission Requirements General Requirements Each MCP must collect data on services furnished to members through an encounter data system and must report encounter data to the ODJFS. ODJFS is required to collect this data pursuant to federal requirements. MCPs are required to submit this data electronically to ODJFS on a monthly basis in the following standard formats: - Institutional Claims - UB92 flat file - Noninstitutional Claims - National standard format - Prescription Drug Claims - NCPDP ODJFS relies heavily on encounter data for monitoring MCP performance. The ODJFS uses encounter data to measure clinical performance, conduct access and utilization reviews, reimburse MCPs for newborn deliveries and help set MCP capitation rates. For these reasons, it is important that encounter data is timely, accurate, and complete. Data quality and performance measures and standards are described in the MCP Provider Agreement. An encounter represents all of the services, including medical supplies and medications, provided to a member of the MCP by a particular provider, regardless of the payment arrangement between the MCP and the provider. For example, if a member had an emergency department visit and was examined by a physician, this would constitute two encounters, one related to the hospital provider and one related to the physician provider. However, for the purposes of calculating a utilization measure, this would be counted as a single emergency department visit. If a member visits their PCP and the PCP examines the member and has laboratory procedures done within the office, then this is one encounter between the member and their PCP. If the PCP sends the member to a lab to have procedures performed, then this is two encounters; one with the PCP and another with the lab. For pharmacy encounters, each prescription filled is a separate encounter. Encounters include services paid for retrospectively through fee-for-service payment arrangements, and prospectively through capitated arrangements. Only encounters with services (line items) that are paid by the MCP, fully or in part, and for which no further payment is anticipated, are acceptable encounter data submissions, except for immunization services. Immunization services submitted to the MCP must be submitted to ODJFS if these services were paid for by another entity (e.g., free vaccine program). Appendix C Page 12 All other services that are unpaid or paid in part and for which the MCP anticipates further payment (e.g., unpaid services rendered during a delivery of a newborn) may not be submitted to ODJFS until they are paid. Penalties for noncompliance with this requirement are specified in Appendix N, Compliance Assessment. Acceptance Testing The MCP must have the capability to report all elements in the Minimum Data Set as set forth in the ODJFS Encounter Data Specifications and must submit a test tape in the required formats prior to contracting or prior to an information systems replacement or update. Acceptance testing of encounter data is required: (i) Before an MCP may submit Aproduction@ encounter tapes; and/or (ii) Whenever an MCP changes the method or preparer of the electronic media; and/or (iii) When the ODJFS determines an MCP's data submissions have an unacceptably high error rate. MCPs that change or modify information systems that are involved in producing encounter data files, either internally or by changing vendors, are required to submit to ODJFS for review and approval a transition plan including the submission of test tapes. Once an acceptable test file is submitted to ODJFS, the MCP can return to submitting production files. ODJFS will inform MCPs in writing when a test file is acceptable. Once an MCP's new or modified information systems are operational, that MCP will have up to 90 days to submit an acceptable test file and an acceptable production file. Submission of test files can start before the new or modified information systems are in production. ODJFS reserves the right to verify any MCP's capability to report elements in the minimum data set prior to executing the provider agreement for the next contract period. Penalties for noncompliance with this requirement are specified in Appendix N, Compliance Assessment System. Encounter Data Tape Submission Procedures A certification letter must accompany the submission of an encounter data tape. The certification letter must be signed by the MCP's Chief Executive Officer (CEO), Chief Financial Officer (CFO), or an individual who has delegated authority to sign for, and who reports directly to, the MCP's CEO or CFO. No more than two production tapes per format (e.g., NSF) should be submitted each month. If it is necessary for an MCP to submit more than two production tapes for a particular format in a month, they must request permission to do so through their Contract Administrator. Appendix C Page 13 Timing of Encounter Data Submissions ODJFS recommends that MCPs submit encounters no more than thirty-five days after the end of the month in which they were paid. For example, claims paid in January are due March 5. ODJFS recommends that MCPs submit tapes by the 5th of each month. This will help to ensure that the encounters are included in the ODJFS master file in the same month in which they were submitted. d. Information Systems Review Every two years, and before ODJFS enters into a provider agreement with a new MCP, ODJFS or designee may review the information system capabilities of each MCP. Each MCP must participate in the review, except as specified below. The review will assess the extent to which MCPs are capable of maintaining a health information system including producing valid encounter data, performance measures, and other data necessary to support quality assessment and improvement, as well as managing the care delivered to its members. The following activities will be carried out during the review. ODJFS or its designee will: (i) Review the Information Systems Capabilities Assessment (ISCA) forms, as developed by CMS; which the MCP will be required to complete. (ii) Review the completed ISCA and accompanying documents; (iii) Conduct interviews with MCP staff responsible for completing the ISCA, as well as staff responsible for aspects of the MCP's information systems function; (iv) Analyze the information obtained through the ISCA, conduct follow-up interviews with MCP staff, and write a statement of findings about the MCP's information system. (v) Assess the ability of the MCP to link data from multiple sources; (vi) Examine MCP processes for data transfers; (vii) If an MCP has a data warehouse, evaluate its structure and reporting capabilities; Appendix C Page 14 (viii) Review MCP processes, documentation, and data files to ensure that they comply with state specifications for encounter data submissions; and (ix) Assess the claims adjudication process and capabilities of the MCP. As noted above, the information system review may be performed every two years. However, if ODJFS or its designee identifies significant information system problems, then ODJFS or its designee may conduct, and the MCP must participate in, a review the following year. If an MCP had an assessment performed of its information system through a private sector accreditation body or other independent entity within the two years preceding when the ODJFS or its designee will be conducting its review, and has not made significant changes to its information system since that time, and the information gathered is the same as or consistent with the ODJFS or its designee's proposed review, as determined by the ODJFS, then the MCP will not required to undergo the IS review. The MCP must provide ODJFS or its designee with a copy of the review that was performed so that ODJFS can determine whether or not the MCP will be required to participate in the IS review. MCPs who are determined to be exempt from the IS review must participate in subsequent information system reviews. 26. Delivery Payments MCPs will be reimbursed for paid deliveries that are identified in the submitted encounters using the methodology outlined in the ODJFS Methods for Reimbursing for Deliveries. The delivery payment represents the facility and professional service costs associated with the delivery event and postpartum care that is rendered in the hospital immediately following the delivery event; no prenatal or neonatal experience is included in the delivery payment. If a delivery occurred, but the MCP did not reimburse providers for any costs associated with the delivery, then the MCP shall not submit the delivery encounter to ODJFS and is not entitled to receive payment for the delivery. MCPs are required to submit all delivery encounters to ODJFS no later than one year after the date of the delivery. Delivery encounters which are submitted after this time will be denied payment. MCPs will receive notice of the payment denial on the remittance advice. To capture deliveries outside of institutions (e.g., hospitals) and deliveries in hospitals without an accompanying physician encounter, both the institutional encounters (UB-92) and the noninstitutional encounters (NSF) are searched for deliveries. Appendix C Page 15 If a physician and a hospital encounter is found for the same delivery, only one payment will be made. The same is true for multiple births; if multiple delivery encounters are submitted, only one payment will be made. The method for reimbursing for deliveries includes the delivery of stillborns where the MCP incurred costs related to the delivery. Rejections If a delivery encounter is not submitted according to ODJFS specifications, it will be rejected and MCPs will receive this information on the exception report (or error report) that accompanies every tape. Tracking, correcting and resubmitting all rejected encounters is the responsibility of the MCP and is required by ODJFS. Timing of Delivery Payments MCPs will be paid monthly for deliveries. For example, payment for a delivery encounter submitted by March 5, 2003, will be reimbursed in May 2003. This payment will be a part of the weekly update (adjustment payment) that is in place currently. The third weekly update of the month will include the delivery payment. The remittance advice is in the same format as the capitation remittance advice. A delivery payment will be indicated by the code >MC00W= in the >Proc-Mod / Revenue-Proc / Drug Code= field. All other information will be the same as a capitation payment. Updating and Deleting Delivery Encounters The process for updating and deleting delivery encounters is handled differently from all other encounters. See the ODJFS Encounter Data Specifications for detailed instructions on updating and deleting delivery encounters. The process for deleting delivery encounters can be found on page 35 of the UB-92 technical specifications (record/field 20-7) and page III-47 of the NSF technical specifications (record/field CA0-31.0a). Auditing of Delivery Payments A delivery payment audit will be conducted periodically. If medical records do not substantiate that a delivery occurred related to the payment that was made, then ODJFS will recoup the delivery payment from the MCP. Also, if it is determined that the encounter which triggered the delivery payment was not a paid encounter, then ODJFS will recoup the delivery payment. 27. If the MCP will be using the Internet functions that will allow approved users to access member information (e.g., eligibility verification), the MCP must receive prior approval from ODJFS that verifies that the proper safeguards, firewalls, etc., are in place to protect member data. Appendix C Page 16 28. MCPs must receive prior approval from ODJFS before adding any information to their website that would require ODJFS prior approval in hard copy form (e.g., provider listings, member handbook information). 29. Pursuant to 42 CFR 438.106(b), the MCP is prohibited from holding a member liable for services provided to the member in the event that the ODJFS fails to make payment to the MCP. 30. In the event of an insolvency of an MCP, the MCP, as directed by ODJFS, must cover the continued provision of services to members until the end of the month in which insolvency has occurred, as well as the continued provision of inpatient services until the date of discharge for a member who is institutionalized when insolvency occurs. APPENDIX D ODJFS RESPONSIBILITIES The following are ODJFS responsibilities or clarifications that are not otherwise specifically stated in OAC Chapter 5101: 3-26 or elsewhere in the ODJFS-MCP provider agreement. General Provisions 1. ODJFS will provide MCPs with an opportunity to review and comment on the rate-setting time line and proposed rates, and proposed changes to the OAC program rules or the provider agreement. 2. ODJFS will notify MCPs of managed care program policy and procedural changes and, whenever possible, offer sufficient time for comment and implementation. 3. ODJFS will provide regular opportunities for MCPs to receive program updates and discuss program issues with ODJFS staff. 4. ODJFS will provide technical assistance sessions where MCP attendance and participation is required. ODJFS will also provide optional technical assistance sessions to MCPs, individually or as a group. 5. ODJFS will provide MCPs with an annual MCP Calendar of Submissions outlining major submissions and due dates. 6. ODJFS will identify contact staff, including the Contract Administrator, selected for each MCP. 7. ODJFS will recalculate the minimum provider panel specifications if ODJFS determines that significant changes have occurred in the availability of specific provider types and the number and composition of the eligible population. 8. ODJFS will recalculate the geographic accessibility standards, using the geographic information systems (GIS) software, if ODJFS determines that significant changes have occurred in the availability of specific provider types and the number and composition of the eligible population and/or the ODJFS provider panel specifications. 9. On a monthly basis, ODJFS will provide MCPs with an electronic file containing their MCP's provider panel as reflected in the ODJFS Provider Verification System (PVS) database. 10. On a monthly basis, ODJFS will provide MCPs with an electronic Master Provider File containing all the Ohio Medicaid fee-for-service providers, which includes their Medicaid Provider Number, as well as all providers who have been assigned a provider reporting number for encounter data purposes. Appendix D Page 2 11. County Designation (Voluntary/Mandatory /Preferred Option Designation) Membership in a service area is voluntary unless ODJFS approves membership in the service area for Preferred Option or mandatory status. It is ODJFS' intention to implement mandatory managed care programs in service areas wherever choice and capacity allow and the criteria in 42 CFR 438.50(a) are met. An MCP in a voluntary county that believes it exceeds minimum capacity requirements and possesses an exemplary performance history may request that ODJFS designate the county as Preferred Option and the plan as the Preferred Option MCP. 12. Consumer information a. ODJFS or its delegated entity will provide membership notices, informational materials, and instructional materials relating to members and eligible individuals in a manner and format that may be easily understood. At least annually, ODJFS will provide MCP eligible individuals, including current MCP members, with a Consumer Guide. The Consumer Guide will describe the managed care program and include information on the MCP options in the service area and other information regarding the managed care program as specified in 42 CFR 438.10. b. ODJFS will notify members or ask MCPs to notify members about significant changes affecting contractual requirements, member services or access to providers. c. If an MCP elects not to provide, reimburse, or cover a counseling service or referral service due to an objection to the service on moral or religious grounds, ODJFS will provide coverage and reimbursement for these services for the MCP's members. ODJFS will provide information on what services the MCP will not cover and how and where the MCP's members may obtain these services in the applicable Consumer Guides. 13. Membership Selection and Premium Payment a. Selection Services Entity (SSE) also known as Selection Services Contractor (SSC): The ODJFS-contracted SSC will provide unbiased education, selection services, and community outreach for the Medicaid managed care program. The SSC shall operate a statewide toll-free telephone center to assist eligible individuals in selecting an MCP or choosing a health care delivery option. The SSC shall distribute the most current Consumer Guide that includes the managed care program information as specified in 42 CFR 438.10, as well as ODJFS prior-approved MCP materials, such as solicitation brochures and provider directories, to consumers who request additional materials. Appendix D Page 3 b. Assignments: ODJFS or the SSC shall assign to an MCP those eligible individuals in mandatory and Preferred Option counties who fail to make a health plan selection following receipt of notice to do so. Assignments shall be based on previous MCP membership history or previous Medicaid FFS primary care relationships when possible. c. Consumer Contact Record (CCR): ODJFS or their designated entity shall forward CCRs to MCPs on no less than a weekly basis. d. Monthly Premiums and Delivery Payments: ODJFS will remit payment to the MCPs via an electronic funds transfer (EFT), or at the discretion of ODJFS, by paper warrant. e. Remittance Advice: ODJFS will confirm all premium payments and delivery payments to the MCP during the month via a monthly remittance advice (RA), which is sent to the MCP the week following state cut-off. f. MCP Reconciliation Assistance: ODJFS will work with an MCP-designated contact(s) to resolve the MCP's member and newborn eligibility and premium payment inquiries and discrepancies and hospital deferment request determinations. 14. ODJFS will make available a website which includes current program information. 15. ODJFS will regularly provide information to MCPs regarding different aspects of MCP performance including, but not limited to, information on MCP-specific and statewide external quality review organization surveys, focused clinical quality of care studies, consumer satisfaction surveys and provider profiles. APPENDIX E RATE METHODOLOGY [MERCER LOGO] Government Human Services Consulting 800 LaSalle Avenue, Suite 2100 Minneapolis, MN 55402-2012 612 642 8892 Fax 612 642 8911 angela.wasdyke@mercer.com www.mercerHR.com November 11, 2003 Ms. Mitali Ghatak Office of Health Plan Policy Ohio Department of Job and Family Services 30 East Broad Street, 27th Floor Columbus, Ohio 43215-3414 Subject: JULY 1, 2003 - DECEMBER 31, 2004 CAPITATION RATE FINAL CERTIFICATION Dear Mitali: The Ohio Department of Job and Family Services (State) contracted with Mercer Government Human Services Consulting (Mercer) to develop actuarially sound capitation rates for use during July 1, 2003 through December 31, 2004. Six (6)-month rates were developed for the period July 1, 2003 through December 31, 2003 and twelve (12)-month rates were developed for the period January 1, 2004 through December 31, 2004. As part of the rate-setting process, Mercer developed a Data Book summarizing Ohio's historical Medicaid fee-for-service (FFS) cost and utilization experience. This letter, together with the Data Book, details the methodology used to determine the fee-for-service equivalents (FFSEs) and capitation rates for the Healthy Families (HF) and Healthy Start (HST) populations. OVERVIEW I. Data Book II. Develop FFSEs III. Develop Capitation Rates IV. Certification of Final Rates I. DATA BOOK The rate-setting process began with summarizing the FFS data from calendar years (CY) 1998-2000, which is contained in the Data Book dated March 29, 2002. This data was validated by the State as outlined in the Centers for Medicare and Medicaid Services' (CMS) Rate Checklist. During the time period of this base data, three significant expansions took place in Ohio that have an effect upon the 6-month and 12-month rates. These expansions increased eligibility [MMC LOGO] [MERCER LOGO] Government Human Services Consulting Page 2 November 11, 2003 Ms. Mitali Ghatak Ohio Department of Job and Family Services definitions for covered populations and included populations previously ineligible. These expansion populations are listed below: [MERCER LOGO] Government Human Services Consulting Page 3 November 11, 2003 Ms. Mitali Ghatak Ohio Department of Job and Family Services II. DEVELOP FFSEs The FFSEs represent the corresponding claims experience expressed on a per member per month (PMPM) basis for a population that is actuarially equivalent to the population that will be enrolled in the managed care program during the 6-month and 12-month periods. The FFSEs are derived from further adjusting the data contained in the Data Book. These further adjustments are described in the following sections: A. Historical Trend After the Data Book adjustments were applied, the data was trended to a common year. The CY 1998 data was trended forward two years, while the CY 1999 data was trended forward one year. This resulted in a base period with the midpoint of July 1, 2000. Historical trends are based on Ohio FFS data for the HF and HST populations. Trends were developed by categories of service (COS): inpatient, outpatient, physician, pharmacy, and other. B. Data Credibility Since the FFS data has eroded due to the increase in managed care membership, some of the remaining FFS data may not be meaningful, and should not be used to set capitation rates. The increase in managed care enrollment is due to the Preferred Option program and higher enrollment in some voluntary counties. Mercer did not rely on historical data for time periods with managed care penetration in excess of 60%. As a result, area factors were used in several counties(1). Data was used in two counties(2) with managed care penetration exceeding 60% in one of the three base years; however, less credibility was given to the year in question. All remaining counties received equal credibility between the three trended base years. Area factors were developed for most counties using a blend of historical FFS data from state fiscal year (SFY) 1995 and SFY 1996. Because managed care penetration was below 60% in all but Hamilton and Montgomery counties, the data from SFY 1995-SFY 1996 was deemed credible. Historical FFS data from these years was summarized for each area factor county and the Base Region(3). Each area factor county's FFS cost and utilization data was compared with the - -------------------- (1) Butler, Cuyahoga, Franklin, Hamilton, Lucas, Montgomery, and Summit counties (2) Stark and Wood counties (3) Allen, Belmont, Clark, Clermont, Columbiana, Crawford, Defiance, Delaware, Fairfield, Fulton, Greene, Henry, Huron, Jefferson, Licking, Lorain, Madison, Mahoning, Monroe, Muskingum, Ottawa, Portage, Pickaway, Richland, Sandusky, Trumbull, Warren, and Washington counties. [MERCER LOGO] Government Human Services Consulting Page 4 November 11, 2003 Ms. Mitali Ghatak Ohio Department of Job and Family Services Base Region FFS data from the same time period. This was done on a COS and rate cohort level of detail. Developing the area factors by rate cohort removes the impact of shifting demographics from year to year. Since the managed care penetration level for Hamilton and Montgomery counties was greater than 60% in SFY 1995 and SFY 1996, the FFS data for these counties and this time period were deemed not credible. Therefore, the area factor approach as outlined above could not be used. The rates for these counties were developed based on Cuyahoga county data and adjusted for inpatient services reflective of each county. This is the same approach used in the CY 2002 rate-setting process. Furthermore, adequate membership size was necessary to develop individual county capitation rates. The FFS data from a number of smaller, more rural counties expected to enter managed care during the 12-month rating period were combined to develop the capitation rates. These counties included Belmont/Monroe, Clark/Madison, Defiance/Fulton/Henry, and Ottawa/Sandusky. C. Blending with CY 2002 FFSEs In order to smooth data fluctuations year over year and develop a more reliable base for the capitation rates, Mercer recommended the 6-month and 12-month FFSEs (FFS base period: CY 1998, CY 1999, and CY 2000) be blended together with CY 2002 FFSEs (FFS base period: SFY 1997, SFY 1998, and SFY 1999). Prior to blending, the CY 2002 FFSEs were trended forward to the midpoint of each of the rating periods. For counties new to managed care, Mercer blended the 6-month and 12-month FFSEs with trended statewide CY 2002 FFSEs. The resulting blended FFSEs were compared with other historical FFS data sources for reasonability. III. DEVELOP CAPITATION RATES The capitation rates that are developed cover only services provided in the State plan. In addition, the data used to develop capitation rates reflects all medical expenses and is not reduced for reinsurance premiums or stop loss. The State currently requires the managed care plans (MCPs) to purchase reinsurance to cover, at a minimum, 80% of inpatient costs incurred by one member in one year, in excess of $75,000. No risk sharing arrangements between the MCPs and the State are used, except as noted below for MCP administration. [MERCER LOGO] Government Human Services Consulting Page 5 November 11, 2003 Ms. Mitali Ghatak Ohio Department of Job and Family Services A. Prospective Trend Trend is an estimate of the change in the overall cost of providing a specific benefit service over a finite period of time. A trend factor is necessary to estimate the expenses of providing health care services in some future year, based in whole or in part upon expenses incurred in prior years. CMS requires the FFSEs be trended forward from the base period to the contract period, and actual trend experience is used to the fullest extent possible. Cost and utilization trend factors were developed by category of service using monthly Ohio historical experience, with some consideration of national trends and indices. The base data was trended forward 39 months from the midpoint of the base period (July 1, 2000) to the midpoint of the contract period (October 1, 2003) for the 6-month rates. For the 12-month rates, the base data was trended forward 48 months from the midpoint of the base period (July 1, 2000) to the midpoint of the contract period (July 1, 2004). B. Programmatic Changes CMS requires the rate-setting methodology used to determine capitation rates incorporate the impact of any programmatic changes that have taken place or are anticipated to take place between the base period and the contract period. The State provided Mercer with a detailed list of program changes that will have a material impact upon the cost, utilization, or demographic structure of the program prior to or within the contract period, and whose impact was not included within the base period data. For those adjustments not incorporated through trend, Mercer adjusted the FFS experience for the following changes: [MERCER LOGO] Government Human Services Consulting Page 6 November 11, 2003 Ms. Mitali Ghatak Ohio Department of Job and Family Services - - The legislature also increased the outpatient rates for general hospitals effective July 1, 2003. Mercer applied a unit cost adjustment to both the 6-month and 12-month rates for this program change. - - Mercer reviewed more recent cesarean rate data provided by the State that showed an increase in caesarean rates year over year. As a result, Mercer updated the caesarean rate from 16% to 17% for the 6-month and 12-month rates. C. Voluntary Selection As a result of the adverse selection adjustment that was applied in the Data Book, the FFSEs already reflect the risk of the entire Medicaid program, i.e., FFS and managed care individuals. To reflect solely the risk of the managed care program, Mercer modified the FFSEs based on the projected managed care penetration levels for the 6-month and 12-month rates(4). This voluntary selection adjustment modifies the FFSEs to reflect the risk to the MCPs, i.e., only those individuals who enroll in a health plan. This adjustment is based on data from other states as well as the actuarial principle that costs associated with enrolled managed care members are generally lower. This adjustment varied by county based on the projected MCP penetration level for the contract period. D. Clinical Measures As part of the MCPs contract, the State requires each MCP reach a minimum performance standard in certain areas including dental, maternity, and well-child services. Mercer has reviewed the impact on the managed care rates based on these standards and incentives and has developed a set of adjustments based upon the State's expected improvement rate. These utilization targets were built into the capitation rates. E. Managed Care Savings In developing managed care savings assumptions, Mercer applied generally accepted actuarial principles that attempt to reflect the impact on FFS experience of MCP programs. Cost Report (MCP reported Medicaid utilization, cost, and PMPM experience) data from CY 2000 and CY 2001 and CY 2002 data were used to assist Mercer with determining how services and costs may have shifted under managed care by COS. The CY 2000 and CY 2001 cost reports were reviewed by an independent auditor, as required by the State. In addition, the State performed a - ------------------ (4) Please see revised penetration chart shown in Exhibit A. [MERCER LOGO] Government Human Services Consulting Page 7 November 11, 2003 Ms. Mitali Ghatak Ohio Department of Job and Family Services desk audit to validate the Cost Report data. The resulting assumptions are consistent with an economic and efficiently operated Medicaid managed care plan. These managed care savings assumptions vary by county, cohort, and COS. Mercer further assumed a mix of Cesarean deliveries of 17% under managed care, based on review of historical MCP data. F. MCP Administrative Load In return for providing more efficient care to enrollees, there are additional administrative costs the MCPs incur. In addition to these administrative costs, the State allows the MCPs a load for risk charges and profit. The final capitation rate is the result of netting out the savings achieved through case management and adding the MCP administrative/profit load. Mercer reviewed the MCP reported administrative experience and overall financial results to determine an amount for administration of 12% of premium for existing plans with 1% of this administrative load contingent upon MCPs meeting administrative requirements. For plans new to managed care in Ohio, the administrative load and at-risk amounts will be set as follows: - - First Plan Year - Administration of 13% of premium - 0% at risk - - Second Plan Year - Administration of 12% of premium - 0% percent at risk - - Third Plan Year - Administration of 12% of premium - 1% at risk IV. CERTIFICATION OF FINAL RATES The following capitation rates were developed for each participating county for the 6-month (July 1, 2003 through December 31, 2003) and the 12-month contract period (January 1, 2004 through December 31, 2004): - - Healthy Families/Healthy Start, Less Than 1, Male & Female, - - Healthy Families/Healthy Start, 1 Year Old, Male & Female, - - Healthy Families/Healthy Start, 2-13 Years Old, Male & Female, - - Healthy Families/Healthy Start, 14-18 Years Old, Female, - - Healthy Families/Healthy Start, 14-18 Years Old, Male, [MERCER LOGO] Government Human Services Consulting Page 8 November 11, 2003 Ms. Mitali Ghatak Ohio Department of Job and Family Services - - Healthy Families, 19-44 Years Old, Female, - - Healthy Families, 19-44 Years Old, Male, - - Healthy Families, 45 and Over, Male & Female, - - Healthy Start, 19-64 Years Old, Female, and - - Delivery Payment. Summaries of the 6-month and 12-month rates by county and by rate cohort may be found in Exhibit B. Mercer certifies the above rates were developed in accordance with generally accepted actuarial practices and principles by actuaries meeting the qualification standards of the American Academy of Actuaries for the populations and services covered under the managed care contract. Rates developed by Mercer are actuarial projections of future contingent events. Actual MCP costs will differ from these projections. Mercer has developed these rates on behalf of the State to demonstrate compliance with the CMS requirements under 42 CFR 438.6(c) and are in accordance with applicable law and regulations. MCPs are advised that the use of these rates may not be appropriate for their particular circumstance and Mercer disclaims any responsibility for the use of these rates by MCPs for any purpose. Mercer recommends any MCP considering contracting with the State should analyze its own projected medical expense, administrative expense, and any other premium needs for comparison to these rates before deciding whether to contract with the State. Use of these rates for purposes beyond that stated may not be appropriate. Sincerely, /s/ Angela L. WasDyke Angela L. WasDyke, A.S.A., M.A.A.A. AW/SJ/KC/kb Copy: Stephanie Davis, Shereen Jensen, Kristin Coyle STATE OF OHIO EXHIBIT A FINAL PENETRATION CHART
PROJECTED PROJECTED COUNTY 7/03-12/03 CY04 - --------------------- ---------- --------- Allen 15% Belmont/Monroe 5% Butler 65% 75% Clark 40% Clark/Madison 60% Clermont 5% 5% Columbiana 15% Crawford 5% Cuyahoga 90% 90% Defiance/Fulton/Henry 5% Delaware 5% Fairfield 5% Franklin 65% 75% Greene 40% 45% Hamilton 65% 70% Huron 5% Jefferson 5% Licking 15% Lorain 60% 65% Lucas 90% 90% Mahoning 5% 40% Montgomery 60% 75% Muskingum 5% Ottawa/Sandusky 5% Pickaway 5% 5% Portage 15% Richland 5% Stark 75% 90% Summit 90% 90% Trumbull 5% 40% Warren 5% 5% Washington 5% Wood 15% 15%
Mercer Government Human Services Consulting STATE OF OHIO EXHIBIT B FINAL SIX MONTH RATES 2ND HALF 2003
Annualized 7/1/2003 - 7/1/2003 - Dec 2002 CY 2002 12/31/2003 7/1/2003 - 12/31/2003 Managed Care Rate w/ Guaranteed 12/31/2003 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase - -------- ----------------------- ------------ ------- --------- ---------- ------------ ---------- -------- Butler HF/HST, Age 0, M & F 7,908 6.1% $ 527.77 $ 428.03 $ 4.32 $ 432.36 -18.1% Butler HF/HST, Age 1, M & F 7,752 6.0% $ 110.32 $ 119.95 $ 1.21 $ 121.16 9.8% Butler HF/HST, Age 2-13, M & F 66,072 50.7% $ 70.25 $ 78.13 $ 0.79 $ 78.92 12.3% Butler HF/HST, Age 14-18, M 7,452 5.7% $ 94.50 $ 101.30 $ 1.02 $ 102.32 8.3% Butler HF/HST, Age 14-18, F 8,184 6.3% $ 123.11 $ 137.87 $ 1.39 $ 139.27 13.1% Butler HF, Age 19-44, M 6,564 5.0% $ 221.82 $ 220.97 $ 2.23 $ 223.20 0.6% Butler HF, Age 19-44, F 23,040 17.7% $ 187.85 $ 211.60 $ 2.14 $ 213.74 13.8% Butler HF, Age 45+, M & F 1,608 1.2% $ 490.36 $ 488.26 $ 4.93 $ 493.19 0.6% Butler HST, Age 19-64, F 1,668 1.3% $ 304.21 $ 341.42 $ 3.45 $ 344.87 13.4% ------------ ------- --------- ---------- ------------ ---------- -------- Butler Subtotal 130,248 100.0% $ 141.75 $ 146.19 $ 1.48 $ 147.66 4.2% ------------ ------- --------- ---------- ------------ ---------- -------- Butler Delivery Payment 269 0.2% $3,417.97 $ 3,873.73 $ 39.13 $ 3,912.86 14.5% ------------ ------- --------- ---------- ------------ ---------- -------- Butler Total 130,248 100.0% $ 148.81 $ 154.19 $ 1.56 $ 155.75 4.7% ------------ ------- --------- ---------- ------------ ---------- -------- Clark HF/HST, Age 0, M & F 1,116 6.0% $ 578.29 $ 444.83 $ 4.49 $ 449.32 -22.3% Clark HF/HST, Age 1, M & F 1,044 5.6% $ 116.69 $ 122.08 $ 1.23 $ 123.31 5.7% Clark HF/HST, Age 2-13, M & F 9,036 48.8% $ 70.44 $ 76.92 $ 0.78 $ 77.70 10.3% Clark HF/HST, Age 14-18, M 924 5.0% $ 88.36 $ 93.27 $ 0.94 $ 94.21 6.6% Clark HF/HST, Age 14-18, F 924 5.0% $ 126.73 $ 139.13 $ 1.41 $ 140.53 10.9% Clark HF, Age 19-44, M 1,188 6.4% $ 192.54 $ 190.61 $ 1.93 $ 192.53 0.0% Clark HF, Age 19-44, F 3,936 21.3% $ 200.69 $ 224.96 $ 2.27 $ 227.24 13.2% Clark HF, Age 45+, M & F 252 1.4% $ 383.27 $ 408.24 $ 4.12 $ 412.36 7.6% Clark HST, Age 19-64, F 96 0.5% $ 281.21 $ 308.43 $ 3.12 $ 311.55 10.8% ------------ ------- --------- ---------- ------------ ---------- -------- Clark Subtotal 18,516 100.0% $ 148.23 $ 150.04 $ 1.52 $ 151.55 2.2% ------------ ------- --------- ---------- ------------ ---------- -------- Clark Delivery Payment 45 0.2% $3,388.96 $ 3,762.72 $ 38.01 $ 3,800.73 12.2% ------------ ------- --------- ---------- ------------ ---------- -------- Clark Total 18,516 100.0% $ 156.47 $ 159.18 $ 1.61 $ 160.79 2.8% ------------ ------- --------- ---------- ------------ ---------- -------- Clermont HF/HST, Age 0, M & F 427 5.5% $ 546.23 $ 417.91 $ 4.22 $ 422.14 -22.7% Clermont HF/HST, Age 1, M & F 430 5.5% $ 141.76 $ 140.79 $ 1.42 $ 142.21 0.3% Clermont HF/HST, Age 2-13, M & F 3,975 51.2% $ 73.20 $ 82.80 $ 0.84 $ 83.64 14.3% Clermont HF/HST, Age 14-18, M 456 5.9% $ 81.01 $ 90.95 $ 0.92 $ 91.87 13.4% Clermont HF/HST, Age 14-18, F 522 6.7% $ 139.84 $ 156.97 $ 1.59 $ 158.56 13.4% Clermont HF, Age 19-44, M 268 3.5% $ 197.25 $ 193.51 $ 1.95 $ 195.47 -0.9% Clermont HF, Age 19-44, F 1,513 19.5% $ 212.15 $ 238.48 $ 2.41 $ 240.89 13.5% Clermont HF, Age 45+, M & F 96 1.2% $ 472.01 $ 497.78 $ 5.03 $ 502.81 6.5% Clermont HST, Age 19-64, F 79 1.0% $ 362.51 $ 371.10 $ 3.75 $ 374.85 3.4% ------------ ------- --------- ---------- ------------ ---------- -------- Clermont Subtotal 7,766 100.0% $ 147.17 $ 152.12 $ 1.54 $ 153.65 4.4% ------------ ------- --------- ---------- ------------ ---------- -------- Clermont Delivery Payment 26 0.3% $4,043.64 $ 3,893.41 $ 39.33 $ 3,932.74 -2.7% ------------ ------- --------- ---------- ------------ ---------- -------- Clermont Total 7,766 100.0% $ 160.71 $ 165.15 $ 1.67 $ 166.82 3.8% ------------ ------- --------- ---------- ------------ ---------- -------- Cuyahoga HF/HST, Age 0, M & F 80,520 4.5% $ 584.96 $ 475.39 $ 4.80 $ 480.19 -17.9% Cuyahoga HF/HST, Age 1, M & F 86,280 4.8% $ 124.16 $ 135.90 $ 1.37 $ 137.28 10.6% Cuyahoga HF/HST, Age 2-13, M & F 891,084 50.0% $ 65.37 $ 73.31 $ 0.74 $ 74.05 13.3% Cuyahoga HF/HST, Age 14-18, M 119,844 6.7% $ 73.86 $ 79.26 $ 0.80 $ 80.06 8.4% Cuyahoga HF/HST, Age 14-18, F 127,620 7.2% $ 113.20 $ 128.73 $ 1.30 $ 130.03 14.9% Cuyahoga HF, Age 19-44, M 61,008 3.4% $ 174.98 $ 170.34 $ 1.72 $ 172.06 -1.7% Cuyahoga HF, Age 19-44, F 360,012 20.2% $ 196.51 $ 223.69 $ 2.26 $ 225.94 15.0% Cuyahoga HF, Age 45+, M & F 36,600 2.1% $ 386.19 $ 380.57 $ 3.84 $ 384.42 -0.5% Cuyahoga HST, Age 19-64, F 17,808 1.0% $ 343.12 $ 388.93 $ 3.93 $ 392.86 14.5% ------------ ------- --------- ---------- ------------ ---------- -------- Cuyahoga Subtotal 1,780,776 100.0% $ 135.35 $ 142.09 $ 1.44 $ 143.53 6.0% ------------ ------- --------- ---------- ------------ ---------- -------- Cuyahoga Delivery Payment 6,847 0.4% $3,975.41 $ 4,634.00 $ 46.81 $ 4,680.81 17.7% ------------ ------- --------- ---------- ------------ ---------- -------- Cuyahoga Total 1,780,776 100.0% $ 150.63 $ 159.91 $ 1.62 $ 161.52 7.2% ------------ ------- --------- ---------- ------------ ---------- -------- Franklin HF/HST, Age 0, M & F 41,412 4.9% $ 503.34 $ 408.34 $ 4.12 $ 412.47 -18.1% Franklin HF/HST, Age 1, M & F 45,912 5.5% $ 107.80 $ 116.70 $ 1.18 $ 117.88 9.3% Franklin HF/HST, Age 2-13, M & F 432,048 51.6% $ 63.12 $ 70.60 $ 0.71 $ 71.32 13.0% Franklin HF/HST, Age 14-18, M 47,880 5.7% $ 75.42 $ 80.51 $ 0.81 $ 81.33 7.8% Franklin HF/HST, Age 14-18, F 54,540 6.5% $ 112.59 $ 127.29 $ 1.29 $ 128.57 14.2% Franklin HF, Age 19-44, M 29,256 3.5% $ 195.37 $ 193.10 $ 1.95 $ 195.05 -0.2% Franklin HF, Age 19-44, F 168,024 20.1% $ 217.48 $ 247.09 $ 2.50 $ 249.58 14.8% Franklin HF, Age 45+, M & F 10,668 1.3% $ 413.63 $ 412.66 $ 4.17 $ 416.83 0.8% Franklin HST, Age 19-64, F 7,488 0.9% $ 264.53 $ 300.16 $ 3.03 $ 303.19 14.6% ------------ ------- --------- ---------- ------------ ---------- -------- Franklin Subtotal 837,228 100.0% $ 133.14 $ 140.21 $ 1.42 $ 141.62 6.4% ------------ ------- --------- ---------- ------------ ---------- -------- Franklin Delivery Payment 2,999 0.4% $3,305.57 $ 3,828.57 $ 38.67 $ 3,867.24 17.0% ------------ ------- --------- ---------- ------------ ---------- -------- Franklin Total 837,228 100.0% $ 144.98 $ 153.92 $ 1.55 $ 155.48 7.2% ------------ ------- --------- ---------- ------------ ---------- --------
Mercer Government Human Services Consulting Page 1 of 4 STATE OF OHIO EXHIBIT B FINAL SIX MONTH RATES 2ND HALF 2003
Annualized 7/1/2003 - 7/1/2003 - Dec 2002 CY 2002 12/31/2003 7/1/2003 - 12/31/2003 Managed Care Rate w/ Guaranteed 12/31/2003 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase - -------- ----------------------- ------------ ------- --------- ---------- ------------ ---------- -------- Greene HF/HST, Age 0, M & F 2,543 5.5% $ 578.29 $ 452.62 $ 4.57 $ 457.20 -20.9% Greene HF/HST, Age 1, M & F 2,561 5.5% $ 116.69 $ 124.30 $ 1.26 $ 125.56 7.6% Greene HF/HST, Age 2-13, M & F 23,654 51.2% $ 70.44 $ 82.15 $ 0.83 $ 82.98 17.8% Greene HF/HST, Age 14-18, M 2,716 5.9% $ 88.36 $ 96.89 $ 0.98 $ 97.87 10.8% Greene HF/HST, Age 14-18, F 3,108 6.7% $ 126.73 $ 142.41 $ 1.44 $ 143.84 13.5% Greene HF, Age 19-44, M 1,596 3.5% $ 192.54 $ 191.25 $ 1.93 $ 193.18 0.3% Greene HF, Age 19-44, F 9,006 19.5% $ 200.69 $ 228.01 $ 2.30 $ 230.32 14.8% Greene HF, Age 45+, M & F 570 1.2% $ 383.27 $ 381.51 $ 3.85 $ 385.37 0.5% Greene HST, Age 19-64, F 470 1.0% $ 281.21 $ 321.33 $ 3.25 $ 324.57 15.4% ------------ ------- --------- ---------- ------------ ---------- -------- Greene Subtotal 46,224 100.0% $ 141.37 $ 148.10 $ 1.50 $ 149.59 5.8% ------------ ------- --------- ---------- ------------ ---------- -------- Greene Delivery Payment 156 0.3% $3,388.96 $ 3,902.69 $ 39.42 $ 3,942.11 16.3% ------------ ------- --------- ---------- ------------ ---------- -------- Greene Total 46,224 100.0% $ 152.81 $ 161.27 $ 1.63 $ 162.90 6.6% ------------ ------- --------- ---------- ------------ ---------- -------- Hamilton HF/HST, Age 0, M & F 24,540 5.9% $ 629.79 $ 510.07 $ 5.15 $ 515.22 -18.2% Hamilton HF/HST, Age 1, M & F 22,860 5.5% $ 125.83 $ 137.00 $ 1.38 $ 138.39 10.0% Hamilton HF/HST, Age 2-13, M & F 213,888 51.8% $ 65.52 $ 72.73 $ 0.73 $ 73.47 12.1% Hamilton HF/HST, Age 14-18, M 26,520 6.4% $ 75.82 $ 80.75 $ 0.82 $ 81.56 7.6% Hamilton HF/HST, Age 14-18, F 31,944 7.7% $ 112.60 $ 127.50 $ 1.29 $ 128.79 14.4% Hamilton HF, Age 19-44, M 8,688 2.1% $ 180.67 $ 175.04 $ 1.77 $ 176.81 -2.1% Hamilton HF, Age 19-44, F 74,136 18.0% $ 197.19 $ 222.26 $ 2.25 $ 224.50 13.9% Hamilton HF, Age 45+, M & F 4,752 1.2% $ 392.89 $ 382.85 $ 3.87 $ 386.72 -1.6% Hamilton HST, Age 19-64, F 5,316 1.3% $ 344.27 $ 386.60 $ 3.91 $ 390.50 13.4% ------------ ------- --------- ---------- ------------ ---------- -------- Hamilton Subtotal 412,644 100.0% $ 140.16 $ 143.69 $ 1.45 $ 145.14 3.5% ------------ ------- --------- ---------- ------------ ---------- -------- Hamilton Delivery Payment 1,267 0.3% $4,319.39 $ 5,026.48 $ 50.77 $ 5,077.26 17.5% ------------ ------- --------- ---------- ------------ ---------- -------- Hamilton Total 412,644 100.0% $ 153.43 $ 159.12 $ 1.61 $ 160.73 4.8% ------------ ------- --------- ---------- ------------ ---------- -------- Lorain HF/HST, Age 0, M & F 7,236 5.0% $ 422.96 $ 345.40 $ 3.49 $ 348.89 -17.5% Lorain HF/HST, Age 1, M & F 8,100 5.6% $ 88.61 $ 92.40 $ 0.93 $ 93.33 5.3% Lorain HF/HST, Age 2-13, M & F 72,528 49.9% $ 57.69 $ 62.36 $ 0.63 $ 62.99 9.2% Lorain HF/HST, Age 14-18, M 8,496 5.8% $ 57.46 $ 61.51 $ 0.62 $ 62.13 8.1% Lorain HF/HST, Age 14-18, F 8,844 6.1% $ 108.81 $ 122.36 $ 1.24 $ 123.59 13.6% Lorain HF, Age 19-44, M 7,428 5.1% $ 160.70 $ 162.14 $ 1.64 $ 163.78 1.9% Lorain HF, Age 19-44, F 29,268 20.1% $ 179.46 $ 199.03 $ 2.01 $ 201.04 12.0% Lorain HF, Age 45+, M & F 2,040 1.4% $ 299.67 $ 299.69 $ 3.03 $ 302.72 1.0% Lorain HST, Age 19-64, F 1,416 1.0% $ 309.72 $ 343.68 $ 3.47 $ 347.16 12.1% ------------ ------- --------- ---------- ------------ ---------- -------- Lorain Subtotal 145,356 100.0% $ 116.33 $ 120.42 $ 1.22 $ 121.63 4.6% ------------ ------- --------- ---------- ------------ ---------- -------- Lorain Delivery Payment 494 0.3% $3,289.08 $ 3,534.17 $ 35.70 $ 3,569.87 8.5% ------------ ------- --------- ---------- ------------ ---------- -------- Lorain Total 145,356 100.0% $ 127.50 $ 132.43 $ 1.34 $ 133.76 4.9% ------------ ------- --------- ---------- ------------ ---------- -------- Lucas HF/HST, Age 0, M & F 32,076 5.4% $ 647.45 $ 533.45 $ 5.39 $ 538.84 -16.8% Lucas HF/HST, Age 1, M & F 33,228 5.6% $ 100.36 $ 109.64 $ 1.11 $ 110.75 10.4% Lucas HF/HST, Age 2-13, M & F 294,060 49.3% $ 62.88 $ 70.64 $ 0.71 $ 71.35 13.5% Lucas HF/HST, Age 14-18, M 37,416 6.3% $ 71.47 $ 78.97 $ 0.80 $ 79.77 11.6% Lucas HF/HST, Age 14-18, F 40,872 6.9% $ 116.85 $ 131.41 $ 1.33 $ 132.74 13.6% Lucas HF, Age 19-44, M 24,528 4.1% $ 187.36 $ 183.95 $ 1.86 $ 185.81 -0.8% Lucas HF, Age 19-44, F 115,356 19.4% $ 199.19 $ 224.58 $ 2.27 $ 226.85 13.9% Lucas HF, Age 45+, M & F 9,048 1.5% $ 415.02 $ 407.68 $ 4.12 $ 411.80 -0.8% Lucas HST, Age 19-64, F 9,516 1.6% $ 340.77 $ 385.01 $ 3.89 $ 388.90 14.1% ------------ ------- --------- ---------- ------------ ---------- -------- Lucas Subtotal 596,100 100.0% $ 141.95 $ 146.99 $ 1.48 $ 148.48 4.6% ------------ ------- --------- ---------- ------------ ---------- -------- Lucas Delivery Payment 2,712 0.5% $3,844.21 $ 4,320.87 $ 43.65 $ 4,364.52 13.5% ------------ ------- --------- ---------- ------------ ---------- -------- Lucas Total 596,100 100.0% $ 159.44 $ 166.65 $ 1.68 $ 168.33 5.6% ------------ ------- --------- ---------- ------------ ---------- -------- Mahoning HF/HST, Age 0, M & F 953 5.5% $ 512.84 $ 395.11 $ 3.99 $ 399.10 -22.2% Mahoning HF/HST, Age 1, M & F 959 5.5% $ 109.61 $ 117.08 $ 1.18 $ 118.26 7.9% Mahoning HF/HST, Age 2-13, M & F 8,862 51.2% $ 71.58 $ 74.18 $ 0.75 $ 74.93 4.7% Mahoning HF/HST, Age 14-18, M 1,017 5.9% $ 101.19 $ 104.99 $ 1.06 $ 106.05 4.8% Mahoning HF/HST, Age 14-18, F 1,165 6.7% $ 121.54 $ 131.29 $ 1.33 $ 132.62 9.1% Mahoning HF, Age 19-44, M 598 3.5% $ 203.35 $ 179.71 $ 1.82 $ 181.53 -10.7% Mahoning HF, Age 19-44, F 3,374 19.5% $ 211.29 $ 228.23 $ 2.31 $ 230.53 9.1% Mahoning HF, Age 45+, M & F 214 1.2% $ 400.10 $ 383.32 $ 3.87 $ 387.19 -3.2% Mahoning HST, Age 19-64, F 176 1.0% $ 346.92 $ 343.88 $ 3.47 $ 347.35 0.1% ------------ ------- --------- ---------- ------------ ---------- -------- Mahoning Subtotal 17,318 100.0% $ 141.70 $ 140.08 $ 1.41 $ 141.50 -0.1% ------------ ------- --------- ---------- ------------ ---------- -------- Mahoning Delivery Payment 58 0.3% $3,509.06 $ 3,818.98 $ 38.58 $ 3,857.56 9.9% ------------ ------- --------- ---------- ------------ ---------- -------- Mahoning Total 17,318 100.0% $ 153.45 $ 152.87 $ 1.54 $ 154.42 0.6% ------------ ------- --------- ---------- ------------ ---------- --------
Mercer Government Human Services Consulting Page 2 of 4 STATE OF OHIO EXHIBIT B FINAL SIX MONTH RATES 2ND HALF 2003
Annualized 7/1/2003 - 7/1/2003 - Dec 2002 CY 2002 12/31/2003 7/1/2003 - 12/31/2003 Managed Care Rate w/ Guaranteed 12/31/2003 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase - ---------- ----------------------- ------------ ------- --------- ---------- ------------ ---------- -------- Montgomery HF/HST, Age 0, M & F 22,200 6.3% $ 602.39 $ 481.06 $ 4.86 $ 485.92 -19.3% Montgomery HF/HST, Age 1, M & F 19,524 5.5% $ 123.80 $ 133.49 $ 1.35 $ 134.84 8.9% Montgomery HF/HST, Age 2-13, M & F 177,480 50.2% $ 64.80 $ 71.63 $ 0.72 $ 72.35 11.6% Montgomery HF/HST, Age 14-18, M 20,316 5.7% $ 74.10 $ 77.90 $ 0.79 $ 78.69 6.2% Montgomery HF/HST, Age 14-18, F 23,388 6.6% $ 111.83 $ 125.38 $ 1.27 $ 126.64 13.3% Montgomery HF, Age 19-44, M 11,952 3.4% $ 176.03 $ 169.42 $ 1.71 $ 171.13 -2.8% Montgomery HF, Age 19-44, F 71,304 20.2% $ 194.95 $ 218.71 $ 2.21 $ 220.92 13.3% Montgomery HF, Age 45+, M & F 4,020 1.1% $ 385.54 $ 375.66 $ 3.79 $ 379.45 -1.6% Montgomery HST, Age 19-64, F 3,312 0.9% $ 340.60 $ 382.39 $ 3.86 $ 386.25 13.4% ------------ ------- --------- ---------- ------------ ---------- -------- Montgomery Subtotal 353,496 100.0% $ 141.71 $ 144.02 $ 1.45 $ 145.47 2.7% ------------ ------- --------- ---------- ------------ ---------- -------- Montgomery Delivery Payment 935 0.3% $4,146.90 $ 4,751.44 $ 47.99 $ 4,799.44 15.7% ------------ ------- --------- ---------- ------------ ---------- -------- Montgomery Total 353,496 100.0% $ 152.68 $ 156.59 $ 1.58 $ 158.17 3.6% ------------ ------- --------- ---------- ------------ ---------- -------- Pickaway HF/HST, Age 0, M & F 148 5.5% $ 501.13 $ 403.29 $ 4.07 $ 407.37 -18.7% Pickaway HF/HST, Age 1, M & F 149 5.5% $ 123.14 $ 122.25 $ 1.23 $ 123.48 0.3% Pickaway HF/HST, Age 2-13, M & F 1,378 51.2% $ 70.44 $ 73.24 $ 0.74 $ 73.98 5.0% Pickaway HF/HST, Age 14-18, M 158 5.9% $ 87.67 $ 90.86 $ 0.92 $ 91.78 4.7% Pickaway HF/HST, Age 14-18, F 181 6.7% $ 122.78 $ 130.76 $ 1.32 $ 132.08 7.6% Pickaway HF, Age 19-44, M 93 3.5% $ 219.16 $ 210.10 $ 2.12 $ 212.22 -3.2% Pickaway HF, Age 19-44, F 525 19.5% $ 214.34 $ 241.07 $ 2.44 $ 243.50 13.6% Pickaway HF, Age 45+, M & F 33 1.2% $ 416.49 $ 430.49 $ 4.35 $ 434.84 4.4% Pickaway HST, Age 19-64, F 27 1.0% $ 346.07 $ 361.94 $ 3.66 $ 365.60 5.6% ------------ ------- --------- ---------- ------------ ---------- -------- Pickaway Subtotal 2,692 100.0% $ 141.78 $ 143.73 $ 1.45 $ 145.19 2.4% ------------ ------- --------- ---------- ------------ ---------- -------- Pickaway Delivery Payment 9 0.3% $3,384.76 $ 3,508.09 $ 35.44 $ 3,543.52 4.7% ------------ ------- --------- ---------- ------------ ---------- -------- Pickaway Total 2,692 100.0% $ 153.09 $ 155.46 $ 1.57 $ 157.03 2.6% ------------ ------- --------- ---------- ------------ ---------- -------- Richland HF/HST, Age 0, M & F 417 5.5% $ 435.57 $ 362.45 $ 3.66 $ 366.11 -15.9% Richland HF/HST, Age 1, M & F 420 5.5% $ 119.58 $ 125.70 $ 1.27 $ 126.97 6.2% Richland HF/HST, Age 2-13, M & F 3,882 51.2% $ 65.11 $ 74.16 $ 0.75 $ 74.91 15.1% Richland HF/HST, Age 14-18, M 446 5.9% $ 73.40 $ 84.99 $ 0.86 $ 85.84 16.9% Richland HF/HST, Age 14-18, F 510 6.7% $ 130.13 $ 142.23 $ 1.44 $ 143.67 10.4% Richland HF, Age 19-44, M 262 3.5% $ 163.01 $ 160.46 $ 1.62 $ 162.08 -0.6% Richland HF, Age 19-44, F 1,478 19.5% $ 176.92 $ 202.52 $ 2.05 $ 204.56 15.6% Richland HF, Age 45+, M & F 94 1.2% $ 323.07 $ 336.51 $ 3.40 $ 339.91 5.2% Richland HST, Age 19-64, F 77 1.0% $ 266.88 $ 300.05 $ 3.03 $ 303.09 13.6% ------------ ------- --------- ---------- ------------ ---------- -------- Richland Subtotal 7,586 100.0% $ 123.76 $ 131.61 $ 1.33 $ 132.94 7.4% ------------ ------- --------- ---------- ------------ ---------- -------- Richland Delivery Payment 26 0.3% $2,900.54 $ 3,365.72 $ 34.00 $ 3,399.71 17.2% ------------ ------- --------- ---------- ------------ ---------- -------- Richland Total 7,586 100.0% $ 133.70 $ 143.14 $ 1.45 $ 144.59 8.1% ------------ ------- --------- ---------- ------------ ---------- -------- Stark HF/HST, Age 0, M & F 348 4.2% $ 433.74 $ 340.28 $ 3.44 $ 343.72 -20.8% Stark HF/HST, Age 1, M & F 372 4.5% $ 98.56 $ 108.09 $ 1.09 $ 109.18 10.8% Stark HF/HST, Age 2-13, M & F 4,392 53.4% $ 62.03 $ 68.02 $ 0.69 $ 68.71 10.8% Stark HF/HST, Age 14-18, M 552 6.7% $ 68.52 $ 75.71 $ 0.76 $ 76.47 11.6% Stark HF/HST, Age 14-18, F 576 7.0% $ 116.83 $ 129.05 $ 1.30 $ 130.36 11.6% Stark HF, Age 19-44, M 300 3.6% $ 152.83 $ 154.63 $ 1.56 $ 156.19 2.2% Stark HF, Age 19-44, F 1,440 17.5% $ 185.77 $ 211.52 $ 2.14 $ 213.65 15.0% Stark HF, Age 45+, M & F 144 1.8% $ 383.72 $ 385.12 $ 3.89 $ 389.01 1.4% Stark HST, Age 19-64, F 96 1.2% $ 277.06 $ 315.24 $ 3.18 $ 318.42 14.9% ------------ ------- --------- ---------- ------------ ---------- -------- Stark Subtotal 8,220 100.0% $ 116.83 $ 122.89 $ 1.24 $ 124.14 6.3% ------------ ------- --------- ---------- ------------ ---------- -------- Stark Delivery Payment 23 0.3% $3,036.07 $ 3,464.84 $ 35.00 $ 3,499.84 15.3% ------------ ------- --------- ---------- ------------ ---------- -------- Stark Total 8,220 100.0% $ 125.33 $ 132.59 $ 1.34 $ 133.93 6.9% ------------ ------- --------- ---------- ------------ ---------- -------- Summit HF/HST, Age 0, M & F 27,504 5.0% $ 544.75 $ 442.59 $ 4.47 $ 447.06 -17.9% Summit HF/HST, Age 1, M & F 27,600 5.0% $ 106.04 $ 116.01 $ 1.17 $ 117.18 10.5% Summit HF/HST, Age 2-13, M & F 268,860 49.0% $ 63.11 $ 70.76 $ 0.71 $ 71.47 13.2% Summit HF/HST, Age 14-18, M 32,988 6.0% $ 85.66 $ 92.28 $ 0.93 $ 93.21 8.8% Summit HF/HST, Age 14-18, F 37,812 6.9% $ 122.35 $ 138.62 $ 1.40 $ 140.02 14.4% Summit HF, Age 19-44, M 24,096 4.4% $ 171.17 $ 170.65 $ 1.72 $ 172.37 0.7% Summit HF, Age 19-44, F 114,744 20.9% $ 202.85 $ 230.77 $ 2.33 $ 233.10 14.9% Summit HF, Age 45+, M & F 10,764 2.0% $ 401.55 $ 399.71 $ 4.04 $ 403.75 0.5% Summit HST, Age 19-64, F 4,884 0.9% $ 324.03 $ 367.39 $ 3.71 $ 371.10 14.5% ------------ ------- --------- ---------- ------------ ---------- -------- Summit Subtotal 549,252 100.0% $ 137.71 $ 144.51 $ 1.46 $ 145.97 6.0% ------------ ------- --------- ---------- ------------ ---------- -------- Summit Delivery Payment 2,475 0.5% $4,091.24 $ 4,688.78 $ 47.36 $ 4,736.14 15.8% ------------ ------- --------- ---------- ------------ ---------- -------- Summit Total 549,252 100.0% $ 156.14 $ 165.64 $ 1.67 $ 167.31 7.2% ------------ ------- --------- ---------- ------------ ---------- --------
Mercer Government Human Services Consulting Page 3 of 4 STATE OF OHIO EXHIBIT B FINAL SIX MONTH RATES 2ND HALF 2003
Annualized 7/1/2003 - 7/1/2003 - Dec 2002 CY 2002 12/31/2003 7/1/2003 - 12/31/2003 Managed Care Rate w/ Guaranteed 12/31/2003 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase - ------------------ ----------------------- ------------ ------- --------- ---------- ------------ ---------- -------- Trumbull HF/HST, Age 0, M & F 775 5.5% $ 512.84 $ 389.00 $ 3.93 $ 392.93 -23.4% Trumbull HF/HST, Age 1, M & F 781 5.5% $ 109.61 $ 119.54 $ 1.21 $ 120.75 10.2% Trumbull HF/HST, Age 2-13, M & F 7,211 51.2% $ 71.58 $ 78.25 $ 0.79 $ 79.04 10.4% Trumbull HF/HST, Age 14-18, M 828 5.9% $ 101.19 $ 97.81 $ 0.99 $ 98.80 -2.4% Trumbull HF/HST, Age 14-18, F 948 6.7% $ 121.54 $ 133.68 $ 1.35 $ 135.03 11.1% Trumbull HF, Age 19-44, M 487 3.5% $ 203.35 $ 201.54 $ 2.04 $ 203.58 0.1% Trumbull HF, Age 19-44, F 2,745 19.5% $ 211.29 $ 233.98 $ 2.36 $ 236.35 11.9% Trumbull HF, Age 45+, M & F 174 1.2% $ 400.10 $ 380.23 $ 3.84 $ 384.07 -4.0% Trumbull HST, Age 19-64, F 143 1.0% $ 346.92 $ 363.68 $ 3.67 $ 367.36 5.9% ------------ ------- --------- ---------- ------------ ---------- -------- Trumbull Subtotal 14,092 100.0% $ 141.68 $ 143.73 $ 1.45 $ 145.18 2.5% ------------ ------- --------- ---------- ------------ ---------- -------- Trumbull Delivery Payment 48 0.3% $3,509.06 $ 3,693.19 $ 37.30 $ 3,730.49 6.3% ------------ ------- --------- ---------- ------------ ---------- -------- Trumbull Total 14,092 100.0% $ 153.63 $ 156.31 $ 1.58 $ 157.89 2.8% ------------ ------- --------- ---------- ------------ ---------- -------- Warren HF/HST, Age 0, M & F 204 5.5% $ 459.45 $ 371.75 $ 3.76 $ 375.51 -18.3% Warren HF/HST, Age 1, M & F 206 5.6% $ 95.81 $ 104.78 $ 1.06 $ 105.84 10.5% Warren HF/HST, Age 2-13, M & F 1,898 51.2% $ 64.76 $ 70.08 $ 0.71 $ 70.79 9.3% Warren HF/HST, Age 14-18, M 218 5.9% $ 65.83 $ 74.57 $ 0.75 $ 75.32 14.4% Warren HF/HST, Age 14-18, F 249 6.7% $ 109.91 $ 126.09 $ 1.27 $ 127.37 15.9% Warren HF, Age 19-44, M 128 3.5% $ 182.03 $ 182.47 $ 1.84 $ 184.32 1.3% Warren HF, Age 19-44, F 723 19.5% $ 209.88 $ 230.34 $ 2.33 $ 232.66 10.9% Warren HF, Age 45+, M & F 46 1.2% $ 458.20 $ 470.19 $ 4.75 $ 474.94 3.7% Warren HST, Age 19-64, F 38 1.0% $ 276.50 $ 315.66 $ 3.19 $ 318.84 15.3% ------------ ------- --------- ---------- ------------ ---------- -------- Warren Subtotal 3,710 100.0% $ 130.65 $ 135.20 $ 1.37 $ 136.57 4.5% ------------ ------- --------- ---------- ------------ ---------- -------- Warren Delivery Payment 13 0.4% $3,211.66 $ 3,427.75 $ 34.62 $ 3,462.37 7.8% ------------ ------- --------- ---------- ------------ ---------- -------- Warren Total 3,710 100.0% $ 141.91 $ 147.21 $ 1.49 $ 148.70 4.8% ------------ ------- --------- ---------- ------------ ---------- -------- Wood HF/HST, Age 0, M & F 516 5.5% $ 436.52 $ 337.53 $ 3.41 $ 340.94 -21.9% Wood HF/HST, Age 1, M & F 432 4.6% $ 115.67 $ 152.85 $ 1.54 $ 154.39 33.5% Wood HF/HST, Age 2-13, M & 4,848 51.9% $ 68.00 $ 74.08 $ 0.75 $ 74.83 10.0% Wood HF/HST, Age 14-18, M 564 6.0% $ 69.03 $ 67.82 $ 0.69 $ 68.50 -0.8% Wood HF/HST, Age 14-18, F 600 6.4% $ 125.18 $ 131.43 $ 1.33 $ 132.76 6.1% Wood HF, Age 19-44, M 564 6.0% $ 159.33 $ 151.43 $ 1.53 $ 152.96 -4.0% Wood HF, Age 19-44, F 1,608 17.2% $ 188.12 $ 208.99 $ 2.11 $ 211.10 12.2% Wood HF, Age 45+, M & F 132 1.4% $ 387.37 $ 381.42 $ 3.85 $ 385.28 -0.5% Wood HST, Age 19-64, F 72 0.8% $ 350.29 $ 344.89 $ 3.48 $ 348.37 -0.5% ------------ ------- --------- ---------- ------------ ---------- -------- Wood Subtotal 9,336 100.0% $ 127.21 $ 129.94 $ 1.31 $ 131.25 3.2% ------------ ------- --------- ---------- ------------ ---------- -------- Wood Delivery Payment 70 0.7% $2,858.71 $ 3,123.56 $ 31.55 $ 3,155.11 10.4% ------------ ------- --------- ---------- ------------ ---------- -------- Wood Total 9,336 100.0% $ 148.65 $ 153.36 $ 1.55 $ 154.90 4.2% ------------ ------- --------- ---------- ------------ ---------- -------- Total Managed Care HF/HST, Age 0, M & F 250,843 5.1% $ 572.95 $ 464.98 $ 4.70 $ 469.68 -18.0% Total Managed Care HF/HST, Age 1, M & F 258,610 5.2% $ 114.60 $ 124.73 $ 1.26 $ 125.99 9.9% Total Managed Care HF/HST, Age 2-13, M & F 2,485,156 50.3% $ 64.44 $ 72.01 $ 0.73 $ 72.73 12.9% Total Managed Care HF/HST, Age 14-18, M 308,791 6.3% $ 75.63 $ 81.22 $ 0.82 $ 82.04 8.5% Total Managed Care HF/HST, Age 14-18, F 341,987 6.9% $ 114.83 $ 129.87 $ 1.31 $ 131.18 14.2% Total Managed Care HF, Age 19-44, M 179,004 3.6% $ 181.37 $ 178.05 $ 1.80 $ 179.85 -0.8% Total Managed Care HF, Age 19-44, F 982,232 19.9% $ 200.51 $ 227.19 $ 2.29 $ 229.48 14.4% Total Managed Care HF, Age 45+, M & F 81,255 1.6% $ 395.40 $ 390.60 $ 3.95 $ 394.54 -0.2% Total Managed Care HST, Age 19-64, F 52,682 1.1% $ 326.70 $ 368.85 $ 3.73 $ 372.58 14.0% ------------ ------- --------- ---------- ------------ ---------- -------- Total Managed Care Subtotal 4,940,560 100.0% $ 136.60 $ 142.40 $ 1.44 $ 143.84 5.3% ------------ ------- --------- ---------- ------------ ---------- -------- Total Managed Care Delivery Payment 18,472 0.4% $3,852.02 $ 4,432.28 $ 44.77 $ 4,477.05 16.2% ------------ ------- --------- ---------- ------------ ---------- -------- Total Managed Care Total 4,940,560 100.0% $ 151.00 $ 158.97 $ 1.61 $ 160.57 6.3% ------------ ------- --------- ---------- ------------ ---------- --------
Mercer Government Human Services Consulting Page 4 of 4 STATE OF OHIO EXHIBIT B FINAL TWELVE MONTH RATES CY 2004
Annualized 1/1/2004 - 1/1/2004 - Dec 2002 CY 2002 12/31/2004 1/1/2004 - 12/31/2004 Managed Care Rate w/ Guaranteed 12/31/2004 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase - -------------- ----------------------- ------------ ------- --------- ---------- ------------ ---------- -------- Allen HF/HST, Age 0, M & F 941 5.5% $ - $ 379.21 $ 3.83 $ 383.04 0.0% Allen HF/HST, Age 1, M & F 948 5.5% $ - $ 116.84 $ 1.18 $ 118.02 0.0% Allen HF/HST, Age 2-13, M & F 8,757 51.2% $ - $ 69.97 $ 0.71 $ 70.68 0.0% Allen HF/HST, Age 14-18, M 1,005 5.9% $ - $ 76.56 $ 0.77 $ 77.33 0.0% Allen HF/HST, Age 14-18, F 1,151 6.7% $ - $ 129.12 $ 1.30 $ 130.42 0.0% Allen HF, Age 19-44, M 591 3.5% $ - $ 163.19 $ 1.65 $ 164.84 0.0% Allen HF, Age 19-44, F 3,334 19.5% $ - $ 214.59 $ 2.17 $ 216.76 0.0% Allen HF, Age 45+, M & F 211 1.2% $ - $ 372.45 $ 3.76 $ 376.21 0.0% Allen HST, Age 19-64, F 174 1.0% $ - $ 350.32 $ 3.54 $ 353.86 0.0% ------------ ------- --------- ---------- ------------ ---------- -------- Allen Subtotal 17,112 100.0% $ - $ 131.92 $ 1.33 $ 133.25 0.0% ------------ ------- --------- ---------- ------------ ---------- -------- Allen Delivery Payment 58 0.3% $ - $ 3,620.88 $ 36.57 $ 3,657.45 0.0% ------------ ------- --------- ---------- ------------ ---------- -------- Allen Total 17,112 100.0% $ - $ 144.19 $ 1.46 $ 145.65 0.0% ------------ ------- --------- ---------- ------------ ---------- -------- Belmont/Monroe HF/HST, Age 0, M & F 335 5.5% $ - $ 361.21 $ 3.65 $ 364.86 0.0% Belmont/Monroe HF/HST, Age 1, M & F 337 5.5% $ - $ 112.61 $ 1.14 $ 113.75 0.0% Belmont/Monroe HF/HST, Age 2-13, M & F 3,114 51.2% $ - $ 68.47 $ 0.69 $ 69.16 0.0% Belmont/Monroe HF/HST, Age 14-18, M 358 5.9% $ - $ 75.95 $ 0.77 $ 76.72 0.0% Belmont/Monroe HF/HST, Age 14-18, F 409 6.7% $ - $ 123.95 $ 1.25 $ 125.21 0.0% Belmont/Monroe HF, Age 19-44, M 210 3.5% $ - $ 157.82 $ 1.59 $ 159.42 0.0% Belmont/Monroe HF, Age 19-44, F 1,185 19.5% $ - $ 210.26 $ 2.12 $ 212.39 0.0% Belmont/Monroe HF, Age 45+, M & F 75 1.2% $ - $ 361.96 $ 3.66 $ 365.61 0.0% Belmont/Monroe HST, Age 19-64, F 62 1.0% $ - $ 338.13 $ 3.42 $ 341.55 0.0% ------------ ------- --------- ---------- ------------ ---------- -------- Belmont/Monroe Subtotal 6,085 100.0% $ - $ 128.26 $ 1.30 $ 129.56 0.0% ------------ ------- --------- ---------- ------------ ---------- -------- Belmont/Monroe Delivery Payment 21 0.3% $ - $ 3,535.77 $ 35.71 $ 3,571.49 0.0% ------------ ------- --------- ---------- ------------ ---------- -------- Belmont/Monroe Total 6,085 100.0% $ - $ 140.47 $ 1.42 $ 141.88 0.0% ------------ ------- --------- ---------- ------------ ---------- -------- Butler HF/HST, Age 0, M & F 7,908 6.1% $ 527.77 $ 437.98 $ 4.42 $ 442.40 -16.2% Butler HF/HST, Age 1, M & F 7,752 6.0% $ 110.32 $ 123.62 $ 1.25 $ 124.87 13.2% Butler HF/HST, Age 2-13, M & F 66,072 50.7% $ 70.25 $ 81.05 $ 0.82 $ 81.87 16.5% Butler HF/HST, Age 14-18, M 7,452 5.7% $ 94.50 $ 104.49 $ 1.06 $ 105.54 11.7% Butler HF/HST, Age 14-18, F 8,184 6.3% $ 123.11 $ 142.24 $ 1.44 $ 143.68 16.7% Butler HF, Age 19-44, M 6,564 5.0% $ 221.82 $ 229.95 $ 2.32 $ 232.28 4.7% Butler HF, Age 19-44, F 23,040 17.7% $ 187.85 $ 220.57 $ 2.23 $ 222.80 18.6% Butler HF, Age 45+, M & F 1,608 1.2% $ 490.36 $ 512.08 $ 5.17 $ 517.26 5.5% Butler HST, Age 19-64, F 1,668 1.3% $ 304.21 $ 352.41 $ 3.56 $ 355.97 17.0% ------------ ------- --------- ---------- ------------ ---------- -------- Butler Subtotal 130,248 100.0% $ 141.75 $ 151.42 $ 1.53 $ 152.95 7.9% ------------ ------- --------- ---------- ------------ ---------- -------- Butler Delivery Payment 269 0.2% $3,417.97 $ 3,935.67 $ 39.75 $ 3,975.42 16.3% ------------ ------- --------- ---------- ------------ ---------- -------- Butler Total 130,248 100.0% $ 148.81 $ 159.55 $ 1.61 $ 161.16 8.3% ------------ ------- --------- ---------- ------------ ---------- -------- Clark/Madison HF/HST, Age 0, M & F 1,203 6.0% $ 578.29 $ 464.46 $ 4.69 $ 469.15 -18.9% Clark/Madison HF/HST, Age 1, M & F 1,132 5.6% $ 116.69 $ 128.58 $ 1.30 $ 129.88 11.3% Clark/Madison HF/HST, Age 2-13, M & F 9,845 49.0% $ 70.44 $ 81.77 $ 0.83 $ 82.59 17.2% Clark/Madison HF/HST, Age 14-18, M 1,017 5.1% $ 88.36 $ 99.65 $ 1.01 $ 100.66 13.9% Clark/Madison HF/HST, Age 14-18, F 1,030 5.1% $ 126.73 $ 147.40 $ 1.49 $ 148.89 17.5% Clark/Madison HF, Age 19-44, M 1,243 6.2% $ 192.54 $ 201.57 $ 2.04 $ 203.60 5.7% Clark/Madison HF, Age 19-44, F 4,244 21.1% $ 200.69 $ 238.60 $ 2.41 $ 241.01 20.1% Clark/Madison HF, Age 45+, M & F 272 1.4% $ 383.27 $ 435.40 $ 4.40 $ 439.80 14.8% Clark/Madison HST, Age 19-64, F 112 0.6% $ 281.21 $ 325.27 $ 3.29 $ 328.55 16.8% ------------ ------- --------- ---------- ------------ ---------- -------- Clark/Madison Subtotal 20,098 100.0% $ 147.70 $ 158.25 $ 1.60 $ 159.85 8.2% ------------ ------- --------- ---------- ------------ ---------- -------- Clark/Madison Delivery Payment 50 0.2% $3,388.96 $ 3,869.97 $ 39.09 $ 3,909.06 15.3% ------------ ------- --------- ---------- ------------ ---------- -------- Clark/Madison Total 20,098 100.0% $ 156.13 $ 167.88 $ 1.70 $ 169.57 8.6% ------------ ------- --------- ---------- ------------ ---------- -------- Clermont HF/HST, Age 0, M & F 427 5.5% $ 546.23 $ 428.41 $ 4.33 $ 432.74 -20.8% Clermont HF/HST, Age 1, M & F 430 5.5% $ 141.76 $ 145.43 $ 1.47 $ 146.90 3.6% Clermont HF/HST, Age 2-13, M & F 3,975 51.2% $ 73.20 $ 85.93 $ 0.87 $ 86.80 18.6% Clermont HF/HST, Age 14-18, M 456 5.9% $ 81.01 $ 94.66 $ 0.96 $ 95.61 18.0% Clermont HF/HST, Age 14-18, F 522 6.7% $ 139.84 $ 162.72 $ 1.64 $ 164.36 17.5% Clermont HF, Age 19-44, M 268 3.5% $ 197.25 $ 199.87 $ 2.02 $ 201.89 2.3% Clermont HF, Age 19-44, F 1,513 19.5% $ 212.15 $ 247.49 $ 2.50 $ 249.99 17.8% Clermont HF, Age 45+, M & F 96 1.2% $ 472.01 $ 518.18 $ 5.23 $ 523.41 10.9% Clermont HST, Age 19-64, F 79 1.0% $ 362.51 $ 380.75 $ 3.85 $ 384.59 6.1% ------------ ------- --------- ---------- ------------ ---------- -------- Clermont Subtotal 7,766 100.0% $ 147.17 $ 157.48 $ 1.59 $ 159.07 8.1% ------------ ------- --------- ---------- ------------ ---------- -------- Clermont Delivery Payment 26 0.3% $4,043.64 $ 3,933.34 $ 39.73 $ 3,973.07 -1.7% ------------ ------- --------- ---------- ------------ ---------- -------- Clermont Total 7,766 100.0% $ 160.71 $ 170.65 $ 1.72 $ 172.37 7.3% ------------ ------- --------- ---------- ------------ ---------- --------
Mercer Government Human Services Consulting Page 1 of 7 STATE OF OHIO EXHIBIT B FINAL TWELVE MONTH RATES CY 2004
Annualized 1/1/2004 - 1/1/2004 - Dec 2002 CY 2002 12/31/2004 1/1/2004 - 12/31/2004 Managed Care Rate w/ Guaranteed 12/31/2004 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase ------ ----------- ------------ ------- ---------- ----------- ------------ ----------- -------- Columbiana HF/HST, Age 0, M & F 1,346 5.5% $ - $ 379.02 $ 3.83 $ 382.85 0.0% Columbiana HF/HST, Age 1, M & F 1,356 5.5% $ - $ 118.38 $ 1.20 $ 119.58 0.0% Columbiana HF/HST, Age 2-13, M & F 12,526 51.2% $ - $ 72.28 $ 0.73 $ 73.01 0.0% Columbiana HF/HST, Age 14-18, M 1,438 5.9% $ - $ 79.58 $ 0.80 $ 80.38 0.0% Columbiana HF/HST, Age 14-18, F 1,646 6.7% $ - $ 128.35 $ 1.30 $ 129.64 0.0% Columbiana HF, Age 19-44, M 845 3.5% $ - $ 166.09 $ 1.68 $ 167.77 0.0% Columbiana HF, Age 19-44, F 4,769 19.5% $ - $ 218.03 $ 2.20 $ 220.23 0.0% Columbiana HF, Age 45+, M & F 302 1.2% $ - $ 369.40 $ 3.73 $ 373.13 0.0% Columbiana HST, Age 19-64, F 249 1.0% $ - $ 350.76 $ 3.54 $ 354.30 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Columbiana Subtotal 24,477 100.0% $ - $ 134.04 $ 1.35 $ 135.39 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Columbiana Delivery Payment 83 0.3% $ - $ 3,646.17 $ 36.83 $ 3,683.00 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Columbiana Total 24,477 100.0% $ - $ 146.40 $ 1.48 $ 147.88 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Crawford HF/HST, Age 0, M & F 166 5.5% $ - $ 362.10 $ 3.66 $ 365.76 0.0% Crawford HF/HST, Age 1, M & F 167 5.5% $ - $ 110.18 $ 1.11 $ 111.30 0.0% Crawford HF/HST, Age 2-13, M & F 1,542 51.2% $ - $ 66.94 $ 0.68 $ 67.61 0.0% Crawford HF/HST, Age 14-18, M 177 5.9% $ - $ 75.08 $ 0.76 $ 75.84 0.0% Crawford HF/HST, Age 14-18, F 203 6.7% $ - $ 125.55 $ 1.27 $ 126.82 0.0% Crawford HF, Age 19-44, M 104 3.5% $ - $ 160.35 $ 1.62 $ 161.97 0.0% Crawford HF, Age 19-44, F 587 19.5% $ - $ 208.24 $ 2.10 $ 210.34 0.0% Crawford HF, Age 45+, M & F 37 1.2% $ - $ 347.17 $ 3.51 $ 350.68 0.0% Crawford HST, Age 19-64, F 31 1.0% $ - $ 332.53 $ 3.36 $ 335.89 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Crawford Subtotal 3,014 100.0% $ - $ 126.93 $ 1.28 $ 128.21 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Crawford Delivery Payment 10 0.3% $ - $ 3,501.94 $ 35.37 $ 3,537.32 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Crawford Total 3,014 100.0% $ - $ 138.55 $ 1.40 $ 139.95 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Cuyahoga HF/HST, Age 0, M & F 80,520 4.5% $ 584.96 $ 486.83 $ 4.92 $ 491.75 -15.9% Cuyahoga HF/HST, Age 1, M & F 86,280 4.8% $ 124.16 $ 140.22 $ 1.42 $ 141.63 14.1% Cuyahoga HF/HST, Age 2-13, M & F 891,084 50.0% $ 65.37 $ 75.98 $ 0.77 $ 76.75 17.4% Cuyahoga HF/HST, Age 14-18, M 119,844 6.7% $ 73.86 $ 81.89 $ 0.83 $ 82.71 12.0% Cuyahoga HF/HST, Age 14-18, F 127,620 7.2% $ 113.20 $ 133.38 $ 1.35 $ 134.73 19.0% Cuyahoga HF, Age 19-44, M 61,008 3.4% $ 174.98 $ 175.09 $ 1.77 $ 176.86 1.1% Cuyahoga HF, Age 19-44, F 360,012 20.2% $ 196.51 $ 231.15 $ 2.33 $ 233.49 18.8% Cuyahoga HF, Age 45+, M & F 36,600 2.1% $ 386.19 $ 395.37 $ 3.99 $ 399.37 3.4% Cuyahoga HST, Age 19-64, F 17,808 1.0% $ 343.12 $ 398.42 $ 4.02 $ 402.44 17.3% ----------- ------ ---------- ----------- ------------ ---------- ----- Cuyahoga Subtotal 1,780,776 100.0% $ 135.35 $ 146.74 $ 1.48 $ 148.22 9.5% ----------- ------ ---------- ----------- ------------ ---------- ----- Cuyahoga Delivery Payment 6,847 0.4% $ 3,975.41 $ 4,675.13 $ 47.22 $ 4,722.35 18.8% ----------- ------ ---------- ----------- ------------ ---------- ----- Cuyahoga Total 1,780,776 100.0% $ 150.63 $ 164.71 $ 1.66 $ 166.38 10.5% ----------- ------ ---------- ----------- ------------ ---------- ----- Defiance/Fulton/Henry HF/HST, Age 0, M & F 253 5.5% $ - $ 367.98 $ 3.72 $ 371.70 0.0% Defiance/Fulton/Henry HF/HST, Age 1, M & F 255 5.5% $ - $ 111.52 $ 1.13 $ 112.65 0.0% Defiance/Fulton/Henry HF/HST, Age 2-13, M & F 2,357 51.2% $ - $ 67.86 $ 0.69 $ 68.54 0.0% Defiance/Fulton/Henry HF/HST, Age 14-18, M 271 5.9% $ - $ 75.18 $ 0.76 $ 75.94 0.0% Defiance/Fulton/Henry HF/HST, Age 14-18, F 310 6.7% $ - $ 125.25 $ 1.27 $ 126.51 0.0% Defiance/Fulton/Henry HF, Age 19-44, M 159 3.5% $ - $ 157.10 $ 1.59 $ 158.69 0.0% Defiance/Fulton/Henry HF, Age 19-44, F 897 19.5% $ - $ 208.16 $ 2.10 $ 210.26 0.0% Defiance/Fulton/Henry HF, Age 45+, M & F 57 1.2% $ - $ 337.45 $ 3.41 $ 340.86 0.0% Defiance/Fulton/Henry HST, Age 19-64, F 47 1.0% $ - $ 334.79 $ 3.38 $ 338.17 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Defiance/Fulton/Henry Subtotal 4,606 100.0% $ - $ 127.52 $ 1.29 $ 128.81 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Defiance/Fulton/Henry Delivery Payment 16 0.3% $ - $ 3,522.15 $ 35.58 $ 3,557.72 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Defiance/Fulton/Henry Total 4,606 100.0% $ - $ 139.75 $ 1.41 $ 141.16 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Delaware HF/HST, Age 0, M & F 159 5.5% $ - $ 367.06 $ 3.71 $ 370.77 0.0% Delaware HF/HST, Age 1, M & F 160 5.5% $ - $ 110.49 $ 1.12 $ 111.61 0.0% Delaware HF/HST, Age 2-13, M & F 1,477 51.2% $ - $ 67.56 $ 0.68 $ 68.24 0.0% Delaware HF/HST, Age 14-18, M 170 5.9% $ - $ 75.68 $ 0.76 $ 76.44 0.0% Delaware HF/HST, Age 14-18, F 194 6.7% $ - $ 124.25 $ 1.26 $ 125.50 0.0% Delaware HF, Age 19-44, M 100 3.5% $ - $ 159.50 $ 1.61 $ 161.11 0.0% Delaware HF, Age 19-44, F 562 19.5% $ - $ 210.63 $ 2.13 $ 212.75 0.0% Delaware HF, Age 45+, M & F 36 1.2% $ - $ 360.43 $ 3.64 $ 364.07 0.0% Delaware HST, Age 19-64, F 29 1.0% $ - $ 337.90 $ 3.41 $ 341.31 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Delaware Subtotal 2,887 100.0% $ - $ 128.12 $ 1.29 $ 129.42 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Delaware Delivery Payment 10 0.3% $ - $ 3,527.06 $ 35.63 $ 3,562.68 0.0% ----------- ------ ---------- ----------- ------------ ---------- ----- Delaware Total 2,887 100.0% $ - $ 140.34 $ 1.42 $ 141.76 0.0% ----------- ------ ---------- ----------- ------------ ---------- -----
Mercer Government Human Services Consulting Page 2 of 7 STATE OF OHIO EXHIBIT B FINAL TWELVE MONTH RATES CY 2004
Annualized 1/1/2004 - 1/1/2004 - Dec 2002 CY 2002 12/31/2004 1/1/2004 - 12/31/2004 Managed Care Rate w/ Guaranteed 12/31/2004 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase ------ ----------- ------------ ------- --------- ----------- ------------ ---------- -------- Fairfield HF/HST, Age 0, M & F 287 5.5% $ - $ 365.44 $ 3.69 $ 369.13 0.0% Fairfield HF/HST, Age 1, M & F 289 5.5% $ - $ 112.58 $ 1.14 $ 113.72 0.0% Fairfield HF/HST, Age 2-13, M & F 2,666 51.2% $ - $ 68.98 $ 0.70 $ 69.68 0.0% Fairfield HF/HST, Age 14-18, M 306 5.9% $ - $ 93.93 $ 0.95 $ 94.88 0.0% Fairfield HF/HST, Age 14-18, F 350 6.7% $ - $ 129.66 $ 1.31 $ 130.97 0.0% Fairfield HF, Age 19-44, M 180 3.5% $ - $ 163.00 $ 1.65 $ 164.64 0.0% Fairfield HF, Age 19-44, F 1,015 19.5% $ - $ 217.09 $ 2.19 $ 219.28 0.0% Fairfield HF, Age 45+, M & F 64 1.2% $ - $ 357.49 $ 3.61 $ 361.1 0.0% Fairfield HST, Age 19-64, F 53 1.0% $ - $ 347.11 $ 3.51 $ 350.61 0.0% ------- ----- --------- ----------- ------- --------- ----- Fairfield Subtotal 5,210 100.0% $ - $ 131.75 $ 1.33 $ 133.08 0.0% ------- ----- --------- ----------- ------- --------- ----- Fairfield Delivery Payment 18 0.3% $ - $ 3,528.59 $ 35.64 $3,564.23 0.0% ------- ----- --------- ----------- ------- --------- ----- Fairfield Total 5,210 100.0% $ - $ 143.94 $ 1.45 $ 145.39 0.0% ------- ----- --------- ----------- ------- --------- ----- Franklin HF/HST, Age 0, M & F 41,412 4.9% $ 503.34 $ 420.76 $ 4.25 $ 425.01 -15.6% Franklin HF/HST, Age 1, M & F 45,912 5.5% $ 107.80 $ 120.19 $ 1.21 $ 121.41 12.6% Franklin HF/HST, Age 2-13, M & F 432,048 51.6% $ 63.12 $ 73.22 $ 0.74 $ 73.96 17.2% Franklin HF/HST, Age 14-18, M 47,880 5.7% $ 75.42 $ 83.12 $ 0.84 $ 83.96 11.3% Franklin HF/HST, Age 14-18, F 54,540 6.5% $ 112.59 $ 131.71 $ 1.33 $ 133.04 18.2% Franklin HF, Age 19-44, M 29,256 3.5% $ 195.37 $ 201.08 $ 2.03 $ 203.11 4.0% Franklin HF, Age 19-44, F 168,024 20.1% $ 217.48 $ 258.89 $ 2.62 $ 261.51 20.2% Franklin HF, Age 45+, M & F 10,668 1.3% $ 413.63 $ 434.56 $ 4.39 $ 438.95 6.1% Franklin HST, Age 19-64, F 7,488 0.9% $ 264.53 $ 309.72 $ 3.13 $ 312.85 18.3% ------- ----- --------- ----------- ------- --------- ----- Franklin Subtotal 837,228 100.0% $ 133.14 $ 145.81 $ 1.47 $ 147.28 10.6% ------- ----- --------- ----------- ------- --------- ----- Franklin Delivery Payment 2,999 0.4% $3,305.57 $ 3,887.49 $ 39.27 $3,926.76 18.8% ------- ----- --------- ----------- ------- --------- ----- Franklin Total 837,228 100.0% $ 144.98 $ 159.74 $ 1.61 $ 161.35 11.3% ------- ----- --------- ----------- ------- --------- ----- Greene HF/HST, Age 0, M & F 2,860 5.5% $ 578.29 $ 459.93 $ 4.65 $ 464.58 -19.7% Greene HF/HST, Age 1, M & F 2,881 5.5% $ 116.69 $ 127.60 $ 1.29 $ 128.89 10.5% Greene HF/HST, Age 2-13, M & F 26,611 51.2% $ 70.44 $ 84.98 $ 0.86 $ 85.83 21.9% Greene HF/HST, Age 14-18, M 3,055 5.9% $ 88.36 $ 100.04 $ 1.01 $ 101.05 14.4% Greene HF/HST, Age 14-18, F 3,497 6.7% $ 126.73 $ 146.50 $ 1.48 $ 147.98 16.8% Greene HF, Age 19-44, M 1,796 3.5% $ 192.54 $ 199.30 $ 2.01 $ 201.31 4.6% Greene HF, Age 19-44, F 10,131 19.5% $ 200.69 $ 237.82 $ 2.40 $ 240.22 19.7% Greene HF, Age 45+, M & F 641 1.2% $ 383.27 $ 397.53 $ 4.02 $ 401.54 4.8% Greene HST, Age 19-64, F 529 1.0% $ 281.21 $ 331.53 $ 3.35 $ 334.88 19.1% ------- ----- --------- ----------- ------- --------- ----- Greene Subtotal 52,001 100.0% $ 141.37 $ 153.07 $ 1.55 $ 154.62 9.4% ------- ----- --------- ----------- ------- --------- ----- Greene Delivery Payment 176 0.3% $3,388.96 $ 4,021.19 $ 40.62 $4,061.81 19.9% ------- ----- --------- ----------- ------- --------- ----- Greene Total 52,001 100.0% $ 152.84 $ 166.68 $ 1.68 $ 168.36 10.2% ------- ----- --------- ----------- ------- --------- ----- Hamilton HF/HST, Age 0, M & F 24,540 5.9% $ 629.79 $ 523.73 $ 5.29 $ 529.02 -16.0% Hamilton HF/HST, Age 1, M & F 22,860 5.5% $ 125.83 $ 141.71 $ 1.43 $ 143.14 13.8% Hamilton HF/HST, Age 2-13, M & F 213,888 51.8% $ 65.52 $ 75.58 $ 0.76 $ 76.35 16.5% Hamilton HF/HST, Age 14-18, M 26,520 6.4% $ 75.82 $ 83.63 $ 0.84 $ 84.47 11.4% Hamilton HF/HST, Age 14-18, F 31,944 7.7% $ 112.60 $ 132.46 $ 1.34 $ 133.8 18.8% Hamilton HF, Age 19-44, M 8,688 2.1% $ 180.67 $ 180.26 $ 1.82 $ 182.09 0.8% Hamilton HF, Age 19-44, F 74,136 18.0% $ 197.19 $ 230.20 $ 2.33 $ 232.52 17.9% Hamilton HF, Age 45+, M & F 4,752 1.2% $ 392.89 $ 398.50 $ 4.03 $ 402.53 2.5% Hamilton HST, Age 19-64, F 5,316 1.3% $ 344.27 $ 396.96 $ 4.01 $ 400.97 16.5% ------- ----- --------- ----------- ------- --------- ----- Hamilton Subtotal 412,644 100.0% $ 140.16 $ 148.66 $ 1.50 $ 150.16 7.1% ------- ----- --------- ----------- ------- --------- ----- Hamilton Delivery Payment 1,267 0.3% $4,319.39 $ 5,084.77 $ 51.36 $5,136.13 18.9% ------- ----- --------- ----------- ------- --------- ----- Hamilton Total 412,644 100.0% $ 153.43 $ 164.27 $ 1.66 $ 165.93 8.2% ------- ----- --------- ----------- ------- --------- ----- Huron HF/HST, Age 0, M & F 192 5.5% $ - $ 370.32 $ 3.74 $ 374.07 0.0% Huron HF/HST, Age 1, M & F 193 5.5% $ - $ 112.66 $ 1.14 $ 113.8 0.0% Huron HF/HST, Age 2-13, M & F 1,786 51.2% $ - $ 67.46 $ 0.68 $ 68.14 0.0% Huron HF/HST, Age 14-18, M 205 5.9% $ - $ 75.48 $ 0.76 $ 76.25 0.0% Huron HF/HST, Age 14-18, F 235 6.7% $ - $ 123.99 $ 1.25 $ 125.25 0.0% Huron HF, Age 19-44, M 121 3.5% $ - $ 153.16 $ 1.55 $ 154.71 0.0% Huron HF, Age 19-44, F 680 19.5% $ - $ 211.18 $ 2.13 $ 213.31 0.0% Huron HF, Age 45+, M & F 43 1.2% $ - $ 349.39 $ 3.53 $ 352.92 0.0% Huron HST, Age 19-64, F 35 1.0% $ - $ 336.47 $ 3.40 $ 339.87 0.0% ------- ----- --------- ----------- ------- --------- ----- Huron Subtotal 3,490 100.0% $ - $ 128.04 $ 1.29 $ 129.34 0.0% ------- ----- --------- ----------- ------- --------- ----- Huron Delivery Payment 12 0.3% $ - $ 3,514.27 35.50 $3,549.77 0.0% ------- ----- --------- ----------- ------- --------- ----- Huron Total 3,490 100.0% $ - $ 140.13 $ 1.42 $ 141.54 0.0% ------- ----- --------- ----------- ------- --------- -----
Mercer Government Human Services Consulting Page 3 of 7 STATE OF OHIO EXHIBIT B FINAL TWELVE MONTH RATES CY 2004
Annualized 1/1/2004 - 1/1/2004 - Dec 2002 CY 2002 12/31/2004 1/1/2004 - 12/31/2004 Managed Care Rate w/ Guaranteed 12/31/2004 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase ------ ----------- ------------ ------- ---------- ----------- ------------ ----------- -------- Jefferson HF/HST, Age 0, M & F 274 5.5% $ - $ 366.23 $ 3.70 $ 369.92 0.0% Jefferson HF/HST, Age 1, M & F 276 5.5% $ - $ 112.58 $ 1.14 $ 113.71 0.0% Jefferson HF/HST, Age 2-13, M & F 2,545 51.2% $ - $ 68.05 $ 0.69 $ 68.74 0.0% Jefferson HF/HST, Age 14-18, M 292 5.9% $ - $ 75.67 $ 0.76 $ 76.43 0.0% Jefferson HF/HST, Age 14-18, F 334 6.7% $ - $ 123.13 $ 1.24 $ 124.37 0.0% Jefferson HF, Age 19-44, M 172 3.5% $ - $ 158.45 $ 1.60 $ 160.05 0.0% Jefferson HF, Age 19-44, F 969 19.5% $ - $ 209.68 $ 2.12 $ 211.80 0.0% Jefferson HF, Age 45+, M & F 61 1.2% $ - $ 357.74 $ 3.61 $ 361.35 0.0% Jefferson HST, Age 19-64, F 51 1.0% $ - $ 344.49 $ 3.48 $ 347.96 0.0% ------- ----- ---------- ----------- ------- ----------- ----- Jefferson Subtotal 4,974 100.0% $ - $ 128.20 $ 1.29 $ 129.49 0.0% ------- ----- ---------- ----------- ------- ----------- ----- Jefferson Delivery Payment 17 0.3% $ - $ 3,537.71 $ 35.73 $ 3,573.44 0.0% ------- ----- ---------- ----------- ------- ----------- ----- Jefferson Total 4,974 100.0% $ - $ 140.29 $ 1.42 $ 141.71 0.0% ------- ----- ---------- ----------- ------- ----------- ----- Licking HF/HST, Age 0, M & F 1,199 5.5% $ - $ 376.04 $ 3.80 $ 379.84 0.0% Licking HF/HST, Age 1, M & F 1,207 5.5% $ - $ 115.17 $ 1.16 $ 116.34 0.0% Licking HF/HST, Age 2-13, M & F 11,152 51.2% $ - $ 70.07 $ 0.71 $ 70.78 0.0% Licking HF/HST, Age 14-18, M 1,280 5.9% $ - $ 79.58 $ 0.80 $ 80.39 0.0% Licking HF/HST, Age 14-18, F 1,465 6.7% $ - $ 128.46 $ 1.30 $ 129.76 0.0% Licking HF, Age 19-44, M 753 3.5% $ - $ 158.46 $ 1.60 $ 160.06 0.0% Licking HF, Age 19-44, F 4,246 19.5% $ - $ 214.86 $ 2.17 $ 217.03 0.0% Licking HF, Age 45+, M & F 269 1.2% $ - $ 368.17 $ 3.72 $ 371.89 0.0% Licking HST, Age 19-64, F 222 1.0% $ - $ 347.73 $ 3.51 $ 351.25 0.0% ------- ----- ---------- ----------- ------- ----------- ----- Licking Subtotal 21,793 100.0% $ - $ 131.66 $ 1.33 $ 132.99 0.0% ------- ----- ---------- ----------- ------- ----------- ----- Licking Delivery Payment 74 0.3% $ - $ 3,633.70 $ 36.70 $ 3,670.41 0.0% ------- ----- ---------- ----------- ------- ----------- ----- Licking Total 21,793 100.0% $ - $ 144.00 $ 1.45 $ 145.45 0.0% ------- ----- ---------- ----------- ------- ----------- ----- Lorain HF/HST, Age 0, M & F 7,236 5.0% $ 422.96 $ 356.94 $ 3.61 $ 360.54 -14.8% Lorain HF/HST, Age 1, M & F 8,100 5.6% $ 88.61 $ 96.46 $ 0.97 $ 97.44 10.0% Lorain HF/HST, Age 2-13, M & F 72,528 49.9% $ 57.69 $ 65.26 $ 0.66 $ 65.91 14.3% Lorain HF/HST, Age 14-18, M 8,496 5.8% $ 57.46 $ 64.67 $ 0.65 $ 65.32 13.7% Lorain HF/HST, Age 14-18, F 8,844 6.1% $ 108.81 $ 127.66 $ 1.29 $ 128.95 18.5% Lorain HF, Age 19-44, M 7,428 5.1% $ 160.70 $ 169.02 $ 1.71 $ 170.73 6.2% Lorain HF, Age 19-44, F 29,268 20.1% $ 179.46 $ 207.63 $ 2.10 $ 209.73 16.9% Lorain HF, Age 45+, M & F 2,040 1.4% $ 299.67 $ 316.05 $ 3.19 $ 319.24 6.5% Lorain HST, Age 19-64, F 1,416 1.0% $ 309.72 $ 355.46 $ 3.59 $ 359.05 15.9% ------- ----- ---------- ----------- ------- ----------- ----- Lorain Subtotal 145,356 100.0% $ 116.33 $ 125.59 $ 1.27 $ 126.86 9.1% ------- ----- ---------- ----------- ------- ----------- ----- Lorain Delivery Payment 494 0.3% $ 3,289.08 $ 3,597.03 $ 36.33 $ 3,633.371 10.5% ------- ----- ---------- ----------- ------- ----------- ----- Lorain Total 145,356 100.0% $ 127.50 $ 137.82 $ 1.39 $ 139.21 9.2% ------- ----- ---------- ----------- ------- ----------- ----- Lucas HF/HST, Age 0, M & F 32,076 5.4% $ 647.45 $ 542.31 $ 5.48 $ 547.79 -15.4% Lucas HF/HST, Age 1, M & F 33,228 5.6% $ 100.36 $ 112.27 $ 1.13 $ 113.40 13.0% Lucas HF/HST, Age 2-13, M & F 294,060 49.3% $ 62.88 $ 72.76 $ 0.73 $ 73.50 16.9% Lucas HF/HST, Age 14-18, M 37,416 6.3% $ 71.47 $ 81.13 $ 0.82 $ 81.95 14.7% Lucas HF/HST, Age 14-18, F 40,872 6.9% $ 116.85 $ 134.90 $ 1.36 $ 136.26 16.6% Lucas HF, Age 19-44, M 24,528 4.1% $ 187.36 $ 187.38 $ 1.89 $ 189.28 1.0% Lucas HF, Age 19-44, F 115,356 19.4% $ 199.19 $ 231.26 $ 2.34 $ 233.60 17.3% Lucas HF, Age 45+, M & F 9,048 1.5% $ 415.02 $ 421.13 $ 4.25 $ 425.38 2.5% Lucas HST, Age 19-64, F 9,516 1.6% $ 340.77 $ 392.90 $ 3.97 $ 396.87 16.5% ------- ----- ---------- ----------- ------- ----------- ----- Lucas Subtotal 596,100 100.0% $ 141.95 $ 150.80 $ 1.52 $ 152.33 7.3% ------- ----- ---------- ----------- ------- ----------- ----- Lucas Delivery Payment 2,712 0.5% $ 3,844.21 $ 4,320.65 $ 43.64 $ 4,364.29 13.5% ------- ----- ---------- ----------- ------- ----------- ----- Lucas Total 596,100 100.0% $ 159.44 $ 170.46 $ 1.72 $ 172.18 8.0% ------- ----- ---------- ----------- ------- ----------- ----- Mahoning HF/HST, Age 0, M & F 7,620 5.5% $ 512.84 $ 419.13 $ 4.23 $ 423.36 -17.4% Mahoning HF/HST, Age 1, M & F 7,676 5.5% $ 109.61 $ 123.78 $ 1.25 $ 125.03 14.1% Mahoning HF/HST, Age 2-13, M & F 70,893 51.2% $ 71.58 $ 78.77 $ 0.80 $ 79.56 11.2% Mahoning HF/HST, Age 14-18, M 8,140 5.9% $ 101.19 $ 111.09 $ 1.12 $ 112.21 10.9% Mahoning HF/HST, Age 14-18, F 9,316 6.7% $ 121.54 $ 139.44 $ 1.41 $ 140.85 15.9% Mahoning HF, Age 19-44, M 4,785 3.5% $ 203.35 $ 192.51 $ 1.94 $ 194.45 -4.4% Mahoning HF, Age 19-44, F 26,991 19.5% $ 211.29 $ 247.27 $ 2.50 $ 249.77 18.2% Mahoning HF, Age 45+, M & F 1,709 1.2% $ 400.10 $ 416.84 $ 4.21 $ 421.05 5.2% Mahoning HST, Age 19-64, F 1,408 1.0% $ 346.92 $ 368.43 $ 3.72 $ 372.16 7.3% ------- ----- ---------- ----------- ------- ----------- ----- Mahoning Subtotal 138,538 100.0% $ 141.68 $ 149.83 $ 1.51 $ 151.35 6.8% ------- ----- ---------- ----------- ------- ----------- ----- Mahoning Delivery Payment 468 0.3% $ 3,509.06 $ 3,980.19 $ 40.20 $ 4,020.39 14.6% ------- ----- ---------- ----------- ------- ----------- ----- Mahoning Total 138,538 100.0% $ 153.53 $ 163.28 $ 1.65 $ 164.93 7.4% ------- ----- ---------- ----------- ------- ----------- -----
Mercer Government Human Services Consulting Page 4 of 7 STATE OF OHIO EXHIBIT B FINAL TWELVE MONTH RATES CY 2004
Annualized 1/1/2004 - 1/1/2004 - Dec 2002 CY 2002 12/31/2004 1/1/2004 - 12/31/2004 Managed Care Rate w/ Guaranteed 12/31/2004 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase ------ ----------- ------------ ------- ---------- ---------- ------------ ----------- -------- Montgomery HF/HST, Age 0, M & F 22,200 6.3% $ 602.39 $ 499.26 $ 5.04 $ 504.30 -16.3% Montgomery HF/HST, Age 1, M & F 19,524 5.5% $ 123.80 $ 139.57 $ 1.41 $ 140.98 13.9% Montgomery HF/HST, Age 2-13, M & F 177,480 50.2% $ 64.80 $ 75.24 $ 0.76 $ 76.00 17.3% Montgomery HF/HST, Age 14-18, M 20,316 5.7% $ 74.10 $ 81.56 $ 0.82 $ 82.39 11.2% Montgomery HF/HST, Age 14-18, F 23,388 6.6% $ 111.83 $ 131.66 $ 1.33 $ 132.99 18.9% Montgomery HF, Age 19-44, M 11,952 3.4% $ 176.03 $ 176.43 $ 1.78 $ 178.21 1.2% Montgomery HF, Age 19-44, F 71,304 20.2% $ 194.95 $ 229.01 $ 2.31 $ 231.33 18.7% Montgomery HF, Age 45+, M & F 4,020 1.1% $ 385.54 $ 395.38 $ 3.99 $ 399.38 3.6% Montgomery HST, Age 19-64, F 3,312 0.9% $ 340.60 $ 396.93 $ 4.01 $ 400.94 17.7% ------- ------ ---------- ---------- ------- --------- ----- Montgomery Subtotal 353,496 100.0% $ 141.71 $ 150.61 $ 1.52 $ 152.14 7.4% ------- ------ ---------- ---------- ------- --------- ----- Montgomery Delivery Payment 935 0.3% $ 4,146.90 $ 4,858.52 $ 49.08 $4,907.60 18.3% ------- ------ ---------- ---------- ------- --------- ----- Montgomery Total 353,496 100.0% $ 152.68 $ 163.46 $ 1.65 $ 165.12 8.1% ------- ------ ---------- ---------- ------- --------- ----- Muskingum HF/HST, Age 0, M & F 384 5.5% $ - $ 365.04 $ 3.69 $ 368.72 0.0% Muskingum HF/HST, Age 1, M & F 387 5.5% $ - $ 114.05 $ 1.15 $ 115.20 0.0% Muskingum HF/HST, Age 2-13, M & F 3,574 51.2% $ - $ 67.59 $ 0.68 $ 68.27 0.0% Muskingum HF/HST, Age 14-18, M 410 5.9% $ - $ 76.34 $ 0.77 $ 77.11 0.0% Muskingum HF/HST, Age 14-18, F 470 6.7% $ - $ 126.57 $ 1.28 $ 127.85 0.0% Muskingum HF, Age 19-44, M 241 3.5% $ - $ 154.07 $ 1.56 $ 155.63 0.0% Muskingum HF, Age 19-44, F 1,361 19.5% $ - $ 208.20 $ 2.10 $ 210.30 0.0% Muskingum HF, Age 45+, M & F 86 1.2% $ - $ 350.23 $ 3.54 $ 353.77 0.0% Muskingum HST, Age 19-64, F 71 1.0% $ - $ 345.81 $ 3.49 $ 349.30 0.0% ------- ------ ---------- ---------- ------- --------- ----- Muskingum Subtotal 6,984 100.0% $ - $ 127.69 $ 1.29 $ 128.98 0.0% ------- ------ ---------- ---------- ------- --------- ----- Muskingum Delivery Payment 24 0.3% $ - $ 3,527.02 $ 35.63 $3,562.64 0.0% ------- ------ ---------- ---------- ------- --------- ----- Muskingum Total 6,984 100.0% $ - $ 139.81 $ 1.41 $ 141.23 0.0% ------- ------ ---------- ---------- ------- --------- ----- Ottawa/Sandusky HF/HST, Age 0, M & F 241 5.5% $ - $ 363.41 $ 3.67 $ 367.08 0.0% Ottawa/Sandusky HF/HST, Age 1, M & F 243 5.5% $ - $ 111.53 $ 1.13 $ 112.66 0.0% Ottawa/Sandusky HF/HST, Age 2-13, M & F 2,245 51.2% $ - $ 66.67 $ 0.67 $ 67.34 0.0% Ottawa/Sandusky HF/HST, Age 14-18, M 258 5.9% $ - $ 75.74 $ 0.77 $ 76.50 0.0% Ottawa/Sandusky HF/HST, Age 14-18, F 295 6.7% $ - $ 123.82 $ 1.25 $ 125.07 0.0% Ottawa/Sandusky HF, Age 19-44, M 152 3.5% $ - $ 151.96 $ 1.53 $ 153.50 0.0% Ottawa/Sandusky HF, Age 19-44, F 855 19.5% $ - $ 205.63 $ 2.08 $ 207.70 0.0% Ottawa/Sandusky HF, Age 45+, M & F 54 1.2% $ - $ 339.06 $ 3.42 $ 342.49 0.0% Ottawa/Sandusky HST, Age 19-64, F 45 1.0% $ - $ 335.99 $ 3.39 $ 339.38 0.0% ------- ------ ---------- ---------- ------- --------- ----- Ottawa/Sandusky Subtotal 4,388 100.0% $ - $ 125.97 $ 1.27 $ 127.24 0.0% ------- ------ ---------- ---------- ------- --------- ----- Ottawa/Sandusky Delivery Payment 15 0.3% $ - $ 3,509.02 $ 35.44 $3,544.46 0.0% ------- ------ ---------- ---------- ------- --------- ----- Ottawa/Sandusky Total 4,388 100.0% $ - $ 137.97 $ 1.39 $ 139.36 0.0% ------- ------ ---------- ---------- ------- --------- ----- Pickaway HF/HST, Age 0, M & F 148 5.5% $ 501.13 $ 413.50 $ 4.18 $ 417.68 -16.7% Pickaway HF/HST, Age 1, M & F 149 5.5% $ 123.14 $ 126.63 $ 1.28 $ 127.91 3.9% Pickaway HF/HST, Age 2-13, M & F 1,378 51.2% $ 70.44 $ 76.41 $ 0.77 $ 77.18 9.6% Pickaway HF/HST, Age 14-18, M 158 5.9% $ 87.67 $ 95.71 $ 0.97 $ 96.67 10.3% Pickaway HF/HST, Age 14-18, F 181 6.7% $ 122.78 $ 135.78 $ 1.37 $ 137.15 11.7% Pickaway HF, Age 19-44, M 93 3.5% $ 219.16 $ 216.64 $ 2.19 $ 218.82 -0.2% Pickaway HF, Age 19-44, F 525 19.5% $ 214.34 $ 250.24 $ 2.53 $ 252.77 17.9% Pickaway HF, Age 45+, M & F 33 1.2% $ 416.49 $ 451.35 $ 4.56 $ 455.91 9.5% Pickaway HST, Age 19-64, F 27 1.0% $ 346.07 $ 371.77 $ 3.76 $ 375.53 8.5% ------- ------ ---------- ---------- ------- --------- ----- Pickaway Subtotal 2,692 100.0% $ 141.78 $ 149.15 $ 1.51 $ 150.66 6.3% ------- ------ ---------- ---------- ------- --------- ----- Pickaway Delivery Payment 9 0.3% $ 3,384.76 $ 3,543.99 $ 35.80 $3,579.79 5.8% ------- ------ ---------- ---------- ------- --------- ----- Pickaway Total 2,692 100.0% $ 153.09 $ 161.00 $ 1.63 $ 162.63 6.2% ------- ------ ---------- ---------- ------- --------- ----- Portage HF/HST, Age 0, M & F 959 5.5% $ - $ 377.92 $ 3.82 $ 381.74 0.0% Portage HF/HST, Age 1, M & F 965 5.5% $ - $ 117.61 $ 1.19 $ 118.79 0.0% Portage HF/HST, Age 2-13, M & F 8,917 51.2% $ - $ 70.54 $ 0.71 $ 71.25 0.0% Portage HF/HST, Age 14-18, M 1,024 5.9% $ - $ 79.32 $ 0.80 $ 80.12 0.0% Portage HF/HST, Age 14-18, F 1,172 6.7% $ - $ 128.32 $ 1.30 $ 129.62 0.0% Portage HF, Age 19-44, M 602 3.5% $ - $ 163.70 $ 1.65 $ 165.35 0.0% Portage HF, Age 19-44, F 3,395 19.5% $ - $ 216.54 $ 2.19 $ 218.73 0.0% Portage HF, Age 45+, M & F 215 1.2% $ - $ 370.57 $ 3.74 $ 374.31 0.0% Portage HST, Age 19-64, F 177 1.0% $ - $ 351.16 $ 3.55 $ 354.71 0.0% ------- ------ ---------- ---------- ------- --------- ----- Portage Subtotal 17,426 100.0% $ - $ 132.68 $ 1.34 $ 134.02 0.0% ------- ------ ---------- ---------- ------- --------- ----- Portage Delivery Payment 59 0.3% $ - $ 3,657.47 $ 36.94 $3,694.41 0.0% ------- ------ ---------- ---------- ------- --------- ----- Portage Total 17,426 100.0% $ - $ 145.06 $ 1.47 $ 146.53 0.0% ------- ------ ---------- ---------- ------- --------- -----
Mercer Government Human Services Consulting Page 5 of 7 STATE OF OHIO EXHIBIT B FINAL TWELVE MONTH RATES CY 2004
Annualized 1/1/2004 - 1/1/2004 - Dec 2002 CY 2002 12/31/2004 1/1/2004 - 12/31/2004 Managed Care Rate w/ Guaranteed 12/31/2004 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase ------ ----------- ------------ ------- ------- ---------- ------------ ---------- -------- Richland HF/HST, Age 0, M & F 417 5.5% $ 435.57 $ 350.76 $ 3.54 $ 354.30 -18.7% Richland HF/HST, Age 1, M & F 420 5.5% $ 119.58 $ 121.94 $ 1.23 $ 123.17 3.0% Richland HF/HST, Age 2-13, M & F 3,882 51.2% $ 65.11 $ 72.63 $ 0.73 $ 73.37 12.7% Richland HF/HST, Age 14-18, M 446 5.9% $ 73.40 $ 83.86 $ 0.85 $ 84.71 15.4% Richland HF/HST, Age 14-18, F 510 6.7% $ 130.13 $ 137.75 $ 1.39 $ 139.14 6.9% Richland HF, Age 19-44, M 262 3.5% $ 163.01 $ 154.69 $ 1.56 $ 156.25 -4.1% Richland HF, Age 19-44, F 1,478 19.5% $ 176.92 $ 200.11 $ 2.02 $ 202.13 14.2% Richland HF, Age 45+, M & F 94 1.2% $ 323.07 $ 335.58 $ 3.39 $ 338.97 4.9% Richland HST, Age 19-64, F 77 1.0% $ 266.88 $ 295.75 $ 2.99 $ 298.74 11.9% ------- ----- --------- ---------- ---------- ---------- ----- Richland Subtotal 7,586 100.0% $ 123.76 $ 128.88 $ 1.30 $ 130.18 5.2% ------- ----- --------- ---------- ---------- ---------- ----- Richland Delivery Payment 26 0.3% $2,900.54 $ 3,287.93 $ 33.21 $ 3,321.14 14.5% ------- ----- --------- ---------- ---------- ---------- ----- Richland Total 7,586 100.0% $ 133.70 $ 140.15 $ 1.42 $ 141.57 5.9% ------- ----- --------- ---------- ---------- ---------- ----- Stark HF/HST, Age 0, M & F 348 4.2% $ 433.74 $ 351.55 $ 3.55 $ 355.10 -18.1% Stark HF/HST, Age 1, M & F 372 4.5% $ 98.56 $ 112.15 $ 1.13 $ 113.28 14.9% Stark HF/HST, Age 2-13, M & F 4,392 53.4% $ 62.03 $ 70.56 $ 0.71 $ 71.28 14.9% Stark HF/HST, Age 14-18, M 552 6.7% $ 68.52 $ 78.60 $ 0.79 $ 79.39 15.9% Stark HF/HST, Age 14-18, F 576 7.0% $ 116.83 $ 133.38 $ 1.35 $ 134.73 15.3% Stark HF, Age 19-44, M 300 3.6% $ 152.83 $ 159.84 $ 1.61 $ 161.46 5.6% Stark HF, Age 19-44, F 1,440 17.5% $ 185.77 $ 219.63 $ 2.22 $ 221.85 19.4% Stark HF, Age 45+, M & F 144 1.8% $ 383.72 $ 402.26 $ 4.06 $ 406.32 5.9% Stark HST, Age 19-64, F 96 1.2% $ 277.06 $ 326.15 $ 3.29 $ 329.44 18.9% ------- ----- --------- ---------- ---------- ---------- ----- Stark Subtotal 8,220 100.0% $ 116.83 $ 127.45 $ 1.29 $ 128.74 10.2% ------- ----- --------- ---------- ---------- ---------- ----- Stark Delivery Payment 23 0.3% $3,036.07 $ 3,526.07 $ 35.62 $ 3,561.69 17.3% ------- ----- --------- ---------- ---------- ---------- ----- Stark Total 8,220 100.0% $ 125.33 $ 137.32 $ 1.39 $ 138.70 10.7% ------- ----- --------- ---------- ---------- ---------- ----- Summit HF/HST, Age 0, M & F 27,504 5.0% $ 544.75 $ 453.44 $ 4.58 $ 458.02 -15.9% Summit HF/HST, Age 1, M & F 27,600 5.0% $ 106.04 $ 119.86 $ 1.21 $ 121.07 14.2% Summit HF/HST, Age 2-13, M & F 268,860 49.0% $ 63.11 $ 73.62 $ 0.74 $ 74.36 17.8% Summit HF/HST, Age 14-18, M 32,988 6.0% $ 85.66 $ 95.66 $ 0.97 $ 96.63 12.8% Summit HF/HST, Age 14-18, F 37,812 6.9% $ 122.35 $ 143.79 $ 1.45 $ 145.24 18.7% Summit HF, Age 19-44, M 24,096 4.4% $ 171.17 $ 177.56 $ 1.79 $ 179.35 4.8% Summit HF, Age 19-44, F 114,744 20.9% $ 202.85 $ 240.56 $ 2.43 $ 242.99 19.8% Summit HF, Age 45+, M & F 10,764 2.0% $ 401.55 $ 419.44 $ 4.24 $ 423.68 5.5% Summit HST, Age 19-64, F 4,884 0.9% $ 324.03 $ 378.98 $ 3.83 $ 382.80 18.1% ------- ----- --------- ---------- ---------- ---------- ----- Summit Subtotal 549,252 100.0% $ 137.71 $ 150.05 $ 1.52 $ 151.56 10.1% ------- ----- --------- ---------- ---------- ---------- ----- Summit Delivery Payment 2,475 0.5% $4,091.24 $ 4,734.82 $ 47.83 $ 4,782.64 16.9% ------- ----- --------- ---------- ---------- ---------- ----- Summit Total 549,252 100.0% $ 156.14 $ 171.38 $ 1.73 $ 173.11 10.9% ------- ----- --------- ---------- ---------- ---------- ----- Trumbull HF/HST, Age 0, M & F 6,201 5.5% $ 512.84 $ 420.17 $ 4.24 $ 424.42 -17.2% Trumbull HF/HST, Age 1, M & F 6,246 5.5% $ 109.61 $ 127.40 $ 1.29 $ 128.69 17.4% Trumbull HF/HST, Age 2-13, M & F 57,685 51.2% $ 71.58 $ 84.74 $ 0.86 $ 85.60 19.6% Trumbull HF/HST, Age 14-18, M 6,623 5.9% $ 101.19 $ 104.08 $ 1.05 $ 105.13 3.9% Trumbull HF/HST, Age 14-18, F 7,581 6.7% $ 121.54 $ 143.03 $ 1.44 $ 144.48 18.9% Trumbull HF, Age 19-44, M 3,893 3.5% $ 203.35 $ 208.99 $ 2.11 $ 211.10 3.8% Trumbull HF, Age 19-44, F 21,962 19.5% $ 211.29 $ 248.24 $ 2.51 $ 250.74 18.7% Trumbull HF, Age 45+, M & F 1,390 1.2% $ 400.10 $ 403.15 $ 4.07 $ 407.23 1.8% Trumbull HST, Age 19-64, F 1,146 1.0% $ 346.92 $ 381.87 $ 3.86 $ 385.72 11.2% ------- ----- --------- ---------- ---------- ---------- ----- Trumbull Subtotal 112,727 100.0% $ 141.68 $ 153.70 $ 1.55 $ 155.26 9.6% ------- ----- --------- ---------- ---------- ---------- ----- Trumbull Delivery Payment 381 0.3% $3,509.06 $ 3,855.96 $ 38.95 $ 3,894.91 11.0% ------- ----- --------- ---------- ---------- ---------- ----- Trumbull Total 112,727 100.0% $ 153.54 $ 166.74 $ 1.68 $ 168.42 9.7% ------- ----- --------- ---------- ---------- ---------- ----- Warren HF/HST, Age 0, M & F 204 5.5% $ 459.45 $ 381.23 $ 3.85 $ 385.09 -16.2% Warren HF/HST, Age 1, M & F 206 5.6% $ 95.81 $ 107.52 $ 1.09 $ 108.60 13.4% Warren HF/HST, Age 2-13, M & F 1,898 51.2% $ 64.76 $ 72.19 $ 0.73 $ 72.92 12.6% Warren HF/HST, Age 14-18, M 218 5.9% $ 65.83 $ 76.94 $ 0.78 $ 77.72 18.1% Warren HF/HST, Age 14-18, F 249 6.7% $ 109.91 $ 129.53 $ 1.31 $ 130.84 19.0% Warren HF, Age 19-44, M 128 3.5% $ 182.03 $ 189.08 $ 1.91 $ 190.99 4.9% Warren HF, Age 19-44, F 723 19.5% $ 209.88 $ 241.88 $ 2.44 $ 244.32 16.4% Warren HF, Age 45+, M & F 46 1.2% $ 458.20 $ 491.59 $ 4.97 $ 496.55 8.4% Warren HST, Age 19-64, F 38 1.0% $ 276.50 $ 324.06 $ 3.27 $ 327.34 18.4% ------- ----- --------- ---------- ---------- ---------- ----- Warren Subtotal 3,710 100.0% $ 130.65 $ 140.16 $ 1.42 $ 141.57 8.4% ------- ----- --------- ---------- ---------- ---------- ----- Warren Delivery Payment 13 0.4% $3,211.66 $ 3,491.56 $ 35.27 $ 3,526.83 9.8% ------- ----- --------- ---------- ---------- ---------- ----- Warren Total 3,710 100.0% $ 141.91 $ 152.39 $ 1.54 $ 153.93 8.5% ------- ----- --------- ---------- ---------- ---------- -----
Marcer Government Human Services Consulting Page 6 of 7 STATE OF OHIO EXHIBIT B FINAL TWELVE MONTH RATES CY 2004
Annualized 1/1/2004 - 1/1/2004 - Dec 2002 CY 2002 12/31/2004 1/1/2004 - 12/31/2004 Managed Care Rate w/ Guaranteed 12/31/2004 Rate w/ Percent County Rate Cohort MM/Delv % of MM Admin Rate Rate At Risk Admin Increase ------ ----------- ------------ ------- ------- ---------- ------------ ---------- -------- Washington HF/HST, Age 0, M & F 231 5.5% $ - $ 363.21 $ 3.67 $ 366.88 0.0% Washington HF/HST, Age 1, M & F 233 5.5% $ - $ 110.71 $ 1.12 $ 111.83 0.0% Washington HF/HST, Age 2-13, M & F 2,152 51.2% $ - $ 69.09 $ 0.70 $ 69.79 0.0% Washington HF/HST, Age 14-18, M 247 5.9% $ - $ 76.06 $ 0.77 $ 76.83 0.0% Washington HF/HST, Age 14-18, F 283 6.7% $ - $ 123.98 $ 1.25 $ 125.23 0.0% Washington HF, Age 19-44, M 145 3.4% $ - $ 158.26 $ 1.60 $ 159.86 0.0% Washington HF, Age 19-44, F 819 19.5% $ - $ 213.95 $ 2.16 $ 216.11 0.0% Washington HF, Age 45+, M & F 52 1.2% $ - $ 359.98 $ 3.64 $ 363.61 0.0% Washington HST, Age 19-64, F 43 1.0% $ - $ 339.44 $ 3.43 $ 342.86 0.0% --------- ----- --------- ---------- ---------- ---------- ----- Washington Subtotal 4,205 100.0% $ - $ 129.31 $ 1.31 $ 130.61 0.0% --------- ----- --------- ---------- ---------- ---------- ----- Washington Delivery Payment 14 0.3% $ - $ 3,516.35 $ 35.52 $ 3,551.87 0.0% --------- ----- --------- ---------- ---------- ---------- ----- Washington Total 4,205 100.0% $ - $ 141.01 $ 1.42 $ 142.44 0.0% --------- ----- --------- ---------- ---------- ---------- ----- Wood HF/HST, Age 0, M & F 516 5.5% $ 436.52 $ 343.33 $ 3.47 $ 346.80 -20.6% Wood HF/HST, Age 1, M & F 432 4.6% $ 115.67 $ 154.96 $ 1.57 $ 156.52 35.3% Wood HF/HST, Age 2-13, M & F 4,848 51.9% $ 68.00 $ 76.24 $ 0.77 $ 77.01 13.2% Wood HF/HST, Age 14-18, M 564 6.0% $ 69.03 $ 69.04 $ 0.70 $ 69.74 1.0% Wood HF/HST, Age 14-18, F 600 6.4% $ 125.18 $ 133.82 $ 1.35 $ 135.17 8.0% Wood HF, Age 19-44, M 564 6.0% $ 159.33 $ 149.05 $ 1.51 $ 150.55 -5.5% Wood HF, Age 19-44, F 1,608 17.2% $ 188.12 $ 211.65 $ 2.14 $ 213.78 13.6% Wood HF, Age 45+, M & F 132 1.4% $ 387.37 $ 384.43 $ 3.88 $ 388.31 0.2% Wood HST, Age 19-64, F 72 0.8% $ 350.29 $ 346.63 $ 3.50 $ 350.13 0.0% --------- ----- --------- ---------- ---------- ---------- ----- Wood Subtotal 9,336 100.0% $ 127.21 $ 132.07 $ 1.33 $ 133.40 4.9% --------- ----- --------- ---------- ---------- ---------- ----- Wood Delivery Payment 70 0.7% $2,858.71 $ 3,136.72 $ 31.68 $ 3,168.40 10.8% --------- ----- --------- ---------- ---------- ---------- ----- Wood Total 9,336 100.0% $ 148.65 $ 155.59 $ 1.57 $ 157.16 5.7% --------- ----- --------- ---------- ---------- ---------- ----- New Counties HF/HST, Age 0, M & F 6,967 5.5% $ - $ 373.31 $ 3.77 $ 377.08 0.0% New Counties HF/HST, Age 1, M & F 7,016 5.5% $ - $ 115.26 $ 1.16 $ 116.42 0.0% New Counties HF/HST, Age 2-13, M & F 64,810 51.2% $ - $ 69.78 $ 0.70 $ 70.48 0.0% New Counties HF/HST, Age 14-18, M 7,441 5.9% $ - $ 78.50 $ 0.79 $ 79.29 0.0% New Counties HF/HST, Age 14-18, F 8,517 6.7% $ - $ 127.31 $ 1.29 $ 128.60 0.0% New Counties HF, Age 19-44, M 4,375 3.5% $ - $ 160.85 $ 1.62 $ 162.47 0.0% New Counties HF, Age 19-44, F 24,674 19.5% $ - $ 214.02 $ 2.16 $ 216.18 0.0% New Counties HF, Age 45+, M & F 1,562 1.2% $ - $ 363.59 $ 3.67 $ 367.26 0.0% New Counties HST, Age 19-64, F 1,289 1.0% $ - $ 346.37 $ 3.50 $ 349.86 0.0% --------- ----- --------- ---------- ---------- ---------- ----- New Counties Subtotal 126,651 100.0% $ - $ 131.06 $ 1.32 $ 132.38 0.0% --------- ----- --------- ---------- ---------- ---------- ----- New Counties Delivery Payment 431 0.3% $ - $ 3,597.59 $ 36.34 $ 3,633.93 0.0% --------- ----- --------- ---------- ---------- ---------- ----- New Counties Total 126,651 100.0% $ - $ 143.30 $ 1.45 $ 144.75 0.0% --------- ----- --------- ---------- ---------- ---------- ----- Original Counties HF/HST, Age 0, M & F 263,340 5.1% $ 570.19 $ 474.34 $ 4.79 $ 479.14 -16.0% Original Counties HF/HST, Age 1, M & F 271,200 5.2% $ 114.38 $ 128.62 $ 1.30 $ 129.92 13.6% Original Counties HF/HST, Age 2-13, M & F 2,601,427 50.3% $ 64.75 $ 75.04 $ 0.76 $ 75.80 17.1% Original Counties HF/HST, Age 14-18, M 322,141 6.2% $ 76.67 $ 85.00 $ 0.86 $ 85.86 12.0% Original Counties HF/HST, Age 14-18, F 357,266 6.9% $ 115.13 $ 134.85 $ 1.36 $ 136.21 18.3% Original Counties HF, Age 19-44, M 186,852 3.6% $ 182.28 $ 184.60 $ 1.86 $ 186.46 2.3% Original Counties HF, Age 19-44, F 1,026,499 19.9% $ 200.96 $ 236.47 $ 2.39 $ 238.86 18.9% Original Counties HF, Age 45+, M & F 84,057 1.6% $ 395.54 $ 407.54 $ 4.12 $ 411.66 4.1% Original Counties HST, Age 19-64, F 54,992 1.1% $ 327.46 $ 378.59 $ 3.82 $ 382.42 16.8% --------- ----- --------- ---------- ---------- ---------- ----- Original Counties Subtotal 5,167,774 100.0% $ 136.82 $ 147.62 $ 1.49 $ 149.11 9.0% --------- ----- --------- ---------- ---------- ---------- ----- Original Counties Delivery Payment 19,240 0.4% $3,838.17 $ 4,455.56 $ 45.01 $ 4,500.57 17.3% --------- ----- --------- ---------- ---------- ---------- ----- Original Counties Total 5,167,774 100.0% $ 151.11 $ 164.21 $ 1.66 $ 165.87 9.8% --------- ----- --------- ---------- ---------- ---------- ----- Total Managed Care HF/HST, Age 0, M & F 270,307 5.1% $ 570.19 $ 471.74 $ 4.77 $ 476.51 -16.4% Total Managed Care HF/HST, Age 1, M & F 278,216 5.3% $ 114.38 $ 128.28 $ 1.30 $ 129.58 13.3% Total Managed Care HF/HST, Age 2-13, M & F 2,666,237 50.4% $ 64.75 $ 74.92 $ 0.76 $ 75.67 16.9% Total Managed Care HF/HST, Age 14-18, M 329,582 6.2% $ 76.67 $ 84.86 $ 0.86 $ 85.71 11.8% Total Managed Care HF/HST, Age 14-18, F 365,783 6.9% $ 115.13 $ 134.67 $ 1.36 $ 136.03 18.2% Total Managed Care HF, Age 19-44, M 191,227 3.6% $ 182.28 $ 184.06 $ 1.86 $ 185.91 2.0% Total Managed Care HF, Age 19-44, F 1,051,173 19.9% $ 200.96 $ 235.94 $ 2.38 $ 238.32 18.6% Total Managed Care HF, Age 45+, M & F 85,619 1.6% $ 395.54 $ 406.74 $ 4.11 $ 410.85 3.9% Total Managed Care HST, Age 19-64, F 56,281 1.1% $ 327.46 $ 377.86 $ 3.82 $ 381.67 16.6% --------- ----- --------- ---------- ---------- ---------- ----- Total Managed Care Subtotal 5,294,425 100.0% $ 136.82 $ 147.23 $ 1.49 $ 148.71 8.7% --------- ----- --------- ---------- ---------- ---------- ----- Total Managed Care Delivery Payment 19,671 0.4% $3,838.17 $ 4,436.76 $ 44.82 $ 4,481.58 16.8% --------- ----- --------- ---------- ---------- ---------- ----- Total Managed Care Total 5,294,425 100.0% $ 151.11 $ 163.71 $ 1.65 $ 165.36 9.4% --------- ----- --------- ---------- ---------- ---------- -----
Marcer Government Human Services Consulting Page 7 of 7 APPENDIX F COUNTY SPECIFICATIONS 1. PREMIUM RATES WITHOUT THE AT-RISK PAYMENT AMOUNTS FOR 01/01/04, THROUGH 06/30/04, SHALL BE AS FOLLOWS*: MCP: BUCKEYE COMMUNITY HEALTH PLAN, INC.
SERVICE VOLUNTARY/ HF/HST HF/HST HF HF HF HST ENROLLMENT MANDATORY/ HF/HST HF/HST HF/HST AGE 14-18 AGE 14-18 AGE 19-44 AGE 19-44 AGE 45 AGE 19-64 DELIVERY AREA PREFERRED OPTION** AGE < 1 AGE 1 AGE 2-13 MALE FEMALE MALE FEMALE AND OVER FEMALE PAYMENT - ------------------------------------------------------------------------------------------------------------------------------------ Lucas Mandatory $554.09 $114.71 $74.34 $82.89 $137.83 $191.45 $236.29 $430.27 $401.44 $4,414.48 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
LIST OF ELIGIBLE ASSISTANCE GROUPS (AGS) Healthy Families: - MA-C Categorically eligible due to ADC cash - MA-H Cash assistance failed due to stepparent income - MA-S Cash assistance failed due to sibling income - MA-T Children under 21 - MA-V ADC; failed due to loss of dependent care - MA-W Cash Assistance failed due to loss of 30 or 1/3 disregard Medicaid - MA-X Cash Assistance failed due to sibling income - MA-Y Transitional Medicaid Healthy Start: - MA-P Pregnant Women and Children Note: An MCP's county membership for this program must not exceed their Primary Care Physician (PCP) capacity for that county as verified by the ODJFS provider database. * Since Buckeye Community Health Plan, Inc. is in its first year of operation, per Appendix E, Rate Methodology, the rates reflect a new plan rate add-on, with zero percent of the premium rates at-risk. ** County status subject to change. Page 1 of 3 APPENDIX F COUNTY SPECIFICATIONS 2. AT-RISK AMOUNTS FOR 01/01/04, THROUGH 06/30/04, SHALL BE AS FOLLOWS: MCP: BUCKEYE COMMUNITY HEALTH PLAN, INC.
AT-RISK AMOUNTS* ---------------- SERVICE VOLUNTARY/ HF/HST HF/HST HF HF HF HST ENROLLMENT MANDATORY/ HF/HST HF/HST HF/HST AGE 14-18 AGE 14-18 AGE 19-44 AGE 19-44 AGE 45 AGE 19-64 DELIVERY AREA PREFERRED OPTION** AGE < 1 AGE 1 AGE 2-13 MALE FEMALE MALE FEMALE AND OVER FEMALE PAYMENT - ------------------------------------------------------------------------------------------------------------------------------------ Lucas Mandatory $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------
LIST OF ELIGIBLE ASSISTANCE GROUPS (AGS) Healthy Families: - MA-C Categorically eligible due to ADC cash - MA-H Cash assistance failed due to stepparent income - MA-S Cash assistance failed due to sibling income - MA-T Children under 21 - MA-V ADC; failed due to loss of dependent care - MA-W Cash Assistance failed due to loss of 30 or 1/3 disregard Medicaid - MA-X Cash Assistance failed due to sibling income - MA-Y Transitional Medicaid Healthy Start: - MA-P Pregnant Women and Children Note: An MCP's county membership for this program must not exceed their Primary Care Physician (PCP) capacity for that county as verified by the ODJFS provider database. * Since Buckeye Community Health Plan, Inc. is in its first year of operation, per Appendix E, Rate Methodology, the rates reflect a new plan rate add-on, with zero percent of the premium rates at-risk. ** County status subject to change. Page 2 of 3 APPENDIX G COVERAGE AND SERVICES 1. Basic Benefit Package By Service Type Pursuant to OAC rule 5101:3-26-03(A), with limited exclusions (see section G.2 of this appendix), MCPs must ensure that members have access to medically-necessary services covered by the Ohio Medicaid fee-for-service (FFS) program, including, but not limited to, the following: a. Inpatient hospital services b. Outpatient hospital services c. Physician services whether furnished in the physician's office, the covered person's home, a hospital or elsewhere d. Obstetrical services e. Laboratory and x-ray services f. Early and periodic screening, diagnosis, and treatment (EPSDT/HealthChek) of covered persons under the age of twenty-one (21) g. Family planning services h. Home health care services i. Clinic services (including federally qualified health centers and rural health clinics) j. Services of licensed practitioners recognized by the Medicaid FFS program such as: podiatrists, chiropractors, physical therapists, occupational therapists, mechanotherapists, certified nurse practitioners, certified nurse midwives and psychologists* (*see Section 2.a. of this Appendix for further clarification) k. Prescribed drugs l. Ambulance and ambulette transportation m. Emergency services n. Dental services, including dentures Appendix G Page 2 o. Speech and hearing services, including hearing aids p. Certain durable medical equipment and medical supplies q. Vision care services, including eyeglasses r. Short-term rehabilitative stays in a nursing facility s. Hospice care services t. Behavioral health services (see section G.2.b.ii of this appendix) For additional information on Medicaid-covered services, see the following ODJFS website: http://dynaweb.odjfs.state.oh.us:6336/dynaweb/medicaid/ @Generic CollectionView;cs=default;ts=default 2. Exclusions, Limitations and Clarifications a. Exclusions MCPs are not required to pay for Ohio Medicaid FFS program (Medicaid) non-covered services including, but not limited to, the following: - Services or supplies that are not medically necessary - Experimental services and procedures, including drugs and equipment, not covered by Medicaid - Organ transplants that are not covered by Medicaid - Abortions except in the case of a reported rape, incest or when medically necessary to save the life of the mother - Infertility services, including reversal of voluntary sterilization procedures. - Voluntary sterilization if under 21 years of age or legally incapable of consenting to the procedure - Cosmetic surgery that is not medically necessary - Services for the treatment of obesity unless medically necessary - Court ordered testing - Education testing and diagnosis - Acupuncture and biofeedback services - Services to find cause of death (autopsy) - Paternity testing Appendix G Page 3 - Effective January 1, 2004, independent psychologist services for adults 21 and older - Effective January 1, 2004, chiropractic services for adults 21 and older MCPs are also not required to pay for non-emergency services or supplies received without members following the directions in their MCP member handbook, unless otherwise directed by ODJFS. b. Limitations & Clarifications i. Member Cost-Sharing Notwithstanding any provision in the Medicaid fee-for-service program which permits cost-sharing by Medicaid consumers, including provisions specific to the pharmacy benefit, MCPs must ensure compliance with OAC rule 5101:3-26-05(D)(10) which prohibits subcontracting providers from charging members any copayment, cost sharing, down-payment, or similar charge, refundable or otherwise. ii. Abortion and Sterilization The use of federal funds to pay for abortion and sterilization services is prohibited unless the specific criteria found in 42 CFR 441 and OAC rules 5101:3-17-01 and 5101:3-21-01 are met. MCPs must verify that the information on the required forms (JFS 03197, 03198, and 03199) meets the required criteria for any such claims paid. Additionally, payment must not be made for associated services such as anesthesia, laboratory tests, or hospital services if the abortion or sterilization itself does not qualify for payment. MCPs are responsible for educating their providers on the requirements; implementing internal procedures including systems edits to ensure that claims are paid only if the required criteria are met, as confirmed by the appropriate certification/consent forms; and for maintaining documentation to justify any such claim payments. iii. Behavioral Health Services Appendix G Page 4 Coordination of Services: MCPs must ensure that members have access to all medically-necessary behavioral health services covered by the Ohio Medicaid FFS program and are responsible for coordinating those services with other medical and support services. MCPs must notify members via the member handbook and provider directory of where and how to access behavioral health services, including the ability to self-refer to mental health services offered through community mental health centers (CMHCs) as well as substance abuse services offered through Ohio Department of Alcohol and Drug Addiction Services (ODADAS)-certified Medicaid providers. MCPs must provide behavioral health services for members who are unable to timely access services or unwilling to access services through community providers. Mental Health Services: There are a number of various Medicaid-covered mental health (MH) services available through the CMHCs. Where an MCP is responsible for providing MH services for their members, the MCP is responsible for ensuring access to counseling and psychotherapy, physician/psychologist/psychiatrist services, outpatient clinic services, general hospital outpatient psychiatric services, pre-hospitalization screening, diagnostic assessment (clinical evaluation), crisis intervention, psychiatric hospitalization in general hospitals (for all ages), and Medicaid-covered prescription drugs and laboratory services. MCPs are not required to cover partial hospitalization, or inpatient psychiatric care in a free-standing psychiatric hospital. Substance Abuse Services: There are a number of various Medicaid-covered substance abuse services available through ODADAS-certified Medicaid providers. Where an MCP is responsible for providing substance abuse services for their members, the MCP is responsible for ensuring access to alcohol and other drug (AOD) urinalysis screening, assessment, counseling, physician/psychologist/psychiatrist AOD treatment services, outpatient clinic AOD treatment services, general hospital outpatient AOD treatment services, crisis intervention, inpatient detoxification services in a general hospital, and Medicaid-covered prescription drugs and laboratory services. MCPs are not required to cover outpatient detoxification and methadone maintenance. Appendix G Page 5 Financial Responsibility: MCPs are responsible for the payment of Medicaid-covered prescription drugs prescribed by a CMHC or ODADAS-certified provider when obtained through an MCP's panel pharmacy. MCPs are also responsible for the payment of Medicaid-covered services provided by an MCP's panel laboratory when referred by a CMHC or ODADAS-certified provider. Additionally, MCPs are responsible for the payment of all other behavioral health services obtained through providers other than those who are CMHC or ODADAS-certified providers when arranged/authorized by the MCP. MCPs are not responsible for paying for behavioral health services provided through CMHCs and ODADAS-certified Medicaid providers. MCPs are also not required to cover the payment of partial hospitalization (mental health), inpatient psychiatric care in a free-standing inpatient psychiatric hospital, outpatient detoxification, or methadone maintenance. 3. Care Coordination a. Utilization Management Programs General Provisions - Pursuant to OAC rule 5101:3-26-03.1(A)(7)(e), MCPs may implement utilization management programs, subject to prior approval by ODJFS. For the purposes of this requirement, utilization management programs are defined as programs designed by the MCP with the purpose of redirecting or restricting access to a particular service or service location. MCP care coordination and disease management activities which are designed to enhance the services provided to members with specific health care needs would not be considered utilization management programs nor would the designation of specific services requiring prior approval by the MCP or the member's PCP. Emergency Department Diversion (EDD) - MCPs must provide access to services in a way that assures access to primary, specialist and urgent care in the most appropriate settings and that minimizes frequent, preventable utilization of emergency department (ED) services. OAC rule 5101:3-26-03.1(A)(7)(e) requires MCPs to implement the ODJFS-required emergency department diversion (EDD) program for frequent utilizers. Appendix G Page 6 Each MCP must establish an ED diversion (EDD) program with the goal of minimizing frequent ED utilization. The MCP's EDD program must include the monitoring of ED utilization, identification of frequent ED utilizers, and targeted approaches designed to reduce avoidable ED utilization. MCP EDD programs must, at a minimum, address those ED visits which could have been prevented through improved education, access, quality or care management approaches. Although there is often an assumption that frequent ED visits are solely the result of a preference on the part of the member and education is therefore the standard remedy, it's also important to ensure that a member's frequent ED utilization is not due to problems such as their PCP's lack of accessibility or failure to make appropriate specialist referrals. The MCP's EDD diversion program must therefore also include the identification of providers who serve as PCPs for a substantial number of frequent ED utilizers and the implementation of corrective action with these providers as so indicated. This requirement does not replace the MCP's responsibility to inform and educate all members regarding the appropriate use of the ED. In accordance with Appendix C, MCP Responsibilities, MCPs must submit to ODJFS by September 1, 2003, for review and approval, a written description of the MCP's EDD program. Any subsequent changes to an approved EDD program must be submitted to ODJFS in writing for review and approval prior to implementation. (b) Case Management In accordance with 5101:3-26-03.1(A)(8), MCPs must offer and provide case management services which coordinate and monitor the care of members with specific diagnoses, or who require high-cost and/or extensive services. i. The MCP's case management system must include, at a minimum, the following components: a. specification of the criteria used by the MCP to identify those potentially eligible for case management services, including the specification of specific diagnosis, cost threshold and amount of service utilization. Appendix G Page 7 b. identification of the methodology or process (e.g.; administrative data, provider referrals; self-referrals) by which the MCP identifies members meeting the criteria in (a); c. a process to inform members and their PCPs in writing that they have been identified as meeting the criteria for case management and any applicable procedures for further health needs assessment to confirm the provision of case management services; d. the procedure by which the MCP will assure the timely development of a care treatment plan for any member receiving case management services; offer both the member and the member's PCP the opportunity to participate in the treatment plan's development; and provide for the periodic review of the member's need for case management and updating of the care treatment plan; ii. MCPs must inform all members and contracting providers of the MCP's case management services. iii. MCPs must submit monthly an electronic report to the Screening, Assessment, and Case Management System (SACMS) for all members who are case managed. iv. In accordance with Appendix C, MCP Responsibilities, MCPs must submit to ODJFS by September 1, 2003, for review and approval, a written description of the MCP's case management system which includes the items in Section G.3.b.i. and which describe the method(s) that the MCP will use to operationalize the requirement in Section G.3.b.ii. of this Appendix. Any subsequent changes to an approved case management system description must be submitted to ODJFS in writing for review and approval prior to implementation. Notwithstanding the need for MCPs to submit this document to ODJFS for review and approval by no later than September 1, 2003, MCPs are responsible for complying with all program requirements, including those in this section, effective July 1, 2003. Appendix G Page 8 c. Children with Special Health Care Needs Children with special health care needs (CSHCN) are a particularly vulnerable population which often have chronic and complex medical health care conditions. In order to ensure state compliance with the provisions of 42 CFR 438.208, ODJFS has implemented program requirements and minimum standards for the identification, assessment, and case management of CSHCN. Each MCP must establish a CSHCN program with the goal of conducting timely identification and screening, assuring a thorough and comprehensive assessment, and providing appropriate and targeted case management services for CSHCN. i. Definition of CSHCN CSHCN are defined as children age 17 and under who are pregnant, and members under 21 years of age with one or more of the following: - Asthma - HIV/AIDS - A chronic physical, emotional, or mental condition for which they need or are receiving treatment or counseling - Supplemental security income (SSI) for a health- related condition - A current letter of approval from the Bureau of Children with Medical Handicaps (BCMH), Ohio Department of Health ii. Identification of CSHCN All MCPs must implement mechanisms to identify CSHCN. These identification mechanisms must include, at a minimum: - For all newly-enrolled members who were not screened at the time of membership selection by the Selection Services Contractor (SSC) and are not identified as a CSHCN through an administrative review, MCPs are required to use the ODJFS CSHCN Screening Questions to identify potential CSHCN. See ODJFS CSHCN Program Requirements for a description of the ODJFS CSHCN Screening Questions. Appendix G Page 9 - For all newly-enrolled members who were screened at the time of membership selection by the SSC, MCPs may choose to re-screen a child. However, if unable to complete a screen, the MCP must submit the screening result from the Consumer Contact Record (CCR) in the screening and assessment file required to be submitted to ODJFS on a monthly basis. MCPs are expected to use other identification criteria, such as MCP administrative review, PCP referrals, or outreach, in order to identify children that meet the definition of CSHCN and are in need of a follow-up assessment. iii. Assessment of CSHCN All MCPs must implement mechanisms to assess children with a positive identification as a CSHCN. A positive assessment confirms the results of the positive identification and should assist the MCP in determining the need for case management. This assessment mechanism must include, at a minimum: - The use of the ODJFS CSHCN Standard Assessment Tool to assess all children with a positive identification based on the CSHCN Screening Questions as a CSHCN. See ODJFS CSHCN Program Requirements for a description of the ODJFS CSHCN Standard Assessment Tool. - No later than January 1, 2004, completion of the assessment by a physician, physician assistant, RN, LPN, licensed social worker, or a graduate of a two or four year allied health program. - The criteria used by the MCP in assessing members with a positive identification as a CSHCN, through a mechanism other than the ODJFS CSHCN Screening Questions. Appendix G Page 10 - The oversight and monitoring by either a registered nurse or a physician, if the assessment is completed by another medical professional. iv. Case Management of CSHCN All MCPs must implement mechanisms to provide case management services for all CSHCN with a positive assessment or a positive identification through administrative data for an ODJFS mandated condition. The ODJFS mandated conditions for case management are HIV/AIDS, asthma, and pregnant teens as specified by the ODJFS methods for Screening, Assessment and Case Management Performance Measures. This case management mechanism must include, at a minimum: - The components required in Section 3.b., Case Management, of this Appendix. - Case management of CSHCN must include at a minimum, the elements listed in the ODJFS CSHCN Minimum Case Management Components document. See ODJFS CSHCN Program Requirements for a description of the ODJFS CSHCN Minimum Case Management Components. v. Access to Specialists for CSHCN All MCPs must implement mechanisms to notify all CSHCN with a positive assessment and determined to need case management of their right to directly access a specialist. Such access may be assured through, for example, a standing referral or an approved number of visits, and documented in the care treatment plan. vi. Submission of Data on CSHCN MCPs must submit to ODJFS all screening and assessment results (except as provided in Appendix M, Performance Evaluation, Section 1. b.) and all case management records as specified by the ODJFS Screening, Assessment, and Case Management File and Submission Specifications. Appendix G Page 11 vii. In accordance with Appendix C, MCP Responsibilities, MCPs must submit to ODJFS by September 1, 2003 for review and approval, a written description of the MCP's mechanisms for: (1) identifying CSHCN, (2) assessing CSHCN, (3) case managing CSHCN, and (4) notifying CSHCN of their right to directly access a specialist. Any subsequent changes to an approved CSHCN system description must be submitted to ODJFS in writing for review and approval prior to implementation. Notwithstanding the need for MCPs to submit this document to ODJFS for review and approval by no later than September 1, 2003, MCPs are responsible for complying with all program requirements, including those in this section, effective July 1, 2003. APPENDIX H PROVIDER PANEL SPECIFICATIONS 1. GENERAL PROVISIONS MCPs must demonstrate that they have an appropriate provider network with an adequate network capacity for each ODJFS-designated service area they wish to serve. A service area may be either one county or multiple counties grouped as a region. MCPs must meet all applicable provider panel requirements prior to receiving a provider agreement with ODJFS and must remain in compliance with these requirements for the duration of the provider agreement. In addition to achieving and maintaining compliance with the minimum provider panel requirements, an MCP must ensure access to appropriate provider types on an as needed basis. For example, if an MCP meets the minimum pediatrician requirement but a member is unable to obtain a timely appointment from a pediatrician on the MCP's provider panel in that service area, the MCP will be required to secure an appointment from a panel pediatrician or arrange for an out-of-panel referral to a pediatrician. If such a provider were located outside the service area, the alternate provider area travel requirements would apply. [See section (8) of this appendix, Transportation Requirements for Alternate Provider Areas, for additional clarification.] For service areas without a designated alternate provider area, MCPs are required to make transportation available to any member that must travel 30 miles or more from their home to receive a medically-necessary Medicaid-covered service. Many of the service areas included in this provider agreement have historically had substantial numbers of the eligible population seek certain types of services outside of the county boundaries. ODJFS has therefore tried to integrate these utilization patterns into the minimum provider network requirements to recognize this practice and to avoid disruption of care. The charts found in this appendix indicate the minimum provider panel requirements for each service area, and in some cases, the ODJFS-designated alternate provider area(s). Alternate provider areas are designated on the basis of demonstrated out-of-county utilization of medical services by the Medicaid population eligible for MCP enrollment. Provider panel requirements listed as "discretionary" refer only to where the provider may be located. Discretionary provider panel requirements may be met in an alternate provider area or in the actual service area. Where an MCP exercises the option to meet a minimum provider panel requirement by contracting with a provider in an alternate provider areas, it will be necessary for the MCP to provide transportation to members on an as needed basis if such providers are located 30 miles or more from the major eligible population center in the service area. Appendix H Page 2 Although ODJFS does offer some latitude in where the minimum required provider panel members may be located, MCPs are strongly urged to consider the importance of geographic accessibility (i.e., within the county/service area or consistent with existing utilization patterns) in developing their entire provider panel. Available and accessible providers have been found to be the essential element in attracting and retaining members. 2. PROVIDER SUBCONTRACTING Unless otherwise specified in this appendix or OAC rule 5101:3-26-05, all MCPs will be required to enter into fully-executed subcontracts with their providers. These subcontracts must include a baseline contractual agreement, as well as the appropriate Model Medicaid Addendum. The Model Medicaid Addendums incorporate all applicable Ohio Administrative Code rule requirements specific to provider subcontracting and therefore cannot be modified except to add personalizing information such as the MCP's name. ODJFS must prior approve all MCP providers in the required provider type categories before they can begin to provide services to that MCP's members. MCPs may not employ or contract with providers excluded from participation in Federal health care programs under either section 1128 or section 1128A of the Social Security Act. As part of the prior approval process, MCPs must submit documentation verifying that all necessary contract documents have been appropriately completed. ODJFS will verify the approvability of the submission and process this information using the ODJFS Provider Verification System (PVS). The PVS is a database system that maintains information on the status of all MCP-submitted providers. Unless otherwise specified by ODJFS, MCPs are to submit provider panel information to ODJFS in accordance with the processes and timelines specified in the current MCP PVS Instructional Manual in order to comply with the provider subcontracting requirements. Only those providers who have been approved through the MCP's credentialing process (where applicable) and who meet the applicable criteria specified in this appendix will be approved by ODJFS. MCPs must credential/recredential providers in accordance with the standards specified by the National Committee for Quality Assurance, or the MCP may request that ODJFS allow the use of an alternate industry standard for provider credentialing/recredentialing. MCPs must notify ODJFS of the addition and deletion of their providers as specified in OAC rule 5101:3-26-05, and must notify ODJFS within one working day in instances where the MCP has identified that they are not in compliance with the provider panel requirements specified in this appendix. Appendix H Page 3 3. PROVIDER PANEL REQUIREMENTS The provider network criteria that must be met by each MCP are as follows: a. Primary Care Physicians (PCPs) Primary Care Physicians (PCPs) may be individuals or group practices/clinics. Generally acceptable specialty types for PCPs are family/general practice, internal medicine, pediatrics and obstetrics/gynecology. (ODJFS reserves the right to request verification of a physician's specialty type.) As part of their subcontract with an MCP, PCPs must stipulate the total Medicaid member capacity that they can ensure for that individual MCP. Each PCP must have the capacity and agree to serve at least 50 Medicaid members at each practice site in order to be approved by ODJFS as a PCP and included in the MCP's total PCP capacity calculation. The capacity by site requirement must be met for all ODJFS- approved PCPs. A PCP's total capacity number may reflect the support the provider receives from residents, nurse practitioners, physician assistants, etc. For example, a PCP in private practice with no assistants might state that they have the capacity to serve 1000 members for an MCP. A PCP with assistants, however, might state that they are able to see up to 2500 members for an MCP. ODJFS reviews the capacity totals for each PCP to determine if they appear excessive. ODJFS reserves the right to request clarification from an MCP for any PCP whose total stated capacity for all MCP networks added together exceeds 2000 Medicaid members [i.e., 1 full-time equivalent (FTE)]. ODJFS may also compare a PCP's capacity against the number of members assigned to that PCP, and/or the number of patient encounters attributed to that PCP to determine if the reported capacity number reasonably reflects a PCP's expected caseload for a specific MCP. Where indicated, ODJFS may set a cap on the maximum amount of capacity that will be approved for a specific PCP. For PCPs contracting with more than one MCP, the MCP must ensure that the capacity figure stated by the PCP in their subcontract reflects only the capacity the PCP intends to provide for that one MCP. ODJFS utilizes each approved PCP's capacity figure to determine if an MCP meets the minimum provider panel requirements and this stated capacity figure does not prohibit a PCP from actually having a caseload that exceeds the capacity figure indicated in their subcontract. ODJFS expects, however, that MCPs will need to utilize specialty physicians to serve as PCPs for some special needs members. Also, in some situations (e.g., continuity of care) a PCP may only want to serve a very small number of members for an MCP. In these situations it will not be necessary for the MCP to submit these PCPs to ODJFS for prior approval. These PCPs will not be included in the ODJFS PVS database and therefore may not appear as PCPs in the MCP's provider directory. Also, no PCP capacity will be counted for these providers. These PCPs will, however, need to execute a subcontract with the MCP which includes the appropriate Model Medicaid Addendum. Appendix H Page 4 In order to determine if adequate PCP FTE capacity exists for each service area, ODJFS will total each MCP's approvable PCP FTEs for each service area (this would include both PCPs with practice sites located within that service area and PCP practice sites located in nearby counties which have been designated as alternate provider areas by ODJFS) and apply the following criteria:
NUMBER OF ELIGIBLES/COUNTY MINIMUM PCP CAPACITY (% ELIGIBLES) - ----------------------------------------------------------------- >100,000 40%* <100,000 50%*
* THE MINIMUM PCP CAPACITY REQUIREMENT IS HIGHER FOR PREFERRED OPTION COUNTIES (For example, WeCare MCP has a PCP FTE capacity of 19.5 for Service Area X. Service Area X has a population of 75,000 eligible recipients. 50% of 75,000 equals 37,500. 37,500 divided by 2000 equals 18.75. In that WeCare has a minimum PCP capacity of 19.5 FTEs for Service Area X and only is required to have a PCP capacity of 18.75 FTEs, ODJFS would find that WeCare MCP has sufficient PCP capacity to serve Service Area X.) At a minimum, each MCP must meet both the PCP minimum FTE requirement for that service area, as well as a minimum ratio of one PCP FTE for each 2,000 of their Medicaid members in that service area. When alternate provider areas are designated, there continues to be a minimum PCP capacity requirement which must be met by the MCP's PCPs within the service area itself. The discretionary PCP FTE figure represents the maximum amount of PCP capacity that may be met in a designated alternate provider area. The minimum PCP provider panel requirements are specified in the charts in Section H of this appendix. Except in voluntary enrollment counties, all MCPs meeting the minimum PCP provider panel requirement must also satisfy a PCP geographic accessibility standard before they will receive a provider agreement for a specific service area. This standard must be maintained in each service area for the duration of the contract. ODJFS will match the PCP practice sites with the geographic location of the eligible population in that service area and perform analysis using Geographic Information Systems (GIS) software. The analysis will be used to determine if at least 40% of the eligible population are located within 10 miles of an MCP's in-area or alternate provider area PCP provider site with PCP capacity taken into consideration. In addition to the PCP FTE capacity requirement, MCPs must also contract with the specified number of pediatric PCPs for each service area. Appendix H Page 5 These must be pediatricians who maintain a general pediatric practice (e.g., a pediatric neurologist would not meet this definition unless this physician also operated a practice as a general pediatrician) at a site(s) located within the service area or an alternate provider area, and be listed as a pediatrician with the Ohio State Medical Board. In addition, a designated number of these physicians must also be certified by the American Board of Pediatrics. The minimum provider panel requirements for pediatricians are included in specialty provider charts in Section H of this appendix. b. Non-PCP Minimum Provider Network In addition to the PCP capacity requirements, each MCP is also required to maintain adequate capacity in the remainder of its provider network within the following categories: hospitals, dentists, pharmacies, vision care providers, obstetricians/gynecologists (OB/GYNs), allergists, general surgeons, otolaryngologists, orthopedists, certified nurse midwives (CNMs), certified nurse practitioners (CNPs), federally qualified health centers (FQHCs)/rural health centers (RHCs) and qualified family planning providers (QFPPs). CNMs, CNPs, FQHCs/RHCs and QFPPs are federally-required provider types. All Medicaid-contracting MCPs must provide all medically-necessary Medicaid-covered services to their members and therefore their complete provider network will include many other additional specialists and provider types. MCPs must ensure that all non-PCP network providers follow community standards in the scheduling of routine appointments (i.e., the amount of time members must wait from the time of their request to the first available time when the visit can occur). Although there are currently no FTE capacity requirements for any of the non-PCP required provider types, MCPs are required to ensure that adequate access is available to members for all required provider types. ODJFS will monitor access to services through a variety of data sources, including: consumer satisfaction surveys; member appeals/grievances/complaints and state hearing notifications/requests; clinical quality studies; encounter data volume; provider complaints, and clinical performance measures. Hospitals - MCPs must contract with at least one hospital in the service area or an alternate provider area, and this hospital, alone or in combination with other contracted hospitals within the service area or the alternate provider area, must be capable and agree to provide all of the following services during the contract period: general medical/surgical services for both the adult and pediatric population; obstetrical services; nursery services; adult, pediatric and neonatal (Levels I and II) intensive care; cardiac care; outpatient surgery; and emergency room services. ODJFS utilizes each hospital's most current Annual Hospital Registration and Planning Report, as filed with the Ohio Department of Health, in determining what types of services that hospital provides. Appendix H Page 6 It will be possible to meet the hospital requirement for some service areas by contracting only with one full-service general hospital outside the service area, however, MCPs are required to contract with at least one hospital in the service area if at least two general hospitals (which are not both members of the same hospital system) are located in that service area. Failing to contract with a local hospital may make such a provider network less attractive to potential members. OB/GYNs - MCPs must contract with the specified number of OB/GYNs, all of whom must maintain a full-time obstetrical practice at a site(s) located in the service area or alternate provider area, as well as having current hospital delivery privileges at a hospital under contract to the MCP in the service area or an alternate provider area. Certified Nurse Midwives (CNMs) and Certified Nurse Practitioners (CNPs) - MCPs must ensure access to at least one CNM and one CNP in the service area or alternate provider area, if such provider types are present. Access to additional CNMs and CNPs must be added on an as needed basis to ensure that no member is denied access to such services. For this provider panel requirement, the MCP may contract directly with the CNM or CNP, or with a physician or other provider entity who is able to obligate the participation of the CNM or CNP. If an MCP does not contract with a CNM or CNP and such providers are present within a service area or alternate provider area, the MCP will be required to allow members to receive CNM or CNP services outside of the MCP's provider network. Contracting CNMs must have hospital delivery privileges at a hospital under contract to the MCP in the service area or an alternate provider area. The MCP must always ensure a member's access to CNM and CNP services if such providers are present within the service area. Vision Care Providers - MCPs must contract with the specified number of ophthalmologists/optometrists for each service area, all of whom must regularly perform routine eye examinations and who maintain a full-time practice at a site(s) within the service area. If optical dispensing is not available in a particular service area through the MCP's contracting ophthalmologists/optometrists, the MCP must separately contract with an optical dispenser. Dental Care Providers- MCPs must assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. The charts in Section H of this appendix reflect the number of dental providers which ODJFS will use as a guideline in assessing the MCP's capacity to assure access to dental services. Appendix H Page 7 ODJFS will aggressively monitor access to dental services through a variety of data sources, including: consumer satisfaction surveys; member appeals/grievances/complaints and state hearing notifications/requests; member just-cause for disenrollment requests; dental quality studies; dental encounter data volume; provider complaints, and dental performance measures. Federally Qualified Health Centers/Rural Health Clinics (FQHCs/RHCs) - MCPs are required to ensure member access to any federally qualified health center or rural health clinic (FQHCs/RHCs), regardless of contracting status. Even if no FQHC/RHC is available within the service area, MCPs must have mechanisms in place to ensure coverage for FQHC/RHC services in the event that a member accesses these services outside of the service area. In order to assure FQHC/RHC access to members, MCPs must make provisions for the following: - Non-contracting FQHC/RHC providers serving as a PCP for an MCP's member must be allowed to refer that member to another provider in the MCP's provider panel. - MCPs may require that their members request a referral from their PCP in order to access FQHC/RHC providers; however, such referral requests must be approved. In order to ensure that any FQHCs/RHCs has the ability to submit a claim to ODJFS for the state's supplemental payment, MCPs must offer FQHCs/RHCs reimbursement pursuant to the following: - MCPs must provide expedited reimbursement on a service-specific basis in an amount no less than the payment made to other providers for the same or similar service. - If the MCP has no comparable service-specific rate structure, the MCP must use the regular Medicaid fee-for-service payment schedule for non-FQHC/RHC providers. - MCPs must make all efforts to pay FQHCs/RHCs as quickly as possible and not just attempt to pay these claims within the prompt pay time frames. MCPs are required to educate their staff and providers on the need to assure member access to FQHC/RHC services. Appendix H Page 8 Qualified Family Planning Providers (QFPPs) - All MCP members must be permitted to self-refer to family planning services provided by a QFPP. A QFPP is defined as any public or not-for-profit health care provider that complies with Title X guidelines/standards, and receives either Title X funding or family planning funding from the Ohio Department of Health. MCPs must reimburse all medically-necessary Medicaid-covered family planning services provided to eligible members by a QFPP provider on a patient self-referral basis, irrespective of the provider's status as a panel or non-panel provider. MCPs will be required to work with QFPPs in their service area to develop mutually-agreeable policies and procedures to preserve patient/provider confidentiality, and convey pertinent information to the member's PCP and/or MCP. Other Specialty Types (pediatricians, general surgeons, otolaryngologists, allergists, and orthopedists) - MCPs must contract with the specified number of all other specialty provider types. In order to be counted toward meeting the minimum provider panel requirements, these specialty providers must maintain a full-time practice at a site(s) located within the service area or alternate provider area. Contracting general surgeons, orthopedists and otolaryngologists must have admitting privileges at a hospital under contract with the MCP in the service area or an alternate provider area. 4. PROVIDER PANEL EXCEPTIONS If an MCP presents sufficient documentation to ODJFS to verify that they have been unable to meet certain minimum provider panel requirements in a particular service area despite all reasonable efforts on the part of the MCP to secure such a contract(s), ODJFS may specify minimum provider panel criteria for that service area which deviate from those specified in this appendix. 5. PROVIDER PANEL DIRECTORIES All MCPs must produce a printed ODJFS-approved provider directory by July 1 of each year. At the time of ODJFS' review, the information listed in the MCP's provider directory for all ODJFS-required provider types must exactly match with the data currently on file in the ODJFS PVS. MCP provider directories must utilize a format specified by ODJFS and include a county-specific listing of the providers who will serve the MCP's members, including at a minimum, all providers of those types specified in this appendix. The directory must also specify: - provider address(es) and phone number(s); - which of these providers will be available to members on a self-referral basis and practice limitations for these self-referred providers; - foreign-language speaking PCPs and specialists and the specific foreign language(s) spoken; and - any PCP or specialist practice limitations. Appendix H Page 9 MCPs must annually revise their directory and this will be the only ODJFS-allowable revision to the actual directory document. MCPs may supplement their directory on an ongoing basis with inserts detailing recent changes to the MCP's provider panel. Such inserts must be prior approved by ODJFS. If an MCP wants to include a provider panel directory on their website, this directory must include all information required for their printed directory and the MCP must receive prior approval from ODJFS before adding this directory to their website. 6. FEDERAL ACCESS STANDARDS MCPs must demonstrate that they are in compliance with the following federally defined provider panel access standards as required by 42 CFR 438.206: In establishing and maintaining their provider panel, MCPs must consider the following: - The anticipated Medicaid membership. - The expected utilization of services, taking into consideration the characteristics and health care needs of specific Medicaid populations represented in the MCP. - The number and types (in terms of training, experience, and specialization) of panel providers required to furnish the contracted Medicaid services. - The geographic location of panel providers and Medicaid members, considering distance, travel time, the means of transportation ordinarily used by Medicaid members, and whether the location provides physical access for Medicaid members with disabilities. - MCPs must adequately and timely cover services to an out-of-network provider if the MCP's contracted provider panel is unable to provide the services covered under the MCP's provider agreement. The MCP must cover the out-of-network services for as long as the MCP network is unable to provide the services. MCPs must coordinate with the out-of-network provider with respect to payment and ensure that the provider agrees with the applicable requirements. Contracting panel providers must offer hours of operation that are no less than the hours of operation offered to commercial members or comparable to Medicaid fee-for-service, if the provider serves only Medicaid members. MCPs must ensure that services are available 24 hours a day, 7 days a week, when medically necessary. MCPs must establish mechanisms to ensure that panel providers comply with these timely access requirements. MCPs are required to regularly monitor their provider panels to determine compliance and if necessary take corrective action if there is failure to comply. Appendix H Page 10 In order to demonstrate adequate provider panel capacity and services, 42 CFR 437.207 stipulates that the MCP must submit documentation to ODJFS, in a format specified by ODJFS, that demonstrates it offers an appropriate range of preventive, primary care and specialty services adequate for the anticipated number of members in the service area, while maintaining a provider panel that is sufficient in number, mix, and geographic distribution to meet the needs of the number of members in the service area. This documentation of assurance of adequate capacity and services must be submitted to ODJFS no less frequently than at the time the MCP enters into a contract with ODJFS; at any time there is a significant change (as defined by ODJFS) in the MCP's operations that would affect adequate capacity and services (including changes in services, benefits, geographic service or payments); and at any time there is enrollment of a new population in the MCP. MCPs are to follow the procedures specified in the current MCP PVS Instructional Manual in order to comply with these federal access requirements. Appendix H Page 11 7. MINIMUM PROVIDER PANEL CHARTS MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: BUTLER
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ---------------------------------------------------------------------------------------- Pediatricians 5(3)(2) 4 1 Hamilton OB/GYNs 2 1 1 Hamilton Dentists(3) 6(4)(4) 4 2 Hamilton Vision 3 2 1 Hamilton Gen. Surgeons 2 1 1 Hamilton Otolaryngologist 1 1 x x Allergists 1 x 1 Hamilton Orthopedists 1 1 x x Pharmacies 2 2 x x Cert. Nurse 1 x 1 Hamilton Midwife Cert. Nurse 1 x 1 Hamilton Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 12 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: HAMILTON
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ---------------------------------------------------------------------------------------- Pediatricians 15(8)(2) 15 x x OB/GYNs 4 4 x x Dentists(3) 18(12)(4) 18 x x Vision 10 10 x x Gen. Surgeons 6 6 x x Otolaryngologist 2 2 x x Allergists 1 1 x x Orthopedists 3 3 x x Pharmacies 7 7 x x Cert. Nurse 1 1 x x Midwife Cert. Nurse 1 1 x x Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 13 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: WARREN
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - --------------------------------------------------------------------------------------------- Pediatricians 2(1)(2) x 2 Hamilton or Montgomery(5) OB/GYNs 2 x 2 Hamilton or Montgomery(5) Dentists(3) 2(1)(4) 1 1 Butler or Hamilton Vision 2 1 1 Hamilton Gen. Surgeons 2 x 2 Hamilton or Montgomery(5) Otolaryngologist 2 x 2 Hamilton or Montgomery(5) Allergists 1 x 1 Hamilton or Montgomery Orthopedists 2 x 2 Hamilton or Montgomery(5) Pharmacies 1 1 x x Cert. Nurse 1 x 1 Hamilton Midwife Cert. Nurse 1 x 1 Hamilton Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. 5. If more than one alternate county is listed, all the discretionary providers may be located in one of the alternate counties or they may be located in multiple alternate counties in any combination (e.g., if there are 2 discretionary providers and the alternate counties are Hamilton and Montgomery, both providers could be located in Hamilton or both located in Montgomery or one located in Hamilton and one located in Montgomery). Appendix H Page 14 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: CLERMONT
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 3(2)(2) x 3 Hamilton OB/GYNs 1 x 1 Hamilton Dentists(3) 3(2)(4) 1 2 Hamilton Vision 2 1 1 Hamilton Gen. Surgeons 1 x 1 Hamilton Otolaryngologist 1 x 1 Hamilton Allergists 1 x 1 Hamilton Orthopedists 1 x 1 Hamilton Pharmacies 1 1 x x Cert. Nurse 1 x 1 Hamilton Midwife Cert. Nurse 1 x 1 Hamilton Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 15 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: MONTGOMERY
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 10(5)(2) 10 x x OB/GYNs 3 3 x x Dentists(3) 12(8)(4) 12 x x Vision 7 7 x x Gen. Surgeons 4 4 x x Otolaryngologist 1 1 x x Allergists 1 1 x x Orthopedists 2 2 x x Pharmacies 4 4 x x Cert. Nurse 1 1 x x Midwife Cert. Nurse 1 1 x x Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 16 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: CLARK
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 3(2)(2) 2 1 Montgomery OB/GYNs 1 x 1 Montgomery Dentists(3) 4(3)(4) 3 1 Montgomery Vision 2 2 x x Gen. Surgeons 1 x 1 Montgomery Otolaryngologist 1 x 1 Montgomery Allergists 1 x 1 Montgomery Orthopedists 1 x 1 Montgomery Pharmacies 1 1 x x Cert. Nurse 1 x 1 Montgomery Midwife Cert. Nurse 1 x 1 Montgomery Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 17 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: GREENE
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 2(1)(2) 1 1 Montgomery OB/GYNs 2 1 1 Montgomery Dentists(3) 3(2)(4) 2 1 Montgomery Vision 2 1 1 Montgomery Gen. Surgeons 2 1 1 Montgomery Otolaryngologist 1 x 1 Montgomery Allergists 1 x 1 Montgomery Orthopedists 1 x 1 Montgomery Pharmacies 1 1 x x Cert. Nurse 1 x 1 Montgomery Midwife Cert. Nurse 1 x 1 Montgomery Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 18 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: FRANKLIN
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 19(10)(2) 19 x x OB/GYNs 5 5 x x Dentists(3) 22(15)(4) 22 x x Vision 12 12 x x Gen. Surgeons 7 7 x x Otolaryngologist 2 2 x x Allergists 1 1 x x Orthopedists 4 4 x x Pharmacies 8 8 x x Cert. Nurse 1 1 x x Midwife Cert. Nurse 1 1 x x Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 19 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: PICKAWAY
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 1(1)(2) x 1 Franklin OB/GYNs 1 x 1 Franklin Dentists(3) 2(1)(4) x 2 Franklin Vision 1 1 x x Gen. Surgeons 1 x 1 Franklin Otolaryngologist 1 x 1 Franklin Allergists 1 x 1 Franklin Orthopedists 1 x 1 Franklin Pharmacies 2 1 1 Franklin Cert. Nurse 1 x 1 Franklin Midwife Cert. Nurse 1 x 1 Franklin Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 20 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: CUYAHOGA
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 28(14)(2) 28 x x OB/GYNs 8 8 x x Dentists(3) 34(23)(4) 34 x x Vision 19 19 x x Gen. Surgeons 11 11 x x Otolaryngologist 3 3 x x Allergists 1 1 x x Orthopedists 6 6 x x Pharmacies 12 12 x x Cert. Nurse 1 1 x x Midwife Cert. Nurse 1 1 x x Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 21 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: LORAIN
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 5(3)(2) 3 2 Cuyahoga OB/GYNs 2 1 1 Cuyahoga Dentists(3) 7(5)(4) 7 x x Vision 4 4 x x Gen. Surgeons 2 1 1 Cuyahoga Otolaryngologist 1 x 1 Cuyahoga Allergists 1 x 1 Cuyahoga Orthopedists 2 1 1 Cuyahoga Pharmacies 2 2 x x Cert. Nurse 1 x 1 Cuyahoga Midwife Cert. Nurse 1 x 1 Cuyahoga Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 22 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: SUMMIT
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 10(5)(2) 10 x x OB/GYNs 3 3 x x Dentists(3) 13(9)(4) 13 x x Vision 7 7 x x Gen. Surgeons 4 4 x x Otolaryngologist 1 1 x x Allergists 1 1 x x Orthopedists 2 2 x x Pharmacies 4 4 x x Cert. Nurse 1 1 x x Midwife Cert. Nurse 1 1 x x Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 23 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: STARK
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 7(4)(2) 7 x x OB/GYNs 2 2 x x Dentists(3) 8(5)(4) 8 x x Vision 4 4 x x Gen. Surgeons 3 3 x x Otolaryngologist 1 1 x x Allergists 1 x 1 Summit Orthopedists 2 2 x x Pharmacies 3 3 x x Cert. Nurse 1 x 1 Cuyahoga Midwife Cert. Nurse 1 x 1 Cuyahoga Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 24 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: LUCAS
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 11(6)(2) 11 x x OB/GYNs 3 3 x x Dentists(3) 13(9)(4) 13 x x Vision 7 7 x x Gen. Surgeons 4 4 x x Otolaryngologist 1 1 x x Allergists 1 1 x x Orthopedists 3 3 x x Pharmacies 5 5 x x Cert. Nurse 1 1 x x Midwife Cert. Nurse 1 1 x x Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 25 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: WOOD
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 2(1)(2) 1 1 Lucas OB/GYNs 2 1 1 Lucas Dentists(3) 2(1)(4) 1 1 Lucas Vision 2 1 1 Lucas Gen. Surgeons 1 x 1 Lucas Otolaryngologist 1 x 1 Lucas Allergists 1 x 1 Lucas Orthopedists 1 x 1 Lucas Pharmacies 2 1 1 Lucas Cert. Nurse 1 x 1 Lucas Midwife Cert. Nurse 1 x 1 Lucas Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 26 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: MAHONING
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - ------------------------------------------------------------------------------------------ Pediatricians 6(3)(2) 6 x x OB/GYNs 2 2 x x Dentists(3) 7(5)(4) 7 x x Vision 4 2 2 Trumbull Gen. Surgeons 2 2 x x Otolaryngologist 1 1 x x Allergists 1 x 1 Cuyahoga Orthopedists 1 1 x x Pharmacies 3 3 x x Cert. Nurse 1 x 1 Cuyahoga Midwife Cert. Nurse 1 x 1 Cuyahoga Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 27 MINIMUM SPECIALIST PROVIDER PANEL REQUIREMENTS July 1, 2003 Service Area: TRUMBULL
MINIMUM PROVIDERS SPECIALTY TOTAL IN DISCRETIONARY ALTERNATE PROVIDER TYPE PROVIDERS CONTRACT COUNTY PROVIDERS(1) COUNTY - -------------------------------------------------------------------------------------------- Pediatricians 5(3)(2) 4 1 Mahoning OB/GYNs 2 1 1 Mahoning Dentists(3) 6(4)(4) 6 x x Vision 3 2 1 Mahoning Gen. Surgeons 2 1 1 Mahoning Otolaryngologist 1 x 1 Mahoning Allergists 1 x 1 Cuyahoga Orthopedists 1 1 x x Pharmacies 2 2 x x Cert. Nurse 1 x 1 Cuyahoga Midwife Cert. Nurse 1 x 1 Cuyahoga Practitioner
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate provider areas can be used to fulfill the minimum provider panel requirement. 2. Indicates the minimum number of pediatricians (i.e., 50%) who must be certified by the American Board of Pediatrics. 3. The dental numbers are not minimum provider panel requirements but rather reflect guidelines to assist in measuring the MCP's capacity to assure access to dental services. MCPs will be required to provide access to all Medicaid-covered dental services regardless of the number of dentists under contract and/or the number of contracting dentists accepting new patients. 4. Indicates the maximum number of pediatric dentists (i.e., two-thirds) that should be used to meet the minimum dentist provider guideline. Appendix H Page 28 MINIMUM PCP FTE REQUIREMENTS(1) July 1, 2003
MINIMUM CONTRACT COUNTY ALTERNATE COUNTY TOTAL FTE FTE DISCRETIONARY FTE(1) COUNTY - ------------------------------------------------------------------------------------- Butler 4.98 3.91 1.07 Hamilton Clark 3.56 2.90 0.66 Montgomery Clermont 2.70 0.68 2.02 Hamilton Cuyahoga 31.08 31.08 x x Franklin 20.32 20.32 x x Greene 2.23 1.11 1.12 Montgomery Hamilton 16.67 16.67 x x Lorain 5.94 3.33 2.61 Cuyahoga Lucas 12.00 12.00 x x Mahoning 6.35 6.35 x x Montgomery 10.66 10.66 x x Pickaway 1.00 0.41 0.59 Franklin Stark 7.29 7.29 x x Summit 11.37 11.37 x x Trumbull 5.18 4.10 1.08 Mahoning 0.45 Hamilton Warren 1.22 0.30 0.28 Montgomery 0.19 Butler Wood 1.22 0.67 0.55 Lucas
1. If it is not possible to contract with providers in the contract county, discretionary providers located in the alternate counties can be used to fulfill the minimum provider panel requirement. Appendix H Page 29 MINIMUM HOSPITAL REQUIREMENTS(1) JULY 1, 2003
IN-COUNTY ALTERNATE COUNTY HOSPITAL CONTRACTING HOSPITAL SERVICE COUNTY REQUIREMENT OPTION(S)(2) - ----------------------------------------------------------------------- Butler 1 Hamilton (D) Clark 1 Montgomery (A, B, C, D) Clermont 0 Hamilton Cuyahoga 1 None Franklin 1 None Greene 0 Montgomery Hamilton 1 None Lorain 1 Cuyahoga (C, D) Lucas 1 None Mahoning 1 None Montgomery 1 None Pickaway 0 Franklin Stark 1 Summit (D) Summit 1 None Trumbull 1 Mahoning (A, B, C, D) Warren 0 Hamilton AND Montgomery AND Butler Wood 0 Lucas
1. Refer to section (3)(b) of this appendix for a description of required hospital services. 2. Hospital Service; A = OB, B = NICU, C = PED GEN, D = PED ICU Appendix H Page 30 8. TRANSPORTATION REQUIREMENTS FOR ALTERNATE PROVIDER AREAS
MANDATORY ALTERNATE PROVIDER MANDATORY ALTERNATE PROVIDER AREA COUNTY AREA * TRANSPORTATION REQUIREMENT ** - ---------------------------------------------------------------------------------------------------------------------- Butler Hamilton Alternate provider area transportation IS NOT REQUIRED for the entire area of Hamilton County. Clark Montgomery Alternate provider area transportation is required for the area South or West of a line formed by starting at the eastern border of Montgomery County on Route 35, then going West on Route 35 to I-75, then North in I-75 to Route 40, then North on Route 40 to the northern border of Montgomery County. Clermont Hamilton Alternate provider area transportation IS NOT REQUIRED for the entire area of Hamilton County. Cuyahoga None N/A*** Franklin None N/A*** Greene Montgomery Alternate provider area transportation IS NOT REQUIRED for the entire area of Montgomery County. Hamilton None N/A*** Lorain Cuyahoga Alternate provider area transportation is required for the area East of a line formed by starting at Lake Erie at Route I-90, then going South on Route I-90 to I-77, then South on Route I-77 to the southern border of Cuyahoga County. Lucas None N/A*** Mahoning Cuyahoga Alternate provider area transportation IS REQUIRED for the entire area of Cuyahoga County. Trumbull Alternate provider area transportation IS NOT REQUIRED for the entire area of Trumbull County. Montgomery None N/A*** Pickaway Franklin Alternate provider area transportation is required for the area North of a line formed by starting at the western Franklin County line on Route I-70, and then going East on Route I-70 to the eastern border of Franklin county. Stark Cuyahoga Alternate provider area transportation IS REQUIRED for the entire area of Cuyahoga County. Summit Alternate provider area transportation is required for the area North of a line formed by starting at the western Summit County line at Route 18, then going Northeast through Fairlawn and Cuyahoga Falls and through Stow to the eastern Summit County line. Summit None N/A*** Trumbull Cuyahoga Alternate provider area transportation IS REQUIRED for the entire area of Cuyahoga County.
Appendix H Page 31 Mahoning Alternate provider area transportation IS NOT REQUIRED for the entire area of Mahoning County. Warren Butler Alternate provider area transportation IS NOT REQUIRED for the entire area of Butler County. Hamilton Alternate provider area transportation IS NOT REQUIRED for the entire area of Hamilton County. Montgomery Alternate provider area transportation is required for the area North of a line formed by starting at the western border of Montgomery County on Route 35, then going East on Route 35 to the eastern border of Montgomery County. Wood Lucas Alternate provider area transportation IS NOT REQUIRED for the entire area of Lucas County.

* Please refer to county-specific charts in Appendix H for the specific provider types designated for alternate provider areas. ** It will be necessary for the MCP to provide transportation to members on an as needed basis if such providers are located 30 miles or more from the major eligible population center in the service area. *** For service areas without a designated alternate provider area, MCPs are required to make transportation available to any member that MUST travel 30 miles or more from their home to receive medically-necessary Medicaid-covered services. APPENDIX I PROGRAM INTEGRITY MCPs must comply with all applicable program integrity requirements, including those specified in 42 CFR, Subpart H. 1. Fraud and Abuse Program: In order to comply with OAC rule 5101:3-26-06, MCPs must have a program that includes administrative and management arrangements or procedures, including a mandatory compliance plan, to guard against fraud and abuse. The MCP's compliance plan must designate staff responsibility for administering the plan and include a clear goal, milestones or objectives, measurements, key dates for achieving identified outcomes, and explain how the MCP will determine the compliance plan's effectiveness. a. Monitoring for fraud and abuse: In addition to the requirements in OAC rule 5101:3-26-06, the MCP's program which safeguards against fraud and abuse must specifically address the MCP's prevention, detection, investigation, and reporting strategies in at least the following areas: i. Embezzlement and theft - MCPs must monitor activities on an ongoing basis to prevent and detect activities involving embezzlement and theft (e.g., by staff, providers, contractors, etc.) and respond promptly to such violations. ii. Underutilization of services - MCPs must monitor for the potential underutilization of services by their members in order to assure that all Medicaid-covered services are being provided, as required. If any underutilized services are identified, the MCP must immediately investigate and, if indicated, correct the problem(s) which resulted in such underutilization of services. The MCP's monitoring efforts must, at a minimum, include the following activities: For SFY 2004, the MCP must review their prior authorization procedures to determine that they do not unreasonably limit a member's access to Medicaid-covered services. The MCP must also review the procedures providers are to follow in appealing the MCP's denial of a prior authorization request to determine that the process does not unreasonably limit a member's access to Medicaid-covered services. Beginning July 1, 2004, in addition to the MCP's annual review of prior authorization procedures and their provider appeal procedures, the MCP must also monitor service denials and utilization on an ongoing basis in order to identify services which may be underutilized. Appendix I Page 2 iii. Claims submission and billing - On an ongoing basis, MCPs must identify and correct claims submission and billing activities which are potentially fraudulent including, at a minimum, double-billing and improper coding, such as upcoding and bundling. b. Reporting MCP fraud and abuse activities: Pursuant to OAC rule 5101:3-26-06, MCPs are required to submit annually to ODJFS a report which summarizes the MCP's fraud and abuse activities for the previous year in each of the areas specified above. The MCP's report must also identify any proposed changes to the MCP's compliance plan for the coming year. c. Reporting fraud and abuse: MCPs are required to promptly report all instances of provider fraud and abuse to ODJFS and member fraud to the CDJFS. 2. Data Certification: Pursuant to 42 CFR 438.604 and 42 CFR 438.606, MCPs are required to provide certification as to the accuracy, completeness, and truthfulness of data and documents submitted to ODJFS which may affect MCP payment. a. MCP Submissions: MCPs must submit the appropriate ODJFS-developed certification concurrently with the submission of the following data or documents: i. Encounter Data [as specified in the Data Quality Appendix (Apendix L)] ii. Prompt Pay Reports [as specified in the Fiscal Performance Appendix (Appendix J)] iii. Cost Reports [as specified in the Fiscal Performance Appendix (Appendix J)] b. Source of Certification: The above MCP data submissions must be certified by one of the following: i. The MCP's Chief Executive Officer; ii. The MCP's Chief Financial Officer, or iii. An individual who has delegated authority to sign for, or who reports directly to, the MCP's Chief Executive Officer or Chief Financial Officer. ODJFS may also require MCPs to certify as to the accuracy, completeness, and truthfulness of additional submissions. Appendix I Page 3 3. Prohibited Affiliations: Pursuant to 42 CFR 438.610, MCPs must not knowingly have a relationship with individuals debarred by Federal Agencies, as specified in Article XII of the Baseline Provider Agreement. APPENDIX J FINANCIAL PERFORMANCE 1. SUBMISSION OF FINANCIAL STATEMENTS AND REPORTS MCPs must submit the following financial reports to ODJFS: a. The National Association of Insurance Commissioners (NAIC) quarterly and annual Health Statements (hereafter referred to as the "Financial Statements"), as outlined in Ohio Administrative Code (OAC) rule 5101:3-26-09(B). The Financial Statements must include all required Health Statement filings, schedules and exhibits as stated in the NAIC Annual Health Statement Instructions including, but not limited to, the following sections: Assets, Liabilities, Capital and Surplus Account, Cash Flow, Analysis of Operations by Lines of Business, Five-Year Historical Data, and the Exhibit of Premiums, Enrollment and Utilization. The Financial Statements must be submitted to BMHC even if the Ohio Department of Insurance (ODI) does not require the MCP to submit these statements to ODI. A signed hard copy and an electronic copy of the reports in the NAIC-approved format must both be provided to ODJFS; b. Hard copies of annual financial statements for those entities who have an ownership interest totaling five percent or more in the MCP or an indirect interest of five percent or more, or a combination of direct and indirect interest equal to five percent or more in the MCP; c. Annual audited Financial Statements prepared by a licensed independent external auditor as submitted to the ODI, as outlined in OAC rule 5101:3-26-09(B); d. Medicaid Managed Care Plan Annual Ohio Department of Job and Family Services (ODJFS) Cost Report and the auditor's certification of the cost report, as outlined in OAC rule 5101:3-26-09(B); e. Annual physician incentive plan disclosure statements and disclosure of and changes to the MCP's physician incentive plans, as outlined in OAC rule 5101:3-26-09(B); f. Reinsurance agreements, as outlined in OAC rule 5101:3-26-09(C); g. Prompt Pay Reports, in accordance with OAC rule 5101:3-26-09(B)(3). A hard copy and an electronic copy of the reports must be provided to ODJFS; h. Notification of requests for information and copies of information released pursuant to a tort action (i.e., third party recovery), as outlined in OAC rule 5101:3-26-09.1; Appendix J Page 2 i. Financial, utilization, and statistical reports, when ODJFS requests such reports, based on a concern regarding the MCP's quality of care, delivery of services, fiscal operations or solvency, in accordance with OAC rule 5101:3-26-06(D); 2. FINANCIAL PERFORMANCE MEASURES AND STANDARDS This Appendix establishes specific expectations concerning the financial performance of MCPs. In the interest of administrative simplicity, nonduplication of areas of the ODI authority and its emphasis on the assurance of access to and quality of care, ODJFS will focus only on a limited number of indicators and related standards to monitor plan performance. The three indicators and standards for this contract period are identified below, along with the calculation methodologies. The source for each indicator will be the NAIC Quarterly and Annual Financial Statements. a. INDICATOR: WORTH AS MEASURED BY NEW WORTH PER MEMBER Definition: Net:Worth = Total Admitted Assets minus Total Liabilities divided by Total Members across all lines of business Standard: For the financial report that covers calendar year 2004, a minimum net worth per member of $113.00, as determined from the annual Financial Statement submitted to ODI and the ODJFS. The Net Worth Per Member (NWPM) standard is the Medicaid Managed Care Capitation amount paid to the MCP during the preceding calendar year, including delivery payments, but excluding the at-risk amount, expressed as a per-member per-month figure, multiplied by the applicable proportion below: 0.75 if the MCP had a total membership of 100,000 or more during that calendar year 0.90 if the MCP had a total membership of less than 100,000 for that calendar year If the MCP did not receive Medicaid Managed Care Capitation payments during the preceding calendar year, then the NWPM standard for the MCP is the average Medicaid Managed Care capitation amount paid to Medicaid-contracting MCPs during the preceding calendar year, including delivery payments, but excluding the at-risk amount, multiplied by the applicable proportion above. Appendix J Page 3 b. INDICATOR: ADMINISTRATIVE EXPENSE RATIO Definition: Administrative Expense Ratio = Administrative Expenses divided by Total Revenue Standard: Administrative Expense Ratio less than or equal to 15%, as determined from the annual Financial Statement submitted to ODI and ODJFS. c. INDICATOR: OVERALL EXPENSE RATIO Definition: Overall Expense Ratio = The sum of the Administrative Expense Ratio and the Medical Expense Ratio Administrative Expense Ratio = Administrative Expenses divided by Total Revenue Medical Expense Ratio = Medical Expenses divided by Total Revenue Standard: Overall Expense Ration not to exceed 100% as determined from the annual Financial Statement submitted to ODI and ODJFS. Report Period: Compliance will be determined based on the annual Financial Statement. Penalty for noncompliance: Failure to meet any standard on 2.a., 2.b., or 2.c. above will result in ODJFS requiring the MCP to complete a corrective action plan (CAP) and specifying the date by which compliance must be demonstrated. Failure to meet the standard or otherwise comply with the CAP by the specified date will result in a new membership freeze unless ODJFS determines that the deficiency does not potentially jeopardize access to or quality of care or affect the MCP's ability to meet administrative requirements (e.g., prompt pay requirements). Justifiable reasons for noncompliance may include one-time events (e.g., MCP investment in information system products). In addition, ODJFS will review two liquidity indicators if a plan demonstrates potential problems in meeting related administrative requirements or the standards listed above. The two standards listed below reflect ODJFS' expected level of performance. At this time, ODJFS has not established penalties for noncompliance with these standards; however, ODJFS will consider the MCP's performance regarding the liquidity measures, in addition to indicators 2.a., 2.b., and 2.d., in determining whether to impose a new membership freeze, as outlined above, or to not issue or renew a contract with an MCP. The source for each indicator will be the NAIC Quarterly and annual Financial Statements. Appendix J Page 4 Long-term investments that can be liquidated without significant penalty within 24 hours, which a plan would like to include in Cash and Short-Term Investments in the next two measurements, must be disclosed in footnotes on the NAIC Reports. Descriptions and amounts should be disclosed. Please note that "significant penalty" for this purpose is any penalty greater than 20%. Also, enter the amortized cost of the investment, the market value of the investment, and the amount of the penalty. d. INDICATOR: DAYS CASH ON HAND Definition: Days Cash on Hand = Cash and Short-Term Investments divided by (Total Hospital and Medical Expenses plus Total Administrative Expenses) divided by 365. Standard: Greater than 25 days as determined from the annual Financial Statement submitted to ODI and ODJFS. e. INDICATOR: RATIO OF CASH TO CLAIMS PAYABLE Definition: Ratio of Cash to Claims Payable = Cash and Short-Term Investments divided by claims Payable (reported and unreported). Standard: Greater than 0.83 as determined from the annual Financial Statement submitted to ODI and ODJFS. If the financial statement is not submitted to ODI by the due date, the MCP continues to be obligated to submit the report to ODJFS by ODI's originally specified due date unless the MCP requests and is granted an extension by ODJFS. Failure to submit complete quarterly and annual Financial Statements on a timely basis will be deemed a failure to meet the standards and will be subject to the noncompliance penalties listed for indicators 2.a., 2.b., and 2.c., including the imposition of a new membership freeze. The new membership freeze will take effect at the first of the month following the month in which the determination was made that the MCP was noncompliant for failing to submit financial reports timely. 3. REINSURANCE REQUIREMENTS Pursuant to the provisions of OAC rule 5101:3-26-09 (C), each MCP must carry reinsurance coverage from a licensed commercial carrier to protect against inpatient-related medical expenses incurred by Medicaid members. The annual deductible or retention amount for such insurance must be specified in the reinsurance agreement and must not exceed $75,000.00, except as provided below. Except for transplant services, and as provided below, this reinsurance must cover, at a minimum, 80% of inpatient costs incurred by one member in one year, in excess of $75,000.00. For transplant services, the reinsurance must cover, at a minimum, 50% of transplant related costs incurred by one member in one year, in excess of $75,000.00. Appendix J Page 5 An MCP may request a higher deductible amount and/or that the reinsurance cover less than 80% of inpatient costs in excess of the deductible amount. In determining whether or not the request will be approved, the ODJFS may consider any or all of the following: a. whether the MCP has sufficient reserves available to pay unexpected claims; b. the MCP's history in complying with financial indicators 2.a., 2.b., and 2.c., as specified in this Appendix. c. the number of members covered by the MCP; d. how long the MCP has been covering Medicaid or other members on a full risk basis. The MCP has been approved to have a reinsurance policy with a deductible amount of $75,000.00 that covers 80% of inpatient costs in excess of the deductible amount for non-transplant services. Penalty for noncompliance: If it is determined that an MCP failed to have reinsurance coverage, that an MCP's deductible exceeds $75,000.00 without approval from ODJFS, or that the MCP's reinsurance for non-transplant services covers less than 80% of inpatient costs in excess of the deductible incurred by one member for one year without approval from ODJFS, then the MCP will be required to pay a monetary penalty to ODJFS. The amount of the penalty will be the difference between the estimated amount, as determined by ODJFS, of what the MCP would have paid in premiums for the reinsurance policy if it had been in compliance and what the MCP did actually pay while it was out of compliance plus 5%. For example, if the MCP paid $3,000,000.00 in premiums during the period of non-compliance and would have paid $5,000,000.00 if the requirements had been met, then the penalty would be $2,100,000.00. If it is determined that an MCP's reinsurance for transplant services covers less than 50% of inpatient costs incurred by one member for one year, the MCP will be required to develop a corrective action plan (CAP). 4. PROMPT PAY REQUIREMENTS In accordance with 42 CFR 447.46, MCPs must pay 90% of all submitted clean claims within 30 days of the date of receipt and 99% of such claims within 90 days of the date of receipt, unless the MCP and its contracted provider(s) have established an alternative payment schedule that is mutually agreed upon and described in their contract. The prompt pay requirement applies to the processing of both electronic and paper claims for contracting providers by the MCP and delegated claims processing entities. The date of receipt is the date the MCP receives the claim, as indicated by its date stamp on the claim. The date of payment is the date of the check or date of electronic payment transmission. A claim means a bill from a provider for health care services that is assigned a unique identifier. A claim does not include an encounter form. Appendix J Page 6 A "claim" can include any of the following: (1) a bill for services; (2) a line item of services; or (3) all services for one recipient within a bill. A "clean claim" is a claim that can be processed without obtaining additional information from the provider of a service or from a third party. Clean claims do not include payments made to a provider of service or a third party where the timing of payment is not directly related to submission of a completed claim by the provider of service or third party (e.g., capitation). A clean claim also does not include a claim from a provider who is under investigation for fraud or abuse, or a claim under review for medical necessity. Penalty for noncompliance: Noncompliance with prompt pay requirements will result in progressive penalties to be assessed on a quarterly basis, as outlined in Appendix N of the Provider Agreement. 5. PHYSICIAN INCENTIVE PLAN DISCLOSURE REQUIREMENTS If the MCP operates a physician incentive plan, no specific payment can be made directly or indirectly under this physician incentive plan to a physician or physician group as an inducement to reduce or limit medically necessary services furnished to an individual. If the physician incentive plan places a physician or physician group at substantial financial risk [as determined under paragraph (d) of 42 CFR 422.208] for services that the physician or physician group does not furnish itself, the MCP must assure that all physicians and physician groups at substantial financial risk have either aggregate or per-patient stop-loss protection in accordance with paragraph (f) of 42 CFR 422.208, and conduct periodic surveys in accordance with paragraph (h) of 42 CFR 422.208. In accordance with 42 CFR 417.479 and 42 CFR 422.210, MCPs must provide physician incentive plan disclosure statements and other information to ODJFS at the time requested by ODJFS. The MCP must disclose the types of physician incentive arrangements to ODJFS indicating whether they involve a withhold, bonus, capitation, or other arrangement. If a physician incentive arrangement involves a withhold or bonus, the MCP must disclose the percent of the withhold or bonus to ODJFS. The MCP must disclose the panel size for each physician incentive plan to the ODJFS. If patients are pooled, then the pooling method used to determine if substantial financial risk exists must also be disclosed. If more than 25% of the total potential payment of a physician/group is at risk for referral services, the MCP must provide a copy of the required patient satisfaction survey and assurance, in writing, to the ODJFS that the physician or physician group has adequate stop-loss protection, including noting the type of coverage (e.g., per member per year, aggregate), the threshold amounts, and any coinsurance required for amounts over the threshold. Appendix J Page 7 Upon request by a member or a potential member and no later than 14 calendar days after the request, the MCP must provide the following information to the member: (1) whether the MCP 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; and (4) a summary of the survey results if the MCP was required to conduct a survey. The information provided by the MCP must adequately address the member's request. 6. NOTIFICATION OF REGULATORY ACTION Any MCP notified by the ODI of proposed or implemented regulatory action must report such notification and the nature of the action to ODJFS no later than one working day after receipt from ODI. The ODJFS may request, and the MCP must provide, any additional information as necessary to assure continued satisfaction of program requirements. MCPs may request that information related to such actions be considered proprietary in accordance with established ODJFS procedures. Failure to comply with this provision will result in an immediate membership freeze. APPENDIX K QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT PROGRAM As required by federal regulation, 42 CFR 438.240, each managed care plan (MCP) must have an ongoing Quality Assessment and Performance Improvement Program (QAPI) that is annually prior-approved by the Ohio Department of Job and Family Services (ODJFS). The program must include the following elements: 1. PERFORMANCE IMPROVEMENT PROJECTS Each MCP must conduct performance improvement projects (PIPs), including those specified by ODJFS. PIPs must achieve, through periodic measurements and intervention, significant and sustained improvement in clinical and non-clinical areas which are expected to have a favorable effect on health outcomes and satisfaction. MCPs must adhere to ODJFS PIP content and format specifications. All ODJFS-specified PIPs must be prior-approved by ODJFS. As part of the external quality review organization (EQRO) process, the EQRO will assist MCPs with conducting PIPs by providing technical assistance and will annually validate the PIPs. In addition, the MCP must annually submit to ODJFS the status and results of each PIP. Starting in State Fiscal Year (SFY) 2004, MCPs must initiate the following two (2) PIPs: a. Non-clinical Topic: Identifying children with special health care needs. b. Clinical Topic: Well-child visits during the first 15 months of life. Starting in SFY 2005, MCPs must initiate an additional PIP which will be specified by ODJFS. In addition, as noted in Appendix M, several of the Clinical Performance Measures, if a MCP fails to meet the Minimum Performance Standard, the MCP will be required to complete a PIP. 2. UNDER- AND OVER-UTILIZATION Each MCP must have mechanisms in place to detect under- and over-utilization of health care services. The MCP must specify the mechanisms used to monitor utilization in its annual submission of the QAPI program to ODJFS. It should also be noted that pursuant to the program integrity provisions outlined in Appendix I, MCPs must monitor for the potential under- utilization of services by their members in order to assure that all Medicaid-covered services are being provided, as required. If any under-utilized services are identified, the MCP must immediately investigate and correct the problem(s) which resulted in such under-utilization of services. Appendix K Page 2 In addition, beginning in SFY 2005, the MCP must conduct an ongoing review of service denials and must monitor utilization on an ongoing basis in order to identify services which may be under-utilized. 3. SPECIAL HEALTH CARE NEEDS Each MCP must have mechanisms in place to assess the quality and appropriateness of care furnished to children with special health care needs. The MCP must specify the mechanisms used in its annual submission of the QAPI program to ODJFS. 4. SUBMISSION OF DATA Each MCP must submit clinical performance measurement data as required by ODJFS that enables ODJFS to calculate standard measures. Refer to Appendix M "Performance Evaluation" for a more comprehensive description of the clinical performance measures. Each MCP must also submit clinical performance measurement data as required by ODJFS that uses standard measures as specified by ODJFS. MCPs are required to submit Health Employer Data Information Set (HEDIS) audited data for the following measures: a. Comprehensive Diabetes Care b. Child Immunization Status c. Adolescent Immunization Status The measures must have received a "report" designation from the HEDIS certified auditor and must be specific to the Medicaid population. Data must be submitted annually and in an electronic format. Data will be used for MCP clinical performance monitoring and will be incorporated into comparative reports developed by the EQRO. This requirement will be phased in over a two-year period. MCPs that do not have HEDIS-audited measures during calendar year (CY) 2004 will have the data collected and audited as part of the EQRO process. All MCPs will be required to submit the HEDIS-audited measures for the contract period beginning July 1, 2004. 5. EQRO EVALUATION AND DEEMING The EQRO will conduct administrative compliance assessments and QAPI program reviews for each MCP every three (3) years. The review will cover all aspects of the QAPI program and other quality and care coordinator areas as specified by ODJFS. MCPs with accreditation from a national accrediting organization approved by the Centers for Medicare and Medicaid Services (CMS) may request to be `deemed' from the compliance review for accreditation standards that are in ODJFS' assessment, the same as ODJFS requirements. Appendix K Page 3 6. MCP AND ODJFS ANNUAL EVALUATION Each MCP must annually submit an evaluation of the effectiveness and impact of their QAPI program. ODJFS will review the effectiveness of each MCP's QAPI by reviewing the MCP's self-evaluation, submission of required data, report on the status of each PIP provided by the MCP, the validation of the PIPs as conducted by the EQRO, and the EQRO's review of the MCP's QAPI functions. 7. EXTERNAL QUALITY REVIEW MINIMUM SCORE As outlined in Appendix M, each MCP must achieve a minimum score of seventy- five percent (75%) for each clinical study and the administrative component. In addition, each MCP must achieve an overall score of at least seventy-five percent (75%). For all studies that are finalized during the contract period, if an MCP is noncompliant with the clinical study and administrative scoring requirements, a corrective action plan (CAP) must be developed by the MCP. Serious deficiencies in the overall score may result in immediate termination or non-renewal of the provider agreement (Examples of an external quality review serious deficiency is a score of less than seventy-five percent (75%) for each clinical study or a score of less than seventy-five percent (75%) for the administrative component with a score of less than seventy-five percent (75%) on the preponderance of clinical studies). Refer to Appendix M "Performance Evaluation" for a more comprehensive description of minimum performance standards. APPENDIX L DATA QUALITY A high level of performance on the data quality measures established in this appendix is crucial in order for the Ohio Department of Job and Family Services (ODJFS) to determine the value of the Medicaid Managed Health Care Program and to evaluate Medicaid consumers' access to and quality of services. Data collected from MCPs are used in key performance assessments such as the external quality review, clinical performance measures, utilization review, care coordination and case management, and in determining incentives. The data will also be used in conjunction with the cost reports in setting the 2005 premium payment rates. Data sets collected from MCPs with data quality standards include: encounter data; screening, assessment, and case management data; data used in the external quality review; members' PCP data; and appeal and grievance data. 1. ENCOUNTER DATA For detailed descriptions of the encounter data quality measures below, see ODJFS Methods for Encounter Data Quality Measures. 1.a. ENCOUNTER DATA COMPLETENESS Each MCP's encounter data submissions will be assessed for completeness. The MCP is responsible for collecting information from providers and reporting the data to ODJFS in accordance with program requirements established in Appendix C, MCP Responsibilities. Failure to do so jeopardizes the MCP's ability to demonstrate compliance with other performance standards. 1.a.i. ENCOUNTER DATA VOLUME Measure: The volume measure for each service category, as listed in Table 1 below, is the rate of utilization (e.g., discharges, visits) per 1,000 member months (MM). Report Period: The report periods for the SFY 2004 and SFY 2005 contract periods are listed in the table below. Appendix L Page 2
DATA SOURCE: ESTIMATED ENCOUNTER QUARTERLY REPORT QUARTERLY REPORT PERIODS DATA FILE UPDATE ESTIMATED ISSUE DATE CONTRACT PERIOD - ------------------------ ------------------- -------------------- --------------- Qtr 1 2003 July 2003 August 2003 Qtr 1, Qtr2 2003 October 2003 November 2003 SFY 2004 Qtr1 thru Qtr3 2003 January 2004 February 2004 Qtr1 thru Qtr4 2003 April 2004 May 2004 Qtr1 thru Qtr4 2003 & Qtr1 2004 July 2004 August 2004 Qtr1 thru Qtr4 2003 & Qtr1, Qtr2 2004 October 2004 November 2004 SFY 2005 Qtr1 thru Qtr4 2003 & Qtr1 thru Qtr3 2004 January 2005 February 2005 Qtr1 thru Qtr4 2003 & Qtr1 thru Qtr4 2004 April 2005 May 2005
Qtr1 = January to March Qtr3 = July to September Qtr2 = April to June Qtr4 = October to December Data Quality Standard: The utilization rate for all service categories listed in Table 1 must be equal to or greater than the standard established in Table 1 below. TABLE 1. STANDARDS - ENCOUNTER DATA VOLUME
STANDARD FOR DATES OF SERVICE MEASURE ON OR AFTER CATEGORY PER 1,000/MM 1/1/2003 DESCRIPTION - ------------------ ------------ ---------------- ----------- Inpatient Hospital Discharges 5.4 General/acute care, excluding newborns, and mental health and chemical dependency services Emergency Department 51.6 Includes physician and hospital emergency department encounters Dental 38.2 Non-institutional and hospital outpatient dental visits Vision Visits 15.1 Non-institutional and hospital outpatient optometry and ophthalmology visits Primary & Specialist Care 220.1 Physician/practitioner and hospital outpatient visits Ancillary Services 144.7 Ancillary visits Behavioral Health Service 7.6 Inpatient and outpatient behavioral encounters Pharmacy Prescriptions 388.5 Prescribed drugs
Appendix L Page 3 Determination of Compliance: Performance is monitored once every quarter for the entire report period. If the standard is not met for every service category in all quarters of the report period, then the MCP will be determined to be noncompliant for the report period. Penalty for noncompliance: The first time an MCP is noncompliant with a standard for this measure, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Upon all subsequent measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 6) of two percent of the current month's premium payment. Monetary sanctions will not be levied for consecutive quarters that an MCP is determined to be noncompliant. If an MCP is noncompliant for three consecutive quarters, membership will be frozen. Once the MCP is determined to be compliant with the standard and the violations/deficiencies are resolved to the satisfaction of ODJFS, the penalties will be lifted, if applicable, and monetary sanctions will be returned. Special consideration will be made for MCPs with less than 1,000 members. 1.a.ii. ENCOUNTER DATA OMISSIONS Measure: Omission studies will evaluate the completeness of the encounter data. This study will compare the medical records of members during the time of membership to the encounters submitted. The encounters documented in the medical record that do not appear in the encounter data will be counted as omissions. Report Period: In order to provide timely feedback on the omission rate of encounters, the report period will be the most recent from when the measure is initiated. This measure is conducted annually. Medical records retrieval from the provider and submittal to ODJFS or its designee is an integral component of the omission measure. ODJFS has optimized the sampling to minimize the number of records required. This methodology requires a high record submittal rate. To aid MCPs in achieving a high submittal rate, ODJFS will give at least an 8 week period to retrieve and submit medical records as a part of the validation process. A record submittal rate will be calculated as a percentage of all records requested for the study. Data Quality Standard: The data quality standard is a maximum omission rate of 35% for the study that will be finalized during contract period 2004, 15% for the study finalized during contract period 2005, and 5% for the study finalized during contract period 2006 and for subsequent studies. Penalty for Noncompliance: The first time an MCP is noncompliant with a standard for this measure, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Appendix L Page 4 Upon all subsequent measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 6) of one percent of the current month's premium payment. Once the MCP is performing at standard levels and violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. 1.a.iii. INCOMPLETE OUTPATIENT HOSPITAL DATA Since July 1, 1997, MCPs have been required to provide both the revenue code and the HCPCS code on applicable outpatient hospital encounters. ODJFS will be monitoring, on a quarterly basis, the percentage of hospital encounters which contain a revenue code and CPT/HCPCS code. A CPT/HCPCS code must accompany certain revenue center codes. These codes are listed in Appendix B of Ohio Administrative Code rule 5101:3-2-21 (fee-for-service outpatient hospital policies) and in the methods for calculating the completeness measures. Measure: The percentage of outpatient hospital line items with certain revenue center codes, as explained above, which had an accompanying valid procedure (CPT/HCPCS) code. Report Period: For the SFY 2004 contract period, performance will be evaluated using the following report periods: January - March, 2003; April - June, 2003; July - September, 2003; October - December, 2003. For the SFY 2005 contract period, performance will be evaluated using the following report periods: January - March, 2004; April - June, 2004; July - September, 2004; October - December, 2004. Data Quality Standard: The data quality standard is a minimum rate of 95%. Penalty for noncompliance: The first time an MCP is noncompliant with a standard for this measure, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Upon all subsequent quarterly measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 6) of one percent of the current month's premium payment. Once the MCP is performing at standard levels and violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. 1.a.iv. INCOMPLETE DATA FOR LAST MENSTRUAL PERIOD As outlined in ODJFS Encounter Data Specifications, the last menstrual period (LMP) field is a required encounter data field. It is discussed in Item 14 of the AHCFA 1500 Billing Instructions.@ The date of the LMP is essential for calculating the clinical performance measures and allows the ODJFS to adjust performance expectations for the length of a pregnancy. Appendix L Page 5 The occurrence code and date fields on the UB-92, which are Aoptional@ fields, can also be used to submit the date of the LMP. These fields are described in Items 32a & b, 33a & b, 34a & b, 35a & b of the AInpatient Hospital@ and AOutpatient Hospital UB-92 Claim Form Instructions.@ An occurrence code value of A10 @ indicates that a LMP date was provided. The actual date of the LMP would be given in the AOccurrence Date@ field. Measure: The percentage of recipients with a live birth during the SFY where a Avalid@ LMP date was given on one or more of the recipient's perinatal claims. If the LMP date is before the date of birth and there is a difference of between 119 and 315 days between the date the recipient gave birth and the LMP date, then the LMP date will be considered a valid date. Report Period: For the SFY 2004 contract period, performance will be evaluated using the January - December, 2003 report period. For the SFY 2005 contract period, performance will be evaluated using the January - December, 2004 report period. Data Quality Standard: The data quality standard is 70% for encounters with dates of service in CY 2003 and 80% for CY 2004 and thereafter. Penalty for noncompliance: The first time an MCP is noncompliant with a standard for this measure, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Upon all subsequent measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 6) of one percent of the current month's premium payment. Once the MCP is performing at standard levels and violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. 1.a.v. REJECTED ENCOUNTERS Encounters submitted to ODJFS that are incomplete or inaccurate are rejected and reported back to the MCPs on the Exception Report. If an MCP does not resubmit rejected encounters, ODJFS' encounter data set will be incomplete. Measure 1 only applies to MCPs that have had Medicaid membership for more than one year. Measure 1: The percentage of encounters submitted to ODJFS that are rejected. Appendix L Page 6 Report Period: For the SFY 2004 contract period, performance will be evaluated using the following report periods: April - June, 2003; July - September, 2003; October - December, 2003; and January - March, 2004. For the SFY 2005 contract period, performance will be evaluated using the following report periods: April - - June, 2004; July - September, 2004; October - December, 2004; and January - March, 2005. Data Quality Standard 1: Data Quality Standard 1 is a maximum encounter data rejection rate of 20% for each tape format for encounters submitted in SFY 2003 and 10% thereafter. Penalty for noncompliance with Data Quality Standard 1: The first time an MCP is noncompliant with a standard for this measure, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Upon all subsequent measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 6) of one percent of the current month's premium payment. The monetary sanction will be applied for each tape format that is determined to be out of compliance. Once the MCP is performing at standard levels and violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. Measures 2 and 3 only apply to MCPs that have had Medicaid membership for one year or less. Measure 2: The percentage of encounters submitted to ODJFS that are rejected. Report Period: The report period for Measure 2 is three months. Results are calculated and performance is monitored quarterly. The first quarter begins with the first three months of enrollment. Data Quality Standard 2: The data quality standard is a maximum encounter data rejection rate for each tape format as follows: First & second quarters with membership: 50% Third & fourth quarters with membership: 25% Tapes that are totally rejected will not be considered in the determination of noncompliance. Measure 3: The rate of encounters (encounters per 1,000 member months (MM)) submitted to ODJFS. Report Period: The report period for Measure 3 is three months. Results are calculated and performance is monitored quarterly. The first quarter begins with the first three months of enrollment. Data Quality Standard 3: The data quality standard is a monthly minimum accepted rate of encounters for each tape format as follows: Appendix L Page 7 First & second quarters with membership: 50 encounters per 1,000 MM for NCPDP 65 encounters per 1,000 MM for NSF 20 encounters per 1,000 MM for UB-92 Third & fourth quarters with membership: 250 encounters per 1,000 MM for NCPDP 350 encounters per 1,000 MM for NSF 100 encounters per 1,000 MM for UB-92

Penalty for Noncompliance with Data Quality Standard 2 or 3: If the MCP is determined to be noncompliant for either standard, ODJFS will impose a monetary sanction of one percent of the MCP's current month's premium payment. The monetary sanction will be applied only once per measure per compliance determination period and will not exceed a total of two percent of the MCP's current month's premium payment. Once the MCP is performing at standard levels and violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. Special consideration will be made for MCPs with less than 1,000 members. 1.a.vi. INCOMPLETE BIRTH WEIGHT DATA Measure: The percentage of newborn delivery inpatient encounters during the state fiscal year which contained a birth weight. If a value of "88" through "96" is found on any of the five condition code fields on the UB-92 inpatient claim format, then the encounter will be considered to have a birth weight. The condition code fields are described in Items 24-30 of the "Inpatient Hospital, UB-92 Claim Form Instructions." Report Period: For the SFY 2004 contract period, performance will be evaluated using the January - December, 2003 report period. For the SFY 2005 contract period, performance will be evaluated using the January - December, 2004 report period. Data Quality Standard: The data quality standard is 50% for encounters with dates of service in CY 2003, 70% in CY 2004, and 90% in CY 2005 and thereafter. Penalty for noncompliance: For report period CY 2003, if an MCP is noncompliant with the standard, then the ODJFS will issue a Sanction Advisory informing the MCP that a monetary sanction will be imposed if the MCP is noncompliant in any future report periods. For report period SFY 2004 and thereafter, if an MCP is determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 6) of one percent of the current month's premium payment. Once the MCP is performing at standard levels and violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. Appendix L Page 8 1.a.vii. CLINICAL PERFORMANCE MEASURES Results that reflect clinical services rendered for the Clinical Performance Measures as described in Appendix M, Performance Evaluation, depend on complete encounter data. The completeness of the encounter data is assessed for all Clinical Performance Measures by calculating a composite score. Report Period: For the SFY 2004 contract period, performance will be evaluated using the January - December, 2003 report period for the clinical performance measures. For the SFY 2005 contract period, performance will be evaluated using the January - December, 2004 report period. For the SFY 2004 contract period, the results of the following CY 2003 Clinical Performance Measures will be used to calculated the composite score: 1. Perinatal Care - Frequency of Ongoing Prenatal Care 2. Perinatal Care - Initiation of Prenatal Care 3. Perinatal Care - Low Birth Weight 4. Perinatal Care - Postpartum Care 5. Preventive Care for Children - Well-Child Visits 6. Use of Appropriate Medication for People with Asthma 7. Annual Dental Visits The composite score will be determined by considering whether or not the MCP's results for each measure are within 70% of the results of the best performing MCP. Points will be awarded for each measure and summed to calculate the composite score. Points for each measure will be awarded as follows: ~~MCP's results below 70% of the results of the best performing MCP: 0 points MCP's results equal to or above 70% of the results of the best performing MCP: 1 point~~

The maximum composite score attainable is seven. For measures with multiple components, each component will contribute equally to the score for the whole measure, e.g., the results for each of the three age ranges will contribute to one-third of the score of the well-child visit measure. Monetary sanctions between 0% and 5 % of the current month's premium payment will be determined according to the following table: Appendix L Page 9
COMPOSITE SCORE MONETARY SANCTION 7 0% 6 0% 5 0% 4 1% 3 2% 2 3% 1 4% 0 5%
In order to transition to the new method of calculating the clinical performance measures composite score for contract period SFY 2004, a one-time revision will be made in determining the method of refunding fines applied to the SFY 2002 results. For MCPs that were sanctioned for low performance for SFY 2002 results, fines will be refunded only if an MCP's CY 2003 or CY 2004 composite score is high enough (5, 6, or 7) to result in no additional fine being applied. For the SFY 2005 contract period and later, when each year's results for the Clinical Performance Measures are finalized, a new composite score will be determined and ODJFS will impose new monetary sanctions, if applicable. At this time, if the composite score is higher than the prior year, then the prior year's monetary sanctions related to this data quality measure will be refunded, if applicable. If a higher composite score is not achieved within two years of a monetary sanction imposed under this data quality measure, then the monetary sanction will not be refunded. 1.b. ENCOUNTER DATA ACCURACY As with data completeness, the MCPs are responsible for assuring the collection and submission of accurate data to ODJFS. Failure to do so jeopardizes the MCP's performance credibility and, if not corrected, will be assumed to indicate a failure in actual performance. 1.b.i. ENCOUNTER DATA ACCURACY STUDY Measure: ODJFS validates the encounter data by measuring the rate of agreement between encounters and the corresponding medical records. The focus of the accuracy study will be on delivery encounters. Its primary purpose will be to verify that MCPs submit encounter data accurately and to ensure only one payment is made per delivery. The rate of appropriate payments will be determined by comparing a sample of delivery payments to the medical record. Appendix L Page 10 Report Period: In order to provide timely feedback on the accuracy rate of encounters, the report period will be the most recent from when the measure is initiated. This measure is conducted annually. Medical records retrieval from the provider and submittal to ODJFS or its designee is an integral component of the validation process. ODJFS has optimized the sampling to minimize the number of records required. This methodology requires a high record submittal rate. To aid MCPs in achieving a high submittal rate, ODJFS will give at least an 8 week period to retrieve and submit medical records as a part of the validation process. A record submittal rate will be calculated as a percentage of all records requested for the study. Data Quality Standard 1: For results that are finalized during the contract year, the accuracy rate for encounters generating delivery payments is 100%. Penalty for noncompliance: The MCP must participate in a detailed review of delivery payments made for deliveries during the report period. Any duplicate or unvalidated delivery payments must be returned to ODJFS. Data Quality Standard 2: A minimum record submittal rate of 85% Penalty for noncompliance: For all encounter data accuracy studies that are completed during this contract period, if an MCP is noncompliant with the standard, ODJFS will impose a non-refundable $10,000 monetary sanction. 1.b.ii. GENERIC PROVIDER NUMBER USAGE Measure: This measure is the percentage of non-pharmacy encounters with the generic provider number. Providers submitting claims which do not have an MMIS provider number must be submitted to ODJFS with the generic provider number 9111115. All other encounters are required to have the MMIS provider number of the servicing provider. The report period for this measure is quarterly. Report Period: For the SFY 2004 contract period, performance will be evaluated using the following report periods: January - March, 2003; April - June, 2003; July - September, 2003; October - December, 2003. For the SFY 2005 contract period, performance will be evaluated using the following report periods: January - March, 2004; April - June, 2004; July - September, 2004; October - December, 2004. Data Quality Standard: A maximum generic provider usage rate of 10% Appendix L Page 11 Penalty for noncompliance: The first time an MCP is noncompliant with a standard for this measure, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Upon all subsequent measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 6) of three percent of the current month's premium payment. Once the MCP is performing at standard levels and violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. 1.c. TIMELY SUBMISSION OF ENCOUNTER DATA 1.c.i. TIMELINESS ODJFS recommends submitting encounters no later than thirty-five days after the end of the month in which they were paid. ODJFS does not monitor standards specifically for timeliness, but the minimum claims volume (Section 1.a.i.) and the rejected encounter (Section 1.a.v.) standards are based on encounters being submitted within this time frame. 1.c.ii. SUBMISSION OF ENCOUNTER DATA TAPES MCP submissions of encounter data tapes to ODJFS are limited to two per format per month. Should an MCP wish to send additional tapes, permission to do so must be obtained by contacting BMHC. Information concerning the proper submission of encounter data may be obtained from the ODJFS Encounter Data File and Submission Specifications document. The MCP must submit a letter of certification, using the form required by ODJFS, with each encounter data tape. The letter of certification must be signed by the MCP's Chief Executive Officer (CEO), Chief Financial Officer (CFO), or an individual who has delegated authority to sign for, and who reports directly to, the MCP's CEO or CFO. 2. SCREENING, ASSESSMENT, AND CASE MANAGEMENT DATA ODJFS designed a screening, assessment, and case management system (SACMS) in order to monitor MCP compliance with program requirements specified in Appendix G, Coverage and Services. Each MCP's screening, assessment, and case management data submissions will be assessed for completeness and accuracy. The MCP is responsible for submitting a screening and assessment file (see Section 1.b. of Appendix M, Performance Evaluation, for exceptions to this requirement) and a case management file every month. Failure to do so jeopardizes the MCP's ability to demonstrate compliance with CSHCN requirements. For detailed descriptions of the screening, assessment, and case management measures below, see ODJFS Methods for Screening, Assessment, and Case Management Data Quality Measures. Appendix L Page 12 2.a. SCREENING, ASSESSMENT, AND CASE MANAGEMENT SYSTEM DATA ACCURACY 2.a.i. OPEN CASE MANAGEMENT SPANS FOR DISENROLLED MEMBERS Measure: The percentage of the MCP's adult and children case management records in the Screening, Assessment, & Case Management System that have open case management date spans for members who have disenrolled from the MCP. Report Period: For the SFY 2004 contract period, performance will be evaluated using the January - June, 2003 and July - December, 2003 report periods. For the SFY 2005 contract period, performance will be evaluated using the January - June, 2004 and July - December, 2004 report periods. Data Quality Standard: A rate of open case management spans for disenrolled members of no more than one percent. Penalty for noncompliance: If an MCP is noncompliant with the standard, then the ODJFS will issue a Sanction Advisory informing the MCP that a monetary sanction will be imposed if the MCP is noncompliant for any future report periods. Upon all subsequent semi-annual measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction of one-half of one percent of the current month's premium payment. Once the MCP is performing at standard levels and violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. 2.b. TIMELY SUBMISSION OF SCREENING AND ASSESSMENT FILES AND CASE MANAGEMENT FILES Data Quality Submission Requirement: The MCP must submit Screening and Assessment and Case Management files on a monthly basis according to the specifications established in ODJFS Screening, Assessment, and Case Management File and Submission Specifications. Penalty for noncompliance: See Appendix N, Compliance Assessment System, for the penalty for noncompliance with this requirement. 3. EXTERNAL QUALITY REVIEW DATA In accordance with federal law and regulations, ODJFS is required to conduct an independent quality review of contracting managed care plans. The OAC rule 5101:3-26-07(C) requires MCPs to submit data and information as requested by ODJFS or its designee for the annual external quality review. Two information sources are integral to these studies: encounter data and medical records. Because encounter data is used to draw samples for the clinical studies, quality must be sufficient to ensure valid sampling. Appendix L Page 13 An adequate number of medical records must then be retrieved from providers and submitted to ODJFS or its designee in order to generalize results to all applicable members. To aid MCPs in achieving the required medical record submittal rate, ODJFS will give at least an eight week period to retrieve and submit medical records. If an MCP does not complete a study because either their encounter data is of insufficient quality or too few medical records are submitted, accurate evaluation of clinical quality in the study area cannot be determined for the individual MCP and the assurance of adequate clinical quality for the program as a whole is jeopardized. 3.a. INDEPENDENT EXTERNAL QUALITY REVIEW Measure: The independent external quality review covers both administrative and clinical focus areas of study. Report Period: The report period is one year. Results are calculated and performance is monitored annually. Performance is measured with each review. Data Quality Standard 1: Sufficient encounter data quality in each study area to draw a sample as determined by the external quality review organization Penalty for noncompliance with Data Quality Standard 1: For each study that is completed during this contract period, if an MCP is noncompliant with the standard, ODJFS will impose a non-refundable $10,000 monetary sanction. Data Quality Standard 2: A minimum record submittal rate of 85 percent for each clinical measure. Penalty for noncompliance for Data Quality Standard 2: For each study that is completed during this contract period, if an MCP is noncompliant with the standard, ODJFS will impose a non-refundable $10,000 monetary sanction. 4. MEMBERS'PCP DATA Data Quality Submission Requirement: The MCP must submit a Members' Designated PCP Data files on a monthly basis according to the specifications established in ODJFS Members' PCP Data File and Submission Specifications. Penalty for noncompliance: See Appendix N, Compliance Assessment System, for the penalty for noncompliance with this requirement. Appendix L Page 14 5. APPEALS AND GRIEVANCES DATA Pursuant to OAC rule 5101:3-26-08.4, MCPs are required to submit information at least monthly to ODJFS regarding appeal and grievance activity. ODJFS requires these submissions to be in an electronic data file format pursuant to the Appeal File and Submission Specifications and Grievance File and Submission Specifications. The appeal data file and the grievance data file must include all appeal and grievance activity, respectively, for the previous month, and must submitted by the ODJFS-specified due date. These data files must be submitted in the ODJFS-specified format and with the ODJFS-specified filename in order to be successfully processed. Penalty for noncompliance: MCPs who fail to submit their monthly electronic data files to the ODJFS by the specified due date or who fail to resubmit, by no later than the end of that month, a file which meets the data quality requirements will be subject to penalty as stipulated under the Compliance Assessment System (Appendix N). 6. NOTES 6.a. PENALTIES, INCLUDING MONETARY SANCTIONS, FOR NONCOMPLIANCE Penalties for noncompliance with standards outlined in this appendix, including monetary sanctions, will be imposed as the results are finalized. Penalties for noncompliance on an individual measure for each period compliance is determined in this appendix will not exceed $300,000. With the exception of Sections 1.a.i. and 1.a.v., no monetary sanctions described in this appendix will be imposed if the MCP is in its first contract year of Medicaid program participation. Refundable monetary sanctions will be based on the premium payment in the month of the cited deficiency and due within 30 days of notification by ODJFS to the MCP of the amount. Any monies collected through the imposition of such a sanction will be returned to the MCP (minus any applicable collection fees owed to the Attorney General's Office, if the MCP has been delinquent in submitting payment) after the MCP has demonstrated full compliance with the particular program requirement and the violations/deficiencies are resolved to the satisfaction of ODJFS. If an MCP does not comply within two years of the date of notification of noncompliance, then the monies will not be refunded. 6.b. COMBINED REMEDIES If ODJFS determines that one systemic problem is responsible for multiple deficiencies, ODJFS may impose a combined remedy which will address all areas of deficient performance. The total fines assessed in any one month will not exceed 15% of the MCP's monthly premium payment. Appendix L Page 15 6.c. MEMBERSHIP FREEZES MCPs found to have a pattern of repeated or ongoing noncompliance may be subject to a membership freeze. 6.d. RECONSIDERATION Requests for reconsideration of monetary sanctions and enrollment freezes may be submitted as provided in Appendix N, Compliance Assessment System. 6.e. CONTRACT TERMINATION, NONRENEWALS, OR DENIALS Upon termination either by the MCP or ODJFS, nonrenewal, or denial of an MCP provider agreement, all previously collected refundable monetary sanctions will be retained by ODJFS. APPENDIX M PERFORMANCE EVALUATION This appendix establishes minimum performance standards for managed care plans (MCPs) in key program areas. The intent is to maintain accountability for contract requirements. Performance will be evaluated in the categories of Quality of Care, Access, Consumer Satisfaction, and Administrative Capacity. Each performance measure has an accompanying minimum performance standard. MCPs with performance levels below the minimum performance standards will be required to take corrective action. Selected measures in this appendix will be used to determine incentives as specified in Appendix O, Performance Incentives. 1. QUALITY OF CARE 1.a. INDEPENDENT EXTERNAL QUALITY REVIEW In accordance with federal law and regulations state Medicaid agencies must annually provide for an external review of the quality outcomes and timeliness of, and access to, services provided by Medicaid-contracting MCPs (42 CFR 438.204(d)). The external review assist the state in assuring MCP compliance with program requirements and facilitates the collection of accurate and reliable information concerning MCP performance. Measure: The independent external quality review covers both an administrative component and clinical focus areas of study. The overall score is weighted to emphasize clinical performance. Report Period: For the SFY 2004 contract period, performance will be evaluated using the reviews that are finalized during SFY 2004. Minimum Performance Standard 1: A minimum score of 75% for each clinical study and the administrative component. Action Required for Noncompliance with the Minimum Performance Standard 1: For all studies that are finalized during this contract period, if an MCP is noncompliant with the standard, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area(s) of noncompliance. Minimum Performance Standard 2: Each MCP must achieve an overall score of at least 75%. Penalty for Noncompliance with the Minimum Performance Standard 2: A serious deficiency may result in immediate termination or nonrenewal of the provider agreement. (Examples of a external quality review serious deficiency is a score of less than 75 percent for each clinical study or a score of less than 75 percent for the administrative component with a score of less than 75 percent on the preponderance of clinical studies). Appendix M Page 2 1.b. CHILDREN WITH SPECIAL HEALTH CARE NEEDS (CSHCN) In order to ensure state compliance with federal requirements under the 1915(b) Medicaid managed care waiver program authority, as well as the provisions of 42 CFR 438.208, the Bureau of Managed Health Care established Children with Special Health Care Needs (CSHCN) basic program requirements in Appendix G, Coverage and Services, and corresponding minimum performance standards as described below. The purpose of these measures is to improve identification and screening, assure a thorough and comprehensive assessment, and provide appropriate and targeted case management services to CSHCN. For a comprehensive description of the CSHCN measures below, see ODJFS Methods for Children with Special Health Care Needs Performance Measures. Data Submission Requirement and Performance Measures Exceptions: Screening and assessment files are not required to be submitted to ODJFS as described in Appendix G, Coverage and Services, and measures pertaining to the screening and assessment of newly-enrolled children as described in this Appendix, Sections 1.b.i. and ii do not apply if an MCP meets one of the two following criteria: - An MCP meets the performance target of 5.0% for the Case Management of Newly-Enrolled Children measure as described in Section 1.b.iii.; or - An MCP meets the 60% minimum performance standard for the Identification of Newly-Enrolled Children with Special Health Care Needs measure as described in Section 1.b.i, and during the same evaluation period meet the 85% minimum performance standard for the Assessment of Newly-Enrolled Children measure as described in Section 1.b.ii. The frequency of measurement to determine this reporting and performance measures exception is monthly and is based on a six month rolling period. 1.b.i IDENTIFICATION OF NEWLY-ENROLLED CHILDREN WITH SPECIAL HEALTH CARE NEEDS Measure: The adjusted percentage of newly-enrolled children 6 months and over and under 21 years of age that are identified within 60 days of the effective date of enrollment, of those children expected to be screened. Note: See Appendix G.ii., for identification methods. For all newly-enrolled members who were not screened at the time of enrollment by the Selection Services Contractor (SSC) and are not identified as CSHCN through an administrative review, MCPs must use the ODJFS CSHCN Screening Questions to identify potential CSHCN. Note: This measure was transitioned from a data quality measure in SFY 2003 to a performance measure for SFY 2004 and thereafter. Appendix M Page 3 Report Period: The first report period using the revised methods is January - June, 2003. For the SFY 2004 contract period, performance will be evaluated using the January - June, 2003 and July - December, 2003 report periods. For the SFY 2005 contract period, performance will be evaluated using the January - June, 2004 and July - December, 2004 report periods. Minimum Performance Standard: A minimum adjusted screening rate of 60%. Penalty for Noncompliance: If the MCP is noncompliant with the standard for the first time in contract year SFY 2004, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. For MCPs that were determined to be noncompliant with this standard during contract year SFY 2003, or for MCPs that are determined to be noncompliant in contract year SFY 2004, upon all subsequent semi-annual measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 5) of one half of one percent of the current month's premium payment. Once the MCP is performing at standard levels and the violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. 1.b.ii. ASSESSMENT OF NEWLY-ENROLLED CHILDREN Measure: The adjusted percentage of newly-enrolled children 6 months and over and under 21 years of age with a positive identification that are assessed within 120 days of the effective date of enrollment, of those members expected to be assessed. Report Period: The first report period using the revised methods is January - June, 2003. For the SFY 2004 contract period, performance will be evaluated using the January - June, 2003 and July - December 2003 report periods. For the SFY 2005 contract period, performance will be evaluated using the January - June, 2004 and July - December 2004 report periods. Minimum Performance Standard: A minimum adjusted assessment rate of 85%. Penalty for Noncompliance: The first time an MCP is noncompliant with a standard for this measure, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Upon all subsequent semiannual measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 5) of one half of one percent of the current month's premium payment. Once the MCP is performing at standard levels and the violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. 1.b.iii. CASE MANAGEMENT OF NEWLY-ENROLLED CHILDREN Measure: The percent of newly-enrolled children 6 months and over and under 21 years of age that receive case management services. Appendix M Page 4 Report Period: For the SFY 2004 contract period, performance will be evaluated using the September, 2002 - February, 2003, report period. Thereafter rolling semiannual periods will be used to determine screening and assessment reporting exemptions. Minimum Performance Standard: A minimum case management rate of 5.0%. Note: There is not a performance standard or penalty for noncompliance for this measure. This measure will be used to determine whether MCPs are required to submit screening and assessment files and if measures pertaining to the screening and assessment of new members will be applied (see Section 1. b.). 1.b.iv. CASE MANAGEMENT OF CHILDREN Measure: The average monthly case management rate for children 6 months and over and under 21 years of age. Report Period and Frequency of Measurement: For the SFY 2004 contract period, a baseline level of performance will be set using the July-December, 2003 report period. For the SFY 2005 contract period, performance will be evaluated using the January-June, 2004 and July-December, 2004 report periods. Performance Target: A minimum case management rate of 5.0%. Minimum Performance Standard: For results that are below the performance target the performance standard is an improvement level that results in a 20% decrease between the target and the previous reporting periods results. For MCPs that reach or surpass the performance target, then the standard is to keep the results at or above the performance target. Penalty for Noncompliance: The first time an MCP is noncompliant with a standard for this measure, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Upon all subsequent semi-annual measurements of performance, if an MCP is again determined to be noncompliant with the standard, ODJFS will impose a monetary sanction (see Section 5) of one half of one percent of the current months premium payment. Once the MCP is performing at standard levels and the violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. 1.b.v. CASE MANAGEMENT OF NEWLY-ENROLLED CHILDREN WITH ODJFS-MANDATED CONDITIONS Measure: The percentage of newly-enrolled children 6 months and over and under 21 years of age with a positive assessment for the ODJFS-mandated case management conditions of asthma and diabetes that are case managed. Report Period for the Asthma & Diabetes Mandated Conditions: For the SFY 2004 contract period, performance results will be reported for the July-December 2002 report period. Appendix M Page 5 This is the final report period to be monitored. Note the following exception for MCPs exempt from submitting screening and assessment files (see Section 1.b.): For MCPs meeting the performance target of 5.0% for the Case Management of Newly-Enrolled Children measure prior to July 1, 2003, performance will be evaluated using the July-September, 2002 report period. Minimum Performance Standard: A minimum case management rate of 70%. Determination of Incentives: The MCP's performance on this measure will be used in determining the MCP's overall performance level in contract period SFY 2003. In determining the status of the at risk amount for the contract period SFY 2003 and any additional incentive payments, only results for the asthma condition for this measure will be used. 1.b.vi. CASE MANAGEMENT OF CHILDREN WITH AN ODJFS-MANDATED CONDITION Measure 1: The percent of children 6 months and over and under 21 years of age with a positive identification through an ODJFS administrative review of data for the ODJFS-mandated case management condition of asthma that are case managed. Report Period: For the SFY 2004 contract period, a baseline level of performance will be set using the January-March, 2004 report period. For the SFY 2005 contract period, performance will be evaluated using the July-September, 2004 and January-March, 2005 report periods. Measure 2: The percent of children under 17 years of age with a positive identification through an ODJFS administrative review of data for the ODJFS-mandated case management condition of teen pregnancy. Report Period: For the SFY 2004 contract period, a baseline level of performance will be set using the January-June, 2004 report period. For the SFY 2005 contract period, performance will be evaluated using the July-December, 2004 report period. Measure 3: The percent of children 6 months and over and under 21 years of age with a positive identification through an ODJFS administrative review of data for the ODJFS-mandated case management condition of HIV/AIDS that are case managed. Report Period: For the SFY 2004 contract period, performance results will be reported for January-March, 2003 and July-September, 2003. A baseline level of performance will be set using the January-March, 2004 report period. For the SFY 2005 contract period, performance will be evaluated using the July-September, 2004 and January-March, 2005 report periods. Performance Target for Measures 1, 2, and 3: A minimum case management rate of 80%. Appendix M Page 6 Minimum Performance Standard for Measures 1, 2, and 3: For results that are below the performance target the performance standard is an improvement level that results in a 20% decrease between the target and the previous reporting periods results. For MCPs that reach or surpass the performance target, then the standard is to keep the results at or above the performance target. Penalty for Noncompliance: The first time an MCP is noncompliant with the standard for measures 1 or 2, ODJFS will issue a Sanction Advisory informing the MCP that any future noncompliance instances with the standard for this measure will result in ODJFS imposing a monetary sanction. Upon all subsequent semi-annual measurements of performance, if an MCP is again determined to be noncompliant with the standard for measures 1 or 2, ODJFS will impose a monetary sanction (see Section 5) of one half of one percent of the current months premium payment. Once the MCP is performing at standard levels and the violations/deficiencies are resolved to the satisfaction of ODJFS, the money will be refunded. Note: For SFY 2004, measure 3 is a reporting-only measure. For SFY 2005, penalties will be applied for noncompliance with the minimum performance standard for measure 3. 1.c. CLINICAL PERFORMANCE MEASURES MCP performance will be assessed based on the analysis of submitted encounter data for each year. For certain measures, standards are established; the identification of these standards is not intended to limit the assessment of other indicators for performance improvement activities. Performance on multiple measures will be assessed and reported to the MCPs and others, including Medicaid consumers. The clinical performance measures described below closely follow the National Committee for Quality Assurance's Health Plan Employer Data and Information Set (HEDIS). Minor adjustments to HEDIS measures were required to account for the differences between the commercial population and the Medicaid population such as shorter and interrupted enrollment periods. For a comprehensive description of the clinical performance measures below, see ODJFS Methods for Clinical Performance Measures. Report Period: For the SFY 2004 contract period, performance will be evaluated using the January-December, 2003 report period for the clinical performance measures. For the SFY 2005 contract period, performance will be evaluated using the January-December, 2004 report period. 1.c.i. PERINATAL CARE-FREQUENCY OF ONGOING PRENATAL CARE Measure: The percentage of enrolled women with a live birth during the year who received the expected number of prenatal visits. The number of observed versus expected visits will be adjusted for length of enrollment. Target: 80% of the eligible population must receive 81% or more of the expected number of prenatal visits. Appendix M Page 7 Minimum Performance Standard: The level of improvement must result in at least a 10% decrease in the difference between the target and the previous report period's results. (For example, if last year's results were 20%, then the difference between the target and last year's results is 60%. In this example, the standard is an improvement in performance of 10% of this difference or 6%. In this example, results of 26% or better would be compliant with the standard.) Action Required for Noncompliance: If the standard is not met and the results are below 42%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 42%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. 1.c.ii. PERINATAL CARE-INITIATION OF PRENATAL CARE Measure: The percentage of enrolled women with a live birth during the year who had a prenatal visit within 42 days of enrollment or by the end of the first trimester for those women who enrolled in the MCP during the early stages of pregnancy. Target: 90% of the eligible population initiate prenatal care within the specified time. Minimum Performance Standard: The level of improvement must result in at least a 10% decrease in the difference between the target and the previous year's results. Action Required for Noncompliance: If the standard is not met and the results are below 71%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 71%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. 1.c.iii. PERINATAL CARE-LOW BIRTH WEIGHT NOTE: This measure will be replaced by the measure described in 1.c.viii., Lead Screening. Beginning with contract year SFY 2005, there will no longer be a performance standard or action required for the low birth weight measure. Measure: The percentage of women enrolled in the MCP who delivered a low birth weight (less than 2500 grams) baby. Target: A maximum of 6% of the eligible women deliver a low birth weight baby. Appendix M Page 8 Minimum Performance Standard: The standard is a level of improvement resulting in at least a 5% decrease in the difference between the target and the previous year's results. (For example, if last year's results were 8%, then the difference between the target and last year's results is 2%. In this example, the standard is an improvement in performance of 5% of this difference or 0.1%. In this example, results of 7.9% or lower would be compliant with the standard.) For contract year 2005 and thereafter, there is no longer a performance standard for this measure. Action Required for Noncompliance: If the standard is not met and the results are above 7.6%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or below 7.6%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. 1.c.iv. PERINATAL CARE-POSTPARTUM CARE Measure: The percentage of women who delivered a live birth who had a postpartum visit on or between 21 days and 56 days after delivery. Target: At least 80% of the eligible population must receive a postpartum visit. Minimum Performance Standard: The level of improvement must result in at least a 5% decrease in the difference between the target and the previous year's results. Action Required for Noncompliance: If the standard is not met and the results are below 48%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 48%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. 1.c.v. PREVENTIVE CARE FOR CHILDREN-WELL-CHILD VISITS Measure: The percentage of children who received the expected number of well-child visits adjusted by age and enrollment. The expected number of visits is as follows: Children who turn 15 months old: six or more well-child visits. Children who were 3, 4, 5, or 6, years old: one or more well-child visits. Children who were 12 through 21 years old: one or more well-child visits. Appendix M Page 9 Target: At least 80% of the eligible children receive the expected number of well-child visits. Minimum Performance Standard for Each of the Age Groups: The level of improvement must result in at least a 10% decrease in the difference between the target and the previous year's results. Action Required for Noncompliance (15 month old age group): If the standard is not met and the results are below 34%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 34%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. Action Required for Noncompliance (3-6 year old age group): If the standard is not met and the results are below 50%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 50%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. Action Required for Noncompliance (12-21 year old age group): If the standard is not met and the results are below 30%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 30%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. 1.c.vi. USE OF APPROPRIATE MEDICATIONS FOR PEOPLE WITH ASTHMA Measure: The percentage of members with persistent asthma who were enrolled for at least 11 months with the plan during the year and who received prescribed medications acceptable as primary therapy for long-term control of asthma. Target: 80% of the eligible population must receive the recommended medications. Minimum Performance Standard: The level of improvement must result in at least a 10% decrease in the difference between the target and the previous year's results. Action Required for Noncompliance: If the standard is not met and the results are below 54%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 54%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. Appendix M Page 10 1.c.vii. ANNUAL DENTAL VISITS Measure: The percentage of enrolled members age 4 through 21 who were enrolled for at least 11 months with the plan during the year and who had at least one dental visit during the year. Target: At least 60% of the eligible population receive a dental visit. Minimum Performance Standard: The level of improvement must result in at least a 10% decrease in the difference between the target and the previous year's results. Action Required for Noncompliance: If the standard is not met and the results are below 40%, then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 40%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. 1.c.viii. LEAD SCREENING NOTE: For contract year SFY 2004 this is a reporting measure only. This measure will replace the Perinatal Care-Birth Weight measure described in Section I.c.iii. of this Appendix in contract year SFY 2005. Measure: The percentage of one and two year olds who received a blood lead screening by age group. Target: At least 80% of the eligible population receive a blood lead screening. Minimum Performance Standard for Each of the Age Groups: For contract year SFY 2004, there is no performance standard. For contract year SFY 2005 and thereafter, the level of improvement must result in at least a 10% decrease in the difference between the target and the previous year's results. Action Required for Noncompliance (1 year olds): For contract year SFY 2004, there is no action required. For contract year SFY 2005 and thereafter, if the standard is not met and the results are below 45% then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 45%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. Appendix M Page 11 Action Required for Noncompliance (2 year olds): For contract year SFY 2004, there is no action required. For contract year SFY 2005 and thereafter, if the standard is not met and the results are below 35% then the MCP is required to complete a Performance Improvement Project, as described in Appendix K, Quality Assessment and Performance Improvement Program, to address the area of noncompliance. If the standard is not met and the results are at or above 35%, then ODJFS will issue a Quality Improvement Directive which will notify the MCP of noncompliance and may outline the steps that the MCP must take to improve the results. 2. ACCESS Performance in the Access category will be determined by the following measures: Primary Care Physician (PCP) Turnover, Childrens Access to Primary Care, and Adults Access to Preventive/Ambulatory Health Services. For a comprehensive description of the access performance measures below, see ODJFS Methods for Access Performance Measures. 2.a. PCP TURNOVER A high PCP turnover rate may affect continuity of care and may signal poor management of providers. However, some turnover may be expected when MCPs end contracts with physicians who are not adhering to the MCP's standard of care. Therefore, this measure is used in conjunction with the children and adult access measures to assess performance in the access category. Measure: The percentage of primary care physicians affiliated with the MCP as of the beginning of the measurement year who were not affiliated with the MCP as of the end of the year. Report Period: For the SFY 2004 contract period, performance will be evaluated using the January-December, 2003 report period. For the SFY 2005 contract period, performance will be evaluated using the January-December, 2004 report period. Minimum Performance Standard: A maximum PCP Turnover rate of 18 percent. Action Required for Noncompliance: MCPs are required to perform a causal analysis of the high PCP turnover rate and assess the impact on timely access to health services, including continuity of care. If access has been reduced or coordination of care affected, then the MCP must develop and implement an action plan to address the findings. 2.b. CHILDREN'S ACCESS TO PRIMARY CARE This measure indicates whether children aged 12 months to 11 years are accessing PCPs for sick or well-child visits. Measure: The percentage of members age 12 months to 11 years who had a visit with an MCP PCP-type provider. Appendix M Page 12 Report Period: For the SFY 2004 contract period, performance will be evaluated using the January-December, 2003 report period. For the SFY 2005 contract period, performance will be evaluated using the January-December, 2004 report period. Minimum Performance Standard: 70% of the children must receive a visit. Penalty for Noncompliance: If an MCP is noncompliant with the Minimum Performance Standard, then the MCP must develop and implement a corrective action plan. 2.c. ADULTS' ACCESS TO PREVENTIVE/AMBULATORY HEALTH SERVICES This measure indicates whether adult members are accessing health services. Measure: The percentage of members age 20 and older who had an ambulatory or preventive-care visit. Report Period: For the SFY 2004 contract period, performance will be evaluated using the January-December, 2003 report period. For the SFY 2005 contract period, performance will be evaluated using the January-December, 2004 report period. Minimum Performance Standard : 65% of the adults must receive a visit. Penalty for Noncompliance: If an MCP is noncompliant with the Minimum Performance Standard, then the MCP must develop and implement a corrective action plan. 3. CONSUMER SATISFACTION In accordance with federal requirements and in the interest of assessing enrollee satisfaction with MCP performance, ODJFS periodically conducts independent consumer satisfaction surveys. Results are used to assist in identifying and correcting MCP performance overall and in the areas of access, quality of care, and member services. Performance in this category will be determined by the overall satisfaction score. For a comprehensive description of the Consumer Satisfaction performance measure below, see ODJFS Methods for Consumer Satisfaction Performance Measures. Measure: Overall Satisfaction with MCP: The average rating of the respondents to the Consumer Satisfaction Survey who were asked to rate their overall satisfaction with their MCP. The results of this measure are reported annually. Report Period: For the SFY 2004 contract period, performance will be evaluated using the results from the most recent annual survey performed. Minimum Performance Standard: An average score of no less than 7.0. Appendix M Page 13 Penalty for noncompliance: If an MCP is determined noncompliant with the Minimum Performance Standard, then the MCP must develop a corrective action plan and provider agreement renewals may be affected. 4. ADMINISTRATIVE CAPACITY The ability of an MCP to meet administrative requirements has been found to be both an indicator of current plan performance and a predictor of future performance. Deficiencies in administrative capacity make the accurate assessment of performance in other categories difficult, with findings uncertain. Performance in this category will be determined by the Compliance Assessment System, assessment of enrollees screened positive for special health needs, and the emergency department diversion program. For a comprehensive description of the Administrative Capacity performance measures below, see ODJFS Methods for Administrative Capacity Performance Measures. 4.a. COMPLIANCE ASSESSMENT SYSTEM Measure: The number of points accumulated for one contract year (one state fiscal year) through the Compliance Assessment System. Report Period: For the SFY 2004 contract period, performance will be evaluated using the July, 2003 - June, 2004 report period. This measure will only apply to incentives applicable to SFY 2003. The method for determining incentives for SFY 2004 will not include this measure (see Appendix O, Performance Incentives). Minimum Performance Standard: No more than 25 points Penalty for Noncompliance: Penalties for points are established in Appendix N, Compliance Assessment System. 4.b. EMERGENCY DEPARTMENT DIVERSION Managed care plans must provide access to services in a way that assures access to primary and urgent care in the most effective settings and minimizes inappropriate utilization of emergency department (ED) services. MCPs are required to identify high utilizers of ED services and implement action plans designed to minimize inappropriate ED utilization. Measure: The percentage of members who had four or more ED visits during the six month reporting period. Appendix M Page 14 Report Period: For the SFY 2004 contract period this measure will have two applicable report periods because the lag time from the end of the report period to the issuance of the report is transitioning from six to three months. For the first report period for contract period SFY 2004, a baseline level of performance was set using the January-June, 2002 report period. Performance for the first report period for the SFY 2004 contract period will be evaluated using the July-December, 2002 report period. For the second report period of the SFY 2004 contract period, a baseline level of performance will be set using the January-June, 2003 report period. Performance for the second report period for the SFY 2004 contract period will be evaluated using the July-December, 2003 report period. For the SFY 2005 contract period, a baseline level of performance will be set using the January-June, 2004 report period. Performance for the SFY 2005 contract period will be evaluated using the July-December, 2004 report period. Minimum Performance Standard: For contract period SFY 2004, the minimum performance standard for the first report period (July-December, 2002) is 2.0%. For second report period of contract period SFY 2004 (July-December, 2003), the minimum performance standard is 1.5%. For report period of contract period SFY 2005 (July-December, 2004), the minimum performance standard is 1.0%. Penalty for Noncompliance: If the MCP is noncompliant with the minimum performance standard, then the MCP must develop a corrective action plan, for which ODJFS may direct the MCP to develop the components of their EDD program as specified by ODJFS. 5. NOTES 5.a. REPORT PERIODS Unless otherwise noted, the most recent report or study finalized prior to the end of the contract period will be used in determining the MCPs performance level for that contract period. 5.b. MONETARY SANCTIONS Penalties for noncompliance with individual standards in this appendix will be imposed as the results are finalized. Penalties for noncompliance with individual standards for each period compliance is determined in this appendix will not exceed $250,000. Refundable monetary sanctions will be based on the capitation payment in the month of the cited deficiency and due within 30 days of notification by ODJFS to the MCP of the amount. Any monies collected through the imposition of such a sanction would be returned to the MCP (minus any applicable collection fees owed to the Attorney Generals Office, if the MCP has been delinquent in submitting payment) after they have demonstrated improved performance in accordance with this appendix. If an MCP does not comply within two years of the date of notification of noncompliance, then the monies will not be refunded. Appendix M Page 15 5.c. COMBINED REMEDIES If ODJFS determines that one systemic problem is responsible for multiple deficiencies, ODJFS may impose a combined remedy which will address all areas of deficient performance. The total fines assessed in any one month will not exceed 15% of the MCPs monthly capitation. 5.d. ENROLLMENT FREEZES MCPs found to have a pattern of repeated or ongoing noncompliance may be subject to an enrollment freeze. 5.e. RECONSIDERATION Requests for reconsideration of monetary sanctions and enrollment freezes may be submitted as provided in Appendix N, Compliance Assessment System. 5.f. CONTRACT TERMINATION, NONRENEWALS OR DENIALS Upon termination, nonrenewal or denial of an MCP contact, all monetary sanctions collected under this appendix will be retained by ODJFS. The at-risk amount paid to the MCP under the current provider agreement will be returned to ODJFS in accordance with Appendix P, Terminations, of the provider agreement. APPENDIX N COMPLIANCE ASSESSMENT SYSTEM (CAS) The compliance assessment system (CAS) is designed to improve the quality of each MCP's performance through a progressive series of actions taken by ODJFS to address identified failures to meet certain program requirements. The CAS assesses progressive remedies with specified values (occurrences or points) assigned for certain documented failures to satisfy the deliverables required by the provider agreement. Remedies are progressive based upon the severity of the violation, or a repeated pattern of violations. Progressive measures that recognize and monitor continuous quality improvement efforts enable both ODJFS and the MCPs to determine performance consistently across MCPs over time. The CAS focuses on noncompliance with clearly identifiable deliverables and occurrences/points are only assessed in documented and verified instances of noncompliance. The CAS does not replace ODJFS' ability to require corrective action plans (CAPs) and program improvements, or to impose any of the sanctions specified in Ohio Administrative Code (OAC) rule 5101:3-26-10, including the proposed termination, amendment, or nonrenewal of the MCP's provider agreement in certain circumstances. The CAS does not include categories which require subjective assessments or which are not under the MCP's control. Documented violations in the categories specified in this appendix will result in the assessment of occurrences and points, with point values proportional to the severity of the violation. This approach allows the accumulated point total to reflect both patterns of less serious violations as well as less frequent, more serious violations. As stipulated in OAC rule 5101:3-26-10(F), regardless of whether ODJFS imposes a sanction, MCPs are required to initiate corrective action for any MCP program violations or deficiencies as soon as they are identified by the MCP or ODJFS. Corrective Action Plans (CAPs) - MCPs may be required to develop CAPs for any instance of noncompliance, and CAPs are not limited to actions taken under the CAS. All CAPs requiring ongoing activity on the part of an MCP to ensure their compliance with a program requirement remain in effect for the next provider agreement period. In situations where ODJFS has already determined the specific action which must be implemented by the MCP or if the MCP has failed to submit an ODJFS-approvable CAP, ODJFS may require the MCP to comply with an ODJFS-developed or "directed" CAP. Appendix N Page 2 Occurrences and Points - Occurrences and points are defined and applied as follows: Occurrences -- Failures to meet program requirements, including but not limited to, noncompliance with administrative requirements. Examples: - Use of unapproved/unapprovable marketing materials. - Failure to attend a required meeting. - Second failure to meet a call center standard. 5 Points -- Failures to meet program requirements, including but not limited to, actions which could impair the member's ability to access information regarding services in a timely manner or which could impair a member's rights. Examples: - 24-hour call-in system is not staffed by medical personnel. - Failure to notify a member of their right to a state hearing when the MCP proposes to deny, reduce, suspend or terminate a Medicaid-covered service. - Failure to appropriately notify ODJFS of provider panel terminations. 10 Points -- Failures to meet program requirements, including but not limited to, actions which could affect the ability of the MCP to deliver or the member to access covered services. Examples: - Failure to comply with the minimum provider panel requirements specified in Appendix H. - Failure to provide medically-necessary Medicaid covered services to members. - Failure to meet the electronic claims adjudication requirements. Failure to submit or comply with CAPs will be assessed occurrences or points based on the nature of the violation under correction. In order to reflect appropriately the impact of repeated violations, the following also applies: Appendix N Page 3 After accumulating a total of three occurrences within the accumulation period, all subsequent occurrences during the period will be assessed as 5-point violations, regardless of the number of 5-point violations which have been accrued by the MCP. After accumulating a total of three 5-point violations within the accumulation period, all subsequent 5-point violations during the period will be assessed as 8-point violations, except as specified above. After accumulating a total of two 10-point violations within the accumulation period, all subsequent 10-point violations during the period will be assessed as 15-point violations. Occurrences and points will accumulate over the duration of the provider agreement. With the beginning of a new provider agreement, the MCP will begin the new accumulation period with a score of zero unless the MCP has accrued a total of 55 points or more during the prior provider agreement period. Those MCPs who have accrued a total of 55 points or more during the provider agreement will carry these points over for the first three months of their next provider agreement. If the MCP does not accrue any additional points during this three-month period the MCP will then have their point total reduced to zero and continue on in the new accumulation period. If the MCP does accrue additional points during this three-month period, the MCP will continue to carry the points accrued from the prior provider agreement plus any additional points accrued during the new provider agreement accumulation period. For purposes of the CAS, the date that ODJFS first becomes aware of an MCP's program violation is considered the date on which the violation occurred. Therefore, program violations that technically reflect noncompliance from the previous provider agreement period will be subject to remedial action under CAS at the time that ODJFS first becomes aware of this noncompliance. In cases where an MCP subcontracting provider is found to have violated a program requirement (e.g., failing to provide adequate contract termination notice, marketing to potential members, unapprovable billing of members, etc.), ODJFS will not assess occurrences or points if: (1) the MCP can document that they provided sufficient notification/education to providers of applicable program requirements and prohibited activities; and (2) the MCP takes immediate and appropriate action to correct the problem and to ensure that it does not happen again. Repeated incidents will be reviewed to determine if the MCP has a systemic problem in this area, and if so, occurrences or points may be assessed. ODJFS expects all required submissions to be received by their specified deadline. Unless otherwise specified, late submissions will initially be addressed through CAPs, with repeated instances of untimely submissions resulting in escalating penalties. Appendix N Page 4 If an MCP determines that they will be unable to meet a program deadline, the MCP must verbally inform the designated ODJFS contact person (or their supervisor) of such and submit a written request (by facsimile transmission) for an extension of the deadline by no later than 3 PM on the date of the deadline in question. Extension requests should only be submitted in situations where unforeseeable circumstances have arisen which make it impossible for the MCP to meet an ODJFS-stipulated deadline. Only written approval by ODJFS of a deadline extension will preclude the assessment of a CAP, occurrence or points for untimely submissions. No points or occurrences will be assigned for any violation where an MCP is able to document that the precipitating circumstances were completely beyond their control and could not have been foreseen (e.g., a construction crew severs a phone line, a lightning strike blows a computer system, etc.). ODJFS will not issue a 10-point violation for failure to meet minimum provider panel requirements if the MCP notifies ODJFS that they will voluntarily amend their provider agreement to cease providing services to Medicaid eligibles in the county in question. REMEDIES Progressive remedies will be based on the number of points accumulated at the time of the most recent incident. Unless otherwise indicated in this appendix, all fines issued under the CAS are nonrefundable. 1-9 Points Corrective Action Plan (CAP) 10-19 Points CAP + $2500 fine 20-29 Points CAP + $5000 fine 30-39 Points CAP + $10,000 fine 40-69 Points CAP + $15,000 fine 70+ Points Proposed Contract Termination Appendix N Page 5 New Member Selection Freezes: ODJFS may prohibit an MCP from receiving new membership through voluntary selections or the assignment process (selection freeze) in one or more counties if: (1) the MCP has accumulated a total of 20 or more points during the accrual period; (2) the MCP fails to fully implement a CAP within the designated time frame; or (3) circumstances exist which potentially jeopardize the MCP's members' access to care. Examples of circumstances that ODJFS may consider as jeopardizing member access to care include: - the MCP has been found by ODJFS to be noncompliant with the prompt payment requirements; - the MCP has been found by ODJFS to be out of compliance with the provider panel requirements specified in Appendix H; or - the MCP has received notice of proposed or implemented adverse action by the Ohio Department of Insurance. Reduction of Assignments ODJFS may reduce the number of assignments an MCP receives if ODJFS determines that the MCP lacks sufficient administrative capacity to meet the needs of the increased volume in membership. Examples of circumstances which ODJFS may determine demonstrate a lack of sufficient administrative capacity include, but are not limited to an MCP's failing to: repeatedly provide new member materials by the member's effective date; meet the minimum call center requirements; meet the minimum performance standards for identifying and assessing children with special health care needs and members needing case management services; and/or provide complete and accurate appeal/grievance, designated PCP and SACMS data files. Noncompliance with Electronic Adjudication: In lieu of a nonrefundable fine, ODJFS will instead impose 10 points and a refundable fine equal to 5% of an MCP's monthly premium payment or $300,000, whichever is less, if ODJFS finds the MCP to be out of compliance with the electronic claims adjudication requirement. Appendix N Page 6 Noncompliance with Prompt Payment: Noncompliance with prompt pay requirements as specified by ODJFS will result in progressive penalties with penalties to be assessed on a quarterly basis. The first violation during the contract term will result in the assessment of 5 points and submission of monthly status reports to ODJFS until the next quarterly report is due. The second violation during the contract term will result in the submission of monthly status reports, assessment of 10 points and a refundable fine equal to 5% of the MCP's monthly premium payment or $300,000, whichever is less. The refundable fine will be applied in lieu of a nonrefundable fine and the money will be refunded by ODJFS only after the MCP complies with the required standards for two consecutive quarters. The third and any additional violation during the contract term, even if nonconsecutive, will result in submission of monthly status reports, assessment of 10 points and a refundable fine equal to 5% of the MCP's monthly premium payment or $300,000, which ever is less. The refundable fine will be applied in lieu of a nonrefundable fine and the money will be refunded by ODJFS only after the MCP complies with the required standards for two consecutive quarters. If an MCP is found to have not been in compliance with the prompt pay requirements for any time period for which a report and signed attestation have been submitted representing the MCP as being in compliance, the MCP will be subject to a selection freeze of not less than three months duration. Noncompliance with Clinical Laboratory Improvement Amendments: Noncompliance with CLIA requirements as specified by ODJFS will result in the assessment of a nonrefundable $1,000 fine for each documented violation. Noncompliance with Encounter Data Submissions: Submission of unpaid encounters (except for immunization services as specified in Appendix L) will result in the assessment of a nonrefundable $1,000 fine for each documented violation. General Provisions: All notifications of the imposition of a fine or freeze will be made via certified or overnight mail to the identified MCP Medicaid Coordinator. Pursuant to procedures specified by ODJFS, refundable and nonrefundable monetary sanctions/assurances must be remitted to ODJFS within thirty days of receipt of the invoice by the MCP. In addition, per Ohio Revised Code Section 131.02, payments not received within forty-five days will be certified to the Attorney General's (AG's) office. MCP payments certified to the AG's office will be assessed the appropriate collection fee by the AG's office. Appendix N Page 7 Refundable monetary sanctions/assurances applied by ODJFS will be based on the premium payment for the month in which the MCP was cited for the deficiency. Any monies collected through the imposition of such a fine would be returned to the MCP (minus any applicable collection fees owed to the Attorney General's Office if the MCP has been delinquent in submitting payment) after they have demonstrated full compliance with the particular program requirement. If an MCP does not comply within two years of the date of notification of noncompliance, then the monies will not be refunded. If ODJFS determines that one systemic problem is responsible for multiple areas of noncompliance, ODJFS may impose a combined remedy which will address all areas of noncompliance. Again, ODJFS can at any time move to terminate, amend or deny renewal of a provider agreement pursuant to the provisions of OAC rule 5101:3-26-10. Upon termination, nonrenewal or denial of an MCP provider agreement, all previously collected monetary sanctions will be retained by ODJFS. In addition to the remedies imposed under the CAS, remedies related to areas of data quality and financial performance may also be imposed pursuant to Appendices J, L, and M respectively. If ODJFS determines that an MCP has violated any of the requirements of sections 1903(m) or 1932 of the Social Security Act which are not specifically identified within the CAS, the ODJFS may, pursuant to the provisions of OAC rule 5101:3-26-10(A): (1) notify the MCP's members that they may terminate from the MCP without cause; and/or (2) suspend any further new member selections. Appendix N Page 8 RECONSIDERATIONS Requests for reconsiderations of remedial action taken under the CAS may be submitted as follows: - MCPs notified of ODJFS' imposition of remedial action taken under the CAS (i.e., occurrences, points, fines, assignment reductions and selection freezes), will have five working days from the date of receipt to request reconsideration, although ODJFS will impose selection freezes based on an access to care concern concurrent with initiating notification to the MCP. (All notifications of the imposition of a fine or a freeze will be made via certified or overnight mail to the identified MCP Contact.) Any information that the MCP would like reviewed as part of the reconsideration must be submitted with the reconsideration request, unless ODJFS extends the time frame in writing. - All requests for reconsideration must be submitted by either facsimile transmission or overnight mail to the Chief, Bureau of Managed Health Care, and received by the fifth working day after receipt of notification of the imposition of the remedial action by ODJFS. The MCP will be responsible for verifying timely receipt of all reconsideration requests. All requests for reconsideration must explain in detail why the specified remedial action should not be imposed. The MCP's justification for reconsideration will be limited to a review of the written material submitted by the MCP. The Bureau Chief will review all correspondence and materials related to the violation in question in making the final reconsideration decision. - Final decisions or requests for additional information will be made by ODJFS within five working days of receipt of the request for reconsideration. If additional information is requested by ODJFS, a final reconsideration decision will be made within three working days of the due date for the submission. Should ODJFS require additional time in rendering the final reconsideration decision, the MCP will be notified of such in writing. - If a reconsideration request is decided, in whole or in part, in favor of the MCP, both the penalty and the points associated with the incident, will be rescinded or reduced. The MCP may still be required to submit a CAP if the Bureau Chief believes that a CAP is still warranted. Appendix N Page 9 POINT COMPLIANCE SYSTEM - POINT VALUES OCCURRENCES: Failures to meet program requirements, including but not limited to, noncompliance with administrative requirements. Examples are: - - Unapproved use of marketing/member materials. - - Failure to attend ODJFS-required meetings or training sessions. - - Failure to maintain ODJFS-required documentation. - - Use of unapproved subcontracting providers where prior approval is required by ODJFS. - - Use of unapprovable subcontractors (e.g., not in good standing with Medicaid and/or Medicare programs, provider listed in directory but no current contract, etc.) where prior-approval is not required by ODJFS. - - Failure to provide timely notification to members, as required by ODJFS (e.g., notice of PCP or hospital termination from provider panel). - - Participation in a prohibited or unapproved marketing activity. - - Second failure to meet the monthly call-center requirements for either the member services or 24-hour call-in system lines. - - Failure to submit and/or comply with a Corrective Action Plan (CAP) requested by ODJFS as the result of an occurrence, or when no occurrence was designated for the precipitating violation of the OAC rules or provider agreement - - Failure to comply with the physician incentive plan (PhIP) requirements, except for noncompliance where member rights are violated (i.e, failure to complete required patient satisfaction surveys or to provide members with requested PhIP information) or where false, misleading or inaccurate information is provided to ODJFS. Appendix N Page 10 5 POINTS: Failures to meet program requirements, including but not limited to, actions which could impair the member's ability to access information regarding services in a timely manner or which could impair a consumer's or member's rights. Examples are: - - Violations which result in selection or termination counter to the recipient's preference (e.g., a recipient makes a selection decision based on inaccurate provider panel information from the MCP). - - Any violation of an member's rights. - - Failure to provide member materials to new members in a timely manner. - - Failure to comply with appeal, grievance, or state hearing requirements, including timely submission to ODJFS. - - Failure to staff 24-hour call-in system with appropriate trained medical personnel. - - Third failure to meet the monthly call-center requirements for either the member services or the 24-hour call-in system lines. - - Failure to submit and/or comply with a CAP as a result of a 5-point violation. - - Failure to meet the prompt payment requirements (first violation). - - Provision of false, inaccurate or materially misleading information to health care providers, the MCP's members, or any eligible individuals. - - Failure to submit a required monthly SACMS file (as specified in Appendix L) by the end of the month the submission was required. - - Failure to submit a required monthly Members' Designated PCP file (as specified in Appendix L) by the end of the month the submission was required. Appendix N Page 11 10 POINTS: Failures to meet program requirements, including but not limited to, actions which could affect the ability of the MCP to deliver or the consumer to access covered services. Examples are: - - Failure to meet any of the provider panel requirements as specified in Appendix H. - - Failure to provide services to a member when the ODJFS has determined that such services are medically-necessary. - - Discrimination among members on the basis of their health status or need for health care services (this includes any practice that would reasonably be expected to encourage termination or discourage selection by individuals whose medical condition indicates probable need for substantial future medical services). - - Failure to assist a member in accessing needed services in a timely manner after request from the member. - - Failure to process prior authorization requests within prescribed time frame. - - Failure to remit any ODJFS-required payments within the specified time frame. - - Failure to meet the electronic claims adjudication requirements. - - Failure to submit and/or comply with a CAP as a result of a 10-point violation. - - Failure to meet the prompt payment requirements (second and subsequent violations). - - Fourth and any subsequent failure to meet the monthly call-center requirements for either the member services or the 24-hour call-in system lines. - - Failure to provide ODJFS with a required submission after ODJFS has notified the MCP that the prescribed deadline for that submission has passed. - - Failure to submit a required monthly appeal or grievance file (as specified in Appendix L) by the end of the month the submission was required. - - Misrepresentation or falsification of information that the MCP furnishes to the ODJFS or to the Centers for Medicare and Medicaid Services. APPENDIX O PERFORMANCE INCENTIVES This Appendix establishes incentives for managed care plans (MCPs) to improve performance in specific areas important to the Medicaid MCP members. Incentives include the at-risk amount included with the monthly premium payments (see Appendix F, Rate Chart), and possible additional monetary rewards up to $250,000. Performance is measured in the categories of Quality of Care, Access, Consumer Satisfaction, and Administrative Capacity. To qualify for consideration of any incentives, MCPs must meet minimum performance standards established in Appendix M, Performance Evaluation on selected measures, and achieve a minimum level of performance on the Clinical Performance Measures. For qualifying MCPs, higher performance standards for selected measures must be reached to be awarded a portion of the at-risk amount or additional incentives (see Sections 1 and 2). Due to MCP requests to ease administrative burden, one measure for determining the SFY 2003 incentives was modified. All other measures and the method for determining the state fiscal year (SFY) 2003 incentives were not changed. For SFY 2003 incentives, the MCP's performance on measures in the four categories mentioned above will be used in determining the MCP's Overall Performance Level (see Section 1). The MCP's Overall Performance Level is used to determine the status of the at-risk amount and additional incentives, if applicable (see Section 3). SFY 2003 incentives will be determined within six months after the end of the SFY 2003 contract period. For the SFY 2004 incentives, a change in methods results in a focus on fewer measures to determine the amount awarded as incentives for superior performance. While an MCP must still qualify for any incentives by meeting minimum performance standards on selected measures from Appendix M, Performance Evaluation, the amount of incentives will be based on an MCP's performance on three measures. An excellent and superior standard is set in this Appendix for each of the three measures. If an MCP qualifies for incentives, they will be awarded a portion of the at-risk amount for each excellent standard met (see Section 2). If an MCP meets all three excellent and superior standards, they may be awarded additional incentives (see Section 3). SFY 2004 incentives will be determined within six months after the end of the SFY 2004 contract period. 1. SFY 2003 INCENTIVES 1.a. QUALIFYING PERFORMANCE LEVELS To be considered for incentives, an MCP's performance level must: 1) meet the minimum performance standards set in Appendix M, Performance Evaluation, for the measures and categories listed below, and 2)achieve the minimum score on the clinical performance measures composite score set below. Appendix O Page 2 The method for calculating the clinical performance measures composite score is described in Section 1.c. of this appendix. The methods for these measures and minimum performance standards below are the same as those set in Appendix M, Performance Evaluation. A detailed description of the methodologies of each measure can be found on the internet at www.state.oh.us/odjfs/ohp/bmhc/managed.stm. Quality of Care 1. Independent External Quality Review (Appendix M, Section 1.a. - Minimum Performance Standard 2) Report Period: SFY 2003 EQRO Review 2. Case Management of Newly-Enrolled Children with the ODJFS-Mandated Condition of Asthma (Appendix M, Section 1.b.v.) Report Period: For MCPs not exempt from reporting screenings and assessments prior to July 1, 2003, the report period is July - December, 2002. For MCPs exempt from reporting screenings and assessments prior to July 1, 2003, the report period is July - September, 2002. Access 3. PCP Turnover (Appendix M, Section 2.a.) Report Period: CY 2002 4. Children's Access to Primary Care (Appendix M, Section 2.b.) Report Period: CY 2002 5. Adults' Access to Preventive/Ambulatory Health Services (Appendix M, Section 2.c.) Report Period: CY 2002 Consumer Satisfaction 6. Overall Satisfaction with MCP (Appendix M, Section 3.) Report Period: The most recent consumer satisfaction survey completed prior to the end of the SFY 2003 contract period. Administrative Capacity 7. Compliance Assessment System (Appendix M, Section 4.a.) Report Period: SFY 2003 Appendix O Page 3 8. Emergency Department Diversion Program (Appendix M, Section 4.b.) Report Period: July - December, 2002 Clinical Performance Measures Composite Score Minimum Clinical Performance Measures composite score: 21 Report Period: SFY 2002 1.b. SUPERIOR PERFORMANCE LEVELS Only MCP's meeting the minimum performance standards on the measures and the minimum Clinical Performance Measures composite score described in Section 1.a. of this Appendix will be considered for incentives including the at-risk amount and any additional incentives. The superior standards for the measures used in determining the Overall Performance Level are set below. A brief description of these measures are described in Appendix M, Performance Evaluation. A detailed description of the methodologies of each measure can be found on the internet at www.state.oh.us/odjfs/ohp/bmhc/managed.stm. The report periods for the following measures are the same as described in Section 1.a. Quality of Care 1. Independent External Quality Review (Appendix M, Section 1.a.) Superior Standard: An overall score of at least 80% 2. Case Management of Newly- Enrolled Children with the ODJFS-Mandated Condition of Asthma (Appendix M, Section 1.b.v.) Superior Standard: 90% of children who assess positive for asthma must receive case management services Access 3. PCP Turnover (Appendix M, Section 2.a.) Superior Standard: A maximum PCP Turnover rate of 12% 4. Children's Access to Primary Care (Appendix M, Section 2.b.) Superior Standard: 90% of the children must receive a visit 5. Adults' Access to Preventive/Ambulatory Health Services (Appendix M, Section 2.c.) Superior Standard: 85% of the adults must receive a visit Appendix O Page 4 Consumer Satisfaction 6. Overall Satisfaction with MCP (Appendix M, Section 3.) Superior Standard: An average score for the measure of no less than 9.0 Administrative Capacity 7. Compliance Assessment System (Appendix M, Section 4.a.) Superior Standard: No more than 15 points 8. Emergency Department Diversion (Appendix M, Section 4.b.) Superior Standard: Any reduction in the percentage of enrollees who had four or more ED visits or a rate equal to or lower than 1.75% 1.c. CLINICAL PERFORMANCE MEASURES COMPOSITE SCORE The results for clinical performance measures listed below are used to calculate the composite score. The minimum performance standards for each measure used to evaluate MCP performance are established in Appendix M, Performance Evaluation, Section 1.c. For a comprehensive description of the clinical performance measures below, see ODJFS Methods for Clinical Performance Measures. This composite score will be used in determining an MCP's Overall Performance Level (see Section 1.d.). The report period for the following measures is SFY 2002. 1. Perinatal Care - Frequency on Ongoing Prenatal Care 2. Perinatal Care - Initiation of Prenatal Care 3. Perinatal Care - Low Birth Weight 4. Perinatal Care - Postpartum Care 6. Preventive Care for Children - Well-Child Visits a. Children who turn 15 months old b. 3, 4, 5, or 6, years old c. 12 through 21 years old 6. Use of Appropriate Medications for People with Asthma 7. Annual Dental Visits The composite score will be determined by considering whether or not 1) the minimum performance standard (as set in Appendix M, Performance Evaluation) for each measure was met, and 2) comparing individual MCP performance relative to the best performing MCP. Points will be awarded for each measure and summed to calculate the composite score. The maximum composite score possible for the SFY 2002 report period is 28 points. Points for each measure will be awarded according to the following matrix: Appendix O Page 5
Equal to or greater than 70% of the results of the best Less than 70% of the results performing MCP of the best performing MCP - -------------------------------------------------------------------------------------------------------- Performing at or above 4 2 standard level Performing at substandard 3 1 level
1.d. DETERMINING INCENTIVES FOR SFY 2003 MCPs not qualifying for incentives (see Section 1.a.) must return the monetary incentives that have been pre-paid to the MCP as the at-risk portion of the premium payments. For MCPs that qualify for incentives, an Overall Performance Level will be determined based on performance levels in the categories of Quality of Care, Access, Consumer Satisfaction, and Administrative Capacity and the composite score for the Clinical Performance Measures. The Overall Performance Level will be determined according to the following: Basic Performance: No categories with all of the Superior Performance Standards met Good Performance: All Superior Performance Standards for one of the four categories met Excellent Performance: All Superior Performance Standards for two of the four categories met - and - A Clinical Performance Measures composite score greater or equal to 23 Superior Performance: All Superior Performance Standards for all four categories met - and - A Clinical Performance Measures composite score greater or equal to 25 The following charts summarizes the Minimum Performance and Superior standards and the overall performance determination: Appendix O Page 6 TABLE 3. SUMMARY OF MEASURES, STANDARDS, AND OVERALL PERFORMANCE LEVELS FOR CONTRACT PERIOD SFY 2003
CATEGORIES / MEASURES MINIMUM PERFORMANCE STANDARDS - ---------------------------------------------------------------------------------- QUALITY OF CARE Independent External Quality An overall score of at least 75% Review Case Management of CSHCN 70% of children who assess positive for with Asthma asthma must receive case management services ACCESS PCP Turnover A maximum rate of 18% Children's Access to Primary 70% of the children must receive a visit Care Adult's Access to Preventive/ 65% of the adults must receive a visit Ambulatory Health Services CONSUMER SATISFACTION Overall Satisfaction with MCP An average score of no less than 7.0 ADMINISTRATIVE CAPACITY Compliance Assessment No more than 25 points for SFY 2002 System Emergency Department. A maximum rate of 2.0% Diversion CATEGORIES / MEASURES SUPERIOR STANDARDS OVERALL PERFORMANCE LEVEL - -------------------------------------------------------------------------------------------------------------------------- QUALITY OF CARE BASIC PERFORMANCE: No category with all of the Superior Performance Standards met Independent External Quality An overall score of at least 80% Review GOOD PERFORMANCE: All Superior Performance Standards for Case Management of CSHCN 90% of children who assess positive one of the four categories met with Asthma for asthma must receive case management services EXCELLENT PERFORMANCE: All Superior Performance Standards for ACCESS two of the four categories met - AND - A Clinical Performance Measures PCP Turnover A maximum rate of 12% composite score greater or equal to 23. SUPERIOR PERFORMANCE: Children's Access to Primary 90% of the children must receive a All Superior Performance Standards for Care visit all four categories met - AND - Adult's Access to Preventive/ 85% of the adults must receive a visit A Clinical Performance Measures Ambulatory Health Services composite score greater or equal to 25. CONSUMER SATISFACTION Overall Satisfaction with MCP An average score of no less than 9.0 ADMINISTRATIVE CAPACITY Compliance Assessment No more than 15 points for SFY 2002 System Emergency Department. Any reduction or a rate equal to or Diversion lower than 1.75%
Appendix O Page 7 Based on the Overall Performance Level, the status of the at-risk dollars and additional incentive payments for contract period SFY 2003 (see Section 3) will be determined in the following manner: - If an MCP does not qualify for incentives according to Section 1.a. of this Appendix, then all of the at-risk amount included in one state fiscal year's premium payments, must be returned to ODJFS and applicable sanctions will be applied according to Appendix M, Performance Evaluation. - If an MCP receives a Basic Performance ranking, then all of the at-risk amount included in one state fiscal year's premium payments, must be returned to ODJFS. By reaching this level of performance MCPs are meeting ODJFS' minimum performance level expectations. To receive or retain incentives, MCPs must perform at higher performance levels. - If an MCP receives a Good Performance ranking, then one - half of the at-risk amount included in one state fiscal year's premium payments, must be returned to ODJFS. - If an MCP receives an Excellent Performance ranking, then none of the at-risk amount must be returned to ODJFS. - If an MCP receives a Superior Performance ranking, then none of the at-risk amount must be returned to ODJFS and the amount in the incentive fund (see Section 3) will be divided equally, up to the maximum amount, among all MCPs with an overall Superior Performance ranking. The maximum amount to be awarded to a single plan for Superior Performance in addition to the at-risk amount is $250,000 per contract year. 2. SFY 2004 INCENTIVES 2.a. QUALIFYING PERFORMANCE LEVELS To qualify for consideration of the SFY 2004 incentives, an MCP's performance level must 1) meet the minimum performance standards set in Appendix M, Performance Evaluation, for the measures listed below; and 2) meet the incentive standards established for the Clinical Performance Measures below. A detailed description of the methodologies of each measure can be found on the internet at www.state.oh.us/odjfs/ohp/bmhc/managed.stm. Measures for which the minimum performance standard for SFY 2004 established in Appendix M, Performance Evaluation, must be met to qualify for consideration of incentives are the following. Appendix O Page 8 1. Independent External Quality Review (Appendix M, Section 1.a. - Minimum Performance Standard 2) Report Period: The most recent Independent External Quality Review completed prior to the end of the SFY 2004 contract period. 2. PCP Turnover (Appendix M, Section 2.a.) Report Period: CY 2003 3. Children's Access to Primary Care (Appendix M, Section 2.b.) Report Period: CY 2003 4. Adults' Access to Preventive/Ambulatory Health Services (Appendix M, Section 2.c.) Report Period: CY 2003 5. Overall Satisfaction with MCP (Appendix M, Section 3.) Report Period: The most recent consumer satisfaction survey completed prior to the end of the SFY 2004 contract period. 6. Emergency Department Diversion Program (Appendix M, Section 4.b.) Report Period: July - December, 2003 For each clinical performance measure listed below the MCP must meet the incentive standard to be considered for SFY 2004 incentives. The MCP meets the incentive standard if one of two criteria are met. The incentive standard is a performance level of either: 1) The minimum performance standard established in Appendix M, Performance Evaluation for seven of the nine clinical performance measures listed below; OR 2) The national benchmark set below for seven of the nine clinical performance measures listed below. Appendix O Page 9
National Clinical Performance Measure Benchmark ---------------------------- --------- 1. Perinatal Care - Frequency of Ongoing Prenatal Care 42% 2. Perinatal Care - Initiation of Prenatal Care 71% 3. Perinatal Care - Low Birth Weight 7.6% 4. Perinatal Care - Postpartum Care 48% 5. Well-Child Visits - Children who turn 15 months old 34% 6. Well-Child Visits - 3, 4, 5, or 6, years old 50% 7. Well-Child Visits - 12 through 21 years old 30% 8. Use of Appropriate Medications for People with Asthma 54% 9. Annual Dental Visits 40%
2.b. EXCELLENT AND SUPERIOR PERFORMANCE LEVELS For qualifying MCPs as determined by Section 2.a., performance will be evaluated on the measures below to determine the status of the at-risk amount or any additional incentives that may be awarded. Excellent and Superior standards are set for the three measures described below. A brief description of these measures are described in Appendix M, Performance Evaluation. A detailed description of the methodologies of each measure can be found on the internet at www.state.oh.us/odjfs/ohp/bmhc/managed.stm. 1. Case Management of Children (Appendix M, Section 1.b.iv.) Report Period: January - June, 2004 Excellent Standard: 2.5% Superior Standard: 3.8% 2. Use of Appropriate Medications for People with Asthma (Appendix M, Section 1.c.vi.) Report Period: CY 2003 Excellent Standard: 54.0% Superior Standard: 62.0% 3. Adults' Access to Preventive/Ambulatory Health Services (Appendix M, Section 2.c.) Report Period: CY 2003 Excellent Standard: 72.8% Superior Standard: 81.9% Appendix O Page 10 2.c. DETERMINING SFY 2004 INCENTIVES MCP's reaching the minimum performance standards described in Section 2.a. will be considered for incentives including retention of the at-risk amount and any additional incentives. For each Excellent standard established in Section 2.b. that an MCP meets, one-third of the at-risk amount may be retained. For MCPs meeting all of the Excellent and Superior standards established in Section 2.b. of this Appendix, additional incentives may be awarded. For MCPs receiving additional incentives, the amount in the incentive fund (see Section 3) will be divided equally, up to the maximum amount, among all MCPs receiving additional incentives. The maximum amount to be awarded to a single plan in incentives additional to the at-risk amount is $250,000 per contract year. 3. NOTES 3.a. STATUS DETERMINATION OF THE AT-RISK AMOUNT AND ADDITIONAL INCENTIVE PAYMENTS Determination of the status of each MCP's at-risk amount will occur within six months of the end of the contract period. For MCPs in their first two years of Ohio Medicaid program participation, the status of the at-risk amount will not be determined because compliance with many of the standards cannot be determined in an MCP's first contract year (see Appendix F, Rate Chart). However, MCPs in their first contract year are not eligible for the additional incentive amount awarded for superior performance. Incentive payments are issued from a specific account funded by monetary sanctions imposed on MCPs and the return of the at-risk amount. If this fund is not accessed because overall performance levels are not at the superior level for any one MCP, then it may roll over to the next year's fund. Determination of additional incentive payments will be made within six months of the end of the contract period. 3.b. CONTRACT TERMINATION, NONRENEWALS, OR DENIALS Upon termination, nonrenewal or denial of an MCP contract, the at-risk amount paid to the MCP under the current provider agreement will be returned to ODJFS in accordance with Appendix P, Terminations/Nonrenewals/Amendments, of the provider agreement. 3.c. REPORT PERIODS The report period used in determining the MCP's performance levels varies for each measure depending on the frequency of the report and the data source. Unless otherwise noted, the most recent report or study finalized prior to the end of the contract period will be used in determining the MCP's overall performance level for that contract period. APPENDIX P MCP TERMINATIONS/NONRENEWALS/AMENDMENTS Upon termination either by the MCP or ODJFS, nonrenewal or denial of an MCP provider agreement, all previously collected refundable monetary sanctions will be retained by ODJFS. MCP-INITIATED TERMINATIONS/NONRENEWALS If an MCP provides notice of the termination/nonrenewal of their provider agreement to ODJFS, pursuant to Article VIII of the agreement, the MCP will be required to submit a refundable monetary assurance. This monetary assurance will be held by ODJFS until such time that the MCP has submitted all outstanding monies owed and reports, including, but not limited to, grievance, appeal, encounter and cost report data related to time periods through the final date of service under the MCPs provider agreement. The monetary assurance must be in an amount of either $50,000 or 5 % of the capitation amount paid by ODJFS in the month the termination/nonrenewal notice is issued, whichever is greater. The MCP must also return to ODJFS the at-risk amount paid to the MCP under the current provider agreement. The amount to be returned will be based on actual MCP membership for preceding months and estimated MCP membership through the end date of the contract. MCP membership for each month between the month the termination/nonrenewal is issued and the end date of the provider agreement will be estimated as the MCP membership for the month the termination/nonrenewal is issued. Any over payment will be determined by comparing actual to estimated MCP membership and will be returned to the MCP following the end date of the provider agreement. The MCP must remit the monetary assurance and the at-risk amount in the specified amounts via separate electronic fund transfers (EFT) payable to Treasurer of State, State of Ohio (ODJFS). The MCP should contact their Contract Administrator to verify the correct amounts required for the monetary assurance and the at-risk amount and obtain an invoice number prior to submitting the monetary assurance and the at-risk amount. Information from the invoices must be included with each EFT to ensure monies are deposited in the appropriate ODJFS Fund account. In addition, the MCP must send copies of the EFT bank confirmations and copies of the invoices to their Contract Administrator. If the monetary assurance and the at-risk amount are not received as specified above, ODJFS will withhold the MCPs next months capitation payment until such time that ODJFS receives documentation that the monetary assurance and the at-risk amount are received by the Treasurer of State. If within one year of the date of issuance of the invoice, an MCP does not submit all outstanding monies owed and required submissions, including, but not limited to, grievance, appeal, encounter and cost report data related to time periods through the final date of service under the MCPs provider agreement, the monetary assurance will not be refunded to the MCP. Appendix P Page 2 ODJFS-INITIATED TERMINATIONS If ODJFS initiates the proposed termination, nonrenewal or amendment of an MCPs provider agreement and the MCP appeals that proposed action, the MCPs provider agreement will be extended through the duration of the appeals process. During this time, the MCP will continue to accrue points and be assessed penalties for each subsequent compliance assessment occurrence/violation under Appendix N of the provider agreement. If the MCP exceeds 69 points, each subsequent point accrual will result in a $15,000 nonrefundable fine. Pursuant to OAC rule 5101:3-26-10(H), if ODJFS has proposed the termination, nonrenewal, denial or amendment of a provider agreement, ODJFS may notify the MCP's members of this proposed action and inform the members of their right to immediately terminate their membership with that MCP without cause. If ODJFS has proposed the termination, nonrenewal, denial or amendment of a provider agreement and access to medically-necessary covered services is jeopardized, ODJFS may propose to terminate the membership of all of the MCP's members. The appeal process for reconsideration of either of these proposed actions is as follows: $ All notifications of such a proposed MCP membership termination will be made by ODJFS via certified or overnight mail to the identified MCP Contact. $ MCPs notified by ODJFS of such a proposed MCP membership termination will have three working days from the date of receipt to request reconsideration. $ All reconsideration requests must be submitted by either facsimile transmission or overnight mail to the Deputy Director, Office of Ohio Health Plans, and received by 5 PM on the third working day following receipt of the ODJFS notification. (For example, if ODJFS notification is received on August 6 the MCPs request for reconsideration must be delivered to the Deputy Director by no later than 5 PM on August 9.) The address and fax number to be used in making these requests will be specified in the ODJFS notification document. $ The MCP will be responsible for verifying timely receipt of all reconsideration requests. All requests must explain in detail why the proposed MCP membership termination is not justified. The MCPs justification for reconsideration will be limited to a review of the written material submitted by the MCP. Appendix P Page 3 $ A final decision or request for additional information will be made by the Deputy Director within three working days of receipt of the request for reconsideration. Should the Deputy Director require additional time in rendering the final reconsideration decision, the MCP will be notified of such in writing. $ The proposed MCP membership termination will not occur while an appeal is under review and pending the Deputy Directors decision. If the Deputy Director denies the appeal, the MCP membership termination will proceed at the first possible effective date. The date may be retroactive if the ODJFS determines that it would be in the best interest of the members. EX-21 16 c83064exv21.txt LIST OF SUBSIDIARIES EXHIBIT 21 LIST OF SUBSIDIARIES Bankers Reserve Insurance Company of Wisconsin, a Wisconsin corporation Buckeye Community Health Plan, Inc., an Ohio corporation Cenphiny, Inc., a Delaware corporation Cenphiny Management LLC, a Delaware LLC Centene Corporation of Texas, a Texas corporation Centene Finance Corporation, a Delaware corporation Centene Management Company LLC, a Wisconsin LLC CMC Real Estate Company LLC, a Delaware LLC Coordinated Care Corporation Indiana, Inc. d/b/a Managed Health Services, an Indiana corporation Group Practice Affiliates LLC, a California LLC Managed Health Services Illinois, Inc., an Illinois corporation * Managed Health Services Insurance Corp., a Wisconsin corporation MHS Consulting Corporation, a Wisconsin corporation MHS Behavioral Health Texas, Inc., a Texas corporation NurseWise Holdings LLC, a Delaware LLC NurseWise LP, a Delaware Limited Partnership Superior HealthPlan, Inc., a Texas corporation University Health Plans, Inc., a New Jersey corporation * Inactive Subsidiary EX-23 17 c83064exv23.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-108467) of Centene Corporation of our reports dated February 9, 2004 relating to the financial statements and financial statement schedule, which appear in this Form 10-K. /s/ PricewaterhouseCoopers LLP St. Louis, Missouri February 24, 2004 EX-31.1 18 c83064exv31w1.txt CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER EXHIBIT 31.1 CERTIFICATION I, Michael F. Neidorff, certify that: 1. I have reviewed this Annual Report on Form 10-K of Centene Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release 34-47986]; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 25, 2004 /s/ Michael F. Neidorff ------------------------------------- Michael F. Neidorff President and Chief Executive Officer (principal executive officer) EX-31.2 19 c83064exv31w2.txt CERTIFICATION OF THE CHIEF FINANCIAL OFFICER EXHIBIT 31.2 CERTIFICATION I, Karey L. Witty certify that: 1. I have reviewed this Annual Report on Form 10-K of Centene Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) [Paragraph omitted in accordance with SEC transition instructions contained in SEC Release34-47986]; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 25, 2004 /s/ Karey L. Witty ----------------------------------------------- Karey L. Witty Senior Vice President, Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer) EX-32.1 20 c83064exv32w1.txt CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report on Form 10-K of Centene Corporation (the "Company") for the period ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Michael F. Neidorff, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Michael F. Neidorff ------------------------------------- Michael F. Neidorff President and Chief Executive Officer (principal executive officer) Dated: February 25, 2004 EX-32.2 21 c83064exv32w2.txt CERTIFICATION OF THE CHIEF FINANCIAL OFFICER EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report on Form 10-K of Centene Corporation (the "Company") for the period ended December 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Karey L. Witty, Senior Vice President, Chief Executive Officer and Treasurer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Karey L. Witty ----------------------------------------------- Karey L. Witty Senior Vice President, Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer) Dated: February 25, 2004 -----END PRIVACY-ENHANCED MESSAGE-----


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2003

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to


Delaware		04-1406317
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

7711 Carondelet Avenue, Suite 800 St. Louis, Missouri (Address of principal executive offices)		63105 (Zip Code)


Common Stock $0.001 Par Value		New York Stock Exchange
Title of Each Class		Name of Each Exchange on Which Registered


PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	We May Not be Able to Obtain or Maintain Adequate Insurance.
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	Item 9A. Controls and Procedures
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accountant Fees and Services
PART IV
	Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
EXHIBIT INDEX
SIGNATURES
Amendments to contract included as Exhibit 10.2
Amendment 11 to contract included as Exhibit 10.4
Amendment 14 to contract included as Exhibit 10.5
Amendment 14 to contract included as Exhibit 10.6
Executive Employment Agreement
Executive Employment Agreement
Amendment to contract included as Exhibit 10.26
Amendment to contract included as Exhibit 10.28
2003 Stock Incentive Plan
Lease Agreement
Asset Sale and Purchase Agreement
Midwest Bankcentre Loan to CMC Real Estate Company
Contract
List of Subsidiaries
Consent of Independent Auditors
Certification of the Chief Executive Officer
Certification of the Chief Financial Officer
Certification of the Chief Executive Officer
Certification of the Chief Financial Officer


Part I

Item 1.	Business	3

Item 2.	Properties	16

Item 3.	Legal Proceedings	16

Item 4.	Submission of Matters to a Vote of Security Holders	17

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17

Item 6.	Selected Financial Data	18

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 8.	Financial Statements and Supplementary Data	39

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	39

Item 9A.	Controls and Procedures	39

Part III

Item 10.	Directors and Executive Officers of the Registrant	40

Item 11.	Executive Compensation	42

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	42

Item 13.	Certain Relationships and Related Transactions	42

Item 14.	Principal Accountant Fees and Services	42

Part IV

Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	43

Signatures		71


	Wisconsin	Texas	Indiana	New Jersey	Ohio

Local Health Plan Name	Managed Health	Superior	Coordinated Care	University	Buckeye Community
	Services	HealthPlan	Corporation Indiana	Health Plans	Health Plan
First Year of Operations	1984	1999	1995	1994	2004
Counties Licensed	22	28	92	20	1
Membership at December 31, 2003	157,800	158,400	119,400	54,000	—


•	significant cost savings compared to fee-for-service	•	timely payment of provider claims
•	data-driven approaches to balance cost and verify eligibility	•	cost saving outreach and specialty programs
•	establishment of realistic and meaningful expectations for quality deliverables	•	responsible collection and dissemination of encounter data
•	expertise in Medicaid managed care	•	timely and accurate reporting
•	improved medical outcomes


•	primary and specialty physician care	•	after hours nurse advice line
•	inpatient and outpatient hospital care	•	transportation assistance
•	emergency and urgent care	•	health status calls to coordinate care
•	prenatal care	•	vision care
•	laboratory and x-ray services	•	dental care
•	home health and durable medical equipment	•	immunizations
•	behavioral health and substance abuse services	•	prescriptions and limited over-the-counter drugs


Item 4.	*Submission of Matters to a Vote of Security Holders*



	2003 Stock Price				2002 Stock Price

	High		Low		High		Low

First Quarter	$	23.23	$	14.90	$	15.71	$	12.07
Second Quarter		26.43		18.77		20.73		15.07
Third Quarter		31.59		24.56		20.45		14.47
Fourth Quarter		35.70		26.98		23.65		16.97



			Year Ended December 31,

			2003			2002			2001			2000			1999


			(In thousands, except share data)
Statement of Earnings Data:
Revenues:
	Premiums		$	759,763		$	461,030		$	326,184		$	216,414		$	200,549
	Services			9,967			457			385			4,936			880

		Total revenues		769,730			461,487			326,569			221,350			201,429

Operating expenses:
	Medical costs			626,192			379,468			270,151			182,495			178,285
	Cost of services			8,323			341			329			135			—
	General and administrative expenses			88,288			50,072			37,617			32,200			29,756

		Total operating expenses		722,803			429,881			308,097			214,830			208,041

		Earnings (losses) from operations		46,927			31,606			18,472			6,520			(6,612	)
Other income (expense):
	Investment and other income			5,160			9,575			3,916			1,784			1,623
	Interest expense			(194	)		(45	)		(362	)		(611	)		(498	)
	Equity in earnings (losses) from joint ventures			—			—			—			(508	)		3

		Earnings (losses) from continuing operations before income taxes		51,893			41,136			22,026			7,185			(5,484	)
Income tax expense (benefit)				19,504			15,631			9,131			(543	)		—
Minority interest				881			116			—			—			—

		Earnings (losses) from continuing operations		33,270			25,621			12,895			7,728			(5,484	)
Loss from discontinued operations, net				—			—			—			—			(3,927	)

		Net earnings (losses)		33,270			25,621			12,895			7,728			(9,411	)
Accretion of redeemable preferred stock				—			—			(467	)		(492	)		(492	)

		Net earnings (losses) attributable to common stockholders	$	33,270		$	25,621		$	12,428		$	7,236		$	(9,903	)

Net earnings (losses) per common share:
	Basic		$	1.86		$	1.63		$	5.98		$	5.35		$	(7.33	)
	Diluted		$	1.73		$	1.47		$	1.07		$	0.76		$	(7.33	)
Weighted average common shares outstanding:
	Basic			17,852,213			15,716,040			2,078,099			1,352,289			1,351,416
	Diluted			19,211,076			17,466,116			12,029,246			10,229,393			1,351,416



	December 31,

	2003		2002		2001		2000			1999


	(In thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	79,506	$	69,227	$	90,036	$	26,423		$	23,663
Total assets		362,692		210,327		131,366		66,017			52,207
Long-term debt, net of current portion		7,616		—		—		4,000			4,000
Redeemable convertible preferred stock		—		—		—		18,878			18,386
Total stockholders’ equity (deficit)		220,115		102,183		64,089		(8,834	)		(16,367	)


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*


						% Change
		2003		2002		2002-2003

Premium revenue		$	759.7	$	461.0		64.8	%
Services revenue			10.0		.5		—

	Total revenues		769.7		461.5		66.8	%
Medical costs			626.2		379.5		65.0	%
Cost of services			8.3		.3		—
General and administrative expenses			88.3		50.1		76.3	%

	Earnings from operations		46.9		31.6		48.5	%
Investment and other income, net			5.0		9.5		(47.9	)%

	Earnings before income taxes		51.9		41.1		26.1	%
Income tax expense			19.5		15.6		24.8	%
Minority interest			.9		.1		—

	Net earnings	$	33.3	$	25.6		29.9	%

Diluted earnings per common share		$	1.73	$	1.47		18.0	%



		Payments Due by Period

				Less Than		1-3		3-5		More Than
		Total		1 Year		Years		Years		5 Years

Debt		$	8,195	$	579	$	576	$	7,040	$	—
Operating leases			37,148		7,233		12,849		8,479		8,587

	Total	$	45,343	$	7,812	$	13,425	$	15,519	$	8,587


Item 1.	*Business*


Item 2.	*Properties*


Item 3.	*Legal Proceedings*


Item 6.	*Selected Financial Data*


	*Reduction in Medicaid and SCHIP Funding Could Substantially Reduce Our Profitability.*


	*If Our Medicaid and SCHIP Contracts are Terminated or are Not Renewed, Our Business Will Suffer.*


	*Changes in Government Regulations Designed to Protect Providers and Members Rather than Our Stockholders Could Force Us to Change How We Operate and Could Harm Our Business.*


	*Regulations May Decrease the Profitability of Our Health Plans.*


	*Failure to Comply With Government Regulations Could Subject Us to Civil and Criminal Penalties.*


	*Compliance With New Government Regulations May Require Us to Make Significant Expenditures.*


	*Changes in Healthcare Law May Reduce Our Profitability.*


	*Changes in Federal Funding Mechanisms May Reduce Our Profitability.*


	*If We Are Unable to Participate in SCHIP Programs, Our Growth Rate May be Limited.*


	*If State Regulators Do Not Approve Payments of Dividends and Distributions by Our Subsidiaries to Us, We May Not Have Sufficient Funds to Implement Our Business Strategy.*


	*Receipt of Inadequate Premiums Would Negatively Affect Our Revenues and Profitability.*


	*Failure to Effectively Manage Our Medical Costs or Related Administrative Costs Would Reduce Our Profitability.*


	*Failure to Accurately Predict Our Medical Expenses Could Negatively Affect Our Reported Results.*


	*Difficulties in Executing Our Acquisition Strategy Could Adversely Affect Our Business.*


	*If Competing Managed Care Programs are Unwilling to Purchase Specialty Services From Us, We May Not be Able to Successfully Implement Our Strategy of Diversifying Our Business Lines.*


	*Failure to Achieve Timely Profitability in Any Business Would Negatively Affect Our Results of Operations.*


	We Derive a Majority of Our Premium Revenues From Operations in Five States, and Our Operating Results Would be Materially Affected by a Decrease in Premium Revenues or Profitability in Any One of Those States.


	*Competition May Limit Our Ability to Increase Penetration of the Markets That We Serve.*


	*If We are Unable to Maintain Satisfactory Relationships With Our Provider Networks, Our Profitability Will be Harmed.*


	*Negative Publicity Regarding the Managed Care Industry May Harm Our Business and Operating Results.*