10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

  For the fiscal year ended December 31, 2004

or

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

  For the transition period from                     to                    

Commission file number: 000-33395

Centene Corporation

(Exact name of registrant as specified in its charter)

Delaware	42-1406317
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
7711 Carondelet Avenue, Suite 800 St. Louis, Missouri	63105
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (314) 725-4477

Securities registered pursuant to Section 12(b) of the Act:

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

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Each Class)

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  x    No  ¨

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.  ¨

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

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 New York Stock Exchange on June 30, 2004, was $760,859,808.

As of January 31, 2005 the registrant had 41,451,131 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the registrant’s 2005 annual meeting of stockholders are incorporated by reference in Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14.

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TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	3
Item 2.	Properties	17
Item 3.	Legal Proceedings	17
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	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 8.	Financial Statements and Supplementary Data	44
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	44
Item 9A.	Controls and Procedures	44
Item 9B.	Other Information	45
Part III
Item 10.	Directors and Executive Officers of the Registrant	46
Item 11.	Executive Compensation	47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13.	Certain Relationships and Related Transactions	47
Item 14.	Principal Accountant Fees and Services	47
Part IV
Item 15.	Exhibits and Financial Statement Schedules	48
Signatures		75
		76

“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.

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PART I

Item 1. Business

OVERVIEW

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 treatment compliance to our own and other healthcare organizations. We have health plans in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin. We also provide specialty services in each of the states where we have health plans as well as free-standing programs in Arizona, California and Colorado. 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 Section 16 filings, 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 filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

INDUSTRY

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 XIX 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 National Association of State Budget Officers estimates the total Medicaid market was approximately $310 billion in 2004 and the federal Centers for Medicare and Medicaid Services, or 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 over 50 million in 2003. Historically, children have represented the largest eligibility group.

SSI beneficiaries receive the majority of their healthcare needs through Medicaid. SSI beneficiaries are people with chronic physical disabilities or behavioral health impairments. State Medicaid expenditures related to the SSI population represent a growing percentage of all Medicaid related expenses.

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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 include the parents of these children in their SCHIP programs.

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. Continued pressure on states’ Medicaid budgets should cause public policy to recognize the value of managed care as a means of delivering quality health care and effectively controlling costs. A growing number of states, including each of the seven states in which we operate, have mandated that their Medicaid recipients enroll in managed care plans. Currently, 42 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, SSI and SCHIP populations. We believe our approach and strategy enable us to be a growing participant in this market.

OUR APPROACH

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

• Multi-Business Lines. We have provided benefits to Medicaid recipients for over 20 years. We are completing the second year of a longer term program 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 which we renamed Cenpatico Behavioral Health (Cenpatico). In 2003 we also purchased assets of ScriptAssist, a treatment compliance company. These businesses marked our entry into the Specialty Services segment. We believe these and other business lines will allow us to expand our services and diversify our sources of revenue.

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• 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 supplying nurse case managers who support our provider network in implementing disease management programs and by supplying 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 work with our members and their communities to promote health and self-improvement through employment and education on how best to access care. Our behavioral health company operates 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, SSI 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 psychological-based tools to predict treatment compliance in an efficient and scalable manner.

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OUR STRATEGY

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 Cenpatico, a behavioral health services company, and purchased assets of ScriptAssist, a treatment 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. For example, in 2004 Cenpatico was awarded a behavioral health contract to serve approximately 34,000 SCHIP members in Kansas effective January 1, 2005. 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, we were awarded a SCHIP Exclusive Provider Organization (EPO) contract, effective September 1, 2004. Through this contract we serve approximately 87,500 SCHIP members in Texas. Also, in Indiana, where the state assigns members to physicians, we increased our membership in 2004 by attracting 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 Kansas and Missouri markets effective December 1, 2004 through our acquisitions of FirstGuard, Inc. and FirstGuard Health Plan, Inc. (collectively, FirstGuard). We also entered the Ohio market effective January 1, 2004 through our acquisition of Medicaid-related assets from Family Health Plan, Inc. In December 2002 we entered the New Jersey market through our acquisition of University Health Plans, Inc., or 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. We have initiated a new claims processing facility in Montana to accommodate our planned growth initiatives providing geographic diversity for this centralized function.

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MEDICAID MANAGED CARE

Health Plans

We have regulated subsidiaries offering healthcare services in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin. 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.

	Indiana	Kansas	Missouri	New Jersey	Ohio	Texas	Wisconsin
Local Health Plan Name	Coordinated Care Corporation Indiana	FirstGuard Health Plan	FirstGuard Health Plan	University Health Plans	Buckeye Community Health Plan	Superior HealthPlan	Managed Health Services
First Year of Operations	1995	1999	1997	1994	2004	1999	1984
Counties Licensed at January 31, 2005	92	105	9	20	9	254	24
Membership at December 31, 2004	150,600	94,200	41,200	52,800	23,800	244,300	165,800

States

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, and from 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:

•      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
•      managed care expertise in government subsidized programs	•      timely and accurate reporting
•      improved medical outcomes

Member Programs and Services

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:

•      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

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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 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. Our SSI program uses a proprietary assessment tool that effectively identifies barriers to care, unmet functional needs, available social supports and the existence of behavioral health conditions that impede a member’s ability to maintain health status. Care coordinators develop individual care plans with the member and healthcare providers ensuring the full integration of behavioral, social and acute care services. These care plans, while specific to an SSI member, incorporate “Condition Specific” practices in collaboration with physician partners and community resources.

Providers

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, 2005, our health plans had the following numbers of physicians and hospitals:

	Primary Care Physicians	Specialty Care Physicians	Hospitals
Indiana	555	1,064	34
Kansas	1,381	3,184	153
Missouri	410	1,624	38
New Jersey	1,553	5,635	81
Ohio	156	540	6
Texas	4,426	7,915	278
Wisconsin	1,812	3,083	60

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.

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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 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 Cenpatico 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 health plans, 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.

Quality Management

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.

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We have implemented specialized information systems to support our medical quality management activities. Information is drawn from our data warehouse, clinical databases and our membership and claims processing system, 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 aimed at helping 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.

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. Additionally, during 2004, Cenpatico received full accreditation under the Health Plan Standards of the Utilization Review Accreditation Committee, also known as URAC. The accreditation is effective January 1, 2005 through January 1, 2007.

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.

Management Information Systems

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 our existing states 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 membership and claims processing system is capable of expanding to support additional members in an efficient manner as needed.

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.

SPECIALTY SERVICES

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

• Cenpatico manages behavioral healthcare for members via a contracted network of providers. Cenpatico 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. Our networks feature a range of services so that patients can be treated at an appropriate level of care. We also run school-based programs in Arizona that focus on students with special education needs.

• ScriptAssist is a treatment compliance program that uses psychological-based tools to predict which patients are likely to cease taking their medications, and then to motivate those at-risk patients to adhere

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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 call volume has ranged from 13,000 to 20,000 calls per month. In addition, NurseWise, through our Ohio plan, has been awarded a contract to serve approximately 1,900 SSI members in Stark County, Ohio through the Enhanced Care Management Program.

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.

CORPORATE COMPLIANCE

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. The audit committee and the board of directors review the incident log on a quarterly basis.

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COMPETITION

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 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. Such organizations include behavioral health managed care organizations and disease management entities that may vie for Medicaid contracts. 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.

Competition for specialty services consists of specialized programs that focus on specific chronic diseases and 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.

FINANCIAL INFORMATION

All of our revenue is derived from operations within the United States. Our managed care subsidiaries in Indiana, New Jersey, Texas and Wisconsin have revenues from their respective state governments that each exceeded 10% of consolidated revenues in 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.

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REGULATION

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 regulated subsidiaries are licensed to operate as health maintenance organizations and/or insurance companies in their respective states. 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.

States have adopted a number of new regulations that may affect our business and results of operations. These regulations in certain states include:

• premium and maintenance taxes;

• stringent prompt-pay laws;

• disclosure requirements regarding provider fee schedules and coding procedures; and

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

Medicaid

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 receive monthly payments based on specified capitation rates determined on an actuarial basis. These rates differ by membership category and by state depending on the specific coverages and policies adopted by each state. In 2004, the premium revenue received per member per month ranged from $73 to $415 based on line of business and covered services.

During 2004, we 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 through our subsidiary, Coordinated Care Corporation Indiana, Inc. The contract commenced January 1, 2005 and has a scheduled termination date of December 31, 2006. 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.

With the acquisition of FirstGuard, we have a contract with the State of Kansas, Department of Social and Rehabilitation Services to provide Medicaid and SCHIP services. The contract commenced on July 1, 2001 and had an initial scheduled termination date of June 30, 2003, but has been renewed through June 30, 2005. The

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agreement is renewable for one additional twelve-month period. The contract may be terminated by the State for event of default or significant change in circumstances. FirstGuard has held a contract with the State of Kansas since 1999.

Additionally, with the acquisition of FirstGuard, we have a contract with the State of Missouri, Office of Administration, Division of Purchasing and Materials Management to provide Medicaid and SCHIP services. The contract commenced on January 1, 2004 and had an initial scheduled termination date of December 31, 2004, but has been renewed through December 31, 2005. The agreement is renewable for one additional twelve-month period. The contract may be terminated by the State for event of default or significant change in circumstances. FirstGuard has held a contract with the State of Missouri since 1997.

With the acquisition of UHP, we have 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, 2005. 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 have entered into a contract with the Ohio Department of Job and Family Services to provide Medicaid services through our subsidiary, Buckeye Community Health Plan. The contract commenced July 1, 2004 and has a scheduled termination date of June 30, 2005. 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. We have held a contract with the State of Ohio since January 2004.

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 current Texas Medicaid and SCHIP contracts commenced September 1, 2004 and have scheduled termination dates of August 31, 2005. 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 have entered into an Exclusive Provider Organization (EPO) contract with the Texas Health and Human Services Commission to provide SCHIP managed care services in Texas through our Bankers Reserve subsidiary, d/b/a Superior HealthPlan Network. The contract commenced on September 1, 2004 and is scheduled to end on August 31, 2007. Upon mutual consent the agreement is renewable for a period or periods, but the contract term may not exceed six years. The contract 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 have entered into a contract with the Wisconsin Department of Health and Family Services to provide Medicaid services. The contract commenced May 1, 2004 and has a scheduled termination date of December 31, 2005. This contract is renewable for an additional one-year term. 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 have also entered into an agreement with Network Health Plan of Wisconsin, Inc. pursuant to which Network Health Plan subcontracts to us its Medicaid services under its contract with the State of Wisconsin. The agreement commenced January 1, 2001 and has a scheduled termination of December 31, 2011. 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.

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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;	•      health education and wellness and prevention programs;
•      covered services;	•      timeliness of claims payment;
•      eligible providers;	•      financial standards;
•      subcontractors;	•      safeguarding of member information;
•      record-keeping and record retention;	•      fraud and abuse detection and reporting;
•      periodic financial and informational reporting;	•      grievance procedures; and
•      quality assurance;	•      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 reports to various regulatory agencies, including quarterly and annual statutory financial statements and utilization reports.

HIPAA

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. Among the main requirements of HIPAA are standards for the processing of health insurance claims and related transactions.

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 to be electronically transmitted. Under the HIPAA regulations, health plans are required to have the capacity to accept and send all covered transactions in a standardized electronic format. The regulations set 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.

HIPAA regulations also protect the privacy of medical records and other personal health information maintained and used by healthcare providers, health plans and healthcare clearinghouses. We have implemented

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processes, policies and procedures to comply with the HIPAA privacy regulations, including educating and training for employees. 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 privacy regulations:

• 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.

Patients’ Rights Legislation

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 legislation is frequently proposed 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.

Other Fraud and Abuse Laws

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 may require substantial resources.

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EMPLOYEES

As of January 31, 2005, we had approximately 1,200 employees. Our employees are not represented by a union. We believe our relationships with our employees are good.

Item 2. Properties

In 2003, we acquired the building in St. Louis, Missouri which houses our corporate headquarters. In 2004 we acquired additional property contiguous to our corporate headquarters building for future growth and expansion, and approximately 24 acres of land in Montana in connection with a new claims processing facility.

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

Item 3. Legal Proceedings

Aurora Health Care, Inc. (Aurora) provides medical professional services under a contract with 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 the present. In 2004 the Court dismissed the claim as filed, but allowed Aurora to replead and seek a declaratory ruling clarifying the contract with respect to reimbursement for ambulatory surgery services. Although the exact amount of the dispute has not been determined, Aurora claims it exceeds $8 million. We continue to dispute the claim and plan to defend against this 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 4. Submission of Matters to a Vote of Security Holders

None.

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PART II

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

Market for Common Stock; Dividends

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 two-for-one stock split effected in the form of a 100% stock dividend paid December 17, 2004 to stockholders of record on November 24, 2004 and 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.

	2004 Stock Price				2003 Stock Price
	High		Low		High		Low
First Quarter	$	16.48	$	13.05	$	11.62	$	7.45
Second Quarter		19.55		14.68		13.22		9.39
Third Quarter		22.10		17.65		15.80		12.28
Fourth Quarter		30.10		20.43		17.85		13.49

As of January 31, 2005 there were 29 holders of record of our common stock.

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.

Securities Authorized for Issuance Under Equity Compensation Plans

Information concerning our equity compensation plans will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Equity Compensation Plan Information.” This portion of our Proxy Statement is incorporated herein by reference.

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Item 6. Selected Financial Data

The following selected consolidated financial data should be read in connection with 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, 2004, 2003 and 2002 and as of December 31, 2004 and 2003 are derived from consolidated financial statements included elsewhere in this filing. The data for the years ended December 31, 2001 and 2000 and as of December 31, 2002, 2001 and 2000 are derived from audited consolidated financial statements not included in this filing.

	Year Ended December 31,
	2004			2003			2002			2001			2000
	(In thousands, except share data)
Statement of Earnings Data:
Revenues:
Premiums	$	991,673		$	759,763		$	461,030		$	326,184		$	216,414
Services		9,267			9,967			457			385			4,936
Total revenues		1,000,940			769,730			461,487			326,569			221,350
Expenses:
Medical costs		800,476			626,192			379,468			270,151			182,495
Cost of services		8,065			8,323			341			329			135
General and administrative expenses		127,863			88,288			50,072			37,617			32,200
Total operating expenses		936,404			722,803			429,881			308,097			214,830
Earnings from operations		64,536			46,927			31,606			18,472			6,520
Other income (expense):
Investment and other income		6,431			5,160			9,575			3,916			1,784
Interest expense		(680	)		(194	)		(45	)		(362	)		(611	)
Equity in losses from joint ventures		—			—			—			—			(508	)
Earnings before income taxes		70,287			51,893			41,136			22,026			7,185
Income tax expense (benefit)		25,975			19,504			15,631			9,131			(543	)
Minority interest		—			881			116			—			—
Net earnings		44,312			33,270			25,621			12,895			7,728
Accretion of redeemable preferred stock		—			—			—			(467	)		(492	)
Net earnings attributable to common stockholders	$	44,312		$	33,270		$	25,621		$	12,428		$	7,236
Net earnings per common share:
Basic	$	1.09		$	0.93		$	0.82		$	2.99		$	2.68
Diluted	$	1.02		$	0.87		$	0.73		$	0.54		$	0.38
Weighted average common shares outstanding:
Basic		40,820,909			35,704,426			31,432,080			4,156,198			2,704,578
Diluted		43,616,445			38,422,152			34,932,232			24,058,492			20,458,786
	December 31,
	2004			2003			2002			2001			2000
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	84,105		$	64,346		$	59,656		$	88,867		$	19,023
Investments		211,070			199,971			89,237			22,288			21,859
Total assets		527,934			362,692			210,327			131,366			66,017
Medical claims liabilities		165,980			106,569			91,181			59,565			45,805
Debt		47,459			8,195			—			—			4,000
Redeemable convertible preferred stock		—			—			—			—			18,878
Total stockholders’ equity (deficit)		271,312			220,115			102,183			64,089			(8,834	)

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

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.”

OVERVIEW

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). We have health plans in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin. We also provide specialty services in each of the states where we have health plans as well as free-standing programs in Arizona, California and Colorado. These specialty services include behavioral health, nurse triage and treatment compliance.

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;

• Regulatory Capital and Dividend Restrictions.

RECENT ACQUISITIONS

Effective December 1, 2004, we acquired FirstGuard, Inc. and FirstGuard Health Plan, Inc., or FirstGuard, for a purchase price of approximately $96.1 million. FirstGuard serves approximately 135,000 members in Kansas and Missouri. The results of operations of this entity are included in our consolidated financial statements beginning December 1, 2004. The preliminary purchase price allocation resulted in estimated identifiable intangible assets of $8.0 million and goodwill of $86.8 million. The estimated identifiable intangible assets are being amortized over an estimated life of ten years.

Effective January 1, 2004, we commenced operations in Ohio through the acquisition of the Medicaid-related assets of Family Health Plan, Inc. for a purchase price of $6.9 million. We are currently serving 23,800 members in Toledo, Ohio. The results of operations of this entity are included in our consolidated financial statements beginning January 1, 2004. The purchase price allocation resulted in identified intangible assets of $1.8 million, representing purchased contract rights, provider network and a non-compete agreement, and goodwill of $5.1 million. The contract rights, provider network and non-compete agreement are being amortized over periods ranging from five to ten years.

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. The purchase price of $1.0 million was allocated to acquired contracts. The contracts are being amortized over a period of five years, the expected period of benefit.

During 2003, we 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). In September 2004, we renamed this subsidiary Cenpatico Behavioral Health, LLC, or Cenpatico. This acquisition is consistent with our

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strategy to provide diversified medical services to the managed Medicaid population. We paid an aggregate purchase price of $1.8 million for Cenpatico, assumed net liabilities of $1.9 million and recorded goodwill of $3.7 million related to the acquisition.

In March 2003, we purchased certain assets of ScriptAssist, a treatment 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 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., or UHP, 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 $5.0 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 over five years, the expected period of benefit.

With our acquisition of Cenpatico 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 regulated subsidiaries, 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 treatment compliance functions.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are more fully described in Note 3 to our annual consolidated financial statements included elsewhere herein. Our accounting policies regarding medical claims liabilities and intangible assets 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.

Medical Claims Liabilities

Our medical claims liabilities include claims reported but not yet paid, estimates for claims incurred but not reported, or IBNR, and estimates for the costs necessary to process unpaid claims. We, together with our independent actuaries, estimate medical claims liabilities using actuarial methods that are commonly used by health insurance actuaries and meet Actuarial Standards of Practice. These actuarial methods consider factors such as historical data for payment patterns, cost trends, product mix, seasonality, utilization of healthcare services and other relevant factors. These estimates are continually reviewed each period and adjustments based on actual claim submissions and additional facts and circumstances are reflected in the period known.

Our management uses its judgment to determine the assumptions to be used in the calculation of the required estimates. In developing our estimate for IBNR, we apply various estimation methods depending on the claim type and the period for which claims are being estimated. For more recent periods, incurred non-inpatient claims are estimated based on historical per member per month claims experience adjusted for known factors. Incurred hospital claims are estimated based on authorized days and historical per diem claim experience adjusted for known factors. For older periods, we utilize an estimated completion factor based on our historical experience to develop IBNR estimates. The completion factor is an actuarial estimate of the percentage of claims incurred during a given period that have been adjudicated as of the reporting period to the estimate of the total ultimate incurred costs. These approaches are consistently applied to each period presented.

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The completion factor, claims per member per month and per diem cost trend factors are the most significant factors affecting the IBNR estimate. The following table illustrates the sensitivity of these factors and the estimated potential impact on our operating results caused by changes in these factors based on December 31, 2004 data:

Completion Factors (a):			Cost Trend Factors (b):
(Decrease) Increase in Factors	Increase (Decrease) in Medical Claims Liabilities		(Decrease) Increase in Factors	Increase (Decrease) in Medical Claims Liabilities
	(in thousands)			(in thousands)
(3)%	$	17,000	(3)%	$	(4,700)
(2)%		11,200	(2)%		(3,100)
(1)%		5,600	(1)%		(1,600)
1%		(5,400)	1%		1,600
2%		(10,800)	2%		3,200
3%		(16,000)	3%		4,800

(a) Reflects estimated potential changes in medical claims liabilities caused by changes in completion factors.

(b) Reflects estimated potential changes in medical claims liabilities caused by changes in cost trend factors for the most recent periods.

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 estimated medical claims liabilities would have affected net earnings by $1.0 million for the year ended December 31, 2004. 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):

	Year Ended December 31,
	2004			2003			2002
Balance, January 1	$	106,569		$	91,181		$	59,565
Acquisitions		24,909			335			16,230
Incurred related to:
Current year		816,418			645,482			396,715
Prior years		(15,942	)		(19,290	)		(17,247	)
Total incurred		800,476			626,192			379,468
Paid related to:
Current year		681,780			544,309			324,210
Prior years		84,194			66,830			39,872
Total paid		765,974			611,139			364,082
Balance, December 31	$	165,980		$	106,569		$	91,181
Claims inventory, December 31		150,000			131,000			151,000
Days in claims liability (a)		66.5			59.0			71.8

(a) Days in claims liability is a calculation of medical claims liabilities at the end of the period divided by average expense per calendar day for the fourth quarter of each year. Acquisitions in the last quarter of 2004 and 2002 contributed to an increase in our days in claims liability calculation.

Acquisitions in 2004 include reserves acquired in connection with our acquisition of FirstGuard. Acquisitions in 2003 and 2002 include reserves acquired in connection with our acquisition of UHP.

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Medical claims are usually paid within a few months of the member receiving service from the physician or other healthcare provider. As a result, these liabilities generally are described as having a “short-tail”, which causes less than 10% of our medical claims liabilities as of the end of any given year to be outstanding the following year. Management expects that substantially all the development of the estimate of medical claims liabilities as of December 31, 2004 will be known by the end of 2005.

Actuarial Standards of Practice generally require that medical claims liabilities estimates be adequate to cover obligations under moderately adverse conditions. Moderately adverse conditions are situations in which the actual claims are expected to be higher than the otherwise estimated value of such claims at the time of estimate. In many situations, the claims amounts ultimately settled will be less than the estimate that satisfies the Actuarial Standards of Practice.

Changes in estimates of incurred claims for prior years were attributable to favorable development in all of our markets, including changes in medical utilization and cost trends. These changes in medical utilization and cost trends can be attributable to our “margin protection” programs and changes in our member demographics. For example, our membership increased 38.3% during the fourth quarter of 2002. This member growth led to changes in our medical utilization and cost trends that were subject to estimates at December 31, 2002. For all of our membership, we routinely implement new or modified policies that we refer to as our “margin protection” programs that assist with the control of medical utilization and cost trends such as emergency room policies. While we try to predict the savings from these programs, actual savings have proven to be better than anticipated, which has contributed to the favorable development of our medical claims liabilities.

Intangible Assets

We have made several acquisitions since 2002 that have resulted in our recording of intangible assets. These intangible assets primarily consist of non-compete agreements, purchased contract rights, provider contracts and goodwill. At December 31, 2004 we have outstanding $101.6 million of goodwill and $14.4 million of net other intangible assets. Non-compete agreements are amortized using the straight-line method over 60 months. 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. 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, future utility and other internal and external factors, 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 each year-end for impairment. In addition, we will perform an impairment analysis of other intangible assets 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 three years ended December 31, 2004.

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REVENUE AND EXPENSE DISCUSSION AND KEY METRICS

Revenues and Revenue Recognition

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 premium payments during the month we provide services and recognize premium revenue during the period in which we are obligated to provide services to our members. Revenues are recorded based on membership and eligibility data provided by the states, which may be adjusted by the states for updates to this data. These adjustments are immaterial in relation to total revenue recorded and are reflected in the period known, typically within two months.

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 treatment compliance program receives fee income from the manufacturers of pharmaceuticals. Our nurse triage line 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 or results of operations.

The primary drivers of our increasing revenue have been membership growth in our Medicaid Managed Care segment. We have increased our membership through internal growth and acquisitions. From December 31, 2002 to December 31, 2004, we increased our membership by 88.6%. The following table sets forth our membership by state:

	December 31,
	2004	2003	2002
Indiana	150,600	119,400	105,700
Kansas	94,200	—	—
Missouri	41,200	—	—
New Jersey	52,800	54,000	52,900
Ohio	23,800	—	—
Texas	244,300	158,400	118,000
Wisconsin	165,800	157,800	133,000
Total	772,700	489,600	409,600

The following table sets forth our membership by line of business:

	December 31,
	2004	2003	2002
Medicaid	580,200	411,800	336,100
SCHIP	182,100	68,400	65,900
SSI	10,400	9,400	7,600
Total	772,700	489,600	409,600

In 2004, we entered the Kansas and Missouri markets through our acquisition of FirstGuard and the Ohio market with our acquisition of the Medicaid-related assets of Family Health Plan, Inc. We increased our Texas membership by approximately 87,500 members from the EPO contract award effective September 1, 2004. Our membership increased in Indiana and Wisconsin from additions to our provider network, increases in counties served and growth in the overall number of Medicaid beneficiaries.

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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 overall 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 members. This increase includes approximately 12,000 members that we managed for the state of Texas on an interim basis. 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 overall number of Medicaid beneficiaries.

Operating Expenses

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:

	Year Ended December 31,
	2004		2003		2002
Medicaid and SCHIP	80.4	%	81.7	%	82.2	%
SSI	93.8		102.5		100.7
Total	80.7		82.4		82.3

Our Medicaid and SCHIP ratio decreased in 2004 from 2003 due primarily to initiatives to reduce inappropriate emergency room usage and to establish preferred drug lists such as generics. The addition of the SSI members resulting from our acquisition in New Jersey in December 2002 caused our total health benefits ratio to increase slightly in 2003. 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).

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 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. Premium taxes are classified as general and administrative expenses. Our general and administrative expense ratio represents

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general and administrative expenses as a percentage of total revenues and reflects the relationship between revenues earned and the costs necessary to drive those revenues. The following table sets forth the general and administrative expense ratios by business segment and in total:

	Year Ended December 31,
	2004		2003		2002
Medicaid Managed Care	10.7	%	10.3	%	10.9	%
Specialty Services	52.3		38.2		—
Total	12.8		11.5		10.9

The increase in the Medicaid Managed Care general and administrative expenses ratio in 2004 reflects the impact of premium taxes enacted in September 2003 in Texas and July 2004 in New Jersey. These taxes totaled $5.5 million in 2004 and $1.4 in 2003 and had the effect of increasing our general and administrative expenses ratio by 0.5% in 2004 and 0.2% in 2003. Additionally, the 2004 results include 1) start-up costs associated with the Texas EPO contract, our claims processing facility in Montana and FirstGuard, 2) severance costs related to job eliminations, and 3) higher compensation costs related to our performance bonus plans.

The Specialty Services ratio may vary depending on the various contracts and nature of the services provided and will have a higher general and administrative expense ratio than the Medicaid Managed Care segment. The 2004 results were affected by expenses associated with transitioning certain activities within Specialty Services, including closing costs of our clinic facilities in Texas and California as Cenpatico fully transitions to a third-party service model for behavioral health services, due diligence costs related to a potential transaction we decided not to pursue, and costs related to investing in new business opportunities.

Other Income (Expense)

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 reflects interest on the borrowings under our credit facility, fees in conjunction with our credit facility and mortgage interest.

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RESULTS OF OPERATIONS

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Summarized comparative financial data for 2004 and 2003 are as follows ($ in millions):

	2004		2003		% Change 2003-2004
Premium revenue	$	991.7	$	759.7	30.5	%
Services revenue		9.2		10.0	(7.0	)%
Total revenues		1,000.9		769.7	30.0	%
Medical costs		800.5		626.2	27.8	%
Cost of services		8.1		8.3	(3.1	)%
General and administrative expenses		127.8		88.3	44.8	%
Earnings from operations		64.5		46.9	37.5	%
Investment and other income, net		5.8		5.0	15.8	%
Earnings before income taxes		70.3		51.9	35.4	%
Income tax expense		26.0		19.5	33.2	%
Minority interest		—		.9	—
Net earnings	$	44.3	$	33.3	33.2	%
Diluted earnings per common share	$	1.02	$	0.87	17.2	%

Revenues

Total revenues for the year ended December 31, 2004 increased 30.0% from the comparable period in 2003. This increase was due to organic growth in our existing markets; the addition of EPO members in Texas, effective September 1, 2004; the acquisition of the Medicaid related assets of Family Health Plan, effective January 1, 2004; and the acquisition of FirstGuard, effective December 1, 2004. Additionally, we received premium rate increases ranging from 2.3% to 5.3%, or 4.4% on a composite basis across our markets.

Operating Expenses

Medical costs increased 27.8% due to the growth in our membership as discussed above. Our health benefits ratio decreased to 80.7% from 82.4% primarily due to continued improvements in our initiatives to reduce emergency room usage and to establish preferred drug lists throughout all our markets.

General and administrative expenses increased 44.8% primarily due to expenses for additional staff to support our membership growth, expansion into the Specialty Services segment, the effect of a premium tax in two states and start-up costs related to our acquisition of FirstGuard, the EPO contract and our claims processing facility in Montana.

Other Income

Investment and other income increased 15.8% as a result of higher average investment balances and an increase in market interest rates partially offset by higher interest expense from increased borrowings under our credit facility and mortgages.

Income Tax Expense

Our effective tax rate in 2004 was 37.0%, compared to 37.6% in 2003. The decrease was primarily due to a lower effective state tax rate.

Earnings Per Share and Shares Outstanding

Our earnings per share calculations reflect an increase in the weighted average shares outstanding in 2004 primarily resulting from the follow-on offering of 6,900,000 common shares sold in August 2003.

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Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

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

	2003		2002		% Change 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	$	0.87	$	0.73	19.2	%

Revenues

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, effective December 1, 2002. 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 Cenpatico beginning March 1, 2003.

Operating Expenses

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 room usage and to establish preferred drug lists.

Cost of services increased due to the inclusion of direct costs related to the services revenues of Cenpatico 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.

Other Income

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.

Income Tax Expense

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.

Earnings Per Share and Shares Outstanding

Our earnings per share calculations reflect an increase in the weighted average shares outstanding in 2003 primarily resulting from the follow-on offering of 6,900,000 common shares sold in August 2003.

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LIQUIDITY AND CAPITAL RESOURCES

Our operating activities provided cash of $99.4 million in 2004, $56.0 million in 2003 and $39.7 million in 2002. The increases were due primarily to continued profitability, increases in membership and increases in medical claims liabilities.

Our investing activities used cash of $122.5 million in 2004, $140.7 million in 2003 and $79.7 million in 2002. During 2004, our investing activities primarily consisted of the acquisition of FirstGuard. In 2003 and 2002, the largest component of investing activities related to increases in our investment portfolio as a result of our stock offerings in those years. 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, 2004, our investment portfolio consisted primarily of fixed-income securities with an average duration of 1.8 years. Cash is invested in investment vehicles such as municipal bonds, corporate bonds, insurance contracts, 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.

Our financing activities provided cash of $42.8 million in 2004, $89.4 million in 2003 and $10.8 million in 2002. During 2004, our financing activities primarily consisted of borrowings under our credit facility. These borrowings were used primarily for our investing activities in conjunction with the acquisition of FirstGuard. During 2003, our financing cash flows primarily consisted of 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.

We spent $14.7 million and $6.6 million in 2004 and 2003, 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 2002, we purchased $3.9 million of furniture, equipment and leasehold improvements. We anticipate spending $16.8 million on additional capital expenditures in 2005 related to office and market expansions and system upgrades.

During 2004, we purchased the property adjacent to our corporate headquarters in St. Louis, Missouri for an aggregate purchase price of $10.3 million. This property will be used for the future expansion of our corporate offices. We financed a portion of the purchase price through a $5.5 million non-recourse mortgage loan arrangement. In July 2003, we purchased the building in which our corporate headquarters 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. During 2004, we renewed this mortgage at the original principal amount of $8.0 million. The mortgage agreements bear interest at the prevailing prime rate less .25%. At December 31, 2004, our mortgages bore interest at 5.0%.

At December 31, 2004, we had working capital, defined as current assets less current liabilities, of $22.1 million as compared to $(18.5) million at December 31, 2003. Our working capital is sometimes 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 $178.4 million at December 31, 2004 and $79.5 million at December 31, 2003. Long-term investments were $139.0 million at December 31, 2004 and $205.2 million at December 31, 2003, including restricted deposits of $22.2 million and $20.4 million, respectively. Cash and investments held by our unregulated entities totaled $46.0 million and $126.7 million at December 31, 2004 and 2003, respectively.

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In September 2004, we executed a five-year $100 million Revolving Credit Agreement with various financial institutions and LaSalle Bank National Association as administrative agent and arranger. Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. The agreement is secured by the common stock and membership interests of our subsidiaries. The agreement contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios, minimum debt-to-EBITDA ratios and minimum tangible net worth. The agreement will expire in September 2009 or on an earlier date in the instance of a default as defined in the agreement. In conjunction with this agreement, we cancelled our prior existing $50 million credit facility. As of December 31, 2004, we had $34 million outstanding under the agreement and were in compliance with all covenants.

In January 2005, we executed a definitive agreement, subject to regulatory approvals, to acquire the Medicaid-related assets of SummaCare, Inc. for approximately $31 million plus transaction costs. The purchase price will consist of approximately $22 million in cash and $9 million in common stock. The acquisition is expected to close in the second quarter of 2005.

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, the planned acquisition of SummaCare, Inc. and capital expenditures for at least 12 months from the date of this filing.

Our principal contractual obligations at December 31, 2004 consisted of medical claims liabilities, borrowings from our credit facility and mortgages, operating leases and purchase obligations. The purchase obligations consist primarily of software purchase and maintenance contracts in addition to development agreements pertaining to our Montana claims facility and the future expansion of our corporate headquarters. The contractual obligations over the next five years and beyond are as follows (in thousands):

	Payments Due by Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Medical claims liabilities	$	165,980	$	165,980	$	—	$	—	$	—
Debt		47,459		486		972		34,972		11,029
Operating leases		33,521		6,766		11,244		7,898		7,613
Purchase obligations		9,049		2,805		3,919		75		2,250
Total	$	256,009	$	176,037	$	16,135	$	42,945	$	20,892

REGULATORY CAPITAL AND DIVIDEND RESTRICTIONS

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, 2004, our regulated subsidiaries had aggregate statutory capital and surplus of $123.6 million, compared with the required minimum aggregate statutory capital and surplus requirements of $65.1 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, 2004, our Indiana, Ohio, Texas and Wisconsin health plans were in

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compliance with risk-based capital requirements enacted in these states. If adopted by Kansas, Missouri or New Jersey, risk-based capital requirements may increase the minimum capital required for these subsidiaries. We continue to monitor the requirements in Kansas, Missouri and New Jersey and do not expect that they will have a material impact on our results of operations, financial position or cash flows. Acquisitions in new states or new markets in existing states may require additional capital funding for our regulated subsidiaries.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, SFAS No. 123 (revised 2004), “Share Based Payment,” was issued. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The grant date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. This Statement is required to be adopted by July 1, 2005. The effect of expensing stock options in accordance with the original SFAS No. 123 is presented in Note 3 of our Notes to Consolidated Financial Statements under the heading Stock Based Compensation included elsewhere in this Form 10-K. After the adoption of SFAS No. 123 (revised 2004) the level of stock compensation expense may differ depending on the fair value method and assumptions utilized.

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 VIEs, which are entities for which control is achieved through means other than through voting rights. We have completed an analysis of this Interpretation and have determined that we do not have any VIEs.

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 our net income or equity.

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FORWARD-LOOKING STATEMENTS

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 healthcare 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 affect 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.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND THE

TRADING PRICE OF OUR COMMON STOCK

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.

Risks Related to Being a Regulated Entity

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

Most of our revenues come from Medicaid, SCHIP and SSI 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, SCHIP and SSI funding and premium rates may be affected by continued government efforts to contain medical costs and may further be affected by state and federal budgetary constraints. For example, in August 2004, the Centers for Medicare & Medicaid Services, or CMS, proposed a rule requiring states to estimate improper payments made under their Medicaid and SCHIP programs, report such overpayments to Congress, and, if

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necessary, take actions to reduce erroneous payments. In February 2005, the Bush administration called for changes in Medicaid that would cut payments for prescription drugs and give states new power to reduce or reconfigure benefits. Changes to Medicaid, SCHIP and SSI 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, SCHIP and SSI. Over the past two years, the majority of states have implemented measures to restrict Medicaid, SCHIP and SSI costs and eligibility. We believe that reductions in Medicaid, SCHIP and SSI 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.

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

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 June 30, 2005 and August 31, 2007. 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.

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.

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 the legislation is frequently proposed in Congress. We cannot predict the impact of this legislation, if adopted, on our business.

Regulations May Decrease the Profitability of Our Health Plans.

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

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by our other regulators may limit our ability to increase our overall profits as a percentage of revenues. The states of Indiana, New Jersey and Texas 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.

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

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 affect 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.

We Will Incur Significant Increased Costs As a Result of Compliance With New Government Regulations And Our Management Will Be Required to Devote Substantial Time To Compliance.

On February 20, 2003 HHS published the final HIPAA health data security regulations. 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. Further, compliance with these regulations could 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.

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In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the New York Stock Exchange, have imposed various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting. In particular, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over our financial reporting as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the NYSE, SEC or other regulatory authorities, which would require additional financial and management resources.

Changes in Healthcare Law May Reduce Our Profitability.

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.

If a State Fails to Renew its Federal Waiver Application for Mandated Medicaid Enrollment into Managed Care or Such Application is Denied, Our Membership in That State Will Likely Decrease.

States may only mandate Medicaid enrollment into managed care under federal waivers or demonstrations. Waivers and programs under demonstrations are approved for two-year periods and can be renewed on an ongoing basis if the state applies. We have no control over this renewal process. If a state does not renew its mandated program or the federal government denies the state’s application for renewal, our business would suffer as a result of a likely decrease in membership.

Changes in Federal Funding Mechanisms May Reduce Our Profitability.

The Bush Administration has 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, instead of federal matching funds, combined Medicaid-SCHIP “allotments” for acute and long-term healthcare 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 a similar proposal initiated by the Bush Administration in February 2003. 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.

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In April 2004, the Bush Administration adopted a new policy that seeks to reduce states’ use of accounting devices such as intergovernmental transfers for the states’ share of Medicaid program funding. By restricting the use of intergovernmental transfers as part of states’ Medicaid contributions, this policy, if continued, may restrict some states’ funding for Medicaid, which could adversely affect our growth, operations and financial performance.

In February 2005, the Bush Administration called for changes in Medicaid that would cut payments for prescription drugs and give states new power to reduce or reconfigure benefits. Any reduction or reconfiguration of state funding could adversely affect our growth, operations and financial performance.

Recent legislative changes in the Medicare program may also affect our business. For example, the Medicare Prescription Drug, Improvement and Modernization Act of 2003, enacted in December 2003, will, upon taking effect in 2006, revise cost-sharing requirements for some beneficiaries and require states to reimburse the federal Medicare program for costs of prescription drug coverage provided to beneficiaries who are enrolled simultaneously in both the Medicaid and Medicare programs. These changes may reduce the availability of funding for some states’ Medicaid programs, which could adversely affect our growth, operations and financial performance.

If State Regulatory Agencies Require a Statutory Capital Level Higher than the State Regulations, We May Be Required to Make Additional Capital Contributions.

Our operations are conducted through our wholly owned subsidiaries, which include HMOs and managed care organizations, or MCOs. HMOs and MCOs are subject to state regulations that, among other things, require the maintenance of minimum levels of statutory capital, as defined by each state. Additionally, state regulatory agencies may require, at their discretion, individual HMO’s to maintain statutory capital levels higher than the state regulations. If this were to occur to one of our subsidiaries, we may be required to make additional capital contributions to the affected subsidiary. Any additional capital contribution made to one of the affected subsidiaries could have a material adverse effect on our liquidity and our ability to grow.

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

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.

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.

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.

Risks Related to Our Business

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

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

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healthcare services delivered to our members. 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.

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

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, over the last six years, our health benefits ratio has ranged from 80.7% to 88.9%. 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.

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

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.

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

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. 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.

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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.

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.

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 Cenpatico Behavioral Health, a behavioral health services company, and purchased contract and name rights of ScriptAssist, a treatment compliance company. In order to diversify our business, we must succeed in selling the services of our 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.

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

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.

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

Operations in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin have accounted for most of our premium revenues to date. 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 could 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.

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

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.

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

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.

Changes in Stock Option Accounting Rules May Have a Significant Adverse Affect on Our Operating Results.

We have a history of using broad based employee stock option programs to hire, incentivize and retain our workforce in a competitive marketplace. Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” allows companies the choice of either using a fair value method of accounting for

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options that would result in expense recognition for all options granted, or using an intrinsic value method, as prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB 25, with a pro forma disclosure of the impact on net income (loss) of using the fair value option expense recognition method. We have previously elected to apply APB 25 and accordingly we generally have not recognized any expense with respect to employee stock options as long as such options are granted at exercise prices equal to the fair value of our common stock on the date of grant.

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), “Share Based Payment,” which would require all companies to measure compensation cost for all share-based payments, including employee stock options, at fair value. This statement is effective for public companies for interim or annual periods beginning after June 15, 2005. We are currently evaluating the effect that the adoption of this Statement will have on our financial position and results of operations. We believe, however, that our adoption of this standard will adversely affect our operating results in future periods.

We May be Unable to Attract and Retain Key Personnel.

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. 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.

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

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.

Claims Relating to Medical Malpractice Could Cause Us to Incur Significant Expenses.

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.

Loss of Providers Due to Increased Insurance Costs Could Adversely Affect Our Business.

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

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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.

Growth in the Number of Medicaid-Eligible Persons During Economic Downturns Could Cause Our Operating Results and Stock Prices to Suffer if State and Federal Budgets Decrease or Do Not Increase.

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.

Growth in the Number of Medicaid-Eligible Persons May be Countercyclical, Which Could Cause Our Operating Results to Suffer When General Economic Conditions are Improving.

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 Intend to Expand Our Medicaid Managed Care Business Primarily into Markets Where Medicaid Recipients are Required to Enroll in Managed Care Plans.

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.

If We are Unable to Integrate and Manage Our Information Systems Effectively, Our Operations Could be Disrupted.

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.

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We Rely on the Accuracy of Eligibility Lists Provided by State Governments. Inaccuracies in Those Lists Would Negatively Affect Our Results of Operations.

Premium payments to us are based upon eligibility lists produced by state governments. From time-to-time, states require us to reimburse them for premiums paid to us based on an eligibility list that a state later discovers contains individuals who are not in fact eligible for a government sponsored program or are eligible for a different premium category or a different program. Alternatively, a state could fail to pay us for members for whom we are entitled to payment. Our results of operations would be adversely affected as a result of such reimbursement to the state if we had made related payments to providers and were unable to recoup such payments from the providers.

We May Not be Able to Obtain or Maintain Adequate Insurance.

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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

INVESTMENTS

As of December 31, 2004, we had short-term investments of $94.3 million and long-term investments of $139.0 million, including restricted deposits of $22.2 million. The short-term investments consist of highly liquid securities with maturities between three and 12 months. The long-term investments consist of municipal, corporate and U.S. Agency bonds, life insurance contracts and U.S. Treasury investments and have maturities greater than one year. Restricted deposits consist of investments required by various state statutes to be deposited or pledged to state agencies. Restricted deposits are classified as long-term regardless of the contractual maturity date due to the nature of the states’ requirements. Our investments are subject to interest rate risk and will decrease in value if market rates increase. Assuming a hypothetical and immediate 1% increase in market interest rates at December 31, 2004, the fair value of our fixed income investments would decrease by approximately $4.1 million. Declines in interest rates over time will reduce our investment income.

INFLATION

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.

COMPLIANCE COSTS

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 may be required. 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.

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Item 8. Financial Statements and Supplementary Data

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

QUARTERLY SELECTED FINANCIAL INFORMATION

(In thousands, except share data and membership data)

(Unaudited)

	For the Quarter Ended
	March 31, 2004		June 30, 2004		September 30, 2004		December 31, 2004
Total revenues	$	225,525	$	233,608	$	253,743	$	288,064
Earnings from operations		14,684		15,937		16,471		17,444
Earnings before income taxes		16,104		17,172		18,028		18,983
Net earnings	$	10,138	$	10,813	$	11,351	$	12,010
Per share data:
Basic earnings per common share	$	0.25	$	0.27	$	0.28	$	0.29
Diluted earnings per common share	$	0.24	$	0.25	$	0.26	$	0.27
Period end membership		522,400		533,300		641,600		772,700
	For the Quarter Ended
	March 31, 2003		June 30, 2003		September 30, 2003		December 31, 2003
Total revenues	$	177,434	$	186,232	$	198,753	$	207,311
Earnings from operations		10,147		10,336		12,640		13,804
Earnings before income taxes		11,094		11,589		13,814		15,396
Net earnings	$	7,161	$	7,708	$	8,704	$	9,697
Per share data:
Basic earnings per common share	$	0.22	$	0.23	$	0.24	$	0.24
Diluted earnings per common share	$	0.20	$	0.22	$	0.22	$	0.23
Period end membership		419,300		438,700		467,100		489,600

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

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures - 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, 2004. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2004, 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.

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Management’s Report on Internal Control Over Financial Reporting - Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2004. Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Management has excluded the FirstGuard subsidiaries from its assessment of internal control over financial reporting as of December 31, 2004 because they were acquired by the Company in a purchase business combination effective December 1, 2004. The FirstGuard subsidiaries are wholly owned subsidiaries whose total assets and total revenues represent 29% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2004.

Changes in Internal Control Over Financial Reporting - 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 quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant

(a) Directors of the Registrant

Information concerning our directors will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Election of Directors.” This portion of the Proxy Statement is incorporated herein by reference.

(b) Executive Officers of the Registrant

The following table sets forth information regarding our executive officers, including their ages at January 31, 2005:

Name	Age	Position
Michael F. Neidorff	62	Chairman, President and Chief Executive Officer
Joseph P. Drozda, Jr., M.D.	59	Executive Vice President, Operations
James D. Donovan, Jr.	54	Senior Vice President, New Products and New Markets
Marie J. Glancy	46	Senior Vice President, Government Relations
Carol E. Goldman	47	Senior Vice President, Chief Administration Officer
Cary D. Hobbs	37	Senior Vice President, Strategy and Business Implementation
William N. Scheffel	51	Senior Vice President and Controller
Brian G. Spanel	49	Senior Vice President and Chief Information Officer
Lisa M. Wilson	40	Senior Vice President, Investor Relations
Karey L. Witty	40	Senior Vice President, Chief Financial Officer, Secretary and Treasurer

Michael F. Neidorff has served as our President, Chief Executive Officer and Chairman of our board of directors since May 2004. From May 1996 to May 2004 Mr. Neidorff served as President, Chief Executive Officer and as a member of our board of directors. 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.

James D. Donovan, Jr., MPH has served as our Senior Vice President, New Products and New Markets since September 2004. From September 1995 to March 2004, Mr. Donovan served as Chief Executive Officer of Amerigroup Texas, Inc., a subsidiary of Amerigroup Corporation. From 1973 to August 1995, Mr. Donovan served in a variety of roles for Kaiser Permanente Medical Care Program, a not-for-profit managed care organization.

Marie J. Glancy has served as our Senior Vice President, Government Relations since January 2005 and as our Vice President, Government Relations from July 2003 to December 2004. From 1996 to July 2003, Ms. Glancy served as a public policy executive for Deere and Company.

46

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.

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.

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. 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.

Lisa M. Wilson has served as our Senior Vice President, Investor Relations since January 2005 and as our Vice President, Investor Relations from March 2004 to December 2004. Ms. Wilson has worked as a consultant for Centene since our initial public offering in 2001. From 1995 to March 2004, Ms. Wilson served as the founder and President of In-Site Communications, an investor relations firm in New York, New York.

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. Mr. Witty is a Certified Public Accountant.

Information concerning our executive officers’ compliance with Section 16(a) of the Securities Exchange Act will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Section 16(a) Beneficial Ownership Reporting Compliance.” These portions of our Proxy Statement are incorporated herein by reference. Information concerning our audit committee financial expert and identification of our audit committee will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Information about Corporate Governance.” Information concerning our code of ethics will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Code of Business Conduct and Ethics.”

Item 11. Executive Compensation

Information concerning executive compensation will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Information About Executive Compensation.” This portion of the Proxy Statement is incorporated herein by reference. The sections entitled “Compensation Committee Report” and “Stock Performance Graph” in our 2005 Proxy Statement are not incorporated herein by reference.

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

Information concerning the security ownership of certain beneficial owners and management and our equity compensation plans will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Information About Stock Ownership” and “Equity Compensation Plan Information.” These portions of the Proxy Statement are incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Information concerning certain relationships and related transactions will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Related Party Transactions.” This portion of our Proxy Statement is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Information concerning principal accountant fees and services will appear in our Proxy Statement for our 2005 annual meeting of stockholders under “Independent Auditor Fees.” This portion of our Proxy Statement is incorporated herein by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

	Page
1. Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	49
Consolidated Balance Sheets as of December 31, 2004 and 2003	51
Consolidated Statements of Earnings for the Years Ended December 31, 2004, 2003 and 2002	52
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2004, 2003 and 2002	53
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002	54
Notes to Consolidated Financial Statements	55
2. Financial Statement Schedules
Report of Independent Registered Public Accounting Firm on Financial Statement Schedule	70
Schedule II—Valuation and Qualifying Accounts	71
3. Exhibits
The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this filing.

48

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Centene Corporation:

We have completed an integrated audit of Centene Corporation’s 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of Centene Corporation and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 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 the standards of the Public Company Accounting Oversight Board (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 of financial statements 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.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control – Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance

49

with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded the FirstGuard subsidiaries from its assessment of internal control over financial reporting as of December 31, 2004 because they were acquired by the Company in a purchase business combination during 2004. We have also excluded the FirstGuard subsidiaries from our audit of internal control over financial reporting. The FirstGuard subsidiaries are wholly-owned subsidiaries whose total assets and total revenues represent 29% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2004.

/s/    PRICEWATERHOUSECOOPERS LLP

St. Louis, Missouri

February 24, 2005

50

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,
	2004			2003
ASSETS
Current assets:
Cash and cash equivalents	$	84,105		$	64,346
Premium and related receivables, net of allowances of $462 and $607, respectively		31,475			20,308
Short-term investments, at fair value (amortized cost $94,442 and $15,192, respectively)		94,283			15,160
Other current assets		14,429			10,487
Total current assets		224,292			110,301
Long-term investments, at fair value (amortized cost $117,177 and $183,749, respectively)		116,787			184,811
Restricted deposits, at fair value (amortized cost $22,295 and $20,201, respectively)		22,187			20,364
Property, software and equipment		43,248			23,106
Goodwill		101,631			13,066
Other intangible assets		14,439			6,294
Other assets		5,350			4,750
Total assets	$	527,934		$	362,692
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims liabilities	$	165,980		$	106,569
Accounts payable and accrued expenses		31,737			17,965
Unearned revenue		3,956			3,673
Current portion of long-term debt and notes payable		486			579
Total current liabilities		202,159			128,786
Long-term debt		46,973			7,616
Other liabilities		7,490			6,175
Total liabilities		256,622			142,577
Stockholders’ equity:
Common stock, $.001 par value; authorized 100,000,000 shares; issued and outstanding 41,316,122 and 40,263,848 shares, respectively		41			40
Additional paid-in capital		165,391			157,360
Accumulated other comprehensive income:
Unrealized (loss) gain on investments, net of tax		(407	)		740
Retained earnings		106,287			61,975
Total stockholders’ equity		271,312			220,115
Total liabilities and stockholders’ equity	$	527,934		$	362,692

See notes to consolidated financial statements.

51

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except share data)

	Year Ended December 31,
	2004			2003			2002
Revenues:
Premiums	$	991,673		$	759,763		$	461,030
Services		9,267			9,967			457
Total revenues		1,000,940			769,730			461,487
Expenses:
Medical costs		800,476			626,192			379,468
Cost of services		8,065			8,323			341
General and administrative expenses		127,863			88,288			50,072
Total operating expenses		936,404			722,803			429,881
Earnings from operations		64,536			46,927			31,606
Other income (expense):
Investment and other income		6,431			5,160			9,575
Interest expense		(680	)		(194	)		(45	)
Earnings before income taxes		70,287			51,893			41,136
Income tax expense		25,975			19,504			15,631
Minority interest		—			881			116
Net earnings	$	44,312		$	33,270		$	25,621
Earnings per share:
Basic earnings per common share	$	1.09		$	0.93		$	0.82
Diluted earnings per common share	$	1.02		$	0.87		$	0.73
Weighted average number of shares outstanding:
Basic		40,820,909			35,704,426			31,432,080
Diluted		43,616,445			38,422,152			34,932,232

See notes to consolidated financial statements.

52

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

	Common Stock
	$.001 Par Value Shares	Amt		Additional Paid-in Capital		Unrealized Gain (Loss) on Investments			Retained Earnings			Total
Balance, December 31, 2001	30,255,336	$	30	$	60,837	$	135		$	3,087		$	64,089
Net earnings	—		—		—		—			25,621			25,621
Change in unrealized investment gains, net of $559 tax	—		—		—		952			—			952
Comprehensive earnings													26,573
Common stock issued for stock options and employee stock purchase plan	820,476		1		490		—			—			491
Proceeds from stock offering	1,411,486		1		10,317		—			—			10,318
Stock compensation expense	—		—		270		—			—			270
Tax benefits related to stock options	—		—		442		—			—			442
Balance, December 31, 2002	32,487,298	$	32	$	72,356	$	1,087		$	28,708		$	102,183
Net earnings	—		—		—		—			33,270			33,270
Change in unrealized investment gains, net of $(186) tax	—		—		—		(347	)		—			(347	)
Comprehensive earnings													32,923
Common stock issued for stock options and employee stock purchase plan	876,550		1		1,144		—			—			1,145
Proceeds from stock offering	6,900,000		7		81,306		—			—			81,313
Stock compensation expense	—		—		188		—			—			188
Tax benefits related to stock options	—		—		2,366		—			—			2,366
Cash paid for fractional share impact of stock split	—		—		—		—			(3	)		(3	)
Balance, December 31, 2003	40,263,848	$	40	$	157,360	$	740		$	61,975		$	220,115
Net earnings	—		—		—		—			44,312			44,312
Change in unrealized investment gains, net of $(703) tax	—		—		—		(1,147	)		—			(1,147	)
Comprehensive earnings													43,165
Common stock issued for stock options and employee stock purchase plan	1,052,274		1		4,065		—			—			4,066
Stock compensation expense	—		—		650		—			—			650
Tax benefits related to stock options	—		—		3,316		—			—			3,316
Balance, December 31, 2004	41,316,122	$	41	$	165,391	$	(407	)	$	106,287		$	271,312

See notes to consolidated financial statements.

53

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net earnings	$	44,312		$	33,270		$	25,621
Adjustments to reconcile net earnings to net cash provided by operating activities—
Depreciation and amortization		10,014			6,448			2,565
Tax benefits related to stock options		3,316			2,366			442
Stock compensation expense		650			188			270
Minority interest		—			(881	)		(116	)
Gain on sale of investments		(138	)		(1,646	)		(649	)
Tax benefits of pre-acquisition net operating losses		3,295			—			—
Changes in assets and liabilities—
Premium and related receivables		(425	)		(2,364	)		(2,449	)
Other current assets		(786	)		(3,180	)		(1,463	)
Deferred income taxes		(1,638	)		772			(574	)
Other assets		(728	)		223			857
Medical claims liabilities		34,501			15,053			15,386
Unearned revenue		283			3,673			(827	)
Accounts payable and accrued expenses		6,483			1,531			1,468
Other operating activities		266			546			(872	)
Net cash provided by operating activities		99,405			55,999			39,659
Cash flows from investing activities:
Purchase of property, software and equipment		(25,009	)		(19,162	)		(3,918	)
Purchase of investments		(254,358	)		(435,282	)		(192,371	)
Sales and maturities of investments		243,623			319,564			127,706
Acquisitions, net of cash acquired		(86,739	)		(5,861	)		(11,096	)
Net cash used in investing activities		(122,483	)		(140,741	)		(79,679	)
Cash flows from financing activities:
Proceeds from issuance of common stock		—			81,313			10,318
Proceeds from exercise of stock options		4,066			1,145			491
Proceeds from borrowings		45,860			8,581			—
Reduction of long-term debt and notes payable		(6,596	)		(386	)		—
Other financing activities		(493	)		(1,221	)		—
Net cash provided by financing activities		42,837			89,432			10,809
Net increase (decrease) in cash and cash equivalents		19,759			4,690			(29,211	)
Cash and cash equivalents, beginning of period		64,346			59,656			88,867
Cash and cash equivalents, end of period	$	84,105		$	64,346		$	59,656
Interest paid	$	494		$	176		$	28
Income taxes paid	$	20,518		$	19,935		$	16,433

See notes to consolidated financial statements.

54

CENTENE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share data)

1. Organization and Operations

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 Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin, and contracts with other managed care organizations to provide risk and non-risk management services. Centene’s Specialty Services segment contracts with Centene owned companies, as well as other healthcare organizations, to provide specialty services including behavioral health, nurse triage and treatment compliance.

In November 2004, the Company declared a two-for-one stock split effected in the form of a 100% stock dividend, payable December 17, 2004 to shareholders of record on November 24, 2004. In May 2004, the Company’s stockholders approved an increase in the authorized shares of common stock to 100,000,000 shares. 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 these stock splits and the increase in authorized shares.

2. Public Stock Offerings

In August 2003, the Company closed a follow-on public offering of 6,900,000 shares of common stock at $12.50 per share. Centene received net proceeds of $81,313 from this offering.

In June 2002, the Company closed a follow-on public offering whereby 15,838,516 shares were sold by selling stockholders and 1,411,486 shares were sold by the Company at $8.25 per share. Centene received net proceeds of $10,318 from this offering.

3. Summary of Significant Accounting Policies

Principles of Consolidation

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.

Estimates

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.

Cash and Cash Equivalents

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

Investments

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

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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

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.

Property, Software and Equipment

Property, software and equipment is stated at cost less accumulated depreciation. Capitalized software consists of certain costs incurred in the development of internal-use software, including external direct costs of materials and services and payroll costs of employees devoted to specific software development. Depreciation is calculated principally by the straight-line method over estimated useful lives ranging from 40 years for buildings, three to five 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 one and ten years.

Intangible Assets

Intangible assets represent assets acquired in purchase transactions and consist of non-compete agreements, 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.

Goodwill is reviewed at each year-end for impairment. In addition, the Company will perform an impairment analysis of other intangible assets 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.

Medical Claims Liabilities

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, 2004; however, actual claim payments may differ from established estimates.

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Revenue Recognition

The majority of the Company’s Medicaid Managed Care premium revenue is received monthly based on fixed rates per member as determined by state contracts. Some contracts allow for additional premium related to certain supplemental services provided such as maternity deliveries. Revenue is recognized as earned over the covered period of services. Revenues are recorded based on membership and eligibility data provided by the states, which may be adjusted by the states for updates to this membership and eligibility data. These adjustments are immaterial in relation to total revenue recorded and are reflected in the period known. 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 treatment 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 judgment on the collectibility of these accounts.

Significant Customers

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 June 30, 2005 and August 31, 2007 are expected to be renewed. Contracts with the states of Indiana, New Jersey, Texas and Wisconsin each accounted for over 10% of the Company’s revenues for the year ended December 31, 2004.

Reinsurance

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 $200 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 $3,730, $5,345 and $1,542 in 2004, 2003 and 2002, respectively. Reinsurance expenses were approximately $6,724, $6,185 and $3,981 in 2004, 2003 and 2002, respectively. Reinsurance recoveries, net of expenses, are included in medical costs.

Other Income (Expense)

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.

Interest expense consists of borrowings under our credit facility, mortgage interest and credit facility fees.

Income Taxes

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

57

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.

Stock Based Compensation

The Company accounts for stock based compensation plans in accordance with the intrinsic value based method of Accounting Principles Board Opinion No. 25. 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 for stock options and restricted stock unit awards is recognized on a straight-line basis over the vesting period, generally five years for stock options and five to ten years for restricted stock unit awards. The Company recognized $650, $188 and $270 during the years ended December 31, 2004, 2003 and 2002, 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:

	2004		2003		2002
Net earnings	$	44,312	$	33,270	$	25,621
Pro-forma stock-based employee compensation expense determined under fair value based method, net of related tax effects		3,490		2,261		1,556
Pro forma net earnings	$	40,822	$	31,009	$	24,065
Basic earnings per common share:
As reported	$	1.09	$	0.93	$	0.82
Pro forma		1.00		0.87		0.77
Diluted earnings per common share:
As reported	$	1.02	$	0.87	$	0.73
Pro forma		0.94		0.81		0.69

Additional information regarding the stock option plans is included in Note 14.

Reclassifications

Certain amounts in the consolidated financial statements have been reclassified to conform to the 2004 presentation. These reclassifications have no effect on net earnings or stockholders’ equity as previously reported.

Recent Accounting Pronouncements

In December 2004, SFAS No. 123 (revised 2004), “Share Based Payment,” was issued. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement requires public entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The grant date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. This Statement is required to be adopted by the Company by July 1, 2005. The effect of expensing stock options in accordance with the original SFAS No. 123 is presented above under the heading Stock Based Compensation. After the adoption of SFAS No. 123 (revised 2004) the level of stock compensation expense may differ depending on the fair value method and assumptions utilized.

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

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the identification and consolidation of variable interest entities (VIEs) 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.

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.

4. Acquisitions

SummaCare

In January 2005, the Company announced a definitive agreement to acquire the Medicaid-related assets in Ohio of SummaCare, Inc. The purchase price of approximately $31,000 plus transaction costs will be allocated to the assets acquired and liabilities assumed according to estimated fair values. This transaction is anticipated to close in the second quarter of 2005 subject to regulatory approvals.

FirstGuard

The Company purchased FirstGuard Inc. and FirstGuard Health Plan, Inc. from Swope Community Enterprises (Swope) effective December 1, 2004. FirstGuard Inc.’s subsidiary, FirstGuard Health Plan Kansas, serves approximately 94,000 Medicaid and SCHIP members throughout the state of Kansas and FirstGuard Health Plan, Inc. serves approximately 41,000 Medicaid members in Missouri (collectively, FirstGuard). Prior to our acquisition of FirstGuard, FirstGuard, Inc. acquired the 20% interest in FirstGuard Health Plan Kansas, Inc. held by a third-party. Swope has indemnified Centene with respect to any claims arising out of the purchase of the 20% interest. Centene paid approximately $96,133 in cash and transaction costs. In accordance with terms in the agreement, the purchase price may be adjusted on certain conditions up to sixteen months after the acquisition date. The results of operations for FirstGuard are included in the consolidated financial statements since December 1, 2004.

The purchase price and costs associated with the acquisition exceeded the preliminary estimated fair value of the net tangible assets acquired by approximately $91,756. We have preliminarily allocated the excess purchase price over the fair value of the net tangible assets acquired to identifiable intangible assets of $8,000 and associated deferred tax liabilities of $3,040 and goodwill of approximately $86,796. The identifiable intangible assets have an estimated useful life of 10 years. The acquired goodwill is not deductible for income tax purposes. Our preliminary estimate of the fair value of the tangible assets/(liabilities) as of the acquisition date, which is subject to further refinement, is as follows:

Cash, cash equivalents and investments	$	51,004
Premium and related receivables and other current assets		13,511
Property, software and equipment		292
Medical claims liabilities		(24,909	)
Accounts payable and accrued expenses		(7,235	)
Due to seller		(28,286	)
Net tangible assets acquired	$	4,377

The following unaudited pro forma information presents the results of operations of Centene and subsidiaries as if the FirstGuard acquisition described above had occurred at the beginning of each period

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presented. 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.

	2004		2003
Revenue	$	1,222,396	$	1,003,107
Net earnings		51,466		46,409
Diluted earnings per common share	$	1.18	$	1.21

Family Health Plan

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 $6,864. The cost to acquire the Medicaid-related assets has been allocated to the assets acquired and liabilities assumed according to estimated fair values.

The purchase price allocation resulted in identified intangible assets of $1,800, representing purchased contract rights, provider network and a non-compete agreement. The intangibles are being amortized over periods ranging from five to ten years. In addition, goodwill approximated $5,064 which is deductible for tax purposes.

HMO Blue Texas

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.

Cenpatico Behavioral Health

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). In September 2004, the Company renamed the subsidiary Cenpatico Behavioral Health, LLC (Cenpatico). The consolidated financial statements include the results of operations of Cenpatico since March 1, 2003. The Company paid $1,800 and assumed net liabilities of approximately $1,939 for its purchase of Cenpatico. The cost to acquire the ownership interest has been allocated to the assets acquired and liabilities assumed according to estimated fair values. The allocation has resulted in goodwill of approximately $3,739. The goodwill is not deductible for tax purposes.

ScriptAssist

In March 2003, the Company purchased contract and name rights of ScriptAssist, LLC (ScriptAssist), a treatment 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.

University Health Plans

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 $5,027 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.

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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, 2002. 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.

	2002
Revenue	$	567,048
Net earnings		25,869
Diluted earnings per common share	$	0.74

Texas Universities Health Plan

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.

Bankers Reserve

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 $306 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, 2004 Separate Account balances of $3,547 are included in Other assets and Other liabilities in the consolidated balance sheets.

5. Short-term and Long-term Investments and Restricted Deposits

Short-term and long-term investments and restricted deposits available for sale by investment type at December 31, 2004 consist of the following:

	December 31, 2004
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	53,171	$	104	$	(317	)	$	52,958
Corporate securities		97,958		77		(473	)		97,562
State and municipal securities		71,428		294		(335	)		71,387
Asset backed securities		3,156		—		(7	)		3,149
Life insurance contracts		8,201		—		—			8,201
Total	$	233,914	$	475	$	(1,132	)	$	233,257

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Substantially all of the investments in a gross unrealized loss position at December 31, 2004 have been in an unrealized loss position for less than 12 months. These investments had an estimated market value of $164,318 and amortized cost of $165,450 at December 31, 2004. The Company monitors these investments for other than temporary impairment. These investments have experienced a decline in value due to changes in market interest rates. Based on the credit quality of the investments and our intent and ability to hold these investments to recovery (which may be maturity), no other than temporary impairment has been recorded.

Short-term and long-term investments and restricted deposits available for sale by investment type at December 31, 2003 consist of the following:

	December 31, 2003
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	19,570	$	163	$	—		$	19,733
State and municipal securities		198,695		1,344		(314	)		199,725
Corporate securities		877		—		—			877
Total	$	219,142	$	1,507	$	(314	)	$	220,335

The contractual maturity of short-term and long-term investments and restricted deposits as of December 31, 2004, are as follows:

	Investments				Restricted Deposits
	Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
One year or less	$	94,442	$	94,283	$	6,876	$	6,846
One year through five years		95,500		95,083		14,591		14,476
Five years through ten years		21,677		21,704		828		865
Total	$	211,619	$	211,070	$	22,295	$	22,187

Actual maturities may differ from contractual maturities due to call or prepayment options. Asset backed securities are included in the one year through five years category, and life insurance contracts are included in the five years through ten years category.

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

	2004			2003			2002
Gross realized gains	$	861		$	1,859		$	698
Gross realized losses		(723	)		(213	)		(49	)
Net realized gains	$	138		$	1,646		$	649

Various state statutes require the Company’s managed care subsidiaries to deposit or pledge minimum amounts of investments to state agencies. Securities with a fair market value of $22,187 and $20,364 were deposited or pledged to state agencies by Centene’s managed care subsidiaries at December 31, 2004 and 2003, respectively. These investments are classified as long-term restricted deposits in the consolidated financial statements due to the nature of the states’ requirements.

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6. Property, Software and Equipment

Property, software and equipment consist of the following as of December 31:

	2004			2003
Building	$	13,649		$	10,971
Land		13,129			2,320
Computer software		10,976			4,878
Computer hardware		7,052			4,311
Furniture and office equipment		6,197			5,330
Leasehold improvements		4,321			3,663
		55,324			31,473
Less—accumulated depreciation		(12,076	)		(8,367	)
Property, software and equipment, net	$	43,248		$	23,106

Depreciation expense for the years ended December 31, 2004, 2003 and 2002 was $5,149, $3,469 and $1,887, respectively.

7. Intangible Assets

Goodwill balances and the changes therein are as follows:

	Medicaid Managed Care			Specialty Services			Total
Balance as of December 31, 2002	$	5,022		$	—		$	5,022
Acquisitions		2,628			3,895			6,523
Purchase price allocation adjustments		1,521			—			1,521
Balance as of December 31, 2003		9,171			3,895			13,066
Acquisitions		91,860			—			91,860
Purchase price allocation adjustments		(3,140	)		(155	)		(3,295	)
Balance as of December 31, 2004	$	97,891		$	3,740		$	101,631

Purchase price allocation adjustments in 2004 were related to the realization of the tax benefits of pre-acquisition net operating loss carryforward amounts.

Other intangible assets at December 31 consist of the following:

							Weighted Average Life in Years
	2004			2003			2004	2003
Purchased contract rights	$	7,318		$	6,492		7.2	7.9
Provider contracts		1,900			1,400		10.0	10.0
Non-compete agreements		300			—		5.0	—
Estimated FirstGuard identifiable intangibles		8,000			—		10.0	—
Other intangible assets		17,518			7,892		7.8	8.3
Less accumulated amortization
Purchased contract rights		(2,611	)		(1,446	)
Provider contracts		(342	)		(152	)
Non-compete agreements		(60	)		—
Estimated FirstGuard identifiable intangibles		(66	)		—
Total accumulated amortization		(3,079	)		(1,598	)
Other intangible assets, net	$	14,439		$	6,294

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Amortization expense was $1,481, $986 and $367 for the years ended December 31, 2004, 2003 and 2002, respectively. The estimated amortization expense for 2005, 2006, 2007, 2008 and 2009 is approximately $2,200, $2,000, $1,900, $1,600 and $1,300, respectively.

8. Income Taxes

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

	2004			2003		2002
Current:
Federal	$	23,652		$	16,776	$	13,661
State		3,038			2,464		2,338
Total current		26,690			19,240		15,999
Deferred		(715	)		264		(368	)
Total expense	$	25,975		$	19,504	$	15,631

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:

	2004			2003			2002
Expected federal income tax expense	$	24,600		$	18,163		$	14,398
State income taxes, net of federal income tax benefit		1,975			1,602			1,520
Tax exempt investment income		(1,030	)		(916	)		(411	)
Other, net		430			655			124
Income tax expense	$	25,975		$	19,504		$	15,631

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

	2004		2003
Medical claims liabilities and other accruals	$	8,696	$	3,992
Allowance for doubtful accounts		175		230
Depreciation and amortization		541		720
Unearned revenue		304		279
Unrealized loss on investments		353		156
Total deferred tax assets		10,069		5,377
Identified intangible assets		4,286		1,288
Unrealized gain on investments		41		472
Prepaid expenses		1,027		409
Depreciation		1,380		566
Total deferred tax liabilities		6,734		2,735
Net deferred tax assets and liabilities	$	3,335	$	2,642

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9. Medical Claims Liabilities

The change in medical claims liabilities is summarized as follows:

	2004			2003			2002
Balance, January 1	$	106,569		$	91,181		$	59,565
Acquisitions		24,909			335			16,230
Incurred related to:
Current year		816,418			645,482			396,715
Prior years		(15,942	)		(19,290	)		(17,247	)
Total incurred		800,476			626,192			379,468
Paid related to:
Current year		681,780			544,309			324,210
Prior years		84,194			66,830			39,872
Total paid		765,974			611,139			364,082
Balance, December 31	$	165,980		$	106,569		$	91,181

Changes in estimates of incurred claims for prior years were attributable to favorable development in all of our markets, including changes in medical utilization and cost trends. These changes in medical utilization and cost trends can be attributable to our medical management programs and changes in our member demographics.

The Company had reinsurance recoverables related to medical claims liabilities of $953 and $1,590 at December 31, 2004 and 2003, respectively, included in premiums and other receivables.

10. Revolving Line of Credit

In September 2004, the Company executed a five-year $100 million Revolving Credit Agreement with various financial institutions and LaSalle Bank National Association as administrative agent and arranger. Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. The agreement is secured by the common stock and membership interests of the Company’s subsidiaries. The agreement contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios, minimum debt-to-EBITDA ratios and minimum tangible net worth. The agreement will expire in September 2009 or on an earlier date in the instance of a default as defined in the agreement. As of December 31, 2004, the Company was in compliance with all covenants. The outstanding borrowings at December 31, 2004 totaled $34,000, consisting of $30,000 bearing interest at 3.71% and $4,000 bearing interest at 5.25%.

11. Notes Payable and Long-term Debt

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. This mortgage was refinanced in November 2004 in conjunction with taking an additional mortgage in the amount of $5,500 related to property purchased to support the Company’s expansion. The mortgages bear interest at the prevailing prime rate less .25%. At December 31, 2004 the mortgages bore interest at 5.00%. The mortgages are collateralized by the respective properties which had a net book value of $25,203 at December 31, 2004. The loans include a financial covenant requiring a minimum rolling twelve-month debt service coverage ratio. As of December 31, 2004, the Company was in compliance with this covenant. Maturities on the mortgages are as follows:

2005	$	486
2006		486
2007		486
2008		486
2009		486
2010		11,029
Total	$	13,459

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In 2003, the Company issued a $581 promissory note payable as part of the acquisition of Cenpatico Behavioral Health. In 2004 this note was paid in full.

12. Stockholders’ Equity

As approved by the Company’s stockholders in May 2004, the Company has 10,000,000 authorized shares of preferred stock at $.001 par value and 100,000,000 authorized shares of common stock at $.001 par value. At December 31, 2004, there were no preferred shares outstanding.

13. Statutory Capital Requirements and Dividend Restrictions

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, 2004 and 2003, Centene’s subsidiaries had aggregate statutory capital and surplus of $123,600 and $64,700, respectively, compared with the required minimum aggregate statutory capital and surplus of $65,100 and $30,900, respectively. The Company received dividends from its managed care subsidiaries of $0, $6,000 and $4,000 during the years ended December 31, 2004, 2003 and 2002, respectively.

14. Stock Incentive Plans

The Company’s stock incentive 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 10,350,000 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.

Option activity for the years ended December 31 is summarized below:

	2004					2003					2002
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning of year		5,438,058		$	6.91		4,665,420		$	3.13		4,268,820		$	0.89
Granted		2,006,500			20.86		1,992,578			13.00		1,467,000			8.28
Exercised		(1,003,098	)		3.76		(877,786	)		1.13		(832,200	)		0.55
Canceled		(258,444	)		10.63		(342,154	)		5.77		(238,200	)		3.66
Options outstanding, end of year		6,183,016		$	11.78		5,438,058		$	6.91		4,665,420		$	3.13
Weighted average remaining life		7.8 years					7.6 years					7.4 years
Weighted average fair value of options granted	$	12.25				$	7.63				$	5.03

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The following table summarizes information about options outstanding as of December 31, 2004:

Options Outstanding					Options Exercisable
Range of Exercise Prices	Options Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Options Exercisable	Weighted Average Exercise Price
$0.00 - $2.49	1,468,212	4.5	$	0.58	1,230,012	$	0.59
$2.50 - $4.99	45,000	7.1		4.67	18,000		4.67
$5.00 - $9.99	1,082,768	7.6		8.00	319,868		7.59
$10.00 - $14.99	1,539,380	8.7		13.28	298,573		13.19
$15.00 - $19.99	1,205,656	9.3		17.32	38,600		15.65
$20.00 - $24.99	37,000	9.8		22.34	—		—
$25.00 - $29.99	805,000	9.9		26.08	—		—
	6,183,016	7.8	$	11.78	1,905,053	$	4.08

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 57%, 53% and 54%; risk-free interest rate of 3.7%, 3.1% and 3.6% and expected lives of 6.0, 6.0 and 7.4 for the years ended December 31, 2004, 2003 and 2002, respectively.

In 2004 the Company granted 1,000,000 restricted stock units with a grant date fair market value per share of $24.60. The restricted stock units will vest as follows: 600,000 in 2009 and 80,000 each in 2010 to 2014.

During 2002, Centene implemented an employee stock purchase plan. The Company has reserved 900,000 shares of common stock and issued 20,676 shares, 18,428 shares and 5,376 shares in 2004, 2003 and 2002, respectively, related to the employee stock purchase plan.

15. Retirement 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 expense related to matching contributions to the plan were $822, $581 and $312 during the years ended December 31, 2004, 2003 and 2002, respectively.

16. Commitments

Centene and its subsidiaries lease office facilities and various equipment under non-cancelable operating leases. Rental expense was $5,482, $3,144 and $2,637 for the years ended December 31, 2004, 2003 and 2002, respectively. Annual non-cancelable minimum lease payments over the next five years and thereafter are as follows:

2005	$	6,766
2006		6,087
2007		5,157
2008		4,276
2009		3,622
Thereafter		7,613
	$	33,521

17. Contingencies

Aurora Health Care, Inc. (Aurora) provides medical professional services under a contract with the Company’s Wisconsin health plan subsidiary. In May 2003, Aurora filed a lawsuit in the Milwaukee County

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Circuit Court claiming the Company had failed to adequately reimburse Aurora for services rendered during the period from 1998 to the present. In 2004 the Court dismissed the claim as filed, but allowed Aurora to replead and seek a declaratory ruling clarifying the contract with respect to reimbursement for ambulatory surgery services. Although the exact amount of the dispute has not been determined, Aurora claims it exceeds $8,000. The Company continues to dispute the claim and plans to defend against this 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.

18. Risks and Uncertainties

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, repurchase agreements, 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.

19. Earnings Per Share

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

	2004		2003		2002
Net earnings	$	44,312	$	33,270	$	25,621
Shares used in computing per share amounts:
Weighted average number of common shares outstanding		40,820,909		35,704,426		31,432,080
Dilutive effect of stock options and stock units (as determined by applying the treasury stock method)		2,795,536		2,717,726		3,500,152
Weighted average number of common shares and potential dilutive common shares outstanding		43,616,445		38,422,152		34,932,232
Basic earnings per common share	$	1.09	$	0.93	$	0.82
Diluted earnings per common share	$	1.02	$	0.87	$	0.73

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The calculation of diluted earnings per common share in 2003 excludes the impact of 1,317,820 shares related to stock options which are antidilutive.

20. Segment Information

With the acquisition of Cenpatico 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 treatment 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.

Segment information as of and for the year ended December 31, 2004, follows:

	Medicaid Managed Care		Specialty Services			Eliminations			Consolidated Total
Revenue from external customers	$	993,304	$	7,636		$	—		$	1,000,940
Revenue from internal customers		60,329		21,923			(82,252	)		—
Total revenue	$	1,053,633	$	29,559		$	(82,252	)	$	1,000,940
Earnings before income taxes	$	71,820	$	(1,533	)	$	—		$	70,287
Total assets	$	519,799	$	8,135		$	—		$	527,934
Depreciation expense	$	4,682	$	467		$	—		$	5,149
Capital expenditures	$	24,726	$	283		$	—		$	25,009

Segment information as of and for the year ended December 31, 2003, follows:

	Medicaid Managed Care		Specialty Services		Eliminations			Consolidated Total
Revenue from external customers	$	760,041	$	9,689	$	—		$	769,730
Revenue from internal customers		14,839		12,374		(27,213	)		—
Total revenue	$	774,880	$	22,063	$	(27,213	)	$	769,730
Earnings before income taxes	$	49,764	$	2,129	$	—		$	51,893
Total assets	$	353,145	$	9,547	$	—		$	362,692
Depreciation expense	$	2,966	$	503	$	—		$	3,469
Capital expenditures	$	18,666	$	496	$	—		$	19,162

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.

21. Comprehensive Earnings

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

	Year Ended December 31,
	2004			2003
Net earnings	$	44,312		$	33,270
Reclassification adjustment, net of tax		(466	)		(529	)
Unrealized (losses) gains on investments available for sale, net of tax		(681	)		182
Total comprehensive earnings	$	43,165		$	32,923

69

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of Centene Corporation:

Our audits of the consolidated financial statements, of management’s assessment of the effectiveness of internal control over financial reporting and of the effectiveness of internal control over financial reporting referred to in our report dated February 24, 2005 appearing in this Annual Report on 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.

/s/ PRICEWATERHOUSECOOPERS LLP

St. Louis, Missouri

February 24, 2005

70

Schedule II

CENTENE CORPORATION

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

(In thousands)

	Balance Beginning of Period		Amounts Charged to Expense			Write-offs of Uncollectible Receivables			Balance End of Period
Allowance for Doubtful Receivables:
Year ended December 31, 2002	$	3,879	$	(971	)	$	(2,689	)	$	219
Year ended December 31, 2003		219		472			(84	)		607
Year ended December 31, 2004		607		407			(552	)		462

71

EXHIBIT INDEX

			INCORPORATED BY REFERENCE
EXHIBIT NUMBER	DESCRIPTION	FILED WITH THIS FORM 10-K	FORM	FILING DATE WITH SEC	EXHIBIT NUMBER
3.1	Certificate of Incorporation of Centene Corporation		S-1	October 9, 2001	3.1
3.1a	Certificate of Amendment to Certificate of Incorporation of Centene Corporation, dated November 8, 2001		S-1/A	November 13, 2001	3.2a
3.1b	Certificate of Amendment to Certificate of Incorporation of Centene Corporation as filed with the Secretary of State of the State of Delaware		10-Q	July 26, 2004	3.1b
3.2	By-laws of Centene Corporation		S-1	October 9, 2001	3.3
4.1	Amended and Restated Shareholders’ Agreement, dated September 23, 1998		S-1	October 9, 2001	4.2
4.2	Rights Agreement between Centene Corporation and Mellon Investor Services LLC, as Rights Agent, dated August 30, 2002		8-K	August 30, 2002	4.1
10.1	Contract for Medicaid/ Badger Care HMO Services between Managed Health Services Insurance Corp. and Wisconsin Department of Health and Family Services.		10-Q	July 26, 2004	10.7
10.2	Contract between the State of Kansas Department of Social and Rehabilitation Services and FirstGuard Health Plan Kansas, Inc.	X
10.3	Contract between the Office of the Medicaid Policy and Planning, the Office of the Children’s Health Insurance Program and Coordinated Care Corporation Indiana, Inc.	X
10.4	1994 Stock Plan of Centene Corporation, shares which are registered on Form S-8 - File Number 333-83190		S-1	October 9, 2001	10.8
10.5	1996 Stock Plan of Centene Corporation, shares which are registered on Form S-8 - File Number 333-83190		S-1	October 9, 2001	10.9
10.6	1998 Stock Plan of Centene Corporation, shares which are registered on Form S-8 - File Number 333-83190		S-1	October 9, 2001	10.10
10.7	1999 Stock Plan of Centene Corporation, shares which are registered on Form S-8 - File Number 333-83190		S-1	October 9, 2001	10.11
10.8	2000 Stock Plan of Centene Corporation, shares which are registered on Form S-8 - File Number 333-83190		S-1	October 9, 2001	10.12

72

10.9	2002 Employee Stock Purchase Plan of Centene Corporation, shares which are registered on Form S-8 - File Number 333-90976		10-Q	April 29, 2002	10.5
10.9a	First Amendment to 2002 Employee Stock Purchase Plan	X
10.10	2003 Stock Incentive Plan of Centene Corporation, shares which are registered on Form S-8 - File Number 333-108467		10-K	February 24, 2004	10.30
10.11	Form of Incentive Stock Option Agreement of Centene Corporation		S-1	October 9, 2001	10.13
10.12	Form of Non-statutory Stock Option Agreement of Centene Corporation		S-1	October 9, 2001	10.14
10.13	Centene Corporation Non-Employee Directors Deferred Stock Compensation Plan		10-Q	October 25, 2004	10.1
10.14	Credit Agreement dated as of September 14, 2004 among Centene Corporation, the various financial institutions party hereto and LaSalle Bank National Association		10-Q	October 25, 2004	10.2
10.15	Executive Employment Agreement between Centene Corporation and Michael F. Neidorff, dated November 8, 2004		8-K	November 8, 2004	10.1
10.16	Executive Employment Agreement between Centene Corporation and Joseph P. Drozda, M.D., dated October 1, 2001		10-Q	April 29, 2002	10.3
10.17	Executive Employment Agreement between Centene Corporation and James D. Donovan, dated September 24, 2004		8-K	November 8, 2004	10.2
10.18	Executive Employment Agreement between Centene Corporation and Carol E. Goldman dated July 1, 2002		10-Q	October 28, 2002	10.2
10.19	Executive Employment Agreement between Centene Corporation and Marie J. Glancy, dated June 6, 2003	X
10.20	Executive Employment Agreement between Centene Corporation and Cary D. Hobbs, dated May 28, 2001		10-K	February 24, 2004	10.18
10.21	Executive Employment Agreement between Centene Corporation and William N. Scheffel, dated December 1, 2003		10-K	February 24, 2004	10.19
10.22	Executive Employment Agreement between Centene Corporation and Brian G. Spanel, dated September 26, 2001		S-1	October 9, 2001	10.16
10.23	Executive Employment Agreement between Centene Corporation and Lisa M. Wilson, dated February 27, 2004	X

73

10.24	Executive Employment Agreement between Centene Corporation and Karey L. Witty, dated January 1, 2001		S-1	October 9, 2001	10.15
10.25	Summary of Board of Director Compensation		8-K	February 11, 2005	10.1
10.26	Summary of Executive Officer Compensation	X
10.27	Stock Purchase Agreement by and between Centene Corporation and Swope Community Enterprises, dated September 28, 2004		10-Q	October 24, 2004	10.3
10.28	Lease Agreement between MHS Consulting Corporation and AVN Air, LLC, dated December 24, 2003		10-K	February 24, 2004	10.31
10.29	Asset Sale and Purchase Agreement by and among Centene Corporation, Buckeye Community Health Plan, Mercy Health Partners, and Family Health Plan, Inc.		10-K	February 24, 2004	10.32
12.1	Computation of ratio of earnings to fixed charges	X
21	List of subsidiaries	X
23	Consent of Independent Registered Public Accounting Firm incorporated by reference in each prospectus constituting part of the Registration Statements on Form S-3 (File Number 333-119944) and on Form S-8 (File Numbers 333-108467, 333-90976 and 333-83190)	X
31.1	Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)	X
31.2	Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)	X
32.1	Certification Pursuant to 18 U.S.C. Section 1350 (Chief Executive Officer)	X
32.2	Certification Pursuant to 18 U.S.C. Section 1350 (Chief Financial Officer)	X

74

SIGNATURES

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 24, 2005.

CENTENE CORPORATION
By:	/s/    MICHAEL F. NEIDORFF
	Michael F. Neidorff Chairman, 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 24, 2005.

Signature	Title
/S/    MICHAEL F. NEIDORFF         Michael F. Neidorff	Chairman, President and Chief Executive Officer (principal executive officer)
/S/    KAREY L. WITTY         Karey L. Witty	Senior Vice President, Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer)
/S/    SAMUEL E. BRADT         Samuel E. Bradt	Director
/S/    STEVE BARTLETT         Steve Bartlett	Director
/S/    ROBERT K. DITMORE         Robert K. Ditmore	Director
/S/    JOHN R. ROBERTS         John R. Roberts	Director
/S/    DAVID L. STEWARD         David L. Steward	Director
/S/    RICHARD P. WIEDERHOLD         Richard P. Wiederhold	Director

75

EX-10.2

Exhibit 10.2

DEPARTMENT OF ADMINISTRATION Division of Purchases BILL GRAVES Governor DAN STANLEY Secretary of Administration JOHN T. HOULIHAN Director of Purchases 900 S.W. Jackson, Room 102-N Landon State Office Building Topeka, KS 66612-1286 (785) 296-2376 FAX (785) 296-7240 http://da.state.ks.us/purch

REQUEST FOR PROPOSAL (RFP)

RFP Number:	02510
PR Number:	03815
Replaces Contract:	33067
Date Mailed:	November 29, 2000
Closing Date:	January 10, 2001, 2:00 PM
Procurement Officer:	Frances J. Welch
Telephone:	785-296-2372
E-Mail Address:	fran.welch@state.ks.us
Web Address:	http://da.state.ks.us/purch
Item:	Capitated Managed Care Services
Agency:	Department of Social and Rehabilitation Services
Location(s):	Topeka, Kansas
Period of Contract:	July 1, 2001 through June 30, 2003 (with three (3) additional optional one-year renewal periods)

Scope:

This Contract shall cover the procurement of Capitated, Managed Care Services for Kansas Title XIX and Title XXI beneficiaries for the Department of Social and Rehabilitation Services during the contract period referenced above.

READ THIS REQUEST CAREFULLY

Failure to abide by all of the conditions of this Request may result in the rejection of a bid. Inquiries about this Request should indicate the contract number and be directed to the procurement officer.

Request For Proposal Number 02510

Page 2

SIGNATURE SHEET

Item:	Capitated Managed Care Services
Agency:	Department of Social and Rehabilitation Services

We submit a proposal to furnish requirements during the contract period in accordance with the specifications and Schedule of Supplies. I hereby certify that I (we) do not have any substantial conflict of interest sufficient to influence the bidding process on this bid. A conflict of substantial interest is one which a reasonable person would think would compromise the open competitive bid process.

Addenda: The undersigned acknowledges receipt of the following addenda:

#1(    )         #2(    )         #3(    )         None(    )

Legal Name of Person, Firm or Corporation __________________________________________________________________________________________
Telephone (800) __________________________	Local  __________________________________________	Fax ________________________________
E-Mail ______________________________________________________________________________________________________________________
Mailing Address ______________________________________________________________________________________________________________
City & State   ____________________________________________________________________________		Zip Code ____________________________
FEIN Number _________________________________________________________________________________________________________________

Please Indicate Taxes Currently Registered for in Kansas:

Corporate Income Tax (    ) Sales Tax (    ) Withholding Tax (    ) Compensating Use Tax (    ) None (    )

(Optional) - The undersigned attests this bidder is not in arrears in taxes due the State of Kansas.

Signature ___________________________________________________________________________	Date ____________________________________
Typed Name of Signature ____________________________________________________________	Title ____________________________________

If awarded a contract and purchase orders are to be directed to an address other than above, indicate mailing address and telephone number below.

Address ______________________________________________________________________________________________________________________
City & State _____________________________________________________________________________		Zip Code ____________________________
Telephone (800) __________________________	Local  __________________________________________	Fax ________________________________
E-Mail ______________________________________________________________________________________________________________________

This pricing is available to Political Subdivisions of the State of Kansas? (See paragraph 3.37)

Yes              No              (Refusal will not be a determining factor in award of this Contract)

Agencies may use State of Kansas Business Procurement Card for purchases from this contract.

Yes              No              (Refusal will not be a determining factor in award of this Contract)

Request for Proposal Number 02510

Page 3

COST PROPOSAL

Vendors shall use the next two pages to submit their bids for the first contract year capitated rates for Title XXI managed care services. Two contracts will be awarded in Region 1 and each contract shall include both Title XIX and Title XXI capitated managed care services throughout all of Region 1. One contract will be awarded in Region 2, for Title XXI services only. This contract shall be for all of Region 2 The vendors awarded contracts in Region 1, MAY supply Title XIX capitated managed care services in Region 2 at each Contractor’s option. Title XIX capitated managed care services may be supplied throughout Region 2 or in selected counties, again at the Contractor’s option.

Title XIX rates are set annually by the Department of Social and Rehabilitation Services (SRS) and their actuaries. These rates are adjusted annually for inflation and policy changes and must be approved by the Health Care Financing Administration (HCFA). The first contract year rates for Title XIX will be issued as an addendum to this RFP in early December, 2000.

Request for Proposal Number 02510

Page 4

This Page Intentionally Left Blank

Request for Proposal Number 02510

Page 5

Title XXI Capitated Bid Rates For Bid Region I

(Vendor acknowledges by completing and submitting this bid sheet that vendor also agrees to provide Title XIX

Capitated Managed Care Services in Region 1, at the Title XIX Rates for the Period July 1, 2001 through June 30,

2002, provided to the vendor as an addendum to this RFP)

	Johnson and Leavenworth Counties	Northeast Kansas (Atchison, Brown, Clay, Cloud, Dickinson, Doniphan, Douglas, Ellsworth, Franklin, Geary, Jackson, Jefferson, Jewell, Lincoln, Marshall, Miami, Mitchell, Nemaha, Ottawa, Pottawatomie, Republic, Riley, Saline, Shawnee, Wabaunsee, and Washington Counties)	Sedgwick County	Southeast Kansas (Allen, Anderson, Bourbon, Butler, Chase, Chautauqua, Cherokee, Coffey, Cowley, Crawford, Elk, Greenwood, Harper, Harvey, Kingman, Labette, Linn, Lyon, Marion, McPherson, Montgomery, Morris, Neosho, Osage, Reno, Rice, Sumner, Wilson, and Woodson Counties)	Western Kansas (Barber, Barton, Clark, Comanche, Edwards, Ellis, Ford, Graham, Hodgeman, Kiowa, Ness, Norton, Osborne, Pawnee, Phillips, Pratt, Rooks, Rush, Russell, Smith, Stafford, and Trego Counties)	Wyandotte County
Up to age 1 Male	$	$	$	$	$	$
Up to age 1 Female	$	$	$	$	$	$
1 through 5 Male	$	$	$	$	$	$
1 through 5 Female	$	$	$	$	$	$
6 through 14 Male	$	$	$	$	$	$
6 through 14 Female	$	$	$	$	$	$
15 through 19 Male	$	$	$	$	$	$
15 through 19 Female	$	$	$	$	$	$
Pregnant women to age 19	$	$	$	$	$	$

The county assignment to bid regions is based on current Title XIX assignment. In the event that there are any changes in these assignments when the actuaries prepare the FY2002 capitation rates for Title XIX, a new bid sheet will be issued as an addendum to this RFP. Please enter your bid for each cohort in Region 1

Request for Proposal Number 02510

Page 6

This Page Intentionally Left Blank

Request for Proposal Number 02510

Page 7

Title XXI Capitated Bid Rates

For Bid Region 2

	Western Kansas (Cheyenne, Decatur, Finney, Gove, Grant, Gray, Greeley, Hamilton, Haskell, Kearny, Lane, Logan, Meade, Morton, Rawlins, Scott, Seward, Sheridan, Sherman, Stanton, Stevens, Thomas, Wallace, and Wichita Counties)
Up to age 1 Male	$
Up to age 1 Female	$
1 through 5 Male	$
1 through 5 Female	$
6 through 14 Male	$
6 through 14 Female	$
15 through 19 Male	$
15 through 19 Female	$
Pregnant women to age 19	$

The county assignment to bid regions is based on current Title XIX assignment. In the event that there are any changes in these assignments when the actuaries prepare the FY2002 capitation rates for Title XIX, a new bid sheet will be issued as an addendum to this RFP. Please enter your bid for each cohort in Region 2.

Request for Proposal Number 02510

Page 8

SECTION I

CONDITIONS TO BIDDING

1.1 Proposal Reference Number: The above-number has been assigned to this Request and MUST be shown on all correspondence or other documents associated with this Request and MUST be referred to in all verbal communications. All inquiries, written or verbal, shall be directed to the procurement officer only.

Frances J. Welch

Telephone: 785-296-2372

Facsimile: 785-296-7240

E-mail Address:  first.last@state.ks.us

Kansas Division of Purchases

900 SW Jackson, Room 102N

Topeka, KS 66612-1286

No communication is to be had with any other State employee regarding this Request except with designated state participants in attendance ONLY DURING:

Negotiations

Contract Signing

as otherwise specified in this Request.

Violations of this provision by vendor or state agency personnel may result in the rejection of all proposals.

1.2 Negotiated Procurement: This is a negotiated procurement pursuant to K.S.A. 75-37,102. Final evaluation and award is made by the Procurement Negotiation Committee (PNC) or their designees, which consists of the following:

Secretary of Department of Administration;

Director of Purchases, Department of Administration; and

Head of Using Agency

1.3 Appearance Before Committee: Any, all or no vendors may be required to appear before the PNC to explain the vendor’s understanding and approach to the project and/or respond to questions from the PNC concerning the proposal; or, the PNC may award to the low bidder without conducting negotiations. The PNC reserves the right to request information from vendors as needed. If information is requested, the PNC is not required to request the information of all vendors.

Vendors selected to participate in negotiations may be given an opportunity to submit a best and final offer to the PNC. Prior to a specified cut-off time for best and final offers, vendors may submit revisions to their technical and cost proposals. Meetings before the PNC are not subject to the Open Meetings Act. Vendors are prohibited from electronically recording these meetings. All information received prior to the cut-off time will be considered part of the vendor’s best and final offer.

No additional revisions shall be made after the specified cut-off time unless requested by the PNC.

Request for Proposal Number 02510

Page 9

1.4 Pre-proposal Conference: A pre-proposal conference will be held at at 10:00 a.m., on December 19, 2000:

Docking State Office Cafeteria, Rooms A and B

915 SW Harrison

Topeka KS 66612

Attendance is not required at the pre-proposal conference but is encouraged. Due to space limitations, vendors should attend with no more than two representatives. All questions requesting clarification of the Request to be addressed at the pre-proposal conference must be submitted in writing to the Procurement Officer (FAX 785-296-7240) prior to the close of business on December 13, 2000. Impromptu questions will be permitted and spontaneous unofficial answers provided, however bidders should clearly understand that the only official answer or position of the State of Kansas will be in writing.

Failure to notify the Procurement Officer of any conflicts or ambiguities in the Request may result in items being resolved in the best interest of the State. Any modification to this Request as a result of the pre-proposal conference, as well as written answers to written questions, shall be made in writing by addendum and mailed to all vendors who received the original request from the Division of Purchases. Only written communications are binding.

1.5 Cost of Preparing Proposal: The cost of developing and submitting the proposal is entirely the responsibility of the vendor. This includes costs to determine the nature of the engagement, preparation of the proposal, submitting the proposal, negotiating for the contract and other costs associated with this Request. All responses will become the property of the State of Kansas and will be a matter of public record subsequent to signing of the contract or rejection of all bids.

1.6 Evaluation of Proposals: Award shall be made in the best interest of the State as determined by the Procurement Negotiating Committee or their designees. Consideration may focus toward but is not limited to:

1.6.1 cost. Vendors are not to inflate prices in the initial proposal as cost is a factor in determining who may receive an award or be invited to formal negotiations;

1.6.2 response format as required by this Request;

1.6.3 adequacy and completeness of proposal;

1.6.4 vendor’s understanding of the project;

1.6.5 compliance with the terms and conditions of the Request;

1.6.6 experience in providing like services;

1.6.7 qualified staff;

1.6.8 methodology to accomplish tasks;

1.6.9 financial stability.

1.7 Acceptance or Rejection: The Committee reserves the right to accept or reject any or all proposals or part of a proposal; to waive any informalities or technicalities; clarify any ambiguities in proposals; modify any criteria in this Request; and unless otherwise specified, to accept any item in a proposal.

1.8 Contract: The successful vendor will be required to enter into a written contract with the State. The vendor agrees to accept the provisions of form DA-146a, Contractual Provisions Attachment, which is incorporated into all contracts with the State and is attached to this Request.

Request for Proposal Number 02510

Page 10

1.9 Contract Documents: This Request and any amendments and the response and any amendments of the successful vendor shall be incorporated along with the DA-146a into the written contract which shall compose the complete understanding of the parties.

In the event of a conflict in terms of language among the documents, the following order of precedence shall govern:

1.9.1 Form DA-146a;

1.9.2 written modifications to the executed contract;

1.9.3 written contract signed by the parties;

1.9.4 this Request including any and all addenda; and

1.9.5 contractor’s written proposal submitted in response to this Request as finalized.

1.10 Contract Formation: No contract shall be considered to have been entered into by the State until all statutorily required signatures and certifications have been rendered; funds for the contract have been encumbered with the Division of Accounts and Reports; and a written contract has been signed by the successful vendor.

1.11 Open Records Act (K.S.A. 45-205 et seq.): All proposals become the property of the State of Kansas. Kansas law requires all information contained in proposals to become open for public review once a contract is signed or all proposals are rejected.

1.12 Federal, State and Local Taxes-Governmental Entity: Unless otherwise specified, the proposal price shall include all applicable federal, state and local taxes. The successful vendor shall pay all taxes lawfully imposed on it with respect to any product or service delivered in accordance with this Request. The State of Kansas is exempt from state sales or use taxes and federal excise taxes for direct purchases. These taxes shall not be included in the vendor’s price quotations.

1.13 Debarment of State Contractors. Any vendor who defaults on delivery as defined in this Request may, be barred (a) After reasonable notice to the person involved and reasonable opportunity for that person to be heard, the secretary of administration, after consultation with the contracting agency and the attorney general, shall have authority to debar a person for cause from consideration for award of contracts. The debarment shall not be for a period exceeding three years. The secretary, after consultation with the contracting agency and the attorney general, shall have authority to suspend a person from consideration for award of contracts if there is probable cause to believe that the person has engaged in any activity which might lead to debarment. The suspension shall not be for a period exceeding three months unless an indictment has been issued for an offense which would be a cause for debarment under subsection (b), in which case the suspension shall, at the request of the attorney general, remain in effect until after the trial of the suspended person.

1.14 Insurance: The State shall not be required to purchase any insurance against loss or damage to any personal property nor shall the State establish a “self-insurance” fund to protect against any loss or damage. Subject to the provisions of the Kansas Tort Claims Act, the vendor shall bear the risk of any loss or damage to any personal property.

Request for Proposal Number 02510

Page 11

SECTION II

PROPOSAL INSTRUCTIONS

2.1 Preparation of Proposal: Prices are to be entered in spaces provided on the proposal cost form if provided herein. Computations and totals shall be indicated where required. The Committee has the right to rely on any price quotes provided by vendors. The vendor shall be responsible for any mathematical error in price quotes. The Committee reserves the right to reject proposals which contain errors.

ALL COPIES OF COST PROPOSALS SHALL BE SUBMITTED IN A SEPARATE SEALED ENVELOPE OR CONTAINER SEPARATE FROM THE TECHNICAL PROPOSAL. THE OUTSIDE SHALL BE IDENTIFIED CLEARLY AS “COST PROPOSAL OR TECHNICAL PROPOSAL” WITH THE REQUEST NUMBER AND CLOSING DATE.

A proposal shall not be considered for award if the price in the proposal was not arrived at independently and without collusion, consultation, communication or agreement as to any matter related to price with any other vendor, competitor or public officer/employee.

Technical proposals shall contain a concise description of vendor’s capabilities to satisfy the requirements of this Request For Proposal with emphasis on completeness and clarity of content. Repetition of terms and conditions of the Request For Proposal without additional clarification shall not be considered responsive.

Vendors are instructed to prepare their Technical Proposal following the same sequence as the Request For Proposal.

2.2 Submission of Proposals: Vendor’s proposal shall consist of:

• Fifteen (15) copies of the technical Proposal, including literature and other supporting documents;

• Fifteen (15) copies of the cost proposal (packaged as described in Section 2.1);

• In addition one (1) electronic / software version (using MicroSoft Word 97/2000^®) of the technical and cost proposals may be required.

Vendor’s proposal, sealed securely in an envelope or other container, shall be received promptly at 2:00 p.m., Central Standard or Daylight Savings Time, whichever is in effect, on January 10, 2001, addressed as follows:

Kansas Division of Purchases

Proposal # 02510

Closing: January 10, 2001

900 SW Jackson Street, Room 102N

Topeka, KS 66612-1286

Faxed or telephoned proposals are not acceptable unless otherwise specified.

Proposals received prior to the closing date shall be kept secured and sealed until closing. The State shall not be responsible for the premature opening of a proposal or for the rejection of a proposal that was not received prior to the closing date because it was not properly identified on the outside of the envelope or container. Late Technical and/or Cost proposals will be retained unopened in the file and not receive consideration.

2.3 Signature of Proposals: Each proposal shall give the complete mailing address of the vendor and be signed by an authorized representative by original signature with his or her name and legal title typed below the signature line. Each proposal shall include the vendor’s social security number or Federal Employer’s Identification Number.

Request for Proposal Number 02510

Page 12

2.4 Acknowledgment of Addenda: All vendors shall acknowledge receipt of any addenda to this Request. Failure to acknowledge receipt of any addenda may render the proposal to be non-responsive. Changes to this Request shall be issued only by the Division of Purchases in writing.

2.5 Modification of Proposals: A vendor may modify a proposal by letter or by FAX transmission at any time prior to the closing date and time for receipt of proposals.

2.6 Withdrawal of Proposals: A proposal may be withdrawn on written request from the vendor to the Procurement Officer at the Division of Purchases prior to the closing date.

2.7 Proposal Disclosures: At the time of closing, only the names of those who submitted proposals shall be made public information. No price information will be released. Interested vendors or their representatives may be present at the announcement at the following location:

State of Kansas Division of Purchases

900 Jackson Street, Room 102N

Topeka, KS 66612-1286

Bid results will not be given to individuals over the telephone. Results may be obtained after contract finalization by obtaining a bid tabulation from the Division of Purchases. Bid results can be obtained by sending (do not include with bid):

1. A check for $3.00, payable to the State of Kansas and

2. A self -addressed, stamped envelope;

3. Contract Proposal Number,

Send to:

Kansas Division of Purchases

Attention: Bid Results/Copies

900 SW Jackson, Room 102N

Topeka, KS 66612-1286

Copies of individual proposals may be obtained under the Kansas Open Records Act by calling 785-296-0002 to request an estimate of the cost to reproduce the documents and remitting that amount with a written request to the above address or a vendor may make an appointment by calling the above number to view the proposal file. Upon receipt of the funds, the documents will be mailed. Information in proposal files shall not be released until a contract has been executed or all proposals have been rejected.

2.8 Notice of Award: An award is made on execution of the written contract by all parties. Only the State is authorized to issue news releases relating to this Request, its evaluation, award and/or performance of the contract.

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SECTION III

GENERAL PROVISIONS

3.1 Term of Contract: The term of this contract is for a two (2) year(s) period from July 1, 2001 with three (3) additional one (1) year renewal(s) by written agreement of the parties.

3.2 Inspection: The State reserves the right to reject, on arrival at destination, any items which do not conform with specification of this Request.

3.3 Termination for Cause: The Director of Purchases may terminate this contract, or any part of this contract, for cause under any one of the following circumstances:

3.3.1 the Contractor fails to make delivery of goods or services as specified in this contract; or

3.3.2 the Contractor fails to perform any of the provisions of this contract, or so fails to make progress as to endanger performance of this contract in accordance with its terms.

The Director of Purchases shall provide Contractor with written notice of the conditions endangering performance. If the Contractor fails to remedy the conditions within ten (10) days from the receipt of the notice (or such longer period as State may authorize in writing), the Director of Purchases shall issue the Contractor an order to stop work immediately. Receipt of the notice shall be presumed to have occurred within three (3) days of the date of the notice.

In the event this contract is terminated in full or in part as provided in this clause, the State of Kansas may procure services similar to those terminated and the Contractor shall be liable to the State of Kansas for any excess costs for such similar services for any calendar month for which the Contractor has been paid to provide services to beneficiaries. In addition, the Contractor shall be liable to the State of Kansas for administrative costs incurred by the State of Kansas in procuring such similar services.

3.4 Termination for Convenience: The Director of Purchases may terminate performance of work under this contract in whole or in part whenever, for any reason, the Director of Purchases shall determine that the termination is in the best interest of the State of Kansas. In the event that the Director of Purchases elects to terminate this contract pursuant to this provision, it shall provide the Contractor written notice at least thirty (30) days prior to the termination date. The termination shall be effective as of the date specified in the notice. The Contractor shall continue to perform any part of the work that may have not been terminated by the notice.

3.5 Termination for Contractor Bankruptcy: In the event that the Contractor shall cease conducting business in the normal course, become insolvent, make a general assignment for the benefit of creditors, suffer or permit the appointment of a receiver for its business or its assets, or avail itself of, or become subject to, any proceeding under the Federal Bankruptcy Act or any other statute of any state relating to insolvency or the protection of the rights of creditors, the Contractor shall notify State of Kansas, Director of Purchases, within twenty-four (24) hours of knowledge of the potential for such declaration. The State of Kansas may, at its option, terminate this contract. In the event the State of Kansas elects to terminate this contract under this provision, it shall do so by sending notice of termination to the Contractor by registered or certified mail, return receipt requested. The date of termination shall be deemed to be the date such notice is mailed to the Contractor unless otherwise specified.

3.6. Termination for Unavailability of Funds: It is understood and agreed by the Contractor and the State of Kansas that all obligations of the State of Kansas, including continuance of payments hereunder, are contingent upon the availability and continued appropriation of state and federal funds, and in no event shall the State of Kansas be liable for any payments hereunder in excess of such available appropriated funds. In the event that the amount of any available or appropriated funds provided by the state or federal sources for the purchase of services hereunder shall be reduced, terminated or shall not be continued at an aggregate level sufficient to allow for the purchase of the services specified hereunder for any reason whatsoever, the State of Kansas shall notify the Contractor of such reduction of funds available and shall be entitled to reduce the State’s commitment hereunder or to terminate the contract as it deems necessary.

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3.7 Termination Obligations of Contractor and the State of Kansas: In the event of any termination, the Contractor shall:

3.7.1. Stop work under the contract on the date and to the extent specified in the notice of termination.

3.7.2. Place no further orders or subcontract for services or facilities except as may be necessary for completion of such portion of the work under the contract as is not terminated.

3.7.3. Terminate all orders and subcontracts to the extent that they relate to the performance of work terminated by the notice of termination.

3.7.4. Complete the performance of such part of the work as shall not have been terminated by the notice of termination.

3.7.5. Any payments advanced to the Contractor for coverage of members for periods after the date of termination shall be promptly returned to SRS.

3.7.6. The Contractor shall promptly supply all information necessary for the reimbursement of any outstanding claims.

The State of Kansas, Department of Social and Rehabilitation Services (SRS) shall be responsible for notifying all members of the date of termination and process by which the members will continue to receive services. If this contract is terminated due to default by the Contractor, the Contractor shall be responsible for all expenses related to said notification. If this contract is terminated for any other reason other than default by the Contractor, SRS shall be responsible for all expenses relating to said notification.

3.8 Notices: All notices, demands, requests, approvals, reports, instructions, consents or other communications (collectively “notices”) which may be required or desired to be given by either party to the other shall be IN WRITING and addressed as follows:

Frances J. Welch

Kansas Division of Purchases

900 SW Jackson St, Room 102N

Topeka, Kansas 66612-1286

or to any other persons or addresses as may be designated by notice from one party to the other.

3.9 Rights and Remedies: If this contract is terminated, the State, in addition to any other rights provided for in this contract, may require the Contractor to transfer title and deliver to the State in the manner and to the extent directed, any completed materials. The State shall be obligated only for those services and materials rendered and accepted prior to the date of termination.

If it is determined, after notice of termination for cause, that Contractor’s failure was due to causes beyond the control of or negligence of the Contractor, the termination shall be a termination for convenience.

In the event of termination, the Contractor shall receive payment pro rated for that portion of the contract period services were provided to and/or goods were accepted by State subject to any offset by State for actual damages including loss of federal matching funds.

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The rights and remedies of the State provided for in this contract shall not be exclusive and are in addition to any other rights and remedies provided by law.

3.10 Force Majeure: The Contractor shall not be held liable if the failure to perform under this contract arises out of causes beyond the control of or negligence of the Contractor. Causes may include, but are not limited to, acts of nature, fires, quarantine, strikes other than by the contractor’s employees, and freight embargoes.

3.11 Waiver: Waiver of any breach of any provision in this contract shall not be a waiver of any prior or subsequent breach. Any waiver shall be in writing and any forbearance or indulgence in any other form or manner by State shall not constitute a waiver.

3.12 Ownership: All data, forms, procedures, software, manuals, system descriptions and work flows developed or accumulated by the Contractor under this contract shall be owned by the using agency. The Contractor may not release any materials without the written approval of the using agency.

3.13 Independent Contractor: Both parties, in the performance of this contract, shall be acting in their individual capacity and not as agents, employees, partners, joint ventures or associates of one another. The employees or agents of one party shall not be construed to be the employees or agents of the other party for any purpose whatsoever.

The Contractor accepts full responsibility for payment of unemployment insurance, workers compensation and social security as well as all income tax deductions and any other taxes or payroll deductions required by law for its employees engaged in work authorized by this contract.

3.14 Staff Qualifications: The Contractor shall warrant that all persons assigned by it to the performance of this contract shall be employees of the Contractor (or specified Subcontractor) and shall be fully qualified to perform the work required. The Contractor shall include a similar provision in any contract with any Subcontractor selected to perform work under this contract.

Failure of the Contractor to provide qualified staffing at the level required by the proposal specifications may result in termination of this contract and/or damages.

3.15 Conflict of Interest: The Contractor shall not knowingly employ, during the period of this contract or any extensions to it, any professional personnel who are also in the employ of the State and who are providing services involving this contract or services similar in nature to the scope of this contract to the State. Furthermore, the Contractor shall not knowingly employ, during the period of this contract or any extensions to it, any state employee who has participated in the making of this contract until at least two years after his/her termination of employment with the State.

3.16 Confidentiality: The Contractor may have access to private or confidential data maintained by State to the extent necessary to carry out its responsibilities under this contract. Contractor must comply with all the requirements of the Kansas Open Records Act in providing services under this contract. Contractor shall accept full responsibility for providing adequate supervision and training to its agents and employees to ensure compliance with the Act. No private or confidential data collected, maintained or used in the course of performance of this contract shall be disseminated by either party except as authorized by statute, either during the period of the contract or thereafter. Contractor must agree to return any or all data furnished by the State promptly at the request of State in whatever form it is maintained by contractor. On the termination of expiration of this contract, contractor will not use any of such data or any material derived from the data for any purpose and, where so instructed by State, will destroy or render it unreadable.

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3.17 Reviews and Hearings: The Contractor agrees to advise the Director of Purchases of all complaints of recipients made known to the Contractor and refer all appeals or fair hearing requests to the Director of Purchases. The State has the discretion to require the Contractor to participate in any review, appeal, fair hearing or litigation involving issues related to this contract.

3.18 Nondiscrimination and Workplace Safety: The Contractor agrees to abide by all federal, state and local laws, rules and regulations prohibiting discrimination in employment and controlling workplace safety. Any violations of applicable laws, rules and regulations may result in termination of this contract.

3.19 Environmental Protection: The Contractor shall abide by all federal, state and local laws, rules and regulations regarding the protection of the environment. The Contractor shall report any violations to the applicable governmental agency. A violation of applicable laws, rule or regulations may result in termination of this contract.

3.20 Hold Harmless: The Contractor shall indemnify the State against any and all claims for injury to or death of any persons; for loss or damage to any property; and for infringement of any copyright or patent occurring in connection with or in any way incidental to or arising out of the occupancy, use, service, operations or performance of work under this contract.

The State shall not be precluded from receiving the benefits of any insurance the Contractor may carry which provides for indemnification for any loss or damage to property in the Contractor’s custody and control, where such loss or destruction is to state property. The Contractor shall do nothing to prejudice the State’s right to recover against third parties for any loss, destruction or damage to State property.

3.21 Care of State Property: The Contractor shall be responsible for the proper care and custody of any state-owned personal tangible property and real property furnished for Contractor’s use in connection with the performance of this contract, and Contractor will reimburse State for such property’s loss or damage caused by Contractor, normal wear and tear excepted.

3.22 Prohibition of Gratuities: Neither the Contractor nor any person, firm or corporation employed by the Contractor in the performance of this contract shall offer or give any gift, money or anything of value or any promise for future reward or compensation to any State employee at any time.

3.23 Retention of Records: Unless the State specifies in writing a shorter period of time, the Contractor agrees to preserve and make available all of its books, documents, papers, records and other evidence involving transactions related to this contract for a period of five (5) years from the date of the expiration or termination of this contract.

Matters involving litigation shall be kept for one (1) year following the termination of litigation, including all appeals, if the litigation exceeds five (5) years.

The Contractor agrees that authorized federal and state representatives, including but not limited to, personnel of the using agency; independent auditors acting on behalf of state and/or federal agencies shall have access to and the right to examine records during the contract period and during the five (5) year post-contract period. Delivery of and access to the records shall be at no cost to the state.

3.24 Federal, State and Local Taxes Contractor: The State make no representation as to the exemption from liability of any tax imposed by any governmental entity on the Contractor.

3.25 Antitrust: If the Contractor elects not to proceed, the Contractor assigns to the State all rights to and interests in any cause of action it has or may acquire under the anti-trust laws of the United States and the State of Kansas relating to the particular products or services purchased or acquired by the State pursuant to this contract.

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3.26 Modification: This contract shall be modified only by the written agreement of the parties with the approval of the PNC. No alteration or variation of the terms and conditions of the contract shall be valid unless made in writing and signed by the parties. Every amendment shall specify the date on which its provisions shall be effective.

3.27 Assignment: The Contractor shall not assign, convey, encumber, or otherwise transfer its rights or duties under this contract without the prior written consent of the State.

This contract may terminate in the event of its assignment, conveyance, encumbrance or other transfer by the Contractor without the prior written consent of the State.

3.28 Third Party Beneficiaries: This contract shall not be construed as providing an enforceable right to any third party.

3.29 Captions: The captions or headings in this contract are for reference only and do not define, describe, extend, or limit the scope or intent of this contract.

3.30 Severability: If any provision of this contract is determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this contract shall not be affected and each provision of this contract shall be enforced to the fullest extent permitted by law.

3.31 Governing Law: This contract shall be governed by the laws of the State of Kansas and shall be deemed executed at Topeka, Shawnee County, Kansas.

3.32 Jurisdiction: The parties shall bring any and all legal proceedings arising hereunder in the State of Kansas, District Court of Shawnee County. The United States District Court for the State of Kansas sitting in Topeka, Shawnee County, Kansas, shall be the venue for any federal action or proceeding arising hereunder in which the State is a party.

3.33 Mandatory Provisions: The provisions found in Contractual Provisions Attachment (DA-146a) which is attached are incorporated by reference and made a part of this contract.

3.34 Integration: This contract, in its final composite form, shall represent the entire agreement between the parties and shall supersede all prior negotiations, representations or agreements, either written or oral, between the parties relating to the subject matter hereof. This contract between the parties shall be independent of and have no effect on any other contracts of either party.

3.35 State Credit Card: Presently, many State Agencies use a State of Kansas Business Procurement Card (Visa) in lieu of a state warrant to pay for some of it’s purchases. No additional charges will be allowed for using the card. Please indicate on the bid signature sheet if you will accept the Business Procurement Card for payment.

3.36 Will Perform Work Under This Contract: Any conviction for a criminal or civil offense that indicates a lack of business integrity or business honesty must be disclosed. This includes (1) conviction of a criminal offense as an incident to obtaining or attempting to obtain a public or private contract or subcontract or in the performance of such contract or subcontract; (2) conviction under state or federal statutes of embezzlement, theft, forgery, bribery, falsification or destruction of records, receiving stolen property; (3) conviction under state or federal antitrust statutes; and (4) any other offense to be so serious and compelling as to affect responsibility as a state contractor. For the purpose of this section, an individual or entity shall be presumed to have control of a company or organization if the individual or entity directly or indirectly, or acting in concert with one or more individuals or entities, owns or controls 25 percent or more of its equity, or otherwise controls its management or policies. Failure to disclose an offense may result in disqualification of the bid or termination of the contract.

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3.37 Competition: The purpose of this Request is to seek competition. The vendor shall advise the Division of Purchases if any specification, language or other requirement inadvertently restricts or limits bidding to a single source. Notification shall be in writing and must be received by the Division of Purchases no later than five (5) business days prior to the bid closing date. The Director of Purchases reserves the right to waive minor deviations in the specifications that do not hinder the intent of this Request.

3.38 Political Subdivisions: Political subdivisions (City, County, School Districts and etc.) are permitted to utilize contracts administered by the Division of Purchases. Please state on your response one of the following statements:

(1) “This pricing IS available to Political Subdivisions of the State of Kansas”;

  or

(2) “This pricing IS NOT available to Political Subdivisions of the State of Kansas”.

Awards shall not be based on which of these statements is selected. However, conditions included in this contract shall be the same for political subdivisions.

The State has no responsibility for payments owed by political subdivisions. The vendor must deal directly with the political subdivision.

3.39 Injunctions: Should Kansas be prevented or enjoined from proceeding with the acquisition before or after contract execution by reason of any litigation or other reason beyond the control of the State, vendor shall not be entitled to make or assert claim for damage by reason of said delay.

3.40 Acceptance: No contract provision or use of items by the State shall constitute acceptance or relieve the vendor of liability in respect to any expressed or implied warranties.

3.41 Breach: Waiver or any breach of any contract term or condition shall not be deemed a waiver of any prior or subsequent breach. No contract term or condition shall be held to be waived, modified, or deleted except by a written instrument signed by the parties thereto.

If any contract term or condition or application thereof to any person(s) or circumstances is held invalid, such invalidity shall not affect other terms, conditions, or applications which can be given effect without the invalid term, condition or application To this end the contract terms and conditions are severable.

3.42 Statutes: Each and every provision of law and clause required by law to be inserted in the contract shall be deemed to be inserted herein and the contract shall be read and enforced as though it were included herein If through mistake or otherwise any such provision is not inserted, or is not correctly inserted, then on the application of either party the contract shall be amended to make such insertion or correction.

3.43 Financial Solvency: In exchange for the capitation rates made by the State of Kansas, the Contractor will be liable or “at risk” for the costs of all covered services. SRS is ultimately responsible for quality provision of care and access to beneficiaries. The Contractor must therefore provide assurances to SRS that they are protected against insolvency and exhibit fiscal responsibility.

If the Contractor no longer contracts with the State of Kansas under this program, SRS shall give the option of re-enrolling the Contractor’s discontinued membership to other Contractors contracting with the State of Kansas.

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The Contractor must be licensed by the Kansas Department of Insurance (KDI) or otherwise approved under the specifications set forth by K.S.A. 38-2001 et. seq. to provide capitated health care services in counties and zip codes where enrolled members reside and services are provided. For entities under KDI licensure the Contractor must show a positive net worth based upon KDI standards. Net worth is defined as the difference between assets and liabilities, which would include stock, paid in surplus, contributed capital, surplus notes, contingency reserves and retained earnings/fund balance.

3.44 Disclosure of Interlocking Relationships: If the Contractor is contracting with the State of Kansas to provide services to Title XXI beneficiaries on a capitated or risk basis and is not also a Federally Qualified Contractor under the Public Health Service Act, it must report to SRS, and on request, to the Secretary, the Inspector General of DHHS, and the Comptroller General, a description of transactions between the Contractor and parties in interest. Transactions that must be reported include: (i) any sale, exchange or leasing of property; (ii) any furnishing for consideration of goods, services or facilities (but not salaries paid to employees); and (iii) any loans or extensions of credit. The Contractor shall make the information reported available to its members upon reasonable request.

3.45 Dispute Resolution/Administrative Fair Hearings Requirement: This Contract is not subject to arbitration. Any dispute concerning performance of the contract shall be decided by the Contract Manager who shall put his/her decision in writing and serve a copy to the Contractor and SRS. The Contract Manager’s decision shall be final unless within 33 days of the mailing of such copy, the Contractor or SRS files with the Administrative Hearings Office. A request for a fair hearing shall be submitted in writing on Form AH-1107, “Request for a Fair Hearing (Other Interested Persons or Taxpayers)” or by letter. In connection with any appeal proceeding under this subsection, the Contractor shall be afforded an opportunity to be heard and to offer evidence and oral argument in support of its appeal. At such hearing, SRS shall also offer evidence and oral argument in support of its position. A designated administrative law judge shall take evidence and hear oral argument.

The administrative fair hearing officer shall issue a decision to the Contractor and to SRS. The Contractor and SRS shall have 18 days after the mailing of the proposed decision to request a review by the State Appeals Committee. There shall be no ex parte communications with the administrative law judge during the appeal. The reasonable costs of an administrative appeal, including costs of reporting and preparing a transcript, will be paid by the party appealing. Such decision shall be final except to the extent that the Contractor, upon appeal to the District Court of Kansas, can demonstrate the decision was made either carelessly, negligently or in bad faith by the Fair Hearings Officer. The pending of an appeal to the Director or the District Court shall not automatically stay any notice of termination which may be subject to appeal.

Pending final determination of any dispute, the Contractor shall proceed diligently with the performance of this contract and in accordance with the Contract Manager’s direction.

The Contractor’s failure to follow the procedure set out above shall be deemed a waiver of any claim which the Contractor might have had.

3.46 Contractual Limitations

3.46.1 Performance Review

a. A designated representative of the Contractor and a designated representative of SRS shall meet as requested by either party, to review the performance of the Contractor under this contract. Written minutes of such meetings shall be the responsibility of the Contractor and shall be provided to SRS no later than seven (7) calendar days after each meeting. In the event of any disagreement regarding the performance of services by the Contractor under this contract, the designated representatives shall discuss the problem and shall negotiate in good faith in an effort to resolve the disagreement.

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b. In the event that no such resolution is achieved within a reasonable time, the matter shall be referred to the Contract Manager as provided under Section 4.8.2, the Disputes clause of this contract. If the Contract Manager determines that the Contractor has failed to perform as measured against applicable contract provisions, the Contract Manager may then assess financial penalties as set out below or terminate this contract in whole or in part, as provided under the Termination for Default clause.

c. Sanctions, Liquidated Damages and Termination Options

i. Financial Sanctions: Withholding of capitation payments as specified in Section 4.8.4

(1) Withholdings shall be graduated using the following percentages:

(a) 10%

(b) 25%

(c) 75%

(d) 100% (Total capitation payment withheld)

(2) Withholdings may accrue (i.e., withholdings increase by 10% each month a noncompliance action is not corrected (30% in month three).

(3) Monies withheld may be paid to the Contractor or may be paid less any liquidated damages incurred by SRS.

(4) Withholding percentages are determined based on the seriousness of the noncompliant action.

(5) The above financial sanctions may be modified if deemed to be appropriate for the situation.

ii. Enrollment Suspensions: Suspension of new beneficiary enrollments as specified at Section 4.8.3.

iii. Liquidated Damages: Liquidated damages as specified at Section 4.8.5.

iv. Terminations: Termination of the Contractor Contract as specified at Section 3.3.

3.46.2 Disputes

The Contractor contract is not subject to arbitration. Any dispute concerning performance of this contract shall be decided by the Contract Manager who shall put his/her decision in writing and serve a copy to the Contractor and SRS. The Contract Manager’s decision shall be final unless the following appeal procedure is followed:

a. Administrative Review

i. Any Kansas Title XIX and/or Title XXI Contractor who has received an adverse decision from the agency shall have the right to request administrative review. Administrative review is an informal process which gives the Contractor the opportunity to have information and processes reconsidered by SRS. SRS will then determine if the action taken was appropriate and within the appropriate Title XIX or Title XXI policies and guidelines.

ii. The Contractor shall be notified in writing of the right to reconsideration and the process by which to make such a request. This right shall be effective through fifteen (15) calendar days after the date of the letter.

b. Fair Hearing

i. If reconsideration is not requested, the Contractor retains the right to further appeal within the time frames allowed by regulation.

ii. If reconsideration is requested and allowed, the Contractor will be notified of the agency’s final determination in writing. When the reconsideration decision is adverse to the Contractor, the Contractor’s rights to an administrative fair hearing shall be contained in the final determination letter.

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iii. Pursuant to Kansas Administrative Regulation (K.A.R.) 30-7-68, a written request for fair hearing must be received 30 days from the notice of adverse action. Written requests for fair hearings should be sent to :

SRS Administrative Hearing Section

610 West 10th, Second Floor

Topeka, KS 66612

iv. The administrative fair hearing officer shall issue a proposed decision to the Contractor and to SRS. The Contractor and SRS shall have 10 days after the mailing of the proposed decision to request a review. If such a request is made, the director shall, thereafter, issue a final decision. There shall be no ex-parte-communications with the administrative law judge during the appeal. The reasonable costs of an administrative appeal including costs of reporting and preparing a transcript will be paid by the party appealing. Such decision shall be final except to the extent that the Contractor, upon appeal to the District Court of Kansas, can demonstrate the decision was made either carelessly, negligently or in bad faith by the Health Services. The appeal to the Director or the District Court shall not automatically stay any notice of termination that may be subject to appeal.

v. Pending final determination of any dispute, the Contractor shall proceed diligently with the performance of this contract and in accordance with the Contract Manager’s direction.

vi. The Contractor’s failure to follow the procedure set out above shall be deemed a waiver of any claim which the Contractor might have had.

3.46.3 Suspension of New Enrollment

Whenever SRS determines that the Contractor is out of compliance with this contract, SRS may suspend enrollment of new members under this contract. SRS, when exercising this option, must notify the Contractor in writing of its intent to suspend new enrollment at the discretion of SRS. The suspension period may be for any length of time specified by SRS, or may be indefinite. The suspension period may extend up to the contract expiration date as provided under Section I. (SRS may also notify existing members of Contractor non-compliance and provide an opportunity to disenroll from the Contractor or to re-enroll with another Contractor).

3.46.4 Withholding of Capitation Payment

a. Notwithstanding the provisions of Section VI, SRS may withhold portions of capitation payments from the Contractor as provided here. Whenever SRS determines that the Contractor has failed to provide one or more of the medically necessary contract services required under Section V or if the Contractor does not follow specified procedures or signed contractual agreements, SRS may withhold an estimated portion of the Contractor’s capitation payment.

b. The Contractor may not elect to withhold any required services when it is determined that it will receive adjusted payment levels. SRS may also adjust payment levels accordingly if the Contractor has failed to maintain or make available any records or reports required under this contract that SRS needs to determine whether the Contractor is providing contract services as required under Section V.

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3.46.5 Liquidated Damages

In the event that SRS shall incur monetary damages or expenses due to the Contractor’s noncompliant action(s) the Contractor shall be responsible for any actual costs incurred by SRS as a result of such non-compliance. SRS shall notify the Contractor in writing of the amount of monetary damages or expenses incurred at least thirty (30) days in advance of recoupment.

3.47 Other Contracts by the Contractor and SRS

3.47.1 Right to Enter Into Other Contracts

a. SRS and the Contractor agree that each may contract for the provision or purchase of services for and from third parties not related to this contract arrangement.

b. SRS may undertake or award other contracts for services related to the services described in this contract or any portion herein. Such other contracts include, but are not limited to consultants retained by SRS to perform functions related in whole or in part to Contractor services. The Contractor shall fully cooperate with such other contractors and SRS in all such cases.

3.47.2 Subcontracts

a. The Contractor has the right to subcontract for services specified under this contract. Any subcontract into which the Contractor enters with respect to performance under the contract shall in no way relieve the Contractor of any responsibility for performance of its duties. SRS will consider the Contractor to be the sole point of contact with regard to contractual matters, including payment of any and all charges resulting from the contract.

Nothing contained in the contract shall be construed as creating any contractual responsibility between the subcontractor(s) and SRS.

b. The subcontractor(s) must be able to perform the same level of review and meet the same requirements as the Contractor. The Contractor must set forth a method by which to monitor the subcontractor and is ultimately responsible for the work performed.

c. Contractor shall require its physicians who provide Medicaid services to have a unique identifier in accordance with the system established under section 1173(b) of the Balanced Budget Act, and to submit such identifier number to SRS on the Provider Roster File (PR1 and PR2 records as specified in Appendix I of this contract).

d. The Contractor shall ensure that all laboratories and/or entities providing laboratory services used for testing both Title XIX and Title XXI beneficiaries are CLIA certified. The Contractor shall provide a listing to SRS of all laboratories and/or entities providing laboratory services used by the Contractor and shall update the listing as laboratories and/or entities providing laboratory services are added to or dropped from the list.

e. Payment in Full:

i. Contractor is responsible for ensuring none of its assigned beneficiaries is charged for all, or any part (i.e., balance of bill), of services provided by network or non-network providers when such service provision was secured through a network primary care physician (PCP); network specialist with appropriate referral from the PCP; non-network specialist or other provider of services when an appropriate referral for such services has been made by the PCP; or when Contractor member obtains services (emergency or otherwise) that are covered by Contractor under this contract.

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ii. Contractor shall provide member education sufficient to ensure that each member fully understands his/her responsibility in following referral procedures. Contractor Plan members must follow established referral rules to ensure protection from inappropriate provider billing. When an MCO member secures services outside the Contractor Plan network without following required referral procedures, or secures specialist services in-network without following required referral procedures, the member may be billed for such services by the direct service provider.

iii. Failure of Contractor to ensure protection from inappropriate provider billing, as set forth above, shall result in Contractor reimbursing its member(s) for any payments the member made to a provider.

iv. Contractor shall ensure that enrollees are protected against liability for payments to providers or entities when the State does not pay Contractor for any reason.

f. The Contractor must verify qualifications of subcontractors in accordance with all state licensing standards, all applicable accrediting standards, and any other standards or criteria established by SRS to assure quality of services. These must be submitted with the Request For Consideration and on an annual basis.

g. The Contract shall assure that all subcontracts shall be in writing, shall comply with the provisions of this contract, and shall include any general requirements of this contract that are appropriate to the service or activity identified. It is not required that subcontractors be enrolled as a Title XIX provider. However, they are encouraged to enroll in order to provide services not covered under this contract on a fee-for-service basis. Continuity of care is encouraged.

h. Copies of all subcontracts and subcontract revisions shall be submitted to SRS no later than 30 days after the awarding of this contract or within 30 days of subcontract execution or revision if occurring after the awarding of this contract. When subcontractors within a given service category contain identical provisions and rates, a completed standard subcontract and list of service providers may be submitted in lieu of copies of all sub-contracts. Subcontracts shall not terminate legal liability of the Contractor under this contract. The Contractor may subcontract for any function covered by this contract, subject to the requirements of this contract.

i. The Contractor and its subcontractors must comply with all the provisions and applicable conditions of Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of 1967, as amended; Equal Pay Act of 1963; the Rehabilitation Act of 1973, as amended; The Americans with Disabilities Act of 1990 and the Civil Rights Act of 1991. If applicable, the Contractor must also comply with all provisions of Executive Order #11246 including amendments, as well as rules, regulations and relevant orders of the Secretary of Labor.

j. Physician Incentive Plans:

The Contractor must obtain SRS approval of any Physician Incentive Plan (PIP) prior to implementation. Contractor must certify to SRS annually in the event that it does not have a PIP. Any PIP must meet the requirements at 42 CFR §422.208, §422.210, §434.67, §434.70, and 42 CFR Part 1003. PIP Regulation information may be found on the Internet at:

http://www.hcfa.gov/medicare/physincp/pip-info.htm

i. The Contractor may operate a PIP only if no specific payment can be made directly or indirectly under a PIP as an inducement to reduce or limit medically necessary services furnished to an individual.

ii. The Contractor shall disclose information specified in the PIP regulations to the State at the initial contract, anniversary date of the contract and at contract renewal.

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iii. The Contractor shall provide information on its PIP to any beneficiary upon request. Member handbooks must annually disclose to enrollees their right to request such information.

iv. The Contractor must disclose the following information to SRS in accordance with 42 CFR §422.210:

(a) If referral services are covered by a PIP.

(b) Type of arrangement(s).

(c) Percent of withhold, bonus, etc.

(d) Panel size and pooling method used.

(e) Assurance of adequate stop-loss insurance.

(f) Summary of enrollee/disenrollee surveys.

v. If the Contractor places a physician group at substantial financial risk for referral services (exceeding 25% of maximum potential payout), the Contractor shall (1) provide adequate stop-loss insurance to the physicians/physician groups, and (2) conduct periodic surveys of enrolled and previously enrolled consumers to determine the degree of access and quality of care afforded to such consumers.

k. Ineligible Physicians/Groups:

i. Entities convicted of a criminal offense related to delivery of Title XVIII, Title XIX, or Title XXI services.

ii. Entities convicted of payment abuse.

iii. Entities convicted of fraud or other financial misconduct.

iv. Entities convicted of obstructing an investigation.

v. Entities convicted of offenses relating to controlled substances.

vi. Entities terminated from the Title XIX Program.

vii. Entities terminated from the Title XXI Program.

l. Terminated Providers:

The Contractor shall terminate contracts with any provider whose Title XIX HealthConnect Contract or Title XIX Provider Agreement has been terminated by the state. Such contract termination shall be effective thirty (30) calendar days after receipt of notice of State termination of a HealthConnect Contract or Title XIX provider agreement.

m. Timeliness of Provider Payments:

Contractor shall pay health care providers on a timely basis consistent with the claims payment procedures described in section 1902(a)(37)(A), of the Social Security Act, unless the health care provider and the Contractor agree to an alternative payment schedule.

n. Anti-Discrimination of Providers:

Contractor shall not discriminate against providers with respect to participation, reimbursement, or indemnification for any provider acting within the scope of that provider’s license or certification under applicable State law solely on the basis of the provider’s license or certification. (SSA §1932(b)(7), [BBA §4704(a)].

o. Anti-Gag Rule Provision:

Contractor shall not prohibit or otherwise restrict health care professionals from advising beneficiaries about their health status, medical care, or treatment regardless of benefit coverage if the professional is acting within their scope of practice. This provision does not require Contractor to cover counseling or referral services if it objects on moral or religious grounds and makes available information on its policies to enrollees within 90 days of a policy change regarding such counseling or referral services. (SSA §1932(b)(3), [BBA §4704(a)].

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3.48 Assignments and Mergers

This contract shall be binding on the parties and their successors and assignees, but neither party may assign this contract without the prior written consent of the other, which consent will not be unreasonably withheld; provided, however, that the Contractor may assign this contract to any corporation or firm which, upon such assignment, shall expressly assume this contract and which (i) shall acquire all or substantially all of the assets of the Contractor or any parent of the Contractor, as the case may be or (ii) shall be the surviving corporation into which the Contractor or any parent of the Contractor, as the case may be, shall have merged, provided in any such case that SRS will be reasonably satisfied with the financial stability of the acquiring or surviving entity, whichever is applicable. Any successor or assignee must accept all outstanding claims of SRS and contractual obligations of the Contractor.

3.49 Continuation of Coverage

Contractor must cover the duration of the contract period for which payment has been made to Contractor, as well as cover the continuation of services to enrollees confined in an inpatient facility on the date of insolvency until their discharge. (42 CFR §434.59).

3.50 Temporary Management Provisions

This contract may be terminated if Contractor fails to meet contract requirements or Balanced Budget Act requirements (BBA §4707). In the event SRS chooses not to terminate this contract despite repeated contract or BBA violations, Contractor shall recognize the authority of temporary management appointed to oversee Contractor.

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SECTION IV

SPECIAL PROVISIONS

4.1 Proposal Format: The following information shall be part of the technical proposal: Vendors are instructed to prepare their Technical Proposal following the same sequence as this section of the Request For Proposal.

(1) Transmittal letter which includes the following statements:

(a) that the vendor is the prime contractor and identifying all subcontractors;

(b) that the vendor is a corporation or other legal entity;

(c) that no attempt has been made or will be made to induce any other person or firm to submit or not to submit a proposal;

(d) that the vendor does not discriminate in employment practices with regard to race, color, religion, age (except as provided by law), sex, marital status, political affiliation, national origin or disability;

(e) that no cost or pricing information has been included in the transmittal letter or the Technical Proposal;

(f) that the vendor presently has no interest, direct or indirect, which would conflict with the performance of services under this contract and shall not employ, in the performance of this contract, any person having a conflict;

(g) that the person signing the proposal is authorized to make decisions as to pricing quoted and has not participated, and will not participate, in any action contrary to the above-statements;

(h) whether there is a reasonable probability that the vendor is or will be associated with any parent, affiliate or subsidiary organization, either formally or informally, in supplying any service or furnishing any supplies or equipment to the vendor which would relate to the performance of this contract. If the statement is in the affirmative, the vendor is required to submit with the proposal, written certification and authorization from the parent, affiliate or subsidiary organization granting the State and/or the federal government the right to examine any directly pertinent books, documents, papers and records involving such transactions related to the contract. Further, if at any time after a proposal is submitted, such an association arises, the vendor will obtain a similar certification and authorization and failure to do so will constitute grounds for termination of the contract at the option of the State;

(i) vendor agrees that any lost or reduced federal matching money resulting from unacceptable performance in a contractor task or responsibility defined in the Request, contract or modification shall be accompanied by reductions in state payments to contractor; and

(j) That the vendor has not been retained, nor has it retained a person to solicit or secure a state contract on an agreement or understanding for a commission, percentage, brokerage or contingent fee, except for retention of bona fide employees or bona fide established commercial selling agencies maintained by the vendor for the purpose of securing business. For breach of this provision, the Committee shall have the right to reject the proposal, terminate the contract and/or deduct from the contract price or otherwise recover the full amount of such commission, percentage, brokerage or contingent fee or other benefit.

4.2 Vendor’s Qualifications: The vendor must include a discussion of the vendor’s corporation and each subcontractor if any. The discussion shall include the following:

(a) date established;

(b) ownership (public, partnership, subsidiary, etc.);

(c) number of personnel, full and part-time, assigned to this project by function and job title;

(d) data processing resources and the extent they are dedicated to other matters;

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(e) location of the project within the vendor’s organization;

(f) relationship of the project and other lines of business; and

(g) organizational chart.

4.3 Subcontractors: The contractor shall be the sole source of contact for the contract. The State will not subcontract any work under the contract to any other firm and will not deal with any subcontractors. The Contractor is totally responsible for all actions and work performed by its subcontractors. All terms, conditions and requirements of the contract shall apply without qualification to any services performed or goods provided by any subcontractor.

4.4 Qualifications: A description of the vendor’s qualifications and experience providing the requested or similar service including resumes of personnel assigned to the project stating their education and work experience. The vendor must be an established firm recognized for its capacity to perform. The vendor must be capable of mobilizing sufficient personnel to meet the deadlines specified in the Request.

4.5 Timeline and Methodology: A timeline and methodology for implementing services.

4.6 Payment: See Section 5.15 – Page 72.

4.7 Vendor Information File: The State will make reference material available for review in the Vendor Information File. This information has been assembled by the using agency to assist vendors in the preparation of the proposals and to ensure that all vendors have equal access to information.

Vendors may have access to the file by contacting the following individual for an appointment:

Rita Haverkamp, SRS

Telephone: 785-296-3774

Email: rszh@srskansas.org.

4.8 Submission of the Bid: Submission of the bid will be considered presumptive evidence that the vendor is conversant with local facilities and difficulties, the requirements of the documents and of pertinent State and/or local codes, state of labor and material markets, and has made due allowances in the proposal for all contingencies. Later claims for labor, work, materials, and equipment required for any difficulties encountered which could have foreseen will not be recognized and all such difficulties shall be properly taken care of by Contractor at no additional cost to the State of Kansas.

4.9 Performance Bond: The Successful vendor shall file with the Director of Purchases a Performance Bond or Certificate of Deposit made out to the State of Kansas with interest accruing to the vendor in an amount equal to one million dollars ($1,000,000.00) as security for the faithful performance of this contract and as security for the payment of all persons performing labor and furnishing materials in connection with this proposal.

If damages exceed the amount of the guaranty, the State may seek additional damages. Necessary bond forms (see Appendix X) will be furnished by the Division of Purchases and can be completed by any General Insurance Agent. Bonds shall be issued by a Surety Company licensed to do business in the State of Kansas.

4.10 Insurance: The successful vendor shall present an affidavit of Worker’s Compensation, Public Liability, Fidelity bonding of persons entrusted with handling of funds. Fidelity bonds must be issued by an insurance company licensed in the State of Kansas and must be for a minimum of $100,000, Unemployment Insurance, Reinsurance (including stop/loss and aggregate solvency insurance), and Property Damage Insurance to the Division of Purchases.

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Reinsurance (Including Stop/loss Insurance And Aggregate Solvency Insurance): The vendor is required to provide SRS with evidence of its financial ability to absorb the risk of catastrophic cases (i.e., private reinsurance coverage, or self-insurance for companies with over five years experience in Kansas). The vendor shall not expose itself to loss on any one risk or hazard to an amount exceeding ten percent (10%) of its paid-up capital and surplus unless the excess shall be reinsured in some other company duly authorized to transact similar business in this state or as otherwise provided in the insurance code. The performance bond required by the Director of Purchases should be considered separate and distinct from this provision. Stop/loss and aggregate insolvency insurance are required. Reinsurance must be approved by SRS prior to Contract signing.

4.11 References: Provide Four (4) references. References shall have purchased similar services from the vendor in the last year. References shall show firm name, contact person, address, and phone number. Vendor employees and the buying agency shall not be shown as references.

4.12 Certification of Specifications Compliance: By submission of a bid and the signatures affixed thereto, the bidder certifies all products and services proposed in the bid meet or exceed all requirements of this specification as set forth in the request.

4.13 Technical Specifications: Vendors shall provide responses to the following information areas. Vendors shall format their response to correspond with the item numbers provided in this RFP. Vendors shall provide enough information on each item to establish their ability to satisfy the applicable provisions of the contract.. SRS reserves the right to request additional information regarding managed care qualifications.

4.13.1 Name and address of Managed Care Organization (MCO): Provide a brief history of your organization. Include such information as:

a. Is your company owned, controlled, sponsored by and/or affiliated with another organization? If so, explain the relationship.

b. Is your company part of a national MCO? If so, explain.

c. Is your company for profit or not-for-profit?

d. Include a copy of your most recent audited annual financial report.

e. Include a copy of your most recent corporate annual report.

4.13.2 Licensure: Is your MCO currently licensed in the State of Kansas? If yes, what type of licensure does the corporation hold? What geographical areas of the state are you licensed for? If no, has an application for licensure been filed?

4.13.3 Type of MCO (if more than one model, indicate percentage of enrollment in each type).

             Staff             Group             Network             IPA            

4.13.4 Federal Qualification (Federally qualified MCOs are not required to be state licensed)

a. Is this a federally qualified MCO?

b. If yes, what was the effective date?

c. If no, does the MCO have any plans to become federally qualified?

4.13.5 Is the MCO accredited by any organization? If so, by whom and at what level of accreditation?

_____  Yes	_____  No
Accrediting Body(ies) _____________________________________________________
Level of Accreditation _____________________________________________________

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4.13.6 Initial Operational Start-up: State the year the MCO began operations and the year the MCO became licensed in the State of Kansas.

Entity responsible for start-up                             

4.13.7 Current Ownership and Management Contracts: Provide the name, address, and telephone number of the current owner. Vendors must include all owners with at least 5% ownership. State if the MCO is operated by a management company, and provide the name and address of that management company. Include a copy of the management contract between the MCO and management company.

4.13.8 Contact Person: Provide the name, title, address and telephone number of the contact person for the management company.

4.13.9 Company Management

a. Provide the names of top management personnel (CEO, CFO, Medical Director, Quality Management Director, Member Services Director, Provider Services Director, Utilization Review Coordinator, etc.) with a brief summary of their experience in MCO management.

b. Organizational Chart: Provide a functional organizational chart, showing main departments and number of staff members with their titles in these departments as well as primary clinical committees. Please provide position descriptions for staff members assigned to this project and identify the percentage of time these individuals will be dedicated to the Kansas Managed Care Contract.

4.13.10 Provide a detailed discussion of how your organization will address the purpose of this RFP as discussed in Section 5.1.

4.13.11 Provide a brief statement detailing the regions that you are proposing to cover as discussed in Section 5.5.

4.13.12 Provide a brief statement indicating your understanding of, and agreement to, the Waiver Authority as described in Section 5.6.

4.13.13 Provide a detailed discussion indicating your understanding of, approach to, and agreement to, each of the Functions and Duties of the MCO as described in Section 5.7.

4.13.14 Provide a brief statement acknowledging your understanding of, and agreement to, each of the Functions and Duties of SRS as provided in Section 5.8.

4.13.15 Provide a detailed discussion indicating your understanding of, approach to, and agreement to, the Medical Services included in the Contract as provided in Section 5.9.

4.13.16 Provide a brief statement acknowledging your understanding of, and agreement to, the Medical Services not included as provided in Section 5.10.

4.13.17 Provide a brief statement acknowledging your understanding of, and agreement to, the Cooperation with Other Agency’s requirements as provided in Section 5.11.

4.13.18 Provide a statement acknowledging your understanding of, and agreement to, the Enrollment, Marketing and Disenrollment activities of the Fiscal Agent(s) and SRS and a detailed discussion of your understanding, approach to, and agreement to, the MCO duties as provided in Section 5.12.

4.13.19 Provide a statement acknowledging your understanding of, and agreement to, the Audits and Reports requirements as provided in Section 5.13.

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4.13.20 Provide a statement acknowledging your understanding of, and agreement to, the Coordination of Benefits and Post-Pay Recovery (Third Party Liability) requirements as provided in Section 5.14.

4.13.21 Encounter Tape:

a. State the vendor’s ability to provide the encounter tape in the format specified in Appendix H and I of the contract, including system capacity, operational standards and capacity for system growth.

b. Provide a detailed description of your MIS including membership processing, assignment tracking claims payments, referral tracking and any other major functions performed.

4.13.22 Enrollment Information

a. Affirm the vendor’s capacity to effectively verify enrollment and disenrollment of beneficiaries using the enrollment information as specified in Section 5.11 of the contract.

b. Describe the MCO’s proposed process for enrolling members with primary care providers. Please include a copy of the proposed member welcome packet.

c. Provide copies of your proposed policies for disenrollment and changing primary care providers. Please provide your proposed policies for enrolling newborns.

4.13.23 Medical Management

a. Providers Serving Enrollees and Access Requirements:

i. Furnish a provider listing of physicians who will serve enrollees under the terms of this contract. Listing shall include: provider name; specialty; gender; languages fluent in; patient caseload; whether they will service beneficiaries in the Title XIX Program, Title XXI Program or both Programs; geographic area; practice address(es); telephone number(s); and Medicaid Provider Number if available. If your Provider Network is not established, provide your plan for establishing a network and the date that the information will be available.

ii. Explain your plans and timelines for obtaining additional providers in underserved areas and specialties.

iii. Do you allow OB/GYN providers to be primary care physicians?

b. Provide a list of all providers within your network by specialty, including hospitals and ancillary providers. If your Provider Network is not established, provide your plan for establishing a network and the date that the information will be available.

c. Are mid-level practitioners included in your provider network? In what manner?

d. Provide a copy of your standard contracts and dated signature pages for all providers within your network. Your contract with providers must include a clause that if terminated from the Title XIX Program, they will not be eligible to serve Title XIX or Title XXI Program beneficiaries. Standard contracts should be submitted at the time of response. Signed contract pages are due to SRS one month after contract signature.

e. Submit letters of intent by the primary care case managers, specialists, pharmacies, FQHCs, home health providers, hospitals, local health departments, transportation providers, certified nurse midwifes, durable medical equipment, occupational, physical, and speech therapy, vision providers, and other specialty providers in the proposed counties. Letters of intent must be submitted with the response to this RFP.

f. Provide your requirements for the waiting time standards. Do they meet those required by the Contract? How will you monitor this?

i. Does the management company have a policy for scheduling appointments? What is it?

ii. What is your policy on physician response time to after hours calls?

iii. Outline the MCO’s system for triaging urgent care needs.

iv. Describe the MCO’s system for monitoring follow-up care?

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g. Location of Ancillary Care Facilities: Furnish a description of facilities within the network and their location which will be used to deliver care.

h. Health Agency Affiliations

i. Describe any current arrangements (formal or informal) the Contractor may have with local health departments, local education agencies, rural health clinics, hospitals, pharmacies or federally qualified health centers. Please describe efforts which will be made to establish arrangements with these agencies where they do not already exist.

ii. Subcontracts with Local Health Departments (LHDs), and any other health agency or clinic (including FQHCs) must be submitted within one month after contract signature.

i. Internal Quality Assurance Committee and Medical Director

i. Discuss the internal QA committee and how it complies with the requirements in the following areas:

(1) authority,

(2) functions,

(3) organizational structure,

(4) reporting relationship(s),

(5) membership, and

(6) meeting frequency.

ii. Medical Director

(1) Will the Medical Director be involved in peer review education?

(2) Is the Medical Director available for daily consultation?

(3) Is anyone authorized to assume the responsibilities of the Medical Director in his/her absence?

4.13.24 Quality Assurance Program

a. Provide a copy of your quality assurance program (QAP), which should address, at a minimum, the areas identified in Section 5.7.13. of this RFP.

b. In brief, discuss the system used to conduct utilization review activities, including manual and automated procedures.

c. In brief, describe how the MCO system will assure coordination and continuity of care through the quality management activities as specified in the contract.

d. In brief, describe how management and integration of care is maintained through a primary care physician/gatekeeper or other means.

e. In brief, describe the system used to assure referrals for medically necessary specialty, secondary and tertiary care. Discussion should include how referrals are authorized and tracked.

f. Is your referral process linked to claims?

g. How will special population groups be referred to specialists and needed services?

h. Provide a copy of your provider credentialing and recredentialing process. What procedures do you have in place for identifying when a physician loses licensure?

i. Describe your prior authorization process.

j. Describe your interventions for Performance Improvement (Corrective Action) Plans.

k. Do you have a database developed to track continuity and coordination of care? How often is this monitored?

l. Indicate your willingness to work with SRS on Quality Indicators and Complaint and Grievance policies.

m. In brief, describe the methods used for provision of care in emergency or urgent situations including:

i. Twenty-four hour coverage and other necessary systems to assure the provision of timely care.

ii. Education processes to inform members of appropriate actions in emergency or urgent situation (i.e., call primary care physician, immediately go to emergency room in life-threatening situation, etc.).

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iii. Please describe what steps you will be taking to reduce inappropriate use of the emergency room.

n. Provide, within ninety (90) days of contract signing, a copy of your termination plan. This plan shall describe the actions you will take to ensure a smooth transition to your successor in the event that this contract is terminated.

4.13.25 Transportation: Define your policy on transportation. How will you be providing transportation to all enrollees in need of transportation? How will you provide lodging and meals, if necessary, to these beneficiaries?

4.13.26 Benefits: Will any additional benefits be provided to Kansas members?

4.13.27 Communication:

a. Health Education and Prevention

i. The vendor shall describe its health education and prevention program including:

(1) General topic areas covered (i.e., prenatal care, nutrition, smoking cessation, etc.)

(2) Targeted programs (i.e., EPSDT, diabetes, AIDS, etc.)

(3) Methods used to educate members (i.e., mailed materials, classes, telephone services, outreach activities, etc.) Samples of all written materials shall be provided and approved by SRS, prior to dissemination.

(4) Community outreach for enrolled members such as Well Baby, etc.

(5) Describe the outreach activities you will provide for outreach activities in the rural communities. Please provide specific activities you will provide for outreach activities.

ii. How often will the vendor evaluate its health promotion program?

iii. How will you offer or arrange for the following services:

Outreach	Risk Assessment
Case Management	Home Visits
Nutritional Counseling	Childbirth Classes
WIC Referral	Parenting Classes
Health Education	Incentive Programs

iv. Describe the vendor’s plan for identifying and monitoring healthcare services.

v. Explain how you will meet the EPSDT (KAN Be Healthy) requirements (staff, data needs, monitoring provider compliance, training and education to providers, member notification, assistance in scheduling appointments, transportation, providing extended services, tracking referrals and the WIC program).

4.13.28 Grievance System: Describe the vendor’s complaint and grievance procedures in accordance with the contract requirements. Please provide a copy of your complaint/grievance process/policy and time frames for resolving each.

4.13.29 Communications with providers:

a. Describe the roles and responsibilities of your provider relations staff.

b. Provide a copy of your provider manual.

c. How will you notify providers of specific quality improvement activities?

d. Who does provider recruitment within the MCO?

e. Provide information on your provider profiling policies and processes.

f. Do you share provider profile information with your providers?

g. Describe your provider appeals process.

h. Describe subcontractor monitoring processes.

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4.13.30 Communications with consumers:

a. How often will you review your member handbook to determine if updates are needed?

b. Describe your process for dealing with non-compliant members.

c. Describe the staffing for consumer services. What is the member to member-service-staff ratio? Is this government funded only or for all managed care plans?

d. Please include draft materials produced for members, including:

i. Member Handbook.

ii. Member Welcome Packet including PCP enrollment materials.

iii. Please provide copies of your member services policy.

e. Provide a copy of your member rights and responsibilities policy.

f. Provide a copy of your current member card(s).

4.13.31 Medical Records System and Confidentiality:

a. Include your medical records documentation policies.

b. Indicate which of the following policies your medical records system addresses:

i. Medical records for all providers in the plan shall be: organized, accurate, legible and safeguarded; available for use in Quality Management activities; and document continuity of care when enrollees are treated by more than one provider.

ii. Provider efforts do not interfere with access to and confidentiality of family planning services.

iii. Confidentiality of information is guaranteed.

iv. Provide your confidentiality policies.

4.13.32 Financial:

a. Financial Statements: Furnish the following financial reports as well as any other reports outlined in this RFP:

i. A copy of the most recent unaudited financial statements for the MCO;

ii. The past year’s income and expense statements;

iii. Current balance sheets;

iv. Copies of applicable fidelity bonds and insurance policies;

v. Descriptions of financing arrangements for operational deficits and for developmental costs;

vi. Financial projections for newly-formed entities, or entities providing health care services for less than one year, shall include:

(1) Monthly statements of revenue and expense for the first year on a gross dollar as well as per-member-per-month basis, with quarters consistent with standard calendar year quarters;

(2) Quarterly statements of revenue and expense for each of three (3) subsequent years;

(3) A quarterly balance sheet for all projected time periods; and,

(4) A statement and justification of assumptions.

b. Provide a written assurance stating a copy of your signed reinsurance policy will be submitted not later than 30 days after contract signing.

c. Provide a plan for Coordination of Benefits and Post-pay recovery activities.

d. Provide a written assurance stating the required performance bond and restricted reserve account will be submitted not later than 45 days after contract signing.

e. Provide an insolvency plan. The MCO must document arrangements made which protect its subscribers in the event of insolvency. The plan must include provisions for dividing the cash reserves, capital and surplus requirements among plan providers in the event of insolvency. The MCO shall hold harmless its beneficiaries in the event of insolvency and its providers shall not charge beneficiaries any portion of the costs associated with the provision of services under this contract.

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f. Provide a copy of each letter of credit held by the MCO.

4.13.33 Fact Sheet and Provider Listing

a. Attach a draft of materials on your managed care plan which SRS may include in the enrollment packet given to Medicaid beneficiaries to help them make an educated choice of enrolling in either the MCO or the PCCM program. The customer service phone number must be included (the toll free number should be listed first and the local number listed second). SRS will review and give comments back to the MCO throughout the negotiation process until the final copy is approved by SRS. The draft is due not later than 60 days after contract signing.

b. Attach a draft provider listing for inclusion in the consumer enrollment packet. You may use 8 1/2 x 11” paper printed on both sides. Providers in Region 1 (Mandatory Coverage Area) must be available to accept Title XIX and Title XXI beneficiaries. Providers in Region 2 (Optional Title XIX) must accept title XXI beneficiaries and Title XIX beneficiaries in those counties the MCO elects to provide Title XIX services. The list shall include which program(s) in which the provider is willing to provide services. Provider address and phone number must be included. The provider listing can only include providers for which SRS has received signed contract signature papers from the vendor.

c. The approved fact sheet and provider listing should be ready to be mailed to beneficiaries as an information sheet about your MCO. Indicate the date on which you will print the “fact sheet” and provider listing in order to prepare for delivering several thousand copies of the items by May 15, 2001.

4.13.34 Miscellaneous: List the names of three references for which your MCO acts as insurer or claims administrator. Include information on the size of the group and the name and telephone number of a contact person at each group. Include Kansas employers whenever possible.

4.13.35 Reports: Specify how you propose to submit the following required reports:

a. Subcontractor Changes.

b. Other Personnel Changes.

c. Provider Satisfaction Survey Results.

d. Pending Legal Actions.

e. Performance Improvement Plans (Corrective Action Plans).

f. Consumer Survey Results.

g. Semi-annual Medicaid specific financials.

h. Prior Authorization Criteria.

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SECTION V

STATEMENT OF WORK

5.1 PURPOSE

The vision of the Medical Policy/Medicaid Program is to create a single health care delivery system that appears seamless to the beneficiary through the integration of Title XIX and Title XXI of the Social Security Act. Using value-based purchasing strategies, the Medical Policy/Medicaid Division of The Department of Social and Rehabilitation Services (SRS) intends to increase access to quality healthcare, encourage the development of a managed system of care which promotes long-term health and wellness and procure and manage quality medical services that are non-stigmatizing. We want to increase the number of persons served within a capitated managed care model and be able to offer a choice of two Managed Care Organizations (MCOs) in almost every county in the State. Through the development of a delivery system of care that more closely resembles commercial health insurance, we hope to uncouple the healthcare programs from other welfare programs and reduce the stigma currently associated with Medicaid. In responding to this RFP, plans should bear in mind this vision and provide information in such a manner as to make clear how their responses relate to the program’s vision. Innovations which enhance the blending of Title XIX and Title XXI into a single program which mirrors commercial health plans are encouraged.

5.2 BACKGROUND

Title XIX of the Social Security Act, referred to as Medicaid, provides medical assistance for certain individuals and families with low incomes and resources. Medicaid became law in 1965 as a jointly funded cooperative between the Federal and State governments to assist States in the provision of adequate medical care to eligible needy persons. The Social Security Act was amended in 1997 to add Title XXI, which provides health insurance coverage to children from low-income families. Title XXI is referred to as HealthWave in Kansas and was implemented by seeking insurers to provide health insurance coverage to children in eligible families (up to 200 percent of the federal poverty level). It is our intent to blend these two programs into one under the HealthWave name.

Enrollment will begin May 1, 2001 and continue on an ongoing basis. Title XXI beneficiaries will have a guaranteed 12 month period of eligibility in the Title XXI Program beginning the first month of eligibility for covered services. Neither Title XIX nor Title XXI beneficiaries are subject to waiting periods or pre-existing condition clauses excluding coverage for conditions as of the effective date of their coverage. Enrollment in the Title XIX and Title XXI programs will be the responsibility of SRS and its fiscal agent(s). Health care services must be available to members beginning July 1, 2001.

5.3 CATEGORIES OF ELIGIBILITY

5.3.1 Title XIX - Medicaid beneficiaries who will be eligible under the contract:

a. Adults and Children, eligible under the Temporary Assistance to Families (TAF) program.

b. Certain pregnant women and children through the month of their first birthday.

c. Certain children over the age of one (1) year and through the month of their sixth (6) birthday.

d. Certain children over the age of six (6) and through the month of their twenty-first (21) birthday, born on or after October 1, 1979.

Title XIX beneficiaries will be in the fee-for-service system until their name appears on the MCO Beneficiary Roster.

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5.3.2 Title XXI - Children’s Health Insurance Program beneficiaries who will be eligible under the contract:

Children under the age of nineteen years who are not eligible for Title XIX (Medicaid), but living in families with incomes less than 200 percent of the federal poverty level.

5.3.3 Title XIX Beneficiaries Not Eligible for the Contract:

The following categories of Medicaid beneficiaries are excluded from receiving services under this contract:

a. Beneficiaries residing in a nursing facility, nursing facility for the mentally ill, intermediate care facilities for mental retardation (ICF/MR) or head injury rehabilitation facility;

b. Beneficiaries with Medicare coverage;

c. Beneficiaries enrolled in another managed care program;

d. Beneficiaries enrolled in a Medicaid administrative “lock-in” program;

e. Beneficiaries who have an eligibility period that is only retroactive;

f. Beneficiaries enrolled in any Home and Community Based Services (HCBS) Waiver Program;

g. Beneficiaries eligible for SSI;

h. Beneficiaries in foster care; and

i. Beneficiaries in the Health Insurance Premium Payment System (HIPPS)

5.4 SERVICES REQUESTED

Contracted MCOs shall provide capitated managed care services to Title XIX and Title XXI beneficiaries. The number of MCOs participating will be limited to two (2) in Region I (see 5.5.1) for both Title XIX and Title XXI. MCOs may selectively provide Title XIX services in counties located in Region 2 (see 5.5.2). SRS will award one MCO contract to provide Title XXI services in Region 2. The MCOs shall assume responsibility for all medical conditions of both Title XIX and Title XXI beneficiaries except those medical conditions specifically excluded below. The MCOs shall ensure the provision of medically necessary services, including prescription drugs, as specified below, subject to all terms, conditions and definitions of this RFP. Covered services shall be available in the service area through the MCOs or their subcontractors.

5.5 GEOGRAPHIC SERVICE AREA

MCOs contracting to provide services under this RFP in Region 1 must provide both Title XIX and Title XXI services to all beneficiaries located in the counties listed in Section 5.5.1. MCOs contracting to provide services under this RFP in Region 2 must provide only Title XXI services to all beneficiaries located in the counties listed in Section 5.5.2. MCO’s contracting to provide services under this RFP may provide Title XIX services to beneficiaries listed in Section 5.5.2 at their option on a county-by-county basis

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5.5.1 Region 1 (Mandatory Title XIX and Title XXI Coverage):

Contractors shall provide both Title XIX and Title XXI funded services in the following counties:

Allen	Cowley	Hodgeman	Mitchell	Rice
Anderson	Crawford	Jackson	Montgomery	Riley
Atchison	Dickinson	Jefferson	Morris	Rooks
Barber	Doniphan	Jewell	Nemaha	Rush
Barton	Douglas	Johnson	Neosho	Russell
Bourbon	Edwards	Kingman	Ness	Saline
Brown	Elk	Kiowa	Norton	Sedgwick
Butler	Ellis	Labette	Osage	Shawnee
Chase	Ellsworth	Leavenworth	Osborne	Smith
Chautauqua	Ford	Lincoln	Ottawa	Stafford
Cherokee	Franklin	Linn	Pawnee	Sumner
Clark	Geary	Lyon	Phillips	Trego
Clay	Graham	Marion	Pottawatomie	Wabaunsee
Cloud	Greenwood	Marshall	Pratt	Washington
Coffey	Harper	McPherson	Reno	Wilson
Comanche	Harvey	Miami	Republic	Woodson
				Wyandott

5.5.2 Region 2 (Mandatory Title XXI, Optional Title XIX Coverage):

Contractors may elect to provide Title XIX services in any or all of the following counties. The successful bidder shall provide Title XXI services in the following counties:

Cheyenne	Gray	Lane	Scott	Stevens
Decatur	Greeley	Logan	Seward	Thomas
Finney	Hamilton	Meade	Sheridan	Wallace
Gove	Haskell	Morton	Sherman	Wichita
Grant	Kearny	Rawlins	Stanton

5.6 WAIVER AUTHORITY

SRS operates Title XIX - Medicaid under a 1915(b) Waiver from the Health Care Financing Administration (HCFA). If waiver authority is withdrawn, the portion of this contract dealing with Title XIX - (Medicaid) shall become null and void. In the event waiver authority is withdrawn that portion of this contract dealing with Title XXI shall continue in full force and effect.

5.7 FUNCTIONS AND DUTIES OF THE MCO

5.7.1. Compliance with Applicable Law

Observe and comply at all times with all federal and state laws in effect during the term of the contract, which in any manner affect the Contractor’s performance under this contract. The Contractor must comply with all provisions of SRS policies, procedures, regulations, guidelines and rules for Contractor services, as well as pertinent federal regulations. The Contractor must remain in compliance with the provisions of the waiver granted by HCFA and all terms and conditions of the waiver established by HCFA. The Contractor must remain in compliance with the Balanced Budget Act. The Contractor must comply with all applicable provisions of the Health Insurance Portability and Accountability Act (HIPAA).

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5.7.2 Statutory Requirements

The Contractor shall:

a. Retain at all times during the period of this contract a valid Certificate of Authority issued by the Kansas Department of Insurance.

b. Certify to SRS, in accordance with section 1932(d)(1) of the Social Security Act, that it does not, and shall not, have a director, officer, partner or person with beneficial ownership of more than 5% of the entity’s equity who has been debarred or suspended by any federal agency. Secondly, the MCO certifies to SRS it has no employment, consulting, or any other agreement with a debarred or suspended person for the provision of items or services that are significant and material to its contractual obligation to SRS. Please refer to the Federal Debarment List located at www.arnet.gov/epls for a listing of federally debarred and suspended individuals.

c. In accordance with HCFA Release No. 35, Medicaid Clinical Laboratory Improvement Amendments (CLIA) Implementation, the Contractor shall obtain copies of the valid CLIA certificates from the laboratories and/or all entities providing laboratory services funded by Title XIX and Title XXI. The Contractor shall provide a listing to SRS of all laboratories and/or entities providing laboratory services used by the Contractor and shall certify to SRS that the laboratories and/or entities providing laboratory services are CLIA certified. The Contractor shall update the listing and certification as laboratories and/or entities providing laboratory services are added to or dropped from the list.

5.7.3 Early and Periodic Screening, Diagnosis and Treatment (EPSDT)

The Contractor must provide the EPSDT screens to all Title XIX beneficiaries under twenty-one (21) years of age and Title XXI beneficiaries under nineteen (19) years of age.

a. EPSDT Background and Definition: The Contractor shall comply with Federal law and regulations governing the administration of the Title XIX services which require that a state provide health screening and necessary diagnostic and treatment services for all children under age twenty-one (21) who are eligible for Title XIX. EPSDT is sometimes referred to as KAN Be Healthy (KBH) in Kansas. All references and provisions relating to EPSDT coverage shall also include all children enrolled under this contract under the age of 19 who are eligible for Title XXI benefits. The federal law requires the state to have 80% of all Title XIX beneficiaries under twenty-one (21) years of age EPSDT screened in accordance with the American Academy of Pediatrics Periodicity Schedule (see Appendix R). SRS is committed to assuring that as many eligible children as possible have a source of regular ongoing health care. A child should be able to receive examination, treatment, and when necessary, referral services from one provider to another provider. This program allows participating individuals under the age of twenty-one (21) years (under the age of nineteen (19) years for Title XXI) to receive any services which are medically necessary (see Appendix M for our proposed medical necessity criteria). In order to be considered a program participant and receive additional services, individuals must follow the periodicity schedule.

b. Screening, Diagnosis And Treatment: The MCO shall ensure the completion of health screens at the entrance to the program, and at specific intervals, which consist of a health history, developmental assessment, complete physical exam, vision screening, hearing test, urinalysis, blood test, immunizations, nutrition screen, anticipatory guidance and other tests as needed and referrals for treatment. Vision and hearing tests shall be completed at the specified intervals for these tests.

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c. Current SRS policy requires the following additional screens and services:

i. Participants may have a dental screening at the age of twelve (12) months but must have a dental screening annually if three (3) years of age or older. Some services require prior authorization (Dental screening is not part of the MCO benefits package. This information is provided here for informational purposes only).

ii. Participants must have a vision screening at the age of three (3) years. Examinations every two (2) years and treatment for medical conditions of the eye are covered.

iii. Participants must have a hearing screen at the age of three (3) years. Examinations every three (3) years and treatment for medical conditions of the ear are covered.

iv. Additional treatment and services which are covered only for EPSDT participants which include, but are not limited to, elective surgery and over the counter (OTC) medications. Under the Federally mandated (OBRA 89) “extended services” requirements, if a service is determined to be medically necessary by a physician for EPSDT participants, the MCO is responsible for the provision of and reimbursement for that service.

d. Reports And Records: SRS has the obligation of assuring the federal government that EPSDT services are being provided as required. All requested records, including medical and peer review records, must be available for inspection by state or federal personnel or their representatives. The Contractor must record their health screenings and examination related activities and must report those findings quarterly, in an SRS approved format. The Contractor shall use the SRS approved Current Procedural Terminology (CPT) codes for EPSDT (see Appendix U). Updates to these codes can be found in provider manuals and provider bulletins. In addition to SRS’ periodic onsite record inspection, the following information shall be reported by the Contractor to SRS in the encounter data that is submitted monthly.

i. The child’s name, Title XIX or Title XXI ID Number, and date of birth.

ii. The date and type of the EPSDT screen.

iii. Whether the child was referred for diagnosis and/or treatment for dental, hearing, vision or other.

5.7.4 Children with Special Health Care Needs

For other young persons with handicaps, disabilities or diseases which require specialty care and who qualify for services under Special Health Services (SHS), Title V, through the Kansas Department of Health and Environment (KDHE), the MCO must contact the Bureau of Children and Families within KDHE and follow SHS advice on referrals and coordination of care.

5.7.5 Cultural Competency

The Contractor shall address the special health needs of members who are poor, homeless and/or members of a minority population group. The Contractor shall incorporate in its policies, administration, and service practice the values of (1) honoring member’s beliefs, (2) sensitivity to cultural diversity, and (3) fostering in staff/providers attitudes and interpersonal communication styles which respect members’ cultural backgrounds. The Contractor shall have specific policy statements on these topics and communicate them to subcontractors.

The Contractor shall encourage and foster cultural competency among providers. The Contractor shall permit members to choose providers from among the Contractor’s network based on cultural preference. The Contractor shall permit members to change primary providers based on cultural preference. Members may submit grievances to the Contractor and/or SRS related to inability to obtain culturally appropriate care, and SRS may, pursuant to such grievance, permit a member to disenroll and enroll in another Contractor, or into HealthConnect (the PCCM program) in a county where Contractors do not enroll all eligible beneficiaries. Culturally appropriate care is care by a provider who can relate to the member and provide care with sensitivity, understanding, and respect for the member’s culture.

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5.7.6 Family Planning Services:

The Contractor is required to provide freedom of choice for family planning and reproductive health services, which may be out of the managed care organization’s network. The Contractor is responsible for payment of these services. Examples of family planning and reproductive health services that must be covered by the health plan include: contraception management, insertion of Norplant, Intrauterine Device(IUD), Depo Provera^® Injections, Pap test, pelvic exams, sexually transmitted disease testing, family planning counseling/education or any other methods of contraception.

a. Medically approved services prescribed by physician/advanced registered nurse practitioner/nurse midwife including diagnosis, treatment, counseling, drug, supply, or device to individuals of childbearing age;

b. For family planning purposes, sterilization shall only be those elective sterilization procedures performed post partum for the purpose of rendering an individual permanently incapable of reproducing and must always be reported as family planning services, in accordance with mandated federal regulations 42 C.F.R. §441.250-441.259;

c. The Contractor must assure that the Sterilization Consent form meets all the criteria required by HCFA in 42.C.F.R. §441.250 - 441.259, and must require a properly completed copy of the Sterilization Consent form from the performing provider. The Contractor must maintain a copy of the form.

5.7.7 Service Accessibility Standards

The following service accessibility standards (for all health service providers, unless otherwise specified herein) shall apply:

a. Number of Beneficiaries Per Physician/Primary Care Provider: An individual physician or primary care provider may not care for more than 1800 beneficiaries enrolled as members of the Contractor’s health plan.

b. Nondiscrimination:

i. The Contractor shall provide contract services to Title XIX and Title XXI members under this contract in the same manner as those services are provided to the Contractor’s other members, although covered services and provider payment levels may vary. The Contractor must guarantee that the locations of facilities and practitioners providing health care services to members are geographically convenient to low-income areas, handicapped accessible and close to public transportation routes. If provider office locations change during the contract term, the Contractor shall notify SRS.

ii. Comply with all the provisions and applicable conditions of Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of 1967, as amended; Equal Pay Act of 1963; the Rehabilitation Act of 1973, as amended; The Americans with Disabilities Act of 1990 and the Civil Rights Act of 1991. If applicable, the Contractor must also comply with all provisions of Executive Order #11246 including amendments, as well as rules, regulations and relevant orders of the Secretary of Labor.

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iii. The Contractor shall not discriminate against individuals eligible to be covered under the contract on the basis of health status or need of health services.

c. Twenty-Four Hour Access To Healthcare Coverage: Provide coverage, either directly or through its primary care providers, to members on a twenty-four (24) hours per day, seven (7) days per week basis. The Contractor shall have written policies and procedures describing how members and providers may contact the Contractor to receive individual instruction on accessing emergency services or receiving prior authorization for treatment of an urgent medical problem and instruction when out of geographic area. The procedures shall include availability of 24-hours, seven days per week access by telephone to a live voice (an employee of the Contractor or an answering service) which will immediately page an on-call medical professional so that referrals can be made for non-emergency services or so information can be given about accessing services or how to handle medical problems during non-office hours. These policies and procedures shall also describe how the Contractor responds to calls received from members. The policies and procedures must be made available in an accessible format upon request. Direct contact with qualified clinical staff must be available through a toll-free voice and telecommunication device for the deaf telephone number. Recorded messages are not acceptable. The Contractor shall ensure all Contractor members equal access to twenty-four hours per day, seven (7) days per week, health care coverage.

d. Travel Distance:

i. Make available to every member, a pharmacy and a primary care provider within twenty (20) minutes in urban counties and thirty (30) minutes in all other areas of the state, of the member’s place of residence. In rural areas where available, pharmacies, specialty physicians and hospitals must be in a location closer than an urban county if traveling to the urban county for these services would endanger the member’s health.

ii. Members may, at their discretion, select primary care providers located further from their homes.

e. Appointment Standards: The Contractor shall monitor and ensure that a member’s waiting time at the primary care provider or specialist office is no more than two (2) hours from the scheduled appointment time, except when the provider is unavailable due to an emergency. Waiting time is the actual time spent waiting to see the provider after check-in. The Contractor shall have procedures in place to ensure:

i. Emergency services are available at all times to members who appropriately seek emergency care under the “prudent lay person” definition of emergency care. (See the definition in Appendix E).

ii. Emergent primary care provider appointments are available the same day, seven days per week, twenty-four hours per day, (e.g., high temperature, persistent vomiting or diarrhea, symptoms which are of sudden or severe onset but which do not require emergency room services).

iii. Urgent primary care provider appointments are available within forty-eight (48) hours (e.g., persistent rash, recurring low grade temperature, nonspecific pain, fever).

iv. Routine care appointments are available within 45 days (e.g., well child exams, routine physical exams).

f. For specialty referrals, arrangements and provisions, the Contractor shall be able to provide:

i. Emergent specialty care appointments, arrangements and provisions within twenty-four (24) hours of referral.

ii. Urgent specialty care appointments available within three days of referral.

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iii. Routine appointments within forty-five (45) days of referral. For maternity care, the Contractor shall be able to provide initial prenatal care appointments for enrolled pregnant members as follows:

(1) First trimester within fourteen (14) days of first request.

(2) Second trimester within seven (7) days of first request.

(3) Third trimester within three (3) days of first request.

(4) High risk pregnancies within three (3) days of identification of high risk to the Contractor or maternity care provider, or immediately if an emergency exists.

g. Limited English Proficiency (LEP): The Contractor must provide language assistance necessary to ensure meaningful access to services at no cost to the LEP beneficiaries. Meaningful access for LEP beneficiaries ensures that the State or Contractor and the LEP beneficiary can communicate effectively and that the beneficiary has adequate information, is able to understand the services and benefits available, and is able to receive those services and benefits for which he or she qualifies.

i. Translation of Written Materials:

(1) The Contractor shall make available written translation of all documents whenever 10% or three thousand (3,000) members, whichever is less, of the Contractor’s enrolled population speak a single non-English language in the home.

(2) The Contractor shall make available written translation of vital documents, whenever 5% or one thousand (1,000) members, whichever is less, of the Contractor’s enrolled population speak a single non-English language in the home. Other documents shall be translated orally, if needed.

(3) The Contractor shall make available written notice in the primary language of the LEP group of the right to receive translated documents whenever one hundred (100) members of the Contractor’s enrolled population speak a single non-English language in the home.

ii. Best Practices: The Contractor and their medical providers are encouraged to utilize:

(1) Simultaneous translation

(2) Language banks

(3) Language support office

(4) Multi cultural delivery project(s)

(5) Pamphlets

(6) Use of translation technology

(7) Telephone information lines and translation services

(8) Signage and other outreach services

iii. Documented expenditures for oral and written translation administrative activities and services may be passed through to SRS for reimbursement. Federal financial participation is available to the State for such activities or services whether provided by staff interpreters, contract interpreters or through a telephone service.

h. Provider Network Coverage: The Contractor shall have a primary care provider, pharmacy and hospital in every county where it has members. In the event there is no primary care physician, pharmacy or hospital in a given county, the contractor shall make other provisions to provide services to its members located within that county. The Contractor may include providers from other states in their provider network for this contract. Members may cross the State line for treatment, providing that they are in a border city which is within 50 miles of the State line.

i. Policies And Procedures: The Contractor shall have established written procedures as contained in the RFP Response for disseminating its standards of practice to the network and it must assign a specific member of its organization to ensure compliance with these standards by the network.

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i. The Contractor shall have written policies and procedures concerning how the Contractor educates its provider network and about appointment time requirements. The Contractor shall monitor compliance with these standards and shall develop and implement a corrective action plan when appointment standards are not met.

ii. The Contractor shall have a formal process for developing and communicating acceptable standards of practice to providers of care. This process must include, at a minimum:

(1) Identification of parties responsible for development of internal standards of practice or dissemination of State-defined standards of practice;

(2) How initial orientation of providers will include education regarding standards of practice; and

(3) Methods for ongoing education of providers regarding standards of practice.

iii. The Contractor shall have written policies and procedures to ensure that participating providers are appropriately credentialed. These policies must be approved by SRS and must include at a minimum:

(1) Designation of a credentialing committee, including qualifications and responsibilities with oversight by the Contractor governing body;

(2) Information reviewed for credentialing purposes, which may include a visit to the practitioner’s office;

(3) Process for periodic recredentialing;

(4) Methods for reporting serious quality deficiencies resulting in suspension or termination of a provider;

(5) Process for provider to appeal adverse credentialing action;

(6) Specific credentialing criteria for each provider type participating with the Contractor; and

(7) Process to ensure providers are actively practicing during the contract period.

5.7.8 Health Education and Prevention

The Contractor shall provide health education such as toll-free phone numbers, videos, and member handbooks to the extent that the member is advised of the appropriate use of health care and is instructed in ways to assist in the maintenance of his or her own health.

The Contractor shall use its best efforts to provide and arrange for a face-to-face contact, a complete physical examination or age/sex specific health screening for all members within the first six months of enrollment and continue to provide health education and/or physical exams on an annual basis thereafter.

5.7.9 Member Handbook and Notification

The Contractor shall mail a member handbook, or other written materials with information on how to access services, approved by SRS, to all members within ten (10) business days of being notified of their enrollment. When there are program changes, notification will be provided to the affected members at least fourteen (14) days before implementation. The Contractor shall maintain documentation verifying that the member handbook is reviewed and updated at least once a year. The member handbook must be written at no higher than a sixth grade reading level.

At a minimum, the member handbook shall include:

a. A Table of Contents.

b. A Glossary.

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c. Information about choosing and changing primary care providers.

d. Toll free telephone number to call with questions.

e. Appointment procedures.

f. A description of all available health plan services and an explanation of any service limitations or exclusions from coverage and a notice stating that the health plan will be liable only for those services authorized by the health plan.

g. How to contact member services and a description of its function.

h. How to register a complaint with the plan or SRS, or file a formal grievance.

i. Provider network listing, including a list of the names, specialties, hospital affiliations, telephone numbers, and service site addresses of primary care providers available for selection. The Contractor must also include a list of participating pharmacies and hospitals.

j. What to do in case of an emergency and instructions for receiving advice on getting care in case of any emergency, including how to access the 24-hour toll-free number. Information should also distinguish between a true emergency, emergent care and urgent care. In a life-threatening situation, the member handbook should instruct members to use the emergency medical services available or to activate emergency medical services by dialing 911.

k. How to obtain emergency transportation and medically necessary transportation.

l. How to obtain mental health/behavioral services.

m. How to obtain dental services.

n. How to obtain pharmaceuticals and pharmacy services.

o. What to do when emergent or urgent services are needed and the member is temporarily outside the service area.

p. How to obtain EPSDT Services.

q. How to access maternity, family planning and sexually transmitted disease services.

r. Information regarding out-of-county and out-of-state moves.

s. Informing the member that if he or she has a worker’s compensation claim, or a pending personal injury or medical malpractice law suit, or has been involved in an auto accident, to immediately contact the Medical Policy/Medicaid Unit, Third Party Liability Manager.

t. Disenrollment policies and procedures.

u. Contributions the member can make toward his or her own health, member responsibilities, appropriate and inappropriate behavior, and any other information deemed essential by the Contractor or SRS.

v, Rights and responsibilities of the member.

w. The Contractor’s policy on referrals for specialty care.

x. The Contractor’s policy regarding copayments and charges to members (copayments may not be charged except for non-Title XIX services).

y. The Contractor’s procedures for appeals.

z. The Contractor’s procedures for notifying members about terminations and/or changes in benefits, services or delivery dates.

aa. SRS’ procedures for appeals.

bb. Information regarding the 90-day choice (of plan) period and the annual reenrollment period.

NOTE: Some of this information may be included as inserts to the handbook.

The Contractor shall submit the member handbook to SRS for approval prior to distribution to members. The Contractor shall make modifications in handbook language if requested to do so by SRS.

The Contractor shall comply with the translation requirements of Section 5.7.7.g. The Contractor shall also provide handbooks in alternative formats, i.e., large print, Braille, or cassette and diskettes for participants with sensory impairments.

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5.7.10 Conversion Privileges

The Contractor shall comply with the Health Insurance Premium Payment Act (HIPPA) and offer conversion to a private pay policy if enrollment stops because Title XIX or Title XXI eligibility is lost. The Contractor shall meet the conversion requirements under Kansas law.

5.7.11 Choice of Health Professional

To the extent possible and appropriate, each member covered under the Contractor shall have the right to choose among Contractor providers at the time of enrollment and within the Contractor network.

5.7.12 Medical Transportation

Medical Transportation will be provided to Title XIX and Title XXI beneficiaries as defined in relevant Title XIX Medicaid Provider Manuals, the Kansas Medical Services Manual and the Kansas Medicaid State Plan. The MCO must meet the minimum federal requirements for provision of transportation services. The MCO will cover the following:

a. Emergency ambulance transportation.

b. Non-emergency ambulance transportation from the member’s home to the nearest medical facility, or transportation from one facility to another if the first facility is inadequate for treatment.

c. Non-ambulance transportation to all medically necessary services including carved out services (i.e., mental health and dental services).

d. Transportation to family planning services even if these services are obtained from a provider not participating in the MCO network.

e. Lodging and meals will be provided for the beneficiary and one attendant (if the beneficiary is 20 years of age or younger) when the receipt of medical services necessitates an overnight stay.

5.7.13 Quality Management

a. SRS is dedicated to improving the quality of care for the Title XIX and Title XXI beneficiaries of Kansas. SRS feels this can best be obtained through a collaborative effort with Managed Care Organizations.

b. SRS maintains oversight of the Contractor’s quality management functions. Therefore, the contractor must comply with all SRS quality management criteria described herein. In addition, quality standards must meet or exceed the requirements of 42 CFR §434.34. The MCO will, at a minimum, monitor, evaluate, and seek to improve the following:

i. Quality improvement;

ii. Utilization management;

iii. Member services;

iv. Provider services;

v. Record keeping;

vi. Organization structure;

vii. Adequacy of personnel;

viii. Access standards; and

ix. Data reporting.

c. The contractor shall be held accountable for the ongoing monitoring, evaluation, and actions as necessary to improve the health of its members and the care delivery systems for those members. The contractor shall be held accountable for the quality of care delivered by providers and subcontractors. SRS’ quality management program shall consist of internal monitoring by the contractor, oversight by federal and state governments, and evaluations by an External Quality Review Organization (EQRO). Areas found to be deficient during the above processes shall be addressed by the contractor through a Corrective Action Plan (CAP) process initiated internally or by SRS.

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d. The contractor shall have a Quality Action Plan (QAP) and internal quality process which conforms to current standards and guidelines prescribed by the Health Care Financing Administration. The contractor shall adhere to the requirements contained within SRS’ Quality Management Plan (QMP), in Appendix F. The contractor shall have a QAP composed of, but not limited to:

i. Scope of the QAP, including the quality of clinical care and quality of non-clinical aspects of service;

ii. Specific activities, including methodologies, arrangements and responsible personnel for focused review of care studies and other quality of care studies, and tracking of outcome indicators;

iii. Methods for provider participation in the QAP;

iv. Methods for coordinating quality assurance activity with other Contractor management activity, including: recredentialing and provider network contracting; utilization management; complaint and grievance procedures; network changes; benefits redesign; patient education and member services; and

v. Maintain and make available to SRS, studies, reports, protocols, standards, worksheets, minutes or such other documentation as may be appropriate, concerning its QAP.

e. The contractor shall operate under a formal organizational structure for the implementation and oversight of the QAP. The formal organizational structure must include at a minimum:

i. Defined responsibilities, job descriptions and reporting relationships for those staff responsible on a day-to-day basis for the implementation and oversight of the quality assurance program;

ii. Identification and job description of the senior executive responsible for QAP implementation;

iii. The responsibilities and composition of the committee responsible for overseeing QAP. The committee should include representatives of the provider community;

iv. Protocol and schedule for regular meetings of oversight committee (minutes of the QA meetings shall be made available to SRS upon request);

v. How documentation associated with the oversight of the QAP will be developed and organized;

vi. How the QAP staff and the QAP oversight committee will be accountable to the governing body of the Contractor;

vii. Process for conducting regular and periodic examination of the scope and content of the QAP; and

viii. Process and responsible parties for completing an annual written evaluation of the QAP, which should address: studies and other activities completed; trending of clinical and service indicators and other performance data; demonstrated improvements in quality; areas of deficiency and recommendations for corrective action; and an evaluation of the overall effectiveness of the QAP.

f. In addition to internal monitoring of quality of care, the contractor shall submit to SRS reports regarding the results of their internal monitoring, evaluation, and QAP implementation. The reports shall include targeted health indicators monitored by SRS and specific quality data periodically requested by HCFA or SRS. The reports may be required on a quarterly or annual basis or as specified by SRS. (Refer to the QMP located in Appendix F for the current report requirements). The report requirements shall be periodically reviewed and updated by SRS. SRS shall provide the contractor with no less than ninety (90) days notice of any changes in the report requirements. The contractor shall comply with all subsequent changes specified by SRS. The contractor shall provide access to documentation, medical records, premises, and staff as deemed necessary by SRS.

g. Have a formal process for ensuring appropriate utilization of services and that services utilized are medically necessary. This process may include:

i. Admission review and pre-certification of non-emergency hospital admissions;

ii. Concurrent review of all admissions not receiving preadmission certification; and must include:

iii. An appeals process for negative preadmission or concurrent review determination.

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iv. Monitoring prescription drug utilization.

v. Cooperation with the Drug Utilization Review Board (DURB) in prescription drug monitoring and provider education regarding drug utilization.

5.7.14 External Quality Review Organization (EQRO)

Federal law (Section 1902(a) (30) (C) of the Social Security Act) requires entities which are external to and independent of the state and its contractor(s) and subcontractors to perform, on an annual basis, a review of the quality of Title XIX managed care services furnished by each such contractor. For the purposes of this contract, these requirements shall apply to Title XIX and Title XXI.

a. The purpose of the external review function shall be threefold:

i. To provide states and the federal government with an independent assessment of the quality of care delivered to Title XIX and Title XXI beneficiaries enrolled with the contractor;

ii. To resolve identified problems in health care and contribute to improving the care of all Title XIX and Title XXI beneficiaries enrolled with the Contractor;

iii. To measure Contractor compliance with contract requirements.

b. The contractor and EQRO shall work together in the design of quality improvement, problem resolution, and review design activities. The Contractor shall participate in the following quality review design activities:

i. Selection of clinical conditions and/or health service delivery issues to be addressed through external quality review;

ii. Study design features including: refining study questions, identification of practice guidelines to be used to assess care, identification of quality indicators, and determination of study methodology;

iii. Analysis and interpretation of study findings;

iv. Determination of characteristics of cases to receive individual review; and

v. Structuring of follow-up work plans.

c. SRS currently contracts with The Kansas Foundation for Medical Care as the External Quality Review Organization (EQRO) to assure quality and accessibility of health care in the appropriate setting to Title XIX and Title XXI beneficiaries.

5.7.15 Complaint, Grievance and Appeals Process

a. Member or Provider Inquiries, Complaints, Grievances and Appeals: The Contractor shall establish an internal inquiry, complaint, grievance and appeal process which shall be approved, in advance, by SRS. Any member or provider whose claim for medical assistance is denied, reduced, suspended, terminated, determined inappropriate, or acted upon improperly by the health plan or SRS may use any of the following:

i. Member or Provider Inquiries - An inquiry is a request for information about the health plan. The Contractor shall log and promptly respond to all member and provider inquiries. The Contractor shall designate staff to handle telephone or in-person inquiries. The Contractor shall log inquiries and identify patterns.

ii. Member or Provider Complaints - A complaint is a verbal or written expression indicating dissatisfaction with the health plan. The Contractor shall establish an internal complaint process which promptly resolves issues. All complaints shall be resolved within ten (10) calendar days of the date they are filed. If the member or provider requests additional information to resolve the complaint, the Contractor shall provide the additional information to the member or provider in writing within three (3) days of such a request. The Contractor shall ensure that quality of care complaints are resolved by qualified medical personnel. Upon resolution of a complaint, the Contractor shall inform members and providers in writing of their right to file a grievance or appeal or request a State fair hearing. The Contractor shall log complaints and identify patterns.

iii. Member or Provider Grievances - A grievance is a written request for further

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review of a complaint upon completion of the complaint process. The Contractor shall establish an internal grievance process to promptly resolve issues. A grievance shall be filed in writing within ninety (90) calendar days of the completion of the complaint process. The Contractor shall inform the member or provider and SRS in writing within ten (10) business days of receiving the grievance that a grievance was filed. The Contractor shall decide grievances within thirty (30) calendar days of the date they are filed. Grievance decisions must be rendered prior to proceeding to an appeal. Grievances related to quality of care must be resolved by qualified medical personnel. Upon resolution of the grievance, the Contractor shall inform members or providers in writing of their right to appeal the grievance decision or request a state fair hearing.

iv. Contractor Appeals Process - An appeal is a formal mechanism that allows a member or provider to appeal a grievance determination. Members or providers or their representatives may file an appeal with the Contractor or with SRS. The Contractor shall establish an appeals process to allow members or providers to appeal complaint and grievance determinations. All appeals shall be filed within ninety (90) calendar days of issuance of the grievance determination. All appeals shall be in writing and addressed to the Contractor. The Contractor shall not terminate or reduce services until the appeal is concluded. The Contractor shall provide an opportunity for members or providers or their representative to present the case in person. The Contractor shall reach a final decision on an appeal within sixty (60) calendar days of receipt of the appeal, with extensions possible if approved by SRS. Qualified medical personnel must be represented on any appeal committee handling quality of care issues. The Contractor’s internal complaint, grievance and appeal process shall not be a substitute for the State Fair Hearing process.

v. State Fair Hearings Process - Members or providers may file a request for a State fair hearing at any stage of the complaint, grievance or appeal process. Within five (5) days of receiving notification of the appeal, the Contractor shall forward a copy all supporting documentation pertaining to the dispute to SRS. The Contractor shall not terminate or reduce services to a member until the State fair hearing office renders a decision. If the Contractor’s action is sustained by the State fair hearing office, the Contractor may institute recovery procedures against the member to recoup the cost of any service furnished to the member. The recoupment shall not exceed the cost of the services furnished during the time of the appeal. The Contractor shall comply with decisions reached by the State fair hearing office.

vi. Expedited Review: If the standard time frame could seriously jeopardize a member’s physical or mental health, the Contractor shall inform the member or provider that expedited review is necessary and review the complaint or grievance within 72 hours of receiving the complaint or grievance.

b. Information Packet: The Contractor shall distribute an information packet to members upon enrollment regarding the Contractor’s complaint, grievance, and appeal process and the State’s fair hearing process. The Contractor shall also distribute the information packet to all providers. SRS must approve the information packet and any other information sent to members and providers prior to distribution.

c. The Contractor shall maintain member/provider complaint, grievance and appeals records that include a summary of the issue(s), member’s name (if different from the complainant), identification number, date of complaint, grievance or appeal, Contractor’s response, name of the provider, provider number, and resolution of complaint, grievance or appeal. The Contractor shall furnish a quarterly complaint, grievance or appeal report to SRS.

d. Providers with two or more complaints in one month or any group with four or more complaints shall be further reviewed by the Contractor. The Contractor shall provide members and providers education to minimize misunderstanding. The Contractor shall provide additional education to members or providers who lodge unsubstantiated complaints.

e. The Contractor must develop methods in coordination with and/or referral to the State Title XIX or Title XXI complaint/grievance process.

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f. The Contractor must implement a process to address provider noncompliance with all pertinent policies and procedures. This process is subject to review and approval by SRS.

g. The Contractor shall provide an explanation of its method for terminating a subcontractor.

5.7.16 Medical Records

The Contractor shall maintain a system of access to medical records. The Contractor must have in effect arrangements which provide for access to the medical records and medical record-keeping systems which include a complete medical record for each enrolled member in accordance with provisions set forth in the contract. SRS, or its designated agent, and the federal government shall be allowed access to this system.

Contractor(s) and its subcontractors must maintain the confidentiality of medical record information as outlined in Section 5.7.25.c and release the information only in the following manner:

a. All medical records of enrolled members shall be confidential and shall not be released without the written consent of the covered person or responsible party except as required above.

b. Written consent of the member is required for the transmission of the medical record information of a former enrolled member to any physician not connected with the Contractor.

c. The extent of medical record information to be released in each instance shall be based upon tests of medical necessity and a “need to know” on the part of the practitioner or a facility requesting the information.

5.7.17 Reproduction and Distribution of Materials

The Contractor shall reproduce and distribute to providers, at Contractor expense, according to a reasonable SRS timetable, information and documents from SRS, necessary for Contractor-affiliated providers to fully implement this contract. Examples include, but are not limited to, forms, policy changes, and membership rosters.

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5.7.18 Coordination and Continuation of Care

The Contractor shall have systems in place to ensure well-managed care, including at a minimum:

a. Management and integration of health care through primary/provider/ gatekeeper/other means.

b. Systems to assure referrals for medically necessary, specialty, secondary and tertiary care.

c. Systems to assure provision of care in emergency situations, including an educational process to help assure that beneficiaries know where and how to obtain medically necessary care in emergency situations.

d. Refer to Section 5.7.7, Service Accessibility Standards for additional requirements.

e. Refer to Section 5.12.3.a.iv and 5.12.5.a for an explanation of hospital inpatient charges and ancillary charges whenever a beneficiary is hospitalized when enrolled or disenrolled.

5.7.19 Encounter Data

a. Data Reporting Requirements: SRS has developed data reporting requirements for Contractors to ensure that the Contractors and SRS will both have access to the information they need to evaluate the impact of all services provided on the health status of Title XIX and XXI beneficiaries, as well as facilitate enrollment.

i. A set of current field descriptions for Title XIX and Title XXI data reporting is included in Appendices H and I. Contractors will be required to work with SRS to further define the required fields as needed. SRS and the Contractors must be able to adapt encounter data changes mandated by HCFA or changes being adopted nationally by the industry. Encounter data records sent by the Contractor must conform to the Title XIX and Title XXI Management Information Systems standards to ensure the integrity of the data and to provide edits for “reasonableness”.

ii. The data requirements imposed on Contractors will apply uniformly to all plans and will take effect when services begin. SRS recognizes that certain Contractors may not currently have the system capabilities to meet these requirements upon contract execution. Therefore, in limited cases, SRS may choose to provide a defined phase-in period to meet these requirements.

b. Encounter Data and Reports: All managed care contractors, public or private shall be required to submit encounter level data for each service encounter, based on the parameters and field descriptions listed in Appendices H and I or as may be amended from time to time. The Contractor must provide SRS with information regarding services provided under this contract via electronic or magnetic media in a format which conforms to SRS’ specifications. Contractors will be responsible for ensuring the quality, integrity, and completeness of submitted data. Penalties may apply to Contractors found to be non-compliant, including enrollment termination as defined in Section 3.3.

c. Encounter Claim Data Set Requirements; General Provisions:

i. Encounters: For purposes of this Section, an Encounter is defined as “when a covered person receives services from a given health care provider”.

ii. Accuracy and Completeness of Data: SRS shall process all Title XIX Encounter Data through the Kansas Title XIX Management Information System. Title XXI Encounter Data shall be processed through the Title XXI HealthWave System. Encounters that cannot be processed because of missing or erroneous data shall be considered incomplete or incorrect. When incomplete or incorrect encounter records are identified:

(1) Encounter records will be rejected: The Title XIX fiscal agent or Title XXI Clearinghouse shall notify the Contractor monthly of all incomplete or incorrect encounter data.

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(2) The Contractor shall have the opportunity to complete or correct all encounter data, within the time period identified, below.

(3) The same penalties shall apply as above, if the Contractor does not complete or correct the data.

iii. Data Submission Requirements:

(1) The Contractor shall submit Encounter Data to the fiscal agents according to a schedule(s) provided by SRS.

(2) The Contractor shall submit all data in the format approved by SRS and attached hereto as Appendices H and I or as may be amended from time to time.

(3) The data set specified in Appendices H and I or as revised by SRS from time to time will define the current data content for encounter data.

iv. Data Validity:

(1) Data must be provided on each encounter rendered to members under the capitated plan (federal requirement).

(2) SRS’ goal is to receive no less than 85% of encounter data within 90 days of the date of service. In those instances when this is not feasible, encounter data should be submitted to the fiscal agent within 45 days of receipt of the data by the Contractor from the rendering provider. Actual submission of data should be, at a minimum, once per month and can be as often as daily. Inpatient hospital stays should be submitted no less than once every 12 months.

(3) The Medical Policy/Medicaid Division shall collect data regarding all services rendered to Title XIX and Title XXI members, whether the services rendered were paid or denied by the Contractor. Where the sequence of like data is necessary to accurately represent an aspect of the encounter, encounter data must be submitted to the fiscal agent in exactly the sequence it was recorded. (Example: the sequence of diagnosis and procedure codes represents the patient’s principle and secondary conditions and is extremely important in the assignment of Diagnosis Related Groupings [DRGs]).

(4) Encounter data may only be submitted electronically by Asynchronous Transmission with FTP. Any other media must be approved by SRS.

(5) Encounter data failing validity rules listed below shall be reported to the Contractor, rejected and not allowed on the database. Contractors shall have 30 days from the rejection date to correct rejected encounter data records and resubmit them. Adjustments to encounter data on the database will not be allowed unless approved by SRS and only under special circumstances. The Contractor will be allowed to void Title XXI original encounter and submit revised encounter data. At this time, this capability is not available for Title XIX encounter data.

v. Claim Level:

(1) Data identified as mandatory must be filled out.

(2) Provider number must match a provider number submitted by the Contractor on their provider roster.

(3) The Beneficiary ID must be valid and for a beneficiary the program paid a capitation for in the month the service was provided.

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vi. Service Level:

(1) All dates of service must be valid dates.

(2) Procedure codes must be valid as defined by HCPCS (CPT-4 and some local codes) and ICD-9 coding manuals. (Current year editions are used).

(3) Diagnoses must be valid as defined by the ICD-9 coding manual. (Current year editions are used).

(4) Inpatient revenue codes must be valid as defined by the national uniform billing committee for the UB92 claim form.

(5) National drug codes (NDCs) must be valid as defined by Red Book, First Databank or other nationally recognized NDC reporting entities.

d. Provider Roster: The Contractor shall submit provider information electronically to the fiscal agent in a provider roster format approved by SRS (see Appendices H and S). This information will be updated monthly by the Contractor and will be a full file replacement each month. Title XIX Provider information will be sent to the Contractor from the fiscal agent on a regular basis as well.

e. Beneficiary Data: The fiscal agent shall transmit a Beneficiary Roster to the Contractor twice (currently HealthWave is transmitting once) per month. The Contractor shall transmit beneficiary/PCP assignments to the fiscal agent within ten days following receipt of the Beneficiary Roster. The Contractor shall routinely provide SRS with additions and updates to the Title XIX beneficiary Third Party Liability (TPL) data. Title XIX TPL information (currently TPL information is not required for Title XXI) will be sent to the Contractor from the fiscal agent on a regular basis as well.

f. Timeliness: The required time frame for submitting data is 90 days from date of service except when SRS determines this time frame is not feasible.

g. Provider Payments: Contractor shall pay health care providers on a timely basis consistent with the claims payment procedures described in section 1902(a)(37)(A), of the Social Security Act, unless the health care provider and the Contractor agree to an alternative payment schedule.

5.7.20 Disclosure of Financial Records

The Contractor shall establish and maintain an accounting system in accordance with generally accepted accounting principles, and the costs properly applicable to this contract shall be readily ascertainable. The accounting system shall maintain records pertaining to the services and any other costs and expenditures made under this contract.

The Contractor and any subcontractors shall make available to SRS, SRS’ authorized agents and appropriate representatives of the U.S. Department of Health and Human Services within fourteen (14) calendar days of date of request, any financial records of the Contractor or subcontractors which relate to the Contractor’s capacity to bear the risk of potential financial losses, or to the services performed and amounts paid or payable under this contract. Accounting procedures, policies and records shall be completely open to state and federal audit at any time during the contract period and for five years thereafter.

5.7.21 Emergency Services Requirements

Contractor Payment Obligations: The Contractor’s obligation to pay for emergency services that are received from providers other than the Contractor or its subcontractors is limited to covered services provided by an appropriate source that meet the definition of emergency services as defined in Appendix E and the time required to reach the Contractor or its subcontractor (or alternatives authorized by the Contractor) would have meant risk of permanent damage to the member’s health. Medically appropriate capitated services following the provision of emergency services are considered to be emergency services as long as transfer of the member to the Contractor or its subcontractor or designated alternative is precluded because of risk to the member’s health or because transfer would be unreasonable, given the distance involved in the transfer and the nature of the medical condition. The Contractor is responsible for medically appropriate transportation to transfer the member to the Contractor’s care when it can be done without medically harmful consequences.

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The Contractor has no obligation to pay for out-of-plan emergency services unless the provider of such services submits a bill to the Contractor within twelve (12) months of the date service was provided and the Contractor has a reasonable basis to believe that the services provided were, in fact, emergency services.

If the Contractor has a reasonable basis to believe that any capitated services claimed to be emergency services were not in fact emergency services, the Contractor may deny payment for such services, provided that, within thirty (30) calendar days of receipt of a claim for payment, the Contractor notifies:

a. The provider of such services of the decision to deny payment, the basis for that decision, and the provider’s right to contest that decision by requesting an SRS Fair Hearing within thirty (30) calendar days pursuant to SRS rules.

b. The member of the decision to deny payment, the basis for that decision, and the member’s right to contest that decision by requesting an SRS Fair Hearing within 30 calendar days pursuant to SRS rules.

The Contractor shall comply with and implement any SRS Fair Hearing decision, subject to any further rights to appeal as outlined in Section 5-7-15.

5.7.22 Appeals to SRS for Contractor Non-payment of Non-participating Providers

The Contractor shall accept SRS’ determinations regarding provider appeals. In cases where there is a dispute between the Contractor and a non-participating provider about whether a service is medically necessary, is an emergency, or is an appropriate diagnostic test to determine whether an emergency condition exists, SRS will hear appeals and make final determinations. SRS will accept written comments from all parties to the dispute prior to making a final decision. After reviewing the pertinent facts SRS shall make determination whether or not payment is ordered as appropriate.

Contractors which have a pattern of inappropriately denying payments for emergency related services may be subject to suspension of new enrollments, withholding of capitation payments, contract termination or refusal to contract in a future time period. This applies to cases where SRS has ordered payment after appeal and also to cases where no appeal has been made (i.e., SRS is knowledgeable about abuse from other sources).

5.7.23 Provider Fraud and Abuse

a. Requirements:

i. The Contractor’s officers understand this contract involves the receipt by the Contractor of state and federal funds. Further, the Contractor’s officers understand that they are subject to criminal prosecution, civil action, or administrative actions for any intentional false statements or other fraudulent conduct related to their obligations under this Contract.

ii. The Contractor and its subcontractors shall, upon the request of the Kansas Title XIX Fraud Control Unit (MFCU) of the Kansas Attorney General’s Office, make available to MFCU all administrative, financial, medical, and any other records that relate to the delivery of items or services under this Contract. The Contractor and its subcontractors shall allow the MFCU access to these records during normal business hours, except under special circumstances when after hours admissions shall be allowed. Such special circumstances shall be determined by the MFCU.

iii. The Contractor and its subcontractors shall report to SRS and MFCU any suspected Fraud or Abuse by Title XIX or Title XXI providers within 24 hours after the Contractor or its subcontractors suspects or has reason to suspect

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Fraud or Abuse. The Contractor and its subcontractors shall cooperate fully in any investigations of the suspected Fraud or Abuse by SRS and MFCU and in any subsequent legal action that may result from those investigations. The Contractor and its subcontractors shall not disclose the existence of any investigation of suspected Abuse or Fraud by SRS and MFCU without the written consent of SRS and MFCU. If the Contractor fails to report any suspected fraud or abuse, SRS may invoke any penalties allowed under this contract including, but not limited to, suspension of payments or termination of the Contract. Furthermore, the enforcement of penalties under the Contract shall not be construed to bar other legal or equitable remedies which may be available to SRS or the MFCU for noncompliance with this section.

iv. The Contractor shall terminate contracts with any provider whose Title XIX HealthConnect Contract or Title XIX Provider Agreement has been terminated by the state. Such contract termination shall be effective thirty (30) calendar days after receipt of notice of State termination of a HealthConnect Contract or Title XIX provider agreement.

b. Fraud and Abuse Operational Procedures: The Contractor shall have in place, internal controls, policies and procedures, that are designed to prevent and detect Fraud and Abuse activities. The specific internal controls, policies and procedures shall be described in a comprehensive written plan, to be submitted to SRS for prior approval no later than fifteen (15) days following contract award. SRS will respond with approval/denial/modifications to the plan within thirty (30) days of receipt. Any changes to the SRS approved plan must be submitted to SRS for approval. At a minimum, the plan must include:

i. Lines of reporting for fraud and abuse

ii. Title and name of person designated as fraud and abuse contact

iii. Internal procedures for reporting

iv. Procedures for reporting to SRS and MFCU, and

v. Internal policies/forms used.

5.7.24 Consumer Fraud and Abuse

The contractor shall notify SRS of members who have been identified as participating in fraudulent or abusive activities. Notification must be in written format with supporting documentation attached. The members may be identified through utilization management, chart review, or by referral from network providers. Upon SRS approval, members found to be committing fraud or abuse may be removed from the contractor and placed in the Lock-in program. The contractor shall notify SRS of suspected fraudulent activities within 24 hours of identification.

The contractor is expected to provide member education in an attempt to correct abusive behavior. These attempts must be documented and accompany materials presented to SRS requesting the members removal. Abusive behavior may include, but is not limited to:

a. Concurrently obtaining services from two or more providers of the same specialty, not in the same group practice, with no referrals.

b. Using two or more emergency facilities for non-emergent diagnosis.

c. Concurrently using two or more prescribing physicians to obtain drugs from the same therapeutic class of medication.

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d. Two or more occurrences of having prescriptions for the same therapeutic class of medication filled two or more times on the same or subsequent day by the same or different providers.

e. Concurrently using two or more pharmacies to obtain quantity of drugs from the same therapeutic class of medication which exceed the manufacturer’s maximum recommended dosage as approved by the FDA.

f. Report of member using the medical card to purchase drugs on a forged prescription.

g. Report of member loaning a card to another individual to obtain Medicaid reimbursed services.

h. On request or recommendation of SRS Legal or Health Care Policy for cause.

i. Consistently seeking/obtaining medical services which are not supported by diagnosis or medical records/documentation.

j. Other just causes.

NOTE: Reasonable cause for disenrollment shall not include adverse changes in the member’s health status.

5.7.25 Use of and Safeguarding Data

a. SRS Data Files:

i. SRS’ data files and data contained therein shall be and remain the property of SRS and shall be returned to SRS by the Contractor upon the termination of this agreement, except that any SRS data files no longer required by the Contractor to render services under this contract shall be returned upon such determination.

ii. SRS’ data shall not be utilized by the Contractor for any purpose other than that of rendering services to SRS under this contract, nor shall SRS’ data or any part thereof be disclosed, sold, assigned, leased or otherwise disposed of to third parties by the Contractor unless there has been prior written SRS approval.

iii. SRS shall have the right of access and use of any data files retained or created by the Contractor for systems operation under this contract.

b. Safeguarding SRS Data: The Contractor shall establish and maintain at all times, reasonable safeguards against the destruction, loss or alteration of the SRS data and any other data in the possession of the Contractor necessary to the performance of operations under this contract.

c. Confidentiality of Data and Records:

i. The Contractor shall comply with 45 C.F.R. §205.50, Safeguarding Information for the Financial Assistance and Social Service Program, as well as 42 C.F.R. §431 Subpart F. As deemed necessary, SRS or its designated agent, and the federal government shall be allowed access to this data. All information, except as noted above, as to personal facts and circumstances obtained by the Contractor shall be treated as privileged communications, shall be held confidential, and shall not be divulged without the written consent of SRS and the written consent of the beneficiary, or his/her attorney, or his/her responsible parent or guardian.

ii. Data and information received by the Contractor and maintained in the Contractor’s database shall be used only for health policy decisions and research. Persons or agencies making requests for data or information from the Contractor’s database shall be directed to SRS.

iii. Appropriate administrative, technical, procedural and physical safeguards shall be established by the Contractor to protect the confidentiality of the data and to prevent unauthorized access to it. The safeguards shall provide a level of security that is at least comparable to the level of security referred to in OMB Circular No. A-130, Appendix III – Security of Federal Automated Information Systems (Appendix X) that sets forth guidelines for security plans for automated information systems in Federal agencies.

d. Security of Facilities: The Contractor shall provide all reasonable security procedures at any place where services are performed by the Contractor under this contract. Contractor personnel shall comply with the rules of SRS with respect to access to SRS offices, data files and data.

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e. Rights in Data and Disclosure of Information

i. The State of Kansas operates under the Open Records Act. SRS may duplicate, use or disclose in any manner and for any purpose whatsoever, all data, reports and documentation delivered to SRS under this contract. This obligation is not subject to any limitation in any respect except as provided under state or federal laws. The Contractor hereby grants to SRS, a royalty-free, non-exclusive, and irrevocable license to publish, reproduce, deliver and to authorize others to do so, all such data, reports and documentation.

ii. It is recognized by the parties that certain information or financial data pertaining to the Contractor may be exempted from public disclosure under both state and federal law. Such data, which the Contractor does not want disclosed, will be prominently identified by the Contractor.

iii. If SRS receives a request for disclosure of such information which the Contractor has marked as proprietary, SRS as an accommodation to the Contractor, before releasing the same will give the Contractor notice orally or in writing at least 48 hours before the release, in order that the Contractor may immediately seek any relief available to it under state or federal law. Failure to give timely notice shall not be a basis for a cause of action against SRS, the State of Kansas, their employees, agents and representatives.

5.8 FUNCTIONS AND DUTIES OF SRS

The Medical Policy/Medicaid Division within SRS shall be responsible for the management of this contract. Management shall be conducted in good faith within the resources of the State with the best interest of the Title XIX and Title XXI beneficiaries being the prime consideration. SRS shall retain full authority and responsibility for the administration of Title XIX and Title XXI in accordance with the requirements of federal and state laws and regulations.

5.8.1. Title XIX and Title XXI Eligibility

SRS shall be responsible for determining the eligibility of an individual for Title XIX or Title XXI funded services. See Appendix A for eligibility criteria.

5.8.2. Approval of Materials Developed by Contractor

SRS shall have the right to approve, disapprove or require modification of procedures and materials developed by the Contractor under this contract. Material requiring SRS approval shall include but is not limited to:

a. Marketing plans and all related materials,

b. Complaint/Grievance Appeal procedures,

c. Insolvency protection,

d. Member Handbook,

e. PCP enrollment procedures,

f. Quality management procedures, and

g. Insurance and bonding plans.

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5.8.3 Interpreting Federal and State Law

SRS shall be responsible for the interpretation of all federal and state laws and regulations governing or in any way affecting this contract. When interpretations are required, the Contractor shall submit written requests to SRS. SRS will contact the appropriate agencies in responding to the request.

5.8.4 Provide Assistance

SRS shall assist, cooperate, and provide information to the Contractor as may be necessary for the performance of obligations and duties under the terms of this contract. SRS shall reserve the right to determine what is necessary for performance.

5.8.5 External Quality Review

SRS shall establish a system of annual external quality review in accordance with Section 1902(a) (30) (C) of the Social Security Act. This system of external quality review shall provide for the identification and collection of management data for use by the external quality review group.

5.9 MEDICAL SERVICES INCLUDED IN THE CONTRACT

The Contractor shall agree to assume responsibility for all medical conditions of each program beneficiary as of the effective date of coverage under this contract. The Contractor shall ensure the provision of medically necessary services as specified below, subject to all terms, conditions and definitions of this contract. Any and all disputes relating to the definition and presence of medical necessity shall be resolved in favor of SRS. Covered services shall be available in the Service Area through the Contractor or its subcontractors.

The Contractor shall maintain a benefit package and procedural coverage at least as comprehensive as the State Title XIX and Title XXI Plans. Experimental surgery and procedures are not covered under the State Title XIX and Title XXI Plans. Contractors may cover experimental surgery and procedures but shall not require members to undergo experimental surgery or procedures.

The Contractor is required to meet certain standards of quality in the provision of all services for which they contract (See Section 5.7.13). Services shall be provided by participating providers who are credentialed to perform the services. Providers who have been banned from participating in any federal program are not eligible to serve beneficiaries under this contract (See Section 5.7.2). The Contractor shall terminate contracts with any provider whose Title XIX HealthConnect Contract or Title XIX Provider Agreement has been terminated by the state (See Section 5.7.23.a). Providers Subcontracts issued by the Contractor must include a provision for termination if the provider has been terminated from any federal program or State Title XIX Program.

The quality management of these services is to be monitored by the Contractor and SRS or its designee, contracted to provide this service. The Contractor agrees to provide or pay for medically appropriate second opinions. Services must be provided by providers who meet the qualifications of all state licensing standards, all applicable accrediting standards, and any other standards or criteria established by SRS to assure quality of services.

The Contractor agrees to serve all Title XIX and Title XXI members for whom current payment has been made to the Contractor without regard to disputes about enrollment status. If such person is later found to be inappropriately enrolled in the Contractor or found to be not eligible for Title XIX or Title XXI in that month, then the Contractor will retain the capitation payment for that month and must provide services for that month.

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The following services and scope of these services as described in each specific Title XIX Provider Manual are reflective of current SRS fee-for-service limitations and must be covered for both Title XIX and Title XXI, at a minimum, under the terms of this contract:

5.9.1 Medical Services

a. Home Health Services.

i. Home health aide services.

ii. Skilled nursing services (free-standing and hospital-based).

b. Physical therapy services when restorative for each injury or acute episode. Under this contract, the Contractor must provide a minimum of six months of this service from the date of the first therapy, if medically necessary.

c. Occupational therapy services when restorative for each injury or acute episode. Under this contract, the Contractor must provide a minimum of six months of this service from the date of the first therapy, if medically necessary.

d. Speech therapy services when restorative for each injury or acute episode. Under this contract, the Contractor must provide a minimum of six months of this service from the date of the first therapy, if medically necessary.

e. Medical supplies as ordered by a qualified health plan provider.

f. Durable medical equipment (DME) as ordered by a qualified health plan provider. DME must be provided, if the member meets one of the following criteria:

i. EPSDT program participant.

ii. Beneficiary who requires DME for life support.

iii. Beneficiary who requires DME for employment.

g. KAN Be Healthy screenings, provided to all Title XXI children through the age of 18, and young Title XIX beneficiaries up to age 21 years in accordance with provisions of the State Plan.

h. Inpatient hospital services (includes Acute Medical Detoxification and excludes psychiatric hospitalizations) based on medical necessity.

i. Outpatient non-psychiatric hospital services, based on medical necessity.

j. Emergency room services based on the prudent layperson standard (See Attachment E, Emergency Services Under the “Prudent Layperson” Definition)

k. Laboratory services meeting Clinical Laboratory Improvement Act Standards, as ordered by a qualified health plan provider. All lab services providers must have CLIA certification on file with the Contractor.

l. Diagnostic and therapeutic radiology as ordered by a qualified health plan provider.

m. Life sustaining therapies (such as chemotherapy, radiation, inhalation therapy or renal dialysis) as ordered by a qualified health plan provider.

n. Blood transfusions, including autologous transfusions, as ordered by a qualified health plan provider.

o. Physician or mid-level practitioner services (according to the licensing standards and scope of practice).

p. Other mid-level practitioner services are allowed according to the licensing standards and scope of practice.

q. Mid-level Practitioners

i. Advanced Registered Nurse Practitioners (ARNP),

ii. Nurse Anesthetists,

iii. Nurse Midwives (Federal guidelines permit consumers to access this service outside the Contractor Plan if the consumer desires to receive this service from a nurse midwife; the Contractor is responsible for payment for this service), and

iv. Physician Assistants (PA).

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r. Audiology and hearing services.

i. Hearing aids are covered every four (4) years, as ordered by a qualified health plan provider. Lost, broken or destroyed hearing aids will be replaced one time during a four year period provided the documentation of the circumstances adequately supports the need and prior authorization is obtained.

ii. Provision of a binaural hearing aid requires specific documentation of medical necessity supporting significant bilateral loss of hearing.

iii. Hearing aid repairs costing less than $15.00 or noncovered services. Repairs costing between $15.00 and $75.00 are covered. Repairs costing more than $75.00 are covered only with prior authorization.

iv. Trial rental of a hearing aid is limited to one month’s duration.

v. Provision of hearing aid batteries is limited to six per month for monaural hearing aids and twelve per month for binaural hearing aids.

s. One chiropractic history and physical per calendar year for EPSDT participants.

t. Prescription Drugs:

i. The MCO is required at a minimum to cover medications and supplies to the extent they are covered by the Medicaid fee-for-service program. Medicaid coverage of outpatient drugs is dictated by Section 1927 of the Social Security Act. Specific information about medications and supplies currently covered by Kansas Medicaid is provided below.

ii. Medicaid is required by the Health Care Financing Administration (HCFA) to cover all medications which are rebated by the pharmaceutical manufacturer, in accordance with Section 1927 of the Social Security Act, with the exception of drugs subject to restriction as outlined in Sect. 1927 (d)(2) of the Act. The drugs which may be excluded from coverage or otherwise restricted include:

(1) Agents when used for anorexia, weight loss, or weight gain.

(2) Agents when used to promote fertility.

(3) Agents when used for cosmetic purposes or hair growth.

(4) Agents when used for the symptomatic relief of cough and colds.

(5) Agents when used to promote smoking cessation.

(6) Prescription vitamins and mineral products, except prenatal vitamins and fluoride preparations.

(7) Nonprescription drugs.

(8) Covered outpatient drugs which the manufacturer seeks to require as a condition of sale that associated tests or monitoring services be purchased exclusively from the manufacturer or its designee.

(9) Barbiturates.

(10) Benzodiazepines.

iii. Kansas Medicaid does make exception for some of the agents listed above when determined to be medically necessary. The prescription weight loss drugs Orlistat and Sibutramine are covered on a restricted basis with prior authorization. Smoking cessation products are covered for a maximum of twelve weeks of therapy per year. The benzodiazepines Alprazolam, Diazepam and Clorazepate are covered with prior authorization. Clonazepam is covered currently without prior authorization.

iv. Prescription Drugs Carved Out of the Managed Care Program: Anti-hemophiliac factors are carved out of the managed care program. Title XIX and Title XXI will pay for anti-hemophiliac factors on a fee-for-service basis. Title XXI claims need to be sent directly to the Title XXI Program Manager.

v. Over-the-counter (OTC) Product Coverage

(1) Cough and cold products, multivitamins and oral electrolyte replacement preparations (e.g. Pedialyte^®) are covered for children with a current EPSDT screening.

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(2) Ibuprofen, Naproxen Sodium and Acetaminophen are covered. Iron and calcium products, are covered.

(3) Diabetic supplies, including glucometers, lancets and blood glucose strips are also covered.

vi. Prior Authorization: The MCO is allowed to use a prior authorization (PA) program to ensure the appropriate use of medications. If a PA program is utilized, the MCO must ensure that all PA requests received are responded to within 24 hours. For PA requests received after hours, the MCO must ensure that a 72 hour supply of medication is dispensed to the beneficiary and the PA request must be responded to the next business day.

vii. Quantity Limitations: The MCO may have in place quantity limitations for covered medications and supplies. These limitations must be based on the maximum recommended dose or supply according to the manufacturer. If there are no published limitations available, the MCO may establish reasonable limits based on appropriate use and standards of quality care.

viii. Day Supply Limitation: The MCO may establish a days supply limitation for prescription medications, however the limitation may not be less than 30 days. The MCO may also establish an early refill edit for prescription claims. The current early refill edit for Kansas Medicaid fee-for-service claims is 80%. (e.g., 80% of the original prescription must be used prior to a refill being covered for the beneficiary.)

ix. Access: The MCO must ensure that the pharmacy provider network is sufficient to provide access to medications and complies with Section 5.7.7 of this RFP. The MCO is not required to ensure that pharmacies within the provider network provide delivery, however, this is encouraged. The MCO must ensure that beneficiaries have access to medications 24 hours per day, 7 days per week. The MCO must have in place a process to provide a 72 hour supply of medication to a beneficiary in an emergency situation, on weekends, holidays or off-hours.

x. Drug Utilization Review: The MCO is responsible for ensuring that point-of-sale pharmacy claims processing and prospective drug utilization review (DUR) is provided by pharmacies within the pharmacy provider network. The prospective DUR services include but are not limited to: a review of drug therapy and counseling prior to dispensing of the prescription. The review should include at a minimum a screening to identify potential drug therapy problems including: therapeutic duplication, drug-disease contraindication, drug-drug interaction, incorrect dosage, incorrect duration of therapy, drug-allergy interactions, over-utilization or abuse.

xi. Reports: The MCO is required to provide SRS with quarterly usage reports. The reports required are:

(1) Ranking report of drugs by volume of Rxs paid, in descending order, and

(2) ranking report of drugs by dollars paid, in descending order.

At a minimum, the reports must include: generic drug name, strength, dosage form, generic code number (GCN), number of prescriptions paid, dollars paid, number of beneficiaries who received the prescription and paid amount per claim and/or average paid amount per claim.

u. Vision Services

i. One complete eye exam and one pair of glasses for members 21 years of age and older, every four years. Repairs shall be provided as needed.

ii. Eyeglasses, repairs and exams as needed for members under 21 years of age.

iii. Eye exams, as needed, for post-cataract surgery patients up to one year following the surgery and eyeglasses for post-cataract surgery members when provided within one year following surgery.

iv. Contact lenses and replacements are covered with prior approval, when ordered by a qualified health plan provider and when such lenses provide better management of some visual or ocular conditions than can be achieved with eyeglass lenses.

v. Artificial eyes are covered.

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v. Hospice services when ordered by a qualified health plan provider, must be available to the service area but the actual facility need not be located within the service area.

w. Podiatric services; up to two office visits per calendar year.

x. Prenatal health promotion and risk reduction (risk assessment, counseling, instruction in prenatal care practices, including methods to control risk factors, instruction in effective parenting practices, referral to other support, if needed, and follow-up), as medically necessary.

y. Newborn Services - One home visit per member within twenty-eight (28) days after the birth date of the newborn. Also, home visits for the newborn, including risk assessment of the newborn, instruction in parenting practices, additional home visits for the newborn and referral to other support services, if needed.

z. Screening, diagnosis and treatment of sexually transmitted diseases, as medically necessary.

aa. All medically necessary services must be provided for any member participating in the EPSDT program.

bb. Dietary services as medically necessary.

cc. Kidney and corneal transplants.

dd. HIV testing and counseling.

ee. Chronic Renal Disease: Treatment services for chronic renal disease (CRD), also referred to as “endstage renal disease” (ESRD), meaning the stage of renal impairment that appears to be irreversible and permanent, and requires a regular course of dialysis or kidney transplantation to maintain life, must be covered by the Contractor until the beneficiary is eligible for Medicare (Title XVIII) coverage.

The first encounter data sent to the fiscal agent for CRD renal dialysis must be accompanied by: a copy of the verification from the Social Security Administration (SSA) stating that this member is not entitled to Medicare, a Medicare denial, and Explanation of Benefits, or a copy of the Medicare card. If a member did not have self-dialysis training in the first three months of maintenance dialysis, the encounter data should be accompanied by a provider’s evaluation of the member for self-dialysis training.

ff. Beneficiaries (ages 0 - 18) in the Title XIX and Title XXI program receive their vaccines from the Vaccines for Children Program. The ACIP schedule should be followed. See appendix S. MCOs should encourage their providers to become Vaccines for Children Providers.

5.9.2. Nothing in this contract shall preclude the Contractor from providing additional health care, health and wellness promotion activities, or related services not specified elsewhere in this contract as long as these services are approved by SRS and are available, as needed or desired, to all members in the geographic region served. Additional reimbursement may be made for additional services provided by the Contractor under this contract if such services can be quantified and documented.

5.10 MEDICAL SERVICES NOT INCLUDED

The following services are not covered under this contract unless otherwise indicated, but are covered under Fee-For-Service in Title XIX.

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5.10.1 Long Term Care Services

a. Nursing Facility Services (see definitions).

b. Home and Community Based Services (see definitions).

c. Head Injury Rehabilitation Services.

d. Intermediate Care Facilities for Mental Retardation.

e. Organ transplant unless the State plan has written standards meeting coverage guidelines specified.

f. Contractor shall contract only with those Home Health Agencies (HHA) or home health organizations having posted the appropriate required surety bond.

g. Any amount expended for roads, bridges, stadiums, or any other item or service not covered under the State plan under 1903(i)(1), (2), (16), (17), (18) of the Social Security Act.

h. Any activities/services in violation of the Assisted Suicide Funding Restriction Act of 1997.

5.10.2 State Institution Services

5.10.3 Alcohol and Drug Abuse Services with the exception of Acute Medical Detoxification (these services are covered for Title XXI).

5.10.4 Sterilizations (sterilizations are covered if they occur during the postpartum period) and Abortions. Abortions are covered if:

a. The pregnancy is the result of an act of rape or incest; or

b. In the case where a woman suffers from a physical disorder, physical injury, or physical illness, including a life-endangering physical condition caused by or arising from the pregnancy itself, that would, as certified by a physician, place the woman in danger of death unless an abortion is performed.

5.10.5 All mental health services including psychiatrists, psychologists, Community Mental Health Center (CMHC) services and Partial Hospitalization Services. These services are covered under a separate contract for Title XXI,

5.10.6 Behavioral management services.

5.10.7 Services provided by Community Developmental Disability Organizations (CDDOs).

5.10.8 Inpatient hospital services for transplants not otherwise stipulated in this agreement.

5.10.9 School-based Services, Early Intervention Services ordered through an Individual Education Plan (IEP) or Independent Family Services Plan (IFSP) Local Education Agencies (LEAs), Head Start Facilities, Part C of the Individuals With Disabilities Education Act.

5.10.10 Dental Services. These services are covered under a separate contract for Title XXI.

5.10.11 Anti-Hemophiliac Drugs.

5.11 COOPERATION WITH OTHER AGENCIES

5.11.1 Local Health Departments

The Kansas Department of Health and Environment provides funding to Local Health Departments for the provision of health care services to low income individuals. The Contractor shall make a reasonable effort to subcontract with any local health care provider receiving funds from Titles V and X of the Social Security Act. Close cooperation with these entities is strongly encouraged.

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The Contractor shall coordinate all cases of Sexually Transmitted Diseases (STD) and tuberculosis with the Local Health Departments to ensure prevention and to limit the spread of disease. The Contractor shall cooperate with the treatment plan developed by the Local Health Department. SRS requires the Contractor to provide a written agreement of coordination of care and reporting on STDs and tuberculosis between the Contractor and any local health departments within the counties they have proposed serving prior to contract signature.

The Contractor shall coordinate with the Special Supplemental Food Program for Women, Infants and Children (WIC). SRS shall assure that coordination exists between the WIC and Contractor. This coordination should include the referral of potentially eligible women, infants, and children to the WIC Program and the provision of medical information by providers working within managed care plans to the WIC Program.

To be eligible for WIC benefits, a competent professional authority must diagnose a pregnant woman, a breast feeding woman, a non-breast feeding postpartum woman, an infant or a child under age 5 as being at nutritional risk. Suggested medical information for a WIC referral includes: Nutrition related metabolic disease; diabetes; low birth weight; failure to thrive; premature birth; infants of alcoholic, mentally retarded, drug addicted or HIV positive mothers; AIDS; allergy or intolerance that effects nutritional status; and anemia. See Appendix M for examples of referral forms used at the Shawnee County Health Department in Topeka, KS. Each health department may have their own referral forms.

The WIC Program in the State of Kansas is coordinated through the Local Health Departments. Contractors are expected to subcontract or coordinate with the Local Health Departments in their areas.

The Contractor shall also coordinate with other Title V programs such as the Individuals with Disabilities Act (I.D.E.A.), the Healthy Start Home Visiting Program, the Maternal and Infant (M & I) and Family Planning Clinics as well as any other programs operated by the Local Health Departments.

5.11.2 Local Education Agencies

The Contractor is encouraged to cooperate with these agencies on the provision of services. SRS will be monitoring this cooperation in order to assess possible future contract requirements.

5.11.3 Rural Health Clinics (RHCs) and Federally Qualified Health Centers (FQHCs)

The Contractor shall make a reasonable effort to subcontract with any RHC and/or FQHC located within its service area. Close cooperation with these entities is strongly encouraged.

Payment for Title XIX FQHC and RHC services by the Contractor shall be at the same rate Contractor pays Non-FQHC and non-RHC providers of like services. Contractor agrees to provide to SRS a monthly payment history for all network and non-network FQHCs and RHCs providing services to Contractor for Medicaid members for that month. The monthly payment history shall document each service provided by the Contractor by each FQHC and RHC, and shall specify the price for each of those services. This provision does not apply to FQHC and RHC services provided to Title XXI beneficiaries.

5.11.4 Indian Health Services

The Contractor shall coordinate with any Indian Health Service Clinics or tribally operated facilities in their service area. Documentation of such coordination is required before contract signature.

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5.12 ENROLLMENT, MARKETING AND DISENROLLMENT

5.12.1 Title XIX Enrollment Process

Current enrollment procedures for Title XIX beneficiaries in managed care includes the following components:

a. Enrollment of eligible beneficiaries not currently enrolled in a managed care program:

i. SRS shall be responsible for all enrollment and disenrollment processes. SRS, through the fiscal agent, will send an enrollment packet to new beneficiaries. The enrollment packet will include managed care training materials and a toll-free number to call with questions.

ii. Beneficiaries with enrollment questions may contact the fiscal agent.

iii. The beneficiary will choose or be assigned a Contractor. Whether the beneficiary chooses or is assigned a managed care plan, the fiscal agent will send the beneficiary a letter informing them of the assigned managed care plan. The beneficiary is also notified that he or she has a 90-day period to make a change in the assigned managed care provider.

iv. After assignment to the MCO, the Contractor may choose to assign new members to a PCP immediately, notify the member of that assignment in writing and allow the member not less than ten (10) days to change this assignment if it is not acceptable. The Contractor may also allow all beneficiaries to voluntarily choose their own primary care provider up-front. If the beneficiary does not choose a primary care provider within ten (10) calendar days, the Contractor shall auto-assign these beneficiaries.

v. After assignment to the MCO the Contractor shall send all new members a welcome packet telling them of their Primary Care Provider (PCP) assignment and that they have ten (10) days to select a new PCP or informing members that they have ten (10) days to choose a PCP, depending on the Contractor’s policies. The welcome packet will include: PCP enrollment materials, a member handbook and a provider listing.

vi. At the beginning of the first month following the initial enrollment period, the Contractor shall send the beneficiary an identification card containing the funding source (Title XIX or Title XXI), effective date, PCP, Contractor organization name, how to access dental and mental health services and other relevant enrollment information on it. This card will be jointly designed by the Contractors and SRS.

vii. The Contractor will maintain a member service hotline, with operators specially trained to handle calls from new enrollees and from members needing assistance in obtaining services.

b. Annual enrollment process for those beneficiaries currently enrolled in a managed care program:

i. The fiscal agents will facilitate the annual enrollment of beneficiaries. An enrollment packet will be mailed to all identified beneficiaries qualified to participate in managed care, informing them they have ninety (90) days to change their assignment without cause. The enrollment packet will include training materials, an enrollment application, Contractors and PCPs within the Contractor and a toll-free number to call with questions.

ii. Beneficiaries may mail in the enrollment choice form or call the toll-free number if they wish to change managed care plans.

iii. The beneficiary has ninety (90) days to change managed care plans. If the beneficiary fails to change his/her plan, the fiscal agents will leave the beneficiary with their current provider.

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iv. The Contractor may choose to assign new members to a PCP immediately, notify the member of that assignment in writing and allow the member not less than ten (10) days to change this assignment if it is not acceptable. The Contractor may also allow beneficiaries to voluntarily choose their own primary care provider up-front. If the beneficiary does not choose a primary care provider within ten calendar days, the Contractor shall auto-assign these beneficiaries.

v. After enrollment into the Contractor, all new members will be sent a Contractor welcome packet by the assigned Contractor.

vi. The Contractor will maintain a member service hotline, with operators specially trained to handle calls from new enrollees and from members needing assistance in obtaining services.

vii. At the beginning of the first month following the initial enrollment period, the Contractor shall send the beneficiary an identification card containing the funding source (Title XIX or Title XXI), effective date, PCP, Contractor organization name, how to access dental and mental health services and other relevant enrollment information on it. This card will be jointly designed by the Contractors and SRS.

c. Participants who frequently request PCP or Contractor changes may be subject to removal from the managed care program and placed on administrative lock-in status, based on established lock-in review and SRS determination of appropriateness.

5.12.2 Title XXI Enrollment Process

The enrollment into a Contractor plan for Title XXI beneficiaries differs from enrollment for Title XIX beneficiaries in that we have a separate fiscal agent for each program and Title XXI beneficiaries will not be offered the 15-day choice period prior to auto-assignment to a Contractor. They will, however, be offered the 90-day change period after auto assignment to a Contractor and an annual open enrollment period consistent with those periods established for Title XIX beneficiaries.

5.12.3 Enrollment Responsibilities

a. Contractor Enrollment Responsibilities

i. The Contractor shall accept, on a monthly basis, any eligible program beneficiary who selects the Contractor or is assigned to it regardless of the beneficiary’s age, sex, ethnicity, language needs, or health status and who appear as members on the Contractor Enrollment Information, provided that the number of members does not exceed the Contractor’s specified enrollment limit. Enrollment in the Contractor shall be voluntary by the beneficiary except when SRS reserves the right to assign a Title XIX beneficiary to a specific managed health care option (the Contractor or another managed care program) if the Title XIX or Title XXI beneficiary fails to choose a managed health care option during the enrollment period. The Contractor is responsible for obtaining any necessary signatures of medical releases. The Contractor is exempt from enrolling those beneficiaries who have previously been disenrolled from the health plan as a result of a request for disenrollment by the health plan as described in Section 5.12.5.

ii. The Contractor will send all new members a Contractor welcome packet. The welcome packet will include: PCP enrollment materials or PCP assignment information, a member handbook and a provider listing. The Contractor may choose to assign new members to a PCP immediately, notify the member of that assignment in writing and allow the member not less than ten (10) days to change this assignment if it is not acceptable. The Contractor may also allow beneficiaries to voluntarily choose their own primary care provider up-front. If the beneficiary does not choose a primary care provider within ten calendar days, the Contractor shall auto-assign these beneficiaries.

iii. The Contractor will maintain a member service hotline, with operators specially trained to handle calls from new enrollees and from members needing assistance in obtaining services. All new members will be sent a Contractor member card (See Section 5.12.1.a.vi or 5.12.1.b.vii) for use in obtaining services covered by the Contractor.

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iv. Coverage of services including inpatient hospital care will be the responsibility of the Contractor as of the beginning of the month enrollment becomes effective, except when the admission date is prior to the assignment to the Contractor. In this instance, Title XIX inpatient hospital claims will be reimbursed on a FFS basis by the fiscal agent. All other (ancillary) charges, not reimbursed by the inpatient hospital payments, are the responsibility of the Contractor. Title XXI inpatient hospital claims will be the responsibility of the member, but again, non-inpatient (ancillary) charges are the responsibility of the Contractor. If an admission date occurs during the assignment to the Contractor, that Contractor is responsible for the cost of the entire admission regardless of assignment or eligibility.

v. The Contractor must have written policies and procedures for providing all medically necessary services required under the benefit package to newborn children of program members effective to the time of birth. Newborns of program eligible mothers who were enrolled at the time of the child’s birth shall be covered under the mother’s health plan. The Contractor shall receive capitation payment for the month of birth and for all subsequent months the child remains enrolled with the Contractor if the Contractor provided the newborn information to SRS within sixty (60) days of the date of birth. If there is an administrative lag not the fault of the beneficiary, in enrolling the newborn and costs are incurred during that period, it is essential that the beneficiary be held harmless for those costs.

vi. The Contractor must agree to make available the full scope of benefits to which a member is entitled immediately upon the effective date of enrollment.

vii. The Contractor must have written policies and procedures for orienting new members to their benefits, the role of the primary care provider, how to utilize services, what to do in an emergent or urgent medical situation, how to register a complaint or file a grievance and their right to disenroll. The Contractor may propose alternative methods for orienting new members but must be prepared to demonstrate their effectiveness. Also refer to Section 5.7.9 regarding the member handbook.

viii. The Contractor must have written policies and procedures for assigning each of its members to a primary care provider. The process must include at least the following features:

(1) The Contractor must contact the member within ten (10) business days of his or her enrollment and provide information on the options for selecting a primary care provider.

(2) If a member does not select a primary care provider within ten (10) days of enrollment the health plan must make an automatic assignment, taking into consideration such factors, if known, as current provider relationships, language need and area of residence. The Contractor may choose to assign new members to a PCP immediately, notify the member of that assignment in writing and allow the member not less than ten (10) days to change this assignment if it is not acceptable. The Contractor must notify the member in writing of his or her primary care provider’s name, specialty, hospital affiliation, and office telephone number.

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(3) If a member requests a change to his or her primary care provider following the initial visit, the Contractor must agree to grant the request to the extent possible and practical and in accordance with its policies for other enrolled groups or product lines.

ix. The Contractor shall provide separate, quarterly reports for Title XIX and Title XXI populations. The reports shall list each PCP, hospital and pharmacy per county. The PCPs shall be listed by open and closed panels.

x. The Contractor must have written policies and procedures for allowing members to select or be assigned to a new primary care provider when such a change is mutually agreed to by the Contractor and member, when a primary care provider is terminated from the managed care plan, or when a primary care provider change is ordered as part of the resolution to a formal grievance proceeding. In cases where a primary care provider has been terminated, the managed care plan must allow members to select another primary care provider or make a re-assignment within twenty (20) days of the termination effective date.

b. SRS Enrollment Responsibilities:

i. Notification will be sent to each beneficiary after annual enrollment in a managed care program stating that he or she may change programs or plans within the next ninety (90) days without good cause. Their right to request a change in primary care provider through the grievance process shall not be restricted.

ii. SRS will conduct education and enrollment activities for program eligibles. SRS will make available to the Contractor on a monthly basis, a roster of members enrolled in the health plan. The roster will include, at a minimum, identifying information, Family Preservation Contractor involvement, if applicable, EPSDT screening dates (last and next), Children and Family Services Contractor involvement, and member addresses and telephone numbers. This roster will be available as a printed document or as an electronic data transmission.

iii. Beneficiary choice of a managed care plan shall be voluntary and neither SRS nor its agents shall do anything to influence the beneficiary’s exercise of free choice. Beneficiaries shall be provided assurances that a decision not to enroll in the Contractor’s plan shall not affect their eligibility for benefits

iv. An application for enrollment in the program and selection of a plan will be provided to members, along with a list of plans serving the members’ geographic area. Staff will also be available, by calling a toll-free number or in person, to assist program eligibles who request a change in managed care plans. A brochure explaining the managed care program and what special services are offered by the Contractor, such as different languages, interpreting services for the deaf, etc. will be provided. Beneficiaries will be advised as to which providers offer any special services that the beneficiary may need. In addition, participants will be offered enrollment materials and opportunities in alternate formats to address physical and language barriers.

v. SRS’ responsibilities at the time of the eligibility determination will include the following:

(1) Educating the family about managed care in general, including the requirement to enroll in a managed care plan, the way services typically are accessed under managed care, the role of the primary care provider, the responsibilities of the managed care plan member, their rights to file grievances and complaints and benefits available through managed care, both in plan and out of plan. The member will have a right to choose a managed care plan subject to the capacity of the provider.

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(2) Informing the family of available managed care plans and outlining criteria that might be important when making a choice (e.g., presence or absence of the family’s existing health care provider in a plan’s network).

(3) SRS will employ a method to assign to a Contractor any eligibles who do not make a voluntary selection. Assignment factors for new members may be weighted to provide equality in the number of beneficiaries enrolled in the plans.

(4) Program members who are disenrolled from a managed care plan due to loss of eligibility will automatically be re-enrolled, or assigned, to the same plan should they regain eligibility within sixty (60) calendar days. The Contractor must agree to re-enroll these beneficiaries. If more than sixty (60) days have elapsed, the member will be permitted to select a plan through the enrollment process.

(5) The effective date of enrollment with the Contractor shall be the first day of the month in which the individual is assigned to the Contractor. Individuals are entitled to be treated by the Contractor when SRS notifies the Contractor that the beneficiary is enrolled in their plan. A newborn beneficiary’s enrollment is effective immediately. All other enrollments are effective at the beginning of the next full month following the determination of managed care eligibility.

(6) Individuals who lose eligibility due to failure to provide eligibility reports to SRS on a timely basis but whose eligibility is subsequently re-established prior to the end of the month, will be reported to the Contractor on a second beneficiary roster to be received by the Contractor on or around the fifth of each month. Capitation payments for those beneficiaries reported on this second roster will be made with the regular capitation payment for the following month.

5.12.4 Marketing

SRS is responsible for marketing the Contractors to the beneficiaries during the enrollment process. The Contractor shall not influence member enrollment in the Contractor through the offer of any compensation, reward or benefit to the member except for additional health-related services or informational or educational services which have been approved by SRS. Direct solicitation of beneficiaries is not allowed. The Contractor must comply with the following Marketing Elements:

a. All marketing materials shall be approved by SRS prior to their use.

b. Contractor marketing materials shall not contain false or misleading information.

c. Contractor shall distribute marketing materials to its entire service area.

d. Contractor shall not offer the sale of any other type of insurance product as an enticement to enrollment.

e. Contractor shall not conduct directly or indirectly, door-to-door, telephonic, or other forms of “cold-call” marketing.

f. Contractor shall not discriminate against individuals eligible to be covered under the contract on the basis of health status or need of health services.

5.12.5 Disenrollment

a. Contractor Disenrollment Responsibilities:

The Contractor shall be able to request disenrollment for specific members after SRS approval in the following situations:

i. A persistent refusal to follow prescribed treatments or comply with health plan requirements that are consistent with state and federal regulations and not related to medical or mental conditions.

ii. Abusive or threatening conduct not related to a medical or mental condition.

iii. Fraud.

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NOTE: Reasonable cause for disenrollment shall not include adverse changes in the member’s health status.

The Contractor must have a disenrollment process consistent with the above concepts and submitted to SRS in the Proposal. The Contractor must have attempted through education and case management to resolve any difficulty leading to a request for disenrollment. Written notice of the request for disenrollment must be provided to the state agency and the member. All notifications regarding requests for disenrollment must be documented.

Members have the right to appeal the Contractor’s request for disenrollment to both SRS and the Contractor appeals process within thirty (30) days of the Contractor’s request for disenrollment of the member. When an appeal is filed, the appeals process must be completed prior to the Contractor and SRS continuing disenrollment procedures.

Disenrollment shall be effective on the last day of the calendar month in which the disenrollment is approved by SRS, but no later than the last day of the month subsequent to the request. Disenrollment is not effective until the member no longer appears on the Contractor’s Beneficiary Roster.

The Contractor shall be entitled to a capitation payment for the member for the entire month in which the disenrollment occurs and shall not be entitled to payment during any month subsequent to disenrollment. The Contractor shall notify members, in the material provided at the time of enrollment, of their right to disenroll and the time necessary to process the disenrollment. This wording must be approved by SRS in advance. The Contractor must provide services to the member until another plan is chosen or assigned.

The Contractor’s responsibility for consumer initiated disenrollments shall include referring the member to the Fiscal Agent’s Consumer Assistance Unit to process the disenrollment. The Contractor is also required to track the reason for the disenrollments for the Contractor QAP process.

It may be necessary to transfer a member between managed care plans for a variety of reasons, including if the member changes managed care plans during open enrollment or if the change is ordered as part of a grievance resolution. The managed care plan must have written policies and procedures for transferring relevant patient information, including medical records and other pertinent materials, when a member is transferred to or from another managed care plan.

When a member changes managed care plans while hospitalized, the relinquishing plan shall notify the hospital of the change prior to the transition. The relinquishing plan shall be responsible for payment of inpatient charges for the entire hospitalization through discharge. All other non-inpatient (ancillary) charges are the responsibility of the new MCO at the beginning of the first month of enrollment.

b. SRS Disenrollment Responsibilities

SRS, through its fiscal agents, shall be responsible for any member enrollments and disenrollments with the managed care plans. SRS has sole authority and discretion for disenrolling program members from managed care plans subject to the conditions specified below:

i. Loss of eligibility, subject to the guarantees outlined in Appendix A.

ii. Placement in a nursing facility, nursing facility for the mentally ill, intermediate care facility for the mentally retarded, an adult or juvenile correctional facility, or a head injury rehabilitation facility.

iii. Selection of another managed care plan during open enrollment.

iv. Change of residence placing the member outside of the Contractor’s service area.

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v. Death of the member.

vi. Approval by SRS of Home and Community Based Services.

vii. Transfer to a Title XIX eligibility category not included in this contract.

viii. To implement the decision of a hearing officer in a formal grievance procedure by the member against the Contractor or by the Contractor against the member.

ix. Members may request to disenroll from the current Contractor’s health plan if any of the following circumstances apply (these disenrollments will be effective on the last day of the calendar month in which they are requested whenever possible):

(1) Adequate transportation to primary care services is not available.

(2) There is an unresolved language barrier.

(3) The MCO is no longer in Title XIX or Title XXI.

(4) The beneficiary has an established family doctor in another Title XIX MCO.

(5) The beneficiary requests that all family members be assigned to the same provider.

(6) There is unsatisfactory care with a current provider, i.e., lack of referral to necessary specialty services, quality of services, or access issues.

(7) The beneficiary is a child with special health care needs that cannot be met by the Contractor.

5.13 AUDITS AND REPORTS

5.13.1 Annual Audit and Financial Reporting Requirement

The Contractor agrees to provide the results of an annual audit performed by an independent certified public accountant and to authorize the Kansas Department of Insurance to share this information with SRS. The Contractor shall authorize the independent accountant to allow representatives of SRS, including the Kansas Department of Insurance, upon written request, to verify the audit report.

5.13.2 Access to and Audit of Contract Records

Throughout the duration of the contract, and for a period of five (5) years after termination of the contract, the Contractor shall provide duly authorized representatives of the state or federal government, access to all records and material relating to the Contractor’s provision of and reimbursement for activities contemplated under the contract. Such access shall include the right to inspect, audit and reproduce all such records and material and to verify reports furnished in compliance with the provisions of the contract.

Allow duly authorized agents or representatives of the state and federal government, during normal business hours, access to the Contractor’s premises or the Contractor’s subcontractor’s premises to inspect, audit, monitor or otherwise evaluate the performance of the Contractor’s or subcontractor’s contractual activities and shall forthwith produce all records requested as part of such review or audit.

In the event right of access is requested under this section, the Contractor or subcontractor shall upon request provide and make available staff to assist in the audit or inspection effort, and provide adequate space on the premises to reasonably accommodate the state or federal representatives conducting the audit or inspection effort. In practice, SRS notifies any entity audited well before the actual audit occurs. A pre-entrance conference is scheduled to inform the contractor about the process. Audits are generally scheduled at a mutually agreed upon time. However, there may be unusual circumstances which require that SRS perform an audit with minimal notice. These circumstances would include alleged failure to comply with the contract. If the Contractor complies with the contract, the timing of any audit is unlikely to be a problem.

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All inspections or audits shall be conducted in a manner as will not unduly interfere with the performance of Contractor’s or subcontractor’s activities. The Contractor shall be given ten (10) days, or an amount of time agreed upon by SRS and the Contractor, to respond to any findings of an audit before SRS shall finalize its findings. All information so obtained will be accorded confidential treatment as provided under applicable law.

5.13.3 Records Retention

The Contractor shall retain, preserve and make available upon request all records relating to the performance of its obligations under the contract, including medical records and claim forms, for a period of not less than five (5) years from the date of termination of the contract. Records involving matters which are the subject of litigation shall be retained for a period of not less than five (5) years following the termination of such litigation, if the litigation is not terminated within the normal retention period. Microfilm copies of documents contemplated herein may be substituted for the originals with the prior written consent of SRS, provided that the microfilming procedures are approved by SRS as reliable and are supported by an effective retrieval system. Upon expiration of the five (5) year retention period, unless the subject of the records are under litigation, the subject records may be destroyed or otherwise disposed of without the prior written consent of SRS.

5.13.4 Periodic Reporting Requirements

The Contractor agrees to furnish information, as required, from its records to SRS and SRS’ authorized agents which SRS may require to administer this contract, including but not limited to the following:

a. Quarterly reports to SRS summarizing formal grievances and informal complaints and resolutions as defined in Section 5.7.15.

b. Service encounter data for members under this contract to be submitted monthly in the format specified in Appendices H and I.

c. EPSDT information as required. This information is included in the encounter data submitted monthly. EPSDT services and reporting shall comply with 42 C.F.R. §441 Subpart B—Early and Periodic Screening, Diagnosis and Treatment.

d. For providers licensed as Health Maintenance Organizations (MCOs) by the Kansas Insurance Department: Copies of financial reports and financial solvency reports as outlined in Section 5.13.1 to be submitted to the Kansas Department of Insurance pursuant to the Title XIX Managed Care Interagency Agreement as well as any additional reports or information required by SRS or its sister agency, the Kansas Department of Insurance (see Appendices H and I). For non-MCO-licensed providers, and for those providing services for Title XXI beneficiaries, income and expense statements specific to the contracted program(s) will be required semi-annually, for the six-month period of January to June, and July to December of each contract period.

e. At a minimum, the Quality Management Reports as outlined in Section 5.7.13.

f. Beneficiary assignments to primary care providers at least one time per month, or as assigned by SRS and the fiscal agent.

g. Provider rosters at least monthly, or as specified by SRS and the fiscal agent.

h. TPL notification reports as outlined in Section 5.14, as specified by SRS and the fiscal agent.

i. Licenses (Contractor and subcontractors) on an annual basis, as requested by SRS or the EQRO for verification.

j. Updated list of primary care providers on a quarterly basis for enrollment materials.

5.13.5 Special Reporting and Compliance Requirements

The Contractor shall comply with the following Federal reporting and compliance requirements for the services listed below, and shall submit applicable reports to SRS:

a. Hysterectomies and sterilizations shall comply with 42 C.F.R. §441. Subpart F—Sterilizations. This includes completion of the consent forms. Completion of the consent forms must be verified prior to the Contractor reimbursement.

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b. The Contractor shall assist the mother of the newborn and SRS in initiating the application process to add the newborn to the mother’s case. Mothers of newborns will be sent a letter by SRS advising them of their right to choose a different managed care plan for their child; otherwise the child will remain enrolled in the mother’s managed care plan.

c. The Contractor must agree to report to the enrollment broker any changes in the status of the families or individual members within ten (10) calendar days of identification, including birth of a child or death of a beneficiary, presence of third party resources, or residence.

5.14 COORDINATION OF BENEFITS AND POST-PAY RECOVERY (THIRD PARTY LIABILITY)

a. Third Party Liability (TPL) refers to any individual, entity or program that may be liable for all or part of a member’s health coverage. Under Section 1902(a)(25) of the Social Security Act, the state is required to take all reasonable measures to identify legally liable third parties and treat verified TPL as a resource of the Title XIX beneficiary.

b. The Contractor must agree to take responsibility for identifying and pursuing TPL for its Title XIX members. The Contractor must make best efforts to identify and coordinate with all third parties against whom members may have a claim for payment or reimbursement for services. These third parties may include Medicare, any other group insurance, trustee, union, welfare, or employer organization, employee benefit organization including preferred provider organizations or similar type organizations, any coverage under governmental programs, and any coverage required to be provided for by state law.

c. Title XIX is secondary to all other third parties with the exception of Special Health Services, Vocational Rehabilitation, Indian Health Services and Crime Victim’s Compensation Funds. As capitated payments made to the Contractor are from Title XIX funds, the Contractor would be secondary to all other third parties not listed above.

d. SRS has adjusted the Contractor capitation payment equal to SRS’ TPL recoveries for Title XIX consumers. In lieu of this offset to capitation, the Contractor will retain its TPL recoveries.

e. The Contractor must track its TPL recovery for Title XIX members and report this recovery amount to SRS according to the format and schedule specified by SRS. Data transfer of TPL information on any member shall occur according to the format and schedule specified by SRS. The Contractor shall transfer to SRS any new TPL information on any member that comes to their attention. SRS shall transfer to the Contractor any new TPL information for any member that comes to their attention.

f. SRS will retain responsibility for collecting medical subrogation. SRS will coordinate these activities with the Contractor. The Contractor is required to comply with any information requests regarding medical subrogation.

5.15 Payment:

5.15.1 Capitation Rates

a. In full consideration of contract services rendered by the Contractor, SRS agrees to pay the Contractor monthly payments based on the number of Title XIX and Title XXI beneficiaries enrolled in the Contractor, and other relevant cohort distinctions (age, gender, geographic location, eligibility category, etc.). Past experience has shown that geographic distinctions do exist for costs in the Title XIX program. Capitation rates for Title XIX beneficiaries will be set by an actuarial contractor for the State, and will be available approximately December 1, 2000, but prior to final bids being accepted. The rate structure will be similar to examples provided in Appendices B and C. Capitation rates for Title XXI can be established by the bidder, and are subject to negotiation. It is requested that Title XXI rates be submitted by the bidder by age, gender, and geographic location cohorts similar to those found in Title XIX. Separate submissions should be submitted for Regions I and II.

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b. A separate lump-sum payment will be made to cover prenatal and delivery costs associated with the mother’s medical costs for Title XIX beneficiaries. This payment will be made upon receipt of encounter data demonstrating a delivery DRG (codes 370 - 375) OR a global or delivery-only CPT code (59400, 59409, 59410, 59510, 59514, 59515, 59610, 59612, 59618, 59620, 59622, Y9512). Delivery costs will be included in the monthly capitation payment for pregnant teenagers in Title XXI.

c. Changes to Title XIX or Title XXI covered services mandated by Federal or state law subsequent to the signing of this contract will not affect the contract services for the term of this contract, unless (1) agreed to by mutual consent, or (2) unless the change is necessary to continue to receive federal funds or due to action of a court of law. The Contractor shall receive thirty (30) days notice prior to such changes and the capitation payment shall be adjusted accordingly.

d. Rate changes in Year Two of this contract will be based on legislative directives, medical costs, utilization, population trends and benefit changes in the Title XIX and Title XXI programs.

5.15.2 Restrictions on Use of Funds

The Contractor agrees that no federally appropriated funds have been paid or will be paid on behalf of SRS or the Contractor to any person for influencing or attempting to influence an officer or employee of any federal agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan or cooperative agreement.

5.15.3 Payment Schedule

a. Payment to the Contractor shall be based on Contractor enrollment data each month during the term of the contract. Payment for Title XIX beneficiaries assigned by a month-end (six days prior to the last day of the month) will be made on the Thursday following the first Friday after month-end. Individuals who lose eligibility for Title XIX due to failure to provide eligibility reports to SRS on a timely basis but whose eligibility is consequently re-established prior to the end of the month, will be reported to the Contractor on a second beneficiary roster to be received by the Contractor approximately by the fifth of the month. Payment for these beneficiaries will be made on the Thursday following the first Friday after the fifth of the month. Payment for Title XXI beneficiaries will be made by the 15^th of the month of assignment. Contractors will be given notice if this payment schedule changes.

b. Payment will be made based on the number of assignees, their age, gender, geographic location, and for Title XIX beneficiaries, their eligibility category.

c. All payments to the Contractor will be made for a full month and no pro-rations shall be used. The Contractor will receive capitation, retroactively, for newborns born to assigned members once eligibility has been established. The Contractor is responsible for the provision of services to the consumer for the entire time period of the capitation payment.

5.15.4 Recovery

a. SRS will not normally recover Contractor monthly payments when the Contractor actually provided service, even if the beneficiary is subsequently determined to be ineligible for the month in question.

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b. In instances where enrollment is disputed between two Contractors, SRS will be the final arbitrator of Contractor membership and reserves the right to recover an inappropriate capitation payment. SRS also reserves the right to recover other types of inappropriate capitation payments, including but not limited to, untimely notice from the Contractor to the Administrative Services contractor of a member’s request to disenroll, which had been submitted to the Contractor.

5.15.5 Renegotiation

a. The monthly capitation rates similar to those in Appendices B and C to be provided after the issuance of this RFP, but prior to the deadline for responses, shall not be subject to renegotiation during the initial contract term or retroactively after the contract term, unless the scope of services delivered is changed by SRS.

b. In the event of a reduction in the appropriation from the state budget for the Medical Policy/Medicaid Division of the Department of Social and Rehabilitation Services or an across the board budget reduction affecting the Medical Policy/Medicaid Division or loss of Federal Financial Participation, SRS may either renegotiate this contract or terminate with 30 days written notice. SRS will confirm current or establish new capitation rates at least 60 days prior to the expiration of the initial term of this agreement and 60 days prior to the expiration of any contract extensions.

c. The Contractor shall have the right to not extend the contract beyond the initial contract term if the new or confirmed rates established is deemed to be insufficient notwithstanding any other provision of this contract. The Contractor shall notify SRS regarding its desire to extend the contract within 15 calendar days of receipt of the new capitation rates.

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APPENDICES

APPENDIX A –	ELIGIBILITY CRITERIA
APPENDIX B –	TITLE XIX CAPITATION RATES FOR FY 2001
APPENDIX C –	TITLE XXI CAPITATION RATES FOR FY 2001
APPENDIX D –	TITLE XIX MANAGED CARE REGIONS
APPENDIX E –	COVERED EMERGENCY SERVICES UNDER THE PRUDENT LAYPERSON DEFINITION
APPENDIX F –	QUALITY MANAGEMENT PLAN
APPENDIX G –	CURRENT ANNUAL TITLE XIX ENROLLMENT SCHEDULE
APPENDIX H –	TITLE XIX ENCOUNTER DATA REQUIREMENTS
APPENDIX I –	TITLE XXI ENCOUNTER DATA REQUIREMENTS
APPENDIX J –	TITLE XXI PROVIDER ROSTER FORMAT
APPENDIX K –	CONSUMER ASSESSMENT OF HEALTH PLAN STUDY (CAHPS™) 2.0 - ADULT CORE QUESTIONNAIRE
APPENDIX L –	CONSUMER ASSESSMENT OF HEALTH PLAN STUDY (CAHPS™) CHILDREN WITH SPECIAL NEEDS - PUBLICLY INSURED MANAGED CARE VERSION
APPENDIX M –	PROPOSED MEDICAL NECESSITY CRITERIA
APPENDIX N –	SHAWNEE COUNTY HEALTH DEPARTMENT REFERRAL FORMS
APPENDIX O –	KANSAS TITLE XIX ELIGIBLES BY COUNTY AND ZIP
APPENDIX P –	KANSAS TITLE XXI ELIGIBLES BY COUNTY AND ZIP
APPENDIX Q –	DEFINITIONS AND ACRONYMS
APPENDIX R –	AMERICAN ACADEMY OF PEDIATRICS PERIODICITY SCHEDULE
APPENDIX S –	IMMUNIZATION SCHEDULE
APPENDIX T –	KAN BE HEALTHY PROCEDURE CODES
APPENDIX U –	KANSAS VACCINES FOR CHILDREN PROGRAM
APPENDIX V –	MAP OF MANDATORY AND VOLUNTARY COVERAGE AREAS (BY COUNTY)
APPENDIX W –	OMB CIRCULAR A-130
APPENDIX X –	SAMPLE PERFORMANCE BOND

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State of Kansas

Department of Administration

DA-146a (Rev. 3-00)

CONTRACTUAL PROVISIONS ATTACHMENT

Important:	This form contains mandatory contract provisions and must be attached to or incorporated in all copies of any contractual agreement. If it is attached to the vendor/contractor’s standard contract form, then that form must be altered to contain the following provision:
	“The Provisions found in Contractual Provisions Attachment (Form DA-146a, Rev. 3-00), which is attached hereto, are hereby incorporated in this contract and made a part thereof.”
	The parties agree that the following provisions are hereby incorporated into the contract to which it is attached and made a part thereof, said contract being the      day of                             , 20    .

1. Terms Herein Controlling Provisions: It is expressly agreed that the terms of each and every provision in this attachment shall prevail and control over the terms of any other conflicting provision in any other document relating to and a part of the contract in which this attachment is incorporated.

2. Agreement With Kansas Law: All contractual agreements shall be subject to, governed by, and construed according to the laws of the State of Kansas.

3. Termination Due To Lack Of Funding Appropriation: If, in the judgment of the Director of Accounts and Reports, Department of Administration, sufficient funds are not appropriated to continue the function performed in this agreement and for the payment of the charges hereunder, State may terminate this agreement at the end of its current fiscal year. State agrees to give written notice of termination to contractor at least 30 days prior to the end of its current fiscal year, and shall give such notice for a greater period prior to the end of such fiscal year as may be provided in this contract, except that such notice shall not be required prior to 90 days before the end of such fiscal year. Contractor shall have the right, at the end of such fiscal year, to take possession of any equipment provided State under the contract. State will pay to the contractor all regular contractual payments incurred through the end of such fiscal year, plus contractual charges incidental to the return of any such equipment. Upon termination of the agreement by State, title to any such equipment shall revert to contractor at the end of State’s current fiscal year. The termination of the contract pursuant to this paragraph shall not cause any penalty to be charged to the agency or the contractor.

4. Disclaimer Of Liability: Neither the State of Kansas nor any agency thereof shall hold harmless or indemnify any contractor beyond that liability incurred under the Kansas Tort Claims Act (K.S.A. 75-6101 et seq.).

5. Anti-Discrimination Clause: The contractor agrees: (a) to comply with the Kansas Act Against Discrimination (K.S.A. 44-1001 et seq.) and the Kansas Age Discrimination in Employment Act (K.S.A. 44-1111 et seq.) and the applicable provisions of the Americans With Disabilities Act (42 U.S.C. 12101 et seq.) (ADA) and to not discriminate against any person because of race, religion, color, sex, disability, national origin or ancestry, or age in the admission or access to, or treatment or employment in, its programs or activities; (b) to include in all solicitations or advertisements for employees, the phrase “equal opportunity employer”; (c) to comply with the reporting requirements set out at K.S.A. 44-1031 and K.S.A. 44-1116; (d) to include those provisions in every subcontract or purchase order so that they are binding upon such subcontractor or vendor; (e) that a failure to comply with the reporting requirements of (c) above or if the contractor is found guilty of any violation of such acts by the Kansas Human Rights Commission, such violation shall constitute a breach of contract and the contract may be cancelled, terminated or suspended, in whole or in part, by the contracting state agency or the Kansas Department of Administration; (f) if it is determined that the contractor has violated applicable provisions of ADA, such violation shall constitute a breach of contract and the contract may be cancelled, terminated or suspended, in whole or in part, by the contracting state agency or the Kansas Department of Administration.

Parties to this contract understand that the provisions of this paragraph number 5 (with the exception of those provisions relating to the ADA) are not applicable to a contractor who employs fewer than four employees during the term of such contract or whose contracts with the contracting state agency cumulatively total $5,000 or less during the fiscal year of such agency.

6. Acceptance Of Contract: This contract shall not be considered accepted, approved or otherwise effective until the statutorily required approvals and certifications have been given.

7. Arbitration, Damages, Warranties: Notwithstanding any language to the contrary, no interpretation shall be allowed to find the State or any agency thereof has agreed to binding arbitration, or the payment of damages or penalties upon the occurrence of a contingency. Further, the State of Kansas shall not agree to pay attorney fees and late payment charges beyond those available under the Kansas Prompt Payment Act (K.S.A. 75-6403), and no provision will be given effect which attempts to exclude, modify, disclaim or otherwise attempt to limit implied warranties of merchantability and fitness for a particular purpose.

8. Representative’s Authority To Contract: By signing this contract, the representative of the contractor thereby represents that such person is duly authorized by the contractor to execute this contract on behalf of the contractor and that the contract agrees to be bound by the provisions thereof.

9. Responsibility For Taxes: The State of Kansas shall not be responsible for, nor indemnify a contractor for, any federal, state or local taxes which may be imposed or levied upon the subject matter of this contract.

10. Insurance: The State of Kansas shall not be required to purchase, any insurance against loss or damage to any personal property to which this contract relates, nor shall this contract require the State to establish a “self-insurance” fund to protect against any such loss of damage. Subject to the provisions of the Kansas Tort Claims Act (K.S.A. 75-6101 et seq.), the vendor or lessor shall bear the risk of any loss or damage to any personal property in which vendor or lessor holds title.

11. Information: No provision of this contract shall be construed as limiting the Legislative Division of Post Audit from having access to information pursuant to K.S.A. 46-1101 et seq.

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Appendixes were attached to the original Request for Proposal.

To obtain a copy of the appendixes, please contact the following person:

Rita Haverkamp

Health Care Policy

915 SW Harrison, Room 651-S

Topeka, KS 66612

Telephone: 785-296-3774

email: rszh@srskansas.org

STATE OF KANSAS	Contract No. 02510
Social and Rehabilitation Services
Health Care Policy/Medicaid

AMENDMENT FIVE

to the

KANSAS HEALTHWAVE TITLE XIX AND TITLE XXI CAPITATED MANAGED CARE HEALTH

SERVICES CONTRACT with

FIRSTGUARD HEALTH PLAN KANSAS, INC.

The above referenced agreement, as amended, entered into by and between the Secretary of Social and Rehabilitation Services (SRS) and FirstGuard Health Plan Kansas, Inc., (FGK), a Kansas Corporation, on July 12, 2001, hereinafter sometimes referred to as Contractor, is hereby amended by agreement of the parties:

WHEREAS, the above-named parties entered into a contract on the date referenced above for the purpose of providing and paying for HealthWave Title XIX and Title XXI capitated managed care health services to beneficiaries enrolled with FGK and now wish to further amend such contract;

NOW THEREFORE, the Parties hereto agree to amend the contract as follows:

Purpose: RFP #02510, Appendix F, Quality Management Plan, part 2, Performance Measures, Section c., Blood Lead Testing, shall be extended to include the following:

Additionally, in cases where a health care provider has confirmed a child’s capillary test result with a venous blood lead level greater than or equal to 20 ug/dL or with two (2) venous blood lead tests of 15-19 ug/dL within 12 weeks, a clinical evaluation and case management services shall be provided. Clinical evaluation and case management services shall be provided according to the Case Management of the Lead Poisoned Child, Kansas Childhood Lead Poisoning Prevention Program, Kansas Department of Health & Environment, November 2001 which follows the Centers for Disease Control (CDC) guidelines.

Other Terms and Conditions: All other terms and conditions of the contract between SRS and FGK remain in effect.

IN WITNESS HEREOF, the Parties hereto have executed this amendment to the original contract as of the date written below.

FIRSTGUARD HEALTH PLAN	SECRETARY OF SOCIAL AND
KANSAS, INC.	REHABILITATION SERVICES
/s/ Joy D. Wheeler
Joy D. Wheeler, President	Janet Schalansky, Secretary
July 8, 2003
Date	Date
DEPARTMENT OF ADMINISTRATION
DIVISION OF PURCHASES
Stuart Leighty, Director
Date

STATE OF KANSAS	Contract No. 02510
Social and Rehabilitation Services
Health Care Policy/Medicaid

AMENDMENT SIX

to the

KANSAS HEALTHWAVE TITLE XIX AND TITLE XXI CAPITATED MANAGED CARE HEALTH

SERVICES CONTRACT with

FIRSTGUARD HEALTH PLAN KANSAS, INC.

The above referenced agreement, as amended, entered into by and between the Secretary of Social and Rehabilitation Services (SRS) and FirstGuard Health Plan Kansas, Inc., (FGK), a Kansas Corporation, on July 12, 2001, hereinafter sometimes referred to as Contractor, is hereby amended by agreement of the parties.

WHEREAS, the above-named parties entered into a contract on the date referenced above for the purpose of providing and paying for HealthWave Title XIX and Title XXI capitated managed care health services to beneficiaries enrolled with FGK and now wish to further amend such contract;

NOW THEREFORE, the Parties hereto agree to amend the contract as follows:

Purpose: RFP #02510, Section 5.7.7(d)(i), Travel Distance, shall be amended from the original verbiage of:

Make available to every member, a pharmacy and a primary care provider within twenty (20) minutes in urban counties and thirty (30) minutes in all other areas of the state, of the member’s place of residence. In rural areas where available, pharmacies, specialty physicians and hospitals must be in a location closer than an urban county if traveling to the urban county for these services would endanger the member’s health.

to read (change is underlined):

Make available to every member, a pharmacy and a primary care provider within 30 minutes in urban counties and 30 miles in all other areas of the state, of the member’s place of residence. In rural areas where available, pharmacies, specialty physicians and hospitals must be in a location closer than an urban county if traveling to the urban county for these services would endanger the member’s health.

Other Terms and Conditions: All other terms and conditions of the contract between SRS and FGK remain in effect.

IN WITNESS HEREOF, the Parties hereto have executed this amendment to the original contract as of the date written below.

FIRSTGUARD HEALTH PLAN		SECRETARY OF SOCIAL AND
KANSAS, INC.		REHABILITATION SERVICES
/s/ Joy D. Wheeler	July 8, 2003
Joy D. Wheeler, President	Date	Janet Schalansky, Secretary	Date
DEPARTMENT OF ADMINISTRATION
DIVISION OF PURCHASES
Stuart Leighty, Director	Date

STATE OF KANSAS	Contract No. 02510
Social and Rehabilitation Services
Health Care Policy/Medicaid

AMENDMENT SEVEN

to the

KANSAS HEALTHWAVE TITLE XIX AND TITLE XXI CAPITATED MANAGED CARE

HEALTH SERVICES CONTRACT

with

FIRSTGUARD HEALTH PLAN KANSAS, INC.

The above referenced agreement, as amended, entered into by and between the Secretary of Social and Rehabilitation Services (SRS) and FirstGuard Health Plan Kansas, Inc., (FGK), a Kansas Corporation, on July 12, 2001, hereinafter sometimes referred to as Contractor, is hereby amended by agreement of the parties:

WHEREAS, the above-named parties entered into a contract on the date referenced above for the purpose of providing and paying for HealthWave Title XIX and Title XXI capitated managed care health services to beneficiaries enrolled with FGK and now wish to further amend such contract;

NOW THEREFORE, the Parties hereto agree to amend the contract as follows:

1. TERM:

In accordance with the provisions of RFP #02510, Section 3.1, the term of this contract is extended for the first of three, optional one-year periods, for the period July 1, 2003 through June 30, 2004.

The following documents are referenced for convenience only and are NOT made a part of this

amendment or intended to be incorporated in this contract by this reference.

Related Advanced Planning Documents: N/A

Related Contract Amendment Number/Name: #4

Related Memorandum of Understanding Number/Name: N/A

Related Policy Number/Name: N/A

Related Request For Proposals Reference(s): RFP #02510

Total Estimated Cost: Title XIX $ 117,600,000    Title XXI $56,900,000

Amendment 7, Page 1 of 5 Pages

2. MEDICAID TITLE XIX AND SCHIP TITLE XXI CAPITATION RATES FOR THE PERIOD BEGINNING JULY 1, 2003:

The parties acknowledge that the service delivery benefit packages and capitation rates for Medicaid Title XIX and SCHIP Title XXI for the contract period beginning July 1, 2003 have not been agreed upon. Therefore, the parties agree that for the period July 1, 2003 through such date as the service delivery benefit packages and capitation rates are agreed upon as evidenced by amendment to this contract, and approved by the Centers for Medicare and Medicaid Services (CMS), but no later than September 30, 2003, the capitation rates set forth in Attachment 1 to Amendment 4 to this Contract, shall apply to Title XIX and that for the same period of time the capitation rates set forth in Attachment 2 to Amendment 4 to this Contract, shall apply to Title XXI. The parties agree to continue to negotiate in good faith toward a final agreement on the service delivery benefit packages and Title XIX and Title XXI rates for the contract year July 1, 2003 through June 30, 2004.

3. STANDARD LANGUAGE FOR GRANTS AND CONTRACTS WHERE PROTECTED HEALTH INFORMATION WILL BE EXCHANGED:

Confidentiality Under the Health Insurance Portability and Accountability Act, 1996 (HIPAA):

SRS is a covered entity under the act and therefore Contractor is not permitted to use or disclose health information in ways that SRS could not. This protection continues as long as the data is in the hands of the Contractor/Grantee.

Definition: For purposes of this section, the terms “Protected Health Information” and “PHI” mean individually identifiable information in any medium pertaining to the past, present or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present or future payment for the provision of health care to an individual, that Contractor/Grantee receives from SRS or that Contractor/Grantee creates or receives on behalf of SRS. The terms “Protected Health Information” and “PHI” apply to the original data and to any data derived or extracted from the original data that has not been de-identified.

a) Required/Permitted Uses Section 164.504(e)(2)(i): Contractor/Grantee is required/permitted to use the PHI for the following purposes:

(1) Quality Assurance

(2) Eligibility Determination

(3) Financial Management

(4) To provide health care services

(5) Other activities related to ensure appropriate treatment

(6) Other activities as required by law

Amendment 7, Page 2 of 5 Pages

b) Required Disclosures §164.504(e)(2)(i): Contractor shall disclose SRS’ PHI to the External Quality Review Organization designated by SRS for the purposes of external quality review and quality review activities directed by SRS.

c) Limitation of Use and Disclosure Section 164.504(e)(2)(ii)(A): Contractor/Grantee agrees that it will not use or further disclose the PHI other than as permitted or required by this contract or as required by law.

d) Disclosures Allowed for Management and Administration Section 164.504(e)(2)(i)(A) and 164.504(e)(4)(i): Contractor/Grantee is permitted to use and disclose PHI received from SRS in its capacity as a Contractor/Grantee to SRS if such use is necessary for proper management and administration of the Contractor/Grantee or to carry out the legal responsibilities of the Contractor/ Grantee.

e) Minimum Necessary: Contractor/Grantee agrees to limit the amount of PHI used and/or disclosed pursuant to this section to the minimum necessary to achieve the purpose of the use and disclosure.

f) Safeguarding and Securing PHI Section 164.504(e)(2)(ii)(B): Contractor/Grantee agrees to take steps to protect the physical security of and prevent unauthorized access to the PHI and upon request will furnish SRS with a written description of such steps taken. Contractor/Grantee agrees to allow authorized representatives of SRS access to premises where the PHI is kept for the purpose of inspecting physical security arrangements.

Appropriate administrative, technical, procedural and physical safeguards shall be established by the Contractor/Grantee to protect the confidentiality of the data and to prevent unauthorized access to it. The safeguards shall provide a level of security that is required by the HIPAA regulations.

Security of facilities: Contractor/Grantee shall provide all reasonable security procedures at any place where services are performed by the Contractor/Grantee under this contract. Contractor/Grantee personnel shall comply with the rules of SRS with respect to access to SRS offices, data files and data.

g) Agents and Subcontractors Section 164.504(e)(2)(ii)(D): Contractor/Grantee will ensure that any entity, including agents and subcontractors, to whom it discloses PHI received from SRS or created or received by Contractor/Grantee on behalf of SRS agrees to the same restrictions and conditions that apply to Contractor/Grantee with respect to such information.

h) Right to Review: SRS reserves the right to review terms of agreements and contracts between the Contractor/Grantee and subcontractors as they relate to the use and disclosure of PHI belonging to SRS.

i) Ownership: Contractor/Grantee shall at all times recognize SRS’ ownership of the PHI.

Amendment 7, Page 3 of 5 Pages

j) Notification Section 164.504(e)(2)(ii)(C): Contractor/Grantee shall notify SRS both orally and in writing of any use or disclosure of PHI not allowed by the provisions of this Contract of which it becomes aware, and of any instance where the PHI is subpoenaed, copied or removed by anyone except an authorized representative of SRS or the contractor/grantee.

k) Transmission of PHI: Contractor/Grantee agrees to follow the HIPAA standards with regard to the transmission of PHI.

l) Employee Compliance with Applicable Laws and Regulations: Contractor/Grantee agrees to require each of its employees having any involvement with the PHI to comply with applicable laws and regulations relating to confidentiality and privacy of the PHI and with the provisions of this Contract.

m) Custodial Responsibility: The following named individual,                                                                              , an employee of Contractor/Grantee, is designated as the custodian of PHI and will be responsible for observance of all conditions of use. If custodianship is transferred within the organization, Contractor/Grantee shall notify SRS promptly.

n) Access, Amendment, and Accounting of Disclosures Section 164.504(e)(2)(ii)(E-G): Contractor/Grantee will provide access to the PHI in accordance with 45 C.F.R. Section 164.524. Contractor/Grantee will make the PHI available for amendment and incorporate any amendments to the PHI in accordance with 45 C.F.R. Section 164.526. Contractor/Grantee will make available the information required to provide an accounting of disclosures in accordance with 45 C.F.R. Section 164.528.

o) Documentation Verifying HIPAA Compliance Section 164.504(e)(2)(ii)(H): Contractor/Grantee will make its internal practices, books, and records relating to the use and disclosure of the PHI received from SRS, or created or received by Contractor/Grantee on behalf of SRS, available to the Secretary of Health and Human Services for purposes of determining SRS’ compliance with 45 C.F.R. Parts 160 and 164. Contractor/Grantee will make these same practices, books and records available to SRS or its designee upon request.

p) Contract Termination Section 164.504(e)(2)(ii)(I): Contractor/Grantee agrees that within 30 days of the termination of this contract, it will return or destroy, at SRS’ direction, any and all PHI that it maintains in any form and will retain no copies of the PHI. If the return or destruction of the PHI is not feasible, the protections of this section of the contract shall be extended to the information, and further use and disclosure of PHI is limited to those purposes that make the return or destruction of PHI infeasible. Any use or disclosure of PHI except for the limited purpose is prohibited.

Amendment 7, Page 4 of 5 Pages

q) Termination for Compliance Violation Section 164.504(e)(2)(iii) and Section 164.504(e)(1)(ii): Contractor/Grantee acknowledges that SRS is authorized to terminate this Contract if SRS determines that Contractor/Grantee has violated a material term of this section of the contract. If termination of the Contract is not feasible due to an unreasonable burden on SRS, Contractor/Grantee’s violation will be reported to the Secretary of Health and Human Services, along with steps SRS took to cure or end the violation or breach and the basis for not terminating the contract.

4. OTHER TERMS AND CONDITIONS:

All other terms and conditions of the contract between SRS and FGK remain unchanged.

IN WITNESS HEREOF, the Parties hereto have executed this amendment to the original contract as of the date written below.

FIRSTGUARD HEALTH PLAN	SECRETARY OF SOCIAL AND
KANSAS, INC.	REHABILITATION SERVICES
/s/ Joy D. Wheeler
Joy D. Wheeler, Executive Director	Janet Schalansky, Secretary
June 23, 2003
Date	Date
DEPARTMENT OF ADMINISTRATION
DIVISION OF PURCHASES
Stuart Leighty, Director
Division of Purchases
Date

Amendment 7, Page 5 of 5 Pages

STATE OF KANSAS	Contract No. 02510
Social and Rehabilitation Services
Health Care Policy/Medicaid

AMENDMENT EIGHT

to the

KANSAS HEALTHWAVE TITLE XIX AND TITLE XXI CAPITATED MANAGED CARE

HEALTH SERVICES CONTRACT

with

FIRSTGUARD HEALTH PLAN KANSAS, INC.

The above referenced agreement, as amended, entered into by and between the Secretary of Social and Rehabilitation Services (SRS) and FirstGuard Health Plan Kansas, Inc., (FGK), a Kansas Corporation, on July 12, 2001, hereinafter sometimes referred to as Contractor, is hereby amended by agreement of the parties:

WHEREAS, the above-named parties entered into a contract on the date referenced above for the purpose of providing and paying for HealthWave Title XIX and Title XXI capitated managed care health services to beneficiaries enrolled with FGK and now wish to further amend such contract;

NOW THEREFORE, the Parties hereto agree to amend the contract as follows:

1. Addendum 3, RFP #02510, Section 5.7.9 Advance Directives:

RFP #02510, Section 5.7.9, New Section dd, added by Addendum 3, Item 4:

Information regarding advance directives in accordance with of 42 C.F.R. §434.28 and §489 Subpart 1, including a description of state law as found in Kansas Statutes Annotated 65-28,101. Withholding or withdrawal of life-sustaining procedures; legislative finding and declaration.

And RFP #02510, New Section 5.7.26 Advance Directives, added by Addendum 3, Item 8:

Contractor shall maintain written policies and procedures respecting advance directives and comply with all provisions of 42 C.F.R. §434.28 and §489 Subpart 1.

Are hereby deleted in their entirety and replaced with the following:

5.7.26 Advance Directives :

a. Contractor shall comply with the requirements set forth in 42 C.F.R. §438.6(i)(2) for maintaining written policies and procedures for advance directives.

(1) Contractor shall maintain written policies and procedures respecting advance directives as set forth in 42 C.F.R.

Contract #02510, Amendment 8, Page 1 of 38

subpart I of §489. Advance Directives shall have the following meaning in accordance with the provisions of 42 C.F.R. § 489.100 Definition.

For purposes of this part, advance directive means a written instruction, such as a living will or durable power of attorney for health care, recognized under State law (whether statutory or as recognized by the courts of the State), relating to the provision of health care when the individual is incapacitated.

(2) Contractor shall maintain written policies and procedures concerning advance directives with respect to all adult individuals receiving medical care by or through the Contractor’s organization.

(a) Contractor shall provide written information to those individuals with respect to the following:

i. Their rights under the law of Kansas to make decisions concerning their medical care, including the right to accept or refuse medical or surgical treatment and the right to formulation of advance directives. Providers may contract with other entities to furnish this information but remain legally responsible for ensuring that the requirements of this section are met. Changes in State law must be provided as soon as possible, but no later than 90 days after the effective date of the change in State law. Applicable State law of Kansas may be found in Kansas Statutes Annotated (KSA) 65-28,101; Withholding or withdrawal of life-sustaining procedures; legislative finding and declaration and KSA 58-625; The Kansas Durable Power of Attorney for Health Care Decisions.

ii. The Contractor’s written policies respecting the implementation of those rights, including a clear and precise statement of limitation if the Contractor cannot implement an advance directive as a matter of conscience. At a minimum, this statement must do the following:

• Clarify any differences between institution-wide conscientious objections and those that may be raised by individual physicians.

Contract #02510, Amendment 8, Page 2 of 38

• Identify the state legal authority (KSA 65-28,107 or KSA 58-625) permitting such objection.

• Describe the range of medical conditions or procedures affected by the conscience objection.

• Provide the information specified in (a)i. of this section to each enrollee at the time of initial enrollment. If an enrollee is incapacitated at the time of initial enrollment and is unable to receive information (due to the incapacitating condition or a mental disorder) or articulate whether or not he or she has executed an advance directive, the Contractor may give advance directive information to the enrollee’s family or surrogate in the same manner that it issues other materials about policies and procedures to the family of the incapacitated enrollee or to a surrogate or other concerned persons in accordance with State law. The Contractor is not relieved of its obligation to provide this information to the enrollee once he or she is no longer incapacitated or unable to receive such information. Follow-up procedures must be in place to ensure that the information is given to the individual directly at the appropriate time.

• The Contractor shall document in a prominent part of the individual’s current medical record whether or not the individual has executed an advance directive.

• The Contractor shall not condition the provision of care or otherwise discriminate against an individual based on whether or not the individual has executed an advance directive.

• The Contractor shall ensure compliance with requirements of State law (whether statutory or recognized by the courts of the State) regarding advance directives.

Contract #02510, Amendment 8, Page 3 of 38

• The Contractor shall provide for education of staff concerning its policies and procedures on advance directives.

• The Contractor shall provide for community education regarding advance directives that may include material required herein, either directly or in concert with other providers or entities. Separate community education materials may be developed and used, at the discretion of the Contractor. The same written materials are not required for all settings, but the material should define what constitutes an advance directive, emphasizing that an advance directive is designed to enhance an incapacitated individual’s control over medical treatment, and describe applicable State law concerning advance directives. The Contractor must be able to document its community education efforts upon request by SRS or applicable agents of the federal government.

b. The Contractor:

i. Is not required to provide care that conflicts with an advance directive; and

ii. Is not required to implement an advance directive if, as a matter of conscience, the Contractor cannot implement an advance directive and State law allows any health care provider or any agent of the provider to conscientiously object.

c. The Contractor must inform individuals that complaints concerning noncompliance with the advance directive requirements may be filed with the Kansas Insurance Department.

2. RFP #02510, Section 3.19 Environmental Protection is deleted in its entirety and replaced with the following:

3.19 Environmental Protection: The Contractor shall comply with all applicable standards, orders or requirements issued under section 306 of the Clean Air Act (42 USC 1857 (h)), section 508 of the Clean Water Act (33 USC 1368), Executive Order 11738, and Environmental Protection

Contract #02510, Amendment 8, Page 4 of 38

Agency regulations (40CFR part 15) and with all other federal, state and local laws, rules and regulations regarding the protection of the environment. The Contractor shall report any violations to the applicable governmental agency. A violation of applicable laws, rule or regulations may result in termination of this contract.

3. RFP #02510, Section 3.46.1.c. Sanctions, Liquidated Damages, and Termination Options is deleted in its entirety and replaced with the following:

3.46.1.c. Sanctions, Liquidated Damages, Temporary Management, and Termination Options:

i. The State may impose sanctions whenever the State has determined that the Contractor acts or fails to act as follows:

(1) Fails substantially to provide medically necessary services that the Contractor is required to provide, under law or under its contract with the State, to an enrollee covered under the contract.

(2) Imposes on enrollees premiums or charges that are in excess of the premiums or charges permitted under the Title XIX – Medicaid or Title XXI – SCHIP programs.

(3) Acts to discriminate among enrollees on the basis of their health status or need for health care services.

(4) Misrepresents or falsifies information that it furnishes to CMS or to the State.

(5) Misrepresents or falsifies information that it furnishes to an enrollee, potential enrollee, or health care provider.

(6) Fails to comply with the requirements for physician incentive plans, as set forth (for Medicare) in 42 CFR 422.208 and 422.210.

(7) Has distributed directly, or indirectly through any agent or independent contractor, marketing materials that have not been approved by the State or that contain false or materially misleading information.

(8) Makes any statement that an enrollee must enroll to obtain or in order not to lose any benefits.

(9) Makes any assertion or statement, written or oral, that the Contractor/MCO is endorsed by CMS, the Federal or State government or similar entity.

(10) Has violated any of the other applicable requirements of sections 1903(m) or 1932 of the Act and any implementing regulations*.

* Only those sanctions in subsection ii. (2) may be imposed for this violation.

Contract #02510, Amendment 8, Page 5 of 38

ii. The State may choose, depending on the severity of the violation but at the State’s discretion, any of the following sanctions:

(1) Withholding of capitation payments as specified in Section 3.46.4

(a) Withholdings shall be graduated using the following percentages:

• 10%

• 25%

• 50%

• 75%

• 100%

(b) Withholdings may accrue (i.e., withholdings increase by 10% each month a noncompliance action is not corrected (30% in month three)).

(c) Monies withheld may be paid to the Contractor or may be paid less any liquidated damages incurred by SRS or by civil monetary penalties imposed.

(d) Withholding percentages are determined based on the seriousness of the noncompliant action.

(e) In the event that civil monetary penalties are imposed they shall be in the following specified amounts:

• A maximum of $25,000 for each determination of failure to provide services; misrepresentation or false statements to enrollees, potential enrollees or health care providers; failure to comply with physician incentive plan requirements; or marketing violations.

• A maximum of $100,000 for each determination of discrimination; or misrepresentation or false statements to CMS or the State.

• A maximum of $15,000 for each recipient the State determines was not enrolled because of a discriminatory practice (subject to the $100,000 overall limit above).

• A maximum of $25,000 or double the amount of the excess charges, (whichever is greater) for charging premiums or charges in excess of the amounts permitted under the Medicaid program. The State must deduct from the penalty the amount of overcharge and return it to the affected enrollee(s).

Contract #02510, Amendment 8, Page 6 of 38

(2) The following sanctions may be imposed for violations of subsection i. (10):

• Granting enrollees the right to terminate enrollment without cause and notifying the affected enrollees of their right to disenroll.

• Suspension of all new enrollment, including default enrollment, after the effective date of the sanction.

• Suspension of payment for recipients enrolled after the effective date of the sanction and until CMS or the State is satisfied that the reason for imposition of the sanction no longer exists and is not likely to recur.

(3) Sanction by CMS: Denial of Payment. Payments provided for under this contract will be denied for new enrollees when, and for so long as, payment for those enrollees is denied by CMS in accordance with the requirements of 42 CFR 438.730.

iii. Enrollment Suspensions: Suspension of new beneficiary enrollments as specified at Section 3.46.3.

iv. Liquidated Damages: Liquidated damages as specified at Section 3.46.5.

v. Temporary Management:

Temporary management may only be imposed by the State if it finds that:

• There is continued egregious behavior by the MCO, including, but not limited to behavior that is described in 42 CFR 438.700, or that is contrary to any requirements of sections 1903(m) and 1932 of the Act; or

• There is substantial risk to enrollees’ health; or

• The sanction is necessary to ensure the health of the MCO’s enrollees while improvements are made to remedy violations under 438.700 or until there is an orderly termination or reorganization of the MCO.

The State must impose temporary management if it finds that an MCO has repeatedly failed to meet substantive requirements in section 1903(m) or section 1932 of the Act. The State must also grant enrollees the right to terminate enrollment without cause and must notify the affected enrollees of their right to terminate enrollment.

* Note: The State may not delay imposition of temporary management to provide a hearing before imposing this sanction. In addition, the State may not terminate temporary management until it determines that the MCO can ensure that the sanctioned behavior will not recur.

Contract #02510, Amendment 8, Page 7 of 38

vi. Termination: Termination of the Contract as specified at Section 3.3 and for failure to carry out the substantive terms of this contract or to meet applicable requirements in section 1932, 1903(m) and 1905(t) of the Act.

4. RFP #02510 New Section 3.46.1.d. Due Process:

New Section 3.46.1.d. Due Process: Notice of Sanction and Pre-Termination Hearing is added as follows:

d. Due Process: Notice of Sanction and Pre-Termination Hearing.

i. Notice: Before imposing any intermediate sanctions, the State shall give the Contractor timely written notice that explains:

• The basis and nature of the sanction.

• Any other due process protections that the State shall elect to provide.

Notice shall be provided to the Contractor, in writing and when possible, at least 30 days prior to the imposition of the sanction. Said notice, when possible, shall give the Contractor 30 days in which the Contractor shall have the opportunity to cure the violation.

ii. Pre-Termination Hearing and Procedures: Before terminating this contract under the terms herein, the State shall provide Contractor a pre-termination hearing. The State shall:

• Give Contractor written notice, at least 7 days in advance of the hearing, of its intent to terminate the Contract, the reason for termination, and the time and place of hearing.

• Give Contractor written notice, after the hearing, of the decision affirming or reversing the proposed termination of the contract, and for an affirming decision, the effective date of termination; and

• For an affirming decision, give enrollees of the Contractor, notice of the termination and information, consistent with 42 CFR 438.10, on their options for receiving Title XIX – Medicaid and Title XXI – SCHIP services following the effective date of termination.

5. RFP #02510, Section 3.47.2. Subcontracts:

a. RFP #02510, Section 3.47.2.g is deleted in its entirety and replaced with the following:

g. The Contractor shall assure that all subcontracts shall be in writing, shall comply with the provisions of this contract, and shall include any general requirements of this contract that are appropriate to the service or activity identified. The subcontract shall specify the activities and report responsibilities delegated to the subcontractor; and provide for revoking said delegation or

Contract #02510, Amendment 8, Page 8 of 38

imposing other sanctions if the subcontractor’s performance is inadequate. It is not required that subcontractors be enrolled as a Title XIX provider. However, they are encouraged to enroll in order to provide services not covered under this contract on a fee-for-service basis. Continuity of care is encouraged.

b. RFP #02510, Section 3.47.2.i is deleted in its entirety and replaced with the following:

i. The Contractor and its subcontractors must comply with all provisions and applicable conditions of title VI of the Civil Rights Act of 1964, as amended; title IX of the Education Amendments of 1972 (regarding education programs and activities); the Age Discrimination Act of 1975, as amended; the Equal Pay Act of 1963; the Rehabilitation Act of 1973, as amended; the Americans with Disabilities Act; and the Civil Rights Act of 1991. If applicable, the Contractor must also comply with all provisions of Executive Order #11246 including amendments, as well as rules, regulations and relevant orders of the Secretary of Labor.

c. RFP #02510, Section 3.47.2.j is deleted in its entirety and replaced with the following:

j. Physician Incentive Plans:

The Contractor must obtain SRS approval of any Physician Incentive Plan (PIP) prior to implementation. Contractor must certify to SRS annually in the event that it does not have a PIP. Any PIP must meet the requirements at 42 CFR §417.479, §422.208, §422.210, §434.70, and §438.6. PIP Regulation information may be found on the Internet at:

http://www.hcfa.gov/medicare/physincp/pip-info.htm

i. The Contractor may operate a PIP only if no specific payment can be made directly or indirectly under a PIP as an inducement to reduce or limit medically necessary services furnished to an individual.

ii. The Contractor shall disclose information specified in the PIP regulations to the State at the initial contract, anniversary date of the contract and at contract renewal.

iii. The Contractor shall report whether services not furnished by physician/group are covered by the incentive plan. No further disclosure is required if PIP does not cover services not furnished by physician/group.

iv. The State shall monitor the Contractor’s PIP to insure compliance with applicable law. Upon request by the State, Contractor shall report: The type of incentive arrangement, e.g. withhold, bonus, capitation; the percent

Contract #02510, Amendment 8, Page 9 of 38

of withhold or bonus (if applicable); the panel size, and if patients are pooled, the approved method used; if the entity is at substantial financial risk, the entity must report proof the physician/group has adequate stop loss coverage, including amount and type of stop-loss.

v. The Contractor shall provide information on its PIP to any Title XIX – Medicaid or Title XXI – SCHIP beneficiary upon request (this includes the right to adequate and timely information on a PIP). Member handbooks must annually disclose to enrollees their right to request such information.

vi. If the physician/group is put at substantial financial risk for services not provided by physician/group, the Contractor must ensure adequate stop-loss protection to individual physicians and conduct annual enrollee surveys.

vii. If the Contractor is required to conduct beneficiary survey, survey results must be disclosed to the State and, upon request, disclosed to beneficiaries. Member handbooks must annually disclose to enrollees their right to request such information.

d. RFP #02510, Section 3.47.2.l is deleted in its entirety and replaced with the following:

l. Terminated Providers:

The Contractor shall terminate contracts with any provider whose Title XIX HealthConnect Contract or Title XIX Provider Agreement has been terminated by the state. Such contract termination shall be effective 30 calendar days after receipt of notice of State termination of a HealthConnect Contract or Title XIX provider agreement. Federal Financial Participation (FFP) is not available for amounts expended for providers excluded by Medicare, Medicaid, or SCHIP, except for emergency services.

e. RFP #02510, Section 3.47.2.n is deleted in its entirety and replaced with the following:

n. Provider Discrimination:

• Contractor shall not discriminate against providers with respect to participation, reimbursement, or indemnification of any provider acting within the scope of that provider’s license or certification under applicable State law solely on the basis of the provider’s license or certification.

• If Contractor declines to include individual or groups of providers in its network, it must give the affected providers written notice of the reason for its decision.

• In all subcontracts with health care professionals, Contractor must comply with the requirements specified in 438.214 that includes selection and retention of providers, credentialing and recredentialing requirements, and nondiscrimination.

Contract #02510, Amendment 8, Page 10 of 38

• This section may not be construed to:

• Require the Contractor to contract with providers beyond the number necessary to meet the needs of its enrollees.

• Preclude the Contractor from using different reimbursement amounts for different specialties or for different practitioners in the same specialty; or

• Preclude the Contractor from establishing measures that are designed to maintain quality of services and control costs and is consistent with its responsibilities to enrollees.

f. RFP #02510, Section 3.47.2.o is deleted in its entirety and replaced with the following:

• Provider – Enrollee Communication:

• Alternative Treatment: Contractor shall not prohibit, or otherwise restrict, a health care professional acting within the lawful scope of practice, from advising or advocating on behalf of an enrollee who is his or her patient for the enrollee’s health status, medical care, or treatment options, including any alternative treatment that may be self-administered.

• Treatment Options: Contractor shall not prohibit, or otherwise restrict, a health care professional acting within the lawful scope of practice, from advising or advocating on behalf of an enrollee who is his or her patient, for any information the enrollee needs in order to decide among all relevant treatment options.

• Treatment vs. Non-Treatment: Contractor shall not prohibit, or otherwise restrict, a health care professional acting within the lawful scope of practice, from advising or advocating on behalf of an enrollee who is his or her patient, for the risks, benefits, and consequences of treatment or non-treatment.

• Participate in Treatment Options: Contractor shall not prohibit, or otherwise restrict, a health care professional acting within the lawful scope of practice, from advising or advocating on behalf of an enrollee who is his or her patient, for the enrollee’s right to participate in decisions regarding his or her health care, including the right to refuse treatment, and to express preferences about future treatment decisions.

• Moral or Religious Objections: If the Contractor would otherwise be required to provide, reimburse for, or provide coverage of, a counseling or referral service is not required to do so if the Contractor objects to the service on moral or religious grounds.

Contract #02510, Amendment 8, Page 11 of 38

• Information Requirements: If the Contractor elects not to provide, reimburse for, or provide coverage of, a counseling or referral service because of an objection on moral or religious grounds, it must furnish information about the services it does not cover as follows:

• To the State.

• With its application for a Medicaid contract.

• Whenever it adopts the policy during the term of the contract; and

• It must be consistent with the provisions of 42 CFR 438.10.

• It must be provided to potential enrollees before and during enrollment.

• It must be provided to enrollees within 90 days after adopting the policy with respect to any particular service.

6. RFP #02510, Section 3.50 Temporary Management Provisions

RFP #02510, Section 3.50 Other Contract Provisions is deleted in its entirety and replaced with the following:

3.50 Other Contract Provisions: The following provisions shall apply:

• EEO - Contractor shall comply with the Equal Employment Opportunity Provisions of Executive Order 11246, as amended by Executive Order 11375, and as supplemented by 41 CFR Part 60.

• Rights to inventions – Contractor shall provide for the rights of the Federal Government and the State of Kansas in any resulting invention in accordance with 37 CFR 401 and any further implementing regulations issued by HHS.

• Clean Air Act (42 U.S.C. 7401 et seq.) and Federal Water Pollution Control Act as amended (33 U.S.C. 1251 et seq.) – Contractor shall comply with all applicable standards orders or regulations issued pursuant to the Clean Air Act and the Federal Water Pollutions Act.*

• Byrd Anti-Lobbying Amendment - Contractor shall file the required certification that each tier will not use Federal funds to pay a person or employee or organization for influencing or attempting to influence an officer or employee of any Federal agency, a member of Congress, officer or employee of Congress, or an employee of a member of Congress in connection with obtaining any Federal contract, grant or any other award covered by 31 U.S.C. 1352. Each tier shall also disclose any lobbying with nonfederal funds that takes place in connection with obtaining any Federal award. Such disclosures are forwarded from tier to tier up to the recipient (45 CFR part 93). The disclosures shall contain a statement that Federal funds have not been used for lobbying.*

Contract #02510, Amendment 8, Page 12 of 38

• Debarment and Suspension - Certain contracts shall not be made to parties listed on the nonprocurements portion of the General Services Administration’s “Lists of Parties Excluded for Federal Procurement or Nonprocurement Program.” This list contains the names of parties debarred, suspended, or otherwise excluded by agencies, and contractors declared ineligible under statutory authority. Contractor shall provide the required certification regarding their exclusion status and that of their principals prior to award.

*Note: For contracts in excess of the small contact threshold of $100,000 only

7. RFP #02510, New Section 3.51 Use of Federal Funds

New Section 3.51 Use of Federal Funds is added as follows:

3.52 Use of Federal Funds: Contractor attests that Contractor has not and shall not use federal funds derived under this contract for lobbying and will comply with all applicable provisions of 45 CFR 93.

8. RFP #02510, Section 4.13.7 Current Ownership and Management Contracts

RFP #02510, Section 4.13.7 Current Ownership and Management Contracts is deleted in its entirety and replaced with the following:

4.13.7 Current Ownership and Management Contracts: Provide the name, address, and telephone number of the current owner. Vendors must include all owners with at least 5% ownership. Financial statements for all owners with over 5% ownership must be submitted annually to SRS. State if the MCO is operated by a management company, and provide the name and address of that management company. Include a copy of the management contract between the MCO and management company.

9. RFP #02510, Section 5.7.4 Children with Special Health Care Needs

RFP #02510, Section 5.7.4 Children with Special Health Care Needs is deleted in its entirety and replaced with the following:

5.7.4 Children with Special Health Care Needs

For other young persons with handicaps, disabilities or diseases which require specialty care and who qualify for services under Special Health Services (SHS), Title V, through the Kansas Department of Health and Environment (KDHE), the MCO must contact the Bureau of Children and Families within KDHE. KDHE shall be responsible for the assessment

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and plan of treatment for children with special health care needs. Contractor shall follow SHS advice on referrals and coordination of care (and must comply with the provisions of Appendix F – Quality Management Plan, Section IV.B.1) and shall have a mechanism in place to allow enrollees to directly access a specialist or specialists as appropriate for the enrollee’s condition and identified needs. Contractor shall implement and have in place, using appropriate health care professionals, mechanisms to assess each Medicaid enrollee identified as having special health care needs in order to identify any ongoing special conditions of the enrollee that require a course of treatment or regular care monitoring. Contractor shall have in place mechanisms to assess the quality and appropriateness of care furnished to enrollees with special health care needs and shall report the results of their assessment to SHS and SRS.

The Contractor’s obligation to pay for services for children with special health care needs that are received from providers other than the Contractor or its subcontractors is limited to covered services provided by a specialist or specialists as appropriate for the enrollee’s condition and identified needs.

10. RFP #02510, Section 5.7.7 Service Accessibility Standards

a. RFP #02510, Section 5.7.7 Service Accessibility Standards, first paragraph, is deleted in its entirety and replaced with the following:

The contractor must implement procedures to ensure that each enrollee has an ongoing source of primary care appropriate to his or her needs and a person or entity formally designated as primarily responsible for coordinating the health care services furnished to the enrollee. The Contractor in establishing and maintaining its network of providers must consider the following:

• The anticipated Title XIX – Medicaid and Title XXI – SCHIP enrollment.

• The expected utilization of services, taking into consideration the characteristics and health care needs of specific Title XIX – Medicaid and Title XXI – SCHIP populations represented in the Contractors enrollment population.

• The numbers and types (in terms of training, experience, and specialization) of providers required to provide the contracted services.

• The numbers of network providers who are not accepting new Title XIX – Medicaid and/or Title XXI – SCHIP patients.

The following service accessibility standards (for all health service providers, unless otherwise specified herein) shall apply:

b. RFP #02510, Section 5.7.7.b.ii is deleted in its entirety and replaced with the following:

ii. Comply with all Federal and State laws and regulations including 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; the Americans with Disabilities Act of 1990; the Civil Rights Act of 1991; and other laws regarding privacy and confidentiality.

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c. RFP #02510, Section 5.7.7.c. is deleted in its entirety and replaced with the following:

c. Timely Access To Healthcare Coverage: Provide coverage, either directly or through its primary care providers, to members on a 24 hours per day, 7 days per week basis. Network providers shall offer hours of operation that are no less than the hours of operation offered to commercial enrollees or comparable to Medicaid fee-for-service, if the provider serves only Medicaid enrollees. The Contractor shall have written policies and procedures describing how members and providers may contact the Contractor to receive individual instruction on accessing emergency and post-stabilization care services or receiving prior authorization for treatment of an urgent medical problem and instruction when out of geographic area. The procedures shall include availability of 24 hours, 7 days per week access by telephone to a live voice (an employee of the Contractor or an answering service) which will immediately page an on-call medical professional so that referrals can be made for non-emergency services or so information can be given about accessing services or how to handle medical problems during non-office hours. These policies and procedures shall also describe how the Contractor responds to calls received from members. The policies and procedures must be made available in an accessible format upon request. Direct contact with qualified clinical staff must be available through a toll-free voice and telecommunication device for the deaf telephone number. Recorded messages are not acceptable. The Contractor shall ensure all Contractor members equal access to 24 hours per day, 7 days per week, health care coverage. The Contractor shall establish procedures to ensure that network providers comply with the timely access requirements. The Contractor shall monitor their provider network to determine compliance. The Contractor shall take corrective action if there is a failure to comply.

d. RFP #02510, Section 5.7.7.g is deleted in its entirety and replaced with the following:

g. Manner and Format of Enrollment Notices, Informational Materials, and Instructional Materials, Translation of Written Materials, Oral Interpretation Services and Alternative Formats:

(1) The Contractor must provide all enrollment notices, informational materials, and instructional materials relating to enrollees and potential enrollees in a manner and format that may be easily understood.

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(2) The Contractor shall make available all documents in the English and Spanish languages.

(3) The Contractor shall make available written notice, in the languages listed below, of the right to receive translated documents in the English, Spanish, French, German, Russian, Vietnamese, Arabic, Chinese, Korean, and Japanese languages. Additional languages may be required when the 2000 Census data becomes available.

(4) The Contractor shall notify all members or potential members of the availability of written documents as required in (1) and (2) above and that oral interpretation services for any language are available and how they may access those services. The Contractor shall provide oral interpretation services for any language at no cost to the applicant or potential applicant.

(5) The Contractor make all written material available in alternative formants and in an appropriate manner that takes into consideration the special needs of those who, for example, are visually impaired or have limited reading proficiency. All enrollees and potential enrollees must be informed that information is available in alternative formats and how to access those formats.

e. RFP #02510, Section 5.7.7.h is deleted in its entirety and replaced with the following:

h. Provider Network Coverage: The Contractor shall have a primary care provider, pharmacy and hospital in every county where it has members.

The contractor shall maintain a network of appropriate providers that is supported by written agreements. The contractor shall maintain a network of appropriate providers that is sufficient to provide adequate access to all services covered under the contract. The Contractor, in establishing and maintaining the network, must consider the following:

• The anticipated Medicaid enrollment,

• The expected utilization of services, taking into consideration the characteristics and health care needs of specific Medicaid populations represented in the particular MCO, PIHP, and PAHP,

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• The numbers and types (in terms of training, experience, and specialization) of providers required to furnish the contracted Medicaid services,

• The numbers of network providers who are not accepting new Medicaid patients, The geographic location of providers and Medicaid enrollees, considering distance, travel time, the means of transportation ordinarily used by Medicaid enrollees, and whether the location provides physical access for Medicaid enrollees with disabilities.

In the event there is no primary care physician, pharmacy or hospital in a given county, the contractor shall make other provisions to provide services to its members located within that county. The Contractor may include providers from other states in their provider network for this contract. Members may cross the State line for treatment, providing that they are in a border city which is within 50 miles of the State line. Contractor shall provide female enrollees with direct access to a women’s health specialist with the network for covered care necessary to provide women’s routine and preventive health care services. This is in addition to the enrollee’s designated source of primary care if that source is not a women’s health specialist.

If the Contractor’s network is unable to provide necessary medical services covered under this contract to a particular enrollee, the Contractor shall adequately and timely cover these services out of network for the enrollee, for as long as the entity is unable to provide them.

Out-of-network providers must coordinate with the Contractor with respect to payment. The Contractor must ensure that cost to the enrollee is no greater than it would be if the services were furnished within the network.

11. RFP #02510, Section 5.7.9, Member Handbook and Notification:

a. RFP #02510, Section 5.7.9, first paragraph, is deleted in its entirety and replaced with the following:

The Contractor shall mail a member handbook, or other written materials with information on how to access services, approved by SRS, to all members within ten (10) business days of being notified of their enrollment. When there are program changes, notification will be provided to the affected members at least fourteen (14) days before implementation. The Contractor shall maintain documentation verifying that the member handbook is reviewed and updated at least once a year. The updated handbook shall be submitted to SRS for approval. The Contractor shall mail the updated handbook to all members within ten (10) business days after Contractor receives notification that SRS has approved the updated handbook. The member handbook must be written at no higher than a sixth grade reading level.

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b. RFP #02510, Section 5.7.9.x is deleted in its entirety and replaced with the following:

x. The Contractor’s policy regarding copayments and charges to members (copayments may not be charged except for non-Title XIX and non-Title XXI services). Any copayments or other cost sharing imposed on members shall be in accordance with 42 CFR 447.50 through 42 CFR 447.50 (same as permitted in Title XIX – Medicaid fee-for-service).

12. RFP #02510, Section 5.7.13, Quality Management

a. RFP #02510, Section 5.7.13.b is deleted and replaced with the following:

b. SRS maintains oversight of the Contractor’s quality management functions. Therefore, the Contractor must comply with all SRS quality management criteria described herein. The Contractor is subject to annual, external independent reviews of the quality outcomes, timeliness of, and access to, the services covered under this contract. The Contractor must maintain an ongoing quality assessment and performance improvement program for the services it furnishes to its enrollees. The Contractor shall also comply with any performance measures and topics for performance improvement projects specified by SRS or CMS. In addition, quality standards must meet or exceed the requirements of 42 CFR 438 Subpart D. The MCO will, at a minimum, monitor, evaluate, and seek to improve the following:

b. RFP #02510, Section 5.7.13.b.i. is deleted in its entirety and replaced with the following:

i. Quality Improvement: Contractor shall conduct performance improvement projects that are designed to achieve, through ongoing measurements and intervention, significant improvement, sustained over time, in clinical care and non-clinical care areas that are expected to have a favorable effect on health outcomes and enrollee satisfaction. Performance improvement projects must be submitted to and approved by SRS prior to implementation. The performance improvement projects must involve the following:

• Measurement of performance using objective quality indicators.

• Implementation of system interventions to achieve improvement in quality.

• Evaluation of the effectiveness of the interventions.

• Planning and initiation of activities for increasing or sustaining improvement.

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Contractor shall report the status and results of each project to the State and its designee as requested. Each performance improvement project must be completed in a reasonable time period so as to generally allow information on the success of performance improvement projects in the aggregate to produce new information on quality of care each year. The Contractor shall have in effect a process for its own evaluation of the impact and effectiveness of its quality assessment and performance improvement program.

c. RFP #02510, new Section 5.7.13.h is added as follows:

h. Contractor shall adopt practice guidelines that meet the following requirements:

• Are based on valid and reliable clinical evidence or a consensus of health care professionals in the particular field;

• Consider the needs of the enrollees;

• Are adopted in consultation with contracting health care professionals; and

• Are reviewed and updated periodically as appropriate.

Contractor shall disseminate the guidelines to all affected providers and, upon request, to enrollees and potential enrollees. Contractor shall ensure consistency between the guidelines and all decisions for utilization management, enrollee education, coverage of services, and other areas to which the guidelines apply.

13. RFP #02510, Section 5.7.14, External Quality Review Organization (EQRO)

RFP #02510, new Section 5.7.14.d is added as follows:

d. SRS contracts for EQR services and Contractor shall provide full cooperation with the External Quality Review Organization (EQRO) to assure quality and accessibility of health care in the appropriate setting to Title XIX and Title XXI beneficiaries including the validation of PIPs and PMs.

14. RFP #02510, Section 5.7.15, Grievance, Appeal and Fair Hearing Processes:

RFP #02510, Section 5.7.15 is deleted in its entirety and replaced with the following (A.5.15):

5.7.15 Inquiry, Grievance and Appeals Process

5.7.15.1     Provider Inquiries, Grievances and Appeals:

a. Provider Inquiries, Grievances and Appeals: The Contractor shall establish an internal inquiry, complaint, grievance and appeal

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process which shall be approved, in advance, by SRS. Any provider whose claim is denied, reduced, suspended, terminated, determined inappropriate, or acted upon improperly by the health plan or SRS may use any of the following:

i. Provider Inquiries - An inquiry is a request for information about the health plan. The Contractor shall log and promptly respond to all provider inquiries. The Contractor shall designate staff to handle telephone or in-person inquiries. The Contractor shall log inquiries and identify patterns.

ii. Provider Grievances - An expression of dissatisfaction about any matter other than an action, as action is defined in this section. Possible subjects for grievances included, but are not limited to, the quality of care or services provided, and aspects of interpersonal relationships such as rudeness of a provider or employee, or failure to respect the member’s rights.

iii. Contractor Appeals Process - An appeal is a formal mechanism that allows a provider to appeal a grievance determination. Providers or their representatives may file an appeal with the Contractor or with SRS. The Contractor shall establish an appeals process to allow providers to appeal complaint and grievance determinations. All appeals shall be filed within ninety (90) calendar days of issuance of the grievance determination. All appeals shall be in writing and addressed to the Contractor. The Contractor shall not terminate or reduce services until the appeal is concluded. The Contractor shall provide an opportunity for providers or their representative to present the case in person. The Contractor shall reach a final decision on an appeal within sixty (60) calendar days of receipt of the appeal, with extensions possible if approved by SRS. Qualified medical personnel must be represented on any appeal committee handling quality of care issues. The Contractor’s internal grievance and appeal process shall not be a substitute for the State Fair Hearing process.

iv. State Fair Hearings Process - Providers may file a request for a State fair hearing at any stage of the grievance or appeal process. Within five (5) days of receiving notification of the appeal, the Contractor shall forward a copy all supporting documentation pertaining to the dispute to SRS. If the Contractor’s action is sustained by the State fair hearing office, the Contractor may institute recovery procedures against the provider to recoup the payment for any disputed service furnished by the provider. The recoupment shall not exceed the cost of the payments made during the time of the appeal. The Contractor shall comply with decisions reached by the State fair hearing office.

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v. Expedited Review: If the standard time frame could seriously jeopardize a member’s physical or mental health, the Contractor shall inform the provider that expedited review is necessary and review the complaint or grievance within 72 hours of receiving the complaint or grievance.

b. Information Packet: Contractor shall distribute an information packet to all providers regarding the Contractor’s grievance, and appeal process and the State’s fair hearing process. SRS must approve the information packet and any other information sent to providers prior to distribution.

c. The Contractor shall maintain provider inquiry, grievance and appeals records that include a summary of the issue(s), provider’s name (if different from the complainant), identification number, date of complaint, grievance or appeal, Contractor’s response, name of the provider, provider number, and resolution of complaint, grievance or appeal. The Contractor shall furnish a quarterly complaint, grievance or appeal report to SRS.

d. Providers with two or more complaints in one month or any group with four or more complaints shall be further reviewed by the Contractor. The Contractor shall provide providers education to minimize misunderstanding. The Contractor shall provide additional education to providers who lodge unsubstantiated complaints.

e. The Contractor must develop methods in coordination with and/or referral to the State Title XIX or Title XXI grievance process.

f. The Contractor must implement a process to address provider noncompliance with all pertinent policies and procedures. This process is subject to review and approval by SRS.

g. The Contractor shall provide an explanation of its method for terminating a subcontractor.

5.7.15.2     Member Inquiries, Grievances and Appeals:

The Contractor shall establish an internal inquiry, complaint, grievance and appeal process for members which shall be in compliance with Appendix AB – Beneficiaries Grievance System, and approved, in advance, by SRS.

a. Information to enrollees of MCO or PIHP.

Contractor shall for all enrollees, the following information on grievance appeal and fair hearing procedures:

• Grievance, appeal and fair hearing procedures and timeframes, as provided in Appendix AB that must include the following:

• For State fair hearing:

• The right to hearing;

• The method for obtaining a hearing; and

• The rules that govern representation at the hearing.

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• The right to file grievances and appeals.

• The requirements and timeframes for filing a grievance or appeal

• The availability of assistance in the filing process

• The toll-free numbers that the enrollee can use to file a grievance or an appeal by phone.

• The fact that, when requested by the enrollee—

• Benefits will continue if the enrollee files an appeal or a request for State fair hearing within the timeframes specified for filing; and

• The enrollee may be required to pay the cost of services furnished while the appeal is pending, if the final decision is adverse to the enrollee.

• Any appeal rights that the State chooses to make available to providers to challenge the failure of the organization to cover a service.

15. RFP #02510, Section 5.7.19, Encounter Data

Section 5.7.19.g is deleted in its entirety.

New Section 5.7.19.h. Data Certifications: is added as follows:

h. Data Certifications: Data submitted by the Contractor including, but not limited to, all documents specified by the State, enrollment information, encounter data, and other information required as a deliverable in the contract, must be certified.

(1) Authority to Certify. All data and documents requiring certification that Contractor submits to the State shall be certified by one of the following:

• Contractor’s Chief Executive Officer

• Contractor’s Chief Financial Officer

• An individual who has delegated authority to sign for, and who reports directly to, the Contractor’s Chief Executive Officer or Chief Financial Officer.

(2) Content of Certification: The certification must attest, based on best knowledge, information, and belief as to the accuracy, completeness and truthfulness of the documents and data.

(3) Timing of Certification: The Contractor must submit the certification concurrently with the certified data and documents.

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16. RFP #02510, Section 5.7.21, Emergency Services Requirements

RFP #02510, Section 5.7.21 Emergency Services Requirements is deleted in its entirety and replaced with the following:

5.7.21 Emergency Services and Post-Stabilization Requirements:

a. Definitions. As used in this section:

• Emergency Medical Condition means a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in the following:

• Placing the health of the individual (or with respect to a pregnant woman, the health of the woman or her unborn child) in serious jeopardy.

• Serious impairment to bodily functions.

• Serious dysfunction of any bodily organ or part.

• Emergency Services means covered inpatient and outpatient services that are as follows:

• Furnished by a provider that is qualified to furnish these services.

• Needed to evaluate or stabilize an emergency medical condition.

• Poststabilization Care Services means covered services, related to an emergency medical condition that are provided after an enrollee is stabilized in order to maintain the stabilized condition, or, under the circumstances described 42 CFR 438.114(e).

b. The contractor is responsible for coverage and payment of emergency services and post stabilization care services.

c. The Contractor must cover and pay for emergency services regardless of whether the provider that furnishes the services has a contract with the entity.

d. The Contractor may not deny payment for treatment obtained when an enrollee had an emergency medical condition, including cases in which the absence of immediate medical attention would not have had the outcomes specified in paragraphs (1), (2), and (3) of the definition of an Emergency Medical Condition found in paragraph a. of this section.

e. The Contractor may not deny payment for treatment obtained when a representative of the entity instructs the enrollee to seek emergency services.

f. The Contractor may not limit what constitutes an emergency medical condition on the basis of lists of diagnoses or symptoms.

g. The Contractor may not refuse to cover emergency services based on the emergency room provider, hospital, or fiscal agent not notifying the enrollee’s primary care provider, MCO, or applicable State entity of the enrollee’s screening and treatment within 10 calendar days of presentation for emergency services.

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h. An enrollee who has an emergency medical condition may not be held liable for payment of subsequent screening and treatment needed to diagnose the specific condition or stabilize the patient.

i. The attending emergency physician, or the provider actually treating the enrollee, is responsible for determining when the enrollee is sufficiently stabilized for transfer or discharge, and that determination is binding on the MCO as responsible for coverage and payment.

j. The Contractor is financially responsible for post-stabilization services obtained within or outside the MCO that are pre-approved by a plan provider or other MCO representative.

k. The Contractor is financially responsible for post-stabilization care services obtained within or outside the MCO that are not pre-approved by a plan provider or other MCO representative, but administered to maintain the enrollee’s stabilized condition within 1 hour of a request to the MCO for pre-approval of further post-stabilization care services.

l. The Contractor is financially responsible for post-stabilization care services obtained within or outside the MCO that are not pre-approved by a plan provider or other MCO representative, but administered to maintain, improve or resolve the enrollee’s stabilized condition if—

• The MCO does not respond to a request for pre-approval within 1 hour;

• the MCO cannot be contacted; or

• the MCO representative and the treating physician cannot reach an agreement concerning the enrollee’s care and a plan physician is not available for consultation. In this situation, the MCO 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 a plan physician is reached or one of the criteria of 422.133(c)(3) is met.

m. The Contractor must limit charges to enrollees for post-stabilization care services to an amount no greater than what the MCO would charge the enrollee if he or she had obtained the services through the MCO.

n. The Contractor’s financial responsibility for post-stabilization care services it has not pre-approved ends when:

• a plan physician with privileges at the treating hospital assumes responsibility for the enrollee’s care;

• a plan physician assumes responsibility for the enrollee’s care through transfer;

• an MCO representative and the treating physician reach an agreement concerning the enrollee’s care; or

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• the enrollee is discharged.

17. RFP #02510, Section 5.7.23 Provider Fraud and Abuse:

a. RFP #02510, Section 5.7.23, subsection a. Requirements, is amended to include:

a. Requirements: The Contractor must have administrative and management arrangements or procedures, and a mandatory compliance plan, that are designed to guard against fraud and abuse.

b. RFP #02510, Section 5.7.23, subsection b. Fraud and Abuse Operational Procedures is deleted in its entirety and replaced with the following:

b. Fraud and Abuse Operational Procedures: The Contractor shall have in place, internal controls, policies and procedures that are designed to prevent and detect Fraud and Abuse activities. The specific internal controls, policies and procedures shall be described in a comprehensive written plan, to be submitted to SRS for prior approval no later than 15 days following contract award. SRS will respond with approval/denial/modifications to the plan within 30 days of receipt. Any changes to the SRS approved plan must be submitted to SRS for approval. At a minimum, the plan must include:

• Written policies, procedures, and standards of conduct that articulates the Contractor’s commitment to comply with all applicable Federal and State standards.

• The designation of a compliance officer and a compliance committee that are accountable to senior management.

• Effective training and education for the compliance officer and the Contractor’s employees.

• Effective lines of communications between the compliance officer and the Contractor’s employees.

• Enforcement of standards through well-publicized disciplinary guidelines.

• Provision for internal monitoring, auditing and reporting.

• Provision for prompt response to detected offenses, and for development of corrective action initiatives relating to this Contract.

c. RFP #02510, Section 5.7.23, new subsection c. Reports is added as follows:

c. Reports: Contractor must report fraud and abuse information to the State. Contractor must report the following:

• Number of complaints of fraud and abuse made to state that warrant preliminary investigation

• For each which warrants investigation, supply the

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• Name and ID number

• Source of complaint

• Type of provider

• Nature of complaint

• Approximate dollars involved

• Legal and administrative disposition of the case.

18. RFP #02510, Section 5.7.25.c Confidentiality of Data and Records:

RFP #02510, Section 5.7.25.c.i. is deleted in its entirety and replaced with the following:

i. The Contractor shall comply with 45 C.F.R. §205.50, Safeguarding Information for the Financial Assistance and Social Service Program, 42 C.F.R. §431 Subpart F, as well as 41 USC 423, Section 27. The Contractor 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. The Contractor 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. As deemed necessary, SRS or its designated agent, and the federal government shall be allowed access to this data. All information, except as noted above, as to personal facts and circumstances obtained by the Contractor shall be treated as privileged communications, shall be held confidential, and shall not be divulged without the written consent of SRS and the written consent of the beneficiary, or his/her attorney, or his/her responsible parent or guardian.

19. RFP #02510, New Section 5.7.26:

New Section 5.7.26, Enrollee Rights and Protection, is added as follows:

5.7.26     Enrollee Rights and Protection

The Contractor must have written policies regarding the enrollee rights specified in this section. The Contractor must comply with any applicable Federal and State laws that pertain to enrollee rights and ensure that its staff and affiliated providers take those rights into account when furnishing services to enrollees. All enrollees shall be guaranteed the following rights and protection:

• Dignity and privacy. Each managed care enrollee is guaranteed the right to be treated with respect and with due consideration for his or her dignity and privacy.

• Receive information on available treatment options. Each managed care enrollee is guaranteed the right to receive information on available treatment options and alternatives, presented in a manner appropriate to the enrollee’s condition and ability to understand.

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• Participate in decisions. Each managed care enrollee is guaranteed the right to participate in decisions regarding his or her health care, including the right to refuse treatment.

• Free from restraint or seclusion. Each managed care enrollee is guaranteed the right to be free from any form of restraint or seclusion used as a means of coercion, discipline, convenience, or retaliation.

• Copy of medical records. Each managed care enrollee is guaranteed the right to request and receive a copy of his or her medical records, and to request that they be amended or corrected, as specified in 45 CFR part 164.

• Free exercise of rights. Each enrollee is freed to exercise his or her rights, and that the exercise of those rights does not adversely affect the way the Contractor and its providers or SRS treat the enrollee.

• Compliance with other Federal and State laws. The Contractor 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.

20. RFP #02510, New Section 5.7.27:

New Section 5.7.27, Information Requirements, is added as follows:

5.7.27     Information Requirements:

If the Contractor elects not to provide, reimburse for, or provide coverage of, a counseling or referral service because of an objection on moral or religious grounds, it must furnish information about the services it does not cover as follows:

• to the State

• with its application for a Medicaid contract

• whenever it adopts the policy during the term of the contract; and

• it must be consistent with the provisions of 42 CFR 438.10

• it must be provided to potential enrollees before and during enrollment

• it must be provided to enrollees within 90 days after adopting the policy with respect to any particular service.

21. RFP #02510, New Section 5.7.28 Timely Claims Payment

5.7.28 Timely Claims Payment

Timely claims payment

• Claim means 1) a bill for services 2) a line item of service or 3) all services for one recipient within a bill.

• Clean claim means one that can be processed without obtaining additional information from the provider of the service or from a third party. It includes a claim with errors originating in a State’s claims

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system. It does not include a claim from a provider who is under investigation for fraud or abuse, or a claim under review for medical necessity.

Contractor shall meet the requirements of FFS timely payment:

• Pay 90% of all clean claims from practitioners, who are in individual or group practice or who practice in shared health facilities, within 90 days of the date of receipt, and

• Abide by the specifications of the following:

• The date receipt is the date the Contractor receives the claim, as indicated by its date stamp on the claim.

• The date of payment is the date of the check or other form of payment.

Exception. The MCO and its providers may, by mutual agreement, establish an alternative payment schedule. Any alternative schedule must be stipulated in the contract.

22. RFP #02510, New Section 5.7.29 Medicaid Enrollees are not Held Liable

5.7.29 Medicaid Enrollees are not Held Liable

Medicaid enrollees are not to be held liable for the following situations:

a. Non-payment to entity. Contractor must provide that its Medicaid enrollees are not held liable for the covered services provided to the enrollee, for which the State does not pay the Contractor.

b. Non-payment to provider. Contractor must provide that its Medicaid enrollees are not held liable for the covered services provided to the enrollee, for which the State, or the Contractor does not pay the individual or health care provider that furnishes the services under a contractual, referral, or other arrangement.

c. Contractor must provide that its Medicaid enrollees are not held liable for payments for covered services furnished under a contract, referral, or other arrangement, to the extent that those payments are in excess of the amount that the enrollee would owe if the MCO, PIHP, or PAHP provided the services directly.

23. RFP #02510, New Section 5.7.30 Compensation for Utilization Management Activities

5.7.30 Compensation for Utilization Management Activities:

Each contract must provide that compensation to individuals or entities that conduct utilization management activities is not structured so as to provide incentives for the individual or entity to deny, limit, or discontinue medically necessary services to any enrollee.

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24. RFP #02510, New Section 5.8.6 Disenrollment During Termination Hearing Process

After SRS notifies Contractor that it intends to terminate the contract, the State shall:

• Give the Contractor’s enrollees written notice of the State’s intent to terminate the contract, and

• Allow enrollees to disenroll immediately without cause.

25. RFP #02510, Section 5.9 Medical Services Included in the Contract

a. RFP#02510, Section 5.9, First Paragraph is deleted in its entirety and replace with the following:

The Contractor shall agree to assume responsibility for all medical conditions of each program beneficiary as of the effective date of coverage under this contract. The Contractor shall ensure the provision of medically necessary services as specified below, subject to all terms, conditions and definitions of this contract. The Contractor shall 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. The contractor shall not arbitrarily deny or reduce the amount, duration, or scope of a required service solely because of the diagnosis, type of illness, or condition. The Contractor may place appropriate limits on a service on the basis of criteria such as medical necessity; or for utilization control, provided the services furnished can reasonably be expected to achieve their purpose. Any and all disputes relating to the definition and presence of medical necessity shall be resolved in favor of SRS. Covered services shall be available in the Service Area through the Contractor or its subcontractors.

b. RFP #02510, Section 5.9, Fourth Paragraph, is deleted in its entirety and replaced with the following:

The quality management of these services is to be monitored by the Contractor and SRS or its designee, contracted to provide this service. The Contractor agrees to provide for a second opinion from a qualified health care professional within the network, or arrange for the ability of the enrollee to obtain one outside the network, at no cost to the enrollee. Services must be provided by providers who meet the qualifications of all state licensing standards, all applicable accrediting standards, and any other standards or criteria established by SRS to assure quality of services.

26. RFP #02510, New Section 5.9.3

RFP #02510, New Section 5.9.3, Coverage, is added as follows:

5.9.3     Coverage. The Contractor may not arbitrarily deny or reduce the amount, duration, or scope of a required service solely because of the diagnosis, type of illness, or condition.

Contract #02510, Amendment 8, Page 29 of 38

27. RFP #02510, New Section 5.9.4

RFP #02510, New Section 5.9.4, Authorization of Services, is added as follows:

5.9.4     Medically Necessary Services. Medically necessary services shall mean those services that meet the definition of Medical necessity as follows:

(1) Medical necessity means that a health intervention is an otherwise covered category of service, is not specifically excluded from coverage, and is medically necessary, according to all of the following criteria:

(a) “Authority.” The health intervention is recommended by the treating physician and is determined to be necessary by the secretary or the secretary’s designee.

(b) “Purpose.” The health intervention has the purpose of treating a medical condition.

(c) “Scope.” The health intervention provides the most appropriate supply or level of service, considering potential benefits and harms to the patient.

(d) “Evidence.” The health intervention is known to be effective in improving health outcomes. For new interventions, effectiveness shall be determined by scientific evidence as provided in paragraph (5.9.4(3)). For existing interventions, effectiveness shall be determined as provided in paragraph (5.9.4(4)).

(e) “Value.” The health intervention is cost-effective for this condition compared to alternative interventions, including no intervention. “Cost-effective” shall not necessarily be construed to mean lowest price. An intervention may be medically indicated and yet not be a covered benefit or meet this regulation’s definition of medical necessity. Interventions that do not meet this regulation’s definition of medical necessity may be covered at the choice of the Secretary or the Secretary’s designee. An intervention shall be considered cost effective if the benefits and harms relative to costs represent an economically efficient use of resources for patients with this condition. In the application of this criterion to an individual case, the characteristics of the individual patient shall be determinative.

(2) The following definitions shall apply to these terms only as they are used in this subsection (5.9.4):

(a) “Effective” means that the intervention can be reasonably expected to produce the intended results and to have expected benefits that outweigh potential harmful effects.

Contract #02510, Amendment 8, Page 30 of 38

(b) “Health intervention” means an item or service delivered or undertaken primarily to treat a medical condition or to maintain or restore functional ability. For this regulation’s definition of medical necessity, a health intervention shall be determined not only by the intervention itself, but also by the medical condition and patient indications for which it is being applied.

(c) “Health outcomes” means treatment results that affect health status as measured by the length or quality of a person’s life.

(d) “Medical condition” means a disease, illness, injury, genetic or congenital defect, pregnancy, or a biological or psychological condition that lies outside the range of normal, age-appropriate human variation.

(e) “New intervention” means an intervention that is not yet in widespread use for the medical condition and patient indications under consideration.

(f) “Scientific evidence” means controlled clinical trials that either directly or indirectly demonstrate the effect of the intervention on health outcomes. However, if controlled clinical trials are not available, observational studies that demonstrate a causal relationship between the intervention and health outcomes may be used. Partially controlled observational studies and uncontrolled clinical series may be considered to be suggestive, but shall not by themselves be considered to demonstrate a causal relationship unless the magnitude of the effect observed exceeds anything that could be explained either by the natural history of the medical condition or potential experimental biases.

(g) “Secretary’s designee” means a person or persons designated by the secretary to assist in the medical necessity decision-making process.

(h) “Treat” means to prevent, diagnose, detect, or palliate a medical condition.

(i) “Treating physician” means a physician who has personally evaluated the patient.

(3) Each new intervention for which clinical trials have not been conducted because of epidemiological reasons, including rare or new diseases or orphan populations, shall be evaluated on the basis of professional standards of care or expert opinion as described below in paragraph (5.9.4(4)).

Contract #02510, Amendment 8, Page 31 of 38

(4) The scientific evidence for each existing intervention shall be considered first and, to the greatest extent possible, shall be the basis for determinations of medical necessity. If no scientific evidence is available, professional standards of care shall be considered. If professional standards of care do not exist, or are outdated or contradictory, decisions about existing interventions shall be based on expert opinion. Coverage of existing interventions shall not be denied solely on the basis that there is an absence of conclusive scientific evidence. Existing interventions may be deemed to meet this regulation’s definition of medical necessity in the absence of scientific evidence if there is a strong consensus of effectiveness and benefit expressed through up-to-date and consistent professional standards of care or, in the absence of those standards, convincing expert opinion.

The contractor shall provide all services that meet the criteria herein and must apply that criteria in a manner that provides recipients

• The prevention, diagnosis, and treatment of health impairments;

• The ability to achieve age-appropriate growth and development; and

• The ability to attain, maintain, or regain functional capacity

28. RFP #02510, New Section 5.9.5

RFP #02510, New Section 5.9.5, Authorization of Services, is added as follows:

5.9.5     Authorization of Services. The Contract and its subcontractors must have in place, and follow, written policies and procedures for processing requests for initial and continuing authorizations of services. The Contractor must have in effect mechanisms to ensure consistent application of review criteria for authorization decisions; and consult with the requesting provider when appropriate. Any decision to deny a service authorization request or to authorize a service in an amount, duration, or scope that is less than requested, must be made by a health care professional who has appropriate clinical expertise in treating the enrollee’s condition or disease.

The Contractor must notify the requesting provider, and give the enrollee written notice of any decision to deny a service authorization request, or to authorize a service in an amount, duration, or scope that is less than requested. The notice must meet the requirements found in Appendix AB – Beneficiaries Grievance System, except that the notice to the provider need not be in writing.

Contract #02510, Amendment 8, Page 32 of 38

The contractor must provide for the following decisions and notices:

Standard authorization decisions. For standard authorization decisions, provide notice as expeditiously as the enrollee’s health condition requires and within State-established timeframes that may not exceed 14 calendar days following receipt of the request for service, with a possible extension of up to 14 additional calendar days, if—

• The enrollee, or the provider, requests extension; or

• The entity justifies to SRS, upon request, a need for additional information and how the extension is in the enrollee’s interest.

Expedited authorization decisions.

• For cases in which a provider indicates, or the entity determines, that following the standard timeframe could seriously jeopardize the enrollee’s life or health or ability to attain, maintain, or regain maximum function, the entity must make an expedited authorization decision and provide notice as expeditiously as the enrollee’s health condition requires and no later than 3 working days after receipt of the request for service.

• The entity may extend the 3 working days time period by up to 14 calendar days if the enrollee requests an extension, or if the entity justifies (to the State agency upon request) a need for additional information and how the extension is in the enrollee’s interest.

• MCO gives notice on the date that the timeframes expire when service authorization decisions not reached within the timeframes for either standard or expedited service authorizations. Untimely service authorizations constitute a denial and are thus adverse actions.

29. RFP #02510, Section 5.12.1 Title XIX Enrollment Process:

a. RFP #02510, Section 6.12.1.a.i is deleted in its entirety and replaced with the following:

i. SRS shall be responsible for all enrollment and disenrollment processes. SRS, through the fiscal agent, will send an enrollment packet to new beneficiaries. The enrollment packet will include managed care training materials and a toll-free number to call with questions. The enrollment packet will comply with the provisions of 42 CFR 438.10 to ensure that, before enrolling, the recipient receives the accurate oral and written information he or she needs to make an informed decision on whether to enroll.

Contract #02510, Amendment 8, Page 33 of 38

b. RFP #02510, Section 6.12.1.a.v is deleted in its entirety and replaced with the following:

v. After assignment to the MCO the Contractor shall send all new members a welcome packet telling them of their Primary Care Provider (PCP) assignment and that they have 10 days to select a new PCP or informing members that they have 10 days to choose a PCP, depending on the Contractor’s policies. Members will be informed that they may request, in writing, and be assigned a new PCP at any time. The welcome packet will include: PCP enrollment materials, a member handbook and a provider listing.

30. RFP #02510, Section 5.12.3 Enrollment Responsibilities

RFP #02510, Section 5.12.3.a.x. is deleted in its entirety and replaced with the following:

The Contractor must have written policies and procedures for allowing members to select or be assigned to a new primary care provider when such a change is mutually agreed to by the Contractor and member, when a primary care provider is terminated from the managed care plan, or when a primary care provider change is ordered as part of the resolution to a formal grievance proceeding. In cases where a primary care provider has been terminated, the managed care plan must allow members to select another primary care provider or make a re-assignment within 15 days of the termination effective date.

31. RFP #02510, Section 5.12.4 Marketing

RFP #02510, Section 5.12.4 is deleted in its entirety and replaced with the following:

5.12.4     Marketing

SRS is responsible for marketing the Contractors’ plans to the beneficiaries during the enrollment process. The Contractor shall not influence member enrollment in the Contractor’s plan through the offer of any compensation, reward or benefit to the member except for additional health-related services or informational or educational services that have been approved by SRS. Direct solicitation of beneficiaries is not allowed. The Contractor must comply with the following Marketing Elements:

a. Cold Call Marketing means any unsolicited personal contact by the Contractor with a potential enrollee for the purpose of marketing as defined in this section. Contractor shall not conduct directly or indirectly, door-to-door, telephonic, or other forms of “cold-call” marketing.

Contract #02510, Amendment 8, Page 34 of 38

b. Marketing means any communication, from the Contractor to a Medicaid recipient who is not enrolled in that entity, that can reasonably be interpreted as intended to influence the recipient to enroll in the Contractor’s MCO, or either to not enroll in, or to disenroll from, another MCO’s or PCCM’s Medicaid product.

c. Marketing material means any materials that are produced in any medium, by or on behalf of the Contractor that can reasonably be interpreted as intended to market to potential enrollees.

d. The Contractor shall not distribute any marketing materials without first obtaining SRS approval.

e. Contractor shall distribute marketing materials to its entire service area.

f. Contractor shall not offer the sale of any other type of insurance product as an enticement to enrollment.

g. Contractor marketing, including plans and materials, must be accurate, shall not contain false or misleading information, and does not mislead, confuse, or defraud the recipients or SRS.

h. Contractor shall not discriminate against individuals eligible to be covered under the contract on the basis of health status or need of health services.

32. RFP #02510, Section 5.12.5 Disenrollment:

a. RFP #02510, Section 5.12.5.a, new subsection iv:

iv. Contractor may not request disenrollment because of a change in the enrollee’s health status, or because of the enrollee’s utilization of medical services, diminished mental capacity, or uncooperative or disruptive behavior resulting from his or her special needs (except when his or her continued enrollment with the Contractor seriously impairs the Contractor’s ability to furnish services to either this particular enrollee or other enrollees).

b. RFP #02510, Section 5.12.5.a, new subsection v:

v. Contractor agrees it will not request disenrollment for any other reason.

c. RFP #02510, Section 5.12.5.b, SRS Disenrollment Responsibilities is deleted in its entirety and replaced with the following:

b. SRS Disenrollment Responsibilities

i. The State of Kansas has continuous open enrollment. Recipients may disenroll at any time with or without cause by submitting an oral or written request to SRS or its fiscal

Contract #02510, Amendment 8, Page 35 of 38

agent (these disenrollments will be effective on the last day of the calendar month in which they are requested whenever possible).

ii. SRS, through its fiscal agents, shall be responsible for any member enrollments and disenrollments with the managed care plans. SRS has sole authority and discretion for disenrolling program members from managed care plans subject to the conditions specified below:

(1) The enrollee moves out of the MCO’s or PCCM’s service area.

(2) The plan does not, because of moral or religious objections, cover the service the enrollee seeks.

(3) The enrollee needs related services (for example a cesarean section and a tubal ligation) to be performed at the same time; not all related services are available within the network; and the enrollee’s primary care provider or another provider determines that receiving the services separately would subject the enrollee to unnecessary risk.

(4) Loss of eligibility, subject to the guarantees outlined in Appendix A.

(5) Placement in a nursing facility, nursing facility for the mentally ill, intermediate care facility for the mentally retarded, an adult or juvenile correctional facility, or a head injury rehabilitation facility.

(6) Selection of another managed care plan.

(7) Death of the member.

(8) Approval by SRS of Home and Community Based Services.

(9) Transfer to a Title XIX eligibility category not included in this contract.

(10) To implement the decision of a hearing officer in a formal grievance procedure by the member against the Contractor or by the Contractor against the member.

(11) Other reasons, including but not limited to, poor quality of care, lack of access to services covered under the contract, or lack of access to providers experienced in dealing with the enrollee’s health care needs.

iii. Regardless of the procedures followed, the effective date of an approved disenrollment must be no later than the last day of the first month following the month in which the enrollee or Contractor files the request for disenrollment. If SRS or its fiscal agent fails to make the determination within the timeframes specified herein, the disenrollment is considered approved.

Contract #02510, Amendment 8, Page 36 of 38

33. RFP #02510, Section 5.13.2, Access to and Audit of Contract Records

RFP #02510, Section 5.13.2, first paragraph is deleted in its entirety and replaced with the following:

Throughout the duration of the contract, and for a period of five (5) years after termination of the contract, the Contractor or its subcontractors shall provide duly authorized representatives of the state or federal government, access to all records and material, including financial records, relating to the Contractor’s provision of and reimbursement for activities contemplated under the contract. Such access shall include the right to inspect, audit and reproduce all such records and material and to verify reports furnished in compliance with the provisions of the contract.

34. RFP #02510, Section 5.13.4 Periodic Reporting Requirements

RFP #02510, Section 5.13.4.g is deleted in its entirety and replaced with the following:

g. Provider rosters at least monthly, to demonstrate, in a format specified by the State, that it

• Offers an appropriate range of preventive, primary care and specialty services that is adequate for the anticipated number of enrollees for the service area.

• Maintains a network of providers that is sufficient in number, mix, and geographic distribution to meet the needs of the anticipated number of enrollees in the service area.

In addition to the monthly submission, provider rosters must be submitted

• At the time Contractor enters into a contract with the State.

• At any time there has been a significant change (as defined by the State) in the entity’s operations that would affect adequate capacity and services, including—

• Changes in services, benefits, geographic service area or payments, or;

• Enrollment of a new population in the MCO.

35. RFP #02510, Appendix Q - Definitions and Acronyms

RFP #02510, Appendix Q – Definitions and Acronyms is amended by adding the following:

Page 2, immediately following the entry for Encounter –

Enrollee – A Medicaid Title XIX or SCHIP Title XXI recipient who is currently enrolled in an MCO, PIHP, PAHP, or PCCM in a given managed care program.

Contract #02510, Amendment 8, Page 37 of 38

Page 3, immediately following the entry for Participating Provider—

Potential Enrollee - A Medicaid Title XIX or SCHIP Title XXI recipient who is subject to mandatory enrollment or may voluntarily elect to enroll in a given managed care program, but is not yet an enrollee of a specific MCO, PIHP, PAHP, or PCCM. Potential enrollees will be given to the State’s enrollment broker. The State’s enrollment broker will then provide the potential enrollee with enrollment notices, informational materials, and instructional materials in a manner and format that is easily understood.

36. Other Terms and Conditions: All other terms and conditions of the contract between SRS and FGK remain in effect.

IN WITNESS HEREOF, the Parties hereto have executed this amendment to the original contract as of the date written below.

FIRSTGUARD HEALTH PLAN	SECRETARY OF SOCIAL AND
KANSAS, INC.	REHABILITATION SERVICES
/s/ Joy D. Wheeler
Joy D. Wheeler, Executive Director	Janet Schalansky, Secretary
August 6, 2003
Date	Date
DEPARTMENT OF ADMINISTRATION
DIVISION OF PURCHASES
Stuart Leighty, Director
Date

Contract #02510, Amendment 8, Page 38 of 38

STATE OF KANSAS	Contract No. 02510
Social and Rehabilitation Services
Health Care Policy/Medicaid

AMENDMENT THIRTEEN

to the

KANSAS HEALTHWAVE TITLE XIX AND TITLE XXI CAPITATED MANAGED CARE

HEALTH SERVICES CONTRACT

with

FIRSTGUARD HEALTH PLAN KANSAS, INC.

The above referenced agreement, as amended, entered into by and between the Secretary of Social and Rehabilitation Services (SRS) and FirstGuard Health Plan Kansas, Inc., (FGK), a Kansas Corporation, on July 12, 2001, hereinafter sometimes referred to as Contractor, is hereby amended by agreement of the parties:

WHEREAS, the above-named parties entered into a contract on the date referenced above for the purpose of providing and paying for HealthWave Title XIX and Title XXI capitated managed care health services to beneficiaries enrolled with FGK and now wish to amend such contract;

NOW THEREFORE, the Parties hereto agree to amend the contract as follows:

1. AMENDMENT 12 RESCINDED AND TERM:

Amendment Twelve to Contract No. 02510, pertaining to contract extension and Title XIX and Title XXI rates for the period July 1, 2004 through June 30, 2005 is hereby rescinded. In accordance with the provisions of RFP #02510, Section 3.1, the term of this contract is extended for the second of three, optional one-year periods, for the period July 1, 2004 through June 30, 2005.

2. SCHIP TITLE XXI CAPITATION RATES FOR THE PERIOD BEGINNING JULY 1, 2004:

The Title XXI SCHIP rates for infants and pregnant teens shall be increased by 1.83% and the Title XXI SCHIP rates for all other covered children shall be increased by 8.4% as shown in Attachment 1 – HealthWave Title XXI Rates for the Period July 1, 2004 through June 30, 2005, incorporated herein by reference.

The following documents are referenced for convenience only and are NOT made a part of this

amendment or intended to be incorporated in this contract by this reference.

Related Advanced Planning Documents: N/A

Related Contract Amendment Number/Name: #4

Related Memorandum of Understanding Number/Name: N/A

Related Policy Number/Name: N/A

Related Request For Proposals Reference(s): RFP #02510

Total Estimated Cost: Title XIX $ 125,009,000 Title XXI $60,485,000

Amendment 13, Page 1 of 2 Pages

3. MEDICAID TITLE XIX CAPITATION RATES:

RFP #02510, Page 114, Paragraph 5.15.1.e. as added by Amendment 1 and amended by Amendment 11:

The parties agree that for the month of December, 2003 the capitation rates set forth in Attachment 1 to Amendment 4 shall continue in effect. The parties further agree that for the period January 1, 2004 through June 30, 2004 the capitation rates set forth in Appendix A to Amendment 11, attached to and incorporated herein shall apply to Title XIX.

Is, effective with the signing of this amendment, amended to read:

The parties acknowledge that the capitation rates for Medicaid Title XIX services for the contract period beginning July 1, 2004 have not been agreed upon. Therefore the parties agree that for the period July 1, 2004 through August 31, 2004 the capitation rates set forth in Appendix A to Amendment 11, attached to and incorporated herein shall apply to Title XIX. The parties agree to continue to negotiate in good faith for a period not to extend beyond August 31, 2004, toward a final agreement on the Title XIX rates for the contract year July 1, 2004 through June 30, 2005. Said contract rates to take effect no later than September 1, 2004, subject to actuarial certification and approval by the Center for Medicare and Medicaid Services (CMS).

4. OTHER TERMS AND CONDITIONS:

All other terms and conditions of the contract between SRS and FGK remain unchanged.

IN WITNESS HEREOF, the Parties hereto have executed this amendment to the original contract as of the date written below.

FIRSTGUARD HEALTH PLAN	SECRETARY OF SOCIAL AND
KANSAS, INC.	REHABILITATION SERVICES
/s/ Joy D. Wheeler
Joy D. Wheeler, President	Janet Schalansky, Secretary
July 30, 2004
Date	Date
DEPARTMENT OF ADMINISTRATION
DIVISION OF PURCHASES
D. Keith Meyers, Director
Division of Purchases
Date

Amendment 13, Page 2 of 2 Pages

STATE OF KANSAS	Contract No. 02510
Social and Rehabilitation Services
Health Care Policy/Medicaid

AMENDMENT FIFTEEN

to the

KANSAS HEALTHWAVE TITLE XIX AND TITLE XXI CAPITATED MANAGED CARE

HEALTH SERVICES CONTRACT

with

FIRSTGUARD HEALTH PLAN KANSAS, INC.

The above referenced agreement, as amended, entered into by and between the Secretary of Social and Rehabilitation Services (SRS) and FirstGuard Health Plan Kansas, Inc., (FGK), a Kansas Corporation, on July 12, 2001, hereinafter sometimes referred to as Contractor, is hereby amended by agreement of the parties:

WHEREAS, the above-named parties entered into a contract on the date referenced above for the purpose of providing and paying for HealthWave Title XIX and Title XXI capitated managed care health services to beneficiaries enrolled with FGK and now wish to amend such contract;

NOW THEREFORE, the Parties hereto agree to amend the contract as follows:

1. MEDICAID TITLE XIX CAPITATION RATES:

RFP #02510, Page 114, Paragraph 5.15.1.e. as added by Amendment 1 and amended by Amendment 14:

The parties acknowledge that the capitation rates for Medicaid Title XIX services for the contract period beginning July 1, 2004 have not been agreed upon. Therefore the parties agree that for the period July 1, 2004 through September 30, 2004 the capitation rates set forth in Appendix A to Amendment 11, attached to and incorporated herein shall apply to Title XIX, unless new rates are agreed to and approved by CMS prior to September 30, 2004. The parties agree to continue to negotiate in good faith for a period not to extend beyond September 30, 2004, toward a final agreement on the Title XIX rates for the contract year July 1, 2004 through June 30, 2005. Said contract rates, subject to actuarial certification, to take effect in the month approved by the Center for Medicare and Medicaid Services (CMS).

The following documents are referenced for convenience only and are NOT made a part of this

amendment or intended to be incorporated in this contract by this reference.

Related Advanced Planning Documents: N/A

Related Contract Amendment Number/Name: #1; #11, #12; #13, #14

Related Memorandum of Understanding Number/Name: N/A

Related Policy Number/Name: N/A

Related Request For Proposals Reference(s): RFP #02510

Total Estimated Cost: Title XIX $ 127,250,000

Amendment 15, Page 1 of 2 Pages

Is, effective with the signing of this amendment, amended to read:

The parties agree that for the period September 1, 2004 through June 30, 2005, the capitation rates set forth in Attachment A to this Amendment, attached to and incorporated herein shall apply to Title XIX HealthWave capitation rates. Said contract rates, to take effect the first day of the month as approved by the Center for Medicare and Medicaid Services (CMS).

2. OTHER TERMS AND CONDITIONS:

All other terms and conditions of the contract between SRS and FGK remain unchanged.

IN WITNESS HEREOF, the Parties hereto have executed this amendment to the original contract as of the date written below.

FIRSTGUARD HEALTH PLAN	SECRETARY OF SOCIAL AND
KANSAS, INC.	REHABILITATION SERVICES
/s/ Joy D. Wheeler
Joy D. Wheeler, President	Janet Schalansky, Secretary
September 28, 2004
Date	Date
DEPARTMENT OF ADMINISTRATION
DIVISION OF PURCHASES
D. Keith Meyers, Director
Division of Purchases
Date

Amendment 15, Page 2 of 2 Pages

STATE OF KANSAS	Contract No. 02510
Social and Rehabilitation Services
Health Care Policy/Medicaid

AMENDMENT SIXTEEN

to the

KANSAS HEALTHWAVE TITLE XIX AND TITLE XXI CAPITATED MANAGED CARE

HEALTH SERVICES CONTRACT

with

FIRSTGUARD HEALTH PLAN KANSAS, INC.

The above referenced agreement, as amended, entered into by and between the Secretary of Social and Rehabilitation Services (SRS) and FirstGuard Health Plan Kansas, Inc., (FGK), a Kansas Corporation, on July 12, 2001, hereinafter sometimes referred to as Contractor, is hereby amended by agreement of the parties:

WHEREAS, the above-named parties entered into a contract on the date referenced above for the purpose of providing and paying for HealthWave Title XIX and Title XXI capitated managed care health services to beneficiaries enrolled with FGK and now wish to amend such contract;

NOW THEREFORE, the Parties hereto agree to amend the contract as follows:

1. OWNERSHIP:

RFP #02510, Page 29, Paragraph 4.13.7 as amended by Addendum 1:

4.13.7 Current Ownership and Management Contracts: Provide full and complete information as to the identity of each person or corporation with an ownership or control interest in the managed care plan, or any subcontractor in which the managed care plan has a five percent (5%) or more ownership interest. Financial statements for all owners with over five percent (5%) shall be submitted.

The following documents are referenced for convenience only and are NOT made a part of this

amendment or intended to be incorporated in this contract by this reference.

Related Advanced Planning Documents: N/A

Related Contract Amendment Number/Name: Addendum 1

Related Memorandum of Understanding Number/Name: N/A

Related Policy Number/Name: N/A

Related Request For Proposals Reference(s): RFP #02510

Total Estimated Cost: $ 0.00

Amendment 16, Page 1 of 3 Pages

So much of FirstGuard’s Technical Proposal in response to RFP #02510, Section 4.13.7 as reads:

FirstGuard, Inc. holds eighty percent (80%) of the FirstGuard Health Plan Kansas Inc. stock (see FirstGuard’s response to Section 4.2 of this RFP for the description of the relationship between FirstGuard Health Plan Kansas Inc. and FirstGuard, Inc.). The remaining twenty percent (20%) of FirstGuard Health Plan Kansas Inc. stock is owned by Heartland Physicians Health Network, Inc. (HPHN). HPHN was formed in the mid 1990’s by a number of physicians throughout the state of Kansas who were members of the Kansas Medical Society (KMS).

See Attachment 4.13.7-A for copies of financial statements for FirstGuard Health Plan Kansas Inc. and Heartland Physician Health Network (HPHN).

Is amended to read:

Centene Corporation, a Delaware corporation located at 7711 Carondelet, Suite 800, St. Louis, MO 63105 holds one hundred percent (100%) of the FirstGuard Health Plan Kansas Inc. stock. Centene Corporation (CNC) is a publicly held corporation, actively traded on the New York Stock Exchange. As of September 30, 2004, the following entities own in excess of 5% of Centene Corporation stock as indicated:

Baron Capital Management Fund – 9%

Baron Capital, Inc.

767 Fifth Avenue

New York, NY 10153

Deutsche Asset Management Americas Fund – 5.91%

Deutsche Bank Americas

60 Wall Street, 25^th Floor

New York, NY 10005

See Attachment A - Securities and Exchange Commission Form 10-Q, Quarterly Report for the Quarter ending September 30, 2004; Attachment B – Centene Corporation 2003 Annual Report; and Attachment C – Written approval by the Kansas Insurance Department for the acquisition of FirstGuard Health Plan Kansas Inc. by Centene Corporation.

Amendment 16, Page 2 of 3 Pages

2. APPROVAL OF CHANGE IN OWNERSHIP:

Subject to the approval of the Center for Medicare and Medicaid Services (CMS), SRS approves the change in ownership, effective December 1, 2004, as evidenced by the amended Technical Proposal response to RFP # 02510, Section 4.13.7.

3. OTHER TERMS AND CONDITIONS:

All other terms and conditions of the contract between SRS and FGK remain unchanged.

IN WITNESS HEREOF, the Parties hereto have executed this amendment to the original contract as of the date written below.

FIRSTGUARD HEALTH PLAN	SECRETARY OF SOCIAL AND
KANSAS, INC.	REHABILITATION SERVICES
/s/ Joy D. Wheeler
Joy D. Wheeler, President	Gary J. Daniels, Acting Secretary
December 2, 2004
Date	Date
DEPARTMENT OF ADMINISTRATION
DIVISION OF PURCHASES
Chris Howe, Director
Division of Purchases
Date

Amendment 16, Page 3 of 3 Pages

EX-10.3

Exhibit 10.3

CONTRACT BETWEEN

THE OFFICE OF MEDICAID POLICY AND PLANNING,

THE OFFICE OF THE CHILDREN’S HEALTH INSURANCE PROGRAM

AND

Coordinated Care Corporation Indiana, Inc.

This Contract, entered into by and between The Office of Medicaid Policy and Planning and the Office of Children’s Health Insurance Program, (hereinafter referred to as “State” or “Office”) of the Indiana Family and Social Services Administration, 402 West Washington Street, Room W382, Indianapolis, IN 46204, and Coordinated Care Corporation Indiana, Inc., doing business as Managed Health Services (hereinafter referred to as “Contractor”), 1099 North Meridian Street, Suite 400, Indianapolis, Indiana 46204, is executed pursuant to the terms and conditions set forth herein.

WHEREAS, IC 12-15-30-1 authorizes the Office of Medicaid Policy and Planning to enter into contracts to assist in the administration of the Medicaid program;

WHEREAS, IC 12-17.6 authorizes the Office of the Children’s Health Insurance Program to enter into contracts as necessary to assist in the design and administration of the Indiana Children’s Health Insurance Program;

WHEREAS, the State of Indiana is desirous to contract for services to assist the Office’s efforts to effectively manage a risk-based health care delivery system that administers and provides covered health care services for certain Hoosier Healthwise members enrolled in Benefit Packages A, B and C, as procured through Request for Proposal (RFP) # 4-79;

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 Contractor is willing and able to perform the desired services for Hoosier Healthwise members assigned to the Contractor;

NOW THEREFORE, the parties enter into this contract for the consideration set out below, all of which is deemed to be good and sufficient consideration in order to make this contract a binding legal instrument.

1. Duties of Contractor

The Contractor shall provide the following services relative to this Contract:

A. The Contractor agrees to assume financial risk for developing and managing a health care delivery system and for arranging or administering all Hoosier Healthwise covered services, as set out in section 2.0 of Attachment 1 of this Contract, in exchange for a per-enrollee, per-month fixed fee, to enrollees in

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Hoosier Healthwise Packages A, B and C and enrolled with the Contractor. Wards of the State, foster children and children receiving adoption assistance may enroll on a voluntary basis and will not be subject to auto-assignment into the Hoosier Healthwise program. The Contractor must, at a minimum, furnish covered services up to the limits specified by the Medicaid and CHIP programs. The Contractor may exceed these limits. However, in no instance may any covered service’s limitations be more restrictive than those which exist in the Indiana Medicaid fee-for-service program for Packages A and B, and the Children’s Health Insurance Program for Package C, in accordance with 42 CFR 438.210.

B. The Contractor agrees to perform all duties and arrange and administer the provision of all services as set out herein and in Contract Attachment 1, MCO Scope of Work, as attached, and contained in the RFP as attached and the Contractor’s responses to the RFP as attached, all of which are incorporated into this Contract by reference. In addition, the Contractor shall comply with all policies and procedures defined in any bulletin, manual, or handbook yet to be distributed by the State or its agents insofar as those policies and procedures provide further clarification and are no more restrictive than any policies and procedures contained in the RFP and any amendments to the RFP. The Contractor agrees to comply with all pertinent state and federal statutes and regulations in effect throughout the duration of this Contract and as they may be amended from time to time.

C. The Contractor agrees that it will not discriminate against individuals eligible to be covered under this Contract on the basis of health status or need for health services; and the Contractor may not terminate an enrollee’s enrollment, or act to encourage an enrollee to terminate his/her enrollment, because of an adverse change in the enrollee’s health. The disenrollment function will be carried out by a State contractor who is independent of the Contractor; therefore, any request to terminate an enrollee’s enrollment must be approved by the Offices.

D. The Contractor agrees that no services or duties owed by the Contractor under this Contract will be performed or provided by any person or entity other than the Contractor, except as contained in written subcontracts or other legally binding agreements. Prior to entering into any such subcontract or other legally binding agreement, the Contractor shall, in each case, submit the proposed subcontract or other legally binding agreement to the Offices for prior review and approval. Prior review and approval of a subcontract or legally binding agreement shall not be unreasonably delayed by the Offices. The Offices shall, in appropriate cases and as requested by the Contractor, expedite the review and approval process. Under no circumstances shall the Contractor be deemed to have breached its obligations under this Contract if such breach was a result of the Offices’ failure to review and approve timely any proposed subcontract or other

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legally binding agreement. If the Offices disapprove any proposed subcontract or other legally binding agreement, the Offices shall state with reasonable particularity the basis for such disapproval on a timely basis. No subcontract into which the Contractor enters with respect to performance under this Contract shall in any way relieve the Contractor of any responsibility for the performance of duties under this Contract. All subcontracts and amendments thereto executed by the Contractor under this Contract must meet the following requirements; any existing subcontracts or legally binding agreements which fail to meet the following requirements shall be revised to include the requirements within ninety (90) days from the effective date of this Contract:

1. Be in writing and specify the functions of the subcontractor.

2. Be legally binding agreements.

3. Specify the amount, duration and scope of services to be provided by the subcontractor.

4. Provide that the Offices may evaluate, through inspection or other means, the quality, appropriateness, and timeliness of services performed.

5. Provide for inspections of any records pertinent to the contract by the Offices.

6. Require an adequate record system to be maintained for recording services, charges, dates and all other commonly accepted information elements for services rendered to recipients under the contract.

7. Provide for the participation of the Contractor and subcontractor in any internal and external quality assurance, utilization review, peer review, and grievance procedures established by the Contractor, in conjunction with the Offices.

8. Provide that the subcontractor indemnify and hold harmless the State of Indiana, its officers, and employees from all claims and suits, including court costs, attorney’s fees, and other expenses, brought because of injuries or damage received or sustained by any person, persons, or property that is caused by any act or omission of the subcontractor. The State shall not provide such indemnification to the subcontractor.

9. Identify and incorporate the applicable terms of this Contract and any incorporated documents. The subcontract shall provide that

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the subcontractor agrees to perform duties under the subcontract, as those duties pertain to enrollees, in accordance with the applicable terms and conditions set out in this Contract, any incorporated documents, and all applicable state and federal laws, as amended.

If a particular subcontractor does not accept the required changes within ninety (90) days, Contractor will need to seek a new subcontractor and will do so on a timely basis.

E. The Contractor agrees that, during the term of this Contract, it shall maintain, with any contracted provider rendering health care services under the RFP, provider service agreements which, in addition to the subcontractor requirements in paragraph 1.D., meet the following requirements; any existing provider service agreements which fail to meet the requirements shall be revised to include the requirements within ninety (90) days from the effective date of this Contract. The provider service agreements shall:

1. Identify and incorporate the applicable terms of this Contract and any incorporated documents. Under the terms of the provider services agreement, the provider shall agree that the applicable terms and conditions set out in this Contract, any incorporated documents, and all applicable state and federal laws, as amended, govern the duties and responsibilities of the provider with regard to the provision of services to enrollees. Contracted providers are not third party beneficiaries to this Contract.

2. Reference a written provider claim resolution procedure as set out in RFP Attachment N.

3. PMP agreements for Primary Medical Providers (PMPs) shall include a provision allowing the PMP to terminate the agreement for any reason upon written notice to the Contractor. The Contractor may require that the physician provide said notice to the Contractor up to ninety (90) days prior to termination.

4. Any monies paid to the PMP, such as bonuses or incentives, over and above the contracted rate must be linked to improvements in member health outcomes (e.g., HEDIS measures) or process performance (e.g., encounter submissions). The payment or retention of the payment may not be contingent on the PMP continuing its contract with the MCO for any period longer than ninety (90) days. On an annual basis, MCO must report to OMPP each PMP who received such a payment, the amount of the payment, and the improvements realized that prompted the payment. This provision shall apply to any and all new PMP contracts, renewals or amendments that are effective after January 1, 2005.

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F. The Contractor agrees that all laboratory testing sites providing services under this Contract must have a valid Clinical Laboratory Improvement Amendments (CLIA) certificate and comply with the CLIA regulations at 42 CFR Part 493.

G. The Contractor agrees that it shall:

1. Retain, at all times during the term of this Contract, a valid Certificate of Authority under applicable State laws issued by the State of Indiana Department of Insurance.

2. Ensure that, during the term of this Contract, each provider rendering health care services under the RFP is authorized to do so in accordance with the following:

a. The provider must maintain a current Indiana Health Coverage Programs (IHCP) provider agreement and must be duly licensed in accordance with the appropriate state licensing board and shall remain in good standing with said board.

b. If a provider is not authorized to provide such services under a current IHCP provider agreement or is no longer licensed by said board, the Contractor is obligated to terminate its contractual relationship authorizing or requiring such provider to provide services under the RFP. The Contractor must terminate its contractual relationship with the provider as soon as the Contractor has knowledge of the termination of the provider’s license or the IHCP provider agreement.

3. Comply with the specific requirements for Health Maintenance Organizations (HMOs) eligible to receive Federal Financial Participation (FFP) under Medicaid, as listed in the State Organization and General Administration Chapter of the Centers for Medicare and Medicaid Services State Medicaid Manual. These requirements include, but are not limited to the following:

a. The Contractor shall meet the definition of HMO as specified in the Indiana State Medicaid Plan.

b. Throughout the duration of this Contract, the Contractor shall satisfy the Chicago Regional Office of the Centers for Medicare and Medicaid Services (hereinafter called CMS) that the Contractor is compliant with the Federal requirements for

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protection against insolvency pursuant to 42 CFR 438.116, the requirement that the Contractor shall continue to provide services to Contractor enrollees until the end of the month in which insolvency has occurred, and the requirement that the Contractor shall continue to provide inpatient services until the date of discharge for an enrollee who is institutionalized when insolvency occurs. The Contractor shall meet this requirement by posting a performance bond pursuant to paragraph 1.27 of the RFP, obtaining appropriate reinsurance pursuant to Section 1.5.3 of Attachment 1 to this Contract, and satisfying the statutory reserve requirements of the Indiana Department of Insurance.

c. The Contractor shall comply with, and shall exclude from participation as either a provider or subcontractor of the Contractor, any entity or person that has been excluded under the authority of Sections 1124A, 1128 or 1128A of the Social Security Act or does not comply with the requirements of Section 1128(b) of the Social Security Act.

d. In the event that the CMS determines that the Contractor has violated any of the provisions of 42 CFR 434.67(a), CMS may deny payment of FFP for new enrollees of the HMO under 42 USC 1396b(m)(5)(B)(ii). The Offices shall automatically deny State payment for new enrollees whenever, and for so long as, Federal payment for such enrollees has been denied.

H. The Contractor shall submit proof, satisfactory to the Offices, of indemnification of the Contractor by the Contractor’s parent corporation, if applicable, and by all of its subcontractors.

I. The Contractor shall submit proof, satisfactory to the Offices, that all subcontractors will hold the State harmless from liability under the subcontract. This assurance in no way relieves the Contractor of any responsibilities under the RFP or this Contract.

J. The Contractor agrees that, prior to initially enrolling any Hoosier Healthwise Package A, B or C enrollees, it shall go through and satisfactorily complete the readiness review as described in the RFP. The required readiness review shall begin before the contract between the Contractor and the State is finalized and executed. Within ninety (90) days from the effective date of this Contract, the Contractor shall make a good faith effort to resolve, to the reasonable satisfaction of the Offices, any outstanding issues brought to the Contractor’s attention by the Offices as a result of the readiness review.

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K. The Contractor shall establish and maintain a quality improvement program that meets the requirements of 42 CFR 438, subpart D, as well as other specific requirements set forth in the RFP. The Offices and the CMS may evaluate, through inspection or other means, including but not limited to, the review of the quality assurance reports required under this Contract, and the quality, appropriateness, and timeliness of services performed under this Contract. The Contractor agrees to participate and cooperate, as directed by the Offices, in the annual external quality review of the services furnished by the Contractor.

L. In accordance with 42 CFR 438.6(i), the Contractor agrees that it and any of its subcontractors shall comply with the requirements, if applicable, of 42 CFR 489, Subpart I, relating to maintaining and distributing written policies and procedures respecting advance directives. The Contractor shall distribute policies and procedures to adult individuals during the enrollee enrollment process and whenever there are revisions to these policies and procedures. The Contractor shall make available for inspection, upon reasonable notice and request by the Offices, documentation concerning its written policies, procedures and distribution of such written procedures to enrollees.

M. Pursuant to 42 CFR 417.479(a), the Contractor agrees that no specific payment can be made directly or indirectly under a physician incentive plan to a physician or physician group as an inducement to reduce or limit medically necessary services furnished to an individual enrollee. The Contractor must disclose to the State the information on provider incentive plans listed in 42 CFR 417.479(h)(1) and 417.479(i) at the times indicated at 42 C.F.R. 438.6(h), in order to determine whether the incentive plan meets the requirements of 42 CFR 417(d)-(g). The Contractor must provide the capitation data required under paragraph (h)(1)(vi) for the previous calendar year to the State by application/contract renewal of each year. The Contractor will provide the information on its physician incentive plan(s) listed in 42 CFR 417.479(h)(3) to any enrollee upon request.

N. The Contractor must not prohibit or restrict a health care professional from advising an enrollee about his/her health status, medical care, or treatment, regardless of whether benefits for such care are provided under this Contract, if the professional is acting within the lawful scope of practice. However, this provision does not require the Contractor to provide coverage of a counseling or referral service if the Contractor objects to the service on moral or religious grounds and makes available information on its policies to potential enrollees and enrollees within ninety (90) days after the date the Contractor adopts a change in policy regarding such counseling or referral service.

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O. In accordance with 42 U.S.C. § 1396u-2(b)(6), the Contractor agrees that an enrollee may not be held liable for the following:

1. Debts of the Contractor, or its subcontractors, in the event of any organization’s insolvency;

2. Services provided to the enrollee in the event the Contractor fails to receive payment from the Offices for such services or in the event a provider fails to receive payment from the Contractor or Offices; or

3. Payments made to a provider in excess of the amount that would be owed by the enrollee if the Contractor had directly provided the services.

P. The Offices may from time to time request and the Contractor, and all of its subcontractors, agree that the Contractor, or its subcontractors, shall prepare and submit additional compilations and reports as requested by the Offices. Such requests will be limited to situations in which the desired data is considered essential and cannot be obtained through existing Contractor reports. The Contractor, and all of its subcontractors, agree that a response to the request shall be submitted by the Offices’ requested completion date, or if the Offices do not specify a completion date, within thirty (30) days from the date of the request. This time period may be extended as reasonably necessary to the extent Contractor can demonstrate to the State that Contractor cannot comply with the request without incurring undue burden or expense. The response shall include the additional compilations and reports as requested, or the status of the requested information and an expected completion date. When such requests pertain to legislative inquiries or expedited inquiries from the Office of the Governor, the additional compilations and reports shall be submitted by the Offices’ requested completion date. Failure by the Contractor, or its subcontractors, to comply with response time frames shall be considered grounds for the Offices to pursue the provisions outlined in Section 8.0 of Attachment 1 of this Contract. In the event that delays in submissions are a consequence of a delay by the Offices or the Medicaid Fiscal Agent, the time frame for submission shall be extended by the length of time of the delay.

Q. Contractor agrees that an abortion will be covered only in the following situations:

1. If the pregnancy is the result of an act of rape or incest; or

2. If the woman suffers from a physical disorder, physical injury, or physical illness, including a life-endangering physical condition caused by or arising from the pregnancy itself, which would, as certified by a physician, place the woman in danger of death unless an abortion is performed.

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2. Consideration

In consideration of the services to be performed by the Contractor, the Offices agree to pay the Contractor the following amounts per month per enrolled member, and per maternity delivery, as contained in the Offices’ capitation payment listing and based upon the capitation rates by category as listed below:

CAPITATION RATES

Category	Packages A and B	Package C
North Region
Newborns	$320.53	$176.46
Preschool	$72.83	$74.95
Children	$70.15	$67.54
Adolescents	$100.83	$94.02
Adult Males	$234.99
Adult Females	$211.26
Deliveries	$3,331.43/delivery	$3,331.43/delivery
Central Region
Newborns	$286.09	$156.09
Preschool	$82.19	$80.54
Children	$79.16	$82.57
Adolescents	$113.78	$101.04
Adult Males	$303.08
Adult Females	$272.48
Deliveries	$3,301.57/delivery	$3,301.57/delivery
South Region
Newborns	$287.06	$158.04
Preschool	$79.12	$74.94
Children	$76.11	$67.57
Adolescents	$109.36	$93.93
Adult Males	$286.33
Adult Females	$258.38
Deliveries	$3,324.80/delivery	$3,324.80/delivery

The parties agree that the Offices have the option to adjust the capitation rates annually. In the event that the Offices adjust the fee-for-service (FFS) rates, the Offices may, in its sole discretion, further adjust the capitation rates in accordance with the FFS adjustment. If the Offices made such an adjustment, it shall apply only to the specific service component of the capitation rate that corresponds to the FFS adjustment. Any capitation rates adjusted due to a change in the FFS program may be further adjusted to ensure actuarial soundness. All adjustments

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are subject to federal regulations for risk contracts. Rates revised under this provision shall be implemented only after a contract amendment is executed and approved. The State shall provide Contractor with a copy of the certification of actuarial soundness of such rate adjustments which is provided to CMS.

Payments provided for under this Contract will be denied for new enrollees when, and for so long as, payment for those enrollees is denied by CMS, in accordance with 42 CFR 438.730.

3. Term

This Contract shall be effective for a period of two (2) years. It shall commence on January 1, 2005, and shall remain in effect through December 31, 2006. At the discretion of the State, the term may be extended for up to two (2) additional year(s). If the State decides to extend the term of the Contract, it will notify Contractor no later than October 1, 2006. In no event shall the term exceed December 31, 2008.

4. Access to Records

The Contractor and its subcontractors, if any, shall maintain all books, documents, papers, accounting records, and other evidence pertaining to all costs incurred under this Contract. They shall make such materials available at their respective offices at all reasonable times during this Contract term, and for three (3) years from the date of final payment under this Contract, for inspection by the State or by any other authorized representative of state or federal government. One copy of said documents shall be furnished at no cost to the State if requested.

5. Assignment

The Contractor shall not assign or subcontract the whole or any part of this Contract without the State’s prior written consent. The Contractor may assign its right to receive payments to such third parties as the Contractor may desire without the prior written consent of the State, provided that Contractor gives written notice (including evidence of such assignment) to the State thirty (30) days in advance of any payment so assigned. The assignment shall cover all unpaid amounts under this Contract and shall not be made to more than one party at a time.

6. Audits

Contractor acknowledges that it may be required to submit to an audit of funds paid through this Contract. Any such audit shall be conducted in accordance with IC 5-11-1, and audit guidelines specified by the State.

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7. Authority to Bind Contractor

Notwithstanding anything in this Contract to the contrary, the signatory for the Contractor represents that he/she has been duly authorized to execute contracts on behalf of the Contractor and has obtained all necessary or applicable approvals from the home office of the Contractor, if applicable, to make this Contract fully binding upon the Contractor when his/her signature is affixed, and this Contract is not subject to further acceptance by Contractor when accepted by the State of Indiana.

8. Changes in Work

In the event the State requires a material change in the scope, character or complexity of the work after the work has begun, adjustments in compensation to the Contractor shall be determined by the State in the exercise of its good faith and prudent judgment. The Contractor shall not commence any additional work or change the scope of the work until authorized in writing by the State. No claim for additional compensation shall be made in the absence of a prior written approval executed by all signatories hereto. All changes shall be by formal amendment, signed by all parties as required by Indiana law.

9. Compliance with Laws

The Contractor shall comply with all applicable federal, state and local laws, rules, regulations and ordinances, the provisions of which are incorporated by reference. The enactment or amendment of any applicable state or federal statute or the promulgation of any rules or regulations thereunder after execution of this Contract shall be reviewed by the State and the Contractor to determine whether the provisions of this Contract require formal modification.

10. Condition of Payment

All deliverables provided by the Contractor under this contract must be performed to the State’s reasonable satisfaction, as determined at the discretion of the undersigned State representative and in accordance with all applicable federal, state, local laws, ordinances, rules, and regulations. Subject to the right to pursue the dispute resolution process provided for in Section 18, the Contractor will not receive payment for work found by the State to be unsatisfactory or performed in violation of federal, state, or local law.

11. Confidentiality of Data, Property Rights in Products, and Copyright Prohibition

The Contractor agrees that all information, data, findings, recommendations, proposals, etc. by whatever name described and in whatever form secured, developed, written or produced by the Contractor solely in furtherance of this Contract shall be the property of the State. The Contractor shall take such action

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as is necessary under law to preserve such confidentiality and property rights in and of the State while such property is within the control and/or custody of the Contractor. The Contractor hereby specifically waives and/or releases to the State any cognizable property right of the Contractor to copyright, license, patent or otherwise use such information, data, findings, recommendations, proposals, etc.; however, State agrees that Contractor shall be permitted to utilize such information as reasonably necessary to comply with Contractor’s own reporting obligations. In addition, State agrees that to the extent that Contractor develops programs or products which include certain trade secret or otherwise proprietary information developed by Contractor, Contractor shall not be required to disclose any such information to third parties and both parties shall agree to maintain such information in a confidential manner to the extent permitted under applicable law.

12. Confidentiality of State Information

The Contractor understands and agrees that data, materials, and information disclosed to Contractor by the State in connection with this Contract and/or the Services may contain confidential and protected data. Therefore, the Contractor promises and assures that data, material, and information gathered, based upon or disclosed to the Contractor for the purpose of this Contract, will not be disclosed to others or discussed with third parties without the prior written consent of the State; however, Contractor may disclose such confidential information to Contractor’s legal and financial advisors, providers and other subcontractors to the extent that such disclosure is permitted by applicable law.

13. Reserved

14. Conflict of Interest

A. As used in this section:

“Immediate family” means the spouse and the unemancipated children of an individual.

“Interested party,” means:

1. The individual executing this contract;

2. An individual who has an interest of three percent (3%) or more of Contractor, if Contractor is not an individual; or

3. Any member of the immediate family of an individual specified under subdivision 1 or 2.

“Department” means the Indiana Department of Administration.

“Commission” means the State Ethics Commission.

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B. The Department may cancel this Contract without recourse by Contractor if any interested party is an employee of the State of Indiana.

C. The Department will not exercise its right of cancellation under section B above if the Contractor gives the Department an opinion by the Commission indicating that the existence of this Contract and the employment by the State of Indiana of the interested party does not violate any statute or rule relating to ethical conduct of state employees. The Department may take action, including cancellation of this Contract consistent with an opinion of the Commission obtained under this section.

D. Contractor has an affirmative obligation under this Contract to disclose to the Department when an interested party is or becomes an employee of the State of Indiana. The obligation under this section extends only to those facts that Contractor knows or reasonably could know.

15. Reserved

16. Debarment and Suspension

Contractor certifies, by entering into this Contract, that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from entering into this Contract by any federal agency or by any department, agency or political subdivision of the State of Indiana. The term “principal” for purposes of this Contract means an officer, director, owner, partner, key employee, or other person with primary management or supervisory responsibilities, or a person who has a critical influence on or substantive control over the operations of Contractor. The Contractor also further certifies that it has verified through an analysis of publicly available information the suspension and debarment status for all sub-contractors receiving funds under this contract and is solely responsible for any paybacks and or penalties that might arise from non-compliance.

17. Default by State

If the State, sixty (60) days after receipt of written notice, fails to correct or cure any breach of this Contract, then the Contractor may cancel and terminate this Contract and collect all monies due up to and including the date of termination.

18. Disputes

A. Should any disputes arise with respect to this Contract, Contractor and the State agree to act immediately to resolve such disputes. Time is of the essence in the resolution of disputes.

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B. The Contractor agrees that, the existence of a dispute notwithstanding, it will continue without delay to carry out all its responsibilities under this Contract that are not affected by the dispute. The State agrees that it will continue to pay for services unrelated to the dispute, as set out in Section 2 of this Contract. Should the Contractor fail to continue to perform its responsibilities regarding all non-disputed work, without delay, any reasonable additional costs incurred by the State or the Contractor as a result of such failure to proceed shall be borne by the Contractor, and the Contractor shall make no claim against the State for such costs. If the State and the Contractor cannot resolve a dispute within ten (10) working days following notification in writing by either party of the existence of a dispute, then the following procedure shall apply:

The parties agree to resolve such matters through submission of their dispute to the Commissioner of the Indiana Department of Administration. The Commissioner shall reduce a decision to writing and mail or otherwise furnish a copy thereof to the Contractor and the State within ten (10) working days after presentation of such dispute for action. The Commissioner’s decision shall be final and conclusive unless either party mails or otherwise furnishes to the Commissioner, within ten (10) working days after receipt of the Commissioner’s decision, a written appeal. Within ten (10) working days of receipt by the Commissioner of a written request for appeal, the decision may be reconsidered. If no reconsideration is provided within ten (10) working days, the parties may mutually agree to submit the dispute to arbitration for a determination, or otherwise either party may submit the dispute to an Indiana court of competent jurisdiction.

The State may withhold payments on disputed items pending resolution of the dispute. The unintentional nonpayment by the State to the Contractor of one or more invoices not in dispute in accordance with the terms of this Contract will not by itself be cause for Contractor to terminate this Contract, and the Contractor may bring suit to collect these amounts without following the disputes procedure contained herein.

19. Drug-Free Workplace Certification

The Contractor hereby covenants and agrees to make a good faith effort to provide and maintain a drug-free workplace. Contractor will give written notice to the State within ten (10) days after receiving actual notice that the Contractor or an employee of the Contractor has been convicted of a criminal drug violation occurring in the contractor’s workplace.

False certification or violation of the certification may result in sanctions including, but not limited to, suspension of contract payments, termination of this Contract and/or debarment of contracting opportunities with the State of Indiana for up to three (3) years.

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In addition to the provisions of the above paragraphs, if the total contract amount set forth in this Contract is in excess of $25,000.00, Contractor hereby further agrees that this agreement is expressly subject to the terms, conditions, and representations of the following certification:

This certification is required by Executive Order No. 90-5, April 12, 1990, issued by the Governor of Indiana. Pursuant to its delegated authority, the Indiana Department of Administration is requiring the inclusion of this certification in all contracts and grants from the State of Indiana in excess of $25,000.00. No award of a contract shall be made, and no contract, purchase order or agreement, the total amount of which exceeds $25,000.00, shall be valid, unless and until this certification has been fully executed by the Contractor and made a part of the contract or agreement as part of the contract documents.

The Contractor certifies and agrees that it will provide a drug-free workplace by:

A. Publishing and providing to all of its employees a statement notifying employees that the unlawful manufacture, distribution, dispensing, possession or use of a controlled substance is prohibited in the Contractor’s workplace, and specifying the actions that will be taken against employees for violations of such prohibition;

B. Establishing a drug-free awareness program to inform its employees of (1) the dangers of drug abuse in the workplace; (2) the Contractor’s policy of maintaining a drug-free workplace; (3) any available drug counseling, rehabilitation, and employee assistance programs; and (4) the penalties that may be imposed upon an employee for drug abuse violations occurring in the workplace;

C. Notifying all employees in the statement required by subparagraph (A) above that as a condition of continued employment, the employee will (1) abide by the terms of the statement; and (2) notify the Contractor of any criminal drug statute conviction for a violation occurring in the workplace no later than five (5) days after such conviction;

D. Notifying in writing the State within ten (10) days after receiving notice from an employee under subdivision (C)(2) above, or otherwise receiving actual notice of such conviction;

E. Within thirty (30) days after receiving notice under subdivision (C)(2) above of a conviction, imposing the following sanctions or remedial measures on any employee who is convicted of drug abuse violations occurring in the workplace: (1) taking appropriate personnel action against the employee, up to and including termination; or (2) requiring such employee to satisfactorily participate in a drug abuse assistance or rehabilitation program approved for such purposes by a federal, state or local health, law enforcement, or other appropriate agency; and

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F. Making a good faith effort to maintain a drug-free workplace through the implementation of subparagraphs (A) through (E) above.

20. Employment Option

If the State determines that it would be in the State’s best interest to hire an employee of the Contractor, the Contractor will release the selected employee from any non-compete agreements that may be in effect solely for the purpose of employment with the State and any non-compete will otherwise remain in effect. This release will be at no cost to the State or the employee.

21. Force Majeure

In the event that either party is unable to perform any of its obligations under this Contract or to enjoy any of its benefits because of natural disaster or decrees of governmental bodies not the fault of the affected party (hereinafter referred to as a “Force Majeure Event”), the party who has been so affected shall immediately give notice to the other party and shall do everything possible to resume performance. Upon receipt of such notice, all obligations under this Contract shall be immediately suspended. If the period of nonperformance exceeds thirty (30) days from the receipt of notice of the Force Majeure Event, the party whose ability to perform has not been so affected may, by giving written notice, terminate this Contract.

22. Funding Cancellation

When the Director of the State Budget Agency makes a written determination that funds are not appropriated or otherwise available to support continuation of performance of this Contract, this Contract shall be canceled. A determination by the Budget Director that funds are not appropriated or otherwise available to support continuation of performance shall be final and conclusive.

23. Governing Laws

This Contract shall be construed in accordance with and governed by the laws of the State of Indiana and suit, if any, must be brought in the State of Indiana.

24. Indemnification

Contractor agrees to indemnify, defend, and hold harmless the State of Indiana and its agents, officials, and employees from all claims and suits including court costs, attorney’s fees, and other expenses caused by any act or omission of the Contractor and/or its subcontractors, if any. The State shall not provide such indemnification to the Contractor.

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25. Independent Contractor

Both parties hereto, in the performance of this Contract, shall act in an individual capacity and not as agents, employees, partners, joint venturers or associates of one another. The employees or agents of one party shall not be deemed or construed to be the employees or agents of the other party for any purposes whatsoever. Neither party will assume liability for any injury (including death) to any persons, or damage to any property arising out of the acts or omissions of the agents, employees or subcontractors of the other party.

The Contractor shall be responsible for providing all necessary unemployment and workers’ compensation insurance for the Contractor’s employees.

26. Reserved

27. Insurance

A. The Contractor shall secure and keep in force during the term of this agreement, the following insurance coverages, covering the Contractor for any and all claims of any nature which may in any manner arise out of or result from this agreement:

1. Commercial general liability, including contractual coverage, and products or completed operations coverage (if applicable), with minimum liability limits of $500,000 per person and $1,000,000 per occurrence unless additional coverage is required by the State.

2. Reserved

3. Reserved

4. Workers compensation coverage meeting all statutory requirements of IC 22-3-2. In addition, an “all states endorsement” covering claims occurring outside the state of Indiana if any of the services provided under this agreement involve work outside the state of Indiana. The Contractor shall provide proof of such insurance coverage by tendering to the undersigned State representative, a certificate of insurance prior to the commencement of this agreement.

B. The Contractor’s insurance coverage must meet the following additional requirements:

1. Any deductible or self-insured retention amount or other similar obligation under the insurance policies shall be the sole obligation of the Contractor.

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2. The State will be defended, indemnified, and held harmless to the full extent of any coverage actually secured by the Contractor in excess of the minimum requirements set forth above. The duty to indemnify the State under this agreement shall not be limited by the insurance required in this agreement.

3. The insurance required in this agreement, through a policy or endorsement, shall include a provision that the policy and endorsements may not be canceled or modified without thirty (30) days’ prior written notice to the undersigned State representative.

4. Failure to provide insurance as required in this agreement is a material breach of contract entitling the State to immediately terminate this agreement.

The Contractor shall furnish a certificate of insurance and all endorsements to the undersigned State representative prior to the commencement of this agreement.

28. Reserved

29. Licensing Standards

The parties agree that Contractor and its employees and subcontractors shall comply with all applicable licensing standards, certification standards, accrediting standards and any other laws, rules or regulations governing services to be provided by the Contractor pursuant to this Contract. The State shall not be required to reimburse Contractor for any services performed when Contractor or its employees or subcontractors are not in compliance with such applicable standards, laws, rules or regulations. If licensure, certification or accreditation expires or is revoked, Contractor shall notify State immediately and the State, at its option, may immediately terminate this Contract.

30. Merger and Modification

This contract constitutes the entire agreement between the parties. No understandings, agreements, or representations, oral or written, not specified within this contract will be valid provisions of this contract. This contract may not be modified, supplemented, or amended, in any manner, except by written agreement signed by all necessary parties.

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31. Minority and Women Business Enterprise Compliance

The Contractor agrees to comply fully with the provisions of the Contractor’s MBE/WBE participation plans in a manner that is consistent with the applicable provisions of the RFP. Contractor agrees to comply with all Minority and Women Business Enterprise statutory and administrative code requirements and obligations, including IC 4-13-16.5 and 25 IAC 5.

The Contractor further agrees to cooperate fully with the minority and women’s business enterprises division to facilitate the promotion, monitoring, and enforcement of the policies and goals of MBE/WBE program including any and all assessments, compliance reviews and audits that may be required.

32. Nondiscrimination

Pursuant to IC 22-9-1-10 and the Civil Rights Act of 1964, Contractor and its subcontractors shall not discriminate against any employee or applicant for employment in the performance of this Contract. The Contractor shall not discriminate with respect to the hire, tenure, terms, conditions or privileges of employment or any matter directly or indirectly related to employment, because of race, color, religion, sex, disability, national origin or ancestry. Breach of this covenant may be regarded as a material breach of this Contract. The Contractor’s execution of this Contract also signifies compliance with applicable federal laws, regulations, and executive orders prohibiting discrimination in the provision of services based on race, color, national origin, age, sex, disability or status as a veteran.

The Contractor understands that the State is a recipient of federal funds. Pursuant to that understanding, the Contractor and its subcontractor, if any, agree that if the Contractor employs fifty (50) or more employees and does at least $50,000.00 worth of business with the State and is not exempt, the Contractor will comply with the affirmative action reporting requirements of 41 CFR 60-1.7. The Contractor shall comply with Section 202 of Executive Order 11246, as amended, 41 CFR 60-250, and 41 CFR 60-741, as amended, which are incorporated herein by specific reference. Breach of this covenant may be regarded as a material breach of this Contract.

33. Notice to Parties

Whenever any notice, statement or other communication is required under this Contract, it shall be sent to the following addresses, unless otherwise specifically advised.

A. Notices to the State shall be sent to:

John Barth, Director of Operations – Managed Care

Office of Medicaid Policy and Planning

402 W. Washington St., W374, MS-07

Indianapolis, IN 46204

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B. Notices to the Contractor shall be sent to:

Rita Johnson-Mills, CEO

Managed Health Services

1099 North Meridian Street, Suite 400

Indianapolis, IN 46204

C. Payments to the Contractor shall be sent via electronic funds transfer by the fiscal agent to an account to be specified by the Contractor.

34. Order of Precedence

Any inconsistency or ambiguity in this Contract shall be resolved by giving precedence in the following order: (1) This Contract, (2) Contract Attachment 1, (3) RFP# 4-79, (4) Contractor’s response to RFP# 4-79, and (5) attachments prepared by the Contractor.

35. Ownership of Documents and Materials

All documents, records, programs, data, film, tape, articles, memoranda, and other materials not developed or licensed by the Contractor prior to execution of this Contract, but specifically developed under this Contract directly in connection with services provided under this Contract shall be considered “work for hire” and the Contractor transfers any ownership claim to the State of Indiana and all such materials will be the property of the State of Indiana. Use of these materials, other than related to contract performance by the Contractor, without the prior written consent of the State, which consent shall not be unreasonable withheld or delayed, is prohibited, except that State agrees that Contractor shall be permitted to utilize such materials to comply with Contractor’s own reporting obligations or to otherwise comply with applicable law without seeking prior consent from the State. During the performance of this Contract, the Contractor shall be responsible for any loss of or damage to these materials developed for or supplied by the State and used to develop or assist in the services provided herein while the materials are in the possession of the Contractor. Any loss or damage thereto shall be restored at the Contractor’s expense. Full, immediate, and unrestricted access to the work product of the Contractor under this Contract and during the term of this Contract shall be available to the State.

36. Payments

A. The Office will provide the above-specified funding on a per member per month and per maternity delivery basis, as contained in the Offices’ capitation payment listing, and according to the capitation rates by category as listed in Paragraph 2.

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B. All payment obligations are subject to the encumbrance of monies and shall be made in arrears in accordance with Indiana law and the State of Indiana’s fiscal policies and procedures. The Contractor may not submit claim forms before the services have been performed.

C. It is understood and agreed upon by the parties that all obligations of the State of Indiana are contingent upon the availability and continued appropriation of State and Federal funds, and in no event shall the State of Indiana be liable for any payments in excess of available appropriated funds.

37. Penalties/Interest/Attorney’s Fees

The State will in good faith perform its required obligations hereunder and does not agree to pay any penalties, liquidated damages, interest, or attorney’s fees, except as required by Indiana law, in part, IC 5-17-5, IC 34-54-8, and IC 34-13-1.

Notwithstanding the provisions contained in IC 5-17-5, the Parties stipulate and agree that any liability resulting from the State of Indiana’s failure to make prompt payment shall be based solely on the amount of funding originating from the State of Indiana and shall not be based on funding from federal or other sources.

38. Progress Reports

The Contractor shall submit progress reports to the State upon reasonable request. The report shall be oral, unless the State, upon receipt of the oral report, should deem it necessary to have it in written form. The progress reports shall serve the purpose of assuring the State that work is progressing in line with the schedule, and that completion can be reasonably assured on the scheduled date.

39. Reserved

40. 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), Privacy Regulations, that take effect April 14, 2003, and Security Regulations, that take effect on April 20, 2005, in all activities related to the 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 (DHHS) has issued the Final Rules, as amended from time to time on the Standards for Privacy of Individually Identifiable Health Information and on the Standards for Security of Individually Identifiable Health Information, as required

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by the Administrative Simplification Section of HIPAA. The parties acknowledge that the Office is a Covered Entity within the meaning of HIPAA, and Office agrees that it will comply with its obligations under HIPAA in activities related to this Contract. 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 all applicable requirements of law relating to PHI with respect to any task or other activity it performs for the Office including, as required by the final Privacy and Security regulations:

A. Contractor may use and disclose PHI for the following purposes: (a) to perform the services described in this Contract; (b) the proper management and administration of Contractor; (c) to carry out the legal responsibilities of Contractor; (d) as required by law; or (e) to report violations of law to appropriate Federal and State authorities, consistent with 45 CFR § 164.502(j)(1). If Contractor discloses PHI for a purpose related to (b) or (c) in the foregoing sentence, Contractor shall obtain reasonable assurances from the person to whom the information is disclosed that it will remain confidential and used or further disclosed only as required by law or for the purpose for which it was disclosed to the person, and require the person to notify Contractor of any instances of which it is aware in which the confidentiality of the information has been breached. Notwithstanding the foregoing (and notwithstanding any contract or legal obligation that Contractor might have with any third party), Contractor may not, without the prior written approval of the State, use or disclose PHI for marketing (except as otherwise provided in this Contract), to third parties for the third parties’ own business uses that do not arise out of Contractor’s duties under this Contract or that are not related to this Contract, or in return for any type of remuneration for purposes that do not arise out Contractor’s duties under this Contract or that are not related to this Contract.

B. Implementing administrative, physical and technical safeguards that reasonably and appropriately protect the confidentiality, integrity and availability of the electronic PHI that the Contractor creates, receives, maintains, or transmits on behalf of OMPP;

C. Implementing a disaster recovery plan, as appropriate, which includes mechanisms to recover data and/or alternative data storage sites, as reasonably determined by OMPP to be necessary to uphold integral business functions in the event of an unforeseen disaster;

D. Not using or further disclosing PHI other than as permitted or required by this Contract or by applicable law;

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E. Using appropriate safeguards to prevent use or disclosure of PHI other than as provided by this Contract or by applicable law;

F. Reporting to OMPP any security and/or privacy incident of which the Contractor becomes aware;

G. 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 in a manner not provided for by this Contract or by applicable law of which the Contractor becomes aware;

H. Ensuring that any subcontractors or agents to whom the Contractor provides PHI received from, or created or received by the Contractor, subcontractors or agents on behalf of the Office agree to the same restrictions, conditions and obligations applicable to such party regarding PHI and agrees to implement reasonable and appropriate safeguards to protect it;

I. 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 Office at its request or to the Secretary of the United States Department of Health and Human Services for 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 from the Secretary of DHHS, and shall provide the Office with copies of any materials made available in response to such a request;

J. In accordance with procedures established by the Office, 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;

K. 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;

L. 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 the duties of the Contractor;

M. Authorizing termination of the Contract if OMPP determines that the Contractor has violated a material provision; and

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N. At the termination of the Contract, if feasible, return or destroy all PHI received or created under the Contract. If OMPP 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.

Office agrees that it shall not require or request the Contractor to use or disclose PHI in any manner that would not be permissible under HIPPA if done by Office.

40.5 Electronic Transaction Standards Compliance

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.

Contractor will indemnify and hold the State harmless from any loss, damage, costs, expense, judgment, sanction or liability, including, but not limited to, reasonable attorneys’ fees and costs, that the State incurs or is subject to, to the extent that the loss, damages, costs, expense, judgment, sanction or liability is caused by Contractor’s breach of this Paragraph.

41. Severability

The invalidity of any section, subsection, clause or provision of this Contract shall not affect the validity of the remaining sections, subsections, clauses or provisions of this Contract.

42. Substantial Performance

This Contract shall be deemed to be substantially performed only when fully performed according to its terms and conditions and any modification thereof.

43. Successors and Assignees

The Contractor binds its successors, executors, administrators, and assignees to all covenants of this Contract. Except as above set forth, the Contractor shall not assign, sublet or transfer interest in this Contract without the prior written consent of the State of Indiana.

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44. Taxes

The State of Indiana is exempt from state, federal, and local taxes. The State will not be responsible for any taxes levied on the Contractor as a result of this Contract.

45. Termination for Convenience

This Contract may be terminated, in whole or in part, by the State whenever, for any reason, the State determines that such termination is in the best interest of the State. Termination of services shall be effected by delivery to the Contractor of a Termination Notice at least thirty (30) days prior to the termination effective date, specifying the extent to which performance of services under such termination becomes effective. The Contractor shall be compensated for services properly rendered prior to the effective date of termination. Except as otherwise stated herein, the State will not be liable for services performed after the effective date of termination. The Contractor shall be compensated for services herein provided but in no case shall total payment made to the Contractor exceed the original contract price or shall any price increase be allowed on individual line items if canceled only in part prior to the original termination date.

46. Termination for Default

A. With the provision of thirty (30) days notice to the Contractor, the State may terminate this Contract in whole or in part, if the Contractor fails to:

1. Correct or cure any breach of this Contract;

2. Deliver the supplies or perform the services within the time specified in this Contract or any extension;

3. Make progress so as to endanger performance of this Contract; or

4. Perform any of the other provisions of this Contract.

B. If the State terminates this Contract in whole or in part, in accordance with Section 46(A), it may acquire, under the terms and in the manner the State considers appropriate, supplies or services similar to those terminated, and the Contractor will be liable to the State for any reasonable excess costs for those supplies or services. However, the Contractor shall continue the work not terminated.

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C. The State shall pay the contract price for completed supplies delivered and services accepted. The Contractor and the State shall agree on the amount of payment for manufacturing materials delivered and accepted and for the protection and preservation of the property. Failure to agree will be a dispute under the Disputes clause. The State may withhold from these amounts any sum the State reasonably determines to be necessary to protect the State against loss because of outstanding liens or claims of former lien holders.

D. The rights and remedies of the State in this clause are in addition to any other rights and remedies provided by law or equity or under this Contract.

47. Registration with the Secretary of State of Indiana

The Contractor certifies that if it is a non-domestic entity, it is registered with the Indiana Secretary of State to do business in the State of Indiana.

48. Reserved

49. Waiver of Rights

No right conferred on either party under this Contract shall be deemed waived and no breach of this Contract excused, unless such waiver or excuse is in writing and signed by the party claimed to have waived such right.

Failure of either party to enforce at any time any provision of this Contract shall not be construed as a waiver thereof. The remedies herein reserved shall be cumulative and additional to any other remedies in law or equity.

50. Work Standards

The Contractor shall execute its responsibilities by following and applying at all times the highest professional and technical guidelines and standards. If the State becomes dissatisfied with the work product of or the working relationship with those individuals assigned to work on this Contract, the State may request in writing the replacement of any or all such individuals, and Contractor shall grant such request within a reasonable time period.

51. State Boilerplate Affirmation Clause

The undersigned attests on behalf of the contractor, subject to the penalties of perjury that I have not altered, modified or changed the State’s Boilerplate contract clauses paragraphs 4 through 49) or the Offices’ additionally required clauses (paragraphs 50 through 56) in any way and that I am not aware of any alterations, modifications or changes to the State’s Boilerplate contract clauses, except for the following clauses which are identified by name below:

Clause 2 Consideration; 4 Access to Records; 5 Assignment; 8 Changes in Work; 10 Condition of Payment; 12 Confidentiality of State Information;

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15 Continuity of Services; 16 Debarment and Suspension; 18 Disputes; 20 Employment Option; 26 Information Technology Accessibility; 28 Key Persons; 31 Minority and Women Business Enterprise Compliance; 33 Notice to Parties; 35 Ownership of Documents and Materials; 36 Payments; 38 Progress Reports; 40 Security and Privacy of Health Information; 45 Termination for Convenience; 46 Termination for Default; 48 Travel; 49 Waiver of Rights; 50 Work Standards; 53 Conveyance of Documents and Continuation of Existing Activity

52. Assurance of Compliance with Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973 and the Age Discrimination Act of 1975, the Americans with Disabilities Act of 1990 and Title IX of the Education Amendments of 1972

The Contractor agrees that it, and all of its subcontractors and providers, will comply with the following:

A. Title VI of the Civil Rights Act of 1964 (Pub. L. 88-352), as amended, and all requirements imposed by or pursuant to the Regulation of the Department of Health and Human Services (45 CFR Part 80), to the end that, in accordance with Title VI of that Act and the Regulation, no person in the United States shall on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under any program or activity for which the Contractor receives Federal financial assistance under this Contract.

B. Section 504 of the Rehabilitation Act of 1973 (Pub. L. 93-112), as amended, and all requirements imposed by or pursuant to the Regulation of the Department of Health and Human Services (45 CFR Part 84), to the end that, in accordance with Section 504 of that Act and the Regulation, no otherwise qualified handicapped individual in the United States shall, solely by reason of his/her handicap, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity for which the Contractor receives Federal financial assistance under this Contract.

C. The Age Discrimination Act of 1975 (Pub. L. 94-135), as amended, and all requirements imposed by or pursuant to the Regulation of the Department of Health and Human Services (45 CFR Part 91), to the end that, in accordance with the Act and the Regulation, no person in the United States shall, on the basis of age, be denied the benefits of, be excluded from participation in, or be subjected to discrimination under any program or activity for which the Contractor receives Federal financial assistance under this Contract.

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D. The Americans with Disabilities Act of 1990 (Pub. L. 101-336), as amended, and all requirements imposed by or pursuant to the Regulation of the Department of Justice (28 CFR 35.101 et seq.), to the end that in accordance with the Act and Regulation, no person in the United States with a disability shall, on the basis of the disability, be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any program or activity for which the Contractor receives Federal financial assistance under this Contract.

E. Title IX of the Education Amendments of 1972, as amended (20 U.S.C. §§ 1681,1683, and 1685-1686), and all requirements imposed by or pursuant to regulation, to the end that, in accordance with the Amendments, no person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or otherwise be subjected to discrimination under any program or activity for which the Contractor receives Federal financial assistance under this Contract.

The Contractor agrees that compliance with this assurance constitutes a condition of continued receipt of Federal financial assistance, and that it is binding upon the Contractor, its successors, transferees and assignees for the period during which such assistance is provided. The Contractor further recognizes that the United States shall have the right to seek judicial enforcement of this assurance.

53. Conveyance of Documents and Continuation of Existing Activity

Should the Contract for whatever reason, (i.e. completion of a contract with no renewal, or termination of service by either party), be discontinued and the activities as provided for in the Contract for services cease, the Contractor and any subcontractors employed by the terminating Contractor in the performance of the duties of the Contract shall promptly convey to the State of Indiana, copies of all vendor working papers, data collection forms, reports, charts, programs, cost records and all other material related to work performed on this Contract. The Contractor and the Office shall convene immediately upon notification of termination or non-renewal of the Contract to determine what work shall be suspended, what work shall be completed, and the time frame for completion and conveyance. The Office will then provide the Contractor with a written schedule of the completion and conveyance activities associated with termination. Documents/materials associated with suspended activities shall be conveyed by the Contractor to the State of Indiana within thirty (30) calendar days’ after notice from the State of Indiana or such other time as the parties shall mutually agree. Upon completion of those remaining activities noted on the written schedule, the Contractor shall also convey all documents and materials to the State of Indiana upon thirty (30) calendar days’ notice from the State of Indiana.

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54. Environmental Standards

If the contract amount set forth in this Contract is in excess of $100,000, the Contractor shall comply with all applicable standards, orders, or requirements issued under section 306 of the Clean Air Act (42 U.S.C. § 7606), section 508 of the Clean Water Act (33 U.S.C. § 1368), Executive Order 11738, and Environmental Protection Agency regulations (40 C.F.R. Part 32), which prohibit the use under non-exempt Federal contracts of facilities included on the EPA List of Violating Facilities. The Contractor shall report any violations of this paragraph to the State of Indiana and to the United States Environmental Protection Agency Assistant Administrator for Enforcement.

55. Lobbying Activities

Pursuant to 31 U.S.C. § 1352, and any regulations promulgated thereunder, the Contractor hereby assures and certifies that no federally appropriated funds have been paid, or will be paid, by or on behalf of the Contractor, to any person for influencing or attempting to influence an officer or employee of any agency, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress, in connection with the awarding of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative contract, and the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan or cooperative contract. If any funds other than federally appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a member of Congress, an officer or employee of Congress, or an employee of a member of Congress in connection with this Contract, the Contractor shall complete and submit Standard Form-LLL, “Disclosure Form to Report Lobbying”, in accordance with its instructions.

56. Ethics Compliance

The contractor and its agents shall abide by all ethical requirements that apply to persons who have a business relationship with the State, as set forth in Indiana Code § 4-2-6 et seq., the regulations promulgated thereunder, and Executive Order 04-08, dated April 27, 2004. If the contractor is not familiar with these ethical requirements, the contractor should refer any questions to the Indiana State Ethics Commission, or visit the Indiana State Ethics Commission website at <<<http://www.in.gov/ethics/>>>. If the contractor or its agents violate any applicable ethical standards, the State may, in its sole discretion, terminate this contract immediately upon notice to the contractor. In addition, the contractor may be subject to penalties under Indiana Code § 4-2-6-12.

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Non-Collusion and Acceptance

The undersigned attests, subject to the penalties for perjury, that he/she is the Contractor, or that he/she is the representative, agent, member or officer of the contracting party, that he/she has not, nor has any other member, employee, representative, agent or officer of the Contractor, directly or indirectly, to the best of his/her knowledge, entered into or offered to enter into any combination, collusion or agreement to receive or pay, and that he/she has not received or paid, any sum of money or other consideration for the execution of this Contract other than that which appears upon the face of this Contract.

In Witness Whereof, Contractor and the State of Indiana have, through duly authorized representatives, entered into this Contract. The parties having read and understand the foregoing terms of this Contract do by their respective signatures dated below hereby agree to the terms thereof.

Contractor:

By:	/s/    Rita Johnson-Mills
	Rita Johnson-Mills
	President/CEO
Date:	12/1/04

State of Indiana Agency:
/s/    Melanie Bella
Melanie Bella
Assistant Secretary
Family and Social Services Administration
Date:	12/9/04
Department of Administration:
/s/    Charles R. Martindale
Charles R. Martindale
Commissioner
Date:	12/14/04

State Budget Agency		Office of the Attorney General
/s/    Marilyn F. Schultz		/s/    Stephen Carter
Marilyn F. Schultz		Stephen Carter
Director		Attorney General
Date:	12/27/04	Date:	1/7/05

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EX-10.9.A

Exhibit 10.9a

FIRST AMENDMENT TO THE

CENTENE CORPORATION

2002 EMPLOYEE STOCK PURCHASE PLAN

This amendment to the Centene Corporation 2002 Employee Stock Purchase Plan (the “Plan”) was approved by the Centene Corporation Board of Directors and became effective on January 1, 2005. The Plan is hereby amended by:

1.    Deleting Section 5 of the Plan in its entirety and replacing it with the following:

“5.    Deductions. The Company will maintain payroll deduction accounts for all participating employees. With respect to any Offering made under this Plan, an employee may authorize a payroll deduction in any dollar amount equal to:

(a)    from a minimum 1.0% to a maximum of 10.0% as specified by the employee, multiplied by;

(b)    the amount of Compensation the employee receives during the Plan Period (or such short period during which deductions from payroll are made), up to a maximum of $8,333.33 of Compensation per month.”

EX-10.19

Exhibit 10.19

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT, made and entered into as of the 6^TH day of June, 2003, by and between CENTENE CORPORATION, a Wisconsin corporation (hereinafter called the “Company”), and Marie J. Glancy (hereinafter called the “Executive”).

1. Employment. Company hereby employs Executive as Vice President of Government Relations with such other or additional titles or positions as the Company’s President 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 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 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 his 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 One Hundred Eighty Thousand Dollars ($180,000), 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 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 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

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 thirty nine (39) weeks of her 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 nine (9) 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 Washington, DC area which Executive refuses, then Executive shall receive severance equal to fifty two (52) weeks pay paid at her 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 twelve (12) 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 § 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 § § 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 nine (9) 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 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 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 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/ Carol Goldman
	“Company”
By	/s/ Marie J. Glancy
	“Executive”

Date June 2, 2003

EX-10.23

Exhibit 10.23

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT, made and entered into as of the 27th day of February, 2004, by and between CENTENE CORPORATION, a Wisconsin corporation (hereinafter called the “Company”), and Lisa Wilson (hereinafter called the “Executive”).

1. Employment. Company hereby employs Executive in an Officer level capacity as Vice-President-Investor Relations, with such other or additional titles or positions as Company’s President, 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, Officers, 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, Officers, 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. Executive will also be obligated to comply with all internal Company policies, which may be developed, withdrawn or modified from time to time at Company’s discretion, that are applicable to other employees.

Except as otherwise provided herein, during the term hereof, 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 $250,000.00, less applicable payroll deductions. This salary may be adjusted from time to time as directed by the Company’s President or Board of Directors. Executive’s first review shall be on or before December 31,2004.

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 fringe benefit plans or arrangements as provided for all Executives, subject to their terms and conditions, including but not limited to health insurance plans, 401K

plans, disability insurance plans, deferred compensation plans and tax preparation and financial planning. Both parties recognize that plans and arrangements may be added, withdrawn, or modified from time to time at Company’s sole discretion.

(c) 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) Executive will be eligible for a bonus pursuant to the terms of the bonus plan applicable to other similar executives. A bonus of $75,000 will be guaranteed for the first year. The annual target bonus is 30% of base salary with potential to exceed that level upon the attainment of certain financial and operational goals. 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.

(e) The Executive will be entitle to receive reimbursement of reasonable relocation expenses, including those for packing, moving and (to the extent necessary) short-term storage of household items, pursuant to Centene’s existing relocation program.

(f) Company agrees to grant to Executive on or before date of hire an option to acquire 15,000 shares, in addition to the 15,000 options granted in June 2003, of common stock of Company, pursuant to any of Employer’s stock option plans, for the price and under the terms of vesting and all other terms and conditions as set forth in the Stock Option Agreement. Stock sales by Executive will be subject to Company’s Trading Policy which is also applicable to other employees.

(g) Executive will be paid a signing bonus of $50,000 payable within Thirty (30) days of assuming her employment with Company.

(h) The Company will assume the obligations on the lease held by In-Site Communications, Inc. for the premises located at In-Site Communications, Inc., 950 Third Avenue, 9th Floor, New York, NY 10022 up to a total cost of $6,279.06/per month or $75,348.75/per annum, before annual real estate assessment charges and including other associated charges (Electric, Estimated Operating Expenses, Messenger Center).

(i) The Company will assume the obligations on the remainders of lease(s) and any additional associated costs held by In-Site Communications, Inc.

for the postage meter and copier equipment located at In-Site Communications, Inc., 950 Third Avenue, 9th floor New York, NY 10022, for the remainder of the 36 month lease on copier equipment (commenced May 2002) at $169 per month plus overages and remainder of 36 month lease on postage meter (commenced March 2002) at $ 195 per quarter plus applicable taxes.

(j) The Company will purchase all office equipment owned by In-site Communications, Inc. for the total sum of $35,000.

5. Termination of Employment.

(a) Termination for Cause. If the Company terminates Executive’s employment for Cause, Executive shall be entitled only to payment of that portion of her salary earned through and including the termination date at the rate of salary in effect at that time. The term “for cause” shall include Executive engaging in (i) criminal acts or acts that are dishonest, fraudulent or similar misconduct while acting for the Company or which reflect negatively on the reputation of the Company; (ii) acts that the Company determines, after affording Employee an opportunity to be heard, could expose the Company to claims of illegal harassment or discrimination in employment;( iii) acts that the Company determines, after affording Employee an opportunity to be heard, constitute material breaches of this Agreement; and (iv) acts that the Company determines, after affording Employee an opportunity to be heard, constitute negligence in performance or intentional nonperformance of duties and which continue fifteen (15) days after receipt by Employee of the written determination from the Company and its notice to cure.

(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(e).

(c) Death. If Executive dies during her employment, or Executive is entitled to receive payments from the Company 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 disabled such that she can not perform the essential functions of her position, the Board may terminate Executive’s employment by providing written notice to Executive at least Seventy Two (72) hours before the termination date. If Executive resigns from employment with the Company as a result of a disability, or the

Company terminates Executive’s employment as a result of a disability, Executive shall be entitled to receive that portion of her salary, at the rate in effect at the time she became disabled, that she earned through and including the termination or resignation date, as applicable.

(e) Compensation Following Termination or Resignation. 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 at the rate of salary in effect at that time, plus an amount equal to Fifty two (52) weeks of her annualized salary paid in accordance with the then current payroll practices and Company’s severance pay plan, and conditioned upon Executive’s signing, and not revoking, a complete Release of any and all claims.

If Executive’s resigns her employment the Company shall pay Executive that portion of her salary earned through and including the resignation date at the rate of salary in effect at that time.

(f) Change of Control. In the event of a “Change in Control” which, within 12 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_(specify area) which Executive refuses, then Executive shall receive severance equal to (52) weeks pay, but conditioned upon Executive’s signing, and not revoking, a complete Release of any and all claims.

6. Covenants.

(a) Return of Company Records and Property. Executive agrees that upon termination of Executive’s employment, whether with or without cause, Executive will surrender to the Company in good condition all documents, electronic files, property and equipment belonging to Company and all records kept by Executive containing the names, addresses or any other information with regard to the Company, including but not limited to those concerning any operational, financial or other confidential documents given to Executive during Executive’s employment with Company.

(b) 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 investor 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. The information which Executive had prior to her employment with Centene and information which is publicly available is specifically excluded from Paragraph 6(c).

(c) Non-competition by Executive. If the employment of Executive is terminated for any reason whatsoever, whether by Executive or Company and whether with cause or without cause, provided the Company has made payments to the extent required by Section 5(e), Executive agrees that for a period of two years after the date of such termination, Executive will not, either personally or as an employee, agent, director, officer, shareholder, associate, partner, manager, agent, advisor, independent contractor, proprietor, consultant or otherwise: (i) engage in or for any managed care organization which is competitive with any business in which Company is engaged as of the termination date; (ii) solicit, divert or take away from Company the services of any of the employees or agents of Company, or induce in any way any nonperformance of any of the obligations of such employees or agents to Company; and (iii) undertake, or engage in, any employment or business activities involving the disclosure or use of Company’s trade secrets or confidential information.

(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 utilizing or disclosing, in whole or in part, the list of the Company’s investor 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.

7. Litigation. Executive agrees that during her employment or thereafter, she shall do all things, including the giving of evidence and truthful testimony 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.

8. 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 substantive laws of the State of Missouri without regard to choice of law.

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/ Carol Goldman
	“Company”
By	/s/ Lisa Wilson
	“Executive”

EX-10.26

Exhibit 10.26

Summary of Compensatory Arrangements with Executive Officers

The compensation committee of the board of directors approved a schedule of the following fiscal year 2005 base salaries for each of our named executive officers:

Name and Principal Position	Base Salary
Michael F. Neidorff Chairman, President and Chief Executive Officer	$	850,000
Joseph P. Drozda, Jr., M.D. Executive Vice President, Operations	$	380,000
William N. Scheffel Senior Vice President, Controller	$	285,000
Lisa M. Wilson Senior Vice President, Investor Relations	$	400,000
Karey L. Witty Senior Vice President, Chief Financial Office, Secretary and Treasurer	$	300,000

EX-12.1

Exhibit 12.1

Centene Corporation

Computation of ratio of earnings to fixed charges

($ in thousands)

	Year ended December 31,
	2004		2003		2002		2001		2000
Earnings:
Pre-tax earnings from continuing operations	$	70,287	$	51,893	$	41,136	$	22,026	$	7,185
Addback:
Fixed charges		2,489		1,232		915		1,058		1,067
Total earnings	$	72,776	$	53,125	$	42,051	$	23,084	$	8,252
Fixed Charges:
Interest expense	$	680	$	194	$	45	$	362	$	611
Interest component of rental payments (1)		1,809		1,038		870		696		456
Total fixed charges	$	2,489	$	1,232	$	915	$	1,058	$	1,067
Ratio of earnings to fixed charges		29.24		43.12		45.96		21.82		7.73

(1) Estimated at 33% of rental expense as a reasonable approximation of the interest factor.

EX-21

Exhibit 21

List of Subsidiaries

Bankers Reserve Life Insurance Company of Wisconsin, a Wisconsin corporation

Buckeye Community Health Plan, Inc., an Ohio corporation

CCTX Holdings, LLC, a Delaware LLC

CenCorp Consulting Company, Inc., a Delaware corporation

Cenphiny Management, LLC, a Delaware LLC

Cenpatico Behavioral Health Wisconsin, LLC, a Wisconsin LLC

Centene Company of Texas, LP, a Texas limited partnership

Centene Finance Corporation, a Delaware corporation *

Centene Holdings, LLC, 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

FirstGuard, Inc., a Delaware corporation

FirstGuard Health Plan, Inc., a Missouri corporation

FirstGuard Health Plan Kansas, Inc., a Kansas corporation

Managed Health Services Illinois, Inc., an Illinois corporation *

Managed Health Services Insurance Corporation, 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

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-119944) and Forms
S-8 (No. 333-108467, 333-90976, 333-83190) of Centene Corporation of our report dated February 24, 2005 relating to the financial statements, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. We also consent to the incorporation by reference of our report dated February 24, 2005 relating to the financial statement schedule, which appears in this Form 10-K.

/s/    PRICEWATERHOUSECOOPERS LLP

St. Louis, Missouri

February 24, 2005

EX-31.1

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 Rules13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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 fourth 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 functions):

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 24, 2005

/S/    MICHAEL F. NEIDORFF

Michael F. Neidorff

Chairman, President and Chief Executive Officer
(principal executive officer)

76

EX-31.2

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)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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 fourth 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 functions):

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 24, 2005

/s/    Karey L. Witty

Karey L. Witty

Senior Vice President, Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer)

77

EX-32.1

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, 2004, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Michael F. Neidorff, Chairman, 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.

Dated: February 24, 2005

/S/    MICHAEL F. NEIDORFF

Michael F. Neidorff

Chairman, President and Chief Executive Officer
(principal executive officer)

78

EX-32.2

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, 2004, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Karey L. Witty, Senior Vice President, Chief Financial Officer, Secretary 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.

Dated: February 24, 2005

/s/    KAREY L. WITTY

Karey L. Witty

Senior Vice President, Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer)

79