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, 2005

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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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 a large accelerated filer, an accelerated filed, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in rule 12b-2 of the Exchange Act.

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

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, 2005, was $1,393,980,683.

As of December 31, 2005 the registrant had 42,988,230 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the registrant’s 2006 annual meeting of stockholders are incorporated by reference in Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14.

TABLE OF CONTENTS

Part I
Item 1.	Business	3
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	28
Item 2.	Properties	28
Item 3.	Legal Proceedings	29
Item 4.	Submission of Matters to a Vote of Security Holders	29
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	46
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	46
Item 9A.	Controls and Procedures	46
Item 9B.	Other Information	49
Part III
Item 10.	Directors and Executive Officers of the Registrant	50
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions	50
Item 14.	Principal Accountant Fees and Services	50
Part IV
Item 15.	Exhibits and Financial Statement Schedules	51
Signatures		79
Certifications		80

“BUCKEYE COMMUNITY HEALTH PLAN,” “CENTENE,” “FIRSTGUARD HEALTH PLAN,” “MANAGED HEALTH SERVICES,” “NURSEWISE,” “START SMART FOR YOUR BABY” and “UNIVERSITY HEALTH PLANS” are our registered service marks. 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 healthcare enterprise 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, disease management, nurse triage and treatment compliance to our own and other healthcare organizations. Effective January 2006, we acquired US Script, Inc., a privately held pharmacy benefits manager (PBM). This acquisition has added pharmacy benefits management to our specialty product line. We have health plans in Indiana, Kansas, Missouri, New Jersey, Ohio, Texas and Wisconsin. Our health plan in Georgia will begin membership operations in 2006. We also provide specialty services in each of the states in which we have health plans as well as free-standing programs in Arizona.

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 resulting in better health outcomes. 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. The majority of funding is provided at the federal level. 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 U.S. state, each U.S. territory and the District of Columbia. The National Association of State Budget Officers (NASBO) 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 spending increased by 7.5% in fiscal 2005 according to the most recent survey by the Kaiser Commission on Medicaid and the Uninsured. States appropriated an increase of 5.5% for Medicaid in fiscal 2006 budgets. The NASBO reports Medicaid expenditures are approximately 22% of all state spending. 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

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federal poverty level. The number of persons covered by Medicaid increased from 23 million in 1989 to approximately 45 million in 2005. 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 represents the largest component of all Medicaid-related expenses.

The Balanced Budget Act of 1997 created SCHIP to help states expand coverage primarily to children whose household income level does not allow them to qualify for Medicaid. 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 and family care. These costs tend to be more predictable than other healthcare issues which predominantly affect the adult population.

While Medicaid programs have directed funds to many individuals who cannot 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 in non-managed care programs 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 tends 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 health plans, 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. 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 third 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. For example, in January 2006 we acquired US Script, Inc., a PBM. In July 2005 we acquired AirLogix, Inc., a disease management provider. We believe these and other business lines will allow us to expand our services, diversify our sources of revenue, and provide better outcomes for our members.

• Medicaid Expertise. Over the last 21 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

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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 offers 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 who 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 decentralized 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, quality committees and advisory boards, who 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 our Medicaid Managed Care and Specialty Services segments.

• 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. We have committed to continually update our systems and invest in technology upgrades. 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 improve treatment compliance in an efficient and scalable manner.

OUR STRATEGY

Our objective is to become the leading multi-line Medicaid and Medicaid-related healthcare enterprise. 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 and income stream. In January 2006, we acquired US Script,

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Inc., a PBM. In 2005 we acquired AirLogix, Inc., a disease management provider. 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 other lines of business that would complement our core business. We believe we have opportunities to offer these services to other healthcare organizations, states and other commercial entities.

• Address Emerging State Needs. We are working to assist the states in which we operate in addressing their various economic challenges. We seek to assist states in balancing premium rates, benefit levels, member eligibility, policies and practices, and provider compensation. For example, in 2005 we began performing under our contract with the State of Arizona to facilitate the delivery of mental health and substance abuse services to behavioral health recipients in Arizona. Effective January 1, 2005, Cenpatico was awarded a behavioral health contract to serve SCHIP members in Kansas. By helping states structure an appropriate level and range of Medicaid, SCHIP, SSI 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. In 2005, the Office of Medicaid Policy and Planning implemented mandatory managed care enrollment across all counties in Indiana. This transition primarily led to our increased membership in the State of Indiana. In 2004, we were awarded a SCHIP Exclusive Provider Organization (EPO) contract. Through this contract we serve approximately 80,200 SCHIP members in Texas. We may also increase membership by acquiring Medicaid businesses, contracts and other related assets from our competitors in our existing markets. For example, in 2005 we acquired certain Medicaid-related assets from SummaCare, Inc. in Ohio.

• Develop and Acquire Additional State Markets. We continue to leverage our experience and disciplined approach 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 in states where Medicaid recipients are mandated to enroll in managed care organizations. For example, in 2005 we were awarded Medicaid contracts in Georgia. 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.

• Leverage Our Established Infrastructure to Enhance Operating Efficiencies. We intend to continue to invest in our infrastructure to further drive efficiencies in our operations and to add functionality to improve the service we provide to our members and other organizations at a low cost. Our centralized functions enable us to add members and markets quickly and economically. For example, we opened a new claims processing facility in Montana to accommodate our 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 each state we serve. We have never been denied a contract renewal from a state in which we do business. The table below provides summary data for the state markets we currently serve.

	Indiana	Kansas	Missouri	New Jersey	Ohio	Texas	Wisconsin
Local Health Plan Name	Managed Health Services	FirstGuard Health Plan	FirstGuard Health Plan	University Health Plans	Buckeye Community Health Plan	Superior HealthPlan/ Network	Managed Health Services
First Year of Operations	1995	1999	1997	1994	2004	1999	1984
Counties Served at December 31, 2005	92	105	9	20	2	195	27
Membership at December 31, 2005	193,300	113,300	36,000	56,500	58,700	242,000	172,100

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 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	•     24-hour nurse advice line
•     inpatient and outpatient hospital care	•     transportation assistance
•     emergency and urgent care	•     vision care
•     prenatal care	•     dental care
•     laboratory and x-ray services	•     immunizations
•     home health and durable medical equipment	•     prescriptions and limited over-the-counter drugs
•     behavioral health and substance abuse services

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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 a community face-to-face outreach and education program 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 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 their health outcomes in a cost effective manner. 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 a proper 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 December 31, 2005, our health plans contracted with the following number of physicians and hospitals:

	Primary Care Physicians	Specialty Care Physicians	Hospitals
Indiana	793	1,243	40
Kansas	1,291	4,335	155
Missouri	373	1,950	44
New Jersey	1,848	4,213	78
Ohio	508	1,980	9
Texas	4,715	10,038	324
Wisconsin	1,958	3,605	63

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 are governed by state prompt payment policies. 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 certain of 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 fee 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 receive payment 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. In addition, this model requires management oversight because our total cost may increase as the units of services increase or as more expensive services are replaced for less expensive services. We have prior authorization procedures in place to make sure that high cost diagnostic and other services are medically appropriate.

Where appropriate, our health plans utilize Cenpatico to provide behavioral health services. We also contract with third-party providers on a negotiated fee arrangement for physical therapy, 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 fee-for-service arrangements with national pharmacy vendors that provide a pharmacy network. Beginning in 2006, we intend to move our pharmacy network to US Script, the PBM we acquired in January 2006.

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

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fine-tuned for implementation in our individual markets by a system of physician committees chaired by local physician leaders. This process promotes physician participation and support, both critical factors in the success of any clinical quality improvement program.

We have implemented specialized information systems to support our medical quality management activities. Information is drawn from our data warehouse, clinical databases and 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.

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 which are 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.

Our 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

Our Specialty Services segment is a key component of our healthcare enterprise and complements our core Medicaid Managed Care business. The specialty services diversify our revenue stream, provide higher quality health outcomes to our membership and others, and effectively control costs. Our specialty services are provided primarily through the following interrelated businesses:

• AirLogix is a chronic respiratory disease management provider. Through their specialization in respiratory management, AirLogix uses self-care therapies, in-home interaction and informatics processes to deliver highly effective clinical results, enhanced patient-provider satisfaction and greater cost reductions in respiratory management.

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• 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 needs. Cenpatico has 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, 2008.

• 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.

• ScriptAssist is a treatment compliance program that uses psychological-based tools to predict which patients are likely to be non-compliant regarding taking their medications, and then to motivate those at-risk patients to adhere to their doctors’ advice. 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.

• US Script is a PBM that administers pharmacy benefits and processes pharmacy claims via its proprietary claims processing software. US Script has developed and administers a contracted national network of retail pharmacies. The addition of US Script is consistent with our strategy to build a multi-line healthcare enterprise and provides a platform to reduce our prescription drug costs.

CORPORATE COMPLIANCE

Our Corporate Ethics and Compliance Program was first established in 1998 and provides methods by which we further enhance operations, safeguard against fraud and abuse, improve access to quality care and helps 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

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procedure database and our toll-free hotline to allow employees or other persons to report suspected incidents of fraud, abuse or other violations. The audit committee and the board of directors review a full compliance report, including an incident log, on a quarterly basis.

COMPETITION

In our 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. Some of these organizations offer a range of specialty services including pharmacy benefits management, behavioral health management, disease management, and nurse triage call support centers.

• Medicaid Managed Care Organizations focus solely on providing healthcare services to Medicaid recipients. Many 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, in the absence of specific healthcare experience, however, present barriers to entry into the Medicaid managed healthcare industry.

We compete with other managed care organizations and specialty companies 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.

FINANCIAL INFORMATION

All of our revenue is derived from operations within the United States and its territories. Our managed care subsidiaries in Indiana, Kansas, Texas and Wisconsin have revenues from their respective state governments that each exceeded 10% of our consolidated total revenues in 2005. Other financial information about our segments is found in Note 17 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.

State Contracts

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 benefits and policies adopted by each state.

During 2005, we entered into a contract with the Arizona Department of Health Services / Division of Behavioral Health Services to provide behavioral healthcare services through our subsidiary, Cenpatico. The contract commenced July 1, 2005 and has an initial termination date of June 30, 2008. The contract may be extended for up to two additional years. The contract may be terminated by the state for non-performance or mutual agreement of the parties.

During 2005, we entered into a contract with the Georgia Department of Community Health to provide healthcare benefits and services through our subsidiary, Peach State Health Plan. The contract commenced on July 1, 2005 with membership operations to commence in 2006. The contract has an initial scheduled termination date of June 30, 2006, with six one-year renewal options. The contract may be terminated by the State for event of default or significant changes in circumstances.

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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 has been renewed through June 30, 2006. 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.

We have entered into a contract with the State of Kansas, Director of Health Policy and Finance to provide behavioral healthcare services through our subsidiary, Cenpatico. The contract commenced January 1, 2005 and has a scheduled termination date of December 31, 2006. The contract may be terminated by the state for cause, without cause upon thirty days prior written notice or for lack of federal funding. Cenpatico has held a contract with the State of Kansas since 2005.

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 has been renewed through June 30, 2006. 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.

We have a contract with the State of New Jersey Department of Human Services to provide Medicaid and SCHIP services through our subsidiary, University Health Plans (UHP). The contract commenced on July 1, 2002 and has been renewed through June 30, 2006. 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 been renewed through June 30, 2006. The agreement is renewable annually for successive twelve-month periods. The contract may be terminated by the State for event of default. 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 (HHSC) to provide Medicaid and SCHIP managed care services in our Texas markets through our Superior HealthPlan, Inc. subsidiary. In December 2005, we entered into a Medicaid/CHIP HMO managed care contract between HHSC and Superior. The operational start date, the date membership operations commence under the contract, is September 1, 2006 and the contract has a scheduled termination date of August 31, 2008. The agreement is renewable for an additional period or periods not to exceed a total term of eight years. Our current Texas Medicaid and SCHIP contracts commenced September 1, 2004 and have been renewed through August 31, 2006. 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.

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We have entered into a contract with the Wisconsin Department of Health and Family Services to provide Medicaid and SCHIP services. The contract commenced February 1, 2006 and has a scheduled termination date of December 31, 2007. 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 since 1984.

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 and SCHIP 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.

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. Penalties can be imposed for failure to comply with these requirements.

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 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

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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;

• guarantee patients 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;

• authorize access to records by researchers and others; and

• impose criminal and civil sanctions for improper uses or disclosures 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 2003, HHS published final regulations relating to the security of electronic individually identifiable health information. Compliance was required by April 2005. 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. In addition, numerous states have adopted personal data security laws that provide for, among other things, private rights of action for breaches of data security and mandatory notification to persons whose identifiable information is obtained without authorization.

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 such federal legislation has been enacted, 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 health plans participating in these programs are complex and changing and may require substantial resources.

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EMPLOYEES

As of December 31, 2005, we had approximately 1,800 employees. Our employees are not represented by a union. We believe our relationships with our employees are good.

EXECUTIVE OFFICERS

The following table sets forth information regarding our executive officers, including their ages at January 31, 2006:

Name	Age	Position
Michael F. Neidorff	63	Chairman and Chief Executive Officer
Joseph P. Drozda, Jr., M.D.	60	Executive Vice President, Chief Medical Officer
James D. Donovan, Jr.	55	Senior Vice President, Health Plans
Marie J. Glancy	47	Senior Vice President, Operational Services and Regulatory Affairs
Carol E. Goldman	48	Senior Vice President, Chief Administration Officer
Cary D. Hobbs	38	Senior Vice President, Strategy and Business Implementation
William N. Scheffel	52	Senior Vice President, Specialty Companies
Lisa M. Wilson	41	Senior Vice President, Investor Relations
Karey L. Witty	41	Senior Vice President, Chief Financial Officer, Secretary and Treasurer

Michael F. Neidorff has served as our Chairman of our board of directors and Chief Executive Officer 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, Chief Medical Officer since May 2005. Dr. Drozda served as our Executive Vice President, Operations from September 2003 through May 2005. 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, Health Plans since May 2005 and as our Senior Vice President, New Products and New Markets from September 2004 through May 2005. 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, Operational Services and Regulatory Affairs since February 2006. Ms. Glancy served as our Senior Vice President, Government Relations from January 2005 to February 2006 and as our Vice President, Government Relations from July 2003 to January 2005. From 1996 to July 2003, Ms. Glancy served as a public policy executive for Deere and Company.

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Carol E. Goldman has served as Senior Vice President, Chief Administration Officer since July 2002. From September 2001 to July 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, Strategy and Business Implementation since January 2004. She served as our Vice President of Strategy and Business Implementation from September 2002 to January 2004 and as our Director of Business Implementation from 1997 to August 2002.

William N. Scheffel has served as our Senior Vice President, Specialty Companies since May 2005 and as our Senior Vice President and Controller from December 2003 to May 2005. 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.

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 January 2005. Ms. Wilson previously worked as a consultant for us 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 2006 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 2006 annual meeting of stockholders under “Information about Corporate Governance.” Information concerning our code of ethics will appear in our Proxy Statement for our 2006 annual meeting of stockholders under “Code of Business Conduct and Ethics.”

Item 1A. Risk Factors

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,

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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 that would have required states to estimate improper payments made under their Medicaid and SCHIP programs, report such overpayments to Congress, and, if necessary, take actions to reduce erroneous payments. In October 2005, CMS announced an interim rule under which a CMS contractor will randomly select states for review once every three years to estimate each state’s rate of erroneous payments, the federal share of which the states will be required to return to CMS.

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. The Bush administration has also proposed to reduce total federal funding for the Medicaid program, by $10 billion over the next five years and both the House of Representatives and the Senate have approved budget bills containing Medicaid reductions. Some states, including Texas, have been authorized to implement special measures to accommodate the arrival of large numbers of beneficiaries from Gulf Coast areas evacuated as a result of hurricanes Katrina and Rita, but it is unknown whether these measures will be sufficient to cover the additional Medicaid costs incurred by these states. The newly effective Medicare prescription drug benefit is interrupting prescription drug coverage for many Medicaid beneficiaries, prompting several states to pay for prescription drugs on an emergency basis without any assurance of receiving reimbursement from Medicaid.

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. In recent 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, 2006 and August 31, 2008. 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 one or 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 the Financial Interests of 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 the financial interests of 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;

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• mandate minimum medical expense levels as a percentage of premium 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 such 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 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.

In recent years, CMS has reduced the rates at which states are permitted to reimburse non-state government-owned or operated hospitals for inpatient and outpatient hospital services, with the upper payment limit decreasing to 100% of Medicare payments for comparable services. Any further reductions in this limit could decrease 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.

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We May Incur Significant Increased Costs as a Result of Compliance With New Government Regulations and Our Management Will Be Required to Devote Time to Compliance.

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 this regulatory landscape difficult. For example, our existing programs and systems may not enable us to comply in all respects with recent security regulations. In order to comply with new regulatory requirements, we were required to employ additional or different programs and systems. Further, compliance with new regulations could require additional 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.

In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the New York Stock Exchange, or the NYSE, have imposed various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will continue to devote 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 the effectiveness of 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 requires 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, 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 and Benefits 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, reduce the reimbursement or payment levels for medical services or reduce benefits included in Medicaid coverage. 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, benefits provided or our contract arrangements may seriously harm our operations and financial results.

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

States may administer Medicaid managed care programs pursuant to demonstration programs or required waivers of federal Medicaid standards. Waivers and demonstration programs are generally approved for two-year periods and can be renewed on an ongoing basis if the state applies. We have no control over this renewal

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process. If a state does not renew such a waiver or demonstration program or the Federal government denies a state’s application for renewal, membership in our health plan in the state could decrease and our business could suffer.

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. 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.

In April 2004, the Bush Administration adopted a new policy that seeks to reduce states’ use of 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. The Administration has also proposed to reduce total federal funding for the Medicaid program by $10 billion over the next five years, and both the House and the Senate have approved budget bills containing Medicaid reductions. Some states, including Texas, have been authorized to implement special measures to accommodate the arrival of large numbers of beneficiaries from Gulf Coast areas evacuated as a result of hurricanes Katrina and Rita, but it is unknown whether these measures will be sufficient to cover the additional Medicaid costs incurred by these states. 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, revised cost-sharing requirements for some beneficiaries and requires 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. The new Medicare prescription drug benefit is interrupting the distribution of prescription drugs to many beneficiaries simultaneously enrolled in both Medicaid and Medicare, prompting several states to pay for prescription drugs on an unbudgeted, emergency basis without any assurance of receiving reimbursement from the federal Medicaid program. These expenses may cause some states to divert funds originally intended for other Medicaid services.

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 HMOs 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.

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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

Ineffectiveness of State-operated Systems and Subcontractors Could Adversely Affect Our Business

Our health plans rely on other state-operated systems or sub-contractors to qualify, solicit, educate and assign eligible clients into the health plans. The effectiveness of these state operations and sub-contractors can have a material effect on a health plan’s enrollment in a particular month or over an extended period. When a state implements new programs to determine eligibility, new processes to assign or enroll eligible clients into health plans, or chooses new contractors, there is an increased potential for an unanticipated impact on the overall number of members assigned into the health plans.

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

Our medical expenses include estimates of incurred but not reported (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.

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 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 revenue, 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.

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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. 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.

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.

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;

• 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 2005, for example, we

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acquired Airlogix, Inc., a disease management 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 Arizona, 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.

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.

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If We are Unable to Maintain Relationships With Our Provider Networks, Our Profitability May 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 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 Statement of Financial Accounting Standard No. 123 (revised 2004) “Share Based Payment” (SFAS123R) which would require all companies to measure compensation cost for all share-based payments, including employee stock options, at fair value. In April 2005 the SEC delayed the implementation until the first annual period beginning after June 15, 2005. We are required to and will adopt SFAS 123R on January 1, 2006. The effect of expensing stock options in accordance with the original SFAS 123 is presented in Note 2 of our Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

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.

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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 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.

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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, the majority of 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 and regulatory requirements. Moreover, our acquisition activity requires frequent transitions to or from, and the integration of, various information systems. We regularly upgrade and expand our information systems’ capabilities. If we experience difficulties with the transition to or from information systems or are unable to properly maintain or expand our information systems, we could suffer, among other things, from operational disruptions, loss of existing members and difficulty in attracting new members, regulatory problems and increases in administrative expenses. In addition, our ability to integrate and manage our information systems may be impaired as the result of events outside our control, including acts of nature, such as earthquakes or fires, or acts of terrorists.

We 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.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our corporate office headquarters building is located in St. Louis, Missouri. The real estate we own surrounding this building is adequate to accommodate office expansion needs to support future company growth.

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We operate claims processing facilities in Missouri and Montana. We lease space in each of the states 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

We routinely are subjected to legal proceedings in the normal course of business. While the ultimate resolution of such matters is uncertain, we do not expect the results 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. 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.

	2005 Stock Price				2004 Stock Price
	High		Low		High		Low
First Quarter	$	35.38	$	26.50	$	16.48	$	13.05
Second Quarter		34.38		24.86		19.55		14.68
Third Quarter		37.91		22.60		22.10		17.65
Fourth Quarter		27.76		16.76		30.10		20.43

As of December 31, 2005 there were 51 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.

Issuer Purchases of Equity Securities

In November 2005, our board of directors adopted a stock repurchase program authorizing us to repurchase up to 4,000,000 shares of common stock from time to time on the open market or through privately negotiated transactions. The repurchase program extends through October 31, 2007, but we reserve the right to suspend or discontinue the program at any time. During the year ended December 31, 2005, we did not repurchase any shares through this program. We have established a trading plan with a registered broker to repurchase shares under certain market conditions.

Securities Authorized for Issuance Under Equity Compensation Plans

Information concerning our equity compensation plans will appear in our Proxy Statement for our 2006 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, 2005, 2004 and 2003 and as of December 31, 2005 and 2004 are derived from consolidated financial statements included elsewhere in this filing. The data for the years ended December 31, 2002 and 2001 and as of December 31, 2003, 2002 and 2001 are derived from audited consolidated financial statements not included in this filing.

	Year Ended December 31,
	2005			2004			2003			2002			2001
	(In thousands, except share data)
Statement of Earnings Data:
Revenues:
Premium	$	1,491,899		$	991,673		$	759,763		$	461,030		$	326,184
Service		13,965			9,267			9,967			457			385
Total revenues		1,505,864			1,000,940			769,730			461,487			326,569
Expenses:
Medical costs		1,226,909			800,476			626,192			379,468			270,151
Cost of services		5,851			8,065			8,323			341			329
General and administrative expenses		193,913			127,863			88,288			50,072			37,617
Total operating expenses		1,426,673			936,404			722,803			429,881			308,097
Earnings from operations		79,191			64,536			46,927			31,606			18,472
Other income (expense):
Investment and other income		10,655			6,431			5,160			9,575			3,916
Interest expense		(3,990	)		(680	)		(194	)		(45	)		(362	)
Earnings before income taxes		85,856			70,287			51,893			41,136			22,026
Income tax expense		30,224			25,975			19,504			15,631			9,131
Minority interest		—			—			881			116			—
Net earnings		55,632			44,312			33,270			25,621			12,895
Accretion of redeemable preferred stock		—			—			—			—			(467	)
Net earnings attributable to common stockholders	$	55,632		$	44,312		$	33,270		$	25,621		$	12,428
Net earnings per common share:
Basic	$	1.31		$	1.09		$	0.93		$	0.82		$	2.99
Diluted	$	1.24		$	1.02		$	0.87		$	0.73		$	0.54
Weighted average number of common shares outstanding:
Basic		42,312,522			40,820,909			35,704,426			31,432,080			4,156,198
Diluted		45,027,633			43,616,445			38,422,152			34,932,232			24,058,492
	December 31,
	2005			2004			2003			2002			2001
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	147,358		$	84,105		$	64,346		$	59,656		$	88,867
Investments		180,361			211,070			199,971			89,237			22,288
Total assets		668,030			527,934			362,692			210,327			131,366
Medical claims liabilities		170,514			165,980			106,569			91,181			59,565
Debt		93,147			47,459			8,195			—			—
Total stockholders’ equity		352,048			271,312			220,115			102,183			64,089

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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 under Item 1A. Risk Factors of this Form 10-K.

OVERVIEW

We are a multi-line healthcare enterprise operating in two segments. Our Medicaid Managed Care segment 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). Our Specialty Services segment operates through contracts with our health plans, as well as other healthcare organizations, state programs and other commercial organizations. These specialty services include behavioral health, disease management, nurse triage and treatment compliance. Effective January 2006, our specialty services also include pharmacy benefits management through our acquisition of US Script, Inc.

Our 2005 financial highlights include:

• Year-end Medicaid Managed Care membership of 871,900.

• Revenues of $1.5 billion, a 50% increase over 2004.

• Medicaid and SCHIP health benefits ratio (HBR) of 81.7%, SSI HBR of 97.5%, Specialty Services HBR of 88.1%.

• Medicaid Managed Care general and administrative (G&A) expense ratio of 10.5% and Specialty Services G&A ratio of 35.4%.

• Operating earnings of $79.2 million, a 23% increase over 2004.

• Diluted earning per share of $1.24, a 22% increase over 2004.

• Operating cash flows of $74 million.

Over the last 2 years we have experienced strong growth in our Medicaid Managed Care segment including membership growth of 78%. Highlights of our growth include the following acquisitions or new contracts:

• During the third quarter of 2005 we were awarded Medicaid contracts in Georgia by the Georgia Department of Community Health. Our subsidiary, Peach State Health Plan, Inc., will manage care for a portion of the Medicaid and SCHIP recipients in the Atlanta, Central and Southwest regions. Membership operations are scheduled to commence in 2006.

• Effective May 1, 2005, we acquired certain Medicaid-related assets of SummaCare, Inc. for approximately $30.4 million. The results of operations of this entity are included in our consolidated financial statements beginning May 1, 2005.

• Effective December 1, 2004, we acquired FirstGuard, Inc. and FirstGuard Health Plan, Inc. (FirstGuard), for a purchase price of $96.0 million. The results of operations of this entity are included in our consolidated financial statements beginning December 1, 2004.

• Effective September 1, 2004, we commenced operations under our Exclusive Provider Organization (EPO) contract in Texas providing managed care for SCHIP recipients in rural Texas counties.

• Effective January 1, 2004, we commenced operations in Ohio through the acquisition of the Medicaid-related assets of Family Health Plan, Inc. (FHP) for a purchase price of $6.9 million. The results of operations of this entity are included in our consolidated financial statements beginning January 1, 2004.

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We have also experienced growth in our Specialty Services segment highlighted by the following acquisitions or new contracts:

• In January 2006, we acquired US Script, Inc., a privately held pharmacy benefits manager (PBM) for $40 million. The results of operations of this entity will be included in our consolidated financial statements beginning January 1, 2006.

• Effective July 22, 2005, we acquired AirLogix, Inc., a disease management provider, for a purchase price of approximately $36.2 million. The results of operations of this entity are included in our consolidated financial statements since July 22, 2005.

• Effective July 1, 2005, we began performing under our contract with the State of Arizona to facilitate the delivery of mental health and substance abuse services to behavioral health recipients in Arizona.

• Effective January 1, 2005, we began performing under our contract with the State of Kansas to facilitate the delivery of mental health and substance abuse services to behavioral health recipients in Kansas.

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RESULTS OF OPERATIONS AND KEY METRICS

Summarized comparative financial data for 2005, 2004 and 2003 are as follows ($ in millions):

	2005		2004		2003		% Change 2004-2005		% Change 2003-2004
Premium revenue	$	1,491.9	$	991.7	$	759.7	50.4	%	30.5	%
Service revenue		14.0		9.2		10.0	50.7	%	(7.0	)%
Total revenues		1,505.9		1,000.9		769.7	50.4	%	30.0	%
Medical costs		1,226.9		800.5		626.2	53.3	%	27.8	%
Cost of services		5.9		8.1		8.3	(27.5	)%	(3.1	)%
General and administrative expenses		193.9		127.8		88.3	51.7	%	44.8	%
Earnings from operations		79.2		64.5		46.9	22.7	%	37.5	%
Investment and other income, net		6.6		5.8		5.0	15.9	%	15.8	%
Earnings before income taxes		85.8		70.3		51.9	22.2	%	35.4	%
Income tax expense		30.2		26.0		19.5	16.4	%	33.2	%
Minority interest		—		—		0.9	—	%	—	%
Net earnings	$	55.6	$	44.3	$	33.3	25.5	%	33.2	%
Diluted earnings per common share	$	1.24	$	1.02	$	0.87	21.6	%	17.2	%

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 health plans. 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. Some contracts allow for additional premium related to certain supplemental services provided such as maternity deliveries. 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.

We generate revenues in our Specialty Services segment under contracts with states and local government entities, our health plans and third-party customers. Revenues are recognized when the services are provided or as ratably earned over the covered period of services. For performance-based contracts, we do not recognize revenue subject to refund until data is sufficient to measure performance. Such amounts are recorded as unearned revenue.

Premium and service revenues collected in advance are recorded as unearned revenue. Premium and service revenues 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 payments during the month in which services are provided, the allowance is typically not significant in comparison to total revenues and does not have a material impact on the presentation of our financial condition or results of operations.

We have increased our total revenue each year primarily through 1) membership growth in the Medicaid Managed Care segment, 2) premium rate increases, and 3) growth in our Specialty Services segment.

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1. Membership growth

From December 31, 2003 to December 31, 2005, we increased our membership by 78.1%. The following table sets forth our membership by state in our Medicaid Managed Care segment:

	December 31,
	2005	2004	2003
Indiana	193,300	150,600	119,400
Kansas	113,300	94,200	—
Missouri	36,000	41,200	—
New Jersey	56,500	52,800	54,000
Ohio	58,700	23,800	—
Texas	242,000	244,300	158,400
Wisconsin	172,100	165,800	157,800
Total	871,900	772,700	489,600

The following table sets forth our membership by line of business in our Medicaid Managed Care segment:

	December 31,
	2005	2004	2003
Medicaid	681,100	580,200	411,800
SCHIP	175,900	182,100	68,400
SSI	14,900	10,400	9,400
Total	871,900	772,700	489,600

In 2005, we increased our membership in Ohio through our acquisition of the Medicaid-related assets of SummaCare, Inc. Our membership increased in Indiana, New Jersey and Wisconsin from additions to our provider networks, expansion into SSI in Wisconsin, increases in counties served and growth in the overall number of Medicaid beneficiaries. In Kansas, we increased our membership by eliminating a ceiling on our membership total with the State. Our membership decreased in Missouri and Texas because of more stringent eligibility requirements for the Medicaid and SCHIP programs.

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 FHP. 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.

2. Premium rate increases

In 2005, we received premium rate increases ranging from 0.6% to 8.7%, or 3.2% on a composite basis across our markets. In 2004, we received premium rate increases ranging from 2.3% to 5.3%, or 4.4% on a composite basis across our markets.

3. Specialty Services segment growth

In 2005, we began performing under our behavioral health contracts with the States of Arizona and Kansas. At December 31, 2005, our behavioral health company, Cenpatico, provided behavioral health services to 94,700 members in Arizona, 38,800 members in Kansas and 702,100 members through contracts with our health plans compared to 584,500 members through contracts with our health plans at December 31, 2004. Additionally, in July 2005 we began offering disease management services through our acquisition of AirLogix.

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Operating Expenses

Medical Costs

Our medical costs include payments to physicians, hospitals, and other providers for healthcare and specialty services claims. Medical costs also include estimates of medical expenses incurred but not yet reported, or IBNR, and estimates of the cost to process unpaid claims. 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 HBR 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 HBR for our external membership by member category:

	Year Ended December 31,
	2005		2004		2003
Medicaid and SCHIP	81.7	%	80.4	%	81.7	%
SSI	97.5		93.8		102.5
Specialty Services	88.1		—		—

Our Medicaid and SCHIP HBR increased in 2005 due to our settlement of a lawsuit with Aurora Health Care, Inc., which increased our ratio by 0.3%; and expansion into new markets previously unmanaged by us; which increased our ratio by 1.2%. For example, we experienced higher cost trends in Indiana where we added membership in 2005 as the state expanded their Medicaid managed care program to include all Medicaid and SCHIP enrollees. Our Specialty Services ratio includes the behavioral health contracts in Arizona and Kansas and reflects the State of Arizona’s minimum HBR requirements.

Our Medicaid and SCHIP HBR decreased in 2004 from 2003 due primarily to initiatives to reduce inappropriate emergency room usage and to establish preferred drug lists.

Cost of Services

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.

General and Administrative Expenses

Our general and administrative (G&A) 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. Our major centralized functions are finance, information systems and claims processing. Premium taxes are classified as G&A expenses. G&A expenses increased in 2005 primarily due to expenses for additional facilities and staff to support our growth, especially in Arizona, Georgia, Kansas and Missouri.

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

	Year Ended December 31,
	2005		2004		2003
Medicaid Managed Care	10.5	%	10.7	%	10.3	%
Specialty Services	35.4		52.3		38.2

The decrease in the Medicaid Managed Care G&A expense ratio in 2005 reflects the overall leveraging of our expenses over higher revenues and lower compensation costs related to our performance bonus plans. These factors were partially offset by implementation costs in Georgia of $6.2 million, higher spending on information systems process improvements and increased charitable contributions. Premium taxes totaled $9.8 million in 2005, increasing the ratio by 0.5%.

The increase in the Medicaid Managed Care G&A expense 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 million in 2003 and had the effect of increasing our G&A expense 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 G&A ratio varies depending on the nature of the services provided and will have a higher general and administrative expense ratio than the Medicaid Managed Care segment. The 2005 results reflect the operations of our behavioral health company in Arizona, including $1.5 million in implementation costs, and $0.2 million in Georgia implementation costs. 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 transitioned 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 income from our cash and investments and interest expense on our debt. Investment and other income increased $4.2 million in 2005 as a result of higher average investment balances and an increase in market interest rates. Interest expense increased $3.3 million from increased borrowings under our credit facility and mortgages.

Income Tax Expense

Our effective tax rate in 2005 was 35.2%, compared to 37.0% in 2004. The decrease was primarily due to a lower state income tax expense resulting from the resolution of state income tax examinations and the recognition of deferred tax benefits related to a change in law during the third quarter of 2005. This change was recorded in our operating results in the period known.

Earnings Per Share and Shares Outstanding

Our earnings per share calculations in 2005 reflect higher basic weighted average shares outstanding resulting from the shares issued upon exercise of stock awards and the shares issued for the acquisition of assets from SummaCare, Inc. Our earnings per share calculations in 2004 reflect an increase in the weighted average shares primarily resulting from 6,900,000 common shares sold in August 2003.

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LIQUIDITY AND CAPITAL RESOURCES

We finance our activities primarily through operating cash flows and borrowings under our revolving credit facility. Our operating activities provided cash of $74.0 million in 2005, $99.4 million in 2004 and $56.0 million in 2003. Cash flow from operations in 2005 reflects an increase in premium and related receivables and a $4.5 million increase in medical claims liabilities. The increase in receivables resulted primarily from the timing of delivery receivable collections. The increase in medical claims liabilities, lower than in prior years, reflects the $9.5 million payment made to Aurora Health Care, Inc. to settle a lawsuit, information systems improvements to reduce our claims processing cycle time and the effect of our behavioral health contract in Arizona. During 2004, the increase in operating cash flow was due primarily to continued profitability, increases in membership and increases in medical claims liabilities.

Our investing activities used cash of $56.4 million in 2005, $122.5 million in 2004 and $140.7 million in 2003. During 2005, our investing activities primarily consisted of the acquisitions of AirLogix and certain Medicaid-related assets of SummaCare, Inc. Approximately $34.1 million was paid, net of cash acquired, for AirLogix. Of the total purchase price of approximately $30.4 million paid to SummaCare, $21.4 million was paid in cash and the remaining $9.0 million was paid through the issuance of our common stock. During 2004, our investing activities primarily consisted of the acquisition of FirstGuard. In 2003, the largest component of investing activities related to increases in our investment portfolio as a result of our stock offering. 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, 2005, our investment portfolio consisted primarily of fixed-income securities with an average duration of 1.6 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.

We spent $26.9 million, $14.7 million and $6.6 million in 2005, 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. We anticipate spending $43 million on additional capital expenditures in 2006 primarily related to market expansions and system upgrades, and approximately $20 million for the acquisition of additional property related to our redevelopment agreement discussed below.

Effective December 30, 2005, we executed an agreement with the City of Clayton, Missouri, a suburb of St. Louis, for the redevelopment of certain properties surrounding our corporate offices. Our primary purpose for the agreement is to accommodate office expansion needs for future company growth. The total scope of the project includes building two new office towers and street-level retail space. We plan to occupy a portion of those towers. The total expected cost of the project is approximately $190 million. It is not our intent to serve as developer of the project; we expect a commercial real estate developer to fund the majority of the project cost.

During 2005, we acquired $5.0 million of property under capital leases. This property consists primarily of the land and building related to our new claims processing facility in Montana. 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 is being used for the 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. The mortgage agreements bear interest at the prevailing prime rate less .75%. At December 31, 2005, our mortgages bore interest at 6.5%.

Our financing activities provided cash of $45.7 million in 2005, $42.8 million in 2004 and $89.4 million in 2003. During 2005 and 2004, our financing activities primarily related to proceeds from borrowings under our

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credit facility. These borrowings were used primarily for our investing activities in conjunction with the acquisition of new business. 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.

At December 31, 2005, we had working capital, defined as current assets less current liabilities, of $58.0 million as compared to $22.1 million at December 31, 2004. 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 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 short-term capital requirements as needed.

Cash, cash equivalents and short-term investments were $204.1 million at December 31, 2005 and $178.4 million at December 31, 2004. Long-term investments were $146.2 million at December 31, 2005 and $139.0 million at December 31, 2004, including restricted deposits of $22.6 million and $22.2 million, respectively. At December 31, 2005, cash and investments held by our unregulated entities totaled $27.7 million while cash and investments held by our regulated entities totaled $322.6 million.

On September 9, 2005, we executed an amendment to our Revolving Credit Agreement dated September 14, 2004, with several lending institutions, for which LaSalle Bank National Association serves as administrative agent and co-lead arranger. The amendment increased the total amount available under the credit agreement to $200 million from $100 million, including a sub-facility for letters of credit in an aggregate amount up to $50 million. In addition, the lending institutions released our prior grant of a security interest in the outstanding common stock and membership interests of each of our subsidiaries. The credit agreement is now an unsecured facility. Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. Under our current capital structure, borrowings under the agreement bear interest at LIBOR plus 1.25%. This rate may change under differing capital structures over the life of the agreement. The agreement contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios, maximum debt-to-EBITDA ratios and minimum tangible net worth. The agreement will expire on September 9, 2010 or on an earlier date in the instance of a default as defined in the agreement. As of February 23, 2006, we had $109.0 million in borrowings outstanding under the agreement and $15.0 million in letters of credit outstanding, leaving an availability of $76.0 million. As of December 31, 2005, we were in compliance with all covenants.

We have filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission, or the SEC, covering the issuance of up to $300 million of securities including common stock and debt securities. No securities have been issued under the shelf registration. We may publicly offer securities from time-to-time at prices and terms to be determined at the time of the offering.

Based on our operating plan, we expect that our available cash, cash equivalents and investments, cash from our operations and cash available under our credit facility will be sufficient to finance our operations and capital expenditures for at least 12 months from the date of this filing.

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Our principal contractual obligations at December 31, 2005 consisted of medical claims liabilities, debt, operating leases and purchase obligations. Our debt consists of borrowings from our credit facility, mortgages and capital leases. The purchase obligations consist primarily of software purchase and maintenance contracts in addition to agreements pertaining to the 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	$	170,514	$	170,514	$	—	$	—	$	—
Debt		93,147		699		1,376		86,822		4,250
Operating leases		46,515		9,210		16,120		11,444		9,741
Purchase obligations		15,509		9,626		5,783		100		—
Total	$	325,685	$	190,049	$	23,279	$	98,366	$	13,991

REGULATORY CAPITAL AND DIVIDEND RESTRICTIONS

As managed care organizations, certain of our 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, 2005, our regulated subsidiaries had aggregate statutory capital and surplus of $183.5 million, compared with the required minimum aggregate statutory capital and surplus requirements of $87.7 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, 2005, our Georgia, Indiana, New Jersey, Ohio, Texas and Wisconsin health plans were in compliance with risk-based capital requirements enacted in these states. If adopted by Kansas or Missouri, risk-based capital requirements may increase the minimum capital required for these subsidiaries. We continue to monitor the requirements in Kansas and Missouri 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 FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share Based Payment,” (SFAS 123R). SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R 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. We will adopt SFAS 123R on January 1, 2006 using the modified-prospective method, and expect the 2006 effect to decrease diluted earnings per share by approximately $0.15.

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CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are more fully described in Note 2 to our 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 (inventory), 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.

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, 2005 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	)%	$	26,500		(3	)%	$	(7,000	)
(2	)		17,500		(2	)		(4,700	)
(1	)		8,600		(1	)		(2,400	)
1			(8,500	)	1			2,400
2			(16,800	)	2			4,800
3			(24,900	)	3			7,200

(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 our 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 $1.1 million for the year ended December 31, 2005. 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.

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

	Year Ended December 31,
	2005			2004			2003
Balance, January 1	$	165,980		$	106,569		$	91,181
Acquisitions		—			24,909			335
Incurred related to:
Current year		1,244,600			816,418			645,482
Prior years		(17,691	)		(15,942	)		(19,290	)
Total incurred		1,226,909			800,476			626,192
Paid related to:
Current year		1,075,204			681,780			544,309
Prior years		147,171			84,194			66,830
Total paid		1,222,375			765,974			611,139
Balance, December 31	$	170,514		$	165,980		$	106,569
Claims inventory, December 31		255,000			150,000			131,000
Days in claims payable (a)		45.4			66.5			59.0

(a) Days in claims payable 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. Days in claims payable decreased in 2005 due to the settlement of a lawsuit with Aurora Health Care, Inc., information systems improvements to reduce our claims processing cycle time and the effect of our behavioral health contract in Arizona. Acquisitions in the last quarter of 2004 contributed to an increase in our 2004 days in claims payable calculation.

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

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 5% 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, 2005 will be known by the end of 2006.

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, 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 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 2003 that have resulted in our recording of intangible assets. These intangible assets primarily consist of purchased contract rights, provider contracts, non-compete agreements and

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goodwill. At December 31, 2005 we have $157.3 million of goodwill and $17.4 million of other intangible assets. Purchased contract rights are amortized using the straight-line method over periods ranging from 5 to 15 years. Provider contracts are amortized using the straight-line method over periods ranging from 5 to 10 years. Non-compete agreements are amortized using the straight-line method over 5 years, the period of the agreement.

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 or goodwill may be permanently impaired, the potential impairment will be measured based upon the difference between the carrying amount of the intangible asset or 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 every year during the fourth quarter 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, 2005.

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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 Item 1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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, including the factors set forth in Item 1A. “Risk 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

INVESTMENTS

As of December 31, 2005, we had short-term investments of $56.7 million and long-term investments of $146.2 million, including restricted deposits of $22.6 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. Due to the nature of the states’ requirements, these investments are classified as long-term regardless of the contractual maturity date. 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, 2005, the fair value of our fixed income investments would decrease by approximately $3.1 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 our margin protection program and 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 in recent years. 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, 2005		June 30, 2005		September 30, 2005 (1)		December 31, 2005 (2)
Total revenues	$	332,376	$	349,628	$	400,642	$	423,218
Earnings from operations		21,318		22,320		15,140		20,413
Earnings before income taxes		22,876		24,209		16,768		22,003
Net earnings	$	14,411	$	15,249	$	12,106	$	13,866
Per share data:
Basic earnings per common share	$	0.35	$	0.36	$	0.28	$	0.32
Diluted earnings per common share	$	0.32	$	0.34	$	0.27	$	0.31
Period end membership		777,300		825,400		847,700		871,900

(1) Includes $4,500 pre-tax expense related to the settlement with Aurora Health Care, Inc. and $2,540 pre-tax expense related to our start up costs in Georgia.

(2) Includes $2,873 pre-tax expense related to our start up costs in Georgia.

	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

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 of December 31, 2005. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes

46

that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2005, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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) and 15d-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, 2005. Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Management has excluded AirLogix, Inc. from its assessment of internal control over financial reporting as of December 31, 2005 because AirLogix was acquired by the Company in a purchase business combination effective July 22, 2005. AirLogix is a wholly owned subsidiary whose total assets and total revenues represent 6.6% and 0.5%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2005.

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, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Centene Corporation:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Centene Corporation (the Company) maintained effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (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 an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit 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. Our audit included 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 considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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 (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance 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 (3) 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.

In our opinion, management’s assessment that Centene Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by COSO. Also, in our opinion, Centene Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by COSO.

Centene Corporation acquired AirLogix, Inc. during 2005, and management excluded from its assessment of the effectiveness of Centene Corporation’s internal control over financial reporting as of December 31, 2005, AirLogix, Inc.’s internal control over financial reporting associated with total assets of $44.0 million and total revenues of $8.2 million included in the consolidated financial statements of Centene Corporation and subsidiaries as of and for the year ended December 31, 2005. Our audit of internal control over financial reporting of Centene Corporation also excluded an evaluation of the internal control over financial reporting of AirLogix, Inc.

48

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Centene Corporation and subsidiaries as of December 31, 2005, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for the year ended December 31, 2005, and our report dated February 23, 2006, expressed an unqualified opinion on those consolidated financial statements.

/s/    KPMG LLP

St. Louis, Missouri

February 23, 2006

Item 9B. Other Information

None.

49

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 2006 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

Pursuant to General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, information regarding our executive officers is provided in Item 1 of Part I of this Annual Report on Form 10-K under the caption “Executive Officers.”

Item 11. Executive Compensation

Information concerning executive compensation will appear in our Proxy Statement for our 2006 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 2006 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 2006 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 2006 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 2006 annual meeting of stockholders under “Independent Auditor Fees.” This portion of our Proxy Statement is incorporated herein by reference.

50

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
Reports of Independent Registered Public Accounting Firms	52
Consolidated Balance Sheets as of December 31, 2005 and 2004	54
Consolidated Statements of Earnings for the Years Ended December 31, 2005, 2004 and 2003	55
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003	56
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003	57
Notes to Consolidated Financial Statements	58
2. Financial Statement Schedules
None
3. Exhibits
The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this filing.

51

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

The Board of Directors and Shareholders

Centene Corporation.:

We have audited the accompanying consolidated balance sheet of Centene Corporation and subsidiaries as of December 31, 2005 and the related consolidated statements of earnings, stockholders’ equity, and cash flows for the year ended December 31, 2005. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Centene Corporation and subsidiaries as of December 31, 2005 and the results of their operations and their cash flows for the year ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of internal control over financial reporting of Centene Corporation as of December 31, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 23, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/    KPMG LLP

St. Louis, Missouri

February 23, 2006

52

To the Board of Directors and Stockholders of Centene Corporation:

In our opinion, the accompanying consolidated balance sheet as of December 31, 2004 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 the results of their operations and their cash flows for each of the two 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.

/s/    PricewaterhouseCoopers LLP

St. Louis, Missouri

February 24, 2005

53

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	December 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	147,358		$	84,105
Premium and related receivables, net of allowances of $343 and $462, respectively		44,108			31,475
Short-term investments, at fair value (amortized cost $56,863 and $94,442, respectively)		56,700			94,283
Other current assets		24,439			14,429
Total current assets		272,605			224,292
Long-term investments, at fair value (amortized cost $126,039 and $117,177, respectively)		123,661			116,787
Restricted deposits, at fair value (amortized cost $22,821 and $22,295, respectively)		22,555			22,187
Property, software and equipment, net		67,199			43,248
Goodwill		157,278			101,631
Other intangible assets, net		17,368			14,439
Other assets		7,364			5,350
Total assets	$	668,030		$	527,934
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Medical claims liabilities	$	170,514		$	165,980
Accounts payable and accrued expenses		29,790			31,737
Unearned revenue		13,648			3,956
Current portion of long-term debt and notes payable		699			486
Total current liabilities		214,651			202,159
Long-term debt		92,448			46,973
Other liabilities		8,883			7,490
Total liabilities		315,982			256,622
Stockholders’ equity:
Common stock, $.001 par value; authorized 100,000,000 shares; issued and outstanding 42,988,230 and 41,316,122 shares, respectively		43			41
Additional paid-in capital		191,840			165,391
Accumulated other comprehensive income:
Unrealized loss on investments, net of tax		(1,754	)		(407	)
Retained earnings		161,919			106,287
Total stockholders’ equity		352,048			271,312
Total liabilities and stockholders’ equity	$	668,030		$	527,934

See notes to consolidated financial statements.

54

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except share data)

	Year Ended December 31,
	2005			2004			2003
Revenues:
Premium	$	1,491,899		$	991,673		$	759,763
Service		13,965			9,267			9,967
Total revenues		1,505,864			1,000,940			769,730
Expenses:
Medical costs		1,226,909			800,476			626,192
Cost of services		5,851			8,065			8,323
General and administrative expenses		193,913			127,863			88,288
Total operating expenses		1,426,673			936,404			722,803
Earnings from operations		79,191			64,536			46,927
Other income (expense):
Investment and other income		10,655			6,431			5,160
Interest expense		(3,990	)		(680	)		(194	)
Earnings before income taxes		85,856			70,287			51,893
Income tax expense		30,224			25,975			19,504
Minority interest		—			—			881
Net earnings	$	55,632		$	44,312		$	33,270
Earnings per share:
Basic earnings per common share	$	1.31		$	1.09		$	0.93
Diluted earnings per common share	$	1.24		$	1.02		$	0.87
Weighted average number of shares outstanding:
Basic		42,312,522			40,820,909			35,704,426
Diluted		45,027,633			43,616,445			38,422,152

See notes to consolidated financial statements.

55

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, 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
Net earnings	—		—		—		—			55,632			55,632
Change in unrealized investment losses, net of $(801) tax	—		—		—		(1,347	)		—			(1,347	)
Comprehensive earnings													54,285
Common stock issued for acquisitions	318,735		1		8,990		—			—			8,991
Common stock issued for stock options and employee stock purchase plan	1,353,373		1		6,016		—			—			6,017
Stock compensation expense	—		—		4,974		—			—			4,974
Tax benefits related to stock options	—		—		6,469		—			—			6,469
Balance, December 31, 2005	42,988,230	$	43	$	191,840	$	(1,754	)	$	161,919		$	352,048

See notes to consolidated financial statements.

56

CENTENE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2005			2004			2003
Cash flows from operating activities:
Net earnings	$	55,632		$	44,312		$	33,270
Adjustments to reconcile net earnings to net cash provided by operating activities—
Depreciation and amortization		13,069			10,014			6,448
Tax benefits related to stock options		6,469			3,316			2,366
Stock compensation expense		4,974			650			188
Minority interest		—			—			(881	)
Loss (gain) on sale of investments		70			(138	)		(1,646	)
Loss on disposal of property and equipment		454			—			102
Deferred income taxes		1,786			(1,638	)		772
Changes in assets and liabilities—
Premium and related receivables		(10,305	)		(425	)		(2,364	)
Other current assets		(6,177	)		(786	)		(3,180	)
Other assets		(525	)		(728	)		223
Medical claims liabilities		4,534			34,501			15,053
Unearned revenue		8,182			283			3,673
Accounts payable and accrued expenses		(4,215	)		9,951			1,531
Other operating activities		100			93			444
Net cash provided by operating activities		74,048			99,405			55,999
Cash flows from investing activities:
Purchase of property, software and equipment		(26,909	)		(25,009	)		(19,162	)
Purchase of investments		(150,444	)		(254,358	)		(435,282	)
Sales and maturities of investments		176,387			243,623			319,564
Acquisitions, net of cash acquired		(55,485	)		(86,739	)		(5,861	)
Net cash used in investing activities		(56,451	)		(122,483	)		(140,741	)
Cash flows from financing activities:
Proceeds from issuance of common stock		—			—			81,313
Proceeds from exercise of stock options		5,621			4,066			1,145
Proceeds from borrowings		45,000			45,860			8,581
Reduction of long-term debt and notes payable		(4,552	)		(6,596	)		(386	)
Other financing activities		(413	)		(493	)		(1,221	)
Net cash provided by financing activities		45,656			42,837			89,432
Net increase in cash and cash equivalents		63,253			19,759			4,690
Cash and cash equivalents, beginning of period		84,105			64,346			59,656
Cash and cash equivalents, end of period	$	147,358		$	84,105		$	64,346
Interest paid	$	3,291		$	494		$	176
Income taxes paid	$	31,287		$	20,518		$	19,935
Supplemental schedule of non-cash investing and financing activities:
Common stock issued for acquisitions	$	8,991		$	—		$	—
Property acquired under capital leases	$	5,026		$	—		$	—

See notes to consolidated financial statements.

57

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 healthcare 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 and states, to provide specialty services including behavioral health, disease management, nurse triage, pharmacy benefits management 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 and stockholders’ equity amounts have been restated to reflect these stock splits and the increase in authorized shares.

2. 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.

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

58

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 includes 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 5 to 15 years. Provider contracts are amortized using the straight-line method over periods ranging from 5 to 10 years. Non-compete agreements are amortized using the straight line method over 5 years, the period of the agreement.

Goodwill is reviewed annually during the fourth quarter for impairment. In addition, the Company performs an impairment analysis of other intangible assets based on the occurrence of other factors. Such factors 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 intangible assets 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 reported but not yet paid (inventory), estimates for claims incurred but not yet received (IBNR) 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, 2005; however, actual claim payments may differ from established estimates.

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

59

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 under contracts with state and local government entities, our health plans and third-party customers. Revenues for services are recognized when the services are provided or as ratably earned over the covered period of services. For performance-based contracts, the Company does not recognize revenue subject to refund until data is sufficient to measure performance. Such amounts are recorded as unearned revenue.

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. Activity in the allowance for uncollectible accounts for the years ended December 31 is summarized below:

	2005			2004			2003
Allowances, beginning of year	$	462		$	607		$	219
Amounts charged to expense		80			407			472
Write-offs of uncollectible receivables		(199	)		(552	)		(84	)
Allowances, end of year	$	343		$	462		$	607

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, 2006 and August 31, 2008 are expected to be renewed. Contracts with the states of Indiana, Kansas, Texas and Wisconsin each accounted for 18%, 12%, 22% and 23%, respectively, of the Company’s revenues for the year ended December 31, 2005.

Reinsurance

Centene has purchased reinsurance from third parties to cover eligible healthcare services. The current reinsurance program covers 90% of inpatient healthcare expenses in excess of annual deductibles of $300 per member, up to a lifetime maximum of $2,000. Centene’s Medicaid Managed Care subsidiaries are responsible for inpatient charges in excess of an average daily per diem.

Reinsurance recoveries were $4,014, $3,730, and $5,345, in 2005, 2004, and 2003, respectively. Reinsurance expenses were approximately $4,105, $6,724, and $6,185 in 2005, 2004, and 2003, 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.

Interest expense relates to borrowings under our credit facility, mortgage interest, interest on capital leases 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.

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Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of the tax rate change.

Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be realized. In determining if a deductible temporary difference or net operating loss can be realized, the Company considers future reversals of existing taxable temporary differences, future taxable income, taxable income in prior carryback periods and tax planning strategies.

Stock Based Compensation

The Company accounts for stock based compensation plans under APB Opinion No. 25 “Accounting for Stock Issued to Employees.” 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 following table illustrates the effect on net earnings and earnings per share if a fair value based method applied to all awards.

	2005			2004			2003
Net earnings	$	55,632		$	44,312		$	33,270
Stock-based employee compensation expense included in net earnings, net of related tax effects		3,084			403			117
Stock-based employee compensation expense determined under fair value based method, net of related tax effects		(11,988	)		(3,893	)		(2,378	)
Pro forma net earnings	$	46,728		$	40,822		$	31,009
Basic earnings per common share:
As reported	$	1.31		$	1.09		$	0.93
Pro forma		1.10			1.00			0.87
Diluted earnings per common share:
As reported	$	1.24		$	1.02		$	0.87
Pro forma		1.05			0.94			0.81

In October 2005 the Compensation Committee approved the immediate and full acceleration of vesting of 260,000 “out-of-the-money” stock options to certain employees. These employees did not include any of the Company’s executive officers or other employees at Vice President level or above. Each stock option issued as a part of these grants has an exercise price greater than the closing price per share on the date of the Compensation Committee’s action. The purpose of the acceleration is to enable the Company to avoid recognizing compensation expense associated with these options in future periods in our consolidated statements of earnings, as a result of SFAS 123R. The pre-tax charge to be avoided totals approximately $3.0 million which would have been recognized over the years 2006, 2007, 2008 and 2009. This amount is reflected in the pro forma disclosures included above. The options that have been accelerated have an exercise price in excess of the current market value of our common stock, and, accordingly, the Compensation Committee determined that the expense savings outweighs the objective of incentive compensation and retention.

Additional information regarding the stock option plans is included in Note 12.

Reclassifications

Certain amounts in the consolidated financial statements have been reclassified to conform to the 2005 presentation. These reclassifications have no effect on net earnings or stockholders’ equity as previously reported.

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Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share Based Payment,” (SFAS 123R). SFAS 123R establishes the accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires public companies 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. The Company will adopt SFAS 123R effective January 1, 2006, using the modified-prospective method, and expects the 2006 effect to decrease diluted earnings per share by approximately $0.15.

3. Acquisitions

AirLogix

Effective July 22, 2005, the Company acquired AirLogix, Inc., a disease management provider. The Company paid approximately $36,200 in cash and related transaction costs. If certain performance criteria are achieved, additional consideration of up to $5,000 may be paid. The results of operations for AirLogix are included in the consolidated financial statements since July 22, 2005.

The preliminary purchase price allocation resulted in estimated identified intangible assets of $5,000 and associated deferred tax liabilities of $1,900, and goodwill of approximately $30,100. The identifiable intangible assets have an estimated useful life of five years. The acquired goodwill is not deductible for income tax purposes. Pro forma disclosures related to the acquisition have been excluded as immaterial.

SummaCare

Effective May 1, 2005, the Company acquired certain Medicaid-related assets from SummaCare, Inc. for a purchase price of approximately $30,400. The purchase price and related transaction costs consisted of approximately $21,400 in cash and 318,735 shares of common stock valued at approximately $9,000. The cost to acquire the Medicaid-related assets has been preliminarily allocated to the assets acquired and liabilities assumed according to estimated fair values. The results of operations for SummaCare are included in the consolidated financial statements since May 1, 2005.

The preliminary purchase price allocation resulted in identified intangible assets of $550, representing purchased contract rights and provider contracts and goodwill of approximately $29,900. The identified intangible assets are being amortized over periods ranging from 5 to 10 years. The acquired goodwill is deductible for income tax purposes. Pro forma disclosures related to the acquisition have been excluded as immaterial.

FirstGuard

The Company purchased FirstGuard, Inc. and FirstGuard Health Plan, Inc. from Swope Community Enterprises (Swope) effective December 1, 2004. Centene paid $96,020 in cash and related transaction costs. 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 estimated fair value of the net tangible assets acquired by approximately $91,920. The Company has allocated the excess purchase price over the fair value of the net tangible assets acquired to identifiable intangible assets of $7,800, representing purchased contract rights and associated deferred tax liabilities of $2,977, and goodwill of approximately

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$87,097. The purchased contract rights have an estimated useful life ranging from 10 to 15 years. The acquired goodwill is not deductible for income tax purposes. The final estimate of the fair value of the tangible assets/(liabilities) as of the acquisition date 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		(7,057	)
Due to seller		(28,741	)
Net tangible assets acquired	$	4,100

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 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 contracts 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 $3,315. The goodwill is not deductible for tax purposes.

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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.

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.

4. 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, 2005 consist of the following:

	December 31, 2005
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	38,648	$	32	$	(660	)	$	38,020
Corporate securities		98,508		20		(1,368	)		97,160
State and municipal securities		58,446		18		(849	)		57,615
Life insurance contracts		10,121		—		—			10,121
Total	$	205,723	$	70	$	(2,877	)	$	202,916

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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The Company monitors investments for other than temporary impairment. Certain investments have experienced a decline in market value due to changes in market interest rates. Based on the credit quality of the investments and our ability to hold these investments to recovery (which may be maturity), no other than temporary impairment has been recorded. Investments in a gross unrealized loss position at December 31, 2005 are as follows:

	Amortized Cost		Less Than 12 Months					12 Months or More					Total
			Unrealized Losses			Market Value		Unrealized Losses			Market Value		Unrealized Losses			Market Value
Corporate	$	67,549	$	(313	)	$	26,151	$	(1,055	)	$	40,030	$	(1,368	)	$	66,181
Government		36,472		(110	)		13,309		(549	)		22,504		(659	)		35,813
Municipal		53,343		(196	)		27,646		(654	)		24,847		(850	)		52,493
Total	$	157,364	$	(619	)	$	67,106	$	(2,258	)	$	87,381	$	(2,877	)	$	154,487

Investments in a gross unrealized loss position at December 31, 2004 are as follows:

	Amortized Cost		Less Than 12 Months					12 Months or More					Total
			Unrealized Losses			Market Value		Unrealized Losses			Market Value		Unrealized Losses			Market Value
Corporate	$	67,079	$	(477	)	$	66,602	$	—		$	—	$	(477	)	$	66,602
Government		52,087		(319	)		51,768		—			—		(319	)		51,768
Municipal		46,284		(290	)		43,555		(46	)		2,393		(336	)		45,948
Total	$	165,450	$	(1,086	)	$	161,925	$	(46	)	$	2,393	$	(1,132	)	$	164,318

The contractual maturities of short-term and long-term investments and restricted deposits as of December 31, 2005, are as follows:

	Investments				Restricted Deposits
	Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
One year or less	$	56,863	$	56,700	$	16,681	$	16,532
One year through five years		112,623		110,311		5,310		5,177
Five years through ten years		13,416		13,350		830		846
Total	$	182,902	$	180,361	$	22,821	$	22,555

The contractual maturities 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.

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

	2005			2004			2003
Gross realized gains	$	—		$	861		$	1,859
Gross realized losses		(70	)		(723	)		(213	)
Net realized (losses) gains	$	(70	)	$	138		$	1,646

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 $22,555 and $22,187 were deposited or pledged to state agencies by Centene’s managed care subsidiaries at December 31, 2005 and 2004, respectively. These investments are classified as long-term restricted deposits in the consolidated financial statements due to the nature of the states’ requirements.

5. Property, Software and Equipment

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

	2005			2004
Building	$	25,376		$	13,649
Computer software		21,510			10,976
Land		11,815			13,129
Computer hardware		11,717			7,052
Furniture and office equipment		10,163			6,197
Leasehold improvements		6,125			4,321
		86,706			55,324
Less accumulated depreciation		(19,507	)		(12,076	)
Property, software and equipment, net	$	67,199		$	43,248

Depreciation expense for the years ended December 31, 2005, 2004 and 2003 was $8,134, $5,149 and $3,469, respectively.

6. Intangible Assets

Goodwill balances and the changes therein are as follows:

	Medicaid Managed Care			Specialty Services			Total
Balance as of December 31, 2003	$	9,171		$	3,895		$	13,066
Acquisitions		89,988			(124	)		89,864
Deferred tax asset recognition		(1,268	)		(31	)		(1,299	)
Balance as of December 31, 2004		97,891			3,740			101,631
Acquisitions		30,158			30,033			60,191
Deferred tax asset recognition		(4,159	)		(385	)		(4,544	)
Balance as of December 31, 2005	$	123,890		$	33,388		$	157,278

Goodwill reductions in 2005 and 2004 were related to the recognition of acquired net operating loss carryforward benefits.

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Other intangible assets at December 31 consist of the following:

							Weighted Average Life in Years
	2005			2004			2005	2004
Purchased contract rights	$	14,543		$	7,318		11.1	7.2
Provider contracts		3,021			1,900		10.0	10.0
Non-compete agreements		300			300		5.0	5.0
Estimated identifiable intangibles		5,000			8,000		5.0	10.0
Other intangible assets		22,864			17,518		10.0	7.8
Less accumulated amortization:
Purchased contract rights		(4,305	)		(2,611	)
Provider contracts		(654	)		(342	)
Non-compete agreements		(120	)		(60	)
Estimated identifiable intangibles		(417	)		(66	)
Total accumulated amortization		(5,496	)		(3,079	)
Other intangible assets, net	$	17,368		$	14,439

Amortization expense was $2,416, $1,481 and $986 for the years ended December 31, 2005, 2004 and 2003, respectively. The estimated amortization expense for 2006, 2007, 2008, 2009 and 2010, assuming no further acquisitions, is approximately $2,800, $2,800, $2,500, $2,200 and $1,700, respectively.

7. Income Taxes

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

	2005		2004			2003
Current provision:
Federal	$	26,884	$	23,652		$	16,776
State and local		1,661		3,038			2,464
Total current provision		28,545		26,690			19,240
Deferred provision		1,679		(715	)		264
Total provision for income taxes	$	30,224	$	25,975		$	19,504

The reconciliation of the tax provision at the U.S. Federal Statutory Rate to the provision for income taxes is as follows:

	2005			2004			2003
Tax provision at the U.S. federal statutory rate	$	30,050		$	24,600		$	18,163
State income taxes, net of federal income tax benefit		1,230			1,975			1,602
Other, net		(1,056	)		(600	)		(261	)
Income tax expense	$	30,224		$	25,975		$	19,504

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The tax effects of temporary differences which give rise to deferred tax assets and liabilities are presented below for the years ended December 31:

	2005			2004
Deferred tax assets:
Medical claims liabilities	$	1,383		$	5,086
Unearned premium and other deferred revenue		4,890			304
Unrealized loss on investments		1,053			312
Federal net operating loss carry forward		5,452			4,219
State net operating loss carry forward		3,205			1,845
Stock compensation		2,126			243
Other		2,675			3,542
Total gross deferred tax assets		20,784			15,551
Deferred tax liabilities:
Intangible assets		6,202			4,286
Prepaid assets		1,621			1,027
Depreciation and amortization		4,864			839
Total gross deferred tax liabilities		12,687			6,152
Valuation allowance		(2,772	)		(6,064	)
Net deferred tax assets	$	5,325		$	3,335

The Company’s deferred tax assets include federal and state net operating losses (NOLs), the majority of which were acquired in business combinations. Accordingly, the total and annual deduction for those NOLs is limited by tax law. The federal NOLs expire between the years 2011 and 2024 and the state NOLs expire between the years 2006 and 2026. Valuation allowances are recorded for those NOLs the Company believes are more-likely-than-not to expire unused. During 2005 and 2004, the Company recorded valuation allowance reductions of $5,340 and $1,745, respectively and recorded additional valuation allowances of $2,048 and $255, respectively. The 2005 and 2004 tax provision included $790 and $273 of the valuation allowance reductions. The remainder was recorded as a reduction of goodwill and other intangible assets. The net deferred tax assets and liabilities are reflected on the consolidated balance sheets in other current assets and other liabilities.

8. Medical Claims Liabilities

The change in medical claims liabilities is summarized as follows:

	2005			2004			2003
Balance, January 1	$	165,980		$	106,569		$	91,181
Acquisitions		—			24,909			335
Incurred related to:
Current year		1,244,600			816,418			645,482
Prior years		(17,691	)		(15,942	)		(19,290	)
Total incurred		1,226,909			800,476			626,192
Paid related to:
Current year		1,075,204			681,780			544,309
Prior years		147,171			84,194			66,830
Total paid		1,222,375			765,974			611,139
Balance, December 31	$	170,514		$	165,980		$	106,569

Changes in estimates of incurred claims for prior years were attributable to favorable development, including changes in medical utilization and cost trends.

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The Company had reinsurance recoverables related to medical claims liabilities of $261 and $953 at December 31, 2005 and 2004, respectively, included in premium and related receivables.

9. Debt

Debt consists of the following at December 31:

	2005			2004
Revolving line of credit	$	75,000		$	34,000
Mortgage notes payable		12,974			13,459
Capital leases		5,173			—
Total debt		93,147			47,459
Less current maturities		(699	)		(486	)
Long-term debt	$	92,448		$	46,973

In September 2005, the Company executed an amendment to the five-year Revolving Credit Agreement dated September 14, 2004 with various financial institutions, for which LaSalle Bank National Association serves as administrative agent and co-lead arranger. The amendment increased the total amount available under the credit agreement to $200,000 from $100,000, including a sub-facility for letters of credit in an aggregate amount up to $50,000. In addition, under the amendment the lending institutions released the Company’s prior grant of a security interest in the outstanding common stock and membership interests of each of the Company’s subsidiaries. The credit agreement is now an unsecured facility. Borrowings under the agreement bear interest based upon LIBOR rates, the Federal Funds Rate or the Prime Rate. There is a commitment fee on the unused portion of the agreement that ranges from 0.225% to 0.35% depending on the total debt-to-EBITDA ratio. The agreement contains non-financial and financial covenants, including requirements of minimum fixed charge coverage ratios, maximum debt-to-EBITDA ratios and minimum tangible net worth. The agreement will expire in September 2010 or on an earlier date in the instance of a default as defined in the agreement. At December 31, 2005, the outstanding borrowings totaled $75,000 bearing interest at a weighted average composite of 5.7% and outstanding letters of credit totaled $15,000.

Mortgage notes payable consists of two mortgages collateralized by the Company’s headquarters property. The mortgages bear interest at the prevailing prime rate less .75%. (6.5% at December 31, 2005). The respective properties had a net book value of $21,858 at December 31, 2005. The mortgages include a financial covenant requiring a minimum rolling twelve-month debt service coverage ratio. As of December 31, 2005, the Company was in compliance with this covenant.

Capital leases consist of office equipment and building facilities with a weighted average composite interest rate of 5.4%.

Aggregate maturities for the Company’s debt are as follows:

2006	$	699
2007		684
2008		692
2009		638
2010		86,184
Thereafter		4,250
Total	$	93,147

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10. Stockholders’ Equity

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

The Company has 10,000,000 authorized shares of preferred stock at $.001 par value. At December 31, 2005, there were no preferred shares outstanding.

In November 2005, the Company’s board of directors adopted a stock repurchase program authorizing the Company to repurchase up to 4,000,000 shares of common stock from time to time on the open market or through privately negotiated transactions. The repurchase program extends through October 31, 2007 but the Company reserves the right to suspend or discontinue the program at anytime. During the year ended December 31, 2005, the Company did not repurchase any shares through this program.

11. Statutory Capital Requirements and Dividend Restrictions

Various state laws require Centene’s regulated subsidiaries to maintain minimum capital levels specified by each state and restrict the amount of dividends that may be paid without prior regulatory approval. At December 31, 2005 and 2004, Centene’s subsidiaries had aggregate statutory capital and surplus of $183,500 and $123,600, respectively, compared with the required minimum aggregate statutory capital and surplus of $87,700 and $65,100, respectively. The Company received dividends from its managed care subsidiaries of $7,000, $0 and $6,000 during the years ended December 31, 2005, 2004 and 2003, respectively.

12. 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 the date of grant. The Plans have 790,769 shares available for future awards. Options granted generally vest over a three or 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:

	2005					2004					2003
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Options outstanding, beginning of year		6,183,016		$	11.78		5,438,058		$	6.91		4,665,420		$	3.13
Granted		775,500			26.41		2,006,500			20.86		1,992,578			13.00
Exercised		(1,315,743	)		3.70		(1,003,098	)		3.76		(877,786	)		1.13
Canceled		(369,202	)		14.07		(258,444	)		10.63		(342,154	)		5.77
Options outstanding, end of year		5,273,571		$	15.79		6,183,016		$	11.78		5,438,058		$	6.91
Weighted average remaining life		7.7 years					7.8 years					7.6 years
Weighted average fair value of options granted	$	13.77				$	12.25				$	7.63

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The following table summarizes information about options outstanding as of December 31, 2005:

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	519,950	4.0	$	0.56	505,850	$	0.54
$2.50 - $4.99	31,978	6.1		4.67	13,978		4.67
$5.00 - $9.99	786,664	6.3		7.80	400,564		7.65
$10.00 - $14.99	1,357,793	7.7		13.30	514,366		13.30
$15.00 - $19.99	1,022,686	8.4		17.52	241,053		17.30
$20.00 - $24.99	112,500	9.5		23.65	7,400		22.34
$25.00 - $29.99	1,314,500	9.3		25.82	350,100		26.07
$30.00 - $34.99	127,500	9.4		32.47	11,000		33.90
	5,273,571	7.7	$	15.79	2,044,311	$	11.78

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 47%, 57% and 53%; risk-free interest rate of 4.3%, 3.7% and 3.1% and expected lives of 6.4, 6.0 and 6.0 for the years ended December 31, 2005, 2004 and 2003, respectively.

In 2005 the Company granted 12,905 shares of restricted stock with a grant date fair market value per share of $29.05 with full vesting in 2006 and 140,750 shares of restricted stock units with a weighted average market value per share of $29.15. Restricted stock units granted generally vest over a three or five-year period beginning on the first anniversary of the date of grant and annually thereafter.

In 2004 the Company granted 1,000,000 restricted stock units with a grant date fair market value per share of $24.60. These 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 45,497 shares, 20,676 shares, and 18,428 shares in 2005, 2004 and 2003, respectively, related to the employee stock purchase plan.

13. 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 $1,124, $822 and $581 during the years ended December 31, 2005, 2004 and 2003, respectively.

71

14. Commitments

Centene and its subsidiaries lease office facilities and various equipment under non-cancelable operating leases which may contain escalation provisions. The rental expense related to these leases is recorded on a straight-line basis over the lease term, including rent holidays. Rent expense was $7,623, $5,482 and $3,144 for the years ended December 31, 2005, 2004 and 2003, respectively. Annual non-cancelable minimum lease payments over the next five years and thereafter are as follows:

2006	$	9,210
2007		8,969
2008		7,151
2009		6,202
2010		5,242
Thereafter		9,741
	$	46,515

15. Contingencies

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.

16. Earnings Per Share

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

	2005		2004		2003
Net earnings	$	55,632	$	44,312	$	33,270
Shares used in computing per share amounts:
Weighted average number of common shares outstanding		42,312,522		40,820,909		35,704,426
Common stock equivalents (as determined by applying the treasury stock method)		2,715,111		2,795,536		2,717,726
Weighted average number of common shares and potential dilutive common shares outstanding		45,027,633		43,616,445		38,422,152
Basic earnings per common share	$	1.31	$	1.09	$	0.93
Diluted earnings per common share	$	1.24	$	1.02	$	0.87

The calculation of diluted earnings per common share for 2005, 2004 and 2003 excludes the impact of 328,250, 0 and 1,317,820 shares, respectively, related to stock options, unvested restricted stock and restricted stock units which are anti-dilutive.

17. 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, disease management, nurse triage and treatment compliance functions.

72

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, 2005, follows:

	Medicaid Managed Care		Specialty Services		Eliminations			Consolidated Total
Revenue from external customers	$	1,445,533	$	60,331	$	—		$	1,505,864
Revenue from internal customers		71,967		37,374		(109,341	)		—
Total revenue	$	1,517,500	$	97,705	$	(109,341	)	$	1,505,864
Earnings from operations	$	79,189	$	2	$	—		$	79,191
Total assets	$	645,409	$	22,621	$	—		$	668,030
Depreciation expense	$	7,723	$	411	$	—		$	8,134
Capital expenditures	$	25,146	$	1,763	$	—		$	26,909

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 from operations	$	66,084	$	(1,548	)	$	—		$	64,536
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 from operations	$	44,811	$	2,116	$	—		$	46,927
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 2.

73

18. Comprehensive Earnings

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

	Year Ended December 31,
	2005			2004
Net earnings	$	55,632		$	44,312
Reclassification adjustment, net of tax		138			(466	)
Change in unrealized losses on investments available for sale, net of tax		(1,485	)		(681	)
Total comprehensive earnings	$	54,285		$	43,165

19. Subsequent Events

US Script

In January 2006, the Company acquired US Script, Inc., a pharmacy benefits manager. The purchase price of approximately $40,000 plus transaction costs will be allocated to the assets acquired and liabilities assumed according to estimated fair values. In accordance with the terms of the agreement, the Company may pay up to an additional $10,000 if US Script, Inc. achieves certain earnings targets over a five-year period.

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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.	X
10.2	Contract between the State of Kansas Department of Social and Rehabilitation Services and FirstGuard Health Plan Kansas, Inc.		10-K	February 24, 2005	10.2
10.2a	Amendment Seventeen to the Kansas Healthwave Title XIX and Title XXI Capitated Managed Care Health Services Contract with FirstGuard Health Plan Kansas, Inc. 2006 Renewal		8-K	July 8, 2005	10.1
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.		10-K	February 24, 2005	10.3
10.3a	First Amendment to Contract Between the Office of Medicaid Policy and Planning, The Office of the Children’s Health Insurance Program and Coordinated Care Corporation Indiana, Inc.		8-K	July 8, 2005	10.2
10.4	Contract Between the Georgia Department of Community Health and Peach State Health Plan, Inc. for Provision of Services to Georgia Healthy Families		8-K	July 22, 2005	10.1

75

10.4a	Amendment #1 to the Contract No. 0653 Between Georgia Department of Community Health and Peach State		10-Q	October 25, 2005	10.9
10.5	Contract between the Texas Health and Human Services Commission and Superior HealthPlan, Inc.	X
10.6	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
10.7	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
10.8	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
10.9	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
10.10	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
10.10a	First Amendment to the 2002 Employee Stock Purchase Plan		10-K	February 24, 2005	10.9a
10.10b	Second Amendment to the 2002 Employee Stock Purchase Plan	X
10.11	2003 Stock Incentive Plan, as amended, shares which are registered on Form S-8 - File Number 333-108467		8-K	July 28, 2005	10.1
10.12	Centene Corporation Non-Employee Directors Deferred Stock Compensation Plan		10-Q	October 25, 2004	10.1
10.12a	First Amendment to the Non-Employee Directors Deferred Stock Compensation Plan	X
10.13	Executive Employment Agreement between Centene Corporation and Michael F. Neidorff, dated November 8, 2004		8-K	November 8, 2004	10.1
10.14	Form of Executive Severance and Change in Control Agreement		8-K	May 23, 2005	10.1
10.15	Form of Restricted Stock Unit Agreement		8-K	July 28, 2005	10.2
10.16	Form of Non-statutory Stock Option Agreement (Non-Employees)		8-K	July 28, 2005	10.3
10.17	Form of Non-statutory Stock Option Agreement (Employees)		8-K	July 28, 2005	10.4
10.18	Form of Incentive Stock Option Agreement		8-K	July 28, 2005	10.5
10.19	Form of Stock Appreciation Right Agreement		8-K	July 28, 2005	10.6
10.20	Form of Restricted Stock Agreement		10-Q	October 25, 2005	10.8
10.21	Settlement and Release Agreement with Aurora Health Care, Inc.		10-Q	October 25, 2005	10.1

76

10.22	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
10.22a	Amendment No. 2 to 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, 2005	10.11
10.22b	Amendment No. 3 to Credit Agreement dated as of September 14, 2004 among Centene Corporation, the various financial institutions party hereto and LaSalle Bank National Association	X
10.23	Redevelopment Agreement for the Forsyth / Hanley Redevelopment Area between the City of Clayton, Missouri and Centene Plaza Redevelopment Corporation dated December 30, 2005		8-K	December 30, 2005	10.1
10.24	Summary of Board of Director Compensation	X
10.25	Summary of Compensatory Arrangements with Executive Officers	X
10.26	Stock Purchase Agreement by and between Centene Corporation and Swope Community Enterprises, dated September 28, 2004		10-Q	October 24, 2004	10.3
10.27	Lease Agreement between MHS Consulting Corporation and AVN Air, LLC, dated December 24, 2003		10-K	February 24, 2004	10.31
10.28	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
10.29	Asset Sale and Purchase Agreement by and among Centene Corporation, Buckeye Community Health Plan, Inc., Summa Health System and SummaCare, Inc. dated January 10, 2005		10-Q	April 25, 2005	10.1
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

77

23a	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

78

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, 2006.

CENTENE CORPORATION
By:	/s/    MICHAEL F. NEIDORFF
	Michael F. Neidorff Chairman 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 as indicated, as of February 24, 2006.

Signature	Title
/s/    MICHAEL F. NEIDORFF         Michael F. Neidorff	Chairman 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/    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/    TOMMY G. THOMPSON         Tommy G. Thompson	Director

79

EX-10.1

Exhibit 10.1

FEBRUARY 2006 – DECEMBER 2007

Contract for Medicaid and BadgerCare HMO Services

Between

HMO

and

Wisconsin Department of

Health and Family Services

TABLE OF CONTENTS

					Page No.
ARTICLE I - DEFINITIONS					1
ARTICLE II - DELEGATIONS OF AUTHORITY					9
ARTICLE III - FUNCTIONS AND DUTIES OF THE HMO					9
	A.	Statutory Requirement			9
	B.	Compliance with Applicable Law			9
	C.	Organizational Responsibilities and Duties			10
		1.	Ineligible Organizations		10
		2.	Contract Representative		12
		3.	Attestation		12
		4.	Affirmative Action (AA) and Civil Rights Compliance (CRC) Plan for Profit and Non-Profit Entities		13
		5.	Non-Discrimination in Employment		15
		6.	Provision of Services to all HMO Members		16
		7.	Access to Premises		16
		8.	Liability for the Provision of Care		17
		9.	Subcontracts		17
		10.	Coordination with:		17
			a.	Community-Based Health Organizations	17
			b.	Local Health Departments	18
			c.	Bureau of Milwaukee Child Welfare	18
			d.	Prenatal Care Coordination (PNCC) Agencies	19
			e.	School-Based Services (SBS) Providers	19
			f.	Targeted Case Management (TCM) Agencies	19
		11.	Clinical Laboratory Improvement Amendments (CLIA)		19
	D.	Payment Requirements/Procedures			20
		1.	Claims Retrieval		20
		2.	Thirty Day Payment Requirement		20
		3.	Payment to a Non-HMO Provider for Services Provided to a Disabled Participant Less Than Three or for Services Ordered by the Courts		21
		4.	Payment of HMO Referrals to Out-of-Area or Non-Affiliated Providers		21
		5.	Health Professional Shortage Area (HPSA) Payment Provision		21
		6.	Payment of Physician Services to Pregnant Women and Children Under Age 19		22
		7.	Federally Qualified Health Centers (FQHC) and Rural Health Centers (RHC)		22

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				Page No.
	8.	Immunization Program		22
	9.	Transplants		23
	10.	Hospitalization at the Time of Enrollment or Disenrollment		23
	11.	Enrollees living in a public institution		24
E.	Covered Medicaid Services			24
	1.	Provision of Contract Services		24
	2.	Medical Necessity		25
	3.	Required Services Under Wis. Stats., and Wis. Adm. Code		26
	4.	Pre-Existing Medical Conditions		26
	5.	Ambulance Services		26
	6.	Chiropractic Services		26
	7.	Common Carrier Transportation		27
	8.	Dental Services		28
	9.	Emergency and Post-Stabilization Services		31
		a.	24-Hour Coverage	31
		b.	Provision/Payment Requirements	32
		c.	Memoranda of Understanding (MOU) or Contract with Hospitals/Urgent Care Centers for the Provision of Emergency Services	32
	10.	Family Planning Services and Confidentiality of Family Planning Information		33
	11.	Fertility Drugs		33
	12.	Prenatal Care Coordination (PNCC) Agencies		33
	13.	School-Based Services (SBS)		34
	14.	Targeted Case Management (TCM) Services		34
F.	Mental Health and Substance Abuse Coverage Requirements/Coordination of Services with Community Agencies			34
	1.	Conditions on Coverage of Mental Health/Substance Abuse Treatment		35
	2.	Mental Health/Substance Abuse Assessment Requirements		35
	3.	Assurance of Expertise for Child Abuse, Child Neglect and Domestic Violence		36
	4.	Court-Related Children’s Services		37
	5.	Court-Related Substance Abuse Services		37
	6.	Crisis Intervention Benefit		37
	7.	Emergency Detention and Court-Related Mental Health Services		38
	8.	Institutionalized Individuals		39
	9.	Transportation Following Emergency Detention		40
	10.	Mental Health and/or Substance Abuse Exemptions		40
	11.	Memoranda of Understanding (MOU)/Contract Requirement and Relations with other Human Service Agencies		40
G.	Provider Appeals			41

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				Page No.
H.	Provider Network and Access Requirements			42
	1.	Use of Medicaid Certified Providers		42
	2.	Protocols/Standards to Ensure Access		43
	3.	Written Standards for Accessibility of Care		43
	4.	Access to Selected Medicaid Providers and/or Covered Services		43
		a.	Dental Providers	43
		b.	Mental Health or Substance Abuse Providers	43
		c.	High Risk Prenatal Care Services	44
		d.	HMO Referrals to Out-of-Network Providers for Services	44
		e.	Primary Care Providers	44
		f.	Second Medical Opinions	45
		g.	Women’s Health Specialists	45
	5.	Network Adequacy Requirements		45
I.	Responsibilities to Enrollees			46
	1.	Advocate Requirements		46
	2.	Advance Directives		49
	3.	Choice of Health Care Professional		50
	4.	Coordination and Continuation of Care		50
	5.	Conversion Privileges		51
	6.	Cultural Competency		51
	7.	Enrollee Handbook, Education and Outreach for Newly Enrolled Recipients		51
	8.	Health Education and Disease Prevention		53
	9.	Interpreter Services		55
J.	Prohibitions to Billing Enrollees			56
K.	HealthCheck			56
L.	Marketing Plans and Informing Materials			59
	1.	Approval of Marketing and Informing Materials		59
	2.	Prohibited Practices		60
	3.	HMOs Agreement to Abide by Marketing/Informing Criteria		61
M.	Reproduction/Distribution of Materials			61
N.	HMO ID Cards			61
O.	Open Enrollment			61
P.	Selective Reporting Requirements			62
	1.	Communicable Disease Reporting		62
	2.	Fraud and Abuse Investigations		62
	3.	Physician Incentive Plans		62
Q.	Abortions, Hysterectomies and Sterilization Requirements			63

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			Page No.
ARTICLE IV - QUALITY ASSESSMENT/PERFORMANCE IMPROVEMENT (QAPI)			63
	A.	QAPI Program	63
	B.	Monitoring and Evaluation	66
	C.	Health Promotion and Disease Prevention Services	67
	D.	Provider Selection (Credentialing) and Periodic Evaluation (Recredentialing)	68
	E.	Enrollee Feedback on Quality Improvement	69
	F.	Medical Records	70
	G.	Utilization Management (UM)	72
	H.	External Quality Review Contractor	73
	I.	Dental Services Quality Improvement (Applies only to HMOs Covering Dental Services)	74
	J.	Accreditation	75
	K.	Performance Improvement Priority Areas and Projects	76
ARTICLE V - FUNCTIONS AND DUTIES OF THE DEPARTMENT			83
	A.	Eligibility Determination	83
	B.	Enrollment	84
	C.	Disenrollment	84
	D.	Enrollment Errors	84
	E.	HMO Enrollment Reports	84
	F.	Utilization Review and Control	85
	G.	HMO Review	85
	H.	Department Audit Schedule	85
	I.	HMO Review of Study or Audit Results	85
	J.	Vaccines	86
	K.	Coordination of Benefits	86
	L.	Wisconsin Medicaid Provider Reports	86
	M.	Enrollee Health Status and Primary Language Report	86
	N.	Fraud and Abuse Training	86
	O.	Provision of Data to HMOs	86
	P.	Special Procedures for Retroactive Payment Adjustments for Pregnant BadgerCare Enrollees	87

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				Page No.
ARTICLE VI - PAYMENT TO THE HMO				88
	A.	Capitation Rates		88
	B.	Actuarial Basis		88
	C.	Annual Negotiation of Capitation Rates		88
	D.	Reinsurance		88
	E.	Payment Schedule		89
	F.	Capitation Payments For Newborns		89
	G.	Coordination of Benefits (COB)		90
	H.	Recoupments		92
	I.	Neonatal Intensive Care Unit (NICU) Risk-Sharing Payment(s)		93
		1.	Coverage Criteria	93
		2.	Reimbursement Criteria	94
		3.	Reporting Requirements	95
	J.	Payment(s) for AIDS/HIV and Ventilator Dependent Enrollees		96
		1.	Reimbursement Criteria	96
		2.	Adjustments to Final Payment	97
		3.	Reporting Requirements for AIDS, HIV-Positive and Ventilator Dependent Enrollees	98
		4.	Documentation Requirements for AIDS, HIV-Positive and Ventilator Dependent Enrollees	98
		5.	Dispute Resolution	99
	K.	Incentive for Expansion		99
	L.	Dental Care Utilization Incentive		99
ARTICLE VII - COMPUTER/DATA REPORTING SYSTEM, DATA, RECORDS AND REPORTS				101
	A.	Access to and/or Disclosure of Financial Records		101
	B.	Access to and Audit of Contract Records		101
	C.	Computer Data Reporting System		101
	D.	Coordination of Benefits (COB), Encounter Record, Formal Grievances and Birth Cost Reporting Requirements		103
	E.	Encounter Data Reporting Requirements		103
		1.	Reporting Requirement	104
		2.	Testing Encounter Data	104
		3.	Primary HMO Contact Person	104
		4.	HMO Encounter Technical Workgroup Requirement	104
		5.	Encounter Data Completeness and Accuracy	105
		6.	Analysis of Encounter Data	105
	F.	Records Retention		105

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				Page No.
	G.	Reporting of Corporate and Other Changes		105
	H.	Provider List Requirement		106
	I.	Contract Specified Reports and Due Dates		107
ARTICLE VIII - ENROLLMENT AND DISENROLLMENTS				113
	A.	Enrollment		113
	B.	Enrollment/Disenrollment Practices		114
	C.	Disenrollment/Exemption Requests		114
		1.	AIDS or HIV-Positive Exemption	115
		2.	Developmental Disability or Admission to a Birth to Three Program Exemption	115
		3.	Certified Nurse Midwives or Nurse Practitioners Exemption	115
		4.	Commercial HMO Insurance Exemption	116
		5.	Federally Qualified Health Centers Exemption	116
		6.	Just Cause Disenrollment	117
		7.	Inmates of a Public Institution Disenrollment	117
		8.	Medicare Beneficiaries	117
		9.	Mental Health and/or Substance Abuse Exemption	117
		10.	Native American Disenrollment	118
		11.	Ninth Month Pregnancy Exemption	118
		12.	SSI Family Exemption and/or Disenrollment	119
		13.	Third Trimester Pregnancy Exemption	119
		14.	Transplant Exemption	119
ARTICLE IX - GRIEVANCE PROCEDURES				120
	A.	Procedures		120
	B.	Grievance and Appeal Process		122
	C.	Notifications to Enrollees		123
	D.	Continuation of Benefits Requirements		124
	E.	Reporting of Grievances to the Department		125
ARTICLE X - SUBCONTRACTS				125
	A.	Subcontract Standard Language		126
	B.	Subcontract Submission Requirements		128
	C.	Review and Approval of Subcontracts		128
	D.	Transition Plan		129
	E.	Notification Requirements Regarding Subcontract Additions or Terminations		129
	F.	Management Subcontracts		130

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			Page No.
ARTICLE XI - REMEDIES FOR VIOLATION, BREACH, OR NON-PERFORMANCE OF CONTRACT			131
	A.	Suspension of New Enrollment	131
	B.	Department-Initiated Enrollment Reductions	131
	C.	Other Enrollment Reductions	132
	D.	Withholding of Capitation Payments and Orders to Provide Services	132
	E.	Inappropriate Payment Denials	135
	F.	Sanctions	135
	G.	Sanctions and Remedial Actions	135
ARTICLE XII - TERMINATION AND MODIFICATION OF CONTRACT			136
	A.	Termination by Mutual Consent	136
	B.	Unilateral Termination	136
	C.	Obligations of Contracting Parties Upon Termination	137
	D.	Modification	138
ARTICLE XIII - INTERPRETATION OF CONTRACT LANGUAGE			138
ARTICLE XIV - CONFIDENTIALITY OF RECORDS AND HIPAA REQUIREMENTS			139
ARTICLE XV - DOCUMENTS CONSTITUTING CONTRACT			142
	A.	Current Documents	142
	B.	Future Documents	142
ARTICLE XVI DISCLOSURE STATEMENT(S) OF OWNERSHIP OR CONTROLLING INTEREST IN AN HMO AND BUSINESS TRANSACTIONS			143
	A.	Ownership or Controlling Interest Disclosure Statement(s)	143
	B.	Business Transaction Disclosures	145
ARTICLE XVII - MISCELLANEOUS			146
	A.	Indemnification	146
	B.	Independent Capacity of Contractor	147
	C.	Omissions	147
	D.	Choice of Law	147
	E.	Waiver	147
	F.	Severability	147

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			Page No.
	G.	Survival	147
	H.	Force Majeure	148
	I.	Headings	148
	J.	Assignability	148
	K.	Right to Publish	148
ARTICLE XVIII - HMO SPECIFIC CONTRACT TERMS			149
	A.	Initial Contract Period	149
	B.	Renewals	149
	C.	Specific Terms of the Contract	149
ADDENDUM I - SUBCONTRACTS AND MEMORANDA OF UNDERSTANDING			151
	I.	MOU Submission Requirements	151
	II.	Emergency Services MOU or Contract	151
	III.	County and Other Human Service Agencies MOU or Contract Requirements for Services Ordered by the Courts	152
	IV.	Required MOUs or Contracts	153
ADDENDUM II - STANDARD ENROLLEE HANDBOOK LANGUAGE			160
ADDENDUM III - ACTUARIAL BASIS			172
ADDENDUM IV - GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN HMOs AND THE BUREAU OF MILWAUKEE CHILD WELFARE			173
ADDENDUM V - GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN MEDICAID HMOS AND COUNTY BIRTH TO THREE AGENCIES			176
ADDENDUM VI - LOCAL HEALTH DEPARTMENTS AND COMMUNITY-BASED HEALTH ORGANIZATIONS A RESOURCE FOR HMOs			181
ADDENDUM VII - GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN HMOS, TARGETED CASE MANAGEMENT (TCM) AGENCIES, AND CHILD WELFARE AGENCIES			184
ADDENDUM VIII - REPORT FORMS AND WORKSHEETS			186
	A.	AIDS and Ventilator Dependent Quarterly Report Form and Detail Report Format	186

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			Page No.
	B.	Coordination of Benefits Quarterly Report Form and Instructions for Completing the Form	188
	C.	Medicaid and BadgerCare HMO Newborn Report	190
	D.	HealthCheck Worksheet	192
	E.	Neonatal Intensive Care Unit (NICU) Risk-Sharing Report Format and Detail Data Requirements	193
	F.	Court Ordered Birth Cost Requests	197
	G.	Formal and Informal Grievance Reporting Forms	200
	H.	Attestation Form	202
ADDENDUM IX - GENERAL INFORMATION ABOUT THE WIC PROGRAM AND SAMPLE HMO-TO-WIC REFERRAL FORMS			203

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CONTRACT FOR SERVICES

Between

The Wisconsin Department of Health and Family Services

and

HMO

The Wisconsin Department of Health and Family Services (the Department) and the HMO, an insurer with a certificate of authority to do business in Wisconsin, and an organization that makes available to enrolled participants, in consideration of periodic fixed payments, comprehensive health care services provided by providers selected by the organization and who are employees or partners of the organization or who have entered into a referral or contractual arrangement with the organization, for the purpose of providing and paying for Medicaid and BadgerCare contract services to recipients enrolled in the HMO under the State of Wisconsin Medicaid Plan approved by the Secretary of the United States Department of Health and Human Services pursuant to the provisions of the Social Security Act and for the further specific purpose of promoting coordination and continuity of preventive health services and other medical care including prenatal care, emergency care, and HealthCheck services, do herewith agree:

ARTICLE I

I. DEFINITIONS

Abuse means provider practices that are inconsistent with sound fiscal, business, or medical practices, and result in an unnecessary cost to Medicaid/BadgerCare, in reimbursement for services that are not medically necessary, or services that fail to meet professionally recognized standards for health. Abuse also includes client or member practices that result in unnecessary costs to Medicaid.

Action means the denial or limited authorization of a requested service, including the type or level of service; the reduction, suspension or termination of a previously authorized service; the denial, in whole or in part, of payment for a service.

Appeal means a request for review of an action.

Assessment means an encounter where an appropriately qualified health care professional evaluates an enrollee’s special health care needs using evaluation, examination or diagnostic tools, review of past medical history, records such as laboratory reports, patient interview, to adequately address the enrollee’s health care and/or cultural needs in a multidisciplinary treatment plan, plan of care or approach to

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delivery of care. The evaluation must include an encounter of care, not merely a telephone contact. Comprehensive physical examination is not required, unless it is necessary to fully assess the enrollee’s health care needs. For the purposes of an assessment, qualified health care professional may include non-physician providers such as a psychologist for an enrollee with an identified mental health care need, or advanced practice nurse, physician assistant, registered nurse or social worker, where medical diagnosis is not required.

BadgerCare means part of the Wisconsin Medicaid Program operated by the Wisconsin Department of Health and Family Services under Title XIX and Title XXI of the Federal Social Security Act, s. 49.665, Wis. Stats., and related state and federal rules and regulations. This term is used throughout this contract.

Balanced Workforce means an equitable representation of persons with disabilities, minorities and women available for jobs at each job category from the relevant labor market from which the recipient recruits job applicants.

Business Associate means a person (or company) that provides a service to a covered program that requires their use of individually identifiable health information.

CESA (Cooperative Educational Service Agencies) means cooperatives that include multiple school districts that work together for purchasing and other coordinated functions. There are 12 CESAs in Wisconsin.

CFR means Code of Federal Regulations.

Children With Special Health Care Needs means children with or at increased risk for chronic physical, developmental, behavioral, or emotional conditions who also require health and related services of a type or amount beyond that required by children generally and who are enrolled in a Children with Special Health Care Needs program operated by a Local Health Department or a local Title V funded Maternal and Child Health Program.

Clean Claim means a truthful, complete and accurate claim that does not have to be returned for additional information.

Community Based Health Organizations means non-profit agencies providing community based health services. These organizations provide important health care services such as HealthCheck screenings, nutritional support, and family planning, targeting such services to high-risk populations.

Complaint is a general term used to describe an enrollee’s oral expression of dissatisfaction with the HMO. It can include access problems such as difficulty getting an appointment or receiving appropriate care; quality of care issues such as long waiting times in the reception area of a provider’s office, rude providers or provider staff; or denial or reduction of a service. A complaint may become a grievance or appeal if it is subsequently submitted in writing.

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Continuing Care Provider means as stated in 42 CFR 441.60(a), a provider who has an agreement with the Medicaid agency to provide:

A. Any reports that the Department may reasonably require, and

B. At least the following services to eligible HealthCheck recipients formally enrolled with the provider as enumerated in 42 CFR 441.60(a)(1)-(5):

1. Screening, diagnosis, treatment, and referrals for follow-up services,

2. Maintenance of the recipient’s consolidated health history, including information received from other providers,

3. Physician’s services as needed by the recipient for acute, episodic or chronic illnesses or conditions,

4. Provision or referral for dental services, and

5. Transportation and scheduling assistance.

Contract means the agreement executed between the HMO and the Department to accomplish the duties and functions, in accordance with the rules and arrangements specified in this document. The contract includes the base agreement and documents specified in Article XV, Sections A and B.

Contract Services means services that the HMO is required to provide under this contract.

Contractor means the HMO(s) awarded a contract resulting from the HMO certification process to provide capitated managed care in accordance with the contract.

Covered Entity means a health plan, a health care clearinghouse, or a health care provider or HMO that transmits any health information in electronic form in connection with a transaction covered by 45 CFR Parts 160 and 162.

Cultural Competency means a set of congruent behaviors, attitudes, practices and policies that are formed within an agency, and among professionals that enable the system, agency, and professionals to work respectfully, effectively and responsibly in diverse situations. Essential elements of cultural competence include understanding diversity issues at work, understanding the dynamic of difference, institutionalizing cultural knowledge, and adapting to and encouraging organizational diversity.

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Department means the Wisconsin Department of Health and Family Services.

Emergency Medical Condition means:

A. A medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in:

1. 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,

2. Serious impairment of bodily functions, or

3. Serious dysfunction of any bodily organ or part; or

B. With respect to a pregnant woman who is in active labor:

1. Where there is inadequate time to effect a safe transfer to another hospital before delivery; or

2. Where transfer may pose a threat to the health or safety of the woman or the unborn child.

C. A psychiatric emergency involving a significant risk of serious harm to oneself or others.

D. A substance abuse emergency exists if there is significant risk of serious harm to an enrollee or others, or there is likelihood of return to substance abuse without immediate treatment.

E. Emergency dental care is defined as an immediate service needed to relieve the patient from pain, an acute infection, swelling, trismus, fever, or trauma. In all emergency situations, the HMO must document in the enrollee’s dental records the nature of the emergency.

Encounter includes the following:

A. A service or item provided to a patient through the health care system. Examples include but are not limited to:

1. Office visits

2. Surgical procedures

3. Radiology, including professional and/or technical components

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4. Prescribed drugs

5. Durable medical equipment

6. Emergency transportation to a hospital

7. Institutional stays (inpatient hospital, rehabilitation stays)

8. HealthCheck screens

B. A service or item not directly provided by the HMO, but for which the HMO is financially responsible. An example would include an emergency service provided by an out-of-network provider or facility.

C. A service or item not directly provided by the HMO, and one for which no claim is submitted but for which the HMO may supplement its encounter data set. Such services might include HealthCheck screens for which no claims have been received and if no claim is received, the HMO’s medical chart. Examples of services or items the HMO may include are:

1. HealthCheck services

2. Lead Screening and Testing

3. Immunizations

Services or items as used above include those services and items not covered by the Wisconsin Medicaid Program, but which the HMO chooses to provide as part of its Medicaid managed care product. Examples include educational services, certain over-the-counter drugs, and delivered meals.

Encounter Record means an electronically formatted list of encounter data elements per encounter as specified in the current Wisconsin Medicaid HMO Encounter Data User Manual. An encounter record may be prepared from paper claims such as the HCFA 1500, UB-92, or electronic transactions such as ASC XX12N 837.

Enrollee and Participant means a Medicaid or BadgerCare recipient who has been certified by the State as eligible to enroll under this Contract, and whose name appears on the HMO Enrollment Reports that the Department transmits to the HMO every month according to an established notification schedule. Children who are reported to the certifying agency within 100 days of birth shall be enrolled in the HMO their mother is enrolled in from their date of birth if the mother was an enrollee on the date of birth. Children who are reported to the certifying agency after the 100^th day but before their first birthday may be eligible for Medicaid or BadgerCare on a fee-for-service (FFS) basis.

Enrollment Area means the geographic area within which recipients must reside in order to enroll, on a mandatory basis, in the HMO under this Contract.

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Experimental Surgery and Procedures means experimental services that meet the definition of HFS 107.035(1) and (2) Wis. Adm. Code. as determined by the Department.

Formally Enrolled with a Continuing Care Provider (as cited in 42 CFR 441.60(d)) means that a recipient (or recipient’s guardian) agrees to use one continuing care provider as the regular source of a described set of services for a stated period of time.

Fraud means an intentional deception or misrepresentation made by a person or entity with the knowledge that the deception could result in some unauthorized benefit to him/herself, itself or some other person or entity. It includes any act that constitutes fraud under applicable federal or state law.

Grievance means an expression of dissatisfaction or a complaint about any matter other than an action. The term is also used to refer to the overall system of complaints, grievances and appeals handled by the HMO. Possible grievance subjects include, 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 enrollee’s rights.

HHS refers to the federal Department of Health and Human Services.

HHS Transaction Standard Regulation means the 45 CFR, Parts 160 and 162.

HIPAA means the Health Insurance Portability and Accountability Act of 1996.

HMO means the health maintenance organization or its parent corporation with a certificate of authority to do business in Wisconsin, that is obligated under this Contract.

HMO Encounter Technical Workgroup means a workgroup composed of HMO technical staff, contract administrators, claims processing, eligibility, and/or other HMO staff, as necessary; Department staff from the Division of Health Care Financing; and staff from the Department’s Medicaid fiscal agent.

Individually Identifiable Health Information (IIHI) means patient demographic information, claims data, insurance information, diagnosis information, and any other information that relates to the past, present, or future health condition, provision of health care, payment for health care and that identifies the individual (or that could reasonably be expected to identify the individual).

Information means any “health information” provided and/or made available by the Department to a Trading Partner, and has the same meaning as the term “health information” as defined by 45 CFR Part 160.103.

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Local Health Department (LHD) means an agency of local government established according to Chapter 251, Wis. Stats. Local health departments have statutory obligation to perform certain core functions, including assessment, assurance, and policy development to protect and promote the health of their communities.

Medicaid means the Wisconsin Medical Assistance Program operated by the Wisconsin Department of Health and Family Services under Title XIX of the Federal Social Security Act, Ch. 49, Wis. Stats., and related State and Federal rules and regulations. This term is used consistently in this Contract. Other expressions or words equivalent to Medicaid are “MA” and “Medical Assistance.”

Medical Status Code means the two digit (alphanumeric) code in the Department’s computer system that defines the type of Medicaid eligibility a recipient has. The code identifies the basis of eligibility, whether cash assistance is being provided, and other aspects of Medicaid. The medical status code is listed on the HMO enrollment reports. Article V, A of this contract includes a list of HMO eligible medical status codes.

Medically Necessary means a medical service that meets the definition of HFS 101.03(96m) Wis. Adm. Code.

Newborn means an enrollee less than 100 days old.

PCP means primary care provider including, but not limited to FQHCs, RHCs, tribal health centers, and physicians, nurse practitioners, nurse midwives, physician assistants and physician clinics with specialties in general practice, family practice, internal medicine, obstetrics, gynecology, and pediatrics.

Post Stabilization Services means medically necessary non-emergency services furnished to an enrollee after he or she is stabilized following an emergency medical condition.

Provider means a person who has been certified by the Department to provide health care services to recipients and to be reimbursed by Medicaid for those services.

Public Institution means an institution that is the responsibility of a governmental unit or over which a governmental unit exercises administrative control as defined by federal regulations, including but not limited to prisons and jails.

Recipient means any individual entitled to benefits under Title XIX and XXI of the Social Security Act, and under the Medicaid State Plan as defined in Chapter 49, Wis. Stats.

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Screening means the use of data-gathering techniques, tests or tools to identify or quantify the health and/or cultural needs of an enrollee. Screening methods may include telephonic contact, mailings, interactive web tools, or encounters in person with screeners or health care providers.

Service Area means an area of the State where the HMO has agreed to provide Medicaid services to Medicaid enrollees. The Department monitors enrollment levels of HMOs by the HMO’s service area(s). The HMO indicates whether they will provide dental or chiropractic services by service area. A service area may be as small as a zip code, may be a county, a number of counties, or the entire State.

Secretary means the Secretary of HHS and any other officer or employee of the Department of HHS to whom the authority involved has been delegated.

Risk means the possibility of monetary loss or gain by the HMO resulting from service costs exceeding or being less than payments made to it by the Department.

State means the State of Wisconsin.

Subcontract means any written agreement between the HMO and another party to fulfill the requirements of this Contract. However, such term does not include insurance purchased by the HMO to limit its loss with respect to an individual enrollee, provided the HMO assumes some portion of the underwriting risk for providing health care services to that enrollee.

Trading Partner shall refer to a provider or HMO that transmits any health information in electronic form in connection with a transaction covered by 45 CFR Parts 160 and 162, or a business associate authorized to submit health information on the Trading Partner’s behalf.

Transaction means the exchange of information between two parties to carry out financial or administrative activities related to health care as defined by 45 CFR Part 160.103.

Wisconsin Tribal Health Directors Association (WTHDA) means the coalition of all Wisconsin American Indian Tribal Health Departments.

Terms that are not defined above shall have their primary meaning identified in HFS 101-108, Wis. Adm. Code.

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ARTICLE II

II. DELEGATIONS OF AUTHORITY

The HMO shall oversee and remain accountable for any functions and responsibilities that it delegates to any subcontractor. For all major or minor delegation of function or authority:

• There shall be a written agreement that specifies the delegated activities and reporting responsibilities of the subcontractor and provides for revocation of the delegation or imposition of other sanctions if the subcontractor’s performance is inadequate.

• Before any delegation, the HMO shall evaluate the prospective subcontractor’s ability to perform the activities to be delegated.

• The HMO shall monitor the subcontractor’s performance on an ongoing basis and subject the subcontractor to formal review at least once a year.

• If the HMO identifies deficiencies or areas for improvement, the HMO and the subcontractor shall take corrective action.

• If the HMO delegates selection of providers to another entity, the HMO retains the right to approve, suspend, or terminate any provider selected by that entity.

ARTICLE III

III. FUNCTIONS AND DUTIES OF THE HMO

A. Statutory Requirement

In consideration of the functions and duties of the Department contained in this Contract the HMO shall retain at all times during the period of this Contract a valid Certificate of Authority issued by the State of Wisconsin Office of the Commissioner of Insurance.

B. Compliance with Applicable Law

In the provision of services under this contract, the Contractor and its subcontractors shall comply with all applicable federal and state statutes and rules and regulations, that are in effect when the contract is signed, or that come into effect during the term of the contract. This includes, but is not limited to Title XIX of the Social Security Act and Title 42 of the CFR.

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Changes to Medicaid 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 agreed to by mutual consent, or the change is necessary to continue to receive federal funds or due to action of a court of law.

The Department may incorporate into the Contract any change in covered services mandated by federal or state law effective the date the law goes into effect, if it adjusts the capitation rate accordingly. The Department will give the HMO at least 30 days notice before the intended effective date of any such change that reflects service increases, and the HMO may elect to accept or reject the service increases for the remainder of that contract year. The Department will give the HMO 60 days notice of any such change that reflects service decreases, with a right of the HMO to dispute the amount of the decrease within that 60 days. The HMO has the right to accept or reject service decreases for the remainder of the Contract year. The date of implementation of the change in coverage will coincide with the effective date of the increased or decreased funding. This section does not limit the Department’s ability to modify this Contract due to changes in the State Budget.

C. Organizational Responsibilities and Duties

1. Ineligible Organizations

Upon obtaining information or receiving information from the Department or from another verifiable source, the HMO must exclude from participation in the HMO all organizations that could be included in any of the categories defined in a, 1), a) through e) of this section (references to the Act in this section refer to the Social Security Act).

a. Entities that could be excluded under Section 1128(b)(8) of the Social Security Act are entities in which a person who is an officer, director, agent or managing employee of the entity, or a person who has direct or indirect ownership or control interest of 5% or more in the entity has:

1) Been convicted of the following crimes:

a) Program related crimes (i.e., any criminal offense related to the delivery of an item or service under Medicare or Medicaid (Section 1128(a)(1) of the Act).

b) Patient abuse (i.e., criminal offense relating to abuse or neglect of patients in connection with the delivery of health care (Section 1128(a)(2) of the Act).

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c) Fraud (i.e., a state or federal crime involving fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct in connection with the delivery of health care or involving an act or omission in a program operated by or financed in whole or part by federal, state or local government (Section 1128(b)(1) of the Act).

d) Obstruction of an investigation (i.e., conviction under state or federal law of interference or obstruction of any investigation into any criminal offense described in subsections a), b), or c) (Section 1128(b)(2) of the Act).

e) Offenses relating to controlled substances (i.e., conviction of a state or federal crime relating to the manufacture, distribution, prescription or dispensing of a controlled substance (Section 1128(b)(3) of the Act).

2) Been excluded, debarred, suspended, otherwise excluded, or is an affiliate (as defined in such Act) of a person described in C, 1, a, above from participating in procurement activities under the Federal Acquisition Regulation or from participating in non-procurement activities under regulations issued pursuant to Executive Order No. 12549 or under guidelines implementing such order.

3) Been assessed a civil monetary penalty under Section 1128A of the Act. Civil monetary penalties can be imposed on individual providers, as well as on provider organizations, agencies, or other entities by the DHHS Office of Inspector General. Section 1128A authorizes their use in case of false or fraudulent submittal of claims for payment, and certain other violations of payment practice standards. (Section 1128(b)(8)(B)(ii) of the Act.)

b. Entities that have a direct or indirect substantial contractual relationship with an individual or entity listed in subsection 1. A substantial contractual relationship is defined as any contractual relationship which provides for one or more of the following services:

1) The administration, management, or provision of medical services.

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2) The establishment of policies pertaining to the administration, management, or provision of medical services.

3) The provision of operational support for the administration, management, or provision of medical services.

c. Entities that employ, contract with, or contract through any individual or entity that is excluded from participation in Medicaid under Section 1128 or 1128A, for the provision (directly or indirectly) of health care, utilization review, medical social work or administrative services. For the services listed, the HMO must refrain from contracting with any entity that employs, contracts with, or contracts through an entity that has been excluded from participation in Medicaid by the Secretary of Health and Human Services under the authority of Section 1128 or 1128A of the Act.

The HMO attests by signing this Contract, that it excludes from participation in the HMO all organizations that could be included in any of the above categories.

2. Contract Representative

The HMO is required to designate a staff person to act as liaison to the Department on all issues that relate to the contract between the Department and the HMO. The contract representative will be authorized to represent the HMO regarding inquiries pertaining to the Contract, will be available during normal business hours, and will have decision making authority in regard to urgent situations that arise. The Contract representative will be responsible for follow-up on contract inquiries initiated by the Department.

3. Attestation

The HMO’s Chief Executive Officer (CEO), the Chief Financial Officer (CFO) or designee must attest to the best of their knowledge to the truthfulness, accuracy, and completeness of all data submitted to the Department at the time of submission. This includes encounter data, NICU, AIDS/Vent, or any other data regarding claims the HMO paid. HMOs may use the Department’s attestation form in Addendum VIII, H. For encounter data, the form should be submitted to a Contract Specialist in the Bureau of Managed Health Care Programs quarterly.

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4. Affirmative Action (AA) and Civil Rights Compliance (CRC) Plan for Profit and Non-Profit Entities

The AA/CRC Plan contains three components: Affirmative Action, Equal Opportunity, and Language Access.

a. HMOs that have more than 25 employees and receive more than $25,000 must submit an Affirmative Action Civil Rights Compliance Plan in accordance to the most recently revised instructions and format requirements for the funding period of January 1, 2004 to December 31, 2006. A new plan will be due on January 15, 2007 for the funding period covering January 1, 2007, to December 31, 2009.

For agreements of $25,000 or more and with 25 employees or more, HMOs shall conduct, keep on file, and update annually, a separate and additional accessibility self-evaluation of all programs and facilities, including employment practices for compliance with the Americans with Disabilities (ADA) Title I regulations, unless an updated self-evaluation under Section 503 of the Rehabilitation Act of 1973 exists that meets the ADA requirements. For technical assistance on all the aspects of Civil Rights Compliance, HMOs are encouraged to contact the Department’s AA/CRC Office at (608) 266-9372 (voice), (888) 701-1251 (TTY), or the Department of Health and Family Services, 1 W. Wilson Street, Room 555, P.O. Box 7850, Madison, Wisconsin 53707-7850.

HMOs should use the link listed below to access the instructions and format for completing the AA/CRC Plan:

http://www.dwd.state.wi.us/civil_rights/cr0406/cr_plans.htm. (Select Instructions for Profit and Non-profit Organizations for the instructions to complete the plan and Civil Rights Compliance Plan for Profit and Non-profit Organizations. Use MS Word version for downloading the format.)

b. HMOs that have less than 25 employees or receive less than $25,000 must submit a Letter of Assurance and proof that it is exempt from submitting AA information in accordance to s. 16.675, Wis. Stats., and ADM 50, Wis. Adm. Code. HMOs meeting this criteria can find the necessary forms and instructions to comply as noted in section 4, a) above.

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c. AA/CRC Reporting Requirements:

1) All HMOs must submit language access information as part of the HMO Certification application.

2) Established HMOs (HMOs that submitted a plan in 2004) must submit a new AA/CRC plan by January 15, 2007.

3) New HMOs must file a 2006 AA/CRC Plan within 15 days after the award of the contract.

4) All HMOs must submit a new plan by January 15, 2007.

5) AA/CRC plans must be submitted to the Department of Health and Family Services, Office of Affirmative Action and Civil Rights Compliance, Box 7850, Madison, Wisconsin 53707-7850.

d. Assurances:

1) No otherwise qualified person shall be excluded from participation in, be denied the benefits of, or otherwise be subject to discrimination in any manner on the basis of race, color, national origin, sex, disability or age. This policy covers eligibility for and access to service delivery, and treatment in all programs and activities. All employees of the HMO are expected to support goals and programmatic activities relating to nondiscrimination in service delivery.

2) No otherwise qualified person shall be excluded from employment, be denied the benefits of employment or otherwise be subject to discrimination in employment in any manner or term of employment on the basis of age, race/ ethnicity, color, sex, or sexual orientation, national origin or ancestry, disability (as defined in Section 504 of the Rehab Act, ADA of 1990 and Subchapter II Wisconsin Fair Employment Law 111.32), arrest or conviction record, marital status, political affiliation, military service, the use of legal products during non-work hours, non-job related genetic and honesty testing. All employees are expected to support goals and programmatic activities relating to non-discrimination in employment.

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3) The HMO must post the Equal Opportunity Policy, the name of the Equal Opportunity Coordinator and the discrimination complaint process in conspicuous places available to applicants and clients of services, and applicants for employment and employees. The complaint process will be according to Department standards as outlined in the AA/CRC Plan and made available in languages and formats understood by enrollees, applicants and employees. The Department will continue to provide appropriate translated program brochures and forms for distribution.

4) The HMO agrees to comply with all of the requirements in the revised Department AA/CRC Plan for Profit and Non-Profit Entities and their subcontractors during this contract period.

5) The Department will monitor the Civil Rights Compliance of the HMO. The Department will conduct reviews to ensure that the HMO is ensuring compliance by its subcontractors or grantees according to guidelines in the Affirmative Action, Equal Opportunity, and Language Access Compliance Plan. The HMO agrees to comply with Civil Rights monitoring reviews, including the examination of records and relevant files maintained by the HMO, interview with staff, clients, and applicants for services, subcontractors, grantees, and referral agencies. The reviews will be conducted according to Department procedures. The Department will also conduct reviews to address immediate concerns of complainants.

6) The HMO agrees to cooperate with the Department in developing, implementing and monitoring corrective action plans that result from complaint investigations or monitoring efforts.

5. Non-Discrimination in Employment

The HMO must comply with all applicable federal and state laws relating to non-discrimination and equal employment opportunity including s. 16.765, Wis. Stats., Federal Civil Rights Act of 1964, regulations issued pursuant to that Act and the provisions of Federal Executive Order 11246 dated September 26, 1985, and ensure physical and program accessibility of all services to persons with physical and sensory disabilities pursuant to Section 504 of the Federal Rehabilitation Act of 1973, as amended (29 U.S.C. 794), all requirements imposed by the applicable Department

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regulations (45 CFR part 84) and all guidelines and interpretations issued pursuant thereto, and the provisions of the Age Discrimination and Employment Act of 1967 and Age Discrimination Act of 1975.

Chapter 16.765, Wis. Stats., requires that in connection with the performance of work under this Contract, the Contractor agrees not to discriminate against any employee or applicant for employment because of age, race, religion, color, handicap, sex, physical condition, developmental disability as defined in s. 51.01(5), sexual orientation or national origin. This provision shall include, but not be limited to, the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. Except with respect to sexual orientation, the Contractor further agrees to take affirmative action to ensure equal employment opportunities. The Contractor agrees to post in conspicuous places, available for employees and applicants for employment, notices to be provided by the contracting officer setting forth the provisions of the non-discrimination clause.

With respect to provider participation, reimbursement, or indemnification, the HMO will not discriminate against any provider who is acting within the scope of the provider’s license or certification under applicable state law, solely on the basis of such license or certification. This shall not be construed to prohibit an HMO from including providers to the extent necessary to meet the needs of the Medicaid population or from establishing any measure designed to maintain quality and control cost consistent with these responsibilities.

6. Provision of Services to all HMO Members

The HMO must provide contract services to Medicaid and BadgerCare enrollees under this contract in the same manner as those services are provided to other members of the HMO.

The HMO must ensure that the services are sufficient in amount, duration, or scope to reasonably be expected to achieve the purpose for which the services are furnished.

7. Access to Premises

The HMO must allow duly authorized agents or representatives of the state or federal government access to the HMO’s or HMO subcontractor’s premises during normal business hours to inspect, audit, monitor or otherwise evaluate the performance of the HMO’s or subcontractor’s contractual activities and shall produce all records requested as part of such review or audit within a reasonable time, but not more than ten

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working days. Upon request for such right of access, the HMO or subcontractor must provide staff to assist in the audit or inspection effort, and adequate space on the premises to reasonably accommodate the state or federal personnel conducting the audit or inspection effort. All inspections or audits must be conducted in a manner as will not unduly interfere with the performance of HMO’s or subcontractor’s activities. The HMO will have 30 business days to respond to any findings of an audit before the Department finalizes it. All information obtained will be accorded confidential treatment as provided under applicable laws, rules or regulations.

8. Liability for the Provision of Care

Remain liable for provision of care for that period for which capitation payment has been made in cases where medical status code changes occur subsequent to capitation payment.

9. Subcontracts

The HMO must ensure that all subcontracts are in writing, comply with the provisions of Article X, include any general requirements of this Contract that are appropriate to the service or activity identified in Article X, and ensure that all subcontracts do not terminate legal liability of the HMO under this Contract. The HMO may subcontract for any function covered by this Contract, subject to the requirements of this Contract.

10. Coordination with Community-Based Health Organizations, Local Health Departments, Bureau of Milwaukee Child Welfare, Prenatal Care Coordination Agencies, School-Based Services Providers and Targeted Case Management Agencies:

a. Community-Based Health Organizations

The Department encourages the HMO to contract with community-based health organizations for the provision of care to Medicaid and BadgerCare enrollees in order to ensure continuity and culturally appropriate care and services. Community-based organizations can provide HealthCheck outreach and screening, immunizations, family-planning services, and other types of services.

The Department encourages HMOs to work closely with community-based health organizations as noted in Addendum VI.

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Community-based health organizations may also provide services, such as WIC services, that HMOs are required by federal law to coordinate with and refer to, as appropriate.

b. Local Health Departments

The Department encourages the HMO to contract with local health departments for the provision of care to Medicaid and BadgerCare enrollees in order to ensure continuity and culturally appropriate care and services. Local health departments can provide HealthCheck outreach and screening, immunizations, blood lead screening services, and services to targeted populations within the community for the prevention, investigation, and control of communicable diseases (e.g., tuberculosis, HIV/AIDS, sexually transmitted diseases, hepatitis and others). WIC projects provide nutrition services and supplemental foods, breastfeeding promotion and support; and immunization screening. Many projects screen for blood lead poisoning during the WIC appointment. Refer to Article X, for basic contract requirements.

As noted in Addendum VI the Department encourages HMOs to work closely with local health departments. Local health departments have a wide variety of resources that could be coordinated with HMOs to produce more efficient and cost-effective care for HMO enrollees. Examples of such resources are ongoing medical services programs, materials on health education, prevention, and disease states, expertise on outreaching specific sub-populations, communication networks with varieties of medical providers, advocates, community-based health organizations, and social service agencies, and access to ongoing studies of health status and disease trends and patterns.

c. Bureau of Milwaukee Child Welfare

Milwaukee County HMOs must designate at least one individual to serve as a contact person for the Bureau of Milwaukee Child Welfare (BMCW). If the HMO chooses to designate more than one contact person, the HMO should identify the service area for which each contact person is responsible. The HMO must provide all Medicaid covered mental health and substance abuse services to individuals identified as clients of BMCW. Disputes regarding the medical necessity of services identified in the Family Treatment Plan will be adjudicated using the dispute process outlined in Addendum IV, except that HMOs must provide court-ordered services in accordance with Article III, F. Addendum IV contains guidelines for how Milwaukee County HMOs and BMCW will

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work together to provide mental health and substance abuse services. Refer to Article III, F for more information regarding mental health and substance abuse covered services.

d. Prenatal Care Coordination (PNCC) Agencies

The HMO must sign a Memorandum of Understanding (MOU) with all agencies in the HMO service area that are Medicaid-certified PNCC agencies. The purpose of the MOU is to ensure coordination of care between the HMO that provides medical services, and the PNCC agency that provides outreach, risk assessment, care planning, care coordination, and follow-up. Refer to Addendum I, IV, B for the MOU requirements and a sample PNCC MOU.

In addition, the HMO must assign an HMO medical representative to interface with the care coordinator from the PNCC agency. Refer to Article III, E, 12 for more information regarding payment/ non-payment requirements and the HMO representative’s care coordination responsibilities.

e. School-Based Services (SBS) Providers

The HMO must use its best effort to sign a Memorandum of Understanding (MOU) with all SBS providers in the HMO service area to ensure continuity of care and to avoid duplication of services. Refer to Article III, E, 13 for more information regarding the HMO’s responsibility to coordinate care with SBS providers and Addendum I, IV, C for the MOU requirements and a sample SBS MOU.

f. Targeted Case Management (TCM) Agencies

The HMO must interface with the case manager from the TCM agency to identify what Medicaid covered services or social services are to be provided to an enrollee. Article III, E, 14 and Addendum VII contain more information on how HMOs and TCM agencies should work together to coordinate care.

11. Clinical Laboratory Improvement Amendments (CLIA)

The HMO must use only certain laboratories. All laboratory testing sites providing services under this Contract must have a valid CLIA certificate along with a CLIA identification number, and comply with CLIA regulations as specified by 42 CFR Part 493 “Laboratory Requirements.” Those laboratories with certificates must provide only the types of tests permitted under the terms of their certification.

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D. Payment Requirements/Procedures

The HMO is responsible for the payment of all contract services provided to all Medicaid and BadgerCare recipients listed as ADDs or CONTINUEs on either the Initial or Final Enrollment Reports (see Article V, B, D and E) generated for the month of coverage. The HMO is also responsible for:

• The payment for services to all newborns meeting the criteria described in Article VI, F, “Capitation Payments for Newborns.”

• The provision, or authorizing the provision of, services to all Medicaid enrollees with valid Forward cards indicating HMO enrollment, without regard to disputes about enrollment status and without regard to any other identification requirements. Any discrepancies between the cards and the enrollment reports must be reported to the Department for resolution. The HMO must continue to provide and authorize provision of all contract services until the discrepancy is resolved, including recipients who were PENDING on the Initial Report and held a valid Forward card indicating HMO enrollment, but did not appear as a CONTINUE on the Final Report.

1. Claims Retrieval

The HMO must maintain a claim retrieval system that can upon request identify date of receipt, action taken on all provider claims (i.e., paid, denied, other), and when action was taken. The HMO must have procedures in place that will show the date a claim was received whether the claim is a paper copy or an electronic submission. In addition, the HMO must maintain a claim retrieval system that can identify, within the individual claim, the services provided and the diagnoses of the enrollees using nationally accepted coding systems: HCPCS including Level I CPT codes and Level II and Level III HCPCS codes with modifiers, ICD-9-CM diagnosis and procedure codes, and other national code sets such as place of service, type of service, and EOB codes. Finally, the claim retrieval system must be capable of identifying the provider of services by the appropriate Wisconsin Medicaid provider ID number assigned to all in-plan providers. Refer to Article III, H, 1, for use of providers certified by the Medicaid program.

2. Thirty Day Payment Requirement

The HMO must pay at least 90% of adjudicated clean claims from subcontractors for covered medically necessary services within 30 days of receipt of a clean claim, 99% within 90 days and 100% within 180 days of

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receipt, except to the extent subcontractors have agreed to later payment. HMO agrees not to delay payment to a subcontractor pending subcontractor collection of third party liability unless the HMO has an agreement with the subcontractor to collect third party liability.

3. Payment to a Non-HMO Provider for Services Provided to a Disabled Participant Less Than Three or for Services Ordered by the Courts

The HMO must pay for covered services provided by a non-HMO provider to a disabled participant less than three years of age, or to any participant pursuant to a court order (for treatment), effective with the receipt of a written request for referral from the non-HMO provider, and extending until the HMO issues a written denial of referral. This requirement does not apply if the HMO issues a written denial of referral within seven days of receiving the request for referral

4. Payment of HMO Referrals to Non-Affiliated Providers

For HMO approved referrals to non-affiliated providers, the HMO must either establish payment arrangements in advance, or the HMO is liable for payment only to the extent that Medicaid pays, including Medicare deductibles, or would pay, its FFS providers for services to the AFDC and BadgerCare population. This condition does not apply to cases where there are specific subcontract agreements, MOUs or other binding agreements entered into before the referral.

5. Health Professional Shortage Area (HPSA) Payment Provision

The following provision refers to payments made by the HMO. HMO covered primary care and emergency care services provided to a recipient living in a Health Professional Shortage Area (HPSA) or by a provider practicing in a HPSA must be paid at an enhanced rate of 20% above the rate the HMO would otherwise pay for those services. Primary care providers (PCP) are defined in Article I. Specified HMO-covered obstetric or gynecological services (see the Wisconsin Medicaid Physician Services Handbook) provided to a recipient living in a HPSA or by a provider practicing in a HPSA must be paid at an enhanced rate of 25% above the rate the HMO would otherwise pay providers in HPSAs for those services.

However, this does not require the HMO to pay more than the enhanced Medicaid FFS rate or the actual amount billed for these services. The HMO shall ensure that the money for HPSA payments is paid to the physicians and is not used to supplant funds that previously were used for payment to the physicians. The Department will supply a list of the services affected by this provision, the maximum FFS rates, and HPSAs.

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The HMO must develop written policies and procedures to ensure compliance with this provision. These policies must be available for review by the Department, upon request.

6. Payment of Physician Services to Pregnant Women and Children Under Age 19

The HMO must adequately fund physician services provided to pregnant women and children under age 19, so that they are paid at rates sufficient to ensure that provider participation and services are as available to the Medicaid and BadgerCare population as to the general population in the HMO service area.

7. Federally Qualified Health Centers (FQHC) and Rural Health Centers (RHC)

If an HMO contracts with a Medicaid certified FQHC or RHC for the provision of services to its enrollees, the HMO must negotiate payment rates for that FQHC or RHC on the same basis it negotiates with other clinics and primary providers. An HMO that contracts with an FQHC or RHC must report to the Department within 45 days of the end of each quarter (for example, January 1 – March 31 reports are due May 15) the total amount paid to each FQHC or RHC per month and as reported on the 1099 forms prepared by the HMO for each FQHC or RHC. FQHC or RHC payments include direct payments to a medical provider who is employed by the FQHC or RHC. The report must be an aggregate of all payments made to contracted FQHCs or RHCs.

8. Immunization Program

As a condition of certification as a Medicaid and BadgerCare provider, the HMO must share enrollee immunization status with Local Health Departments and other non-profit HealthCheck providers upon their request without the necessity of enrollee authorization. The Department also requires that Local Health Departments and other non-profit HealthCheck providers share the same information with HMOs upon request. This provision ensures proper coordination of immunization services and prevents duplication of services.

The HMO must have a signed user agreement with the Wisconsin Immunization Registry (WIR) or must be able to demonstrate that its major providers have signed WIR user agreements.

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9. Transplants

As a general principle, Wisconsin Medicaid does not pay for items that it determines to be experimental in nature.

a. Medicaid covers cornea transplants and kidney transplants. These services are no longer considered experimental. Therefore, HMOs must also cover these services.

b. HMOs are not required to cover procedures that are approved only at particular institutions, including bone marrow transplants, liver, heart, heart-lung, lung, pancreas-kidney, and pancreas transplants. There are no funds in the FFS experience data (and thus in the HMO capitation rates) for these services.

Enrollees who have had one or more of the transplant surgeries referenced in 9, b, above will be permanently exempted from HMO enrollment. Refer to Article VIII, C, 14 for the exemption criteria.

10. Hospitalization at the Time of Enrollment or Disenrollment

Enrollees, including newborn enrollees, who are hospitalized at the time of disenrollment from the HMO shall remain the financial responsibility of the HMO. The financial liability of the HMO shall encompass all contract services. The HMO’s financial liability shall continue for the duration of the hospitalization, except where:

a. Loss of Medicaid and BadgerCare eligibility occurs.

b. Disenrollment occurs because there is a voluntary disenrollment from the HMO as a result of one of the conditions in Article III, F, in which case HMO liability shall terminate upon disenrollment being effective.

c. Disenrollment is due to a medical status change to a code indicating SSI, 503 case, or institutionalized eligibility. 503 cases are SSI cases that continue Medicaid eligibility when Social Security cost of living increases cause an SSI recipient to lose SSI eligibility.

In these three exceptions, the HMO’s liability shall not exceed the period for which it is capitated.

The HMO will not assume financial responsibility for enrollees who are hospitalized at the time of enrollment (effective date of coverage) until an appropriate hospital discharge. The Department is responsible for paying on a FFS basis all Medicaid covered services for such hospitalized enrollees during hospitalization.

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Discharge from one hospital and admission to another within 24 hours for continued treatment shall not be considered discharge under this section. Discharge is defined here as it is in the UB-92 Manual.

11. Enrollees Living in a Public Institution

The HMO is liable for the cost of providing all medically necessary services to enrollees who are living in a public institution as defined in Article I, during the month in which they first enter the public institution. Enrollees who remain in a public institution after the last day of the month are no longer eligible for Medicaid or BadgerCare and HMOs are not liable for providing care after the end of the first month. Refer to Article VIII, C, 7 for the disenrollment criteria.

Enrollees who are living in a public institution and go directly from the public institution to a medical facility, court ordered or voluntarily, are no longer living in a public institution and remain eligible for Medicaid or BadgerCare. The HMO shall be liable for the provision of medically necessary treatment if treatment is at the HMO’s facilities, or if unable to itself provide for such treatment.

E. Covered Medicaid Services

HMOs are not restricted to providing Wisconsin Medicaid covered services. Sometimes HMOs find that other treatment methods may be more appropriate than Medicaid covered services, or result in better outcomes.

None of the provisions of this Contract that are applicable to Wisconsin Medicaid covered services apply to other services that an HMO may choose to provide, except that abortions, hysterectomies and sterilizations must comply with 42 CFR 441 Subpart E and 42 CFR 441 Subpart F.

Whether the service provided is an alternative or replacement to a Wisconsin Medicaid covered service or is a Wisconsin Medicaid covered service, the HMO or HMO provider is not allowed to bill the enrollee for the service.

1. Provision of Contract Services

Promptly provide or arrange for the provision of all services required under s. 49.46(2), Wis. Stats., and HFS 107 Wis. Adm. Code as further clarified in all Wisconsin Medicaid and BadgerCare Provider Publications and HMO Contract Interpretation Bulletins, and as otherwise specified in this Contract except:

a. Common Carrier Transportation, except as defined in Article III, E, 7.

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b. Dental, except as defined in Article III, E, 8.

c. Prenatal Natal Care Coordination (PNCC), except HMOs must sign a Memorandum of Understanding (MOU) as defined in Article III, C, 10, d, and Addendum I, IV, B.

d. Targeted Case Management (TCM), except HMOs must work with the TCM case manager as defined in Article III, E, 14 and Addendum VII.

e. School-Based Services (SBS), except HMOs must use its best efforts to sign a Memorandum of Understanding (MOU) as defined in Addendum I, IV, C.

f. Milwaukee Childcare Coordination.

g. Tuberculosis-related Services.

h. Crisis Intervention Benefit.

i. Community Support Program (CSP) services.

j. Comprehensive Community Services (CCS).

2. Medical Necessity

The actual provision of any service is subject to the professional judgment of the HMO providers as to the medical necessity of the service, except that the HMO must provide assessment, evaluation, and treatment services ordered by a court. Decisions to provide or not to provide or authorize medical services shall be based solely on medical necessity and appropriateness as defined in HFS 101.03(96m). Disputes between HMOs and recipients about medical necessity can be appealed through an HMO grievance system, and ultimately to the Department for a binding determination; the Department’s determinations will be based on whether Medicaid would have covered that service on a FFS basis (except for certain experimental procedures discussed in Article III, D, 9). Alternatively, disputes between HMOs and enrollees about medical necessity can be appealed directly to the Department.

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3. Required Services Under Wis. Stats., and Wis. Adm. Code

Services required under s. 49.46(2), Wis. Stats., and HFS 107, Wis. Adm. Code, include (without limitation due to enumeration) private duty nursing services, nurse-midwife services, and independent nurse practitioner services; physician services, including primary care services, are not only services performed by physicians, but services under the direct, on-premises supervision of a physician performed by other providers such as physician assistants and nurses of various levels of certification.

4. Pre-Existing Medical Conditions

The HMO must assume responsibility for all covered pre-existing medical conditions of each enrollee as of the effective date of coverage under the Contract. The aforementioned responsibility does not apply in the case of persons hospitalized at the time of initial enrollment, as defined in Article III, D, 10.

5. Ambulance Services

HMOs may require submission of a trip ticket with ambulance claims before paying the claim. Claims submitted without a trip ticket need only be paid at the service charge rate. HMOs must:

a. Pay a service fee for ambulance response to a call in order to determine whether an emergency exists, regardless of the HMO’s determination to pay for the call.

b. Pay for emergency ambulance services based on established Medicaid criteria for claims payment of these services.

c. Either pay or deny payment of a clean claim from an ambulance service within 45 days of receipt of the clean claim.

d. Respond to appeals from ambulance providers within the time frame described in Article III, G. Failure will constitute HMO agreement to pay the appealed claim in full.

6. Chiropractic Services

The HMO must cover chiropractic services, or in the alternative, enter into a subcontract for chiropractic services with the state as provided in Article XIX. State law mandates coverage.

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7. Common Carrier Transportation

a. Enrollees Outside of Milwaukee County

All HMOs must arrange for transportation for HealthCheck screenings. When authorized by the Department, the HMO may provide non-emergency transportation by common carrier or private motor vehicle for these visits and be reimbursed by the county.

HMOs may negotiate arrangements with local county Departments of Health and Social Services for common carrier or private vehicle transportation for HMO services in general and not just for HealthCheck screenings.

b. Enrollees in Milwaukee County

All Milwaukee County HMOs must provide common carrier transportation to and from Medicaid covered services to their Medicaid and BadgerCare enrollees that reside in Milwaukee County.

The HMO is responsible for arranging common carrier transportation and providing monthly costs incurred to Milwaukee County Department of Human Services (MCDHS). The HMO agrees to submit the monthly costs to the MCDHS within the first 15 days of the following month to:

Milwaukee County DHS

Financial Assistant, Division Administrator

1220 W. Vliet Street

Milwaukee, WI 53206

MCDHS is responsible for reimbursing the HMO for mileage and an administration fee. The Department reserves the right to adjust these rates.

The HMO shall maintain adequate records for each enrollee, including all pertinent and sufficient information relating to common carrier transportation, and make this information readily available to the Department. The HMO agrees to report suspected abuse by enrollees or providers to the Department.

c. The Department is issuing an RFP for common carrier transportation. The contract for transportation services is expected to be implemented in July 2006, at which time the HMOs must use the Department’s contracted transportation broker. The Department will work with the HMOs to ensure a smooth transition for the enrollees, both in Milwaukee County and statewide.

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8. Dental Services

a. Dental Services Covered by all HMOs

1) Emergency Dental Care

All HMOs must cover emergency dental care. The only exception is the dentist’s or oral surgeon’s direct charges.

2) Dental Surgeries performed in a Hospital

All HMOs must pay all ancillary charges relating to dental surgeries when a hospital or freestanding ambulatory care setting is medically indicated. Ancillary charges include, but are not limited to physician, anesthesia, pharmacy and facility charges. The only exception is the dentist’s or oral surgeon’s direct charges. If an HMO is unable to arrange for the dental surgery to be performed within their own provider network then the HMO must authorize the service(s) to be performed out of plan.

3) Prescription Drugs Prescribed by a Dental Provider

All HMOs are liable for the cost of all medically necessary prescription drugs when ordered by a certified Medicaid dental provider.

b. Dental Services Covered by HMOs Contracted to Provide Dental Care

1) All Medicaid covered dental services as required under HFS 107.07, provider handbooks, bulletins, and periodic updates.

2) Diagnostic, preventive, and medically necessary follow-up care to treat a dental disease, illness, injury or disability of enrollees while they are enrolled in an HMO, except as required in subsection 3) below.

3) Completion of orthodontic or prosthodontic treatment begun while an enrollee was enrolled in an HMO if the enrollee became ineligible for Medicaid or disenrolled from the HMO, no matter how long the treatment takes. An HMO will not be required to complete orthodontic or prosthodontic treatment on an enrollee who began treatment as a FFS recipient and who subsequently was enrolled in an HMO.

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[Refer to the chart following this page of the Contract for the specific details of completion of orthodontic or prosthodontic treatment in these situations.]

c. Reporting Requirements for HMOs that Cover Dental Services

HMOs that cover dental services must submit quarterly progress reports to the Department documenting the outcomes or current status of activities intended to increase utilization. These reports are due 15 days after the end of each calendar quarter.

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RESPONSIBILITY FOR PAYMENT OF ORTHODONTIC AND PROSTHODONTIC

TREATMENT WHEN THERE IS AN ENROLLMENT STATUS CHANGE

DURING THE COURSE OF TREATMENT

			Who pays for completion of orthodontic and prosthodontic treatment* when there is an enrollment status change
			First HMO	Second HMO	FFS
Person converts from one status to another:
1.	FFS to an HMO covering dental.			N/A	X
2a.	HMO covering dental to an HMO not covering dental, and person’s residence remains within 50 miles of the person’s residence when in the first HMO.		X
2b.	HMO covering dental to an HMO not covering dental, and person’s residence changes to greater than 50 miles of the person’s residence when in the first HMO.				X
3a.	HMO covering dental to the same or another HMO covering dental and the person’s residence remains within 50 miles of the residence when in the first HMO.		X
3b.	HMO covering dental to the same or another HMO covering dental and the person’s residence changes to greater than 50 miles of the residence when in the first HMO.				X
4.	HMO with dental coverage to FFS because:
	a.	Person moves out of the HMO service area but the person’s residence remains within 50 miles of the residence when in the HMO.	X
	b.	Person moves out of the HMO service area, but the person’s residence changes to greater than 50 miles of the residence when in the HMO.		N/A	X
	c.	Person exempted from HMO enrollment.		N/A	X
	d.	Person’s medical status changes to an ineligible HMO code and the person’s residence remains within 50 miles of the residence when in that HMO.	X	N/A
	e.	Person’s medical status changes to an ineligible HMO code and the person’s residence changes to greater than 50 miles of the residence when in that HMO.		N/A	X
5a.	HMO with dental to ineligible for Medicaid/BC and the person’s residence remains within 50 miles of the residence when in that HMO.		X	N/A
5b.	HMO with dental to ineligible for Medicaid/BC and the person’s residence changes to greater than 50 miles of the residence when in that HMO.			N/A	X
6.	HMO without dental to ineligible for Medicaid/BC.			N/A	X

* Orthodontic treatment is only covered by Medicaid and BadgerCare for children under 21 as a result of a HealthCheck referral (HFS 107.07(3)).

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9. Emergency and Post-Stabilization Services

a. 24-Hour Coverage

The HMO must provide all emergency contract services and post-stabilization services as defined in this Contract 24 hours each day, seven days a week, either by the HMO’s own facilities or through arrangements approved by the Department with other providers. The HMO must:

1) Have one toll-free telephone number that enrollees or individuals acting on behalf of an enrollee can call at any time to obtain assistance in determining if emergency services are needed, to obtain authorization for urgent care and to obtain authorization for transportation. This telephone number must provide access to individuals with authority to authorize treatment as appropriate. Responses to these calls must be provided within 30 minutes. If the HMO fails to respond timely, the HMO will be liable for the cost of subsequent care related to that illness or injury incident whether the treatment is rendered by in or out-of-plan providers and whether the condition is emergency, urgent or routine.

Authorization here refers to the requirements defined in Addendum II, in the Standard Enrollee Handbook Language, regarding the conditions under which an enrollee must receive permission from the HMO prior to receiving services from a non-HMO affiliated provider in order for the HMO to reimburse the provider.

2) Be able to communicate with the caller in the language spoken by the caller or the HMO will be liable for the cost of subsequent care related to that illness or injury incident whether the treatment is in or out-of-plan and whether the condition is emergency, urgent, or routine. These calls must be logged with the time, date and any pertinent information regarding the persons involved, resolution and follow-up instructions.

3) Notify the Department of any changes to this toll-free telephone number for emergency calls within seven working days of the change.

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b. Provision/Payment Requirements

HMOs must promptly provide or pay for needed contract services for emergency medical conditions and post-stabilization services as defined in Article I, regardless of whether the provider that furnishes the service has a contract with the entity. Nothing in this requirement mandates HMOs to reimburse for non-authorized post-stabilization services. Payment and liability requirements include but are not limited to:

1) Payments for qualifying emergencies (including services at hospitals or urgent care centers within the HMO service area) are to be based on the medical signs and symptoms of the condition upon initial presentation. The retrospective findings of a medical work-up may legitimately be the basis for determining how much additional care may be authorized, but not for payment for dealing with the initial emergency. Liability for emergency services continues until the patient is stabilized and can be safely discharged or transferred.

2) Paying for an appropriate medical screening examination to determine whether or not an emergency medical condition exists.

3) When emergency services are provided by non-affiliated providers, be liable for payment only to the extent that Medicaid pays, including Medicare deductibles, or would pay, FFS providers for services to the Medicaid and BadgerCare population. In no case will the HMO be required to pay more than billed charges. This condition does not apply to: (1) Cases where prior payment arrangements were established; and (2) Specific subcontract agreements.

c. Memoranda of Understanding (MOU) or Contract with Hospitals/ Urgent Care Centers for the Provision of Emergency Services

HMOs may have a contract or an MOU with hospitals or urgent care centers within the HMO’s service area to ensure prompt and appropriate payment for emergency services. The provisions for this type of MOU are defined in Addendum I, II, A. Unless a contract or MOU specifies otherwise, HMOs are liable to the extent that FFS would have been liable for a situation that meets the definition of emergency. The Department reserves the right to resolve disputes between HMOs, hospitals and urgent care centers

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regarding emergency situations based on the emergency definition in Article I of this contract. For situations where a contract or MOU is not possible, HMOs must identify for hospitals and urgent care centers procedures that ensure prompt and appropriate payment for emergency services.

10. Family Planning Services and Confidentiality of Family Planning Information

a. The HMO must give enrollees the opportunity to have a different primary physician for the provision of family planning services. This physician does not replace the primary care provider chosen by or assigned to the enrollee.

b. The enrollee may choose to receive family planning services at any Medicaid certified family planning clinic. Family planning services provided at Medicaid certified family planning clinics are paid FFS for HMO enrollees except for pharmacy items ordered by the family planning provider. The HMO is liable to provide the prescribed pharmacy items.

c. All information and medical records relating to family planning shall be kept confidential including those of a minor.

11. Fertility Drugs

The HMO must get prior authorization from the Chief Medical Officer in the Division of Health Care Financing before an HMO provider may treat an enrollee with any of the following drug products: Chorionic Gonadotropin, Clomiphene, Gonadorelin, Menotropins, Urofollitropin and any other new fertility enhancing drugs.

12. Prenatal Care Coordination (PNCC) Agencies

The HMO must assign an HMO medical representative to interface with the care coordinator from the PNCC agency. This HMO representative shall work with the care coordinator to identify what Medicaid covered services, in conjunction with other identified social services, are to be provided to the enrollee. The HMO is not liable for medical services directed outside of their provider network by the care coordinator unless prior authorized by the HMO. In addition, the HMO is not required to pay for services provided directly by the Prenatal Care Coordinating provider. Such services are paid on a FFS basis.

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The HMO must sign an MOU with all agencies in the HMO service area that are Medicaid-certified PNCC agencies. Article III, C, 10, d, and Addendum I, IV, B contain more information regarding this requirement.

13. School-Based Services (SBS)

School-Based Services (SBS) are paid FFS by Medicaid when provided by a Medicaid certified SBS provider. However, in situations where an enrollee’s course of treatment is interrupted due to school breaks, after school hours or during the summer months, the HMO is responsible for providing and paying for all Medicaid covered services.

To avoid duplication of services and to promote continuity of care the HMO must use its best efforts to sign a Memorandum of Understanding (MOU) with all SBS providers in the HMO service area who are Medicaid certified. For Medicaid certification purposes, a SBS service provider is a school district under ch. 120, Wis. Stats., or a cooperative educational service agency (CESA) under ch. 116, Stats. Refer to Addendum I, IV, C that contains the requirements for an MOU with SBS providers.

14. Targeted Case Management (TCM) Services

The HMO must assign an HMO medical representative to interface with the case manager from the TCM agency. This HMO representative will work with the case manager to identify what Medicaid covered services, in conjunction with other identified social services, are to be provided to the enrollee. The HMO is not required to pay for medical services directed outside of their provider network by the case manager unless prior authorized by the HMO. The Department will distribute a statewide list of Medicaid-certified TCM agencies to the HMOs and periodically update the list. Addendum VII contains guidelines for how HMOs and TCM agencies should coordinate care.

F. Mental Health and Substance Abuse Coverage Requirements/Coordination of Services with Community Agencies

HMOs must provide Wisconsin Medicaid covered services, but HMOs are not restricted to providing only those services. HMOs may provide additional or alternative treatments if the other treatment modalities are more appropriate and result in better outcomes than Medicaid covered services. Whether the service provided is a Medicaid covered service or an alternative or replacement to a Wisconsin Medicaid covered service, the HMO or HMO provider is not allowed to bill the enrollee for the service.

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1. Conditions on Coverage of Mental Health/Substance Abuse Treatment

On the effective date of this contract, the HMO must, in compliance with s.632.89 Wis. Stats.:

a. Be certified according to HFS 105.21, 105.22, 105.23, 105.24, 105.25 and/or 105.255, to provide mental health and/or substance abuse services; or

b. Have contracted with facilities and/or providers certified according to HFS 105.21, 105.22, 105.23, 105.24, 105.25, and/or 105.255, to provide mental health and/or substance abuse services.

The HMO may request variances of certain certification requirements for mental health providers. The Department will approve the variances to the extent allowed under federal or state law.

Regardless of whether a. or b., above, is chosen, such treatment facilities and/or providers must provide arrangements for covered transitional treatment in addition to other outpatient mental health and/or substance abuse services. Such transitional treatment arrangements may include but are not limited to Adult Day Treatment, Child/Adolescent Day Treatment and Substance Abuse Day Treatment.

Department decisions to waive the requirement to cover these services shall be based solely on whether there is a certified provider that is geographically or culturally accessible to enrollees, and whether the use of psychiatrists, or psychologists alone improves the quality and/or the cost-effectiveness of care.

In compliance with said provisions, the HMO must further guarantee all enrolled Medicaid and BadgerCare enrollees access to all medically necessary outpatient mental health/substance abuse and covered transitional treatment. No limit may be placed on the number of hours of outpatient treatment that the HMO must provide or reimburse where it has been determined that treatment for mental illness and/or substance abuse or covered transitional treatment is medically necessary. The HMO shall not establish any monetary limit or limit on the number of days of inpatient hospital treatment where it has been determined that this treatment is medically necessary.

2. Mental Health/Substance Abuse Assessment Requirements

The HMO must assure that authorization for mental health/substance abuse treatment for its enrollees is governed by the findings of an assessment performed promptly by the HMO upon request of a client or

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referral from a primary care provider or physician in the HMO’s network. Such assessments must be conducted by qualified staff in a certified program, who are experienced in mental health/substance abuse treatment. All denials of service and the selection of particular modalities of service shall be governed by the findings of this assessment, the effectiveness of the therapy for the condition, and the medical necessity of treatment. The lack of motivation of an enrollee to participate in treatment shall not be considered a factor in determining medical necessity and may not be used as a rationale for withholding or limiting treatment of a client/enrollee. HMOs will use Wisconsin Uniform Placement Criteria (WI-UPC), or placement criteria developed by the American Society of Addiction Medicine (ASAM) as mandated for substance abuse care providers in HFS 75. The requirement in no way obligates the HMOs to provide care options included in the placement criteria, that are not covered services of FFS Medicaid.

The HMO must involve and engage the enrollee in the process used to select a provider and treatment option. The purpose of the participation is to get a good match between the enrollee’s condition, culture preference (see Article III, I, 6), medical needs and the provider who must seek to meet these needs. This section does not require HMOs to use providers who are not qualified to treat the individual enrollee or who are not contracted providers.

3. Assurance of Expertise for Child Abuse, Child Neglect and Domestic Violence

The HMO must consult with human service agencies on appropriate providers in their community. The HMO must arrange for the provision of examination and treatment services by providers with expertise and experience in dealing with medical and psychiatric aspects of caring for victims and perpetrators of child abuse and neglect and domestic violence. Such expertise shall include the identification of possible and potential victims of child abuse and neglect and domestic violence, statutory reporting requirements, and local community resources for the prevention and treatment of child abuse and neglect and domestic violence.

The HMO must notify all persons employed by or under contract to the HMO who are required by law to report suspected child abuse and neglect, and ensure they are knowledgeable about the law and about the identification requirements and procedures. Services provided must include and are not limited to court-ordered physical, psychological and mental or developmental examinations and medical and psychiatric treatment appropriate for victims and perpetrators of child abuse and neglect.

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The HMO must further assure that providers with appropriate expertise and experience in dealing with perpetrators and victims of domestic abuse and incest are utilized in service provision.

4. Court-Related Children’s Services

The HMO is liable for the cost of providing assessments under the Children’s Code, s. 48.295, Wis. Stats., and is responsible for reimbursing for the provision of medically necessary treatment if unable to itself provide for such treatment ordered by a juvenile court. The medical necessity of court-ordered evaluation and treatment is assumed to be established and the HMO is allowed to provide the care through its network, if at all possible. The HMO may not withhold or limit services unless or until the court has agreed.

5. Court-Related Substance Abuse Services

The HMO is liable for the cost of providing medically necessary substance abuse treatment, as long as the treatment occurs in an HMO-approved facility or by an HMO-approved provider ordered in the subject’s Driver Safety Plan, pursuant to Chapter 343, Wis. Stats., and HFS 62 of the Wis. Adm. Code. The medical necessity of services specified in this plan is assumed to be established, and the HMO shall provide those services unless the assessment agency agrees to amend the enrollee’s Driver Safety Plan. This is not meant to require HMO coverage of substance abuse educational programs, or the initial assessment used to develop the Driver Safety Plan. Necessary HMO referrals or treatment authorizations by providers must be furnished promptly. It is expected that no more than five days will elapse between receipt of a written request by an HMO and the issuance of a referral or authorization for treatment. Such referral or authorization, once determined to be medically necessary, will be retroactive to the date of the request. After the fifth day, an assumption will exist that an authorization has been made until such time as the HMO responds in writing.

6. Crisis Intervention Benefit

The HMO must assign a medical representative to interface with the designees of crisis intervention agencies certified under HFS 34 Wis. Adm. Code that provide services within the HMOs service area. The HMO must work with the certified Crisis Intervention Agency to coordinate the transition from crisis intervention care to ongoing Medicaid covered mental health and substance abuse care within the HMO’s network. The HMO is not responsible for payment for services provided to their enrollees by certified Crisis Intervention Agencies. Those services are to be billed directly to Medicaid FFS. In addition, the HMO is not

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required to pay for services directed by the certified Crisis Intervention Agency outside the HMO network, unless the HMO has authorized those services.

7. Emergency Detention and Court-Related Mental Health Services

The HMO is liable for the cost of all emergency detention and court-related mental health/substance abuse treatment, including stipulated and involuntary commitment provided by non-HMO providers to HMO enrollees where the time required to obtain such treatment at the HMO’s facilities, or the facilities of a provider with which the HMO has arrangements, would have risked permanent damage to the enrollee’s health or safety, or the health or safety of others. The extent of the HMO’s liability for appropriate emergency treatment is the current Medicaid FFS rate for such treatment.

a. Care provided in the first three business days (72 hours), plus any intervening weekend days and/or holidays, is deemed medically necessary and the HMO is responsible for payment.

b. The HMO is responsible for payment for additional care beyond the time period in paragraph a. above only if notified of the emergency treatment within 72 hours, excluding weekends and holidays, and if given the opportunity to provide such care. The opportunity for the HMO to provide care to an enrollee admitted to a non-HMO facility is accomplished if the county or treating facility notifies and advises the HMO of the admission within 72 hours, excluding weekends and/or holidays. The HMO may provide an alternative treatment plan for the county to submit at the probable cause hearing. The HMO must submit the name of an in-plan facility willing to treat the enrollee if the court rejects the alternative treatment plan and the court orders the enrollee to receive an inpatient evaluation.

c. If the county attempts to notify the person identified as the primary contact by the HMO to receive authorization for care, and does not succeed in reaching the HMO within 72 hours of admission excluding weekends and holidays, the HMO is responsible for court-ordered care beyond the initial 72 hours. The county must document the attempts to notify with dates, times, names and numbers attempted to contact, and outcomes. The care provided to the HMO enrollee by the non-HMO provider is deemed medically necessary, and coverage by the HMO is retroactive to the date of admission.

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d. The HMO is financially liable for the enrollee’s court ordered evaluation and/or treatment when an HMO enrollee is defending him/herself against a mental illness or substance abuse commitment:

1) If services are provided in an HMO facility; or

2) If the HMO approves provision in a non-contracted facility; or

3) If the HMO was given the opportunity but failed to provide the county with the name of an inpatient facility and, as a result, the enrollee is sent for court ordered evaluation to an out-of-plan provider; or

4) If the HMO gives the county the name of an in-plan facility and the facility refuses to accept the enrollee.

e. The HMO is not liable for the enrollee’s court ordered evaluation and treatment if the HMO provided the name of an in-plan facility and the court ordered the evaluation at an out-of-plan facility.

8. Institutionalized Individuals

a. Institutionalized Children

If inpatient or institutional services are provided in an HMO facility, or approved by the HMO for provision in a non-contracted facility, the HMO shall be financially liable for all children enrolled under this Contract for the entire period for which capitation is paid. The HMO remains financially liable for the entire period a capitation is paid even if the child’s medical status code changes, or the child’s relationship to the original AFDC case changes.

b. Institutionalized Adults

The HMO is not liable for expenditures for any service to a person 21 to 64 years of age who is a resident of an institution for mental disease (IMD), except to the extent that expenditures for a service to an individual on convalescent leave from an IMD are reimbursed by Medicaid FFS.

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9. Transportation Following Emergency Detention

The HMO shall be liable for the provision of medical transportation to an HMO-affiliated provider when the enrollee is under emergency detention or commitment and the HMO requires the enrollee to be moved to a participating provider, provided the transfer can be made safely. If a transfer requires a secured environment by local law enforcement officials, (i.e., Sheriff Department, Police Department, etc.), the HMO shall not be liable for the cost of the transfer. The HMO is not prohibited from entering into an MOU or agreement with local law enforcement agencies or with county agencies for such transfer.

10. Mental Health and/or Substance Abuse Exemptions

The Medicaid or BadgerCare case head shall be given the option of disenrolling the enrollee who meets one or more of the mental health and/or substance abuse criteria defined in Article VIII, C, 9 of this contract, or applying to have the affected person remain in the Medicaid FFS system. The same privilege applies to HMO enrollees who are thought to meet one or more of the criteria defined in Article VIII, C, 9 at any point during the term of this contract.

11. Memoranda of Understanding (MOU)/Contract Requirement and Relations with other Human Service Agencies

The HMO shall develop a working relationship with community agencies involved in the provision of mental health and/or substance abuse services to enrollees. HMOs must work cooperatively with other community agencies, to treat mental health and/or substance abuse conditions as legitimate health care problems.

The HMO must make a “good faith” attempt to negotiate either an MOU or a contract with the county(ies) in its service area. A “good faith” attempt is defined as a minimum of one face-to-face meeting between the HMO and the county in an attempt to develop either an MOU or a contract. If a face-to-face meeting is not possible, the HMO must maintain a written record of their attempt to negotiate either an MOU or a contract with the county(ies). The MOU(s), contract(s) or written documentation of a good faith attempt must be available during the certification process and when requested by the Department. Failure of the HMO to have an MOU, contract or demonstrate a good faith effort, as specified by the Department, may result in the application by the Department of remedies specified under Article XI of this Contract. MOU requirements are specified in Addendum I, III of this contract.

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G. Provider Appeals

Medicaid and BadgerCare providers must appeal first to the HMO and then to the Department if they disagree with the HMO’s payment or nonpayment of a claim.

1. The HMO must inform providers in writing of the HMO’s decision to pay or deny the original claim.

a. A specific explanation of the payment amount or a specific reason for the nonpayment.

b. A statement regarding the provider’s rights to appeal to the HMO.

c. The name of the person and/or function at the HMO to whom provider appeals should be submitted.

d. An explanation of the process the provider should follow when appealing the HMO’s decision.

1) Include a separate letter or form clearly marked “appeal.”

2) Include the provider’s name, date of service, date of billing, date of payment and/or nonpayment, recipient’s name and Medicaid or BadgerCare ID number.

3) Include the reason(s) the claim merits reconsideration.

4) Address the letter or form to the person and/or function at the HMO that handles Provider Appeals.

5) Send the appeal within 60 days of the initial denial or payment notice.

e. A statement advising the provider of the provider’s right to appeal to the Department if the HMO fails to respond to the appeal within 45 days or if the provider is not satisfied with the HMO’s response to the request for reconsideration. Appeals to the Department must be submitted in writing within 60 days of the HMO’s final decision or, in the case of no response, within 60 days from the 45 day timeline allotted the HMO to respond. Appeals should be sent to:

Medicaid Fiscal Agent

Managed Care Unit

P.O. Box 6470

Madison, WI 53716-0470

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2. The HMO must accept written appeals from providers submitted within 60 days of the HMO’s initial payment and/or nonpayment notice. The HMO must respond in writing within 45 days from the date of receipt of the request for reconsideration. If the HMO fails to respond within 45 days, or if the provider is not satisfied with the HMO’s response, the provider may seek a final determination from the Department.

3. After a provider has appealed to the HMO according to the terms described in Subsection 1 above and the provider disputes the determination, the provider may appeal to the Department for the final determination. Appeals must be submitted to the Department within 60 days of the date of written notification of the HMO’s final decision resulting from a request for reconsideration or, if the HMO fails to respond, within 60 days from the 45 day timeline allotted the HMO to respond. In exceptional cases, the Department may override the HMO’s time limit for the submission of claims and appeals. The Department will not exercise its authority in this regard unreasonably. The Department will accept written comments from all parties to the dispute prior to making a final decision. The Department has 45 days from the date of receipt of all written comments to inform the provider and the HMO of the final decision. If the Department’s decision is in favor of the provider, the HMO will pay provider(s) within 45 days of receipt of the Department’s final determination. The HMO must accept the Department’s determinations regarding appeals of disputed claims.

H. Provider Network and Access Requirements

The HMO must provide medical care to its Medicaid and BadgerCare enrollees that is as accessible to them, in terms of timeliness, amount, duration, and scope, as those services are to non-enrolled Medicaid and BadgerCare recipients within the area served by the HMO.

1. Use of Medicaid Certified Providers

Except in emergency situations, HMOs must use only providers who have been certified by the Medicaid program for services or items covered by Wisconsin Medicaid. The Department reserves the right to withhold from the capitation payments the monies related to services provided by non-Medicaid-certified providers, at the Medicaid FFS rate for those services, unless the HMO can demonstrate that it reasonably believed, based on the information provided by the Department, that the provider was certified by the Medicaid program at the time the HMO reimbursed the provider for service provision. The Wis. Adm. Code, Chapter HFS 105, contains information regarding provider certification requirements. Every Medicaid HMO must require every physician providing services to enrollees to have a unique physician identifier, as specified in Section 1173(b) of the Social Security Act.

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2. Protocols/Standards to Ensure Access

The HMO must have written protocols to ensure that enrollees have access to screening, diagnosis and referral, and appropriate treatment for those conditions and services covered under the Wisconsin Medicaid program.

The HMO’s protocols must include methods for identification, outreach to and screening/assessment, as defined in Article I, of enrollees with special health care needs.

3. Written Standards for Accessibility of Care

The HMO must have written standards for the accessibility of care and services. These standards must be communicated to providers and monitored by the HMO. The standards must include the following: Waiting times for care at facilities; waiting times for appointments; statement that providers’ hours of operation do not discriminate against Medicaid and BadgerCare enrollees; and whether or not provider(s) speak member’s language. The HMO must take corrective action if its standards are not met.

4. Access to Selected Medicaid Providers and/or Covered Services

a. Dental Providers

HMOs that cover dental services must have a dental provider within a 35-mile distance from any enrollee residing in the HMO service area or no further than the distance for non-enrolled recipients residing in the service area. If there is no Medicaid certified provider within the specified distance, the travel distance shall be no more than for a non-enrolled recipient. The HMO must also consider whether the dentist accepts new patients, and whether full or part-time coverage is available.

b. Mental Health or Substance Abuse Providers

The HMO must have a mental health or substance abuse provider within a 35-mile distance from any enrollee residing in the HMO service area or no further than the distance for non-enrolled recipients residing in the service area. If there is no Medicaid certified provider within the specified distance, the travel distance shall be no more than for a non-enrolled recipient. The HMO must also consider whether the providers accept new patients, and whether full or part-time coverage is available.

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c. High Risk Prenatal Care Services

The HMO must provide medically necessary high risk prenatal care within two weeks of the enrollee’s request for an appointment, or within three weeks if the request is for a specific HMO provider.

d. HMO Referrals to Out-of-Network Providers for Services

HMO must provide adequate and timely coverage of services provided out of network, when the required medical service is not available within the HMO network. The HMO must coordinate with out-of-network providers with respect to payment and ensure that cost to the enrollee is no greater than it would be if the services were furnished within the network. (42 CFR. §. 438.206(b)(v)(5)).

e. Primary Care Providers

Primary Care Providers are defined in Article I. HMOs may define other types of providers as primary care providers. If they do so, the HMOs must define these other types of primary care providers and justify their inclusion as primary care providers during the pre-contract review phase of the HMO Certification process.

The HMO must have a Medicaid certified primary care provider within a 20-mile distance from any enrollee residing in the HMO service area, unless there is no Medicaid certified provider within the specified distance. In that case, the travel distance shall be no more than for a non-enrolled recipient. A service area for an HMO will be specified down to the zip code. Therefore, all portions of each zip code in the HMO service area must be within 20 miles from a Medicaid certified primary care provider.

This access standard does not prevent a recipient from choosing an HMO when the recipient resides in a zip code that does not meet the 20-mile distance standard. However, the recipient will not be automatically assigned to that HMO. If the recipient has been assigned to the HMO or has chosen the HMO and becomes dissatisfied with the access to medical care, the recipient may disenroll from the HMO because of distance.

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f. Second Medical Opinions

HMOs must upon enrollee request, provide enrollees the opportunity to have a second opinion from a qualified network provider subject to referral procedures approved by the Department. If an appropriately qualified provider is not available within the network, the HMO must arrange for a second opinion outside the network at no charge to the enrollee.

g. Women’s Health Specialists

In addition to a primary care provider a female enrollee may have a women’s health specialist. The HMO must provide female enrollees with direct access to a women’s health specialist within the network for covered women’s routine and preventive health care services.

5. Network Adequacy Requirements

The HMO must ensure that its delivery network is sufficient to provide adequate access to all services covered under this contract. In establishing the network, the HMO must consider:

a. The anticipated Medicaid and BadgerCare enrollment.

b. The expected utilization of services, considering enrollee characteristics and health care needs.

c. The number and types of providers (in terms of training experience and specialization) required to furnish the contracted services.

d. The number of network providers not accepting new patients.

e. The geographic location of providers and enrollees, distance, travel time, normal means of transportation used by enrollees and whether provider locations are accessible to enrollees with disabilities.

The HMO must provide documentation and assurance of the above network adequacy criteria as required by the Department for pre-contract certification or upon request of the Department. In addition, the HMO must update the documentation and assurance to the Department with respect to network adequacy whenever there has been a significant change, as defined by the Department, in the HMO’s operations that would affect adequate capacity and services, including changes in HMO benefits, geographic service areas, provider network, payments, or enrollment of a new population in the HMO. (42 CFR, §. 438.207(c)(2)(i-ii)).

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I. Responsibilities to Enrollees

1. Advocate Requirements

Each HMO must employ a Medicaid/BadgerCare HMO Advocate during the entire contract term. The HMO Advocate must work with both enrollees and providers to facilitate the provision of Medicaid benefits to enrollees, and the advocate is responsible for making recommendations to management on any changes needed to improve either the care provided or the way care is delivered. The advocate position must be in an organizational location within the HMO that provides the authority needed to carry out these tasks. The detailed requirements of the HMO Advocate are listed below:

a. Functions of the Medicaid/BadgerCare HMO Advocate(s)

1) Investigate and resolve access and cultural sensitivity issues identified by HMO staff, state staff, providers, advocate organizations, and enrollees.

2) Monitor formal and informal grievances with the grievance personnel for purposes of identification of trends or specific problem areas of access and care delivery. The monitoring function includes ongoing participation in the HMO grievance committee.

3) Recommend policy and procedural changes to HMO management including those needed to ensure and/or improve enrollee access to and quality of care. The recommended changes can be for both internal administrative policies and subcontracted providers.

4) Act as the primary contact for enrollee advocacy groups. Work with enrollee advocacy groups on an ongoing basis to identify and correct enrollee access barriers.

5) Act as the primary contact for local community based organizations (local governmental units, non-profit agencies, etc.). Work with the local community based organizations on an ongoing basis to acquire knowledge and insight regarding the special health care needs of enrollees.

6) Participate in the Department’s Advocacy Program for Managed Care. Such participation includes working with the Department’s managed care staff person assigned to the

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HMO on issues of access to medical care and quality of medical care and working with the Enrollment Specialist and Medicaid Ombudsmen on issues of access to medical care, quality of medical care, and enrollment/disenrollment.

7) Analyze on an ongoing basis internal HMO system functions that affect enrollee access to medical care and quality of medical care.

8) Organize and provide ongoing training and educational materials for HMO staff and providers to enhance their understanding of the values and practices of all cultures with which the HMO interacts.

9) Provide ongoing input to HMO management on how changes in the HMO provider network will affect enrollee access to medical care and enrollee quality and continuity of care. Participate in the development and coordination of plans to minimize any potential problems that could be caused by provider network changes.

10) Review and approve all HMO informing materials to be distributed to enrollees to assess clarity and accuracy.

11) Assist enrollees and their authorized representatives for the purpose of obtaining their medical records.

12) The lead advocate position is responsible for overall evaluation of the HMO’s internal advocacy plan and is required to monitor any contracts the HMO may enter into for external advocacy with culturally diverse associations or agencies. The lead advocate is responsible for training the associations or agencies and ensuring their input into the HMO’s advocacy plan.

b. Staff Requirements and Authority of the Medicaid/BadgerCare HMO Advocate

1) At a minimum, one HMO Advocate must be located in the organizational structure so that the Advocate has the authority to perform the functions and duties listed in subsection section 1, a, 1)-12) above.

The HMO Certification Application requires HMOs to state the staffing levels to perform the functions and duties listed in subsection 1, a, 1)-12) above in terms of number of full

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and part time staff and total full time equivalents (FTEs) assigned to these tasks. The Department assumes that an HMO acting as an Administrative Service Organization (ASO) for another HMO will have at least one advocate or FTE position for each ASO contract as well as maintain their own internal advocate(s). An HMO may employ less than a FTE advocate position, but must justify to the satisfaction of the Department why less than one FTE position will suffice for the HMO’s enrollee population. The HMO must also regularly evaluate the advocate position, workplan(s), and job duties and allocate an additional FTE advocate position or positions to meet the duties listed in subsection 1, a, 1)-12) above if there is significant increase in the HMO’s enrollee population or in the HMO service area. The Department reserves the right to require an HMO to employ an FTE advocate position if the HMO does not demonstrate the adequacy of a part-time advocate position.

In order to meet the requirement for the advocate position statewide, the Department encourages HMOs to contract or have a formal memorandum of understanding for advocacy and/or translation services with associations or organizations that have culturally diverse populations within the HMO service area. However, the overall or lead responsibility for the advocate position must be within each HMO. HMOs must monitor the effectiveness of the associations and agencies under contract and may alter the contract(s) with written notification to the Department.

2) The HMO advocate is responsible for facilitating and ensuring access to all medically necessary services for each enrollee as stipulated in this Contract.

3) The HMO advocate staffing levels submitted in the HMO Certification Application must be maintained, and solely devoted to the functions and duties listed in subsection 1, a, 1)-12) above throughout the contract term. Changes in the HMO advocate staffing levels must be approved by the Department 30 days prior to the effective date of the change.

4) Prior to contract signing, the HMO advocate must develop a Medicaid and BadgerCare HMO advocacy workplan, with the timelines and activities specified, and must maintain and modify it as necessary, throughout the contract term.

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2. Advance Directives

The HMO must maintain written policies and procedures related to advance directives. (Written information provided must reflect changes in state law as soon as possible, but no later than 90 days after the effective date of the change.) An advance directive is a written instruction, such as a living will or durable power of attorney for health care, recognized under Wisconsin law (whether statutory or recognized by the courts of Wisconsin) and relating to the provision of such care when the individual is incapacitated. The HMO must:

a. Provide written information at the time of HMO enrollment to all adults receiving medical care through the HMO regarding:

1) The individual’s rights under Wisconsin law (whether statutory or recognized by the courts of Wisconsin) to make decisions concerning such medical care, including the right to accept or refuse medical or surgical treatment and the right to formulate advance directives; and

2) The HMO’s written policies respecting the implementation of such rights.

b. Document in the individual’s medical record whether or not the individual has executed an advance directive.

c. Not discriminate in the provision of care or otherwise discriminate against an individual based on whether or not the individual has executed an advance directive. This provision shall not be construed as requiring the provision of care which conflicts with an advance directive.

d. Ensure compliance with the requirements of Wisconsin law (whether statutory or recognized by the courts of Wisconsin) respecting advance directives.

e. Provide education for staff and the community on issues concerning advance directives.

The above provisions shall not be construed to prohibit the application of any Wisconsin law which allows for an objection on the basis of conscience for any health care provider or any agent of such provider which as a matter of conscience cannot implement an advance directive.

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3. Choice of Health Care Professional

The HMO must offer each enrollee covered under this Contract the opportunity to choose a primary health care professional affiliated with the HMO, to the extent possible and appropriate. If the HMO assigns recipients to primary care providers, then the HMO must notify recipients of the assignment. HMOs must permit Medicaid and BadgerCare enrollees to change primary providers at least twice in any calendar year, and to change primary providers more often than that for just cause, just cause being defined as lack of access to quality, culturally appropriate, health care. Such just cause will be handled as a formal grievance. If the HMO has reason to lock in an enrollee to one primary provider and/or pharmacy in cases of difficult case management, the HMO must submit a written request in advance of such lock-in to the Department’s Contract Specialist. Culturally appropriate care in this section means care by a provider who can relate to the enrollee and who can provide care with sensitivity, understanding, and respect for the enrollee’s culture.

4. Coordination and Continuation of Care

Have systems in place to ensure well-managed patient care, including at a minimum:

a. Management and integration of health care through primary provider/gatekeeper/other means.

b. Systems to ensure referrals for medically necessary, specialty, secondary and tertiary care.

c. Systems to ensure provision of care in emergency situations, including an education process to ensure that enrollees know where and how to obtain medically necessary care in emergency situations.

d. Systems that clearly specify referral requirements to providers and subcontractors. The HMO must keep copies of referrals (approved and denied) in a central file or the patient’s medical records.

e. Systems to ensure the provision of a clinical determination of the medical necessity and appropriateness of the enrollee to continue with MH/SA providers who are not subcontracted with the HMO. The determination must be made within 10 business days of the enrollee’s request. If the HMO determines that the enrollee does not need to continue with the non-contracted provider, it must ensure an orderly transition of care.

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5. Conversion Privileges

The HMO must offer any enrollee covered under this Contract, whose enrollment is subsequently terminated due to loss of Medicaid/BadgerCare eligibility, the opportunity to convert to a private enrollment contract without underwriting. The time period for conversion following Medicaid/BadgerCare termination notice must comply with Wis. Stats. 632.897 regarding conversion rights.

6. Cultural Competency

The HMO must address the special health needs of enrollees who are low income or members of specific population groups needing specific culturally competent services. The HMO must incorporate in its policies, administration, and service practice such as (1) recognizing members’ beliefs, (2) addressing cultural differences in a competent manner, and (3) fostering in its staff and providers behaviors that effectively address interpersonal communication styles that respect enrollees’ cultural backgrounds. The HMO must have specific policy statements on these topics and communicate them to subcontractors.

The HMO must encourage and foster cultural competency among providers. When appropriate the HMO must permit enrollees to choose providers from among the HMO’s network based on linguistic/cultural needs. The HMO must permit enrollees to change primary providers based on the provider’s ability to provide services in a culturally competent manner. Enrollees may submit grievances to the HMO and/or the Department regarding their inability to obtain culturally appropriate care, and the Department may, pursuant to such a grievance, permit an enrollee to disenroll from that HMO and enroll into another HMO, or into FFS in a county where HMOs do not enroll all eligibles.

7. Enrollee Handbook, Education and Outreach for Newly Enrolled Recipients

a. Within one week of initial enrollment notification to the HMO, annually thereafter and whenever the enrollee’s requests, the HMO must mail to each casehead an enrollee handbook which is at the “sixth grade reading comprehension level” and which at a minimum will include information about:

1) The telephone number that can be used for assistance in obtaining emergency care or for prior authorization for urgent care.

2) Information on contract services offered by the HMO.

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3) Location of facilities.

4) Hours of service.

5) Informal and formal grievance procedures, including notification of the enrollee’s right to a fair hearing.

6) Grievance appeal procedures.

7) HealthCheck.

8) Family planning policies.

9) Policies on the use of emergency and urgent care facilities.

10) Providers and whether the provider is accepting new “enrollees.”

11) Changing HMOs.

b. As needed the HMO must provide periodic updates to the handbook and explain changes to the information listed above. Such changes must be approved by the Department prior to printing.

c. When HMOs reprint their enrollee handbooks, they must include all of the changes to the standard language as specified in Addendum II, to this Contract.

d. Enrollee handbooks (or other enrollee information approved by the Department that explains HMO services and how to use the HMO) must be made available in at least: Spanish, Russian and Hmong if the HMO has enrollees who are conversant only in those languages. The handbook must tell enrollees how to obtain a copy of the handbook in those languages. The Department will translate the standard handbook language in Addendum II into the three specified languages. HMOs may use the translated standard handbook language as appropriate to its service area. However, HMOs must have local resources review the final handbook language to ensure that the appropriate dialect(s) is/are used in the standard translation. HMOs must also arrange for translation into any other dialects appropriate for its enrollees.

e. HMOs may create enrollee handbook language that is simpler than the standard language of Addendum II, but this language must be approved by the Department. HMOs must also independently arrange for the translation of any non-standard language.

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f. HMOs must submit their enrollee handbook for review and approval within 60 days of signing the contract for 2006-2007.

g. Standard language on several subjects, including HealthCheck, family planning, grievance and appeal rights, conversion rights, and emergency and urgent care, must appear in all handbooks and is included in Addendum II. Any exceptions to the standard must be approved in advance by the Department, and will be approved only for exceptional reasons. If the standard language changes during the course of the contract period, due to changes in federal or state laws, rules or regulations, HMOs must insert the new language into the enrollee handbooks as of the effective date of any such change.

h. In addition to the above requirements for the enrollee handbook, HMOs must perform other education and outreach activities for newly enrolled recipients. HMOs must submit to the Department for prior written approval an education and outreach plan targeted towards newly enrolled recipients. The outreach plan will be examined by the Department during pre-contract review. Newly enrolled recipients are listed as “ADD-New” on the enrollment reports (Article V, E). The plan must identify at least two educational/outreach activities the HMO will undertake to tell new enrollees how to access services within the HMO network. The plan must include the frequency (i.e., weekly, monthly, etc.) of the activities, the person within the HMO responsible for the activities, and how the activities will be documented and evaluated for effectiveness.

8. Health Education and Disease Prevention

The HMO must inform all enrollees of ways they can maintain their own health and properly use health care services.

The HMO must have a health education and disease prevention program that is readily accessible to its enrollees. The program must be offered within the normal course of office visits, as well as by discrete programming. The program must include:

a. An individual responsible for the coordination and delivery of services.

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b. Information on how to obtain these services (locations, hours, telephone numbers, etc.).

c. Health-related educational materials in the form of printed, audiovisual, and/or personal communication.

Health-related educational materials produced by the HMO must be at a sixth grade reading comprehension level and reflect sensitivity to the diverse cultures served. Also, if the HMO uses material produced by other entities, the HMO must review these materials for grade level comprehension and sensitivity to the diverse cultures served. Finally, the HMO must make all reasonable efforts to locate and use culturally appropriate health-related material.

d. Information on recommended check ups and screenings, and prevention and management of disease states that affect the general population. This includes specific information for persons who have or who are at risk of developing such health problems as hypertension, diabetes, STD, asthma, breast and cervical cancer, osteoporosis and postpartum depression.

e. Health education and disease prevention programs, including injury control, family planning, teen pregnancy, sexually transmitted disease prevention, prenatal care, nutrition, childhood immunization, substance abuse prevention, child abuse prevention, parenting skills, stress control, postpartum depression, exercise, smoking cessation, weight gain and healthy birth, postpartum weight loss, and breast-feeding promotion and support. (Note: any education and prevention programs for family planning and substance abuse would supplement the required family planning and substance abuse health care services covered by Medicaid and BadgerCare.

f. Promotion of the health education and disease prevention program, including use of languages understood by the population served, and use of facilities accessible to the population served.

g. Information on and promotion of other available prevention services offered outside of the HMO, including child nutrition programs, parenting classes, programs offered by local health departments and other programs.

h. Systematic referrals of potentially eligible women, infants, and children to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and relevant medical

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information to the WIC program. Addendum IX contains general information about recipient eligibility requirements for the WIC program as well as sample WIC referral forms. More information about the WIC program as well a list of the local WIC agencies can be found on the WIC website (www.dhfs.state.wi.us/wic).

9. Interpreter Services

As soon as it is determined that the enrollee is of limited English proficiency the HMO must provide interpreter and sign language services free of charge for enrollees as necessary to ensure availability of effective communication regarding treatment, medical history or health education and/or any other component of this contract. The HMO must:

a. Provide for 24-hour a day, seven days a week access to interpreter and sign language services in languages spoken by those individuals eligible to receive the services provided by the HMO or its providers.

b. Provide an interpreter in time to assist adequately with all necessary care, including urgent and emergency care, when a recipient or provider requests interpreter services in a specific situation where care is needed. The HMO must clearly document all such actions and results. This documentation must be available to the Department upon request.

c Use professional interpreters, as needed, where technical, medical, or treatment information or other matters, where impartiality is critical, are to be discussed or where use of a family member or friend, as interpreter is otherwise inappropriate. Family members, especially children, should not be used as interpreters in assessments, therapy and other situations where impartiality is critical.

d. Maintain a current list of “On Call” interpreters who can provide interpreter services. Provision of interpreter services must be in compliance with Title VI of the Civil Rights Act.

e. Designate a staff person to be responsible for the administration of interpreter/translation services.

f. Receive Department approval of written policies and procedures for the provision of interpreter services.

As part of the certification application, the HMOs must submit the policies and procedures for interpreters, a list of interpreters the HMO uses, and the

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language spoken by each interpreter. The HMO must also submit, as part of certification, its policy on provision of auxiliary aids to hearing-impaired enrollees. The policy must include a description of the HMO’s process for assessing the preferred method of communication of each hearing-impaired enrollee. The HMO must offer each hearing-impaired enrollee the type of auxiliary aid(s) s/he prefers in order to access program services and benefits. Once the hearing-impaired enrollee identifies the type of auxiliary aid(s) s/he prefers, a less effective form of communication may not be used. For example, a person who can most effectively communicate in sign language may not be required to communicate using hand written notes.

J. Prohibitions to Billing Enrollees

The HMO and its providers and subcontractors must not bill a Medicaid or BadgerCare enrollee for medically necessary services covered under this Contract and provided during the enrollee’s period of HMO enrollment. The HMO and its providers and subcontractors must not bill a Medicaid or BadgerCare enrollee for copayments and/or premiums for medically necessary services covered under this Contract and provided during the enrollee’s period of HMO enrollment. Any provider who knowingly and willfully bills a Medicaid or BadgerCare enrollee for a Medicaid covered service shall be guilty of a felony and upon conviction shall be fined, imprisoned, or both, as defined in Section 1128B.(d)(1) [42 U.S.C. 1320a-7b] of the Social Security Act. This provision shall continue to be in effect even if the HMO becomes insolvent.

However, if an enrollee agrees in advance in writing to pay for a service not covered by Medicaid or BadgerCare, then the HMO, HMO provider, or HMO subcontractor may bill the enrollee. The standard release form signed by the enrollee at the time of services does not relieve the HMO and its providers and subcontractors from the prohibition against billing an enrollee in the absence of a knowing assumption of liability for a non-Medicaid or BadgerCare covered service. The form or other type of acknowledgment relevant to an enrollee’s liability must specifically state the admissions, services, or procedures that are not covered by Medicaid and BadgerCare.

K. HealthCheck

1. HMO Responsibilities

a. Provide HealthCheck services as a continuing care provider as defined in Article I, and according to policies and procedures in the Wisconsin Medicaid HealthCheck Provider Handbook related to covered services.

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b. Provide HealthCheck screens upon request. For enrollees over one year of age, if an enrollee, parent or guardian of an enrollee requests a HealthCheck screen, the HMO must provide such a screen within 60 days, if a screen is due according to the periodicity schedule. If the screen is not due within 60 days, then the HMO must schedule the appointment in accordance with the periodicity schedule. For enrollees up to one year of age, if a parent or guardian of an enrollee requests a HealthCheck screen, the HMO must provide such a screen within 30 days, if a screen is due according to the periodicity schedule. If the screen is not due within 30 days, then the HMO must schedule the appointment in accordance with the periodicity schedule.

c. Provide HealthCheck screens at a rate equal to or greater than 80% of the expected number of screens. The rate of HealthCheck screens will be determined by the calculation in the HealthCheck Worksheet in Addendum VIII, D. The HMO may complete the worksheet on its own, periodically, as a means to monitor its HealthCheck screening performance.

HealthCheck data provided by the HMO must agree with its medical record documentation. For the purpose of the HealthCheck recoupment process, the Department will not include any additional HealthCheck encounter records that are received after January 16, 2008, and 2009 for the year under consideration. (Please note: This date marks the end of the twelve and one half month period of time from the end of the year under consideration. For example, for dates of service in 2006 the cut-off date will be January 16, 2008).

2. Department Responsibilities

The Department will provide quarterly reports to inform the HMO of their progress in meeting the HealthCheck requirements. Quarterly reports will be provided 90 days following the end of the quarter.

If the HMO provides fewer screens in the contract year than 80%, the Department will:

a. Recoup the funds provided to the HMO for the provision of the remaining screens. The following formula will be used:

(0.80 x A - B) x (C - D), where

A  = Expected number of screens (line 6 of HealthCheck Worksheet).

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B  = Number of screens paid in the contract year as reported in the HMO’s Encounter Data Set as of January 16, 2006, and January 16, 2007. (The end of the twelve and one half month period following the year under consideration.)

C  = *FFS maximum allowable fee (line 11 of the HealthCheck Worksheet). The FFS maximum allowable fee is the average maximum fee for the year. For example, if the maximum allowable fee for HealthCheck is $50 from January through June, and $52 from July through December in one calendar year, then the average maximum allowable fee for the year is $51.

D  = HMO discount, if applicable.

b. Determine the amount of the HMO’s HealthCheck recoupment, by Rate Region, excluding Dane, Eau Claire, Kenosha, Milwaukee and Waukesha counties, which will be determined separately. Rate Regions are defined in Addendum III.

c. Determine the actual number of screens completed, for the recoupment calculation (Line 8 of the Worksheet), by using the number of screens reported in the HMO’s Encounter Database for calendar years 2006 and 2007 by Rate Region, except for Dane, Eau Claire, Kenosha, Milwaukee and Waukesha counties which will be determined separately. The Department will identify and retrieve the HealthCheck screening data from the Encounter Database.

When assigning HealthCheck screens to an age category, the Department will use the member’s age on the first day of the month in which the screening occurred. If a newborn enrollee is screened in the month of their birth, the newborn’s screen will be assigned to the under one age category.

d. Determine the number of eligible months and unduplicated enrollees (Lines 1 and 2 of the Worksheet) per HMO per year by using the Medicaid Management Information System Recipient Eligibility File. When calculating member months for each age category, the Department will use the member’s age on the first day of the month except for newborns. Newborns enrolled in an HMO in the month of their birth will be counted as eligible from their date of birth.

Inform the HMO in writing of its preliminary analysis of the HealthCheck data and allow the HMO 30 business days to review and respond to the calculations. If the HMO responds within 30

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business days, the Department will review the HMO’s concerns and notify the HMO of its final decision. If an HMO does not respond within 30 business days, the Department will send a “Notice of Intent to Recover” letter 40 days after the initial letter.

3. HealthCheck Redesign Project

The Department is analyzing options for replacing the HMO HealthCheck utilization monitoring and recoupment process with a performance improvement incentive system. The Department and HMOs will work closely on the HealthCheck redesign project. If the new system requires any changes to this contract, the Department will initiate an amendment to incorporate the changes.

L. Marketing Plans and Informing Materials

As used in this section, “marketing materials, other marketing activities, and informing materials” include the production and dissemination of any informing materials, marketing plans, marketing materials and other marketing activities that refer to Medicaid, Title XIX, BadgerCare, or Title XXI and are intended for Medicaid and BadgerCare recipients. This requirement includes marketing or informing materials that are produced by providers under contract to the HMO or owned by the HMO in whole or in part. Educational materials prepared by the HMO or by their contracted providers and sent to the HMOs entire membership (i.e. Medicare, Medicaid, commercial recipients) do not require the Department’s approval, unless there is specific mention of Medicaid or BadgerCare. Educational material prepared by outside entities (i.e. the American Cancer Society, the Diabetic Association etc.) does not require the Department’s approval.

1. Approval of Marketing and Informing Materials

HMOs must submit to the Department for prior written approval all informing materials, marketing plans, and all marketing materials and other marketing activities that refer to Medicaid Title XIX, BadgerCare, or Title XXI or are intended for Medicaid and BadgerCare recipients. This requirement includes marketing or informing materials that are produced by providers under contract to the HMO or owned by the HMO in whole or in part.

Marketing plans and informing materials must be written at a “sixth grade comprehension level.” The Department will review them in a manner that does not unduly restrict or inhibit the HMO’s informing or marketing plans. When applying this provision to specific marketing plans, informing materials and/or activities, the entire content and use of the informing/marketing materials or activities will be taken into consideration. The Department will review all materials as follows:

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a. The Department will review and either approve, approve with modifications, or deny all marketing or informing materials within 10 business days of receipt of the informing materials. If the HMO does not receive a response from the Department within 10 business days, the HMO must contact the Contracts Section Chief in the Bureau of MHCP. A response will be prepared within two business days of this contact.

b. Time-sensitive marketing or informing materials must be clearly marked time-sensitive by the HMO and will be approved, approved with modifications or denied by the Department within three business days. The Department reserves the right to determine whether the material is, indeed, time-sensitive. If the HMO does not receive a response from the Department within three business days the HMO must contact the Contracts Section Chief in the Bureau of MHCP. A response will be prepared within one business day of this contact.

c. The Department will not approve any materials it deems confusing, fraudulent, or misleading, or that do not accurately reflect the scope, philosophy, or covered benefits of the Medicaid and BadgerCare program.

d. Problems and errors the Department subsequently identifies must be corrected by the HMO when they are identified. The HMO agrees to comply with Ins. 6.07 and 3.27, Wis. Adm. Code, and practices consistent with the Balanced Budget Amendment of 1997 P.L. 105-33 Sec. 4707(a) [42 U.S.C. 1396v(d)(2)].

2. Prohibited Practices

a. Practices that are discriminatory.

b. Practices that seek to influence enrollment in conjunction with the sale of any other insurance product.

c. Direct and indirect cold calls, either door-to-door or telephonic.

d. Offer of material or financial gain to potential members as an inducement to enroll.

e. Activities and material that could mislead, confuse or defraud consumers.

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f. Materials that contain false information.

g Practices that are reasonably expected to have the effect of denying or discouraging enrollment.

3. HMOs Agreement to Abide by Marketing/Informing Criteria

The HMO agrees to engage only in marketing activities and distribute only those informing and marketing materials that are pre-approved in writing. Any activities must occur in its entire service area and only as indicated in the agreement. HMOs that fail to abide by these marketing requirements may be subject to any and all sanctions available under Article XI. In determining any sanctions, the Department will take into consideration any past unfair marketing practices, the nature of the current problem and the specific implications on the health and wellbeing of the Medicaid enrollees. In the event that an HMO’s affiliated provider fails to abide by these requirements, the Department will evaluate whether the HMO should have had knowledge of the marketing issue and the HMO’s ability to adequately monitor ongoing future marketing activities of the subcontractor(s).

M. Reproduction/Distribution of Materials

Reproduce and distribute at HMO expense, according to a reasonable Department timetable, information or documents sent to the HMO from the Department that contains information the HMO-affiliated providers must have in order to fully implement this Contract.

N. HMO ID Cards

The HMO may issue its own HMO ID cards. The HMO may not deny services to an enrollee solely for failure to present an HMO issued ID card. The Forward ID card will always determine HMO enrollment, even where an HMO issues HMO ID cards.

O. Open Enrollment

Conduct a continuous open enrollment period during which the HMO shall accept recipients eligible for coverage under this Contract in the order in which they are enrolled. The HMO will not discriminate against individuals eligible to enroll on the basis of race, color, national origin or health status and will not use any policy or practice that has the effect of discriminating on the basis of race, color, or national origin or health status.

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P. Selective Reporting Requirements

1. Communicable Disease Reporting

As required by Wis. Stats. 252.05, 252.15(5)(a)6 and 252.17(7)(9b), physicians, physician assistants, podiatrists, nurses, nurse midwives, physical therapists, and dietitians affiliated with a Medicaid HMO shall report the appearance, suspicion or diagnosis of a communicable disease or death resulting from a communicable disease to the Local Health Department for any enrollee treated or visited by the provider. Reports of human immunodeficiency virus (HIV) infection shall be made directly to the State Epidemiologist. Such reports shall include the name, sex, age, residence, communicable disease, and any other facts required by the Local Health Department and Wisconsin Division of Public Health. Such reporting shall be made within 24 hours of learning about the communicable disease or death or as specified in Wis. Adm. Code HFS 145.04, Appendix A. Charts and reporting forms on communicable diseases are available from the Local Health Department. Each laboratory subcontracted or otherwise affiliated with the HMO shall report to the Local Health Department the identification or suspected identification of any communicable disease listed in Wis. Adm. Rules 145, Appendix A. Reports of HIV infections shall be made directly to the State Epidemiologist.

2. Fraud and Abuse Investigations

The HMO agrees to cooperate with the Department on fraud and abuse investigations. In addition, the HMO agrees to report allegations of fraud and abuse (both provider and enrollee) to the Department within 15 days of the suspected fraud or abuse coming to the attention of the HMO. Failure on the part of HMOs to cooperate or report fraud and/or abuse may result in any applicable sanctions under Article XI.

3. Physician Incentive Plans

A physician incentive plan is any compensation arrangement between the HMO and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services provided with respect to individuals enrolled with the HMO.

The HMO shall fully comply with the physician incentive plan requirements specified in 42 CFR s. 417.479(d) through (g) and the requirements relating to subcontracts set forth in 42 CFR s. 417.479(i), as those provisions may be amended from time to time.

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Q. Abortions, Hysterectomies and Sterilization Requirements

The HMO shall comply with the following state and federal compliance requirements for the services listed below:

1. Abortions must comply with the requirements of Chapter 20.927, Wis. Stats., and with 42 CFR 441 Subpart E—Abortions.

2. Hysterectomies and sterilizations must comply with 42 CFR 441 Subpart F—Sterilizations.

Sanctions in the amount of $10,000.00 may be imposed for non-compliance with the above compliance requirements.

3. HMOs must abide by s. 609.30, Wis. Stats.

ARTICLE IV

IV. QUALITY ASSESSMENT/PERFORMANCE IMPROVEMENT (QAPI)

The HMO QAPI program must conform to the requirements of 42 CFR, Part 400, Medicaid Managed Care Requirements, Subpart D, QAPI. The program must also comply with 42 CFR 434.34 which states that the HMO must have a QAPI system that:

• Is consistent with the utilization control requirement of 42 CFR 456.

• Provides for review by appropriate health professionals of the process followed in providing health services.

• Provides for systematic data collection of performance and patient results.

• Provides for interpretation of this data to the practitioners.

• Provides for making needed changes.

A. QAPI Program

The HMO must have a comprehensive QAPI program that protects, maintains, and improves the quality of care provided to Wisconsin Medicaid and BadgerCare program recipients.

1. The HMO must evaluate the overall effectiveness of its QAPI program annually to determine whether the program has demonstrated improvement, where needed, in the quality of care and service provided to its Medicaid and BadgerCare population.

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2. The HMO must have documentation of all aspects of the QAPI program available for Department review upon request. The Department may perform off-site and on-site QAPI audits to ensure that the HMO is in compliance with contract requirements. The review and audit may include: on-site visits; staff and enrollee interviews; medical record reviews; review of all QAPI procedures, reports, committee activities, including credentialing and recredentialing activities, corrective actions and follow-up plans; peer review process; review of the results of the member satisfaction surveys, and review of staff and provider qualifications.

3. The HMO must have a written QAPI work plan that is ratified by the board of directors and outlines the scope of activity and the goals, objectives, and time lines for the QAPI program. New goals and objectives must be set at least annually based on findings from quality improvement activities and studies and results of the HMO on DHCF enrollee satisfaction surveys and MEDDIC-MS performance measures.

4. The HMO governing body is ultimately accountable to the Department for the quality of care provided to HMO enrollees. Oversight responsibilities of the governing body include, at a minimum; approval of the overall QAPI program and an annual QAPI plan; designating an accountable entity or entities within the organization to provide oversight of QAPI; review of written reports from the designated entity on a periodic basis which include a description of QAPI activities, progress on objectives, and improvements made; formal review on an annual basis of a written report on the QAPI program; and directing modifications to the QAPI program on an ongoing basis to accommodate review findings and issues of concern within the HMO.

5. The QAPI committee must be in an organizational location within the HMO such that it can be responsible for all aspects of the QAPI program. The committee membership must be interdisciplinary and be made up of both providers and administrative staff of the HMO, including:

• A variety of health professions (e.g., pharmacy, physical therapy, nursing, etc.).

• Qualified professionals specializing in mental health or substance abuse and dental care on a consulting basis when an issue related to these areas arises.

• A variety of medical disciplines (e.g., medicine, surgery, radiology, etc.).

• OB/GYN and pediatric representation.

• HMO management or governing body.

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6. Enrollees of the HMO must be able to contribute input to the QAPI Committee. The HMO must have a system to receive enrollee input on quality improvement, document the input received, document the HMO’s response to the input, including a description of any changes or studies it implemented as the result of the input and document feedback to enrollees in response to input received. The HMO response must be timely.

7. The committee must meet on a regular basis, but not less frequently than quarterly. The activities of the QAPI Committee must be documented in the form of minutes and reports. The QAPI Committee must be accountable to the governing body. Documentation of Committee minutes and activities must be available to the Department upon request.

8. QAPI activities of HMO providers and subcontractors, if separate from HMO QAPI activities, must be integrated into the overall HMO/QAPI program. Requirements to participate in QAPI activities, including submission of complete encounter data, are incorporated into all provider and subcontractor contracts and employment agreements. The HMO QAPI program shall provide feedback to the providers/subcontractors regarding the integration of, operation of, and corrective actions necessary in provider/subcontractor QAPI efforts. Other management activities (Utilization Management, Risk Management, Customer Service, Complaints and Grievances, etc.) must be integrated with the QAPI program. Physicians and other health care practitioners and institutional providers must actively cooperate and participate in the HMO’s quality activities.

The HMO remains accountable for all QAPI functions, even if certain functions are delegated to other entities. If the HMO delegates any activities to contractors, the conditions listed in Article II “Delegations of Authority” must be met.

9. There is evidence that HMO management representatives and providers participate in the development and implementation of the QAPI plan of the HMO. This provision shall not be construed to require that HMO management representatives and providers participate in every committee or subcommittee of the QAPI program.

10. The HMO must designate a senior executive to be responsible for the operation and success of the QAPI program. If this individual is not the HMO Medical Director, the Medical Director must have substantial involvement in the QAPI program. The designated individual shall be accountable for the QAPI activities of the HMO’s own providers, as well as the HMO’s subcontracted providers.

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11. The qualifications, staffing level and available resources must be sufficient to meet the goals and objectives of the QAPI program and related QAPI activities. Such activities include, but are not limited to, monitoring and evaluation of important aspects of care and services, facilitating appropriate use of preventive services, monitoring provider performance, provider credentialing, involving members in QAPI initiatives and conducting performance improvement projects.

Written documentation listing the staffing resources that are directly under the organizational control of the person who is responsible for QAPI (including total FTEs, percent of time dedicated to QAPI, background and experience, and role) must be available to the Department upon request.

B. Monitoring and Evaluation

1. The QAPI program must monitor and evaluate the quality of clinical care on an ongoing basis. Important aspects of care (i.e., acute, chronic conditions, high volume, high-risk preventive care and services) are studied and prioritized for performance improvement and/or development of practice guidelines. Standardized quality indicators must be used to assess improvement, ensure achievement of minimum performance levels (Ref: MEDDIC-MS Measures and Technical Specifications), monitor adherence to guidelines, and identify patterns of over utilization and under utilization. The measurement of quality indicators selected by the HMO for areas other than those included in MEDDIC-MS must be supported by appropriate data collection and analysis methods to improve clinical care and services.

2. Provider performance must be measured against practice guidelines and standards adopted by the QAPI Committee. Areas identified for improvement must be tracked and corrective actions taken when warranted. The effectiveness of corrective actions must be monitored until problem resolution occurs. Reevaluation must occur to ensure that the improvement is sustained.

3. The HMO must use appropriate clinicians to evaluate the data on clinical performance, and multi-disciplinary teams to analyze and address data on systems issues.

4. The HMO must also monitor and evaluate care and services in certain priority clinical and non-clinical areas specified in Article IV, K, 3.

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5. The HMO must make documentation available to the Department upon request regarding quality improvement and assessment studies on plan performance, which relate to the enrolled population. See reporting requirements in Article IV, K, “Performance Improvement Priority Areas and Projects.”

6. The HMO must develop or adopt practice guidelines that are disseminated to providers and to enrollees as appropriate or upon request. The guidelines are based on valid and reliable medical evidence or consensus of health professionals; consider the needs of the enrollees; developed or adopted in consultation with the contracting health professionals, and reviewed and updated periodically (42 CFR, §. 438.236.).

Decisions with respect to utilization management, enrollee education, coverage of services, and other areas to which the practice guidelines apply are consistent with the guidelines. Variations from the guidelines must be based on the clinical situation.

C. Health Promotion and Disease Prevention Services

1. The HMO must identify at-risk populations for preventive services and develop strategies for reaching Medicaid and BadgerCare members included in this population. Public health resources can be used to enhance the HMO’s health promotion and preventive care programs.

2. The HMO must have mechanisms for facilitating appropriate use of preventive services and educating enrollees on health promotion. At a minimum, an effective health promotion and prevention program includes HMO outreach to and education of its enrollees, tracking preventive services, practice guidelines for preventive services, yearly measurement of performance in the delivery of such services, and communication of this information to providers and enrollees.

3. The Department encourages the HMO to develop and implement disease management programs and systems to enhance quality of care for individuals identified as having chronic or special health care needs known to be responsive to application of clinical practice guidelines and other techniques.

4. The HMO agrees to implement systems to independently identify enrollees with special health care needs and to utilize data generated by the systems or data that may be provided by the Department to facilitate outreach, assessment and care for individuals with special health care needs.

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D. Provider Selection (Credentialing) and Periodic Evaluation (Recredentialing)

1. The HMO must have written policies and procedures for provider selection and qualifications. For each practitioner, including each member of a contracting group that provides services to the HMO’s enrollees, initial credentialing must be based on a written application, primary source verification of licensure, disciplinary status, eligibility for payment under Medicaid and certified for Medicaid. The HMO’s written policies and procedures must identify the circumstances in which site visits are appropriate in the credentialing process.

The HMO may not employ or contract with providers excluded in federal health care programs under either Section 1128 or Section 1128A of the Social Security Act.

2. The HMO must periodically monitor (no less than every three years) the provider’s documented qualifications to ensure that the provider still meets the HMO’s specific professional requirements.

3. The HMO must also have a mechanism for considering the provider’s performance. The recredentialing method must include updating all the information (except medical education) utilized in the initial credentialing process. Performance evaluation must include information from the QAPI system, reviewing enrollee complaints, and the utilization management system.

4. The selection process must not discriminate against providers such as those serving high-risk populations, or specialize in conditions that require costly treatment. The HMO must have a process for receiving advice on the selection criteria for credentialing and recredentialing practitioners in the HMO’s network.

If the HMO declines to include groups of providers in its network, the HMO must give the affected providers written notice of the reason for its decision.

5. If the HMO delegates selection of providers to another entity, the organization retains the right to approve, suspend, or terminate any provider selected by that entity.

6. The HMO must have a formal process of peer review of care delivered by providers and active participation of the HMO’s contracted providers in the peer review process. This process may include internal medical audits, medical evaluation studies, peer review committees, evaluation of outcomes of care, and systems for correcting deficiencies. The HMO must supply documentation of its peer review process upon request.

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7. The HMO must have written policies that allow it to suspend or terminate any provider for quality deficiencies. There must also be an appeals process available to the provider that conforms to the requirements of the HealthCare Quality Improvement Act of 1986 (42 USC §. 11101 et. Seq.).

8. The names of individual practitioners and institutional providers who have been terminated from the HMO provider network as a result of quality issues must be immediately forwarded to the Department and reported to other entities as required by law (42 USC §. 11101 et. Seq.).

9. Institutional Provider Selection: The HMO must determine and verify at specified intervals that:

a. Each provider, other than an individual practitioner is licensed to operate in the state, if licensure is required, and in compliance with any other applicable state or federal requirements; and

b. The HMO verifies if the provider claims accreditation, or is determined by the HMO to meet standards established by the HMO itself.

10. Exceptions to credentialing and recredentialing requirements. These standards do not apply to:

a. Providers who practice only under the direct supervision of a physician or other provider, and

b. Hospital-based providers such as emergency room physicians, anesthesiologists, and other providers who provide services only incident to hospital services.

These exceptions do not apply if the provider contracts independently with the HMO.

E. Enrollee Feedback on Quality Improvement

1. The HMO must have a process to maintain a relationship with its enrollees that promotes two way communication and contributes to quality of care and service. The HMO must treat members with respect and dignity.

2. The Department will conduct a satisfaction survey of a representative sample of enrolled Medicaid and BadgerCare recipients. The Department will work with HMOs to develop the survey instrument and plan. The HMO must have systems in place for acting on survey results and must report to the Department any quality management projects planned in response to survey results. The frequency of the survey will be annually or biennially, at the Department’s discretion. The Department will inform HMOs in advance of the audit date and audit plan.

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3. The HMO is encouraged to find additional ways to involve Medicaid and BadgerCare enrollees in quality improvement initiatives and in soliciting enrollee feedback on the quality of care and services the HMO provides. Other ways to bring enrollees into the HMO’s efforts to improve the health care delivery system include but are not limited to focus groups, consumer advisory councils, enrollee participation on the governing board, the QAPI committees or other committees, or task forces related to evaluating services. All efforts to solicit feedback from enrollees must be approved by the Department.

F. Medical Records

1. The HMO must have policies and procedures for participating provider medical records content and documentation that have been communicated to providers and a process for evaluating its providers’ medical records based on the HMO’s policies. These policies must address patient confidentiality, organization and completeness, tracking, and important aspects of documentation such as accuracy, legibility, and safeguards against loss, destruction, or unauthorized use. The HMO must also have confidentiality policies and procedures that are applicable to administrative functions that are concerned with confidential patient information. Those policies must include information with respect to disclosure of enrollee-identifiable medical record and/or enrollment information and specifically provide:

a. That enrollees may review and obtain copies of medical records information that pertains to them.

b. That policies above must be made available to enrollees upon request.

2. Patient medical records must be maintained in an organized manner (by the HMO, and/or by the HMO’s subcontractors) that permits effective patient care, reflect all aspects of patient care and be readily available for patient encounters, administrative purposes, and Department review.

3. Because HMOs are considered contractors of the state and therefore (only for the limited purpose of obtaining medical records of its enrollees) entitled to obtain medical records according to Wis. Adm. Code, HFS 104.01(3), the Department requires Medicaid-certified providers to release relevant records to the HMO to assist in compliance with this section. HMOs that have not specifically addressed photocopying expenses in their provider contracts or other arrangements, are liable for charges for copying records only to the extent that the Department would reimburse on a FFS basis.

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4. The HMO must have written confidentiality policies and procedures in regard to individually-identifiable patient information. Policies and procedures must be communicated to HMO staff, members, and providers. The transfer of medical records to out-of-plan providers or other agencies not affiliated with the HMO (except for the Department) are contingent upon the receipt by the HMO of written authorization to release such records signed by the enrollee or, in the case of a minor, by the enrollee’s parent, guardian, or authorized representative.

5. The HMO must have written quality standards and performance goals for participating provider medical record documentation and be able to demonstrate, upon request of the Department, that the standards and goals have been communicated to providers. The HMO must actively monitor compliance with established standards and provide documentation of monitoring for compliance with the standards and goals upon request of the Department.

6. Medical records must be readily available for HMO-wide Quality Assessment/Performance Improvement (QAPI) and Utilization Management (UM) activities and provide adequate medical and other clinical data required for QAPI/UM, and Department use.

7. The HMO must have adequate policies in regard to transfer of medical records to ensure continuity of care when enrollees are treated by more than one provider. This may include transfer to local health departments subject to the receipt of a signed authorization form as specified in subsection 4 above (with the exception of immunization status information described in Article III, D, 8, which does not require enrollee authorization).

8. Requests for completion of residual functional capacity evaluation forms and other impairment assessments, such as queries as to the presence of a listed impairment, must be provided within 10 business days of the request (at the discretion of the individual provider and subject to the provider’s medical opinion of its appropriateness) and according to the other requirements listed above. The HMO and its providers and subcontractor may charge the enrollee, authorized representative, or other third party a reasonable rate for the completion of such forms and other impairment assessments. Such rates may be reviewed by the Department for reasonableness and may be modified based on this review.

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9. Minimum medical record documentation per chart entry or encounter must conform to the Wis. Adm. Code, Chapter HFS 106.02, (9)(b) Medical record content.

G. Utilization Management (UM)

1. The HMO must have documented policies and procedures for all UM activities that involve determining medical necessity, and the approval or denial of medical services. Qualified medical professionals must be involved in any decision-making that requires clinical judgment. The decision to deny, reduce or authorize a service that is less than requested must be made by a health professional with appropriate clinical expertise in treating the affected enrollee’s condition(s). Criteria used to determine medical necessity and appropriateness must be communicated to providers. The criteria for determining medical necessity may not be more stringent than HFS 101.03 (96m) Wis. Adm. Code.

2. If the HMO delegates any part of the UM program to a third party, the delegation must meet the requirements in Article II Delegations of Authority.

3. If the HMO utilizes telephone triage, nurse lines or other demand management systems, the HMO must document review and approval of qualification criteria of staff and of clinical protocols or guidelines used in the system. The system’s performance will be evaluated annually in terms of clinical appropriateness.

4. The HMO’s policies must specify time frames for responding to requests for initial and continued service determinations, specify information required for authorization decisions, provide for consultation with the requesting provider when appropriate, and provide for expedited responses to requests for authorization of urgently needed services. In addition, the HMO must have in effect mechanisms to ensure consistent application of review criteria for authorization decisions (interrater reliability).

a. Within the time frames specified, the HMO must give the enrollee and the requesting provider written notice of:

1) The decision to deny, limit, reduce, delay or terminate a service along with the reasons for the decision.

2) The enrollee’s right to file a grievance or request a state fair hearing.

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b. Authorization decisions must be made within the following time frames and in all cases as expeditiously as the enrollee’s condition requires:

1) Within 14 calendar days of the receipt of the request, or

2) Within three business days if the physician indicates or the HMO determines that following the ordinary time frame could jeopardize the enrollee’s health or ability to regain maximum function.

One extension of up to 14 calendar days may be allowed if the enrollee requests it or if the HMO justifies the need for more information.

On the date that the timeframes expire, HMO gives notice that service authorization decisions are not reached. Untimely service authorizations constitute a denial and are thus adverse actions.

5. Criteria for decisions on coverage and medical necessity are clearly documented, are based on reasonable medical evidence, current standards of medical practice, or a consensus of relevant health care professionals, and are regularly updated.

6. The HMO oversees and is accountable for any functions and responsibilities that it delegates to any subcontractor. (See Article II Delegations of Authority).

7. Postpartum discharge policy for mothers and infants must be based on medical necessity determinations. This policy must include all follow-up tests and treatments consistent with currently accepted medical practice and applicable federal law. The policy must allow at least a 48-hour hospital stay for normal spontaneous vaginal delivery, and 96 hours for a cesarean section delivery, unless a shorter stay is agreed to by both the physician and the enrollee. HMOs may not deny coverage, penalize providers, or give incentives or payments to providers or enrollees. Post hospitalization follow-up care must be based on the medical needs and circumstances of the mother and infant. The Department may request documentation demonstrating compliance with this requirement.

H. External Quality Review Contractor

1. The HMO must assist the Department and the external quality review organization under contract with the Department in identification of provider and enrollee information required to carry out on-site or off-site medical chart reviews. This includes arranging orientation meetings for

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physician office staff concerning medical chart review, and encouraging attendance at these meetings by HMO and physician office staff as necessary. The provider of service may elect to have charts reviewed on-site or off-site.

2. When the professional review organization under contract with the Department identifies an adverse health situation in which follow-up is needed to determine whether appropriate care was provided, the HMO must:

a. Assign a staff person(s) to conduct follow-up with the provider(s) concerning each adverse health situation identified by the Department’s external quality review organization, including informing the provider(s) of the finding and monitoring the provider’s resolution of the finding;

b. Inform the HMO’s QAPI Committee of the final finding and involve the QAPI Committee in the development, implementation and monitoring of the corrective action plan; and

c. Submit a corrective action plan or an opinion in writing to the Department within 60 days that addresses the measures that the HMO and the provider intend to take to resolve the finding. The HMO’s final resolution of all cases must be completed within six months of HMO notification. A case is not considered resolved by the Department until the Department approves the response provided by the HMO and provider.

3. The HMO will facilitate training provided by the Department to its providers.

I. Dental Services Quality Improvement (Applies only to HMOs Covering Dental Services)

The HMO QAPI Committee and QAPI coordinator will review subcontracted dental programs quarterly to ensure that quality dental care is provided and that the HMO and the contractor comply with the following:

1. The HMO or HMO affiliated dental provider must advise the enrollee within 30 days of effective enrollment of the name of the dental provider and the address of the dental provider’s site. The HMO or HMO affiliated dental provider must also inform the enrollee in writing how to contact his/her dentist (or dental office), what dental services are covered, when the coverage is effective, and how to appeal denied services.

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2. An HMO or HMO affiliated dental provider who assigns all or some Medicaid and BadgerCare HMO enrollees to specific participating dentists must give enrollees at least 30 days after assignment to choose another dentist. Thereafter, the HMO and/or affiliated provider must permit enrollees to change dentists at least twice in any calendar year and more often than that for just cause.

3. HMO-affiliated dentists must provide a routine dental appointment to an assigned enrollee within 90 days after the request. Enrollee requests for emergency treatment must be addressed within 24 hours after the request is received.

4. Dental providers must maintain adequate records of services provided. Records must fully disclose the nature and extent of each procedure performed and should be maintained in a manner consistent with standard dental practice.

5. The HMO affirms by execution of this Contract that the HMO’s peer review systems are consistently applied to all dental subcontractors and providers.

6. The HMO must document, evaluate, resolve, and follow up on all verbal and written complaints they receive from Medicaid/BadgerCare enrollees related to dental services.

J. Accreditation

1. The Department encourages the HMO to actively pursue accreditation by the National Committee for Quality Assurance (NCQA), the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) or other recognized accrediting bodies approved by the Department. 42 CFR §. 438.360 provides that the Department may recognize “a private national accrediting organization that CMS has approved as applying standards at least as stringent as Medicare under the procedures in §. 422.158.”

The Centers for Medicare and Medicaid Services (CMS) has recognized the following accrediting bodies: The National Committee for Quality Assurance (NCQA), the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), and the Accreditation Association for Ambulatory Health Care (AAAHC). The Department may recognize other accreditation bodies as they may qualify for such recognition.

2. The achievement of full accreditation by an accreditation body approved by the Department and satisfaction of the requirements of the HMO Accreditation Incentive Program as specified by the Department will result in the HMO qualifying for the Accreditation Incentive.

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Where accreditation standards conflict with the standard set forth in this Contract, the Contract prevails unless the accreditation standard is more stringent.

K. Performance Improvement Priority Areas and Projects

1. The HMO must develop and ensure implementation of program initiatives to address the specific clinical needs that have a higher prevalence in the HMO’s enrolled population served under this Contract. These priority areas must include clinical and non-clinical Performance Improvement projects. The Department strongly advocates the development of collaborative relationships among HMOs, local health departments, community based behavioral health treatment agencies (both public and private), and other community health organizations to achieve improved services in priority areas and must report complete encounter data for all services provided. Linkages between managed care organizations and public health agencies is an essential element for the achievement of the public health objectives, potentially reducing the quantity and intensity of services the HMO needs to provide. The Department and the HMO are jointly committed to on going collaboration in the area of service and clinical care improvements by the development and sharing of “best practices” and use of encounter data-driven performance measures (MEDDIC-MS).

The HMO must annually monitor and evaluate the quality of care and services through performance improvement projects for at least two of the priority areas specified by the Department and listed in subsections 3. below, or an HMO may propose to address alternative performance improvement topics by making a request in writing to the Department. In addition, to two performance improvement projects required under subsection 3 below the HMO may be required to conduct up to two additional performance improvement initiatives and submit reports as required to achieve performance goals specified in the MEDDIC-MS technical specifications. The final or on-going status report for each project must be submitted by October 1 of each calendar year, or as may be specified in the MEDDIC-MS technical specifications. The performance improvement topic must take into account the prevalence of a condition among, or need for a specific service by, the HMO enrollees served under this Contract; enrollee demographic characteristics and health risks; and the interest of consumers or purchasers in the aspect of care or services to be addressed.

The report for each performance improvement project must address each of the following points in order for the Department to evaluate the reliability and validity of the data and the conclusions described in the study:

a. Topic

1) Is the topic important to the enrolled population?

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b. Can it be affected by the actions of the HMO?

1) Was the process of the topic selection described?

c. Method

1) Was the method and procedure used to study the topic clear?

2) Study question:

• Was the study question clearly stated and consistent throughout the study?

• Is the study question specific?

d. Data Collection

1) Was the data fully described in detail?

2) Was the data appropriate to answer the study question?

3) Was the data collection process fully described?

4) Was the data collection appropriate to answer the study question?

5) Were the data collectors appropriate to collect the data?

6) Was interrater reliability adequate?

7) Did the loss of data or subjects affect validity?

8) Was the study time clear?

e. Intervention (not applicable if the project is to establish a baseline only)

1) Was the intervention fully described?

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2) Was the intervention practical (can it be widely implemented?)

3) Was the implementation of the intervention monitored and reported to ensure that it was done properly?

f. Results and interpretation

1) Was the data collected fully reported?

2) Did the study include comparisons to give meaning to the results?

3) Is the norm or standard expressed in a specific numerical manner?

4) Is the goal, norm or standard appropriate to this population and study?

5) Was the comparison group (if applicable) as close as possible to the population under study and were any differences acknowledged?

6) If pre-and-post measures were used, was an explanation for the differences between the measures considered?

7) Was assignment to groups random?

8) Did the study appropriately use statistical testing? (x² t-test, regression analysis, etc.)?

9) Were the conclusions consistent with the results?

10) Were data tables, figures and graphs consistent with the text?

11) Did the study consider its limitations?

12) Did the study conclude or imply causality when the supporting data is only correlational?

13) Did the study include how to improve the study?

14) Did the study present recommendations on the results?

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15) Did the report clearly state whether performance improvement goals were met (if an intervention was carried out), and if the goals were not met, was there an analysis of why not and a plan for future action?

g. Miscellaneous

1) Was enrollee confidentiality protected?

2) Did consumers participate in the study (other than as the subjects)?

3) Did the study include cost/benefit analysis or some other consideration of financial impact?

4) Were next steps described in detail? (Dates and timelines)

5) Were the results and conclusions distributed throughout the HMO?

6) Did table, figures and graphs convey their information clearly without reference to the report text?

7) Did the study report include an accurate summary?

8) Was the study clearly written?

2. Performance reporting will utilize standardized indicators appropriate to the performance improvement area or as specified in the MEDDIC-MS technical specifications. Minimum performance levels must be specified for each performance improvement area, using normative standards derived from regional, national norms, or from norms established by an appropriate practice organization. Goals for improvement for the “Priority Areas” listed in Section 3. below, may be set by the organization itself.

The organization must ensure that improvements are sustained through periodic audits of relevant data and maintenance of the interventions that resulted in the improvement. The HMO agrees to open at least one new performance improvement project during the contract period. In all cases, not less than two performance improvement projects must be reported to the Department in any year and not less than three different projects must be reported to the Department in 2006-2007. These projects are in addition to any that may be required as the result of sub-goal performance on any MEDDIC-MS Targeted Performance Improvement Measures. However, if the HMO chooses to initiate or continue a project on a topic that coincides with a required MEDDIC-MS project, the Department will accept the report as fulfilling both requirements during the next contract year.

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The organization must implement a performance improvement project in the area if a quality improvement opportunity is identified. The HMO must report to the Department on each study, including those areas where the HMO will not pursue a performance improvement project.

The Department will accept for fulfillment of the above requirement Performance Improvement Project Reports arising out of voluntary HMO participation in collaborative quality improvement projects including, but not limited to, the Improving Birth Outcomes Project (IBOP), First Breath smoking cessation project, Care Analysis Projects (CAP) or other collaborative efforts designated by the Department. In order to be accepted the project report by the HMO must meet all the content criteria described in Performance Improvement Project Outline in subsection K, 1.

3. Priority Areas

Clinical Priority Areas:

• Prenatal services;

• Identification of adequate treatment for high-risk pregnancies, including those involving substance abuse;

• Evaluating the need for specialty services;

• Availability of comprehensive, ongoing nutrition education, counseling, and assessments;

• Family Health Improvement Initiative: Smoking Cessation;

• Enrollees with special health care needs;

• Outpatient management of asthma;

• The provision of family planning services;

• Early postpartum discharge of mothers and infants;

• STD screening and treatment;

• High volume/high risk services selected by the HMO;

• Prevention and care of acute and chronic conditions;

• Coordination and continuity of care;

• Obesity; and

• Overuse and inappropriate use of antibiotics.

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Non-Clinical Priority Areas:

• Grievances, appeals and complaints;

• Access to and availability of services;

• Enrollee satisfaction with HMO customer service; and

• Satisfaction with services for enrollees with special health care needs or cultural competency of the HMO and its providers.

In addition, the HMO may be required to conduct performance improvement projects specific to the HMO and to participate in one annual statewide project that may be specified by the Department.

4. Performance Measurement and Goal-setting for Improvement – MEDDIC-MS Medicaid Encounter Data-Driven Improvement Core Measure Set and MEDDIC-MS Goal-setting Procedures.

The Department will evaluate HMO performance using the MEDDIC-MS automated performance measures. Evaluation of HMO performance on each measure will be conducted on timetables determined by the Department. The technical specifications for each measure are established by the Department with HMO and other stakeholder input and are described in “MEDDIC-MS Measures and Technical Specifications,” as revised.

The Department will inform the HMO of its performance on each measure, whether the HMO’s performance satisfied the goal requirements set by the Department and whether a performance improvement initiative by the HMO is required. The HMO will have 60 business days to review and respond to the Department’s performance report. When a performance improvement initiative is required due to sub-goal performance on the measure, the HMO may request recalculation of the performance level based on new or additional data the HMO may supply, or if the HMO can demonstrate material error in the calculation of the performance level. The Department will provide a tentative schedule of measure calculation dates to the HMO within 90 days of the beginning of each calendar year in the contract period.

MEDDIC-MS consists of targeted performance improvement measure (TPIMS) and monitoring measures. The specifications for each TPIM includes denominator and numerator specifications, performance goals and requirements for actions to be taken when sub-goal performance occurs.

Unless otherwise noted within a specific targeted performance improvement measure, the Department may specify minimum performance levels and require that the HMOs develop plans to respond to levels below the minimum performance levels. Additions, deletions or modifications to the Targeted Performance Improvement Measures and

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Monitoring Measures in the MEDDIC-MS Technical Specifications and goals must be mutually agreed upon by the parties. The Department will give 90 days notice to the HMO of its intent to change any measures, technical specifications or goals. The HMO shall have the opportunity to comment on the measure specifications, goals and implementation plan within the 90 day notice period. The Department reserves the right to require the HMO to report such performance measure data as may be deemed necessary to monitor and improve HMO-specific or program-wide quality performance.

5. Pay for Performance – The Department will implement pay for performance incentives for HMOs for selected health status or outcomes improvements to be mutually agreed. The incentive payment will be based on the criteria to be developed and agreed through a contract amendment.

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ARTICLE V

V. FUNCTIONS AND DUTIES OF THE DEPARTMENT

In consideration of the functions and duties of the HMO contained in this Contract, the Department must:

A. Eligibility Determination

Identify Medicaid and BadgerCare recipients who are eligible for enrollment in HMOs as a result of eligibility under the following eligibility status:

Med Stat	Cap Rate*	Description
31	A	AFDC-Regular
32	A	AFDC-Unemployed
38, 39	A	AFDC-Related, No Cash Payment
CC, CM, GC, PC	A	Healthy Start Children
E2	A	AFDC-Related, No Cash Payment
GE	A	Healthy Start Children Ages 15-18
N1, N2	A	Medicaid Newborn
UA	A	AFDC-Related, Unemployed
WH	A	AFDC Employed over 100 Hours a Month
X1, X2, X3, X4	A	AFDC-Related, No Cash Payment
B1	A	BadgerCare – Income equal or greater than 100% of FPL, and less than or equal to 150% of FPL, Kids, No premium.
B4	A	BadgerCare – Income equal or greater than 100% of FPL, and less than or equal to 150% of FPL, Adults, No premium.
B2	A	BadgerCare – Income greater than 150% of FPL, and less than 185% of FPL, Kids, Premium.
B5	A	Income greater than 150% of FPL, and less than 185% of FPL, Adults, Premium.
B3	A	Income equal or greater than 185% of the FPL, and less than 200% of the FPL, Kids, Premium.
B6	A	Income equal or greater than 185% of the FPL, and less than 200% of the FPL, Adults, Premium.
GP	A	Income less than 100% of FPL, Adults Parents of OBRA kids (AFDC), No premium.
95	B	Pregnant Women in Intact Families
A6, A7, A8,	B	Pregnant Woman, IRCA Alien
E3, E4	B	Extension for Pregnant Woman
PW, P1	B	Healthy Start Pregnant Women

* A = AFDC/Healthy Start Children/BadgerCare capitation rate.

* B = Pregnant Women Healthy Start capitation rate.

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B. Enrollment

Promptly notify the HMO of all Medicaid and BadgerCare recipients enrolled in the HMO under this Contract. Notification will be effected through the HMO Enrollment Reports. All recipients listed as an ADD or CONTINUE on either the Initial or Final HMO Enrollment Report are members of the HMO during the enrollment month. The reports will be generated in the sequence specified under HMO enrollment reports Article V, E. These reports shall be in both tape and hard copy formats or available through electronic file transfer capability and will include medical status codes. The Department will make all reasonable efforts to enroll pregnancy cases as soon as possible.

C. Disenrollment

Promptly notify the HMO of all Medicaid and BadgerCare recipients no longer eligible to receive services through the HMO under this Contract. Notification will be effected through the HMO Enrollment Reports which the Department will transmit to the HMO for each month of coverage throughout the term of the Contract. The reports will be generated in the sequence under HMO enrollment reports Article V, E. Any recipient who was enrolled in the HMO in the previous enrollment month, but does not appear as an ADD or CONTINUE on either the Initial or Final HMO Enrollment Report for the current enrollment month, is disenrolled from the HMO effective the last day of the previous enrollment month.

D. Enrollment Errors

The Department must investigate enrollment errors brought to its attention by the HMO. The Department must correct systems errors and human errors and ensure that the HMO is not financially responsible for recipients that the Department determines have been enrolled in error. Capitation payments made in error will be recouped.

E. HMO Enrollment Reports

For each month of coverage throughout the term of the Contract, the Department will transmit “HMO Enrollment Reports” to the HMO. These reports will provide the HMO with ongoing information about its Medicaid and BadgerCare enrollees and disenrollees and will be used as the basis for the monthly capitation claims described in Article VI, payments to the HMO. The HMO Enrollment Reports will be generated in the following sequence:

1. The Initial HMO Enrollment Report will list all of the HMO’s enrollees and disenrollees for the enrollment month that are known on the date of report generation. The Initial HMO Enrollment Report will be available to the HMO on or about the twenty-first of each month. A capitation claim shall be generated for each enrollee listed as an ADD or CONTINUE on

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this report. Enrollees who appear as PENDING on the Initial Report and are reinstated into the HMO prior to the end of the month will appear as a CONTINUE on the Final Report and a capitation claim will be generated at that time.

2. The final HMO Enrollment Report will list all of the HMO’s enrollees for the enrollment month, who were not included in the Initial HMO Enrollment Report. The Final HMO Enrollment Report will be available to the HMO by the first day of the capitation month. A capitation claim will be generated for every enrollee listed as an ADD or CONTINUE on this report. Enrollees in PENDING status will not be included on the final report.

3. The Department will provide HMOs with effective dates for medical status code changes, county changes and other address changes in each enrollment report to the extent that the county reports these to the Department.

F. Utilization Review and Control

Waive, to the extent allowed by law, any present Department requirements for prior authorization, second opinions, copayment, or other Medicaid restrictions for the provision of contract services provided by the HMO to enrollees, except as may be provided in Article III, F.

G. HMO Review

Submit to HMOs for prior approval materials that describe specific HMOs and that will be distributed by the Department or County to recipients.

H. Department Audit Schedule

HMOs will be notified approximately 30 days prior to regularly scheduled, routine audits being conducted via a letter from the Division of Health Care Financing. The Department will develop an annual schedule of known audits for the next contract period.

I. HMO Review of Study or Audit Results

Submit to HMOs for a 30 business day review/comment period, any Medicaid and BadgerCare HMO audits, the annual HMO Comparison Report, HMO Consumer Satisfaction Reports, or any other Medicaid and BadgerCare HMO studies the Department releases to the public. The review/comment period will commence on the fifth business day after the audit report was mailed. The HMO may request an extension and the Department will exercise reasonable discretion in making the determination to waive the 30 business day review/comment requirement.

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J. Vaccines

Provide certain vaccines to HMO providers for administration to Medicaid and BadgerCare HMO enrollees according to the policies and procedures in the Wisconsin Medicaid and BadgerCare Physicians Services Handbook. The Department will reimburse the HMO for the cost of vaccines that are newly approved during the contract year and not yet part of the Vaccine for Children program. The cost of the vaccine shall be the same as the cost to the Department of buying the new vaccine through the Vaccine for Children program. The HMO retains liability for the cost of administering the vaccines.

K. Coordination of Benefits

Maintain a report of recovered money reported by the HMO and its subcontractor.

L. Wisconsin Medicaid Provider Reports

Provide a monthly electronic listing of all Wisconsin Medicaid certified providers to include, at a minimum, the name, address, Wisconsin Medicaid provider ID number, and dates of certification in Wisconsin Medicaid.

M. Enrollee Health Status and Primary Language Report

The Department will provide the HMO with an enrollee health status and primary language report of all enrollees who have agreed to participate with the gathering of this data. The reports will be provided to the HMO on a monthly basis. The purpose of this report is to assist HMOs with continuity of care issues and with the identification of non-English speaking enrollees and to facilitate appointments for enrollees who have urgent health care needs.

N. Fraud and Abuse Training

The Department will provide fraud and abuse detection training to the HMOs annually.

O. Provision of Data to HMOs

Provide to each HMO the following data related to the HMO’s members:

1. Lead testing performed and sent to the State Lab of Hygiene for analysis.

2. Immunization information from the Wisconsin Immunization Registry to the extent available. The Department will make every effort to get the Wisconsin Immunization Registry information to HMOs.

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P. Special Procedures for Retroactive Payment Adjustments for Pregnant BadgerCare Enrollees

The Department will continue to work on development and implementation of an automated procedure by which payment adjustments will be made for BadgerCare enrollees who should have been designated as a Healthy Start Pregnant Woman. As long as the woman was enrolled in the HMO at the time of delivery, the adjustment will be made for up to seven months of enrollment before the delivery and two months following the delivery.

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ARTICLE VI

VI. PAYMENT TO THE HMO

A. Capitation Rates

In consideration of full compliance by the HMO with contract requirements, the Department agrees to pay the HMO monthly payments based on the capitation rates specified in Addendum III. The HMO accepts the monthly capitation payment as payment in full except for cost payments from third party payers and payments under the contract for NICU, AIDS and vent services. The HMO assumes full risk for the cost of services covered by the capitation payment. The capitation rate does not include any amount for recoupment of losses incurred by the HMO under previous contracts nor does it include services that are not covered under the State Plan.

The Department’s enhanced funding policies include NICU risk sharing, ventilator dependent and AIDS/HIV enrollees. HMOs cannot submit a request for enhanced funding under more than one of the three funding policies for the same enrollee for the same date(s) of service.

B. Actuarial Basis

The capitation rate is calculated on an actuarial basis recognizing the payment limits set forth in 42 CFR 438.6.

C. Annual Negotiation of Capitation Rates

The monthly capitation rates set forth in this article are recalculated on an annual basis. The HMO will have 30 calendar days from the date of the written notification to accept the new capitation rates in writing or to initiate termination or non-renewal of the Contract. The capitation rates are not subject to renegotiation once they have been accepted, unless such renegotiation is required by changes in federal or state laws, rules or regulations.

D. Reinsurance

The HMO may obtain a risk-sharing arrangement from an insurer other than the Department for coverage of enrollees under this Contract, provided that the HMO remains substantially at risk for providing services under this Contract.

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E. Payment Schedule

Payment to the HMO is based on the HMO Enrollment Reports that the Department transmits to the HMO according to the schedule in Article V, E. Payment for each person listed as an ADD or CONTINUE on the HMO Enrollment Reports shall be made by the Department within 60 days of the date the report is generated. Also, all retroactive capitation payments for newborns will be paid within 60 days of the child’s first appearance on an enrollment report. (See Article VI, F.) Any claim that is not paid within these time limits will be denied by the Department and the recipient will be disenrolled from the HMO for the capitation month specified on the claim. Notification of all paid and denied claims will be given through the weekly Remittance Status Report, which is available on both tape and hard copy.

F. Capitation Payments For Newborns

The HMO will authorize provision of contract services to the newborn child of an enrolled mother for the first ten days of life. The child’s date of birth should be counted as day one. In addition, if the child is reported within 100 days of the date of birth, the HMO will provide contract services to the child from its date of birth until the child is disenrolled from the HMO. The HMO will receive a separate capitation payment for the month of birth and for all other months the HMO is responsible for providing contract services to the child. If the child is not reported within 100 days of the date of birth, the child will not be retroactively enrolled into the HMO. In this case, the HMO is not responsible for payment of services provided prior to the child’s enrollment and will receive no capitation payments for that time period and may recoup payments from providers for any services that were authorized in that 100 day time period. The providers who gave services in this 100 day time period may then bill the Department on a FFS basis. More detailed information for providers on billing the Department on a FFS basis in these situations can be found in the Claims Submission section of the Wisconsin Medicaid and BadgerCare All-Provider handbook.

HMOs or their providers must complete an HMO Newborn Report (refer to the example and instructions in Addendum VIII, C. for newborns. The HMO will report all births to the Department’s fiscal agent as soon as possible after the date of birth, but at least monthly. Prompt HMO reporting of newborns will facilitate retroactive enrollment and capitation payments for newborns, since this newborn reporting will ensure the newborn’s Medicaid or BadgerCare eligibility for the first 12 months of life contingent upon the newborn continuously residing with the mother.

Infants weighing less than 1200 grams will be exempt from enrollment if the data submitted by the HMO or the provider supports the infant’s low birth weight. If an infant weighs less than 1200 grams, the HMO or provider should check the box on the Medicaid and BadgerCare Newborn Report (Addendum VIII, C) to identify the infant as a low birth-weight baby.

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G. Coordination of Benefits (COB)

The HMO must actively pursue, collect and retain all monies from all available resources for services to enrollees covered under this Contract except where the amount of reimbursement the HMO can reasonably expect to receive is less than the estimated cost of recovery (this exception does not apply to collections for AIDS and ventilator dependent patients), or except as provided in Article III, F. COB recoveries will be done by post-payment billing (pay and chase) for certain prenatal care and preventive pediatric services. Post-payment billing will also be done in situations where the third party liability (TPL) is derived from a parent whose obligation to pay is being enforced by the state Child Support Enforcement Agency and the provider has not received payment within 30 days after the date of service.

1. Cost effectiveness of recovery is determined by, but not limited to time, effort, and capital outlay required to perform the activity. The HMO upon request of the Department, must be able to specify the threshold amount or other guidelines used in determining whether to seek reimbursement from a liable third party, or describe the process by which the HMO determines seeking reimbursement would not be cost effective.

2. To ensure compliance, the HMO must maintain records of all COB collections and report them to the Department on a quarterly basis. The COB report must be submitted in the format specified in Addendum VIII, B. HMOs must be able to demonstrate that appropriate collection efforts and appropriate recovery actions were pursued. The Department has the right to review all billing histories and other data related to COB activities for enrollees. HMOs must seek from all enrollees’ information on other available resources. HMOs must also seek to coordinate benefits before claiming reimbursement from the Department for the AIDS and ventilator dependent enrollees:

a. Other available resources may include, but are not limited to, all other state or federal medical care programs that are primary to Medicaid, group or individual health insurance, ERISAs, service benefit plans, the insurance of absent parents who may have insurance to pay medical care for spouses or minor enrollees, and subrogation/worker’s compensation collections.

b. Subrogation collections are any recoverable amounts arising out of the settlement of personal injury, medical malpractice, product liability, or Worker’s Compensation. State subrogation rights have been extended to HMOs under s. 49.89(9), Act 31, Laws of 1989. After attorneys’ fees and expenses have been paid, the HMO will collect the full amount paid on behalf of the enrollee.

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3. Section 1912(b) of the Social Security Act must be construed in a beneficiary-specific manner. The purpose of the distribution provision is to permit the beneficiary to retain TPL benefits to which he or she is entitled except to the extent that Medicaid (or the HMO on behalf of Medicaid) is reimbursed for its costs. The HMO is free, within the constraints of state law and this Contract, to make whatever case it can to recover the costs it incurred on behalf of its enrollee. It can use the Medicaid fee schedule, an estimate of what a capitated physician would charge on a FFS basis, the value of the care provided in the market place, or some other acceptable proxy as the basis of recovery. However, any excess recovery, over and above the cost of care (however the HMO chooses to define that cost), must be returned to the beneficiary. HMOs may not collect from amounts allotted to the beneficiary in a judgment or court-approved settlement. The HMO must follow the practices outlined in the Department’s Casualty Recovery Manual.

4. COB collections are the responsibility of the HMO or its subcontractors. Subcontractors must report COB information to the HMO. HMOs and subcontractors must not pursue collection from the enrollee, but directly from the third party payer. Access to medical services must not be restricted due to COB collection.

5. The following requirement applies if the Contractor (or the Contractor’s parent firm and/or any subdivision or subsidiary of either the Contractor’s parent firm or of the Contractor) is a health care insurer (including, but not limited to, a group health insurer and/or health maintenance organization) licensed by the Wisconsin Office of the Commissioner of Insurance and/or a third-party administrator for a group or individual health insurer(s), health maintenance organization(s), and/or employer self-insurer health plan(s):

a. Throughout the contract term, these insurers and third-party administrators must comply in full with the provision of subsection 49.475 of the Wisconsin Statutes. Such compliance must include the routine provision of information to the Department in a manner and electronic format prescribed by the Department and based on a monthly schedule established by the Department. The type of information provided must be consistent with the Department’s written specifications.

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b. Throughout the contract term, these insurers and third-party administrators must also accept and properly process post payment billings from the Department’s fiscal agent for health care services and items received by Wisconsin Medicaid enrollees.

6. If at any time during the contract term any of the insurers or third party administrators fail, in whole or in part, to adhere to the requirements of subsection 5, a or 5, b above, the Department may take the remedial measures specified in Article XII, B, 2 and Article XII, C, 3, a.

H. Recoupments

The Department will not normally recoup HMO per capita payments when the HMO actually provided services. However, if the Medicaid enrollee cannot use HMO facilities, the Department will recoup HMO capitation payments. Such situations are described more fully below:

1. The Department will recoup HMO capitation payments for the following situations where an enrollee’s HMO status has changed before the first day of a month for which a capitation payment has been made:

a. Enrollee moves out of the HMO’s service area.

b. Enrollee enters a public institution.

c. Enrollee dies.

2. The Department will recoup HMO capitation payments for the following situations where the Department initiates a change in an enrollee’s HMO status on a retroactive basis, reflecting the fact that the HMO was not able to provide services. In these situations, recoupments for multiple month’s capitation payments are more likely:

a. Correction of a computer or human error, where the person was never really enrolled in the HMO.

b. Disenrollments of enrollees for reasons of pregnancy and continuity of care, or for reasons specified in Article III, F.

3. If membership is disputed between two HMOs, the Department will be the final arbitrator of HMO membership and reserve the right to recoup an inappropriate capitation payment.

4. If an HMO enrollee moves out of the HMO’s service area, the enrollee will be disenrolled from the HMO on the date the enrollee moved as verified by the eligibility worker. If the eligibility worker is unable to

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verify the enrollee’s move, the HMO may mail a “certified return receipt requested” letter to the enrollee to verify the move. The enrollee must sign for the letter. A copy of the letter and the signed return receipt must be sent to the Department or its designee within twenty days of the enrollee’s signature date. If this criteria is met the effective date of the disenrollment is the first of the month in which the certified returned receipt requested letter was sent. Documentation that fails to meet the 20 day criteria will result in disenrollment the first day of the month that the HMO supplied information to the Department or its designee. This policy does not apply to extended service area requests that have been approved by the HMO unless the enrollee moves out of the extended service area or the HMO’s service area. Any capitation payment made for periods of time after disenrollment will be recouped.

5. If a contract is terminated, recoupments will be handled through a payment by the HMO within 30 business days of contract termination.

6. If an HMO is unable to meet the HealthCheck requirements specified in Article III, K.

I. Neonatal Intensive Care Unit (NICU) Risk-Sharing Payment(s)

The HMO may seek reimbursement as specified in Article VI, A. The Department will reimburse each HMO for a portion of the NICU costs incurred by the HMO per county for those enrollees who meet the criteria defined in Subsection 1 below and if the HMO’s average number of NICU days per thousand member years per county exceeds 75 days per thousand member years per county during the contract period.

1. Coverage Criteria

a. NICU days cover any newborn transferred or directly admitted after birth to a Level II, Level III or Level IV SCN/NICD for treatment and/or observation under the care of a neonatologist or pediatrician. NICU coverage continues until the infant is deemed medically stable to be discharged to a newborn nursery, medical floor or home. Level II, III, and IV facilities provide the following services:

1) Level II facilities provide a full range of services for low birth weight neonates who are not sick, but require frequent feeding, and neonates who require more hours of nursing than do normal neonates.

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2) Level III facilities provide a full range of newborn intensive care services for neonatal patients who do not require intensive care but require 6-12 hours of nursing each day.

3) Level IV facilities provide a full range of services for severely ill neonates who require constant nursing and continuous cardiopulmonary and other support.

b. NICU days also cover any newborn infant transferred or directly admitted after birth to a Level II, Level III or Level IV SCN/NICD who requires transfer to another institution for a severe, compromised physical status, diagnostic testing or surgical intervention that cannot be provided at the hospital of initial admission. NICU coverage continues until the infant is transferred back to the initial hospital and deemed medically stable to be discharged to a newborn nursery, medical floor or home.

2. Reimbursement Criteria

a. The HMO’s NICU reimbursement amount is calculated by contract period and by county. For NICU risk sharing, a “contract period” is defined as one calendar year.

b. The Department will reimburse the HMO for 90% of the HMO’s NICU cost per day, not to exceed a reimbursement of $1,443 per day, for each day that the HMO’s average number of NICU days per thousand member years exceeds 75 NICU days per thousand member years per county during the contract period.

c. The HMO’s NICU cost per day includes the HMO’s NICU inpatient payment per day and the HMO’s associated physician payments. Associated physician payments refer to the total HMO payments made by the HMO to the physician(s) for services provided to the infant during the NICU stay. Associated physician payments are divided by the number of days reported for the NICU stay to determine the HMO’s payment per day of associated physician payments.

Amounts paid must include payments for all physician and hospital services that were provided during the report period regardless of the HMO’s actual payment date.

d. The Department makes the NICU reimbursement to the HMO after the end of the contract year, after the HMO has submitted all needed NICU data. The Department will reimburse the HMO within 60 days of receipt of all necessary data from the HMO. The

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Department may make a final adjustment to the NICU reimbursement amount one year after the initial payment. This adjustment will be based on adjustments to eligible months and, updated information from the HMO such as the number of NICU days, inpatient payments, associated physician payments and amounts recovered from third parties.

e. The number of eligible months for the NICU calculation must include the HMOs entire Healthy Start Pregnant Women, AFDC and Healthy Start Children population. If an enrollee’s medical status code is retroactively backdated to an SSI medical status code and the HMO receives a capitation payment for those months, those months must also be included in the NICU calculation (refer to the NICU Risk-Sharing Worksheet in Addendum VIII, E “calculation number 1”). The Department will make the final determination regarding the number of eligible months for the NICU calculation by HMO, by county and by year, using the Medicaid Management Information System Recipient Eligibility File.

f. Costs for care provided to NICU enrollees who are retroactively disenrolled under Article VIII of this Contract are not payable. The HMO must back out the costs of the care provided during the backdated period from their NICU reports.

3. Reporting Requirements

HMOs that choose to submit their report(s) under the NICU enhanced funding policy must follow the reporting requirements listed below:

a. HMOs may submit an interim and a final report for each contract period if the NICU criteria are met. The HMO does not have to file a report if the NICU criteria are not met:

1) Interim reports must be submitted to the Department on or before May 1 of the following year (i.e., an interim report for the period January 1, 2006, through December 31, 2006, must be submitted on or before May 1, 2007.

2) Final reports must be submitted on or before May 1, one year after the submission of an interim report (i.e., a final report for the period January 1, 2006, through December 31, 2006, must be submitted on or before May 1, 2008).

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b. HMOs must submit all data by county and in the format requested by the Department for calculating the NICU reimbursement on or before May 1 of the following calendar year. The data and data format requirements are defined in Addendum VIII, E.

c. HMO’s must submit their NICU report(s) to the Department’s Contract Specialist as specified in Article VII, I.

4. Dispute Resolution

Disputes regarding the Department’s payment or nonpayment of NICU services as well an any adjustments made by the HMO (e.g., adjustments to provider payments, NICU days or adjustments due to amounts recovered from third parties) must be submitted in the next report period as specified in Article VII, I.

J. Payment(s) for AIDS/HIV and Ventilator Dependent Enrollees

The Department will pay 100% of the HMO’s costs of providing Medicaid covered services to HMO enrollees who meet the AIDS, HIV-positive or ventilator dependent criteria in this section, by county. The HMO may seek reimbursement as specified in Article VI, A.

1. Reimbursement criteria specific to each policy is defined below

a) AIDS

For those enrollees with a confirmed diagnosis of AIDS, as indicated by an ICD-9-CM diagnosis code, the 100% reimbursement is effective on the first day of the month in which they were diagnosed as having AIDS.

b) HIV-positive

For those enrollees who are HIV-Positive and on anti-retroviral drug treatment approved by the Food and Drug Administration, qualify for reimbursement. The 100% reimbursement is effective on the first day of the month that the first anti-retroviral medication was dispensed. If the name of the anti-retroviral medication and the date it was started is unclear, the Department will use the HMO’s pharmacy detail record(s) to determine the effective date of enhanced funding. In cases where pharmacy detail records are used, the effective date will be the first day of the month that the first anti-retroviral medication was dispensed.

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c) Ventilator dependent

For the purposes of this reimbursement, a ventilator-assisted patient must have died while on total respiratory support or the patient must require equipment that provides total respiratory support. This equipment may be a volume ventilator, a negative pressure ventilator, a continuous positive airway pressure (CPAP) system, or a Bi (inspiratory and expiratory) PAP. The patient may need a combination of these systems. Any equipment used only for the treatment of sleep apnea does not qualify as total respiratory support. Total respiratory support must be required for a total of six or more hours per 24 hours. The patient must have total respiratory support for at least 30 days that need not be continuous. The absolute need for the respiratory support must be supported by appropriate medical documentation.

The period of enhanced funding starts on the first day of the month that the patient was placed on ventilator support. It ends on the last day of the month that the patient is removed from the ventilator support, or at the end of the hospital stay, whichever is later.

Dates of enhanced funding are based on the following:

• Day one is the day that the patient is placed on the ventilator. If the patient is on the ventilator for less than six hours on the first day, the use must continue into the next day and be more than six total hours.

• Each day that the patient is on the ventilator for part of any day, as long as it is part of the six total hours per 24 hours, counts as a day for enhanced funding.

2. Adjustments that will be made to the HMO’s final payment include but are not limited to

a. Reimbursement(s) already paid to the HMO in the form of capitation payments for enrollees who qualify as being AIDS, HIV-positive or ventilator dependent will be deducted from the HMOs 100% reimbursement.

b. Costs for care provided to AIDS, HIV-positive or ventilator dependent enrollees who are retroactively disenrolled under Article VIII of this contract are not payable. The HMO must back out the cost of the care provided during the backdated period from their reports.

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3. Reporting Requirements for AIDS, HIV-Positive and Ventilator Dependent Enrollees

a. HMOs must submit detail reports on disk in a text delimited file and hard copy and must include the data fields specified in Addendum VIII, A of this Contract.

b. HMOs must submit their reports to the Department’s Contract Specialist on a quarterly basis as specified in Article VII, I, of this Contract.

c. As required by the Wis. Adm. Code HFS 106.03, payment data or adjustment data must be received within 365 days after the date of the service. Since HMOs are required to submit their AIDS, HIV and ventilator claim(s) to the Department on a quarterly basis, the HMOs will be given an additional three months plus 10 days to file their claim(s) or payment data adjustment data. In addition, if the last date of service for an inpatient hospital facility stay occurs within the time line specified (365 days plus three months plus 10 days) the Department will reimburse the HMO for the facility charges that entire stay. If the HMO cannot meet these requirements, the HMO must provide documentation that substantiates the delay. The Department will make the final determination to pay or deny the services. The Department will exercise reasonable discretion in making the determination to waive these filing requirements.

4. Documentation Requirements for AIDS, HIV-Positive and Ventilator

Dependent Enrollees

To qualify enrollees for reimbursement the HMO must submit the documentation that is required for each policy at the same time as the quarterly reports identified in Article VII, I. HMOs may use the Department’s designated form or develop their own as long as it contains the required information as specified for each policy.

a. AIDS documentation

A signed statement from a physician that indicates a confirmed diagnosis of AIDS and the diagnosis date must accompany each new request.

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b. HIV-positive documentation

A signed statement from the physician that the enrollee is HIV-Positive and on antiretroviral medications, the name of the drug and the date it was started must accompany each new request. If the name of the drug and the date it was started are not available, the date of enhanced funding will be determined as defined in Article VI, J, 1., b) above.

c. Ventilator dependent documentation

1) A signed statement from the physician attesting to the need of the patient.

2) Copies of progress notes that show the need for continuation of total ventilator support, any change in the type of ventilator support and the removal of the ventilatory support. Copies of lab reports must be submitted if the progress notes do not include blood gas levels.

5. Dispute Resolution

Disputes regarding the Department’s payment or nonpayment of AIDS, HIV-positive or ventilator dependent Medicaid services as well as any adjustments made by the HMO (e.g., adjustments to provider payments or adjustments due to amounts recovered from third parties) must be submitted in the next report period as specified in Article VII, I.

K. Incentive for Expansion

A special incentive payment will be made for an HMO that increases its net enrollment in those areas significantly below enrollment capacity, or those areas currently designated as voluntary or fee-for-service only. Incentive payments will be awarded based on enrollment increases in the selected areas compared to enrollment numbers shown on the January 2006 MMIS enrollment report. The incentive payment award will be made at the sole discretion of the Department and will be based on criteria to be developed and communicated to the HMO through a contract amendment.

L. Dental Care Utilization Incentive

NOTE: This incentive does not apply to HMOs that first contracted with the Department after January 1, 2004.

To improve access to dental care for Medicaid and BadgerCare enrollees, the Department will provide incentive payments for HMOs that increase enrollees’

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utilization of dental services to a specific target. The performance targets will be set for each individual HMO that provides dental services as part of its benefit package and will be based on selected existing managed care performance measures.

a. Performance Measures

Existing managed care dental performance measures will be used as the basis for awarding the incentive for calendar year (CY) 2006. The existing measures that will be used to determine the incentive are:

1. Preventive care measure children – preventive care, such as dental varnishes, cleanings and comprehensive exams for children ages 3-20.

2. General dental care measure children – all dental services, both preventive and restorative care for children ages 3-20.

3. General dental care measure adults – all dental services, both preventive and restorative care for adults 21 and over.

b. Performance Target

Performance targets will be set for the selected measures. HMOs will be awarded incentives for achieving the target(s).

Specific details regarding incentive payment methodology will be developed and communicated to the HMOs through a contract amendment.

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ARTICLE VII

VII. COMPUTER/DATA REPORTING SYSTEM, DATA, RECORDS AND REPORTS

A. Access to and/or Disclosure of Financial Records

The HMO and any subcontractors must make available to the Department, the Department’s authorized agents, and appropriate representatives of the U.S. Department of Health and Human Services any financial records of the HMO or subcontractors that relate to the HMO’s capacity to bear the risk of potential financial losses, or to the services performed and amounts paid or payable under this Contract. The HMO must comply with applicable record keeping requirements specified in HFS 105.02(1)-(7) Wis. Adm. Code, as amended.

B. Access to and Audit of Contract Records

Throughout the duration of this Contract, and for a period of five years after termination of this Contract, the HMO must provide duly authorized representatives of the state or federal government access to all records and material relating to the HMO’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 this Contract. All information so obtained will be accorded confidential treatment as provided under applicable laws, rules or regulations.

C. Computer Data Reporting System

The HMO must maintain a computer/data reporting system that meets the following Department requirements. The HMO is responsible for complying with all the Department’s reporting requirements and with ensuring the accuracy and completeness of the data as well as the timely submission of data. The data submitted must be supported by records available to the Department or its designee. The Department reserves the right to conduct on-site inspections and/or audits prior to awarding the Contract. The HMO must have a contact person responsible for the computer/data reporting system and who can answer questions from the Department and resolve problems identified by the Department regarding the requirements listed below:

1. The HMO must have a claims processing system that is adequate to meet all claims processing and retrieval requirements specified in this Contract, specifically Article III, D, 1.

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2. The HMO must have a computer/data collection, processing, and reporting system sufficient to monitor HMO enrollment/disenrollment (in order to determine on any specific day which recipients are enrolled or disenrolled from the HMO) and to monitor service utilization for the Utilization Management requirements of Quality Assessment/Performance Improvement (QAPI) that are specified in Article IV, G of this Contract.

3. The HMO must have a computer/data collection, processing, and reporting system sufficient to support the QAPI requirements described in Article IV. The system must be able to support the variety of QAPI monitoring and evaluation activities, including the monitoring/evaluation of quality of clinical care and service (Article IV, B); periodic evaluation of HMO providers (Article IV, D, 2); member feedback on QAPI (Article IV, E, 1 and 2); maintenance of and use of medical records in QAPI (Article IV, F, 6 and 9); and monitoring and evaluation of priority areas (Article IV, B).

4. The HMO must have a computer and data processing system sufficient to accurately produce the data, reports, and encounter data set, in the formats and time lines prescribed by the Department in this contract, that are included in Article VII, I of this Contract. Newly certified HMOs and HMOs who substantially change the IS system during the contract period are required to submit electronic test encounter data files as required by the Department in the format specified in the HMO encounter data user manual and timelines specified in Article VII, I of this Contract and as may be further specified by the Department. The electronic test encounter data files are subject to Department review and approval before production data is accepted by the Department. Production claims or other documented encounter data must be used for the test data files.

5. The HMO must capture and maintain a claim record of each service or item provided to enrollees, using HCFA 1500, UB-92, NCPDP, HIPAA transaction code sets, or other claim, or claim formats that are adequate to meet all reporting requirements of this Contact. The computerized database must be a complete and accurate representation of all services the HMO covers for the contract period. The HMO is responsible for monitoring the integrity of the database, and facilitating its appropriate use for such required reports as encounter data and targeted performance improvement studies.

6. The HMO must have a computer processing and reporting system that is capable of following or tracing an encounter within its system using a unique encounter record identification number for each encounter.

7. The HMO reporting system must have the ability to identify all denied claims/encounters using national HIPAA Claim Adjustment Reason.

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8. The HMO system must be capable of reporting original and reversed claim detail records and encounter records.

9. The HMO system must be capable of correcting an error to the encounter record within 90 days of notification by the Department.

The HMO must notify the Department of all significant personnel changes and system changes that may impact the integrity of the data, including new claims processing software and vendors.

D. Coordination of Benefits (COB), Encounter Record, Formal Grievances and Birth Cost Reporting Requirements

The HMO agrees to furnish to the Department and to its authorized agents, within the Department’s time frame and format, information that the Department requires to administer this Contract, including but not limited to the following:

1. Coordination of Benefits (COB)

Summaries of amounts recovered from third parties for services rendered to enrollees under this Contract in the format specified in Addendum VIII, B.

2. Encounter Record for Each Enrollee Service

An encounter record for each service provided to enrollees covered under this Contract. The encounter data set must include at least those data elements specified in section E of this Article.

The encounter data set must be submitted no less frequently then monthly via electronic media. Refer to Article I, Definitions, for the definition of an encounter.

3. Formal Grievances

Copies of all formal grievances and documentation of actions taken on each grievance, as specified in Addendum VIII, G.

4. Birth Cost as specified in Addendum VIII, F

E. Encounter Data Reporting Requirements

All HMOs that contract with the Department to provide Medicaid services must submit monthly encounter data files according to the specifications and submission protocols published in the Wisconsin Medicaid HMO Encounter Data User Manual.

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1. Reporting Requirement

The rules governing the level of detail when reporting encounters should be those rules established by the following classification schemes: ICD-9-CM (or ICD-10-CM) diagnosis codes and CPT procedure codes (HCPCS Level I codes), Level II HCPCS codes, Level III HCPCS codes, National Drug Codes (NDC), CDT-2 codes, Hospital revenue codes for inpatient and outpatient hospital services, and hospital inpatient Diagnostic Related Group (DRG) codes, if DRG codes are used.

Multiple encounters can occur between a single provider and a single recipient on a day. For example, if a physician provides a limited office visit, administers an immunization, and takes a chest x-ray, and the provider submits a claim or report specifically identifying all three services, then there are three encounters, and the HMO will report three encounters to the Wisconsin Medicaid Program.

2. Testing Encounter Data

New HMOs must test the encounter data set until the Department is satisfied that the HMO is capable of submitting valid, accurate, and timely encounter data according to the schedule and timetable in Article VII, I.

3. Primary HMO Contact Person

Each HMO must specify to the Department the name of the primary contact person assigned responsibility for submitting and correcting HMO encounter and utilization data, and a secondary contact person in the event the primary contact person is not available.

4. HMO Encounter Technical Workgroup Requirement

All HMOs must assign staff to participate in HMO encounter technical workgroup meetings periodically scheduled by the Department. This workgroup’s purpose is to enhance the HMO and Medicaid data submission protocols and improve the accuracy and completeness of the data. The HMO encounter technical workgroup is also responsible for planning the implementation of the 820 and 834 electronic transaction formats mandated by the Health Insurance Portability and Accountability Act (HIPAA).

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5. Encounter Data Completeness and Accuracy

The Department will conduct data validity and completeness audits during the contract period. At least one of these audits will include a review of the HMO’s encounter data system and system logic.

6. Analysis of Encounter Data

The Department retains the right to analyze encounter data and use it for any purpose it deems necessary. However, the Department will make every effort to ensure that the analysis does not violate the integrity of the reported data submitted by the HMO.

F. Records Retention

The HMO must retain, preserve and make available upon request all records relating to the performance of its obligations under the contract, including paper and electronic claim forms, for a period of not less than five years from the date of termination of this contract. Records involving matters that are the subject of litigation shall be retained for a period of not less than five years following the termination of litigation. Microfilm copies of the documents contemplated herein may be substituted for the originals with the prior written consent of the Department, if the Department approves the microfilming procedures as reliable and supported by an effective retrieval system.

Upon expiration of the five year retention period and upon request, the subject records must be transferred to the Department’s possession. No records shall be destroyed or otherwise disposed of without the prior written consent of the Department.

G. Reporting of Corporate and Other Changes

The HMO must report to the Department any change in corporate structure or any other change in information previously reported. The HMO must report the change as soon as possible, but not later than 30 days after the effective date of the change. Changes in information covered under this section include all of the following:

1. Any change to the information the HMO previously provided in response to the Department’s questions in the current HMO Certification Application or any previous RFB for Medicaid and BadgerCare HMO Contracts. This includes any change in information provided by the HMO as a “new HMO,” within the meaning of the HMO Certification Application or RFB.

2. Any change in information relevant to Article III, C, 1 of this Contract, relating to ineligible organizations.

3. Any change in information relevant to Article XVI of this Contract, relating to ownership and business transactions of the HMO.

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H. Provider List Requirement

All HMOs that contract with the Department to provide Medicaid services must submit provider data once per contract period, based on the HMO files as of December 31, 2006.

The data must be provided in a Microsoft Access database by January 31, 2007. A CD containing the database with instructions for the required fields will be provided by the Department by November 1, 2006.

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I. Contract Specified Reports and Due Dates

REPORTS AND DUE DATES

Due Date*	Type of Report	Reporting Period	Due to	Report Format	Reporting Unit	Contract Reference
Within 15 days of contract signing	Civil Rights Compliance Plan: Affirmative Action Plan and Civil Rights Plan components	Contract period	DHFS		Affirmative Action/Civil Rights Compliance Office	Art. III, C, 4, a and b
Within 30 days of contract signing	Disclosure Statements	As of present time	BMHCP			Art. XVI
YEAR 2006
Jan 1	Encounter Data File (AFDC/HS & BC)	Dec. 2005	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
Jan 10	Electronic list of HMO providers	Oct. – Dec. 2005	Enrollment Broker	As Agreed Upon	HMO Service Area	Art. X, E, 3
Jan 15	**Dental Progress Report	Oct. – Dec. 2005	BMHCP	Hardcopy	Dental Service Area	Art. III, E, 8, c
Jan 31	Formal/Informal Grievance Experience Summary report (AFDC/HS & BC)	Oct. – Dec. 2005	BMHCP	Hardcopy	Entire HMO	Art. IX; Add. VIII, G
Feb 1	Encounter Data File (AFDC/HS & BC)	Jan. 2006	Medicaid Fiscal Agent – MEDS	Electronic Media	Encounter	Art. VII, D and E
Feb 1	AIDS/Ventilator Dependent (AFDC/HS & BC)	Oct. – Dec. 2005	BMHCP	Hardcopy & Disc	HMO Service Area	Art. VI, J; Add. VIII, A
Feb 15	Federally Qualified Health Centers & Rural Health Centers (AFDC/HS & BC)	Oct. – Dec. 2005	BMHCP	Hardcopy – no form	By FQHC/RHC	Art, III, D, 7
Feb 15	Coordination of Benefits Report (AFDC/HS & BC)	Oct. – Dec. 2005	BMHCP	Hardcopy	Entire HMO	Art. VI, G; Add VIII, B
Mar 1	Encounter Data File AFDC/HS and BC)	Feb. 2006	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
Apr 1	Encounter Data File (AFDC/HS & BC)	March 2006	Medicaid Fiscal Agent–MEDS	Electronic Media	Encounter	Art. VII, D and E
Apr 10	Electronic list of HMO providers	Jan. – Mar. 2006	Enrollment Broker	As Agreed Upon	HMO Service Area	Art. X, E, 3
Apr 15	**Dental Progress Report	Jan. – Mar. 2006	BMHCP	Hardcopy	Dental Service Area	Art. III, E, 8, c

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Due Date*	Type of Report	Reporting Period	Due to	Report Format	Reporting Unit	Contract Reference
Apr 30	Formal/Informal Grievance Experience Summary report (AFDC/HS & BC)	Jan. – Mar. 2006	BMHCP	Hardcopy	Entire HMO	Art. IX; Add. VIII, G
May 1	Neonatal ICU Patient Care Data	Jan. – Dec. 2005	BMHCP	Hardcopy	HMO By County	Art. VI, I; Add VIII, E
May 1	Encounter Data File (AFDC/HS & BC)	Apr. 2006	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
May 1	AIDS/Ventilator Dependent (AFDC/HS & BC)	Jan. – Mar. 2006	BMHCP	Hardcopy & Disc	HMO Service Area	Art. VI, J; Add. VIII, A
May 15	Federally Qualified Health Centers & Rural Health Centers (AFDC/HS & BC)	Jan. – Mar. 2006	BMHCP	Hardcopy - no form	By FQHC/RHC	Art. III, D, 7
May 15	Coordination of Benefits Report (AFDC/HS & BC)	Jan. – Mar. 2006	BMHCP	Hardcopy	Entire HMO	Art. VI, G; Add VIII, B
Jun 1	Encounter File (AFDC/HS & BC)	May 2006	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
Jul 1	Encounter File (AFDC/HS & BC)	Jun. 2006	Medicaid Fiscal Agent – MEDS	Electronic Media	Encounter	Art. VII, D and E
Jul 10	Electronic list of HMO providers	Apr.– Jun.. 2006	Enrollment Broker	As Agreed Upon	HMO Service Area	Art. X, E, 3
Jul 15	**Dental Progress Report	Mar. – Jun. 2006	BMHCP	Hardcopy	Dental Service Area	Art. III, E, 8, c
Jul 31	Formal/Informal Grievance Experience Summary report (AFDC/HS & BC)	Apr. – Jun. 2006	BMHCP	Hardcopy	Entire HMO	Art. IX; Add. VIII, G
Aug 1	AIDS/Ventilator Dependent (AFDC/HS & BC)	Apr. – Jun. 2006	BMHCP	Hardcopy & Disc	HMO Service Area	Art. VI, J; Add. VIII, A
Aug 1	Encounter File (AFDC/HS & BC)	Jul. 2006	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
Aug 15	Federally Qualified Health Centers & Rural Health Centers	Apr. – Jun. 2006	BMHCP	Hardcopy - no form	By FQHC/RHC	Art. III, D, 7
Aug 15	Coordination of Benefits Report (AFDC/HS & BC)	Apr. – Jun. 2006	BMHCP	Hardcopy	Entire HMO	Art. VI, G; Add VIII, B
Sept 1	Encounter File (AFDC/HS & BC)	Aug. 2006	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
Oct 1	Performance Improvement Projects (AFDC/HS & BC)	Jan. – Dec. 2005	BMHCP	Hardcopy	Per Improvement Project	Art. IV, K

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Due Date*	Type of Report	Reporting Period	Due to	Report Format	Reporting Unit	Contract Reference
Oct 1	Encounter File (AFDC/HS & BC)	Sep. 2006	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
Oct 10	Electronic list of HMO providers	Jul. – Sep.. 2006	Enrollment Broker	As Agreed Upon	HMO Service Area	Art. X, E, 3
Oct 15	**Dental Progress Report	Jul. – Sep. 2006	BMHCP	Hardcopy	Dental Service Area	Art. III, E, 8, c
Oct 31	Formal/Informal Grievance Experience Summary report (AFDC/HS & BC)	Jul. – Sep. 2006	BMHCP	Hardcopy	Entire HMO	Art. IX; Add. VIII, G
Nov 1	AIDS/Ventilator Dependent (AFDC/HS & BC)	Jul. – Sep. 2006	BMHCP	Hardcopy & Disc	HMO Service Area	Art. VI, J; Add. VIII, A
Nov 1	Encounter File (AFDC/HS & BC)	Oct. 2006	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
Nov 15	Federally Qualified Health Centers & Rural Health Centers (AFDC/HS & BC)	Jul. – Sep. 2006	BMHCP	Hardcopy - no form	By FQHC/RHC	Art. III, D, 7
Nov 15	Coordination of Benefits Report (AFDC/HS & BC)	Jul. – Sep. 2006	BMHCP	Hardcopy	Entire HMO	Art. VI, G; Add VIII, B
Dec 1	Encounter File (AFDC/HS & BC)	Nov. 2006	Medicaid Fiscal Agent–MEDS	Electronic Media	Encounter	Art. VII, D and E
YEAR 2007
Jan 1	Encounter File (AFDC/HS & BC)	Dec. 2006	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E
Jan 10	Electronic list of HMO providers	Oct. – Dec. 2006	Enrollment Broker	As Agreed Upon	HMO Service Area	Art. X, E, 3
Jan 15	**Dental Progress Report	Oct. – Dec. 2006	BMHCP	Hardcopy	Dental Service Area	Art. III, E, 8, c
Jan 31	Formal/Informal Grievance Experience Summary report (AFDC/HS & BC)	Oct. – Dec. 2006	BMHCP	Hardcopy	Entire HMO	Art. IX; Add. VIII, G
Jan 31	Provider List on Tape	Dec. 31, 2006	BMHCP	Disc	HMO Service Area	Art. VII, H
Feb 1	AIDS/Ventilator Dependent (AFDC/HS & BC)	Oct. – Dec. 2006	BMHCP	Hardcopy & Disc	HMO Service Area	Art. VI, J; Add. VIII, A
Feb 1	Encounter File (AFDC/HS & BC)	Jan. 2007	Medicaid Fiscal Agent-MEDS	Electronic Media	Encounter	Art. VII, D and E

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Due Date*	Type of Report	Reporting Period	Due to	Report Format	Reporting Unit	Contract Reference
Feb 15	Federally Qualified Health Centers & Rural Health Centers (AFDC/HS & BC)	Oct. – Dec. 2006	BMHCP	Hardcopy - no form	By FQHC/RHC	Art. III, D, 7
Feb 15	Coordination of Benefits Report (AFDC/HS & BC)	Oct. – Dec. 2006	BMHCP	Hardcopy	Entire HMO	Art. VI, G; Add VIII, B
Mar 1	Encounter File (AFDC/HS & BC)	Feb. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E
Apr 1	Encounter File (AFDC/HS & BC)	Mar. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E
Apr 10	Electronic list of HMO providers	Jan. – Mar. 2007	Enrollment Broker	As Agreed Upon	HMO Service Area	Art. X, E, 3
Apr 15	**Dental Progress Report	Jan. – Mar. 2007	BMHCP	Hardcopy	Dental Service Area	Art. III, E, 8, c
Apr 30	Formal/Informal Grievance Experience Summary report (AFDC/HS & BC)	Jan. – Mar. 2007	BMHCP	Hardcopy	Entire HMO	Art. IX; Add. VIII, G
May 1	Neonatal ICU Patient Care Data	Jan. – Dec. 2006	BMHCP	Hardcopy	HMO By County	Art. VI, I; Add. VIII, E
May 1	Encounter File (AFDC/HS & BC)	Apr. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E
May 1	AIDS/Ventilator Dependent (AFDC/HS & BC)	Jan. – Mar. 2007	BMHCP	Hardcopy & Disc	HMO Service Area	Art. VI, J; Add. VIII, A
May 15	Federally Qualified Health Centers & Rural Health Centers (AFDC/HS & BC)	Jan. – Mar. 2007	BMHCP	Hardcopy - no form	By FQHC/RHC	Art. III, D, 7
May 15	Coordination of Benefits Report (AFDC/HS & BC)	Jan. – Mar. 2007	BMHCP	Hardcopy	Entire HMO	Art. VI, G; Add VIII, B
Jun 1	Encounter File (AFDC/HS & BC)	May 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E
Jul 1	Encounter File (AFDC/HS & BC)	Jun. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E
Jul 10	Electronic list of HMO providers	Apr. – Jun. 2007	Enrollment Broker	As Agreed Upon	HMO Service Area	Art. X, E, 3
Jul 15	**Dental Progress Report	Apr. – Jun. 2007	BMHCP	Hardcopy	Dental Service Area	Art. III, E, 8, c
Jul 31	Formal/Informal Grievance Experience Summary report (AFDC/HS & BC)	Apr. – Jun. 2007	BMHCP	Hardcopy	Entire HMO	Art. IX; Add. VIII, G

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Due Date*	Type of Report	Reporting Period	Due to	Report Format	Reporting Unit	Contract Reference
Aug 1	AIDS/Ventilator Dependent (AFDC/HS & BC)	Apr. – Jun. 2007	BMHCP	Hardcopy & Disc	HMO Service Area	Art. VI, J; Add. VIII, A
Aug 1	Encounter File (AFDC/HS & BC)	Jul. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E
Aug 15	Federally Qualified Health Centers & Rural Health Centers (AFDC/HS & BC)	Apr. – Jun. 2007	BMHCP	Hardcopy - no form	By FQHC/RHC	Art. III, D, 7
Aug 15	Coordination of Benefits Report (AFDC/HS & BC)	Apr. – Jun. 2007	BMHCP	Hardcopy	Entire HMO	Art. VI, G; Add VIII, B
Sep 1	Encounter File (AFDC/HS & BC)	Aug. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E
Oct 1	Performance Improvement Projects (AFDC/HS & BC)	Jan. – Dec. 2006	BMHCP	Hardcopy	Per Improvement Project	Art. IV, K
Oct 1	Encounter File (AFDC/HS & BC)	Sep. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E
Oct 10	Electronic list of HMO providers	Jul.-Sep. 2007	Enrollment Broker	As Agreed Upon	HMO Service Area	Art. X, E, 3
Oct 15	**Dental Progress Report	Jul. – Sep. 2007	BMHCP	Hardcopy	Dental Service Area	Art III, E, 8 c
Oct 31	Formal/Informal Grievance Experience Summary report (AFDC/HS & BC)	Jul. – Sep. 2007	BMHCP	Hardcopy	Entire HMO	Art. IX; Add. VIII, G
Nov 1	AIDS/Ventilator Dependent (AFDC/HS & BC)	Jul. – Sep. 2007	BMHCP	Hardcopy & Disc	HMO Service Area	Art. VI, J; Add. VIII, A
Nov 1	Encounter File (AFDC/HS & BC)	Oct. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Entire HMO	Art. VII, D and E
Nov 15	Federally Qualified Health Centers & Rural Health Centers (AFDC/HS & BC)	Jul. – Sep. 2007	BMHCP	Hardcopy - no form	By FQHC/RHC	Art. III, D, 7
Nov 15	Coordination of Benefits Report (AFDC/HS & BC)	Jul. – Sep. 2007	BMHCP	Hardcopy	Entire HMO	Art. VI, G; Add VIII, B
Dec 1	Encounter File (AFDC/HS & BC)	Nov. 2007	Medicaid Fiscal Agent-MEDS	Electronic File	Encounter	Art. VII, D and E

Any reports that are due on a weekend or holiday are due the following business day.

** Only HMOs that are certified to provide dental services are required to submit dental progress reports for the service area in which the HMO is certified to provide dental.

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Report Mailing Addresses:	Medicaid Fiscal Agent -MEDS 10 E. Doty Street, Suite 200 Madison, WI 53703	*BMHCP Department of Health and Family Services Bureau of Managed Health Care Programs P.O. Box 309 Madison, WI 53701-0309	Medicaid Fiscal Agent Managed Care Unit P.O. Box 6470 Madison, WI 53716-0470
	Department of Health and Family Services Affirmative Action/Civil Rights Compliance Office P.O. Box 7850 Madison ,WI 53707-7850

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ARTICLE VIII

VIII.    ENROLLMENT AND DISENROLLMENTS

A. Enrollment

The HMO must accept as enrolled all persons who appear as enrollees on the HMO Enrollment Reports and newborns as defined in Article I. Enrollment in the HMO is voluntary by the recipient except where limited by departmental implementation of a State Plan Amendment or a Section 1115(a) waiver. The current State Plan Amendment and 1115(a) waiver require mandatory enrollment into an HMO for those service areas in which there are two or more HMOs with sufficient slots for the HMO eligible population and in rural areas, as defined in 42 CFR 438.52, where there is only one HMO with an adequate provider network as determined by the Department. The Department reserves the right to assign a Medicaid or BadgerCare recipient to a specific HMO when the recipient fails to choose an HMO during a required enrollment period.

1. Section 1115(A) Waiver and State Plan Amendment

If at any time during the contract period the Department obtains a State Plan Amendment, a waiver or revised waiver authority under the Social Security Act (as amended), the conditions of enrollment described in this Contract, including but not limited to voluntary enrollment and the right to voluntary disenrollment, will be amended by the terms of said waiver and State Plan Amendment.

2. Enrollee Lock-In Period

Under the Department’s State Plan Amendment and waiver authority of Section 1115(a) of the Social Security Act (as amended) enrollees in mandatory HMO service areas will be locked into an HMO for 12 months. The first 90 days of the 12-month lock-in period are open enrollment period during which the enrollee may change HMOs without cause. The conditions of disenrollment specified in Article VIII, C, apply during this lock-in period.

3. Enrollment Levels

As specified in Article XIX and Article XVIII of this Contract, the HMO must designate its maximum enrollment level for its entire service area. The Department may take up to 60 days from the date of written notification to implement maximum enrollment level changes. The HMO must accept as enrolled all persons who appear as enrollees on the HMO Enrollment Reports and newborns up to the HMO specified enrollment

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level for its service area. The number of enrollees may exceed the maximum enrollment level by 5% on a temporary basis. The Department does not guarantee any minimum enrollment level. The maximum enrollment level for a service area may be increased or decreased during the course of the contract period based on mutual acceptance of a different maximum enrollment level.

4. Additional Health-Related Services

The HMO must not obtain enrollment through the offer of any compensation, reward, or benefit to the enrollee except for additional health-related services that have been approved by the Department.

B. Enrollment/Disenrollment Practices

The HMO must permit the Department to monitor its enrollment and disenrollment practices under this Contract. The HMO will not discriminate in enrollment/disenrollment activities between individuals on the basis of health status or requirement for health care services, including those who have AIDS or are HIV-Positive. This includes an enrollee with a diminished mental capacity, who is uncooperative and displays disruptive behavior due to the enrollee’s special needs.

The Department must ensure that recipients with medical status codes that are not eligible for HMO enrollment are appropriately disenrolled according to Department policy.

This section does not prevent the HMO from assisting in the disenrollment process for individuals who the Department determines should be assigned a different medical status code.

C. Disenrollment/Exemption Requests

All enrollees shall have the right to disenroll from the HMO pursuant to 42 CFR 434.27(b)(1) unless otherwise limited by a State Plan Amendment or a Section 1115(a) waiver of federal laws, or pursuant to Article III, F. A voluntary disenrollment shall be effective no later than the first day of the second month following the month in which the enrollee requests termination. The HMO will promptly forward to the Department or its designee all requests from enrollees for disenrollment. Wisconsin currently has a State Plan Amendment and an 1115(a) waiver which allows the Department to “lock-in” enrollees to an HMO for a period of 12 months in mandatory HMO service areas, except that disenrollment is allowed for good cause as described in subsections 1 through 14 below. The lock-in policy is described more completely in Section A, 2 above. Article III, F allows voluntary exemptions and disenrollment from HMOs for a variety of reasons.

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Disenrollment/exemption requests will be processed as soon as possible and will generally be effective the first day of the month of the request unless otherwise specified. Disenrollments/exemptions will not normally be backdated further. The Department will not use its authority regarding backdating unreasonably. If the disenrollment or exemption is approved, the HMO will not be liable for services, as of the effective date of the disenrollment or exemption. If the Department fails to make a disenrollment determination within 30 days of receipt of all necessary information the disenrollment is considered approved.

1. AIDS or HIV-Positive Exemption

Enrollees with a confirmed diagnosis of AIDS, as indicated by an ICD-9-CM diagnosis code, or who are HIV-Positive and on anti-retroviral drug treatment approved by the Federal Food and Drug Administration, are eligible for an exemption. The HMO must not counsel or otherwise influence an enrollee or potential enrollee in such a way as to encourage exemption from enrollment or continued enrollment.

Exemption requests must come from the casehead or the enrollee and should be directed to the Department’s Enrollment Specialist. Exemptions are processed as soon as possible and are effective on the first day of the month that anti-retroviral treatment begins or the date that the enrollee was diagnosed with AIDS. Exemptions are not backdated more than nine months from the date the request is received.

2. Developmental Disability or Admission to a Birth to Three Program Exemption

A child from birth through two years of age (including two-year-olds), who is severely developmentally disabled or suspected of a severe developmental delay, or who is admitted to a Birth to 3 program is eligible for an exemption. Exemption requests must be made by the casehead of the enrollee or by the County Birth to 3 programs, on behalf of an enrollee. Exemption requests should be directed to the Department’s Enrollment Specialist. Exemptions are backdated no more than two months from the date the request is received.

3. Certified Nurse Midwives or Nurse Practitioners Exemption

Enrollees may be eligible for an exemption from enrollment if all of the following criteria are met:

a. The enrollee resides in a service area of a certified nurse midwife or nurse practitioner.

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b. The enrollee chooses to receive her care from a certified nurse midwife or nurse practitioner.

c. The certified nurse midwife or nurse practitioner is not affiliated with any HMO in the service area either as an independently certified provider or as a non-billing provider.

Exemption requests are made by the casehead or the enrollee and should be directed to the Department’s Enrollment Specialist.

4. Commercial HMO Insurance Exemption

Enrollees who have commercial HMO insurance may be eligible for an exemption or disenrollment from a Medicaid and BadgerCare HMO if the commercial HMO does not participate in Medicaid. In addition, enrollees who have commercial insurance that limits them to a restricted provider network (e.g., PPOs, PHOs, etc.) may be eligible for an exemption from enrollment in a Medicaid and BadgerCare HMO or disenrollment.

Exemption or disenrollment requests are made by the enrollee and should be directed to the Department’s Enrollment Specialist. The HMO may request assistance from the Department’s contracted Enrollment Specialist in situations where the enrollee has commercial insurance that limits the enrollee to providers outside the HMO’s network.

When the Department’s recipient eligibility file indicates commercial HMO coverage limiting an enrollee to providers outside the Medicaid HMO network, and the enrollee seeks services from the Medicaid HMO network providers, the Medicaid HMO network providers may refuse to provide services to that enrollee and refer him/her to their commercial network, except in the case of an emergency.

5. Federally Qualified Health Centers Exemption

Enrollees may be eligible for an exemption from enrollment if the following criteria are met:

a. The enrollee resides in the service area of an FQHC.

b. The enrollee chooses to receive their primary care from the FQHC.

c. The FQHC is not affiliated with any HMO within the service area.

Exemption requests may be made by the casehead and should be directed to the Department’s Enrollment Specialist.

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6. Just Cause Disenrollment

The HMO may request and the Department will approve disenrollment for specific cases or persons where there is just cause. Just cause is defined as a situation where enrollment would be harmful to the interests of the recipient or in which the HMO cannot provide the recipient with appropriate medically necessary contract services for reasons beyond its control. Disruptive behavior resulting from diminished mental capacity from a special needs enrollee will not qualify as a just cause disenrollment. Disenrollment requests should be directed to the Department’s fiscal agent Nurse Consultant.

7. Inmates of a Public Institution Disenrollment

HMOs are not liable for providing care to enrollees who are inmates in a public institution for more than a full calendar month as defined in HFS 101.03(85). The HMO must provide documentation that shows that the enrollee is incarcerated. The disenrollment will be effective the first of the month following the first full month of incarceration or the date of Medicaid ineligibility, whichever comes first. Disenrollment requests may be made by the HMO and should be directed to the Department’s Enrollment Specialist.

8. Medicare Beneficiaries

Enrollees who become eligible for Medicare will be disenrolled effective the first of the month of notification to the Medicaid and BadgerCare programs from the Social Security Administration (SSA). Even if SSA awards Medicare eligibility retroactively, the effective date of HMO disenrollment will be the first of the month of notification.

9. Mental Health and/or Substance Abuse Exemption

Requests for exemption from HMO enrollment must be initiated by the casehead or the enrollee who meets one or more of the following:

a. A child meeting criteria for severe emotional disturbance (SED) who is enrolled or has been accepted in a SED program, such as intensive in-home psychotherapy or child/adolescent day treatment, during the term of the SED treatment.

b. A person participating in a methadone treatment program, or who has been determined to need methadone treatment unless the person declines to receive such treatment. Enrollees who request exemption prior to participation in a methadone treatment program may be exempted for a maximum of two months, and the exemption may be extended if they continue to participate in the program.

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c. A person with a complex physical or psychiatric condition who has extensive non-medical programming needs best provided or coordinated by the 51.42, 51.437, and/or social/human services system (such as Community Support Programs, Comprehensive Community Services etc).

When the HMO confirms that at least one of these conditions exists, the HMO must inform the Medicaid or BadgerCare casehead of their options to enroll the affected enrollee in the HMO or to request that the person remain in the Medicaid FFS system. The HMO shall not encourage an enrollee to request an exemption from enrollment or to continue enrollment. The Department, the local boards, and the county social service departments may notify enrollees or potential enrollees of their options independently where such notification is deemed appropriate. Exemption requests should be directed to the Department’s Enrollment Specialist.

10. Native American Disenrollment

Enrollees who are Native American and members of a federally recognized tribe are eligible for disenrollment. Disenrollment requests should be directed to the Department’s Enrollment Specialist.

11. Ninth Month Pregnancy Exemption

Enrollees who deliver or are expected to deliver the first month they are assigned to a HMO may be eligible for exemption. In order for exemption to occur:

a. The enrollee must have been automatically assigned or reassigned and must not have been in the HMO to which they were assigned or reassigned within the last seven months.; and

b. The enrollee must be seeking care from a provider (physician and/or hospital) not affiliated with the HMO to which they were assigned.

Exemption requests can be made by the HMO, a provider, or the enrollee. Providers and HMOs should direct their exemption request to the Department’s fiscal agent Contract Monitor. Enrollees should direct their exemption request to the Department’s Enrollment Specialist.

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12. SSI Family Exemption and/or Disenrollment

Families may be eligible for an exemption from enrollment or be disenrolled if:

a. There are one or more members in the family who are receiving SSI benefits, and

b. The SSI member receives primary care from a provider who does not accept any Medicaid HMO, and

c. Other family members receive their primary care from the same provider as the SSI member.

Exemption and disenrollment requests may be made by the SSI member, parent or guardian and should be directed to the Department’s Enrollment Specialist.

13. Third Trimester Pregnancy Exemption

Enrollees who are in their third trimester of pregnancy when they are expected to enter an HMO may be eligible for exemption. In order for exemption to occur:

a. The enrollee must have been automatically assigned or reassigned to their current HMO; and

b. The enrollee must be seeking care from a provider (physician and/or hospital) who is either not affiliated with the HMO to which they were assigned or is affiliated but the HMO is closed to new enrollment.

Exemption requests can only be made by the enrollee and/or casehead. Exemption requests must be made before the end of the second month in the HMO or before the birth, whichever occurs first. Exemption requests should be directed to the Department’s Enrollment Specialist.

14. Transplant Exemption

Enrollees who have had a transplant that is considered experimental such as a liver, heart, lung, heart-lung, pancreas, pancreas-kidney or bone marrow transplant are eligible for an exemption:

a. The person to get the transplant will be permanently exempted from HMO enrollment the first of the month in which surgery is performed.

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b. In the case of autologous bone marrow transplants, the person will be permanently exempted from HMO enrollment the date the bone marrow was extracted.

c. Enrollees who have had one or more of the transplant surgeries referenced above prior to enrollment in an HMO will be permanently exempted. The effective date will be either the first of the month not more than six months prior to the date of the request, or the first of the month of the HMO enrollment, whichever is later. Exemption requests may be made by the HMO and should be directed to the Department’s fiscal agent Nurse Consultant.

ARTICLE IX

IX. COMPLAINT, GRIEVANCE AND APPEAL PROCEDURES

The grievance process refers to the overall system that includes complaints, grievances and appeals as defined in Article I. Medicaid and BadgerCare enrollees may grieve any aspect of service delivery provided or arranged by the HMO to the HMO and to the Department (described in Sections A and B below). The enrollee may appeal an action as defined in Article I to the HMO, the Department and/or to the Division of Hearings and Appeals as described in section C below.

A. Procedures

The HMO must:

1. Have written policies and procedures that detail what the grievance and appeal system is and how it operates.

2. Identify a contact person in the HMO to receive grievances and appeals and be responsible for routing/processing.

3. Operate a complaint process that enrollees can use to get problems resolved without going through the formal, written grievance process.

4. Operate a grievance process that enrollees can use to grieve in writing.

5. Inform enrollees about the existence of the complaint and grievance processes and how to use them.

6. Attempt to resolve complaints, grievances and appeals informally.

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7. Respond to grievances and appeals in writing within 10 business days of receipt, except in cases of emergency or urgent (expedited grievance) situations. This represents the first response. HMOs must resolve the grievance or appeal within two business days of receipt of an expedited grievance, or sooner if possible. More complete procedures are described in Section B of this Article.

8. Operate a grievance process within the HMO that enrollees can use to grieve or appeal any negative response to the Board of Directors of the HMO. The HMO Board of Directors may delegate the authority to review grievances and appeals to an HMO grievance appeal committee, but the delegation must be in writing. If a grievance appeal committee is established, the Medicaid HMO Advocate must be a member of the committee.

9. Provide the enrollee and his or her representative opportunity, before and during the appeals process, to examine enrollee’s case file, including medical records, and any other documents and records considered during the appeals process.

10. Grant the enrollee the right to appear in person before the grievance appeal committee to present written and oral information. The enrollee may bring a representative to the meeting. The HMO must inform the enrollee in writing of the time and place of the meeting at least seven calendar days before the meeting.

11. Maintain a record keeping “log” of complaints and grievances that includes a short, dated summary of each problem, the response, and the resolution. The log must distinguish Medicaid and BadgerCare from commercial enrollees, if the HMO does not have a separate log for Medicaid and BadgerCare. The HMO must submit quarterly reports to the Department of all complaints, grievances and appeals. The analysis of the log will include the number of complaints, grievances and appeals divided into two categories, program administration and benefit denials.

12. Maintain a record keeping system for grievances and appeals that includes a copy of the original grievance or appeal, the response, and the resolution. The system must distinguish Medicaid and BadgerCare from commercial enrollees.

13. At the time of the HMO’s initial grievance denial of an action decision the HMO must notify the enrollee that the grievance denial decision may be appealed to the Department and/or to the Division of Hearings and Appeals.

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14. Ensure that individuals with the authority to require corrective action are involved in the grievance process.

15. Distribute to its gatekeepers* and IPAs the informational flyer on enrollee grievance and appeal rights (the ombudsman brochure). When a new brochure is available, the HMO must distribute copies to its gatekeepers and IPAs within three weeks of receipt of the new brochure.

16. Ensure that its gatekeepers* and IPAs have written procedures for describing how enrollees are informed of denied services. The HMO will make copies of the gatekeepers’ and IPAs’ grievance procedures available for review upon request by the Department.

17. Inform enrollees about the availability of interpreter services and provide interpreter services for non-English speaking and hearing impaired enrollees throughout the HMO’s grievance process.

* The word “gatekeeper” in this context refers to any entity that performs a management services contract, a behavioral health science IPA, or a dental IPA, and not to individual physicians acting as a gatekeeper to primary care services.

B. Grievance and Appeal Process

The enrollee may choose to use the HMO’s grievance and appeal process or may appeal to the Department instead of using the HMO’s grievance and appeal process. If the enrollee chooses to use the HMO’s process, the HMO must provide an initial response within 10 business days and a final response within 30 calendar days of receiving the grievance or appeal. If the HMO is unable to resolve the grievance or appeal within 30 calendar days, the time period may be extended another 14 calendar days from receipt if the HMO notifies the enrollee in writing that the HMO has not resolved the grievance or appeal, when the resolution may be expected, and why the additional time is needed. The total timeline for HMOs to finalize a formal grievance or appeal may not exceed 45 calendar days from the date of the receipt.

Any grievance or appeal decision by the HMO may be appealed by the enrollee to the Department. The Department shall review such appeals and may affirm, modify, or reject any formal decision of the HMO at any time after the enrollee files the formal appeal. The Department will request the name and credentials of the person making the denial decision as part of the grievance process. The Department will give a final response within 30 days from the date the Department has all information needed for a decision. Also, an enrollee can submit a grievance or appeal directly to the Department at any time during the grievance process. Any decision made by the Department under this section is subject to enrollee appeal rights to the extent provided by state and federal laws and rules. The Department will receive input from the recipient and the HMO in considering grievances and appeals.

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For an expedited grievance or appeal, the HMO must resolve all issues within two business days of receiving the written request for an expedited grievance. The HMO must make reasonable effort to provide oral notice, in addition to written notice for the resolution.

The HMO must ensure that punitive action is not taken against anyone who either requests an expedited resolution or supports an enrollee’s appeal.

C. Notifications to Enrollees

When an HMO, its *gatekeepers, or its IPAs discontinues, terminates, suspends, limits, or reduces a service (including services authorized by an HMO the enrollee was previously enrolled in or services received by the enrollee on a Medicaid FFS basis), the HMO must notify the affected enrollee(s), and his/her provider when appropriate, in writing at least 10 days before the date of action. When an HMO, its gatekeepers, or its IPAs deny coverage of a new service, the HMO must notify the enrollee of the denial in writing. Notices for both ongoing services and new benefits must include all of the following:

1. The nature of the intended action.

2. The reasons for the intended action. The reason must be clearly stated in sufficient detail to ensure that the enrollee understands the action being taken by the HMO.

3. The fact that the enrollee if appealing the action must do so within 45 days.

4. The fact that the enrollee has the right to examine the documentation the HMO used to make its determination.

5. The fact that interpreter services are available free of charge during the grievance and appeal process and how the enrollee can access those services.

6. The fact that the enrollee may bring a representative with him/her to the hearing.

7. The fact that the enrollee may present “new” information during the grievance and appeal process.

8. The process for requesting an oral or written expedited grievance or appeal.

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9. An explanation of the enrollee’s right to appeal the HMO’s decision to the Department at any point in the process.

10. The fact that the enrollee, if appealing the HMO action, may file a request for a hearing with the Division of Hearings and Appeals (DHA) at any point in the process and the address of the DHA.

11. The fact that the enrollee can receive help in filing a grievance or appeal by calling either the Enrollment Specialist or the Ombudsman.

12. The telephone number of the HMO Advocate, the Enrollment Specialist and the Ombudsman.

Notifications to enrollees of termination, suspension, or reduction of an ongoing benefit (including services authorized by an HMO the enrollee was previously enrolled in or services received by the enrollee on a Medicaid FFS basis), must in addition to items 1 through 12 above, also include the following:

13. The circumstance under which a benefit will continue during the grievance and appeal process.

14. The fact that if the enrollee continues to receive the disputed service, the enrollee may be liable for the cost of care if the decision is adverse to the enrollee.

* The word “gatekeeper” in this context refers to any entity that performs a management services contract, a behavioral health science IPA, or a dental IPA, and not to individual physicians acting as a gatekeeper to primary care services.

This notice requirement does not apply when an HMO, its gatekeeper or its IPA triages an enrollee to a proper health care provider or when an individual health care provider determines that a service is medically unnecessary.

The Department must review and approve all notice language prior to its use by the HMO. Department review and approval will occur during the Medicaid certification process of the HMO and prior to any change of the notice language by the HMO.

D. Continuation of Benefits Requirements

If the enrollee files a request for a hearing with the DHA on or before the later of the effective date or within 10 days of the HMO mailing the notice of action to reduce, limit, terminate or suspend benefits, upon notification by the DHA the

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HMO will notify the enrollee they are eligible to continue receiving care but may be liable for care if DHA upholds the HMO’s decision. If the enrollee requests that the services in question be continued pending the outcome of the fair hearing, the following conditions apply:

1. If the DHA reverses the HMO’s decision the HMO is responsible to cover services provided to the enrollee during the administrative hearing process.

2. If the DHA upholds the HMO’s decision, the HMO may pursue reimbursement from the enrollee for all services provided to the enrollee, to the extent that the services were covered solely because of this requirement.

Benefits must be continued until one of the following occurs:

• The enrollee withdraws the appeal.

• A state fair hearing decision adverse to the enrollee is made.

• The authorization expires or the authorization service is met.

E. Reporting of Grievances to the Department

HMOs must forward both the complaint, and grievance reports to the Department within 30 days of the end of a quarter in the format specified in Addendum VIII, G. Failure on the part of an HMO to submit the quarterly complaint and grievance reports in the required format within five days of the due date may result in any or all sanctions available under Article XI.

ARTICLE X

X. SUBCONTRACTS

This Article does not apply to subcontracts between the Department and the HMO. The Department shall have sole authority to determine the conditions and terms of such subcontracts. Subcontractor (hereinafter identified as subcontractor) agrees to abide by all applicable provisions of (HMO NAME)’s contract with the Department of Health and Family Services, hereinafter referred to as the Medicaid and BadgerCare HMO Contract. Subcontractor compliance with the Medicaid and BadgerCare HMO Contract specifically includes but is not limited to the requirements specified in Section A below.

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A. Subcontract Standard Language

HMOs must ensure that all subcontracts are in writing and include the following standard language when applicable.

1. Subcontractor uses only Medicaid-certified providers in accordance with Article III, H, 1 of the Medicaid and BadgerCare HMO Contract.

2. No terms of this subcontract are valid which terminate legal liability of the HMO.

3. Subcontractor agrees to participate in and contribute required data to HMO Quality Assessment/Performance Improvement programs as required in Article IV of the Medicaid and BadgerCare HMO Contract.

4. Subcontractor agrees to abide by the terms of the Medicaid and BadgerCare HMO Contract (Article III, E, 9) for the timely provision of emergency and urgent care. Where applicable, subcontractor agrees to follow those procedures for handling urgent and emergency care cases stipulated in any required hospital/emergency room MOUs signed by the HMO in accordance with Article III, E, 9, c and Addendum I of the Medicaid and BadgerCare HMO Contract.

5. Subcontractor agrees to submit HMO encounter data in the format specified by the HMO, so that the HMO can meet the Department specifications required by Article VII of the Medicaid and BadgerCare HMO Contract. HMOs will evaluate the credibility of data obtained from subcontracted vendors’ external databases to ensure that any patient-reported information has been adequately verified.

6. Subcontractor agrees to comply with all non-discrimination requirements in Article III, C, 5 of the Medicaid and BadgerCare HMO Contract.

7. Subcontractor agrees to comply with all record retention requirements and, where applicable, the special compliance requirements on abortions, sterilizations, hysterectomies, and HealthCheck reporting requirements.

8. Subcontractor agrees to provide representatives of the HMO, as well as duly authorized agents or representatives of the Department and the Federal Department of Health and Human Services, access to its premises and its contracts and/or medical records in accordance with Article III and Article VII of the Medicaid and BadgerCare HMO Contract. Subcontractor agrees otherwise to preserve the full confidentiality of medical records in accordance with Article XIV of the Medicaid and BadgerCare HMO Contract.

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9. Subcontractor agrees to the requirements for maintenance and transfer of medical records stipulated in Article IV, F of the Medicaid and BadgerCare HMO Contract.

10. Subcontractor agrees to ensure confidentiality of family planning services in accordance with Article III, E, 10 of the Medicaid and BadgerCare HMO Contract.

11. Subcontractor agrees not to create barriers to access to care by imposing requirements on recipients that are inconsistent with the provision of medically necessary and covered Medicaid benefits (e.g., COB recovery procedures that delay or prevent care).

12. Subcontractor agrees to clearly specify referral approval requirements to its providers and in any sub-subcontracts.

13. Subcontractor agrees not to bill Medicaid and BadgerCare enrollees for medically necessary services covered under the Medicaid and BadgerCare HMO Contract and provided during the enrollees’ period of HMO enrollment. Subcontractor also agrees not to bill enrollees for any missed appointments while the enrollees are eligible under the Medicaid and BadgerCare Program. This provision will remain in effect even if the HMO becomes insolvent. However, if an enrollee agrees in writing to pay for a non-Medicaid covered service, then the HMO, HMO provider, or HMO subcontractor can bill.

The standard release form signed by the enrollee at the time of services does not relieve the HMO and its providers and subcontractors from the prohibition against billing a Medicaid enrollee in the absence of a knowing assumption of liability for a non-Medicaid covered service. The form or other type of acknowledgment relevant to Medicaid or BadgerCare enrollee liability must specifically state the admissions, services, or procedures that are not covered by Medicaid.

14. Within 15 business days of the HMO’s request subcontractors must forward medical records pursuant to grievances to the HMO. If the subcontractor does not meet the 15 business day requirement, the subcontractor must explain why and indicate when the medical records will be provided.

15 Subcontractor agrees to abide by the terms of Article III, G, regarding appeals to the HMO and to the Department regarding the HMO’s nonpayment for services providers render to Medicaid or BadgerCare enrollees.

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16. Subcontractor agrees to abide by the HMO marketing/informing requirements. Subcontractor will forward to the HMO for prior approval all flyers, brochures, letters and pamphlets the subcontractor intends to distribute to its Medicaid and BadgerCare enrollees concerning its HMO affiliation(s), or changes in affiliation, or relating directly to the Medicaid and BadgerCare population. Subcontractor will not distribute any “marketing” or recipient informing materials without the consent of the HMO and the Department.

B. Subcontract Submission Requirements

1. Changes in Established Subcontracts

a) The HMO must submit changes in previously approved subcontracts to the Department for review and approval before they take effect. This review requirement applies to changes that affect the amount, duration, scope, location, or quality of services.

1) Technical changes do not have to be approved.

2) Changes in rates paid do not have to be approved, with the exception of changes in the amounts paid to HMO management services subcontractors.

b) The Department will review the subcontract changes and respond to the HMO within 15 business days. If the Department does not respond to the request for review within 15 business days of submission, the HMO must contact the Contracts Section Chief in the Bureau of MHCP. A response will be prepared within five business days of this contact.

2. New Subcontracts

The HMO must submit new subcontracts to the Department for review and approval before they take effect. If the Department does not respond to the request for review within 15 business days of submission, the HMO must contact the Contracts Section Chief in the Bureau of MHCP. A response will be prepared within five business days of this contact.

C. Review and Approval of Subcontracts

The Department may approve, approve with modification, or deny subcontracts under this Contract at its sole discretion. The Department may, at its sole discretion and without the need to demonstrate cause, impose such conditions or limitations on its approval of a subcontract as it deems appropriate. The Department may consider such factors as it deems appropriate to protect the interests of the state and Medicaid and BadgerCare recipients, including but not limited to the proposed subcontractor’s past performance. The Department will:

1. Give the HMO (1) 120 days to implement a change that requires the HMO to find a new subcontractor, and (2) 60 days to implement any other change required by the Department.

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2. Acknowledge the approval or disapproval of a subcontract within 15 business days after its receipt from the HMO.

3. Review and approve or disapprove each new subcontract before the contract takes effect. Any disapproval of subcontracts may result in the application by the Department of remedies pursuant to Article XI of this Contract.

4. Ensure that the HMO has included the standard subcontract language as specified in section A of this Article (except for specific provisions that are inapplicable in a specific HMO management subcontract).

D. Transition Plan

The HMO may be required to submit transition plans when a primary care provider(s), mental health provider(s), gatekeeper or dental clinic terminates their contractual relationship with the HMO. The transition plan will address continuity of care issues, enrollee notification and any other information required by the Department to ensure adequate enrollee access. The Department will either approve, deny, or modify the transition plan within 15 business days of receipt or prior to the effective date of the subcontract change.

E. Notification Requirements Regarding Subcontract Additions or Terminations

HMOs must:

1. Notify the Department of Additions or Terminations

The HMO must notify the Department within 10 days of subcontract additions or terminations involving: (i) a clinic or group of physicians, (ii) an individual physician (iii) an individual mental health provider and/or clinic, (iv) an individual dental provider and/or clinic.

2. Notify the Department of a Termination or Modification that Involves Reducing Access to Care

The HMO must notify the Department within seven days of any notice by the HMO to a subcontractor, or any notice to the HMO from a

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subcontractor, of a subcontract termination, a pending subcontract termination, or a pending modification in subcontract terms, that could reduce Medicaid and BadgerCare enrollee access to care.

If the Department determines that a pending subcontract termination or pending modification in subcontract terms will jeopardize enrollee access to care, then the Department may invoke the remedies pursuant to Article XI and Article XII of this Contract. These remedies include contract termination (notice to the HMO and opportunity to correct are provided for), suspension of new enrollment, and giving enrollees an opportunity to enroll in a different HMO.

3. Notify the Enrollment Broker of an Addition or Termination

The HMO must notify the Department’s enrollment broker within 10 days of additions to, and deletions from, the provider network. The HMO must also submit to the enrollment broker an electronic listing of all network Medicaid providers, facilities and pharmacies within the first 10 days of each calendar quarter in a mutually agreed upon format approved by the Department. This listing will include, but is not limited to, provider name, provider number, address, telephone number, and specialty as well as indicators designating whether a provider can be selected as a PCP, and whether the PCP is accepting new patients. The listing shall include only Medicaid certified providers who are contracted with the HMO to provide contract services to Medicaid and BadgerCare enrollees.

4. Notify Enrollees of Provider Terminations

Not less than 30 days prior to the effective date of the termination. The HMO must also send written notification to enrollees whose PCP, mental health provider, gatekeeper or dental clinic terminates a contract with the HMO. The Department must approve all notifications before they are sent to enrollees.

F. Management Subcontracts

The Department Will Review HMO Management Subcontracts to Ensure that:

1. Rates are reasonable.

2. They clearly describe the services to be provided and the compensation to be paid.

3. Any potential bonus, profit-sharing, or other compensation, not directly related to the cost of providing goods and services to the HMO, is identified and clearly defined in terms of potential magnitude and expected

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magnitude during the Medicaid and BadgerCare HMO Contract period. Any such bonus or profit-sharing must be reasonable compared to the services performed. The HMO must document reasonableness. A maximum dollar amount for such bonus or profit-sharing shall be specified for the contract period.

The requirements addressed in a. through c. do not have to relate to non-Medicaid and BadgerCare enrollees if the HMO wishes to have separate arrangements for non-Medicaid enrollees.

ARTICLE XI

XI. REMEDIES FOR VIOLATION, BREACH, OR NON-PERFORMANCE OF CONTRACT

A. Suspension of New Enrollment

Whenever the Department determines that the HMO is out of compliance with this Contract, the Department may suspend the HMO’s right to receive new enrollment under this Contract. When exercising this option, the Department, must notify the HMO in writing of its intent to suspend new enrollment at least 30 days prior to the beginning of the suspension period. The suspension will take effect if the non-compliance remains uncorrected at the end of this period. The Department may suspend new enrollment sooner than the time period specified in this paragraph if the Department finds that enrollee health or welfare is jeopardized. The suspension period may be for any length of time specified by the Department, or may be indefinite. The suspension period may extend up to the expiration of the Contract as provided under Article XIX.

The Department may also notify enrollees of HMO non-compliance and provide an opportunity to enroll in another HMO.

B. Department-Initiated Enrollment Reductions

The Department may reduce the maximum enrollment level and/or number of current enrollees whenever it determines that the HMO has failed to provide one or more of the contract services required under Article III or that the HMO has failed to maintain or make available any records or reports required under this Contract that the Department needs to determine whether the HMO is providing contract services as required under Article III. The HMO will have at least 30 days to correct the non-compliance prior to the Department taking any action set forth in this paragraph. The Department may reduce enrollment sooner than the time period specified in this paragraph if the Department finds that enrollee health or welfare is jeopardized.

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C. Other Enrollment Reductions

The Department may also suspend new enrollment or disenroll enrollees in anticipation of the HMO not being able to comply with federal or state law at its current enrollment level. Such suspension shall not be subject to the 30-day notification requirement.

D. Withholding of Capitation Payments and Orders to Provide Services

Notwithstanding the provisions of Article VI, the Department may withhold portions of capitation payments as liquidated damages or otherwise recover damages from the HMO on the following grounds:

1. Whenever the Department determines that the HMO has failed to provide one or more of the medically necessary Medicaid covered contract services required under Article III, the Department may either order the HMO to provide such service, or withhold a portion of the HMO’s capitation payments for the following month or subsequent months, such portion withheld to be equal to the amount of money the Department must pay to provide such services.

If the Department orders the HMO to provide services under this section and the HMO fails to provide the services within the timeline specified by the Department, the Department may withhold from the HMO’s capitation payments an amount up to 150% of the FFS amount for such services.

When it withholds payments under this section, the Department must submit to the HMO a list of the participants for whom payments are being withheld, the nature of the service(s) denied, and payments the Department must make to provide medically necessary services.

If the Department acts under this section and subsequently determines that the services in question were not covered services:

a. If the Department withheld payments, it will restore to the HMO the full capitation payment; or

b. If the Department ordered the HMO to provide services under this section, it will pay the HMO the actual documented cost of providing the services.

2. If the HMO fails to submit required data and/or information to the Department or the Department’s authorized agents, or fails to submit such data or information in the required form or format, by the deadline specified by the Department, the Department may immediately impose

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liquidated damages in the amount of $1,500 per day for each day beyond the deadline that the HMO fails to submit the data or fails to submit the data in the required form or format, such liquidated damages to be deducted from the HMO’s capitation payments.

3. If the HMO fails to comply with state and federal compliance requirements for abortions, hysterectomies and sterilizations, the Department may impose liquidated damages in the amount of $10,000.

4. The term “erred encounter record” means an encounter record that has failed an edit when a correction is expected by the Department. If the HMO fails to correct an error to the encounter record within the timeframe specified, the Department may assess liquidated damages of $5 per erred encounter record per month until the error has been corrected. The liquidated damage amount will be deducted from the HMO’s capitation payment. When applied, these liquidated damages will be calculated and assessed on a monthly basis.

If upon audit or review, the Department finds that the HMO has removed an erred encounter record without the Department’s approval, the Department may assess liquidated damages for each day from the date of original error notification until the date of correction.

The following criteria will be used prior to assessing liquidated damages:

• The Department will calculate a percentage rate by dividing the number of erred records not corrected within 90 days (numerator), by the total number of records in error (denominator) and multiply the result by 100.

• Records failing non-critical edits, as defined in the Wisconsin Medicaid and BadgerCare HMO Encounter Data User Manual, will not be included in the numerator.

• If this rate is 2% or less, liquidated damages will not be assessed.

• The Department will calculate this rate each month.

5. Whenever the Department determines that the HMO has failed to perform an administrative function required under this Contract, the Department may withhold a portion of future capitation payments. For the purposes of this section, “administrative function” is defined as any contract obligation other than the actual provision of contract services. The amount withheld by the Department under this section will be an amount that the Department determines in the reasonable exercise of its discretion to approximate the cost to the Department to perform the function. The Department may increase these amounts by 50% for each subsequent non-compliance.

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Whenever the Department determines that the HMO has failed to perform the administrative functions defined in Article VI, G, 1 and 2, the Department may withhold a portion of future capitation payments sufficient to directly compensate the Department for the Medicaid and BadgerCare program’s costs of providing health care services and items to individuals insured by said insurers and/or the insurers/employers represented by said third party administrators.

6. In any case under this Contract where the Department has the authority to withhold capitation payments, the Department also has the authority to use all other legal processes for the recovery of damages.

7. Notwithstanding the provisions of this subsection, in any case where the Department deducts a portion of capitation payments under subsection 2 above, the following procedures will be used:

a. The Department will notify the HMO’s contract administrator no later than the second business day after the Department’s deadline that the HMO has failed to submit the required data or the required data cannot be processed.

b. Beginning on the second business day after the Department’s deadline, the HMO will be subject without further notification to liquidated damages per data file or report.

c. If the HMO submits encounter data late but submits it within five business days from the deadline, the Department will rescind liquidated damages if the data can be processed according to the criteria published in the Wisconsin Medicaid and BadgerCare HMO Encounter Data User Manual. The Department will not edit the data until the process period in the subsequent month.

d. If the HMO submits any other required data or report but in the required format within five business days from the deadline, the Department will rescind liquidated damages and immediately process the data or report.

e. If the HMO repeatedly fails to submit required data or reports, or submits data that cannot be processed, the Department will require the HMO to develop an action plan to comply with the contract requirements that must meet Department approval.

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f. After the corrective action plan has been implemented, if the HMO continues to submit data beyond the deadline, or continues to submit data that cannot be processed, the Department will invoke the remedies under section A (Suspension of New Enrollment), or under section B (Department-Initiated Enrollment Reductions) of this Article, or both, in addition to liquidated damages that may have been imposed for a current violation.

g. If an HMO notifies the Department that it will discontinue contracting with the Department at the end of a contract period, but reports or data are due for a contract period, the Department retains the right to withhold up to two months of capitation payments otherwise due the HMO that will not be released to the HMO until all required reports or data are submitted and accepted after expiration of the Contract. Upon determination by the Department that the reports and data are accepted, the Department will release the monies withheld.

E. Inappropriate Payment Denials

HMOs that inappropriately fail to provide or deny payments for services may be subject to suspension of new enrollments, withholding, in full or in part, of capitation payments, contract termination, or refusal to contract in a future time period, as determined by the Department. The Department will select among these sanctions based upon the nature of the services in question, whether the failure or denial was an isolated instance or a repeated pattern or practice, and whether the health of an enrollee was injured, threatened or jeopardized by the failure or denial. These sanctions apply not only to cases where the Department has ordered payment after appeal, but also to cases where no appeal was made (i.e., the Department knows about the documented abuse from other sources).

F. Sanctions

Section 1903(m)(5)(B)(ii) of the Social Security Act vests the Secretary of the Department of Health and Human Services with the authority to deny Medicaid payments to an HMO for enrollees who enroll after the date on which the HMO has been found to have committed one of the violations identified in the federal law. State payment for enrollees of the contracting organization is automatically denied whenever, and for so long as, federal payment for such enrollees has been denied as a result of the commission of such violations.

G. Sanctions and Remedial Actions

The Department may pursue all sanctions and remedial actions with HMOs that are taken with Medicaid FFS providers, including any civil penalties not to exceed the amounts specified in the Balanced Budget Amendment of 1997 P.L. 105-33 Sec. 4707(a) [42 U.S.C. 1396v(d)(2)].

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ARTICLE XII

XII. TERMINATION AND MODIFICATION OF CONTRACT

A. Termination by Mutual Consent

This Contract may be terminated at any time by mutual written agreement of both the HMO and the Department.

B. Unilateral Termination

This Contract between the parties may be terminated by either party as follows:

1. Either party may terminate this Contract at any time, due to modifications mandated by changes in federal or state laws, rules or regulations that materially affect either party’s rights or responsibilities under this Contract. At least 90 days prior to the proposed date of termination, the party initiating the termination must notify the other party of its intent to terminate this Contract. Termination by the Department under these circumstances shall impose an obligation upon the Department to pay the Contractor’s reasonable and necessarily incurred termination expenses.

2. Either party may terminate this Contract at any time if it determines that the other party has substantially failed to perform any of its functions or duties under this Contract. The party exercising this option must notify the other party in writing of this intent to terminate this Contract and give the other party 30 days to correct the identified violation, breach or non-performance of Contract. If such violation, breach or non-performance of Contract is not satisfactorily addressed within this time period, the exercising party may terminate this Contract. The termination date shall always be the last day of a month. The Contract may be terminated by the Department sooner than the time period specified in this paragraph if the Department finds that enrollee health or welfare is jeopardized by continued enrollment in the HMO. A “substantial failure to perform” for purposes of this paragraph includes any violation of any requirement of this Contract that is repeated or ongoing, that goes to the essentials or purpose of the Contract, or that injures, jeopardizes or threatens the health, safety, welfare, rights or other interests of enrollees.

3. Either party may terminate this Contract if federal or state funding of contractual services rendered by the Contractor become or will become permanently unavailable. In the event it becomes evident state or federal funding of claims payments or contractual services rendered by the Contractor will be temporarily suspended or unavailable, the Department shall immediately notify the Contractor, in writing, identifying the basis

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for the anticipated unavailability or suspension of funding. Upon such notice, the Department or the Contractor may suspend performance of any or all of the Contractor’s obligations under this Contract if the suspension or unavailability of funding will preclude reimbursement for performance of those obligations. The Department or Contractor shall attempt to give notice of suspension of performance of any or all of the Contractor’s obligations by 60 calendar days prior to said suspension, if this is possible; otherwise, such notice of suspension should be made as soon as possible. In the event funding temporarily suspended or unavailable is reinstated, the Contractor may remove suspension hereunder by written notice to the Department, to be made within 30 calendar days from the date the funds are reinstated. In the event the Contractor elects not to reinstate services, the Contractor shall give the Department written notice of its reasons for such decision, to be made within 30 calendar days from the date the funds are reinstated. The Contractor shall make such decision in good faith and will provide to the Department documentation supporting its decision. In the event of termination under this Section, this Contract shall terminate without termination costs to either party.

C. Obligations of Contracting Parties Upon Termination

When termination of the Contract occurs, the following obligations must be met by the parties:

1. Where this Contract is terminated unilaterally by the Department due to non-performance by the HMO or by mutual consent with termination initiated by the HMO:

a. The Department will be responsible for notifying all enrollees of the date of termination and process by which the enrollees will continue to receive contract services.

b. The HMO will be responsible for all expenses related to said notification

c. The Department will grant the HMO a hearing before termination by the Department occurs. The Department will notify the enrollees of the hearing and allow them to disenroll from the HMO without cause.

2. Where this Contract is terminated on any basis not given in 1 above including non-renewal of the contract for a given contract period:

a. The Department will be responsible for notifying all enrollees of the date of termination and process by which the enrollees will continue to receive contract services.

b. The Department will be responsible for all expenses relating to said notification.

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3. Where this contract is terminated for any reason the following payment criteria will apply:

a. Any payments advanced to the HMO for coverage of enrollees for periods after the date of termination will be returned to the Department within the period of time specified by the Department.

b. The HMO will supply all information necessary for the reimbursement of any outstanding Medicaid and BadgerCare claims within the period of time specified by the Department.

c. If a contract is terminated, recoupments will be handled through a payment by the HMO within 90 days of contract termination.

D. Modification

This Contract may be modified at any time by written mutual consent of the HMO and the Department or when modifications are mandated by changes in federal or state laws, rules or regulations. If changes in state or federal laws, rules or regulations require the Department to modify its contract with the HMO, the HMO will receive written notice.

If the Department exercises its right to renew this Contract, as allowed by Article XIX, the Department will recalculate the capitation rate for succeeding calendar years. The HMO will have 30 days to accept the new capitation rate in writing or to initiate termination of the Contract. If the Department changes the reporting requirements during the contract period, the HMO shall have 180 days to comply with such changes or to initiate termination of the Contract.

ARTICLE XIII

XIII. INTERPRETATION OF CONTRACT LANGUAGE

When disputes arise, the Department has the right to final interpretation of the contract language. The HMO will abide by the interpretation of the Department.

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ARTICLE XIV

XIV.    CONFIDENTIALITY OF RECORDS AND HIPAA REQUIREMENTS

The parties agree that all information, records, and data collected in connection with this Contract will be protected from unauthorized disclosure as provided in Chapter 49, Subchapter IV, Wis. Stats., HFS 108.01, Wis. Adm. Code, 42 CFR 431 Subpart F and 42 CFR 438 Subpart F. Except as otherwise required by law, rule or regulation, access to such information shall be limited by the HMO and the Department to persons who, or agencies which, require the information in order to perform their duties related to this Contract, including the U.S. Department of Health and Human Services and such others as may be required by the Department.

A. The HMO agrees to forward to the Department all media contacts regarding Medicaid and BadgerCare enrollees or the Medicaid and BadgerCare program.

B. Regarding the services provided under this Contract, the HMO will comply with all applicable health data and information privacy and security policies, standards and regulations as may be adopted or promulgated under the Health Insurance Portability and Accountability Act (HIPAA) of 1996 in final form, and as amended or revised from time to time. This includes cooperating with the Department in amending this Contract, or developing a new agreement, if the Department deems it necessary to meet the Department’s obligations under HIPAA.

C. Trading Partner requirements under HIPAA. For the purposes of this section Trading Partner means the HMO.

1. Trading Partner Obligations:

a. Trading Partner must not change any definition, data condition or use of a data element or segment as proscribed in the HHS Transaction Standard Regulation (45 CFR Part 162.915(a)).

b. Trading Partner must not add any data elements or segments to the maximum data set as proscribed in the HHS Transaction Standard Regulation (45 CFR Part 162.915(b)).

c. Trading Partner must not use any code or data elements that are either marked “not used” in the HHS Transaction Standard’s implementation specifications or are not in the HHS Transaction Standard’s implementation specifications (45 CFR Part 162.915(c)).

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d. Trading Partner must not change the meaning or intent of any of the HHS Transaction Standard’s implementation specifications (45 CFR Part 162.915(d)).

e. Trading Partner must submit a new Trading Partner profile form in writing if any of the information provided as part of the Trading Partner profile form is modified.

2. Trading Partner understands that there exists the possibility that the Department or others may request an exception from the uses of a standard in the HHS Transaction Standards. If this occurs, Trading Partner must participate in such test modification (45 CFR Part 162.940 (a) (4)).

3. Trading Partners or Trading Partner’s Business Associate have responsibilities to adequately test business rules appropriate to their types and specialties.

4. Trading Partner or their Business Associate agrees to cure Transactions errors or deficiencies identified by the Department.

5. Trading Partner or Trading Partner’s Business Associate understands that from time-to-time HHS may modify and set compliance dates for the HHS Transaction Standards. Trading Partner or Trading Partner’s Business associate must incorporate by reference any such modifications or changes (45 CFR Part 160.104).

6. The Department and the Trading Partner agree to keep open code sets being processed or used for at least the current billing period or any appeal period, whichever is longer (45 CFR Part 162.925 (c)(2)).

7. Privacy

a. The Trading Partner or the Trading Partner’s Business Associate will comply with all applicable state and federal privacy statutes and regulations concerning the treatment of Protected Health Information (PHI).

b. The Department and the Trading Partner or Trading Partner’s Business Associate will promptly notify the other Party of any unlawful or unauthorized use or disclosure of PHI that may have an impact on the other Party that comes to the Party’s attention, and will cooperate with the other Party in the event that any litigation arises concerning the unlawful or unauthorized disclosure of use of PHI.

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c. The Department retains all rights to seek injunctive relief to prevent or stop the unauthorized use or disclosure of PHI by the Trading Partner, Trading Partner’s Business Associate, or any agent, contractor or third Party that received PHI from the Trading Partner.

8. Security

a. The Department and the Trading Partner or Trading Partner’s Business Associate must maintain reasonable security procedures to prevent unauthorized access to data, data transmissions, security access codes, envelope, backup files, and source documents. Each party will immediately notify the other Party of any unauthorized attempt to obtain access to or otherwise tamper with data, data transmissions security access codes, envelope, backup files, source documents other Party’s operating system when the attempt may have an impact on the other Party.

b. The Department and the Trading Partner or Trading Partner’s Business associate must develop, implement, and maintain appropriate security measures for its own Operating System. The Department and the Trading Partner or Trading Partner’s Business Associate must document and keep current its security measures. Each Party’s security measure will include, at a minimum, the requirements and implementation features set forth in ‘site specific HIPAA rule’ and all applicable HHS implementation guidelines.

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ARTICLE XV

XV. DOCUMENTS CONSTITUTING CONTRACT

A. Current Documents

In addition to this base agreement, the contract between the Department and the HMO includes, existing Medicaid provider publications addressed to HMOs, the terms of the most recent HMO certification application issued by this Department for Medicaid and BadgerCare HMO contracts, any questions and answers released pursuant to said HMO certification application by the Department, and an HMO’s signed application. The terms of the HMO certification application are also part of this Contract even if the HMO had a Medicaid and BadgerCare HMO Contract in the prior contract period and consequently did not have to answer all the questions in the HMO certification application. In the event of any conflict in provisions among these documents, the terms of this base agreement will prevail. The provisions in any question and answer document will prevail over the HMO certification application. And the HMO Certification Application terms shall prevail over any conflict with an HMO’s actual signed application. In addition, the Contract shall incorporate the following Addenda:

I.	Memoranda of Understanding
II.	Standard Enrollee Handbook Language
III.	Actuarial Basis
IV.	Guidelines for the Coordination of Services between HMOs and the Bureau of Milwaukee Child Welfare
V.	Guidelines for the Coordination of Services between Medicaid HMOs and County Birth to 3 Agencies
VI.	Local Health Departments and Community Based Health Organizations a Resource for HMOs
VII.	Guidelines for the Coordination of Services Between HMOs, Targeted Case Management (TCM) Agencies, and Child Welfare Agencies
VIII.	Report Forms and Worksheets
IX.	General Information about the WIC Program and Sample HMO-to-WIC Referral Forms

B. Future Documents

The HMO is required by this Contract to comply with all future Medicaid and BadgerCare provider publications and Contract Interpretation Bulletins issued pursuant to this Contract. The documents listed in this section constitute the entire Contract between the parties. No other oral or written expression, constitutes any part of this Contract.

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ARTICLE XVI

XVI.  DISCLOSURE STATEMENT(S) OF OWNERSHIP OR CONTROLLING INTEREST IN AN HMO AND BUSINESS TRANSACTIONS

A. Ownership or Controlling Interest Disclosure Statement(s)

Within 30 days of contract signing, the HMO agrees to submit to the Department full and complete information as to the identity of each person or corporation with an ownership or controlling interest in the HMO, or any subcontractor in which the HMO has a 5% or more ownership interest. A “person with an ownership or controlling interest” means a person or corporation that:

1. Owns, directly or indirectly, 5% or more of the HMO’s capital or stock or receives 5% or more of its profits;

a. Has an interest in any mortgage, deed of trust, note, or other obligation secured in whole or in part by the HMO or by its property or assets, and that interest is equal to or exceeds 5% of the total property and assets of the HMO; or

b. Is an officer or director of the HMO (if it is organized as a corporation or is a partner in the HMO (if it is organized as a partnership).

2. Calculation of 5% Ownership or Control is as follows:

The percentage of direct ownership or control is the percentage interest in the capital, stock or profits.

The percentage of indirect ownership or control is calculated by multiplying the percentages of ownership in each organization. Thus, if a person owns 10% of the stock in a corporation that owns 80% of the stock of the HMO, the person owns 8% of the HMO.

The percentage of ownership or control through an interest in a mortgage, deed or trust, note or other obligation is calculated by multiplying the percent of interest that a person owns in that obligation by the percent of the HMO’s assets used to secure the obligation. Thus, if a person owns 10% of a note secured by 60% of the HMO’s assets, the person owns 6% of the HMO.

3. Information to be Disclosed

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The following information must be disclosed:

a. The name and address of each person with an ownership or controlling interest of 5% or more in the HMO or in any subcontractor in which the HMO has direct or indirect ownership of 5% or more;

b. A statement as to whether any of the persons with ownership or controlling interest is related as spouse, parent, child, or sibling to any other of the persons with ownership or controlling interest; and

c. The name of any other organization in which the person also has ownership or controlling interest. This is required to the extent that the HMO can obtain this information by requesting it in writing. The HMO must keep copies of all of these requests and the responses to them, make them available upon request, and advise the Department when there is no response to a request.

4. Potential Sources of Disclosure Information

This information may already have been reported on Form HCFA-1513, “Disclosure of Ownership and Controlling Interest Statement.” Form HCFA-1513 is likely to have been completed in two different cases. First, if an HMO is federally qualified and has a Medicare contract, it is required to file Form HCFA-1513 with CMS within 120 days of the HMO’s fiscal year end. Secondly, if the HMO is owned by or has subcontracts with Medicaid providers that are reviewed by the state survey agency, these providers may have completed Form HCFA-1513 as part of the survey process. If Form HCFA-1513 has not been completed, the HMO may supply the ownership and controlling information on a separate report or submit reports filed with the State’s insurance or health regulators as long as these reports provide the necessary information for the prior 12 month period.

As directed by the CMS Regional Office (RO), the Department must provide documentation of this disclosure information as part of the prior approval process for contracts. This documentation must be submitted to the Department and the RO prior to each contract period. If an HMO has not supplied the information that must be disclosed, a contract with the HMO is not considered approved for this period of time and no FFP is available for the period of time preceding the disclosure.

A managed care entity may not knowingly have as a director, officer, partner, or person with beneficial ownership of more than 5% of the entity’s a person who is debarred, suspended, or otherwise excluded from participating in procurement or non-procurement activities under the

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Federal Acquisition Regulation or who has an employment, consulting, or other agreement for the provision of items and services that are significant and material to the entity’s obligations under its contract with the state.

B. Business Transaction Disclosures

Within 30 days of contract signing, all HMOs that are not federally qualified must disclose to the Department information on certain types of transactions they have with a “party in interest” as defined in the Public Health Service Act. (See Sections 1903(m)(2)(A)(viii) and 1903(m)(4) of the Act.).

1. Party In Interest as defined in Section 1318(b) of the Public Health Service Act, is:

a. Any director, officer, partner, or employee responsible for management or administration of an HMO and HIO; any person who is directly or indirectly the beneficial owner of more than 5% of the equity of the HMO; any person who is the beneficial owner of more than 5% of the HMO; or, in the case of an HMO organized as a nonprofit corporation, an incorporator or member of such corporation under applicable state corporation law;

b. Any organization in which a person described in subsection A, 1 above is director, officer or partner; has directly or indirectly a beneficial interest of more than 5% of the equity of the HMO; or has a mortgage, deed of trust, note, or other interest valuing more than 5% of the assets of the HMO;

c. Any person directly or indirectly controlling, controlled by, or under common control with an HMO; or

d. Any spouse, child, or parent of an individual described in subsections 1, 2, or 3 above.

2. Business Transactions That Must Be Disclosed Include:

a. Any sale, exchange or lease of any property between the HMO and a party in interest.

b. Any lending of money or other extension of credit between the HMO and a party in interest.

c. Any furnishing for consideration of goods, services (including management services) or facilities between the HMO and the party in interest. This does not include salaries paid to employees for services provided in the normal course of their employment.

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3. Information That Must Be Disclosed In The Transactions Between an HMO and a Party In Interest Includes:

a. The name of the party in interest for each transaction.

b. A description of each transaction and the quantity or units involved.

c. The accrued dollar value of each transaction during the fiscal year.

d. Justification of the reasonableness of each transaction.

If the Medicaid and BadgerCare HMO Contract is being renewed or extended, the HMO must disclose information on those business transactions that occurred during the prior contract period. If the Contract is an initial contract with Medicaid, but the HMO has operated previously in the commercial or Medicare markets, information on business transactions for the entire year preceding the initial contract period must be disclosed. The business transactions which must be reported are not limited to transactions related to serving Medicaid enrollment. All of these HMO business transactions must be reported.

ARTICLE XVII

XVII.   MISCELLANEOUS

A. Indemnification

The HMO agrees to defend, indemnify and hold the Department harmless with respect to any and all claims, costs, damages and expenses, including reasonable attorney’s fees, that are related to or arise out of:

1. Any failure, inability, or refusal of the HMO or any of its subcontractors to provide contract services.

2. The negligent provision of contract services by the HMO or any of its subcontractors.

3. Any failure, inability or refusal of the HMO to pay any of its subcontractors for contract services.

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B. Independent Capacity of Contractor

The Department and the HMO agree that the HMO and any agents or employees of the HMO, in the performance of this Contract, will act in an independent capacity, and not as officers or employees of Department.

C. Omissions

In the event either party hereto discovers any material omission in the provisions of this Contract that is essential to the successful performance of this Contract, said party may so inform the other party in writing. The parties hereto will thereafter promptly negotiate the issues in good faith in order to make all reasonable adjustments necessary to perform the objectives of this Contract.

D. Choice of Law

This Contract is governed by and construed in accordance with the laws of the State of Wisconsin. The HMO shall be required to bring all legal proceedings against the Department in Wisconsin State courts.

E. Waiver

No delay or failure by either party hereto to exercise any right or power accruing upon noncompliance or default by the other party with respect to any of the terms of this Contract will impair that right or power or be construed as a waiver thereof. A waiver by either of the parties hereto of a breach of any of the covenants, conditions, or agreements to be performed by the other will not be construed as a waiver of any succeeding breach thereof or of any other covenant, condition, or agreement contained herein.

F. Severability

If any provision of this Contract is declared or found to be illegal, unenforceable, invalid or void, then both parties will be relieved of all obligations arising under such provision. If such provision does not relate to payments or services to Medicaid and BadgerCare enrollees and if the remainder of this Contract is not affected then each provision not so affected will be enforced to the fullest extent permitted by law.

G. Survival

The terms and conditions contained in this contract that by their sense and context are intended to survive the completion of performance shall so survive the completion, expiration or termination of the contract. This specifically includes, but is not limited to recoupments and confidentiality provisions.

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H. Force Majeure

Both parties shall be excused from performance hereunder for any period that they are prevented from meeting the terms of this Contract as a result of a catastrophic occurrence or natural disaster including but not limited to an act of war, and excluding labor disputes.

I. Headings

The article and section headings used herein are for reference and convenience only and do not affect its interpretation.

J. Assignability

Except as allowed under subcontracting, the Contract is not assignable by the HMO either in whole or in part, without the prior written consent of the Department.

K. Right to Publish

The HMO must obtain prior written approval from the Department before publishing any material on subjects addressed by this Contract.

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ARTICLE XVIII

XVIII.    HMO SPECIFIC CONTRACT TERMS

A. Initial Contract Period

The respective rights and obligations of the parties as set forth in this Contract shall commence on February 1, 2006, and, unless earlier terminated under Article XII, shall remain in full force and effect through December 31, 2007. The specific terms for enrollment, rates, risk-sharing, dental coverage, and chiropractic coverage are as specified in Section C of this Article.

B. Renewals

By mutual written agreement of the parties, there may be one one-year renewal of the term of the Contract. An agreement to renew must be effected at least 30 calendar days prior to the expiration date of any contract term. The terms and conditions of the Contract shall remain in full force and effect throughout any renewal period, unless modified under the provision of Article XII, Section D.

C. Specific Terms of the Contract

The specific terms of the Medicaid/BadgerCare HMO Contract to which the HMO agrees are set forth in this Contract. The capitation rates to which the HMO agrees are indicated by the Department in a completed Addendum III, Actuarial Basis of the Medicaid and BadgerCare HMO Contract. Except as stated below, the specific terms in the HMO’s completed application for certification are incorporated into this Contract, including whether dental services and chiropractic services will be provided by the HMO. For each rate period in this Contract, the HMO agrees not to reduce its service area that was in effect at the time of acceptance of the rates. The HMO’s service area and maximum enrollment are specified in its certification application.

In WITNESS WHEREOF, the State of Wisconsin has executed this agreement:

(Name of HMO)	State of Wisconsin
Official Signature	Official Signature
/s/ Linda McKnew
Title Chief Operating Officer	Title
Date January 26, 2006

Note: HMOs that elect to enter into a subcontract with the state, for the provision of Chiropractic Services, must sign and date the Subcontract for Chiropractic Services. This subcontract will not become effective without a signature.

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SUBCONTRACT FOR CHIROPRACTIC SERVICES

A. THIS AGREEMENT is made and entered into by and between the HMO and the Department of Health and Family Services.

The parties agree as follows:

1. The Department agrees to be at risk for and pay claims for chiropractic services covered under this Contract.

2. The HMO agrees to a deduction from the capitation rate of an amount of money based on the cost of chiropractic services. This deduction is reflected in the Contract that is being signed on the same date.

B. This is the only subcontract for services that the Department is entering into with the HMO.

C. The provisions of the Contract regarding subcontracts, in Article X, do not apply to this subcontract.

D. The term of this subcontract is for the same period as the Contract between HMO and Department for medical services.

Signed:

FOR HMO:	/s/ Linda McKnew	FOR STATE:
TITLE:	Chief Operating Officer	TITLE:
DATE:	January 26, 2006	DATE:

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ADDENDUM I

MEMORANDA OF UNDERSTANDING

I. MOU Submission Requirements

The HMO must submit to the Department copies of new MOUs, or changes in existing MOUs for review and approval before they take effect. This requirement will be considered met if the Department has not responded within 15 business days after receipt of the MOU.

The HMO shall submit MOUs referred to in this Contract and this Addendum to the Department upon the Department’s request and during the certification process if required by the Department.

II. Emergency Services MOU or Contract

HMOs may have a contract or an MOU with hospitals or urgent care centers within the HMO’s service area(s) to ensure prompt and appropriate payment for emergency services.

A. The MOU Shall Provide For:

1. The process for determining whether an emergency exists.

2. The requirements and procedures for contacting the HMO before the provision of urgent or routine care.

3. Agreements, if any, between the HMO and the provider regarding indemnification, hold harmless, or any other deviation from malpractice or other legal liability which would attach to the HMO or provider in the absence of such an agreement.

4. Payments for an appropriate medical screening examination to determine whether or not an emergency medical condition exists.

5. Assurance of timely and appropriate provision of and payment for emergency services.

B. HMO’s Liability for Emergency Situations

Unless a contract or MOU specifies otherwise, HMOs are liable to the extent that FFS would have been liable for the emergency situation. The Department reserves the right to resolve disputes between HMOs, hospitals and urgent care centers regarding emergency situations based on FFS criteria.

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III. County and Other Human Service Agencies MOU or Contract Requirements for Services Ordered by the Courts

HMOs must make a “good faith” attempt to negotiate either an MOU or a contract with the county(ies) in their service area. See Article III, F, 11.

A. MOU Requirement with Boards Created Under §. 51.42, 51.437 or 46.23, Wis. Stats.

At a minimum the MOU must specify the conditions under which the HMO will either reimburse the Board(s) or another contract provider, or directly cover medical services, including, but not limited to, examinations ordered by a court, specified by the Board’s designated assessment agency in an enrollee’s driver safety plan as provided under HFS 62. It is the responsibility of both the HMO and the Board to ensure that courts order the use of the HMO’s providers. If the court orders a non-HMO source to provide the treatment or evaluation, the HMO is liable for the cost up to the full Medicaid rate if the HMO could not have provided the service through its own provider arrangements. If the service was such that the HMO could reasonably have been expected to provide it through its own provider arrangements, the HMO is not liable. Reasonable arrangements, in this situation, are certified providers with facilities and services to safely meet the medical and psychiatric needs of the recipient within a prompt and reasonable time frame. The MOU shall further specify reimbursement arrangements between the HMO and the Board’s provider for assessments performed by the Board’s designated assessment agency under HFS 62, Intoxicated Driver Program rules. The MOU shall also specify other reporting and referral relationships if required by the Board or the HMO.

B. MOU Requirement with the Department of Social Services (DSS) Created Under s. 46.21 or 46.22, Wis. Stats., or the Human Service Department Created Under s. 46.23, Wis. Stats.

At a minimum the MOU must specify that the HMO will reimburse the DSS or its provider if the HMO cannot provide the treatment, or will directly cover medical services including examinations and treatment which are ordered by a court. It is the responsibility of both the HMO and the DSS to ensure that courts order the use of the HMO’s providers. If the court orders a non-HMO source to provide the treatment or evaluation, the HMO is liable for the cost up to the full Medicaid rate if the HMO could not have provided the service through its own provider arrangements. If the service was such that the HMO could reasonably have been expected to provide it through its own provider arrangements, the HMO is not liable. The MOU will also specify the reporting and referral relationships for suspected cases of child abuse or neglect pursuant to s. 48.981, Wis. Stats. The MOU shall also specify a referral agreement for HMO enrollees who are physically disabled and who may be in need of Supportive Home Care or other programming provided or purchased by the county agency. The MOU may

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specify that evaluations for substitute care will be provided by a provider acceptable to both parties; the DSS may require in the MOU that the HMO specify expert providers acceptable to the DSS and the HMO in dealing with court-related children’s services, victims of child abuse and neglect, and domestic abuse.

HMOs and counties may develop alternative MOU language, if both parties agree. However, all elements defined above must be addressed in the MOU. As an alternative to an MOU, HMOs may enter into contracts with the counties. Any contracts the HMO enters into with the counties must be in compliance with Part A of this Addendum and would supersede any MOU requirements.

IV. Required MOUs or Contracts

A. Milwaukee County Common Carrier Transportation MOU

Refer to the sample Common Carrier Transportation MOU following this page.

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MEMORANDUM OF UNDERSTANDING

BETWEEN

MILWAUKEE COUNTY MEDICAID AND BADGERCARE HMOS

AND

MILWAUKEE COUNTY DEPARTMENT OF HUMAN SERVICES

All Milwaukee County Medicaid Health Maintenance Organizations (HMOs) will provide common carrier transportation for their Medicaid and BadgerCare enrollees. Transportation services will be limited to:

• Transportation of Medicaid and BadgerCare HMO members only.

• Transportation of Medicaid and BadgerCare HMO members to and from Medicaid covered services only.

The HMO is responsible for arranging for the common carrier transportation and providing monthly costs to the Milwaukee County Department of Human Services (DHS), of the common carrier transportation provided. Monthly costs will include the information specified in the attachment. The DHS is responsible for reimbursing the HMO for mileage and an administration fee.

The HMO and DHS agree to facilitate effective communication between agencies, work together to resolve inter-agency coordination and communication problems, and inform staff from both the HMO and DHS about the policies and procedures for this cooperation, coordination and communication.

This agreement becomes effective when both the HMO and DHS have signed.

Milwaukee County Department of Human Services	Milwaukee County Health Maintenance Organization
Signature	Signature
Title	Title
Date	Date

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Milwaukee County Medicaid/HMO Common Carrier Transportation

Monthly Invoice from HMO to County

(DATE)

Milwaukee County DHS

Financial Assistance Division Administrator

1220 West Vliet Street

Milwaukee, WI 53205

Dear Sir:

(HMO NAME)’s total transportation costs for the month of (MONTH, YEAR) was ($                    ). This amount includes transportation and administration fees.

Please remit the above dollar amount to:

(HMO NAME)

(AUTHORIZED INDIVIDUAL)

(ADDRESS)

Thank you.

Sincerely,

(NAME/HMO)

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B. Prenatal Care Coordination (PNCC) MOU

The HMO must sign an MOU with all agencies in the HMO service area that are Medicaid-certified prenatal care coordination agencies. The MOU will be effective on the effective date of the agency’s PNCC Wisconsin Medicaid certification or when both the HMO and the PNCC agency have signed it, whichever is later. In addition, if the PNCC wants to negotiate additional provisions in the MOU, the HMO must negotiate in good faith and document those negotiations. Such documentation must be available to the Department for review on request.

The main purpose of the MOU is to ensure coordination of care between the HMO, that provides medical services, and the Prenatal Care Coordinating Agency that provides outreach risk assessment, care planning, care coordination, and follow-up.

Refer to the sample PNCC MOU following this page.

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MODEL MEMORANDUM OF UNDERSTANDING

BETWEEN

HEALTH MAINTENANCE ORGANIZATION

AND

PRENATAL CARE COORDINATION AGENCY

Prenatal care coordination services are paid FFS by the Wisconsin Medicaid Program for all recipients, including those enrolled in HMOs. The prenatal care coordination agencies (PNCC) are responsible for services which include outreach, risk assessment, care planning, care coordination and follow-up support to high-risk pregnant women. The HMOs are responsible for providing and managing medically necessary services. The successful provision of services to individual enrollees requires cooperation, coordination and communication between the HMO and the PNCC.

The HMO and the PNCC agree to facilitate effective communication between agencies, work to resolve inter-agency coordination and communication problems, and inform staff from both the HMO and the PNCC about the policies and procedures for this cooperation, coordination and communication.

Recognizing that these “clients-in-common” are at high risk for poor birth outcomes, the HMO and the PNCC agree to cooperate in removing access barriers, coordinating care and providing culturally competent services.

This agreement becomes effective on the date the PNCC is certified by Wisconsin Medicaid or on the date when both the HMO and the PNCC have signed it, whichever is later. It may be terminated in writing with two weeks notice by either signer.

HMO	PNCC
Authorizing Signature	Authorizing Signature
Title	Title
Date	Date

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C. School-Based Services (SBS) MOU

The HMO must sign an MOU with all School-Based Services (SBS) providers in the HMO service area who are Medicaid-certified. The MOU will be effective on the date when both the HMO and the SBS provider have signed it or when the SBS provider is Medicaid-certified, whichever is later. Refer to Article III, C, 10, e and Article III, E, 13 that contain more information regarding SBS providers.

Refer to the sample SBS MOU following this page.

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MODEL MEMORANDUM OF UNDERSTANDING

BETWEEN

HEALTH MAINTENANCE ORGANIZATION

AND

SCHOOL DISTRICT OR CESA MEDICAID-CERTIFIED FOR THE SCHOOL BASED

SERVICES BENEFIT

School-based services are a benefit paid FFS by Wisconsin Medicaid for all school-enrolled recipients, including those enrolled in HMOs. The School-Based Service (SBS) provider is responsible for services provided in the schools such as occupational/physical/speech therapies, private duty or home care individualized nursing services, mental health services, testing services, school Individual Education Plan (IEP) services, and Individualized Family Service Program (IFSP) services. The HMOs are responsible for providing and managing medically necessary services outside of school settings. However, the schools cannot provide services in some situations, such as after school hours, during school vacations, and during the summer. Therefore, avoidance of duplication of services and promotion of continuity of care for Medicaid and BadgerCare HMO enrollees requires cooperation, coordination and communication between the HMO and the SBS provider.

The HMO and the SBS provider agree to facilitate effective communication between agencies, work to resolve inter-agency coordination and communication problems, and inform staff from both the HMO and the SBS provider about the policies and procedures for this cooperation, coordination and communication. Recognizing that these “clients-in-common” could receive duplicate services and could suffer from problems in continuity of care (e.g., when the school year ends in the middle of a series of treatments), the HMO and the SBS provider agree to cooperate in communicating information about the provision of services and in coordinating care.

This agreement becomes effective on the date when the SBS provider is certified by Wisconsin Medicaid or when both the HMO and the SBS provider have signed it, whichever is later. It may be terminated in writing with two weeks notice by either signer. The SBS provider is the School District or the CESA.

HMO	SBS Provider
Authorizing Signature	Authorizing Signature
Title	Title
Date	Date

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ADDENDUM II

STANDARD ENROLLEE HANDBOOK LANGUAGE

INTERPRETER SERVICES

English –	For help to translate or understand this, please call [1-800-xxx-xxxx] (TTY).
Spanish –	Si necesita ayuda para traducir o entender este texto, por favor llame al teléfono
	[1-800-xxx-xxxx] (TTY).
Russian –	[1-800-xxx-xxxx] (TTY).
Hmong –	Yog xav tau kev pab txhais cov ntaub ntawv no kom koj totaub, hu rau
	[1-800-xxx-xxxx] (TTY).
Laotian -	grnjv-j;p.odkocx s]ng0Qk.9goNvsk.ooUF dti5ok3mitla[sk
	[1-800-xxx-xxxx] (TTY).

Interpreter services are provided free of charge to you.

IMPORTANT [HMO NAME] PHONE NUMBERS

Customer Service	[1-800-xxx-xxxx]	[Hours/Days Available]
Emergency Number	[1-800-xxx-xxxx]	Call 24 hours a day, 7 days a week
TDD/TTY	[1-800-xxx-xxxx]

WELCOME

Welcome to [HMO NAME]. As a member of [HMO NAME], you will receive all your health care from [HMO NAME] doctors, hospitals, and pharmacies. See [HMO NAME] Provider Directory for a list of these providers. You may also call our Customer Service Department at [1-800-xxx-xxxx]. Providers not accepting new patients are marked in the Provider Directory.

YOUR FORWARD ID CARD

Always carry your Forward ID card with you, and show it every time you get care. You may have problems getting care or prescriptions if you do not have your card with you. Also bring any other health insurance cards you may have.

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PRIMARY CARE PHYSICIAN (PCP)

It is important to call your primary care physician (PCP) first when you need care. This doctor will manage all your health care. If you think you need to see another doctor, or a specialist, ask your PCP. Your PCP will help you decide if you need to see another doctor, and give you a referral. Remember, you must get approval from your PCP before you see another doctor.

You can choose your primary care physician (PCP) from those available (NOTE: For women you may also see a women’s health specialist (for example a OB/GYN doctor or a nurse midwife) without a referral, in addition to choosing your PCP). There are HMO doctors who are sensitive to the needs of many cultures. To choose a PCP, or to change to a different PCP, call our Customer Service Department at [1-800-xxx-xxxx].

EMERGENCY CARE

Emergency care is care needed right away. This may be caused by an injury or a sudden illness. Some examples are:

Choking	Severe or unusual bleeding
Trouble breathing	Suspected poisoning
Serious broken bones	Suspected heart attack
Unconsciousness	Suspected stroke
Severe burns	Convulsions
Severe pain	Prolonged or repeated seizures

If you need emergency care, go to a [HMO NAME] provider for help if you can. BUT, if the emergency is severe, go to the nearest provider (hospital, doctor or clinic). You may want to call 911 or your local police or fire department emergency services if the emergency is severe.

If you must go to a [non-HMO NAME] hospital or provider, call [HMO NAME] at [1-800-xxx-xxxx] as soon as you can and tell us what happened. This is important so we can help you get follow up care.

Remember, hospital emergency rooms are for true emergencies only. Call your doctor or our 24-hour emergency number at [1-800-xxx-xxxx] before you go to the emergency room, unless your emergency is severe.

URGENT CARE

Urgent Care is care you need sooner than a routine doctor’s visit. Urgent care is not emergency care. Do not go to a hospital emergency room for urgent care unless your doctor tells you to go there. Some examples of urgent care are:

Most broken bones	Minor cuts
Sprains	Bruises
Non-severe bleeding	Most drug reactions
Minor burns

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If you need urgent care, call [insert instructions here—call clinic, doctor, 24-hour number, nurse line, etc.] We will tell you where you can get care. You must get urgent care from [HMO NAME] doctors unless you get our approval to see a [non-HMO NAME] doctor.

Remember, do not go to a hospital emergency room for urgent care unless you get approval from [HMO NAME] first.

HOW TO GET MEDICAL CARE WHEN YOU ARE AWAY FROM HOME

Follow these rules if you need medical care but are too far away from home to go to your assigned primary care physician (PCP) or clinic.

For severe emergencies, go to the nearest hospital, clinic, or doctor.

For urgent or routine care away from home, you must get approval from us to go to a different doctor, clinic or hospital. This includes children who are spending time away from home with a parent or relative. Call us at [1-800-xxx-xxxx] for approval to go to a different doctor, clinic, or hospital.

PREGNANT WOMEN AND DELIVERIES

You must go to a [HMO NAME] hospital to have your baby. Talk to your [HMO NAME] doctor to make sure you understand which hospital you are to go to when it’s time to have your baby.

Also, talk to your doctor if you plan to travel in your last month of pregnancy. Because we want you to have a healthy birth and a good birthing experience, it may not be a good time for you and your unborn child to be traveling. We want you to have a healthy birth and your [HMO Name] doctor knows your history and is the best doctor to help you have a healthy birth. Do not go out of area to have your baby unless you have [HMO NAME] approval.

You may also wish to pick a doctor for your child before you give birth. We will be able to help you pick a doctor for your unborn child.

WHEN YOU MAY BE BILLED FOR SERVICES

It is very important to follow the rules when you get medical care so you are not billed for services. You must receive your care from [HMO NAME] providers, hospitals, and pharmacies unless you have our approval. The only exception is for severe emergencies.

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If you travel outside of Wisconsin and need emergency services, health care providers can treat you and send claims to [HMO NAME]. You will have to pay for any service you get outside Wisconsin if the health care provider refuses to submit claims or refuses to accept [HMO NAME’s] payment as payment in full.

[HMO NAME] does not cover any service, including emergency services, provided outside of the United States, Canada and Mexico.

IF YOU ARE BILLED

If you receive a bill for services, call our Customer Service Department at [1-800-xxx-xxxx]. You do not have to pay for covered services that are provided by a Wisconsin Medicaid certified provider and that [HMO NAME] is required to provide you.

OTHER INSURANCE

If you have other insurance in addition to [HMO NAME], you must tell your doctor or other provider. Your health care provider must bill your other insurance before billing [HMO NAME]. If your [HMO NAME] doctor does not accept your other insurance, call the HMO Enrollment Specialist at 1-800-291-2002. The Enrollment Specialist can tell you how to match your HMO enrollment with your other insurance so you can use both insurance plans.

SERVICES COVERED BY [HMO NAME]

[HMO NAME] provides all medically necessary covered services. Some services may require a doctor’s order or a prior authorization. Covered services include:

• Prescription drugs and certain over-the-counter drugs when ordered by a doctor.

• Services by doctors and nurses, including nurse practitioners and nurse midwives.

• Inpatient and outpatient hospital services.

• Laboratory and X-ray services.

• HealthCheck for members under 21 years of age, including referral for other medically necessary services.

• Certain podiatrists’ (foot doctors) services.

• Inpatient care at institutions for mental disease (care for persons 22-64 years of age is not included).

• Optometrists’ (eye doctors) or opticians’ services, including eyeglasses.

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• Mental health treatment.

• Substance abuse (drug and alcohol) services.

• Family planning services and supplies.

• Abortions when necessary to protect the health or life of the patient or when the pregnancy was the result of sexual assault or incest.

• The following services when a doctor gives a written order:

• Prostheses and other corrective support devices

• Hearing aids and other hearing services

• Home health care

• Personal care

• Independent nursing services

• Medical supplies and equipment

• Occupational therapy

• Physical therapy

• Speech therapy

• Respiratory therapy

• Nursing home services

• Medical Nutrition Counseling

• Hospice care

• Appropriate transportation to obtain medical care by ambulance or specialized medical vehicles

• Certain dental services (not all dental services are covered) [Eliminate if HMO does not provide dental].

• Certain chiropractic services [Eliminate if HMO does not provide chiropractic].

MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES

[HMO NAME] provides mental health and substance abuse (drug and alcohol) services to all enrollees. If you need these services, call [PCP, gatekeeper, Customer Service, as appropriate].

FAMILY PLANNING SERVICES

We provide confidential family planning services to all enrollees. This includes minors. If you do not want to talk to your primary care doctor about family planning, call our Customer Service Department at [1–800-xxx-xxx]. We will help you choose a [HMO NAME] family planning doctor who is different from your primary care doctor.

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You can also go to any family planning clinic that will accept your Forward ID card even if the clinic is not part of [HMO NAME]. But we encourage you to receive family planning services from a [HMO NAME] doctor. That way we can better coordinate all your health care.

DENTAL SERVICES

[Note to HMO: Use statement 1. if you provide dental services. Use statement 2. if you do not provide dental services. If you provide dental services in only part of your service area, use both statements and list the appropriate counties with each statement.]

1. [HMO NAME] provides all covered dental services. But you must go to a [HMO NAME] dentist. See the Provider Directory or call the Customer Service Department at [1-800-xxx-xxxx] for the names of our dentists.

2. You may get dental services from any dentist who will accept your Forward ID card. Your dental services are provided by the State, not [HMO NAME].

Dental Emergency:

A dental emergency is an immediate dental service needed to treat dental pain, swelling, fever, infection, or injury to the teeth.

WHAT TO DO IF YOU OR YOUR CHILD HAS A DENTAL EMERGENCY

1. If you already have a dentist who is with [HMO NAME]:

• Call the dentist’s office.

• Identify yourself or your child as having a dental emergency.

• Tell the dentist’s office what the exact dental problem is. This may be something like a toothache or swollen face. Make sure the office understands that you or your child is having a “dental emergency.”

• Call us if you need help with transportation to your dental appointment.

2. If you do not currently have a dentist who is with [HMO NAME]:

• Call {HMO specific dental gatekeeper or HMO}. Tell us that you/your child is having a dental emergency. We can help you get dental services.

• Tell us if you need a ride to the dentist’s office.

• Alternative language for HMO’s whose dental gatekeeper handles appointment for emergencies. Call [HMO NAME] if you need help with transportation to the dentist’s office. We can help with transportation.

For help with a dental emergency call [xxx-xxx-xxxx].

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CHIROPRACTIC SERVICES

[Note to HMO: Use statement 1 if you provide chiropractic services. Use statement 2 if you do not provide chiropractic services.]

1. [HMO NAME] provides covered chiropractic services. But you must go to a [HMO NAME] chiropractor. See the Provider Directory or call the Customer Service Department at [1-800-xxx-xxxx] for the names of our chiropractors.

2. You may get chiropractic services from any chiropractor who will accept your Forward ID card. Your chiropractic services are provided by the State, not [HMO NAME].

HEALTHCHECK

HealthCheck is a preventive health checkup program for members under the age of 21. The HealthCheck program covers complete health checkups. These checkups are very important for children’s health. Your child may look and feel well, yet may have a health problem. Your doctor wants to see your children for regular checkups, not just when they are sick.

The HealthCheck health program has three purposes:

1. To find and treat children’s health problems early,

2. To let you know about the special child health services you can receive, and

3. To make your children eligible for some health care not otherwise covered.

The HealthCheck program covers the care for any health problems found during the checkup including medical care, eye care and dental care.

The HealthCheck checkup includes:

• a health history

• physical exam

• developmental assessment

• hearing and vision test

• blood and urine lab tests

• complete immunizations (shots)

Children age three and older will be referred to a dentist. You will receive help in choosing and getting to a dentist.

[HMO NAME] will help arrange for transportation for HealthCheck visits. Call our Customer Service Department a [1-800-xxx-xxxx].

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Ask your child’s primary care doctor (PCP) when your child should have his/her next HealthCheck exam or call our Customer Service Department at [1-800-xxx-xxxx] for more information.

TRANSPORTATION

(Note to HMO: Use statement 1 if you arrange transportation for your enrollees. Use statement 2 if you do not arrange transportation for your enrollees. Use statement 3 if you arrange transportation in only part of your service area.)

1. Bus or taxi rides to receive care are arranged by [HMO NAME]. Call our Customer Service Department at [1-800-xxx-xxxx] if you need a ride.

2. Bus or taxi rides to receive care are arranged by your county Department of Social or Human Services Call them for information.

3. Bus or taxi rides to receive care are arranged by [HMO NAME] if you live in [INSERT COUNTIES]. Call our Customer Service Department at [1-800-xxx-xxxx] if you need a ride. If you live in a county that is not listed, please call your county Department of Social or Human Services for information about arranging a ride.

AMBULANCE

[HMO NAME] covers ambulance service for Emergency Care. We may also cover this service at other times, but you must have approval for all non-emergency ambulance trips. Call our Customer Service Department at [1-800-xxx-xxxx] for approval.

SPECIAL MEDICAL VEHICLE (SMV)

[HMO NAME] covers transportation by special vehicle for those in wheelchairs. We may also cover this service for others if your doctor asks for it. Call our Customer Service Department at [1-800-xxx-xxxx] if you need this service.

IF YOU MOVE

If you are planning to move, contact your county Department of Social or Human Services. If you move to a different county, you must also contact the Department of Social or Human Services in your new county to update your eligibility.

If you move out of [HMO NAME’S] service area, call the HMO Enrollment Specialist at 1-800 291-2002. [HMO NAME] will only provide emergency care if you move out of our service area. The Enrollment Specialist will help you choose an HMO that serves your area.

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HEALTH INSURANCE AFTER YOUR ELIGIBILITY ENDS

You have the right to purchase a private health insurance policy from [HMO NAME] when your eligibility ends. Call our Customer Service Department at [1-800-xxx-xxxx]. If you decide to purchase a policy from us, you have 30 days after the date your eligibility ends to apply.

SECOND MEDICAL OPINION

A second medical opinion on recommended surgeries may be appropriate in some cases. Contact your doctor or our Customer Service Department for information.

HMO EXEMPTIONS

An HMO exemption means you are not required to join an HMO to receive your health care benefits. Most exemptions are granted for only a short period of time so you can complete a course of treatment before you are enrolled in an HMO. If you think you need an exemption from HMO enrollment, call the HMO Enrollment Specialist at 1-800-291-2002 for more information.

LIVING WILL OR POWER OF ATTORNEY FOR HEALTH CARE

You have a right to make decisions about your medical care. You have a right to accept or refuse medical or surgical treatment. You also have the right to plan and direct the types of health care you may receive in the future if you become unable to express your wishes. You can let your doctor know about your feelings by completing a living will or power of attorney for health care form. Contact your doctor for more information.

RIGHT TO MEDICAL RECORDS

You have the right to ask for copies of your medical record from your provider(s). We can help you get copies of these records. Please call [1-800-xxx-xxxx] for help. Please note: You may have to pay to copy your medical record. You also may correct wrong information in your medical records if your doctor agrees to the correction.

[HMO NAME’S] MEMBER ADVOCATE

[HMO NAME] has a Member Advocate to help you get the care you need. The Advocate can answer your questions about getting health care from [HMO NAME]. The Advocate can also help you solve any problems you may have getting health care from [HMO NAME]. You can reach the Advocate at [1-800-xxx-xxxx].

STATE OF WISCONSIN HMO OMBUDSMAN PROGRAM

The State has Ombudsmen who can help you with any questions or problems you have as an HMO member. The Ombudsman can tell you how to get the care you need from your HMO.

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The Ombudsman can also help you solve problems or complaints you may have about the HMO Program or your HMO. Call 1-800-760-0001 and ask to speak to an Ombudsman.

COMPLAINTS, GRIEVANCES AND APPEALS

We would like to know if you have a complaint about your care at [HMO NAME]. Please call [HMO NAME’S] Member Advocate at [1-800-xxx-xxxx] if you have a complaint. Or you can write to us at:

[HMO name and mailing address]

If you want to talk to someone outside of [HMO NAME] about the problem, call the HMO Enrollment Specialist at 1-800-291-2002. The Enrollment Specialist may be able to help you solve the problem, or can help you write a formal grievance to [HMO NAME] or to the Wisconsin Managed Care Program. The address to complain to the Wisconsin Managed Care Program is:

Wisconsin Managed Care

Ombudsman

P. O. Box 6470

Madison, WI 53716-0470

1-800-760-0001

If your complaint or grievance needs action right away because a delay in treatment would greatly increase the risk to your health, please call [HMO NAME] as soon as possible at [1-800-xxx-xxxx].

We cannot treat you differently than other members because you file a complaint or grievance. Your health care benefits will not be affected.

You have the right to appeal to the State of Wisconsin Division of Hearings and Appeals (DHA) for a Fair Hearing if you believe your benefits are wrongly denied, limited, reduced, delayed or stopped by [HMO NAME]. An appeal must be made no later than 45 days after the date of the action being appealed. If you appeal this action to DHA before the effective date, the service may continue. You may need to pay for the cost of services if the hearing decision is not in your favor.

If you want a Fair Hearing, send a written request to:

Department of Administration

Division of Hearings and Appeals

P. O. Box 7875

Madison, WI 53707-7875

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The hearing will be held in the county where you live. You have the right to bring a friend or be represented at the hearing. If you need a special arrangement for a disability, or for English language translation, please call (608) 266-3096 (voice) or (608) 264-9853 (hearing impaired).

We cannot treat you differently than other members because you request a Fair Hearing. Your health care benefits will not be affected.

If you need help writing a request for a Fair Hearing, please call:

Wisconsin Managed Care Ombudsman	1-800-760-0001
or
HMO Enrollment Specialist	1-800-291-2002

PHYSICIAN INCENTIVE PLAN

You are entitled to ask if we have special financial arrangements with our physicians that can affect the use of referrals and other services you might need. To get this information, call our Customer Service Department at [1-800-xxx-xxxx] and request information about our physician payment arrangements.

PROVIDER CREDENTIALS

You have the right to information about our providers that includes the provider’s education, board certification and recertification. To get this information, call our Customer Service Department at [1-800-xxx-xxxx].

MEMBER RIGHTS

You have the right to ask for an interpreter and have one provided to you during any Medicaid/BadgerCare covered service.

You have the right to receive the information provided in this member handbook in another language or another format.

You have the right to receive health care services as provided for in federal and state law. All covered services must be available and accessible to you. When medically appropriate, services must be available 24 hours a day, 7 days a week.

You have the right to receive information about treatment options including the right to request a second opinion.

You have the right to make decisions about your health care.

You have the right to be treated with dignity and respect.

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You have the right to be free from any form of restraint or seclusion used as a means of force, control, ease or reprisal.

YOUR CIVIL RIGHTS

[HMO NAME] provides covered services to all eligible members regardless of:

• Age

• Race

• Religion

• Color

• Disability

• Sex

• Sexual Orientation

• National Origin

• Marital Status

• Arrest or Conviction Record

• Military Participation

All medically necessary covered services are available to all members.

All services are provided in the same manner to all members.

All persons or organizations connected with [HMO Name] who refer or recommend members for services shall do so in the same manner for all members.

Translating or interpreting services are available for those members who need them. This service is free.

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Addendum III-A:

CY 2006 Final AFDC/HS Children Capitation Rates by Age/Gender & Rate Region

effective February 1st, 2006

All services Capitation Rate by Age/Gender and Rate Region
	Rate Region > Age Code	1		2		3		4		5		6		7		8		9		40		13		18		30		67
Age Range		Duluth/ Sup		Wausau/ Rldr		Green Bay		Twin Cities		Mfld/St Pt		Appleton/Osh		La Crosse		Madison		SE Wis		Milw Co		Dane Co		Eau Claire Co		Kenosha Co		Wauk Co
< 1	A	$	355.57	$	346.13	$	350.31	$	377.12	$	341.95	$	315.89	$	308.96	$	334.32	$	318.73	$	339.42	$	307.77	$	317.48	$	379.57	$	348.18
01-05	B	$	76.91	$	74.64	$	75.32	$	80.73	$	75.02	$	68.64	$	67.05	$	72.35	$	68.53	$	72.56	$	66.30	$	68.38	$	81.20	$	73.52
06-14	C	$	65.72	$	63.60	$	64.01	$	68.36	$	64.89	$	58.86	$	57.45	$	61.83	$	58.22	$	61.31	$	56.43	$	58.24	$	68.68	$	61.46
15-20F	E	$	235.19	$	228.69	$	230.86	$	248.73	$	228.25	$	209.50	$	204.95	$	221.12	$	209.84	$	222.45	$	202.93	$	210.64	$	249.05	$	227.01
15-20M	D	$	90.55	$	87.88	$	88.44	$	95.19	$	88.97	$	80.96	$	79.19	$	85.14	$	80.32	$	84.65	$	77.81	$	81.19	$	94.88	$	85.63
21-34F	G	$	340.67	$	331.54	$	334.62	$	361.39	$	330.27	$	303.33	$	296.96	$	320.25	$	303.99	$	322.25	$	293.96	$	306.27	$	360.90	$	329.65
21-34M	F	$	196.57	$	191.29	$	192.85	$	208.65	$	191.15	$	175.17	$	171.57	$	184.75	$	175.08	$	185.22	$	169.40	$	177.33	$	207.58	$	189.36
35+F	I	$	415.78	$	404.79	$	408.40	$	441.89	$	403.13	$	370.20	$	362.59	$	390.80	$	370.85	$	392.92	$	358.67	$	374.88	$	440.20	$	402.44
35+M	H	$	328.48	$	319.75	$	322.58	$	348.94	$	318.66	$	292.52	$	286.49	$	308.74	$	292.92	$	310.28	$	283.33	$	296.09	$	347.63	$	317.63
Dental No Chiropractic Service Capitation Rate by Age/Gender and Rate Region
	Rate Region > Age Code	1		2		3		4		5		6		7		8		9		40		13		18		30		67
Age Range		Duluth/ Sup		Wausau/ Rldr		Green Bay		Twin Cities		Mfld/St Pt		Appleton/Osh		La Crosse		Madison		SE Wis		Milw Co		Dane Co		Eau Claire Co		Kenosha Co		Wauk Co
< 1	A	$	355.17	$	345.67	$	349.97	$	376.32	$	341.38	$	315.50	$	308.48	$	333.98	$	318.53	$	339.39	$	307.53	$	316.50	$	379.43	$	347.98
01-05	B	$	76.50	$	74.17	$	74.97	$	79.91	$	74.43	$	68.24	$	66.56	$	72.00	$	68.32	$	72.52	$	66.05	$	67.38	$	81.06	$	73.31
06-14	C	$	65.10	$	62.89	$	63.49	$	67.13	$	64.01	$	58.26	$	56.71	$	61.30	$	57.91	$	61.26	$	56.06	$	56.73	$	68.46	$	61.15
15-20F	E	$	233.67	$	226.94	$	229.57	$	245.70	$	226.07	$	208.02	$	203.12	$	219.81	$	209.08	$	222.32	$	202.01	$	206.91	$	248.52	$	226.25
15-20M	D	$	89.44	$	86.60	$	87.49	$	92.97	$	87.37	$	79.87	$	77.85	$	84.18	$	79.76	$	84.55	$	77.14	$	78.46	$	94.49	$	85.07
21-34F	G	$	338.06	$	328.53	$	332.40	$	356.18	$	326.52	$	300.78	$	293.82	$	318.00	$	302.68	$	322.02	$	292.38	$	299.86	$	359.98	$	328.34
21-34M	F	$	194.49	$	188.89	$	191.08	$	204.50	$	188.17	$	173.14	$	169.07	$	182.96	$	174.03	$	185.04	$	168.14	$	172.22	$	206.85	$	188.31
35+F	I	$	412.01	$	400.45	$	405.20	$	434.36	$	397.72	$	366.52	$	358.06	$	387.55	$	368.95	$	392.59	$	356.39	$	365.63	$	438.87	$	400.55
35+M	H	$	325.47	$	316.28	$	320.02	$	342.93	$	314.34	$	289.58	$	282.87	$	306.15	$	291.40	$	310.02	$	281.50	$	288.69	$	346.57	$	316.12
Chiropractic No Dental Service Capitation Rate by Age/Gender and Rate Region
	Rate Region > Age Code	1		2		3		4		5		6		7		8		9		40		13		18		30		67
Age Range		Duluth/ Sup		Wausau/ Rldr		Green Bay		Twin Cities		Mfld/St Pt		Appleton/Osh		La Crosse		Madison		SE Wis		Milw Co		Dane Co		Eau Claire Co		Kenosha Co		Wauk Co
< 1	A	$	355.54	$	346.10	$	350.28	$	377.09	$	341.91	$	315.86	$	308.93	$	334.29	$	318.70	$	339.39	$	307.74	$	317.45	$	379.54	$	348.16
01-05	B	$	72.06	$	70.21	$	70.95	$	76.74	$	69.46	$	64.05	$	62.72	$	67.73	$	64.47	$	68.51	$	62.29	$	64.85	$	76.69	$	70.41
06-14	C	$	57.93	$	56.48	$	56.99	$	61.95	$	55.96	$	51.50	$	50.51	$	54.42	$	51.70	$	54.81	$	49.99	$	52.58	$	61.44	$	56.46
15-20F	E	$	227.21	$	221.40	$	223.67	$	242.16	$	219.10	$	201.96	$	197.84	$	213.53	$	203.16	$	215.79	$	196.33	$	204.84	$	241.64	$	221.89
15-20M	D	$	82.99	$	80.97	$	81.63	$	88.97	$	80.30	$	73.82	$	72.45	$	77.95	$	73.99	$	78.34	$	71.56	$	75.69	$	87.86	$	80.78
21-34F	G	$	332.12	$	323.72	$	326.91	$	354.35	$	320.46	$	295.25	$	289.33	$	312.11	$	296.83	$	315.11	$	286.89	$	300.05	$	352.95	$	324.16
21-34M	F	$	189.92	$	185.21	$	186.85	$	203.17	$	183.52	$	168.88	$	165.64	$	178.42	$	169.51	$	179.67	$	163.90	$	172.49	$	201.40	$	185.09
35+F	I	$	406.50	$	396.30	$	400.03	$	434.25	$	392.49	$	361.42	$	354.31	$	381.96	$	363.08	$	385.17	$	350.99	$	368.13	$	431.57	$	396.48
35+M	H	$	320.30	$	312.27	$	315.20	$	342.20	$	309.28	$	284.78	$	279.19	$	300.95	$	286.07	$	303.45	$	276.56	$	290.14	$	340.02	$	312.38
No Chiropractic & No Dental Service Capitation Rate by Age/Gender and Rate Region
	Rate Region > Age Code	1		2		3		4		5		6		7		8		9		40		13		18		30		67
Age Range		Duluth/ Sup		Wausau/ Rldr		Green Bay		Twin Cities		Mfld/St Pt		Appleton/Osh		La Crosse		Madison		SE Wis		Milw Co		Dane Co		Eau Claire Co		Kenosha Co		Wauk Co
< 1	A	$	355.14	$	345.64	$	349.94	$	376.29	$	341.34	$	315.47	$	308.45	$	333.95	$	318.50	$	339.36	$	307.50	$	316.47	$	379.40	$	347.96
01-05	B	$	71.65	$	69.74	$	70.60	$	75.92	$	68.87	$	63.65	$	62.23	$	67.38	$	64.26	$	68.47	$	62.04	$	63.85	$	76.55	$	70.20
06-14	C	$	57.31	$	55.77	$	56.47	$	60.72	$	55.08	$	50.90	$	49.77	$	53.89	$	51.39	$	54.76	$	49.62	$	51.07	$	61.22	$	56.15
15-20F	E	$	225.69	$	219.65	$	222.38	$	239.13	$	216.92	$	200.48	$	196.01	$	212.22	$	202.40	$	215.66	$	195.41	$	201.11	$	241.11	$	221.13
15-20M	D	$	81.88	$	79.69	$	80.68	$	86.75	$	78.70	$	72.73	$	71.11	$	76.99	$	73.43	$	78.24	$	70.89	$	72.96	$	87.47	$	80.22
21-34F	G	$	329.51	$	320.71	$	324.69	$	349.14	$	316.71	$	292.70	$	286.19	$	309.86	$	295.52	$	314.88	$	285.31	$	293.64	$	352.03	$	322.85
21-34M	F	$	187.84	$	182.81	$	185.08	$	199.02	$	180.54	$	166.85	$	163.14	$	176.63	$	168.46	$	179.49	$	162.64	$	167.38	$	200.67	$	184.04
35+F	I	$	402.73	$	391.96	$	396.83	$	426.72	$	387.08	$	357.74	$	349.78	$	378.71	$	361.18	$	384.84	$	348.71	$	358.88	$	430.24	$	394.59
35+M	H	$	317.29	$	308.80	$	312.64	$	336.19	$	304.96	$	281.84	$	275.57	$	298.36	$	284.55	$	303.19	$	274.73	$	282.74	$	338.96	$	310.87

Addendum III - A

CY 2006 BadgerCare Capitation Rates - by Age and Gender

Effective February 1st, 2006

2006 BadgerCare Rates - Applies to medical status codes B1,B2,B3,B4,B5,B6,GP All Services
Age Range	Gender	Duluth/ Superior 1		Wausau/ Rhinelander 2		Green Bay 3		Twin Cities 4		Marshfield/ Stevens Point 5		Appleton/ Oshkosh 6		La Crosse 7		Madison 8		Southeast Wisconsin 9		Milwaukee 10		Dane 11		Eau Claire 12		Kenosha 13		Waukesha 14
Age 0	All	$	355.57	$	346.13	$	350.31	$	377.12	$	341.95	$	315.89	$	308.96	$	334.32	$	318.73	$	339.42	$	307.77	$	317.48	$	379.57	$	348.18
Age 1-14	All	$	66.85	$	63.84	$	64.96	$	66.59	$	62.26	$	62.78	$	51.52	$	68.56	$	64.22	$	62.38	$	58.76	$	57.70	$	71.58	$	65.49
Age 15-20	F	$	139.00	$	135.15	$	136.34	$	140.78	$	128.52	$	129.52	$	107.13	$	143.12	$	134.61	$	128.35	$	124.69	$	122.04	$	147.57	$	138.27
Age 15-20	M	$	100.82	$	97.43	$	98.58	$	101.52	$	93.43	$	94.18	$	77.69	$	103.67	$	97.38	$	93.45	$	89.85	$	88.00	$	107.36	$	99.80
Age 21-34	F	$	212.16	$	207.82	$	209.08	$	216.16	$	194.80	$	196.77	$	163.16	$	218.74	$	206.50	$	195.35	$	192.41	$	187.49	$	224.50	$	212.95
Age 21-34	M	$	123.26	$	120.65	$	121.28	$	125.68	$	114.02	$	114.66	$	95.16	$	127.15	$	119.61	$	113.26	$	111.22	$	108.93	$	130.42	$	123.07
Age 35-44	F	$	275.02	$	270.03	$	271.40	$	280.78	$	252.17	$	254.77	$	211.46	$	283.68	$	268.02	$	252.94	$	250.16	$	243.56	$	290.70	$	276.69
Age 35-44	M	$	192.68	$	189.12	$	190.05	$	196.72	$	177.01	$	178.64	$	148.29	$	198.77	$	187.62	$	177.14	$	175.01	$	170.61	$	203.68	$	193.56
Age 45+	F	$	356.39	$	349.91	$	351.78	$	363.75	$	326.30	$	329.97	$	273.81	$	367.56	$	347.50	$	327.97	$	324.44	$	315.57	$	376.74	$	358.90
Age 45+	M	$	313.46	$	307.29	$	309.31	$	319.27	$	286.31	$	290.10	$	240.42	$	323.09	$	305.78	$	289.05	$	285.40	$	277.08	$	331.67	$	315.91
BadgerCare Rates - Applies to medical status codes B1,B2,B3,B4,B5,B6,GP Dental Services - No Chiropractic
Age Range	Gender	Duluth/ Superior 1		Wausau/ Rhinelander 2		Green Bay 3		Twin Cities 4		Marshfield/ Stevens Point 5		Appleton/ Oshkosh 6		La Crosse 7		Madison 8		Southeast Wisconsin 9		Milwaukee 10		Dane 11		Eau Claire 12		Kenosha 13		Waukesha 14
Age 0	All	$	355.17	$	345.67	$	349.97	$	376.32	$	341.38	$	315.50	$	308.48	$	333.98	$	318.53	$	339.39	$	307.53	$	316.50	$	379.43	$	347.98
Age 1-14	All	$	66.17	$	62.74	$	64.20	$	65.31	$	61.02	$	62.02	$	50.64	$	67.68	$	63.67	$	62.27	$	58.16	$	56.66	$	71.13	$	65.00
Age 15-20	F	$	137.16	$	132.19	$	134.31	$	137.34	$	125.18	$	127.49	$	104.76	$	140.75	$	133.14	$	128.05	$	123.09	$	119.25	$	146.35	$	136.96
Age 15-20	M	$	99.62	$	95.49	$	97.25	$	99.27	$	91.24	$	92.85	$	76.14	$	102.12	$	96.42	$	93.25	$	88.80	$	86.18	$	106.56	$	98.94
Age 21-34	F	$	209.70	$	203.86	$	206.36	$	211.56	$	190.33	$	194.05	$	159.99	$	215.56	$	204.53	$	194.95	$	190.27	$	183.76	$	222.87	$	211.20
Age 21-34	M	$	121.23	$	117.38	$	119.03	$	121.88	$	110.32	$	112.41	$	92.54	$	124.52	$	117.99	$	112.93	$	109.45	$	105.85	$	129.08	$	121.62
Age 35-44	F	$	271.82	$	264.88	$	267.86	$	274.80	$	246.35	$	251.23	$	207.33	$	279.55	$	265.46	$	252.42	$	247.37	$	238.71	$	288.58	$	274.41
Age 35-44	M	$	190.21	$	185.15	$	187.32	$	192.11	$	172.52	$	175.91	$	145.11	$	195.59	$	185.65	$	176.74	$	172.86	$	166.87	$	202.05	$	191.81
Age 45+	F	$	352.61	$	343.83	$	347.60	$	356.69	$	319.43	$	325.79	$	268.94	$	362.68	$	344.48	$	327.35	$	321.15	$	309.85	$	374.24	$	356.21
Age 45+	M	$	310.91	$	303.18	$	306.49	$	314.50	$	281.66	$	287.27	$	237.13	$	319.79	$	303.74	$	288.63	$	283.18	$	273.21	$	329.98	$	314.09
BadgerCare Rates - Applies to medical status codes B1,B2,B3,B4,B5,B6,GP Chiropractic Services - No Dental
Age Range	Gender	Duluth/ Superior 1		Wausau/ Rhinelander 2		Green Bay 3		Twin Cities 4		Marshfield/ Stevens Point 5		Appleton/ Oshkosh 6		La Crosse 7		Madison 8		Southeast Wisconsin 9		Milwaukee 10		Dane 11		Eau Claire 12		Kenosha 13		Waukesha 14
Age 0	All	$	355.54	$	346.10	$	350.28	$	377.09	$	341.91	$	315.86	$	308.93	$	334.29	$	318.70	$	339.39	$	307.74	$	317.45	$	379.54	$	348.16
Age 1-14	All	$	57.52	$	56.92	$	57.02	$	59.13	$	52.50	$	53.09	$	44.20	$	59.43	$	56.30	$	52.70	$	52.83	$	51.31	$	60.59	$	58.31
Age 15-20	F	$	128.63	$	127.46	$	127.52	$	132.49	$	117.68	$	118.75	$	98.99	$	132.97	$	125.81	$	117.60	$	118.10	$	114.93	$	135.36	$	130.29
Age 15-20	M	$	91.13	$	90.25	$	90.34	$	93.78	$	83.30	$	84.12	$	70.09	$	94.19	$	89.16	$	83.40	$	83.69	$	81.36	$	95.95	$	92.35
Age 21-34	F	$	203.63	$	201.50	$	201.83	$	209.35	$	185.89	$	187.92	$	156.47	$	210.39	$	199.26	$	186.51	$	186.99	$	181.65	$	214.46	$	206.39
Age 21-34	M	$	116.37	$	115.55	$	115.42	$	120.18	$	106.82	$	107.51	$	89.76	$	120.41	$	113.76	$	106.12	$	106.84	$	104.21	$	122.31	$	117.77
Age 35-44	F	$	266.55	$	263.76	$	264.20	$	274.02	$	243.32	$	245.98	$	204.82	$	275.39	$	260.83	$	244.16	$	244.78	$	237.76	$	280.73	$	270.18
Age 35-44	M	$	185.86	$	184.06	$	184.25	$	191.27	$	169.88	$	171.56	$	142.94	$	192.09	$	181.83	$	170.07	$	170.67	$	165.94	$	195.65	$	188.31
Age 45+	F	$	346.33	$	342.46	$	343.23	$	355.71	$	315.79	$	319.53	$	265.92	$	357.72	$	338.96	$	317.54	$	318.05	$	308.68	$	364.90	$	351.16
Age 45+	M	$	304.60	$	300.72	$	301.78	$	312.19	$	277.05	$	280.90	$	233.47	$	314.42	$	298.26	$	279.86	$	279.77	$	271.01	$	321.24	$	309.09
BadgerCare Rates - Applies to medical status codes B1,B2,B3,B4,B5,B6,GP No Dental or Chiropractic
Age Range	Gender	Duluth/ Superior 1		Wausau/ Rhinelander 2		Green Bay 3		Twin Cities 4		Marshfield/ Stevens Point 5		Appleton/ Oshkosh 6		La Crosse 7		Madison 8		Southeast Wisconsin 9		Milwaukee 10		Dane 11		Eau Claire 12		Kenosha 13		Waukesha 14
Age 0	All	$	355.14	$	345.64	$	349.94	$	376.29	$	341.34	$	315.47	$	308.45	$	333.95	$	318.50	$	339.36	$	307.50	$	316.47	$	379.40	$	347.96
Age 1-14	All	$	56.84	$	55.82	$	56.26	$	57.85	$	51.26	$	52.33	$	43.32	$	58.55	$	55.75	$	52.59	$	52.23	$	50.27	$	60.14	$	57.82
Age 15-20	F	$	126.79	$	124.50	$	125.49	$	129.05	$	114.34	$	116.72	$	96.62	$	130.60	$	124.34	$	117.30	$	116.50	$	112.14	$	134.14	$	128.98
Age 15-20	M	$	89.93	$	88.31	$	89.01	$	91.53	$	81.11	$	82.79	$	68.54	$	92.64	$	88.20	$	83.20	$	82.64	$	79.54	$	95.15	$	91.49
Age 21-34	F	$	201.17	$	197.54	$	199.11	$	204.75	$	181.42	$	185.20	$	153.30	$	207.21	$	197.29	$	186.11	$	184.85	$	177.92	$	212.83	$	204.64
Age 21-34	M	$	114.34	$	112.28	$	113.17	$	116.38	$	103.12	$	105.26	$	87.14	$	117.78	$	112.14	$	105.79	$	105.07	$	101.13	$	120.97	$	116.32
Age 35-44	F	$	263.35	$	258.61	$	260.66	$	268.04	$	237.50	$	242.44	$	200.69	$	271.26	$	258.27	$	243.64	$	241.99	$	232.91	$	278.61	$	267.90
Age 35-44	M	$	183.39	$	180.09	$	181.52	$	186.66	$	165.39	$	168.83	$	139.76	$	188.91	$	179.86	$	169.67	$	168.52	$	162.20	$	194.02	$	186.56
Age 45+	F	$	342.55	$	336.38	$	339.05	$	348.65	$	308.92	$	315.35	$	261.05	$	352.84	$	335.94	$	316.92	$	314.76	$	302.96	$	362.40	$	348.47
Age 45+	M	$	302.05	$	296.61	$	298.96	$	307.42	$	272.40	$	278.07	$	230.18	$	311.12	$	296.22	$	279.44	$	277.55	$	267.14	$	319.55	$	307.27

ADDENDUM III - A:

CY 2006 Healthy Start Pregnant Women Capitation Rates by Rate Region and Service

effective February 1st, 2006

2006 HSPW RATES

	1		2		3		4		5		6		7		8		9		10		11		12		13		14
	Duluth/ Superior		Wausau/ Rhinelander		Green Bay		Twin Cities		Marshfield/ Stevens Point		Appleton/ Oshkosh		La Crosse		Madison		Southeast Wisconsin		Milwaukee		Dane		Eau Claire		Kenosha		Waukesha
All Services	$	639.61	$	599.26	$	599.54	$	690.68	$	626.57	$	590.99	$	597.21	$	660.79	$	612.54	$	750.10	$	669.84	$	721.56	$	678.93	$	627.14
Dental, No Chiro	$	637.68	$	596.37	$	598.16	$	687.68	$	623.00	$	588.83	$	594.90	$	658.61	$	611.16	$	749.81	$	668.55	$	717.77	$	678.26	$	626.26
Chiro, No Dental	$	636.78	$	597.20	$	597.31	$	687.66	$	623.30	$	587.36	$	594.95	$	657.64	$	609.96	$	745.55	$	666.72	$	719.61	$	673.64	$	624.89
No Dental or Chiro	$	634.85	$	594.31	$	595.93	$	684.66	$	619.73	$	585.20	$	592.64	$	655.46	$	608.58	$	745.26	$	665.43	$	715.82	$	672.97	$	624.01
2006 Rates by service and Rate Region
All Services	$	639.61	$	599.26	$	599.54	$	690.68	$	626.57	$	590.99	$	597.21	$	660.79	$	612.54	$	750.10	$	669.84	$	721.56	$	678.93	$	627.14
Medical	$	634.85	$	594.31	$	595.93	$	684.66	$	619.73	$	585.20	$	592.64	$	655.46	$	608.58	$	745.26	$	665.43	$	715.82	$	672.97	$	624.01
Dental	$	2.83	$	2.06	$	2.23	$	3.02	$	3.27	$	3.63	$	2.26	$	3.15	$	2.58	$	4.55	$	3.12	$	1.95	$	5.29	$	2.25
Chiro	$	1.93	$	2.89	$	1.38	$	3.00	$	3.57	$	2.16	$	2.31	$	2.18	$	1.38	$	0.29	$	1.29	$	3.79	$	0.67	$	0.88

Addendum III - B:

CY 2006 AFDC/HS Children Capitation Rates By Service Category

2006 Capitation - Medical Only

Age Range	Age Code	1		2		3		4		5		6		7		8		9		40		13		18		30		67
		Duluth/Sup		Wausau/Rldr		Green Bay		Twin Cities		Mfld/St Pt		Appleton/Osh		La Crosse		Madison		SE Wis		Milw Co		Dane Co		Eau Claire Co		Kenosha Co		Wauk Co
< 1	A	$	355.14	$	345.64	$	349.94	$	376.29	$	341.34	$	315.47	$	308.45	$	333.95	$	318.50	$	339.36	$	307.50	$	316.47	$	379.40	$	347.96
01-05	B	$	71.65	$	69.74	$	70.60	$	75.92	$	68.87	$	63.65	$	62.23	$	67.38	$	64.26	$	68.47	$	62.04	$	63.85	$	76.55	$	70.20
06-14	C	$	57.31	$	55.77	$	56.47	$	60.72	$	55.08	$	50.90	$	49.77	$	53.89	$	51.39	$	54.76	$	49.62	$	51.07	$	61.22	$	56.15
15-20F	E	$	225.69	$	219.65	$	222.38	$	239.13	$	216.92	$	200.48	$	196.01	$	212.22	$	202.40	$	215.66	$	195.41	$	201.11	$	241.11	$	221.13
15-20M	D	$	81.88	$	79.69	$	80.68	$	86.75	$	78.70	$	72.73	$	71.11	$	76.99	$	73.43	$	78.24	$	70.89	$	72.96	$	87.47	$	80.22
21-34F	G	$	329.51	$	320.71	$	324.69	$	349.14	$	316.71	$	292.70	$	286.19	$	309.86	$	295.52	$	314.88	$	285.31	$	293.64	$	352.03	$	322.85
21-34M	F	$	187.84	$	182.81	$	185.08	$	199.02	$	180.54	$	166.85	$	163.14	$	176.63	$	168.46	$	179.49	$	162.64	$	167.38	$	200.67	$	184.04
35+F	I	$	402.73	$	391.96	$	396.83	$	426.72	$	387.08	$	357.74	$	349.78	$	378.71	$	361.18	$	384.84	$	348.71	$	358.88	$	430.24	$	394.59
35+M	H	$	317.29	$	308.80	$	312.64	$	336.19	$	304.96	$	281.84	$	275.57	$	298.36	$	284.55	$	303.19	$	274.73	$	282.74	$	338.96	$	310.87
2006 Capitation - Dental Only
Age Range	Age Code	1		2		3		4		5		6		7		8		9		40		13		18		30		67
		Duluth/Sup		Wausau/Rldr		Green Bay		Twin Cities		Mfld/St Pt		Appleton/Osh		La Crosse		Madison		SE Wis		Milw Co		Dane Co		Eau Claire Co		Kenosha Co		Wauk Co
< 1	A	$	0.03	$	0.03	$	0.03	$	0.03	$	0.04	$	0.03	$	0.03	$	0.03	$	0.03	$	0.03	$	0.03	$	0.03	$	0.03	$	0.02
01-05	B	$	4.85	$	4.43	$	4.37	$	3.99	$	5.56	$	4.59	$	4.33	$	4.62	$	4.06	$	4.05	$	4.01	$	3.53	$	4.51	$	3.11
06-14	C	$	7.79	$	7.12	$	7.02	$	6.41	$	8.93	$	7.36	$	6.94	$	7.41	$	6.52	$	6.50	$	6.44	$	5.66	$	7.24	$	5.00
15-20F	E	$	7.98	$	7.29	$	7.19	$	6.57	$	9.15	$	7.54	$	7.11	$	7.59	$	6.68	$	6.66	$	6.60	$	5.80	$	7.41	$	5.12
15-20M	D	$	7.56	$	6.91	$	6.81	$	6.22	$	8.67	$	7.14	$	6.74	$	7.19	$	6.33	$	6.31	$	6.25	$	5.50	$	7.02	$	4.85
21-34F	G	$	8.55	$	7.82	$	7.71	$	7.04	$	9.81	$	8.08	$	7.63	$	8.14	$	7.16	$	7.14	$	7.07	$	6.22	$	7.95	$	5.49
21-34M	F	$	6.65	$	6.08	$	6.00	$	5.48	$	7.63	$	6.29	$	5.93	$	6.33	$	5.57	$	5.55	$	5.50	$	4.84	$	6.18	$	4.27
35+F	I	$	9.28	$	8.49	$	8.37	$	7.64	$	10.64	$	8.78	$	8.28	$	8.84	$	7.77	$	7.75	$	7.68	$	6.75	$	8.63	$	5.96
35+M	H	$	8.18	$	7.48	$	7.38	$	6.74	$	9.38	$	7.74	$	7.30	$	7.79	$	6.85	$	6.83	$	6.77	$	5.95	$	7.61	$	5.25
2006 Capitation - Chiropractic Only
		1		2		3		4		5		6		7		8		9		40		13		18		30		67
Age Range	Age Code	Duluth/Sup		Wausau/Rldr		Green Bay		Twin Cities		Mfld/St Pt		Appleton/Osh		La Crosse		Madison		SE Wis		Milw Co		Dane Co		Eau Claire Co		Kenosha Co		Wauk Co
< 1	A	$	0.40	$	0.46	$	0.34	$	0.80	$	0.57	$	0.39	$	0.48	$	0.34	$	0.20	$	0.03	$	0.24	$	0.98	$	0.14	$	0.20
01-05	B	$	0.41	$	0.47	$	0.35	$	0.82	$	0.59	$	0.40	$	0.49	$	0.35	$	0.21	$	0.04	$	0.25	$	1.00	$	0.14	$	0.21
06-14	C	$	0.62	$	0.71	$	0.52	$	1.23	$	0.88	$	0.60	$	0.74	$	0.53	$	0.31	$	0.05	$	0.37	$	1.51	$	0.22	$	0.31
15-20F	E	$	1.52	$	1.75	$	1.29	$	3.03	$	2.18	$	1.48	$	1.83	$	1.31	$	0.76	$	0.13	$	0.92	$	3.73	$	0.53	$	0.76
15-20M	D	$	1.11	$	1.28	$	0.95	$	2.22	$	1.60	$	1.09	$	1.34	$	0.96	$	0.56	$	0.10	$	0.67	$	2.73	$	0.39	$	0.56
21-34F	G	$	2.61	$	3.01	$	2.22	$	5.21	$	3.75	$	2.55	$	3.14	$	2.25	$	1.31	$	0.23	$	1.58	$	6.41	$	0.92	$	1.31
21-34M	F	$	2.08	$	2.40	$	1.77	$	4.15	$	2.98	$	2.03	$	2.50	$	1.79	$	1.05	$	0.18	$	1.26	$	5.11	$	0.73	$	1.05
35+F	I	$	3.77	$	4.34	$	3.20	$	7.53	$	5.41	$	3.68	$	4.53	$	3.25	$	1.90	$	0.33	$	2.28	$	9.25	$	1.33	$	1.89
35+M	H	$	3.01	$	3.47	$	2.56	$	6.01	$	4.32	$	2.94	$	3.62	$	2.59	$	1.52	$	0.26	$	1.83	$	7.40	$	1.06	$	1.51

Addendum III - B:

CY 2006 BadgerCare Capitation Rates By Service Category

BadgerCare Rates

Medical Capitation Rates by Service Category - Medical Costs

Age Range	Gender	Duluth/ Superior 1		Wausau/ Rhinelander 2		Green Bay 3		Twin Cities 4		Marshfield/ Stevens Point 5		Appleton/ Oshkosh 6		La Crosse 7		Madison 8		Southeast Wisconsin 9		Milwaukee 10		Dane 11		Eau Claire 12		Kenosha 13		Waukesha 14
Age 0	All	$	355.14	$	345.64	$	349.94	$	376.29	$	341.34	$	315.47	$	308.45	$	333.95	$	318.50	$	339.36	$	307.50	$	316.47	$	379.40	$	347.96
Age 1-14	All	$	56.84	$	55.82	$	56.26	$	57.85	$	51.26	$	52.33	$	43.32	$	58.55	$	55.75	$	52.59	$	52.23	$	50.27	$	60.14	$	57.82
Age 15-20	F	$	126.79	$	124.50	$	125.49	$	129.05	$	114.34	$	116.72	$	96.62	$	130.60	$	124.34	$	117.30	$	116.50	$	112.14	$	134.14	$	128.98
Age 15-20	M	$	89.93	$	88.31	$	89.01	$	91.53	$	81.11	$	82.79	$	68.54	$	92.64	$	88.20	$	83.20	$	82.64	$	79.54	$	95.15	$	91.49
Age 21-34	F	$	201.17	$	197.54	$	199.11	$	204.75	$	181.42	$	185.20	$	153.30	$	207.21	$	197.29	$	186.11	$	184.85	$	177.92	$	212.83	$	204.64
Age 21-34	M	$	114.34	$	112.28	$	113.17	$	116.38	$	103.12	$	105.26	$	87.14	$	117.78	$	112.14	$	105.79	$	105.07	$	101.13	$	120.97	$	116.32
Age 35-44	F	$	263.35	$	258.61	$	260.66	$	268.04	$	237.50	$	242.44	$	200.69	$	271.26	$	258.27	$	243.64	$	241.99	$	232.91	$	278.61	$	267.90
Age 35-44	M	$	183.39	$	180.09	$	181.52	$	186.66	$	165.39	$	168.83	$	139.76	$	188.91	$	179.86	$	169.67	$	168.52	$	162.20	$	194.02	$	186.56
Age 45+	F	$	342.55	$	336.38	$	339.05	$	348.65	$	308.92	$	315.35	$	261.05	$	352.84	$	335.94	$	316.92	$	314.76	$	302.96	$	362.40	$	348.47
Age 45+	M	$	302.05	$	296.61	$	298.96	$	307.42	$	272.40	$	278.07	$	230.18	$	311.12	$	296.22	$	279.44	$	277.55	$	267.14	$	319.55	$	307.27
BadgerCare Rates Medical Capitation Rates by Service Category - Dental Costs
Age Range	Gender	Duluth/ Superior 1		Wausau/ Rhinelander 2		Green Bay 3		Twin Cities 4		Marshfield/ Stevens Point 5		Appleton/ Oshkosh 6		La Crosse 7		Madison 8		Southeast Wisconsin 9		Milwaukee 10		Dane 11		Eau Claire 12		Kenosha 13		Waukesha 14
Age 0	All	$	0.03	$	0.03	$	0.03	$	0.03	$	0.04	$	0.03	$	0.03	$	0.03	$	0.03	$	0.03	$	0.03	$	0.03	$	0.03	$	0.02
Age 1-14	All	$	9.33	$	6.92	$	7.94	$	7.46	$	9.76	$	9.69	$	7.32	$	9.13	$	7.92	$	9.68	$	5.93	$	6.39	$	10.99	$	7.18
Age 15-20	F	$	10.37	$	7.69	$	8.82	$	8.29	$	10.84	$	10.77	$	8.14	$	10.15	$	8.80	$	10.75	$	6.59	$	7.11	$	12.21	$	7.98
Age 15-20	M	$	9.69	$	7.18	$	8.24	$	7.74	$	10.13	$	10.06	$	7.60	$	9.48	$	8.22	$	10.05	$	6.16	$	6.64	$	11.41	$	7.45
Age 21-34	F	$	8.53	$	6.32	$	7.25	$	6.81	$	8.91	$	8.85	$	6.69	$	8.35	$	7.24	$	8.84	$	5.42	$	5.84	$	10.04	$	6.56
Age 21-34	M	$	6.89	$	5.10	$	5.86	$	5.50	$	7.20	$	7.15	$	5.40	$	6.74	$	5.85	$	7.14	$	4.38	$	4.72	$	8.11	$	5.30
Age 35-44	F	$	8.47	$	6.27	$	7.20	$	6.76	$	8.85	$	8.79	$	6.64	$	8.29	$	7.19	$	8.78	$	5.38	$	5.80	$	9.97	$	6.51
Age 35-44	M	$	6.82	$	5.06	$	5.80	$	5.45	$	7.13	$	7.08	$	5.35	$	6.68	$	5.79	$	7.07	$	4.34	$	4.67	$	8.03	$	5.25
Age 45+	F	$	10.06	$	7.45	$	8.55	$	8.04	$	10.51	$	10.44	$	7.89	$	9.84	$	8.54	$	10.43	$	6.39	$	6.89	$	11.84	$	7.74
Age 45+	M	$	8.86	$	6.57	$	7.53	$	7.08	$	9.26	$	9.20	$	6.95	$	8.67	$	7.52	$	9.19	$	5.63	$	6.07	$	10.43	$	6.82
BadgerCare Rates Medical Capitation Rates by Service Category - Chiropractic Costs
Age Range	Gender	Duluth/ Superior 1		Wausau/ Rhinelander 2		Green Bay 3		Twin Cities 4		Marshfield/ Stevens Point 5		Appleton/ Oshkosh 6		La Crosse 7		Madison 8		Southeast Wisconsin 9		Milwaukee 10		Dane 11		Eau Claire 12		Kenosha 13		Waukesha 14
Age 0	All	$	0.40	$	0.46	$	0.34	$	0.80	$	0.57	$	0.39	$	0.48	$	0.34	$	0.20	$	0.03	$	0.24	$	0.98	$	0.14	$	0.20
Age 1-14	All	$	0.68	$	1.10	$	0.76	$	1.28	$	1.24	$	0.76	$	0.88	$	0.88	$	0.55	$	0.11	$	0.60	$	1.04	$	0.45	$	0.49
Age 15-20	F	$	1.84	$	2.96	$	2.03	$	3.44	$	3.34	$	2.03	$	2.37	$	2.37	$	1.47	$	0.30	$	1.60	$	2.79	$	1.22	$	1.31
Age 15-20	M	$	1.20	$	1.94	$	1.33	$	2.25	$	2.19	$	1.33	$	1.55	$	1.55	$	0.96	$	0.20	$	1.05	$	1.82	$	0.80	$	0.86
Age 21-34	F	$	2.46	$	3.96	$	2.72	$	4.60	$	4.47	$	2.72	$	3.17	$	3.18	$	1.97	$	0.40	$	2.14	$	3.73	$	1.63	$	1.75
Age 21-34	M	$	2.03	$	3.27	$	2.25	$	3.80	$	3.70	$	2.25	$	2.62	$	2.63	$	1.62	$	0.33	$	1.77	$	3.08	$	1.34	$	1.45
Age 35-44	F	$	3.20	$	5.15	$	3.54	$	5.98	$	5.82	$	3.54	$	4.13	$	4.13	$	2.56	$	0.52	$	2.79	$	4.85	$	2.12	$	2.28
Age 35-44	M	$	2.47	$	3.97	$	2.73	$	4.61	$	4.49	$	2.73	$	3.18	$	3.18	$	1.97	$	0.40	$	2.15	$	3.74	$	1.63	$	1.75
Age 45+	F	$	3.78	$	6.08	$	4.18	$	7.06	$	6.87	$	4.18	$	4.87	$	4.88	$	3.02	$	0.62	$	3.29	$	5.72	$	2.50	$	2.69
Age 45+	M	$	2.55	$	4.11	$	2.82	$	4.77	$	4.65	$	2.83	$	3.29	$	3.30	$	2.04	$	0.42	$	2.22	$	3.87	$	1.69	$	1.82

ADDENDUM III-C - CY 2006 Age & Gender Factors

Wisconsin Department of Health and Family Services

2006 MCE and HMO Capitation Rate Development for AFDC-Related, Healthy Start, and BadgerCare

ADFC-Related and Healthy Start Children Age / Gender Factors

Medical Services (Non-Dental, Non-Chiropractor)
		Region
Age Range	Gender	1		2		3		4		5		6		7		8		9		10		11		12		13		14		Total
Age 0	All	2.078		2.175		2.079		2.422		2.210		2.248		2.206		1.499		1.898		2.686		2.019		2.164		2.043		1.653		2.290
Ages 1 - 5	All	0.441		0.578		0.479		0.467		0.458		0.465		0.475		0.451		0.432		0.458		0.509		0.472		0.453		0.456		0.462
Ages 6 - 14	All	0.446		0.428		0.395		0.453		0.421		0.390		0.432		0.432		0.396		0.327		0.414		0.377		0.334		0.457		0.370
Ages 15 - 20	Female	1.300		1.181		1.316		1.370		1.321		1.225		1.341		1.582		1.451		1.529		1.461		1.364		1.370		1.273		1.455
Ages 15 - 20	Male	0.555		0.508		0.500		0.556		0.562		0.548		0.562		0.466		0.521		0.530		0.479		0.411		0.398		0.975		0.528
Ages 21 - 34	Female	2.361		2.210		2.038		2.029		2.360		2.120		2.005		2.319		2.194		2.059		2.265		2.045		2.142		2.121		2.125
Ages 21 - 34	Male	1.124		0.985		2.271		0.975		1.194		1.187		1.224		1.349		1.172		1.061		1.023		0.968		1.739		1.210		1.211
Ages 35 & Over	Female	2.350		3.103		2.604		2.151		2.561		2.601		2.626		2.653		2.542		2.593		2.580		2.594		2.652		2.692		2.597
Ages 35 & Over	Male	1.684		2.115		1.817		1.862		1.771		2.020		2.205		1.779		2.826		2.069		1.819		2.600		2.684		1.660		2.046
Composite		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
Dental Services
		Region
Age Range	Gender	1		2		3		4		5		6		7		8		9		10		11		12		13		14		Total
Age 0	All	0.000		0.001		0.008		0.012		0.002		0.001		0.001		0.002		0.016		0.006		0.009		0.004		0.001		0.003		0.005
Ages 1 - 5	All	0.689		1.085		0.699		0.711		0.833		0.673		0.797		0.629		0.758		0.728		1.035		0.700		0.684		0.556		0.750
Ages 6 - 14	All	1.117		1.166		1.479		1.325		1.192		1.297		1.303		1.348		1.238		1.082		1.330		1.409		1.255		1.277		1.204
Ages 15 - 20	Female	1.766		1.242		1.275		1.498		1.439		1.389		1.366		1.358		1.242		1.073		1.053		1.495		1.047		1.423		1.233
Ages 15 - 20	Male	1.619		0.960		1.597		1.579		1.368		1.633		1.591		1.595		1.168		0.830		0.934		1.431		0.941		1.408		1.168
Ages 21 - 34	Female	1.302		0.991		1.134		1.163		1.242		1.383		1.105		1.305		1.460		1.475		0.837		1.216		1.439		1.623		1.322
Ages 21 - 34	Male	0.903		0.623		0.802		0.961		1.012		1.093		0.991		0.929		1.180		1.241		0.681		0.745		1.180		1.431		1.028
Ages 35 & Over	Female	1.245		0.844		1.140		1.175		1.159		1.217		1.091		1.310		1.367		1.816		0.855		1.243		1.473		1.617		1.435
Ages 35 & Over	Male	1.265		1.005		0.831		1.257		0.903		1.305		0.845		1.005		1.031		1.789		0.831		1.356		1.346		1.735		1.265
Composite		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
Chiropractor Services
		Region
Age Range	Gender	1		2		3		4		5		6		7		8		9		10		11		12		13		14		Total
Age 0	All	0.309		0.473		0.282		0.367		0.383		0.354		0.490		0.357		0.258		0.340		0.224		0.570		0.133		0.221		0.364
Ages 1 - 5	All	0.268		0.443		0.388		0.388		0.369		0.245		0.458		0.401		0.313		0.241		0.247		0.420		0.257		0.329		0.373
Ages 6 - 14	All	0.645		0.643		0.592		0.650		0.570		0.435		0.504		0.609		0.649		0.407		0.462		0.662		0.517		0.871		0.562
Ages 15 - 20	Female	1.798		1.574		1.281		1.500		1.706		1.574		1.553		1.563		1.189		1.272		0.715		1.635		0.870		0.610		1.387
Ages 15 - 20	Male	1.028		0.743		1.146		1.062		0.960		0.610		1.284		1.250		1.374		0.652		1.025		1.064		1.703		1.322		1.017
Ages 21 - 34	Female	2.359		2.565		2.507		2.405		2.422		2.913		2.365		2.235		2.590		2.823		3.571		2.061		3.060		2.619		2.384
Ages 21 - 34	Male	1.275		1.687		1.726		1.501		0.967		1.802		2.005		1.741		1.776		2.176		3.225		1.638		1.671		1.126		1.899
Ages 35 & Over	Female	3.604		3.423		3.750		3.494		4.090		4.417		3.142		3.128		3.506		3.674		3.157		3.730		3.074		3.002		3.442
Ages 35 & Over	Male	1.561		2.388		3.090		2.097		2.364		2.538		2.385		2.053		2.247		4.798		1.972		1.392		2.135		2.368		2.751
Composite		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
Projected 2006 HMO Eligible Month Weights
		Region
Age Range	Gender	1		2		3		4		5		6		7		8		9		10		11		12		13		14		Total
Age 0	All	7.4	%	7.5	%	8.3	%	8.1	%	7.4	%	8.3	%	8.2	%	7.7	%	8.4	%	6.6	%	7.7	%	9.0	%	7.0	%	9.1	%	7.4	%
Ages 1 - 5	All	27.7	%	28.7	%	30.8	%	28.7	%	28.9	%	30.2	%	29.6	%	29.0	%	30.0	%	26.7	%	29.8	%	30.9	%	28.4	%	31.3	%	28.4	%
Ages 6 - 14	All	28.2	%	30.8	%	28.1	%	29.0	%	29.2	%	27.9	%	28.4	%	28.8	%	27.6	%	31.7	%	29.5	%	25.6	%	29.7	%	27.4	%	29.8	%
Ages 15 - 20	Female	6.3	%	6.3	%	6.4	%	6.3	%	6.6	%	6.1	%	6.5	%	6.4	%	6.1	%	7.9	%	6.4	%	6.0	%	6.1	%	5.2	%	6.9	%
Ages 15 - 20	Male	5.7	%	5.2	%	4.1	%	4.8	%	5.0	%	4.2	%	4.6	%	4.1	%	4.0	%	5.3	%	4.4	%	4.5	%	4.9	%	3.7	%	4.8	%
Ages 21 - 34	Female	11.7	%	10.7	%	11.9	%	11.1	%	11.3	%	12.6	%	11.7	%	13.2	%	12.8	%	13.1	%	12.5	%	13.2	%	13.1	%	12.8	%	12.6	%
Ages 21 - 34	Male	3.4	%	2.7	%	2.6	%	3.2	%	2.7	%	2.6	%	2.9	%	2.7	%	2.6	%	1.5	%	2.2	%	3.4	%	2.5	%	2.3	%	2.2	%
Ages 35 & Over	Female	6.4	%	5.5	%	5.6	%	5.9	%	6.1	%	5.7	%	5.6	%	6.0	%	6.1	%	5.9	%	5.7	%	5.4	%	6.1	%	6.6	%	5.9	%
Ages 35 & Over	Male	3.2	%	2.6	%	2.2	%	2.9	%	2.9	%	2.3	%	2.6	%	2.2	%	2.3	%	1.3	%	1.9	%	2.1	%	2.3	%	1.8	%	2.0	%
Composite		100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

ADDENDUM III-C - CY 2006 Age & Gender Factors

Wisconsin Department of Health and Family Services

2006 MCE and HMO Capitation Rate Development for AFDC-Related, Healthy Start, and BadgerCare

BadgerCare Age / Gender Factors

Medical Services (Non-Dental, Non-Chiropractor)
		Region
Age Range	Gender	1		2		3		4		5		6		7		8		9		10		11		12		13		14		Total
Age 0 - 14	All	0.327		0.383		0.358		0.355		0.362		0.356		0.359		0.315		0.349		0.325		0.445		0.344		0.324		0.347		0.344
Ages 15 - 20	Female	0.878		0.665		0.680		0.841		0.728		0.853		0.901		0.710		0.686		0.758		1.123		0.732		0.697		0.678		0.768
Ages 15 - 20	Male	1.016		0.694		0.407		0.436		0.454		0.670		0.549		0.762		0.485		0.442		0.433		0.603		0.546		0.570		0.544
Ages 21 - 34	Female	1.327		1.231		1.161		1.304		1.262		1.134		1.239		1.329		1.204		1.177		1.256		1.155		1.144		1.250		1.218
Ages 21 - 34	Male	0.785		0.690		0.851		0.583		0.652		0.708		0.706		0.616		0.661		0.748		0.713		0.632		0.714		0.763		0.692
Ages 35 - 44	Female	1.606		1.422		1.507		1.583		1.631		1.512		1.684		1.463		1.430		1.689		1.749		1.766		1.647		1.447		1.594
Ages 35 - 44	Male	0.940		1.036		1.134		0.948		1.175		1.205		0.920		1.174		1.338		1.191		1.043		0.916		0.914		1.486		1.110
Ages 45 & Over	Female	1.552		2.364		2.335		2.382		1.864		1.761		1.753		1.815		2.316		2.160		1.457		3.518		2.437		1.654		2.074
Ages 45 & Over	Male	1.348		1.809		1.457		1.734		1.545		2.213		1.747		1.868		1.902		2.191		1.106		1.676		2.250		1.317		1.828
Composite		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
Dental Services
		Region
Age Range	Gender	1		2		3		4		5		6		7		8		9		10		11		12		13		14		Total
Age 0 - 14	All	0.961		1.339		1.276		1.128		1.108		1.081		1.213		1.125		1.071		0.914		1.480		1.176		1.026		0.873		1.075
Ages 15 - 20	Female	1.601		1.373		1.370		1.350		1.273		1.364		1.663		1.431		1.218		0.886		1.270		0.988		0.780		1.026		1.195
Ages 15 - 20	Male	1.399		1.381		1.402		1.500		1.071		1.217		1.413		1.301		1.091		0.745		1.681		0.859		0.950		1.178		1.117
Ages 21 - 34	Female	1.026		0.880		0.840		0.841		0.948		0.989		0.852		0.978		0.973		1.054		0.754		0.916		1.049		1.083		0.983
Ages 21 - 34	Male	0.782		0.656		0.704		0.755		0.844		0.896		0.829		0.730		0.847		0.877		0.573		0.737		1.107		0.902		0.794
Ages 35 - 44	Female	0.918		0.777		0.853		0.914		0.884		0.931		0.924		0.891		1.037		1.123		0.714		0.957		0.953		0.995		0.976
Ages 35 - 44	Male	0.827		0.626		0.747		0.768		0.922		0.745		0.658		0.797		0.774		0.876		0.730		1.090		0.850		0.923		0.786
Ages 45 & Over	Female	1.197		1.044		1.126		1.345		1.214		1.000		0.934		0.981		1.074		1.406		0.969		1.017		1.228		1.227		1.159
Ages 45 & Over	Male	0.928		1.026		1.126		1.194		0.945		0.958		0.846		1.035		0.907		1.231		0.669		1.343		0.868		1.057		1.021
Composite		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
Chiropractor Services
		Region
Age Range	Gender	1		2		3		4		5		6		7		8		9		10		11		12		13		14		Total
Age 0 - 14	All	0.253		0.311		0.376		0.325		0.372		0.382		0.407		0.327		0.381		0.197		0.233		0.365		0.552		0.427		0.334
Ages 15 - 20	Female	1.025		0.924		0.973		1.201		0.854		0.671		1.067		0.864		0.719		0.528		1.505		1.123		0.495		0.561		0.898
Ages 15 - 20	Male	0.495		0.573		0.409		0.767		0.516		0.488		0.718		0.710		0.571		0.247		0.560		1.039		0.677		0.548		0.589
Ages 21 - 34	Female	1.243		1.434		1.256		1.206		1.381		1.291		1.144		1.275		1.141		1.097		1.134		1.354		1.381		1.312		1.203
Ages 21 - 34	Male	0.912		0.881		0.739		0.885		0.815		0.816		0.867		1.040		0.888		1.514		1.096		0.793		0.816		0.849		0.994
Ages 35 - 44	Female	1.603		1.481		1.613		1.705		1.436		1.676		1.695		1.477		1.776		1.407		1.348		1.623		1.369		1.500		1.565
Ages 35 - 44	Male	1.114		1.146		0.933		1.071		1.025		0.927		1.019		1.126		1.191		1.462		1.501		0.947		1.179		1.260		1.206
Ages 45 & Over	Female	2.038		1.733		1.924		1.603		1.923		1.835		1.598		1.867		1.753		3.405		1.993		1.330		1.591		1.436		1.846
Ages 45 & Over	Male	1.268		1.057		1.195		1.082		1.257		1.092		1.187		0.860		1.138		2.162		1.714		1.390		0.719		0.976		1.249
Composite		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000		1.000
Projected 2006 HMO Eligible Month Weights
		Region
Age Range	Gender	1		2		3		4		5		6		7		8		9		10		11		12		13		14		Total
Age 0 - 14	All	23.1	%	25.3	%	22.2	%	24.5	%	23.7	%	22.6	%	24.9	%	23.7	%	24.0	%	25.5	%	26.6	%	25.3	%	24.7	%	25.7	%	24.7	%
Ages 15 - 20	Female	5.2	%	5.0	%	5.1	%	5.4	%	5.0	%	5.1	%	4.9	%	5.0	%	5.2	%	5.5	%	5.0	%	4.9	%	5.3	%	5.2	%	5.1	%
Ages 15 - 20	Male	5.2	%	5.0	%	4.0	%	4.2	%	4.7	%	4.0	%	4.3	%	4.3	%	5.0	%	4.8	%	4.1	%	4.8	%	5.3	%	4.4	%	4.5	%
Ages 21 - 34	Female	17.7	%	18.9	%	25.4	%	19.7	%	19.6	%	23.6	%	20.0	%	22.9	%	22.6	%	27.7	%	25.4	%	22.5	%	23.4	%	24.0	%	22.8	%
Ages 21 - 34	Male	11.0	%	9.7	%	8.9	%	11.3	%	11.6	%	10.3	%	10.8	%	10.3	%	8.7	%	6.0	%	8.5	%	12.8	%	8.9	%	7.2	%	9.6	%
Ages 35 - 44	Female	14.0	%	13.5	%	14.6	%	13.8	%	13.8	%	14.6	%	13.9	%	14.8	%	14.8	%	14.9	%	12.3	%	12.9	%	14.5	%	14.7	%	13.8	%
Ages 35 - 44	Male	11.1	%	10.4	%	8.9	%	10.1	%	9.1	%	8.7	%	9.5	%	8.4	%	7.9	%	6.1	%	7.5	%	7.3	%	7.6	%	7.1	%	8.5	%
Ages 45 & Over	Female	6.4	%	6.0	%	5.7	%	5.5	%	6.2	%	6.0	%	6.2	%	5.6	%	6.5	%	5.6	%	6.0	%	5.1	%	5.8	%	6.2	%	6.0	%
Ages 45 & Over	Male	6.3	%	6.2	%	5.3	%	5.5	%	6.3	%	5.0	%	5.6	%	5.0	%	5.3	%	3.8	%	4.4	%	4.5	%	4.4	%	5.3	%	5.1	%
Composite		100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

ADDENDUM III

ACTUARIAL BASIS

HMO Rate Regions and Established Counties

Region 1: Duluth/Superior				Region 2: Wausau/Rhinelander
02	Ashland	85	Red Cliff RNIP	21	Forest	86	Stockbridge RNIP
04	Bayfield		(Bayfield Co.)	34	Langlade		(Shawano Co.)
07	Burnett	89	Bad River RNIP	35	Lincoln	87	Potowatomi RNIP
16	Douglas		(Ashland Co.)	37	Marathon		(Forest Co.)43 Oneida
26	Iron	94	Lac Courte RNIP	50	Price	88	Lac du Flambeau RNIP
57	Sawyer		(Sawyer Co.)	58	Shawano		(Vilas Co.)
65	Washburn	95	St. Croix RNIP	60	Taylor		91 Sokaogaon RNIP
			(Burnett Co.)	63	Vilas		(Forest Co.)
Region 3: Green Bay				Region 4: Twin Cities
05	Brown	38	Marinette	03	Barron	47	Pierce
15	Door	42	Oconto	09	Chippewa	48	Polk
19	Florence	72	Menominee	17	Dunn	54	Rusk
31	Kewaunee	84	Menominee RNIP	46	Pepin	55	St. Croix
36	Manitowoc		(Menominee Co.)
Region 5: Marshfield/Stevens Point				Region 6: Appleton/Oshkosh
01	Adams	39	Marquette	08	Calumet	92	Oneida RNIP
10	Clark	49	Portage	20	Fond Du Lac		(Outagamie Co.)
24	Green Lake	69	Waushara	44	Outagamie
27	Jackson	71	Wood	68	Waupaca
29	Juneau			70	Winnebago
Region 7: LaCrosse				Region 8: Madison/South Central
06	Buffalo	61	Trempealeau	11	Columbia	28	Jefferson
12	Crawford	62	Vernon	14	Dodge	33	Lafayette
32	LaCrosse			22	Grant	53	Rock
41	Monroe			23	Green	56	Sauk
52	Richland			25	Iowa

Region 9: Southeast Wisconsin		Established Counties
45	Ozaukee	13	Dane
51	Racine	18	Eau Claire
59	Sheboygan	30	Kenosha
64	Walworth	40	Milwaukee
66	Washington	67	Waukesha

HMO Contract for February 1, 2006 - December 31, 2007

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ADDENDUM IV

GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN HMOS AND

THE BUREAU OF MILWAUKEE CHILD WELFARE

I. HMO Rights and Responsibilities:

A. The HMO must designate at least one individual to serve as a contact person for the Bureau of Milwaukee Child Welfare (BMCW). If the HMO chooses to designate more than one contact person, the HMO should identify the service area for which each contact person is responsible.

B. The HMO must provide all Medicaid covered mental health and substance abuse services to individuals identified as clients of BMCW. Disputes in the medical necessity of services identified in the Family Treatment Plan will be adjudicated using the dispute process outlined in this MOU, except that HMOs will provide court ordered services in accordance with Article III, F.

C. The HMO liaison, or other appropriate staff as designated by the HMO, will participate in case conference with BMCW upon the request of BMCW. The planning session may be done through telephone contact or other means of communication when attending a formal case conference is not feasible.

D. The HMO liaison and BMCW will discuss who will be responsible for ensuring that the recipient receives the services authorized and provided through the HMO. The HMO must have a mechanism in place for notifying BMCW of missed appointments or family crisis situations that could potentially lead to an out-of-home placement by BMCW. The notification will be within three business days of occurrence or sooner if possible.

E. The HMO agrees to participate in dispute resolution using the following process:

1. The BMCW and the HMO designated personnel will meet or teleconference to discuss the case and attempt to resolve issues of dispute.

2. If the BMCW designees and the HMO designees (known as the team) are unable to resolve the issues, BMCW and the HMO will schedule a meeting or a teleconference of representatives with expertise in the area of dispute to look at outstanding issues within two days of the teleconference or sooner if indicated.

3. If the team is unable to resolve the issues to both parties’ satisfaction, either party may appeal to the Department. It will be the disputing party’s responsibility to supply the necessary documentation for the Department to adjudicate the dispute.

HMO Contract for February 1, 2006 - December 31, 2007

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F. The HMO will work with BMCW in developing lists of providers and fostering a provider network that has expertise in:

1. Working with adults and children effectively.

2. Working with dual diagnosed clients effectively.

3. Understanding adult functioning problems in the context of parenting, child safety and child well-being.

4. Recognizing the interrelationship of the problems BMCW families experience and, therefore, the value of close collaboration among the various service providers working with the family.

G. The HMO will share with BMCW agency(ies) the procedure and process for prior authorization and out-of-plan referrals.

II. Bureau of Milwaukee Child Welfare’s Rights and Responsibilities:

A. It is the BMCW’s responsibility to initiate contact with the HMO regarding child welfare families and/or individuals in need of service. BMCW will provide (through court order and/or signed release of information) completed assessment information that supports the request for HMO services.

B. BMCW will complete and involve the HMO in the development of a comprehensive case plan that identifies the outcomes to be achieved, the services to be provided and the measures to be used for evaluation.

C. BMCW will utilize the HMO’s provider network for routine services whenever possible and will attempt to utilize the HMO provider network for emergency services. BMCW will obtain criteria from the HMO concerning BMCW’s ability to utilize non-participating providers and the mechanism for authorizing non-participating providers.

D. BMCW will evaluate the progress of the case plan at 90-day intervals, including the effectiveness of services, and will forward those results to the HMO within 10 days of completion.

E. BMCW will be responsible for informing the HMO of the status of the case, including court-ordered revisions within two business days of the revisions.

F. BMCW agrees to participate in dispute resolution using the following process:

1. BMCW and the HMO designated personnel will meet or teleconference to discuss the case and attempt to resolve issues of dispute.

HMO Contract for February 1, 2006 - December 31, 2007

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2. If the BMCW designees and the HMO designees (known as the team) are unable to resolve the issues, the BMCW and the HMO will schedule a meeting of representatives to look at outstanding issues within two days of the meeting or teleconference or sooner if indicated.

3. If the team is unable to resolve the issues to both parties’ satisfaction, either party may appeal to the Department. It will be the disputing party’s responsibility to supply the necessary documentation for the Department to adjudicate the dispute.

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ADDENDUM V

GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN MEDICAID

HMOS AND COUNTY BIRTH TO THREE AGENCIES

The Birth to 3 program is an entitlement program established by the Federal Individuals with Disabilities Education Act (IDEA) and is funded by federal, state, and local funds. The goal of the program is to provide Early Intervention (EI) services to children from birth up to the age of three who have developmental disabilities or delays. The intended outcome of the program is to ensure maximum amelioration of the impact of developmental disabilities or delays on infants and toddlers by early and ongoing provision of rehabilitation services.

Early Intervention services under Part C of the IDEA are administered in Wisconsin under Administrative Code HSF 90 by county health and human service department Birth to 3 programs. Birth to 3 agencies arrange for the provision of rehabilitative services (including needed physical therapy, occupational therapy, speech-language pathology, special instruction, audiology, certain nursing, psychological and other services), service coordination, and related parent education. Regulations require that Birth to 3 services be delivered in a “natural” environment, frequently the child’s home. Federal rules designate that IDEA, Part C funds are a payer of last resort after all other private and public funds, including Medicaid funds.

There are HMO enrollees that either are or will be in the Birth to 3 program. To summarize the Birth to 3 program process for ease of HMO understanding, the Birth to 3 program has four stages. These “stages” are a conceptual tool.

1. Stage 1 is the identification of a child as potentially eligible and in need of evaluation of whether the child is developmentally delayed. This can be done simply by a parent who believes the child is not developing normally, or more formally though a medical evaluation by the HMO provider. The child is then referred to the HMO for evaluation of eligibility and assessment of medically necessary services for the Individual Family Service Plan (IFSP). If the HMO originated the referral to the Birth to 3 agency, then any evaluations already completed by the HMO can be used as part of the eligibility decision process.

2. Stage 2 is the evaluation for eligibility by the Birth to 3 program according to state and federal rules and the assessment of needed medical and developmental services for the IFSP.

3. Stage 3 is the coordinated development of an IFSP that describes the integrated set of services that the child and family should receive. The HMO, the family, the Birth to 3 agency, and other relevant agencies are involved in the development of the IFSP.

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4. Stage 4 is the provision of services based on the IFSP.

The HMO is involved with the Birth to 3 program throughout all of the above stages. The HMO can identify and refer a child to the program based on the physician’s determination that the child is not developing normally. The HMO will receive referrals from the program. The HMO will be involved in performing evaluation/assessment for eligibility determination and needed IFSP services. The HMO will be involved in family members, program staff, and other agencies. Finally, the HMO will be providing the services in the IFSP that meet medical necessity per Medicaid guidelines.

Federal and state regulations require an evaluation for eligibility, an assessment of needs and the development of an IFSP within 45 days of an EI referral to the Birth to 3 agency. A child eligible for receives services according to the IFSP document. Regulations require that Medicaid pay for covered IFSP services that meet Medicaid’s definition of medical necessity. Services meeting Medicaid’s coverage requirement are to be paid by Medicaid funds before county, state or federal IDEA funds are used to pay for the services. Wisconsin Medicaid requires HMOs to seek payment from a recipient’s health insurance first. However, in the Birth to 3 program, parents do not have to allow their Medicaid HMO to bill their health insurance for Birth to 3 services. In this situation, where the enrollee has other insurance but the parents do not allow billing of their health insurance for services, the HMO must work with the Birth to 3 agency on how to bill the agency for services rendered. The agencies have established an “average insurance liability amount” per month for IFSP therapy services for these situations and will reimburse the HMO this amount. HMOs would be responsible for the cost of services after the county pays the average insurance liability. The agency will inform the HMOs of those recipients participating in the program for whom the parents/guardians do not allow billing of their health insurance. The agency will inform the HMOs of the alternative billing procedures for these recipients.

The following guidelines have been developed to establish the complementary roles of the HMO and the Birth to 3 agency for clients they have in common and to identify the mutual activities of each party that will promote effective communication and coordination between the two parties. This language will also be incorporated as an Appendix in the county Birth to 3 provider materials ensuring that both HMOs and county Birth to 3 providers have the same information available to them. All actions are governed by HSF 90, and HMOs are required to make a reasonable attempt to assure that HSF 90 standards are met (e.g., two day referral).

HMO Rights and Responsibilities

A. The HMO must designate at least one individual to serve as a contact person for county B-3 agencies. If the HMO chooses to designate more than one contact person, the HMO should identify the counties for which each contact person is responsible. The contact person will work toward achieving a close, cooperative relationship between the HMO and the agency. The contact person will work with the agency to establish a mechanism to identify and refer eligible recipients for services and for the distribution of appropriate paperwork.

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B. When the HMO identifies a recipient who may meet the eligibility guidelines for the Wis. Adm. Code, Chapter 90 HFS for Birth to 3 services it will make a referral to the county agency within two days. A child under the age of three can be identified and referred to the agency based on the judgment of the HMO provider that the child is not developing normally.

C. If the parent of a child requests the HMO to conduct an evaluation/assessment, the HMO will determine the need for such evaluation/assessment in accordance with the Medicaid and Chapter 90 HFS definition of medical necessity. If the evaluation/assessment warrants eligibility for Birth to 3 services, a referral should be made to the agency as soon as possible. The HMO evaluation/assessment may be used by the agency for eligibility determination. If additional information is needed, the HMO and program will coordinate a evaluation of eligibility and an assessment of IFSP services needed. The evaluation and assessment results should be completed within 35 days from the date of the parent request. Results should be sent to the agency with the parent/guardian consent at the time of referral to give the agency sufficient time to complete the IFSP within the 45 day time limit mandated by HSF Chapter 90.

D. If the county Birth to 3 agency requests a eligibility determination evaluation and assessment of IFSP service needs, the agency will provide a copy of the recipient screening tool to assist the HMO in determining the need for a full evaluation/assessment. If the HMO agrees with the agency request, the HMO will conduct a complete evaluation/assessment of the recipient’s rehabilitative needs. Federal regulations under Chapter 90 HFS require the HMO to forward a copy of the findings to the county agency within 35 days from the date of the parent/guardian request. This allows the agency sufficient time to complete the IFSP within the 45 day deadline required by federal regulations under Chapter 90 HFS. If the HMO determines that no evaluation/assessment is needed, the HMO will document the rationale for this decision.

E. If the HMO requires copies of the recipient’s early intervention records held by the county Birth to 3 agency, the HMO may request the records directly from the agency with the parents’/guardians’ consent:

1. The HMO case management liaison and the county Birth to 3 case manager must establish feasible administrative procedures for obtaining parents’/guardians’ consent for release of such records.

2. If the parents’/guardians’ consent is not obtained, then any further actions on the part of the HMO requiring such records may cease.

F. The HMO must determine the need for medical treatment related to Birth to 3 services covered under the HMO Contract based on the results of the evaluation/assessment and the HMO determination of medical necessity. The HMO will not have final say on the entire IFSP, but only on whether the EI services indicated in the IFSP are the HMO’s responsibility.

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G. The HMO shall work cooperatively with the Birth to 3 agency so that the provision of medically necessary services identified in the IFSP plan do not suffer interruption due to delays caused by HMO prior authorization and/or utilization management procedures.

H. The HMO Birth to 3 liaison, or other appropriate staff as designated by the HMO, must participate in case planning for the development of the IFSP with the county agency, unless no services are provided through the HMO:

1. The case planning may be done through telephone contact or written communication rather than attending a formal case planning meeting.

2. The HMO is encouraged to recommend the type, frequency, and amount of services that might be on the IFSP.

3. The HMO must informally discuss differences in opinion regarding the HMO’s determination of medically necessary treatment needs if requested by the recipient or case manager.

4. The HMO case management liaison and the county Birth to 3 manager must discuss the follow-up to be undertaken so that IFSP services authorized by the HMO according to the criteria of medical necessity are made available and accessible to the recipient, and work with agencies to assist in scheduling recipient appointments.

5. The HMO’s role in the case planning may be limited to a confirmation of the services the HMO will authorize if the recipient and county Birth to 3 case manager find these acceptable.

I. The parent/guardian of a Birth to 3 recipient may chose to receive Birth to 3 services from the recipient’s HMO or may elect to disenroll the child from the HMO as allowed by Medicaid. However, HMOs may not restrict in any way the right of the recipient to remain enrolled in the HMO and to receive medically necessary services through the HMO.

J. HMOs must arrange for providers with expertise appropriate to treat the infant and toddler population to meet the medically necessary needs of recipients enrolled in the HMO.

County Birth to 3 Agency Rights and Responsibilities

A. The county Birth to 3 agency is responsible for the initial contact with the HMO to coordinate services to recipient(s) they have in common, and will provide the HMO with the name and phone number of the county Birth to 3 agency.

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B. If the HMO refers a recipient to the county Birth to 3 agency, the county agency must conduct an eligibility evaluation/assessment based on their usual procedures and policies in collaboration with the HMO.

C. If the county Birth to 3 agency requires copies of the recipient’s medical records, the agency may request the records directly from the HMO with the consent of the parent/guardian.

D. The Birth to 3 case manager (service coordinator) may also identify whether the recipient has service or treatment needs over and above what is included in the child’s IFSP. As a part of this process, the county agency and the recipient may seek additional assessment for treatment of medical conditions not included in the IFSP which the HMO may be expected to assess and treat under the terms of its contract. In these cases, the HMO will determine if there are specific signs and symptoms indicating the medical necessity for the assessment and treatment. The agency must refer and coordinate evaluation/ assessment with the HMO within two days of identifying a potentially eligible child.

E. The county Birth to 3 agency may not determine the need for specific medical care covered under the HMO contract, nor may the county agency make referrals directly to specific providers of medical care covered through the HMO.

F. The county Birth to 3 agency must complete an IFSP in accordance with the requirements of HSF 90.

G. If the county Birth to 3 agency specifically requests the HMO liaison to attend a planning meeting in person, the county agency may coordinate with the HMO for the costs associated with attending the planning meeting. These are not separately allowable costs for reimbursement through Wisconsin Medicaid.

H. The county Birth to 3 agency is responsible for making timely referrals to School Based Services (SBS) providers for recipients participating in Birth to 3 programs, who turn the age of three and lose eligibility for services and are likely to be eligible for the SBS program.

Nothing in these guidelines precludes the HMO and the county Birth to 3 agency from entering into a formal contract or memorandum of understanding to address issues not outlined here.

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ADDENDUM VI

LOCAL HEALTH DEPARTMENTS AND COMMUNITY-BASED HEALTH

ORGANIZATIONS A RESOURCE FOR HMOS

Local Health Departments (LHDs) throughout the state have an essential role in promoting the health of citizens of Wisconsin. They have general and specific statutory authority to prevent disease, promote health and protect the health of the citizens. They work in collaboration with community-based organizations, medical care facilities, and local community agencies to develop and coordinate systems of care so that the public’s health can be protected. Specific statutory authority includes the three public health core functions of assessment, policy development and assurance:

Assessment means the regular, systematic collection, assembly, analysis and dissemination of information on the health of the community. This includes incidence and prevalence data, and morbidity, mortality and environmental data in areas that include: communicable disease, chronic disease and environmental health.

Policy Development means the exercise of responsibility to serve the public’s interest by fostering shared ownership with the community in the development of comprehensive public health plans, programs, services and guidelines.

Assurance means to take reasonable and necessary action to assure citizens that services necessary to achieve public health goals are available. This is done by encouraging the actions of others in the private, public and/or voluntary sectors, and by requiring action through enforcement or by directly providing services.

Description of Public Health Services LHDs’ capacities may vary; however, LHDs are required to provide or ensure five basic public health services. These include:

1. Communicable disease surveillance

2. Prevention and control

3. Health promotion

4. Disease prevention

5. Human health hazard control

6. Generalized public health nursing programs

Although LHDs serve the population as a whole, they have established traditions of working with population groups at increased risk of illness, disability and premature death. The following specific services have been delineated with the hope of linking Medicaid Managed Care Plans with LHDs. Linking primary care and public health is an essential strategy to strengthen the health of local communities and thus benefit the population of the state as a whole.

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• LHDs have access to population data that may be very useful to managed care organizations in determining their services and quality studies.

• LHDs closely collaborate their programs with key community agencies that serve the Medicaid population. These include: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Prenatal Care Coordination, School Health Services, Birth to 3 programs, Family Planning, and Developmental Disabilities.

• LHDs promote and provide health education programs on topics that include domestic abuse/violence prevention, smoking cessation, breast feeding, cardiovascular risk reduction, prenatal/postpartum education, nutrition, and self-care skills.

• LHDs provide health-related home/community inspections in areas that include lead poisoning, asbestos, indoor air quality, home safety, and drinking water safety.

• LHDs monitor communicable disease incidence/prevalence, provide information to the public on prevention, and conduct epidemiological investigations of outbreaks/unusual conditions.

Access to Special Populations

Wisconsin’s LHDs perform many public health services, including the provision of direct services to Medicaid recipients. Some LHDs provide Medicaid reimbursable services for which HMOs may contract, such as:

• HealthCheck screening, outreach and follow-up.

• Immunizations.

• Blood lead screening.

• Extended case management of medical conditions such as asthma, diabetes, hypertension and children with special health care needs.

• Home health and personal care services.

• LHDs provide important resources such as:

• Clinics serving high-risk populations.

• Culturally competent staff experienced in dealing with diverse, high risk populations.

• Direct access to outreach and follow up with at-risk population groups in home and community settings.

• Environmental inspection and case management for children with elevated blood lead levels.

• Ability to contact hard-to-reach people to assist HMOs in achieving required rates, such as the HealthCheck screening rate.

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• Experience in family-centered care.

• Linkages with other community based providers and advocacy groups.

• Highly skilled staff who emphasize prevention and public health.

Community Based Health Organizations

Throughout the state, the health care network includes many nonprofit community based health organizations including private HealthCheck providers, family planning clinics, and WIC clinics. These organizations may provide some of the same Medicaid reimbursable services as LHDs and are essential to advancing the health of community. They may also have the same access to special populations as LHDs.

Collaboration with Public and Community Based Health Organizations

HMOs should consider how to utilize the LHDs and community based health organizations through:

• Identifying and utilizing the resources they provide.

• Contracting with LHDs and other community health agencies for Medicaid reimbursable services where appropriate.

The complementary roles of managed care and public health are significant and evolving. Communities will be healthier and health care costs reduced if health care providers work together. To find out the names of key contacts at LHDs and community based health organizations in your area, contact your LHD.

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ADDENDUM VII

GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN HMOS,

TARGETED CASE MANAGEMENT (TCM) AGENCIES, AND CHILD WELFARE

AGENCIES

(The same language will be incorporated as an Appendix in the case management provider handbook, ensuring that both HMOs and case management providers have the same language available to them.)

HMO Rights and Responsibilities

1. The HMO must designate at least one individual to serve as a contact person for case management providers. If the HMO chooses to designate more than one contact person, the HMO should identify the target populations for which each contact person is responsible.

2. The HMO may make referrals to case management agencies when they identify an enrollee from an eligible target population who could benefit from case management services.

3. If the enrollee or case manager requests the HMO to conduct an assessment, the HMO will determine whether there are signs and symptoms indicating the need for an assessment. If the HMO finds that assessment is needed, the HMO will determine the most appropriate level for an assessment to be conducted (e.g., primary care physician, specialist, etc.). If the HMO determines that no assessment is needed, the HMO will document the rationale for this decision.

4. The HMO must determine the need for medical treatment of those services covered under the HMO Contract based on the results of the assessment and the medical necessity of the treatment recommended.

5. The HMO case management liaison, or other appropriate staff as designated by the HMO, must participate in case planning with the case management agency, unless no services provided through the HMO are required.

• The case planning may be done through telephone contact or means of communication other than attending a formal case planning meeting.

• The HMO must informally discuss differences in opinion regarding the HMO’s determination of treatment needs if requested by the recipient or case manager.

• The HMO case management liaison and the case manager must discuss who will be responsible for ensuring that the enrollee receives the services authorized by and provided through the HMO.

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• The HMO’s role in the case planning may be limited to a confirmation of the services the HMO will authorize if the enrollee and case manager find these acceptable.

Case Management Agency Rights and Responsibilities

1. The case management agency is responsible for initiating contact with the HMO to coordinate services to recipient(s) they have in common and providing the HMO with the name and telephone number of the case manager(s).

2. If the HMO refers an enrollee to the case management agency, the case management agency must conduct an initial screening based on their usual procedures and policies. The case management agency must determine whether or not they will provide case management services and notify the HMO of this decision.

3. The case management agency must complete a comprehensive assessment of the enrollee’s needs in accordance with the requirements in the Case Management provider handbook. This includes a review of the enrollee’s physical and dental health needs.

4. If the case management agency requires copies of the enrollee’s medical records, the case management agency must obtain the records directly from the service provider, not from the HMO.

5. The case manager must identify whether the enrollee has additional service or treatment needs. As a part of this process, the case manager and the enrollee may seek additional assessment of conditions which the HMO may be expected to treat under the terms of the HMO Contract, if the HMO determines there are specific signs and symptoms indicating the need for an assessment.

6. The case management agency may not determine the need for specific medical care covered under the HMO Contract, nor may the case management agency make referrals directly to specific providers of medical care covered through the HMO.

7. The case manager must complete a comprehensive case plan in accordance with the requirements of the Case Management provider handbook. The plan must include the medical services the enrollee requires as determined by the HMO.

8. If the case management agency specifically requests the HMO liaison to attend a planning meeting in person, the case management agency must reimburse the HMO for the costs associated with attending the planning meeting. These are allowable costs for case management reimbursement through Wisconsin Medicaid.

Nothing in these guidelines precludes the HMO and the case management agency from entering into a formal contract or memorandum of understanding to address issues not outlined here.

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ADDENDUM VIII

REPORT FORMS AND WORKSHEETS

A. AIDS and Ventilator Dependent Quarterly Report Form and Detail Report Format

AIDS COST SUMMARY

HMO Name:                                         

Report Period:                                         

Number of Cases Reported:                                          

Category of Service	Amount Billed	Amount Paid
Inpatient
Outpatient
Physician
Pharmacy
All Other
Total

VENTILATOR COST SUMMARY

HMO Name:                                         

Report Period:                                          

Number of Cases Reported:                                          

Category of Service	Amount Billed	Amount Paid
Inpatient
Outpatient
Physician
Pharmacy
All Other
Total

MAIL TO:	Bureau of Managed HealthCare Programs
	ATTN: A/V Contracts Specialist Rm 265
	P.O. Box 309
	Madison, WI 53701-0309

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AIDS and Ventilator Dependent Detail Report: The detail report must be provided on disk in a text delimited file and paper and must be in the following layout:

	Field Name	Type	Width	Dec	Position	Explanation
1	HMO_ID	Num	8	0	1-8	Right justified (HMO Service Area Provider Number)
2	MA_ID	Num	10	0	9-18	Recipient Medicaid ID
3	LNAME	Char	13		19-31	Recipient Last Name - Left justified
4	FNAME	Char	10		32-41	Recipient First Name - Left justified
5	ELIG_CODE	Char	1		42	A = AIDS; N = NICU vent dependent; V = Vent dependent, non-NICU
6	DOB	Date	8		43-50	mmddyyyy
7	SEX	Char	1		51	F or M
8	PROV_ID	Num	8	0	52-59	Medicaid Provider Number
9	PROV LNAME	Char	13		60-72	Medicaid Provider Last Name – Left Justified
10	PROV FNAME	Char	10		73-82	Medicaid Provider First Name – Left Justified
11	FROM_DATE	Date	8		83-90	mmddyyyy
12	TO_DATE	Date	8		91-98	mmddyyyy
13	DIAG_1	Char	5		99-103	Left justified, ICD-9, implied decimal
14	DIAG_2	Char	5		104-108	Left justified, ICD-9, implied decimal
15	QTY	Num	4	0	109-112	Right justified (do not zero fill)
16	PROC_CODE	Char	5		113-117	Left justified, CPT-4, UB92
17	PROC_DESC	Char	10		118-127
18	DRUG_CODE	Num	11	0	128-138	National Drug Code
19	DRUG DESC	Char	10		139-148	Drug Name – Left Justified
20	AMT_BILL	Num	9	2	149-157	Include decimal (do not zero fill)
21	AMT-PAID	Num	9	2	158-166	Include decimal (do not zero fill)
22	ADMIT_DATE	Date	8		167-174	Hospital admission date: mmddyyyy
23	DIS_DATE	Date	8		175-182	Hospital discharge date: mmddyyyy
24	COUNTY CODE	Num	3		183-185	County Code - Where the enrollee resides for each date of service billed

Note: In addition to the total dollar amount(s) billed and paid for all enrollees the HMO must report the total dollar amount(s) billed and paid for each individual enrollee.

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B. Coordination of Benefits Quarterly Report Form and Instructions for Completing the Form

In order to comply with CMS reporting requirements, HMOs must submit a Coordination of Benefits (COB) report regarding their Medicaid and BadgerCare enrollees. For the purposes of this report, an HMO enrollee is any Medicaid recipient listed as an ADD or CONTINUE on the monthly HMO enrollment report(s) that are generated by the Department’s Medicaid fiscal agent.

Birth costs or delivery costs (e.g., routine delivery and associated hospital charges) are not to be included in the report.

The report is to be for the HMOs entire service area, aggregating separate service areas if the HMO has more than one service area. The report must be completed on a calendar quarterly basis and submitted to the Department’s fiscal agent within 45 days of the end of the quarter being reported, as specified in Article VII, I.

MAIL TO:	FAX TO:
Bureau of Managed Health Care Programs	Bureau of Managed Health Care Programs
ATTN: COB Analyst Room 265	ATTN: COB Analyst
P.O. Box 309	(608) 261-7792
Madison, WI 53701-0309

The COB report form follows this page.

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STATE OF WISCONSIN

MEDICAID/BADGERCARE

HMO REPORT ON COORDINATION OF BENEFITS

Name of HMO	Mailing Address
Office Telephone
Provider Number

Please designate below the quarter period for which information is given in this report.

                    , 20                     through             , 20

A. Cost Avoidance – Indicate the dollar amount you denied as a result of your knowledge of other insurance that is available for the enrollee.

Amount Cost Avoided:                         

B. Recoveries (Post-Pay Billing/Pay and Chase) – Indicate below the dollar amounts recovered as a result of:

Subrogation/Workers’ Compensation:                            

(e.g., collections from auto, homeowners, or malpractice insurance, restitution payments from the Division of Corrections, collections from Worker’s Compensation).

Other Recoveries:                            

(e.g., Third Party Liability (TPL), legal action, estate recoveries or any other recoveries that are not specifically noted above.)

I HEREBY CERTIFY that to the best of my knowledge and belief, the information contained in this report is a correct and complete statement prepared from the records of the HMO, except as noted on the report.

Signed:                                                                                                                                                                                                     

                                         Original Signature of Director or Administrator

Title:                                                                                                                                                                                                     

Date Signed:                                                                                                                                                                                         

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C. Medicaid and BadgerCare HMO Newborn Report

This report should be completed for infants born to mothers who are Medicaid or BadgerCare eligible and enrolled in the HMO at the time of birth of the infant.

1.      HMO Name:	In this field enter the name of the HMO reporting.
HMO Provider Number:	In this field enter the eight digit Medicaid provider number of the HMO reporting.
Telephone Number:	In this field enter the HMO telephone number the fiscal agent can call with questions about submitted newborn reports.
2.      Newborn Name:	In this field enter the name of the newborn infant. If the mother has not given a first and middle name to the baby at the time the report is completed, enter the last name of the newborn as the mother’s last name; the first name/middle initial can be entered as “baby male” or “baby female.”
Date of Birth:	In this field enter the date of birth of the newborn infant, in MM/DD/YY format.
Sex:	In this field check the sex of the newborn infant, Male or.
Low Birth Weight <1200 grams:	In this field check the box if the newborn infant weighs less than 1200 grams.
Twin:	In this field check no if the newborn infant is not a twin, check yes if the newborn infant is a twin. If the newborn infant is a twin, complete one newborn report for each twin.
Date of Death:	In this field enter the date of death, if the newborn infant died, in MM/DD/YY format.
3.      Mother’s Name:	In this field enter the first name, middle initial, and last name of the mother of the newborn infant.
Address:	In this field enter the address of the mother of the newborn infant – street address, city, state, and zip code.
Mother’s Medicaid ID Number:	In this field enter the 10 digit Medicaid or BadgerCare number of the mother of the newborn infant.

The HMO staff person completing the report should sign and date the form and send it to the address listed at the bottom of the report.

The HMO does not have to use the above format. However, whatever format the HMO uses, the HMO must submit all of the information described above to the Department’s fiscal agent.

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MEDICAID AND BADGERCARE HMO NEWBORN REPORT

Please print, type, or complete in a legible manner

1.	HMO Name
	HMO Provider Number
	Telephone Number
2.	Newborn Name
	(First)                         (M.I.)	(Last)
	Date of Birth                                                               ¨  Male                 ¨  Female
	¨  Low Birth Weight <1200 grams
	Twins:              ¨  No              ¨  Yes (If yes, complete two forms)
	Date of Death if Applicable
3.	Mother’s Name
	(First)                                          (M.I.)	(Last)
	Address
	(Street Address)
	(City)                                                          (State)	(Zip Code)
4.	Mother’s Medicaid or BadgerCare ID Number
5.	I certify this information is accurate to the best of my knowledge.
	Signature	Date

Mail To:	FAX To:
Medicaid Fiscal Agent	Medicaid Fiscal Agent
ATTN: Managed Care Unit	ATTN: Managed Care Unit
P.O. Box 6470	(608) 224-6318
Madison, WI 53716-0470

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D. HealthCheck Worksheet

HEALTHCHECK WORKSHEET

HMO NAME:                                                     

			Age Groups
		Calculation	< 1	1-5	6–14	15–20	Total
1	Number of eligible months for enrollees under age 21	Entered (Total is sum of age groups.)
2	Number of unduplicated enrollees under age 21	Entered
3	Ratio of recommended screens per age group member	Given	5.00	1.4	0.56	0.50
4	Average period of eligibility (in years)	Line 1 ÷ line 2 ÷ 12 (Total is calculated by formula.)
5	Adjusted ratio of recommended screens per age group member	Line 3 x line 4
6	Expected number of screens (100% of required screens for ages and months of eligibility)	Line 2 x line 5 (Total is sum of age groups.)
7	Number of screens in goal (80%)	Line 6 x 0.80 (Total is calculated by formula.)
8	Actual number of screens completed	Entered (Total is sum of age groups.)
9	Difference between goal and actual	Line 8 – line 7 (Positive result means goal is met; negative result means goal is not met.)
10	Percent of the HMO discount or premium if applicable except for Milwaukee, Dane, Eau Claire, Kenosha and Waukesha Counties.
11	Amount per screen to be recouped	FFS maximum allowable fee *(Refer Article III, K, 2) x line 10
12	Total recoupment	Line 11 x line 9

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E. Neonatal Intensive Care Unit (NICU) Risk-Sharing Report Format and Detail Data Requirements

HMO reporting of NICU costs must include all of the data elements specified in this section. Risk-sharing for NICU is based on the criteria defined in Article VI, I of this Contract. As specified in Article VII, I of this Contract NICU reports must be submitted to the Department’s Contract Specialist on or before May 1 of the following year. The HMO does not have to file a report if the NICU criteria is not met.

The NICU report form, detailed data format and worksheet follow this page.

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HMO NEONATAL INTENSIVE CARE UNIT (NICU) REPORT FORM

HMO Name:                                                                              

HMO Medicaid (Payee) Number                                     

Report Period: January 1, 200                 through December 31, 200    

Questions regarding this report should be referred to:                                             

                                                                                                      (please print)

Phone Number:                     

A. HMO DATA SUMMARY BY COUNTY

1. Hospital Inpatient Costs Associated with Level II, III, and IV NICU Services as defined in Article VI, I, 1 of this Contract.

Number of Days Number of Admissions Amount Billed Amount Paid

2. Physician Costs Associated with Level II, III, and IV NICU Services.

Amount Billed: Amount Paid

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B. HMO DETAILED NICU DATA FORMAT

The costs summarized in Section A must be reported by month, by county, and by year (i.e., if an enrollee is in an NICU for two or more months, the NICU days, physician and hospital costs must be separated by the month in which they occurred). Amounts paid must include payments for all physician and hospital services that were provided during the report period regardless of the HMO’s actual payment date.

Enrollee Name

Enrollee MA ID Number

Admit Date (mm/dd/yy)

Discharge Date (mm/dd/yy)

Total Number of NICU Admissions

Month

NICU Hospital Data by month First NICU Day (mm/dd/yy)

NICU Hospital Data by month Last NICU Day (mm/dd/yy)

Total Number of NICU Days (by month)

NICU Amount Billed Hosp (prorated by month)

NICU Amount Paid Hosp (prorated by month)

NICU Amount Billed Physician (by month)

NICU Amount Paid Physician (by month)

Name

xxxxxxxxxx

07/01/02

07/22/02

1

Jul

07/01/02

07/22/02

20

$

00,000.00

$

00,000.00

$

0,00.00

$

00.00

MAIL TO:

Bureau of Managed HealthCare Programs

ATTN: NICU Contracts Specialist Room 265

P.O. Box 309

Madison, WI 53701-0309

C. NICU WORKSHEET

HMOs may complete the worksheet following this page to determine if their NICU days meet the criteria defined in Article VI, I. HMOs do not have to file a report if the NICU criteria is not met.

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Neonatal Intensive Care Unit Risk-Sharing Worksheet

Calculation

1.      HMO enrollee months:
2.      Enrollee years:	(line 1/12)
3.      Threshold (75 days per 1000 enrollee years):	(75 x line 2/1000)
4.      NICU days reported by HMO:
5.      NICU days over threshold to be reimbursed:	(line 4 – line 3)
6.      Inpatient paid:
7.      Physician paid:
8.      Total cost:	(line 6 + line 7)
9.      Average cost per day:	(line 8 /line 4)
10.    90% of cost/day (Not to exceed $1,443):	(0.9 x line 9)
11.    Reimbursement amount (Days x 90% cost):	(line 5 x line 10)

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F. Court Ordered Birth Cost Requests

County Child Support Agencies (CSA) obtain court orders requiring fathers to repay birth costs that have been paid by Medicaid FFS as well as Medicaid Health Maintenance Organizations (HMO). In some counties, judges will not assign birth costs to the father based upon average costs. Upon request of the Medicaid fiscal agent Contract Monitor, the HMO must provide actual charges less any payments made by a third party payer for the use by the court in setting actual birth and related costs to be paid by the father. Birth cost information must be submitted to the Bureau of Managed Health Care Programs within 14 days from the date the request was received by the HMO.

The birth cost report forms follows this page.

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MEDICAID AND BADGERCARE HMO BIRTH COST REQUEST

PART I: Local Child Support Agency Portion

PART I: To be completed by the Local Child Support Agency. Please type or print, in a legible manner.

1.	HMO Name
2.	Mother’s Name
	(First)                         (M.I.)                              (Last)
Medicaid/BadgerCare ID Number
Address
	(Street Address)
	(City)                                          (State)                                     (Zip Code)
3.	Newborn’s Name
	(First)                                                  (M.I.)                                 (Last)
Medicaid/BadgerCare ID Number
Date of Birth                                                                       Sex

Note: In cases of multiple births, a form must be completed for each newborn. In addition, the form(s) should not be submitted to the BMHCP until 60 days after the birth.

4. I certify this information is accurate to the best of my knowledge:

Name of Local Child Support Agency
Name (Please Print)
Signature
Title
Date
Telephone Number:	FAX Number:
Email Address:

Mail To:	FAX To:
Bureau of Managed HealthCare Programs	Bureau of Managed HealthCare Programs
ATTN: Birth Costs, Room 265	ATTN: Birth Costs
P.O. BOX 309	(608) 261-7792
MADISON, WI 53701-0309

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PART II: HMO Portion

Part II: To be completed by the HMO. Please type or print in a legible manner.

1. The actual payment for birthing costs for the mother and her baby.

Mother’s Name                                                                               ID#
Baby’s Name                                     ID#                                         D.O.B
Hospital/Birthing Center Payment (Mother)	$
Hospital/Birthing Center Payment (Newborn)	$
Physician Payment (Mother)	$
Physician Payment (Newborn)	$
Amount Paid by Other Insurance	$

2. Comments: (i.e., retroactively disenrolled from [HMO NAME] effective [DATE], services denied)

[State Denial Reason]:                                                                                                                                                

3. I certify this information is accurate to the best of my knowledge.

Name of HMO
Name (Please Print)
Signature
Title
Date
Telephone Number:	FAX Number:
Email Address:

4. Mail or FAX Part I and Part II within 14 days of receipt to:

Mail To:	FAX To:
Bureau of Managed Health Care Programs	Bureau of Managed Health Care Programs
ATTN: Birth Costs, Room 265	ATTN: Birth Costs
P.O. Box 309	(608) 261-7792
Madison, WI 53701-0309

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G. Complaint and Grievance Reporting Forms

1. Grievance Experience Summary Report

Summarize each Medicaid and BadgerCare grievance reviewed in the past quarter.

a. Grievances Related to Program Administration

Member Identification Number Date Grievance Filed Nature of Grievance Date Resolved Summary of Grievance Resolution Administrative Changes as a Result of Grievance Review

b. Grievances Related to Benefit Denial/Reduction

Member Identification Number Date Grievance Filed Nature of Grievance Date Resolved Summary of Grievance Resolution Administrative Changes as a Result of Grievance Review

c. Summary

SUBTOTAL: Program Administration

SUBTOTAL: Benefit Denial/Reduction

TOTAL NUMBER OF GRIEVANCES:

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2. HMO Reporting Form for Complaints

                                                 HMO Name

¨        First Quarter

¨        Second Quarter

¨        Third Quarter

¨        Fourth Quarter

¨        Calendar Year 2004

¨        Calendar Year 2005

TYPE OF COMPLAINT	TOTAL NUMBER OF COMPLAINTS
1.      ACCESS PROBLEMS
2.      BILLING ISSUES
3.      QUALITY OF CARE
4.      DENIAL OF SERVICE
5.      OTHER SPECIFY:

General Definitions

1. Access problems include any problem identified by the HMO that causes an enrollee to have difficulty getting an appointment, receiving care, or on culturally appropriate care, including the provision of interpreter services in a timely manner.

2. Billing issues include the denial of a service or a recipient receiving a bill for a Medicaid covered service that the HMO is responsible for providing or arranging for the provision of that service.

3. Quality of care includes long waiting time in the reception area of providers’ offices, rude providers or provider staff, or any other complaint related directly to patient care.

4. Denial of service includes any Medicaid covered service that the HMO denied.

5. Others as identified by each HMO.

Return the completed forms to:

Bureau of Managed Health Care Programs

ATTN: Grievance Contracts Specialist, Rm 265

P.O. Box 309

Madison, WI 53701-0309

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H. Attestation Form

ATTESTATION

I,                                                                   , have reviewed the following data:

                            (Name and Title)

¨ Encounter Data for (month)                     (year) 200    .

¨ AIDS/Vent Report for (quarter)                    for (year) 200    .

¨ Other                                          (Specify Report)

I hereby attest and affirm that the information being submitted is complete, factual and correct to the best of my knowledge. I furthermore attest and affirm that no material facts have been omitted from this form. I understand that payment and satisfaction of this/these claim(s) will be from federal and state public funds and that I may be prosecuted under applicable federal and state laws for any false claims, statements, or documents, or concealment of a material fact. I furthermore understand that state or federal authorities may inspect all claims, records or documents pertaining to the provision of these services.

(Signature)	(Date)
(Print Name)	(Print Date)

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ADDENDUM IX

GENERAL INFORMATION ABOUT THE WIC PROGRAM AND SAMPLE HMO-TO-

WIC REFERRAL FORMS

General Information about the WIC Program and its Relationship to Medicaid HMOs

The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) is a program enacted as an amendment to the Child Nutrition Act of 1996, and is funded by USDA. WIC provides supplemental nutritious foods, nutrition education, and referrals to pregnant and breastfeeding women, infants and children up to age five, who are determined to be at nutritional risk. Income eligibility is determined by family size and gross income (185% of the poverty level). WIC uses “adjunctive” eligibility which means that any recipient of Medicaid (including Healthy Start and BadgerCare) is income eligible for WIC.

The State Division of Public Health contracts with 69 local agencies to provide WIC benefits. In Wisconsin, most WIC agencies are local health departments, but other community-based organizations are contracted with WIC to provide WIC benefits, including community action programs. other private non-profit health agencies and one hospital.

WIC serves approximately 106,000 women, infants and children each month. Approximately fifty-three thirty-five (53) percent of all Wisconsin births are on WIC. Approximately half of all WIC participants were enrolled in a Medicaid HMO. Seventy-one (71) percent of all participants have incomes at or below the poverty level; thirty-five (35) percent have less than a high school education.

Section 1902(a)(11)(C) of the Social Security Act requires coordination between Medicaid HMOs and WIC. This coordination includes the referral of potentially eligible women, infants, and children to the WIC program and the provision of medical information by providers working within Medicaid managed care plans to the WIC program if requested by WIC agencies. Typical types of medical information requested by WIC agencies include information on nutrition related metabolic disease, diabetes, low birth weight, failure to thrive, prematurity, infants of alcoholic, mentally retarded, or drug addicted mothers, AIDS, allergy or intolerance that affects nutritional status, and anemia.

The WIC referral forms follow this page. Multiple copies of the forms may be obtained from local WIC agencies. More information about the WIC program and a list of local WIC agencies can be found on the WIC website (www.dhfs.state.wi.us/wic).

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DEPARTMENT OF HEALTH AND FAMILY SERVICES	STATE OF WISCONSIN
Division of Public Health	Bureau of Family & Community Health
DPH 4024B (Rev. 08/03)	WIC Program, Federal Reg. 246

WIC MEDICAL REFERRAL INFANTS AND CHILDREN (THROUGH 4 YEARS OF AGE)

Completion of this form is voluntary. Personally identifiable information is used to determine WIC services

(e.g., certification / enrollment and food package issuance) and may be disclosed to others only as allowed by state and federal laws.

INSTRUCTIONS: To facilitate WIC services (certification and food package issuance) for your WIC-eligible patient, fill in the blanks and check the boxes, as appropriate, and return this form to the WIC Project indicated at the bottom of the page.

Patient’s First and Last Name	Birthdate
Address	Telephone
Parent / Caregiver’s First and Last Name

ALL INFANTS AND CHILDREN		INFANTS ONLY
Present weight	Hct             % and/or Hgb              gm	Birth weight
Length / stature		Birth length
¨  recumbent or    ¨  standing	Date taken	Gestational age
Date taken	Blood lead	E.D.D.
Vitamin / Mineral Rx	Date taken

INFANTS Medical conditions the mother had prenatally
¨  anemia	¨  high blood lead	¨  food allergy or intolerance, specify
¨  pregnancy-induced hypertension	¨  gestational diabetes
¨  nutrition-related infectious or chronic disease, genetic or central nervous system disorder,        or other medical condition, specify

Current nutrition-related health problems
¨  pyloric stenosis	¨  GI reflux	¨  LGA at birth	¨  currently LGA	¨  head circumference <5th percentile

ALL INFANTS AND CHILDREN – Current nutrition-related health problems
¨  SGA at birth	¨  food allergy or intolerance, specify	¨  failure to thrive
¨  currently SGA	¨  recent surgery, trauma, or burns, specify

¨  infectious disease in last 6 months, specify:
¨  pneumonia	¨  HIV or AIDS	¨  tuberculosis
¨  bronchiolitis (# episodes in last 6 mos                             )	¨  meningitis	¨  parasitic infection
¨  nutrition-related chronic disease, genetic or central nervous system disorder, or other medical condition

FORMULA PRESCRIBED Special formula for infants and children:
¨  Similac NeoSure Advance	¨  Enfamil AR LIPIL or Enfamil AR	¨  Kindercal	¨  Pediatric EO28
¨  Enfamil EnfaCare LIPIL	¨  Neocate	¨  PediaSure	¨  EleCare
¨  Enfamil Nutramigen LIPIL or         Enfamil Nutramigen	¨  Similac PM 60/40 ¨  Enfamil Pregestimil	¨  PediaSure w/Fiber	¨  Portagen
¨  Alimentum Advance or Alimentum

Standard formula for children:
¨  Similac with Iron	¨  Isomil Soy with Iron	¨  Similac Lactose Free with Iron
¨  Similac Advance with Iron	¨  Isomil Advance Soy with Iron	¨  Similac Lactose Free Advance with Iron
Intended length of use

Additional Diagnoses / Health Concerns / Diet Orders

SIGNATURE – Health Care Provider	Date Signed
(Physician, physician assistant, or advanced practice nurse prescriber signature is required for prescription of special formulas and formulas for children.)
Medical Office / Clinic
Address	Telephone

  LOCAL WIC PROJECT:

WIC is an Equal Opportunity Provider and Employer

HMO Contract for February 1, 2006 - December 31, 2007

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DEPARTMENT OF HEALTH AND FAMILY SERVICES	STATE OF WISCONSIN
Division of Public Health	Bureau of Family & Community Health
DPH 4024A (Rev. 11/02)	WIC Program, Federal Reg. 246

WIC MEDICAL REFERRAL

PREGNANT, BREASTFEEDING AND NONBREASTFEEDING POSTPARTUM WOMEN

Completion of this form is voluntary. Personally identifiable information is used to determine WIC services

(e.g., certification / enrollment and food package issuance) and may be disclosed to others only as allowed by state and federal laws.

INSTRUCTIONS: To facilitate WIC services (certification and food package issuance) for your WIC-eligible patient, fill in the blanks and check the boxes, as appropriate, and return this form to the WIC Project indicated at the bottom of the page.

Patient’s First and Last Name	Birthdate
Address	Telephone

ALL WOMEN		PREGNANT	POSTPARTUM
Present weight	Hct                                       %	E.D.D.	Delivery date
Present height	And/or	Weeks gest.	Prepreg. Weight
Date taken	Hgb                                     gm	Prepreg. weight	Weight gained
Vitamin / Mineral Rx	Date taken

ALL WOMEN

Current nutrition-related health problems

¨  food allergy or intolerance, specify                                                                                                                                                        

¨  recent major surgery, trauma, or burns, specify                                                                                                                                     

¨  infectious disease in last 6 months:

¨  pneumonia                ¨  tuberculosis                ¨  HIV or AIDS                ¨  meningitis                ¨  parasitic infection

¨  nutrition-related chronic disease, genetic or central nervous system disorder, or other medical condition,

          specify:                                                                                                                                                                                                  

Obstetrical history in any previous pregnancy (if currently pregnant) or most recent pregnancy (if currently postpartum)
¨  gestational diabetes	¨  large for gestational age infant
¨  low birth weight or preterm infant	¨  fetal or neonatal death
¨  infant with nutrition-related birth defect, specify

PREGNANT WOMEN - Current nutrition-related health problems
¨  gestational diabetes ¨  pregnancy-induced hypertension	¨  hyperemesis gravidarum ¨  fetal growth restriction

MEDICAL NUTRITIONAL PRESCRIBED
Ensure:	¨  Regular	¨  Fiber	¨  Glucerna	¨  Glucerna OS	¨  High Calcium	¨  High protein	¨  Light	¨  Plus	¨  Plus HN
Boost:	¨  Regular	¨  Fiber	¨  Plus	¨  High Protein	¨  Breeze
Sustacal:	¨  Regular	¨  Plus
Intended length of use

Additional Diagnoses / Health Concerns / Diet Orders

SIGNATURE – Health Care Provider                                                                                           Date Signed                                            

(Physician, physician assistant, or advanced practice nurse prescriber signature is required for prescription of a medical nutritional.)

Medical Office / Clinic                                                                                                                                                                                     

Address                                                                                                                                                    Telephone                                     

LOCAL WIC PROJECT:

WIC is an Equal Opportunity Provider and Employer

Pages 190 through 241 have been deleted as the information contained in those pages can be found on the Bureau of Family and Community Health Services that pertains to the WIC program.

HMO Contract for February 1, 2006 - December 31, 2007

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EX-10.5

Exhibit 10.5

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)
Subject: HHSC Managed Care Contract	HHSC Contract No. 529-06-0280-00014

Part 1: Parties to the Contract:
This Contract is between the Texas Health and Human Services Commission (HHSC), an administrative agency within the executive department of the State of Texas, having its principal office at 4900 North Lamar Boulevard, Austin, Texas 78751, and Superior HealthPlan, Inc. (HMO) a corporation organized under the laws of the State of Texas, having its principal place of business at: 2100 South IH-35, Suite 202, Austin, Texas 78704.
Part 2: Contract Effective Date:	Part 3: Contract Expiration Date	Part 4: Operational Start Date:
November 15, 2005	August 31, 2008	September 1, 2006
Part 5: Project Managers:
HHSC:	HMO:
Pamela Coleman Director of Medicaid/CHIP Health Plan Operations 11209 Metric Boulevard, Building H Austin, Texas 78758 Phone: 512-491-1302 Fax: 512-491-1966	Stacey Hull Vice President of Regulatory Affairs 2100 South IH-35, Suite 202 Austin, Texas 78704 Phone: 512-692-1465 Fax: 512-692-1474 E-mail: shull@centene.com
Part 6: Deliver Legal Notices to:
HHSC:	HMO:
General Counsel 4900 North Lamar Boulevard, 4th Floor Austin, Texas 78751 Fax: 512-424-6586	Superior HealthPlan 2100 South IH-35, Suite 202 Austin, Texas 78704 Fax: 512-692-1435
Part 7: HMO Programs and Service Areas:
This Contract applies to the following HHSC HMO Programs and Service Areas (check all that apply). All references in the Contract Attachments to HMO Programs or Service Areas that are not checked are superfluous and do not apply to the HMO.
x Medicaid STAR HMO Program
Service Areas:	x Bexar ¨ Dallas x El Paso ¨ Harris	x Lubbock x Nueces ¨ Tarrant x Travis

Page 1 of 3

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)
Subject: HHSC Managed Care Contract	HHSC Contract No. 529-06-0280-00014

x CHIP HMO Program
Core Service Areas:	x Bexar ¨ Dallas x El Paso ¨ Harris x Lubbock	x Nueces ¨ Tarrant x Travis ¨ Webb
Optional Service Areas:	x Bexar x El Paso ¨ Harris	x Lubbock x Nueces x Travis
See Attachment B-6, “Map of Counties with HMO Program Service Areas,” for listing of counties included within the STAR Service Areas, CHIP Core Service Areas, and CHIP Optional Service Areas.
Part 8: Payment
Capitation: See Attachment A, “HHSC Uniform Managed Care Contract Terms and Conditions,” Article 10, for a description of the Capitation Rate-setting methodology and the Capitation Payment requirements for the STAR and CHIP Programs.
STAR SSI Administrative Fee: HHSC will pay a STAR HMO a monthly Administrative Fee of $14.00 per SSI Beneficiary who voluntarily enrolls in the HMO in accordance with Attachment A, “HHSC Uniform Managed Care Contract Terms and Conditions,” Article 10.
Delivery Supplemental Payment: See Attachment A, “HHSC Uniform Managed Care Contract Terms and Conditions,” Article 10, for a description of the methodology for establishing the Delivery Supplemental Payment for the STAR and CHIP Programs.
Part 9: Contract Attachments:
A: HHSC Uniform Managed Care Contract Terms & Conditions, Version 1.0 B: Scope of Work/Performance Measures B-1: HHSC RFP 529-04-272, Sections 6-9 B-2: Covered Services B-3: Value-added Services B-4: Performance Improvement Goals B-5: Deliverables/Liquidated Damages Matrix B-6: Map of Counties with HMO Program Service Areas C: HMO’s Proposal and Related Documents C-1: HMO’s Proposal C-2: HMO Supplemental Responses C-3: Agreed Modifications to HMO’s Proposal

Page 2 of 3

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)
Subject: HHSC Managed Care Contract	HHSC Contract No. 529-06-0280-00014

Part 10: Signatures:
The Parties have executed this Contract in their capacities as stated below with authority to bind their organizations on the dates set forth by their signatures.
Texas Health and Human Services Commission		Superior HealthPlan, Inc.
/s/ Charles E. Bell, M.D.		/s/ Christopher Bowers
By:	Charles E. Bell, M.D.	By:	Christopher Bowers
Title:	Deputy Executive Commissioner for Health Services	Title:	President and CEO
Date:	11/15/05	Date:	11/10/05

Page 3 of 3

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Texas Health & Human Services Commission

Uniform Managed Care Contract Terms & Conditions

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

DOCUMENT HISTORY LOG

STATUS1	DOCUMENT REVISION2	EFFECTIVE DATE	DESCRIPTION3
Baseline	n/a		Initial version of the Uniform Managed Care Contract Terms & Conditions

¹ Status should be represented as “Baseline” for initial issuances, “Revision” for changes to the Baseline version, and “Cancellation” for withdrawn versions

² Revisions should be numbered in accordance according to the version of the issuance and sequential numbering of the revision—e.g., “1.2” refers to the first version of the document and the second revision.

³ Brief description of the changes to the document made in the revision.

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

TABLE OF CONTENTS

Article 1. Introduction	2
Section 1.01 Purpose.	2
Section 1.02 Risk-based contract.	2
Section 1.03 Inducements.	2
Section 1.04 Construction of the Contract.	2
Section 1.05 No implied authority.	3
Section 1.06 Legal Authority.	3
Article 2. Definitions	3
Article 3. General Terms & Conditions	14
Section 3.01 Contract elements.	14
Section 3.02 Term of the Contract.	14
Section 3.03 Funding.	14
Section 3.04 Delegation of authority.	14
Section 3.05 No waiver of sovereign immunity.	14
Section 3.06 Force majeure.	14
Section 3.07 Publicity.	14
Section 3.08 Assignment.	15
Section 3.09 Cooperation with other vendors and prospective vendors.	15
Section 3.10 Renegotiation and reprocurement rights.	15
Section 3.11 RFP errors and omissions.	15
Section 3.12 Attorneys’ fees.	15
Section 3.13 Preferences under service contracts.	15
Section 3.14 Time of the essence.	15
Section 3.15 Notice	16
Article 4. Contract Administration & Management	16
Section 4.01 Qualifications, retention and replacement of HMO employees.	16
Section 4.02 HMO’s Key Personnel.	16
Section 4.03 Executive Director.	16
Section 4.04 Medical Director.	17
Section 4.05 Responsibility for HMO personnel and Subcontractors.	17
Section 4.06 Cooperation with HHSC and state administrative agencies.	18
Section 4.07 Conduct of HMO personnel.	18
Section 4.08 Subcontractors.	18
Section 4.09 HHSC’s ability to contract with Subcontractors.	19
Section 4.10 HMO Agreements with Third Parties	19
Article 5. Member Eligibility & Enrollment	20
Section 5.01 Eligibility Determination	20
Section 5.02 Member Enrollment & Disenrollment.	20
Section 5.03 STAR enrollment for pregnant women and infants.	20
Section 5.04 CHIP eligibility and enrollment.	20
Section 5.05 Span of Coverage	21
Section 5.06 Verification of Member Eligibility.	21
Section 5.07 Special Temporary STAR Default Process	21
Article 6. Service Levels & Performance Measurement	21
Section 6.01 Performance measurement.	21
Article 7. Governing Law & Regulations	22
Section 7.01 Governing law and venue.	22
Section 7.02 HMO responsibility for compliance with laws and regulations.	22
Section 7.03 TDI licensure/ANHC certification and solvency.	22
Section 7.04 Immigration Reform and Control Act of 1986.	23

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Section 7.05 Compliance with state and federal anti-discrimination laws.	23
Section 7.06 Environmental protection laws.	23
Section 7.07 HIPAA.	23
Article 8. Amendments & Modifications	23
Section 8.01 Mutual Contract.	23
Section 8.02 Changes in law or contract.	23
Section 8.03 Modifications as a remedy.	24
Section 8.04 Modifications upon renewal or extension of Contract.	24
Section 8.05 Modification of HHSC Uniform Managed Care Manual.	24
Section 8.06 CMS approval of STAR amendments.	24
Section 8.07 Required compliance with amendment and modification procedures.	24
Article 9. Audit & Financial Compliance	24
Section 9.01 Financial record retention and audit.	24
Section 9.02 Access to records, books, and documents.	24
Section 9.03 Audits of Services, Deliverables and inspections.	25
Section 9.04 SAO Audit	25
Section 9.05 Response/compliance with audit or inspection findings.	25
Article 10. Terms & Conditions of Payment	26
Section 10.01 Calculation of monthly Capitation Payment.	26
Section 10.02 Time and Manner of Payment.	26
Section 10.03 Certification of Capitation Rates.	26
Section 10.04 Modification of Capitation Rates.	26
Section 10.05 STAR Capitation Structure.	26
CHIP Capitation Rates Structure.	27
Section 10.07 HMO input during rate setting process.	28
Adjustments to Capitation Payments.	28
Delivery Supplemental Payment for CHIP and STAR HMOs.	28
Administrative Fee for SSI Members	29
Experience Rebate	29
Payment by Members.	30
Restriction on assignment of fees.	31
Liability for taxes.	31
Liability for employment-related charges and benefits.	31
No additional consideration.	31
Article 11. Disclosure & Confidentiality of Information	31
Section 11.01 Confidentiality.	31
Section 11.02 Disclosure of HHSC’s Confidential Information.	32
Section 11.03 Member Records	32
Section 11.04 Requests for public information.	32
Section 11.05 Privileged Work Product.	32
Section 11.06 Unauthorized acts.	33
Section 11.07 Legal action.	33
Article 12. Remedies & Disputes	33
Section 12.01 Understanding and expectations.	33
Section 12.02 Tailored remedies.	33
Section 12.03 Termination by HHSC.	35
Section 12.04 Termination by HMO.	37
Section 12.05 Termination by mutual agreement.	37
Section 12.06 Effective date of termination.	37
Section 12.07 Extension of termination effective date.	37
Section 12.08 Payment and other provisions at Contract termination.	37
Section 12.09 Modification of Contract in the event of remedies.	37
Section 12.10 Turnover assistance.	38

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Section 12.11 Rights upon termination or expiration of Contract.	38
Section 12.12 HMO responsibility for associated costs.	38
Section 12.13 Dispute resolution.	38
Section 12.14 Liability of HMO.	39
Article 13. Assurances & Certifications	39
Section 13.01 Proposal certifications.	39
Section 13.02 Conflicts of interest.	39
Section 13.03 Organizational conflicts of interest.	39
Section 13.04 HHSC personnel recruitment prohibition.	40
Section 13.05 Anti-kickback provision.	40
Section 13.06 Debt or back taxes owed to State of Texas.	40
Section 13.07 Certification regarding status of license, certificate, or permit.	40
Section 13.08 Outstanding debts and judgments.	40
Article 14. Representations & Warranties	40
Section 14.01 Authorization.	40
Section 14.02 Ability to perform.	40
Section 14.03 Minimum Net Worth.	40
Section 14.04 Insurer solvency.	40
Section 14.05 Workmanship and performance.	41
Section 14.06 Warranty of deliverables.	41
Section 14.07 Compliance with Contract.	41
Section 14.08 Technology Access	41
Article 15. Intellectual Property	41
Section 15.01 Infringement and misappropriation.	41
Section 15.02 Exceptions.	42
Section 15.03 Ownership and Licenses	42
Article 16. Liability	43
Section 16.01 Property damage.	43
Section 16.02 Risk of Loss.	43
Section 16.03 Limitation of HHSC’s Liability.	43
Article 17. Insurance & Bonding	43
Section 17.01 Insurance Coverage.	43
Section 17.02 Performance Bond.	44
Section 17.03 TDI Fidelity Bond	45

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Article 1. Introduction

Section 1.01 Purpose.

The purpose of this Contract is to set forth the terms and conditions for the HMO’s participation as a managed care organization in one or more of the HMO Programs administered by HHSC. Under the terms of this Contract, HMO will provide comprehensive health care services to qualified Program recipients through a managed care delivery system.

Section 1.02 Risk-based contract.

This is a Risk-based contract.

Section 1.03 Inducements.

In making the award of this Contract, HHSC relied on HMO’s assurances of the following:

(1) HMO is an established health maintenance organization that arranges for the delivery of health care services, is currently licensed as such in the State of Texas and is fully authorized to conduct business in the Service Areas;

(2) HMO and the HMO Administrative Service Subcontractors have the skills, qualifications, expertise, financial resources and experience necessary to provide the Services and Deliverables described in the RFP, HMO’s Proposal, and this Contract in an efficient, cost-effective manner, with a high degree of quality and responsiveness, and has performed similar services for other public or private entities;

(3) HMO has thoroughly reviewed, analyzed, and understood the RFP, has timely raised all questions or objections to the RFP, and has had the opportunity to review and fully understand HHSC’s current program and operating environment for the activities that are the subject of the Contract and the needs and requirements of the State during the Contract term;

(4) HMO has had the opportunity to review and understand the State’s stated objectives in entering into this Contract and, based on such review and understanding, HMO currently has the capability to perform in accordance with the terms and conditions of this Contract;

(5) HMO also has reviewed and understands the risks associated with the HMO Programs as described in the RFP, including the risk of non-appropriation of funds.

Accordingly, on the basis of the terms and conditions of this Contract, HHSC desires to engage HMO to perform the Services and provide the Deliverables described in this Contract under the terms and conditions set forth in this Contract.

Section 1.04 Construction of the Contract.

(a) Scope of Introductory Article.

The provisions of any introductory article to the Contract are intended to be a general introduction and are not intended to expand the scope of the Parties’ obligations under the Contract or to alter the plain meaning of the terms and conditions of the Contract.

(b) References to the “State.”

References in the Contract to the “State” shall mean the State of Texas unless otherwise specifically indicated and shall be interpreted, as appropriate, to mean or include HHSC and other agencies of the State of Texas that may participate in the administration of the HMO Programs, provided, however, that no provision will be interpreted to include any entity other than HHSC as the contracting agency.

(c) Severability.

If any provision of this Contract is construed to be illegal or invalid, such interpretation will not affect the legality or validity of any of its other provisions. The illegal or invalid provision will be deemed stricken and deleted to the same extent and effect as if never incorporated in this Contract, but all other provisions will remain in full force and effect.

(d) Survival of terms.

Termination or expiration of this Contract for any reason will not release either Party from any liabilities or obligations set forth in this Contract that:

(1) The Parties have expressly agreed shall survive any such termination or expiration; or

(2) Arose prior to the effective date of termination and remain to be performed or by their nature would be intended to be applicable following any such termination or expiration.

(e) Headings.

The article, section and paragraph headings in this Contract are for reference and convenience only and may not be considered in the interpretation of this Contract.

(f) Global drafting conventions.

(1) The terms “include,” “includes,” and “including” are terms of inclusion, and where used in this Contract, are deemed to be followed by the words “without limitation.”

(2) Any references to “sections,” “appendices,” “exhibits” or “attachments” are deemed to be references to sections, appendices, exhibits or attachments to this Contract.

(3) Any references to laws, rules, regulations, and manuals in this Contract are deemed references to these documents as amended, modified, or supplemented from time to time during the term of this Contract.

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Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Section 1.05 No implied authority.

The authority delegated to HMO by HHSC is limited to the terms of this Contract. HHSC is the state agency designated by the Texas Legislature to administer the HMO Programs, and no other agency of the State grants HMO any authority related to this program unless directed through HHSC. HMO may not rely upon implied authority, and specifically is not delegated authority under this Contract to:

(1) make public policy;

(2) promulgate, amend or disregard administrative regulations or program policy decisions made by State and federal agencies responsible for administration of HHSC Programs; or

(3) unilaterally communicate or negotiate with any federal or state agency or the Texas Legislature on behalf of HHSC regarding the HHSC Programs.

HMO is required to cooperate to the fullest extent possible to assist HHSC in communications and negotiations with state and federal governments and agencies concerning matters relating to the scope of the Contract and the HMO Program(s), as directed by HHSC.

Section 1.06 Legal Authority.

(a) HHSC is authorized to enter into this Contract under Chapters 531 and 533, Texas Government Code; Section 2155.144, Texas Government Code; and/or Chapter 62, Texas Health & Safety Code. HMO is authorized to enter into this Contract pursuant to the authorization of its governing board or controlling owner or officer.

(b) The person or persons signing and executing this Contract on behalf of the Parties, or representing themselves as signing and executing this Contract on behalf of the Parties, warrant and guarantee that he, she, or they have been duly authorized to execute this Contract and to validly and legally bind the Parties to all of its terms, performances, and provisions.

Article 2. Definitions

As used in this Contract, the following terms and conditions shall have the meanings assigned below:

Abuse means provider practices that are inconsistent with sound fiscal, business, or medical practices and result in an unnecessary cost to the Medicaid or CHIP Program, or in reimbursement for services that are not Medically Necessary or that fail to meet professionally recognized standards for health care. It also includes Member practices that result in unnecessary cost to the Medicaid or CHIP Program.

Account Name means the name of the individual who lives with the child(ren) and who applies for the Children’s Health Insurance Program coverage on behalf of the child(ren).

Action (Medicaid only) means:

(1) the denial or limited authorization of a requested Medicaid service, including the type or level of service;

(2) the reduction, suspension, or termination of a previously authorized service;

(3) the denial in whole or in part of payment for service;

(4) the failure to provide services in a timely manner;

(5) the failure of an HMO to act within the timeframes set forth in the Contract and 42 C.F.R. §438.408(b); or

(6) for a resident of a rural area with only one HMO, the denial of a Medicaid Members’ request to obtain services outside of the Network.

An Adverse Determination is one type of Action.

Acute Care means preventive care, primary care, and other medical care provided under the direction of a physician for a condition having a relatively short duration.

Acute Care Hospital means a hospital that provides acute care services

Adjudicate means to deny or pay a clean claim.

Administrative Services see HMO Administrative Services.

Administrative Services Contractor see HHSC Administrative Services Contractor.

Adverse Determination means a determination by an HMO or Utilization Review agent that the Health Care Services furnished, or proposed to be furnished to a patient, are not Medically Necessary or not appropriate.

Affiliate means any individual or entity owning or holding more than a five percent (5%) interest in the HMO or in which the HMO owns or holds more than a five percent (5%) interest; any parent entity; or subsidiary entity of the HMO, regardless of the organizational structure of the entity.

Agreement or Contract means this formal, written, and legally enforceable contract and amendments thereto between the Parties.

Allowable Expenses means all expenses related to the Contract between HHSC and the HMO that are incurred during the Contract Period, are not reimbursable or recovered from another source, and that conform with the HHSC Uniform Managed Care Manual’s “Cost Principles for Administrative Expenses.”

AAP means the American Academy of Pediatrics.

Approved Non-Profit Health Corporation (ANHC) means an organization formed in compliance with Chapter 844 of the Texas Insurance Code and licensed by TDI. See also HMO.

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Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Appeal (Medicaid only) means the formal process by which a Member or his or her representative request a review of the HMO’s Action, as defined above.

Appeal (CHIP only) means the formal process by which a Utilization Review agent addresses Adverse Determinations.

Auxiliary Aids and Services includes:

(1) qualified interpreters or other effective methods of making aurally delivered materials understood by persons with hearing impairments;

(2) taped texts, large print, Braille, or other effective methods to ensure visually delivered materials are available to individuals with visual impairments; and

(3) other effective methods to ensure that materials (delivered both aurally and visually) are available to those with cognitive or other Disabilities affecting communication.

Behavioral Health Services means Covered Services for the treatment of mental, emotional, or chemical dependency disorders.

Benchmark means a target or standard based on historical data or an objective/goal.

Business Continuity Plan or BCP means a plan that provides for a quick and smooth restoration of MIS operations after a disruptive event. BCP includes business impact analysis, BCP development, testing, awareness, training, and maintenance. This is a day-to-day plan.

Business Day means any day other than a Saturday, Sunday, or a state or federal holiday on which HHSC’s offices are closed, unless the context clearly indicates otherwise.

CAHPS means the Consumer Assessment of Health Plans Survey. This survey is conducted annually by the EQRO.

Call Coverage means arrangements made by a facility or an attending physician with an appropriate level of health care provider who agrees to be available on an as-needed basis to provide medically appropriate services for routine, high risk, or Emergency Medical Conditions or Emergency Behavioral Health Conditions that present without being scheduled at the facility or when the attending physician is unavailable.

Capitation Rate means a fixed predetermined fee paid by HHSC to the HMO each month in accordance with the Contract, for each enrolled Member in a defined Rate Cell, in exchange for the HMO arranging for or providing a defined set of Covered Services to such a Member, regardless of the amount of Covered Services used by the enrolled Member.

Capitation Payment means the aggregate amount paid by HHSC to the HMO on a monthly basis for the provision of Covered Services to enrolled Members in accordance with the Capitation Rates in the Contract.

Case Head means the head of the household that is applying for Medicaid.

C.F.R. means the Code of Federal Regulations.

Chemical Dependency Treatment means treatment provided for a chemical dependency condition by a Chemical Dependency Treatment facility, chemical dependency counselor or hospital.

Children’s Health Insurance Program or CHIP means the health insurance program authorized and funded pursuant to Title XXI, Social Security Act (42 U.S.C. §§ 1397aa-1397jj) and administered by HHSC.

Child (or Children) with Special Health Care Needs (CSHCN) means a child (or children) who:

(1) ranges in age from birth up to age nineteen (19) years;

(2) has a serious ongoing illness, a complex chronic condition, or a disability that has lasted or is anticipated to last at least twelve (12) continuous months or more;

(3) has an illness, condition or disability that results (or without treatment would be expected to result) in limitation of function, activities, or social roles in comparison with accepted pediatric age-related milestones in the general areas of physical, cognitive, emotional, and/or social growth and/or development;

(4) requires regular, ongoing therapeutic intervention and evaluation by appropriately trained health care personnel; and

(5) has a need for health and/or health-related services at a level significantly above the usual for the child’s age.

CHIP HMO Program, or CHIP Program, means the State of Texas program in which HHSC contracts with HMOs to provide, arrange for, and coordinate Covered Services for enrolled CHIP Members.

CHIP HMOs means HMOs participating in the CHIP HMO Program.

Chronic or Complex Condition means a physical, behavioral, or developmental condition which may have no known cure and/or is progressive and/or can be debilitating or fatal if left untreated or under-treated.

Clean Claim means a claim submitted by a physician or provider for medical care or health care services rendered to an enrollee, with documentation reasonably necessary for the HMO to process the claim. The HMO may not require a physician or

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Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

provider to submit documentation that conflicts with the requirements of Texas Administrative Code, Title 28, Part 1, Chapter 21, Subchapters C and T.

CMS means the Centers for Medicare and Medicaid Services, formerly known as the Health Care Financing Administration (HCFA), which is the federal agency responsible for administering Medicare and overseeing state administration of Medicaid and CHIP.

COLA means the Cost of Living Adjustment.

Community Resource Coordination Groups (CRCGs) means a statewide system of local interagency groups, including both public and private providers, which coordinate services for “multi-need” children and youth. CRCGs develop individual service plans for children and adolescents whose needs can be met only through interagency cooperation. CRCGs address Complex Needs in a model that promotes local decision-making and ensures that children receive the integrated combination of social, medical and other services needed to address their individual problems.

Complainant means a Member or a treating provider or other individual designated to act on behalf of the Member who filed the Complaint.

Complaint (CHIP only) means any dissatisfaction, expressed by a Complainant, orally or in writing to the HMO, with any aspect of the HMO’s operation, including, but not limited to, dissatisfaction with plan administration, procedures related to review or Appeal of an Adverse Determination, as defined in Texas Insurance Code, Chapter 843, Subchapter G; the denial, reduction, or termination of a service for reasons not related to medical necessity; the way a service is provided; or disenrollment decisions. The term does not include misinformation that is resolved promptly by supplying the appropriate information or clearing up the misunderstanding to the satisfaction of the CHIP Member.

Complaint (Medicaid only) means an expression of dissatisfaction expressed by a Complainant, orally or in writing to the HMO, about any matter related to the HMO other than an Action. As provided by 42 C.F.R. §438.400, possible subjects for Complaints include, but are not limited to, the quality of care of services provided, and aspects of interpersonal relationships such as rudeness of a provider or employee, or failure to respect the Medicaid Member’s rights.

Complex Need means a condition or situation resulting in a need for coordination or access to services beyond what a PCP would normally provide, triggering the HMO’s determination that Care Coordination is required.

Comprehensive Care Program: See definition for Texas Health Steps.

Confidential Information means any communication or record (whether oral, written, electronically stored or transmitted, or in any other form) consisting of:

(1) Confidential Client information, including HIPAA-defined protected health information;

(2) All non-public budget, expense, payment and other financial information;

(3) All Privileged Work Product;

(4) All information designated by HHSC or any other State agency as confidential, and all information designated as confidential under the Texas Public Information Act, Texas Government Code, Chapter 552;

(5) The pricing, payments, and terms and conditions of the Contract, unless disclosed publicly by HHSC or the State; and

(6) Information utilized, developed, received, or maintained by HHSC, the HMO, or participating State agencies for the purpose of fulfilling a duty or obligation under this Contract and that has not been disclosed publicly.

Consumer-Directed Services means the Member or his legal guardian is the employer of and retains control over the hiring, management, and termination of an individual providing personal assistance or respite.

Continuity of Care means care provided to a Member by the same PCP or specialty provider to ensure that the delivery of care to the Member remains stable, and services are consistent and unduplicated.

Contract or Agreement means this formal, written, and legally enforceable contract and amendments thereto between the Parties.

Contract Period or Contract Term means the Initial Contract Period plus any and all Contract extensions.

Contractor or HMO means the HMO that is a party to this Contract and is an insurer licensed by TDI as an HMO or as an ANHC formed in compliance with Chapter 844 of the Texas Insurance Code.

Core Service Area (CSA) means the core set Service Area counties defined by HHSC for the STAR and/or CHIP HMO Programs in which Eligibles will be required to enroll in an HMO. (See Attachment B-6 to the HHSC Managed Care Contract document for detailed information on the Service Area counties.)

Copayment (CHIP only) means the amount that a Member is required to pay when utilizing certain benefits within the health care plan. Once the copayment is made, further payment is not required by the Member.

Corrective Action Plan means the detailed written plan that may be required by HHSC to correct or resolve a deficiency or event causing the assessment of a remedy or damage against HMO.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Court-Ordered Commitment means a commitment of a STAR or CHIP Member to a psychiatric facility for treatment ordered by a court of law pursuant to the Texas Health and Safety Code, Title VII Subtitle C.

Covered Services means Health Care Services the HMO must arrange to provide to Members, including all services required by the Contract and state and federal law, and all Value-added Services negotiated by the Parties (see Attachments B-2 and B-3 of the HHSC Managed Care Contract relating to “Covered Services” and “Value-added Services”). Covered Services include Behavioral Health Services.

Credentialing means the process of collecting, assessing, and validating qualifications and other relevant information pertaining to a health care provider to determine eligibility and to deliver Covered Services.

Cultural Competency means the ability of individuals and systems to provide services effectively to people of various cultures, races, ethnic backgrounds, and religions in a manner that recognizes, values, affirms, and respects the worth of the individuals and protects and preserves their dignity.

Date of Disenrollment means the last day of the last month for which HMO receives payment for a Member.

Day means a calendar day unless specified otherwise.

Default Enrollment means the process established by HHSC to assign a mandatory STAR enrollee who has not selected an MCO to an MCO.

Deliverable means a written or recorded work product or data prepared, developed, or procured by HMO as part of the Services under the Contract for the use or benefit of HHSC or the State of Texas.

Delivery Supplemental Payment means a one-time per pregnancy supplemental payment for each delivery to a Member in the STAR and CHIP Programs.

DADS means the Texas Department of Aging and Disability Services or its successor agency (formerly Department of Human Services).

DSHS means the Texas Department of State Health Services or its successor agency (formerly Texas Department of Health and Texas Department of Mental Health and Mental Retardation).

Disease Management means a system of coordinated healthcare interventions and communications for populations with conditions in which patient self-care efforts are significant.

Disproportionate Share Hospital (DSH) means a hospital that serves a higher than average number of Medicaid and other low-income patients and receives additional reimbursement from the State.

Disabled Person or Person with Disability means a person under sixty-five (65) years of age, including a child, who qualifies for Medicaid services because of a disability.

Disability means a physical or mental impairment that substantially limits one or more of an individual’s major life activities, such as caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and/or working.

Disability-related Access means that facilities are readily accessible to and usable by individuals with disabilities, and that auxiliary aids and services are provided to ensure effective communication, in compliance with Title III of the Americans with Disabilities Act.

Disaster Recovery Plan means the document developed by the HMO that outlines details for the restoration of the MIS in the event of an emergency or disaster.

DSM-IV means the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, which is the American Psychiatric Association’s official classification of behavioral health disorders.

ECI means Early Childhood Intervention, a federally mandated program for infants and children under the age of three with or at risk for developmental delays and/or disabilities. The federal ECI regulations are found at 34 §C.F.R. 303.1 et seq. The State ECI rules are found at 25 TAC §621.21 et seq.

EDI means electronic data interchange.

Effective Date means the effective date of this Contract, as specified in the HHSC Managed Care Contract document.

Effective Date of Coverage means the first day of the month for which the HMO has received payment for a Member.

Eligibles means individuals residing in one of the Service Areas and eligible to enroll in a STAR or CHIP HMO, as applicable.

Emergency Behavioral Health Condition means any condition, without regard to the nature or cause of the condition, which in the opinion of a prudent layperson possessing an average knowledge of health and medicine:

(1) requires immediate intervention and/or medical attention without which Members would present an immediate danger to themselves or others, or

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(2) which renders Members incapable of controlling, knowing or understanding the consequences of their actions.

Emergency Services means covered inpatient and outpatient services furnished by a provider that is qualified to furnish such services under the Contract and that are needed to evaluate or stabilize an Emergency Medical Condition and/or an Emergency Behavioral Health Condition, including Post-stabilization Care Services.

Emergency Medical Condition means a medical condition manifesting itself by acute symptoms of recent onset and sufficient severity (including severe pain), such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical care could result in:

(1) placing the patient’s health in serious jeopardy;

(2) serious impairment to bodily functions;

(3) serious dysfunction of any bodily organ or part;

(4) serious disfigurement; or

(5) in the case of a pregnant women, serious jeopardy to the health of a woman or her unborn child.

Encounter means a Covered Service or group of Covered Services delivered by a Provider to a Member during a visit between the Member and Provider. This also includes Value-added Services.

Encounter Data means data elements from Fee-for-Service claims or capitated services proxy claims that are submitted to HHSC by the HMO in accordance with HHSC’s required format for Medicaid and CHIP HMOs.

Enrollment Report/Enrollment File means the daily or monthly list of Eligibles that are enrolled with an HMO as Members on the day or for the month the report is issued.

EPSDT means the federally mandated Early and Periodic Screening, Diagnosis and Treatment program contained at 42 U.S.C. 1396d(r). The name has been changed to Texas Health Steps (THSteps) in the State of Texas.

Exclusive Provider Organization (EPO) means the vendor contracted with HHSC to operate the CHIP EPO in Texas.

Expansion Area means a county or Service Area that has not previously provided healthcare to HHSC’s HMO Program Members utilizing a managed care model.

Expansion Children means children who are generally at least one, but under age 6, and live in a family whose income is at or below 133 percent of the federal poverty level (FPL). Children in this coverage group have either elected to bypass TANF or are not eligible for TANF in Texas.

Experience Rebate means the portion of the HMO’s net income before taxes that is returned to the State in accordance with Section 10.11 (“Experience Rebate”).

Expedited Appeal means an appeal to the HMO in which the decision is required quickly based on the Member’s health status, and the amount of time necessary to participate in a standard appeal could jeopardize the Member’s life or health or ability to attain, maintain, or regain maximum function.

Expiration Date means the expiration date of this Contract, as specified in HHSC’s Managed Care Contract document.

External Quality Review Organization (EQRO) means the entity that contracts with HHSC to provide external review of access to and quality of healthcare provided to Members of HHSC’s HMO Programs.

Fair Hearing means the process adopted and implemented by HHSC in 25 T.A.C. Chapter 1, in compliance with federal regulations and state rules relating to Medicaid Fair Hearings.

Fee-for-Service means the traditional Medicaid Health Care Services payment system under which providers receive a payment for each unit of service according to rules adopted pursuant to Chapter 32, Texas Human Resources Code.

Force Majeure Event means any failure or delay in performance of a duty by a Party under this Contract that is caused by fire, flood, hurricane, tornadoes, earthquake, an act of God, an act of war, riot, civil disorder, or any similar event beyond the reasonable control of such Party and without the fault or negligence of such Party.

FQHC means a Federally Qualified Health Center, certified by CMS to meet the requirements of §1861(aa)(3) of the Social Security Act as a federally qualified health center, that is enrolled as a provider in the Texas Medicaid program.

FPL means the Federal Poverty Level.

Fraud means an intentional deception or misrepresentation made by a person with the knowledge that the deception could result in some unauthorized benefit to himself or some other person. It includes any act that constitutes fraud under applicable federal or state law.

FSR means Financial Statistical Report.

Habilitative and Rehabilitative Services means Health Care Services described in Attachment B-2 that may be required by children who fail to reach (habilitative) or have lost (rehabilitative) age appropriate developmental milestones.

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Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Health Care Services means the Acute Care, Behavioral Health Care and health-related services that an enrolled population might reasonably require in order to be maintained in good health, including, at a minimum, Emergency Services and inpatient and out patient services.

Health and Human Services Commission or HHSC means the administrative agency within the executive department of Texas state government established under Chapter 531, Texas Government Code, or its designee, including, but not limited to, the HHS Agencies.

Health-related Materials are materials developed by the HMO or obtained from a third party relating to the prevention, diagnosis or treatment of a medical condition.

HEDIS, the Health Plan Employer Data and Information Set, is a registered trademark of NCQA. HEDIS is a set of standardized performance measures designed to reliably compare the performance of managed health care plans. HEDIS is sponsored, supported and maintained by NCQA.

HHS Agency means the Texas health and human service agencies subject to HHSC’s oversight under Chapter 531, Texas Government Code, and their successor agencies.

HHSC Administrative Services Contractor (ASC) means an entity performing HMO administrative services functions, including member enrollment functions, for STAR or CHIP HMO Programs under contract with HHSC.

HHSC HMO Programs or HMO Programs mean the STAR and CHIP HMO Programs for which this Joint HMO RFP was issued.

HHSC Uniform Managed Care Manual means the manual published by or on behalf of HHSC that contains policies and procedures required of all HMOs participating in the HHSC Programs.

HIPAA means the Health Insurance Portability and Accountability Act of 1996, P.L. 104-191 (August 21, 1996), as amended or modified.

HMO or Contractor means the HMO that is a party to this Contract, and is either:

(1) an insurer licensed by TDI as a Health Maintenance Organization in accordance with Chapter 843 of the Texas Insurance Code, or

(2) a certified Approved Non-Profit Health Corporation (ANHC) formed in compliance with Chapter 844 of the Texas Insurance Code.

HMO Administrative Services means the performance of services or functions, other than the direct delivery of Covered Services, necessary for the management of the delivery of and payment for Covered Services, including but not limited to Network, utilization, clinical and/or quality management, service authorization, claims processing, management information systems operation and reporting.

HMO’s Service Area means all the counties included in any HHSC-defined Core or Optional Service Area, as applicable to each HMO Program and within which the HMO has been selected to provide HMO services.

Home and Community Support Services Agency or HCSS means an entity licensed to provide home health, hospice, or personal assistance services provided to individuals in their own home or independent living environment as prescribed by a physician or individualized service plan. Each HCSS must provide clients with a plan of care that includes specific services the agency agrees to perform. The agencies are licensed and monitored by DADS or its successor.

Hospital means a licensed public or private institution as defined by Chapter 241, Texas Health and Safety Code, or in Subtitle C, Title 7, Texas Health and Safety Code.

ICF-MR means an intermediate care facility for the mentally retarded.

Individual Family Service Plan (IFSP) means the plan for services required by the Early Childhood Intervention (ECI) Program and developed by an interdisciplinary team.

Initial Contract Period means the Effective Date of the Contract through August 31, 2008.

Inpatient Stay means at least a 24-hour stay in a facility licensed to provide hospital care.

JCAHO means Joint Commission on Accreditation of Health Care Organizations.

Joint Interface Plan (JIP) means a document used to communicate basic system interface information. This information includes: file structure, data elements, frequency, media, type of file, receiver and sender of the file, and file I.D. The JIP must include each of the HMO’s interfaces required to conduct business under this Contract. The JIP must address the coordination with each of the HMO’s interface partners to ensure the development and maintenance of the interface; and the timely transfer of required data elements between contractors and partners.

Key HMO Personnel means the critical management and technical positions identified by the HMO in accordance with Article 4.

Linguistic Access means translation and interpreter services, for written and spoken language to ensure effective communication. Linguistic access includes sign language interpretation, and the provision of other auxiliary aids and services to persons with disabilities.

Local Health Department means a local health department established pursuant to Health and Safety Code, Title 2, Local Public Health Reorganization Act §121.031.

Page 8 of 45

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Local Mental Health Authority (LMHA) means an entity within a specified region responsible for planning, policy development, coordination, and resource development and allocation and for supervising and ensuring the provision of mental health care services to persons with mental illness in one or more local service areas.

Major Population Group means any population, which represents at least 10% of the Medicaid and/or CHIP population in any of the counties in the Service Area served by the HMO.

Material Subcontractor or Major Subcontractor means any entity that contracts with the HMO for all or part of the HMO Administrative Services, where the value of the subcontracted HMO Administrative Service(s) exceeds $100,000, or is reasonably expected to exceed $100,000, per State Fiscal Year. Providers in the HMO’s Provider Network are not Material Subcontractors.

Mandated or Required Services means services that a state is required to offer to categorically needy clients under a state Medicaid plan.

Marketing means any communication from the HMO to a Medicaid or CHIP Eligible who is not enrolled with the HMO that can reasonably be interpreted as intended to influence the Eligible to:

(1) enroll with the HMO; or

(2) not enroll in, or to disenroll from, another MCO.

Marketing Materials means materials that are produced in any medium by or on behalf of the HMO and can reasonably be interpreted as intending to market to potential Members. Health-related Materials are not Marketing Materials.

MCO means managed care organization.

Medicaid means the medical assistance entitlement program authorized and funded pursuant to Title XIX, Social Security Act (42 U.S.C. §1396 et seq.) and administered by HHSC.

Medicaid HMOs means contracted HMOs participating in STAR.

Medical Home means a PCP or specialty care Provider who has accepted the responsibility for providing accessible, continuous, comprehensive and coordinated care to Members participating in a HHSC HMO Program.

Medically Necessary means:

(1) Non-behavioral health related Health Care Services that are:

(a) reasonable and necessary to prevent illnesses or medical conditions, or provide early screening, interventions, and/or treatments for conditions that cause suffering or pain, cause physical deformity or limitations in function, threaten to cause or worsen a handicap, cause illness or infirmity of a Member, or endanger life;

(b) provided at appropriate facilities and at the appropriate levels of care for the treatment of a Member’s health conditions;

(c) consistent with health care practice guidelines and standards that are endorsed by professionally recognized health care organizations or governmental agencies;

(d) consistent with the diagnoses of the conditions;

(e) no more intrusive or restrictive than necessary to provide a proper balance of safety, effectiveness, and efficiency;

(f) are not experimental or investigative; and

(g) are not primarily for the convenience of the Member or Provider; and

(2) Behavioral Health Services that are:

(a) are reasonable and necessary for the diagnosis or treatment of a mental health or chemical dependency disorder, or to improve, maintain, or prevent deterioration of functioning resulting from such a disorder;

(b) are in accordance with professionally accepted clinical guidelines and standards of practice in behavioral health care;

(c) are furnished in the most appropriate and least restrictive setting in which services can be safely provided;

(d) are the most appropriate level or supply of service that can safely be provided;

(e) could not be omitted without adversely affecting the Member’s mental and/or physical health or the quality of care rendered;

(f) are not experimental or investigative; and

(g) are not primarily for the convenience of the Member or Provider.

Member means a person who:

(1) is entitled to benefits under Title XIX of the Social Security Act and Medicaid, is in a Medicaid eligibility category included in the STAR Program, and is enrolled in the STAR Program and the HMO’s STAR HMO;

(2) is entitled to benefits under Title XIX of the Social Security Act and Medicaid, is in a Medicaid eligibility category included as a voluntary participant in the STAR Program, and is enrolled in the STAR Program and the HMO’s STAR HMO, or

Page 9 of 45

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

(3) has met CHIP eligibility criteria and is enrolled in the HMO’s CHIP HMO.

Member Materials means all written materials produced or authorized by the HMO and distributed to Members or potential members containing information concerning the HMO Program(s). Member Materials include, but are not limited to, Member ID cards, Member handbooks, Provider directories, and Marketing Materials.

Member Month means one Member enrolled with the HMO during any given month. The total Member Months for each month of a year comprise the annual Member Months.

Member(s) with Special Health Care Needs (MSHCN) includes a Child or Children with a Special Health Care Need (CSHCN) and any adult Member who:

(1) has a serious ongoing illness, a Chronic or Complex Condition, or a Disability that has lasted or is anticipated to last for a significant period of time, and

(2) requires regular, ongoing therapeutic intervention and evaluation by appropriately trained health care personnel.

MIS means Management Information System.

National Committee for Quality Assurance (NCQA) means the independent organization that accredits HMOs, managed behavioral health organizations, and accredits and certifies disease management programs. HEDIS and the Quality Compass are registered trademarks of NCQA.

Net Income before Taxes means an aggregate excess of Revenues over Allowable Expenses.

Network or Provider Network means all Providers that have a contract with the HMO, or any Subcontractor, for the delivery of Covered Services to the HMO’s Members under the Contract.

Network Provider or Provider means an appropriately credentialed and licensed individual, facility, agency, institution, organization or other entity, and its employees and subcontractors, that has a contract with the HMO for the delivery of Covered Services to the HMO’s Members.

Non-capitated Services means those Medicaid services identified in Attachment B-1, Section 8.2.2.8.

Non-provider Subcontracts means contracts between the HMO and a third party that performs a function, excluding delivery of health care services, that the HMO is required to perform under its Contract with HHSC.

OB/GYN means obstetrician-gynecologist.

Open Panel means Providers who are accepting new patients for the HMO Program(s) served.

Operational Start Date means the first day on which an HMO is responsible for providing Covered Services to Members of an HMO Program in a Service Area in exchange for a Capitation Payment under the Contract. The Operational Start Date may vary per HMO Program and Service Area. The Operational Start Date(s) applicable to this Contract are set forth in the HHSC Managed Care Contract document.

Optional Service Area (OSA) means an HHSC defined county or counties, contiguous to a CSA, in which CHIP HMOs have the option to submit a proposal to provide health care coverage to CHIP Eligibles. The CHIP HMO must serve the associated Core Service Area in order to provide coverage in the OSA. If HSHC accepts a proposal for an OSA, the HHSC Managed Care Contract document will include such OSA in the applicable Service Area.

Operations Phase means the period of time when HMO is responsible for providing the Covered Services and all related Contract functions for a Service Area. The Operations Phase begins on the Operational Start Date, and may vary by HMO Program and Service Area.

Out-of-Network (OON) means an appropriately licensed individual, facility, agency, institution, organization or other entity that has not entered into a contract with the HMO for the delivery of Covered Services to the HMO’s Members.

Parties means HHSC and HMO, collectively.

Party means either HHSC or HMO, individually.

Pended Claim means a claim for payment, which requires additional information before the claim can be adjudicated as a clean claim.

Population Risk Group means a distinct group of members identified by age, age range, gender, type of program, or eligibility category.

Post-stabilization Care Services means Covered Services, related to an Emergency Medical Condition that are provided after a Medicaid Member is stabilized in order to maintain the stabilized condition, or, under the circumstances described in 42 §§C.F.R. 438.114(b)&(e) and 42 C.F.R. §422.113(c)(iii) to improve or resolve the Medicaid Member’s condition.

Primary Care Physician or Primary Care Provider (PCP) means a physician or provider who has agreed with the HMO to provide a Medical Home to Members and who is responsible for providing initial and primary care to patients, maintaining the continuity of patient care, and initiating referral for care.

Provider types that can be PCPs are from any of the following practice areas: General Practice, Family Practice, Internal Medicine, Pediatrics, Obstetrics/Gynecology (OB/GYN), Pediatric and

Page 10 of 45

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Family Advanced Practice Nurses (APNs) and Physician Assistants (when practicing under the supervision of a physician specializing in Family Practice, Internal Medicine, Pediatrics or Obstetrics/Gynecology who also qualifies as a PCP under this contract), Federally Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs) and similar community clinic s; and specialist physicians who are willing to provide a Medical Home to selected Members with special needs and conditions.

Proposal means the proposal submitted by the HMO in response to the RFP.

Provider or Network Provider means an appropriately credentialed and licensed individual, facility, agency, institution, organization or other entity, and its employees and subcontractors, that has a contract with the HMO for the delivery of Covered Services to the HMO’s Members.

Provider Contract means a contract entered into by a direct provider of health care services and the HMO or an intermediary entity.

Provider Network or Network means all Providers that have contracted with the HMO for the applicable HMO Program.

Proxy Claim Form means a form submitted by Providers to document services delivered to Members under a capitated arrangement. It is not a claim for payment.

Public Health Entity means a HHSC Public Health Region, a Local Health Department, or a hospital district.

Public Information means information that:

(1) Is collected, assembled, or maintained under a law or ordinance or in connection with the transaction of official business by a governmental body or for a governmental body; and

(2) The governmental body owns or has a right of access to.

Quality Improvement means a system to continuously examine, monitor and revise processes and systems that support and improve administrative and clinical functions.

Rate Cell means a Population Risk Group for which a Capitation Rate has been determined.

Rate Period 1 means the period of time beginning on the Operational Start Date and ending on August 31, 2007.

Rate Period 2 means the period of time beginning on September 1, 2007 and ending on August 31, 2008.

Real-Time Captioning (also known as CART, Communication Access Real-Time Translation) means a process by which a trained individual uses a shorthand machine, a computer, and real-time translation software to type and simultaneously translate spoken language into text on a computer screen. Real Time Captioning is provided for individuals who are deaf, have hearing impairments, or have unintelligible speech. It is usually used to interpret spoken English into text English but may be used to translate other spoken languages into text.

Readiness Review means the assurances made by a selected HMO and the examination conducted by HHSC, or its agents, of HMO’s ability, preparedness, and availability to fulfill its obligations under the Contract.

Request for Proposals or RFP means the procurement solicitation instrument issued by HHSC under which this Contract was awarded and all RFP addenda, corrections or modifications, if any.

Revenue means all managed care revenue received by the HMO pursuant to this Contract during the Contract Period, including retroactive adjustments made by HHSC. This would include any funds earned on Medicaid or CHIP managed care funds such as investment income, earned interest, or third party administrator earnings from services to delegated Networks.

Risk means the potential for loss as a result of expenses and costs of the HMO exceeding payments made by HHSC under the Contract.

Routine Care means health care for covered preventive and medically necessary Health Care Services that are non-emergent or non-urgent.

Rural Health Clinic (RHC) means an entity that meets all of the requirements for designation as a rural health clinic under 1861(aa)(1) of the Social Security Act and approved for participation in the Texas Medicaid Program.

Scope of Work means the description of Services and Deliverables specified in this Contract, the RFP, the HMO’s Proposal, and any agreed modifications to these documents.

SDX means State Data Exchange.

SED means severe emotional disturbance as determined by a Local Mental Health Authority.

Service Area means the counties included in any HHSC-defined Core and Optional Service Area as applicable to each HMO Program.

Service Management is an administrative service in STAR and CHIP performed by the HMO to facilitate development of a Service Plan and coordination of services among a Member’s PCP, specialty providers and non-medical providers to ensure Members with Special Health Care Needs and/or Members needing high-cost treatment have access to, and appropriately utilize, Medically Necessary Covered Services, Non-capitated Services, and other services and supports.

Page 11 of 45

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Service Plan (SP) means an individualized plan developed with and for Members with Special Health Care Needs, including persons with disabilities or chronic or complex conditions. The SP includes, but is not limited to, the following:

(1) the Member’s history;

(2) summary of current medical and social needs and concerns;

(3) short and long term needs and goals;

(4) a list of services required, their frequency, and

(5) a description of who will provide such services.

The Service Plan should incorporate as a component of the plan the Individual Family Service Plan (IFSP) for members in the Early Childhood Intervention (ECI) Program

The Service Plan may include information for services outside the scope of covered benefits such as how to access affordable, integrated housing.

Services means the tasks, functions, and responsibilities assigned and delegated to the HMO under this Contract.

Significant Traditional Provider or STP (for Medicaid) means primary care providers and long-term care providers, identified by HHSC as having provided a significant level of care to Fee-for-Service clients. Disproportionate Share Hospitals (DSH) are also Medicaid STPs.

Significant Traditional Provider or STP (for CHIP) means primary care providers participating in the CHIP HMO Program prior to May 2004, and Disproportionate Share Hospitals (DSH).

Skilled Nursing Facility Services (CHIP only) Services provided in a facility that provides nursing or rehabilitation services and Medical supplies and use of appliances and equipment furnished by the facility.

Software means all operating system and applications software used by the HMO to provide the Services under this Contract.

SPMI means severe and persistent mental illness as determined by the Local Mental Health Authority.

Specialty Hospital means any inpatient hospital that is not a general Acute Care hospital.

Specialty Therapy means physical therapy, speech therapy or occupational therapy.

SSA means the Social Security Administration.

SSI Administrative Fee means the monthly per member per month fee paid to an HMO to provide administrative services to manage the healthcare of the HMO’s voluntary SSI beneficiaries. These services are described in more detail under Section 10.10 of this document.

Stabilize means to provide such medical care as to assure within reasonable medical probability that no deterioration of the condition is likely to result from, or occur from, or occur during discharge, transfer, or admission of the Member.

STAR or STAR Program stands for the State of Texas Access Reform, and means the State of Texas Medicaid managed care program in which HHSC contracts with HMOs to provide, arrange, and coordinate preventive, primary, and Acute Care Covered Services to non-disabled children and families, and pregnant women.

STAR HMOs means HMOs participating in the STAR Program.

State Fiscal Year (SFY) means a 12-month period beginning on September 1 and ending on August 31 the following year.

Subcontract means any agreement between the HMO and other party to fulfill the requirements of the Contract.

Subcontractor means any individual or entity, including an Affiliate, that has entered into a Subcontract with HMO.

Subsidiary means an Affiliate controlled by such person or entity directly or indirectly through one or more intermediaries.

Supplemental Security Income (SSI) means the federal cash assistance program of direct financial payments to the aged, blind, and disabled administered by the SSA under Title XVI of the Social Security Act. All persons who are certified as eligible for SSI in Texas are eligible for Medicaid. Local SSA claims representatives make SSI eligibility determinations. The transactions are forwarded to the SSA in Baltimore, who then notifies the states through the SDX.

Supplemental Security Income (SSI) Beneficiary means a person that receives supplemental security income cash assistance as cited in 42 U.S.C.A. § 1320 a-6 and as described in the definition of Supplemental Security Income.

T.A.C. means Texas Administrative Code.

TDD means telecommunication device for the deaf. It is interchangeable with the term Teletype machine or TTY.

TDI means the Texas Department of Insurance.

Temporary Assistance to Needy Families (TANF) means the federally funded program that provides assistance to single parent families with children who meet the categorical requirements for aid. This program was formerly known as the Aid to Families with Dependent Children (AFDC) program.

Texas Health Network (THN) is the name of the Medicaid primary care case management program in Texas.

Page 12 of 45

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Texas Health Steps (THSteps) is the name adopted by the State of Texas for the federally mandated Early and Periodic Screening, Diagnosis and Treatment (EPSDT) program. It includes the State’s Comprehensive Care Program extension to EPSDT, which adds benefits to the federal EPSDT requirements contained in 42 U.S.C. §1396d(r), and defined and codified at 42 C.F.R. §§440.40 and 441.56-62. HHSC’s rules are contained in 25 T.A.C., Chapter 33 (relating to Early and Periodic Screening, Diagnosis and Treatment).

Texas Medicaid Bulletin means the bi-monthly update to the Texas Medicaid Provider Procedures Manual.

Texas Medicaid Provider Procedures Manual means the policy and procedures manual published by or on behalf of HHSC that contains policies and procedures required of all health care providers who participate in the Texas Medicaid program. The manual is published annually and is updated bi-monthly by the Texas Medicaid Bulletin.

Texas Medicaid Service Delivery Guide means an attachment to the Texas Medicaid Provider Procedures Manual.

Third Party Liability (TPL) means the legal responsibility of another individual or entity to pay for all or part of the services provided to Members under the Contract (see 1 TAC §354.2301 et seq., relating to Third Party Resources).

Third Party Recovery (TPR) means the recovery of payments on behalf of a Member by HHSC or the HMO from an individual or entity with the legal responsibility to pay for the Covered Services.

TP 40 means Type Program 40, which is a Medicaid program eligibility type assigned to pregnant women under 185% of the federal poverty level (FPL).

TP 45 means Type Program 45, which is a Medicaid program eligibility code assigned to newborns (under 12 months of age) who are born to mothers who are Medicaid eligible at the time of the child’s birth.

Transition Phase includes all activities the HMO is required to perform between the Contract Effective Date and the Operational Start Date for a Service Area.

Turnover Phase includes all activities the HMO is required to perform in order to close out the Contract and/or transition Contract activities and operations for a Service Area to HHSC or a subsequent contractor.

Turnover Plan means the written plan developed by HMO, approved by HHSC, to be employed during the Turnover Phase. The Turnover Plan describes HMO’s policies and procedures that will assure:

(1) The least disruption in the delivery of Health Care Services to those Members who are enrolled with the HMO during the transition to a subsequent health plan;

(2) Cooperation with HHSC and the subsequent health plan in notifying Members of the transition and of their option to select a new plan, as requested and in the form required or approved by HHSC; and

(3) Cooperation with HHSC and the subsequent health plan in transferring information to the subsequent health plan, as requested and in the form required or approved by HHSC.

URAC /American Accreditation Health Care Commission means the independent organization that accredits Utilization Review functions and offers a variety of other accreditation and certification programs for health care organizations.

Urgent Behavioral Health Situation means a behavioral health condition that requires attention and assessment within twenty-four (24) hours but which does not place the Member in immediate danger to himself or herself or others and the Member is able to cooperate with treatment.

Urgent Condition means a health condition including an Urgent Behavioral Health Situation that is not an emergency but is severe or painful enough to cause a prudent layperson, possessing the average knowledge of medicine, to believe that his or her condition requires medical treatment evaluation or treatment within twenty-four (24) hours by the Member’s PCP or PCP designee to prevent serious deterioration of the Member’s condition or health.

Utilization Review means the system for retrospective, concurrent, or prospective review of the medical necessity and appropriateness of Health Care Services provided, being provided, or proposed to be provided to a Member. The term does not include elective requests for clarification of coverage.

Value-added Services means additional services for coverage beyond those specified in the RFP. Value-added Services must be actual health care services or benefits rather than gifts, incentives, health assessments or educational classes. Temporary phones, cell phones, additional transportation benefits, and extra home health services may be Value-added Services, if approved by HHSC. Best practice approaches to delivering Covered Services are not considered Value-added Services.

Waste means practices that are not cost-efficient.

Page 13 of 45

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Article 3. General Terms & Conditions

Section 3.01 Contract elements.

(a) Contract documentation.

The Contract between the Parties will consist of the HHSC Managed Care Contract document and all attachments and amendments.

(b) Order of documents.

In the event of any conflict or contradiction between or among the contract documents, the documents shall control in the following order of precedence:

(1) The final executed HHSC Managed Care Contract document, and all amendments thereto;

(2) HHSC Managed Care Contract Attachment A – “HHSC’s Uniform Managed Care Contract Terms and Conditions,” and all amendments thereto;

(3) HHSC Managed Care Contract Attachment B – “Scope of Work/Performance Measures,” and all attachments and amendments thereto;

(4) The HHSC Uniform Managed Care Manual, and all attachments and amendments thereto;

(5) HHSC Managed Care Contract Attachment C-3 – “Agreed Modifications to HMO’s Proposal;”

(6) HHSC Managed Care Contract Attachment C-2, “HMO Supplemental Responses,” and

(7) HHSC Managed Care Contract Attachment C-1 – “HMO’s Proposal.”

Section 3.02 Term of the Contract.

The term of the Contract will begin on the Effective Date and will conclude on the Expiration Date. The Parties may renew the Contract for an additional period or periods, but the Contract Term may not exceed a total of eight (8) years. All reserved contract extensions beyond the Expiration Date will be subject to good faith negotiations between the Parties and mutual agreement to the extension(s).

Section 3.03 Funding.

This Contract is expressly conditioned on the availability of state and federal appropriated funds. HMO will have no right of action against HHSC in the event that HHSC is unable to perform its obligations under this Contract as a result of the suspension, termination, withdrawal, or failure of funding to HHSC or lack of sufficient funding of HHSC for any activities or functions contained within the scope of this Contract. If funds become unavailable, the provisions of Article 12 (“Remedies and Disputes”) will apply. HHSC will use all reasonable efforts to ensure that such funds are available, and will negotiate in good faith with HMO to resolve any HMO claims for payment that represent accepted Services or Deliverables that are pending at the time funds become unavailable. HHSC shall make best efforts to provide reasonable written advance notice to HMO upon learning that funding for this Contract may be unavailable.

Section 3.04 Delegation of authority.

Whenever, by any provision of this Contract, any right, power, or duty is imposed or conferred on HHSC, the right, power, or duty so imposed or conferred is possessed and exercised by the Commissioner unless any such right, power, or duty is specifically delegated to the duly appointed agents or employees of HHSC. The Commissioner will reduce any such delegation of authority to writing and provide a copy to HMO on request.

Section 3.05 No waiver of sovereign immunity.

The Parties expressly agree that no provision of this Contract is in any way intended to constitute a waiver by HHSC or the State of Texas of any immunities from suit or from liability that HHSC or the State of Texas may have by operation of law.

Section 3.06 Force majeure.

Neither Party will be liable for any failure or delay in performing its obligations under the Contract if such failure or delay is due to any cause beyond the reasonable control of such Party, including, but not limited to, unusually severe weather, strikes, natural disasters, fire, civil disturbance, epidemic, war, court order, or acts of God. The existence of such causes of delay or failure will extend the period of performance in the exercise of reasonable diligence until after the causes of delay or failure have been removed. Each Party must inform the other in writing with proof of receipt within five (5) Business Days of the existence of a force majeure event or otherwise waive this right as a defense.

Section 3.07 Publicity.

(a) HMO may use the name of HHSC, the State of Texas, any HHS Agency, and the name of the HHSC HMO Program in any media release, public announcement, or public disclosure relating to the Contract or its subject matter only if, at least seven (7) calendar days prior to distributing the material, the HMO submits the information to HHSC for review and comment. If HHSC has not responded within seven (7) calendar days, the HMO may use the submitted information. HHSC reserves the right to object to and require changes to the publication if, at HHSC’s sole discretion, it determines that the publication does not accurately reflect the terms of the Contract or the HMO’s performance under the Contract.

(b) HMO will provide HHSC with one (1) electronic copy of any information described in Subsection 3.07(a) prior to public release. HMO will provide additional copies, including hard copies, at the request of HHSC.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

(c) The requirements of Subsection 3.07(a) do not apply to:

(1) proposals or reports submitted to HHSC, an administrative agency of the State of Texas, or a governmental agency or unit of another state or the federal government;

(2) information concerning the Contract’s terms, subject matter, and estimated value:

(a) in any report to a governmental body to which the HMO is required by law to report such information, or

(b) that the HMO is otherwise required by law to disclose; and

(3) Member Materials (the HMO must comply with the Uniform Managed Care Manual’s provisions regarding the review and approval of Member Materials).

Section 3.08 Assignment.

(a) Assignment by HMO.

HMO shall not assign all or any portion of its rights under or interests in the Contract or delegate any of its duties without prior written consent of HHSC. Any written request for assignment or delegation must be accompanied by written acceptance of the assignment or delegation by the assignee or delegation by the delegate. Except where otherwise agreed in writing by HHSC, assignment or delegation will not release HMO from its obligations pursuant to the Contract. An HHSC-approved Material Subcontract will not be considered to be an assignment or delegation for purposes of this section.

(b) Assignment by HHSC.

HMO understands and agrees HHSC may in one or more transactions assign, pledge, transfer, or hypothecate the Contract. This assignment will only be made to another State agency or a non-State agency that is contracted to perform agency support.

(c) Assumption.

Each party to whom a transfer is made (an “Assignee”) must assume all or any part of HMO’S or HHSC’s interests in the Contract, the product, and any documents executed with respect to the Contract, including, without limitation, its obligation for all or any portion of the purchase payments, in whole or in part.

Section 3.09 Cooperation with other vendors and prospective vendors.

HHSC may award supplemental contracts for work related to the Contract, or any portion thereof. HMO will reasonably cooperate with such other vendors, and will not commit or permit any act that may interfere with the performance of work by any other vendor.

Section 3.10 Renegotiation and reprocurement rights.

(a) Renegotiation of Contract terms.

Notwithstanding anything in the Contract to the contrary, HHSC may at any time during the term of the Contract exercise the option to notify HMO that HHSC has elected to renegotiate certain terms of the Contract. Upon HMO’s receipt of any notice pursuant to this Section, HMO and HHSC will undertake good faith negotiations of the subject terms of the Contract, and may execute an amendment to the Contract in accordance with Article 8.

(b) Reprocurement of the services or procurement of additional services.

Notwithstanding anything in the Contract to the contrary, whether or not HHSC has accepted or rejected HMO’s Services and/or Deliverables provided during any period of the Contract, HHSC may at any time issue requests for proposals or offers to other potential contractors for performance of any portion of the Scope of Work covered by the Contract or Scope of Work similar or comparable to the Scope of Work performed by HMO under the Contract.

(c) Termination rights upon reprocurement.

If HHSC elects to procure the Services or Deliverables or any portion of the Services or Deliverables from another vendor in accordance with this Section, HHSC will have the termination rights set forth in Article 12 (“Remedies and Disputes”).

Section 3.11 RFP errors and omissions.

HMO will not take advantage of any errors and/or omissions in the RFP or the resulting Contract. HMO must promptly notify HHSC of any such errors and/or omissions that are discovered.

Section 3.12 Attorneys’ fees.

In the event of any litigation, appeal, or other legal action to enforce any provision of the Contract, HMO agrees to pay all reasonable expenses of such action, including attorneys’ fees and costs, if HHSC is the prevailing Party.

Section 3.13 Preferences under service contracts.

HMO is required in performing the Contract to purchase products and materials produced in the State of Texas when they are available at a price and time comparable to products and materials produced outside the State.

Section 3.14 Time of the essence.

In consideration of the need to ensure uninterrupted and continuous HHSC HMO Program performance, time is of the essence in the performance of the Scope of Work under the Contract.

Page 15 of 45

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment A — HHSC Uniform Managed Care Contract Terms & Conditions Version 1.0

Section 3.15 Notice

(a) Any notice or other legal communication required or permitted to be made or given by either Party pursuant to the Contract will be in writing and in English, and will be deemed to have been given:

(1) Three (3) Business Days after the date of mailing if sent by registered or certified U.S. mail, postage prepaid, with return receipt requested;

(2) When transmitted if sent by facsimile, provided a confirmation of transmission is produced by the sending machine; or

(3) When delivered if delivered personally or sent by express courier service.

(b) The notices described in this Section may not be sent by electronic mail.

(c) All notices must be sent to the Project Manager identified in the HHSC Managed Care Contract document. In addition, legal notices must be sent to the Legal Contact identified in the HHSC Managed Care Contract document.

(d) Routine communications that are administrative in nature will be provided in a manner agreed to by the Parties.

Article 4. Contract Administration & Management

Section 4.01 Qualifications, retention and replacement of HMO employees.

HMO agrees to maintain the organizational and administrative capacity and capabilities to carry out all duties and responsibilities under this Contract. The personnel HMO assigns to perform the duties and responsibilities under this Contract will be properly trained and qualified for the functions they are to perform. Notwithstanding transfer or turnover of personnel, HMO remains obligated to perform all duties and responsibilities under this Contract without degradation and in accordance with the terms of this Contract.

Section 4.02 HMO’s Key Personnel.

(a) Designation of Key Personnel.

HMO must designate key management and technical personnel who will be assigned to the Contract. For the purposes of this requirement, Key Personnel are those with management responsibility or principal technical responsibility for the following functional areas for each HMO Program included within the scope of the Contract:

(1) Member Services;

(2) Management Information Systems;

(3) Claims Processing,

(4) Provider Network Development and Management;

(5) Benefit Administration and Utilization and Care Management;

(6) Quality Improvement;

(7) Behavioral Health Services;

(8) Financial Functions;

(9) Reporting;

(10) Executive Director(s) for applicable HHSC HMO Program(s) as defined in Section 4.03 (“Executive Director”);

(11) Medical Director(s) for applicable HHSC HMO Program(s) as defined in Section 4.04 (“Medical Director”); and

(b) Support and Replacement of Key Personnel.

The HMO must maintain, throughout the Contract Term, the ability to supply its Key Personnel with the required resources necessary to meet Contract requirements and comply with applicable law. The HMO must ensure project continuity by timely replacement of Key Personnel, if necessary, with a sufficient number of persons having the requisite skills, experience and other qualifications. Regardless of specific personnel changes, the HMO must maintain the overall level of expertise, experience, and skill reflected in the Key HMO Personnel job descriptions and qualifications included in the HMO’s proposal.

(c) Notification of replacement of Key Personnel.

HMO must notify HHSC within fifteen (15) Business Days of any change in Key Personnel. Hiring or replacement of Key Personnel must conform to all Contract requirements. If HHSC determines that a satisfactory working relationship cannot be established between certain Key Personnel and HHSC, it will notify the HMO in writing. Upon receipt of HHSC’s notice, HHSC and HMO will attempt to resolve HHSC’s concerns on a mutually agreeable basis.

Section 4.03 Executive Director.

(a) The HMO must employ a qualified individual to serve as the Executive Director for its HHSC HMO Program(s). Such Executive Director must be employed full-time by the HMO, be primarily dedicated to HHSC HMO Program(s), and must hold a Senior Executive or Management position in the HMO’s organization, except that the HMO may propose an alternate structure for the Executive Director position, subject to HHSC’s prior review and written approval.

(b) The Executive Director must be authorized and empowered to represent the HMO regarding all matters pertaining to the Contract prior to such representation. The Executive Director must act as liaison between the HMO and the HHSC and must have responsibilities that include, but are not limited to, the following:

(1) ensuring the HMO’s compliance with the terms of the Contract, including securing and coordinating resources necessary for such compliance;

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(2) receiving and responding to all inquiries and requests made by HHSC related to the Contract, in the time frames and formats specified by HHSC. Where practicable, HHSC must consult with the HMO to establish time frames and formats reasonably acceptable to the Parties;

(3) attending and participating in regular HHSC HMO Executive Director meetings or conference calls;

(4) attending and participating in regular HHSC Regional Advisory Committees (RACs) for managed care (the Executive Director may designate key personnel to attend a RAC if the Executive Director is unable to attend);

(5) making best efforts to promptly resolve any issues identified either by the HMO or HHSC that may arise and are related to the Contract;

(6) meeting with HHSC representative(s) on a periodic or as needed basis to review the HMO’s performance and resolve issues, and

(7) meeting with HHSC at the time and place requested by HHSC, if HHSC determines that the HMO is not in compliance with the requirements of the Contract.

Section 4.04 Medical Director.

(a) The HMO must have a qualified individual to serve as the Medical Director for its HHSC HMO Program(s). The Medical Director must be currently licensed in Texas under the State Board of Medical Examiners as an M.D. or D.O. with no restrictions or other licensure limitations. The Medical Director must comply with the requirements of 28 T.A.C. §11.1606 and all applicable federal and state statutes and regulations.

(b) The Medical Director, or his or her physician designee meeting the same Contract qualifications that apply to the Medical Director, must be available by telephone 24 hours a day, seven days a week, for Utilization Review decisions. The Medical Director, and his/her designee, must either possess expertise with Behavioral Health Services, or ready access to such expertise to ensure timely and appropriate medical decisions for Members, including after regular business hours.

(c) The Medical Director, or his or her physician designee meeting the same Contract qualifications that apply to the Medical Director, must be authorized and empowered to represent the HMO regarding clinical issues, Utilization Review and quality of care inquiries. The Medical Director, or his or her physician designee, must exercise independent medical judgment in all decisions relating to medical necessity. The HMO must ensure that its decisions relating to medical necessity are not adversely influenced by fiscal management decisions. HHSC may conduct reviews of decisions relating to medical necessity upon reasonable notice.

Section 4.05 Responsibility for HMO personnel and Subcontractors.

(a) HMO’s employees and Subcontractors will not in any sense be considered employees of HHSC or the State of Texas, but will be considered for all purposes as the HMO’s employees or its Subcontractor’s employees, as applicable.

(b) Except as expressly provided in this Contract, neither HMO nor any of HMO’s employees or Subcontractors may act in any sense as agents or representatives of HHSC or the State of Texas.

(c) HMO agrees that anyone employed by HMO to fulfill the terms of the Contract is an employee of HMO and remains under HMO’s sole direction and control. HMO assumes sole and full responsibility for its acts and the acts of its employees and Subcontractors.

(d) HMO agrees that any claim on behalf of any person arising out of employment or alleged employment by the HMO (including, but not limited to, claims of discrimination against HMO, its officers, or its agents) is the sole responsibility of HMO and not the responsibility of HHSC. HMO will indemnify and hold harmless the State from any and all claims asserted against the State arising out of such employment or alleged employment by the HMO. HMO understands that any person who alleges a claim arising out of employment or alleged employment by HMO will not be entitled to any compensation, rights, or benefits from HHSC (including, but not limited to, tenure rights, medical and hospital care, sick and annual/vacation leave, severance pay, or retirement benefits).

(e) HMO agrees to be responsible for the following in respect to its employees:

(1) Damages incurred by HMO’s employees within the scope of their duties under the Contract; and

(2) Determination of the hours to be worked and the duties to be performed by HMO’s employees.

(f) HMO agrees and will inform its employees and Subcontractor(s) that there is no right of subrogation, contribution, or indemnification against HHSC for any duty owed to them by HMO pursuant to this Contract or any judgment rendered against the HMO. HHSC’s liability to the HMO’s employees, agents and Subcontractors, if any, will be governed by the Texas Tort Claims Act, as amended or modified (TEX. CIV. PRACT. & REM. CODE §101.001et seq.).

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(g) HMO understands that HHSC does not assume liability for the actions of, or judgments rendered against, the HMO, its employees, agents or Subcontractors. HMO agrees that it has no right to indemnification or contribution from HHSC for any such judgments rendered against HMO or its Subcontractors.

Section 4.06 Cooperation with HHSC and state administrative agencies.

(a) Cooperation with Other MCOs.

HMO agrees to reasonably cooperate with and work with the other MCOs in the HHSC HMO Programs, Subcontractors, and third-party representatives as requested by HHSC. To the extent permitted by HHSC’s financial and personnel resources, HHSC agrees to reasonably cooperate with HMO and to use its best efforts to ensure that other HHSC contractors reasonably cooperate with the HMO.

(b) Cooperation with state and federal administrative agencies.

HMO must ensure that HMO personnel will cooperate with HHSC or other state or federal administrative agency personnel at no charge to HHSC for purposes relating to the administration of HHSC programs including, but not limited to the following purposes:

(1) The investigation and prosecution of fraud, abuse, and waste in the HHSC programs;

(2) Audit, inspection, or other investigative purposes; and

(3) Testimony in judicial or quasi-judicial proceedings relating to the Services and/or Deliverables under this Contract or other delivery of information to HHSC or other agencies’ investigators or legal staff.

Section 4.07 Conduct of HMO personnel.

(a) While performing the Scope of Work, HMO’s personnel and Subcontractors must:

(1) Comply with applicable State rules and regulations and HHSC’s requests regarding personal and professional conduct generally applicable to the service locations; and

(2) Otherwise conduct themselves in a businesslike and professional manner.

(b) If HHSC determines in good faith that a particular employee or Subcontractor is not conducting himself or herself in accordance with this Contract, HHSC may provide HMO with notice and documentation concerning such conduct. Upon receipt of such notice, HMO must promptly investigate the matter and take appropriate action that may include:

(1) Removing the employee from the project;

(2) Providing HHSC with written notice of such removal; and

(3) Replacing the employee with a similarly qualified individual acceptable to HHSC.

(c) Nothing in the Contract will prevent HMO, at the request of HHSC, from replacing any personnel who are not adequately performing their assigned responsibilities or who, in the reasonable opinion of HHSC’s Project Manager, after consultation with HMO, are unable to work effectively with the members of the HHSC’s staff. In such event, HMO will provide replacement personnel with equal or greater skills and qualifications as soon as reasonably practicable. Replacement of Key Personnel will be subject to HHSC review. The Parties will work together in the event of any such replacement so as not to disrupt the overall project schedule.

(d) HMO agrees that anyone employed by HMO to fulfill the terms of the Contract remains under HMO’s sole direction and control.

(e) HMO shall have policies regarding disciplinary action for all employees who have failed to comply with federal and/or state laws and the HMO’s standards of conduct, policies and procedures, and Contract requirements. HMO shall have policies regarding disciplinary action for all employees who have engaged in illegal or unethical conduct.

Section 4.08 Subcontractors.

(a) HMO remains fully responsible for the obligations, services, and functions performed by its Subcontractors to the same extent as if such obligations, services, and functions were performed by HMO’s employees, and for purposes of this Contract such work will be deemed work performed by HMO. HHSC reserves the right to require the replacement of any Subcontractor found by HHSC to be unacceptable and unable to meet the requirements of the Contract, and to object to the selection of a Subcontractor.

(b) HMO must:

(1) actively monitor the quality of care and services, as well as the quality of reporting data, provided under a Subcontract;

(2) notify HHSC in writing at least 60 days prior to reprocurement of services provided by any Material Subcontractor;

(3) notify HHSC in writing within three (3) Business Days after making a decision to terminate a Subcontract with a Material Subcontractor or upon receiving notification from the Material Subcontractor of its intent to terminate such Subcontract;

(4) notify HHSC in writing within one (1) Business Day of making a decision to enter into

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a Subcontract with a new Material Subcontractor, or a new Subcontract for newly procured services of an existing Material Subcontractor; and

(5) provide HHSC with a copy of TDI filings of delegation agreements.

(c) During the Contract Period, Readiness Reviews by HHSC or its designated agent may occur if:

(1) a new Material Subcontractor is employed by HMO;

(2) an existing Material Subcontractor provides services in a new Service Area;

(3) an existing Material Subcontractor provides services for a new HMO Program;

(4) an existing Material Subcontractor changes locations or changes its MIS and or operational functions;

(5) an existing Material Subcontractor changes one or more of its MIS subsystems, claims processing or operational functions; or

(6) a Readiness Review is requested by HHSC.

The HMO must submit information required by HHSC for each proposed Material Subcontractor as indicated in Attachment B-1, Section 7.

(d) HMO must not disclose Confidential Information of HHSC or the State of Texas to a Subcontractor unless and until such Subcontractor has agreed in writing to protect the confidentiality of such Confidential Information in the manner required of HMO under this Contract.

(e) HMO must identify any Subcontractor that is a subsidiary or entity formed after the Effective Date of the Contract, whether or not an Affiliate of HMO, substantiate the proposed Subcontractor’s ability to perform the subcontracted Services, and certify to HHSC that no loss of service will occur as a result of the performance of such Subcontractor. The HMO will assume responsibility for all contractual responsibilities whether or not the HMO performs them. Further, HHSC considers the HMO to be the sole point of contact with regard to contractual matters, including payment of any and all charges resulting from the Contract.

(f) Except as provided herein, all Subcontracts must be in writing and must provide HHSC the right to examine the Subcontract and all Subcontractor records relating to the Contract and the Subcontract. This requirement does not apply to agreements with utility or mail service providers.

(g) A Subcontract whereby HMO receives rebates, recoupments, discounts, payments, or other consideration from a Subcontractor (including without limitation Affiliates) pursuant to or related to the execution of this Contract must be in writing and must provide HHSC the right to examine the Subcontract and all records relating to such consideration.

(h) All Subcontracts described in subsections (f) and (g) must show the dollar amount, the percentage of money, or the value of any consideration that HMO pays to or receives from the Subcontractor.

(i) HMO must submit a copy of each Material Subcontract executed prior to the Effective Date of the Contract to HHSC no later than thirty (30) days after the Effective Date of the Contract. For Material Subcontracts executed after the Effective Date of the Contract, HMO must submit a copy to HHSC no later than five (5) Business Days after execution.

(j) Network Provider Contracts must include the mandatory provisions included in the HHSC Uniform Managed Care Manual.

(k) HHSC reserves the right to reject any Subcontract or require changes to any provisions that do not comply with the requirements or duties and responsibilities of this Contract or create significant barriers for HHSC in monitoring compliance with this Contract.

Section 4.09 HHSC’s ability to contract with Subcontractors.

The HMO may not limit or restrict, through a covenant not to compete, employment contract or other contractual arrangement, HHSC’s ability to contract with Subcontractors or former employees of the HMO.

Section 4.10 HMO Agreements with Third Parties

(a) If the HMO intends to report compensation paid to a third party (including without limitation an Affiliate) as an Allowable Expense under this Contract, and the compensation paid to the third party exceeds $100,000, or is reasonably anticipated to exceed $100,000, in a State Fiscal Year, then the HMO’s agreement with the third party must be in writing. The agreement must provide HHSC the right to examine the agreement and all records relating to the agreement.

(b) All agreements whereby HMO receives rebates, recoupments, discounts, payments, or other consideration from a third party (including without limitation Affiliates) pursuant to or related to the execution of this Contract, must be in writing and must provide HHSC the right to examine the agreement and all records relating to such consideration. .

(c) All agreements described in subsections (a) and (b) must show the dollar amount, the percentage of money, or the value of any consideration that HMO pays to or receives from the third party.

(d) HMO must submit a copy of each third party agreement described in subsections (a) and (b) to HHSC. If the third party agreement is entered into

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prior to the Effective Date of the Contract, HMO must submit a copy no later than thirty (30) days after the Effective Date of the Contract. If the third party agreement is executed after the Effective Date of the Contract, HMO must submit a copy no later than five (5) Business Days after execution. (e) For third party agreements valued under $100,000 per State Fiscal Year that are reported as Allowable Expenses, the HMO must maintain financial records and data sufficient to verify the accuracy of such expenses in accordance with the requirements of Article 9.

(f) HHSC reserves the right to reject any third party agreement or require changes to any provisions that do not comply with the requirements or duties and responsibilities of this Contract or create significant barriers for HHSC in monitoring compliance with this Contract.

(g) This section shall not apply to Provider Contracts, or agreements with utility or mail service providers. .

Article 5. Member Eligibility & Enrollment

Section 5.01 Eligibility Determination

The State or its designee will make eligibility determinations for each of the HHSC HMO Programs.

Section 5.02 Member Enrollment & Disenrollment.

(a) The HHSC Administrative Services Contractor will enroll and disenroll eligible individuals in the HMO Program. To enroll in an HMO, the Member’s permanent residence must be located within the HMO’s Service Area. The HMO is not allowed to induce or accept disenrollment from a Member. The HMO must refer the Member to the HHSC Administrative Services Contractor.

(b) HHSC makes no guarantees or representations to the HMO regarding the number of eligible Members who will ultimately be enrolled into the HMO or the length of time any such enrolling Members remain enrolled with the HMO beyond the minimum mandatory enrollment periods established for each HHSC HMO Program.

(c) The HHSC Administrative Services Contractor will electronically transmit to the HMO new Member information and change information applicable to active Members.

(d) As described in the following Sections, depending on the HMO Program, special conditions may also apply to enrollment and span of coverage for the HMO.

(e) HMO has a limited right to request a Member be disenrolled from HMO without the Member’s consent. HHSC must approve any HMO request for disenrollment of a Member for cause. HHSC may permit disenrollment of a Member under the following circumstances:

(1) Member misuses or loans Member’s HMO membership card to another person to obtain services.

(2) Member is disruptive, unruly, threatening or uncooperative to the extent that Member’s membership seriously impairs HMO’s or Provider’s ability to provide services to Member or to obtain new Members, and Member’s behavior is not caused by a physical or behavioral health condition.

(3) Member steadfastly refuses to comply with managed care restrictions (e.g., repeatedly using emergency room in combination with refusing to allow HMO to treat the underlying medical condition).

(4) HMO must take reasonable measures to correct Member behavior prior to requesting disenrollment. Reasonable measures may include providing education and counseling regarding the offensive acts or behaviors.

(f) HMO must notify the Member of HMO’s decision to disenroll the Member if all reasonable measures have failed to remedy the problem.

(g) If the Member disagrees with the decision to disenroll the Member from HMO, HMO must notify the Member of the availability of the Complaint procedure and, for Medicaid Members, HHSC’s Fair Hearing process.

(h) HMO cannot request a disenrollment based on adverse change in the member’s health status or utilization of services that are Medically Necessary for treatment of a member’s condition.

Section 5.03 STAR enrollment for pregnant women and infants.

(a) The HHSC Administrative Services Contractor will retroactively enroll some pregnant Members in a Medicaid HMO based on their date of eligibility.

(b) The HHSC Administrative Services Contractor will enroll newborns born to Medicaid eligible mothers who are enrolled in a STAR HMO in the same HMO for 90 days following the date of birth, unless the mother requests a plan change as a special exception. The Administrative Service Contractor will consider such requests on a case-by-case basis. The HHSC Administrative Services Contractor will retroactively, to date of birth, enroll newborns in the applicable STAR HMO.

Section 5.04 CHIP eligibility and enrollment.

(a) Continuous coverage.

A child who is CHIP-eligible will have six (6) months of continuous coverage. Children enrolling in CHIP for the first time, or returning to CHIP after disenrollment, will be subject to a waiting period before coverage actually begins, except as provided

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in 1 T.A.C. §370.46. The waiting period for a child is determined by the date on which he/she is found eligible for CHIP, and extends for a duration of three months. If the child is found eligible for CHIP on or before the 15th day of a month, then the waiting period begins on the first day of that same month. If the child is found eligible on or after the 16th day of a month, then the waiting period begins on the first day of the next month.

(b) Pregnant Members and Infants.

The HHSC Administrative Contractor will refer pregnant CHIP Members, with the exception of Legal Permanent Residents and other legally qualified aliens barred from Medicaid due to federal eligibility restrictions, to Medicaid for eligibility determinations. Those CHIP Members who are determined to be Medicaid Eligible will be disenrolled from HMO’s CHIP plan. Medicaid coverage will be coordinated to begin after CHIP eligibility ends to avoid gaps in health care coverage.

In the event the HMO remains unaware of a Member’s pregnancy until delivery, the delivery will be covered by CHIP. The HHSC Administrative Services Contractor will then set the Member’s eligibility expiration date at the later of (1) the end of the second month following the month of the baby’s birth or (2) the Member’s original eligibility expiration date. Most newborns born to CHIP Members or CHIP heads of household will be Medicaid eligible. Eligibility of newborns must be determined for CHIP before enrollment can occur. For newborns determined to be CHIP-eligible, the baby will be covered from the beginning of the month of birth for the period of time specified in the evidence of coverage.

Section 5.05 Span of Coverage

(a) Medicaid HMOs.

(1) HHSC will conduct continuous open enrollment for Medicaid Eligibles and the HMO must accept all persons who choose to enroll as Members in the HMO or who are assigned as Members in the HMO by HHSC, without regard to the Member’s health status or any other factor. Persons in a hospital on the enrollment date will not be enrolled until they are discharged from the hospital.

(2) Members who are disenrolled because they are temporarily ineligible for Medicaid will be automatically re-enrolled into the same health plan, if available. Temporary loss of eligibility is defined as a period of six months or less.

(3) A Member cannot change from one Medicaid MCO to another Medicaid MCO during an inpatient hospital stay. The MCO responsible for the hospital charges at the start of an Inpatient Stay remains responsible for hospital charges until the time of discharge, or until such time that there is a loss of Medicaid eligibility. Medicaid MCOs are responsible for professional charges during every month for which the MCO receives a full capitation for a Member.

(b) CHIP HMOs.

If a CHIP Member’s Effective Date of Coverage occurs while the CHIP Member is confined in a hospital, HMO is responsible for the CHIP Member’s costs of Covered Services beginning on the Effective Date of Coverage. If a CHIP Member is disenrolled while the CHIP Member is confined in a hospital, HMO’s responsibility for the CHIP Member’s costs of Covered Services terminates on the Date of Disenrollment.

Section 5.06 Verification of Member Eligibility.

Medicaid MCOs are prohibited from entering into an agreement to share information regarding their Members with an external vendor that provides verification of Medicaid recipients’ eligibility to Medicaid providers. All such external vendors must contract with the State and obtain eligibility information from the State.

Section 5.07 Special Temporary STAR Default Process

(a) STAR HMOs that did not contract with HHSC prior to the Effective Date of the Contract to provide Medicaid Health Care Services will be assigned a limited number of Medicaid-eligibles, who have not actively made a STAR HMO choice, for a finite period. The number will vary by Service Area as set forth below. To the extent possible, the special default assignment will be based on each eligible’s prior history with a PCP and geographic proximity to a PCP.

(b) For the Bexar, Dallas, El Paso, Harris, Tarrant, and Travis Service Areas, the special default process will begin with the Operational Start Date and conclude when the HMO has achieved an enrollment of 15,000 mandatory STAR members, or at the end of six months, whichever comes first.

(c) For the Lubbock Service Area, the special default process will begin with the Operational Start Date and conclude when the HMO has achieved an enrollment of 5,000 mandatory STAR members, or at the end of six months, whichever comes first.

(d) Special default periods may be extended for one or more Service Areas if consistent with HHSC administrative rules.

(e) This Section does not apply to the Nueces Service Area.

Article 6. Service Levels & Performance Measurement

Section 6.01 Performance measurement.

Satisfactory performance of this Contract will be measured by:

(a) Adherence to this Contract, including all representations and warranties;

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(b) Delivery of the Services and Deliverables described in Attachment B;

(c) Results of audits performed by HHSC or its representatives in accordance with Article 9 (“Audit and Financial Compliance”);

(d) Timeliness, completeness, and accuracy of required reports; and

(e) Achievement of performance measures developed by HMO and HHSC and as modified from time to time by written agreement during the term of this Contract.

Article 7. Governing Law & Regulations

Section 7.01 Governing law and venue.

This Contract is governed by the laws of the State of Texas and interpreted in accordance with Texas law. Provided HMO first complies with the procedures set forth in Section 12.13 (“Dispute Resolution,”) proper venue for claims arising from this Contract will be in the State District Court of Travis County, Texas.

Section 7.02 HMO responsibility for compliance with laws and regulations.

(a) HMO must comply, to the satisfaction of HHSC, with all provisions set forth in this Contract, all applicable provisions of state and federal laws, rules, regulations, federal waivers, policies and guidelines, and any court-ordered consent decrees, settlement agreements, or other court orders that govern the performance of the Scope of Work including, but not limited to:

(1) Titles XIX and XXI of the Social Security Act;

(2) Chapters 62 and 63, Texas Health and Safety Code;

(3) Chapters 531 and 533, Texas Government Code;

(4) 42 C.F.R. Parts 417 and 457, as applicable;

(5) 45 C.F.R. Parts 74 and 92;

(6) 48 C.F.R. Part 31, or OMB Circular A-122, as applicable;

(7) 1 T.A.C. Part 15, Chapters 361, 370, 391, and 392; and

(8) all State and Federal tax laws, State and Federal employment laws, State and Federal regulatory requirements, and licensing provisions.

(b) The Parties acknowledge that the federal and/or state laws, rules, regulations, policies, or guidelines, and court-ordered consent decrees, settlement agreements, or other court orders that affect the performance of the Scope of Work may change from time to time or be added, judicially interpreted, or amended by competent authority. HMO acknowledges that the HMO Programs will be subject to continuous change during the term of the Contract and, except as provided in Section 8.02, HMO has provided for or will provide for adequate resources, at no additional charge to HHSC, to reasonably accommodate such changes. The Parties further acknowledge that HMO was selected, in part, because of its expertise, experience, and knowledge concerning applicable Federal and/or state laws, regulations, policies, or guidelines that affect the performance of the Scope of Work. In keeping with HHSC’s reliance on this knowledge and expertise, HMO is responsible for identifying the impact of changes in applicable Federal or state legislative enactments and regulations that affect the performance of the Scope of Work or the State’s use of the Services and Deliverables. HMO must timely notify HHSC of such changes and must work with HHSC to identify the impact of such changes on how the State uses the Services and Deliverables.

(c) HHSC will notify HMO of any changes in applicable law, regulation, policy, or guidelines that HHSC becomes aware of in the ordinary course of its business.

(d) HMO is responsible for any fines, penalties, or disallowances imposed on the State or HMO arising from any noncompliance with the laws and regulations relating to the delivery of the Services or Deliverables by the HMO, its Subcontractors or agents.

(e) HMO is responsible for ensuring each of its employees, agents or Subcontractors who provide Services under the Contract are properly licensed, certified, and/or have proper permits to perform any activity related to the Services.

(f) HMO warrants that the Services and Deliverables will comply with all applicable Federal, State, and County laws, regulations, codes, ordinances, guidelines, and policies. HMO will indemnify HHSC from and against any losses, liability, claims, damages, penalties, costs, fees, or expenses arising from or in connection with HMO’s failure to comply with or violation of any such law, regulation, code, ordinance, or policy.

Section 7.03 TDI licensure/ANHC certification and solvency.

(a) Licensure

HMO must be either licensed by the TDI as an HMO or a certified ANHC in all counties for the Service Areas included within the scope of the Contract.

(b) Solvency

HMO must maintain compliance with the Texas Insurance Code and rules promulgated and administered by the TDI requiring a fiscally sound operation. HMO must have a plan and take

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appropriate measures to ensure adequate provision against the risk of insolvency as required by TDI. Such provision must be adequate to provide for the following in the event of insolvency:

(1) continuation of benefits, until the time of discharge, to Members who are confined on the date of insolvency in a Hospital or other inpatient facility;

(2) payment to unaffiliated health care providers and affiliated health care providers whose agreements do not contain member “hold harmless” clauses acceptable to TDI, and

(3) continuation of benefits for the duration of the Contract period for which HHSC has paid a Capitation Payment.

Provision against the risk of insolvency must be made by establishing adequate reserves, insurance or other guarantees in full compliance with all financial requirements of TDI.

Section 7.04 Immigration Reform and Control Act of 1986.

HMO shall comply with the requirements of the Immigration Reform and Control Act of 1986 and the Immigration Act of 1990 (8 U.S.C. §1101, et seq.) regarding employment verification and retention of verification forms for any individual(s) hired on or after November 6, 1986, who will perform any labor or services under this Contract.

Section 7.05 Compliance with state and federal anti-discrimination laws.

HMO shall comply with Title VI of the Civil Rights Act of 1964, Executive Order 11246 (Public Law 88-352), Section 504 of the Rehabilitation Act of 1973 (Public Law 93-112), the Americans with Disabilities Act of 1990 (Public Law 101-336), and all amendments to each, and all requirements imposed by the regulations issued pursuant to these Acts. In addition, HMO shall comply with Title 40, Chapter 73 of the Texas Administrative Code, “Civil Rights,” to the extent applicable to this Contract. These provide in part that no persons in the United States must, on the grounds of race, color, national origin, sex, age, disability, political beliefs, or religion, be excluded from participation in, or denied, any aid, care, service or other benefits provided by Federal or State funding, or otherwise be subjected to any discrimination.

Section 7.06 Environmental protection laws.

HMO shall comply with the applicable provisions of federal environmental protection laws as described in this Section:

(a) Pro-Children Act of 1994.

HMO shall comply with the Pro-Children Act of 1994 (20 U.S.C. §6081 et seq.), as applicable, regarding the provision of a smoke-free workplace and promoting the non-use of all tobacco products.

(b) National Environmental Policy Act of 1969.

HMO shall comply with any applicable provisions relating to the institution of environmental quality control measures contained in the National Environmental Policy Act of 1969 (42 U.S.C. §4321 et seq.) and Executive Order 11514 (“Protection and Enhancement of Environmental Quality”).

(c) Clean Air Act and Water Pollution Control Act regulations.

HMO shall comply with any applicable provisions relating to required notification of facilities violating the requirements of Executive Order 11738 (“Providing for Administration of the Clean Air Act and the Federal Water Pollution Control Act with Respect to Federal Contracts, Grants, or Loans”).

(d) State Clean Air Implementation Plan.

HMO shall comply with any applicable provisions requiring conformity of federal actions to State (Clean Air) Implementation Plans under §176(c) of the Clean Air Act of 1955, as amended (42 U.S.C. §740 et seq.).

(e) Safe Drinking Water Act of 1974.

HMO shall comply with applicable provisions relating to the protection of underground sources of drinking water under the Safe Drinking Water Act of 1974, as amended (21 U.S.C. § 349; 42 U.S.C. §§ 300f to 300j-9).

Section 7.07 HIPAA.

HMO shall comply with applicable provisions of HIPAA. This includes, but is not limited to, the requirement that the HMO’s MIS system comply with applicable certificate of coverage and data specification and reporting requirements promulgated pursuant to HIPAA. HMO must comply with HIPAA EDI requirements.

Article 8. Amendments & Modifications

Section 8.01 Mutual agreement.

This Contract may be amended at any time by mutual agreement of the Parties. The amendment must be in writing and signed by individuals with authority to bind the Parties.

Section 8.02 Changes in law or contract.

If Federal or State laws, rules, regulations, policies or guidelines are adopted, promulgated, judicially interpreted or changed, or if contracts are entered or changed, the effect of which is to alter the ability of either Party to fulfill its obligations under this Contract, the Parties will promptly negotiate in good faith appropriate modifications or alterations to the Contract and any schedule(s) or attachment(s) made a part of this Contract. Such modifications or alterations must be in writing and signed by individuals with authority to bind the parties, equitably adjust the terms and conditions of this Contract, and must be limited to those provisions of this Contract affected by the change.

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Section 8.03 Modifications as a remedy.

This Contract may be modified under the terms of Article 12 ( “Remedies and Disputes”).

Section 8.04 Modifications upon renewal or extension of Contract.

(a) If HHSC seeks modifications to the Contract as a condition of any Contract extension, HHSC’s notice to HMO will specify those modifications to the Scope of Work, the Contract pricing terms, or other Contract terms and conditions.

(b) HMO must respond to HHSC’s proposed modification within the timeframe specified by HHSC, generally within thirty (30) days of receipt. Upon receipt of HMO’s response to the proposed modifications, HHSC may enter into negotiations with HMO to arrive at mutually agreeable Contract amendments. In the event that HHSC determines that the Parties will be unable to reach agreement on mutually satisfactory contract modifications, then HHSC will provide written notice to HMO of its intent not to extend the Contract beyond the Contract Term then in effect.

Section 8.05 Modification of HHSC Uniform Managed Care Manual.

(a) HHSC will provide HMO with at least thirty (30) days advance written notice before implementing a substantive and material change in the HHSC Uniform Managed Care Manual (a change that materially and substantively alters the HMO’s ability to fulfill its obligations under the Contract). The Uniform Managed Care Manual, and all modifications thereto made during the Contract Term, are incorporated by reference into this Contract. HHSC will provide HMO with a reasonable amount of time to comment on such changes, generally at least ten (10) Business Days. HHSC is not required to provide advance written notice of changes that are not material and substantive in nature, such as corrections of clerical errors or policy clarifications.

(b) The Parties agree to work in good faith to resolve disagreements concerning material and substantive changes to the HHSC Uniform Managed Care Manual. If the Parties are unable to resolve issues relating to material and substantive changes, then either Party may terminate the agreement in accordance with Article 12 (“Remedies and Disputes”).

(c) Changes will be effective on the date specified in HHSC’s written notice, which will not be earlier than the HMO’s response deadline, and such changes will be incorporated into the HHSC Uniform Managed Care Manual. If the HMO has raised an objection to a material and substantive change to the HHSC Uniform Managed Care Manual and submitted a notice of termination in accordance with Section 12.04(d), HHSC will not enforce the policy change during the period of time between the receipt of the notice and the date of Contract termination.

Section 8.06 CMS approval of STAR amendments.

The implementation of amendments, modifications, and changes to STAR HMO contracts is subject to the approval of the Centers for Medicare and Medicaid Services (“CMS.”)

Section 8.07 Required compliance with amendment and modification procedures.

No different or additional services, work, or products will be authorized or performed except as authorized by this Article. No waiver of any term, covenant, or condition of this Contract will be valid unless executed in compliance with this Article. HMO will not be entitled to payment for any services, work or products that are not authorized by a properly executed Contract amendment or modification.

Article 9. Audit & Financial Compliance

Section 9.01 Financial record retention and audit.

HMO agrees to maintain, and require its Subcontractors to maintain, supporting financial information and documents that are adequate to ensure that payment is made and the Experience Rebate is calculated in accordance with applicable Federal and State requirements, and are sufficient to ensure the accuracy and validity of HMO invoices. Such documents, including all original claims forms, will be maintained and retained by HMO or its Subcontractors for a period of five (5) years after the Contract Expiration Date or until the resolution of all litigation, claim, financial management review or audit pertaining to this Contract, whichever is longer.

Section 9.02 Access to records, books, and documents.

(a) Upon reasonable notice, HMO must provide, and cause its Subcontractors to provide, the officials and entities identified in this Section with prompt, reasonable, and adequate access to any records, books, documents, and papers that are related to the performance of the Scope of Work.

(b) HMO and its Subcontractors must provide the access described in this Section upon HHSC’s request. This request may be for, but is not limited to, the following purposes:

(1) Examination;

(2) Audit;

(3) Investigation;

(4) Contract administration; or

(5) The making of copies, excerpts, or transcripts.

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(c) The access required must be provided to the following officials and/or entities:

(1) The United States Department of Health and Human Services or its designee;

(2) The Comptroller General of the United States or its designee;

(3) HMO Program personnel from HHSC or its designee;

(4) The Office of Inspector General;

(5) Any independent verification and validation contractor or quality assurance contractor acting on behalf of HHSC;

(6) The Office of the State Auditor of Texas or its designee;

(7) A State or Federal law enforcement agency;

(8) A special or general investigating committee of the Texas Legislature or its designee; and

(9) Any other state or federal entity identified by HHSC, or any other entity engaged by HHSC.

(d) HMO agrees to provide the access described wherever HMO maintains such books, records, and supporting documentation. HMO further agrees to provide such access in reasonable comfort and to provide any furnishings, equipment, and other conveniences deemed reasonably necessary to fulfill the purposes described in this Section. HMO will require its Subcontractors to provide comparable access and accommodations.

Section 9.03 Audits of Services, Deliverables and inspections.

(a) Upon reasonable notice from HHSC, HMO will provide, and will cause its Subcontractors to provide, such auditors and inspectors as HHSC may from time to time designate, with access to:

(1) HMO service locations, facilities, or installations; and

(2) HMO Software and Equipment.

(b) The access described in this Section will be for the purpose of examining, auditing, or investigating:

(1) HMO’s capacity to bear the risk of potential financial losses;

(2) the Services and Deliverables provided;

(3) a determination of the amounts payable under this Contract;

(4) detection of fraud, waste and/or abuse; or

(5) other purposes HHSC deems necessary to perform its regulatory function and/or enforce the provisions of this Contract.

(c) HMO must provide, as part of the Scope of Work, any assistance that such auditors and inspectors reasonably may require to complete such audits or inspections.

(d) If, as a result of an audit or review of payments made to the HMO, HHSC discovers a payment error or overcharge, HHSC will notify the HMO of such error or overcharge. HHSC will be entitled to recover such funds as an offset to future payments to the HMO, or to collect such funds directly from the HMO. HMO must return funds owed to HHSC within thirty (30) days after receiving notice of the error or overcharge, or interest will accrue on the amount due. HHSC will calculate interest at the Department of Treasury’s Median Rate (resulting from the Treasury’s auction of 13-week bills) for the week in which liability is assessed. In the event that an audit reveals that errors in reporting by the HMO have resulted in errors in payments to the HMO or errors in the calculation of the Experience Rebate, the HMO will indemnify HHSC for any losses resulting from such errors, including the cost of audit.

Section 9.04 SAO Audit

The HMO understands that acceptance of funds under this Contract acts as acceptance of the authority of the State Auditor’s Office (“SAO”), or any successor agency, to conduct an investigation in connection with those funds. The HMO further agrees to cooperate fully with the SAO or its successor in the conduct of the audit or investigation, including providing all records requested. The HMO will ensure that this clause concerning the authority to audit funds received indirectly by Subcontractors through HMO and the requirement to cooperate is included in any Subcontract it awards, and in any third party agreements described in Section 4.10 (a-b).

Section 9.05 Response/compliance with audit or inspection findings.

(a) HMO must take action to ensure its or a Subcontractor’s compliance with or correction of any finding of noncompliance with any law, regulation, audit requirement, or generally accepted accounting principle relating to the Services and Deliverables or any other deficiency contained in any audit, review, or inspection conducted under this Article. This action will include HMO’S delivery to HHSC, for HHSC’S approval, a Corrective Action Plan that addresses deficiencies identified in any audit(s), review(s), or inspection(s) within thirty (30) calendar days of the close of the audit(s), review(s), or inspection(s).

(b) HMO must bear the expense of compliance with any finding of noncompliance under this Section that is:

(1) Required by Texas or Federal law, regulation, rule or other audit requirement relating to HMO’s business;

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(2) Performed by HMO as part of the Services or Deliverables; or

(3) Necessary due to HMO’s noncompliance with any law, regulation, rule or audit requirement imposed on HMO.

(c) As part of the Scope of Work, HMO must provide to HHSC upon request a copy of those portions of HMO’s and its Subcontractors’ internal audit reports relating to the Services and Deliverables provided to HHSC under the Contract.

Article 10. Terms & Conditions of Payment

Section 10.01 Calculation of monthly Capitation Payment.

(a) This is a Risk-based contract. For each applicable HMO Program, HHSC will pay the HMO fixed monthly Capitation Payments based on the number of eligible and enrolled Members. HHSC will calculate the monthly Capitation Payments by multiplying the number of Members by each applicable Member Rate Cell. In consideration of the Monthly Capitation Payment(s), the HMO agrees to provide the Services and Deliverables described in this Contract.

(b) HMO will be required to provide timely financial and statistical information necessary in the Capitation Rate determination process. Encounter Data provided by HMO must conform to all HHSC requirements. Encounter Data containing non-compliant information, including, but not limited to, inaccurate client or member identification numbers, inaccurate provider identification numbers, or diagnosis or procedures codes insufficient to adequately describe the diagnosis or medical procedure performed, will not be considered in the HMO’s experience for rate-setting purposes.

(c) Information or data, including complete and accurate Encounter Data, as requested by HHSC for rate-setting purposes, must be provided to HHSC: (1) within thirty (30) days of receipt of the letter from HHSC requesting the information or data; and (2) no later than March 31^st of each year.

(d) The fixed monthly Capitation Rate consists of the following components:

(1) an amount for Health Care Services performed during the month;

(2) an amount for administering the program, and

(3) an amount for the HMO’s Risk margin.

Capitation Rates for each HMO Program may vary by Service Area and MCO. HHSC will employ or retain qualified actuaries to perform data analysis and calculate the Capitation Rates for each Rate Period.

(e) HMO understands and expressly assumes the risks associated with the performance of the duties and responsibilities under this Contract, including the failure, termination or suspension of funding to HHSC, delays or denials of required approvals, and cost overruns not reasonably attributable to HHSC.

Section 10.02 Time and Manner of Payment.

(a) During the Contract Term and beginning after the Operational Start Date, HHSC will pay the monthly Capitation Payments by the 10th Business Day of each month.

(b) The HMO must accept Capitation Payments by direct deposit into the HMO’s account.

(c) HHSC may adjust the monthly Capitation Payment to the HMO in the case of an overpayment to the HMO, for Experience Rebate amounts due and unpaid, and if money damages are assessed in accordance with Article 12 (“Remedies and Disputes”).

(d) HHSC’s payment of monthly Capitation Payments is subject to availability of federal and state appropriations. If appropriations are not available to pay the full monthly Capitation Payment, HHSC may:

(1) equitably adjust Capitation Payments for all participating Contractors, and reduce scope of service requirements as appropriate in accordance with Article 8, or

(2) terminate the Contract in accordance with Article 12 (“Remedies and Disputes”).

Section 10.03 Certification of Capitation Rates.

HHSC will employ or retain a qualified actuary to certify the actuarial soundness of the Capitation Rates contained in this Contract. HHSC will also employ or retain a qualified actuary to certify all revisions or modifications to the Capitation Rates.

Section 10.04 Modification of Capitation Rates.

The Parties expressly understand and agree that the agreed Capitation Rates are subject to modification in accordance with Article 8 (“Amendments and Modifications,”) if changes in state or federal laws, rules, regulations or policies affect the rates or the actuarial soundness of the rates. HHSC will provide the HMO notice of a modification to the Capitation Rates 60 days prior to the effective date of the change, unless HHSC determines that circumstances warrant a shorter notice period. If the HMO does not accept the rate change, either Party may terminate the Contract in accordance with Article 12 (“Remedies and Disputes”).

Section 10.05 STAR Capitation Structure.

(a) STAR Rate Cells.

STAR Capitation Rates are defined on a per Member per month basis by Rate Cells and Service Areas. STAR Rate Cells are:

(1) TANF adults;

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(2) TANF children over 12 months of age;

(3) Expansion children over 12 months of age;

(4) Newborns less than or equal to 12 months of age;

(5) TANF children less than or equal to 12 months of age;

(6) Expansion children less than or equal to 12 months of age;

(7) Federal mandate children; and

(8) Pregnant women.

(b) STAR Capitation Rate development:

(1) Capitation Rates for Rate Periods 1 and 2 for Service Areas with historical STAR Program participation.

For Service Areas where HHSC operated the STAR Program prior to the Effective Date of this Contract, HHSC will develop base Capitation Rates by analyzing historical STAR Encounter Data and financial data for the Service Area. This analysis will apply to all MCOs in the Service Area, including MCOs that have no historical STAR Program participation in the Service Area. The analysis will include a review of historical enrollment and claims experience information; any changes to Covered Services and covered populations; rate changes specified by the Texas Legislature; and any other relevant information. If the HMO participated in the STAR Program in the Service Area prior to the Effective Date of this Contract, HHSC may modify the Service Area base Capitation Rates using diagnosis-based risk adjusters to yield the final Capitation Rates.

(2) Capitation Rates for Rate Periods 1 and 2 for Service Areas with no historical STAR Program participation.

For Service Areas where HHSC has not operated the STAR Program prior to the Effective Date of this Contract, HHSC will establish base Capitation Rates for Rate Periods 1 and 2 by analyzing Fee-for-Service claims data for the Service Area. This analysis will include a review of historical enrollment and claims experience information; any changes to Covered Services and covered populations; rate changes specified by the Texas Legislature; and any other relevant information.

(3) Capitation Rates for subsequent Rate Periods for Service Areas with no historical STAR Program participation.

For Service Areas where HHSC has not operated the STAR Program prior to the Effective Date of this Contract, HHSC will establish base Capitation Rates for the Rate Periods following Rate Period 2 by analyzing historical STAR Encounter Data and financial data for the Service Area. This analysis will include a review of historical enrollment and claims experience information; any changes to Covered Services and covered populations; rate changes specified by the Texas Legislature; and any other relevant information.

(c) Acuity adjustment.

HHSC may evaluate and implement an acuity adjustment methodology, or alternative reasonable methodology, that appropriately reimburses the HMO for acuity and cost differences that deviate from that of the community average, if HHSC in its sole discretion determines that such a methodology is reasonable and appropriate. The community average is a uniform rate for all HMOs in a Service Area, and is determined by combining all the experience for all HMOs in a Service Area to get an average rate for the Service Area.

(d) Value-added Services will not be included in the rate-setting process.

Section 10.06 CHIP Capitation Rates Structure.

(a) CHIP Rate Cells.

CHIP Capitation Rates are defined on a per Member per month basis by the Rate Cells applicable to a Service Area. CHIP Rate Cells are based on the Member’s age group as follows:

(1) under age one (1);

(2) ages one (1) through five (5);

(3) ages six (6) through fourteen (14); and

(4) ages fifteen (15) through eighteen (18).

(b) CHIP Capitation Rate development:

HHSC will establish base Capitation Rates by analyzing Encounter Data and financial data for each Service Area. This analysis will include a review of historical enrollment and claims experience information; any changes to Covered Services and covered populations; rate changes specified by the Texas Legislature; and any other relevant information. HHSC may modify the Service Area base Capitation Rate using diagnosis based risk adjusters to yield the final Capitation Rates.

(c) Acuity adjustment.

HHSC may evaluate and implement an acuity adjustment methodology, or alternative reasonable methodology, that appropriately reimburses the HMO for acuity and cost differences that deviate from that of the community average, if HHSC in its sole discretion determines that such a methodology is reasonable and appropriate. The community average is a uniform rate for all HMOs in a Service Area, and is determined by combining all the experience for all HMOs in a Service Area to get an average rate for the Service Area.

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(d) Value-added Services will not be included in the rate-setting process.

Section 10.07 HMO input during rate setting process.

(1) In Service Areas with historical STAR or CHIP Program participation, HMO must provide certified Encounter Data and financial data as prescribed in HHSC’s Uniform Managed Care Manual. Such information may include, without limitation: claims lag information by Rate Cell, capitation expenses, and stop loss reinsurance expenses. HHSC may request clarification or for additional financial information from the HMO. HHSC will notify the HMO of the deadline for submitting a response, which will include a reasonable amount of time for response.

(2) HHSC will allow the HMO to review and comment on data used by HHSC to determine base Capitation Rates. In Service Areas with no historical STAR Program participation, this will include Fee-for-Service data for Rate Periods 1 and 2. HHSC will notify the HMO of deadline for submitting comments, which will include a reasonable amount of time for response. HHSC will not consider comments received after the deadline in its rate analysis.

(3) During the rate setting process, HHSC will conduct at least two (2) meetings with the HMO. HHSC may conduct the meetings in person, via teleconference, or by another method deemed appropriate by HHSC. Prior to the first meeting, HHSC will provide the HMO with proposed Capitation Rates. During the first meeting, HHSC will describe the process used to generate the proposed Capitation Rates, discuss major changes in the rate setting process, and receive input from the HMO. HHSC will notify the HMO of the deadline for submitting comments, which will include a reasonable amount of time to review and comment on the proposed Capitation Rates and rate setting process. After reviewing such comments, HHSC will conduct a second meeting to discuss the final Capitation Rates and changes resulting from HMO comments, if any.

Section 10.08 Adjustments to Capitation Payments.

(a) Recoupment.

HHSC may recoup a payment made to the HMO for a Member if:

(1) the Member is enrolled into the HMO in error, and the HMO provided no Covered Services to the Member during the month for which the payment was made;

(2) the Member moves outside the United States, and the HMO has not provided Covered Services to the Member during the month for which the payment was made;

(3) the Member dies before the first day of the month for which the payment was made; or

(4) a Medicaid Member’s eligibility status or program type is changed, corrected as a result of error, or is retroactively adjusted.

(b) Appeal of recoupment.

The HMO may appeal the recoupment or adjustment of capitations in the above circumstances using the HHSC dispute resolution process set forth in Section 12.12, (“Dispute Resolution”).

Section 10.09 Delivery Supplemental Payment for CHIP and STAR HMOs.

(a) The Delivery Supplemental Payment (DSP) is a function of the average delivery cost in each Service Area. Delivery costs include facility and professional charges.

(b) CHIP and STAR HMOs will receive a Delivery Supplemental Payment (DSP) from HHSC for each live or stillbirth by a Member. The one-time payment is made in the amount identified in the HHSC Managed Care Contract document regardless of whether there is a single birth or there are multiple births at time of delivery. A delivery is the birth of a live born infant, regardless of the duration of the pregnancy, or a stillborn (fetal death) infant of twenty (20) weeks or more of gestation. A delivery does not include a spontaneous or induced abortion, regardless of the duration of the pregnancy.

(c) HMO must submit a monthly DSP Report as described in Attachment B to the HHSC Managed Care Contract document, (“Scope of Work/Performance Measures’) in the format prescribed in HHSC’s Uniform Managed Care Manual.

(d) HHSC will pay the Delivery Supplemental Payment within twenty (20) Business Days after receipt of a complete and accurate report from the HMO.

(e) The HMO will not be entitled to Delivery Supplemental Payments for deliveries that are not reported to HHSC within 210 days after the date of delivery, or within thirty (30) days from the date of discharge from the hospital for the stay related to the delivery, whichever is later.

(f) HMO must maintain complete claims and adjudication disposition documentation, including paid and denied amounts for each delivery. The HMO must submit the documentation to HHSC within five (5) Business Days after receiving a request for such information from HHSC.

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Section 10.10 Administrative Fee for SSI Members

(a) Administrative Fee.

STAR HMOs will receive a monthly fee for administering benefits to each SSI Beneficiary who voluntarily enrolls in the HMO (a “Voluntary SSI Member”), in the amount identified in the HHSC Managed Care Contract document. The HHSC will pay for Health Care Services for such Voluntary SSI Members under the Medicaid Fee-for-Services program. SSI Beneficiaries in all Service Areas except Nueces may voluntarily participate in the STAR Program; however, HHSC reserves the right to discontinue such voluntary participation.

(b) Administrative services and functions.

(1) HMO must perform the same administrative services and functions for Voluntary SSI Members as are performed for other Members under this contract. These administrative services and functions include, but are not limited to:

(i) prior authorization of services;

(ii) all Member services functions, including linguistic services and Member materials in alternative formats for the blind and disabled;

(iii) health education;

(iv) utilization management using HHSC Administrative Services Contractor encounter data to provide service management and appropriate interventions;

(v) quality assessment and performance improvement activities;

(vi) coordination to link Voluntary SSI Members with applicable community resources and Non-capitated services.

(2) HMO must require Network Providers to submit claims for health and health-related services to the HHSC Administrative Services Contractor for claims adjudication and payment.

(3) HMO must provide services to Voluntary SSI Members within the HMO’s Network unless necessary services are unavailable within Network. HMO must also allow referrals to Out-of-Network providers if necessary services are not available within the HMO’s Network. Records must be forwarded to Member’s PCP following a referral visit.

(c) Members who become eligible for SSI

A Member’s SSI status is effective the date the State’s eligibility system identifies the Member as Type Program 13 (TP13). On this effective date, the Member becomes a voluntary STAR enrollee.

Section 10.11 Experience Rebate

(a) HMO’s duty to pay.

At the end of each Rate Year beginning with Rate Year 1, the HMO must pay an Experience Rebate to HHSC if the HMO’s Net Income before Taxes is greater than 3% of the total Revenue for the period. The Experience Rebate is calculated in accordance with the tiered rebate method set forth below based on the consolidated Net Income before Taxes for all of the HMO’s Service Areas and HMO Programs included within the scope of the Contract, as measured by any positive amount on the Financial-Statistical Report (FSR) as reviewed and confirmed by HHSC.

(b) Graduated Experience Rebate Sharing Method.

Experience Rebate as a % of Revenues	HMO Share		HHSC Share
< 3%	100	%	0	%
> 3% and < 7%	75	%	25	%
> 7% and < 10%	50	%	50	%
> 10% and < 15%	25	%	75	%
> 15%	0	%	100	%

HHSC and the HMO will share the Net Income before Taxes as follows, unless HHSC provides the HMO an Experience Rebate Reward in accordance with Section 6 of Attachment B-1 to the HHSC Managed Care Contract document and HHSC’s Uniform Managed Care Manual:

(1) The HMO will retain all Net Income before Taxes that is equal to or less than 3% of the total Revenues received by the HMO.

(2) HHSC and the HMO will share that portion of the Net Income before Taxes that is over 3% but less than or equal to 7% of the total Revenues received with 75% to the HMO and 25% to HHSC.

(3) HHSC and the HMO will share that portion of the Net Income before Taxes that is over 7% but less than or equal to 10% of the total Revenues received with 50% to the HMO and 50% to HHSC.

(4) HHSC and the HMO will share that portion of the Net Income before Taxes that is over 10% but less than or equal to 15% of the total Revenues received with 25% to the HMO and 75% to HHSC.

(5) HHSC will be paid the entire portion of the Net Income before Taxes that exceeds 15% of the total Revenues.

(c) Net income before taxes.

The HMO must compute the Net Income before Taxes in accordance with the HHSC Uniform Managed Care Manual’s “Cost Principles for Administrative Expenses” and “FSR Instructions for Completion” and applicable federal regulations. The Net Income before Taxes will be confirmed by HHSC or its agent for the Rate Year relating to all revenues and expenses incurred pursuant to the Contract. HHSC reserves the right to modify the

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“Cost Principles for Administrative Expenses” and “FSR Instructions for Completion” found in HHSC’s Uniform Managed Care Manual in accordance with Section 8.05.

(d) Carry forward of prior Rate Year losses.

Losses incurred by HMO for one Rate Year may be carried forward to the next Rate Year, and applied as an offset against an Experience Rebate. Prior losses may be carried forward for only one Rate Year for this purpose. If the HMO offsets a loss against another HMO Service Area or HMO Program, only that portion of the loss that was not used as an offset may be carried forward to the next Rate Year.

(e) Settlements for payment.

(1) There will be two settlements for HMO payment(s) of the State share of the Experience Rebate. The first settlement shall equal 100% of the State share of the Experience Rebate as derived from the FSR, and shall be paid on the same day the 90-day FSR Report is submitted to HHSC, accompanied by an actuarial opinion certifying the reserve.

(2) The second settlement shall be an adjustment to the first settlement and shall be paid by the HMO to HHSC on the same day that the 334-day FSR is submitted to HHSC if the adjustment is a payment from the HMO to HHSC.

(3) HHSC or its agent may audit or review the FSRs. If HHSC determines that corrections to the FSRs are required, based on an HHSC audit/review or other documentation acceptable to HHSC, to determine an adjustment to the amount of the second settlement, then final adjustment shall be made within three years from the date that the HMO submits the 334-day FSR.

(4) HHSC may offset any Experience Rebates owed to the State from future Capitation Payments, or collect such sums directly from the HMO. HHSC must receive the first and second settlements by the specified due dates for the first and second FSRs respectively or HMO will incur interest on the amounts due at the current prime interest rate as set forth below. HHSC may adjust the Experience Rebate if HHSC determines the HMO has paid amounts for goods or services that are not reasonable, necessary, and allowable in accordance with the HHSC Uniform Managed Care Manual’s “Cost Principles for Administrative Expenses” and “FSR Instructions for Completion” and applicable federal regulations. HHSC has final authority in auditing and determining the amount of the Experience Rebate.

(f) Interest on Experience Rebate.

Interest on any Experience Rebate owed to HHSC shall be charged beginning thirty (30) days after the date that the first and second settlements are due. In addition, if any adjusted amount is owed to HHSC at the final settlement date, then interest will be charged on the adjusted amount owed beginning thirty (30) days after the second settlement date to the date of the final settlement payment. HHSC will calculate interest at the Department of Treasury’s Median Rate (resulting from the Treasury’s auction of 13-week bills) for the week in which the liability is assessed.

Section 10.12 Payment by Members.

(a) Medicaid HMOs

Medicaid HMOs and their Network Providers are prohibited from billing or collecting any amount from a Member for Health Care Services covered by this Contract. HMO must inform Members of costs for non-covered services, and must require its Network Providers to:

(1) inform Members of costs for non-covered services prior to rendering such services; and

(2) obtain a signed Private Pay form from such Members.

(b) CHIP HMOs.

Families that meet the enrollment period cost share limit requirement must report it to the HHSC Administrative Services Contractor. The HHSC Administrative Service Contractor notifies the HMO that a family’s cost share limit has been reached. Upon notification from the HHSC Administrative Services Contractor that a family has reached its cost-sharing limit for the term of coverage, the HMO will generate and mail to the CHIP Member a new Member ID card within five days, showing that the CHIP Member’s cost-sharing obligation for that term of coverage has been met. No cost-sharing may be collected from these CHIP Members for the balance of their term of coverage.

Providers are responsible for collecting all CHIP Member co-payments at the time of service. Co-payments that families must pay vary according to their income level. No co-payments apply, at any income level, to well-child or well-baby visits or immunizations. Except for costs associated with unauthorized non-emergency services provided to a Member by Out-of-Network providers and for non-covered services, the co-payments outlined in the CHIP Cost Sharing table in the HHSC Uniform Managed Care Manual are the only amounts that a provider may collect from a CHIP-eligible family.

Federal law prohibits charging cost-sharing or deductibles to CHIP Members of Native Americans or Alaskan Natives. The HHSC Administrative Services Contractor will notify the HMO of CHIP Members who are not subject to cost-sharing requirements. The HMO is responsible for educating Providers regarding the cost-sharing waiver for this population.

A HMO’s monthly Capitation Payment will not be reduced for a family’s failure to make its CHIP

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premium payment. There is no relationship between the per Member/per month amount owed to the HMO for coverage provided during a month and the family’s payment of its CHIP premium obligation for that month.

Section 10.13 Restriction on assignment of fees.

During the term of the Contract, HMO may not, directly or indirectly, assign to any third party any beneficial or legal interest of the HMO in or to any payments to be made by HHSC pursuant to this Contract. This restriction does not apply to fees paid to Subcontractors.

Section 10.14 Liability for taxes.

HHSC is not responsible in any way for the payment of any Federal, state or local taxes related to or incurred in connection with the HMO’s performance of this Contract. HMO must pay and discharge any and all such taxes, including any penalties and interest. In addition, HHSC is exempt from Federal excise taxes, and will not pay any personal property taxes or income taxes levied on HMO or any taxes levied on employee wages.

Section 10.15 Liability for employment-related charges and benefits.

HMO will perform work under this Contract as an independent contractor and not as agent or representative of HHSC. HMO is solely and exclusively liable for payment of all employment-related charges incurred in connection with the performance of this Contract, including but not limited to salaries, benefits, employment taxes, workers compensation benefits, unemployment insurance and benefits, and other insurance or fringe benefits for Staff.

Section 10.16 No additional consideration.

(a) HMO will not be entitled to nor receive from HHSC any additional consideration, compensation, salary, wages, charges, fees, costs, or any other type of remuneration for Services and Deliverables provided under the Contract, except by properly authorized and executed Contract amendments.

(b) No other charges for tasks, functions, or activities that are incidental or ancillary to the delivery of the Services and Deliverables will be sought from HHSC or any other state agency, nor will the failure of HHSC or any other party to pay for such incidental or ancillary services entitle the HMO to withhold Services and Deliverables due under the Agreement.

(c) HMO will not be entitled by virtue of the Contract to consideration in the form of overtime, health insurance benefits, retirement benefits, disability retirement benefits, sick leave, vacation time, paid holidays, or other paid leaves of absence of any type or kind whatsoever.

Article 11. Disclosure & Confidentiality of Information

Section 11.01 Confidentiality.

(a) HMO and all Subcontractors, consultants, or agents under the Contract must treat all information that is obtained through performance of the Services under the Contract, including, but not limited to, information relating to applicants or recipients of HHSC Programs as Confidential Information to the extent that confidential treatment is provided under law and regulations.

(b) HMO is responsible for understanding the degree to which information obtained through performance of this Contract is confidential under State and Federal law, regulations, or administrative rules.

(c) HMO and all Subcontractors, consultants, or agents under the Contract may not use any information obtained through performance of this Contract in any manner except as is necessary for the proper discharge of obligations and securing of rights under the Contract.

(d) HMO must have a system in effect to protect all records and all other documents deemed confidential under this Contract maintained in connection with the activities funded under the Contract. Any disclosure or transfer of Confidential Information by HMO, including information required by HHSC, will be in accordance with applicable law. If the HMO receives a request for information deemed confidential under this Contract, the HMO will immediately notify HHSC of such request, and will make reasonable efforts to protect the information from public disclosure.

(e) In addition to the requirements expressly stated in this Section, HMO must comply with any policy, rule, or reasonable requirement of HHSC that relates to the safeguarding or disclosure of information relating to Members, HMO’S operations, or HMO’s performance of the Contract.

(f) In the event of the expiration of the Contract or termination of the Contract for any reason, all Confidential Information disclosed to and all copies thereof made by the HMOI shall be returned to HHSC or, at HHSC’s option, erased or destroyed. HMO shall provide HHSC certificates evidencing such destruction.

(g) The obligations in this Section shall not restrict any disclosure by the HMO pursuant to any applicable law, or by order of any court or government agency, provided that the HMO shall give prompt notice to HHSC of such order.

(h) With the exception of confidential Member information, Confidential Information shall not be afforded the protection of the Contract if such data was:

(1) Already known to the receiving Party without restrictions at the time of its disclosure by the furnishing Party;

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(2) Independently developed by the receiving Party without reference to the furnishing Party’s Confidential Information;

(3) Rightfully obtained by the other Party without restriction from a third party after its disclosure by the furnishing Party;

(4) Publicly available other than through the fault or negligence of the other Party; or

(5) Lawfully released without restriction to anyone.

Section 11.02 Disclosure of HHSC’s Confidential Information.

(a) HMO will immediately report to HHSC any and all unauthorized disclosures or uses of HHSC’s Confidential Information of which it or its Subcontractor(s), consultant(s), or agent(s) is aware or has knowledge. HMO acknowledges that any publication or disclosure of HHSC’s Confidential Information to others may cause immediate and irreparable harm to HHSC and may constitute a violation of State or federal laws. If HMO, its Subcontractor(s), consultant(s), or agent(s) should publish or disclose such Confidential Information to others without authorization, HHSC will immediately be entitled to injunctive relief or any other remedies to which it is entitled under law or equity. HHSC will have the right to recover from HMO all damages and liabilities caused by or arising from HMO’s, its Subcontractors’, consultants’, or agents’ failure to protect HHSC’s Confidential Information. HMO will defend with counsel approved by HHSC, indemnify and hold harmless HHSC from all damages, costs, liabilities, and expenses (including without limitation reasonable attorneys’ fees and costs) caused by or arising from HMO’s or its Subcontractors’, consultants’ or agents’ failure to protect HHSC’s Confidential Information. HHSC will not unreasonably withhold approval of counsel selected by the HMO.

(b) HMO will require its Subcontractor(s), consultant(s), and agent(s) to comply with the terms of this provision.

Section 11.03 Member Records

(a) HMO must comply with the requirements of state and federal laws, including the HIPAA requirements set forth in Section 7.07, regarding the transfer of Member Records.

(b) If at any time during the Contract Term this Contract is terminated, HHSC may require the transfer of Member Records, upon written notice to HMO, to another entity, as consistent with federal and state laws and applicable releases.

(c) The term “Member Record” for this Section means only those administrative, enrollment, case management and other such records maintained by HMO and is not intended to include patient records maintained by participating Network Providers.

Section 11.04 Requests for public information.

(a) HHSC agrees that it will promptly notify HMO of a request for disclosure of information filed in accordance with the Texas Public Information Act, Chapter 552 of the Texas Government Code, that consists of the HMO’S confidential information, including without limitation, information or data to which HMO has a proprietary or commercial interest. HHSC will deliver a copy of the request for public information to HMO.

(b) With respect to any information that is the subject of a request for disclosure, HMO is required to demonstrate to the Texas Office of Attorney General the specific reasons why the requested information is confidential or otherwise excepted from required public disclosure under law. HMO will provide HHSC with copies of all such communications.

(c) To the extent authorized under the Texas Public Information Act, HHSC agrees to safeguard from disclosure information received from HMO that the HMO believes to be confidential information. HMO must clearly mark such information as confidential information or provide written notice to HHSC that it considers the information confidential.

Section 11.05 Privileged Work Product.

(a) HMO acknowledges that HHSC asserts that privileged work product may be prepared in anticipation of litigation and that HMO is performing the Services with respect to privileged work product as an agent of HHSC, and that all matters related thereto are protected from disclosure by the Texas Rules of Civil Procedure, Texas Rules of Evidence, Federal Rules of Civil Procedure, or Federal Rules of Evidence.

(b) HHSC will notify HMO of any privileged work product to which HMO has or may have access. After the HMO is notified or otherwise becomes aware that such documents, data, database, or communications are privileged work product, only HMO personnel, for whom such access is necessary for the purposes of providing the Services, may have access to privileged work product.

(c) If HMO receives notice of any judicial or other proceeding seeking to obtain access to HHSC’s privileged work product, HMO will:

(1) Immediately notify HHSC; and

(2) Use all reasonable efforts to resist providing such access.

(d) If HMO resists disclosure of HHSC’s privileged work product in accordance with this Section, HHSC will, to the extent authorized under Civil Practices and Remedies Code or other applicable State law, have the right and duty to:

(1) represent HMO in such resistance;

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(2) to retain counsel to represent HMO; or

(3) to reimburse HMO for reasonable attorneys’ fees and expenses incurred in resisting such access.

(e) If a court of competent jurisdiction orders HMO to produce documents, disclose data, or otherwise breach the confidentiality obligations imposed in the Contract, or otherwise with respect to maintaining the confidentiality, proprietary nature, and secrecy of privileged work product, HMO will not be liable for breach of such obligation.

Section 11.06 Unauthorized acts.

Each Party agrees to:

(1) Notify the other Party promptly of any unauthorized possession, use, or knowledge, or attempt thereof, by any person or entity that may become known to it, of any HHSC Confidential Information or any information identified by the HMO as confidential or proprietary;

(2) Promptly furnish to the other Party full details of the unauthorized possession, use, or knowledge, or attempt thereof, and use reasonable efforts to assist the other Party in investigating or preventing the reoccurrence of any unauthorized possession, use, or knowledge, or attempt thereof, of Confidential Information;

(3) Cooperate with the other Party in any litigation and investigation against third Parties deemed necessary by such Party to protect its proprietary rights; and

(4) Promptly prevent a reoccurrence of any such unauthorized possession, use, or knowledge such information.

Section 11.07 Legal action.

Neither party may commence any legal action or proceeding in respect to any unauthorized possession, use, or knowledge, or attempt thereof by any person or entity of HHSC’s Confidential Information or information identified by the HMO as confidential or proprietary, which action or proceeding identifies the other Party such information without such Party’s consent.

Article 12. Remedies & Disputes

Section 12.01 Understanding and expectations.

The remedies described in this Section are directed to HMO’s timely and responsive performance of the Services and production of Deliverables, and the creation of a flexible and responsive relationship between the Parties. The HMO is expected to meet or exceed all HHSC objectives and standards, as set forth in the Contract. All areas of responsibility and all Contract requirements will be subject to performance evaluation by HHSC. Performance reviews may be conducted at the discretion of HHSC at any time and may relate to any responsibility and/or requirement. Any and all responsibilities and/or requirements not fulfilled may be subject to remedies set forth in the Contract.

Section 12.02 Tailored remedies.

(a) Understanding of the Parties.

HMO agrees and understands that HHSC may pursue tailored contractual remedies for noncompliance with the Contract. At any time and at its discretion, HHSC may impose or pursue one or more remedies for each item of noncompliance and will determine remedies on a case-by-case basis. HHSC’s pursuit or non-pursuit of a tailored remedy does not constitute a waiver of any other remedy that HHSC may have at law or equity.

(b) Notice and opportunity to cure for non-material breach.

(1) HHSC will notify HMO in writing of specific areas of HMO performance that fail to meet performance expectations, standards, or schedules set forth in the Contract, but that, in the determination of HHSC, do not result in a material deficiency or delay in the implementation or operation of the Services.

(2) HMO will, within five (5) Business Days (or another date approved by HHSC) of receipt of written notice of a non-material deficiency, provide the HHSC Project Manager a written response that:

(A) Explains the reasons for the deficiency, HMO’s plan to address or cure the deficiency, and the date and time by which the deficiency will be cured; or

(B) If HMO disagrees with HHSC’s findings, its reasons for disagreeing with HHSC’s findings.

(3) HMO’s proposed cure of a non-material deficiency is subject to the approval of HHSC. HMO’s repeated commission of non-material deficiencies or repeated failure to resolve any such deficiencies may be regarded by HHSC as a material deficiency and entitle HHSC to pursue any other remedy provided in the Contract or any other appropriate remedy HHSC may have at law or equity.

(c) Corrective action plan.

(1) At its option, HHSC may require HMO to submit to HHSC a written plan (the “Corrective Action Plan”) to correct or resolve a material breach of this Contract, as determined by HHSC.

(2) The Corrective Action Plan must provide:

(A) A detailed explanation of the reasons for the cited deficiency;

(B) HMO’s assessment or diagnosis of the cause; and

(C) A specific proposal to cure or resolve the deficiency.

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(3) The Corrective Action Plan must be submitted by the deadline set forth in HHSC’s request for a Corrective Action Plan. The Corrective Action Plan is subject to approval by HHSC, which will not unreasonably be withheld.

(4) HHSC will notify HMO in writing of HHSC’s final disposition of HHSC’s concerns. If HHSC accepts HMO’s proposed Corrective Action Plan, HHSC may:

(A) Condition such approval on completion of tasks in the order or priority that HHSC may reasonably prescribe;

(B) Disapprove portions of HMO’s proposed Corrective Action Plan; or

(C) Require additional or different corrective action(s).

Notwithstanding the submission and acceptance of a Corrective Action Plan, HMO remains responsible for achieving all written performance criteria.

(5) HHSC’s acceptance of a Corrective Action Plan under this Section will not:

(A) Excuse HMO’s prior substandard performance;

(B) Relieve HMO of its duty to comply with performance standards; or

(C) Prohibit HHSC from assessing additional tailored remedies or pursuing other appropriate remedies for continued substandard performance.

(d) Administrative remedies.

(1) At its discretion, HHSC may impose one or more of the following remedies for each item of material noncompliance and will determine the scope and severity of the remedy on a case-by-case basis:

(A) Assess liquidated damages in accordance with Attachment B-5 to the HHSC Managed Care Contract, “Liquidated Damages Matrix;”

(B) Conduct accelerated monitoring of the HMO. Accelerated monitoring includes more frequent or more extensive monitoring by HHSC or its agent;

(C) Require additional, more detailed, financial and/or programmatic reports to be submitted by HMO;

(D) Decline to renew or extend the Contract;

(E) Appoint temporary management;

(F) Initiate disenrollment of a Member or Members;

(G) Suspend enrollment of Members;

(H) Withhold or recoup payment to HMO;

(I) Require forfeiture of all or part of the HMO’s bond; or

(J) Terminate the Contract in accordance with Section 12.03, (“Termination by HHSC”).

(2) For purposes of the Contract, an item of material noncompliance means a specific action of HMO that:

(A) Violates a material provision of the Contract;

(B) Fails to meet an agreed measure of performance; or

(C) Represents a failure of HMO to be reasonably responsive to a reasonable request of HHSC relating to the Services for information, assistance, or support within the timeframe specified by HHSC.

(3) HHSC will provide notice to HMO of the imposition of an administrative remedy in accordance with this Section, with the exception of accelerated monitoring, which may be unannounced. HHSC may require HMO to file a written response in accordance with this Section.

(4) The Parties agree that a State or Federal statute, rule, regulation, or Federal guideline will prevail over the provisions of this Section unless the statute, rule, regulation, or guidelines can be read together with this Section to give effect to both.

(e) Damages.

(1) HHSC will be entitled to actual and consequential damages resulting from the HMO’S failure to comply with any of the terms of the Contract. In some cases, the actual damage to HHSC or State of Texas as a result of HMO’S failure to meet any aspect of the responsibilities of the Contract and/or to meet specific performance standards set forth in the Contract are difficult or impossible to determine with precise accuracy. Therefore, liquidated damages will be assessed in writing against and paid by the HMO in accordance with and for failure to meet any aspect of the responsibilities of the Contract and/or to meet the specific performance standards identified by the HHSC in Attachment B-5 to the HHSC Managed Care Contract, “Deliverables/Liquidated Damages Matrix.” Liquidated damages will be assessed if HHSC determines such failure is the fault of the HMO (including the HMO’S Subcontractors and/or consultants) and is not materially caused or contributed to by HHSC or its agents. If at any time, HHSC determines the HMO has not met any aspect of the responsibilities of the Contract and/or the specific performance standards due to mitigating circumstances, HHSC reserves the right to waive all or part of the liquidated damages. All such waivers must be in writing, contain the reasons for the waiver, and be signed by the appropriate executive of HHSC.

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(2) The liquidated damages prescribed in this Section are not intended to be in the nature of a penalty, but are intended to be reasonable estimates of HHSC’s projected financial loss and damage resulting from the HMO’s nonperformance, including financial loss as a result of project delays. Accordingly, in the event HMO fails to perform in accordance with the Contract, HHSC may assess liquidated damages as provided in this Section.

(3) If HMO fails to perform any of the Services described in the Contract, HHSC may assess liquidated damages for each occurrence of a liquidated damages event, to the extent consistent with HHSC’s tailored approach to remedies and Texas law.

(4) HHSC may elect to collect liquidated damages:

(A) Through direct assessment and demand for payment delivered to HMO; or

(B) By deduction of amounts assessed as liquidated damages as set-off against payments then due to HMO or that become due at any time after assessment of the liquidated damages. HHSC will make deductions until the full amount payable by the HMO is received by HHSC.

(f) Equitable Remedies

(1) HMO acknowledges that, if HMO breaches (or attempts or threatens to breach) its material obligation under this Contract, HHSC may be irreparably harmed. In such a circumstance, HHSC may proceed directly to court to pursue equitable remedies.

(2) If a court of competent jurisdiction finds that HMO breached (or attempted or threatened to breach) any such obligations, HMO agrees that without any additional findings of irreparable injury or other conditions to injunctive relief, it will not oppose the entry of an appropriate order compelling performance by HMO and restraining it from any further breaches (or attempted or threatened breaches).

(g) Suspension of Contract

(1) HHSC may suspend performance of all or any part of the Contract if:

(A) HHSC determines that HMO has committed a material breach of the Contract;

(B) HHSC has reason to believe that HMO has committed, assisted in the commission of Fraud, Abuse, Waste, malfeasance, misfeasance, or nonfeasance by any party concerning the Contract;

(C) HHSC determines that the HMO knew, or should have known of, Fraud, Abuse, Waste, malfeasance, or nonfeasance by any party concerning the Contract, and the HMO failed to take appropriate action; or

(D) HHSC determines that suspension of the Contract in whole or in part is in the best interests of the State of Texas or the HHSC Programs.

(2) HHSC will notify HMO in writing of its intention to suspend the Contract in whole or in part. Such notice will:

(A) Be delivered in writing to HMO;

(B) Include a concise description of the facts or matter leading to HHSC’s decision; and

(C) Unless HHSC is suspending the contract for convenience, request a Corrective Action Plan from HMO or describe actions that HMO may take to avoid the contemplated suspension of the Contract.

Section 12.03 Termination by HHSC.

This Contract will terminate upon the Expiration Date. In addition, prior to completion of the Contract Term, all or a part of this Contract may be terminated for any of the following reasons:

(a) Termination in the best interest of HHSC.

HHSC may terminate the Contract without cause at any time when, in its sole discretion, HHSC determines that termination is in the best interests of the State of Texas. HHSC will provide reasonable advance written notice of the termination, as it deems appropriate under the circumstances. The termination will be effective on the date specified in HHSC’s notice of termination.

(b) Termination for cause.

HHSC reserves the right to terminate this Contract, in whole or in part, upon the following conditions:

(1) Assignment for the benefit of creditors, appointment of receiver, or inability to pay debts.

HHSC may terminate this Contract at any time if HMO:

(A) Makes an assignment for the benefit of its creditors;

(B) Admits in writing its inability to pay its debts generally as they become due; or

(C) Consents to the appointment of a receiver, trustee, or liquidator of HMO or of all or any part of its property.

(2) Failure to adhere to laws, rules, ordinances, or orders.

HHSC may terminate this Contract if a court of competent jurisdiction finds HMO failed to adhere to any laws, ordinances, rules, regulations or orders of any public authority having jurisdiction and such violation prevents or substantially impairs performance of HMO’s duties under this Contract. HHSC will provide at least thirty (30) days advance written notice of such termination.

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(3) Breach of confidentiality.

HHSC may terminate this Contract at any time if HMO breaches confidentiality laws with respect to the Services and Deliverables provided under this Contract.

(4) Failure to maintain adequate personnel or resources.

HHSC may terminate this Contract if, after providing notice and an opportunity to correct, HHSC determines that HMO has failed to supply personnel or resources and such failure results in HMO’s inability to fulfill its duties under this Contract. HHSC will provide at least thirty (30) days advance written notice of such termination.

(5) Termination for gifts and gratuities.

(A) HHSC may terminate this Contract at any time following the determination by a competent judicial or quasi-judicial authority and HMO’s exhaustion of all legal remedies that HMO, its employees, agents or representatives have either offered or given any thing of value to an officer or employee of HHSC or the State of Texas in violation of state law.

(B) HMO must include a similar provision in each of its Subcontracts and shall enforce this provision against a Subcontractor who has offered or given any thing of value to any of the persons or entities described in this Section, whether or not the offer or gift was in HMO’s behalf.

(C) Termination of a Subcontract by HMO pursuant to this provision will not be a cause for termination of the Contract unless:

(1) HMO fails to replace such terminated Subcontractor within a reasonable time; and

(2) Such failure constitutes cause, as described in this Subsection 12.03(b).

(D) For purposes of this Section, a “thing of value” means any item of tangible or intangible property that has a monetary value of more than $50.00 and includes, but is not limited to, cash, food, lodging, entertainment, and charitable contributions. The term does not include contributions to holders of public office or candidates for public office that are paid and reported in accordance with State and/or Federal law.

(6) Termination for non-appropriation of funds.

Notwithstanding any other provision of this Contract, if funds for the continued fulfillment of this Contract by HHSC are at any time not forthcoming or are insufficient, through failure of any entity to appropriate funds or otherwise, then HHSC will have the right to terminate this Contract at no additional cost and with no penalty whatsoever by giving prior written notice documenting the lack of funding. HHSC will provide at least thirty (30) days advance written notice of such termination. HHSC will use reasonable efforts to ensure appropriated funds are available.

(7) Judgment and execution.

(A) HHSC may terminate the Contract at any time if judgment for the payment of money in excess of $500,000.00 that is not covered by insurance, is rendered by any court or governmental body against HMO, and HMO does not:

(1) Discharge the judgment or provide for its discharge in accordance with the terms of the judgment;

(2) Procure a stay of execution of the judgment within thirty (30) days from the date of entry thereof; or

(3) Perfect an appeal of such judgment and cause the execution of such judgment to be stayed during the appeal, providing such financial reserves as may be required under generally accepted accounting principles.

(B) If a writ or warrant of attachment or any similar process is issued by any court against all or any material portion of the property of HMO, and such writ or warrant of attachment or any similar process is not released or bonded within thirty (30) days after its entry, HHSC may terminate the Contract in accordance with this Section.

(8) Termination for insolvency.

(A) HHSC may terminate the Contract at any time if HMO:

(1) Files for bankruptcy;

(2) Becomes or is declared insolvent, or is the subject of any proceedings related to its liquidation, insolvency, or the appointment of a receiver or similar officer for it;

(3) Makes an assignment for the benefit of all or substantially all of its creditors; or

(4) Enters into an Contract for the composition, extension, or readjustment of substantially all of its obligations.

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(B) HMO agrees to pay for all reasonable expenses of HHSC including the cost of counsel, incident to:

(1) The enforcement of payment of all obligations of the HMO by any action or participation in, or in connection with a case or proceeding under Chapters 7, 11, or 13 of the United States Bankruptcy Code, or any successor statute;

(2) A case or proceeding involving a receiver or other similar officer duly appointed to handle the HMO’s business; or

(3) A case or proceeding in a State court initiated by HHSC when previous collection attempts have been unsuccessful.

(9) Termination for HMO’S material breach of the Contract.

HHSC will have the right to terminate the Contract in whole or in part if HHSC determines, at its sole discretion, that HMO has materially breached the Contract. HHSC will provide at least thirty (30) days advance written notice of such termination.

Section 12.04 Termination by HMO.

(a) Failure to pay.

HMO may terminate this Contract if HHSC fails to pay the HMO undisputed charges when due as required under this Contract. Retaining premium, recoupment, sanctions, or penalties that are allowed under this Contract or that result from the HMO’s failure to perform or the HMO’s default under the terms of this Contract is not cause for termination. Termination for failure to pay does not release HHSC from the obligation to pay undisputed charges for services provided prior to the termination date.

If HHSC fails to pay undisputed charges when due, then the HMO may submit a notice of intent to terminate for failure to pay in accordance with the requirements of Subsection 12.04(d). If HHSC pays all undisputed amounts then due within thirty (30)-days after receiving the notice of intent to terminate, the HMO cannot proceed with termination of the Contract under this Article.

(b) Change to HHSC Uniform Managed Care Manual.

HMO may terminate this agreement if the Parties are unable to resolve a dispute concerning a material and substantive change to the HHSC Uniform Managed Care Manual (a change that materially and substantively alters the HMO’s ability to fulfill its obligations under the Contract). HMO must submit a notice of intent to terminate due to a material and substantive change in the HHSC Uniform Managed Care Manual no later than thirty (30) days after the effective date of the policy change. HHSC will not enforce the policy change during the period of time between the receipt of the notice of intent to terminate and the effective date of termination.

(c) Change to Capitation Rate.

If HHSC proposes a modification to the Capitation Rate that is unacceptable to the HMO, the HMO may terminate the Contract. HMO must submit a written notice of intent to terminate due to a change in the Capitation Rate no later than thirty (30) days after HHSC’s notice of the proposed change. HHSC will not enforce the rate change during the period of time between the receipt of the notice of intent to terminate and the effective date of termination.

(d) Notice of intent to terminate.

In order to terminate the Contract pursuant to this Section, HMO must give HHSC at least ninety (90) days written notice of intent to terminate. The termination date will be calculated as the last day of the month following ninety (90) days from the date the notice of intent to terminate is received by HHSC.

Section 12.05 Termination by mutual agreement.

This Contract may be terminated by mutual written agreement of the Parties.

Section 12.06 Effective date of termination.

Except as otherwise provided in this Contract, termination will be effective as of the date specified in the notice of termination.

Section 12.07 Extension of termination effective date.

The Parties may extend the effective date of termination one or more times by mutual written agreement.

Section 12.08 Payment and other provisions at Contract termination.

(a) In the event of termination pursuant to this Article, HHSC will pay the Capitation Payment for Services and Deliverables rendered through the effective date of termination. All pertinent provisions of the Contract will form the basis of settlement.

(b) HMO must provide HHSC all reasonable access to records, facilities, and documentation as is required to efficiently and expeditiously close out the Services and Deliverables provided under this Contract.

(c) HMO must prepare a Turnover Plan, which is acceptable to and approved by HHSC. The Turnover Plan will be implemented during the time period between receipt of notice and the termination date.

Section 12.09 Modification of Contract in the event of remedies.

HHSC may propose a modification of this Contract in response to the imposition of a remedy under this Article. Any modifications under this Section must be reasonable, limited to the matters causing the exercise of a remedy, in writing, and executed in accordance with Article 8. HMO must negotiate such proposed modifications in good faith.

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Section 12.10 Turnover assistance.

Upon receipt of notice of termination of the Contract by HHSC, HMO will provide any turnover assistance reasonably necessary to enable HHSC or its designee to effectively close out the Contract and move the work to another vendor or to perform the work itself.

Section 12.11 Rights upon termination or expiration of Contract.

In the event that the Contract is terminated for any reason, or upon its expiration, HHSC will, at HHSC’s discretion, retain ownership of any and all associated work products, Deliverables and/or documentation in whatever form that they exist.

Section 12.12 HMO responsibility for associated costs.

If HHSC terminates the Contract for Cause, the HMO will be responsible to HHSC for all reasonable costs incurred by HHSC, the State of Texas, or any of its administrative agencies to replace the HMO. These costs include, but are not limited to, the costs of procuring a substitute vendor and the cost of any claim or litigation that is reasonably attributable to HMO’s failure to perform any Service in accordance with the terms of the Contract

Section 12.13 Dispute resolution.

(a) General agreement of the Parties.

The Parties mutually agree that the interests of fairness, efficiency, and good business practices are best served when the Parties employ all reasonable and informal means to resolve any dispute under this Contract. The Parties express their mutual commitment to using all reasonable and informal means of resolving disputes prior to invoking a remedy provided elsewhere in this Section.

(b) Duty to negotiate in good faith.

Any dispute that in the judgment of any Party to this Contract may materially or substantially affect the performance of any Party will be reduced to writing and delivered to the other Party. The Parties must then negotiate in good faith and use every reasonable effort to resolve such dispute and the Parties shall not resort to any formal proceedings unless they have reasonably determined that a negotiated resolution is not possible. The resolution of any dispute disposed of by Contract between the Parties shall be reduced to writing and delivered to all Parties within ten (10) Business Days.

(c) Claims for breach of Contract.

(1) General requirement. HMO’s claim for breach of this Contract will be resolved in accordance with the dispute resolution process established by HHSC in accordance with Chapter 2260, Texas Government Code.

(2) Negotiation of claims. The Parties expressly agree that the HMO’s claim for breach of this Contract that the Parties cannot resolve in the ordinary course of business or through the use of all reasonable and informal means will be submitted to the negotiation process provided in Chapter 2260, Subchapter B, Texas Government Code.

(A) To initiate the process, HMO must submit written notice to HHSC that specifically states that HMO invokes the provisions of Chapter 2260, Subchapter B, Texas Government Code. The notice must comply with the requirements of Title 1, Chapter 392, Subchapter B of the Texas Administrative Code.

(B) The Parties expressly agree that the HMO’s compliance with Chapter 2260, Subchapter B, Texas Government Code, will be a condition precedent to the filing of a contested case proceeding under Chapter 2260, Subchapter C, of the Texas Government Code.

(3) Contested case proceedings. The contested case process provided in Chapter 2260, Subchapter C, Texas Government Code, will be HMO’s sole and exclusive process for seeking a remedy for any and all alleged breaches of contract by HHSC if the Parties are unable to resolve their disputes under Subsection (c)(2) of this Section.

The Parties expressly agree that compliance with the contested case process provided in Chapter 2260, Subchapter C, Texas Government Code, will be a condition precedent to seeking consent to sue from the Texas Legislature under Chapter 107, Civil Practices & Remedies Code. Neither the execution of this Contract by HHSC nor any other conduct of any representative of HHSC relating to this Contract shall be considered a waiver of HHSC’s sovereign immunity to suit.

(4) HHSC rules. The submission, processing and resolution of HMO’s claim is governed by the rules adopted by HHSC pursuant to Chapter 2260, Texas Government Code, found at Title 1, Chapter 392, Subchapter B of the Texas Administrative Code.

(5) HMO’s duty to perform. Neither the occurrence of an event constituting an alleged breach of contract nor the pending status of any claim for breach of contract is grounds for the suspension of performance, in whole or in part, by HMO of any duty or obligation with respect to the performance of this Contract. Any changes to the Contract as a result of a dispute resolution will be implemented in accordance with Article 8 (“Amendments and Modifications”).

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Section 12.14 Liability of HMO.

(a) HMO bears all risk of loss or damage to HHSC or the State due to:

(1) Defects in Services or Deliverables;

(2) Unfitness or obsolescence of Services or Deliverables; or

(3) The negligence or intentional misconduct of HMO or its employees, agents, Subcontractors, or representatives.

(b) HMO must, at the HMO’s own expense, defend with counsel approved by HHSC, indemnify, and hold harmless HHSC and State employees, officers, directors, contractors and agents from and against any losses, liabilities, damages, penalties, costs, fees, including without limitation reasonable attorneys’ fees, and expenses from any claim or action for property damage, bodily injury or death, to the extent caused by or arising from the negligence or intentional misconduct of the HMO and its employees, officers, agents, or Subcontractors. HHSC will not unreasonably withhold approval of counsel selected by HMO.

(c) HMO will not be liable to HHSC for any loss, damages or liabilities attributable to or arising from the failure of HHSC or any state agency to perform a service or activity in connection with this Contract.

Article 13. Assurances & Certifications

Section 13.01 Proposal certifications.

HMO acknowledges its continuing obligation to comply with the requirements of the following certifications contained in its Proposal, and will immediately notify HHSC of any changes in circumstances affecting these certifications:

(1) Federal lobbying;

(2) Debarment and suspension;

(3) Child support; and

(4) Nondisclosure statement.

Section 13.02 Conflicts of interest.

(a) Representation.

HMO agrees to comply with applicable state and federal laws, rules, and regulations regarding conflicts of interest in the performance of its duties under this Contract. HMO warrants that it has no interest and will not acquire any direct or indirect interest that would conflict in any manner or degree with its performance under this Contract.

(b) General duty regarding conflicts of interest.

HMO will establish safeguards to prohibit employees from using their positions for a purpose that constitutes or presents the appearance of personal or organizational conflict of interest, or personal gain. HMO will operate with complete independence and objectivity without actual, potential or apparent conflict of interest with respect to the activities conducted under this Contract with the State of Texas.

Section 13.03 Organizational conflicts of interest.

(a) Definition.

An organizational conflict of interest is a set of facts or circumstances, a relationship, or other situation under which a HMO, or a Subcontractor has past, present, or currently planned personal or financial activities or interests that either directly or indirectly:

(1) Impairs or diminishes the HMO’s, or Subcontractor’s ability to render impartial or objective assistance or advice to HHSC; or

(2) Provides the HMO or Subcontractor an unfair competitive advantage in future HHSC procurements (excluding the award of this Contract).

(b) Warranty.

Except as otherwise disclosed and approved by HHSC prior to the Effective Date of the Contract, HMO warrants that, as of the Effective Date and to the best of its knowledge and belief, there are no relevant facts or circumstances that could give rise to an organizational conflict of interest affecting this Contract. HMO affirms that it has neither given, nor intends to give, at any time hereafter, any economic opportunity, future employment, gift, loan, gratuity, special discount, trip, favor, or service to a public servant or any employee or representative of same, at any time during the procurement process or in connection with the procurement process except as allowed under relevant state and federal law.

(c) Continuing duty to disclose.

(1) HMO agrees that, if after the Effective Date, HMO discovers or is made aware of an organizational conflict of interest, HMO will immediately and fully disclose such interest in writing to the HHSC project manager. In addition, HMO must promptly disclose any relationship that might be perceived or represented as a conflict after its discovery by HMO or by HHSC as a potential conflict. HHSC reserves the right to make a final determination regarding the existence of conflicts of interest, and HMO agrees to abide by HHSC’s decision.

(2) The disclosure will include a description of the action(s) that HMO has taken or proposes to take to avoid or mitigate such conflicts.

(d) Remedy.

If HHSC determines that an organizational conflict of interest exists, HHSC may, at its discretion, terminate the Contract pursuant to Subsection 12.03(b)(9). If HHSC determines that HMO was aware of an organizational conflict of interest before

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the award of this Contract and did not disclose the conflict to the contracting officer, such nondisclosure will be considered a material breach of the Contract. Furthermore, such breach may be submitted to the Office of the Attorney General, Texas Ethics Commission, or appropriate State or Federal law enforcement officials for further action.

(e) Flow down obligation.

HMO must include the provisions of this Section in all Subcontracts for work to be performed similar to the service provided by HMO, and the terms “Contract,” “HMO,” and “project manager” modified appropriately to preserve the State’s rights.

Section 13.04 HHSC personnel recruitment prohibition.

HMO has not retained or promised to retain any person or company, or utilized or promised to utilize a consultant that participated in HHSC’s development of specific criteria of the RFP or who participated in the selection of the HMO for this Contract.

Unless authorized in writing by HHSC, HMO will not recruit or employ any HHSC professional or technical personnel who have worked on projects relating to the subject matter of this Contract, or who have had any influence on decisions affecting the subject matter of this Contract, for two (2) years following the completion of this Contract.

Section 13.05 Anti-kickback provision.

HMO certifies that it will comply with the Anti-Kickback Act of 1986, 41 U.S.C. §51-58 and Federal Acquisition Regulation 52.203-7, to the extent applicable.

Section 13.06 Debt or back taxes owed to State of Texas.

In accordance with Section 403.055 of the Texas Government Code, HMO agrees that any payments due to HMO under the Contract will be first applied toward any debt and/or back taxes HMO owes State of Texas. HMO further agrees that payments will be so applied until such debts and back taxes are paid in full.

Section 13.07 Certification regarding status of license, certificate, or permit.

Article IX, Section 163 of the General Appropriations Act for the 1998/1999 state fiscal biennium prohibits an agency that receives an appropriation under either Article II or V of the General Appropriations Act from awarding a contract with the owner, operator, or administrator of a facility that has had a license, certificate, or permit revoked by another Article II or V agency. HMO certifies it is not ineligible for an award under this provision.

Section 13.08 Outstanding debts and judgments.

HMO certifies that it is not presently indebted to the State of Texas, and that HMO is not subject to an outstanding judgment in a suit by State of Texas against HMO for collection of the balance. For purposes of this Section, an indebtedness is any amount sum of money that is due and owing to the State of Texas and is not currently under dispute. A false statement regarding HMO’s status will be treated as a material breach of this Contract and may be grounds for termination at the option of HHSC.

Article 14. Representations & Warranties

Section 14.01 Authorization.

(a) The execution, delivery and performance of this Contract has been duly authorized by HMO and no additional approval, authorization or consent of any governmental or regulatory agency is required to be obtained in order for HMO to enter into this Contract and perform its obligations under this Contract.

(b) HMO has obtained all licenses, certifications, permits, and authorizations necessary to perform the Services under this Contract and currently is in good standing with all regulatory agencies that regulate any or all aspects of HMO’s performance of this Contract. HMO will maintain all required certifications, licenses, permits, and authorizations during the term of this Contract.

Section 14.02 Ability to perform.

HMO warrants that it has the financial resources to fund the capital expenditures required under the Contract without advances by HHSC or assignment of any payments by HHSC to a financing source.

Section 14.03 Minimum Net Worth.

The HMO has, and will maintain throughout the life of this Contract, minimum net worth to the greater of (a) $1,500,000; (b) an amount equal to the sum of twenty-five dollars ($25) times the number of all enrollees including Members; or (c) an amount that complies with standards adopted by TDI. Minimum net worth means the excess total admitted assets over total liabilities, excluding liability for subordinated debt issued in compliance with Chapter 843 of the Texas Insurance Code.

Section 14.04 Insurer solvency.

(a) The HMO must be and remain in full compliance with all applicable state and federal solvency requirements for basic-service health maintenance organizations, including but not limited to, all reserve requirements, net worth standards, debt-to-equity ratios, or other debt limitations. In the event the HMO fails to maintain such compliance, HHSC, without limiting any other rights it may have by law or under the Contract, may terminate the Contract.

(b) If the HMO becomes aware of any impending changes to its financial or business structure that could adversely impact its compliance

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with the requirements of the Contract or its ability to pay its debts as they come due, the HMO must notify HHSC immediately in writing.

(c) The HMO must have a plan and take appropriate measures to ensure adequate provision against the risk of insolvency as required by TDI. Such provision must be adequate to provide for the following in the event of insolvency:

(1) continuation of Covered Services, until the time of discharge, to Members who are confined on the date of insolvency in a hospital or other inpatient facility;

(2) payments to unaffiliated health care providers and affiliated healthcare providers whose Contracts do not contain Member “hold harmless” clauses acceptable to the TDI;

(3) continuation of Covered Services for the duration of the Contract Period for which a capitation has been paid for a Member;

(4) provision against the risk of insolvency must be made by establishing adequate reserves, insurance or other guarantees in full compliance with all financial requirements of TDI and the Contract.

Should TDI determine that there is an immediate risk of insolvency or the HMO is unable to provide Covered Services to its Members, HHSC, without limiting any other rights it may have by law, or under the Contract, may terminate the Contract.

Section 14.05 Workmanship and performance.

(a) All Services and Deliverables provided under this Contract will be provided in a manner consistent with the standards of quality and integrity as outlined in the Contract.

(b) All Services and Deliverables must meet or exceed the required levels of performance specified in or pursuant to this Contract.

(c) HMO will perform the Services and provide the Deliverables in a workmanlike manner, in accordance with best practices and high professional standards used in well-managed operations performing services similar to the services described in this Contract.

Section 14.06 Warranty of deliverables.

HMO warrants that Deliverables developed and delivered under this Contract will meet in all material respects the specifications as described in the Contract during the period following its acceptance by HHSC, through the term of the Contract, including any subsequently negotiated by HMO and HHSC. HMO will promptly repair or replace any such Deliverables not in compliance with this warranty at no charge to HHSC.

Section 14.07 Compliance with Contract.

HMO will not take any action substantially or materially inconsistent with any of the terms and conditions set forth in this Contract without the express written approval of HHSC.

Section 14.08 Technology Access

(a) HMO expressly acknowledges that State funds may not be expended in connection with the purchase of an automated information system unless that system meets certain statutory requirements relating to accessibility by persons with visual impairments. Accordingly, HMO represents and warrants to HHSC that this technology is capable, either by virtue of features included within the technology or because it is readily adaptable by use with other technology, of:

(1) Providing equivalent access for effective use by both visual and non-visual means;

(2) Presenting information, including prompts used for interactive communications, in formats intended for non-visual use; and

(3) Being integrated into networks for obtaining, retrieving, and disseminating information used by individuals who are not blind or visually impaired.

(b) For purposes of this Section, the phrase “equivalent access” means a substantially similar ability to communicate with or make use of the technology, either directly by features incorporated within the technology or by other reasonable means such as assistive devices or services that would constitute reasonable accommodations under the Americans with Disabilities Act or similar State or Federal laws. Examples of methods by which equivalent access may be provided include, but are not limited to, keyboard alternatives to mouse commands and other means of navigating graphical displays, and customizable display appearance.

(c) In addition, all technological solutions offered by the HMO must comply with the requirements of Texas Government Code §531.0162. This includes, but is not limited to providing technological solutions that meet federal accessibility standards for persons with disabilities, as applicable.

Article 15. Intellectual Property

Section 15.01 Infringement and misappropriation.

(a) HMO warrants that all Deliverables provided by HMO will not infringe or misappropriate any right of, and will be free of any claim of, any third person or entity based on copyright, patent, trade secret, or other intellectual property rights.

(b) HMO will, at its expense, defend with counsel approved by HHSC, indemnify, and hold harmless HHSC, its employees, officers, directors, contractors,

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and agents from and against any losses, liabilities, damages, penalties, costs, fees, including without limitation reasonable attorneys’ fees and expenses, from any claim or action against HHSC that is based on a claim of breach of the warranty set forth in the preceding paragraph. HHSC will promptly notify HMO in writing of the claim, provide HMO a copy of all information received by HHSC with respect to the claim, and cooperate with HMO in defending or settling the claim. HHSC will not unreasonably withhold, delay or condition approval of counsel selected by the HMO.

(c) In case the Deliverables, or any one or part thereof, is in such action held to constitute an infringement or misappropriation, or the use thereof is enjoined or restricted or if a proceeding appears to HMO to be likely to be brought, HMO will, at its own expense, either:

(1) Procure for HHSC the right to continue using the Deliverables; or

(2) Modify or replace the Deliverables to comply with the Specifications and to not violate any intellectual property rights.

If neither of the alternatives set forth in (1) or (2) above are available to the HMO on commercially reasonable terms, HMO may require that HHSC return the allegedly infringing Deliverable(s) in which case HMO will refund all amounts paid for all such Deliverables.

Section 15.02 Exceptions.

HMO is not responsible for any claimed breaches of the warranties set forth in Section 15.01 to the extent caused by:

(a) Modifications made to the item in question by anyone other than HMO or its Subcontractors, or modifications made by HHSC or its contractors working at HMO’s direction or in accordance with the specifications; or

(b) The combination, operation, or use of the item with other items if HMO did not supply or approve for use with the item; or

(c) HHSC’s failure to use any new or corrected versions of the item made available by HMO.

Section 15.03 Ownership and Licenses

(a) Definitions.

For purposes of this Section 15.03, the following terms have the meanings set forth below:

(1) “Custom Software” means any software developed by the HMO: for HHSC; in connection with the Contract; and with funds received from HHSC. The term does not include HMO Proprietary Software or Third Party Software.

(2) “HMO Proprietary Software” means software: (i) developed by the HMO prior to the Effective Date of the Contract, or (ii) software developed by the HMO after the Effective Date of the Contract that is not developed: for HHSC; in connection with the Contract; and with funds received from HHSC.

(3) “Third Party Software” means software that is: developed for general commercial use; available to the public; or not developed for HHSC. Third Party Software includes without limitation: commercial off-the-shelf software; operating system software; and application software, tools, and utilities.

(b) Deliverables.

The Parties agree that any Deliverable, including without limitation the Custom Software, will be the exclusive property of HHSC.

(c) Ownership rights.

(1) HHSC will own all right, title, and interest in and to its Confidential Information and the Deliverables provided by the HMO, including without limitation the Custom Software and associated documentation. For purposes of this Section 15.03, the Deliverables will not include HMO Proprietary Software or Third Party Software. HMO will take all actions necessary and transfer ownership of the Deliverables to HHSC, including, without limitation, the Custom Software and associated documentation prior to Contract termination.

(2) HMO will furnish such Deliverables, upon request of HHSC, in accordance with applicable State law. All Deliverables, in whole and in part, will be deemed works made for hire of HHSC for all purposes of copyright law, and copyright will belong solely to HHSC. To the extent that any such Deliverable does not qualify as a work for hire under applicable law, and to the extent that the Deliverable includes materials subject to copyright, patent, trade secret, or other proprietary right protection, HMO agrees to assign, and hereby assigns, all right, title, and interest in and to Deliverables, including without limitation all copyrights, inventions, patents, trade secrets, and other proprietary rights therein (including renewals thereof) to HHSC.

(3) HMO will, at the expense of HHSC, assist HHSC or its nominees to obtain copyrights, trademarks, or patents for all such Deliverables in the United States and any other countries. HMO agrees to execute all papers and to give all facts known to it necessary to secure United States or foreign country copyrights and patents, and to transfer or cause to transfer to HHSC all the right, title, and interest in and to such Deliverables. HMO also agrees not to assert any moral rights under applicable copyright law with regard to such Deliverables.

(d) License Rights

HHSC will have a royalty-free and non-exclusive license to access the HMO Proprietary Software and associated documentation during the term of the Contract. HHSC will also have ownership and

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unlimited rights to use, disclose, duplicate, or publish all information and data developed, derived, documented, or furnished by HMO under or resulting from the Contract. Such data will include all results, technical information, and materials developed for and/or obtained by HHSC from HMO in the performance of the Services hereunder, including but not limited to all reports, surveys, plans, charts, recordings (video and/or sound), pictures, drawings, analyses, graphic representations, computer printouts, notes and memoranda, and documents whether finished or unfinished, which result from or are prepared in connection with the Services performed as a result of the Contract.

(e) Proprietary Notices

HMO will reproduce and include HHSC’s copyright and other proprietary notices and product identifications provided by HMO on such copies, in whole or in part, or on any form of the Deliverables.

(f) State and Federal Governments

In accordance with 45 C.F.R. §95.617, all appropriate State and Federal agencies will have a royalty-free, nonexclusive, and irrevocable license to reproduce, publish, translate, or otherwise use, and to authorize others to use for Federal Government purposes all materials, the Custom Software and modifications thereof, and associated documentation designed, developed, or installed with federal financial participation under the Contract, including but not limited to those materials covered by copyright, all software source and object code, instructions, files, and documentation.

Article 16. Liability

Section 16.01 Property damage.

(a) HMO will protect HHSC’s real and personal property from damage arising from HMO’s, its agent’s, employees’ and Subcontractors’ performance of the Contract, and HMO will be responsible for any loss, destruction, or damage to HHSC’s property that results from or is caused by HMO’s, its agents’, employees’ or Subcontractors’ negligent or wrongful acts or omissions. Upon the loss of, destruction of, or damage to any property of HHSC, HMO will notify the HHSC Project Manager thereof and, subject to direction from the Project Manager or her or his designee, will take all reasonable steps to protect that property from further damage.

(b) HMO agrees to observe and encourage its employees and agents to observe safety measures and proper operating procedures at HHSC sites at all times.

(c) HMO will distribute a policy statement to all of its employees and agents that directs the employee or agent to promptly report to HHSC or to HMO any special defect or unsafe condition encountered while on HHSC premises. HMO will promptly report to HHSC any special defect or an unsafe condition it encounters or otherwise learns about.

Section 16.02 Risk of Loss.

During the period Deliverables are in transit and in possession of HMO, its carriers or HHSC prior to being accepted by HHSC, HMO will bear the risk of loss or damage thereto, unless such loss or damage is caused by the negligence or intentional misconduct of HHSC. After HHSC accepts a Deliverable, the risk of loss or damage to the Deliverable will be borne by HHSC, except loss or damage attributable to the negligence or intentional misconduct of HMO’s agents, employees or Subcontractors.

Section 16.03 Limitation of HHSC’s Liability.

HHSC WILL NOT BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES UNDER CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHER LEGAL THEORY. THIS WILL APPLY REGARDLESS OF THE CAUSE OF ACTION AND EVEN IF HHSC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

HHSC’S LIABILITY TO HMO UNDER THE CONTRACT WILL NOT EXCEED THE TOTAL CHARGES TO BE PAID BY HHSC TO HMO UNDER THE CONTRACT, INCLUDING CHANGE ORDER PRICES AGREED TO BY THE PARTIES OR OTHERWISE ADJUDICATED.

HMO’s remedies are governed by the provisions in Article 12.

Article 17. Insurance & Bonding

Section 17.01 Insurance Coverage.

(a) Required Coverage

(1) Statutory and General Coverage.

HMO will maintain, at HMO’s own expense, during the Term of the Contract and until final acceptance of all Services and Deliverables, the following insurance coverage. HMO will provide HHSC with proof of the following insurance coverage on or before the Contract Effective Date:

(A) Standard Worker’s Compensation Insurance coverage;

(B) Automobile Liability;

(C) Comprehensive Liability Insurance including Bodily Injury coverage of $100,000.00 per each occurrence and Property Damage Coverage of $25,000.00 per each occurrence; and

(D) General Liability Insurance of at least $1,000,000.00 per occurrence and $5,000,000.00 in the aggregate.

If HMO’s current Comprehensive General Liability insurance coverage does not meet the

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above stated requirements, HMO will obtain excess liability insurance to compensate for the difference in the coverage amounts.

(2) Professional Liability Coverage.

(A) HMO must maintain at its own expense, or cause its Network Providers to maintain, during the Term of the Contract and until final acceptance of all Services and Deliverables, Professional Liability Insurance for each Network Provider of $100,000.00 per occurrence and $300,000.00 in the aggregate, or the limits required by the hospital at which the Network Provider has admitting privileges. HMO must provide proof of such coverage upon request to HHSC.

(B) HMO must maintain at its own expense, during the Term of the Contract and until final acceptance of all Services and Deliverables, an Umbrella Professional Liability Insurance Policy for the greater of $3,000,000.00 or an amount (rounded to the nearest $100,000.00) that represents the number of Members enrolled in the HMO in the first month of the applicable State Fiscal Year multiplied by $150.00, not to exceed $10,000,000.00. HMO will provide HHSC with proof of this insurance coverage on or before the Contract Effective Date.

(3) Any exceptions to the insurance requirements of this Contract must be approved in writing by HHSC. HMO and Network Providers who qualify as either state or federal units of government are exempt from the liability insurance requirements of this Contract and are not required to obtain exemptions from these provisions. State and federal units of government are required to comply with, and are subject to, the provision of the Texas and Federal Tort Claims Act.

(4) HMO is responsible for any and all deductibles stated in the policies. Insurance will be maintained at all times during the performance of the Contract. Insurance coverage will be issued by insurance companies authorized by applicable law to conduct business in the State of Texas, and must name HHSC as an additional insured, whether performed by HMO or by Subcontractors.

(5) The policies will have an extended reporting period of two years. When policies are renewed or replaced, the policy retroactive date must coincide with, or precede, the Contract Effective Date.

(b) Proof of Insurance Coverage

(1) HMO will furnish the HHSC Project Manager original Certificates of Insurance evidencing the required coverage to be in force on the date of award, and renewal certificates of insurance, or such similar evidence, if the coverages have an expiration or renewal date occurring during the term of the Contract. HMO will submit original evidence of insurance prior to the Effective Date of the Contract. The failure of HHSC to obtain such evidence from HMO before permitting HMO to commence work will not be deemed to be a waiver by HHSC and HMO will remain under continuing obligation to maintain and provide proof of the insurance coverage.

(2) The insurance specified above will be carried until all services required to be performed under the terms of the Contract are satisfactorily completed. Failure to carry or keep such insurance in force will constitute a violation of the Contract.

(3) The insurance will provide for thirty (30) calendar days prior written notice to be given to HHSC in the event coverage is substantially changed, canceled, or non-renewed. HMO must submit a new coverage binder to HHSC to ensure no break in coverage.

(4) HMO will require all Subcontractors operating in Texas to carry Worker’s Compensation coverage in the amounts required by Texas law. HMO will also require Subcontractors to carry Comprehensive Liability Insurance including Bodily Injury coverage or $100,000.00 per occurrence and Property Damage Coverage of $25,000.00 per occurrence. HMO may provide the coverage for any or all Subcontractors, and, if so, the evidence of insurance submitted will so stipulate.

(5) The Parties expressly understand and agree that any insurance coverages and limits furnished by HMO will in no way expand or limit HMO’s liabilities and responsibilities specified within the Contract documents or by applicable law.

(6) HMO expressly understands and agrees that any insurance maintained by HHSC will apply in excess of and not contribute to insurance provided by HMO under the Contract.

(7) If HMO, or its Subcontractor(s), desire additional coverage, higher limits of liability, or other modifications for its own protection, HMO and each of its Subcontractors will be responsible for the acquisition and cost of such additional protection.

Section 17.02 Performance Bond.

Beginning on the Operational Start Date of the Contract, and each year thereafter, the HMO must obtain a performance bond with a one (1) year term. The performance bond must continue to be in effect for one (1) year following the expiration of the one (1) year term. HMO must obtain and maintain the annual performance bonds in the form prescribed by HHSC and approved by TDI, naming HHSC as Obligee,

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securing HMO’s faithful performance of the terms and conditions of this Contract. The annual performance bonds must comply with Chapter 843 of the Texas Insurance Code and 28 T.A.C. §11.1805. The annual performance bond(s) must be issued in the amount of $100,000.00 for each applicable HMO Program within each Service Area that the HMO covers under this Contract. All performance bonds must be issued by a surety licensed by TDI, and specify cash payment as the sole remedy. HMO must deliver the initial performance bond to HHSC prior to the Operational Start Date of the Contract, and each renewal performance bond prior to the first day of the State Fiscal Year.

Section 17.03 TDI Fidelity Bond

The HMO will secure and maintain throughout the life of the Contract a fidelity bond in compliance with Chapter 843 of the Texas Insurance Code and 28 T.A.C. §11.1805. The HMO must promptly provide HHSC with copies of the bond and any amendments or renewals thereto.

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6. Premium Payment, Incentives, and Disincentives

This section documents how the Capitation Rates are developed and describes performance incentives and disincentives related to HHSC’s value-based purchasing approach. For further information, HMOs should refer to the HHSC Uniform Managed Care Contract Terms and Conditions.

Under the HMO Contracts, health care coverage for Members will be provided on a fully insured basis. The HMO must provide the Services and Deliverables, including Covered Services to enrolled Members in order for monthly Capitation Payments to be paid by HHSC. Attachment B-1, Section 8 includes the HMO’s financial responsibilities regarding out-of-network Emergency Services and Medically Necessary Covered Services not available through Network Providers.

6.1 Capitation Rate Development

Refer to Attachment A, HHSC Uniform Managed Care Contract Terms & Conditions, Article 10, “Terms & Conditions of Payment,” for information concerning Capitation Rate development.

6.2 Financial Payment Structure and Provisions

HHSC will pay the HMO monthly Capitation Payments based on the number of eligible and enrolled Members. HHSC will calculate the monthly Capitation Payments by multiplying the number of Member months times the applicable monthly Capitation Rate by Member rate cell. The HMO must provide the Services and Deliverables, including Covered Services to Members, described in the Contract for monthly Capitation Payments to be paid by HHSC.

The HMO must understand and expressly assume the risks associated with the performance of the duties and responsibilities under the Contract, including the failure, termination, or suspension of funding to HHSC, delays or denials of required approvals, cost of claims incorrectly paid by the HMO, and cost overruns not reasonably attributable to HHSC. The HMO must further agree that no other charges for tasks, functions, or activities that are incidental or ancillary to the delivery of the Services and Deliverables will be sought from HHSC or any other state agency, nor will the failure of HHSC or any other party to pay for such incidental or ancillary services entitle the HMO to withhold Services or Deliverables due under the Contract.

6.2.1 Capitation Payments

The HMO must refer to the HHSC Uniform Managed Care Contract Terms & Conditions for information and Contract requirements on the:

1) Time and Manner of Payment,

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 6 Version 1.0

2) Adjustments to Capitation Payments,

3) Delivery Supplemental Payment, and

4) Experience Rebate.

6.3 Performance Incentives and Disincentives

HHSC introduces several financial and non-financial performance incentives and disincentives through this Contract. These incentives and disincentives are subject to change by HHSC over the course of the Contract Period. The methodologies required to implement these strategies will be refined by HHSC after collaboration with contracting HMOs through a new incentives workgroup to be established by HHSC.

6.3.1 Non-financial Incentives

6.3.1.1 Performance Profiling

HHSC intends to distribute information on key performance indicators to HMOs on a regular basis, identifying an HMO’s performance, and comparing that performance to other HMOs, and HHSC standards and/or external Benchmarks. HHSC will recognize HMOs that attain superior performance and/or improvement by publicizing their achievements. For example, HHSC may post information concerning exceptional performance on its website, where it will be available to both stakeholders and members of the public.

6.3.1.2 Auto-assignment Methodology for Medicaid HMOs

HHSC may also revise its auto-assignment methodology during the Contract Period for new Medicaid Members who do not select an HMO (Default Members). The new assignment methodology would reward those HMOs that demonstrate superior performance and/or improvement on one or more key dimensions of performance. In establishing the assignment methodology, HHSC will employ a subset of the performance indicators contained within the Performance Indicator Dashboard. At present, HHSC intends to recognize those HMOs that exceed the minimum geographic access standards defined within Attachment B-1, Section 8 and the Performance Indicator Dashboard. HHSC may also use its assessment of HMO performance on annual quality improvement goals (described in Attachment B-1, Section 8) in developing the assignment methodology. The methodology would disproportionately assign Default Members to the HMO(s) in a given Service Area that performed comparably favorably on the selected performance indicators.

HHSC anticipates that it will not implement a performance-based auto-assignment algorithm before September 1, 2007. HHSC will invite HMO comments on potential approaches prior to implementation of the new performance-based auto-assignment algorithm.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 6 Version 1.0

6.3.2 Financial Incentives and Disincentives

6.3.2.1 Experience Rebate Reward

HHSC historically has required HMOs to provide HHSC with an Experience Rebate (see the Uniform Managed Care Contract Terms and Conditions, Article 10.11) when there has been an aggregate excess of Revenues over Allowable Expenses. During the Contract Period, should the HMO experience an aggregate excess of Revenues over Allowable Expenses across all HMO Programs and Service Areas, HHSC will allow the HMO to retain that portion of the aggregate excess of Revenues over Allowable Expenses that is equal to or less than 3.5% of the total Revenue for the period should the HMO demonstrate superior performance on selected performance indicators. The retention of 3.5% of revenue exceeds the retention of 3.0% of revenue that would otherwise be afforded to a HMO without demonstrated superior performance on these performance indicators relative to other HMOs. HHSC will develop the methodology for determining the level of performance necessary for an HMO to retain the additional 0.5% of revenue after consultation with HMOs. The finalized methodology will be added to the Uniform Managed Care Manual.

HHSC will calculate the Experience Rebate Reward after it has calculated the HMO’s at-risk Capitation Rate payment, as described below in Section 6.3.2.2. HHSC will calculate whether a HMO is eligible for the Experience Rebate Reward prior to the 90-day Financial Statistical Report (FSR) filing.

HHSC anticipates that it will not implement the incentive for Rate Period 1 of the Contract. HHSC will invite HMO comments on potential approaches prior to implementation of the new performance-based Experience Rebate Reward.

6.3.2.2 Performance-Based Capitation Rate

Beginning in State Fiscal Year 2007 of the Contract, HHSC will place each HMO at risk for 1% of the Capitation Rate(s). HHSC retains the right to vary the percentage of the Capitation Rate placed at risk in a given Rate Period.

As noted in Section 6.2, HHSC will pay the HMO monthly Capitation Payments based on the number of eligible and enrolled Members. HHSC will calculate the monthly Capitation Payments by multiplying the number of Member months times the applicable monthly Capitation Rate by Member rate cell. At the end of Rate Period 2, HHSC will evaluate if the HMO has demonstrated that it has fully met the performance expectations for which the HMO is at risk. Should the HMO fall short on some or all of the performance expectations, HHSC will adjust a future monthly Capitation Payment by an appropriate portion of the 1% at-risk amount. HMOs will be able to earn variable percentages up to 100% of the 1% at-risk Capitation Rate. HHSC’s objective is that all HMOs achieve performance levels that enable them to receive the full at-risk amount.

HHSC will determine the extent to which the HMO has met the performance expectations by assessing the HMO’s performance for each applicable HMO Program relative to performance targets for the rate period. HHSC will conduct separate accounting for each HMO Program’s at-risk Capitation Rate amount.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 6 Version 1.0

HHSC will identify no more than 10 performance indicators for either HMO Program. Some of the performance indicators will be standard across the two HMO Programs while others may apply to only one of the HMO Programs.

HHSC’s performance indicators may include some or all of the following measures. The specific performance indicators, periods of data collection, and associated points are detailed in the HHSC Uniform Managed Care Manual. The minimum percentage targets identified in this section were developed based, in part, on the HHSC HMO Program objective of ensuring access to care and quality of care, past performance of the HHSC HMOs, and performance of Medicaid and CHIP HMOs nationally on HEDIS and CAHPS measures of plan performance. The Performance Indicator Dashboard includes a more detailed explanation.

Standard Performance Indicators:

1. 98% of Clean Claims are properly Adjudicated within 30 calendar days.

2. The Member Services Hotline abandonment rate does not exceed 7%.

3. The Behavioral Health Hotline abandonment rate does not exceed 5%.¹

4. The Provider Services Hotline abandonment rate does not exceed 7%.

Additional STAR Performance Indicators

1. 90% of child Members have access to at least one child-appropriate PCP with an Open Panel within 30 miles travel distance.

2. 90% of adult Members have access to at least one adult-appropriate PCP with an Open Panel within 30 miles travel distance.

3. 36% of age-qualified child Members receive six or more well-child visits (in the first 15 months of life.

4. 56% of age-qualified child Members receive at least one well-child visit in the 3rd, 4th, 5th, or 6th year of life.

5. 72% of pregnant women Members receive a prenatal care visit in the first trimester or within 42 days of enrollment.

Additional CHIP Performance Indicators

1. 90% of child Members have access to at least one child-appropriate PCP with an Open Panel within 30 miles travel distance.

2. 90% of child Members have access to at least one otolaryngologist (ENT) within 75 miles travel distance.

3. 56% of age-qualified child Members receive at least one well-child visit in the 3rd, 4th, 5th, or 6th year of life

4. 38% of adolescents receive an annual well visit.

¹ Will not apply in the Dallas Core Service Area. Points will be allocated proportionately over the remaining standard performance indicators.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 6 Version 1.0

Failure to timely provide HHSC with necessary data related to the calculation of the performance indicators will result in HHSC’s assignment of a zero percent performance rate for each related performance indicator.

Should Member survey-based indicators yield response rates deemed by HHSC to be too low to yield credible data, HHSC will reapportion points across the remaining measures.

Actual plan rates will be rounded to the nearest whole number. HHSC will calculate performance assessment for the at-risk portion of the capitation payments by summing all earned points and converting them to a percentage. For example, an HMO that earns 92 points will earn 92% of the at-risk Capitation Rate. HHSC will apply the premium assessment of 8% of the at-risk Capitation Rate as a reduction to the monthly Capitation Payment ninety days after the end of the contract period.

HMOs will report actual Capitation Payments received on the Financial Statistical Report (FSR). Actual Capitation Payments received include all of the at-risk Capitation Payment paid to the HMO. Any performance assessment based on performance for a contract period will appear on the second final (334-day) FSR for that contract period.

HHSC will evaluate the performance-based Capitation Rate methodology annually in consultation with HMOs. HHSC may then modify the methodology it deems necessary and appropriate to motivate, recognize, and reward HMOs for performance. The methodologies for Rate Periods 1 and 2 will be included in the HHSC Uniform Managed Care Manual.

6.3.2.3 Quality Challenge Award

Should one or more HMOs be unable to earn the full amount of the performance-based at-risk portion of the Capitation Rate, HHSC will reallocate the funds through the HMO Program’s Quality Challenge Award. HHSC will use these funds to reward HMOs that demonstrate superior clinical quality. HHSC will determine the number of HMOs that will receive Quality Challenge Award funds annually based on the amount of the funds to be reallocated. Separate Quality Challenge Award payments will be made for the STAR and CHIP programs.

As with the performance-based Capitation Rate, each HMO will be evaluated separately for each HMO Program. HHSC intends to evaluate HMO performance annually on some combination of the following performance indicators in order to determine which HMOs demonstrate superior clinical quality. In no event will a distribution from the Quality Challenge Award, plus any other incentive payments made in accordance with the HMO Contract, when combined with the Capitation Rate payments, exceed 105% of the Capitation Rate payments to an HMO.

Information about the data collection period to be used for each indicator is found in the HHSC Uniform Managed Care Manual.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 6 Version 1.0

STAR Indicators

1. asthma medication for children – ages 5-9 years;

2. asthma medication for children – ages 10-17 years;

3. cervical cancer screening;

4. diabetes – HbA1c control (blood test to inform Provider of the status of the diabetes);

5. mental health – 7-day follow-up after hospitalization.

CHIP Indicators

1. advising smokers to quit;

2. asthma medication for children – ages 5-9 years;

3. asthma medication for children – ages 10-17 years; and

4. mental health – 7-day follow-up after hospitalization.

HHSC will calculate all of the above indicators. Failure on the part of the HMO to provide HHSC with necessary data to support the calculation of the performance indicators on a timely basis will result in the HMO being considered to have a performance rate of zero on the applicable indicator performance standard(s).

HHSC will evaluate the Quality Challenge Award methodology annually in consultation with HMOs. HHSC will make methodology modifications annually as it deems necessary and appropriate to motivate, recognize, and reward HMOs for superior performance based on available Quality Challenge Award funds and/or any other financial or non-financial performance incentives HHSC has designated to apply to the award. HHSC will include any modifications to the Quality Challenge Award in the HHSC Uniform Managed Care Manual.

6.3.2.4 Remedies and Liquidated Damages

All areas of responsibility and all requirements in the Contract will be subject to performance evaluation by HHSC. Any and all responsibilities or requirements not fulfilled may have remedies and HHSC will assess either actual or liquidated damages. Refer to Attachment A, HHSC Uniform Managed Care Contract Terms and Conditions and Attachment B-5 for performance standards that carry liquidated damage values.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

7. Transition Phase Requirements

7.1 Introduction

This Section presents the scope of work for the Transition Phase of the Contract, which includes those activities that must take place between the time of Contract award and the Operational Start Date.

The Transition Phase will include a Readiness Review of each HMO, which must be completed successfully prior to a HMO’s Operational Start Date. HHSC may, at its discretion, postpone the Operational Start Date of the Contract for any such HMO that fails to satisfy all Transition Phase requirements.

If for any reason, a HMO does not fully meet the Readiness Review prior to the Operational Start Date, and HHSC has not approved a delay in the Operational Start Date or approved a delay in the HMO’s compliance with the applicable Readiness Review requirement, then HHSC shall impose remedies and either actual or liquidated damages. If the HMO is a current HMO Contractor, HHSC may also freeze enrollment into the HMO’s plan for any of its HMO Programs. Refer to the HHSC Uniform Managed Care Contract Terms and Conditions (Attachment A) and the Liquidated Damages Matrix (Attachment B-5) for additional information.

7.2 Transition Phase Scope for HMOs

All HMOs must meet the Readiness Review requirements established by HHSC no later than 90 days prior to Operational Start Date. HMO agrees to provide all materials required to complete the readiness review by the dates established by HHSC and its Contracted Readiness Review Vendor.

7.3 Transition Phase Schedule and Tasks

The Transition Phase will begin after both Parties sign the Contract. The anticipated start date for the Transition Phase is November 15, 2005. The Transition Phase must be completed no later than the agreed upon Operational Start Date(s) for each HMO Program and Service Area. The HMO may be subject to liquidated damages for failure to meet the agreed upon Operational Start Date (see Attachment B-5).

7.3.1 Transition Phase Tasks

The HMO has overall responsibility for the timely and successful completion of each of the Transition Phase tasks. The HMO is responsible for clearly specifying and requesting information needed from HHSC, other HHSC contractors, and Providers in a manner that does not delay the schedule or work to be performed.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

7.3.1.1 Contract Start-Up and Planning

HHSC and the HMO will work together during the initial Contract start-up phase to:

• define project management and reporting standards;

• establish communication protocols between HHSC and the HMO;

• establish contacts with other HHSC contractors;

• establish a schedule for key activities and milestones; and

• clarify expectations for the content and format of Contract Deliverables.

The HMO will be responsible for developing a written work plan, referred to as the Transition/Implementation Plan, which will be used to monitor progress throughout the Transition Phase. An updated and detailed Transition /Implementation Plan will be due to HHSC.

7.3.1.2 Administration and Key HMO Personnel

No later than the Effective Date of the Contract, the HMO must designate and identify Key HMO Personnel that meet the requirements in HHSC Uniform Managed Care Contract Terms & Conditions, Article 4. The HMO will supply HHSC with resumes of each Key HMO Personnel as well as organizational information that has changed relative to the HMO’s Proposal, such as updated job descriptions and updated organizational charts, (including updated Management Information System (MIS) job descriptions and an updated MIS staff organizational chart), if applicable. If the HMO is using a Material Subcontractor(s), the HMO must also provide the organizational chart for such Material Subcontractor(s).

7.3.1.3 Financial Readiness Review

In order to complete a Financial Readiness Review, HHSC will require that HMOs update information submitted in their proposals. This information will include the following:

Contractor Identification and Information

1. The Contractor’s legal name, trade name, or any other name under which the Contractor does business, if any.

2. The address and telephone number of the Contractor’s headquarters office.

3. A copy of its current Texas Department of Insurance Certificate of Authority to provide HMO or ANHC services in the applicable Service Area(s). The Certificate of Authority must include all counties in the Service Area(s) for which the Contractor is proposing to serve HMO Members.

4. Indicate with a “Yes-HMO”, “Yes-ANHC” or “No” in the applicable cell(s) of the Column B of the following chart whether the Contractor is currently certified by TDI as an HMO or ANHC in all counties in each of the CSAs in which the Contractor proposes to participate in one or more of the HHSC HMO Programs. If the Contractor is not proposing to serve a CSA for a particular HMO Program, the Contractor should leave the applicable cells in the table empty.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

Table 2: TDI Certificate of Authority in Proposed HMO Program CSAs

Column A	Column B	Column C
Core Service Area (CSA)	TDI Certificate of Authority	Counties/Partial Counties without a TDI Certificate of Authority
Bexar
Dallas
El Paso
Harris
Lubbock
Nueces
Tarrant
Travis
Webb

If the Contractor is not currently certified by TDI as an HMO or ANHC in any one or more counties in a proposed CSA, the Contractor must identify such entire counties in Column C for each CSA. For each county listed in Column C, the Contractor must document that it applied to TDI for such certification of authority prior to the submission of a Proposal for this RFP. The Contractor shall indicate the date that it applied for such certification and the status of its application to get TDI certification in the relevant counties in this section of its submission to HHSC.

5. For Contractors proposing to serve any CHIP OSAs, indicate with a “Yes-HMO”, “Yes-ANHC” or “No” in the applicable cell(s) of the Column C of the following chart whether the Contractor is currently certified by TDI as an HMO or ANHC in the entire county in the OSA. If the Contractor is not proposing to serve an OSA, the Contractor should leave the applicable cells in the table empty.

Table 3: TDI Certificate of Authority in Proposed HMO Program OSAs

Column A	Column B	Column C
Core Service Area (CSA)	Affiliated CHIP OSA	TDI Certificate of Authority
Bexar
El Paso
Harris
Lubbock
Nueces
Travis

For each county listed in Column C, the Contractor must document that it applied to TDI for such certification of authority prior to the submission of a Proposal for this RFP. The Contractor shall indicate the date that it applied for such certification and the status of its application to get TDI certification in the relevant counties in this section of its submission to HHSC.

6. If the Contractor proposes to participate in STAR and seeks to be considered as an organization meeting the requirements of Section §533.004(a) or (e) of the Texas Government Code, describe how the Contractor meets the requirements of §§533.004(a)(1), (a)(2), (a)(3), or (e) for each proposed Service Areas.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

7. The type of ownership (proprietary, partnership, corporation).

8. The type of incorporation (for profit, not-for-profit, or non-profit) and whether the Contractor is publicly or privately owned.

9. If the Contractor is an Affiliate or Subsidiary, identify the parent organization.

10. If any change of ownership of the Contractor’s company is anticipated during the 12 months following the Proposal due date, the Contractor must describe the circumstances of such change and indicate when the change is likely to occur.

11. The name and address of any sponsoring corporation or others who provide financial support to the Contractor and type of support, e.g., guarantees, letters of credit, etc. Indicate if there are maximum limits of the additional financial support.

12. The name and address of any health professional that has at least a five percent financial interest in the Contractor and the type of financial interest.

13. The names of officers and directors.

14. The state in which the Contractor is incorporated and the state(s) in which the Contractor is licensed to do business as an HMO. The Contractor must also indicate the state where it is commercially domiciled, if applicable.

15. The Contractor’s federal taxpayer identification number.

16. The Contractor’s Texas Provider Identifier (TPI) number if the Contractor is Medicaid-enrolled in Texas.

17. Whether the Contractor had a contract terminated or not renewed for non-performance or poor performance within the past five years. In such instance, the Contractor must describe the issues and the parties involved, and provide the address and telephone number of the principal terminating party. The Contractor must also describe any corrective action taken to prevent any future occurrence of the problem leading to the termination.

18. A current Certificate of Good Standing issued by the Texas Comptroller of Public Accounts, or an explanation for why this form is not applicable to the Contractor.

19. Whether the Contractor has ever sought, or is currently seeking, National Committee for Quality Assurance (NCQA) or American Accreditation HealthCare Commission (URAC) accreditation status, and if it has or is, indicate:

• its current NCQA or URAC accreditation status;

• if NCQA or URAC accredited, its accreditation term effective dates; and

• if not accredited, a statement describing whether and when NCQA or URAC accreditation status was ever denied the Contractor.

Material Subcontractor Information

A Material Subcontractor means any entity retained by the HMO to provide all or part of the HMO Administrative Services where the value of the subcontracted HMO Administrative Service(s) exceeds $100,000 per fiscal year. HMO Administrative Services are those services or functions other than the direct delivery of Covered Services necessary to manage the delivery of and payment for Covered Services. HMO Administrative Services include but are not limited to Network, utilization, clinical and/or quality management, service authorization, claims processing, Management Information System (MIS) operation and reporting. The term Material Subcontractor does not include Providers in the HMO’s Provider Network.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

Contractors must submit the following for each proposed Material Subcontractor, if any:

1. A signed letter of commitment from each Material Subcontractor that states the Material Subcontractor’s willingness to enter into a Subcontractor agreement with the Contractor and a statement of work for activities to be subcontracted. Letters of Commitment must be provided on the Material Subcontractor’s official company letterhead and signed by an official with the authority to bind the company for the subcontracted work. The Letter of Commitment must state, if applicable, the company’s certified HUB status.

2. The Material Subcontractor’s legal name, trade name, or any other name under which the Material Subcontractor does business, if any.

3. The address and telephone number of the Material Subcontractor’s headquarters office.

4. The type of ownership (e.g., proprietary, partnership, corporation).

5. The type of incorporation (i.e., for profit, not-for-profit, or non-profit) and whether the Material Subcontractor is publicly or privately owned.

6. If a Subsidiary or Affiliate, the identification of the parent organization.

7. The name and address of any sponsoring corporation or others who provide financial support to the Material Subcontractor and type of support, e.g., guarantees, letters of credit, etc. Indicate if there are maximum limits of the additional financial support.

8. The name and address of any health professional that has at least a five percent (5%) financial interest in the Material Subcontractor and the type of financial interest.

9. The state in which the Material Subcontractor is incorporated, commercially domiciled, and the state(s) in which the organization is licensed to do business.

10. The Material Subcontractor’s Texas Provider Identifier if Medicaid-enrolled in Texas.

11. The Material Subcontractor’s federal taxpayer identification number.

12. Whether the Material Subcontractor had a contract terminated or not renewed for non-performance or poor performance within the past five years. In such instance, the Contractor must describe the issues and the parties involved, and provide the address and telephone number of the principal terminating party. The Contractor must also describe any corrective action taken to prevent any future occurrence of the problem leading to the termination.

13. Whether the Material Subcontractor has ever sought, or is currently seeking, National Committee for Quality Assurance (NCQA) or American Accreditation HealthCare Commission (URAC) accreditation or certification status, and if it has or is, indicate:

• its current NCQA or URAC accreditation or certification status;

• if NCQA or URAC accredited or certified, its accreditation or certification term effective dates; and

• if not accredited, a statement describing whether and when NCQA or URAC accreditation status was ever denied the Material Subcontractor.

Organizational Overview

1. Submit an organizational chart (labeled Chart A), showing the corporate structure and lines of responsibility and authority in the administration of the Bidder’s business as a health plan.

2. Submit an organizational chart (labeled Chart B) showing the Texas organizational structure and how it relates to the proposed Service Area(s), including staffing and functions performed at the local level. If Chart A represents the entire organizational structure, label the submission as Charts A and B.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

3. Submit an organizational chart (labeled Chart C) showing the Management Information System (MIS) staff organizational structure and how it relates to the proposed Service Area(s) including staffing and functions performed at the local level.

4. If the Bidder is proposing to use a Material Subcontractor(s), the Bidder shall include an organizational chart demonstrating how the Material Subcontractor(s) will be managed within the Bidder’s Texas organizational structure, including the primary individuals at the Bidder’s organization and at each Material Subcontractor organization responsible for overseeing such Material Subcontract. This information may be included in Chart B, or in a separate organizational chart(s).

5. Submit a brief narrative explaining the organizational charts submitted, and highlighting the key functional responsibilities and reporting requirements of each organizational unit relating to the Bidder’s proposed management of the HMO Program(s), including its management of any proposed Material Subcontractors.

Other Information

1. Briefly describe any regulatory action, sanctions, and/or fines imposed by any federal or Texas regulatory entity or a regulatory entity in another state within the last 3 years, including a description of any letters of deficiencies, corrective actions, findings of non-compliance, and/or sanctions. Please indicate which of these actions or fines, if any, were related to Medicaid or CHIP programs. HHSC may, at its option, contact these clients or regulatory agencies and any other individual or organization whether or not identified by the Contractor.

2. No later than ten (10) days after the Contract Effective Date, submit documentation that demonstrates that the HMO has secured the required insurance and bonds in accordance with TDI requirements and Attachment B-1, Section 8.

3. Submit annual audited financial statement for fiscal years 2004 and 2005 (2005 to be submitted no later than six months after the close of the fiscal year).

4. Submit an Affiliate Report containing a list of all Affiliates and for HHSC’s prior review and approval, a schedule of all transactions with Affiliates that, under the provisions of the Contract, will be allowable as expenses in the FSR Report for services provided to the HMO by the Affiliate. Those should include financial terms, a detailed description of the services to be provided, and an estimated amount that will be incurred by the HMO for such services during the Contract Period.

7.3.1.4 System Testing and Transfer of Data

The HMO must have hardware, software, network and communications systems with the capability and capacity to handle and operate all MIS systems and subsystems identified in Attachment B-1, Section 8.1.18. For example, the HMO’s MIS system must comply with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) as indicated in Section 8.1.18.4.

During this Readiness Review task, the HMO will accept into its system any and all necessary data files and information available from HHSC or its contractors. The HMO will install and test all hardware, software, and telecommunications required to support the Contract. The HMO will define and test modifications to the HMO’s system(s) required to support the business functions of the Contract.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

The HMO will produce data extracts and receive all electronic data transfers and transmissions. Existing and New STAR/CHIP MCOs must be able to demonstrate the ability to produce an EQRO (currently, Institute for Child Health Policy (ICHP)) encounter file by April 1, 2006 and the 837-encounter file by August 1, 2006.

If any errors or deficiencies are evident, the HMO will develop resolution procedures to address problems identified. The HMO will provide HHSC, or a designated vendor, with test data files for systems and interface testing for all external interfaces. This includes testing of the required telephone lines for Providers and Members and any necessary connections to the HHSC Administrative Services Contractor and the External Quality Review Organization. The HHSC Administrative Services Contractor will provide enrollment test files to new HMOs that do not have previous HHSC enrollment files. The HMO will demonstrate its system capabilities and adherence to Contract specifications during readiness review.

7.3.1.5 System Readiness Review

The HMO must assure that systems services are not disrupted or interrupted during the Operations Phase of the Contract. The HMO must coordinate with HHSC and other contractors to ensure the business and systems continuity for the processing of all health care claims and data as required under this contract.

The HMO must submit to HHSC, descriptions of interface and data and process flow for each key business processes described in Section 8.1.18.3, System-wide Functions.

The HMO must clearly define and document the policies and procedures that will be followed to support day-to-day systems activities. The HMO must develop, and submit for State review and approval the following:

1. Joint Interface Plan.

2. Disaster Recovery Plan

3. Business Continuity Plan

4. Risk Management Plan, and

5. Systems Quality Assurance Plan.

7.3.1.6 Demonstration and Assessment of System Readiness

The HMO must provide documentation on systems and facility security and provide evidence or demonstrate that it is compliant with HIPAA. The HMO shall also provide HHSC with a summary of all recent external audit reports, including findings and corrective actions, relating to the HMO’s proposed systems, including any SAS70 audits that have been conducted in the past three years. The HMO shall promptly make additional information on the detail of such system audits available to HHSC upon request.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

In addition, HHSC will provide to the HMO a test plan that will outline the activities that need to be performed by the HMO prior to the Operational Start Date of the Contract. The HMO must be prepared to assure and demonstrate system readiness. The HMO must execute system readiness test cycles to include all external data interfaces, including those with Material Subcontractors.

HHSC, or its agents, may independently test whether the HMO’s MIS has the capacity to administer the STAR and/or CHIP HMO business, as applicable to the HMO. This Readiness Review of a HMO’s MIS may include a desk review and/or an onsite review. HHSC may request from the HMO additional documentation to support the provision of STAR and/or CHIP HMO Services, as applicable to the HMO. Based in part on the HMO’s assurances of systems readiness, information contained in the Proposal, additional documentation submitted by the HMO, and any review conducted by HHSC or its agents, HHSC will assess the HMO’s understanding of its responsibilities and the HMO’s capability to assume the MIS functions required under the Contract.

The HMO is required to provide a Corrective Action Plan in response to any Readiness Review deficiency no later than ten (10) calendar days after notification of any such deficiency by HHSC. If the HMO documents to HHSC’s satisfaction that the deficiency has been corrected within ten (10) calendar days of such deficiency notification by HHSC, no Corrective Action Plan is required.

7.3.1.7 Operations Readiness

The HMO must clearly define and document the policies and procedures that will be followed to support day-to-day business activities related to the provision of STAR and/or CHIP HMO Services, including coordination with contractors. The HMO will be responsible for developing and documenting its approach to quality assurance.

Readiness Review. Includes all plans to be implemented in one or more Service Areas on the anticipated Operational Start Date. At a minimum, the HMO shall, for each HMO Program:

1. Develop new, or revise existing, operations procedures and associated documentation to support the HMO’s proposed approach to conducting operations activities in compliance with the contracted scope of work.

2. Submit to HHSC, a listing of all contracted and credentialed Providers, in a HHSC approved format including a description of additional contracting and credentialing activities scheduled to be completed before the Operational Start Date.

3. Prepare and implement a Member Services staff training curriculum and a Provider training curriculum.

4. Prepare a Coordination Plan documenting how the HMO will coordinate its business activities with those activities performed by HHSC contractors and the HMO’s Material Subcontractors, if any. The Coordination Plan will include identification of coordinated activities and protocols for the Transition Phase.

5. Develop and submit to HHSC the draft Member Handbook, draft Provider Manual, draft Provider Directory, and draft Member Identification Card for HHSC’s review and approval. The materials must at a minimum meet the requirements specified in Section 8.1.5 and include the Critical Elements to be defined in the HHSC Uniform Managed Care Manual.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

6. Develop and submit to HHSC the HMO’s proposed Member complaint and appeals processes for Medicaid and CHIP, as applicable to the HMO’s Program participation.

7. Provide sufficient copies of the final Provider Directory to the HHSC Administrative Services Contractor in sufficient time to meet the enrollment schedule.

8. Demonstrate toll-free telephone systems and reporting capabilities for the Member Services Hotline, the Behavioral Health Hotline, and the Provider Services Hotline.

9. Submit a written Fraud and Abuse Compliance Plan to HHSC for approval no later than 30 days after the Contract Effective Date. See Section 8.1.19, Fraud and Abuse, for the requirements of the plan, including new requirements for special investigation units. As part of the Fraud and Abuse Compliance Plan, the HMO shall:

• designate executive and essential personnel to attend mandatory training in fraud and abuse detection, prevention and reporting. Executive and essential fraud and abuse personnel means HMO staff persons who supervise staff in the following areas: data collection, provider enrollment or disenrollment, encounter data, claims processing, utilization review, appeals or grievances, quality assurance and marketing, and who are directly involved in the decision-making and administration of the fraud and abuse detection program within the HMO. The training will be conducted by the Office of Inspector General, Health and Human Services Commission, and will be provided free of charge. The HMO must schedule and complete training no later than 90 days after the Operational Start Date.

• designate an officer or director within the organization responsible for carrying out the provisions of the Fraud and Abuse Compliance Plan.

• The HMO is held to the same requirements and must ensure that, if this function is subcontracted to another entity, the subcontractor also meets all the requirements in this section and the Fraud and Abuse section as stated in Attachment B-1, Section 8.

During the Readiness Review, HHSC may request from the HMO certain operating procedures and updates to documentation to support the provision of STAR and/or CHIP HMO Services. HHSC will assess the HMO’s understanding of its responsibilities and the HMO’s capability to assume the functions required under the Contract, based in part on the HMO’s assurances of operational readiness, information contained in the Proposal, and in Transition Phase documentation submitted by the HMO.

The HMO is required to promptly provide a Corrective Action Plan and/or Risk Mitigation Plan as requested by HHSC in response to Operational Readiness Review deficiencies identified by the HMO or by HHSC or its agent. The HMO must promptly alert HHSC of deficiencies, and must correct a deficiency or provide a Corrective Action Plan and/or Risk Mitigation Plan no later than ten (10) calendar days after HHSC’s notification of deficiencies. If the Contractor documents to HHSC’s satisfaction that the deficiency has been corrected within ten (10) calendar days of such deficiency notification by HHSC, no Corrective Action Plan is required.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 7 Version 1.0

7.3.1.8 Assurance of System and Operational Readiness

In addition to successfully providing the Deliverables described in Section 7.3.1, the HMO must assure HHSC that all processes, MIS systems, and staffed functions are ready and able to successfully assume responsibilities for operations prior to the Operational Start Date. In particular, the HMO must assure that Key HMO Personnel, Member Services staff, Provider Services staff, and MIS staff are hired and trained, MIS systems and interfaces are in place and functioning properly, communications procedures are in place, Provider Manuals have been distributed, and that Provider training sessions have occurred according to the schedule approved by HHSC.

7.3.1.9 Post-Transition

The HMO will work with HHSC, Providers, and Members to promptly identify and resolve problems identified after the Operational Start Date and to communicate to HHSC, Providers, and Members, as applicable, the steps the HMO is taking to resolve the problems.

If a HMO makes assurances to HHSC of its readiness to meet Contract requirements, including MIS and operational requirements, but fails to satisfy requirements set forth in this Section, or as otherwise required pursuant to the Contract, HHSC may, at its discretion do any of the following in accordance with the severity of the non-compliance and the potential impact on Members and Providers:

1. freeze enrollment into the HMO’s plan for the affected HMO Program(s) and Service Area(s);

2. freeze enrollment into the HMO’s plan for all HMO Programs or for all Service Areas of an affected HMO Program;

3. impose contractual remedies, including liquidated damages; or

4. pursue other equitable, injunctive, or regulatory relief.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8. OPERATIONS PHASE REQUIREMENTS

This Section is designed to provide HMOs with sufficient information to understand the HMOs’ responsibilities. This Section describes scope of work requirements for the Operations Phase of the Contract.

Section 8.1 includes the general scope of work that applies to both the STAR and CHIP HMO Programs.

Section 8.2 includes the additional Medicaid scope of work that applies only to STAR HMOs.

Section 8.3 includes the additional scope of work that applies only to CHIP HMOs.

The Section does not include detailed information on the STAR and CHIP HMO Program requirements, such as the time frame and format for all reporting requirements. HHSC has included this information in the Uniform Managed Care Contract Terms and Conditions (Attachment A) and the Uniform Managed Care Manual. HHSC reserves the right to modify these documents as it deems necessary using the procedures set forth in the Uniform Managed Care Contract Terms and Conditions.

8.1 General Scope of Work

In each STAR and CHIP HMO Program Service Area, HHSC will select HMOs for each HMO Program to provide health care services to Members. The HMO must be licensed by the Texas Department of Insurance (TDI) as an HMO or an ANHC in all zip codes in the respective Service Area(s).

Coverage for benefits will be available to enrolled Members effective on the Operational Start Date. The Operational Start Date is anticipated to be September 1, 2006.

8.1.1 Administration and Contract Management

The HMO must comply, to the satisfaction of HHSC, with (1) all provisions set forth in this Contract, and (2) all applicable provisions of state and federal laws, rules, regulations, and waivers.

8.1.1.1 Performance Evaluation

The HMO must identify and propose to HHSC, in writing, no later than May 1^st of each State Fiscal Year (SFY), annual HMO Performance Improvement Goals for the next fiscal year, as well as measures and time frames for demonstrating that such goals are being met. Performance Improvement Goals must be based on HHSC priorities and identified opportunities for improvement (see Attachment B-4, Performance Improvement Goals). The Parties will negotiate such Performance Improvement Goals, the measures that will be used to assess goal

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

achievement, and the time frames for completion, which will be incorporated into the Contract. If HHSC and the HMO cannot agree on the Performance Improvement Goals, measures, or time frames, HHSC will set the goals, measures, or time frames.

For the first year, HHSC has established two goals to be used by all HMOs. A third goal will be tailored to improve a specific area of each HMO’s performance (to be negotiated before the Operational Start Date). These goals include the following:

1. Network adequacy and access to care, evaluated using the following measures:

(a) A specific percentage of PCPs must have an open panel; and

(b) A specific percentage of children and adults must have access to two PCPs with open panels within 30 miles.

2. Access to Behavioral Health Services, evaluated using the following measure:

(a) A specific percentage increase in the number of outpatient mental health providers with an open panel.

3. Specific HMO Performance Goal, evaluated using the measures negotiated by HHSC and the HMO.

Specific percentages for Goals 1 and 2 will be negotiated by HHSC and the HMO before the Operational Start Date. The Specific HMO Performance Goal and the measures used to evaluate Goal 3 will be negotiated by HHSC and the HMO before the Operational Start Date.

The HMO must participate in semi-annual Contract Status Meetings (CSMs) with HHSC for the primary purpose of reviewing progress toward the achievement of annual Performance Improvement Goals and Contract requirements. HHSC may request additional CSMs, as it deems necessary to address areas of noncompliance. HHSC will provide the HMO with reasonable advance notice of additional CSMs, generally at least five (5) business days.

The HMO must provide to HHSC, no later than 14 business days prior to each semi-annual CSM, one electronic copy of a written update, detailing and documenting the HMO’s progress toward meeting the annual Performance Improvement Goals or other areas of noncompliance.

HHSC will track HMO performance on Performance Improvement Goals. It will also track other key facets of HMO performance through the use of a Performance Indicator Dashboard (see HHSC’s Uniform Managed Care Manual). HHSC will compile the Performance Indicator Dashboard based on HMO submissions, data from the External Quality Review Organization (EQRO), and other data available to HHSC. HHSC will share the Performance Indicator Dashboard with the HMO on a quarterly basis.

8.1.2 Covered Services

The HMO is responsible for authorizing, arranging, coordinating, and providing Covered Services in accordance with the requirements of the Contract. The HMO must provide Medically Necessary Covered Services to all Members beginning on the Member’s date of enrollment regardless of pre-existing conditions, prior diagnosis and/or receipt of any prior health care services. The HMO must not impose any pre-existing condition limitations or exclusions or require Evidence of Insurability to provide coverage to any Member.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must provide full coverage for Medically Necessary Covered Services to all Members without regard to the Member’s:

1. previous coverage, if any, or the reason for termination of such coverage;

2. health status;

3. confinement in a health care facility; or

4. for any other reason.

Please Note:

(Medicaid HMOs): A Member cannot change from one Medicaid HMO to another Medicaid HMO during an inpatient hospital stay. The HMO responsible for the hospital charges at the start of an Inpatient Stay remains responsible for hospital charges until the time of discharge or until such time that there is a loss of Medicaid eligibility. Medicaid HMOs are responsible for professional charges during every month for which the HMO receives a full capitation for a Member.

(CHIP HMOs): If a CHIP Member’s Effective Date of Coverage occurs while the CHIP Member is confined in a hospital, HMO is responsible for the CHIP Member’s costs of Covered Services beginning on the Effective Date of Coverage. If a CHIP Member is disenrolled while the CHIP Member is confined in a hospital, HMO’s responsibility for the CHIP Member’s costs of Covered Services terminates on the Date of Disenrollment.

The HMO must not practice discriminatory selection, or encourage segregation among the total group of eligible Members by excluding, seeking to exclude, or otherwise discriminating against any group or class of individuals.

Covered Services for all Medicaid HMO Members are listed in Attachment B-2 of the Contract. As noted in Attachment B-2, all Medicaid HMOs must provide Covered Services described in the most recent Texas Medicaid Provider Procedures Manual (Provider Procedures Manual), the THSteps Manual (a supplement to the Provider Procedures Manual), and in all Texas Medicaid Bulletins, which update the Provider Procedures Manual except for those services identified in Section 8.2.2.8 as non-capitated services. A description of CHIP Covered Services and exclusions is provided in Attachment B-2 of the Contract.

Covered Services are subject to change due to changes in federal and state law, changes in Medicaid or CHIP policy, and changes in medical practice, clinical protocols, or technology.

8.1.2.1 Value-added Services

HMOs may propose additional services for coverage. These are referred to as “Value-added Services.” Value-added Services must be actual health care services or benefits rather than gifts, incentives, educational classes or health assessments. Temporary phones, cell phones, additional transportation benefits, and extra home health services may be Value-added Services, if approved by HHSC. Best practice approaches to delivering Covered Services are not considered Value-added Services.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

If offered, Value-added Services must be offered to all mandatory HMO Members within the applicable HMO Program and Service Area. Value-added Services do not need to be consistent across more than one HMO Program or across more than one Service Area. Value-added Services that are approved by HHSC during the contracting process will be included in the Contract’s scope of services.

The HMO must provide Value-added Services at no additional cost to HHSC. The HMO must not pass on the cost of the Value-added Services to Providers. The HMO must specify the conditions and parameters regarding the delivery of the Value-added Services in the HMO’s Marketing Materials and Member Handbook, and must clearly describe any limitations or conditions specific to the Value-added Services.

Value-added Services can be added or removed only by written amendment of the Contract one time per fiscal year to be effective September 1 of the fiscal year, except when services are amended by HHSC during the fiscal year. This will allow HHSC to coordinate with annual revisions to HHSC’s HMO Comparison Charts for Members. A HMO’s request to add or delete a Value-added Service must be submitted to HHSC by May 1 of each year to be effective for the following contract period. (See Attachment B-3, Value-Added Services).

A HMO’s request to add a Value-added Service must:

1. Define and describe the proposed Value-added Service;

2. Specify the Service Areas and HMO Programs for the proposed Value-added Service;

3. Identify the category or group of mandatory Members eligible to receive the Value-added Service if it is a type of service that is not appropriate for all mandatory Members;

4. Note any limits or restrictions that apply to the Value-added Service;

5. Identify the Providers responsible for providing the Value-added Service;

6. Describe how the HMO will identify the Value-added Service in administrative (Encounter) data;

7. Propose how and when the HMO will notify Providers and mandatory Members about the availability of such Value-added Service;

8. Describe how a Member may obtain or access the Value-added Service; and

9. Include a statement that the HMO would provide such Value-added Service for at least 12 months from the approval date of the Value-added Service.

A HMO cannot include a Value-added Service in any material distributed to mandatory Members or prospective mandatory Members until the Parties have amended the Contract to include that Value-added Service. If a Value-added Service is deleted by amendment, the HMO must notify each mandatory Member that the service is no longer available through the HMO. The HMO must also revise all materials distributed to prospective mandatory Members to reflect the change in Value-added Services.

8.1.2.2 Case-by-Case Added Services

The HMO may offer additional benefits that are outside the scope of services to individual Members on a case-by-case basis, based on Medical Necessity, cost-effectiveness, the wishes of the Member/Member’s family, and the potential for improved health status of the Member.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.3 Access to Care

All Covered Services must be available to Members on a timely basis in accordance with medically appropriate guidelines, and consistent with generally accepted practice parameters, requirements in this Contract. The HMO must comply with the access requirements as established by the Texas Department of Insurance (TDI) for all HMOs doing business in Texas, except as otherwise required by this Contract. Medicaid HMOs must be responsive to the possibility of increased Members due to the phase-out of the PCCM model in Service Areas where adequate HMO coverage exists.

The HMO must provide coverage for Emergency Services to Members 24 hours a day and 7 days a week, without regard to prior authorization or the Emergency Service provider’s contractual relationship with the HMO. The HMO’s policy and procedures, Covered Services, claims adjudication methodology, and reimbursement performance for Emergency Services must comply with all applicable state and federal laws and regulations, whether the provider is in-network or Out-of-Network. A HMO is not responsible for payment for unauthorized non-emergency services provided to a Member by Out-of-Network providers.

The HMO must also have an emergency and crisis Behavioral Health Services Hotline available 24 hours a day, 7 days a week, toll-free throughout the Service Area. The Behavioral Health Services Hotline must meet the requirements described in Section 8.1.15. For Medicaid Members, a HMO must provide coverage for Emergency Services in compliance with 42 C.F.R. §438.114, and as described in more detail in Section 8.2.2.1. The HMO may arrange Emergency Services and crisis Behavioral Health Services through mobile crisis teams.

For CHIP Members, Emergency Services, including emergency Behavioral Health Services, must be provided in accordance with the Texas Insurance Code and TDI regulations.

The HMO must require, and make best efforts to ensure, that PCPs are accessible to Members 24 hours a day, 7 days a week and that its Network Primary Care Providers (PCPs) have after-hours telephone availability that is consistent with, Section 8.1.4.

The HMO must provide that if Medically Necessary Covered Services are not available through Network physicians or other Providers, the HMO must, upon the request of a Network physician or other Provider, within the time appropriate to the circumstances relating to the delivery of the services and the condition of the patient, but in no event to exceed five business days after receipt of reasonably requested documentation, allow a referral to a non-network physician or provider. The HMO must fully reimburse the non-network provider in accordance with the Out-of-Network methodology for Medicaid as defined by HHSC, and for CHIP, at the usual and customary rate defined by TDI in 28 T.A.C. Section 11.506.

The Member will not be responsible for any payment for Medically Necessary Covered Services, other than HHSC-specified co-payments for CHIP Members, where applicable.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.3.1 Waiting Times for Appointments

Through its Provider Network composition and management, the HMO must ensure that appointments for the following types of Covered Services are provided within the time frames specified below. In all cases below, “day” is defined as a calendar day.

1. Emergency Services must be provided upon Member presentation at the service delivery site, including at non-network and out-of-area facilities;

2. Urgent care, including urgent specialty care, must be provided within 24 hours of request.

3. Routine primary care must be provided within 14 days of request;

4. Initial outpatient behavioral health visits must be provided within 14 days of request;

5. Routine specialty care referrals must be provided within 30 days of request;

6. Pre-natal care must be provided within 14 days of request, except for high-risk pregnancies or new Members in the third trimester, for whom an appointment must be offered within five days, or immediately, if an emergency exists;

7. Preventive health services for adults must be offered to a Member within 90 days of request; and

8. Preventive health services for children, including well-child check-ups should be offered to Members in accordance with the American Academy of Pediatrics (AAP) periodicity schedule. Please note that for Medicaid Members, HMOs should use the THSteps Program modifications to the AAP periodicity schedule. For newly enrolled Members under age 21, overdue or upcoming well-child checkups, including THSteps medical checkups, should be offered as soon as practicable, but in no case later than 14 days of enrollment for newborns, and no later than 60 days of enrollment for all other eligible child Members.

8.1.3.2 Access to Network Providers

The HMO’s Network shall have within its Network, PCPs in sufficient numbers, and with sufficient capacity, to provide timely access to regular and preventive pediatric care and THSteps services to all child Members in accordance with the waiting times for appointments in Section 8.1.3.1.

PCP Access: At a minimum, the HMO must ensure that all Members have access to an age-appropriate PCP in the Provider Network with an Open Panel within 30 miles of the Member’s residence. For the purposes of assessing compliance with this requirement, an internist who provides primary care to adults only is not considered an age-appropriate PCP choice for a Member under age 21, and a pediatrician is not considered an age-appropriate choice for a Member age 21 and over.

OB/GYN Access: At a minimum, the HMO must ensure that all female Members have access to an OB/GYN in the Provider Network with an Open Panel within 75 miles of the Member’s residence. (If the OB/GYN is acting as the Member’s PCP, the HMO must follow the access requirements for the PCP.) The HMO must allow female Members to select an OB/GYN within its Provider Network. A female Member who selects an OB/GYN must be allowed direct access to the OB/GYN’s health care services without a referral from the Member’s PCP or a prior authorization. A pregnant Member with 12 weeks or less remaining before the expected delivery date must be allowed to remain under the Member’s current OB/GYN care though the Member’s post-partum checkup, even if the OB/GYN provider is, or becomes, Out-of-Network.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Outpatient Behavioral Health Service Provider Access: At a minimum, the HMO must ensure that all Members have access to an outpatient Behavioral Health Service Provider in the Network with an Open Panel within 75 miles of the Member’s residence. Outpatient Behavioral Health Service Providers must include Masters and Doctorate-level trained practitioners practicing independently or at community mental health centers, other clinics or at outpatient hospital departments. A Qualified Mental Health Provider (QMHP), as defined and credentialed by the Texas Department of State Health Services standards (T.A.C. Title 25, Part I, Chapter 412), is an acceptable outpatient behavioral health provider as long as the QMHP is working under the authority of an MHMR entity and is supervised by a licensed mental health professional or physician.

Other Specialist Physician Access: At a minimum, the HMO must ensure that all Members have access to a Network specialist physician with an Open Panel within 75 miles of the Member’s residence for common medical specialties. For adult Members, common medical specialties shall include general surgery, cardiology, orthopedics, urology, and ophthalmology. For child Members, common medical specialties shall include orthopedics and otolaryngology.

Hospital Access: The HMO must ensure that all Members have access to an Acute Care hospital in the Provider Network within 30 miles of the Member’s residence.

All other Covered Services, except for services provided in the Member’s residence: At a minimum, the HMO must ensure that all Members have access to at least one Network Provider with an Open Panel for each of the remaining Covered Services described in Attachment B-2, within 75 miles of the Member’s residence. This access requirement includes, but is not limited to, specialists, specialty hospitals, psychiatric hospitals, diagnostic and therapeutic services, and single or limited service health care physicians or Providers.

The HMO is not precluded from making arrangements with physicians or providers outside the HMO’s Service Area for Members to receive a higher level of skill or specialty than the level available within the Service Area, including but not limited to, treatment of cancer, burns, and cardiac diseases. HHSC may consider exceptions to the above access-related requirements when an HMO has established, through utilization data provided to HHSC, that a normal pattern for securing health care services within an area does not meet these standards, or when an HMO is providing care of a higher skill level or specialty than the level which is available within the Service Area such as, but not limited to, treatment of cancer, burns, and cardiac diseases.

8.1.3.3 Monitoring Access

The HMO is required to systematically and regularly verify that Covered Services furnished by Network Providers are available and accessible to Members in compliance with the standards described in Sections 8.1.3.1 and 8.1.3.2, and for Covered Services furnished by PCPs, the standards described in Section 8.1.4.2.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must enforce access and other Network standards required by the Contract and take appropriate action with Providers whose performance is determined by the HMO to be out of compliance.

8.1.4 Provider Network

The HMO must enter into written contracts with properly credentialed Providers as described in this Section. The Provider contracts must comply with the Uniform Managed Care Manual’s requirements.

The HMO must maintain a Provider Network sufficient to provide all Members with access to the full range of Covered Services required under the Contract. The HMO must ensure its Providers and subcontractors meet all current and future state and federal eligibility criteria, reporting requirements, and any other applicable rules and/or regulations related to the Contract.

The Provider Network must be responsive to the linguistic, cultural, and other unique needs of any minority, elderly, or disabled individuals, or other special population in the Service Areas and HMO Programs served by the HMO, including the capacity to communicate with Members in languages other than English, when necessary, as well as with those who are deaf or hearing impaired.

The HMO must seek to obtain the participation in its Provider Network of qualified providers currently serving the Medicaid and CHIP Members in the HMO’s proposed Service Area(s).

All Providers: All Providers must be licensed in the State of Texas to provide the Covered Services for which the HMO is contracting with the Provider, and not be under sanction or exclusion from the Medicaid program. All Acute Care Providers serving STAR Members must be enrolled as Medicaid providers and have a Texas Provider Identification Number (TPIN).

Inpatient hospital and medical services: The HMO must ensure that Acute Care hospitals and specialty hospitals are available and accessible 24 hours per day, seven days per week, within the HMO’s Network to provide Covered Services to Members throughout the Service Area.

Children’s Hospitals/hospitals with specialized pediatric services: The HMO must ensure Members access to hospitals designated as Children’s Hospitals by Medicare and hospitals with specialized pediatric services, such as teaching hospitals and hospitals with designated children’s wings, so that these services are available and accessible 24 hours per day, seven days per week, to provide Covered Services to Members throughout the Service Area. The HMO must make Out-of-Network reimbursement arrangements with a designated Children’s Hospital and/or hospital with specialized pediatric services in proximity to the Member’s residence if the HMO does not include such hospitals in its Provider Network. Provider Directories, Member materials, and Marketing materials must clearly distinguish between hospitals designated as Children’s Hospitals and hospitals that have designated children’s units.

Trauma: The HMO must ensure Members access to Texas Department of State Health Services (TDSHS) designated Level I and Level II trauma centers within the State or hospitals meeting the equivalent level of trauma care in the HMO’s Service Area, or in close proximity to such Service

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Area. The HMO must make Out-of-Network reimbursement arrangements with the DSHS-designated Level I and Level II trauma centers or hospitals meeting equivalent levels of trauma care, if the HMO does not include such a trauma center in its Provider Network.

Transplant centers: The HMO must ensure Member access to HHSC-designated transplant centers or centers meeting equivalent levels of care. A list of HHSC-designated transplant centers can be found in the Procurement Library in Attachment H. The HMO must make Out-of-Network reimbursement arrangements with a designated transplant center or center meeting equivalent levels of care in proximity to the Member’s residence if the HMO does not include such a center in its Provider Network.

Hemophilia centers: The HMO must ensure Member access to hemophilia centers supported by the Centers for Disease Control (CDC). A list of these hemophilia centers can be found at http://www.cdc.gov/ncbddd/hbd/htc_list.htm. The HMO must make Out-of-Network reimbursement arrangements with a CDC-supported hemophilia center if the HMO does not include such a center in its Provider Network.

Physician services: The HMO must ensure that Primary Care Providers are available and accessible 24 hours per day, seven days per week, within the Provider Network. The HMO must contract with a sufficient number of participating physicians and specialists within each Service Area to comply with the access requirements throughout Section 8.1.3 and meet the needs of Members for all Covered Services.

The HMO must ensure that an adequate number of participating physicians have admitting privileges at one or more participating Acute Care hospitals in the Provider Network to ensure that necessary admissions are made. In no case may there be less than one in-network PCP with admitting privileges available and accessible 24 hours per day, seven days per week for each Acute Care hospital in the Provider Network.

The HMO must ensure that an adequate number of participating specialty physicians have admitting privileges at one or more participating hospitals in the HMO’s Provider Network to ensure necessary admissions are made. The HMO shall require that all physicians who admit to hospitals maintain hospital access for their patients through appropriate call coverage.

Laboratory services: The HMO must ensure that in-network reference laboratory services must be of sufficient size and scope to meet the non-emergency and emergency needs of the enrolled population and the access requirements in Section 8.1.3. Reference laboratory specimen procurement services must facilitate the provision of clinical diagnostic services for physicians, Providers and Members through the use of convenient reference satellite labs in each Service Area, strategically located specimen collection areas in each Service Area, and the use of a courier system under the management of the reference lab. For Medicaid Members, THSteps requires that laboratory specimens obtained as part of a THSteps medical checkup visit must be sent to the TDSHS Laboratory.

Diagnostic imaging: The HMO must ensure that diagnostic imaging services are available and accessible to all Members in each Service Area in accordance with the access standards in Section 8.1.3. The HMO must ensure that diagnostic imaging procedures that require the injection or ingestion of radiopaque chemicals are performed only under the direction of physicians qualified to perform those procedures.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Home health services: The HMO must have a contract(s) with a home health Provider so that all Members living within the HMO’s Service Area will have access to at least one such Provider for home health Covered Services.

8.1.4.1 Provider Contract Requirements

The HMO is prohibited from requiring a provider or provider group to enter into an exclusive contracting arrangement with the HMO as a condition for participation in its Provider Network.

The HMO’s contract with health care Providers must be in writing, must be in compliance with applicable federal and state laws and regulations, and must include minimum requirements specified in the Uniform Managed Care Contract Terms and Conditions (Attachment A) and HHSC’s Uniform Managed Care Manual.

The HMO must submit model Provider contracts to HHSC for review during Readiness Review. HHSC retains the right to reject or require changes to any model Provider contract that does not comply with HMO Program requirements or the HHSC-HMO Contract.

8.1.4.2 Primary Care Providers

The HMO’s PCP Network may include Providers from any of the following practice areas: General Practice; Family Practice; Internal Medicine; Pediatrics; Obstetrics/Gynecology (OB/GYN); Certified Nurse Midwives (CNM) and Physician Assistants (PAs) practicing under the supervision of a physician; Federally Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs), and similar community clinics; and specialist physicians who are willing to provide a Medical Home to selected Members with special needs and conditions. Section 533.005(a)(13), Government Code, requires the HMO to use Pediatric and Family Advanced Practice Nurses practicing under the supervision of a physician as PCPs in its provider network for STAR.

An internist or other Provider who provides primary care to adults only is not considered an age-appropriate PCP choice for a Member under age 21. An internist or other Provider who provides primary care to adults and children may be a PCP for children if:

1. the Provider assumes all HMO PCP responsibilities for such Members in a specific age group under age 21,

2. the Provider has a history of practicing as a PCP for the specified age group as evidenced by the Provider’s primary care practice including an established patient population under age 20 and within the specified age range, and

3. the Provider has admitting privileges to a local hospital that includes admissions to pediatric units.

A pediatrician is not considered an age-appropriate choice for a Member age 21 and over.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The PCP for a Member with disabilities, Special Health Care Needs, or Chronic or Complex Conditions may be a specialist physician who agrees to provide PCP services to the Member. The specialty physician must agree to perform all PCP duties required in the Contract and PCP duties must be within the scope of the specialist’s license. Any interested person may initiate the request through the HMO for a specialist to serve as a PCP for a Member with disabilities, Special Health Care Needs, or Chronic or Complex Conditions. The HMO shall handle such requests in accordance with 28 T.A.C. Part 1, Chapter 11, Subchapter J.

PCPs must either have admitting privileges at a hospital that is part of the HMO’s Provider Network or make referral arrangements with a Provider who has admitting privileges to a Network hospital.

The HMO must require, through contract provisions, that PCPs are accessible to Members 24 hours a day, 7 days a week. The HMO is encouraged to include in its Network sites that offer primary care services during evening and weekend hours. The following are acceptable and unacceptable telephone arrangements for contacting PCPs after their normal business hours.

Acceptable after-hours coverage:

1. The office telephone is answered after-hours by an answering service, which meets language requirements of the Major Population Groups and which can contact the PCP or another designated medical practitioner. All calls answered by an answering service must be returned within 30 minutes;

2. The office telephone is answered after normal business hours by a recording in the language of each of the Major Population Groups served, directing the patient to call another number to reach the PCP or another provider designated by the PCP. Someone must be available to answer the designated provider’s telephone. Another recording is not acceptable; and

3. The office telephone is transferred after office hours to another location where someone will answer the telephone and be able to contact the PCP or another designated medical practitioner, who can return the call within 30 minutes.

Unacceptable after-hours coverage:

1. The office telephone is only answered during office hours;

2. The office telephone is answered after-hours by a recording that tells patients to leave a message;

3. The office telephone is answered after-hours by a recording that directs patients to go to an Emergency Room for any services needed; and

4. Returning after-hours calls outside of 30 minutes.

The HMO must require PCPs, through contract provisions or Provider Manual, to provide children under the age of 21 with preventive services in accordance with the AAP recommendations for CHIP Members and the THSteps periodicity schedule published in the THSteps Manual for Medicaid Members. The HMO must require PCPs, through contract provisions or Provider Manual, to provide adults with preventive services in accordance with the U.S. Preventive Services Task Force requirements. The HMO must make best efforts to ensure that PCPs follow these periodicity requirements for children and adult Members. Best efforts must include, but not be limited to, Provider education, Provider profiling, monitoring, and feedback activities.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must require PCPs, through contract provisions or Provider Manual, to assess the medical needs of Members for referral to specialty care providers and provide referrals as needed. PCPs must coordinate Members’ care with specialty care providers after referral. The HMO must make best efforts to ensure that PCPs assess Member needs for referrals and make such referrals. Best efforts must include, but not be limited to, Provider education activities and review of Provider referral patterns.

8.1.4.3 PCP Notification

The HMO must furnish each PCP with a current list of enrolled Members enrolled or assigned to that Provider no later than five (5) working days after the HMO receives the Enrollment File from the HHSC Administrative Services Contractor each month. The HMO may offer and provide such enrollment information in alternative formats, such as through access to a secure Internet site, when such format is acceptable to the PCP.

8.1.4.4 Provider Credentialing and Re-credentialing

The HMO must review, approve and periodically recertify the credentials of all participating physician Providers and all other licensed Providers who participate in the HMO’s Provider Network. The HMO may subcontract with another entity to which it delegates such credentialing activities if such delegated credentialing is maintained in accordance with the National Committee for Quality Assurance (NCQA) delegated credentialing requirements and any comparable requirements defined by HHSC.

At a minimum, the scope and structure of a HMO’s credentialing and re-credentialing processes must be consistent with recognized HMO industry standards such as those provided by NCQA and relevant state and federal regulations including 28 T.A.C. §11.1902, relating to credentialing of providers in HMOs, and as an additional requirement for Medicaid HMOs, 42 C.F.R. §438.214(b). The initial credentialing process, including application, verification of information, and a site visit (if applicable), must be completed before the effective date of the initial contract with the physician or Provider. The re-credentialing process must occur at least every three years.

The re-credentialing process must take into consideration Provider performance data including, but not be limited to, Member Complaints and Appeals, quality of care, and utilization management.

8.1.4.5 Board Certification Status

The HMO must maintain a policy with respect to Board Certification for PCPs and specialty physicians that encourage participation of board certified PCPs and specialty physicians in the Provider Network. The HMO must make information on the percentage of Board-certified PCPs in the Provider Network and the percentage of Board-certified specialty physicians, by specialty, available to HHSC upon request.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.4.6 Provider Manual, Materials and Training

The HMO must prepare and issue a Provider Manual(s), including any necessary specialty manuals (e.g., behavioral health) to all existing Network Providers. For newly contracted Providers, the HMO must issue copies of the Provider Manual(s) within five (5) working days from inclusion of the Provider into the Network. The Provider Manual must contain sections relating to special requirements of the HMO Program(s) and the enrolled populations in compliance with the requirements of this Contract.

HHSC or its designee must approve the Provider Manual, and any substantive revisions to the Provider Manual, prior to publication and distribution to Providers. The Provider Manual must contain the critical elements defined in the Uniform Managed Care Manual. HHSC’s initial review of the Provider Manual is part of the Operational Readiness Review described in Attachment B-1, Section 7.

The HMO must provide training to all Providers and their staff regarding the requirements of the Contract and special needs of Members. The HMO’s Medicaid and/or CHIP Program training must be completed within 30 days of placing a newly contracted Provider on active status. The HMO must provide on-going training to new and existing Providers as required by the HMO or HHSC to comply with the Contract. The HMO must maintain and make available upon request enrollment or attendance rosters dated and signed by each attendee or other written evidence of training of each Provider and their staff.

The HMO must establish ongoing Provider training that includes, but is not limited to, the following issues:

1. Covered Services and the Provider’s responsibilities for providing and/or coordinating such services. Special emphasis must be placed on areas that vary from commercial coverage rules (e.g., Early Intervention services, therapies and DME/Medical Supplies); and for Medicaid, making referrals and coordination with Non-capitated Services;

2. Relevant requirements of the Contract;

3. The HMO’s quality assurance and performance improvement program and the Provider’s role in such a program; and

4. The HMO’s policies and procedures, especially regarding in-network and Out-of-Network referrals.

Provider Materials produced by the HMO, relating to Medicaid Managed Care and/or the CHIP Program, must be in compliance with State and Federal laws and requirements of the HHSC Uniform Managed Care Contract Terms and Conditions. HMO must make available any provider materials to HHSC upon request.

8.1.4.7 Provider Hotline

The HMO must operate a toll-free telephone line for Provider inquiries from 8 a.m. to 5 p.m. local time for the Service Area, Monday through Friday, except for State-approved holidays. The Provider Hotline must be staffed with personnel who are knowledgeable about Covered Services and each applicable HMO Program, and for Medicaid, about Non-capitated Services.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must ensure that after regular business hours the line is answered by an automated system with the capability to provide callers with operating hours information and instructions on how to verify enrollment for a Member with an Urgent Condition or an Emergency Medical Condition. The HMO must have a process in place to handle after-hours inquiries from Providers seeking to verify enrollment for a Member with an Urgent Condition or an Emergency Medical Condition, provided, however, that the HMO and its Providers must not require such verification prior to providing Emergency Services.

The HMO must ensure that the Provider Hotline meets the following minimum performance requirements for all HMO Programs and Service Areas:

1. 99% of calls are answered by the fourth ring or an automated call pick-up system is used;

2. no more than one percent of incoming calls receive a busy signal;

3. the average hold time is 2 minutes or less; and

4. the call abandonment rate is 7% or less.

The HMO must conduct ongoing call quality assurance to ensure these standards are met. The Provider Hotline may serve multiple HMO Programs if Hotline staff is knowledgeable about all of the HMO’s Programs. The Provider Hotline may serve multiple Service Areas if the Hotline staff is knowledgeable about all such Service Areas, including the Provider Network in such Service Areas.

The HMO must monitor its performance regarding Provider Hotline standards and submit performance reports summarizing call center performance for the Hotline as indicated in Section 8.1.20. If the HMO subcontracts with a Behavioral Health Organization (BHO) that is responsible for Provider Hotline functions related to Behavioral Health Services, the BHO’s Provider Hotline must meet the requirements in Section 8.1.4.7.

8.1.4.8 Provider Reimbursement

The HMO must make payment for all Medically Necessary Covered Services provided to all Members for whom the HMO is paid a capitation. The HMO must ensure that claims payment is timely and accurate as described in Section 8.1.18.5. The HMO must require tax identification numbers from all participating Providers. The HMO is required to do back-up withholding from all payments to Providers who fail to give tax identification numbers or who give incorrect numbers.

8.1.4.9 Termination of Provider Contracts

Unless prohibited or limited by applicable law, at least 15 days prior to the effective date of the HMO’s termination of contract of any participating Provider the HMO must notify the HHSC Administrative Services Contractor and notify affected current Members in writing. Affected Members include all Members in a PCP’s panel and all Members who have been receiving ongoing care from the terminated Provider, where ongoing care is defined as two or more visits for home-based or office-based care in the past 12 months.

For CHIP, the HMO’s process for terminating Provider contracts must comply with the Texas Insurance Code and TDI regulations.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.5 Member Services

The HMO must maintain a Member Services Department to assist Members and Members’ family members or guardians in obtaining Covered Services for Members. The HMO must maintain employment standards and requirements (e.g., education, training, and experience) for Member Services Department staff and provide a sufficient number of staff for the Member Services Department to meet the requirements of this Section, including Member Hotline response times, and Linguistic Access capabilities, see 8.1.5.6 Member Hotline Requirements.

8.1.5.1 Member Materials

The HMO must design, print and distribute Member identification (ID) cards and a Member Handbook to Members. No later than the fifth business day of the month following the receipt of an Enrollment File from the HHSC Administrative Services Contractor, the HMO must mail a Member’s ID card and Member Handbook to the Case Head or Account Name for each new Member. When the Case Head or Account Name is on behalf of two or more new Members, the HMO is only required to send one Member Handbook. The HMO is responsible for mailing materials only to those Members for whom valid address data are contained in the Enrollment File.

The HMO must design, print and distribute a Provider Directory to the HHSC Administrative Services Contractor as described in Section 8.1.5.4.

Member materials must be at or below a 6th grade reading level as measured by the appropriate score on the Flesch reading ease test. Member materials must be available in English, Spanish, and the languages of other Major Population Groups making up 10% or more of the managed care eligible population in the HMO’s Service Area, as specified by HHSC. HHSC will provide the HMO with reasonable notice when the enrolled population reaches 10% within the HMO’s Service Area. All Member materials must be available in a format accessible to the visually impaired, which may include large print, Braille, and audiotapes.

The HMO must submit member materials to HHSC for approval prior to use or mailing. HHSC will identify any required changes to the Member materials within 15 business days. If HHSC has not responded to the Contractor by the fifteenth day, the Contractor may proceed to use the submitted materials. HHSC reserves the right to require discontinuation of any Member materials that violate the terms of the Uniform Managed Care Terms and Conditions, including but not limited to “Marketing Policies and Procedures” as described in the Uniform Managed Care Manual.

8.1.5.2 Member Identification (ID) Card

All Member ID cards must, at a minimum, include the following information:

1. the Member’s name;

2. the Member’s Medicaid or CHIP number;

3. the effective date of the PCP assignment;

4. the PCP’s name, address (optional for all products), and telephone number;

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

5. the name of the HMO;

6. the 24-hour, seven (7) day a week toll-free Member services telephone number and BH Hotline number operated by the HMO; and

7. any other critical elements identified in the Uniform Managed Care Manual.

The HMO must reissue the Member ID card if a Member reports a lost card, there is a Member name change, if the Member requests a new PCP, or for any other reason that results in a change to the information disclosed on the ID card.

8.1.5.3 Member Handbook

HHSC must approve the Member Handbook, and any substantive revisions, prior to publication and distribution. As described in Attachment B-1, Section 7, the HMO must develop and submit to HHSC the draft Member Handbook for approval during the Readiness Review and must submit a final Member Handbook incorporating changes required by HHSC prior to the Operational Start Date.

The Member Handbook for each applicable HMO Program must, at a minimum, meet the Member materials requirements specified by Section 8.1.5.1 above and must include critical elements in the Uniform Managed Care Manual.

The HMO must produce a revised Member Handbook, or an insert informing Members of changes to Covered Services upon HHSC notification and at least 30 days prior to the effective date of such change in Covered Services. In addition to modifying the Member materials for new Members, the HMO must notify all existing Members of the Covered Services change during the time frame specified in this subsection.

8.1.5.4 Provider Directory

The Provider Directory for each applicable HMO Program, and any substantive revisions, must be approved by HHSC prior to publication and distribution. The HMO is responsible for submitting draft Provider directory updates to HHSC for prior review and approval if changes other than PCP information or clerical corrections are incorporated into the Provider Directory.

As described in Attachment B-1, Section 7, during the Readiness Review, the HMO must develop and submit to HHSC the draft Provider Directory template for approval and must submit a final Provider Directory incorporating changes required by HHSC prior to the Operational Start Date. Such draft and final Provider Directories must be submitted according to the deadlines established in Attachment B-1, Section 7.

The Provider Directory for each applicable HMO Program must, at a minimum, meet the Member Materials requirements specified by Section 8.1.5.1 above and must include critical elements in the Uniform Managed Care Manual. The Provider Directory must include only Network Providers credentialed by the HMO in accordance with Section 8.1.4.4. If the HMO contracts with limited Provider Networks, the Provider Directory must comply with the requirements of 28 T.A.C. §11.1600(b)(11), relating to the disclosure and notice of limited Provider Networks.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must update the Provider Directory on a quarterly basis. The HMO must make such update available to existing Members on request, and must provide such update to the HHSC Administrative Services Contractor at the beginning of each state fiscal quarter. HHSC will consult with the HMOs and the HHSC Administrative Services Contractors to discuss methods for reducing the HMO’s administrative costs of producing new Provider Directories, including considering submission of new Provider Directories on a semi-annual rather than a quarterly basis if a HMO has not made major changes in its Provider Network, as determined by HHSC. HHSC will establish weight limits for the Provider Directories. Weight limits may vary by Service Area. HHSC will require HMOs that exceed the weight limits to compensate HHSC for postage fees in excess of the weight limits.

The HMO must send the most recent Provider Directory, including any updates, to Members upon request. The HMO must, at least annually, include written and verbal offers of such Provider Directory in its Member outreach and education materials.

8.1.5.5 Internet Website

The HMO must develop and maintain, consistent with HHSC standards and Section 843.2015 of the Texas Insurance Code and other applicable state laws, a website to provide general information about the HMO’s Program(s), its Provider Network, its customer services, and its Complaints and Appeals process. The HMO may develop a page within its existing website to meet the requirements of this section. The HMO must maintain a Provider Directory for its HMO Program(s) on the HMO’s website with designation of open versus closed panels. The HMO’s website must comply with the Marketing Policies and Procedures for each applicable HHSC HMO Program.

The website’s HMO Program content must be:

1. Written in Major Population Group languages (which under this contract include only English and Spanish);

2. Culturally appropriate;

3. Written for understanding at the 6th grade reading level; and

4. Be geared to the health needs of the enrolled HMO Program population.

To minimize download and “wait times,” the website must avoid tools or techniques that require significant memory or disk resources or require special intervention on the customer side to install plug-ins or additional software. Use of proprietary items that would require a specific browser are not allowed. HHSC strongly encourages the use of tools that take advantage of efficient data access methods and reduce the load on the server or bandwidth.

8.1.5.6 Member Hotline

The HMO must operate a toll-free hotline that Members can call 24 hours a day, seven (7) days a week. The Member Hotline must be staffed with personnel who are knowledgeable about its HMO Program(s) and Covered Services, between the hours of 8:00 a.m. to 5:00 p.m. local time for the Service Area, Monday through Friday, excluding state-approved holidays.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must ensure that after hours, on weekends, and on holidays the Member Services Hotline is answered by an automated system with the capability to provide callers with operating hours and instructions on what to do in cases of emergency. All recordings must be in English and in Spanish. A voice mailbox must be available after hours for callers to leave messages. The HMO’s Member Services representatives must return member calls received by the automated system on the next working day.

If the Member Hotline does not have a voice-activated menu system, the HMO must have a menu system that will accommodate Members who cannot access the system through other physical means, such as pushing a button.

The HMO must ensure that its Member Service representatives treat all callers with dignity and respect the callers’ need for privacy. At a minimum, the HMO’s Member Service representatives must be:

1. Knowledgeable about Covered Services;

2. Able to answer non-technical questions pertaining to the role of the PCP;

3. Able to answer non-clinical questions pertaining to referrals or the process for receiving authorization for procedures or services;

4. Able to give information about Providers in a particular area;

5. Knowledgeable about Fraud, Abuse, and Waste and the requirements to report any conduct that, if substantiated, may constitute Fraud, Abuse, or Waste in the HMO Program;

6. Trained regarding Cultural Competency;

7. Trained regarding the process used to confirm the status of persons with Special Health Care Needs;

8. For Medicaid members, able to answer non-clinical questions pertaining to accessing Non-capitated Services; and

9. For CHIP Members, able to give correct cost-sharing information relating to premiums, co-pays or deductibles, as applicable.

Hotline services must meet Cultural Competency requirements and must appropriately handle calls from non-English speaking (and particularly, Spanish-speaking) callers, as well as calls from individuals who are deaf or hard-of-hearing. To meet these requirements, the HMO must employ bilingual Spanish-speaking Member Services representatives and must secure the services of other contractors as necessary to meet these requirements.

The HMO must process all incoming Member correspondence and telephone inquiries in a timely and responsive manner. The HMO cannot impose maximum call duration limits but must allow calls to be of sufficient length to ensure adequate information is provided to the Member. The HMO must ensure that the toll-free Member Hotline meets the following minimum performance requirements for all HMO Programs and Service Areas:

1. 99% of calls are answered by the fourth ring or an automated call pick-up system;

2. no more than one percent (1%) of incoming calls receive a busy signal;

3. at least 80% of calls must be answered by toll-free line staff within 30 seconds;

4. the call abandonment rate is 7% or less; and

5. the average hold time is 2 minutes or less.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must conduct ongoing quality assurance to ensure these standards are met.

The Member Services Hotline may serve multiple HMO Programs if Hotline staff is knowledgeable about all of the HMO’s Medicaid and/or CHIP Programs. The Member Services Hotline may serve multiple Service Areas if the Hotline staff is knowledgeable about all such Service Areas, including the Provider Network in each Service Area.

The HMO must monitor its performance regarding HHSC Member Hotline standards and submit performance reports summarizing call center performance for the Member Hotline as indicated in Section 8.1.20 and the Uniform Managed Care Manual.

8.1.5.7 Member Education

The HMO must, at a minimum, develop and implement health education initiatives that educate Members about:

1. How the HMO system operates, including the role of the PCP;

2. Covered Services, limitations and any Value-added Services offered by the HMO;

3. The value of screening and preventive care, and

4. How to obtain services, including:

a. Emergency Services;

b. Accessing OB/GYN and specialty care;

c. Behavioral Health Services;

d. Disease Management programs;

e. Service Coordination, treatment for pregnant women, Members with Special Health Care Needs, including Children with Special Health Care Needs; and other special populations;

f. Early Childhood Intervention (ECI) Services;

g. Screening and preventive services, including well-child care (THSteps medical checkups for Medicaid Members);

h. For CHIP Members, Member co-payments

i. Suicide prevention; and

j. Identification and health education related to Obesity.

The HMO must provide a range of health promotion and wellness information and activities for Members in formats that meet the needs of all Members. The HMO must propose, implement, and assess innovative Member education strategies for wellness care and immunization, as well as general health promotion and prevention. The HMO must conduct wellness promotion programs to improve the health status of its Members. The HMO may cooperatively conduct health education classes for all enrolled Members with one or more HMOs also contracting with HHSC in the Service Area. The HMO must work with its Providers to integrate health education, wellness and prevention training into the care of each Member.

The HMO also must provide condition and disease-specific information and educational materials to Members, including information on its Service Management and Disease Management programs described in Section 8.1.13 and Section 8.1. Condition- and disease-specific information must be oriented to various groups within the managed care eligible population, such as children, the elderly, persons with disabilities and non-English speaking Members, as appropriate to the HMO’s Medicaid and/or CHIP Program(s).

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.5.8 Cultural Competency Plan

The HMO must have a comprehensive written Cultural Competency Plan describing how the HMO will ensure culturally competent services, and provide Linguistic Access and Disability-related Access. The Cultural Competency Plan must describe how the individuals and systems within the HMO will effectively provide services to people of all cultures, races, ethnic backgrounds, and religions as well as those with disabilities in a manner that recognizes, values, affirms, and respects the worth of the individuals and protects and preserves the dignity of each. The HMO must submit the Cultural Competency Plan to HHSC for Readiness Review. Modifications and amendments to the plan must be submitted to HHSC no later than 30 days prior to implementation. The Plan must also be made available to the HMO’s Network of Providers.

8.1.5.9 Member Complaint and Appeal Process

The HMO must develop, implement and maintain a system for tracking, resolving, and reporting Member Complaints regarding its services, processes, procedures, and staff. The HMO must ensure that Member Complaints are resolved within 30 calendar days after receipt. The HMO is subject to remedies, including liquidated damages, if at least 98 percent of Member Complaints are not resolved within 30 days of receipt of the Complaint by the HMO. Please see the Uniform Managed Care Contract Terms & Conditions and Attachment B-5, Deliverables/Liquidated Damages Matrix.

The HMO must develop, implement and maintain a system for tracking, resolving, and reporting Member Appeals regarding the denial or limited authorization of a requested service, including the type or level of service and the denial, in whole or in part, of payment for service. Within this process, the HMO must respond fully and completely to each Appeal and establish a tracking mechanism to document the status and final disposition of each Appeal.

The HMO must ensure that Member Appeals are resolved within 30 calendar days, unless the HMO can document that the Member requested an extension or the HMO shows there is a need for additional information and the delay is in the Member’s interest. The HMO is subject to liquidated damages if at least 98 percent of Member Appeals are not resolved within 30 days of receipt of the Appeal by the HMO. Please see the Uniform Managed Care Contract Terms & Conditions and Attachment B-5, Deliverables/Liquidated Damages Matrix.

Medicaid HMOs must follow the Member Complaint and Appeal Process described in Section 8.2.6. CHIP HMOs must comply with the CHIP Complaint and Appeal Process described in Section 8.4.2.

8.1.6 Marketing and Prohibited Practices

The HMO and its Subcontractors must adhere to the Marketing Policies and Procedures as set forth by HHSC in the Contract, and the HHSC Uniform Managed Care Manual.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.7 Quality Assessment and Performance Improvement

The HMO must provide for the delivery of quality care with the primary goal of improving the health status of Members and, where the Member’s condition is not amenable to improvement, maintain the Member’s current health status by implementing measures to prevent any further decline in condition or deterioration of health status. The HMO must work in collaboration with Providers to actively improve the quality of care provided to Members, consistent with the Quality Improvement Goals and all other requirements of the Contract. The HMO must provide mechanisms for Members and Providers to offer input into the HMO’s quality improvement activities.

8.1.7.1 QAPI Program Overview

The HMO must develop, maintain, and operate a quality assessment and performance improvement (QAPI) Program consistent with the Contract, and TDI requirements, including 28 T.A.C. §11.1901(a)(5) and §11.1902. Medicaid HMOs must also meet the requirements of 42 C.F.R. §438.240.

The HMO must have on file with HHSC an approved plan describing its QAPI Program, including how the HMO will accomplish the activities required by this section. The HMO must submit a QAPI Program Annual Summary in a format and timeframe specified by HHSC or its designee. The HMO must keep participating physicians and other Network Providers informed about the QAPI Program and related activities. The HMO must include in Provider contracts a requirement securing cooperation with the QAPI.

The HMO must approach all clinical and non-clinical aspects of quality assessment and performance improvement based on principles of Continuous Quality Improvement (CQI)/Total Quality Management (TQM) and must:

1. Evaluate performance using objective quality indicators;

2. Foster data-driven decision-making;

3. Recognize that opportunities for improvement are unlimited;

4. Solicit Member and Provider input on performance and QAPI activities;

5. Support continuous ongoing measurement of clinical and non-clinical effectiveness and Member satisfaction;

6. Support programmatic improvements of clinical and non-clinical processes based on findings from on-going measurements; and

7. Support re-measurement of effectiveness and Member satisfaction, and continued development and implementation of improvement interventions as appropriate.

8.1.7.2 QAPI Program Structure

The HMO must maintain a well-defined QAPI structure that includes a planned systematic approach to improving clinical and non-clinical processes and outcomes. The HMO must designate a senior executive responsible for the QAPI Program and the Medical Director must have substantial involvement in QAPI Program activities. At a minimum, the HMO must ensure that the QAPI Program structure:

1. Is organization-wide, with clear lines of accountability within the organization;

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2. Includes a set of functions, roles, and responsibilities for the oversight of QAPI activities that are clearly defined and assigned to appropriate individuals, including physicians, other clinicians, and non-clinicians;

3. Includes annual objectives and/or goals for planned projects or activities including clinical and non-clinical programs or initiatives and measurement activities; and

4. Evaluates the effectiveness of clinical and non-clinical initiatives.

8.1.7.3 Clinical Indicators

The HMO must engage in the collection of clinical indicator data. The HMO must use such clinical indicator data in the development, assessment, and modification of its QAPI Program.

8.1.7.4 QAPI Program Subcontracting

If the HMO subcontracts any of the essential functions or reporting requirements contained within the QAPI Program to another entity, the HMO must maintain a file of the subcontractors. The file must be available for review by HHSC or its designee upon request.

8.1.7.5 Behavioral Health Integration into QAPI Program

If the HMO provides Behavioral Health Services within the Covered Services as defined in Attachment B-2, it must integrate behavioral health into its QAPI Program and include a systematic and on-going process for monitoring, evaluating, and improving the quality and appropriateness of Behavioral Health Services provided to Members. The HMO must collect data, and monitor and evaluate for improvements to physical health outcomes resulting from behavioral health integration into the Member’s overall care.

8.1.7.6 Clinical Practice Guidelines

The HMO must adopt not less than two evidence-based clinical practice guidelines for each applicable HMO Program. Such practice guidelines must be based on valid and reliable clinical evidence, consider the needs of the HMO’s Members, be adopted in consultation with contracting health care professionals, and be reviewed and updated periodically, as appropriate. The HMO must develop practice guidelines based on the health needs and opportunities for improvement identified as part of the QAPI Program.

The HMO may coordinate the development of clinical practice guidelines with other HHSC HMOs to avoid providers in a Service Area receiving conflicting practice guidelines from different HMOs.

The HMO must disseminate the practice guidelines to all affected Providers and, upon request, to Members and potential Members.

The HMO must take steps to encourage adoption of the guidelines, and to measure compliance with the guidelines, until such point that 90% or more of the Providers are consistently in compliance, based on HMO measurement findings. The HMO must employ substantive Provider

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motivational incentive strategies, such as financial and non-financial incentives, to improve Provider compliance with clinical practice guidelines. The HMO’s decisions regarding utilization management, Member education, coverage of services, and other areas included in the practice guidelines must be consistent with the HMO’s clinical practice guidelines.

8.1.7.7 Provider Profiling

The HMO must conduct PCP and other Provider profiling activities at least annually. As part of its QAPI Program, the HMO must describe the methodology it uses to identify which and how many Providers to profile and to identify measures to use for profiling such Providers.

Provider profiling activities must include, but not be limited to:

1. Developing PCP and Provider-specific reports that include a multi-dimensional assessment of a PCP or Provider’s performance using clinical, administrative, and Member satisfaction indicators of care that are accurate, measurable, and relevant to the enrolled population;

2. Establishing PCP, Provider, group, Service Area or regional Benchmarks for areas profiled, where applicable, including STAR and CHIP-specific Benchmarks where appropriate; and

3. Providing feedback to individual PCPs and Providers regarding the results of their performance and the overall performance of the Provider Network.

8.1.7.8 Network Management

The HMO must:

1. Use the results of its Provider profiling activities to identify areas of improvement for individual PCPs and Providers, and/or groups of Providers;

2. Establish Provider-specific quality improvement goals for priority areas in which a Provider or Providers do not meet established HMO standards or improvement goals;

3. Develop and implement incentives, which may include financial and non-financial incentives, to motivate Providers to improve performance on profiled measures; and

4. At least annually, measure and report to HHSC on the Provider Network and individual Providers’ progress, or lack of progress, towards such improvement goals.

8.1.7.9 Collaboration with the EQRO

The HMO will collaborate with HHSC’s external quality review organization (EQRO) to develop studies, surveys, or other analytical approaches that will be carried out by the EQRO. The purpose of the studies, surveys, or other analytical approaches is to assess the quality of care and service provided to Members and to identify opportunities for HMO improvement. To facilitate this process, the HMO will supply claims data to the EQRO in a format identified by HHSC in consultation with HMOs, and will supply medical records for focused clinical reviews conducted by the EQRO. The HMO must also work collaboratively with HHSC and the EQRO to annually measure selected HEDIS measures that require chart reviews. During the first year of operations, HHSC anticipates that the selected measures will include, at a minimum, well-child visits and immunizations, appropriate use of asthma medications, measures related to Members with diabetes, and control of high blood pressure.

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8.1.8 Utilization Management

The HMO must have a written utilization management (UM) program description, which includes, at a minimum:

1. Procedures to evaluate the need for Medically Necessary Covered Services;

2. The clinical review criteria used, the information sources, the process used to review and approve the provision of Covered Services;

3. The method for periodically reviewing and amending the UM clinical review criteria; and

4. The staff position functionally responsible for the day-to-day management of the UM function.

The HMO must make best efforts to obtain all necessary information, including pertinent clinical information, and consult with the treating physician as appropriate in making UM determinations.

The HMO must issue coverage determinations, including adverse determinations, according to the following timelines:

• Within three (3) business days after receipt of the request for authorization of services;

• Within one (1) business day for concurrent hospitalization decisions; and

• Within one (1) hour for post-stabilization or life-threatening conditions, except that for Emergency Medical Conditions and Emergency Behavioral Health Conditions, the HMO must not require prior authorization.

The HMO’s UM Program must include written policies and procedures to ensure:

1. Consistent application of review criteria that are compatible with Members’ needs and situations;

2. Determinations to deny or limit services are made by physicians under the direction of the Medical Director;

3. Appropriate personnel are available to respond to utilization review inquiries 8:00 a.m. to 5:00 p.m., Monday through Friday, with a telephone system capable of accepting utilization review inquiries after normal business hours. The HMO must respond to calls within one business day;

4. Confidentiality of clinical information; and

5. Quality is not adversely impacted by financial and reimbursement-related processes and decisions.

For HMOs with preauthorization or concurrent review programs, qualified medical professionals must supervise preauthorization and concurrent review decisions.

The HMO UM Program must include polices and procedures to:

1. Routinely assess the effectiveness and the efficiency of the UM Program;

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2. Evaluate the appropriate use of medical technologies, including medical procedures, drugs and devices;

3. target areas of suspected inappropriate service utilization;

4. Detect over- and under-utilization;

5. Routinely generate Provider profiles regarding utilization patterns and compliance with utilization review criteria and policies;

6. Compare Member and Provider utilization with norms for comparable individuals;

7. Routinely monitor inpatient admissions, emergency room use, ancillary, and out-of-area services;

8. Ensure that when Members are receiving Behavioral Health Services from the local mental health authority that the HMO is using the same UM guidelines as those prescribed for use by Local Mental Health Authorities by MHMR which are published at: http://www.mhmr.state.tx.us/centraloffice/behavioralhealthservices/RDMClinGuide.html; and

9. Refer suspected cases of provider or Member Fraud, Abuse, or Waste to the Office of Inspector General (OIG) as required by Section 8.1.19.

8.1.9 Early Childhood Intervention (ECI)

The HMO must ensure that Network Providers are educated regarding their responsibility under federal laws (e.g., 20 U.S.C. §1435 (a)(5); 34 C.F.R. §303.321(d)) to identify and refer any Member age three (3) or under suspected of having a developmental disability or delay, or who is at risk of delay, to the designated ECI program for screening and assessment within two (2) working days from the day the Provider identifies the Member. The HMO must use written educational materials developed or approved by the Department of Assistive and Rehabilitative Services – Division for Early Childhood Intervention Services for these “child find” activities. Eligibility for ECI services will be determined by the local ECI program using the criteria contained in 40 T.A.C. §108.25.

The HMO must contract with qualified ECI Providers to provide ECI services to Members under age three who have been determined eligible for ECI services. The HMO must permit Members to self refer to local ECI Service Providers without requiring a referral from the Member’s PCP. The HMO’s policies and procedures, including its Provider Manual, must include written policies and procedures for allowing such self-referral to ECI providers.

The HMO must coordinate and cooperate with local ECI programs in the development and implementation of the Individual Family Service Plan (IFSP), including on-going case management and other non-capitated services required by the Member’s IFSP. The IFSP is an agreement developed by the interdisciplinary team that consists of the ECI Case Manager/Service Coordinator, the Member/family, and other professionals who participated in the Member’s evaluation or are providing direct services to the Member, and may include the Member’s Primary Care Physician (PCP) with parental consent. The IFSP identifies the Member’s present level of development based on assessment, describes the services to be provided to the child to meet the needs of the child and the family, and identifies the person or persons responsible for each service required by the plan. The IFSP shall be transmitted by the ECI Provider to the HMO and the PCP with parental consent to enhance coordination of the plan of care. The IFSP may be included in the Member’s medical record.

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Cooperation with the ECI program includes covering medical diagnostic procedures and providing medical records required to perform developmental assessments and developing the IFSP within the 45-day timeline established in federal rule (34 C.F.R. §303.342(a)). The HMO must require compliance with these requirements through Provider contract provisions. The HMO must not withhold authorization for the provision of such medical diagnostic procedures. The HMO must promptly provide to the ECI program, relevant medical records available to the HMO.

The interdisciplinary team will determine Medical Necessity for health and Behavioral Health Services as approved by the Member’s PCP. The HMO must require, through contract provisions, that all Medically Necessary health and Behavioral Health Services contained in the Member’s IFSP are provided to the Member in the amount, duration, scope and service setting established by the IFSP. The HMO must allow services to be provided by a non-network provider if a Network Provider is not available to provide the services in the amount, duration, scope and service setting as required by the IFSP. The HMO cannot modify the plan of care or alter the amount, duration, scope, or service setting required by the Member’s IFSP. The HMO cannot create unnecessary barriers for the Member to obtain IFSP services, including requiring prior authorization for the ECI assessment or establishing insufficient authorization periods for prior authorized services.

8.1.10 Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) - Specific Requirements

The HMO must, by contract, require its Providers to coordinate with the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to provide medical information necessary for WIC eligibility determinations, such as height, weight, hematocrit or hemoglobin. The HMO must make referrals to WIC for Members potentially eligible for WIC. The HMO may use the nutrition education provided by WIC to satisfy certain health education requirements of the Contract.

8.1.11 Coordination with Texas Department of Family and Protective Services

The HMO must cooperate and coordinate with the Texas Department of Family and Protective Services (TDFPS) (formerly the Department of Protective and Regulatory Services) for the care of a child who is receiving services from or has been placed in the conservatorship of TDFPS.

The HMO must comply with all provisions related to Covered Services, including Behavioral Health Services, in the following documents:

• A court order (Order) entered by a Court of Continuing Jurisdiction placing a child under the protective custody of TDFPS.

• A TDFPS Service Plan entered by a Court of Continuing Jurisdiction placing a child under the protective custody of TDFPS.

• A TDFPS Service Plan voluntarily entered into by the parents or person having legal custody of a Member and TDFPS.

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The HMO cannot deny, reduce, or controvert the Medical Necessity of any health or Behavioral Health Services included in an Order. The HMO may participate in the preparation of the medical and behavioral care plan prior to TDFPS submitting the health care plan to the Court. Any modification or termination of court-ordered services must be presented and approved by the court having jurisdiction over the matter.

A Member or the parent or guardian whose rights are subject to an Order or Service Plan cannot use the HMO’s Complaint or Appeal processes, or the HHSC Fair Hearing process to Appeal the necessity of the Covered Services.

The HMO must include information in its Provider Manuals and training materials regarding:

1. Providing medical records to TDFPS;

2. Scheduling medical and Behavioral Health Services appointments within 14 days unless requested earlier by TDFPS; and

3. Recognition of abuse and neglect, and appropriate referral to TDFPS.

The HMO must continue to provide all Covered Services to a Member receiving services from, or in the protective custody of, TDFPS until the Member has been disenrolled from the HMO due to loss of Medicaid managed care eligibility or placed into foster care.

8.1.12 Services for People with Special Health Care Needs

This section applies to both STAR and CHIP HMOs.

8.1.12.1 Identification

The HMO must develop and maintain a system and procedures for identifying Members with Special Health Care Needs (MSHCN), including people with disabilities or chronic or complex medical and behavioral health conditions and Children with Special Health Care Needs (CSHCN)¹.

The HMO must contact Members pre-screened by the HHSC Administrative Services Contractor as MSHCN to determine whether they meet the HMO’s MSHCN assessment criteria, and to determine whether the Member requires special services described in this section. The HMO must provide information to the HHSC Administrative Services Contractor that identifies Members who the HMO has assessed to be MSHCN, including any Members pre-screened by the HHSC Administrative Services Contractor and confirmed by the HMO as a MSHCN. The information must be provided, in a format and on a timeline to be specified by HHSC in the Uniform Managed Care Manual, and updated with newly identified MSHCN by the 10th day of each

¹ CSHCN is a term often used to refer to a services program for children with special health care needs administered by TDH, and described in 25 TAC, Part 1, Section 38.1. Although children served through this program may also be served by Medicaid or CHIP, the reference to “CSHCN” in this Contract does not refer to children served through this program.

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month. In the event that a MSHCN changes HMOs, the HMO must provide the receiving contractor information concerning the results of the HMO’s identification and assessment of that Member’s needs, to prevent duplication of those activities.

8.1.12.2 Access to Care and Service Management

Once identified, the HMO must have effective systems to ensure the provision of Covered Services to meet the special preventive, primary Acute Care, and specialty health care needs appropriate for treatment of the individual Member’s condition(s).

The HMO must provide access to identified PCPs and specialty care Providers with experience serving MSHCN. Such Providers must be board-qualified or board-eligible in their specialty. The HMO may request exceptions from HHSC for approval of traditional providers who are not board-qualified or board-eligible but who otherwise meet the HMO’s credentialing requirements.

For services to CSHCN, the HMO must have Network PCPs and specialty care Providers that have demonstrated experience with CSHCN in pediatric specialty centers such as children’s hospitals, teaching hospitals, and tertiary care centers.

The HMO is responsible for working with MSHCN, their families and legal guardians if applicable, and their health care providers to develop a seamless package of care in which primary, Acute Care, and specialty service needs are met through a Service Plan that is understandable to the Member, or, when applicable, the Member’s legal guardian.

The HMO is responsible for providing Service Management to develop a Service Plan and ensure MSHCN, including CSHCN, have access to treatment by a multidisciplinary team when the Member’s PCP determines the treatment is Medically Necessary, or to avoid separate and fragmented evaluations and service plans. The team must include both physician and non-physician providers determined to be necessary by the Member’s PCP for the comprehensive treatment of the Member. The team must:

1. Participate in hospital discharge planning;

2. Participate in pre-admission hospital planning for non-emergency hospitalizations;

3. Develop specialty care and support service recommendations to be incorporated into the Service Plan; and

4. Provide information to the Member, or when applicable, the Member’s legal guardian concerning the specialty care recommendations.

MSHCN, their families, or their health providers may request Service Management from the HMO. The HMO must make an assessment of whether Service Management is needed and furnish Service Management when appropriate. The HMO may also recommend to a MSHCN, or to a CSHCN’s family, that Service Management be furnished if the HMO determines that Service Management would benefit the Member.

The HMO must provide information and education in its Member Handbook and Provider Manual about the care and treatment available in the HMO’s plan for Members with Special Health Care Needs, including the availability of Service Management.

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The HMO must have a mechanism in place to allow Members with Special Health Care Needs to have direct access to a specialist as appropriate for the Member’s condition and identified needs, such as a standing referral to a specialty physician. The HMO must also provide MSHCN with access to non-primary care physician specialists as PCPs, as required by 28 T.A.C. §11.900 and Section 8.1.

The HMO must implement a systematic process to coordinate Non-capitated Services, and enlist the involvement of community organizations that may not be providing Covered Services but are otherwise important to the health and wellbeing of Members. The HMO also must make a best effort to establish relationships with State and local programs and community organizations, such as those listed below, in order to make referrals for MSHCN and other Members who need community services:

• Community Resource Coordination Groups (CRCGs);

• Early Childhood Intervention (ECI) Program;

• Local school districts (Special Education);

• Texas Department of Transportation’s Medical Transportation Program (MTP);

• Texas Department of Assistive and Rehabilitative Services (DARS) Blind Children’s Vocational Discovery and Development Program;

• Texas Department of State Health (DSHS) services, including community mental health programs, the Title V Maternal and Child Health and Children with Special Health Care Needs (CSHCN) Programs, and the Program for Amplification of Children of Texas (PACT);

• Other state and local agencies and programs such as food stamps, and the Women, Infants, and Children’s (WIC) Program;

• Civic and religious organizations and consumer and advocacy groups, such as United Cerebral Palsy, which also work on behalf of the MSHCN population.

8.1.13 Service Management for Certain Populations

The HMO must have service management programs and procedures for the following populations, as applicable to the HMO’s Medicaid and/or CHIP Program(s):

1. High-cost catastrophic cases;

2. Women with high-risk pregnancies (STAR Program only); and

3. Individuals with mental illness and co-occurring substance abuse.

8.1.14 Disease Management (DM)

The HMO must provide, or arrange to have provided to Members, comprehensive disease management services consistent with state statutes and regulations. Such DM services must be part of person-based approach to DM and holistically address the needs of persons with multiple chronic conditions. The HMO must develop and implement DM services that relate to chronic conditions that are prevalent in HMO Program Members. In the first year of operations, STAR and CHIP HMOs must have DM Programs that address Members with chronic conditions to be identified by HHSC and included within the Uniform Managed Care Manual. HHSC will not

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identify the Members with chronic conditions. The HMO must implement policies and procedures to ensure that Members that require DM services are identified and enrolled in a program to provide such DM services. The HMO must develop and maintain screening and evaluation procedures for the early detection, prevention, treatment, or referral of participants at risk for or diagnosed with chronic conditions identified by HHSC and included within the Uniform Managed Care Manual. The HMO must ensure that all Members identified for DM are enrolled into a DM Program with the opportunity to opt out of these services within 30 days while still maintaining access to all other Covered Services.

The DM Program(s) must include:

1. Patient self-management education;

2. Provider education;

3. Evidence-based models and minimum standards of care;

4. Standardized protocols and participation criteria;

5. Physician-directed or physician-supervised care;

6. Implementation of interventions that address the continuum of care;

7. Mechanisms to modify or change interventions that are not proven effective; and

8. Mechanisms to monitor the impact of the DM Program over time, including both the clinical and the financial impact.

The HMO must maintain a system to track and monitor all DM participants for clinical, utilization, and cost measures.

The HMO must provide designated staff to implement and maintain DM Programs and to assist participating Members in accessing DM services. The HMO must educate Members and Providers about the HMO’s DM Programs and activities. Additional requirements related to the HMO’s Disease Management Programs and activities are found in the HHSC Uniform Managed Care Manual.

8.1.14.1 DM Services and Participating Providers

At a minimum, the HMO must:

1. Implement a system for Providers to request specific DM interventions;

2. Give Providers information, including differences between recommended prevention and treatment and actual care received by Members enrolled in a DM Program, and information concerning such Members’ adherence to a service plan; and

3. For Members enrolled in a DM Program, provide reports on changes in a Member’s health status to their PCP.

8.1.14.2 HMO DM Evaluation

HHSC or its EQRO will evaluate the HMO’s DM Program.

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8.1.15 Behavioral Health (BH) Network and Services

The requirements in this sub-section pertain to all HMOs except the STAR HMOs in the Dallas CSA, whose Members receive Behavioral Health Services through the NorthSTAR Program.

The HMO must provide, or arrange to have provided, to Members all Medically Necessary Behavioral Health (BH) Services as described in Attachment B-2. All BH Services must be provided in conformance with the access standards included in Section 8.1.3. For Medicaid HMOs, BH Services are described in more detail in the Texas Medicaid Provider Procedures Manual and the Texas Medicaid Bulletins. When assessing Members for BH Services, the HMO and its Network Behavioral Health Service Providers must use the DSM-IV multi-axial classification. HHSC may require use of other assessment instrument/outcome measures in addition to the DSM-IV. Providers must document DSM-IV and assessment/outcome information in the Member’s medical record.

8.1.15.1 BH Provider Network

The HMO must maintain a Behavioral Health Services Provider Network that includes psychiatrists, psychologists, and other Behavioral Health Service Providers. The Provider Network must include Behavioral Health Service Providers with experience serving special populations among the HMO Program(s)’ enrolled population, including, as applicable, children and adolescents, persons with disabilities, the elderly, and cultural or linguistic minorities, to ensure accessibility and availability of qualified Providers to all Members in the Service Area.

8.1.15.2 Member Education and Self-referral for Behavioral Health Services

The HMO must maintain a Member education process to help Members know where and how to obtain Behavioral Health Services.

The HMO must permit Members to self refer to any in-network Behavioral Health Services Provider without a referral from the Member’s PCP. The HMOs’ policies and procedures, including its Provider Manual, must include written policies and procedures for allowing such self- referral to BH services.

The HMO must permit Members to participate in the selection of the appropriate behavioral health individual practitioner(s) who will serve them and must provide the Member with information on accessible in-network Providers with relevant experience.

8.1.15.3 Behavioral Health Services Hotline

This Section includes Hotline functions pertaining to Members. Requirements for Provider Hotlines are found in Section 8.1.4.7. The HMO must have an emergency and crisis Behavioral Health Services Hotline staffed by trained personnel 24 hours a day, 7 days a week, toll-free throughout the Service Area. Crisis hotline staff must include or have access to qualified Behavioral Health Services professionals to assess behavioral health emergencies. Emergency and crisis Behavioral Health Services may be arranged through mobile crisis teams. It is not acceptable for an emergency intake line to be answered by an answering machine.

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The HMO must operate a toll-free hotline as described in Section 8.1.5.6 to handle Behavioral Health-related calls. The HMO may operate one hotline to handle emergency and crisis calls and routine Member calls. The HMO cannot impose maximum call duration limits and must allow calls to be of sufficient length to ensure adequate information is provided to the Member. Hotline services must meet Cultural Competency requirements and provide linguistic access to all Members, including the interpretive services required for effective communication.

The Behavioral Health Services Hotline may serve multiple HMO Programs Hotline staff is knowledgeable about all of the HMO Programs. The Behavioral Health Services Hotline may serve multiple Service Areas if the Hotline staff is knowledgeable about all such Service Areas, including the Behavioral Health Provider Network in each Service Area. The HMO must ensure that the toll-free Behavioral Health Services Hotline meets the following minimum performance requirements for all HMO Programs and Service Areas:

1. 99% of calls are answered by the fourth ring or an automated call pick-up system;

2. No incoming calls receive a busy signal;

3. At least 80% of calls must be answered by toll-free line staff within 30 seconds;

4. The call abandonment rate is 7% or less; and

5. The average hold time is 2 minutes or less.

The HMO must conduct on-going quality assurance to ensure these standards are met.

The HMO must monitor the HMO’s performance against the Behavioral Health Services Hotline standards and submit performance reports summarizing call center performance as indicated in Section 8.1.20 and the Uniform Managed Care Manual.

8.1.15.4 Coordination between the BH Provider and the PCP

The HMO must require, through contract provisions, that PCPs have screening and evaluation procedures for the detection and treatment of, or referral for, any known or suspected behavioral health problems and disorders. PCPs may provide any clinically appropriate Behavioral Health Services within the scope of their practice.

The HMO must provide training to network PCPs on how to screen for and identify behavioral health disorders, the HMO’s referral process for Behavioral Health Services and clinical coordination requirements for such services. The HMO must include training on coordination and quality of care such as behavioral health screening techniques for PCPs and new models of behavioral health interventions.

The HMO shall develop and disseminate policies regarding clinical coordination between Behavioral Health Service Providers and PCPs. The HMO must require that Behavioral Health Service Providers refer Members with known or suspected and untreated physical health problems or disorders to their PCP for examination and treatment, with the Member’s or the Member’s legal guardian’s consent. Behavioral Health Providers may only provide physical health care services if they are licensed to do so. This requirement must be specified in all Provider Manuals.

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The HMO must require that behavioral health Providers send initial and quarterly (or more frequently if clinically indicated) summary reports of a Members’ behavioral health status to the PCP, with the Member’s or the Member’s legal guardian’s consent. This requirement must be specified in all Provider Manuals.

8.1.15.5 Follow-up after Hospitalization for Behavioral Health Services

The HMO must require, through Provider contract provisions, that all Members receiving inpatient psychiatric services are scheduled for outpatient follow-up and/or continuing treatment prior to discharge. The outpatient treatment must occur within seven (7) days from the date of discharge. The HMO must ensure that Behavioral Health Service Providers contact Members who have missed appointments within 24 hours to reschedule appointments.

8.1.15.6 Chemical Dependency

The HMO must comply with 28 T.A.C. §3.8001 et seq., regarding utilization review for Chemical Dependency Treatment. Chemical Dependency Treatment must conform to the standards set forth in 28 T.A.C. Part 1, Chapter 3, Subchapter HH.

8.1.15.7 Court-Ordered Services

“Court-Ordered Commitment” means a commitment of a Member to a psychiatric facility for treatment that is ordered by a court of law pursuant to the Texas Health and Safety Code, Title VII, Subtitle C.

The HMO must provide inpatient psychiatric services to Members under the age of 21, up to the annual limit, who have been ordered to receive the services by a court of competent jurisdiction under the provisions of Chapters 573 and 574 of the Texas Health and Safety Code, relating to Court-Ordered Commitments to psychiatric facilities. The HMO is not obligated to cover placements as a condition of probation, authorized by the Texas Family Code.

The HMO cannot deny, reduce or controvert the Medical Necessity of inpatient psychiatric services provided pursuant to a Court-ordered Commitment for Members under age 21. Any modification or termination of services must be presented to the court with jurisdiction over the matter for determination.

A Member who has been ordered to receive treatment under the provisions of Chapter 573 or 574 of the Texas Health and Safety Code can only Appeal the commitment through the court system.

8.1.15.8 Local Mental Health Authority (LMHA)

The HMO must coordinate with the Local Mental Health Authority (LMHA) and state psychiatric facility regarding admission and discharge planning, treatment objectives and projected length of stay for Members committed by a court of law to the state psychiatric facility.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Medicaid HMOs are required to comply with additional Behavioral Health Services requirements relating to coordination with the LMHA and care for special populations. These Medicaid HMO requirements are described in Section 8.2.8.

8.1.16 Financial Requirements for Covered Services

The HMO must pay for or reimburse Providers for all Medically Necessary Covered Services provided to all Members. The HMO is not liable for cost incurred in connection with health care rendered prior to the date of the Member’s Effective Date of Coverage in that HMO.

A Member may receive collateral health benefits under a different type of insurance such as workers compensation or personal injury protection under an automobile policy. If a Member is entitled to coverage for specific services payable under another insurance plan and the HMO paid for such Covered Services, the HMO may obtain reimbursement from the responsible insurance entity not to exceed 100% of the value of Covered Services paid.

8.1.17 Accounting and Financial Reporting Requirements

The HMO’s accounting records and supporting information related to all aspects of the Contract must be accumulated in accordance with Generally Accepted Accounting Principles (GAAP) and the cost principles contained in the Cost Principles Document in the Uniform Managed Care Manual. The State will not recognize or pay services that cannot be properly substantiated by the HMO and verified by HHSC.

The HMO must:

1. Maintain accounting records for each applicable HMO Program separate and apart from other corporate accounting records;

2. Maintain records for all claims payments, refunds and adjustment payments to providers, capitation payments, interest income and payments for administrative services or functions and must maintain separate records for medical and administrative fees, charges, and payments;

3. Maintain an accounting system that provides an audit trail containing sufficient financial documentation to allow for the reconciliation of billings, reports, and financial statements with all general ledger accounts; and

4. Within 60 days after Contract execution, submit an accounting policy manual that includes all proposed policies and procedures the HMO will follow during the duration of the Contract. Substantive modifications to the accounting policy manual must be approved by HHSC.

The HMO agrees to pay for all reasonable costs incurred by HHSC to perform an examination, review or audit of the HMO’s books pertaining to the Contract.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.17.1 General Access to Accounting Records

The HMO must provide authorized representatives of the Texas and federal government full access to all financial and accounting records related to the performance of the Contract.

The HMO must:

1. Cooperate with the State and federal governments in their evaluation, inspection, audit, and/or review of accounting records and any necessary supporting information;

2. Permit authorized representatives of the State and federal governments full access, during normal business hours, to the accounting records that the State and the Federal government determine are relevant to the Contract. Such access is guaranteed at all times during the performance and retention period of the Contract, and will include both announced and unannounced inspections, on-site audits, and the review, analysis, and reproduction of reports produced by the HMO;

3. Make copies of any accounting records or supporting documentation relevant to the Contract available to HHSC or its agents within ten (10) business days of receiving a written request from HHSC for specified records or information. If such documentation is not made available as requested, the HMO agrees to reimburse HHSC for all costs, including, but not limited to, transportation, lodging, and subsistence for all State and federal representatives, or their agents, to carry out their inspection, audit, review, analysis, and reproduction functions at the location(s) of such accounting records; and

4. Pay any and all additional costs incurred by the State and federal government that are the result of the HMO’s failure to provide the requested accounting records or financial information within ten (10) business days of receiving a written request from the State or federal government.

8.1.17.2 Financial Reporting Requirements

HHSC will require the HMO to provide financial reports by HMO Program and by Service Area to support Contract monitoring as well as State and Federal reporting requirements. HHSC will consult with HMOs regarding the format and frequency of such reporting. All financial information and reports that are not Member-specific are property of HHSC and will be public record. HHSC’s Uniform Managed Care Manual will govern the timing, format and content for the following reports.

Audited Financial Statement –The HMO must provide the annual audited financial statement, for each year covered under the Contract, no later than June 30. The HMO must provide the most recent annual financial statements, as required by the Texas Department of Insurance for each year covered under the Contract, no later than March 1.

Affiliate Report – The HMO must submit an Affiliate Report to HHSC if this information has changed since the last report submission. The report must contain the following:

1. A list of all Affiliates, and

2. For HHSC’s prior review and approval, a schedule of all transactions with Affiliates that, under the provisions of the Contract, will be allowable as expenses in the FSR Report for services provided to the HMO by the Affiliate. Those should include financial terms, a detailed description of the services to be provided, and an estimated amount that will be incurred by the HMO for such services during the Contract Period.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Bonus and/or Incentive Payment Plan – If a HMO intends to include Bonus or Incentive Payments as allowable administrative expenses, the HMO must furnish a written Bonus and/or Incentive Payments Plan to HHSC so it may determine whether such payments are allowable administrative expenses in accordance with Cost Principles Document in the Uniform Managed Care Manual. The written plan must include a description of the HMO’s criteria for establishing bonus and/or incentive payments, the methodology to calculate bonus and/or incentive payments, and the timing of bonus and/or incentive payments. The Bonus and/or Incentive Payment Plan and description must be submitted to HHSC for approval no later than 30 days after the Effective Date of the Contract and any Contract renewal. If the HMO substantively revises the Bonus and/or Incentive Payment Plan, the HMO must submit the revised plan to HHSC for prior review and approval.

Claims Summary Lag Report - The HMO must submit an Incurred Claims Summary Lag Report as a Contract year-to-date report. The report must be submitted quarterly by the last day of the month following the reporting period. The report must be submitted to HHSC in a format specified by HHSC, or in a format approved by HHSC. The report must at a minimum disclose the amount of incurred claims each month and the amount paid each month by categories of service, such as inpatient, non-inpatient, and prescription drugs, if applicable. The report must also include total claims incurred and paid by month.

DSP Report - The HMO must submit a monthly Delivery Supplemental Payment (DSP) Report that includes the data elements specified by HHSC in the format specified by HHSC. HHSC will consult with contracted HMOs prior to revising the DSP Report data elements and requirements. The DSP Report must include only unduplicated deliveries and only deliveries for which the HMO has made a payment, to either a hospital or other provider.

Form CMS-1513 - The HMO must file an original Form CMS-1513 prior to beginning operations regarding the HMO’s control, ownership, or affiliations. An updated Form CMS-1513 must also be filed no later than 30 days after any change in control, ownership, or affiliations.

FSR Reports – The HMO must file quarterly and annual Financial-Statistical Reports (FSR) in the format and timeframe specified by HHSC. HHSC will include FSR format and directions in the Uniform Managed Care Manual. The HMO must incorporate financial and statistical data of delegated networks (e.g., IPAs, ANHCs, Limited Provider Networks), if any, in its FSR Reports. Administrative expenses reported in the FSRs must be reported in accordance with the Cost Principles Document in the Uniform Managed Care Manual. Quarterly FSR reports are due no later than 30 days after the end of the quarter and must provide information for the current quarter and year-to-date information through the current quarter. The first annual FSR report must reflect expenses incurred through the 90th day after the end of the fiscal year. The first annual report must be filed on or before the 120th day after the end of each fiscal year and accompanied by an actuarial opinion by a qualified actuary who is in good standing with the American Academy of Actuaries. Subsequent annual reports must reflect data completed through the 334th day after the end of each fiscal year and must be filed on or before the 365th day following the end of each fiscal year.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Out-of-Network Utilization Reports – The HMO must file quarterly Out-of Network Utilization Reports in the format and timeframe specified by HHSC. HHSC will include the report format and directions in the Uniform Managed Care Manual. Quarterly reports are due 30 days after the end of each quarter.

HUB Reports – Upon contract award, the HMO must attend a post award meeting in Austin, Texas, at a time specified by HHSC, to discuss the development and submission of a Client Services HUB Subcontracting Plan for inclusion and the HMO’s good faith efforts to notify HUBs of subcontracting opportunities. The HMO must maintain its HUB Subcontracting Plan and submit monthly reports documenting the HMO’s Historically Underutilized Business (HUB) program efforts and accomplishments to the HHSC HUB Office. The report must include a narrative description of the HMO’s program efforts and a financial report reflecting payments made to HUBs. HMOs must use the formats included in HHSC’s Uniform Managed Care Manual for the HUB monthly reports. The HMO must comply with HHSC’s standard Client Services HUB Subcontracting Plan requirements for all subcontractors.

IBNR Plan - The HMO must furnish a written IBNR Plan to manage incurred-but-not-reported (IBNR) expenses, and a description of the method of insuring against insolvency, including information on all existing or proposed insurance policies. The Plan must include the methodology for estimating IBNR. The plan and description must be submitted to HHSC no later than 60 days after the Effective Date of the Contract. Substantive changes to a HMO’s IBNR plan and description must be submitted to HHSC no later than 30 days before the HMO implements changes to the IBNR plan.

Medicaid Disproportionate Share Hospital (DSH) Reports – Medicaid HMOs must file preliminary and final Medicaid DSH reports, required by HHSC to identify and reimburse hospitals that qualify for Medicaid DSH funds. The preliminary and final DSH reports must include the data elements and be submitted in the form and format specified by HHSC in the Uniform Managed Care Manual. The preliminary DSH reports are due on or before June 1 of the year following the state fiscal reporting year. The final DSH reports are due no later than July 15 of the year following the state fiscal reporting year. This reporting requirement does not apply to CHIP HMOs.

TDI Examination Report - The HMO must furnish a copy of any TDI Examination Report, including the financial, market conduct, target exam, quality of care components, and corrective action plans and responses, no later than 10 days after receipt of the final report from TDI.

TDI Filings – The HMO must submit annual figures for controlled risk-based capital, as well as its quarterly financial statements, both as required by TDI.

Registration Statement (also known as the “Form B”) - If the HMO is a part of an insurance holding company system, the HMO must submit to HHSC a complete registration statement, also known as Form B, and all amendments to this form, and any other information filed by such insurer with the insurance regulatory authority of its domiciliary jurisdiction.

Section 1318 Financial Disclosure Report - The HMO must file an original CMS Public Health Service (PHS) Section 1318 Financial Disclosure Report prior to the start of Operations and an updated CMS PHS Section 1318 Financial Disclosure Report no later than 30 days after the end of each Contract Year and no later than 30 days after entering into, renewing, or terminating a relationship with an affiliated party.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Third Party Recovery (TPR) Reports - The HMO must file TPR Reports in accordance with the format developed by HHSC in the Uniform Managed Care Manual. HHSC will require the HMO to submit TPR reports no more often than quarterly. TRP reports must include total dollars recovered from third party payers for each HMO Program for services to the HMO’s Members, and the total dollars recovered through coordination of benefits, subrogation, and worker’s compensation. For CHIP HMOs, the TPR Reports only apply if the HMO chooses to engage in TPR activities.

8.1.18 Management Information System Requirements

The HMO must maintain a Management Information System (MIS) that supports all functions of the HMO’s processes and procedures for the flow and use of HMO data. The HMO must have hardware, software, and a network and communications system with the capability and capacity to handle and operate all MIS subsystems for the following operational and administrative areas:

1. Enrollment/Eligibility Subsystem;

2. Provider Subsystem;

3. Encounter/Claims Processing Subsystem;

4. Financial Subsystem;

5. Utilization/Quality Improvement Subsystem;

6. Reporting Subsystem;

7. Interface Subsystem; and

8. TPR Subsystem, as applicable to each HMO Program.

The MIS must enable the HMO to meet the Contract requirements, including all applicable state and federal laws, rules, and regulations. The MIS must have the capacity and capability to capture and utilize various data elements required for HMO administration.

HHSC will provide the HMO with pharmacy data on the HMO’s Members on a weekly basis through the HHSC Vendor Drug Program, or should these services be outsourced, through the Pharmacy Benefit Manager. HHSC will provide a sample format of pharmacy data to contract awardees.

The HMO must have a system that can be adapted to changes in Business Practices/Policies within the timeframes negotiated by the Parties. The HMO is expected to cover the cost of such systems modifications over the life of the Contract.

The HMO is required to participate in the HHSC Systems Work Group.

The HMO must provide HHSC prior written notice of major systems changes, generally within 90 days, and implementations, including any changes relating to Material Subcontractors, in accordance with the requirements of this Contract and the Uniform Managed Care Terms and Conditions.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must provide HHSC any updates to the HMO’s organizational chart relating to MIS and the description of MIS responsibilities at least 30 days prior to the effective date of the change. The HMO must provide HHSC official points of contact for MIS issues on an on-going basis.

HHSC, or its agent, may conduct a Systems Readiness Review to validate the HMO’s ability to meet the MIS requirements as described in Attachment B-1, Section 7. The System Readiness Review may include a desk review and/or an onsite review and must be conducted for the following events:

1. A new plan is brought into the HMO Program;

2. An existing plan begins business in a new Service Area;

3. An existing plan changes location;

4. An existing plan changes its processing system, including changes in Material Subcontractors performing MIS or claims processing functions; and

5. An existing plan in one or two HHSC HMO Programs is initiating a Contract to participate in any additional HMO Programs.

If for any reason, a HMO does not fully meet the MIS requirements, then the HMO must, upon request by HHSC, either correct such deficiency or submit to HHSC a Corrective Action Plan and Risk Mitigation Plan to address such deficiency as requested by HHSC. Immediately upon identifying a deficiency, HHSC may impose remedies and either actual or liquidated damages according to the severity of the deficiency. HHSC may also freeze enrollment into the HMO’s plan for any of its HMO Programs until such deficiency is corrected. Refer to the Uniform Managed Care Terms and Conditions and Attachment B-5 for additional information.

8.1.18.1 Encounter Data

The HMO must provide complete Encounter Data for all Covered Services, including Value-added Services. Encounter Data must follow the format, and data elements as described in the HIPAA-compliant 837 format. HHSC will specify the method of transmission, and the submission schedule, in the Uniform Managed Care Manual. The HMO must submit monthly Encounter Data transmissions, and include all Encounter Data and Encounter Data adjustments processed by the HMO. Encounter Data quality validation must incorporate assessment standards developed jointly by the HMO and HHSC. The HMO must make original records available for inspection by HHSC for validation purposes. Encounter Data that do not meet quality standards must be corrected and returned within a time period specified by HHSC.

In addition to providing Encounter Data in the 837 format described above, HMOs must submit an Encounter Data file to HHSC’s EQRO, in the format provided in the Uniform Managed Care Manual. This additional submission requirement is time-limited and may not be required for the entire term of the Contract.

For reporting Encounters and fee-for-service claims to HHSC, the HMO must use the procedure codes, diagnosis codes, and other codes as directed by HHSC. Any exceptions will be considered on a code-by-code basis after HHSC receives written notice from the HMO requesting an exception. The HMO must also use the provider numbers as directed by HHSC for both Encounter and fee-for-service claims submissions, as applicable.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.18.2 HMO Deliverables related to MIS Requirements

At the beginning of each state fiscal year, the HMO must submit for HHSC’s review and approval any modifications to the following documents:

1. Joint Interface Plan;

2. Disaster Recovery Plan;

3. Business Continuity Plan;

4. Risk Management Plan; and

5. Systems Quality Assurance Plan.

The HMO must submit such modifications to HHSC according to the format and schedule identified the HHSC Uniform Managed Care Manual.

8.1.18.3 System-wide Functions

The HMO’s MIS system must include key business processing functions and/or features, which must apply across all subsystems as follows:

1. Process electronic data transmission or media to add, delete or modify membership records with accurate begin and end dates;

2. Track Covered Services received by Members through the system, and accurately and fully maintain those Covered Services as HIPAA-compliant Encounter transactions;

3. Transmit or transfer Encounter Data transactions on electronic media in the HIPAA format to the contractor designated by HHSC to receive the Encounter Data;

4. Maintain a history of changes and adjustments and audit trails for current and retroactive data;

5. Maintain procedures and processes for accumulating, archiving, and restoring data in the event of a system or subsystem failure;

6. Employ industry standard medical billing taxonomies (procedure codes, diagnosis codes) to describe services delivered and Encounter transactions produced;

7. Accommodate the coordination of benefits;

8. Produce standard Explanation of Benefits (EOBs);

9. Pay financial transactions to Providers in compliance with federal and state laws, rules and regulations;

10. Ensure that all financial transactions are auditable according to GAAP guidelines.

11. Relate and extract data elements to produce report formats (provided within the Uniform Managed Care Manual) or otherwise required by HHSC;

12. Ensure that written process and procedures manuals document and describe all manual and automated system procedures and processes for the MIS;

13. Maintain and cross-reference all Member-related information with the most current Medicaid or CHIP Provider number; and

14. Ensure that the MIS is able to integrate pharmacy data from HHSC’s Drug Vendor file (available through the Virtual Private Network (VPN)) into the HMO’s Member data.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.1.18.4 Health Insurance Portability and Accountability Act (HIPAA) Compliance

The HMO’s MIS system must comply with applicable certificate of coverage and data specification and reporting requirements promulgated pursuant to the Health Insurance Portability and Accountability Act (HIPAA) of 1996, P.L. 104-191 (August 21, 1996), as amended or modified. The HMO must comply with HIPAA EDI requirements. HMO’s enrollment files must be in the 834 HIPAA-compliant format. Eligibility inquiries must be in the 270/271 format and all claims and remittance transactions in the 837/835 format.

The HMO must provide its Members with a privacy notice as required by HIPAA. The HMO must provide HHSC with a copy of its privacy notice for filing.

8.1.18.5 Claims Processing Requirements

The HMO must process all provider claims and must pay all claims for Medically Necessary Covered Services that are filed within the time frames specified by this Section.

The HMO must administer an effective, accurate, and efficient claims payment process in compliance with state and federal laws, rules and regulations, the Contract, and the Uniform Managed Care Manual, which includes claims processing procedures.

The HMO must maintain a claim retrieval service processing system that can identify date of receipt, action taken on all provider claims or Encounters (i.e., paid, denied, pended, appealed, other), and when any action was taken in real time.

All provider claims that are clean and payable must be paid within 30 days from the date of claim receipt.

The HMO must offer its Providers/subcontractors the option of submitting and receiving claims information through electronic data interchange (EDI) that allows for automated processing and adjudication of claims. EDI processing must be offered as an alternative to the filing of paper claims. Electronic claims must use HIPAA-compliant electronic formats.

The HMO is subject to remedies, including liquidated damages, if within 30 days of receipt, the HMO does not process and finalize to a paid or denied status 98% of all Clean Claims. The HMO is subject to remedies, including liquidated damages, if within 90 days of receipt, the HMO does not process and finalize to a paid or denied status 99% of all Clean Claims.

The HMO is subject to remedies, including liquidated damages, if the HMO does not pay providers interest at an 18 % annual rate, calculated daily for the full period in which the Clean Claim remain unadjudicated beyond the 30-day claims processing deadline. The HMO may negotiate Provider contract terms that indicate that duplicate claims filed prior to the expiration of 31 days would not be subject to the 18 % interest payment if not processed within 30 days.

The HMO must not pay any claim submitted by a provider excluded or suspended from the Medicare, Medicaid, or CHIP programs for Fraud, Abuse, or Waste. The HMO must not pay any claim submitted by a Provider that is on payment hold under the authority of HHSC or its authorized agent(s), or who has pending accounts receivable with HHSC.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Not later than the 15^th day after the receipt of a provider unclean claim requiring additional information, the HMO must pend the claim and request in writing all relevant information to process the claim. After receipt of requested information from the provider, the HMO must process the claim within 15 days of receiving the additional information. The HMO is subject to remedies, including liquidated damages if within 15days of receipt of such information, the HMO does not process 98% of such claims.

Claims pended for additional information must be closed (paid or denied) by the 30^th day following the date the claim is pended if requested information is not received prior to the expiration of 30 days (see the Uniform Managed Care Manual, Chapter 2). The HMO must send Providers written notice for each claim that is denied, including the reason(s) for the denial, the date the HMO received the claim, and the information required from the provider to adjudicate the claim.

The HMO must process, and finalize, all Appealed Claims to a paid or denied status within 30 days of receipt of the Appealed Claim. The HMO is subject to remedies, including liquidated damages, if 98% of Appealed Claims are not processed and finalized to a paid or denied status within 30 days of receipt of the Appealed Claim. The HMO must finalize all claims, including Appealed Claims, within 24 months of the date of service.

The HMO is subject to the requirements related to coordination of benefits for secondary payors in the Texas Insurance Code Section 843.349 (e) and (f).

The HMO must inform all Network Providers about the information required to submit a claim at least 30 days prior to the Operational Start Date and as a provision within the HMO/Provider contract. The HMO must make available to Providers claims coding and processing guidelines for the applicable provider type. Providers must receive 90 days notice prior to the HMO’s implementation of changes to claims guidelines.

The HMO may deny a claim for failure to file timely if a Provider does not submit claims to the HMO within 95 days of the date of service. If a provider files with the wrong HMO, or with the HHSC Administrative Services Contractor, and produces documentation verifying the initial timely claims filing within 95 days of the date of service, the HMO must process the provider’s claim without denying for failure to timely file (see the Uniform Managed Care Manual, Chapter 2).

8.1.19 Fraud and Abuse

A HMO is subject to all state and federal laws and regulations relating to Fraud, Abuse, and Waste in health care and the Medicaid and CHIP programs. The HMO must cooperate and assist HHSC and any state or federal agency charged with the duty of identifying, investigating, sanctioning or prosecuting suspected Fraud, Abuse or Waste. The HMO must provide originals and/or copies of all records and information requested and allow access to premises and provide records to the Inspector General for the Texas Health and Human Services System, HHSC or its

8-42

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

authorized agent(s), the Centers for Medicare and Medicaid Services (CMS), the U.S. Department of Health and Human Services (DHHS), Federal Bureau of Investigation, TDI, or other units of state government. The HMO must provide all copies of records free of charge.

The HMO must submit a written Fraud and Abuse compliance plan to the Office of Inspector General at HHSC for approval (See Attachment B-1, Section 7 for requirements regarding timeframes for submitting the original plan.) The plan must ensure that all officers, directors, managers and employees know and understand the provisions of the HMO’s Fraud and Abuse compliance plan. The plan must include the name, address, telephone number, electronic mail address, and fax number of the individual(s) responsible for carrying out the plan.

The written Fraud and Abuse compliance plan must:

1. Contain procedures designed to prevent and detect potential or suspected Abuse, Fraud and Waste in the administration and delivery of services under the Contract;

2. Contain a description of the HMO’s procedures for educating and training personnel to prevent Fraud, Abuse, or Waste;

3. Include provisions for the confidential reporting of plan violations to the designated person within the HMO’s organization and ensure that the identity of an individual reporting violations is protected from retaliation;

4. Include provisions for maintaining the confidentiality of any patient information relevant to an investigation of Fraud, Abuse, or Waste;

5. Provide for the investigation and follow-up of any allegations of Fraud, Abuse, or Waste and contain specific and detailed internal procedures for officers, directors, managers and employees for detecting, reporting, and investigating Fraud and Abuse compliance plan violations;

6. Require that confirmed violations be reported to the Office of Inspector General (OIG); and

7. Require any confirmed violations or confirmed or suspected Fraud, Abuse, or Waste under state or federal law be reported to OIG.

If the HMO contracts for the investigation of allegations of Fraud, Abuse, or Waste and other types of program abuse by Members or Providers, the plan must include a copy of the subcontract; the names, addresses, telephone numbers, electronic mail addresses, and fax numbers of the principals of the subcontracted entity; and a description of the qualifications of the subcontracted entity. Such subcontractors must be held to the requirements stated in this Section.

The HMO must designate executive and essential personnel to attend mandatory training in Fraud and Abuse detection, prevention and reporting. Designated executive and essential personnel means the HMO staff persons who supervise staff in the following areas: data collection, provider enrollment or disenrollment, encounter data, claims processing, utilization review, appeals or grievances, quality assurance and marketing, and who are directly involved in the decision-making and administration of the Fraud and Abuse detection program within the HMO. The training will be conducted by the OIG free of charge. The HMO must schedule and complete training no later than 90 days after the Effective Date of the Contract. If the HMO updates or modifies its written Fraud and Abuse compliance plan, the HMO must train its executive and essential personnel on these updates or modifications no later than 90 days after the effective date of the updates or modifications.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must designate an officer or director in its organization with responsibility and authority to carry out the provisions of the Fraud and Abuse compliance plan. A HMO’s failure to report potential or suspected Fraud or Abuse may result in sanctions, cancellation of the Contract, and/or exclusion from participation in the Medicaid or CHIP HMO Programs. The HMO must allow the OIG, HHSC, its agents, or other governmental units to conduct private interviews of the HMO’s personnel, subcontractors and their personnel, witnesses, and Members with regard to a confirmed violation. The HMO’s personnel and it subcontractors must reasonably cooperate, to the satisfaction of HHSC, by being available in person for interviews, consultation, grand jury proceedings, pre-trial conferences, hearings, trials and in any other process, including investigations, at the HMO’s and subcontractors’ own expense.

8.1.20 Reporting Requirements

The HMO must provide and must require its subcontractors to provide:

1. All information required under the Contract, including but not limited to, the reporting requirements or other information related to the performance of its responsibilities hereunder as reasonably requested by the HHSC; and

2. Any information in its possession sufficient to permit HHSC to comply with the Federal Balanced Budget Act of 1997 or other Federal or state laws, rules, and regulations. All information must be provided in accordance with the timelines, definitions, formats and instructions as specified by HHSC. Where practicable, HHSC may consult with HMOs to establish time frames and formats reasonably acceptable to both parties.

The HMO’s Chief Executive and Chief Financial Officers, or persons in equivalent positions, must certify that financial data, Encounter Data and other measurement data has been reviewed by the HMO and is true and accurate to the best of their knowledge after reasonable inquiry.

8.1.20.1 HEDIS and Other Statistical Performance Measures

The HMO must provide to HHSC or its designee all information necessary to analyze the HMO’s provision of quality care to Members using measures to be determined by HHSC in consultation with the HMO. Such measures must be consistent with HEDIS or other externally based measures or measurement sets, and involve collection of information beyond that present in Encounter Data. The Performance Indicator Dashboard, found in the Uniform Managed Care Manual provides additional information on the role of the HMO and the EQRO in the collection and calculation of HEDIS, CAHPS, and other performance measures.

8.1.20.2 Reports

The HMO must provide the following reports, in addition to the Financial Reports described in Section 8.1.17 and those reporting requirements listed elsewhere in the Contract. The HHSC Uniform Managed Care Manual will include a list of all required reports, and a description of the format, content, file layout and submission deadlines for each report.

8-44

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Claims Data Specifications Report – HHSC, in collaboration with the HMO and the EQRO, will develop specifications on the reporting and processing of claims data that meet federal and programmatic requirements.

All Claims Summary Report - The HMO must submit a quarterly All Claims Summary Report to HHSC by HMO Program, Service Area and claims processing subcontractor by the 45^th day following the reporting period unless otherwise specified. The HMO must submit an End of Fiscal Year Cumulative All Claims Summary Report to HHSC by HMO Program, Service Area and claims processing subcontractor by the 45^th day following the reporting period unless otherwise specified. The report will provide HHSC with information on how many claims were processed within the required timeframes.

QAPI Program Annual Summary Report - The HMO must submit a QAPI Program Annual Summary in a format and timeframe as specified in the Uniform Managed Care Manual.

Fraudulent Practices Report - Utilizing the HHSC-Office of Inspector General (OIG) fraud referral form, the HMO’s assigned officer or director must report and refer all possible acts of waste, abuse or fraud to the HHSC-OIG within 30 working days of receiving the reports of possible acts of waste, abuse or fraud from the HMO’s Special Investigative Unit (SIU). The report and referral must include: an investigative report identifying the allegation, statutes/regulations violated or considered, and the results of the investigation; copies of program rules and regulations violated for the time period in question; the estimated overpayment identified; a summary of the interviews conducted; the encounter data submitted by the provider for the time period in question; and all supporting documentation obtained as the result of the investigation. This requirement applies to all reports of possible acts of waste, abuse and fraud.

Additional reports required by the Office of the Inspector General relating to waste, abuse or fraud are listed in the HHSC Uniform Managed Care Manual.

Summary Report of Member Complaints and Appeals - The HMO must submit quarterly Member Complaints and Appeals reports. The HMO must include in its reports Complaints and Appeals submitted to its subcontracted risk groups (e.g., IPAs) and any other subcontractor that provides Member services. The HMO must submit the Complaint and Appeals reports electronically on or before 45 days following the end of the state fiscal quarter, using the format specified by HHSC in the HHSC Uniform Managed Care Manual - Chapter 5.5.

Summary Report of Provider Complaints - The HMO must submit Provider complaints reports on a quarterly basis. The HMO must include in its reports complaints submitted by providers to its subcontracted risk groups (e.g., IPAs) and any other subcontractor that provides Provider services. The complaint reports must be submitted electronically on or before 45 days following the end of the state fiscal quarter, using the format specified by HHSC in the HHSC Uniform Managed Care Manual - Chapter 5.5.

Hotline Reports - The HMO must submit, on a quarterly basis, a status report for the Member Hotline, the Behavioral Health Services Hotline, and the Provider Hotline in comparison with the performance standards set out in Sections 8.1.5.6, 8.1.14.3, and 8.1.4.7. The HMO shall submit such reports using a format to be prescribed by HHSC in consultation with the HMOs.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

If the HMO is not meeting a hotline performance standard, HHSC may require the HMO to submit monthly hotline performance reports and implement corrective actions until the hotline performance standards are met. If a HMO has a single hotline serving multiple Service Areas, multiple HMO Programs, or multiple hotline functions, (i.e. Member, Provider, Behavioral Health Services hotlines), HHSC may request on an annual basis that the HMO submit certain hotline response information by HMO Program, by Service Area, and by hotline function, as applicable to the HMO. HHSC may also request this type of hotline information if a HMO is not meeting a hotline performance standard.

The HMO must follow all applicable Joint Interface Plans (JIPs) and all required file submissions for HHSC’s Administrative Services Contractor, External Quality Review Organization (EQRO) and HHSC Medicaid Claims Administrator. The JIPs can be accessed through the Uniform Managed Care Manual.

8.2 Additional Medicaid HMO Scope of Work

The following provisions apply to any HMO participating in the STAR HMO Program.

8.2.1 Continuity of Care and Out-of-Network Providers

The HMO must ensure that the care of newly enrolled Members is not disrupted or interrupted. The HMO must take special care to provide continuity in the care of newly enrolled Members whose health or behavioral health condition has been treated by specialty care providers or whose health could be placed in jeopardy if Medically Necessary Covered Services are disrupted or interrupted.

The HMO must allow pregnant Members with 12 weeks or less remaining before the expected delivery date to remain under the care of the Member’s current OB/GYN through the Member’s postpartum checkup, even if the provider is Out-of-Network. If a Member wants to change her OB/GYN to one who is in the Network, she must be allowed to do so if the Provider to whom she wishes to transfer agrees to accept her in the last trimester of pregnancy.

The HMO must pay a Member’s existing Out-of-Network providers for Medically Necessary Covered Services until the Member’s records, clinical information and care can be transferred to a Network Provider, or until such time as the Member is no longer enrolled in that HMO, whichever is shorter. Payment to Out-of-Network providers must be made within the time period required for Network Providers. The HMO must comply with out-of-network provider reimbursement rules as adopted by HHSC.

This Article does not extend the obligation of the HMO to reimburse the Member’s existing Out-of-Network providers for on-going care for:

1. More than 90 days after a Member enrolls in the HMO’s Program, or

2. For more than nine (9) months in the case of a Member who, at the time of enrollment in the HMO, has been diagnosed with and receiving treatment for a terminal illness and remains enrolled in the HMO.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO’s obligation to reimburse the Member’s existing Out-of-Network provider for services provided to a pregnant Member with 12 weeks or less remaining before the expected delivery date extends through delivery of the child, immediate postpartum care, and the follow-up checkup within the first six weeks of delivery.

The HMO must provide or pay Out-of-Network providers who provide Medically Necessary Covered Services to Members who move out of the Service Area through the end of the period for which capitation has been paid for the Member.

The HMO must provide Members with timely and adequate access to Out-of-Network services for as long as those services are necessary and covered benefits not available within the network, in accordance with 42 C.F.R. §438.206(b)(4). The HMO will not be obligated to provide a Member with access to Out-of-Network services if such services become available from a Network Provider.

The HMO must ensure that each Member has access to a second opinion regarding the use of any Medically Necessary Covered Service. A Member must be allowed access to a second opinion from a Network Provider or Out-of-Network provider if a Network Provider is not available, at no cost to the Member, in accordance with 42 C.F.R. §438.206(b)(3).

8.2.2 Provisions Related to Covered Services for Medicaid Members

8.2.2.1 Emergency Services

HMO policy and procedures, Covered Services, claims adjudication methodology, and reimbursement performance for Emergency Services must comply with all applicable state and federal laws, rules, and regulations including 42 C.F.R. §438.114, whether the provider is in-network or Out-of-Network. HMO policies and procedures must be consistent with the prudent layperson definition of an Emergency Medical Condition and the claims adjudication processes required under the Contract and 42 C.F.R. §438.114.

The HMO must pay for the professional, facility, and ancillary services that are Medically Necessary to perform the medical screening examination and stabilization of a Member presenting with an Emergency Medical Condition or an Emergency Behavioral Health Condition to the hospital emergency department, 24 hours a day, 7 days a week, rendered by either the HMO’s Network or Out-of-Network providers.

The HMO cannot require prior authorization as a condition for payment for an Emergency Medical Condition, an Emergency Behavioral Health Condition, or labor and delivery. The HMO cannot limit what constitutes an Emergency Medical Condition on the basis of lists of diagnoses or symptoms. The HMO cannot refuse to cover Emergency Services based on the emergency room provider, hospital, or fiscal agent not notifying the Member’s PCP or the HMO of the Member’s screening and treatment within 10 calendar days of presentation for Emergency Services. The HMO may not hold the Member who has an Emergency Medical Condition liable for payment of subsequent screening and treatment needed to diagnose the specific condition or stabilize the patient. The HMO must accept the emergency physician or provider’s determination of when the Member is sufficiently stabilized for transfer or discharge.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

A medical screening examination needed to diagnose an Emergency Medical Condition must be provided in a hospital based emergency department that meets the requirements of the Emergency Medical Treatment and Active Labor Act (EMTALA) (42 C.F.R. §§489.20, 489.24 and 438.114(b)&(c)). The HMO must pay for the emergency medical screening examination, as required by 42 U.S.C. §1395dd. The HMO must reimburse for both the physician’s services and the hospital’s Emergency Services, including the emergency room and its ancillary services.

When the medical screening examination determines that an Emergency Medical Condition exists, the HMO must pay for Emergency Services performed to stabilize the Member. The emergency physician must document these services in the Member’s medical record. The HMO must reimburse for both the physician’s and hospital’s emergency stabilization services including the emergency room and its ancillary services.

The HMO must cover and pay for Post-Stabilization Care Services in the amount, duration, and scope necessary to comply with 42 C.F.R. §438.114(b)&(e) and 42 C.F.R. §422.113(c)(iii). The HMO is financially responsible for post-stabilization care services obtained within or outside the Network that are not pre-approved by a Provider or other HMO representative, but administered to maintain, improve, or resolve the Member’s stabilized condition if:

1. The HMO does not respond to a request for pre-approval within 1 hour;

2. The HMO cannot be contacted; or

3. The HMO representative and the treating physician cannot reach an agreement concerning the Member’s care and a Network physician is not available for consultation. In this situation, the HMO must give the treating physician the opportunity to consult with a Network physician and the treating physician may continue with care of the patient until an HMO physician is reached. The HMO’s financial responsibility ends as follows: the HMO physician with privileges at the treating hospital assumes responsibility for the Member’s care; the HMO physician assumes responsibility for the Member’s care through transfer; the HMO representative and the treating physician reach an agreement concerning the Member’s care; or the Member is discharged.

8.2.2.2 Family Planning - Specific Requirements

The HMO must require, through Provider contract provisions, that Members requesting contraceptive services or family planning services are also provided counseling and education about the family planning and family planning services available to Members. The HMO must develop outreach programs to increase community support for family planning and encourage Members to use available family planning services.

The HMO must ensure that Members have the right to choose any Medicaid participating family planning provider, whether the provider chosen by the Member is in or outside the Provider Network. The HMO must provide Members access to information about available providers of family planning services and the Member’s right to choose any Medicaid family planning provider. The HMO must provide access to confidential family planning services.

The HMO must provide, at minimum, the full scope of services available under the Texas Medicaid program for family planning services. The HMO will reimburse family planning agencies the Medicaid fee-for service amounts for family planning services, including Medically

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Necessary medications, contraceptives, and supplies not covered by the Vendor Drug Program and will reimburse Out-of-Network family planning providers in accordance with HHSC’s administrative rules.

The HMO must provide medically approved methods of contraception to Members, provided that the methods of contraception are Covered Services. Contraceptive methods must be accompanied by verbal and written instructions on their correct use. The HMO must establish mechanisms to ensure all medically approved methods of contraception are made available to the Member, either directly or by referral to a subcontractor.

The HMO must develop, implement, monitor, and maintain standards, policies and procedures for providing information regarding family planning to Providers and Members, specifically regarding State and federal laws governing Member confidentiality (including minors). Providers and family planning agencies cannot require parental consent for minors to receive family planning services. The HMO must require, through contractual provisions, that subcontractors have mechanisms in place to ensure Member’s (including minor’s) confidentiality for family planning services.

8.2.2.3 Texas Health Steps (EPSDT)

The HMO must develop effective methods to ensure that children under the age of 21 receive THSteps services when due and according to the recommendations established by the AAP and the THSteps periodicity schedule for children. The HMO must arrange for THSteps services for all eligible Members except when a Member knowingly and voluntarily declines or refuses services after receiving sufficient information to make an informed decision.

HMO must have mechanisms in place to ensure that all newly enrolled newborns receive an appointment for a THSteps checkup within 14 days of enrollment and all other eligible child Members receive a THSteps checkup within 60 days of enrollment, if one is due according to the AAP periodicity schedule.

The HMO must ensure that Members are provided information and educational materials about the services available through the THSteps Program, and how and when they may obtain the services. The information should tell the Member how they can obtain dental benefits, transportation services through the Texas Department of Transportation’s Medical Transportation Program, and advocacy assistance from the HMO.

The HMO must provide appropriate training to all Network Providers and Provider staff in the Providers’ area of practice regarding the scope of benefits available and the THSteps Program. Training must include:

1. THSteps benefits,

2. The periodicity schedule for THSteps medical checkups and immunizations,

3. The required elements of THSteps medical checkups,

4. Providing or arranging for all required lab screening tests (including lead screening), and Comprehensive Care Program (CCP) services available under the THSteps program to Members under age 21 years.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

HMO must also educate and train Providers regarding the requirements imposed on HHSC and contracting HMOs under the Consent Decree entered in Frew v. Hawkins, et. al., Civil Action No. 3:93CV65, in the United States District Court for the Eastern District of Texas, Paris Division. Providers should be educated and trained to treat each THSteps visit as an opportunity for a comprehensive assessment of the Member.

The HMO must provide outreach to Members to ensure they receive prompt services and are effectively informed about available THSteps services. Each month, the HMO must retrieve from the HHSC Administrative Services Contractor Bulletin Board System a list of Members who are due and overdue THSteps services. Using these lists and its own internally generated list, the HMO will contact such Members to obtain the service as soon as possible. The HMO outreach staff must coordinate with DSHS THSteps outreach staff to ensure that Members have access to the Medical Transportation Program, and that any coordination with other agencies is maintained.

The HMO must cooperate and coordinate with the State, outreach programs and THSteps regional program staff and agents to ensure prompt delivery of services to children of migrant farm workers and other migrant populations who may transition into and out of the HMO’s Program more rapidly and/or unpredictably than the general population.

The HMO must have mechanisms in place to ensure that all newborn Members have an initial newborn checkup before discharge from the hospital and again within two weeks from the time of birth. The HMO must require Providers to send all THSteps newborn screens to the DSHS Bureau of Laboratories or a DSHS certified laboratory. Providers must include detailed identifying information for all screened newborn Members and the Member’s mother to allow DSHS to link the screens performed at the hospital with screens performed at the two-week follow-up.

All laboratory specimens collected as a required component of a THSteps checkup (see Medicaid Provider Procedures Manual for age-specific requirements) must be submitted to the DSHS Laboratory for analysis. The HMO must educate Providers about THSteps Program requirements for submitting laboratory tests to the DSHS Bureau of Laboratories.

The HMO must make an effort to coordinate and cooperate with existing community and school-based health and education programs that offer services to school-aged children in a location that is both familiar and convenient to the Members. The HMO must make a good faith effort to comply with Head Start’s requirement that Members participating in Head Start receive their THSteps checkup no later than 45 days after enrolling into either program.

The HMO must educate Providers on the Immunization Standard Requirements set forth in Chapter 161, Health and Safety Code; the standards in the ACIP Immunization Schedule; the AAP Periodicity Schedule for CHIP Members; and the DSHS Periodicity Schedule for Medicaid Members. The HMO shall educate Providers that Medicaid Members under age 21 must be immunized during the THSteps checkup according to the DSHS routine immunization schedule. The HMO shall also educate Providers that the screening provider is responsible for administration of the immunization and should not refer children to Local Health Departments to receive immunizations.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must educate Providers about, and require Providers to comply with, the requirements of Chapter 161, Health and Safety Code, relating to the Texas Immunization Registry (ImmTrac), to include parental consent on the Vaccine Information Statement.

The HMO must require all THSteps Providers to submit claims for services paid (either on a capitated or fee-for service basis) on the HCFA 1500 claim form and use the HIPAA compliant code set required by HHSC.

Encounter Data will be validated by chart review of a random sample of THSteps eligible enrollees against monthly Encounter Data reported by the HMO. HHSC or its designee will conduct chart reviews to validate that all screens are performed when due and as reported, and that reported data is accurate and timely. Substantial deviation between reported and charted Encounter Data could result in the HMO and/or Network Providers being investigated for potential Fraud, Abuse, or Waste without notice to the HMO or the Provider.

8.2.2.4 Perinatal Services

The HMO’s perinatal health care services must ensure appropriate care is provided to women and infant Members of the HMO from the preconception period through the infant’s first year of life. The HMO’s perinatal health care system must comply with the requirements of the Texas Health and Safety Code, Chapter 32 (the Maternal and Infant Health Improvement Act) and administrative rules codified at 25 T.A.C. Chapter 37, Subchapter M.

The HMO must have a perinatal health care system in place that, at a minimum, provides the following services:

1. Pregnancy planning and perinatal health promotion and education for reproductive- age women;

2. Perinatal risk assessment of non-pregnant women, pregnant and postpartum women, and infants up to one year of age;

3. Access to appropriate levels of care based on risk assessment, including emergency care;

4. Transfer and care of pregnant women, newborns, and infants to tertiary care facilities when necessary;

5. Availability and accessibility of OB/GYNs, anesthesiologists, and neonatologists capable of dealing with complicated perinatal problems; and

6. Availability and accessibility of appropriate outpatient and inpatient facilities capable of dealing with complicated perinatal problems.

The HMO must have a process to expedite scheduling a prenatal appointment for an obstetrical exam for a TP40 Member no later than two weeks after receiving the daily Enrollment File verifying the Member’s enrollment into the HMO.

The HMO must have procedures in place to contact and assist a pregnant/delivering Member in selecting a PCP for her baby either before the birth or as soon as the baby is born.

The HMO must provide inpatient care and professional services relating to labor and delivery for its pregnant/delivering Members, and neonatal care for its newborn Members at the time of delivery and for up to 48 hours following an uncomplicated vaginal delivery and 96 hours following an uncomplicated Caesarian delivery.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must Adjudicate provider claims for services provided to a newborn Member in accordance with HHSC’s claims processing requirements using the proxy ID number or State-issued Medicaid ID number. The HMO cannot deny claims based on a provider’s non-use of State-issued Medicaid ID number for a newborn Member. The HMO must accept provider claims for newborn services based on mother’s name and/or Medicaid ID number with accommodations for multiple births, as specified by the HMO.

The HMO must notify providers involved in the care of pregnant/delivering women and newborns (including Out-of-Network providers and hospitals) of the HMO’s prior authorization requirements. The HMO cannot require a prior authorization for services provided to a pregnant/delivering Member or newborn Member for a medical condition that requires Emergency Services, regardless of when the emergency condition arises.

8.2.2.5 Sexually Transmitted Diseases (STDs) and Human Immunodeficiency Virus (HIV)

The HMO must provide STD services that include STD/HIV prevention, screening, counseling, diagnosis, and treatment. The HMO is responsible for implementing procedures to ensure that Members have prompt access to appropriate services for STDs, including HIV. The HMO must allow Members access to STD services and HIV diagnosis services without prior authorization or referral by a PCP.

The HMO must comply with Texas Family Code Section 32.003, relating to consent to treatment by a child. The HMO must provide all Covered Services required to form the basis for a diagnosis by the Provider as well as the STD/HIV treatment plan.

The HMO must make education available to Providers and Members on the prevention, detection and effective treatment of STDs, including HIV.

The HMO must require Providers to report all confirmed cases of STDs, including HIV, to the local or regional health authority according to 25 T.A.C. §§97.131 - 97.134, using the required forms and procedures for reporting STDs. The HMO must coordinate with the HHSC regional health authority to ensure that Members with confirmed cases of syphilis, chancroid, gonorrhea, chlamydia and HIV receive risk reduction and partner elicitation/notification counseling.

The HMO must have established procedures to make Member records available to public health agencies with authority to conduct disease investigation, receive confidential Member information, and provide follow up activities.

The HMO must require that Providers have procedures in place to protect the confidentiality of Members provided STD/HIV services. These procedures must include, but are not limited to, the manner in which medical records are to be safeguarded, how employees are to protect medical information, and under what conditions information can be shared. The HMO must inform and require its Providers who provide STD/HIV services to comply with all state laws relating to communicable disease reporting requirements. The HMO must implement policies and procedures to monitor Provider compliance with confidentiality requirements.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must have policies and procedures in place regarding obtaining informed consent and counseling Members provided STD/HIV services.

8.2.2.6 Tuberculosis (TB)

The HMO must provide Members and Providers with education on the prevention, detection and effective treatment of tuberculosis (TB). The HMO must establish mechanisms to ensure all procedures required to screen at-risk Members and to form the basis for a diagnosis and proper prophylaxis and management of TB are available to all Members, except services referenced in Section 8.2.2.8 as Non-Capitated Services. The HMO must develop policies and procedures to ensure that Members who may be or are at risk for exposure to TB are screened for TB. An at-risk Member means a person who is susceptible to TB because of the association with certain risk factors, behaviors, drug resistance, or environmental conditions. The HMO must consult with the local TB control program to ensure that all services and treatments are in compliance with the guidelines recommended by the American Thoracic Society (ATS), the Centers for Disease Control and Prevention (CDC), and DSHS policies and standards.

The HMO must implement policies and procedures requiring Providers to report all confirmed or suspected cases of TB to the local TB control program within one working day of identification, using the most recent DSHS forms and procedures for reporting TB. The HMO must provide access to Member medical records to DSHS and the local TB control program for all confirmed and suspected TB cases upon request.

The HMO must coordinate with the local TB control program to ensure that all Members with confirmed or suspected TB have a contact investigation and receive Directly Observed Therapy (DOT). The HMO must require, through contract provisions, that Providers report to DSHS or the local TB control program any Member who is non-compliant, drug resistant, or who is or may be posing a public health threat. The HMO must cooperate with the local TB control program in enforcing the control measures and quarantine procedures contained in Chapter 81 of the Texas Health and Safety Code.

The HMO must have a mechanism for coordinating a post-discharge plan for follow-up DOT with the local TB program. The HMO must coordinate with the DSHS South Texas Hospital and Texas Center for Infectious Disease for voluntary and court-ordered admission, discharge plans, treatment objectives and projected length of stay for Members with multi-drug resistant TB.

8.2.2.7 Objection to Provide Certain Services

In accordance with 42 C.F.R. §438.102, the HMO may file an objection to providing, reimbursing for, or providing coverage of, a counseling or referral service for a Covered Service based on moral or religious grounds. The HMO must work with HHSC to develop a work plan to complete the necessary tasks and determine an appropriate date for implementation of the requested changes to the requirements related to Covered Services. The work plan will include timeframes for completing the necessary Contract and waiver amendments, adjustments to Capitation Rates, identification of the HMO and enrollment materials needing revision, and notifications to Members.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

In order to meet the requirements of this section, the HMO must notify HHSC of grounds for and provide detail concerning its moral or religious objections and the specific services covered under the objection, no less than 120 days prior to the proposed effective date of the policy change.

8.2.2.8 Medicaid Non-capitated Services

The following Texas Medicaid programs and services have been excluded from HMO Covered Services. STAR Members are eligible to receive these Non-capitated services on a fee-for-service basis from Texas Medicaid providers. HMOs should refer to relevant chapters in the Provider Procedures Manual and the Texas Medicaid Bulletins for more information.

1. THSteps dental (including orthodontia);

2. Early Childhood Intervention (ECI) case management/service coordination;

3. DSHS targeted case management;

4. DSHS mental health rehabilitation;

5. DSHS case management for Children and Pregnant Women;

6. Texas School Health and Related Services (SHARS);

7. Department of Assistive and Rehabilitative Services Blind Children’s Vocational Discovery and Development Program;

8. Tuberculosis services provided by DSHS-approved providers (directly observed therapy and contact investigation);

9. Vendor Drug Program (out-of-office drugs);

10. Texas Department of Transportation Medical Transportation;

11. DADS hospice services (all Members are disenrolled from their health plan upon enrollment into hospice);

12. Audiology services and hearing aids for children (under age 21) (hearing screening services are provided through the THSteps Program and are capitated) through PACT (Program for Amplification for Children of Texas).

8.2.2.9 Referrals for Non-capitated Services

Although STAR HMOs are not responsible for paying or reimbursing for Non-capitated Services, HMOs are responsible for educating Members about the availability of Non-capitated Services, and for providing appropriate referrals for Members to obtain or access these services. The HMO is responsible for informing Providers that bills for all Non-capitated Services must be submitted to HHSC’s Claims Administrator for reimbursement.

8.2.3 Medicaid Significant Traditional Providers

In the first three (3) years of a Medicaid HMO Program operating in a Service Area, the HMO must seek participation in its Network from all Medicaid Significant Traditional Providers (STPs) defined by HHSC in the applicable Service Area for the applicable HMO Program. For STAR HMOs, the Medicaid STP requirements only apply in the Nueces Service Area. Medicaid STPs are defined as PCPs that, when listed by provider type by county in descending order by

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

unduplicated number of clients, served the top 80% of unduplicated clients. Hospitals receiving Disproportionate Share Hospital (DSH) funds are also considered STPs in the Service Area in which they are located. The Procurement Library includes listings of Medicaid STPs by Service Area.

The HMO must give STPs the opportunity to participate in its Network for at least three (3) years commencing on the implementation date of Medicaid managed care in the Service Area. However, the STP provider must:

1. Agree to accept the HMO’s Provider reimbursement rate for the provider type; and

2. Meet the standard credentialing requirements of the HMO, provided that lack of board certification or accreditation by the Joint Commission on Accreditation of Health Care Organizations (JCAHO) is not the sole grounds for exclusion from the Provider Network.

8.2.4 Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs)

The HMO must make reasonable efforts to include FQHCs and RHCs (freestanding and hospital-based) in its Provider Network. The HMO must reimburse FQHCs and RHCs for health care services provided outside of regular business hours, as defined by HHSC in rules, including weekend days or holidays, at a rate that is equal to the allowable rate for those services as determined under Section 32.028, Human Resources Code, if the Member does not have a referral from their PCP. FQHCs or RHCs will receive a cost settlement from HHSC and must agree to accept initial payments from the HMO in an amount that is equal to or greater than the HMO’s payment terms for other Providers providing the same or similar services.

The HMO must submit monthly FQHC and RHC encounter and payment reports to all contracted FQHCs and RHCs, and FQHCs and RHCs with which there have been encounters, not later than 21 days from the end of the month for which the report is submitted. The format will be developed by HHSC and provided in the Uniform Managed Care Manual. The FQHC and RHC must validate the encounter and payment information contained in the report(s). The HMO and the FQHC/RHC must both sign the report(s) after each party agrees that it accurately reflects encounters and payments for the month reported. The HMO must submit the signed FQHC and RHC encounter and payment reports to HHSC not later than 45 days from the end of the reported month.

8.2.5 Provider Complaints and Appeals

8.2.5.1 Provider Complaints

Medicaid HMOs must develop, implement, and maintain a system for tracking and resolving all Medicaid Provider complaints. Within this process, the HMO must respond fully and completely to each complaint and establish a tracking mechanism to document the status and final disposition of each Provider complaint.

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Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.2.5.2 Appeal of Provider Claims

Medicaid HMOs must develop, implement, and maintain a system for tracking and resolving all Medicaid Provider appeals related to claims payment. Within this process, the Provider must respond fully and completely to each Medicaid Provider’s claims payment appeal and establish a tracking mechanism to document the status and final disposition of each Medicaid Provider’s claims payment appeal.

Medicaid HMOs must contract with physicians who are not Network Providers to resolve claims disputes related to denial on the basis of medical necessity that remain unresolved subsequent to a Provider appeal. The determination of the physician resolving the dispute must be binding on the HMO and the Provider. The physician resolving the dispute must hold the same specialty or a related specialty as the appealing Provider. HHSC reserves the right to amend this process to include an independent review process established by HHSC for final determination on these disputes.

8.2.6 Member Rights and Responsibilities

In accordance with 42 C.F.R. §438.100, all Medicaid HMOs must maintain written policies and procedures for informing Members of their rights and responsibilities, and must notify their Members of their right to request a copy of these rights and responsibilities. The Member Handbook must include notification of Member rights and responsibilities.

8.2.7 Medicaid Member Complaint and Appeal System

The HMO must develop, implement, and maintain a Member Complaint and Appeal system that complies with the requirements in applicable federal and state laws and regulations, including 42 C.F.R. §431.200, 42 C.F.R. Part 438, Subpart F, “Grievance System,” and the provisions of 1 T.A.C. Chapter 357 relating to Medicaid managed care organizations.

The Complaint and Appeal system must include a Complaint process, an Appeal process, and access to HHSC’s Fair Hearing System. The procedures must be the same for all Members and must be reviewed and approved in writing by HHSC or its designee. Modifications and amendments to the Member Complaint and Appeal system must be submitted for HHSC’s approval at least 30 days prior to the implementation.

8.2.7.1 Member Complaint Process

The HMO must have written policies and procedures for receiving, tracking, responding to, reviewing, reporting and resolving Complaints by Members or their authorized representatives. For purposes of this Section 8.2.7, an “authorized representative” is any person or entity acting on behalf of the Member and with the Member’s written consent. A Provider may be an authorized representative.

The HMO must resolve Complaints within 30 days from the date the Complaint is received. The HMO is subject to remedies, including liquidated damages, if at least 98 percent of Member

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Complaints are not resolved within 30 days of receipt of the Complaint by the HMO. Please see the Uniform Managed Care Contract Terms & Conditions and Attachment B-5, Deliverables/Liquidated Damages Matrix. The Complaint procedure must be the same for all Members under the Contract. The Member or Member’s authorized representative may file a Complaint either orally or in writing. The HMO must also inform Members how to file a Complaint directly with HHSC, once the Member has exhausted the HMO’s complaint process.

The HMO must designate an officer of the HMO who has primary responsibility for ensuring that Complaints are resolved in compliance with written policy and within the required timeframe. For purposes of Section 8.2.7.2, an “officer” of the HMO means a president, vice president, secretary, treasurer, or chairperson of the board for a corporation, the sole proprietor, the managing general partner of a partnership, or a person having similar executive authority in the organization.

The HMO must have a routine process to detect patterns of Complaints. Management, supervisory, and quality improvement staff must be involved in developing policy and procedure improvements to address the Complaints.

The HMO’s Complaint procedures must be provided to Members in writing and through oral interpretive services. A written description of the HMO’s Complaint procedures must be available in prevalent non-English languages for Major Population Groups identified by HHSC, at no more than a 6th grade reading level.

The HMO must include a written description of the Complaint process in the Member Handbook. The HMO must maintain and publish in the Member Handbook, at least one local and one toll-free telephone number with TeleTypewriter/Telecommunications Device for the Deaf (TTY/TDD) and interpreter capabilities for making Complaints.

The HMO’s process must require that every Complaint received in person, by telephone, or in writing must be acknowledged and recorded in a written record and logged with the following details:

1. Date;

2. Identification of the individual filing the Complaint;

3. Identification of the individual recording the Complaint;

4. Nature of the Complaint;

5. Disposition of the Complaint (i.e., how the HMO resolved the Complaint);

6. Corrective action required; and

7. Date resolved.

The HMO is prohibited from discriminating or taking punitive action against a Member or his or her representative for making a Complaint.

If the Member makes a request for disenrollment, the HMO must give the Member information on the disenrollment process and direct the Member to the HHSC Administrative Services Contractor. If the request for disenrollment includes a Complaint by the Member, the Complaint will be processed separately from the disenrollment request, through the Complaint process.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO will cooperate with the HHSC’s Administrative Services Contractor and HHSC or its designee to resolve all Member Complaints. Such cooperation may include, but is not limited to, providing information or assistance to internal Complaint committees.

The HMO must provide designated Member Advocates to assist Members in understanding and using the HMO’s Complaint system as described in Section 8.2.7.9. The HMO’s Member Advocates must assist Members in writing or filing a Complaint and monitoring the Complaint through the HMO’s Complaint process until the issue is resolved.

8.2.7.2 Medicaid Standard Member Appeal Process

The HMO must develop, implement and maintain an Appeal procedure that complies with state and federal laws and regulations, including 42 C.F.R.§ 431.200 and 42 C.F.R. Part 438, Subpart F, “Grievance System.” An Appeal is a disagreement with an HMO Action as defined in HHSC’s Uniform Contract Terms and Conditions. The Appeal procedure must be the same for all Members. When a Member or his or her authorized representative expresses orally or in writing any dissatisfaction or disagreement with an Action, the HMO must regard the expression of dissatisfaction as a request to Appeal an Action.

A Member must file a request for an Appeal with the HMO within 30 days from receipt of the notice of the Action. The HMO is subject to remedies, including liquidated damages, if at least 98 percent of Member Appeals are not resolved within 30 days of receipt of the Appeal by the HMO. Please see the Uniform Managed Care Contract Terms & Conditions and Attachment B-5, Deliverables/Liquidated Damages Matrix. To ensure continuation of currently authorized services, however, the Member must file the Appeal on or before the later of 10 days following the HMO’s mailing of the notice of the Action, or the intended effective date of the proposed Action. The HMO must designate an officer who has primary responsibility for ensuring that Appeals are resolved in compliance with written policy and within the 30-day time limit.

The provisions of Article 21.58A, Texas Insurance Code, (to be recodified as Texas Insurance Code, Title 14, Chapter 4201), relating to a Member’s right to Appeal an Adverse Determination made by the HMO or a utilization review agent to an independent review organization, do not apply to a Medicaid recipient. Article 21.58A is pre-empted by federal Fair Hearings requirements.

The HMO must have policies and procedures in place outlining the Medical Director’s role in an Appeal of an Action. The Medical Director must have a significant role in monitoring, investigating and hearing Appeals. In accordance with 42 C.F.R.§ 438.406, the HMO’s policies and procedures must require that individuals who make decisions on Appeals are not involved in any previous level of review or decision-making, and are health care professionals who have the appropriate clinical expertise in treating the Member’s condition or disease.

The HMO must provide designated Member Advocates, as described in Section 8.2.7.9, to assist Members in understanding and using the Appeal process. The HMO’s Member Advocates must assist Members in writing or filing an Appeal and monitoring the Appeal through the HMO’s Appeal process until the issue is resolved.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must have a routine process to detect patterns of Appeals. Management, supervisory, and quality improvement staff must be involved in developing policy and procedure improvements to address the Appeals.

The HMO’s Appeal procedures must be provided to Members in writing and through oral interpretive services. A written description of the Appeal procedures must be available in prevalent non-English languages identified by HHSC, at no more than a 6th grade reading level. The HMO must include a written description of the Appeals process in the Member Handbook. The HMO must maintain and publish in the Member Handbook at least one local and one toll-free telephone number with TTY/TDD and interpreter capabilities for requesting an Appeal of an Action.

The HMO’s process must require that every oral Appeal received must be confirmed by a written, signed Appeal by the Member or his or her representative, unless the Member or his or her representative requests an expedited resolution. All Appeals must be recorded in a written record and logged with the following details:

1) Date notice is sent;

2) Effective date of the Action;

3) Date the Member or his or her representative requested the Appeal;

4) Date the Appeal was followed up in writing;

5) Identification of the individual filing;

6) Nature of the Appeal; and

7) Disposition of the Appeal, and notice of disposition to Member.

The HMO must send a letter to the Member within five (5) business days acknowledging receipt of the Appeal request. Except for the resolution of an Expedited Appeal as provided in Section 8.2.7.3, the HMO must complete the entire standard Appeal process within 30 calendar days after receipt of the initial written or oral request for Appeal. The timeframe for a standard Appeal may be extended up to 14 calendar days if the Member or his or her representative requests an extension; or the HMO shows that there is a need for additional information and how the delay is in the Member’s interest. If the timeframe is extended, the HMO must give the Member written notice of the reason for delay if the Member had not requested the delay. The HMO must designate an officer who has primary responsibility for ensuring that Appeals are resolved within these timeframes and in accordance with the HMO’s written policies.

During the Appeal process, the HMO must provide the Member a reasonable opportunity to present evidence and any allegations of fact or law in person as well as in writing. The HMO must inform the Member of the time available for providing this information and that, in the case of an expedited resolution, limited time will be available.

The HMO must provide the Member and his or her representative opportunity, before and during the Appeal process, to examine the Member’s case file, including medical records and any other documents considered during the Appeal process. The HMO must include, as parties to the Appeal, the Member and his or her representative or the legal representative of a deceased Member’s estate.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

In accordance with 42 C.F.R.§ 438.420, the HMO must continue the Member’s benefits currently being received by the Member, including the benefit that is the subject of the Appeal, if all of the following criteria are met:

1. The Member or his or her representative files the Appeal timely as defined in this Contract:

2. The Appeal involves the termination, suspension, or reduction of a previously authorized course of treatment;

3. The services were ordered by an authorized provider;

4. The original period covered by the original authorization has not expired; and

5. The Member requests an extension of the benefits.

If, at the Member’s request, the HMO continues or reinstates the Member’s benefits while the Appeal is pending, the benefits must be continued until one of the following occurs:

1. The Member withdraws the Appeal;

2. Ten (10) days pass after the HMO mails the notice resolving the Appeal against the Member, unless the Member, within the 10-day timeframe, has requested a Fair Hearing with continuation of benefits until a Fair Hearing decision can be reached; or

3. A state Fair Hearing officer issues a hearing decision adverse to the Member or the time period or service limits of a previously authorized service has been met.

In accordance with 42 C.F.R.§ 438.420(d), if the final resolution of the Appeal is adverse to the Member and upholds the HMO’s Action, then to the extent that the services were furnished to comply with the Contract, the HMO may recover such costs from the Member.

If the HMO or State Fair Hearing Officer reverses a decision to deny, limit, or delay services that were not furnished while the Appeal was pending, the HMO must authorize or provide the disputed services promptly and as expeditiously as the Member’s health condition requires.

If the HMO or State Fair Hearing Officer reverses a decision to deny authorization of services and the Member received the disputed services while the Appeal was pending, the HMO is responsible for the payment of services.

The HMO is prohibited from discriminating or taking punitive action against a Member or his or her representative for making an Appeal.

8.2.7.3 Expedited Medicaid HMO Appeals

In accordance with 42 C.F.R. §438.410, the HMO must establish and maintain an expedited review process for Appeals, when the HMO determines (for a request from a Member) or the provider indicates (in making the request on the Member’s behalf or supporting the Member’s request) that taking the time for a standard resolution could seriously jeopardize the Member’s life or health. The HMO must follow all Appeal requirements for standard Member Appeals as set forth in Section 8.2.7.2), except where differences are specifically noted. The HMO must accept oral or written requests for Expedited Appeals.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

Members must exhaust the HMO’s Expedited Appeal process before making a request for an expedited Fair Hearing. After the HMO receives the request for an Expedited Appeal, it must hear an approved request for a Member to have an Expedited Appeal and notify the Member of the outcome of the Expedited Appeal within 3 business days, except that the HMO must complete investigation and resolution of an Appeal relating to an ongoing emergency or denial of continued hospitalization: (1) in accordance with the medical or dental immediacy of the case; and (2) not later than one (1) business day after receiving the Member’s request for Expedited Appeal is received.

Except for an Appeal relating to an ongoing emergency or denial of continued hospitalization, the timeframe for notifying the Member of the outcome of the Expedited Appeal may be extended up to 14 calendar days if the Member requests an extension or the HMO shows (to the satisfaction of HHSC, upon HHSC’s request) that there is a need for additional information and how the delay is in the Member’s interest. If the timeframe is extended, the HMO must give the Member written notice of the reason for delay if the Member had not requested the delay.

If the decision is adverse to the Member, the HMO must follow the procedures relating to the notice in Section 8.2.7.5. The HMO is responsible for notifying the Member of his or her right to access an expedited Fair Hearing from HHSC. The HMO will be responsible for providing documentation to the State and the Member, indicating how the decision was made, prior to HHSC’s expedited Fair Hearing.

The HMO is prohibited from discriminating or taking punitive action against a Member or his or her representative for requesting an Expedited Appeal. The HMO must ensure that punitive action is neither taken against a provider who requests an expedited resolution or supports a Member’s request.

If the HMO denies a request for expedited resolution of an Appeal, it must:

(1) Transfer the Appeal to the timeframe for standard resolution, and

(2) Make a reasonable effort to give the Member prompt oral notice of the denial, and follow up within two (2) calendar days with a written notice.

8.2.7.4 Access to Fair Hearing for Medicaid Members

The HMO must inform Members that they have the right to access the Fair Hearing process at any time during the Appeal system provided by the HMO. In the case of an expedited Fair Hearing process, the HMO must inform the Member that he or she must first exhaust the HMO’s internal Expedited Appeal process prior to filing an Expedited Fair Hearing. The HMO must notify Members that they may be represented by an authorized representative in the Fair Hearing process.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.2.7.5 Notices of Action and Disposition of Appeals for Medicaid Members

The HMO must notify the Member, in accordance with 1 T.A.C. Chapter 357, whenever the HMO takes an Action. The notice must, at a minimum, include any information required by 1 T.A.C. Chapter 357 that relates to a managed care organization’s notice of Action and any information required by 42 C.F.R. §438.404 as directed by HHSC, including but not limited to:

1. The Action the HMO has taken or intends to take;

2. The reasons for the Action;

3. The Member’s right to access the HMO’s Appeal process.

4. The procedures by which the Member may Appeal the HMO’s Action;

5. The circumstances under which expedited resolution is available and how to request it;

6. The circumstances under which a Member may continue to receive benefits pending resolution of the Appeal, how to request that benefits be continued, and the circumstances under which the Member may be required to pay the costs of these services;

7. The date the Action will be taken;

8. A reference to the HMO policies and procedures supporting the HMO’s Action;

9. An address where written requests may be sent and a toll-free number that the Member can call to request the assistance of a Member representative, file an Appeal, or request a Fair Hearing;

10. An explanation that Members may represent themselves, or be represented by a provider, a friend, a relative, legal counsel or another spokesperson;

11. A statement that if the Member wants a Fair Hearing on the Action, the Member must make the request for a Fair Hearing within 90 days of the date on the notice or the right to request a hearing is waived;

12. A statement explaining that the HMO must make its decision within 30 days from the date the Appeal is received by the HMO, or 3 business days in the case of an Expedited Appeal; and

13. A statement explaining that the hearing officer must make a final decision within 90 days from the date a Fair Hearing is requested.

8.2.7.6 Timeframe for Notice of Action

In accordance with 42 C.F.R.§ 438.404(c), the HMO must mail a notice of Action within the following timeframes:

1. For termination, suspension, or reduction of previously authorized Medicaid-covered services, within the timeframes specified in 42 C.F.R.§§ 431.211, 431.213, and 431.214;

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

2. For denial of payment, at the time of any Action affecting the claim;

3. For standard service authorization decisions that deny or limit services, within the timeframe specified in 42 C.F.R.§ 438.210(d)(1);

4. If the HMO extends the timeframe in accordance with 42 C.F.R. §438.210(d)(1), it must:

a. give the Member written notice of the reason for the decision to extend the timeframe and inform the Member of the right to file an Appeal if he or she disagrees with that decision; and

b. issue and carry out its determination as expeditiously as the Member’s health condition requires and no later than the date the extension expires;

5. For service authorization decisions not reached within the timeframes specified in 42 C.F.R.§ 438.210(d) (which constitutes a denial and is thus an adverse Action), on the date that the timeframes expire; and

6. For expedited service authorization decisions, within the timeframes specified in 42 C.F.R. 438.210(d).

8.2.7.7 Notice of Disposition of Appeal

In accordance with 42 C.F.R.§ 438.408(e), the HMO must provide written notice of disposition of all Appeals including Expedited Appeals. The written resolution notice must include the results and date of the Appeal resolution. For decisions not wholly in the Member’s favor, the notice must contain:

1. The right to request a Fair Hearing;

2. How to request a Fair Hearing;

3. The circumstances under which the Member may continue to receive benefits pending a Fair Hearing;

4. How to request the continuation of benefits;

5. If the HMO’s Action is upheld in a Fair Hearing, the Member may be liable for the cost of any services furnished to the Member while the Appeal is pending; and

6. Any other information required by 1 T.A.C. Chapter 357 that relates to a managed care organization’s notice of disposition of an Appeal.

8.2.7.8 Timeframe for Notice of Resolution of Appeals

In accordance with 42 C.F.R.§ 438.408, the HMO must provide written notice of resolution of Appeals, including Expedited Appeals, as expeditiously as the Member’s health condition requires, but the notice must not exceed the timelines as provided in this Section for Standard or Expedited Appeals. For expedited resolution of Appeals, the HMO must make reasonable efforts to give the Member prompt oral notice of resolution of the Appeal, and follow up with a written notice within the timeframes set forth in this Section for Expedited Appeals. If the HMO denies a request for expedited resolution of an Appeal, the HMO must transfer the Appeal to the timeframe for standard resolution as provided in this Section, and make reasonable efforts to give the Member prompt oral notice of the denial, and follow up within two calendar days with a written notice.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.2.7.9 Medicaid Member Advocates

The HMO must provide Member Advocates to assist Members. Member Advocates must be physically located within the Service Area unless an exception is approved by HHSC. Member Advocates must inform Members of the following:

• Their rights and responsibilities,

• The Complaint process,

• The Appeal process,

• Covered Services available to them, including preventive services, and

• Non-capitated Services available to them.

Member Advocates must assist Members in writing Complaints and are responsible for monitoring the Complaint through the HMO’s Complaint process.

Member Advocates are responsible for making recommendations to management on any changes needed to improve either the care provided or the way care is delivered. Member Advocates are also responsible for helping or referring Members to community resources available to meet Member needs that are not available from the HMO as Medicaid Covered Services.

8.2.8 Additional Medicaid Behavioral Health Provisions

8.2.8.1 Local Mental Health Authority (LMHA)

Assessment to determine eligibility for rehabilitative and targeted DSHS case management services is a function of the LMHA. Covered Services must be provided to Members with severe and persistent mental illness (SPMI) and severe emotional disturbance (SED), when Medically Necessary, whether or not they are also receiving targeted case management or rehabilitation services through the LMHA.

The HMO must enter into written agreements with all LMHAs in the Service Area that describe the process(es) that the HMO and LMHAs will use to coordinate services for STAR Members with SPMI or SED. The agreements will:

1. Describe the Behavioral Health Services indicated in detail in the Provider Procedures Manual and in the Texas Medicaid Bulletin, include the amount, duration, and scope of basic and Value-added Services, and the HMO’s responsibility to provide these services;

2. Describe criteria, protocols, procedures and instrumentation for referral of STAR Members from and to the HMO and the LMHA;

3. Describe processes and procedures for referring Members with SPMI or SED to the LMHA for assessment and determination of eligibility for rehabilitation or targeted case management services;

4. Describe how the LMHA and the HMO will coordinate providing Behavioral Health Services to Members with SPMI or SED;

5. Establish clinical consultation procedures between the HMO and LMHA including consultation to effect referrals and on-going consultation regarding the Member’s progress;

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

6. Establish procedures to authorize release and exchange of clinical treatment records;

7. Establish procedures for coordination of assessment, intake/triage, utilization review/utilization management and care for persons with SPMI or SED;

8. Establish procedures for coordination of inpatient psychiatric services (including Court- ordered Commitment of Members under 21) in state psychiatric facilities within the LMHA’s catchment area;

9. Establish procedures for coordination of emergency and urgent services to Members;

10. Establish procedures for coordination of care and transition of care for new Members who are receiving treatment through the LMHA; and

11. Establish that when Members are receiving Behavioral Health Services from the Local Mental Health Authority that the HMO is using the same UM guidelines as those prescribed for use by local mental health authorities by DSHS which are published at: http://www.mhmr.state.tx.us/centraloffice/behavioralhealthservices/RDMClinGuide.html.

The HMO must offer licensed practitioners of the healing arts (defined in 25 T.A.C., Part 2, Chapter 419, Subchapter L), who are part of the Member’s treatment team for rehabilitation services, the opportunity to participate in the HMO’s Network. The practitioner must agree to accept the HMO’s Provider reimbursement rate, meet the credentialing requirements, and comply with all the terms and conditions of the HMO’s standard Provider contract.

HMOs must allow Members receiving rehabilitation services to choose the licensed practitioners of the healing arts who are currently a part of the Member’s treatment team for rehabilitation services to provide Covered Services. If the Member chooses to receive these services from licensed practitioners of the healing arts who are part of the Member’s rehabilitation services treatment team but are not part of the HMO’s Network, the HMO must reimburse the Local Mental Health Authority through Out-of-Network reimbursement arrangements.

Nothing in this section diminishes the potential for the Local Mental Health Authority to seek best value for rehabilitative services by providing these services under arrangement, where possible, as specified is 25 T.A.C. §419.455.

8.2.9 Third Party Liability and Recovery

Medicaid HMOs are responsible for establishing a plan and process for recovering costs for services that should have been paid through a third party in accordance with State and Federal law and regulations. To recognize this requirement, capitation payments to the HMOs are reduced by the projected amount of TPR that the HMO is expected to recover.

The HMOs must provide required reports as stated in Section 8.1.17.2, Financial Reporting Requirements.

After 120-days from the date of service on any claim, encounter, or other Medicaid related payment by the HMO subject to Third Party Recovery, HHSC may attempt recovery independent of any HMO action. HHSC will retain, in full, all funds received as a result of the state initiated recovery or subrogation action.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

HMOs shall provide a Member quarterly file, which contains the following information if available to the HMO: the Member name, address, claim submission address, group number, employer’s mailing address, social security number, and date of birth for each subscriber or policyholder and each dependent of the subscriber or policyholder covered by the insurer. The file shall be used for the purpose of matching the Texas Medicaid eligibility file against the HMO Member file to identify Medicaid clients enrolled in the HMO, which may not be known the Medicaid Program.

8.2.10 Coordination With Public Health Entities

8.2.10.1 Reimbursed Arrangements with Public Health Entities

The HMO must make a good faith effort to enter into a subcontract for Covered Services with Public Health Entities. Possible Covered Services that could be provided by Public Health Entities include, but are not limited to, the following services:

1. Sexually Transmitted Diseases (STDs) services;

2. Confidential HIV testing;

3. Immunizations;

4. Tuberculosis (TB) care;

5. Family Planning services;

6. THSteps medical checkups, and

7. Prenatal services.

These subcontracts must be available for review by HHSC or its designated agent(s) on the same basis as all other subcontracts. If the HMO is unable to enter into a contract with Public Health Entities, the HMO must document efforts to contract with Public Health Entities, and make such documentation available to HHSC upon request.

HMO Contracts with Public Health Entities must specify the scope of responsibilities of both parties, the methodology and agreements regarding billing and reimbursements, reporting responsibilities, Member and Provider educational responsibilities, and the methodology and agreements regarding sharing of confidential medical record information between the Public Health Entity and the HMO or PCP.

The HMO must:

1. Identify care managers who will be available to assist public health providers and PCPs in efficiently referring Members to the public health providers, specialists, and health-related service providers either within or outside the HMO’s Network; and

2. Inform Members that confidential healthcare information will be provided to the PCP, and educate Members on how to better utilize their PCPs, public health providers, emergency departments, specialists, and health-related service providers.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.2.10.2 Non-Reimbursed Arrangements with Local Public Health Entities

The HMO must make a good faith effort to enter into a Memorandum of Understanding (MOU) with Public Health Entities in each Service Area regarding the provision of essential public health care services. If the HMO is unable to enter into an MOU with a Public Health Entity, the HMO must document efforts and make such documentation available to HHSC upon request. MOUs must describe the roles and responsibilities of the HMO and the Public Health Entity for the following:

1. Public health reporting requirements regarding communicable diseases and/or diseases that are preventable by immunization as defined by state law;

2. Notification of and referral to the local Public Health Entity, as defined by state law, of communicable disease outbreaks involving Members;

3. Referral to the local Public Health Entity for TB contact investigation and evaluation and preventive treatment of persons with whom the Member has come into contact;

4. Referral to the local Public Health Entity for STD/HIV contact investigation and evaluation and preventive treatment of persons with whom the Member has come into contact;

5. Referral for WIC services and information sharing; and

6. Coordination and follow-up of suspected or confirmed cases of childhood lead exposure.

8.2.11 Coordination with Other State Health and Human Services (HHS) Programs

The HMO must make a good faith effort to enter into a Memorandum of Understanding (MOU) with other state HHS Programs in each Service Area regarding the provision of essential public health care services. If a HMO is unable to enter into an MOU with other HHS Programs, the HMO must document efforts and make such information available to HHSC upon request. MOUs must delineate the roles and responsibilities of the HMO and the HHS programs for the following services:

1. Use of the DSHS Bureau of Laboratories for specimens contained as part of a THSteps medical checkup, including THSteps newborn screens, lead testing, and hemoglobin/hematocrit tests;

2. Availability of vaccines through the Texas Vaccines for Children Program;

3. Reporting of immunizations provided to the statewide ImmTrac Registry including parental consent to share data;

4. Referral for WIC services and information sharing;

5. DSHS case management for Children and Pregnant Women (CPW);

6. Participation in the community-based coalitions with the Medicaid-funded case management programs in MHMR, ECI, TCB, and DSHS;

7. Referral to the Texas Department of Transportation’s Medical Transportation Program;

8. Cooperation with activities required of state and local public health authorities necessary to conduct the annual population and community based needs assessment; and

9. Coordination and follow-up of suspected or confirmed cases of childhood lead exposure.

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Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.2.12 Advance Directives

Federal and state law require HMOs and providers to maintain written policies and procedures for informing all adult Members 18 years of age and older about their rights to refuse, withhold or withdraw medical treatment and mental health treatment through advance directives (see Social Security Act §1902(a)(57) and §1903(m)(1)(A)). The HMO’s policies and procedures must include written notification to Members and comply with provisions contained in 42 C.F.R. §434.28 and 42 C.F.R. § 489, Subpart I, relating to advance directives for all hospitals, critical access hospitals, skilled nursing facilities, home health agencies, providers of home health care, providers of personal care services and hospices, as well as the following state laws and rules:

1. A Member’s right to self-determination in making health care decisions;

2. The Advance Directives Act, Chapter 166, Texas Health and Safety Code, which includes:

a. A Member’s right to execute an advance written directive to physicians and family or surrogates, or to make a non-written directive to administer, withhold or withdraw life-sustaining treatment in the event of a terminal or irreversible condition;

b. A Member’s right to make written and non-written out-of-hospital do-not-resuscitate (DNR) orders;

c. A Member’s right to execute a Medical Power of Attorney to appoint an agent to make health care decisions on the Member’s behalf if the Member becomes incompetent; and

3. The Declaration for Mental Health Treatment, Chapter 137, Texas Civil Practice and Remedies Code, which includes: a Member’s right to execute a Declaration for Mental Health Treatment in a document making a declaration of preferences or instructions regarding mental health treatment.

The HMO must maintain written policies for implementing a Member’s advance directive. Those policies must include a clear and precise statement of limitation if the HMO or a Provider cannot or will not implement a Member’s advance directive.

The HMO cannot require a Member to execute or issue an advance directive as a condition of receiving health care services. The HMO cannot discriminate against a Member based on whether or not the Member has executed or issued an advance directive.

The HMO’s policies and procedures must require the HMO and subcontractors to comply with the requirements of state and federal law relating to advance directives. The HMO must provide education and training to employees and Members on issues concerning advance directives.

All materials provided to Members regarding advance directives must be written at a 7^th - 8^th grade reading comprehension level, except where a provision is required by state or federal law and the provision cannot be reduced or modified to a 7^th - 8^th grade reading level because it is a reference to the law or is required to be included “as written” in the state or federal law.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

The HMO must notify Members of any changes in state or federal laws relating to advance directives within 90 days from the effective date of the change, unless the law or regulation contains a specific time requirement for notification.

8.3 [Deleted Section]

8.4 Additional CHIP Scope of Work

The following provisions only apply to HMOs participating in CHIP.

8.4.1 CHIP Provider Network

In each Service Area, the HMO must seek to obtain the participation in its Provider Network of CHIP Significant Traditional Providers (STPs), defined by HHSC as PCP Providers currently serving the CHIP population and DSH hospitals. The Procurement Library includes CHIP STPs by Service Area.

The HMO must give STPs the opportunity to participate in its Network if the STPs:

1. Agree to accept the HMO’s Provider reimbursement rate for the provider type; and

2. Meet the standard credentialing requirements of the HMO, provided that lack of board certification or accreditation by the Joint Commission on Accreditation of Health Care Organizations (JCAHO) is not the sole grounds for exclusion from the Provider Network.

8.4.2 CHIP Provider Complaint and Appeals

CHIP Provider Complaints and Appeals are subject to disposition consistent with the Texas Insurance Code and any applicable TDI regulations

8.4.3 CHIP Member Complaint and Appeal Process

CHIP Member Complaints and Appeals are subject to disposition consistent with the Texas Insurance Code and any applicable TDI regulations. HHSC will require the HMO to resolve Complaints and Appeals (that are not elevated to TDI) within 30 days from the date the Complaint or Appeal is received. The HMO is subject to remedies, including liquidated damages, if at least 98 percent of Member Complaints or Member Appeals are not resolved within 30 days of receipt of the Complaint or Appeal by the HMO. Please see the Uniform Managed Care Contract Terms & Conditions and Attachment B-5, Deliverables/Liquidated Damages Matrix. Any person, including those dissatisfied with a HMO’s resolution of a Complaint or Appeal, may report an alleged violation to TDI.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 8 Version 1.0

8.4.4 Dental Coverage for CHIP Members

The HMO is not responsible for reimbursing dental providers for preventive and therapeutic dental services obtained by CHIP Members. However, medical and/or hospital charges, such as anesthesia, that are necessary in order for CHIP Members to access standard therapeutic dental services, are Covered Services for CHIP Members. The HMO must provide access to facilities and physician services that are necessary to support the dentist who is providing dental services to a CHIP Member under general anesthesia or intravenous (IV) sedation.

The HMO must inform Network facilities, anesthesiologists, and PCPs what authorization procedures are required, and how Providers are to be reimbursed for the preoperative evaluations by the PCP and/or anesthesiologist and for the facility services. For dental-related medical Emergency Services, the HMO must reimburse in-network and Out-of-Network providers in accordance with federal and state laws, rules, and regulations.

8-70

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 9 Version 1.0

9. Turnover Requirements

9.1 Introduction

This section presents the Turnover Requirements to which the HMO must agree. Turnover is defined as those activities that are required for the HMO to perform upon termination of the Contract in situations in which the HMO must transition Contract operations to HHSC or a subsequent Contractor.

9.2 Transfer of Data

The HMO must transfer all data regarding the provision of Covered Services to Members to HHSC or a new HMO, at the sole discretion of HHSC and as directed by HHSC. All transferred data must be compliant with HIPAA.

All relevant data must be received and verified by HHSC or the subsequent Contractor. If HHSC determines that not all of the data regarding the provision of Covered Services to Members was transferred to HHSC or the subsequent Contractor, as required, or the data is not HIPAA compliant, HHSC reserves the right to hire an independent contractor to assist HHSC in obtaining and transferring all the required data and to ensure that all the data are HIPAA compliant. The reasonable cost of providing these services will be the responsibility of the HMO.

9.3 Turnover Services

Six months prior to the end of the Contract Period, including any extensions to such Period, the HMO must propose a Turnover Plan covering the possible turnover of the records and information maintained to either the State or a successor HMO. The Turnover Plan must be a comprehensive document detailing the proposed schedule, activities, and resource requirements associated with the turnover tasks. The Turnover Plan must be approved by HHSC.

As part of the Turnover Plan, the HMO must provide HHSC with copies of all relevant Member and service data, documentation, or other pertinent information necessary, as determined by the HHSC, for HHSC or a subsequent Contractor to assume the operational activities successfully. This includes correspondence, documentation of ongoing outstanding issues, and other operations support documentation. The plan will describe the HMO’s approach and schedule for transfer of all data and operational support information, as applicable. The information must be supplied in media and format specified by the State and according to the schedule approved by the State.

HHSC is not limited or restricted in the ability to require additional information from the HMO or modify the turnover schedule as necessary.

9.4 Post-Turnover Services

Thirty (30) days following turnover of operations, the HMO must provide HHSC with a Turnover Results report documenting the completion and results of each step of the Turnover Plan. Turnover will not be considered complete until this document is approved by HHSC.

9-1

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-1 – HHSC Joint Medicaid/CHIP HMO RFP, Section 9 Version 1.0

If the HMO does not provide the required relevant data and reference tables, documentation, or other pertinent information necessary for HHSC or the subsequent Contractor to assume the operational activities successfully, the HMO agrees to reimburse the State for all reasonable costs, including, but not limited to, transportation, lodging, and subsistence for all state and federal representatives, or their agents, to carry out their inspection, audit, review, analysis, reproduction and transfer functions at the location(s) of such records.

The HMO also agrees to pay any and all additional costs incurred by the State that are the result of the HMO’s failure to provide the requested records, data or documentation within the time frames agreed to in the Turnover Plan.

The HMO must maintain all files and records related to Members and Providers for five years after the date of final payment under the Contract or until the resolution of all litigation, claims, financial management review or audit pertaining to the Contract, whichever is longer. The HMO agrees to repay any valid, undisputed audit exceptions taken by HHSC in any audit of the Contract.

9-2

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

STAR Covered Services

The following is a non-exhaustive, high-level listing of Acute Care Covered Services included under the STAR Medicaid managed care program.

Medicaid HMO Contractors are responsible for providing a benefit package to Members that includes all medically necessary services covered under the traditional, fee-for-service Medicaid programs except for Non-capitated Services provided to STAR Members outside of the HMO capitation and listed in Attachment B-1, Section 8.2.2.8. Medicaid HMO Contractors must coordinate care for Members for these Non-capitated Services so that Members have access to a full range of medically necessary Medicaid services, both capitated and non-capitated. A Contractor may elect to offer additional acute care Value-added Services.

The STAR Members are provided with three enhanced benefits compared to the traditional, fee-for-service Medicaid coverage:

1) waiver of the three-prescription per month limit;

2) waiver of the 30-day spell-of-illness limitation under fee-for-services; and

3) inclusion of an annual adult well check for patients 21 years of age and over.

Medicaid HMO Contractors are responsible for providing a benefit package to Members that includes the waiver of the 30-day spell-of-illness limitation under fee-for-service and the inclusion of an annual adult well check for patients 21 years of age and over. Prescription drug benefits to Medicaid HMO Members are provided outside of the HMO capitation.

Bidders and Contractors should refer to the current Texas Medicaid Provider Procedures Manual and the bi-monthly Texas Medicaid Bulletin for a more inclusive listing of limitations and exclusions that apply to each Medicaid benefit category. (These documents can be accessed online at: http://www.tmhp.com.)

The services listed in this Attachment are subject to modification based on Federal and State laws and regulations and Programs policy updates.

Services included under the HMO capitation payment

• Ambulance services

• Audiology services, including hearing aids for adults (hearing aids for children are provided through the PACT program and are a non-capitated service)

• Behavioral Health Services, including:

• Inpatient and outpatient mental health services for children (under age 21)

• Outpatient chemical dependency services for children (under age 21)

• Detoxification services

• Psychiatry services

• Counseling services for adults (21 years of age and over)

• Birthing center services

• Chiropractic services

• Dialysis

• Durable medical equipment and supplies

• Emergency Services

• Family planning services

• Home health care services

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

• Hospital services, including inpatient and outpatient

• Laboratory

• Medical check-ups and Comprehensive Care Program (CCP) Services for children (under age 21) through the Texas Health Steps Program

• Optometry, glasses, and contact lenses, if medically necessary

• Podiatry

• Prenatal care

• Primary care services

• Radiology, imaging, and X-rays

• Specialty physician services

• Therapies – physical, occupational and speech

• Transplantation of organs and tissues

• Vision

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

CHIP Covered Services

Covered CHIP services must meet the CHIP definition of Medically Necessary Covered Services as defined in this Contract. There is no lifetime maximum on benefits; however, 12-month period, enrollment period (a 6-month period), or lifetime limitations do apply to certain services, as specified in the following chart. Please note that if services with a 12-month annual limit are all used within one 6-month enrollment period, these particular services are not available during the second 6-month enrollment period within that annual period. Co-pays apply until a family reaches its specific cost-sharing maximum.

Covered Benefit	Description
Inpatient General Acute and Inpatient Rehabilitation Hospital Services	Services include, but are not limited to, the following: •      Hospital-provided Physician or Provider services •      Semi-private room and board (or private if medically necessary as certified by attending) •      General nursing care •      Special duty nursing when medically necessary •      ICU and services •      Patient meals and special diets •      Operating, recovery and other treatment rooms •      Anesthesia and administration (facility technical component) •      Surgical dressings, trays, casts, splints •      Drugs, medications and biologicals •      Blood or blood products that are not provided free-of-charge to the patient and their administration •      X-rays, imaging and other radiological tests (facility technical component) •      Laboratory and pathology services (facility technical component) •      Machine diagnostic tests (EEGs, EKGs, etc.) •      Oxygen services and inhalation therapy •      Radiation and chemotherapy •      Access to DSHS-designated Level III perinatal centers or Hospitals meeting equivalent levels of care •      In-network or out-of-network facility and Physician services for a mother and her newborn(s) for a minimum of 48 hours following an uncomplicated vaginal delivery and 96 hours following an uncomplicated delivery by caesarian section. •      Hospital, physician and related medical services, such as anesthesia, associated with dental care
Skilled Nursing Facilities (Includes Rehabilitation Hospitals)	Services include, but are not limited to, the following: •      Semi-private room and board •      Regular nursing services •      Rehabilitation services •      Medical supplies and use of appliances and equipment furnished by the facility
Outpatient Hospital, Comprehensive Outpatient Rehabilitation Hospital, Clinic (Including Health Center) and Ambulatory Health Care Center	Services include, but are not limited to, the following services provided in a hospital clinic or emergency room, a clinic or health center, hospital-based emergency department or an ambulatory health care setting: •      X-ray, imaging, and radiological tests (technical component) •      Laboratory and pathology services (technical component) •      Machine diagnostic tests •      Ambulatory surgical facility services •      Drugs, medications and biologicals •      Casts, splints, dressings

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

Covered Benefit	Description
	•      Preventive health services •      Physical, occupational and speech therapy •      Renal dialysis •      Respiratory services •      Radiation and chemotherapy •      Blood or blood products that are not provided free-of-charge to the patient and the administration of these products •      Facility and related medical services, such as anesthesia, associated with dental care, when provided in a licensed ambulatory surgical facility.
Physician/Physician Extender Professional Services	Services include, but are not limited to, the following: •      American Academy of Pediatrics recommended well-child exams and preventive health services (including, but not limited to, vision and hearing screening and immunizations) •      Physician office visits, in-patient and out-patient services •      Laboratory, x-rays, imaging and pathology services, including technical component and/or professional interpretation •      Medications, biologicals and materials administered in Physician’s office •      Allergy testing, serum and injections •      Professional component (in/outpatient) of surgical services, including: •      Surgeons and assistant surgeons for surgical procedures including appropriate follow-up care •      Administration of anesthesia by Physician (other than surgeon) or CRNA •      Second surgical opinions •      Same-day surgery performed in a Hospital without an over-night stay •      Invasive diagnostic procedures such as endoscopic examinations •      Hospital-based Physician services (including Physician-performed technical and interpretive components) •      In-network and out-of-network Physician services for a mother and her newborn(s) for a minimum of 48 hours following an uncomplicated vaginal delivery and 96 hours following an uncomplicated delivery by caesarian section. •      Physician services medically necessary to support a dentist providing dental services to a CHIP member such as general anesthesia or intravenous (IV) sedation.
Durable Medical Equipment (DME), Prosthetic Devices and Disposable Medical Supplies	$20,000 12-month period limit for DME, prosthetics, devices and disposable medical supplies (diabetic supplies and equipment are not counted against this ccap). Services include DME (equipment which can withstand repeated use and is primarily and customarily used to serve a medical purpose, generally is not useful to a person in the absence of Illness, Injury, or Disability, and is appropriate for use in the home), including devices and supplies that are medically necessary and necessary for one or more activities of daily living and appropriate to assist in the treatment of a medical condition, including: •      Orthotic braces and orthotics •      Prosthetic devices such as artificial eyes, limbs, and braces •      Prosthetic eyeglasses and contact lenses for the management of severe ophthalmologic disease •      Other artificial aids including surgical implants •      Hearing aids •      Implantable devices are covered under Inpatient and Outpatient services and do not count towards the DME 12-month period limit. •      Diagnosis-specific disposable medical supplies, including diagnosis-specific prescribed specialty formula and dietary supplements. (See Attachment A)

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

Covered Benefit	Description
Home and Community Health Services	Services that are provided in the home and community, including, but not limited to: •      Home infusion •      Respiratory therapy •      Visits for private duty nursing (R.N., L.V.N.) •      Skilled nursing visits as defined for home health purposes (may include R.N. or L.V.N.). •      Home health aide when included as part of a plan of care during a period that skilled visits have been approved. •      Speech, physical and occupational therapies. •      Services are not intended to replace the CHILD’S caretaker or to provide relief for the caretaker •      Skilled nursing visits are provided on intermittent level and not intended to provide 24-hour skilled nursing services •      Services are not intended to replace 24-hour inpatient or skilled nursing facility services
Inpatient Mental Health Services	Mental health services, including for serious mental illness, furnished in a free-standing psychiatric hospital, psychiatric units of general acute care hospitals and state-operated facilities, including, but not limited to: •      Neuropsychological and psychological testing. •      Inpatient mental health services are limited to: •      45 days 12-month inpatient limit •      Includes inpatient psychiatric services, up to 12-month period limit, ordered by a court of competent jurisdiction under the provisions of Chapters 573 and 574 of the Texas Health and Safety Code, relating to court ordered commitments to psychiatric facilities. Court order serves as binding determination of medical necessity. Any modification or termination of services must be presented to the court with jurisdiction over the matter for determination •      25 days of the inpatient benefit can be converted to residential treatment, therapeutic foster care or other 24-hour therapeutically planned and structured services or sub-acute outpatient (partial hospitalization or rehabilitative day treatment) mental health services on the basis of financial equivalence against the inpatient per diem cost •      20 of the inpatient days must be held in reserve for inpatient use only •      Does not require PCP referral
Outpatient Mental Health Services Services	Mental health services, including for serious mental illness, provided on an outpatient basis, including, but not limited to: •      Medication management visits do not count against the outpatient visit limit. •      The visits can be furnished in a variety of community-based settings (including school and home-based) or in a state-operated facility •      Up to 60 days 12-month period limit for rehabilitative day treatment •      60 outpatient visits 12-month period limit •      60 rehabilitative day treatment days can be converted to outpatient visits on the basis of financial equivalence against the day treatment per diem cost •      60 outpatient visits can be converted to skills training (psycho educational skills development) or rehabilitative day treatment on the basis of financial equivalence against the outpatient visit cost •      Includes outpatient psychiatric services, up to 12-month period limit, ordered by a court of competent jurisdiction under the provisions of Chapters 573 and 574 of the Texas Health and Safety Code, relating to court ordered commitments to psychiatric facilities. Court order serves as binding

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

Covered Benefit	Description
	determination of medical necessity. Any modification or termination of services must be presented to the court with jurisdiction over the matter for determination •      Inpatient days converted to sub-acute outpatient services are in addition to the outpatient limits and do not count towards those limits •      A Qualified Mental Health Professional (QMHP), as defined by and credentialed through Texas Department of State Health Services (DSHS) standards (TAC Title 25, Part II, Chapter 412), is a Local Mental Health Authorities provider. A QMHP must be working under the authority of an DSHS entity and be supervised by a licensed mental health professional or physician. QMHPs are acceptable providers as long as the services would be within the scope of the services that are typically provided by QMHPs. Those services include individual and group skills training (which can be components of interventions such as day treatment and in-home services), patient and family education, and crisis services •      Does not require PCP referral
Inpatient Substance Abuse Treatment Services	Services include, but are not limited to: •      Inpatient and residential substance abuse treatment services including detoxification and crisis stabilization, and 24-hour residential rehabilitation programs •      Does not require PCP referral •      Medically necessary detoxification/stabilization services, limited to 14 days per 12-month period. •      24-hour residential rehabilitation programs, or the equivalent, up to 60 days per 12-month period •      30 days may be converted to partial hospitalization or intensive outpatient rehabilitation, on the basis of financial equivalence against the inpatient per diem cost •      30 days must be held in reserve for inpatient use only.
Outpatient Substance Abuse Treatment Services	•      Services include, but are not limited to, the following: •      Prevention and intervention services that are provided by physician and non-physician providers, such as screening, assessment and referral for chemical dependency disorders. •      Intensive outpatient services is defined as an organized non-residential service providing structured group and individual therapy, educational services, and life skills training which consists of at least 10 hours per week for four to 12 weeks, but less than 24 hours per day •      Outpatient treatment service is defined as consisting of at least one to two hours per week providing structured group and individual therapy, educational services, and life skills training •      Outpatient treatment services up to a maximum of: •      Intensive outpatient program (up to 12 weeks per 12-month period) •      Outpatient services (up to six-months per 12-month period) •      Does not require PCP referral
Rehabilitation Services	Services include, but are not limited to, the following: •      Habilitation (the process of supplying a child with the means to reach age-appropriate developmental milestones through therapy or treatment) and rehabilitation services include, but are not limited to the following: •      Physical, occupational and speech therapy •      Developmental assessment
Hospice Care Services	Services include, but are not limited to: •      Palliative care, including medical and support services, for those children who have six months or less to live, to keep patients comfortable during the last weeks and months before death

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

Covered Benefit	Description
	•      Treatment for unrelated conditions is unaffected •      Up to a maximum of 120 days with a 6 month life expectancy •      Patients electing hospice services waive their rights to treatment related to their terminal illnesses; however, they may cancel this election at anytime •      Services apply to the hospice diagnosis
Emergency Services, including Emergency Hospitals, Physicians, and Ambulance Services	HMO cannot require authorization as a condition for payment for emergency conditions or labor and delivery. Covered services include, but are not limited to, the following: •      Emergency services based on prudent lay person definition of emergency health condition •      Hospital emergency department room and ancillary services and physician services 24 hours a day, 7 days a week, both by in-network and out-of-network providers •      Medical screening examination •      Stabilization services •      Access to DSHS designated Level 1 and Level II trauma centers or hospitals meeting equivalent levels of care for emergency services •      Emergency ground, air and water transportation •      Emergency dental services, limited to fractured or dislocated jaw, traumatic damage to teeth, and removal of cysts.
Transplants	Services include, but are not limited to, the following: •      Using up-to-date FDA guidelines, all non-experimental human organ and tissue transplants and all forms of non-experimental corneal, bone marrow and peripheral stem cell transplants, including donor medical expenses.
Vision Benefit	The health plan may reasonably limit the cost of the frames/lenses. Services include: •      One examination of the eyes to determine the need for and prescription for corrective lenses per 12-month period, without authorization •      One pair of non-prosthetic eyewear per 12-month period
Chiropractic Services	Services do not require physician prescription and are limited to spinal subluxation
Tobacco Cessation Program	Covered up to $100 for a 12- month period limit for a plan- approved program •      Health Plan defines plan-approved program. •      May be subject to formulary requirements.
[Value-added services]	See Attachment B-3

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

CHIP EXCLUSIONS FROM COVERED SERVICES

• Inpatient and outpatient infertility treatments or reproductive services other than prenatal care, labor and delivery, and care related to disease, illnesses, or abnormalities related to the reproductive system

• Personal comfort items including but not limited to personal care kits provided on inpatient admission, telephone, television, newborn infant photographs, meals for guests of patient, and other articles which are not required for the specific treatment of sickness or injury

• Experimental and/or investigational medical, surgical or other health care procedures or services which are not generally employed or recognized within the medical community

• Treatment or evaluations required by third parties including, but not limited to, those for schools, employment, flight clearance, camps, insurance or court

• Private duty nursing services when performed on an inpatient basis or in a skilled nursing facility.

• Mechanical organ replacement devices including, but not limited to artificial heart

• Hospital services and supplies when confinement is solely for diagnostic testing purposes, unless otherwise pre-authorized by Health Plan

• Prostate and mammography screening

• Elective surgery to correct vision

• Gastric procedures for weight loss

• Cosmetic surgery/services solely for cosmetic purposes

• Out-of-network services not authorized by the Health Plan except for emergency care and physician services for a mother and her newborn(s) for a minimum of 48 hours following an uncomplicated vaginal delivery and 96 hours following an uncomplicated delivery by caesarian section

• Services, supplies, meal replacements or supplements provided for weight control or the treatment of obesity, except for the services associated with the treatment for morbid obesity as part of a treatment plan approved by the Health Plan

• Acupuncture services, naturopathy and hypnotherapy

• Immunizations solely for foreign travel

• Routine foot care such as hygienic care

• Diagnosis and treatment of weak, strained, or flat feet and the cutting or removal of corns, calluses and toenails (this does not apply to the removal of nail roots or surgical treatment of conditions underlying corns, calluses or ingrown toenails)

• Replacement or repair of prosthetic devices and durable medical equipment due to misuse, abuse or loss when confirmed by the Member or the vendor

• Corrective orthopedic shoes

• Convenience items

• Orthotics primarily used for athletic or recreational purposes

• Custodial care (care that assists a child with the activities of daily living, such as assistance in walking, getting in and out of bed, bathing, dressing, feeding, toileting, special diet preparation, and medication supervision that is usually self-administered or provided by a parent. This care does not require the continuing attention of trained medical or paramedical personnel.) This exclusion does not apply to hospice services.

• Housekeeping

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

• Public facility services and care for conditions that federal, state, or local law requires be provided in a public facility or care provided while in the custody of legal authorities

• Services or supplies received from a nurse, which do not require the skill and training of a nurse

• Vision training and vision therapy

• Reimbursement for school-based physical therapy, occupational therapy, or speech therapy services are not covered except when ordered by a Physician/PCP

• Donor non-medical expenses

• Charges incurred as a donor of an organ when the recipient is not covered under this health plan

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

CHIP DME/SUPPLIES

SUPPLIES	COVERED	EXCLUDED	COMMENTS/MEMBER CONTRACT PROVISIONS
Ace Bandages		X	Exception: If provided by and billed through the clinic or home care agency it is covered as an incidental supply.
Alcohol, rubbing		X	Over-the-counter supply.
Alcohol, swabs (diabetic)	X		Over-the-counter supply not covered, unless RX provided at time of dispensing.
Alcohol, swabs	X		Covered only when received with IV therapy or central line kits/supplies.
Ana Kit Epinephrine	X		A self-injection kit used by patients highly allergic to bee stings.
Arm Sling	X		Dispensed as part of office visit.
Attends (Diapers)	X		Coverage limited to children age 4 or over only when prescribed by a physician and used to provide care for a covered diagnosis as outlined in a treatment care plan
Bandages		X
Basal Thermometer		X	Over-the-counter supply.
Batteries – initial	X	.	For covered DME items
Batteries – replacement	X		For covered DME when replacement is necessary due to normal use.
Betadine		X	See IV therapy supplies.
Books		X
Clinitest	X		For monitoring of diabetes.
Colostomy Bags			See Ostomy Supplies.
Communication Devices		X
Contraceptive Jelly		X	Over-the-counter supply. Contraceptives are not covered under the plan.
Cranial Head Mold		X
Diabetic Supplies	X		Monitor calibrating solution, insulin syringes, needles, lancets, lancet device, and glucose strips.
Diapers/Incontinent Briefs/Chux	X		Coverage limited to children age 4 or over only when prescribed by a physician and used to provide care for a covered diagnosis as outlined in a treatment care plan
Diaphragm		X	Contraceptives are not covered under the plan.
Diastix	X		For monitoring diabetes.
Diet, Special		X
Distilled Water		X
Dressing Supplies/Central Line	X		Syringes, needles, Tegaderm, alcohol swabs, Betadine swabs or ointment, tape. Many times these items are dispensed in a kit when includes all necessary items for one dressing site change.
Dressing Supplies/Decubitus	X		Eligible for coverage only if receiving covered home care for wound care.
Dressing Supplies/Peripheral IV Therapy	X		Eligible for coverage only if receiving home IV therapy.
Dressing Supplies/Other		X
Dust Mask		X
Ear Molds	X		Custom made, post inner or middle ear surgery
Electrodes	X		Eligible for coverage when used with a covered DME.
Enema Supplies		X	Over-the-counter supply.

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Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

SUPPLIES	COVERED	EXCLUDED	COMMENTS/MEMBER CONTRACT PROVISIONS
Enteral Nutrition Supplies	X		Necessary supplies (e.g., bags, tubing, connectors, catheters, etc.) are eligible for coverage. Enteral nutrition products are not covered except for those prescribed for hereditary metabolic disorders, a non-function or disease of the structures that normally permit food to reach the small bowel, or malabsorption due to disease
Eye Patches	X		Covered for patients with amblyopia.
Formula		X	Exception: Eligible for coverage only for chronic hereditary metabolic disorders a non-function or disease of the structures that normally permit food to reach the small bowel; or malabsorption due to disease (expected to last longer than 60 days when prescribed by the physician and authorized by plan.) Physician documentation to justify prescription of formula must include: •      Identification of a metabolic disorder, dysphagia that results in a medical need for a liquid diet, presence of a gastrostomy, or disease resulting in malabsorption that requires a medically necessary nutritional product Does not include formula: •      For members who could be sustained on an age-appropriate diet. •      Traditionally used for infant feeding •      In pudding form (except for clients with documented oropharyngeal motor dysfunction who receive greater than 50 percent of their daily caloric intake from this product) •      For the primary diagnosis of failure to thrive, failure to gain weight, or lack of growth or for infants less than twelve months of age unless medical necessity is documented and other criteria, listed above, are met. Food thickeners, baby food, or other regular grocery products that can be blenderized and used with an enteral system that are not medically necessary, are not covered, regardless of whether these regular food products are taken orally or parenterally.
Gloves		X	Exception: Central line dressings or wound care provided by home care agency.
Hydrogen Peroxide		X	Over-the-counter supply.
Hygiene Items		X
Incontinent Pads	X		Coverage limited to children age 4 or over only when prescribed by a physician and used to provide care for a covered diagnosis as outlined in a treatment care plan
Insulin Pump (External) Supplies	X		Supplies (e.g., infusion sets, syringe reservoir and dressing, etc.) are eligible for coverage if the pump is a covered item.
Irrigation Sets, Wound Care	X		Eligible for coverage when used during covered home care for wound care.
Irrigation Sets, Urinary	X		Eligible for coverage for individual with an indwelling urinary catheter.
IV Therapy Supplies	X		Tubing, filter, cassettes, IV pole, alcohol swabs, needles, syringes and any other related supplies necessary for home IV therapy.
K-Y Jelly		X	Over-the-counter supply.
Lancet Device	X		Limited to one device only.
Lancets	X		Eligible for individuals with diabetes.
Med Ejector	X
Needles and Syringes/Diabetic			See Diabetic Supplies

11 of 12

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-2 – STAR and CHIP Covered Services Version 1.0

SUPPLIES	COVERED	EXCLUDED	COMMENTS/MEMBER CONTRACT PROVISIONS
Needles and Syringes/IV and Central Line			See IV Therapy and Dressing Supplies/Central Line.
Needles and Syringes/Other	X		Eligible for coverage if a covered IM or SubQ medication is being administered at home.
Normal Saline			See Saline, Normal
Novopen	X
Ostomy Supplies	X		Items eligible for coverage include: belt, pouch, bags, wafer, face plate, insert, barrier, filter, gasket, plug, irrigation kit/sleeve, tape, skin prep, adhesives, drain sets, adhesive remover, and pouch deodorant. Items not eligible for coverage include: scissors, room deodorants, cleaners, rubber gloves, gauze, pouch covers, soaps, and lotions.
Parenteral Nutrition/Supplies	X		Necessary supplies (e.g., tubing, filters, connectors, etc.) are eligible for coverage when the Health Plan has authorized the parenteral nutrition.
Saline, Normal	X		Eligible for coverage: a) when used to dilute medications for nebulizer treatments; b) as part of covered home care for wound care; c) for indwelling urinary catheter irrigation.
Stump Sleeve	X
Stump Socks	X
Suction Catheters	X
Syringes			See Needles/Syringes.
Tape			See Dressing Supplies, Ostomy Supplies, IV Therapy Supplies.
Tracheostomy Supplies	X		Cannulas, Tubes, Ties, Holders, Cleaning Kits, etc. are eligible for coverage.
Under Pads			See Diapers/Incontinent Briefs/Chux.
Unna Boot	X		Eligible for coverage when part of wound care in the home setting. Incidental charge when applied during office visit.
Urinary, External Catheter & Supplies		X	Exception: Covered when used by incontinent male where injury to the urethra prohibits use of an indwelling catheter ordered by the PCP and approved by the plan
Urinary, Indwelling Catheter & Supplies	X		Cover catheter, drainage bag with tubing, insertion tray, irrigation set and normal saline if needed.
Urinary, Intermittent	X		Cover supplies needed for intermittent or straight catherization.
Urine Test Kit	X		When determined to be medically necessary.
Urostomy supplies			See Ostomy Supplies.

12 of 12

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

ATTACHMENT B-3: VALUE-ADDED SERVICES

HMO: Superior HealthPlan, Inc.

HMO PROGRAM: CHIP

SERVICE AREA(S): Bexar, El Paso, Lubbock, Nueces, and Travis

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Vision	20% discount off of Upgraded Hardware- The Member will receive a 20% discount on upgraded hardware.	There is no limitation on the number of times the discount can be utilized.	TVHP contracted providers.
Pharmacy	Provides members with a $15.00 per household per quarter credit toward over the counter medications and supplies.	Services must be sought from contracted pharmacies only. Items eligible for purchase under this benefit are over-the-counter, health related items only.	Pharmacy Data Management contracted providers.

1 of 4

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Transportation	For Members in need of transportation that cannot access transportation in a timely manner, Superior will provide bus tokens to ensure that Members have a means of accessing their provider appointment.	Members in the Nueces Service Area. The Transportation Authority in this area will not agree to allow the plan to purchase bus vouchers or tokens. The bus tokens must be requested in advance of a provider visit and authorized by Superior’s Member Services Department.	Transit Authorities in applicable Service Area.
NurseWise	Twenty-four hour nurse advice line	Available to all members by calling the Member Services toll-free number	NurseWise, an affiliate of Centene Corporation

Behavioral Health Value-added Services for Members Under 21

Value-added Service Description of Value-added Services and
Members Eligible to Receive the Services Limitations or Restrictions Provider(s) responsible for
providing this service

2 of 4

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

Behavioral Health Value-added Services for Members 21 and Over

Value-added Service Description of Value-added Services and
Members Eligible to Receive the Services Limitations or Restrictions Provider(s) responsible for
providing this service

ADDITIONAL INFORMATION:

1. Explain how and when Providers and Members will be notified about the availability of the value-added services to be provided.

Value Added Services information will be included in the Superior Provider Manual and also during training sessions. Members will receive this information via the Plan Comparison Chart, in the Member Handbook, with New Member Packets and during orientations. Periodically, Superior will also highlight Value Added Services in the Provider and Member Newsletters.

2. Describe how a Member may obtain or access the value-added services to be provided.

See explanations provided above for accessing services.

3 of 4

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

3. Describe how the HMO will identify the Value-added Service in administrative (encounter) data.

Superior will track the value added services through our claims system for those value-adds that HIPAA-compliant procedural codes are available (vision, behavioral health, flu shots). Superior will create a specific benefit category to track and report the value added services ‘separately’ from our ‘capitated’ service data. In addition, Superior will have the ability to pass this information to the State utilizing the encounter submission process, as long as the State is able to segregate the value adds data from the capitated services data.

For pharmacy services, Superior will receive a data file from the pharmacy vendor to capture all utilization of the pharmacy value-add benefit.

For transportation services, Superior will maintain an electronic file of transportation services provided for Superior’s membership.

4. Superior HealthPlan, Inc. (Vendor) certifies that it will provide the above Value-added Services for at least 12 months from the approval date of the Value-added Services.

/s/ Christopher Bowers	11/10/05
Signature	Date
Christopher Bowers
Print Name
President and CEO
Title

4 of 4

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

ATTACHMENT B-3: VALUE-ADDED SERVICES

HMO: Superior HealthPlan, Inc.

HMO PROGRAM: Medicaid

SERVICE AREA(S): Bexar, El Paso, Lubbock, Nueces, and Travis

Physical Health Value-added Services

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Vision	Members are allowed to purchase any prescription eyewear and apply a $100 allowance toward the purchase of that eyewear.	Members are responsible for any charges trial exceed the $100 allowance. Disposable contact lenses are excluded from this $100 allowance. This Value-Added benefit is only allowed one time per benefit period (i.e. 24-months).	TVHP contracted providers.
Pharmacy	Provides members with a $15.00 per household per quarter credit toward over the counter medications and supplies.	Services must be sought from contracted pharmacies only. Items eligible for purchase under this benefit are over-the-counter, health related items only.	Pharmacy Data Management contracted providers.

1 of 8

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

Physical Health Value-added Services

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Transportation	HMO will offer tokens or vouchers for bus services to HMO members that have trouble accessing the State’s Medical Transportation Program in a timely manner to ensure access to their provider appointments. In addition, HMO will provide transportation to non-medical services such as health education programs, nutrition classes, and birth preparation classes. HMO’s member service staff will approve and coordinate the transportation service.	Members in the Nueces Service Area. The Transportation Authority in this area will not agree to allow the plan to purchase bus vouchers or tokens. The bus tokens must be requested in advance of a provider visit and authorized by Superior’s Member Services Department.	Transit Authorities in applicable Service Area.
Adult Flu Shot	During the flu season months of October through December, Members age 21 or older will be provided with a flu shot through their Primary Care Provider (PCP).	This benefit is available to all STAR Adult Members age 21 and over. These services must be obtained from the Member’s Primary Care Provider.	It is anticipated that the Member’s designated Primary Care Provider (PCP) will render this service.
NurseWise	Twenty-four hour nurse advice line	Available to all members by calling the Member Services toll-free number	NurseWise, an affiliate of Centene Corporation

2 of 8

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

Behavioral Health Value-added Services for Members Under 21

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Behavioral Health	Rehabilitation/skills training. These are services provided to pregnant and parenting substance abusers at MHMR centers or in other treatment settings, focusing both on substance abuse and parenting issues. An augmentation of standard substance abuse treatment to focus on the special needs of this population. Authorized in increments of 15 minutes, with amount, duration, and scope based on medical necessity. This benefit is available to all Members. It is geared to pregnant women and parenting Members.	These services must be authorized by Superior’s Behavioral Health Subcontractor. In addition, the service will be authorized for 15-minute increments. The amount, duration, and scope are based on medical necessity.	It is anticipated that Superior’s contracted MHMR providers specializing in Rehabilitation/Skills training in each Service Area will render this service.
Behavioral Health	Superior’s Behavioral Health Subcontractor will authorize Behavioral Health practitioners in medical settings to provide health psychology interventions focused on the effective management of chronic medical conditions. These might include psycho-educational groups for chronic conditions, individual coaching for patients with chronic disease states, or skills training activities.	These services must be authorized by Superior’s Behavioral Health Subcontractor. The authorization will be tied to medical necessity.	It is anticipated that these services will be rendered by Superior’s behavioral health practitioners located in Superior’s contracted Federally Qualified Health Centers.

3 of 8

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

Behavioral Health Value-added Services for Members Under 21

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Behavioral Health	Partial Hospitalization/Extended Day Treatment-An alternative to, or a step down from, inpatient care.	These services must be authorized by Superior’s Behavioral Health Subcontractor. Services are authorized for a minimum of five hours, but for less than 24 hours per day. The amount, duration, and scope will be based on medical necessity.	It is anticipated that Superior’s contracted Behavioral Health Providers such as its’ MHMR facilities and other contracted facilities in each Service Area will render this service.
Behavioral Health	Intensive Outpatient Treatment/Day Treatment (IOP)-Used as an alternative to or step down from more restrictive levels of care.	These services must be authorized by Superior’s Behavioral Health Material Subcontractor. In addition, the service will be authorized for greater than one and one half hours, but less than five hours per day. Amount, duration, and scope are based on medical necessity.	It is anticipated that Superior’s contracted Behavioral Health Providers such as the MHMR or other facilities in each Service Area will render this service.

4 of 8

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

Behavioral Health Value-added Services for Members 21 and Over

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Behavioral Health	Rehabilitation/skills training. These are services provided to pregnant and parenting substance abusers at MHMR centers or in other treatment settings, focusing both on substance abuse and parenting issues. An augmentation of standard substance abuse treatment to focus on the special needs of this population. This benefit is available to all Members. It is geared to pregnant women and parenting Members.	These services must be authorized by Superior’s Behavioral Health Subcontractor. In addition, the service will be authorized for 15-minute increments. The amount, duration, and scope are based on medical necessity.	It is anticipatedthat Superior’s contracted MHMR providers specializing in Rehabilitation/Skills training in each Service Area will render this service.
Behavioral Health	Partial Hospitalization/Extended Day Treatment- An alternative to, or a step down from, inpatient care.	These services must be authorized by Superior’s Behavioral Health Subcontractor. Services are authorized for a minimum of five hours, but for less than 24-hours per day. The amount, duration, and scope will be based on medical necessity.	It is anticipated that Superior’s contracted Behavioral Health Providers such as its’ MHMR facilities and other contracted facilities in each Service Area will render this service.

5 of 8

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

Behavioral Health Value-added Services for Members 21 and Over

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Behavioral Health	Superior’s Behavioral Health Subcontractor, will authorize Behavioral Health practitioners in medical settings to provide health psychology interventions focused on the effective management of chronic medical conditions. These might include psycho-educational groups for chronic conditions, individual coaching for patients with chronic disease states, or skills training activities.	These services must be authorized by Superior’s Behavioral Health Subcontractor. The authorization will be tied to medical necessity.	It is anticipated that these services will be rendered by Superior’s behavioral health practitioners located in Superior’s contracted Federally Qualified Heath Centers.
Behavioral Health	Intensive Outpatient Treatment/Day Treatment (IOP)- Used as an alternative to or step down from more restrictive levels of care.	These services must be authorized by Superior’s Behavioral Health Subcontractor. In addition, the service will be authorized for greater than one and one half hours, but less than five hours per day. Amount, duration, and scope are based on medical necessity.	It is anticipated that Superior’s contracted Behavioral Health Providers such as the MHMR or other facilities in each Service Area will render this service.

6 of 8

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

Behavioral Health Value-added Services for Members 21 and Over

Value-added Service	Description of Value-added Services and Members Eligible to Receive the Services	Limitations or Restrictions	Provider(s) responsible for providing this service
Behavioral Health	Off-site Services such as home-based services, mobile crisis, intensive case management. It should be noted that staff must go off-site to provide such services. These services are provided to Members to help reduce or avoid inpatient admissions by a community based, mobile, multi-disciplinary team of licensed clinicians and trained, unlicensed workers working under the direction of a licensed professional.	These services must be authorized by Superior’s Behavioral Health Subcontractor. The amount, duration and scope are based on medical necessity.	It is anticipated that Superior’s contracted Behavioral Health Providers such as the MHMR in each Service Area will render this service.

ADDITIONAL INFORMATION:

1. Explain how and when Providers and Members will be notified about the availability of the value-added services to be provided.

Value Added Services information will be included in the Superior Provider Manual and also during training sessions. Members will receive this information via the Plan Comparison Chart, in the Member Handbook, with New Member Packets and during orientations. Periodically, Superior will also highlight Value Added Services in the Provider and Member Newsletters.

2. Describe how a Member may obtain or access the value-added services to be provided.

See explanations provided above for accessing services.

7 of 8

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-3 – Value-added Services Version 1.0

3. Describe how the HMO will identify the Value-added Service in administrative (encounter) data.

Superior will track the value added services through our claims system for those value-adds that HIPAA-compliant procedural codes are available (vision, behavioral health, flu shots). Superior will create a specific benefit category to track and report the value added services ‘separately’ from our ‘capitated’ service data. In addition, Superior will have the ability to pass this information to the State utilizing the encounter submission process, as long as the State is able to segregate the value adds data from the capitated services data.

For pharmacy services, Superior will receive a data file from the pharmacy vendor to capture all utilization of the pharmacy value-add benefit.

For transportation services, Superior will maintain an electronic file of transportation services provided for Superior’s membership.

4. Superior HealthPlan, Inc. certifies that it will provide the above Value-added Services for at least 12 months from the approval date of the Value-added Services.

/s/ Christopher Bowers	11/10/05
Signature	Date
Christopher Bowers
Print Name
President and CEO
Title

8 of 8

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-4—Performance Improvement Goals Version 1.0

Texas Health and Human Services Commission

HMO Performance Improvement Goal Template

State Fiscal Year 2007

(September 1, 2006 – August 31, 2007)

Plan Name:

Overarching Goals:

1. Improve access to primary care services for managed care enrollees.

2. Improve access to behavioral health services for managed care enrollees.

3. Improve a specific area of the HMO’s performance (to be negotiated before the Operational Start Date).

Sub-Goals:

1. Network adequacy and access to care, evaluated using the following measures:

(a) At least      percent of PCPs have an open panel; and

(b) At least      percent of children and adults have access to two PCPs with open panels within 30 miles.

2. Access to Behavioral Health Services, evaluated using the measure of an increase by at least      percent of outpatient mental health providers with an open panel.

3. Specific HMO Performance Goal, evaluated using the measures negotiated by HHSC and the HMO.

Specific percentages for Sub-Goals 1 and 2 will be negotiated by HHSC and the HMO before the Operational Start Date.

The Specific HMO Performance Goal and the measures used to evaluate Sub-Goal 3 will be negotiated by HHSC and the HMO before the Operational Start Date.

Additional information related to the Performance Improvement Goals can be found in Attachment B-1, Section 8.1.1.1, to the Contract.

1 of 1

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-5 –Deliverables/Liquidated Damages Matrix Version 1.0

Deliverables/Liquidated Damages Matrix

Service/ Component1	Performance Standard2	Measurement Period3	Measurement Assessment4	Liquidated Damages
Contract Attachment B-1, RFP §7.3 —Transition Phase Schedule	TheHMOmustbe operational no later than the agreed upon Operations Start Date. HHSC, or its agent, will determine when the HMO is considered to be operational based on the requirements in Section 7 and 8 of Attachment B-1.	Operations Start Date	Each calendar day of non-compliance, per HMO Program, per Service Area (SA).	HHSC may assess up to $10,000 per calendar day for each day beyond the Operations Start date that the HMO is not operational until the day that the HMO is operational, including all systems.
Contract Attachment B-1, RFP §7.3.1 — Transition Phase Tasks
Contract Attachment B-1, RFP §8.1 — General Scope
Contract Attachment B-1 RFP §7.3.1.5 — Systems Readiness Review	The HMO must submit to HHSC or to the designated Readiness Review Contractor the following plans for review, by December 14, 2005: •      Joint Interface Plan; •      Disaster Recovery Plan; •      Business Continuity Plan; •      Risk Management Plan; and •      Systems Quality Assurance Plan.	Transition Period	Each calendar day of non-compliance, per report, per HMO Program, and per SA.	HHSC may assess up to $1,000 per calendar day for each day a deliverable is late, inaccurate or incomplete.

1 Derived from the Contract or HHSC’s Uniform Managed Care Manual.

2 Standard specified in Contract

3 Period during which HHSC will evaluate service for purposes of tailored remedies.

4 Measure against which HHSC will apply remedies.

Page 1 of 7

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-5 –Deliverables/Liquidated Damages Matrix Version 1.0

Service/ Component1	Performance Standard2	Measurement Period3	Measurement Assessment4	Liquidated Damages
Contract Attachment B-1 RFP §7.3.1.7 – Operations Readiness	Final versions of the Provider Directory must be submitted to the Administrative Services Contractor no later than 95 days prior to the Operational Start Date.	Transition Period	Each calendar day of non-compliance, per directory, per HMO Program and per SA.	HHSC may assess up to $1,000 per calendar day for each day the directory is late, inaccurate or incomplete.
Contract Attachment B-1 RFP §§ 6, 7, 8 and 9 Uniform Managed Care Manual	All reports and deliverables as specified in Sections 6, 7, 8 and 9 of Attachment B-1 must be submitted according to the timeframes and requirements stated in the Contract (including all attachments) and HHSC’s Uniform Managed Care Manual. (Specific Reports or deliverables listed separately in this matrix are subject to the specified liquidated damages.)	Transition Period, Quarterly during Operations Period	Each calendar day of non-compliance, per HMO Program, per SA.	HHSC may assess up to $250 per calendar day if the report/deliverable is late, inaccurate, or incomplete.
Contract Attachment B-1 RFP §8.1.6 — Marketing & Prohibited Practices Uniform Managed Care Manual	The HMO may not engage in prohibited marketing practices.	Transition, Measured Quarterly during the Operations Period	Per incident of non-compliance.	HHSC may assess up to $1,000 per incident of non-compliance.

1 Derived from the Contract or HHSC’s Uniform Managed Care Manual.

2 Standard specified in Contract

3 Period during which HHSC will evaluate service for purposes of tailored remedies.

4 Measure against which HHSC will apply remedies.

Page 2 of 7

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-5 –Deliverables/Liquidated Damages Matrix Version 1.0

Service/ Component1	Performance Standard2	Measurement Period3	Measurement Assessment4	Liquidated Damages
Contract Attachment B-1 RFP §8.1.17.2 — Financial Reporting Requirements Uniform Managed Care Manual – Chapter 5	Financial Statistical Reports (FSR): For each SA, the HMO must file quarterly and annual FSRs. Quarterly reports are due no later than 30 days after the conclusion of each State Fiscal Quarter (SFQ). The first annual report is due no later than 120 days after the end of each Contract Year and the second annual report is due no later than 365 days after the end of each Contract Year.	Quarterly during the Operations Period	Per calendar day of non-compliance, per HMO Program, per SA.	HHSC may assess up to $1,000 per calendar day a quarterly or annual report is late, inaccurate or incomplete.
Contract Attachment B-1 RFP §8.1.17.2 — Financial Reporting Requirements: Uniform Managed Care Manual – Chapter 5	Medicaid Disproportionate Share Hospital (DSH) Reports: The Medicaid HMO must submit, on an annual basis, preliminary and final DSH Reports. The Preliminary report is due no later than June 1st after each reporting year, and the final report is due no later than July 15th after each reporting year. This standard does not apply to CHIP HMOs.	Measured during 4th Quarter of the Operations Period (6/1–8/31)	Per calendar day of non-compliance, per HMO Program, per SA.	HHSC may assess up to $1,000 per calendar day, per program, per service area, for each day the report is late, incorrect, inaccurate or incomplete.
Contract Attachment B-1 RFP §8.1.18 – Management Information System (MIS) Requirements	The HMO’s MIS must be able to resume operations within 72 hours of employing its Disaster Recovery Plan.	Measured Quarterly during the Operations Period	Per calendar day of non-compliance, per HMO Program, per SA.	HHSC may assess up to $5,000 per calendar day of non-compliance

1 Derived from the Contract or HHSC’s Uniform Managed Care Manual.

2 Standard specified in Contract

3 Period during which HHSC will evaluate service for purposes of tailored remedies.

4 Measure against which HHSC will apply remedies.

Page 3 of 7

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-5 –Deliverables/Liquidated Damages Matrix Version 1.0

Service/ Component1	Performance Standard2	Measurement Period3	Measurement Assessment4	Liquidated Damages
Contract Attachment B-1 RFP §8.1.18.3 – Management Information System (MIS) Requirements: System-Wide Functions	The HMO’s MIS system must meet all requirements in Section 8.1.18.3 of Attachment B-1.	Measured Quarterly during the Operations Period	Per calendar day of non-compliance, per HMO Program, per SA.	HHSC may assess up to $5,000 per calendar day of non-compliance.
Contract Attachment B-1 RFP §8.1.18.5 — Claims Processing Requirements	The HMO must adjudicate all provider Clean Claims within 30 days. The HMO must pay providers interest at an 18% per annum, calculated daily for the full period in which the Clean Claim remains unadjudicated beyond the 30-day claims processing deadline.	Measured Quarterly during the Operations Period	Per incident of non-compliance.	HHSC may assess up to $1,000 per claim if the HMO fails to timely pay interest.
Contract Attachment B-1 RFP §8.1.18.5 — Claims Processing Requirements Uniform Managed Care Manual – Chapter 2	The HMO must comply with the claims processing requirements and standards as described in Section 8.1.18.5 of Attachment B-1.	Measured Quarterly during the Operations Period	Per quarterly reporting period, per HMO Program, per SA.	HHSC may assess liquidated damages of up to $5,000 for the first quarter that an HMO’s Aggregated Claims Performance percentages fall below the performance standards. HHSC may assess up to $25,000 per quarter for each additional quarter that the Aggregated Claims Performance percentages fall below the performance standards.

1 Derived from the Contract or HHSC’s Uniform Managed Care Manual.

2 Standard specified in Contract

3 Period during which HHSC will evaluate service for purposes of tailored remedies.

4 Measure against which HHSC will apply remedies.

Page 4 of 7

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-5 –Deliverables/Liquidated Damages Matrix Version 1.0

Service/ Component1	Performance Standard2	Measurement Period3	Measurement Assessment4	Liquidated Damages
Contract Attachment B-1 RFP §8.1.20.2— Reporting Requirements Uniform Managed Care Manual Chapters 2 and 5	All Claims Summary Report: The HMO must submit quarterly, non-cumulative All Claims Summary reports for each HMO Program and each SA no later than 45 days after each quarterly reporting period. Along with its fourth quarter report, the HMO must submit a cumulative, annual All Claims Summary report for each HMO Program and each SA.	Measured Quarterly during the Operations Period	Per calendar day of non-compliance, per HMO Program, per SA.	HHSC may assess up to $1,000 per calendar day the report is late, inaccurate, or incomplete.
Contract Attachment B-1 RFP §8.1.5.9— Member Complaint and Appeal Process Contract Attachment B-1 RFP §8.2.7.1 — Member Complaint Process Contract Attachment B-1 RFP §8.4.3 – CHIP Member Complaint and Appeal Process	The HMO must resolve at least 98% of Member Complaints within 30 calendar days from the date the Complaint is received by the HMO.	Measured Quarterly during the Operations Period	Per reporting period, per HMO Program, per SA.	HHSC may assess up to $250 per reporting period if the HMO fails to meet the performance standard.

1 Derived from the Contract or HHSC’s Uniform Managed Care Manual.

2 Standard specified in Contract

3 Period during which HHSC will evaluate service for purposes of tailored remedies.

4 Measure against which HHSC will apply remedies.

Page 5 of 7

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-5 –Deliverables/Liquidated Damages Matrix Version 1.0

Service/ Component1	Performance Standard2	Measurement Period3	Measurement Assessment4	Liquidated Damages
Contract Attachment B-1 RFP §8.1.5.9—Member Complaint and Appeal Process Contract Attachment B-1 RFP §8.2.7.2 — Medicaid Standard Member Appeal Process Contract Attachment B-1 RFP § 8.4.3 CHIP Member Complaint and Appeal Process	The HMO must resolve at least 98% of Member Appeals within 30 calendar days from the date the Appeal is filed with the HMO.	Measured Quarterly during the Operations Period	Per reporting period, per HMO Program, per SA.	HHSC may assess up to $500 per reporting period if the HMO fails to meet the performance standard.
Contract Attachment B-1 RFP §9.2 — Transfer of Data	The HMO must transfer all data regarding the provision of Covered Services to Members to HHSC or a new HMO, at the sole discretion of HHSC and as directed by HHSC. All transferred data must comply with the Contract requirements, including HIPAA.	Measured at Time of Transfer of Data and ongoing after the Transfer of Data until satisfactorily completed	Per incident of non- compliance (failure to provide data and/ or failure to provide data in required format), per HMO Program, per SA.	HHSC may assess up to $10,000 per calendar day the data is late, inaccurate or incomplete.

1 Derived from the Contract or HHSC’s Uniform Managed Care Manual.

2 Standard specified in Contract

3 Period during which HHSC will evaluate service for purposes of tailored remedies.

4 Measure against which HHSC will apply remedies.

Page 6 of 7

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment B-5 –Deliverables/Liquidated Damages Matrix Version 1.0

Service/ Component1	Performance Standard2	Measurement Period3	Measurement Assessment4	Liquidated Damages
Contract Attachment B-1 RFP §9.3 — Turnover Services	Six months prior to the end of the contract period or any extension thereof, the HMO must propose a Turnover Plan covering the possible turnover of the records and information maintained to either the State (HHSC) or a successor HMO.	Measured at Six Months prior to the end of the contract period or any extension thereof and ongoing until satisfactorily completed	Each calendar day of non-compliance, per HMO Program, per SA.	HHSC may assess up to $1,000 per calendar day the Plan is late, inaccurate, or incomplete.
Contract Attachment B-1 RFP §9.4 — Post-Turnover Services	The HMO must provide the State (HHSC) with a Turnover Results report documenting the completion and results of each step of the Turnover Plan 30 days after the Turnover of Operations.	Measured 30 days after the Turnover of Operations	Each calendar day of non-compliance, per HMO program, per SA.	HHSC may assess up to $250 per calendar day the report is late, inaccurate or incomplete.
Contract Attachment A HHSC Uniform Managed Care Contract Terms and Conditions, Section 4.08 Subcontractors	The HMO must notify HHSC in writing immediately upon making a decision to terminate a subcontract with a Material Subcontractor or upon receiving notification from the Material Subcontractor of its intent to terminate such subcontract.	Transition, Measured Quarterly during the Operations Period	Each calendar day of non-compliance, per HMO Program, per SA.	HHSC may assess up to $5,000 per calendar day of non-compliance.

1 Derived from the Contract or HHSC’s Uniform Managed Care Manual.

2 Standard specified in Contract

3 Period during which HHSC will evaluate service for purposes of tailored remedies.

4 Measure against which HHSC will apply remedies.

Page 7 of 7

Attachment B-6

[Logo – Map of Texas]

HHSC, Health Plan Operations

July 2005

CHIP HMO Service Areas

Bexar	Bexar			Nueces	Aransas	El Paso	El Paso
	Atoscosa	Dallas	Dallas		Bee		Hudspeth
	Comal		Collin		Calhoun
	Guadalupe		Ellis		Jim Wells
	Kendall		Hunt		Kleberg
	Medina		Kaufman		Nueces	Tarrant	Tarrant
	Wilson		Navarro		Refugio		Denton
Optional Addition to	Bandera		Rockwall		San Patricio		Hood
Bexar CSA (O-SA)					Victoria		Johnson
				Optional	Brooks		Parker
				Addition to	Goliad		Wise
Harris	Harris	Lubbock	Lubbock	Nueces	Karnes
	Brazoria		Crosby	CSA (O-SA)	Kennedy
	Fort Bend		Floyd		Live Oak
	Galveston		Garza			Webb	Webb
	Montgomery		Hale	Travis	Travis	(CHIP Only SA)	Duval
	Waller		Hockley		Bastrop		Jim Hogg
Optional	Austin		Lamb		Burnet		Zapata
Addition to	Chambers		Lynn		Caldwell
Harris	Hardin		Terry		Hays
CSA (O-SA)	Jasper	Optional	Carson		Lee
	Jefferson	Addition to	Deaf Smith		Williamson
	Liberty	Lubbock	Hutchinson	O-SA	Fayette
	Matagorda	CSA (O-SA)	Potter
	Newton		Randall
	Orange		Swisher
	Polk
	San Jacinto
	Tyler
	Walker
	Wharton

HHSC, Health Plan Operations

July 2005

Attachment B-6

[Logo – Map of Texas]

HHSC, Health Plan Operations

July 2005

STAR HMO Service Areas

Bexar	Bexar	Dallas	Dallas
	Atascosa		Collin	El Paso	El Paso
	Comal		Ellis
	Guadalupe		Hunt	Travis	Travis
	Kendall		Kaufman		Bastrop
	Medina		Navarro		Burnet	New STAR Service Area
	Wilson		Rockwall		Caldwell	Nueces	Aransas
					Hays		Bee
					Lee		Calhoun
Harris	Harris	Lubbock	Lubbock		Williamson		Jim Wells
	Brazoria		Crosby				Kleberg
	Fort Bend		Floyd	Tarrant	Tarrant		Nueces
	Galveston		Garza		Denton		Refugio
	Montgomery		Hale		Hood		San Patricio
	Waller		Hockley		Johnson		Victoria
			Lamb		Parker
			Lynn		Wise
			Terry

HHSC, Health Plan Operations

July 2005

Contractual Document (CD)

Responsible Office: HHSC Office of General Counsel (OGC)

Subject: Attachment C-3 – Agreed Modifications to HMO’s Proposal Version 1.0

The following table includes agreed modifications to the HMO’s Proposal. Unless specifically referenced below, all exceptions, reservations, or limitations to the RFP’s terms and conditions, including the HHSC Uniform Managed Care Contract Terms & Conditions, included in the HMO’s Proposal are deemed rejected and are not included in the final agreement of the Parties.

ID	Proposal Section	Agreed Modification
1
2
3
4
5

1 of 1

EX-10.10(B)

EXHIBIT 10.10(b)

SECOND 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, 2006. The Plan is hereby amended by:

1. Deleting Section 9 of the Plan in its entirety and replacing it with the following:

“9. Purchase of Shares. On the Offering Commencement Date of each Plan Period, the Company will grant to each eligible employee who is then a participant in the Plan an option (“Option”) to purchase on the last business day of such Plan Period (the “Exercise Date”), at the Option Price hereinafter provided for, the largest number of whole shares of Common Stock of the Company as does not exceed the number of shares determined by multiplying $2,083 by the number of full months in the Offering Period and dividing the result by the closing price (as defined below) on the Offering Commencement Date of such Plan Period.

Notwithstanding the above, no employee may be granted an Option (as defined in Section 9) that permits the employee’s rights to purchase Common Stock under this Plan and any other employee stock purchase plan (as defined in Section 423(b) of the Code) of the Company and its subsidiaries, to accrue at a rate that exceeds $25,000 of the fair market value of such Common Stock (determined at the Offering Commencement Date of the Plan Period) for each calendar year in which the Option is outstanding at any time.

The purchase price for each share purchased will be 95% of the closing price of the Common Stock on the Exercise Date. Such closing price shall be (a) the closing price on any national securities exchange on which the Common Stock is listed, (b) the closing price of the Common Stock on the Nasdaq National Market or (c) the average of the closing bid and asked prices in the over-the-counter-market, whichever is applicable, as published in The Wall Street Journal. If no sales of Common Stock were made on such a day, the price of the Common Stock for purposes of clauses (a) and (b) above shall be the reported price for the next preceding day on which sales were made.

Each employee who continues to be a participant in the Plan on the Exercise Date shall be deemed to have exercised the employee’s Option at the Option Price on such date and shall be deemed to have purchased from the Company the number of full shares of Common Stock reserved for the purpose of the Plan that the employee’s accumulated payroll deductions on such date will pay for, but not in excess of the maximum number determined in the manner set forth above.

Any balance remaining in an employee’s payroll deduction account at the end of a Plan Period will be automatically refunded to the employee, except that any balance that is less than the purchase price of one share of Common Stock will be carried forward into the employee’s payroll deduction account for the following Offering, unless the employee elects not to participate in the following Offering under the Plan, in which case the balance in the employee’s account shall be refunded.”

EX-10.12(A)

EXHIBIT 10.12(a)

FIRST AMENDMENT TO THE

CENTENE CORPORATION NON-EMPLOYEE

DIRECTORS DEFERRED STOCK

COMPENSATION PLAN

This Plan Amendment executed this 28th day of December, 2005, by Centene Corporation, a Delaware corporation (“Centene”):

WITNESSETH:

WHEREAS, Centene originally adopted the Centene Corporation Non-Employee Directors Deferred Stock Compensation Plan effective September 15, 2004.

WHEREAS, the Compensation Committee of Centene believes that it is in the best interests of Centene to amend the Plan.

NOW, THEREFORE, Centene amends the Plan effective July 1, 2005 as follows:

1. Section VI.2, Timing of Election, is deleted in its entirety and substituted in lieu thereof is the following:

VI.2 Timing of Election. Each Non-Employee Director who is serving on the Board on the Effective Date may make a Deferral Election at any time prior to the Effective Date for Fees for services rendered and payable on or after the Effective Date. Any person who is not then serving as a Non-Employee Director may make a Deferral Election within thirty (30) days after commencing to serve as a Non-Employee Director, effective for Fees for services performed subsequent to the date such Deferral Election is made.

In the event a Non-Employee Director does not timely make a Deferral Election pursuant to the preceding paragraph for the first year of eligibility, such Deferral Election shall be effective for Fees paid for the calendar quarter in which such Deferral Election is made to the extent described in the subsequent sentence. The Deferral Election will apply to the portion of the Fees equal to the total amount of Fees for such calendar quarter multiplied by the ratio of the number of days remaining in the calendar quarter over the total number of days in the calendar quarter.

A Non-Employee Director who does not make a Deferral Election during the first calendar year of eligibility may make a Deferral Election at such time before the first day of any subsequent calendar year. Such Deferral Election shall be effective in accordance with administrative procedures established with respect to the Plan.

IN WITNESS WHEREOF, Centene has caused this Amendment to be executed by its duly authorized officer or representative.

CENTENE CORPORATION
By:	/s/ David L. Steward
	David L. Steward
By:	/s/ Robert K. Ditmore
	Robert K. Ditmore Chairman, Compensation Committee

- 2 -

EX-10.22(B)

EXHIBIT 10.22(b)

AMENDMENT NO. 3

(dated and effective November 7, 2005)

to

CREDIT AGREEMENT

(that was dated as of September 14, 2004)

by and among

LASALLE BANK NATIONAL ASSOCIATION,

as Administrative Agent and Co-Lead Arranger,

WACHOVIA CAPITAL MARKETS, LLC, as Co-Lead Arranger,

WACHOVIA BANK, NATIONAL ASSOCIATION, as Co-Syndication Agent,

NATIONAL CITY BANK OF THE MIDWEST, as Co-Syndication Agent,

the LENDERS, and

CENTENE CORPORATION,

as Company

In consideration of their mutual agreements herein and for other sufficient consideration, the receipt of which is hereby acknowledged, CENTENE CORPORATION, a Delaware corporation (Company), LASALLE BANK NATIONAL ASSOCIATION (Administrative Agent), and the Lenders agree as follows:

1. Definitions; Section References. The term Original Loan Agreement means the Credit Agreement dated as of September 14, 2004 among Company, Administrative Agent, and the Lenders party thereto, as amended by that certain Amendment No. 1 thereto dated as of July 18, 2005, as amended by that certain Amendment No. 2 thereto dated as of September 9, 2005. The term this Amendment means this Amendment No. 3. The term Loan Agreement means the Original Loan Agreement as amended by this Amendment. Capitalized terms used and not otherwise defined herein have the meanings defined in the Loan Agreement. Section and Exhibit references are to sections of, and exhibits to, respectively, the Original Loan Agreement unless otherwise specified.

2. Conditions to Effectiveness of this Amendment. This Amendment is effective as of November 7, 2005, but only if, on or before 12:00 noon Chicago time on November 7, 2005, (i) this Amendment has been duly executed by Company, Administrative Agent, and Required Lenders, and (ii) all of the documents listed on Exhibit A to this Amendment have been delivered and, as applicable, executed, sealed, attested, acknowledged, certified, or authenticated, each in form and substance satisfactory to Administrative Agent, and all of the requirements described in Exhibit A to this Amendment shall have been met.

3. Amendments to Original Loan Agreement. The Original Loan Agreement is hereby amended as follows:

3.1. Use of Proceeds. Section 10.6 is amended by inserting the following after the words “for Acquisitions permitted by Section 11.5,”: “for redemptions by Company of Capital Securities consisting of its commons shares in accordance with, and to the extent permitted by, Section 11.4,”.

3.2. Restricted Payments. Section 11.4 is deleted in its entirety and replaced with the following:

11.4 Restricted Payments. Not, and not permit any other Loan Party to, (a) make any distribution to any holders of its Capital Securities (except for dividends or distributions from a Subsidiary to the Company), (b) purchase or redeem any of its Capital Securities (except as provided below), (c) pay any management fees or similar fees to any of its equityholders or any Affiliate thereof, (d) make any redemption, prepayment, defeasance, repurchase or any other payment in respect of any Subordinated Debt, (e) make any loans or advances to a shareholder, (f) make any contribution to, donation to, loan to, investment in, or any other transfer of funds or property to any Charitable Foundation, or (g) set aside funds for any of the foregoing. Notwithstanding the foregoing, so long as no Unmatured Event of Default or Event of Default has occurred and is continuing or could reasonably be expected to occur as a result thereof, (i) any Subsidiary may pay dividends or make other distributions to a domestic Wholly-Owned Subsidiary, (ii) the Company may make a distribution to holders of its Capital Securities in the form of stock of the Company, (iii) in lieu of fractional shares in association with a stock dividend, the Company may pay cash dividends in an aggregate amount not exceeding $1,000,000 in any Fiscal Year and (iv) Company may redeem its Capital Securities consisting of common shares so long as (1) the aggregate purchase price for the common shares redeemed from and after the date of this Agreement does not exceed $75,000,000, (2) all such redemptions are consummated on or before November 7, 2007, and (3) on the Business Day of any such redemption when exceeding $25,000,000, Company delivers to Administrative Agent a summary with respect to such redemption, including the date and the aggregate Dollar amount thereof, and a calculation demonstrating compliance with all the financial ratios and restrictions set forth in Section 11.14 both as of the date thereof (based on a computation period of the twelve calendar month period most recently ended) and on a pro forma basis after giving effect to such redemption for up to the maximum amount allowed. In addition, notwithstanding the foregoing, the Company or any other Loan Party may make contributions to a Charitable Foundation so long as (I) no Unmatured Event of Default or Event of Default has occurred and is continuing or could reasonably be expected to occur as a result thereof, (II) such contribution could not reasonably be expected to have a Material Adverse Effect, (III) such contributions are treated for accounting purposes by the Company as an expense and deducted in the calculation of Consolidated Net Income (and EBITDA), and (IV) such Charitable Foundation is exempt from taxation pursuant to Section 501(c)(3) of the Code.

4. Representations and Warranties. Company hereby represents and warrants to Administrative Agent and each Lender that (i) this Amendment and each and every other document and instrument delivered by Company in connection with this Amendment (each, an Amendment Document and, collectively, the Amendment Documents) has been duly authorized by its Board of Directors, (ii) no consents are necessary from any third Person for its execution, delivery or performance of the Amendment Documents to which it is a party which have not been obtained and a copy thereof delivered to Administrative Agent, (iii) each of the Amendment Documents to which it is a party constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms, except to the extent that the enforceability thereof against it may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforceability of creditors’ rights generally or by equitable principles of general application (whether considered in an action at law or in equity), (iv) all of the representations and warranties contained in the Loan Agreement, as amended hereby, are true and correct with the same force and effect as if made on and as of the effective date of this Amendment,

2

except that with respect to the representations and warranties made regarding financial data, such representations and warranties are hereby made with respect to the most recent financial statements and other financial data (in the form required by the Original Loan Agreement) delivered by it to Administrative Agent, and (v) there exists no Unmatured Event of Default or Event of Default under the Original Loan Agreement.

5. Effect of Amendment. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Administrative Agent or the Lenders under the Original Loan Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Original Loan Agreement or any of the other Loan Documents or any Unmatured Event of Default or Event of Default, nor act as a release or subordination of the Liens of Administrative Agent under the Loan Documents, except as expressly provided herein. Each reference in the Original Loan Agreement to the Agreement, hereunder, hereof, herein, or words of like import, shall be read as referring to the Original Loan Agreement as amended hereby. Each reference in the other Loan Documents to the Loan Agreement shall be read as referring to the Original Loan Agreement, as amended hereby.

6. Reaffirmation. Company hereby acknowledges and confirms that (i) except as expressly amended hereby, the Original Loan Agreement and other Loan Documents remain in full force and effect, (ii) the Loan Agreement, as amended hereby, is in full force and effect, (iii) it has no defenses to its obligations under the Loan Agreement or any of the other Loan Documents to which it is a party, (iv) the Liens of Administrative Agent under the Loan Documents continue in full force and effect and have the same priority as before this Amendment except as expressly provided herein, and (v) it has no claim against Administrative Agent or any Lender arising from or in connection with the Loan Agreement or the other Loan Documents.

7. Counterparts. This Amendment may be executed by the parties hereto on any number of separate counterparts, each of which shall be deemed an original, but all of which counterparts taken together shall constitute one and the same instrument. It shall not be necessary in making proof of this Amendment to produce or account for more than one counterpart signed by the party to be charged.

8. Counterpart Facsimile Execution. This Amendment, or a signature page thereto intended to be attached to a copy of this Amendment, signed and transmitted by facsimile machine or telecopier shall be deemed and treated as an original document. The signature of any Person thereon, for purposes hereof, is to be considered as an original signature, and the document transmitted is to be considered to have the same binding effect as an original signature on an original document. At the request of any party hereto, any facsimile or telecopy document is to be re-executed in original form by the Persons who executed the facsimile or telecopy document. No party hereto may raise the use of a facsimile machine or telecopier or the fact that any signature was transmitted through the use of a facsimile or telecopier machine as a defense to the enforcement of this Amendment.

9. Governing Law. This Amendment and the rights and obligations of the parties hereunder shall be governed by and construed and interpreted in accordance with the internal laws of the State of Illinois applicable to contracts made and to be performed wholly within such state, without regard to choice or conflict of laws provisions.

10. Section Titles. The section titles in this Amendment are for convenience of reference only and shall not be construed so as to modify any provisions of this Amendment.

3

11. Incorporation By Reference. Administrative Agent, the Lenders, and Company hereby agree that all of the terms of the Loan Documents are incorporated in and made a part of this Amendment by this reference.

12. Statutory Notice - Oral Commitments. Nothing contained in such notice shall be deemed to limit or modify the terms of the Loan Documents or this Amendment:

ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (COMPANY) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

COMPANY ACKNOWLEDGES THAT THERE ARE NO OTHER AGREEMENTS BETWEEN ADMINISTRATIVE AGENT OR ANY LENDER AND COMPANY, ORAL OR WRITTEN, CONCERNING THE SUBJECT MATTER OF THE LOAN DOCUMENTS, AND THAT ALL PRIOR AGREEMENTS CONCERNING THE SAME SUBJECT MATTER, INCLUDING ANY PROPOSAL, TERM SHEET OR LETTER, ARE MERGED INTO THE LOAN DOCUMENTS AND THEREBY EXTINGUISHED.

{remainder of page intentionally left blank}

4

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by appropriate duly authorized officers as of the date first above written.

Company:
CENTENE CORPORATION
By:	/s/ Karey L. Witty
Name:	Karey L. Witty
Title:	Senior Vice President and CFO
Administrative Agent:
LASALLE BANK NATIONAL ASSOCIATION
By:	/s/ Sam L. Dendrinos
Name:	Sam L. Dendrinos
Title:	First Vice President

Lenders:
LASALLE BANK NATIONAL ASSOCIATION
By:	/s/ Sam L. Dendrinos
Name:	Sam L. Dendrinos
Title:	First Vice President
WACHOVIA BANK, NATIONAL ASSOCIATION
By:	/s/ Jeanette A. Griffin
Name:	Jeanette A. Griffin
Title:	Director
NATIONAL CITY BANK OF THE MIDWEST
By:	/s/ William J. Tunis
Name:	William J. Tunis
Title:	Vice President
SUNTRUST BANK
By:	/s/ Gregory M. Ratliff
Name:	Gregory M. Ratliff
Title:	Vice President
REGIONS BANK
By:	/s/ Anne D. Silvestri
Name:	Anne D. Silvestri
Title:	Vice President

EX-10.24

EXHIBIT 10.24

Summary of Board of Director Compensation

On February 7, 2005, the board of directors (the “board”) of Centene Corporation (the “Corporation”) adopted a compensation arrangement for directors who are not employees of the Corporation (the “Outside Directors”), effective as of the date of the Corporation’s 2005 Annual Meeting of Stockholders. The compensation arrangement provides for the following:

(i) a quarterly retainer fee of $18,750 for each Outside Director, all of which amount shall be eligible, at the election of such Outside Director, for payment pursuant to the Corporation’s Non-Employee Directors Deferred Stock Compensation Plan;

(ii) an additional quarterly retainer fee of $2,500 for the Chairman of the Audit Committee of the board, all of which amount shall be eligible, at the election of such Outside Director, for payment pursuant to the Corporation’s Non-Employee Directors Deferred Stock Compensation Plan;

(iii) an additional quarterly retainer fee of $1,250 for the Chairman of the Compensation Committee or Nominating and Governance Committee (or any successor committee to either of such committees) of the board, all of which amount shall be eligible, at the election of such Outside Director, for payment pursuant to the Corporation’s Non-Employee Directors Deferred Stock Compensation Plan; and

(iv) a grant of restricted shares of common stock to each Outside Director, which (a) shall be granted as of the date of each of the Corporation’s Annual Meeting of Stockholders, beginning in 2005, (b) shall be granted in a number equal to $75,000 divided by the last reported sale price of the common stock of the Corporation on the New York Stock Exchange on the trading day immediately preceding the grant date, rounded to the nearest whole number, and (c) shall vest in full as of the immediately succeeding Annual Meeting of Stockholders, provided that, with respect to such grant as of any such Annual Meeting, the Compensation Committee of the board may determine that the Corporation shall, in lieu of granting such restricted shares as of any such Annual Meeting of Stockholders, grant common stock options, restricted stock units, stock appreciation rights or other equity-based incentives payable in common stock having a deemed value (as determined by such Committee) of $75,000.

In addition, the board adopted a policy, effective February 7, 2005, under which the Corporation shall grant each Outside Director who is first elected to the board, as of the date on which such Outside Director is first elected to the board and without the need for any further action by the board or any committee thereof, a non-qualified stock option under the Corporation’s 2003 Stock Incentive Plan to purchase 10,000 shares of common stock of the Corporation, which option (i) shall have an exercise price equal to the last reported sale price of the common stock of the Corporation on the New York Stock Exchange on the trading day immediately preceding the grant date and (ii) shall vest in three installments, with 3,334 shares vesting on the first anniversary of the grant date and an additional 3,333 shares vesting on each of the second and third anniversaries of the grant date.

On February 6, 2006 the board amended this policy, effective May 1, 2006, to increase the quarterly retainer discussed in point (i) above to $25,000, provided that the Outside Director elect 100% payment pursuant to the Corporation’s Non-Employee Directors Deferred Stock Compensation Plan.

EX-10.25

Exhibit 10.25

Summary of Compensatory Arrangements with Executive Officers

The compensation committee of the board of directors approved a schedule of the following fiscal year 2005 performance bonuses and fiscal year 2006 base salaries for each of our named executive officers:

Name and Principal Position	2005 Bonus		2006 Base Salary
Michael F. Neidorff Chairman and Chief Executive Officer	$	1,000,000	$	950,000
Joseph P. Drozda, Jr., M.D. Executive Vice President, Chief Medical Officer	$	50,000	$	395,000
James D. Donovan, Jr. Senior Vice President, Health Plans	$	75,000	$	400,000
William N. Scheffel Senior Vice President, Specialty Companies	$	100,000	$	425,000
Karey L. Witty Senior Vice President, Chief Financial Office, Secretary and Treasurer	$	100,000	$	400,000

The basis for awarding bonuses, if any, to the executive officers named above shall be determined in accordance with the provisions of their respective employment agreements.

EX-12.1

Exhibit 12.1

Centene Corporation

Computation of ratio of earnings to fixed charges

($ in thousands)

	Year ended December 31,
	2005		2004		2003		2002		2001
Earnings:
Pre-tax earnings from continuing operations	$	85,856	$	70,287	$	51,893	$	41,136	$	22,026
Addback:
Fixed charges		6,506		2,489		1,232		915		1,058
Total earnings	$	92,362	$	72,776	$	53,125	$	42,051	$	23,084
Fixed Charges:
Interest expense	$	3,990	$	680	$	194	$	45	$	362
Interest component of rental payments (1)		2,516		1,809		1,038		870		696
Total fixed charges	$	6,506	$	2,489	$	1,232	$	915	$	1,058
Ratio of earnings to fixed charges		14.20		29.24		43.12		45.96		21.82

(1) Estimated at 33% of rental expense as a reasonable approximation of the interest factor.

EX-21

Exhibit 21

List of Subsidiaries

AirLogix, Inc., a Delaware corporation

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, LLC, a California LLC

Cenpatico Behavioral Health of Texas, Inc., a Texas corporation

Centene Company of Texas, LP, a Texas limited partnership

Centene Finance Corporation, a Delaware corporation *

Centene Holdings, LLC, a Delaware LLC

Centene Management Company, LLC, a Wisconsin LLC

Centene Plaza Redevelopment Corporation, a Missouri corporation

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

NurseWise Holdings, LLC, a Delaware LLC

NurseWise, LP, a Delaware limited partnership

Peach State Health Plan, Inc., a Georgia corporation

Superior HealthPlan, Inc., a Texas corporation

University Health Plans, Inc., a New Jersey corporation

U.S. Script, Inc., a Delaware 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 which appear in this Form 10-K.

/s/    PRICEWATERHOUSECOOPERS LLP

St. Louis, Missouri

February 23, 2006

EX-23.(A)

Exhibit 23(a)

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Centene Corporation:

We 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 reports dated February 23, 2006, with respect to the consolidated balance sheet of Centene Corporation and subsidiaries (the Company) as of December 31, 2005, the related consolidated statements of earnings, stockholders’ equity and cash flows for the year then ended, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of Centene Corporation.

Centene Corporation acquired Airlogix, Inc. during 2005, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, Airlogix, Inc.’s internal control over financial reporting associated with total assets of $44.0 million and total revenues of $8.2 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2005. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Airlogix, Inc.

/s/ KPMG LLP

St. Louis, Missouri

February 23, 2006

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 Rules 13a-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, 2006

/s/    MICHAEL F. NEIDORFF

Michael F. Neidorff

Chairman and Chief Executive Officer
(principal executive officer)

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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 Rules 13a-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, 2006

/s/    KAREY L. WITTY

Karey L. Witty

Senior Vice President, Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer)

81

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, 2005, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, Michael F. Neidorff, Chairman 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, 2006

/s/    MICHAEL F. NEIDORFF

Michael F. Neidorff

Chairman and Chief Executive Officer
(principal executive officer)

82

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, 2005, 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, 2006

/s/    KAREY L. WITTY

Karey L. Witty

Senior Vice President, Chief Financial Officer, Secretary and Treasurer (principal financial and accounting officer)

83