<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
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 33-99624
CHOICECARE CORPORATION
OHIO 31-1446609
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
655 EDEN PARK DRIVE, SUITE 400 45202
CINCINNATI, OHIO (Zip Code)
(Address of Principal Executive Offices)
(513) 784-5200
(Registrant's telephone number, including area code)
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
--- ---
As of August 2, 1996, 14,853,944 shares of ChoiceCare Corporation common stock
were outstanding.
<PAGE> 2
CHOICECARE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income for the three
month periods ended June 30, 1996 and 1995 3
Consolidated Statements of Income for the six
month periods ended June 30, 1996 and 1995 4
Consolidated Balance Sheets at June 30, 1996 and
December 31, 1995 5
Consolidated Statements of Cash Flows for the
six month periods ended June 30, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURE 17
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHOICECARE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1995
---- ----
<S> <C> <C>
REVENUES:
Premium revenue $ 70,777 $ 66,022
Management services revenue 3,440 3,816
Other operating revenue 638 172
-------- --------
Total Operating Revenues 74,855 70,010
-------- --------
EXPENSES:
Health care services
Physician services 28,573 26,624
Hospital services 23,780 22,551
Pharmacy services 8,891 7,440
-------- --------
Total Health Care Services 61,244 56,615
Selling, general and administrative expenses 14,021 13,164
-------- --------
Total Operating Expenses 75,265 69,779
OPERATING INCOME (LOSS) (410) 231
OTHER INCOME (EXPENSES)
Investment income, net 1,003 3,414
Gain on assignment of Medicaid contract 4,554 --
Income from agreement termination -- 3,350
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,147 6,995
PROVISION FOR INCOME TAXES 1,048 --
-------- --------
NET INCOME $ 4,099 $ 6,995
======== ========
</TABLE>
<TABLE>
<CAPTION>
PRO
FORMA
-----
<S> <C> <C>
EARNINGS PER SHARE $ .29 $ .33
======== ========
AVERAGE NUMBER OF SHARES OUTSTANDING 14,229,047 13,500,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
CHOICECARE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1995
---- ----
<S> <C> <C>
REVENUES:
Premium revenue $ 141,285 $ 129,215
Management services revenue 6,859 7,719
Other operating revenue 761 347
--------- ---------
Total Operating Revenues 148,905 137,281
--------- ---------
EXPENSES:
Health care services
Physician services 58,717 52,272
Hospital services 48,297 46,393
Pharmacy services 17,161 14,088
--------- ---------
Total Health Care Services 124,175 112,753
Selling, general and administrative expenses 28,684 25,812
--------- ---------
Total Operating Expenses 152,859 138,565
OPERATING LOSS (3,954) (1,284)
OTHER INCOME (EXPENSES)
Investment income, net 2,153 5,101
Gain on assignment of Medicaid contract 4,554 --
Income from agreement termination -- 3,350
--------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,753 7,167
PROVISION FOR INCOME TAXES 1,048 --
--------- ---------
NET INCOME $ 1,705 $ 7,167
========= =========
</TABLE>
<TABLE>
<CAPTION>
PRO
FORMA
-----
<S> <C> <C>
EARNINGS PER SHARE $ .12 $ .34
========= =========
AVERAGE NUMBER OF SHARES OUTSTANDING 13,864,523 13,500,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
CHOICECARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 30,889 $ 12,622
Cash held in escrow -- 28,000
Securities available-for-sale 66,293 73,009
Premiums receivable 4,622 7,637
Health care receivables 3,044 6,251
Other current assets 5,833 5,545
--------- ---------
Total Current Assets 110,681 133,064
PROPERTY AND EQUIPMENT, net 10,406 10,258
OTHER LONG-TERM ASSETS 4,635 3,865
--------- ---------
Total Assets $ 125,722 $ 147,187
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Medical costs payable $ 44,974 $ 46,754
Accounts payable and accrued liabilities 11,226 14,829
Amounts due to vendor 6,200 --
Unearned premiums 4,057 4,104
Hospital risk pool liability 339 5,600
Medical risk pool liability 9,230 10,081
Settlement liability -- 28,000
--------- ---------
Total Current Liabilities 76,026 109,368
LONG-TERM LIABILITIES 2,873 3,290
--------- ---------
Total Liabilities 78,899 112,658
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, without par value,
4,000,000 shares authorized; none issued -- --
Common stock, without par or stated value,
45,000,000 shares authorized; 14,853,944
shares issued and outstanding at June 30, 1996
(13,500,000 at December 31, 1995) 12,025 --
Net unrealized gains (losses) on securities
available-for-sale (590) 846
Retained earnings 35,388 33,683
--------- ---------
Total Shareholders' Equity 46,823 34,529
--------- ---------
Total Liabilities and Shareholders' Equity $ 125,722 $ 147,187
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
CHOICECARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1996 1995
---- ----
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES $ (2,298) $ (3,511)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from sale of investments 35,875 87,091
Payments for purchase of investments (30,763) (84,027)
Receipts from assignment of Medicaid contract 5,000 --
Additions to property and equipment (1,572) (1,614)
Other -- (215)
-------- --------
Net cash provided by investing activities 8,540 1,235
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts from sale of common stock, net 12,025 --
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 18,267 (2,276)
CASH AND CASH EQUIVALENTS, beginning of period 12,622 15,614
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 30,889 $ 13,338
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
CHOICECARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
ChoiceCare Corporation (the "Company") is an Ohio for-profit
corporation, which is a majority-owned subsidiary of Tristate
Foundation for Health (the "Foundation"), an Ohio not-for-profit
corporation. On October 1, 1995, the Foundation transferred
substantially all of the operating assets and liabilities relating to
its managed health care operations to the Company in exchange for all
of the issued and outstanding shares of the Company. Contemporaneously,
the Company transferred the assets and liabilities of the managed
health care operations to its wholly-owned subsidiary, ChoiceCare
Health Plans, Inc., in exchange for all of its issued and outstanding
common shares. These events are collectively referred to as the
"Restructuring."
During June 1996, a requested ruling from the Internal Revenue Service
was received confirming that the Foundation incurred no tax liability
as a result of the Restructuring and continues to be recognized as a
tax exempt organization subsequent to the Restructuring.
The consolidated financial statements for the interim periods included
herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission,
with the financial statements for the 1995 interim periods having been
derived from audited amounts for the nine-month period ended September
30, 1995. Although certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, management believes that the
disclosures are adequate to make the information presented not
misleading. Operating results for the interim periods are not
necessarily indicative of results for the full fiscal year. It is
suggested that these consolidated financial statements and notes be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Post-Effective Amendment No. 2
to Form S-1, as filed with the Securities and Exchange Commission on
April 1, 1996, and its Amended Prospectus dated April 1, 1996.
The pro forma earnings per share information reflected in the
accompanying 1995 Consolidated Statement of Income is presented solely
to give effect to the estimated provision for income taxes that would
have been reported in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" had the Company filed
federal, state and local income tax returns as a for-profit
corporation, based on an assumed effective federal, state and local tax
rate of 35.5%. The pro forma earnings per share information is based
upon 13,500,000 issued and outstanding shares of common stock. See Note
4.
Certain reclassifications have been made to the 1995 financial
statements to conform with the 1996 presentation.
7
<PAGE> 8
NOTE 2. ACCOUNTING POLICIES
The consolidated financial statements presented in this report have
been prepared in accordance with the accounting policies described in
Note 2 of Notes to Consolidated Financial Statements included in the
aforementioned Post-Effective Amendment No. 2 to Form S-1 and Amended
Prospectus and reflect all adjustments consisting solely of normal
recurring adjustments which, in the opinion of management, are
necessary for a fair statement of the results of the interim periods
presented. While management believes that the procedures followed in
the preparation of the consolidated financial statements for the
interim periods are reasonable, certain estimated amounts are dependent
upon current facts and other information that may change subsequently
during the fiscal year.
NOTE 3. PER SHARE DATA
Earnings per share for the three and six months ended June 30, 1996 are
based on the weighted average number of shares of common stock
outstanding during the periods. The effect of the common stock
equivalents for these periods (resulting from the granting of stock
options -- see Note 6) was not significant. Fully diluted earnings per
share for these periods is not significantly different from earnings
per share set forth in the Consolidated Statements of Income.
NOTE 4. STOCK TRANSACTIONS
Pursuant to the Company's stock offering that terminated on May 1,
1996, approximately 1.36 million shares of common stock were purchased
by over 1,000 shareholders. Gross proceeds from the offering totaled
$13,539 and were reduced by $1,514 of offering related expenses, which
were comprised of underwriting discounts and commissions ($706) and
other expenses incurred in connection with the offering ($808). The
$12,025 of net proceeds are reflected as Common Stock in the
accompanying June 30, 1996 Consolidated Balance Sheet. Had such newly
issued shares been outstanding from the beginning of the three and six
month periods ended June 30, 1996, earnings per share for the periods
would have been $.28 and $.11, respectively.
On October 1, 1995, the Company issued 100 shares of common stock to
the Foundation representing the initial shares issued as part of the
Restructuring. In subsequent transactions related to the Restructuring,
on January 5, 1996 and February 6, 1996, respectively, the Company
effected a 142,000-to-1 stock split and redeemed 700,000 shares for a
total consideration of $1.00, resulting in 13,500,000 shares
outstanding. The accompanying consolidated financial statements give
effect to all stock transactions related to the Restructuring as of the
earliest period presented.
NOTE 5. ASSIGNMENT OF MEDICAID CONTRACT
Pursuant to the April 11, 1996 agreement with Health Power HMO, Inc.
("Health Power"), a Columbus, Ohio-based health maintenance
organization, effective June 30, 1996, the Company assigned its
Medicaid provider agreement with the Ohio Department of Human Services
to Health Power. Consideration aggregating $5,000 in cash was received,
resulting in a gain of $4,554, after deducting a
8
<PAGE> 9
provision of approximately $446 for expenses related to this
transaction. During the three and six months ended June 30, 1996, the
Company recognized premium revenues of approximately $5,350 and
$10,750, respectively, related to members enrolled in its Special
Health Medicaid product ($3,000 and $5,900, respectively, in the three
and six months ended June 30, 1995). The absence of the revenue from
this product after June 30, 1996 will not have a material effect on the
Company's future operating income.
NOTE 6. LONG TERM STOCK INCENTIVE PLAN
On June 5, 1996, options to purchase 1,132,764 shares of the Company's
common stock at an exercise price equal to the then-current market
value of $10 were granted pursuant to the Company's Long Term Stock
Incentive Plan. With the exception of the 375,000 options granted to
the Company's Chief Executive Officer, the options have ten year terms
and become exercisable ratably over the four annual grant anniversary
dates following the date of grant. The options granted to the Chief
Executive Officer have ten year terms and become exercisable over the
three annual grant anniversary dates following the date of grant.
NOTE 7. COMMITMENTS AND CONTINGENCIES
VENDOR AGREEMENT - The Company has agreements with various vendors for
services, including the management of medical services, certain of
which provide for the monthly prepayment of fees. The Company believes
that one such vendor has experienced a decline in the ratio of cash and
cash equivalents to claims outstanding. The Company believes that the
vendor has, to date, continued to meet its financial obligations to the
Company. By agreement on March 12, 1996, the vendor paid the Company
$6,000, which represents a portion of the amounts previously paid by
the Company to the vendor, and agreed to adjust such funds quarterly to
approximate ChoiceCare-related outstanding claims liabilities. Such
amount is reflected as Amounts due to vendor in the accompanying June
30, 1996 Consolidated Balance Sheet. The vendor has waived its right to
avoid and recover such funds (which waiver may be ineffective) in the
event of bankruptcy proceedings. However, there exists a risk that if
the vendor files for bankruptcy protection or if an involuntary
petition is filed against the vendor, any payments made by the vendor
within 90 days of the commencement of the bankruptcy case may be
avoided and recovered by the vendor as a preferential transfer. As a
result of the above, the Company may be obligated to pay for unpaid
claims of service through the date of bankruptcy. Such amounts are
currently estimated to be approximately $6,200 and would be in addition
to the amount previously paid by the Company to the vendor that were
anticipated to cover such claims. The Company's management believes it
unlikely that current circumstances will result in this vendor entering
bankruptcy proceedings.
The aforementioned 90 day period has expired in relation to the payment
received from the vendor and, to date, the vendor has made no attempt
to seek any action which would serve to nullify the aforementioned
arrangement.
9
<PAGE> 10
LITIGATION - The Company is routinely involved in litigation matters
arising in the normal course of business. Management believes, based
upon the advice of counsel, that these actions and proceedings and
losses, if any, resulting from the final outcome thereof, will not be
material in the aggregate to the Company's financial position.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
THREE MONTHS ENDED JUNE 30, 1996
For the three months ended June 30, 1996 (the "1996 quarter"), the Company
generated net income of $4,099, as compared to $6,995 for the corresponding
prior year quarter (the "1995 quarter") during which the Company operated as a
not-for-profit corporation. See Note 1 of Notes to Consolidated Financial
Statements. Net income for these quarters were impacted by the following
non-recurring transactions:
1996 Quarter - 1) $4,554 pre-tax gain on the assignment of the
Company's Medicaid contract, and 2) $540 earned in
connection with the risk sharing agreement with the
Company's pharmacy vendor, which is reflected in Other
Operating Revenue
1995 Quarter - $3,350 of income from termination of an agreement with
another managed care entity
An increase in member months for the Company's prepaid products and an increase
in premium rates for such products, as evidenced by an approximate 3.4% average
increase in premium rates for fully-insured groups renewing during the first six
months of 1996, resulted in the Company experiencing an increase in premium
revenue as compared to the 1995 quarter. These positive trends, as well as a
retention rate of approximately 95% for groups renewing during the first six
months of 1996, were achieved in an increasingly competitive environment within
the Company's service area, following two years of flat or decreasing premium
rates. Offsetting the effects of this membership growth and increase in premium
rates for renewing fully-insured groups were the following factors, which
combined to yield a $410 operating loss for the 1996 quarter, as compared to
$231 of operating income for the 1995 quarter:
- decreased self-funded membership, resulting largely from the
downsizing activities of a large self-funded employer group;
- increased health care professional services utilization levels
and drug costs compared to the 1995 quarter; and
- continued industry-wide health care cost inflation trends,
particularly pharmacy benefits.
SIX MONTHS ENDED JUNE 30, 1996
During the six months ended June 30, 1996, the Company achieved net income of
$1,705, compared to $7,167 in the corresponding prior year period, and operating
losses of $3,954 and $1,284 were reported in each of the respective periods.
While these comparative results can primarily be attributed to the year-to-date
effects of the factors previously noted in the discussion of quarterly results,
the six month year-over-year declines also reflect the continuing effects of the
Company's decision to decrease overall premium rates throughout 1995 (consistent
with its previous not-for-profit mission), as it relates to employer groups
having other than calendar year renewals.
11
<PAGE> 12
RESULTS OF OPERATIONS
The following table sets forth selected operating data, expressed as a
percentage of total operating revenues, and the medical-expense ratio for the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Premiums 94.6% 94.3% 94.9% 94.1%
Management services fees 4.6 5.5 4.6 5.6
Other .8 .2 .5 .3
----- ----- ----- -----
Total 100.0 100.0 100.0 100.0
----- ----- ----- -----
OPERATING EXPENSES:
Health care services 81.8 80.9 83.4 82.1
Selling, general and
administrative 18.7 18.8 19.3 18.8
----- ----- ----- -----
Total 100.5 99.7 102.7 100.9
----- ----- ----- -----
Operating income (loss) (.5) .3 (2.7) (.9)
Investment income, net 1.3 4.9 1.4 3.7
Gain on assignment of Medicaid
contact 6.1 -- 3.1 --
Income from agreement termination -- 4.8 -- 2.4
----- ----- ----- -----
Income before provision
for income taxes 6.9 10.0 1.8 5.2
Provision for income taxes 1.4 -- .7 --
----- ----- ----- -----
Net income 5.5% 10.0% 1.1% 5.2%
===== ===== ===== =====
MEDICAL-EXPENSE RATIO* 86.5% 85.8% 87.9% 87.3%
MEMBER MONTHS FOR THE PERIOD:
Prepaid 610,557 570,711 1,220,437 1,112,477
Self-funded 259,387 279,825 520,992 562,117
------- ------- --------- ---------
Total 869,944 850,536 1,741,429 1,674,594
======= ======= ========= =========
PMPM DATA:
Premium revenue $115.92 $115.68 $115.77 $116.15
Management services revenue 13.26 13.64 13.17 13.73
Health care services expense 100.31 99.20 101.75 101.35
Selling, general and
administrative expense 16.12 15.48 16.47 15.41
</TABLE>
* Health care services expense as a percentage of premiums.
12
<PAGE> 13
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
PREMIUM REVENUE -
The 7.2% increase in premium revenue during the 1996 quarter reflects a 7.0%
increase in member months for the Company's prepaid products and a .2% increase
in the weighted average PMPM premium. The increase in weighted average PMPM
premium can primarily be attributed to the aforementioned average increase in
premium rates, somewhat offset by the continued migration of the customer base
to the Company's more cost effective products and benefit structures.
MANAGEMENT SERVICES REVENUE -
The decrease in management services fees from self-funded employer groups
results primarily from the combined effects of a 7.3% decrease in self-funded
membership, due largely to the aforementioned downsizing activities of a large
self-funded employer group, and renegotiation of an increased rate with a
self-funded employer group during 1995, applied retroactively to the second
quarter of 1994.
Subsequent to June 30, 1996, the Company was successful in receiving a
commitment for the renewal of a multi-year contract, which will begin January 1,
1997, with an existing customer that accounts for approximately 39% of the
Company's total self-funded members. The customer has opted to also offer
another competitor's managed care plan. While management anticipates the Company
will retain a sizable amount of this customer's members, the possibility exists
that existing members will choose to enroll in competing health care plans
offered by the employer.
In addition, negotiations for the renewal of a multi-year contract are currently
ongoing with an existing customer that accounts for approximately 33% of the
Company's total self-funded members, with the customer's decision expected in
the near future. At the present time, the ultimate results of these negotiations
are unknown.
OTHER OPERATING INCOME -
The increase in other operating income is primarily attributable to the
aforementioned $540 earned during the 1996 quarter in connection with the risk
sharing agreement with the Company's pharmacy vendor for the contract year ended
May 1996. See discussion of pharmacy expense below.
HEALTH CARE SERVICES EXPENSE -
The 8.2% increase in total health care services expense during the 1996 quarter
reflects 1) the 7.0% increase in prepaid member months during the quarter; 2) an
11.7% increase in pharmacy expenses on a PMPM basis, resulting from continued
industry-wide drug cost inflation and lower amounts of rebate rates; and 3) a
.3% increase in physician expenses on a PMPM basis, due primarily to increased
health care professional services utilization levels, decreased cost per service
resulting from changes in the mix of service provided and refining downward the
Company's estimate of physician claims expense in the 1995 quarter. These
factors were partially offset by a 1.4% decrease in hospital expenses on a PMPM
basis, which can be attributed primarily to the net effects of 1) decreased
utilization; 2) increased inpatient cost per service, reflecting changes in the
mix of service provided and the effect of transitioning certain less complex
services to outpatient settings; 3) refinement downward of the Company's
estimate of hospital claims expense during the 1995 quarter; and 4) an increase
in amounts earned in connection with the Company's hospital risk/reward sharing
arrangements, due to the hospitals' performance against
13
<PAGE> 14
established targets. As a result of the 1.1% increase in health care services
expense on a PMPM basis outpacing the .2% increase in the weighted average PMPM
premium, the Company's medical-expense ratio increased to 86.5% in the 1996
quarter from 85.8% in the 1995 quarter.
During the 1996 quarter, the Company began implementation of several initiatives
designed to decrease health care services expense, particularly the pharmacy
expense component. However, there is no assurance that the benefits of such
efforts will be realized.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -
The 6.5% increase in expenses for selling, general and administrative ("SG&A")
costs in the 1996 quarter largely resulted from the 2.3% growth in overall
member months and the expenses incurred in connection with continued
infrastructure and new product investments made in order to raise the standard
of service provided to current members, to service anticipated membership growth
and to manage medical cost inflation effectively. Such increased expenses are
substantially comprised of 1) compensation resulting in large part from a net
increase in employees since the 1995 quarter of approximately 45, or 8%; 2)
commissions paid to sales brokers, as an increased number of smaller employer
groups are being sold through such sales channel; and 3) depreciation and
amortization expense, relating to computer hardware and software. The 1995
quarter included approximately $670 of expenses incurred in connection with the
Company's restructuring.
INVESTMENT INCOME -
During the 1996 quarter, the Company experienced a $2,411 decrease in net gains
realized on the investment portfolio as compared to the 1995 quarter. This
decline can primarily be attributed to 1) a decrease in the average outstanding
portfolio balance, which resulted largely from funding the Thompson litigation
settlement in October 1995; 2) the effect of equity investments comprising an
increased percentage of the Company's investment portfolio during the 1996
quarter, the earnings on which are not anticipated to be declared and recorded
until later in the year; and 3) unfavorable fixed income security market
conditions resulting in net realized losses on the sale of such investments
during the 1996 quarter.
OTHER NON-OPERATING INCOME -
During the 1996 quarter, the Company recognized the aforementioned $4,554 gain
on the assignment of its Medicaid contract. See Note 5 of Notes to Consolidated
Financial Statements.
The 1995 quarter included a $3,350 payment received in connection with the
termination of an agreement with another managed care entity. This amount
represented reimbursement for expenses incurred in 1994 and 1995 for negotiating
and implementing infrastructure changes to provide services under the agreement,
the cost of negotiating termination of the agreement and an element of
compensation for potential lost profits ChoiceCare may have realized under the
terms of the agreement.
INCOME TAX EXPENSE -
During the 1996 quarter, management conservatively revised its estimate of the
Company's 1996 effective tax rate. Accordingly, income tax expense has been
recorded at the highest tax rate applicable to the Company. The Company operated
as a tax exempt organization throughout the 1995 quarter.
14
<PAGE> 15
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
The majority of the factors previously noted in the quarter-to-quarter analysis
were also the primary factors contributing to the results for the six month
period ended June 30, 1996 (the "1996 period"), as compared to the corresponding
prior year period (the "1995 period"). As a result, with the exception of the
.3% decline in weighted average PMPM premium, the trends between the 1996 and
1995 year-to-date results are consistent in all material respects with the
previously analyzed quarter-to-quarter trends.
In addition to the aforementioned average increase in premium rates and the
continued migration of the customer base to the Company's more cost effective
products, the .3% decrease in weighted average PMPM premium, as compared to the
1995 period, also reflects the impact of the following factor existing primarily
in the first three months of 1996. The weighted average PMPM premium achieved
during the 1996 period reflects the continuing effects of the Company's decision
to decrease overall premium rates throughout 1995 (consistent with its previous
not-for-profit mission), as it relates to employer groups having other than
calendar year renewals.
FINANCIAL CONDITION
Net cash totaling $2,298 was used in operations during the first six months of
1996, resulting primarily from the net effects of 1) the $6,222 decrease in
receivables, due in large part to receiving payment of amounts due; 2) the
$3,603 decrease in accounts payable and accruals, reflecting the impact of
making payment on certain significant amounts owed at year-end; 3) the $5,261
decrease in the hospital risk pool liability, which resulted from the combined
impact of the hospitals' year-to-date performance against established targets
and the Company's payment during the 1996 period of amounts owed to the
hospitals for 1995; and 4) the receipt of $6,200 under a vendor agreement during
March 1996. See Note 7 of Notes to Consolidated Financial Statements for
discussion of the cash received under the aforementioned vendor agreement, and
the Company's related obligation. This use of cash was more than offset by the
$12,025 net proceeds from the sale of common stock and $8,540 of net cash
provided by investing activities, which reflects the net cash impact of
investment portfolio transactions and cash received from assignment of the
Company's Medicaid contract, less capital expenditures.
As of June 30, 1996, the Company's investment portfolio was comprised of debt
securities (80.3%), equity-based mutual funds (10.7%) and money market
instruments (9.0%), all of which are available to meet current obligations and
classified as securities available-for-sale in the accompanying Consolidated
Balance Sheet. Unfavorable fixed income security market conditions resulted in
unrealized losses on the investment portfolio totaling $590 as of June 30, 1996
compared to unrealized gains totaling $846 as of December 31, 1995. Such net
unrealized gains and losses are reflected as a separate component of equity in
the accompanying Consolidated Balance Sheets. The Company believes that its
investment portfolio will be sufficient to fund its liquidity needs for at least
the next 12 months.
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C>
10.(ii)(B)(12) Diagnostic Imaging Services Agreement between
ChoiceCare Health Plans, Inc. and Medicon, Inc.,
dated April 1, 1996
27. Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
The Company filed a Form 8-K dated April 25, 1996 reporting the signing
of the agreement providing for the assignment of the Company's Medicaid
provider agreement with the Ohio Department of Human Services to Health
Power HMO, Inc. See Note 5 of Notes to Consolidated Financial
Statements.
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements 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.
CHOICECARE CORPORATION
Date: August 12, 1996 By: /s/ Juan M. Fraiz
-------------------------------------
Juan M. Fraiz
Vice President and Chief Financial
Officer (Principal Financial Officer)
17
<PAGE> 1
Exhibit 10.(ii)(B)(12)
DIAGNOSTIC IMAGING SERVICES AGREEMENT
BETWEEN
MEDICON, INC.
AND
CHOICECARE
This Diagnostic Imaging Services Agreement (the "AGREEMENT")
is entered into as of April 1, 1996 (the "EFFECTIVE DATE") by and between
ChoiceCare Health Plans, Inc., an Ohio corporation ("CHOICECARE"), and Medicon,
Inc. d/b/a MEDICON ("MEDICON"), an Illinois corporation.
RECITALS
WHEREAS, ChoiceCare is a health maintenance organization and a
third party administrator which is in the business of arranging for the
provision of certain health care services to individuals who are beneficiaries
of contracts issued by ChoiceCare or who are entitled to health care benefits
under health plans which are maintained by employers, employee benefit plans,
union trusts, insurers, government agencies and other payors for which
ChoiceCare performs certain administrative duties;
WHEREAS, MEDICON is in the business of providing or arranging
for diagnostic imaging services through radiology providers and providing
radiology management services; and
WHEREAS, ChoiceCare and MEDICON have agreed to terminate the
previous Diagnostic Imaging Services Agreement between them, upon terms and
conditions agreeable to each, and to thereafter enter into a wholly new
agreement relating to the provision of Imaging Services as defined below; and
WHEREAS, the parties to this Agreement desire to enter into an
arrangement whereby MEDICON shall arrange for the provision of diagnostic
imaging services for Members of ChoiceCare.
NOW, THEREFORE, in consideration of the mutual covenants and
promises recited herein, the parties, intending to be legally bound, agree as
follows:
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings specified.
1
<PAGE> 2
1.1 CAPITATION PAYMENT. The amount per member per month paid by
ChoiceCare to MEDICON for diagnostic imaging services and related administrative
services as defined in Exhibit C, "Compensation."
1.2 COVERED SERVICES. Any health care service or supply for which
benefits are available under the applicable Health Plan.
1.3 Emergency. Unless otherwise defined in the applicable Health Plan,
a condition which arises suddenly and unexpectedly and for which immediate care
is necessary to prevent the death or serious impairment of the health of a
Member or to treat severe pain.
1.4 HEALTH PLAN. Any plan of health care benefits which is maintained
by a Plan Sponsor for its own employees or members or for groups of employees or
other groups and with respect to which ChoiceCare enters into an agreement or
arrangement with such Plan Sponsor under which ChoiceCare develops, maintains
and/or administers a network of Participating Providers to be used in connection
with such plan of health care benefits. A Health Plan may be, but need not be,
an HMO Plan, a POS Health Plan, a PPO Health Plan or an Other Payor Plan.
1.5 HMO PLAN. A Health Plan which provides for enrollment in the
ChoiceCare health maintenance organization.
1.6 IMAGING SERVICES. The diagnostic imaging services set forth in
"Program Design" of this Agreement, as amended from time to time, attached
hereto as Exhibit A ("Program Design").
1.7 MEMBER. Any individual who is eligible and enrolled for coverage
under Health Plan is participating in this diagnostic imaging services program
with MEDICON and who is eligible to receive Covered Services, regardless of
whether or not any such individual is referred to in the Health Plan as a
"Subscriber," "Enrollee," "Dependent," "Participant," "Insured," "Covered
Person," "Member" or otherwise.
1.8 OTHER PAYOR PLAN. A Health Plan under which an employer, insurer,
government agency or other Plan Sponsor bears financial responsibility for the
cost of Covered Services rendered to Members.
1.9 PARTICIPATING PROVIDER. With respect to any Health Plan, any health
care provider who or which agrees with ChoiceCare to render or arrange for
services or supplies for which benefits are available under such Health Plan, to
comply with the requirements of such Health Plan and to accept negotiated or
other binding fees as payment in full for services covered under such Health
Plan, whether individually or through a Group Practice Services Agreement.
1.10 PARTICIPATING RADIOLOGY PROVIDER OR "PRP". A provider who has
contracted with ChoiceCare to provide Imaging Services to Members.
1.11 PLAN SPONSOR. An employer, employee benefit plan, union trust,
health maintenance organization, insurer, government agency or other payor that
is a sponsor of a Health Plan or otherwise is the party contracting with
ChoiceCare for services with respect to a Health Plan.
2
<PAGE> 3
1.12 POINT OF SERVICE ("POS") HEALTH PLAN. A Health Plan in which
Members have indemnity coverage for certain services if rendered by
non-Participating Providers or by Participating Providers without a required
referral, authorization, or notification.
1.13 PREFERRED PROVIDER ORGANIZATION ("PPO") HEALTH PLAN. A Health Plan
which does not require that the in-network benefits of such plan must be
provided, managed or referred by a Primary Care Physician.
1.14 PRIMARY CARE PHYSICIAN. With respect to any Health Plan, a
Participating Provider who is a physician in the specialty of internal medicine,
pediatrics, family medicine or general practice who (i) provides initial and
primary care services to Members in such Health Plan, (ii) maintains the
continuity of a Member's medical care and (iii) initiates and manages referrals
to Participating Providers as required by the Health Plan.
1.15 PRODUCT. A Health Plan design characterized by a particular
combination of Covered Services, provider network and medical delivery system
rules and marketed under a specific product name. ChoiceCare's current Products
include, for example, the Primary Access, Select by ChoiceCare, Co-Choice and
New Health.
Additional Products may be developed by ChoiceCare from time to time.
ARTICLE 2 - SERVICES
2.1 PRP NETWORK. MEDICON and ChoiceCare will develop jointly
ChoiceCare's network of PRPs for the delivery of Imaging Services (the "PRP
Network"). ChoiceCare shall maintain final approval, however, of any network
design.
2.2 PRP NETWORK DEVELOPMENT. ChoiceCare shall enter into and maintain
the agreements with the PRP Network. ChoiceCare shall ensure that the PRP
Network provides adequate access for Members to receive Imaging Services in
accordance with the provisions of this Agreement. With the consent of
ChoiceCare, MEDICON may recommend limiting the number of PRPs in the PRP Network
when adequate access for Members to Imaging Services has been assured. Changes
to the composition or compensation of the PRP Network initiated by ChoiceCare
which materially increase or decrease MEDICON's costs in fulfilling this
Agreement shall prompt a renegotiation of the Capitation Payment. To provide
MEDICON with information relevant to the payment of claims for Imaging Services,
MEDICON shall have the right to obtain copies of the relevant portions of
ChoiceCare provider agreements, provided, however, that MEDICON shall not have a
right to those portions of the provider agreements which ChoiceCare considers
proprietary. To the extent any such proprietary portion contains information
which is relevant for MEDICON for the payment of claims for Imaging Services,
ChoiceCare shall provide MEDICON with such relevant information, upon request.
2.3 BILLING BY PROVIDERS. ChoiceCare shall require PRPs to submit
claims for Imaging Services to ChoiceCare for forwarding to MEDICON on Health
Care Financing Administration Form 1500, Uniform Billing Form (UB92), or in an
equivalent form and manner. ChoiceCare shall require its PRPs to use best
efforts to submit any such claim within thirty (30) days after the date of
service, provided however that there be a mechanism whereby a PRP may submit a
claim after such time if the PRP can demonstrate good cause for delay.
Notwithstanding the above, in
3
<PAGE> 4
no event shall MEDICON be responsible for or liable for any claim submitted to
ChoiceCare more than one hundred eighty (180) days after the date of service.
2.4 QUALITY ASSESSMENT/UTILIZATION MANAGEMENT PROGRAM. MEDICON shall
establish and implement a quality assessment/utilization management program for
Imaging Services that meets National Committee on Quality Assurance ("NCQA")
standards in consultation with ChoiceCare by August 1, 1996. MEDICON is
responsible for submitting to ChoiceCare an annual quality plan for the 1996
calendar year by August 1, 1996. The annual quality plans for subsequent
years,beginning with the quality plan for calendar year 1997, shall be developed
and submitted to ChoiceCare during the first quarter of each calendar year such
that it may be approved by ChoiceCare management and appropriate committee(s) by
no later than March 31 of that year. A critical analysis of the previous year's
annual quality plan will be reported to ChoiceCare by February 28 of each year
beginning with the critical analysis for 1996. Quarterly progress updates will
be presented by MEDICON to the Local Imaging Advisory Committee within 60 days
of the quarter end beginning with a report due by August 31 for the second
quarter of calendar year 1996. From time to time MEDICON may audit quality
assurance data reported by PRPs to verify data accuracy. ChoiceCare will have
the right to conduct office staff and provider satisfaction surveys of providers
and their staff providing Imaging Services from time to time as frequently as
quarterly and will report the results to MEDICON. MEDICON will cooperate with
such surveys and will use its best efforts to achieve a satisfaction rating
greater than 95%. After the initial term of this Agreement, a 95% satisfaction
rating for MEDICON in such surveys shall be required and such requirement shall
be included in the Service Standards and Reporting Requirements, as amended from
time to time, incorporated into this Agreement fully by reference and attached
hereto as Exhibit B (the "Service Standards and Reporting Requirements"), and
such satisfaction rating shall be subject to certain incentive sharing
arrangements if the satisfaction rating is less than 95%.
2.5 SERVICE STANDARDS AND REPORTING REQUIREMENTS. In addition to
MEDICON's other obligations under this Agreement, MEDICON shall perform in
accordance with the Service Standards and Reporting Requirements. MEDICON will
provide the reports required by the Service Standards and Reporting Requirements
to show compliance with the performance standards set forth in the Service
Standards and Reporting Requirements, and will provide the other reports
required by the Service Standards and Reporting Requirements, monthly by the
15th day of the following month or quarterly within 45 days after the end of the
previous calendar quarter, as specified in Service Standards and Reporting
Requirements. MEDICON's performance will be evaluated quarterly to determine if
it meets the standards set forth in the Service Standards and Reporting
Requirements. MEDICON's performance will be subject to the incentive sharing
arrangements described in Service Standards and Reporting Requirements. The
settlement process associated with the incentive sharing arrangements will be
conducted by ChoiceCare and MEDICON every six (6) months. The settlement of the
incentive sharing will be determined no later than November 1, 1996 for the 6
months ending September 30, 1996, and no later than May 1, 1997 for the 6 months
ending March 31, 1997.
2.6 PROVIDER EDUCATION. By August 1, 1996, MEDICON will develop a
detailed program and strategy to educate and service PRPs which meets
ChoiceCare's approval. Implementation of the program and strategy will be a
joint effort of ChoiceCare and MEDICON. MEDICON will comply with ChoiceCare's
standards in its interactions with PRPs and their staff. In addition, MEDICON
will provide medical director and program advisor support to the local Imaging
Advisory Council. Areas to be addressed through provider education include
program
4
<PAGE> 5
operations, report frequency and formats, assessments and quality improvement
strategies, clinical indications for diagnostic imaging examinations, and
strategies to educate PRPs regarding the cost-effective use of diagnostic
imaging studies. Failure to satisfy the provisions of this Section 2.6 shall be
considered a material breach of this Agreement.
2.7 PROVIDER SERVICES. MEDICON shall maintain a toll-free telephone
number for providers and PRPs to communicate with MEDICON regarding any matters
related to the Imaging Services agreed to hereunder, which will be operated in
accordance with the standards set forth in the Service Standards and Reporting
Requirements.
2.8 LICENSURE. MEDICON shall comply with all applicable local, state
and federal laws relating to the performance of MEDICON's obligations hereunder
during the term of this Agreement. ChoiceCare shall require that all PRPs and
all employees of such PRPs maintain all required licenses and/or certifications
during the term of their PRP agreement with ChoiceCare. In the course of
fulfilling its obligations under Section 2.6 above, MEDICON will be responsible
for the verification of PRPs and their employees compliance with all applicable
licensure requirements. Failure to verify such compliance shall be a material
breach of this Agreement.
ARTICLE 3 - PAYMENT AND CLAIMS PROCESSING
3.1 COMPENSATION AND PAYMENT OF PROVIDERS. ChoiceCare shall pay MEDICON
on a monthly basis the Capitation Payment set forth in Exhibit C. The obligation
for ChoiceCare to make the Capitation Payments described herein shall commence
upon the Effective Date specified in this Agreement. The monthly Capitation
Payment shall be sent by ChoiceCare to MEDICON by electronic funds transfer on
or before the 10th business day of each month. The payment shall be based on the
number of Members for the current month. Any retroactive adjustments to the
monthly payment based upon additions or deletions to ChoiceCare's member list
shall be made within ninety (90) days of the date of payment.
New radiology technologies that are approved for use
subsequent to the Effective Date of this Agreement may be added to the list of
Imaging Services only upon the agreement of the parties and appropriate
adjustments to the Capitation Payment.
The Capitation Payments made by ChoiceCare to MEDICON are to
be held by MEDICON on ChoiceCare's behalf and used by MEDICON solely for payment
due ChoiceCare's providers for Imaging Services rendered to Members under this
Agreement. In the event MEDICON voluntarily commences a case under the
Bankruptcy Code or an involuntary case is commenced against MEDICON under the
Bankruptcy Code, MEDICON agrees that the Capitation Payments paid to it by
ChoiceCare will not be included within MEDICON's estate within the meaning of
the Bankruptcy Code.
MEDICON will be solely responsible for making all payments
owed to (a) PRPs and (b) non-PRPs approved for payment in accordance with this
Agreement. MEDICON will indemnify and hold ChoiceCare harmless against all
claims, demands, liabilities, losses, damages, costs and expenses (including
reasonable attorneys' fees) that ChoiceCare may incur for payments due to
providers for the provision to Members of Imaging Services during the term of
this Agreement, or to collect amounts owed by MEDICON to providers during the
term of this
5
<PAGE> 6
Agreement, except for services not covered under this Agreement and except for
authorized coinsurance, deductibles and copayment amounts.
MEDICON will compensate PRPs and non-PRPs approved for
payment, in accordance with this Agreement, the Program Design (as defined
below), the Service Standards and Reporting Requirements, the Participating
Provider's Agreement with ChoiceCare, and all applicable ChoiceCare Health
Plans. The Program Design, as amended from time to time upon mutual agreement of
the parties, is incorporated fully into this Agreement by reference and is
attached hereto as Exhibit A (the "Program Design").
3.2 ELIGIBILITY INFORMATION. ChoiceCare shall provide MEDICON no less
frequently than monthly with Membership eligibility information on a product
specific basis or any other basis required for MEDICON to perform its
obligations under this Agreement in a format that is mutually agreeable to both
parties.
3.3 CLAIMS ADMINISTRATION. PRPs will submit claims to ChoiceCare for
Imaging Services provided to Members in accordance with such providers
agreements with ChoiceCare and ChoiceCare's procedures. ChoiceCare will process
the claims internally to determine whether the Imaging Services provided are
Covered Services. On a weekly basis, ChoiceCare will provide MEDICON with any
information from its claims processing systems which is reasonably required for
MEDICON to meet its claims processing obligations under this Agreement in a
format that is mutually agreeable to the parties. Upon receipt of such
information from ChoiceCare, MEDICON will process the claims for payment to
Participating Providers for Covered Services in accordance with the Program
Design and the Service Standards and Reporting Requirements.
ChoiceCare will handle all appeals of denial of payment for
services provided to Members in accordance with ChoiceCare's agreements with
Participating Providers and ChoiceCare's procedures as established from time to
time. ChoiceCare will report the decisions on such appeals to MEDICON within a
reasonable time thereafter. MEDICON will be bound by such determinations made by
ChoiceCare on appeal, provided that any expenditures incurred by MEDICON as a
result of ChoiceCare's decisions on such appeals are in accordance with the
Program Design.
3.4 IMAGING SERVICES REFERRALS. Except in the case of an Emergency or
upon the joint authorization of MEDICON and ChoiceCare, ChoiceCare shall require
Participating Providers to refer Members to PRPs for all Imaging Services.
Except in the case of an Emergency or prior approval by ChoiceCare, ChoiceCare
shall not approve payment of claims for Imaging Services that are submitted by
non-Participating Providers or Participating Providers who are not PRPs. In no
event shall MEDICON assume financial responsibility for the payment of such
claims, except in the case of an Emergency or upon the joint authorization of
MEDICON and ChoiceCare. Specific guidelines for administration of this provision
are included in the Program Design.
3.5 PARTICIPATING PROVIDER INFORMATION. ChoiceCare shall provide
MEDICON with names and addresses of Participating Providers on a product
specific basis or any other basis required for MEDICON to perform its
obligations under this Agreement. Such provider records shall be updated by
ChoiceCare on a monthly basis in a format that is mutually agreeable to both
parties.
6
<PAGE> 7
3.6 TREATMENT OF MEMBERS. MEDICON agrees to arrange for and approve
Covered Services to Members in at least the same manner, in accordance with the
same standards, as offered to other patients. MEDICON agrees not to discriminate
or permit providers to discriminate in the availability of treatment of Members
or the delivery of services to Members, either in the quality, quantity or type
of services rendered or in any other manner, on the basis of race, national
origin, place of residence, handicap, religion, sex, marital status, sexual
orientation, age, health status, need for services or source of payment.
3.7 MEMBER BILLING PROHIBITION. MEDICON agrees that in no event,
including but not limited to, non-payment by ChoiceCare, ChoiceCare's breach of
this Agreement or ChoiceCare's insolvency, shall MEDICON bill, charge, collect a
deposit from, seek compensation, remuneration or reimbursement from, or have any
recourse against a Member or persons acting on behalf of a Member for Covered
Services except for authorized coinsurance, deductibles or copayment amounts.
MEDICON further agrees that: (i) this provision shall survive the termination of
this Agreement regardless of the cause giving rise to termination and shall be
construed to be for the benefit of the Members and Plan Sponsors; (ii) this
provision supersedes any oral or written agreement now existing or hereafter
entered into between MEDICON and a Member or persons acting on a Member's
behalf; and (iii) any amendments, modifications or changes to this Section 3.7
shall be effective no earlier than thirty (30) days after the Department of
Insurance has received written notice of such proposed changes.
ARTICLE 4 - MASS MAILINGS
In the event that the parties mutually agree to provide a written
communication about the MEDICON diagnostic imaging program to Participating
Providers or Members, MEDICON shall prepare a master copy of the text of the
communication subject to ChoiceCare's sole approval. ChoiceCare shall reproduce
and mail the communication at MEDICON's expense.
ARTICLE 5 - INSPECTION OF RECORDS
MEDICON and ChoiceCare agree that all Member medical records shall be
treated as confidential so as to comply with all applicable state, federal and
local laws. ChoiceCare shall have the right upon request to inspect during
normal business hours any accounting, administrative, and medical reports
maintained by MEDICON pertaining to, among other things, ChoiceCare, PRPs,
Participating Providers, Members and MEDICON's performance hereunder.
ARTICLE 6 - INSURANCE AND LIABILITY
MEDICON shall at its own expense procure and maintain a policy of
professional liability insurance as shall be necessary to insure it and its
employees and agents against any claim or claims for damages arising by reason
of personal injury or death occasioned, directly or indirectly, in connection
with the performance of services hereunder. The limit of liability coverage
shall not be less than one (1) million ($1,000,000) dollars per claims and three
(3) million ($3,000,000) dollars in the aggregate. Memorandum copies of such
policies shall be made available and delivered to ChoiceCare upon request.
MEDICON shall, and shall require its insurer to, provide
7
<PAGE> 8
ChoiceCare with at least fifteen (15) days' advance written notice of the
cancellation of such policy or any material modification of such policy.
MEDICON shall use its best efforts to obtain, at no expense to ChoiceCare,
errors and omissions ("E&O") insurance sufficient to cover MEDICON's potential
liability. When such E&O insurance is obtained by MEDICON, memorandum copies of
such policies shall be made available and delivered to ChoiceCare. MEDICON
shall, and shall require its insurer to, provide ChoiceCare with at least
fifteen (15) days' advance written notice of the cancellation of such policy or
any material modification of such policy.
ARTICLE 7 - TERM AND TERMINATION
7.1 TERM. This Agreement shall commence on April 1, 1996 (the
"Effective Date"), and shall continue in effect until March 31, 1997, unless
sooner terminated pursuant to this Agreement. Thereafter, this Agreement shall
automatically renew for successive twelve (12) month periods subject to the
termination provisions and all other terms and provisions specified in this
Agreement.
7.2 TERMINATION. During the initial term or any subsequent term, this
Agreement may be terminated as follows:
(a) Mutual Agreement. This Agreement may be terminated at any
time by mutual agreement in writing by ChoiceCare and MEDICON as of the date
agreed to by the parties.
(b) Non-Renewal. If ChoiceCare provides written notice of its
intent not to renew this Agreement any time at least sixty (60) days in advance
of the end of the initial term (but no earlier than January 1, 1997) or any
subsequent term, then this Agreement shall not be renewed and shall terminate
upon the expiration of the initial term or any subsequent term, as applicable.
If MEDICON provides written notice of its intent not to renew this Agreement any
time at least ninety (90) days in advance of the end of the initial term or any
subsequent term, then this Agreement shall not be renewed and shall terminate
upon the expiration of the initial term or any subsequent term, as applicable.
(c) Termination for Cause. ChoiceCare and MEDICON shall have
the right to terminate this Agreement for cause prior to the expiration of its
term. Cause for termination shall include, without limitation, the following
event(s) (referred to herein as "Default(s)"):
(i) Material breach of this Agreement by any party;
(ii) Failure of ChoiceCare to maintain licenses,
certifications or accreditations required to operate in conformity with this
Agreement or to comply with local, state or federal laws and regulations,
excluding federal qualification;
(iii) Failure of MEDICON to maintain licenses, certifications
or accreditations required to operate in conformity with or perform MEDICON's
duties under this Agreement, or to comply with local, state or federal laws and
regulations or ChoiceCare's policies and procedures;
8
<PAGE> 9
(iv) Failure of MEDICON to provide the reports required under
this Agreement or by the Service Standards and Reporting Requirements;
(v) Failure of MEDICON to make payments to providers in the
manner or at the times required by this Agreement, Exhibit C or the Service
Standards and Reporting Requirements;
(vi) Failure by MEDICON to comply with any of the terms of the
Earmarking Agreement (as defined below), including but not limited to the
failure of MEDICON to make any additional payments to ChoiceCare required
thereunder, or any attempt is made by MEDICON (other than as permitted by the
Earmarking Agreement) or any third party to recover any payments made to
ChoiceCare thereunder;
(vii) If either party becomes insolvent, takes any action or
has any action taken against it to dissolve or liquidate, or files or has filed
against it any proceeding in bankruptcy, reorganization, debt adjustment or
receivership, or any assignment for the benefit of creditors;
(viii) A default with respect to any indebtedness of MEDICON
for borrowed money, if the effect of such default is to accelerate the maturity
of such debt;
(ix) The entry of a final judgment against MEDICON and the
failure of MEDICON to discharge the judgment within ten (10) days of the entry
thereof;
(x) Any material adverse change in the financial condition of
MEDICON;
(xi) Any representation or warranty made by MEDICON to
ChoiceCare is false or erroneous in any material respect; or
(xii) If during any six (6) month evaluation period under the
Service Standards and Reporting Requirements MEDICON fails to comply with (a)
any one of the performance standards for call abandonment, turnaround time for
90% of claims, and financial accuracy of claims payment, as set forth in the
Service Standards and Reporting Requirements, or (b) more than one (1) of the
other four (4) performance standards set forth in the Service Standards and
Reporting Requirements.
If either party is in Default (other than a Default under
Section 7.2 (c) (vii) above), the other party may give written notice of such
default (the "Default Notice") to such defaulting party. If the defaulting party
has not used good faith efforts to cure such breach or default within thirty
(30) days after the date of the Default Notice, or if good faith efforts have
been demonstrated to the other party within such thirty (30) day period but such
cure is not completed within sixty (60) days after the date of the Default
Notice, the other party shall have the right by further written notice (the
"Termination Notice") to terminate this Agreement as of any future date which is
at least thirty (30) days after the Termination Notice was sent. This Agreement
may be terminated immediately for a Default under Section 7.2 (c) (vii), at the
non-defaulting party's option. If the existence of a continuing material breach
is disputed by any party, that dispute shall be arbitrated as provided below.
The demand for arbitration shall be made within ten (10) days after the receipt
of the Termination Notice.
9
<PAGE> 10
7.3 NO WAIVER. The waiver by any party of one or more Defaults on the
part of another party shall not be construed to operate as a waiver of any
subsequent Defaults.
7.4 EFFECTS OF TERMINATION. Termination of this Agreement shall not
affect the rights, obligations and liabilities of the parties arising out of
transactions occurring prior to termination.
(a) No Consents. Termination of this Agreement in accordance with this
Article 7 may be without the consent of or advance notice to any Participating
Provider, PRP, Plan Sponsor, or Member.
(b) Payments. In the event of the termination of this Agreement by any
party, whether or not for cause, each party shall pay to the other any amounts
due under this Agreement while it was in force and shall pay any amounts due
under the Earmarking Agreement, subject to ChoiceCare's right to set off any
amounts owed to providers against any amounts owed to MEDICON hereunder.
(c) Extension. If this Agreement is terminated for any reason, whether
for cause or for nonrenewal, ChoiceCare may elect, in its sole discretion, to
extend this Agreement for up to three (3) additional months beyond the noticed
termination date, giving ChoiceCare effectively six (6) months notice of a
termination of this Agreement, which period is intended to serve as a transition
period for ChoiceCare.
7.5 LIQUIDATED DAMAGES. Upon MEDICON's breach of a material term of the
Agreement, the Capitation Payment will be adjusted downward by fifteen (15)
cents per member per month as liquidated damages. Adjustments under this Section
7.5 do not affect the Effective Program Cost (as defined in Exhibit C) for
purposes of a renewal adjustment or calculation of Operating Margin (as defined
in Exhibit C), but shall be applied monthly, beginning the 61st day from the
date that the original notice was received by MEDICON and continuing until cure
or termination, whichever occurs first.
ARTICLE 8 - MISCELLANEOUS PROVISIONS
8.1 INDEPENDENT ENTITIES. None of the provisions of this Agreement are
intended to create, nor shall any be construed to create, any relationship
between parties other than that of independent entities contracting with each
other hereunder solely to effectuate the provisions of the Agreement. Neither of
the parties hereto nor any of their respective representatives or employees
shall be construed to be the agent, employee or representative of the other.
8.2 SYMBOLS AND TRADEMARKS. The parties reserve the right to control
and use their names and all symbols, trademarks, or service marks presently
existing or later established. Except as otherwise provided herein, no party
shall use the other party's name, symbols, trademarks, or service marks, or such
marks as such party has rights to, in advertising or promotional materials, or
otherwise, without the prior written consent of such other party. Any use by a
party, without the approval of the other party, of the name, symbols,
trademarks, or service marks of such other party or of such marks as such other
has rights to, shall cease immediately upon the earlier of written notice by
such other party or termination of this Agreement.
10
<PAGE> 11
8.3 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective heirs, successors and
assigns. This Agreement shall not be assigned by either party without the prior
written consent of the other party; provided, however, that any reference to
ChoiceCare shall include any successors in interest and that ChoiceCare may
assign its duties, rights and interests under this Agreement in whole or in part
to a ChoiceCare affiliate, or may delegate any and all of its duties in the
ordinary course of business, provided that any party to which ChoiceCare
delegates its duties shall have sufficient financial resources to fulfill
ChoiceCare's obligations hereunder.
8.4 SEVERABILITY. The invalidity or unenforceability of any terms or
provisions of this Agreement shall not affect the validity or enforceability of
any other terms or provisions.
8.5 NOTICE. Except as specified otherwise in this Agreement, any notice
required to be given pursuant to the terms and provisions of this Agreement
shall be considered effective when received and shall be in writing and sent by
either hand delivery or by certified mail, return receipt requested,
to ChoiceCare at:
ChoiceCare Health Plans, Inc.
Grand Baldwin Building
655 Eden Park Drive
Cincinnati, Ohio 45202
ATTN: Larry Savage, Senior Vice President
and to MEDICON at:
MEDICON, Inc.
40 Skokie Boulevard - Suite 500
Northbrook, Illinois 60062
ATTN: General Counsel
8.6 ARBITRATION. Any dispute arising with respect to this Agreement,
including with respect to the performance or interpretation of this Agreement,
shall be submitted to the chief executive officers of ChoiceCare and MEDICON. If
ChoiceCare and MEDICON are unable to resolve such dispute, then to the extent
permitted by law the matter in controversy shall be submitted for arbitration in
accordance with the arbitration rules of the National Health Lawyers
Association, within sixty (60) days after the last attempted resolution, except
to the extent a shorter time period applies under Section 7.2 of this Agreement.
Any such arbitration shall be held in Cincinnati, Ohio. There
shall be a panel of three (3) arbitrators, one chosen by ChoiceCare, one chosen
by MEDICON, and a third selected by the two arbitrators. The parties expressly
covenant and agree to be bound by the decision of the arbitrator as the final
decision of the matter in dispute. Each party shall assume its own costs,
including those costs associated with the arbitrator selected by that party, but
the expense of the third arbitrator shall be shared equally by ChoiceCare and
MEDICON. Judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction. In any case, the arbitrator must agree to follow
any federal and state laws applicable to the matter in controversy,
11
<PAGE> 12
the arbitrator may not assess punitive damages and the arbitrator shall have the
ability to determine whether an issue is subject to arbitration. Unless the term
of this Agreement has expired or this Agreement has otherwise been terminated,
this Agreement shall continue while arbitration proceedings are pending.
8.7 AMENDMENT. This Agreement may be amended by mutual agreement of the
parties, and any such amendment shall be reduced to writing and signed by the
parties in order to be effective.
8.8 WAIVER. Waiver of any term, condition or breach of any provision of
this Agreement shall not be deemed a waiver of the same or any other term,
condition or a breach of the same or different provision.
8.9 FORCE MAJEURE. ChoiceCare and MEDICON shall be excused, discharged
and released from performance to the extent such performance is limited, delayed
or prevented in whole or in part for any reason whatever not reasonably within
the control of the affected party, including but not limited to any acts of God,
war, invasion, acts of foreign enemy, hostilities (whether war be declared or
not), or by any law, regulation, order, or other action by any authority;
provided, however, that ChoiceCare shall have the right to terminate this
Agreement by notice to MEDICON if MEDICON does not resume normal business
operations within five (5) days of any such event. The foregoing shall not be
considered to be a waiver of either party's obligations under this Agreement,
and as soon as such occurrence or occurrences cease the party affected thereby
shall promptly fulfill its obligations under this Agreement. MEDICON shall
develop and maintain an adequate disaster recovery plan and provide such a plan
to ChoiceCare upon request.
8.10 HEADINGS AND CAPTIONS. The headings and captions used in this
Agreement are for the convenience of the parties and shall not be used in the
construction or interpretation of this Agreement.
8.11 INTERPRETATION. The validity, enforceability and interpretation of
any of the provisions of this Agreement shall be governed and construed in
accordance with the laws of the State of Ohio.
8.12 ENTIRE AGREEMENT; EARMARKING LOAN AND LETTER AGREEMENT
The terms and conditions of the Earmarking Letter Agreement
between the parties, dated March 12, 1996, the Special Purpose Loan document,
dated March 12, 1996, and the agreements or notes referenced therein
(collectively, the "Earmarking Agreement") are fully incorporated, by reference,
into this Agreement.
All exhibits, schedules and attachments referred to herein are
specifically and expressly incorporated herein by this reference, and any
references thereto shall be construed as if the exhibits, schedules and
attachments are set out herein in their entirety.
This Agreement together with the Earmarking Agreement
constitute the entire agreement of the parties with respect to the subject
matter hereof. The Earmarking Agreement will remain in full force and effect
without modification. This Agreement supersedes and replaces the terms of the
Diagnostic Imaging Services Agreement for HMO executed by Midwest
12
<PAGE> 13
Foundation Independent Physicians Association, dba ChoiceCare on January 26,
1995 and by Medicon, Inc. dba MEDICON on May 22, 1995 (the 1995 Agreement),
which prior agreement is of no further force and effect except as necessary to
fulfill provider payment obligations and for reference in calculating any
settlement adjustments required by the 1995 Agreement or any prior agreement.
IN WITNESS WHEREOF, the undersigned have agreed to the terms and
conditions of this Agreement.
ChoiceCare Health Plans, Inc. MEDICON, Inc.
By: /s/ Larry D. Savage By: /s/ Brad Keller
-------------------------------- ------------------
Title: Sr. Vice President Title: Vice President, Client Services
-------------------------------- ----------------------------------
13
<PAGE> 14
EXHIBIT A
CHOICECARE/MEDICON
PROGRAM DESIGN
(5/22/96)
CONTENTS
SECTION 1 COVERED SETTINGS
SECTION 2 COVERED PROCEDURE CODES AND PAYMENT METHODOLOGIES, BY
SPECIALTY
SECTION 3 COVERED PROCEDURE CODE LIST
SECTION 4 PRECERTIFIED PROCEDURE CODES
SECTION 5 CLAIMS PAYMENT RESPONSIBILITY
SECTION 6 ASSESSMENT
SECTION 7 UTILIZATION MANAGEMENT
SECTION 8 QUALITY MANAGEMENT
SECTION 9 OPERATIONS
<PAGE> 15
______________________________________________________________________SECTION 1
COVERED SETTINGS
I. NETWORK PROVIDERS (HOSPITALS, FREESTANDING IMAGING CENTERS,
RADIOLOGISTS)
x Elective Outpatient Diagnostic Imaging
II. SELECTED NON-RADIOLOGY PROVIDERS (DIAGNOSTIC IMAGING PERFORMED IN
OFFICE)
Infertility Specialists
x Obstetricians/Gynecologists
x Orthopedists
x Perinatologists
x Podiatrists
x Primary Care Physicians
x Pulmonologists
x Rheumatologists
x Urologists
x Urgent Care Center
SETTINGS NOT COVERED BY THE MEDICON PROGRAM
I. NETWORK PROVIDERS (HOSPITALS, FREESTANDING IMAGING CENTERS,
RADIOLOGISTS)
Preadmission Testing
23 Hour Observation
Ambulatory Surgery
Inpatient
Emergency Room
II. NON-RADIOLOGY PROVIDERS
All non-radiology providers are excluded except for those
listed above.
A-1
<PAGE> 16
______________________________________________________________________SECTION 2
COVERED PROCEDURE CODES AND PAYMENT METHODOLOGIES, BY SPECIALTY
I. INFERTILITY SPECIALISTS
PAYMENT METHODOLOGY: $86.00 per ultrasound for diagnostic
infertility studies
$107.50 per ultrasound for
diagnostic infertility studies for
Proctor & Gamble and General
Electric employees only
COVERED CODES:
74740 Hysterosalpingography
74742 Transcervical catheterization of fallopian
tube
76775 Echography, retroperitoneal
76830 Transvaginal ultrasound
76856 Echo exam of pelvis, complete
76857 Echo exam of pelvis, limited
76948 Ultrasound guide for ova aspiration
CLAIMS SUBMISSION: Contracted infertility specialists
must submit a claim form and
interpretation for an ultrasound,
with an ICD-9 code indicating a
diagnostic infertility study.
Payment for subsequent studies for a
given patient are considered covered
by the flat fee. A copy of the
interpretation is required for each
ultrasound performed.
- - -------------------------------------------------------------------------------
II. OBSTETRICIANS/GYNECOLOGISTS
PAYMENT METHODOLOGY: $150.00 flat fee per pregnancy
for Obstetric Ultrasounds $375.00 flat fee per high risk
pregnancy
COVERED CODES:
76805 OB ultrasound, complete
76810 OB ultrasound, complete multigestate
76815 OB ultrasound, limited
76816 OB ultrasound, follow-up (repeat)
76818 Fetal biophysical profile
76825 Fetal echocardiography
76826 Fetal echocardiography, follow-up study
A-2a
<PAGE> 17
______________________________________________________________________SECTION 2
76827 Doppler echocardiography, complete
76828 Doppler echocardiography, follow-up or
repeat study
CLAIMS SUBMISSION: Contracted obstetricians must submit
a MEDICON logsheet for notification
of pregnancy. A report or
interpretation must be submitted for
each ultrasound performed that the
global payment covers.
PAYMENT METHODOLOGY: $150.00 per exam for gynecological
FOR GYNECOLOGICAL ULTRASOUNDS ultrasounds
COVERED CODES:
76830 Transvaginal ultrasound
76856 Echo exam of pelvis, complete
CLAIMS SUBMISSION: Contracted
obstetrician/gynecologists must
submit a claim form and
interpretation for an ultrasound.
Only one of the two CPT codes will
be payable per given patient per 12
month period, unless an exception is
granted for reasons of medical
necessity.
- - -------------------------------------------------------------------------------
III. ORTHOPEDISTS
PAYMENT METHODOLOGY: $22.40 per office visit regardless
of whether a diagnostic imaging exam
is performed.
COVERED CODES:
72010 Spine, complete survey
72020 Spine, 1VW, specific level
72040 Cervical spine, 2VW
72050 Cervical spine, 4+VW
72052 Cervical spine, w/ oblique & flexion
72069 Thoracolumbar spine, standing
72070 Thoracic spine, 2VW
72072 Thoracic spine, 2VW, w/ swim view
72074 Thoracic spine, 4+VW, w/ obliques
72080 Thoracolumbar spine, 2VW
A-2b
<PAGE> 18
______________________________________________________________________SECTION 2
72090 Scoliosis study, supine & erect
72100 Lumbosacral spine, AP & LAT
72110 Lumbosacral spine, complete, w/obliques
72114 Lumbosacral spine, complete, bending
72120 Lumbosacral spine, 4+VW, bending
72170 Pelvis, AP only
72190 Pelvis, 3+VW
72200 X-ray exam of sacroiliac joints
72202 X-ray exam of sacroiliac joints
72220 X-ray exam ot tailbone, 2+VW
73000 Clavicle, complete
73010 Scapula, completes
73020 Shoulder, 1VW
73030 Shoulder, complete, 2+VW
73050 Acromioclavivular joints, bilateral
73060 Humerus, 2+VW
73070 Elbow 2VW (AP & LAT)
73080 Elbow, complete, 3+VW
73090 Forearm 2VW (AP & LAT)
73092 Upper extremity, infant, 2+VW
73100 Wrist 2VW (AP & LAT)
73110 Wrist, complete, 3+VW
73120 Hand 2VW
73130 Hand 3+VW
73140 Finger(s), 2+VW
73500 Hip, unilateral 1VW
73510 Hip, unilateral 2+VW
73520 Hips, bilateral 2+VW w/AP pelvis
73540 Pelvis & Hips, infant 2+VW
73550 Femur 2VW (AP &LAT)
73560 Knee 2VW (AP & LAT)
73562 Knee w/obliques 3+VW
73564 Knee w/obliques, tunnel, patellar, standing
73565 Knees, both, stand, AP
73590 Tibia and Fibula AP & LAT
73592 Lower Extremity infant 2VW
73600 Ankle, 2VW (AP & LAT)
73610 Ankle, complete 3+VW
73620 Foot, 2VW (AP & LAT)
73630 Foot, complete, 3+VW
73650 Heel, 2+VW
73660 Toe(s) 2+VW
A-2c
<PAGE> 19
______________________________________________________________________SECTION 2
CLAIMS SUBMISSION: Contracted orthopedists must submit
a claim form with CPT code 99024 for
notification of an office visit. A
report or interpretation is not
required for each diagnostic imaging
exam as this was waived by
ChoiceCare in the program design.
- - -------------------------------------------------------------------------------
IV. PERINATOLOGISTS
PAYMENT METHODOLOGY: $185.00 per ultrasound for
consultative ultrasound to determine
high risk pregnancy status.
In addition:
$315.00 flat fee per pregnancy for
any and all ultrasounds performed
for treatment of high risk
pregnancy.
$500.00 per pregnancy maximum.
COVERED CODES:
76805 OB ultrasound, complete
76810 OB ultrasound, complete multigestate
76815 OB ultrasound, limited
76816 OB ultrasound, follow-up (repeat)
76818 Fetal biophysical profile
76830 Transvaginal ultrasound
THE FOLLOWING COVERED CODES ARE PAID FEE-FOR-SERVICE IN
ACCORDANCE WITH MEDICON'S FEE SCHEDULE.
76825 Fetal echocardiography
76826 Fetal echocardiography, follow-up study
76827 Doppler echocardiography, complete
76828 Doppler echocardiography, follow-up or
repeat study
CLAIMS SUBMISSION: Contracted perinatologists or
(physicians deemed capable of
providing perinatal care by
ChoiceCare) must submit a claim form
for notification of a pregnancy. A
report or interpretation must be
submitted for each ultrasound
performed that the global payment
covers.
A-2d
<PAGE> 20
______________________________________________________________________SECTION 2
V. PODIATRISTS
PAYMENT METHODOLOGY: $18.00 per office visit regardless
of whether a diagnostic imaging exam
is performed.
COVERED CODES:
73600 Ankle, 2VW (AP & LAT)
73610 Ankle, complete 3+VW
73620 Foot, 2VW (AP & LAT)
73630 Foot, complete, 3+VW
73650 Heel, 2+VW
73660 Toe(s) 2+VW
CLAIMS SUBMISSION: Contracted podiatrists must submit a
claim form with CPT code 99024 for
notification of an office visit. A
report or interpretation must be
submitted to MEDICON for each
diagnostic imaging exam performed
that the global payment covers.
- - -------------------------------------------------------------------------------
VI. PRIMARY CARE PHYSICIANS
PAYMENT METHODOLOGY: $.50 PMPM
COVERED CODES:
71010 Spine, complete survey
71020 Spine, 1VW, specific level
71021 Chest, 2VW
71022 Chest, 2VW, w/oblique
71030 Chest, complete
71035 Chest, special views
71100 Ribs, unilateral, 2VW
71101 Ribs, unilateral, 3+VW
71110 Ribs, bilateral, 3 VW
71111 Ribs, bilateral, 4+VW
71120 Sternum, 2+VW
71130 Sternoclavicular joints, 3+VW
73000 Clavicle, complete
73010 Scapula, complete
73020 Shoulder, 1VW
73030 Shoulder, complete, 2+VW
A-2e
<PAGE> 21
______________________________________________________________________SECTION 2
73050 Acromioclavivular joints, bilateral
73060 Humerus, 2+VW
73070 Elbow 2VW (AP & LAT)
73080 Elbow, complete, 3+VW
73090 Forearm 2VW (AP & LAT)
73092 Upper extremity, infant, 2+VW
73100 Wrist 2VW (AP & LAT)
73110 Wrist, complete, 3+VW
73120 Hand 2VW
73130 Hand 3+VW
73140 Finger(s), 2+VW
73500 Hip, unilateral 1VW
73510 Hip, unilateral 2+VW
73520 Hips, bilateral 2+VW w/AP pelvis
73540 Pelvis & Hips, infant 2+VW
73550 Femur 2VW (AP &LAT)
73560 Knee 2VW (AP & LAT)
73562 Knee w/obliques 3+VW
73564 Knee w/obliques, tunnel, patellar, standing
73565 Knees, both, stand, AP
73590 Tibia and Fibula AP & LAT
73592 Lower Extremity infant 2VW
73600 Ankle, 2VW (AP & LAT)
73610 Ankle, complete 3+VW
73620 Foot, 2VW (AP & LAT)
73630 Foot, complete, 3+VW
73650 Heel, 2+VW
73660 Toe(s) 2+VW
CLAIMS SUBMISSION: Contracted primary care physicians
must submit a claim form and
interpretation for each imaging
exam.
OVERREAD POLICY: Films must be overread by a network
radiologist. To allow for
appropriate billing, the primary
care physician must supply the
radiologist performing the overread
with with ChoiceCare's name and the
patient ID number. Medicon will pay
the network radiologist directly
$8.00 per study upon receipt of the
radiology report and claim form.
A-2f
<PAGE> 22
______________________________________________________________________SECTION 2
VII. PULMONOLOGISTS
PAYMENT METHODOLOGY: $32.00 flat fee per episode of care
(60 day episode of care)
COVERED CODES:
71010 Spine, complete survey
71020 Spine, 1VW, specific level
71021 Chest, 2VW
71022 Chest, 2VW, w/oblique
71030 Chest, complete
71035 Chest, special views
CLAIMS SUBMISSION: Contracted pulmonologists must
submit a claim form and
interpretation for each imaging
exam.
VIII. RADIOLOGISTS, HOSPITALS AND FREESTANDING IMAGING CENTERS
PAYMENT METHODOLOGY: Intensity Adjusted Episode of Care
EXCLUDING MAMMOGRAPHY (60 day episode of care)
Account funded at $3.20 pmpm
Payout Schedule (effective April 1, 1996)
-----------------------------------------
Month 1 40% Month 4 .67%
Month 2 10% Month 5 .67%
Month 3 48% Month 6 .68%
Payout Schedule (effective upon 30 days written notice from ChoiceCare)
Month 1 70%
Month 2 20%
Month 3 10%
PAYMENT METHODOLOGY: $52.00 per exam for CPT code 76090
FOR MAMMOGRAPHY $70.00 per exam for CPT code 76091
$70.00 per exam for CPT code 76092
$45.00 per exam for CPT code 76645
COVERED CODES: See Section 3
CLAIMS SUBMISSION: Contracted radiologists must submit
a claim form and interpretation for
each imaging exam.
- - -------------------------------------------------------------------------------
IX. RHEUMATOLOGISTS
PAYMENT METHODOLOGY: $42.00 flat fee per episode of care
(60 day)
A-2g
<PAGE> 23
______________________________________________________________________SECTION 2
COVERED CODES:
72010 Spine, complete survey
72020 Spine, 1VW, specific level
72040 Cervical spine, 2VW
72050 Cervical spine, 4+VW
72052 Cervical spine, w/ oblique & flexion
72069 Thoracolumbar spine, standing
72070 Thoracic spine, 2VW
72072 Thoracic spine, 2VW, w/ swim view
72074 Thoracic spine, 4+VW, w/ obliques
72080 Thoracolumbar spine, 2VW
72090 Scoliosis study, supine & erect
72100 Lumbosacral spine, AP & LAT
72110 Lumbosacral spine, complete, w/obliques
72114 Lumbosacral spine, complete, bending
72120 Lumbosacral spine, 4+VW, bending
72170 Pelvis, AP only
72190 Pelvis, 3+VW
72200 X-ray exam of sacroiliac joints
72202 X-ray exam of sacroiliac joints
72220 X-ray exam ot tailbone, 2+VW
73000 Clavicle, complete
73010 Scapula, completes
73020 Shoulder, 1VW
73030 Shoulder, complete, 2+VW
73050 Acromioclavivular joints, bilateral
73060 Humerus, 2+VW
73070 Elbow 2VW (AP & LAT)
73080 Elbow, complete, 3+VW
73090 Forearm 2VW (AP & LAT)
73092 Upper extremity, infant, 2+VW
73100 Wrist 2VW (AP & LAT)
73110 Wrist, complete, 3+VW
73120 Hand 2VW
73130 Hand 3+VW
73140 Finger(s), 2+VW
73500 Hip, unilateral 1VW
73510 Hip, unilateral 2+VW
73520 Hips, bilateral 2+VW w/AP pelvis
73540 Pelvis & Hips, infant 2+VW
73550 Femur 2VW (AP &LAT)
73560 Knee 2VW (AP & LAT)
73562 Knee w/obliques 3+VW
73564 Knee w/obliques, tunnel, patellar, standing
A-2h
<PAGE> 24
______________________________________________________________________SECTION 2
73565 Knees, both, stand, AP
73590 Tibia and Fibula AP & LAT
73592 Lower Extremity infant 2VW
73600 Ankle, 2VW (AP & LAT)
73610 Ankle, complete 3+VW
73620 Foot, 2VW (AP & LAT)
73630 Foot, complete, 3+VW
73650 Heel, 2+VW
73660 Toe(s) 2+VW
CLAIMS SUBMISSION: Contracted rheumatologists must
submit a claim form and
interpretation for each imaging
exam.
X. URGENT CARE CENTERS
PAYMENT METHODOLOGY: $6.00 per office visit regardless of
whether any diagnostic imaging exam
is performed
COVERED CODES:
71010 Spine, complete survey
71020 Spine, 1VW, specific level
71021 Chest, 2VW
71022 Chest, 2VW, w/oblique
71030 Chest, complete
71035 Chest, special views
71100 Ribs, unilateral, 2VW
71101 Ribs, unilateral, 3+VW
71110 Ribs, bilateral, 3 VW
71111 Ribs, bilateral, 4+VW
71120 Sternum, 2+VW
71130 Sternoclavicular joints, 3+VW
73000 Clavicle, complete
73010 Scapula, complete
73020 Shoulder, 1VW
73030 Shoulder, complete, 2+VW
73050 Acromioclavivular joints, bilateral
73060 Humerus, 2+VW
73070 Elbow 2VW (AP & LAT)
73080 Elbow, complete, 3+VW
73090 Forearm 2VW (AP & LAT)
73092 Upper extremity, infant, 2+VW
73100 Wrist 2VW (AP & LAT)
A-2i
<PAGE> 25
______________________________________________________________________SECTION 2
73110 Wrist, complete, 3+VW
73120 Hand 2VW
73130 Hand 3+VW
73140 Finger(s), 2+VW
73500 Hip, unilateral 1VW
73510 Hip, unilateral 2+VW
73520 Hips, bilateral 2+VW w/AP pelvis
73540 Pelvis & Hips, infant 2+VW
73550 Femur 2VW (AP &LAT)
73560 Knee 2VW (AP & LAT)
73562 Knee w/obliques 3+VW
73564 Knee w/obliques, tunnel, patellar, standing
73565 Knees, both, stand, AP
73590 Tibia and Fibula AP & LAT
73592 Lower Extremity infant 2VW
73600 Ankle, 2VW (AP & LAT)
73610 Ankle, complete 3+VW
73620 Foot, 2VW (AP & LAT)
73630 Foot, complete, 3+VW
73650 Heel, 2+VW
73660 Toe(s) 2+VW
CLAIMS SUBMISSION: Contracted urgent care centers must
submit a claim form with CPT code
99024 for notification of an office
visit. A report or interpretation
must be submitted for each
diagnostic imaging exam.
- - -------------------------------------------------------------------------------
XI. UROLOGISTS
PAYMENT METHODOLOGY: $93.00 per patient for ultrasounds
FOR PROSTATE ULTRASOUNDS performed either in conjunction with
a prostate biopsy or for diagnostic
purposes
COVERED CODES:
76872 Echo exam of prostate
76942 Ultrasound guide for needle biopsy
PAYMENT METHODOLOGY: $45.00 per exam
FOR BLADDER RESIDUAL ULTRASOUNDS
A-2j
<PAGE> 26
______________________________________________________________________SECTION 2
COVERED CODES:
76775 Echo exam, retroperitoneal, limited
76857 Echo exam of pelvis, limited
CLAIMS SUBMISSION: Contracted urologists must submit a
claim form an interpretation for
each imaging exam.
A-2k
<PAGE> 27
COVERED PROCEDURE DESCRIPTION SECTION 3
CODE
DIAGNOSTIC RADIOLOGY
HEAD AND NECK
70010 MYELOGRAPHY POST FOSSA S&I
70015 CISTERNOGRAPHY S&I
70030 EYE, DETECT FOREIGN BODY
70100 MANDIBLE 1-3VW
70110 MANDIBLE COMPL 4+VW
70120 MASTOIDS 1-2VW
70130 MASTOIDS COMPL 3+VW
70134 IAC'S WITH TOMOGRAPHY
70140 FACIAL BONES 1-2VW
70150 FACIAL BONES 3+VW
70160 NASAL BONES COMP 3+VW
70170 DACRYOCYSTOGRAPHY S&I
70190 OPTIC FORAMINA
70200 ORBITS COMPL 4+VW
70210 SINUS 1-2VW (WATERS)
70220 SINUS PARANASAL COMP 3+VW
70240 SELLA TURCICA
70250 SKULL 1-3VW W/WO STEREO
70260 SKULL COMPL 4+VW W/WO STEREO
70300 TEETH 1VW
70310 TEETH PARTIAL MOUTH
70320 TEETH FULL MOUTH
70328 TMJ UNI W/TOMOGRAM
70330 TMJ BIL W/TOMOGRAM
70332 ARTHROGRAPHY TMJ S&I
70336 MRI TMJ
70350 CEPHALOGRAPHY, ORTHODONTIC
70355 ORTHOPANTOGRAPHY
70360 NECK SOFT TISSUE
70370 PHARYNX/LARYNX W/FLUORO
70371 PHARYNX, VIDEO SPEECH EVALUATION
70373 LARYNGOGRAPHY S&I
70380 SALIVARY GLAND
70390 SIALOGRAPHY S&I
70450 CT HEAD/BRAIN WO
70460 CT HEAD/BRAIN W
70470 CT HEAD/BRAIN W/WO
70480 CT ORBIT SELLA WO
70481 CT ORBIT SELLA W
70482 CT ORBIT SELLA W/WO
70486 CT FACIAL/SINUS WO
70487 CT FACIAL/SINUS W
70488 CT FACIAL/SINUS W/WO
<PAGE> 28
70490 CT NECK SOFT TISSUE WO
70491 CT NECK SOFT TISSUE W
70492 CT NECK SOFT TISSUE W/WO
70540 MRI ORBIT, FACE & NECK
70541 MRA, HEAD &/NECK W/WO
70551 MRI BRAIN WO
70552 MRI BRAIN W
70553 MRI BRAIN W & WO
CHEST
71010 CHEST 1VW FRONTAL
71015 CHEST 1VW FRONTAL STEREO
71020 CHEST PAL 2VW
71021 CHEST 2VW W/APICAL LORDOT
71022 CHEST 2VW W/OBLIQUES
71023 CHEST 2VW FR&LAT W/FLUORO
71030 CHEST 4+VW
71034 CHEST 4+VW W/FLUORO
71035 CHEST SPECIAL VIEWS, DECUB-BUCKY
71036 NEEDLE BIOPSY INTRATHORACIC FLUORO LOC S&I
71038 TRANSBRONCHIAL BIOPSY FLUORO LOCALIZATION
71040 BRONCHOGRAPHY UNI S&I
71060 BRONCHOGRAPHY BIL S&I
71090 PACEMAKER INSERT W/FLUORO S&I
71100 RIBS UNI 2VW
71101 RIBS UNI W/AP CHEST 3VW
71110 RIBS BIL 3VW
71111 RIBS BIL W/AP CHEST 4+VW
71120 STERNUM
71130 STERNOCLAVICULAR JOINTS
71250 CT CHEST/THORAX WO
71260 CT CHEST/THORAX W
71270 CT CHEST/THORAX W/WO
71550 MRI CHEST
71555 MRA, CHEST (EXCL MYOCARDIUM) W/WO
SPINE AND PELVIS
72010 SPINE COMPLETE SURVEY
72020 SPINE 1VW, SPECIFIC LEVEL
72040 CERVICAL SPINE 2VW
72050 CERVICAL SPINE 4+VW
72052 CERVICAL SPINE W/OBL&FLEX
72069 THORACOLUMBR SPINE STANDING
72070 THORACIC SPINE 2VW
72072 THORACIC SPINE W/OBL 3VW
72074 THORACIC SPINE 4VW
72080 THORACOLUMBR SPINE 2VW
72090 SCOLIOSIS STUDY 3+VW
<PAGE> 29
72100 LUMBOSACRAL SPINE 2+VW
72110 LUMBOSACRAL SPINE W/OBL
72114 LUMBOSACRAL SPINE W/FLEX
72120 LUMBOSACRAL SPINE 4+BENDING VW
72125 CT CERVICAL SPINE WO
72126 CT CERVICAL SPINE W
72127 CT CERVICAL SPINE W/WO
72128 CT THORACIC SPINE WO
72129 CT THORACIC SPINE W
72130 CT THORACIC SPINE W/WO
72131 CT LUMBAR SPINE WO
72132 CT LUMBAR SPINE W
72133 CT LUMBAR SPINE W/WO
72141 MRI CERVICAL SPINE WO
72142 MRI CERVICAL SPINE W
72146 MRI THORACIC SPINE WO
72147 MRI THORACIC SPINE W
72148 MRI LUMBAR SPINE WO
72149 MRI LUMBAR SPINE W
72156 MRI CERVICAL SPINE W & WO
72157 MRI THORACIC SPINE W & WO
72158 MRI LUMBAR SPINE W & WO
72159 MRA, SPINAL CANAL & CONTENTS W/WO
72170 PELVIS AP ONLY
72190 PELVIS 3+VW
72192 CT PELVIS WO
72193 CT PELVIS W
72194 CT PELVIS W/WO
72196 MRI PELVIS
72198 MRA, PELVIS W/WO
72200 SI JOINTS 1-2VW
72202 SI JOINTS 3+VW
72220 SACRUM/COCCYX 1-2VW
72240 MYELOGRAPHY CERVICAL S&I
72255 MYELOGRAPHY THORACIC S&I
72265 MYELOGRAPHY LUMBROSACRAL S&I
72270 MYELOGRAPHY SPINAL CANAL S&I
72285 DISKOGRAPHY CERVICAL S&I
72295 DISKOGRAPHY LUMBAR S&I
UPPER EXTREMITIES
73000 CLAVICLE
73010 SCAPULA
73020 SHOULDER 1VW
73030 SHOULDER 2+VW
73040 ARTHROGRAPHY SHOULDER S&I
<PAGE> 30
73050 AC JOINTS BIL
73060 HUMERUS 2+VW
73070 ELBOW 2VW
73080 ELBOW 3+VW
73085 ARTHROGRAPHY ELBOW S&I
73090 FOREARM 2VW
73092 UPPER EXT INFANT 2+VW
73100 WRIST 2VW
73110 WRIST 3+VW
73115 ARTHROGRAPHY WRIST S&I
73120 HAND 2VW
73130 HAND 3+VW
73140 FINGER(S) 2+VW
73200 CT UPPER EXTREMITY WO
73201 CT UPPER EXTREMITY W
73202 CT UPPER EXTREMITY W/WO
73220 MRI UPPER EXTREMITY
73221 MRI UPPER EXTREMITY JOINT
73225 MRA, UPPER EXTREMITY W/WO
LOWER EXTREMITIES
73500 HIP UNI 1VW
73510 HIP UNI 2+VW
73520 HIPS BIL 2+VW W/AP PELVIS
73525 ARTHROGRAPHY HIP S&I
73530 X-RAY EXAM OF HIP
73540 PELVIS & HIPS INFANT 2+VW
73550 FEMUR 2VW
73560 KNEE 2VW
73562 KNEE W/OBL 3+VW
73564 KNEE W/OBL&TUN &/PATELLAR &/STANDING
73565 KNEES BOTH STANDING A/P
73580 ARTHROGRAPHY KNEE S&I
73590 TIBIA/FIBULA
73592 LOWER EXTREM INFANT 2+VW
73600 ANKLE 2VW
73610 ANKLE 3+VW
73615 ARTHROGRAPHY ANKLE S&I
73620 FOOT 2VW
73630 FOOT 3+VW
73650 HEEL 2+VW
73660 TOE(S) 2+VW
73700 CT LOWER EXTREMITY WO
73701 CT LOWER EXTREMITY W
73702 CT LOWER EXTREMITY W/WO
73720 MRI LOWER EXTREMITY
73721 MRI LOWER EXTREMITY JOINT
73725 MRA, LOWER EXTREMITY W/WO
<PAGE> 31
ABDOMEN
74000 ABDOMEN 1VW (KUB)
74010 ABDOMEN W/OBL&CONE VWS
74020 ABDOMEN W/DECUB &/ERECT
74022 ABDOMEN ACUTE W/CHEST
74150 CT ABDOMEN WO
74160 CT ABDOMEN W
74170 CT ABDOMEN W/WO
74181 MRI ABDOMEN
74185 MRA, ABDOMEN W/WO
74190 PERITONEOGRAM, S&I
GASTROENTEROLOGY TRACT
74210 PHARYNX &/CERVICAL ESOPHAGUS
74220 ESOPHAGUS/BARIUM SWALLOW
74230 ESOPHAGUS SWALLOW W/CINE
74235 ESOPHAGUS FOREIGN BODY LOCALIZATION W/FLUORO
74240 UGI
74241 UGI W/KUB
74245 UGI W/SMALL BOWEL
74246 UGI W/AIR CONTRAST
74247 UGI W/AIR CONTRAST W/KUB
74249 UGI W/AIR W/SMALL BOWEL F/U
74250 SMALL BOWEL SERIES
74251 SMALL BOWEL SERIES, VIA ENTEROCLYSIS TUBE
74260 DUODENOGRAPHY, HYPOTONIC
74270 BARIUM ENEMA (LGI)
74280 BARIUM ENEMA (LGI) W/AIR
74283 CONTRAST X-RAY EXAM OF COLON
74290 GALLBLADDER ORAL CHOLECYSTOGRAPHY
74291 GALLBLADDER 2ND DAY
74300 CHOLANGIOGRAPHY DURING SURGERY
74301 CHOLANGIOGRAPHY, ADDITIONAL SET
74305 CHOLANGIOGRAPHY, POST OP
74320 CHOLANGIOGRAPHY TRANSHEPATIC S&I
74327 X-RAY FOR BILE STONE REMOVAL S&I
74328 ENDOCATH BILIARY DUCT FLUORO S&I
74329 ENDOCATH PANCEATIC DUCT FLUORO S&I
74330 ENDOCATH BILIARY&PANCEATIC DUCTS S&I
74340 X-RAY GUIDE FOR LONG GI TUBE
74350 X-RAY GUIDE, GASTROSTOMY TUBE S&I
74355 X-RAY GUIDE, INTESTINAL TUBE S&I
74360 X-RAY GUIDE, INTRALUMINAL DILATION S&I
74363 X-RAY GUIDE, BIL DUCT STRICTURE DILATION
URINARY TRACT
74400 IVP (UROGRAM)
<PAGE> 32
74405 IVP (UROGRAPHY) W/CONTRAST
74410 IVP (UROGRAPHY) W/INFUSION
74415 IVP (UROGRAPHY) W/TOMOGRAPHY
74420 UROGRAPHY RETROGRADE
74425 UROGRAPHY ANTEGRADE S&I
74430 CYSTOGRAPHY S&I
74440 VASO/VESICULO/EPIDIDYMOGRAPHY S&I
74445 CORPORA CAVERNOSOGRAPHY S&I
74450 CYSTOGRAPHY RETROGRADE S&I
74455 CYSTOGRAPHY VOIDING S&I
74470 RENAL CYST STUDY S&I
74475 INTRODUCTION OF CATHETER RENAL PELVIS S&I
74480 INTRODUCTION OF CATHETER URETER PELVIS S&I
74485 DILATION NEPHROSTOMY/URETERS/URETHRA S&I
GYNECOLOGY AND OBSTETRICS
74710 PELVIMETRY
74740 HYSTEROSALPING S&I
74742 TRANSCREVICAL CATHIZATION, FALLOPIAN TUBE S&I
74775 PERINEOGRAPHY, VAGINOGRAPHY
CARDIAC MRI
75552 MRI MYOCARDIUM
75553 MRI MYOCARDIUM WITH CONTRAST
75554 MRI CARDIAC FUNCTION, W/WO MORPHOLOGY
75555 MRI CARDIAC FUNCTION, W/WO MORPH, LTD
75556 MRI CARDIAC VELOCITY FLOW MAPPING
AORTA AND ARTERIES
75600 AORTOGRAPHY THORACIC WO/SERIAL S&I
75605 AORTOGRAPHY THORACIC SERIALOGRAPHY S&I
75625 AORTOGRAPHY ABDOMEN TRANS-LUMBAR SERIAL S&I
75630 AORTOGRAPHY ABDOMEN BI-ILIO SERIAL S&I
75650 ANGIOGRAPHY CERVICOCEREBRAL S&I
75658 ANGIOGRAPHY BRACHIAL RETRO S&I
75660 ANGIOGRAPHY X/CARTIOD CEREBRAL UNI S&I
75662 ANGIOGRAPHY X/CARTIOD CEREBRAL BIL S&I
75665 ANGIOGRAPHY CARTIOD CEREBRAL UNI S&I
75671 ANGIOGRAPHY CARTIOD CEREBRAL BIL S&I
75676 ANGIOGRAPHY CARTIOD CERVICAL UNI S&I
75680 ANGIOGRAPHY CARTIOD CERVICAL BIL S&I
75685 ANGIOGRAPHY VERTEBRAL S&I
75705 ANGIOGRAPHY SPINAL S&I
75710 ANGIOGRAPHY EXTREMITY UNI S&I
75716 ANGIOGRAPHY EXTREMITY BIL S&I
75722 ANGIOGRAPHY RENAL UNI S&I
75724 ANGIOGRAPHY RENAL BIL S&I
75726 ANGIOGRAPHY VISCERAL S&I
<PAGE> 33
75731 ANGIOGRAPHY ADRENAL UNI S&I
75733 ANGIOGRAPHY ADRENAL BIL S&I
75736 ANGIOGRAPHY PELVIC S&I
75741 ANGIOGRAPHY PULMONARY UNI S&I
75743 ANGIOGRAPHY PULMONARY BIL S&I
75746 ANGIOGRAPHY PULMONARY NON/SELECTIVE S&I
75756 ANGIOGRAPHY INTERNAL MAMMARY S&I
75774 ANGIOGRAPHY SELECTIVE EACH ADD'L VESSEL S&I
75790 ANGIOGRAPHY ARTERIOVENOUS SHUNT S&I
VEINS AND LYMPHATICS
75801 LYMPHANGIOGRAPHY EXTREMITY UNI S&I
75803 LYMPHANGIOGRAPHY EXTREMITY BIL S&I
75805 LYMPHANGIOGRAPHY PELVIS/ABDOMEN UNI S&I
75807 LYMPHANGIOGRAPHY PELVIS/ABDOMEN BIL S&I
75809 SHUNTOGRAM (LEVEEN SHUNT) S&I
75810 SPLENOPORTOGRAPHY S&I
75820 VENOGRAPHY EXTREMITY UNI S&I
75822 VENOGRAPHY EXTREMITY BIL S&I
75825 VENOGRAPHY CAVAL INF W/SERIAL S&I
75827 VENOGRAPHY CAVAL SUP W/SERIAL S&I
75831 VENOGRAPHY RENAL UNI S&I
75833 VENOGRAPHY RENAL BIL S&I
75840 VENOGRAPHY ADRENAL UNI S&I
75842 VENOGRAPHY ADRENAL BIL S&I
75860 VENOGRAPHY SINUS/JUGULR S&I
75870 VENOGRAPHY SAGITTAL SINUS S&I
75872 VENOGRAPHY EPIDURAL S&I
75880 VENOGRAPHY ORBITAL S&I
75885 PERCUTANEOUS TRANSHEPATIC W/HEMO S&I
75887 PERCUTANEOUS TRANSHEPATIC WO/HEMO S&I
75889 HEPATIC VENOGRAPHY W/HEMO S&I
75891 HEPATIC VENOGRAPHY WO/HEMO S&I
75893 VENOUS SAMPLING WO/ANGIOGRAPHY
TRANSCATHETER AND BIOPSY
75894 TRANSCATHETER THERAPY EMBOLIZATION S&I
75896 TRANSCATHETER THERAPY INFUSION S&I
75898 TRANSCATHETER ANGIOGRAM F/U STUDY
75940 PERCUTANEOUS PLACE IVC FILTER S&I
75960 TRANSCATHETER INTRODUCTION S&I
75961 TRANSCATHETER RETRIEVAL S&I
75962 TRANSLUM ANGIOPLASTY PERIPHERAL ARTERY S&I
75964 TRANSLUM ANGIOPLASTY ADD'L PERIPH ART S&I
75966 TRANSLUM ANGIOPLASTY VISCERAL ART S&I
75968 TRANSLUM ANGIOPLASTY ADD'L VISCERAL ART S&I
75970 TRANSCATHETER BIOPSY S&I
75978 TRANSLUMINAL ANGIOPLASTY, VENOUS S&I
<PAGE> 34
75980 TRANSHEPATIC BILIARY DRAINAGE S&I
75982 PLACE DRAINAGE CATHETER S&I
75984 DRAINAGE CATHETER CHANGE S&I
75989 ABSCESS DRAINAGE GUIDANCE S&I
TRANSLUMINAL ATHERECTOMY
75992 TRANSLUM ATHERCTOMY, PERIPH ART S&I
75993 TRANSLUM ATHERCTOMY, ADDL PERIPH S&I
75994 TRANSLUM ATHERCTOMY, RENAL ART S&I
75995 TRANSLUM ATHERCTOMY, VICERAL ART S&I
75996 TRANSLUM ATHERCTOMY, ADD'L VICERAL S&I
MISCELLANEOUS
76000 FLUOROSCOPY
76001 FLUOROSCOPY, PHYSICIAN ASSIST
76003 FLUOROSCOPY, NEEDLE LOCATION
76010 FB LOCALIZATION NOSE-TO-RECTUM, CHILD
76020 BONE AGE STUDY
76040 BONE LENGTH, ORTHOROENTGENO/SCANOGRAM
76061 BONE (OSSEOUS) SURVEY LTD
76062 BONE (OSSEOUS) SURVEY COMPLETE
76065 BONE SURVEY INFANT
76066 JOINT SURVEY 1+JOINTS 1VW
76070 CT BONE DENSITY STUDY
76080 FISTULA/SINUS STUDY S&I
76086 MAMMO DUCTOGRAM 1DUCT S&I
76088 MAMMO DUCTOGRAM 2+DCT S&I
76090 MAMMOGRAPHY UNILATERAL
76091 MAMMOGRAPHY BILATERAL
76092 MAMMOGRAPHY BILATERAL (SCREENING)
76096 BREAST MASS LOCALIZATION PREOP
76098 BREAST SURGICAL SPECIMEN
76100 TOMOGRAPHY BODY SECTION 1PLANE
76101 LAMINOGRAGRAPHY UNILATERAL
76102 LAMINOGRAPHY BILATTERAL
76120 CINERADIOGRAPHY, NON-INCLUDED
76125 CINERADIOGRAPHY W/ROUTINE EXAM
76140 CONSULTION ON X-RAY EXAM
76150 XERORADIOGRAPHY
76350 SUBTRACTION W/CONT STUDY
76355 CT GUIDE STERIOTACTIC LOCALIZATION
76360 CT NEEDLE BIOPSY GUIDE S&I
76365 CT CYST ASPIRATION GUIDE S&I
76375 CT 3-D RECONSTRUCTION
76380 CT 3D RECON LTD/LOCAL F/U
76400 MRI BONE MARROW BLOOD
76499 UNLISTED DIAGNOSTIC EXAM
<PAGE> 35
DIAGNOSTIC ULTRASOUND
HEAD AND NECK
76506 US BRAIN B-SCAN
76511 US EYE, A-SCAN
76512 US EYE, B-SCAN
76513 US EYE, WATER BATH
76516 US EYE, A-SCAN BIOMETRY
76519 US EYE, W/LENS POWER CALCULATION
76529 US EYE, FOREIGN BODY LOCALIZATION
76536 US NECK SOFT TISSUE
CHEST
76604 US CHEST
76645 US BREAST(S)
ABDOMEN AND RETROPERITONEUM
76700 US ABDOMEN COMPLETE
76705 US ABDOMEN LTD (1 ORGAN)
76770 US RETROPERITONEAL RENAL
76775 US RETROPERI (RENAL) LTD
76778 US KIDNEY TRANSPLANT
SPINAL CANAL
76800 US SPINAL CANAL & CONTENTS
PELVIS
76805 US OB COMPLETE - I
76810 US OB MULTI GESTATE - II
76815 US OB LTD
76816 US OB FOLLOW-UP/2ND
76818 US FETAL BIOPHYSICAL PROFILE
76825 US FETAL HEART
76826 US FETAL HEART, F/U
76827 US DOPPLER FETAL HEART
76828 US DOPPLER FETAL HEART, F/U
76830 US TRANSVAGINAL
76856 US PELVIS NON-OB
76857 US PELVIS NON-OB LTD/FU
GENITALIA
76870 US TESTICULAR MASS
76872 US PROSTATE TRANSRECTAL
EXTREMITIES
76880 US EXTREMITY NON-VASCULAR
<PAGE> 36
ULTRASONIC GUIDANCE PROCEDURES
76930 USG PERICARDIOCENTES S&I
76932 USG ENDOMYOCARD BIO S&I
76934 USG THORACENTESIS S&I
76938 USG CYST/RENAL PELVIS ASPIRATION S&I
76942 USG NEEDLE BIOPSY S&I
76946 USG AMNIOCENTESIS S&I
76948 USG OVA ASPIRATION S&I
MISCELLANEOUS
76970 US REPEAT
76975 US GASTROINTESTINAL ENDOSCOPIC, S&I
76986 US DURING SURGERY
76999 UNLISTED US PROCEDURE
NUCLEAR MEDICINE
ENDOCRINE
78000 THYROID UPTAKE 6 HOUR DETERMINATION
78001 THYROID UPTAKE MULTI DETERMINATION
78003 THYROID UPTAKE STIM/SUPPRESS/DISCHARGE
78006 THYROID SCAN 6 HR UPTAKE
78007 THYROID SCAN 6&4 HR
78010 THYROID SCAN
78011 THYROID SCAN VASCULAR FLOW
78015 THYROID CARCINOMA LIMITED AREA
78016 THYROID CARCINOMA ADD'L AREAS
78017 THYROID CARCINOMA MULTIPLE AREAS
78018 THYROID CARCINOMA WHOLE BODY
78070 PARATHYROID IMAGING
78075 ADRENAL, CORTEX/MEDULLA
78099 UNLISTED ENDOCRINE EXAM
HEMATOPOIETIC, RETICULOENDOTHELIAL AND LYMPHATIC
SYSTEM
78102 BONE MARROW SCAN LIMITED AREA
78103 BONE MARROW SCAN MULTIPLE AREAS
78104 BONE MARROW SCAN WHOLE BODY
78110 PLASMA VOLUME 1 SAMPLE
78111 PLASMA VOLUME MULTI SAMPLE
78120 RED CELL VOL 1 SAMPLE
78121 RED CELL VOL MULTI SAMPLE
78122 WHOLE BLOOD VOLUME DETERMINATION
78130 RED CELL SURVIVAL STUDY
78135 RED CELL SURVIVAL DIFF'L ORGAN/TISSUE
78140 LABELED RED CELL SEQUESTRATION
78160 PLASMA RADIOIRON DISAPPEARANCE RATE
78162 RADIOIRON ORAL ABSORPTION
<PAGE> 37
78170 RADIOIRON RED CELL UTILIZATION
78172 CHELATABLE IRON ESTIMATE
78185 SPLEEN SCAN W/WO VASCULAR FLOW
78190 PLATELET SURVIVAL KINETICS
78191 PLATELET SURVIVAL STUDY
78195 LYMPHATICS & LYMPH GLANDS
78199 UNLISTED NM HEMO/RETICULO/LYMPHATIC
GASTROENTEROLOGY SYSTEM
78201 LIVER SCAN
78202 LIVER SCAN W/VASCULAR FLO
78205 LIVER SCAN (SPECT)
78215 LIVER & SPLEEN SCAN
78216 LIVER & SPLEEN W/VASC FLO
78220 LIVER FUNCTION STUDY
78223 HEPATOBILIARY SCAN
78230 SALIVARY GLAND SCAN
78231 SALIVARY-PARTOID SERIAL
78232 SALIVARY GLAND FUNCTION STUDY
78258 ESOPHAGEAL MOTILITY
78261 GASTRIC MUCOSA SCAN
78262 GASTROESOPHAGEAL REFLUX
78264 GASTRIC EMPTYING STUDY
78270 VIT B-12 W/O INTRINSIC FACTOR
78271 VIT B-12 WITH INTRINSIC FACTOR
78272 VIT B-12 W/WO INTRINSIC FACTOR
78278 GI ACUTE BLOOD LOSS SCAN
78282 GI PROTEIN LOSS
78290 BOWEL SCAN
78291 PERITONEAL-VENOUS SHUNT PATENCY
78299 UNLISTED NM GI PROCEDURE
MUSKULOSKELETAL SYSTEM
78300 BONE SCAN LIMITED AREA
78305 BONE SCAN MULTIPLE AREAS
78306 BONE SCAN WHOLE BODY
78315 BONE SCAN 3 PHASE STUDY
78320 BONE SCAN TOMO SPECT
78399 UNLISTED NM MUSCULOSKELETAL
CARDIOVASCULAR SYSTEM
78414 CENTRAL C-V HEMODYNAMICS
78428 CARDIAC SHUNT DETECTION
78445 VASCULAR FLOW STUDY
78455 VENOUS THROMBOSIS STUDY
78457 VENOUS THROMBOSIS SCAN UNILATERAL
78458 VENOUS THROMBOSIS SCAN BILATERAL
78460 THALLIUM RESTING ONLY
<PAGE> 38
78461 THALLIUM STRESS
78464 THALLIUM RESTING W/TOMO
78465 THALLIUM STRESS W/TOMO
78466 MYOCARD INFARCT AVID QUAL
78468 MYOCARD INFARCT AVID 1PAS
78469 MYOCARD INFARCT AVID W/CT
78472 MUGA GATED EQUILIBRIUM WMS+EJECT FRACTION
78473 MUGA GATED EQUILIBRIUM WMS+EJECT FRACTION MULTI
78478 MYOCARDIAL PERFUSION STUDY
78480 MUGA 1PS WMS+EJECT FRACTION
78481 CARDIAC BLOOD POOL IMAGE, 1PS WMS+EJECT FRAC
78483 CARDIAC BLOOD POOL IMAGE, WMS+EJECT FRAC MULTIPLE
78499 UNLISTED NM CARDIOVASCULAR
RESPIRATORY SYSTEM
78580 PULMONARY PERFUSION PARTICLE
78584 PULMONARY PERFUSION PART W/VENT 1BREATH
78585 PULMONARY PERFUSION PART REBREATH+WASHOUT
78586 PULMONARY VENT AEROSOL 1PROJECTION
78587 PULMONARY VENT AEROSOL MULTIPLE PROJECTIONS
78591 PULMONARY VENT GAS 1BRE 1PROJECTION
78593 PULMONARY VENT GAS REBREATH+WASHOUT
78594 PULMONARY VENT GAS M/BREATH M/PROJECTIONS
78596 VENTILATION/PERFUSION STUDY
78599 UNLISTD NM RESPIRATORY
NERVOUS SYSTEM
78600 BRAIN SCAN LTD STATIC
78601 BRAIN SCAN LTD W/VASCULAR FLOW
78605 BRAIN SCAN COMPLETE STUDY
78606 BRAIN SCAN VASCULAR FLOW
78607 BRAIN SCAN TOMOGRAPHIC (SPECT)
78610 BRAIN SCAN VASC FLOW ONLY
78615 CEREBRAL BLOOD FLOW
78630 CSF FLOW CISTERNOGRAPHY
78635 CSF FLOW VENTRICULOGRAPHY
78645 CSF FLOW SHUNT EVALUATION
78650 CSF LEAKAGE DETECTION & LOCALIZATION
78652 CSF LEAK DETECTION, TOMOGRAPHIC
78655 RADIONUCLIDE ID OF EYE TUMOR
78660 RADIONUCLIDE DACRYOCYSTOGRAPHY
78699 UNLISTED NM NERVOUS SYSTEM
GENITOURINARY SYSTEM
78700 KIDNEY SCAN STATIC
<PAGE> 39
78701 KIDNEY SCAN W/VASCULAR FLOW
78704 KIDNEY SCAN W/FUNCTION STUDY
78707 KIDNEY SCAN W/FLOW&FUNCTION STUDY
78710 KIDNEY SCAN (SPECT)
78715 KIDNEY VASCULAR FLOW ONLY
78725 KIDNEY FUNCTION STUDY
78726 KIDNEY FUNCTION STUDY W/PHARMACY
78727 KIDNEY TRANSPLANT EVALUATION
78730 URINARY BLADDER RESIDUAL
78740 URETERAL REFLUX STUDY
78760 TESTICULAR SCAN
78761 TESTICULAR W/VASCULAR FLOW
78799 UNLISTED NM GENITOURINARY
MISCELLANEOUS
78800 GALLIUM SCAN TUMOR LIMITED AREA
78801 GALLIUM SCAN TUMOR MULTIPLE AREAS
78802 GALLIUM SCAN TUMOR WHOLE BODY
78803 TUMOR LOCALIZATION (SPECT)
78805 GALLIUM SCAN ABSCESS LIMITED AREA
78806 GALLIUM SCAN ABSCESS WHOLE BODY
78807 RADIONUCLIDE ABCESS LOCALIZATION, SPECT
78890 GEN AUTO DATA INTERPRETATION SIMPLE
78891 GEN AUTO DATA INTERPRETATION COMPLEX
78990 DIAGNOSTIC RADIONUCLIDE(S)
78999 UNLISTED NM MISCELLANEOUS
Shaded code indicates precertification required
<PAGE> 40
COVERED CODE PROCEDURE DESCRIPTION SECTION 4
70541 MRA, HEAD &/NECK W/WO
71555 MRA, CHEST (EXCL MYOCARDIUM) W/WO
72159 MRA, SPINAL CANAL & CONTENTS W/WO
72198 MRA, PELVIS W/WO
73225 MRA, UPPER EXTREMITY W/WO
73725 MRA, LOWER EXTREMITY W/WO
74185 MRA, ABDOMEN W/WO
75552 MRI MYOCARDIUM
75553 MRI MYOCARDIUM WITH CONTRAST
75554 MRI CARDIAC FUNCTION, W/WO MORPHOLOGY
75555 MRI CARDIAC FUNCTION, W/WO MORPH, LTD
75556 MRI CARDIAC VELOCITY FLOW MAPPING
<PAGE> 41
SECTION 5
CLAIMS PAYMENT RESPONSIBILITY
The following grid outlines the claims payment responsibilities for MEDICON and
ChoiceCare for the covered settings and services defined in this Program Design
(Exhibit A).
Product PRPs* Non-PRPs**
HMO MEDICON ChoiceCare***
POS MEDICON MEDICON
*PRPs are participating providers contracted with ChoiceCare.
**Non-PRPs are providers not contracted with ChoiceCare.
***Unless prior approval was obtained in accordance with Section 3.4 of the
Agreement.
A-5
<PAGE> 42
SECTION 6
ASSESSMENT PROCESS
INITIAL ASSESSMENT
MASS MAILING
A. Application Packets will be mailed to designated providers by MEDICON.
The packets will consist of:
- - - INSTRUCTION FORM for submission of information.
- - - PROVIDER INFORMATION FORM requesting general information about provider.
- - - ASSESSMENT CHECKLIST that focuses on fundamental patient safety,
radiation safety, and policies and procedures related to quality
diagnostic imaging.
- - - IMAGING EQUIPMENT AND PERSONNEL FORMS requesting specific information.
B. MEDICON will require a computer download of all providers on the mailing list
(organized by provider group or site, if possible). The requested mailing list
should be the one utilized for the master assessment letter mailing.
C. Providers will be requested to return the completed Application Packet or
to return the post card to MEDICON within 2 weeks of receipt of packet.
D. New ChoiceCare providers may request Applications Forms for participation in
the diagnostic imaging program at any time. All requests for applications should
be made through MEDICON's customer service department.
DOCUMENT ASSESSMENT
All providers requesting participation in a diagnostic imaging program must
complete the document assessment process.
Providers will be assessed based on the information provided in the completed
assessment checklist. The focus of the assessment will center around member
safety to include standards of general and radiation safety and identifying
standards for quality diagnostic imaging.
Checklist information and requested documentation will be reviewed for
compliance with standards.
A-6a
<PAGE> 43
SECTION 6
STANDARD REQUIREMENTS FOR PARTICIPATION:
All diagnostic imaging providers applying to participate in the imaging program
must provide a copy of the standard imaging report that will be utilized by
their practice. The report must include the following criteria.
Clinical Information Demographic Information
a. EXAMINATION ORDERED a. DATE OF SERVICE
b. INDICATION b. PATIENT NAME
c. FINDINGS c. PROVIDER NAME
d. IMPRESSION d. REFERRING PHYSICIAN NAME
e. RECOMMENDATIONS (IF APPLICABLE) e. RADIOLOGIST NAME
f. DATE OF BIRTH/AGE
g. SEX/GENDER
- - - Preventive maintenance and Calibration or Electrical Check , which ever is
applicable, should be performed on all diagnostic imaging equipment
according to the manufacturer's recommendations or state requirements.
- - - Copy of current registration/certification for all technologists who perform
diagnostic imaging for your practice.
- - - Provide a copy of state registration for radiation emitting equipment.
- - - Provide a copy of the Quality Assurance/Quality Management Program in place.
- - - Other requirements may be applicable.
NON-COMPLIANT STATUS
1. Providers who do not meet the requirements at the time of submission of
Application Packet will be allowed 2 weeks to submit to MEDICON documentation
supporting compliance.
NOTE: In order to meet the deadline, proof of a scheduled PM/Calibration or
Electrical Check should be submitted to MEDICON in lieu of actual
documentation, until which time the document supporting compliance can be
submitted.
2. Providers who do not specify on the assessment checklist that fundamental
standards for QUALITY IMAGING and RADIATION SAFETY are in place will be
candidates for a site assessment. Providers who do not specify that standards
for PATIENT SAFETY are in place will be sent resource materials to assist in
compliance. A corrective action plan may be required from providers
documenting intentions of implementation of standard(s). If MEDICON is not in
receipt of the requested corrective action plan within a two week timeframe,
ChoiceCare will be notified and will make the determination as to what action
should be taken.
A-6b
<PAGE> 44
SECTION 6
3. A site assessment may be required based upon the criteria listed below.
CRITERIA FOR SITE ASSESSMENT
NETWORK PROVIDER SITES (Hospitals and Freestanding Imaging Centers participating
in a CDIP) All network provider sites, not JCAHO accredited, will require an on
site assessment. All participating diagnostic imaging providers must submit a
completed Application Packet. As well, freestanding mammography centers are
required to meet criteria established by the ACR and FDA in order to participate
as a network provider. MEDICON will work with ChoiceCare to cooperate with
further requests for Assessment as it relates to NCQA and Medicare guidelines.
IN-OFFICE PROVIDERS OF PLAIN FILM RADIOGRAPHY
The Medical Assessment Department suggest that a site assessment be performed
under the following conditions:
- - - When the operators of radiation emitting equipment have not specified on the
assessment checklist that policies and procedures which meet standards for
quality diagnostic imaging and radiation safety are in place.
- - - When a provider does not employ certified personnel to operate the radiation
emitting equipment. This includes offices in which physicians are operating
the equipment themselves.
- - - A provider has been identified by ChoiceCare as deficient in providing
quality diagnostic imaging and/or patient safety.
- - - When requested by ChoiceCare.
FILM REVIEW
- - - A 10 Exam Film Review will be performed by the Medical Assessment Specialist,
during the site assessment, for each imager that performs diagnostic imaging
at the provider site. This review is based on standards for diagnostic
imaging and technical quality. If the imaging personnel does not pass the
film review, the MAS will offer to conduct a quality improvement inservice.
- - - 30 days following a quality improvement inservice, a second film review will
be required. The films for review will be submitted to MEDICON for evaluation
and returned to the physicians' office within 5 business days following the
review. If the imaging personnel does not meet standards at this time, the
physicians' office will be placed in the non-compliant status and ChoiceCare
will be notified.
PROVIDERS OF ULTRASOUND IMAGING
OB/GYN and Urology providers will not routinely require a site assessment.
However, these provider's must meet the document assessment requirements.
ChoiceCare may request that site assessments be performed at these specialty
sites.
A-6c
<PAGE> 45
SECTION 6
A 10 exam film review will be conducted on all NON-REGISTERED ultrasound imaging
personnel by MEDICON's Medical Assessment Department. All films for review will
be submitted to MEDICON, with a projected one week turn around time for the
return of the films to the provider. A call to the imager will be made by the
reviewing MAS to discuss the film review findings. The film review report will
be provided with the films. If an imager fails the first film review they will
be given the opportunity to submit a second set of films for review that
demonstrate the improvements. MEDICON will offer to provide a quality
improvement inservice, where applicable.
PROVIDER STATUS REPORT
ChoiceCare will be provided with an updated report to identify providers' status
in the following areas:
- - - SAFETY COMPLIANT: The provider meets requirements for participation and has
specified that policies and procedures which meet standards for safety are in
place.
- - - QUALITY COMPLIANT: The provider has specified that standards for quality
diagnostic imaging are in place.
- - - NON-COMPLIANT(Safety and/or Imaging Quality) : The provider does not meet
standards and or does not meet requirements for participation.
- - - ON-SITE NEEDED: Dependent upon mutually agreed upon criteria.
- - - TOTAL COMPLIANCE: Providers that are both Safety and Quality compliant and
meets all requirements for participation.
- - - MISSING INFORMATION: Requested Assessment information that has not been
submitted.
A-6d
<PAGE> 46
SECTION 6
REASSESSMENT
Reassessment of offices/facilities occurs every two years from the date of
implementation.
The following criteria will be used in determining the information that will be
reviewed during the reassessment process:
A. DOCUMENT ASSESSMENT
All offices/facilities will be required to submit the following
information in order to continue participating in a diagnostic imaging
program.
1. Preventive Maintenance Information. Current copies of calibration/
preventive maintenance for each piece of imaging equipment.
2. Technologist Information. Current copies of technologist
certification/ registration for each individual performing imaging
procedures.
3. Physician Information. Current list of participating physician's
within the practice.
4. Provider Information Forms. Complete address, tax identification,
telephone number and office manager/contact name.
5. Completion of an Assessment Checklist, attached to this Exhibit A as
Attachment A-1.
B. SITE VISIT
Offices/facilities will require a "Site Visit" for the following:
1. Quality issues identified by ChoiceCare - when significant issues
exist whereby safety is jeopardized in general patient and imaging
areas Also, when deficiencies in quality diagnostic imaging have
been reported.
2. Any providers who had a serious quality issue identified during the
initial site assessment and had to comply with a corrective action
plan.
C. FILM REVIEW
- Only for reviews which were originally identified as having passed with
borderline results on the initial film review.
- When a new employee who is not certified is performing diagnostic imaging
at a provider site.
A-6e
<PAGE> 47
SECTION 7
UTILIZATION MANAGEMENT
GOAL
The goal of MEDICON's Utilization Management Plan is to reduce inappropriate
diagnostic imaging utilization through positive interactions with network
radiologists and ordering physicians. Through the precertification of specified
diagnostic imaging examinations and by sharing outcome-based results with
network physicians, MEDICON works to modify physicians' ordering practices
through education, and promote cost-efficient quality patient care.
OBJECTIVES
In order to meet the goal of cost-efficient, quality patient care, MEDICON's
Utilization Management Plan encompasses the following objectives:
- Ensure the timely dissemination of standard and accurate reports to all
clients, providers, and ordering physicians.
- Develop meaningful measurement tools which are structured in analysis, and
supported by data.
- Identify physician ordering patterns through the establishment of best
practice measures, and use criteria-driven physician profiles to help
reduce the number of inappropriate exams related to specific disease
management patterns.
- Formulate action plans specific to our client's needs and focus on the
management of all diagnostic imaging services.
- Provide a framework for data analysis and interpretation that shall be
made available to all providers of diagnostic imaging services.
- Create educational tools that improve the flow of information to medical
professionals who order and perform diagnostic imaging, and ensure the
quality and efficiency of patient care.
SCOPE
MEDICON's Utilization Management Plan is the foundation for analysis and
reporting to all clients, network providers, and ordering physicians associated
with the MEDICON program.
METHODS OF REVIEW
PRECERTIFICATION
Through the application of standardized criteria, a sequential three-level
review process is employed to prospectively review specific diagnostic imaging
examinations. This process includes initial review by a Referral Associate,
secondary review by a Precertification Nurse, and final
A-7a
<PAGE> 48
SECTION 7
review, if necessary, by a Precertification Program's Medical Director. A
determination to certify the requested examination may be made at any one of the
three stages.
RETROSPECTIVE REVIEW
Retrospective analysis of diagnostic imaging examination data is performed to
identify opportunities for improvement in utilization trends. Utilization
management information is made available to all network radiology providers,
network physicians, and ChoiceCare at different frequencies during the year.
The following reports will be distributed at either the end of the each calendar
quarter or year, depending upon frequency, and all information contained therein
is subject to a 60 day lag for the processing of claims and/or radiology
reports.
- QUARTERLY NETWORK RADIOLOGIST REPORTS
These reports are designed to provide the network radiologists with an
overview of their utilization activity for any given quarter. By
demonstrating utilization data organized by individual providers as
compared to the utilization trends of other network providers, each
facility will gain an understanding of how they rank amongst their peers.
To aid the radiologist in reducing inappropriate referral patterns,
MEDICON will identify those indications for which radiologists are
performing multiple exams per patient, the total number of exams performed
per each indication, the varying modalities used to treat the particular
indication, and an overview of the highest volume referring physicians.
- QUARTERLY CHOICECARE REPORT
Utilization management data will be made available to ChoiceCare on a
quarterly basis. Each report will include a year-to-date utilization
analysis, a summary of the top 20 procedures performed, the top 20
indications for which imaging tests were performed, and the corresponding
negativity percentages for both. In an effort to provide the most
cumulative data possible, all reports will identify the top 10 procedures
performed in conjunction with the top 20 cited indications, as well as an
overview of the diagnostic imaging activity recorded by the top five
providers within each network. By incorporating this report, it is
MEDICON's goal to allow ChoiceCare the ability to identify those trends
and/or patterns of treatment deemed worthy of monitoring, and develop
guidelines to improve the ordering patterns of network physicians and
reduce inappropriate utilization.
- SEMI-ANNUAL PRIMARY CARE PHYSICIAN REPORTS
Semi-annual reports will be issued to specific primary care physicians.
Because we believe that physicians are the key to change, semi-annual
reports will be issued to specific non-radiologists, and/or non-radiology
practices ordering 30 or more imaging studies per reporting period. In
keeping with our disease management approach, these reports will outline
the total number of imaging studies ordered by indication, the per patient
imaging rate associated with that indication, and how that physician's
rates compare to those of his/her peers of the same specialty. As
supporting documentation, an exam detail report is also included, which
defines every patient, procedure, indication, outcome, and date of service
attributable to all imaging studies ordered by the reporting physician.
A-7b
<PAGE> 49
SECTION 7
- QUARTERLY PROVIDER RADIOLOGY REPORT COMPLIANCE SUMMARY
To ensure data integrity, MEDICON's Clinical Information Department is
expanding it's reporting capabilities to include a compliance report
detailing the percentage of radiology reports received by MEDICON from
it's providers. MEDICON's data is only as good as what it receives, and
reporting purely from claims driven data does not allow for the type of
analysis that centers on disease management, and proper utilization
management controls. Each report will indicate the total number of claims
received by month during the quarter, the total number of radiology
reports received during that same quarter, and the corresponding
percentage of compliance. For those claims received without radiology
reports, and for those radiology reports that are received without claims,
an exam log is included that lists the member name, date of service, and
procedure. MEDICON perceives anything less than 85% compliance to be
unacceptable, and payments may be withheld in an effort to obtain the
appropriate information.
UTILIZATION MANAGEMENT TOOLS
MEDICON's utilization management activity draws from other tools in addition to
disease management and utilization analysis. In particular, the Clinical
Information Department works with other areas of MEDICON to develop educational
tools and disseminate them amongst network physicians, as to provide current
information on diagnostic imaging studies and promote quality patient care.
These tools include the following:
- LOCAL IMAGING ADVISORY COUNCILS
Each client shall establish a Local Imaging Advisory Council which shall
meet ten times during the initial term of the Agreement and six times per
year thereafter and consist of both radiologists and non-radiologists from
the local medical community. This group is responsible for the development
of strategies to educate physicians on appropriate utilization, to develop
quality standards for diagnostic imaging, to review and adopt clinical
practice guidelines, to review and compare local utilization patterns to
national utilization patterns, to provide recommendations for program
changes, and evaluate and integrate recommendations from the MEDICON
National Imaging Advisory Council. As partner to the Local Imaging
Advisory Council, MEDICON will provide analyses and data presentations as
required. These reports will be specifically designed to work in
conjunction with MEDICON's Physician Education Programs.
- PHYSICIAN EDUCATION PROGRAMS
MEDICON employs an educational data-driven approach to modify physicians'
diagnostic imaging ordering practices. The primary vehicle for carrying
out this initiative is the Physician Education Module. These initiatives
focus on the Primary Care Physician, as well as the Radiologist who should
be recognized as an imaging consultant to all referring physicians.
The purpose of this program is:
- To identify physicians demonstrating a strong reliance on the use
of diagnostic imaging with regards to a particular indication.
A-7c
<PAGE> 50
SECTION 7
- To alert those physicians identified that their utilization
frequency is above that of their peers.
- To educate physicians on the type, frequency, and value of
particular diagnostic imaging studies with regards to the
treatment of a specific indication.
- To reduce inappropriate diagnostic imaging utilization.
- To provide the referring physician community with the most
current information available in the medical literature.
The strategy of this program is based upon the theory that Primary Care
Physicians believe that they are in fact providing the best quality and up
to date treatment that is available. However, if notified otherwise and
provided with the appropriate literature and documentation the Primary
Care Physicians will almost invariably self-correct patterns of
inappropriate utilization.
Combining this approach with a tracking system to monitor practical effect
on overall and individual utilization patterns will be non-intrusive,
enlightening and effective.
Upon approval from ChoiceCare, MEDICON will define the parameters of the
program (i.e. indications, appropriate patterns of treatment, supporting
literature, etc.) and the Clinical Information Department will perform an
analysis identifying all physicians to be targeted for the initiative.
These physicians will then be contacted by letter which will include a
summarization of their general ordering habits, the efficacy of ordering
diagnostic imaging studies for that particular indication, the current
treatment patterns for that indication as demonstrated in the latest
medical literature. Approximately 6 months following the completion of
this initiative, MEDICON will re-analyze the data to quantify its impact
on an individual physician basis. Continuing patterns of inappropriate
utilization will be identified and shared with the client's medical
leadership.
- AD HOC REPORTING CAPABILITIES AND PROGRAMS
To provide our clients with the most complete data and remain as flexible
as possible in meeting our client's needs, MEDICON provides ad hoc reports
to our clients on a regularly scheduled basis. Four special analyses are
provided for each client per year. These analyses should be structured to
reflect the issues centered within the Local Imaging Advisory Council, and
the Physician Education Program. The number of reports will be monitored
by the number of hours associated with the production of each report, and
should extra analyses be requested by the client, they may be obtained at
an additional cost.
A-7d
<PAGE> 51
SECTION 7
All of MEDICON's reports, individual consultations, educational programs, and
written materials are used to support diagnostic imaging providers in their role
as consultants and to encourage physicians to consider alternative ordering
practices. The success of MEDICON's diagnostic imaging networks depends upon
this collaboration of imaging providers and referring physicians to reduce
inappropriate diagnostic imaging utilization.
A-7e
<PAGE> 52
SECTION 8
QUALITY MANAGEMENT
INTRODUCTION
The MEDICON Quality Improvement Program covers the management of all diagnostic
imaging services. This encompasses collecting information from providers during
assessment of imaging facilities and providing this information to the client,
along with ongoing quality improvement information. Based on this information,
the managed care organization will make credentialing and quality improvement
decisions. In all of these areas, MEDICON acts as a non-delegated contractor.
PURPOSE
Progress toward quality improvement is documented through the use of quality
products that rely on measurable data. These quality products are designed to
measure satisfaction, network operation and clinical care.
OBJECTIVE
The objective of the Quality Improvement Program is to create proactive response
to improvement by increasing the amount of information regarding the structure
and process problems that may occur in diagnostic imaging networks.
SCOPE AND INTEGRATION
MEDICON's Quality Improvement Program is the foundation for using various data
sources for analyzing quality of radiology services. The emphasis is placed on
data and its transformation into information. Diverse clinical expertise is used
to analyze data gathered from various sources in the conversion to information.
LOCAL IMAGING ADVISORY COUNCILS
ChoiceCare shall establish a Local Imaging Advisory Council which consists of
both radiologists and non-radiologists from the local medical community. This
group is responsible for the development of quality standards, oversees quality
activities within their network, providing recommendations for program changes,
and evaluation and integration of recommendations from the MEDICON National
Imaging Advisory Council.
REPORTING
Quality reports contain measures of quality, access and satisfaction. Data from
database sources are tabulated and abstracted into defined categories to target
areas of concern. The summaries of these reports are available for review by
ChoiceCare.
A-8a
<PAGE> 53
SECTION 8
All medical information and/or records incident to Quality Improvement shall be
considered confidential so as to comply with all applicable state, federal and
local laws. MEDICON has the responsibility to protect the confidential nature of
these records against loss, defacement, tampering and unauthorized use.
Medical information contained in the reports will be prohibited from general
discussion and/or release to parties outside of MEDICON, except to ChoiceCare's
Medical Directors and/or Representatives for QA/QI activities with the consent
of the Member or Member's authorized representative. The Member's signed
enrollment application form used by the client shall be deemed sufficient
consent unless directed otherwise.
QUALITY PRODUCTS
Quality Improvement is documented through the following quality products that
rely upon measurable data extracted from various databases. These reports
identify targets for quality improvement activity. More detailed information
regarding these products is available by request to MEDICON's Client Services
department.
- - - QUALITY IMPROVEMENT SUMMARY REPORT - MEDICAL INQUIRIES
Complaints and concerns expressed by referring physicians, members and
radiologists are addressed through a medical inquiry process that
investigates, analyzes and reports on their nature and extent. The
information is tracked in a database and reviewed for patterns and to
assess the success of planned strategies for problem resolution.
- - - MAMMOGRAPHY TRACKING REPORT
MEDICON will provide Mammography Tracking Reports to ChoiceCare on a
quarterly basis. These reports are designed to comply with HEDIS 2.5
Administrative Specifications for the Breast Cancer Screening
(Mammography) Quality Performance Measure. ChoiceCare may use this
information to identify strengths and weaknesses in breast cancer
screening programs and to apply best practice principles to encourage
appropriate breast cancer screening.
- - - MAMMOGRAPHY NON-COMPLIANCE REPORT
MEDICON may provide Mammography Non-Compliance Reports to ChoiceCare in
accordance with the ChoiceCare client agreement. These reports measure the
number of members within HEDIS 2.5 specified age groups that did not have
a mammogram within the last two years. These reports are used to identify
and educate primary care physicians with a high non-compliance rate.
- - - ASSESSMENT RATING SYSTEM
The goal of the assessment process is to provide a measurable evaluation
by use of a rating system. The categories addressed include accessibility,
radiation safety, staffing, and general office conditions. An overall
office/facility rating is provided to the client. The scores identify
areas for technical improvement. MEDICON Medical Assessment Specialists
offer assistance to providers to educate and improve the provider's
rating.
A-8b
<PAGE> 54
SECTION 8
- - - STRIDE REPORT
The STRIDE Report focuses on the variability of the content,
interpretation and communication style of radiology reports. The goal is
to work towards standardization of radiology reports through education of
network providers.
- - - PREAUTHORIZATION/PRECERTIFICATION REPORT
Data analyses of the precertification and exception authorization
processes provide information concerning network operations and quality of
services. The information may identify structure of process opportunities
for improvement that may occur in a network.
A-8c
<PAGE> 55
SECTION 9
OPERATIONS
REPORTING
Reports will be provided to ChoiceCare in accordance with this Agreement and
specified in Exhibit B.
MAILINGS TO PROVIDERS
ChoiceCare will be responsible for the following mailings to providers, unless
otherwise agreed to by MEDICON.
- - - Announcement letters
- - - General notifications (i.e. program changes)
- - - Utilization Management reports
A-9
<PAGE> 56
EXHIBIT B
SERVICE STANDARDS AND REPORTING REQUIREMENTS
<TABLE>
<CAPTION>
PERFORMANCE MEASURES STANDARD REPORTING REQUIREMENTS *
<S> <C> <C>
Customer Service:
RISK MEASURES
abandonment rate [less than] 3%
average speed of answer [less than] 20 seconds
% calls answered within 30 seconds [greater than] 70%
REPORTING MEASURES measured monthly, reported by the 15th
of the following month (form Exhibit
B1)
abandonment rate (defined on
Exhibit B2) see standard above
average speed of answer (defined on
Exhibit B2) see standard above
% calls answered within 30 seconds
(defined on Exhibit B2) see standard above
initial call resolution rate
(defined on Exhibit B2) [greater than] 95%
Inquiry resolution (defined on
Exhibit B2) resolved within 7 business days
quality monitoring scores (Exhibit
B3) [greater than] 36 measured monthly, reported to Medicon
by the 15th of the following month.
Hours of Call Center Operations 8:00am to 6:30pm Eastern Standard Time
- - ------------------------------------------------------------------------------------------------------------------------------------
Claims Payment
RISK MEASURES
Receipt to payable (all claims) 90% payable within 11 business days of receipt
98% payable within 22 business days of receipt
100% payable within 33 business days of receipt
Financial Accuracy [greater than] 99.5%
REPORTING MEASURES measured monthly, reported by the 15th
of the following month.
Receipt to payable (defined on
Exhibit B2) see standard above
Financial Accuracy (defined on
Exhibit B2) see standard above
Receipt to paid (all claims)
claims lag (Exhibit B4)
claims inventory
- - ------------------------------------------------------------------------------------------------------------------------------------
Provider Satisfaction
REPORTING MEASURES (TO BECOME A
RISK MEASURE AFTER YEAR 1)
Quarterly satisfaction rating
measured through ChoiceCare's
Provider Satisfaction and Office
Staff Satisfaction Surveys.
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* A penalty of $500 per day will be assessed for failure to meet reporting
requirements.
<PAGE> 57
EXHIBIT B
SERVICE STANDARDS AND REPORTING REQUIREMENTS
<TABLE>
<CAPTION>
PERFORMANCE MEASURES STANDARD REPORTING REQUIREMENTS *
<S> <C> <C>
Assessment
REPORTING MEASURES
site surveys completed by Medicon
within 30 days of ChoiceCare
notifying Medicon of a new provider
(when a site visit is required). 100% measured quarterly, reported by the
45th day following the end of a
quarter.
Quarterly status of assessments 45th day following the end of the
quarter.
Quarterly status of credentials of
technicians 45th day following the end of the
quarter.
- - ------------------------------------------------------------------------------------------------------------------------------------
Financial:
REPORTING MEASURES
monthly financial summary of program 15th of the following month
separate totals for: fully and
self insured product lines
quarterly financial summary of
program 45th day following the end of the
quarter
separate totals for: fully and
self insured product lines
employer group specific
quarterly corporate financials specified in Earmark agreement
audited financial statements,
management letter comments 90 days following the end of the year
Statement of Auditing Standards 70
(SAS 70) obligation in the second year of this
Agreement
- - ------------------------------------------------------------------------------------------------------------------------------------
Utilization:
REPORTING MEASURES 45th day following the end of the
quarter
quarterly and trended total
utilization / 1000 occurrences
quarterly and trended mammography
results
quarterly and trended positivity
and negativity results across all
diag.
See Exhibit A for reporting details
- - ------------------------------------------------------------------------------------------------------------------------------------
Quality of Care
REPORTING MEASURES 45th day following the end of the
quarter
Five physician education modules
will be available initially. 1
module will be implemented each
quarter with ChoiceCare's approval.
Retake rate data will be supplied
with each quarterly educational
module.
Ten modules will be available by the
end of contract year one.
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* A penalty of $500 per day will be assessed for failure to meet reporting
requirements.
<PAGE> 58
CAPITATION REBATE SCHEDULE
<TABLE>
<CAPTION>
OPERATING MARGIN MEDICON CHOICECARE
<S> <C> <C> <C>
0 - 10.99% Contract 100% 0%
Hit 100% 0%
Miss 75% 25%
11.00% - 12.99% Contract 50% 50%
Hit 75% 25%
Miss 25% 75%
13.00% - 19.99% Contract 20% 80%
Hit 40% 60%
Miss 0% 100%
</TABLE>
The following measures are considered crucial risk measures. Performance
standards must be met for the following:
* Abandonment Rate
* Receipt to payable within 11 business days
* Financial Accuracy
One risk measure, not including the above, may be missed and still considered a
"hit".
If more than one risk measure, or any one of the above crucial measures,
performance does not meet standard, Medicon will be obligated to pay ChoiceCare
according to the "miss" percentage for the applicable operating margin.
Capitation rebates will be calculated on a six month average performance score.
$500 / day penalty for failure to submit reports timely.
<PAGE> 59
EXHIBIT C
COMPENSATION
THE COMPENSATION EXHIBIT and its provisions are effective commencing
on April 1, 1996 and will continue in effect through the term of this Agreement
or as otherwise modified by mutual agreement of the parties.
SECTION 1 DEFINITIONS
"1996 BASE FEE" means the set amount per member per month (pm/pm)
that MEDICON shall receive on a monthly basis for the period April
1, 1996 to March 31, 1997.
"CAPITATION PAYMENT" means the set amount per member per month
(pm/pm) that MEDICON shall receive on a monthly basis during the
term of this Agreement.
- For the initial term of this Agreement, the Capitation Payment
shall be the 1996 Base Fee.
- Upon renewal, the Capitation Payment for the next contract year
shall be the previous year's Effective Program Cost adjusted by
any increase in the All- Items Consumer Price Index for the most
recent calendar year, minus one (1) percentage point.
"EFFECTIVE PROGRAM COST" means the Capitation Payment for the most
recently completed contract year minus (i) the pm/pm equivalent of
ChoiceCare's and any self-funded employers share of any Operating
Margin for the corresponding contract year earned in accordance with
the schedule set forth in Section 2.8 of this Exhibit C and (ii) the
pm/pm equivalent of changes in the MLR which are the result of
changes to the reimbursement terms in PRP contracts with ChoiceCare.
"OPERATING MARGIN" means a surplus represented by subtracting the
aggregate value of medical expenses paid by MEDICON in accordance
with Exhibit A of this Agreement from the aggregate revenue paid by
ChoiceCare to MEDICON in the form of Capitation Payments for the
corresponding period.
SECTION 2 CAPITATION TERMS
2.1 CAPITATION FEES. ChoiceCare will pay MEDICON a monthly
Capitation Payment for services outlined in the Program Design.
2.2 THE 1996 BASE FEE for each of the applicable ChoiceCare products
is outlined below:
C-1
<PAGE> 60
<TABLE>
<CAPTION>
Product Base Fee
------- --------
<S> <C>
Fully Insured PCAS $5.83
Fully Insured Select $5.83
Fully Insured NewHealth $5.83
Fully Insured Co-Choice $6.13
Self-Funded NewHealth $5.83
Self-Funded Co-Choice $6.13
Self-Funded Select $5.83
Self-Funded PCAS $5.83
</TABLE>
2.3 PAYMENTS TO PROVIDERS
MEDICON will pay the technical and/or professional component to
PRP from a monthly Diagnostic Imaging Provider Account (DIPA).
The amount in this account equals:
$3.50 x TOTAL ENROLLMENT
Total enrollment is the number of eligible Members at the
beginning of each month. Solely for purpose of example, if
April enrollment is 175,000 Members, the account for April
equals $612,500.
Monthly payments from this account will be disbursed to PRPs
according to each PRP's percentage of the total Intensity
Adjusted Episodes of Care per month.
An Intensity Adjusted Episode of Care ("IAEOC") is defined as
diagnostic imaging services for a particular patient for one
condition over a sixty (60) day period indexed by an intensity
adjustment factor based upon the types of studies performed.
Initially the DIPA account for a given month will be paid out
as follows:
<TABLE>
<S> <C> <C> <C>
Month 1 40% Month 4 .67%
Month 2 10% Month 5 .67%
Month 3 48% Month 6 .66%
</TABLE>
Upon notification by ChoiceCare, the DIPA account for a given
month will be paid out as follows:
<TABLE>
<CAPTION>
Month Percentage Paid
----- ---------------
<S> <C>
1 70%
2 90%
3 98%
</TABLE>
C-2
<PAGE> 61
By the end of month three, all DIPA dollars will be 98%
disbursed. The remaining two percent (2%) shall be paid over
the following three (3) months.
Monthly payment from the DIPA is made prior to and no later
than the 15th of the month. There are two components to each
DIPA payment. The first is based on an estimate for the
previous month's IAEOC. The second is an adjustment based on
the actual IAEOCs provided in the second preceding month. The
first payment under this program shall be paid no later than
the 15th of the month.
Presume a PRP had performed 500 studies during the month of
April and the average Relative Value Units (RVU) per
examination is 2.0. This PRP's resulting IAEOC would be 1,000.
Further presume that the total IAEOC for all DIPA, or $6,125,
subject to the pay-out schedule described above (i.e.,
1,000/100,000 x $612,500).
Solely for the purposes of example, presume the April 1996
enrollment given above of 175,000 would result in a DIPA for
the month of April of $612,500. The first pay-out of those
funds will occur by May 15, 1996. Based on the above schedule,
70% of the $612,500 DIPA, or $428,750, will be available for
pay-out in month one (May 15, 1996) to all PRPs. The June 15,
1996 payment will include an estimate for May 1996 and also an
actual payment for April based upon information submitted by
the PRPs to calculate each PRP's IAEOC. The June 15, 1996 total
pay-out for DIPA PRPs for April will be an additional 20% of
the $612,500 (i.e., $122,500) for a total disbursement of
$551,250 of the April DIPA. The July 15, 1996 payment will
bring the total payments to 98% of the April DIPA of $612,500
(i.e., $600,250), paid to each PRP proportionately based on the
IAEOC.
MEDICON will guarantee during the life of the program that the
PRPs will receive a Medicare Physicians Fee Schedule minimum
guarantee as outlined in Exhibit D. This will be calculated as
the sum of the DIPA, Co-pay, deductible and other supplemental
payments in accordance with this Agreement to the equivalent of
an effective aggregate payment per procedure. The guarantee
will be reconciled quarterly and will be based on the sum of
the activity during the quarter. Reconciliation payments will
be made within 60 days following the close of a quarter and
will be based on claims submitted within thirty (30) days of
the close of a quarter.
A NewHealthSM Member may receive a mammogram from any
ChoiceCare/MEDICON PRP. A NewHealthSM Member requiring an
imaging examination other than a mammogram must go to a
NewHealthSM Provider within the ChoiceCare/MEDICON Imaging
Network, except for certain examinations covered by the
NewHealthSM Centralized Policy currently in effect and as
amended from time to time. Services performed for NewHealthSM
Members by other than NewHealthSM Providers which are part of
the ChoiceCare/MEDICON Imaging Network, will not be counted as
C-3
<PAGE> 62
Episodes of Care nor will the RVU for such studies be counted
in calculating the RVU adjustment factor.
2.4 MAMMOGRAPHY RESERVE
The Capitation Payment includes forty-seven cents ($0.47) per
member per month, established as the Mammography Reserve, which
is to be paid out according to the Program Design. The
subsequent year's Mammography Reserve Capitation Payment will
be adjusted, upward or downward, based on the claims experience
of mammography for the period of April 1 to December 31 of the
current contract year. The adjustment to the Mammography
Reserve Capitation Payment must be calculated by MEDICON and
agreed upon by ChoiceCare, no later than March 31 of the
current contract year. The adjustment will be effective April 1
of the subsequent contract year. In no event will a
retrospective adjustment be applied.
If, upon termination of this Agreement, there is an excess in
the Mammography Reserve, such excess shall be returned to
ChoiceCare in full, no later than 45 days after the date the
last ChoiceCare claim is paid by MEDICON, not to exceed 180
days from the termination date. If, upon termination of this
Agreement, there is a deficit in the Mammography Reserve, such
deficit shall be funded by ChoiceCare with funds in addition to
any Capitation Payments due to MEDICON under this Agreement, no
later than forty-five (45) days after the date the last
ChoiceCare claim is paid by MEDICON, not to exceed 180 days
from the termination date.
2.5 LOCAL MEDICAL DIRECTOR
MEDICON will provide medical director support to the local
Imaging Advisory Council. This medical director will not
necessarily be a local medical director, but a MEDICON employee
or consultant who may have responsibility for service areas
other than just Cincinnati. This medical director is not
intended to be an employee or contractor of ChoiceCare.
ChoiceCare may, in its sole discretion, appoint a medical
director to support the local Imaging Advisory Council.
The local medical director provided for under Section 2.12 of
the prior agreement between ChoiceCare and MEDICON ("the 1995
Agreement") will not be a part of this Agreement, except to the
extent that monthly payments continue to be required to be made
to the local medical director under the March 8, 1994
consulting agreement for imaging medical director services (the
"Medical Director Agreement"). Such payments to the local
medical director under the Medical Director Agreement shall
continue to be the financial responsibility of MEDICON.
Upon the termination of the local medical director, the monthly
fee due MEDICON will be adjusted down by one-half of the amount
of the monthly
C-4
<PAGE> 63
fee which would have been paid to the medical director under
the Medical Director Agreement and the 1995 Agreement.
2.6 PROGRAM DESIGN CHANGES
Upon the mutual agreement of the parties to Program Design
changes which affect costs under this Agreement, the Capitation
Payment shall be adjusted by a mutually agreed upon amount to
reflect the financial impact of such changes, effective as of
the date of the Program Design change.
2.7 RENEWAL
Upon renewal, the Capitation Payment for the next contract year
shall be the previous year's Effective Program Cost adjusted by
any increase in the All-Items Consumer Price Index for the most
recent calendar year, minus one (1) percentage point. The
Capitation Payment shall be calculated as close to the
beginning of the recent contract year as possible, but in any
event no later than within sixty (60) days after the end of the
contract year.
2.8 SHARING OF OPERATING MARGIN: UTILIZATION SETTLEMENT
Within a pre-negotiated time frame after the end of each
contract year, MEDICON will provide ChoiceCare a report which
shows the average medical loss ratio (MLR) for Health Plans for
that contract year for both self-funded business, detailed by
employer group, and prepaid business. The 1996 Base Fee
anticipates a MLR of 93% after MEDICON meets all requirements
and obligations to PRPs. Should the MLR increase, ChoiceCare
shall not be obligated to provide any additional funds to
MEDICON. Should the MLR decrease, a settlement shall occur
whereby MEDICON shall refund to ChoiceCare a certain percentage
of the additional Operating Margin according to the following
schedule:
Percentage of Additional
Operating Margin
<TABLE>
<CAPTION>
Operating Margin MLR MEDICON ChoiceCare
---------------- --- ------- ----------
<S> <C> <C> <C>
0.00% - 10.99% 89.01% - 100.00% 100% 0%
11.00% - 12.99% 87.01% - 89.00% 50% 50%
13.00% - 19.99% 80.01% - 87.00% 20% 80%
20.00% - 100.00% 0.00% - 80.00% 0% 100%
</TABLE>
The percentage of additional operating margin is subject to the
incentive sharing arrangements in the Service Standards and
Reporting Requirements.
This provision does not affect the parties obligations under
any prior agreement between them.
C-5
<PAGE> 64
This provision considers only those reductions in the MLR which
are the result of utilization-driven reductions, and not any
change in the MLR which is the result of changes to the PRP
contracts with ChoiceCare. The entire amount of changes which
are the result of changes to the PRP contracts with ChoiceCare
(whether favorable or unfavorable) shall accrue directly to
ChoiceCare and such amount shall also be deducted from or added
to the Capitation Payment when calculating that year's
Effective Program Costs.
C-6
<PAGE> 65
EXHIBIT D
HOSPITAL CONTRACTUAL GUARANTEES
In accordance with Section 2.3 of Exhibit C, MEDICON will guarantee that, during
the term of this Agreement, PRPs will receive a minimum level of reimbursement
reflecting the percentages of the then current Medicare Physicians Fee Schedule,
which is Geographic Practice Cost Indices (GPCI) for Cincinnati, Louisville, and
Lexington combined, as shown below. If the current Medicare fee schedule is
unfavorable when compared to the corresponding fee schedules for 1993, the
higher of the 1993 fee schedule will be used.
The following list of PRPs is complete as of the date of the execution of this
Agreement. The guarantee levels noted below may be adjusted upward or downward
at ChoiceCare's discretion subject to the ability to negotiate such adjustments
with PRPs. Any such changes would prompt a re-negotiation of the Capitation
Payment payable by ChoiceCare to MEDICON so that the effects of the revised
guarantees (whether favorable or unfavorable) accrue to ChoiceCare directly.
Additionally, PRPs may be added or deleted at ChoiceCare's discretion, subject
to the provisions of Section 2.2 of the Agreement. Such additions or deletions
shall prompt renegotiation of the Capitation Payment, but only to the extent the
added PRP's guarantee level exceeds the greatest maximum listed below or is less
than the lowest minimum listed below, so that the effects of the revised
guarantees (favorable or unfavorable) accrue to ChoiceCare directly.
<TABLE>
<CAPTION>
PROVIDER MINIMUM MAXIMUM (in %)
- - -------- ------- --------------
<S> <C> <C>
Anderson Radiology 140 140
Bethesda North 140 160
Bethesda Oak 140 160
Bethesda Oak X-Ray 130 150
CINHIO Diagnostic Imaging 130 150
Clermont Mercy Hospital 140 160
Clinton Memorial Hospital 140 160
Clinton Radiology 130 150
Dearborn County Hospital 140 160
Diagnostic Radiology (Clermont) 140 140
</TABLE>
D-1
<PAGE> 66
<TABLE>
<S> <C> <C>
Diagnostic Radiology (5-Mile) 150 150
Fort Hamilton Hughes 140 160
Good Samaritan Hospital NONE NONE
Hamilton Radiology 130 160
Kentucky Diagnostic Services 130 150
Mercy Anderson Hospital 140 160
Mercy Fairfield Hospital 140 160
Middletown Radiologic Associates 140 140
Middletown Regional Hospital 140 160
N. Ray Baumgartner 140 160
Northern Hills MRI, Inc. 130 150
Queen City Radiologists, Inc. 130 150
Radiology Associates of N. Kentucky 130 150
St. Elizabeth Grant County 140 160
St. Elizabeth Medical Center 140 160
St. Lukes Hospital - East 140 160
St. Lukes Hospital - West 140 160
Wellington Diagnostic Services 130 150
Western Hills Imaging 130 150
Western Hills Radiology, Inc. 130 150
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 30,889
<SECURITIES> 66,293
<RECEIVABLES> 4,690
<ALLOWANCES> 68
<INVENTORY> 0
<CURRENT-ASSETS> 110,681
<PP&E> 18,186
<DEPRECIATION> 7,780
<TOTAL-ASSETS> 125,722
<CURRENT-LIABILITIES> 76,026
<BONDS> 0
0
0
<COMMON> 12,025
<OTHER-SE> 34,798
<TOTAL-LIABILITY-AND-EQUITY> 125,722
<SALES> 0
<TOTAL-REVENUES> 148,905
<CGS> 0
<TOTAL-COSTS> 124,175
<OTHER-EXPENSES> 28,684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,753
<INCOME-TAX> 1,048
<INCOME-CONTINUING> 1,705
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,705
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
