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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1996
OR
COMMISSION FILE NUMBER 0-19393
MANAGED CARE SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3338328
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2510 WEST DUNLAP AVENUE
SUITE 300
PHOENIX, ARIZONA 85021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 602-943-5660
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.____
Based on the closing sale price of $4.00 on the NASDAQ National Market System,
as of August 20, 1996 the aggregate market value of the registrant's common
stock held by nonaffiliates was approximately $6,370,868.
As of August 20, 1996 the number of shares outstanding of the registrant's
common stock, $.01 par value, was 4,364,712 shares.
Documents Incorporated by Reference. Portions of the Company's Proxy Statement
for its Annual Meeting of Shareholders (the "1996 Proxy Statement") are
incorporated by reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
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Page
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Part I Item 1. Business........................................................... 1
Item 2. Properties......................................................... 11
Item 3. Legal Proceedings.................................................. 11
Item 4. Submission of Matters to a Vote of Security Holders................ 11
Part II Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters........................................... 11
Item 6. Selected Financial Data............................................ 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 13
Item 8. Financial Statements and Supplementary Data........................ 18
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 18
Part III Item 10. Directors and Executive Officers................................... 18
Item 11. Executive Compensation............................................. 19
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 19
Item 13. Certain Relationships and Related Transactions..................... 19
Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K... 19
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PART I
ITEM 1. BUSINESS
GENERAL
Managed Care Solutions, Inc. ("MCS" or the "Company") is involved in
several aspects of health care programs serving indigent and Medicaid
populations. The Company's operations include a long term care Arizona-based HMO
subsidiary, Ventana Health Systems; an acute care HMO, Arizona Health Concepts;
management contracts pursuant to which the Company administers privately owned
HMOs located in Colorado, Hawaii, and Michigan; the management of an indigent
population for the County of San Diego; a contractual arrangement with the State
of Indiana Medicaid Agency; a Third Party Administrator (TPA) contract with a
Missouri HMO; and an Ancillary Services Division which manages arrangements in
which hospitals deliver clinical services on-site at nursing homes.
RECENT DEVELOPMENTS
The Company has recently experienced serious cash flow problems, and on
July 29, 1996, laid off a total of 45 (approximately 10%) of its employees. The
Company has been negotiating with Blue Cross and Blue Shield of Texas, Inc.
("BCBSTX") concerning the possibility of an investment by BCBSTX in the Company
in the form of a convertible secured loan in the amount of $3,000,000 and has
executed a letter of intent with BCBSTX with respect to such investment. There
can be no assurance as to whether such transaction will be consummated. If such
transaction is not consummated and the Company is not able to obtain other
financing, it will have to consider seriously reducing the scope of its business
activities. See Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
HISTORY
The Company as it presently exists is the result of a spinoff and
subsequent merger transactions which occurred on March 1, 1996. Prior to March
1, 1996 the Company was named Medicus Systems Corporation (the "Predecessor
Corporation"). On March 1, 1996, all of the assets of the Predecessor
Corporation, other than those related to its managed care business, were
transferred to a wholly owned subsidiary of the Predecessor Corporation, and all
of the shares of that company, then named Medicus Systems Corporation, were
distributed (the "Distribution") on a share-for-share basis to stockholders of
the Predecessor Corporation. Immediately after the Distribution, the Company,
which then consisted only of the managed care business of the Predecessor
Corporation, effected a one-for-three reverse stock split. Also on March 1,
1996, immediately after the reverse stock split, the Company acquired three
Arizona corporations engaged in the managed care business through merger
transactions (the "Mergers") pursuant to which each of the Arizona corporations
(Managed Care Solutions, Inc., now named Managed Care Solutions of Arizona, Inc.
("MCSAZ"), Ventana Health Systems, Inc. ("Ventana") and Arizona Health Concepts,
Inc. ("AHC") became a wholly owned subsidiary of the Company, and the Company's
name was changed to Managed Care Solutions, Inc.
The Predecessor Corporation was started in 1969 as The Medicus
Corporation and was principally involved in facilities management of hospital
data processing centers, the development and marketing of financial information
systems for hospitals, and providing various service offerings to the health
care industry. Richard C. Jelinek, a director and chairman of MCS, was one of
the original co-founders of the Predecessor Corporation.
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In 1978 the Predecessor Corporation's managed care service business was
begun when the Predecessor Corporation established its Government Services
Division in Washington, D.C. This Division focused on providing technical and
professional management, consulting, and evaluation services to public sector
customers responsible for health care programs related to public sector
patients, including Medicaid, Medicare, and the indigent.
In 1983, the Managed Care Division of the Predecessor Corporation was
awarded a contract to provide administrative services to the San Diego County
Medical Services' indigent health care program. This program was one of the
first in the nation to provide services to non-Medicaid indigent patients under
a managed care model. In 1990, the Managed Care Division assumed major
responsibility for management of San Diego County's Perinatal Access Program.
Later that same year, the Predecessor Corporation was awarded a contract with
the City and County of San Francisco to administer their programs to reimburse
hospitals and physicians for uncompensated health care they provided. This
contract has been extended for subsequent years.
In 1994, the Managed Care Division was awarded a multi-year contract by
the State of Indiana to provide administrative services, including provider
network development, member education and enrollment, public relations, and
quality assurance, to that state's Primary Care Case Management (PCCM) and Risk
Based Managed Care (RBMC) programs.
Ventana was formed by three rural physicians in Arizona in 1988.
Ventana is a health plan that provides managed institutional and home based
health and long term care services to the elderly indigent and the physically
disabled in rural Arizona. These services are provided pursuant to a contract
with the Arizona Health Care Cost Containment System ("AHCCCS") through the
Arizona Long Term Care System ("ALTCS"), in which federal, state, and county
funding is paid through AHCCCS to health care plans, like Ventana, on a prepaid
capitated basis, to care for eligible members.
AHC was formed in 1992 by the three Arizona physicians who formed
Ventana. AHC is a prepaid health plan in the AHCCCS Acute Care Medicaid program.
MCSAZ began operation in 1993 with the initial purpose of providing
management for Ventana and AHC. In 1994, MCSAZ began consulting with a newly
formed health plan in Hawaii known as AlohaCare and MCSAZ subsequently entered
into a contract with the plan pursuant to which MCSAZ performs most of
AlohaCare's state mandated functions in managing the delivery of medical
services to Hawaii's eligible indigent population, certain unemployed persons
and part-time workers.
In 1995, MCSAZ entered into a management agreement with the Alliance
For Community Health d.b.a. Community CarePlus, a health care plan operating in
St. Louis under the supervision of the State Medicaid Agency of Missouri. In
December 1995, MCS was awarded a contract to manage a prepaid health plan in
Michigan named Community Choice Michigan ("CCM").
PRODUCT/SERVICE DESCRIPTION
The Company's primary business is the development, management and
ownership of Medicaid managed care health plans. The Company's management model
is highly focused on the Primary Care Physician (PCP). In most managed care
settings, PCP's occupy a key strategic role in the nature and extent of services
a patient receives. PCP's perform a so-called "gatekeeper" or "super-manager"
role so patients cannot refer themselves for most elective services. The PCP's
role is to diagnose the patient, determine whether the PCP will treat presenting
medical problems and if so, provide the necessary
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services in the most cost effective manner possible. PCPs also represent the
source of most referrals to the appropriate specialty physician or other health
care provider.
Approximately 80% of health care costs are determined by physicians who
see, treat and refer their patients. Hospitals often account for 40% or more of
total medical expenditures in outpatient, inpatient and emergency service
settings. MCS empowers the individuals or entities most able to decide how
medical care is provided, and its associated cost, to assume some financial
responsibility for those decisions. MCS's services provide a context and
management infrastructure which allows providers, particularly PCPs, to assume
the preeminent role they desire in the medical delivery system by taking
financial risk and responsibility. MCS furnishes the management and
administrative infrastructure, including the organizational activities required
to form a managed care health plan, to prepare competitive proposals, and to
complete the pre-operational phase of the health plan. MCS may own the health
plan or manage a plan for others, although the Company's decided preference is
to have a majority or significant equity position in the HMO entity.
The Company believes that physicians, hospitals and other health care
professionals dislike the intervention in their practice and delivery of health
care services by many HMOs and insurers. There is a strong sentiment that some
managed care companies have overstepped their bounds, require too much
bureaucratic paperwork, and in general are not "provider friendly." MCS believes
there is an opportunity, through managed care health plans developed by local
providers and MCS, to eliminate bureaucratic interventions that do not make a
difference in producing cost effective, quality outcomes. MCS believes, based on
its experience in Arizona and Hawaii, that providers' willingness to accept
financial risk correlates to their ability and opportunity to exercise control
and influence in the local health care delivery system.
The services offered by MCS are intended to achieve the following
goals:
1. Empower health care providers to supply high quality,
cost-effective medical care to health plan enrollees.
2. Allow participating providers to maintain market share of
existing patients and to expand when new opportunities are presented.
3. Minimize the amount of bureaucratic intervention and paperwork
required in the patient/provider transaction.
4. Enhance the opportunity for providers to receive maximum
reward and compensation.
5. Place the health care provider in a position of influence and
control.
6. Allow MCS to carve out a unique market niche as a "provider
friendly" organization.
Proprietary Features. MCS presently possesses no patents, registered
copyrights, or trademarks. MCS is currently investigating protection of its
software products and Long Term Care case management protocols, utilization
review manuals, and information system design through registered copyrights. All
employees have signed confidentiality statements to protect MCS from the
unauthorized disclosure of proprietary procedures and system design.
Significant Customers; Percentage of Revenues. In fiscal 1996 revenues
from management of health plans not owned by the Company accounted for
approximately 47% of total revenues of which the
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County of San Diego and the State of Indiana represented 16% and 10%,
respectively. The Company's revenues in fiscal 1996, recorded by Ventana and
AHC, from the State of Arizona represented 53% of total revenues. In fiscal 1995
and 1994, all of the Company's revenues were attributable to management of
health plans not owned by the Company.
OWNERSHIP OF HMOS
The Company owns and operates two existing HMOs, and has begun
establishing HMOs in two other states, all as described below.
Ventana Health Systems. Ventana, a wholly owned subsidiary of the
Company, is a Long Term Care (LTC) Medicaid HMO. LTC Medicaid recipients,
defined as those persons "at risk for institutionalization in a nursing care
facility," comprise only 5% of Medicaid beneficiaries but 35% or more, on
average, of a State Medicaid Agency's program expenditures. Arizona was the
first and remains the only state to place all of its LTC Medicaid recipients in
managed care HMOs, which it did beginning in 1989. Using focused methods of
intensive case management and development of home and community based services,
Ventana has been able to successfully manage and contain costs relative to this
elderly, vulnerable population in which 85% of the members are also duly
enrolled in the federal Medicare program. Ventana currently has 1,150 members,
with a current capitation rate of nearly $1,900 per member per month. Ventana's
contract with the State of Arizona has been renewed, effective October 1996, for
a five year period, with respect to seven of the eight counties currently served
by Ventana.
Arizona Health Concepts. AHC is an acute care Medicaid HMO operating in
one metropolitan Arizona county (Maricopa) and two rural counties (Gila and
Yavapai). AHC has been a contracted health plan in the Arizona Medicaid program
since 1992. AHC is one of thirteen HMOs participating in the Arizona Health Care
Cost Containment System (AHCCCS), the Arizona Medicaid program which has
utilized HMOs exclusively since its inception in 1982. Medicaid recipients
served by AHC include those in the following categories: Aid to Families with
Dependent Children (AFDC); Aged, Blind and Disabled (ABAD), and the Medically
Indigent/Medically Needy (MI/MN) which is comprised of an indigent population
not eligible for federal Medicaid matching funds. AHC currently has
approximately 11,500 members.
The Company was awarded one-year contracts with the state in 1994 and
1995 at reduced rates. Access may renew the contract for an additional one-year
period. AHC may elect not to accept such renewal. During the first year of this
renewed contract, AHC lost approximately $600,000 from operations and losses for
the second twelve months are now expected to reach approximately an additional
$2,500,000. The Company understands that several acute care Medicaid HMOs
suffered financial losses in the contract year ended in September 1995 and
believes that in the contract year ending in September 1996 few if any Medicaid
acute care HMOs operating in Arizona are profitable. The Company will not renew
the contract at the end of September 1996 unless the rates offered are
increased.
Illinois. Prior to its merger with MCS, the Managed Care Division of
the Predecessor Corporation was selected by a group of community health centers
to develop a licensed HMO in Illinois to serve initially Medicaid recipients.
After the Mergers, negotiations continued and it was decided to form a
for-profit HMO entity called Community Health Choice of Illinois (Choice) which
would be owned 49% by MCS and 51% by the community health centers. MCS agreed to
supply the capitalization for Choice in exchange for its ownership share and the
community health center ownership share was given in consideration of the large
number of Medicaid recipients expected to enroll in Choice because of their
traditional relationships with community health centers. Currently, MCS has
submitted an
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application to the Illinois Department of Insurance to license Choice as an HMO
in the state. As a condition of the HMO application process, Choice has
deposited $2,000,000 with an escrow agent to meet the capital reserve
requirements of the Illinois Department of Insurance. The $2,000,000 amount is a
loan, at the prime interest rate, from MCS to Choice with the principal due and
payable seven years from the closing date of the loan. If Choice does not
receive its HMO license by October 31, 1996, the $2,000,000 will be returned in
its entirety to MCS. It is the Company's opinion that existing capitation and
hospital rates will not allow this plan to be financially viable, the Company
has notified Choice that it should be dissolved, our relationship with Choice
terminated, and the $2,000,000 loan repaid.
West Virginia. The Company has been negotiating with community health
centers in the West Virginia Medicaid market to establish an HMO to be owned 70%
by MCS. The Company had submitted an application for an HMO license in West
Virginia under the name of Neighbor Care, Inc. (Neighbor Care). However, the
Neighbor Care HMO application was withdrawn in July 1996 because two major
hospital systems would not sign provider agreements at Medicaid-equivalent
rates. Neighbor Care's HMO application can be reinstated, and the Company would
expect to do so, if, after further negotiations, an acceptable agreement can be
reached with these essential hospital providers.
If established, Neighbor Care would initially cover eight West Virginia
counties with a potential enrollment of 20,000 or more members. The Company
considers West Virginia a prime area for development because managed care is not
prevalent in that state, and the Company therefore believes that there is high
potential for revenue and membership growth in Medicaid, Medicare, commercial
and long-term care market sectors.
Based on HMO reserve and development cost requirements, an investment
of $2,700,000 to $3,000,000 would be required to establish Neighbor Care as a
licensed HMO in West Virginia. There can be no assurance at this time that the
Company will be able to provide such funds. See Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
MANAGEMENT OF HMOS
AlohaCare. During 1993 and 1994, MCS assisted this Hawaii nonprofit
corporation in the development and implementation of an HMO. AlohaCare is
governed by a Board of Directors that includes representatives from community
health centers, hospitals, the University of Hawaii School of Medicine faculty
practice group, and MCS. AlohaCare began providing services to Medicaid
enrollees and certain part-time workers on August 1, 1994, utilizing MCS as its
full service management company. AlohaCare currently has approximately 24,000
members.
The Company's revenue under this service contract, which has been
profitable since inception, is based on a percentage of AlohaCare's revenue plus
a 15% share of medical risk pool profits or losses. The HMO has also operated at
a profit continuously since its first year of operation and has recently
received approval to market two commercial HMO policies in Hawaii. AlohaCare
also intends to enter the Medicare Risk HMO market in Hawaii where to date only
one HMO, Kaiser Permanente, has marketed an HMO product.
Colorado Access. This nonprofit HMO, formed by Denver area community
health centers and three local hospital systems, is managed by MCS (under a
contract executed with the Managed Care Division of the Predecessor Corporation
prior to the Mergers). Colorado Access began serving Medicaid and other indigent
populations on December 1, 1995 and currently has 42,000 members. The financial
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terms of the management agreement have not been favorable for the Company, as
discussed below, and the Company has given a notice of termination of the
agreement.
Management of this HMO and the Company negotiated an original payment
formula to the Company based on the number of members, with the payment being
reduced when enrollment reached a level of 40,000 members. Because this
enrollment level was reached much faster than anticipated, and as a result of
unsatisfactory performance of third party software, among other reasons, the
Company has experienced, and would expect to continue to experience, losses on
this contract. As a result of the Company's termination of the contract,
Colorado Access has stated its intention that no further losses were or will be
incurred by the Company after July 16, 1996, although the Company is continuing
to perform services on a transition basis, and expects to continue to do so
until October 31, 1996.
Community Choice Michigan. During 1995, a consortium of seventeen
Michigan community health centers, through the Michigan Primary Care
Association, contracted with MCS to assist in the development and formation of a
Michigan HMO to be called Community Choice Michigan. In December 1995, MCS was
also awarded the contract to manage CCM. In July 1996, CCM received its HMO
license to operate in Michigan. CCM began operation in August 1996 with 5,400
members "rolled over" in two counties from the state's fee-for-service Physician
Sponsored Program (PSP).
The Company hopes to expand the CCM provider network in an additional
four to six counties, including the Detroit metropolitan area, within the next
several months. The State of Michigan also plans to implement a mandatory
enrollment managed care program in 1997 which should enhance CCM's potential for
membership gains.
GOVERNMENT CONTRACTS
County Contracts. In 1983, the Managed Care Division of the Predecessor
Corporation was awarded a contract to provide administrative services to the San
Diego County Medical Services' indigent health care program. This program was
one of the first in the nation to provide services to non-Medicaid indigent
patients under a managed care model. During the period 1987 through 1995, the
scope of the County of San Diego contract was expanded several times to
incorporate additional service responsibilities. In 1990, the company assumed
major responsibility for San Diego County's Perinatal Access Program. Later in
1990, the company was awarded a contract with the City and County of San
Francisco to reimburse hospitals and physicians for uncompensated health care
provided.
San Diego County will competitively bid this contract in September
1996, and there is no guarantee that the winning bidder will be MCS. In 1997,
the county will also assume significant administrative oversight of the
California Medicaid program in San Diego. This program is called "Healthy San
Diego" and it is expected the county will sub-contract for many management
services. The Company intends to bid for those portions of the county's services
which are sub-contracted.
In 1990, the Predecessor Corporation was awarded a contract with the
City and County of San Francisco to administer their programs to reimburse
hospitals and physicians for uncompensated health care they provided. This
contract has been extended for subsequent years.
State Contract. In 1994, the Managed Care Division of the Predecessor
Corporation was awarded a multi-year contract by the State of Indiana to provide
various administrative services, including provider network development, member
education and enrollment, public relations, and quality assurance, to the State
Medicaid Agency's Primary Care Case Management (PCCM) and Risk Based
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Managed Care (RBMC) programs. In 1996, this contract was expanded to provide
similar services to the disabled Medicaid population in Indiana.
Benova. In June 1996 the Company formed a limited liability corporation
with Benova, Inc., a privately held for-profit company located in Portland,
Oregon. The limited liability corporation, known as Benova Managed Care
Solutions (BMCS) has submitted a bid to the State of New York to administer
enrollment broker, member education and information services to over one million
Medicaid recipients to be enrolled into managed care plans. The Company will own
65% of BMCS and is expected to provide initial capitalization estimated to be
$1,500,000 for capital equipment and working capital. There can be no assurance
at this time that the contract will be awarded or that the Company will be able
to provide such funds. See Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
OTHER PROGRAMS
TPA Contract. MCS has been providing computer, claims payment and other
support services since September 1995 to Community CarePlus (CCP), a 21,000
member nonprofit Missouri HMO sponsored by St. Louis area community health
centers. MCS also assisted CCP in various pre-operational and operational
activities, such as provider network development and establishment of medical
management programs.
CCP has indicated it may wish to manage all aspects of its HMO by
developing an internal capability to provide the computer and claims services
now furnished by MCS. Based on current conversations with CCP officials, it is
likely that this contractual agreement will be terminated on a mutually
agreeable basis in the last quarter of calendar 1996.
Consulting Contracts. MCS derives consulting revenues from
pre-operational contracts with HMOs it manages, such as AlohaCare and Community
Choice Michigan (CCM). In July 1996, MCS completed a pre-operational contract
commitment with CCM and in January 1996 was awarded a pre-operational contract
by the North Carolina Primary Care Association to develop a statewide HMO on
behalf of community health centers in North Carolina.
Maryland. In April 1996, the Company was awarded a consulting contract
to prepare, on behalf of certain Maryland community health centers, a
feasibility study regarding managed care strategies in that state. The study was
completed in July 1996 and, in the course of this work, the Company began
preliminary negotiations with these community health centers to establish a new
HMO or purchase an existing HMO in the State of Maryland, whose Medicaid agency
intends to accelerate the development of managed care programs in a fashion
similar to states such as Hawaii, Illinois and Michigan. The Company considers
Maryland a good prospect for managed care development, particularly in light of
the state's expressed desire to develop managed care long-term care programs as
well as acute care health plans.
California. In March 1996, the Company was commissioned by the
California Primary Care Association (CPCA) to prepare a feasibility study and
action plan to formulate a managed care strategy for community health centers in
California. The community health centers affiliated with CPCA serve over one
million patients each year, including approximately 300,000 Medicaid (Medi-Cal)
recipients. The study was finished in June 1996 and MCS has discussed further
assisting CPCA with other possible business arrangements.
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Utah. MCS has been following managed care developments in Utah and has
learned that the state intends to issue a Request for Proposal (RFP) in 1997 for
a long-term care managed care Medicaid program which would be similar to the
operation of Ventana by the Company in the State of Arizona. MCS has had several
meetings and discussions with principals in the Utah nursing home and health
care industry and, as a result, the Company may have an opportunity to
participate in the ownership of a new long-term care HMO in that state which
would require a capitalization in the range of $3,000,000 to $4,000,000. There
can be no assurance at this time that the Company will be able to provide any of
such funds. See Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
Ancillary Services Division. In 1994, the Company began an effort it
believes is unique in the Long Term Care (LTC) industry. The Ancillary Services
Division (ASD) manages relationships between hospitals and nursing homes,
whereby hospitals deliver clinical services (physical therapy, speech therapy,
radiology, etc.) on-site at nursing homes. This program provides enhanced
continuity of care for patients transitioning between acute hospital and nursing
facility settings, and intensifies community relationships between the two types
of facilities. The ASD currently has contractual agreements in the states of
Arizona, Colorado, Louisiana, Oklahoma and Texas and considers its market to be
nationwide in scope. The ASD is also expected to aid the Company's LTC Medicaid
and Medicare managed care program development through the cultivation of
relationships with the nursing home industry.
COMPETITION
The competitive forces in the marketplace serving Medicaid and indigent
populations are changing rapidly. A number of established, large commercial HMOs
are currently serving or entering the market. Several smaller, regional
publicly-traded HMOs are also moving into this market segment. Additionally,
there is an emergence of several small companies focusing specifically on
Medicaid managed care business. The movement of nearly every state Medicaid
program in the country away from traditional fee-for-service insurance programs
to managed care has severely threatened the traditional third party
administrator and state/government contractor companies who stand to lose
significant business to managed care companies. This structural shift will force
all current and new contractors to endeavor to adapt themselves to the managed
care environment as well.
These changes are also likely to accelerate the creation of provider
based delivery systems consisting of providers who traditionally have served the
Medicaid population through fee-for-service programs. As the movement to managed
care continues in the provider community, a large number of physician practices
and groups have turned to management organizations to assist with their business
functions. These management organizations will likely enter the Medicaid managed
care niche. All of the foregoing entities, some of which are separately
discussed below, will compete to varying degrees with the services offered by
MCS, and many of them have much greater financial and other resources than MCS.
HMOs and Insurance Companies. HMOs and insurance companies that now
have a large market share in the states targeted by MCS are expected to be
strong competitors. These entities may currently be processing claims for the
State Medicaid Agency or Medicare as a third-party administrator, and in some
cases, may already be participating in regionalized Medicaid or Medicare managed
care programs. HMO/insurance entities expected to expand or emerge in the
Medicaid industry include United Health Care, CIGNA, Blue Cross plans, FHP,
Prudential, and other HMO companies seeking expanded market share. HMOs and
insurance companies have the requisite capital, underwriting expertise, and
provider networks to develop and implement a Medicaid/Medicare health plan.
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Hospitals. Hospitals are expected to enter the Medicaid and Medicare
markets to increase their prospective patient base and to protect existing
market share.
Physician Organizations. Physician organizations are strongest in the
provider network area. Physician groups consisting of primary care providers and
specialists can be very influential in the contracting arena because they are
the "gatekeeper" within a managed care environment. Physician organizations
often collaborate with a strong hospital partner to form managed care entities.
Community Health Centers. Community Health Centers (CHCs) are nonprofit
community organizations that serve primarily low income persons and many
Medicaid recipients. CHCs serve about 7,000,000 persons each year throughout the
United States. Approximately 40% of CHC clientele are Medicaid recipients. Many
CHCs receive federal funding assistance and as such are designated as Federally
Qualified Health Centers (FQHCs). CHCs are concerned that the perception of
Medicaid as a new and profitable market opportunity may, in some cases, threaten
the very existence of CHCs. CHCs have a long and successful history of serving
Medicaid beneficiaries that imparts a competitive experience edge and prime
geographic locations in both rural and urban areas. CHCs have typically been
unable to develop substantial financial reserves, which could handicap
competitive efforts as Medicaid/Medicare managed care matures in the next
several years. In response, the CHC advocacy organization, the National
Association of Community Health Centers, has developed a national Management
Services Organization (MSO) to assist CHCs in retaining their market share,
especially in the Medicaid program.
Management Companies. A variety of management and third party
administrator companies have emerged and are expected to continue to emerge to
compete with MCS to administer Medicaid and Medicare health plans established by
provider organizations. Although MCS is currently only one of a few companies to
have succeeded in multiple markets (Arizona and Hawaii) in which all the state's
Acute Care Medicaid recipients are placed in managed care plans, several other
companies have had successes in states where some managed care experimentation
and development has occurred.
MCS believes that the principal factors affecting competition in all of
its lines of businesses are customer service, track record of performance,
employee expertise, competitive pricing, and corporate reputation. MCS believes
that it competes favorably in these areas.
RECURRING REVENUE
MCS's recurring revenue (defined as revenue generated pursuant to a
multi-year contract or pursuant to an ongoing contract whose nature contemplates
continued renewals) for the three fiscal years ended May 31, 1996, 1995 and
1994, was $22,600,000, $6,100,000 and $5,200,000, respectively, or 97%, 98% and
97% of total revenues, respectively.
BACKLOG
As of May 31, 1996 and May 31, 1995, MCS's traditional backlog,
consisting of signed contracts or purchase orders for services that are expected
to be realized over the next twelve months, was approximately $51,500,000 and
$7,900,000, respectively.
9
<PAGE> 12
EMPLOYEES
On May 31, 1996, the Company employed 382 persons on a full-time basis
and approximately 24 on a part-time basis. Substantially all of the part-time
employees were in direct health care. None of the Company's employees are
represented by unions.
On July 29, 1996, the Company laid off 45 (or approximately 10%) of its
employees, and as of August 15, 1996 employs 384 persons on a full-time basis
and 21 on a part-time basis.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
---- --- ----------------
<S> <C> <C>
Richard C. Jelinek 59 Chairman and Director
James A. Burns 53 Vice Chairman, Chief Executive Officer,
President and Director
Michael J. Kennedy 40 Chief Financial Officer
William G. Brown 53 Secretary and Director
</TABLE>
Richard C. Jelinek, age 59, Chairman of the Board of Medicus Systems
Corporation, was co-founder of the predecessor of the Predecessor Corporation in
1969 and served as Chief Executive Officer of the Predecessor Corporation from
its incorporation in December 1984 until February 27, 1996. From 1983 to 1985 he
was also Chairman of the Board and Chief Executive Officer of Mediflex Systems
Corporation. Prior to founding the predecessor of the Predecessor Corporation,
Mr. Jelinek was Associate Professor of Industrial Engineering and Hospital
Administration and Director, Systems Engineering Group, Bureau of Hospital
Administration at The University of Michigan. He has a Ph.D. in Industrial
Engineering from The University of Michigan. Mr. Jelinek also serves as a
director of Spectra Medical Systems, Inc. He has been a director of Medicus
Systems Corporation since its incorporation in 1984 and of the Company and
Medicus Systems Corporation since the Distribution and Mergers.
James Burns, 53, has been Vice Chairman of MCS since the Mergers and
became Chief Executive Officer and President on August 13, 1996. Prior to that,
he was President of MCSAZ since 1992. Previously, he served as President of
Med*Star Management Corporation from 1990 through 1992, as Senior Vice President
of Health Management Associates, Inc. from 1987 through 1990 and as Executive
Vice President of Lincoln National Health Plan from 1984 through 1987.
Michael Kennedy, 40, has been Chief Financial Officer since April
1996. Previously, he was Vice President - Treasurer of In Home Health, Inc. from
1993 to 1996, Vice President - Controller of In Home Health, Inc. from 1991 to
1993, and Controller from 1989 to 1991. From 1978 to 1989 he was with Deloitte
and Touche as a Certified Public Accountant.
William G. Brown, age 53, is a partner of Bell, Boyd & Lloyd, Chicago,
Illinois, counsel to the Company and Medicus Systems Corporation, and has been
Secretary and a director of the Predecessor Corporation since its incorporation
in December 1984 and of the Company and Medicus Systems Corporation since the
Distribution and Mergers. Mr. Brown is also a director of MYR Group, Inc.,
Dovenmuehle Mortgage, Inc. and CFC International, Inc.
10
<PAGE> 13
ITEM 2. PROPERTIES
The Company's executive offices are located in Phoenix, Arizona, in
approximately 29,000 square feet of leased space. The Company leases 17 other
offices in various cities and towns in Arizona, California, Colorado, Hawaii,
Illinois, Indiana, Michigan and Missouri. The Company's leased properties are
suitable and adequate for its current needs and additional space is expected to
be available as needed at competitive rates.
ITEM 3. LEGAL PROCEEDINGS
Redpath Computer Services, Inc. and Isotech Marketing, Inc., Arizona
corporations that have filed for protection under Chapter 11 of the Bankruptcy
Code, have filed an action against the Company and Ventana, among other
defendants, seeking substantial damages for alleged breach of contract,
copyright infringement and conversion of software and unfair competition. The
complaint was filed in the United States Bankruptcy Court for the District of
Arizona (Case No. 94-10160 and No. 94-10161, Adversary No. 96-297).
The Company, Ventana and the other defendants considered the complaint
to be so confusing and incomplete that they moved the Court to compel the
plaintiffs to file a more coherent pleading. The defendants also filed motions
to have the lawsuit transferred to the United States District Court for the
District of Arizona. The plaintiffs agreed to the transfer and to file an
amended complaint, which they have not yet done. Investigation is only in the
early stages and no discovery has been conducted. The Company believes the
lawsuit is without merit and intends to vigorously contest it.
The Company is also a party to various claims and legal proceedings
which management believes are in the normal course of business and will not
involve any material loss.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is registered under Section 12(g) of the
Securities Exchange Act of 1934 and is traded on the NASDAQ National Market
System under the symbol "MCSX". As of August 20, 1996 there were approximately
143 record holders of the common stock.
The MCS Common Stock began trading under the MCSX symbol on March 1,
1996, the date of the Distribution and Mergers. The high and low closing sale
prices for the Common Stock as reported by NASDAQ from that date until May 31,
1996 are set forth below.
<TABLE>
<CAPTION>
Year Ended May 31, 1996
-----------------------
High Low
---- ---
<S> <C> <C>
March 1 through May 31 $8.00 $5.58
</TABLE>
The high and low reported sale prices for the common stock of the
Predecessor Corporation from the beginning of the 1995 fiscal year until the
Distribution and Mergers, as reported by NASDAQ, are set forth below. Such
prices have not been adjusted to reflect the Distribution, the reverse stock
split which occurred immediately after the Distribution, or the Mergers.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal Year 1995
First Quarter $ 10.25 $ 8.75
Second Quarter 15.25 11.75
Third Quarter 20.06 12.25
Fourth Quarter 18.00 10.50
Fiscal Year 1996
First Quarter $ 11.50 $ 7.50
Second Quarter 10.00 7.56
Third Quarter 10.50 6.00
</TABLE>
11
<PAGE> 14
These prices do not include retail markups, markdowns, or commissions and may
not represent actual transactions. The Company intends to reinvest any earnings
in continued expansion and does not expect to pay cash dividends in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars and Shares in Thousands, except per share amounts)
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Year Ended May 31
--------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $23,192 $6,190 $5,332 $4,642 $4,039
Income (loss) from operations (2,799) 721 968 880 697
Income (loss) from continuing operations (2,214) 461 623 539 434
Income from continuing operations per share (.82) .21 .30 .30 .24
Cash dividends per share .14 .43 - - -
Weighted average number of shares outstanding 2,702 2,235 2,106 1,821 1,794
BALANCE SHEET DATA
May 31
---------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Working Capital (Deficit) $(2,640) $6,625 $1,220 $ 605 $ 97
Total assets 27,599 6,911 1,598 1,082 555
Long-term debt 267 - - - -
Shareholders' equity 12,194 6,778 1,316 693 154
</TABLE>
All amounts have been restated on a continuing operations basis. Discontinued
operations are more fully discussed in the Notes to Consolidated Financial
Statements.
12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion pertains to the managed care business and continuing
operations of the Company. The other business activities, which have been
conducted by Medicus since the distribution on March 1, 1996, are separately
identified as discontinued operations. Results presented consist of the
Company's managed care business for the period June 1, 1993 to May 31, 1996
consolidated with the operations of all three wholly owned subsidiaries (MCSAZ,
Ventana, and AHC) for the period March 1, 1996 to May 31, 1996.
The following table indicates the percentage relationship of income
and expense items to revenue as set forth in the Company's consolidated
statements of operations and the percentage changes from year to year.
<TABLE>
<CAPTION>
Percent of Revenues Percent Change
------------------- --------------
1996 1995 1994 1995 to 1996 1994 to 1995
---- ---- ---- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 274.7% 16.1%
----- ----- -----
Direct cost of operations 91.2 71.7 68.6 376.9 21.1
Marketing, sales and administrative 20.9 16.7 13.2 368.1 46.9
----- ----- -----
Total costs and expenses 112.1 88.4 81.8 375.2 25.3
----- ----- -----
Operating income (loss) (12.1) 11.6 18.2 (488.2) (25.5)
</TABLE>
Comparison of Fiscal Year 1996 to Fiscal Year 1995
Revenues increased 275% from $6,190,000 in fiscal 1995 to $23,192,000
in fiscal 1996, principally as a result of the Mergers. Revenues for fiscal 1996
consisted of $10,915,000 from fees received for management of health plans not
owned by the Company and $12,277,000 from capitation revenue received by Ventana
and AHC after the March 1, 1996 effective date of the Mergers. Management fee
revenue increased 76% in fiscal 1996 due to an increase in rates and services
provided on contracts in existence at June 1, 1995 (22% of the increase), the
addition of new contracts during fiscal 1996 (43% of the increase) and revenues
generated by contracts managed by MCSAZ since the effective date of the Mergers
(35% of the increase).
The most significant revenue growth occurred as a result of a contract
that commenced December 1995 with Colorado Access to administer its Medicaid and
indigent acute care program. This contract achieved a 42,000 membership level in
its third month of operation, which represented annual revenues of approximately
$3,700,000.
The Company incurred operating losses attributable to the Colorado
Access contract of $857,000 for fiscal 1996 as a result of a rate reduction and
start-up expenses. The contract included a significant rate reduction when
membership reached the 40,000 membership level. It was originally estimated that
the program would not reach this membership level for two years, at which time
the cost to administer this program would have decreased significantly.
13
<PAGE> 16
After unsuccessful attempts to negotiate a rate increase, the Company
notified Colorado Access in July 1996 that it was terminating the contract. It
was mutually agreed that the Company would assist in a timely transfer of
management operations to Colorado Access. In return, Colorado Access agreed that
the Company would incur no further losses on this contract from the notice date
until the transfer is completed, which is anticipated to occur by October 31,
1996.
Ventana is the Company's Long Term Care Medicaid HMO currently
providing services in eight Arizona counties under a contract that expires
September 30, 1996. In July, Ventana was awarded a five year contract for seven
counties, commencing October 1, 1996.
AHC, the Company's Acute Care Medicaid HMO in Arizona, is operating
under a three-year contract (October 1994 through September 1997) that had
intense pricing competition during the bidding process. The agreed upon rates
have resulted in AHC, as well as several other HMO plans participating in this
program, incurring operating losses. Without a significant rate increase from
AHCCCS for the third year of the contract, which begins October 1, 1996, coupled
with measurable improvements in medical expense costs, AHC will continue to
incur losses through the end of the contract term. If adequate rate increases
and medical expense improvements do not appear likely, it is management's
intention to terminate this contract on September 30, 1996.
In conjunction with the acquisition of AHC, the Company recorded a loss
contract reserve of $542,000, including anticipated contract losses of $440,000
for the period June 1, 1996 to September 30, 1996. Subsequent to the effective
date of the Mergers, the Company has charged operating losses incurred against
this reserve. As a result these contract losses are not fully reflected in the
Company's operating results for any period presented.
At May 31, 1996, AHC had a net deficit of $1,577,000. The Company is
obligated to fund this deficit or find other alternatives acceptable to AHCCCS
by November 27, 1996. There can be no assurance at this time that the Company
will be able to provide such funds or find other alternatives acceptable to
AHCCCS.
Direct cost of operations increased 377% to $21,151,000 in fiscal 1996
from $4,435,000 in fiscal 1995. Direct cost of operations for fiscal 1996
consisted of $9,511,000 related to fees generated from management of health
plans not owned by the Company and $11,640,000 from Ventana and AHC. The direct
cost of operations to manage plans as a percentage of related revenue increased
from 72% in fiscal 1995 to 77% in fiscal 1996 primarily as a result of the
Colorado Access contract.
The direct costs of Ventana and AHC, respectively, as a percentage of
related revenue for the period from the date of acquisition to May 31, 1996 were
86% and 104%.
Marketing, sales, and administrative expenses increased 368% from
$1,034,000 in fiscal 1995 to $4,840,000 in fiscal 1996. This increase is
primarily the result of the additional marketing, sales and administrative
activities of MCSAZ, Ventana, and AHC subsequent to the effective date of the
Mergers and the impact of an administrative services agreement with Medicus.
Effective March 1, 1996, the Company entered into an administrative
services agreement with Medicus, whereby Medicus agreed to provide the Company
with certain administrative support services for a one year period for a fee of
$700,000. The Company has accrued the full amount due under this agreement as of
May 31, 1996 as it believes that it has received all benefits under the
agreement.
14
<PAGE> 17
Interest income for fiscal 1996 was $339,000 which is primarily related
to investments held by Ventana and AHC subsequent to the acquisition.
Income tax benefit in fiscal 1996 is the result of the Company
offsetting losses generated by the parent entity in fiscal 1996 against income
generated in prior periods. Losses incurred by the acquired operations can only
be utilized against earnings of the consolidated operations subsequent to the
effective date of the Mergers.
As of May 31, 1996, the Company has a net operating loss carryforward
of $876,000 which expires in 2011. The Company also has a net operating loss
carryforward of $792,000, generated by a subsidiary prior to the Mergers, which
expires in 2011. The ability of the Company to utilize these net operating loss
carryforwards is dependent upon the Company generating future taxable income.
Additionally, if a substantial change in the Company's ownership should occur,
there would be an annual limitation on the amount of carryforwards which can be
utilized. These limitations could affect the Company's ability to utilize the
entire amount of its loss carryforwards.
Income (loss) from continuing operations was ($2,214,000) in fiscal
1996 versus $461,000 in fiscal 1995. The primary reasons for the change in
profitability were the losses incurred by AHC, losses incurred on the Colorado
Access contract and the impact of the Medicus administrative services agreement.
Discontinued operations generated a net loss of $254,000 in fiscal 1996
versus net income of $3,025,000 in fiscal 1995. The decrease was primarily due
to lower software and related services sales and increased costs of maintenance
and support services.
Comparison of Fiscal Year 1995 to Fiscal Year 1994
Revenues increased 16% to $6,190,000 in fiscal 1995 from $5,332,000 in
fiscal 1994. The increase was primarily due to revenues from a contract that
commenced in January 1994 with the State of Indiana Office of Medicaid Policy
and Planning to administer facets of Indiana Medicaid's Primary Care Case
Management Program. Significant revenues in both years were provided by the
contract with the County of San Diego to provide administrative services for the
County's indigent health care and perinatal access programs. This contract and
related business represented 71% and 84% of the Company's revenues in fiscal
years 1995 and 1994, respectively.
Direct cost of operations increased 21% to $4,435,000 in fiscal 1995
from $3,660,000 in fiscal 1994. The increase is primarily associated with the
State of Indiana administrative contract. Direct cost of operations as a
percentage of revenues increased to 72% from 69% due to normal operating expense
increases on the County of San Diego contract which were not offset by
contractual increases in billings.
Marketing, sales and administrative expenses increased 47% to
$1,034,000 in fiscal 1995 from $704,000 in fiscal 1994. The increase primarily
resulted from an increase in administrative resources focused on the growth and
management of the business.
Income from continuing operations decreased from $623,000 in fiscal
1994 to $461,000 in fiscal 1995. The decrease was primarily the result of
increased direct costs of operations and marketing, sales and administrative
expenses as a percent of revenue.
Discontinued operations generated $3,025,000 of net income in fiscal
1995 versus $3,225,000 in fiscal 1994. The decrease reflected higher costs
associated with research and development, marketing, and sales without a
comparable increase in revenue.
15
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Comparison of fiscal year 1996 to fiscal year 1995
During fiscal 1996 the Company's cash and cash equivalents increased
$2,329,000 to $3,804,000 at May 31, 1996 including an increase in restricted
cash of $3,082,000. Operating activity used $2,827,000 in fiscal 1996 versus
providing $231,000 in fiscal 1995. The primary cause for the change was the loss
from continuing operations and growth in accounts receivable both of which were
partially offset by growth in current liabilities.
Investing activities provided $2,852,000 in fiscal 1996 versus using
$4,113,000 in fiscal 1995. Sources of cash included cash acquired in the Mergers
of $1,700,000 and sales of securities. Cash was used to purchase $1,593,000 of
property and equipment for expansion and to fund a $2,000,000 loan to Choice to
allow it to apply for its HMO license in Illinois.
Financing activities generated $1,958,000 in fiscal 1996 versus
$3,956,000 in fiscal 1995. Short term debt issued in fiscal 1996 was the
principal source of funds while an infusion of $5,000,000 from Medicus, in
contemplation of the separation of the two business units, was the primary
source of funds in fiscal 1995. Both years include the use of funds to pay
dividends. The Company purchased $1,039,000 less in treasury stock in fiscal
1996 versus fiscal 1995 and issued $266,000 less in stock under employee stock
plans for the same periods. The balance of the treasury stock was retired.
Certain of the Company's operating subsidiaries are subject to state
regulations which require compliance with certain net worth, reserve and deposit
requirements. To the extent the operating subsidiaries must comply with these
regulations, they may not have the financial flexibility to transfer funds to
MCS. MCS' proportionate share of net assets (after inter-company eliminations)
which, at May 31, 1996, may not be transferred to MCS by subsidiaries in the
form of loans, advances or cash dividends without the consent of a third party
is referred to as "Restricted Net Assets". Total Restricted Net Assets of these
operating subsidiaries was $9,295,000 at May 31, 1996, with deposit and reserve
requirements (performance bonds) representing $2,057,000 of the Restricted Net
Assets and net worth requirements, in excess of deposit and reserve
requirements, representing the remaining $7,238,000. Ventana provided funds to
MCS under three separate loans and one line of credit agreement totaling
$2,407,000 at May 31, 1996. All such agreements were pre-approved as required by
AHCCCS.
Operating cash flows were negative for fiscal 1996. Additionally, the
Company has negative working capital of $2,640,000 at May 31, 1996. In an effort
to reduce its negative operating cash flows, in July the Company reduced its
total workforce from 442 to 397, which is expected to result in an estimated
annual savings of $1,700,000. In addition, the Company has implemented stringent
controls over other expenses. It is in the process of consolidating its AHC
operations by closing two satellite offices in Arizona. The closure of these two
offices is expected to result in estimated savings of $240,000 annually and, by
bringing these operations into one facility, is also expected to improve
controls over medical expenses. There can be no assurance as to the amount of
savings which will actually result from the actions described above.
The Company is also reviewing its corporate space requirements. It is
considering relocating its corporate headquarters elsewhere in the Phoenix area
where it can reduce rent expense as well as more efficiently utilize the space
available. The Company's existing leases on its corporate headquarters will
expire in January 1997.
16
<PAGE> 19
In August, the Company signed a letter of intent with BCBSTX whereby
BCBSTX will invest $3,000,000 in the Company in the form of a convertible
secured loan. The loan bears an interest rate of 8% payable at the end of the
initial three year term. It is convertible into the Company's common stock at
$3.85. The loan may be extended for two years beyond the initial term if certain
conditions are met. BCBSTX will also receive a warrant to purchase 100,000
shares of the Company's common stock at $4.45 and has a right of first refusal
to participate as an equity partner in future MCS funding requirements. The
transaction is subject to approval by both parties and is scheduled to close in
September 1996.
MCS has committed to provide CCM a line of credit of up to $500,000 at
prime plus 2% to assist CCM in maintaining minimum financial requirements.
Although MCS has made the commitment to provide funds if requested by CCM, it is
not possible to determine at this time whether such request may be made by CCM's
management. Also, there can be no assurance at this time that the Company will
be able to provide such funds.
In April, 1996 the Company entered into an agreement with Community
Health Care, Inc. (CHCI) pursuant to which the Company became a 49% owner in
Choice, a new HMO being developed in Illinois. The Company is obligated to
develop the HMO, provide the capital to purchase equipment for the plan and
provide the equity capital necessary to apply for the HMO license. The equity
capital requirement was met in April when the Company loaned Choice $2,000,000
in the form of a seven year note. These funds are being held in an escrow
account. It is the Company's opinion that existing capitation and hospital rates
will not allow this plan to be financially viable, the Company has notified
Choice that it should be dissolved, our relationship with Choice terminated, and
the $2,000,000 loan repaid.
In June 1996 the Company formed a limited liability corporation with
Benova, Inc., a privately held for-profit company located in Portland, Oregon,
that provides benefits enrollment services. The limited liability corporation,
known as Benova Managed Care Solutions (BMCS) has submitted a bid to the State
of New York to administer enrollment broker, member education, and information
services to over one million Medicaid recipients to be enrolled into managed
care plans. The Company will own 65% of BMCS and is required to provide initial
capitalization, estimated to be $1,500,000 for capital equipment and working
capital. There can be no assurance at this time that the Company will be able to
provide such funds. BMCS is one of two finalists bidding on the Contract which
is expected to be awarded before the end of calendar 1996.
The Company believes that, based on its current projections and
assuming the completion of the BCBSTX transaction, its cash and capital
resources should be sufficient to meet its financial requirements in fiscal
1997. The Company will continue its effort to increase revenues, renegotiate
existing agreements, and minimize operating costs. However, the Company can make
no assurances that it will meet its current projections or that the BCBSTX
transaction will be consummated. If the Company is not successful in completing
the BCBSTX transaction or obtaining other financing, it will have to consider
seriously reducing the scope of its business activities.
17
<PAGE> 20
Comparison of fiscal year 1995 to fiscal year 1994
Cash and cash equivalents increased $74,000 in fiscal 1995 to
$1,475,000 at May 31, 1995. Operating activities provided $231,000 in fiscal
1995, a decrease from $582,000 in fiscal 1994. This decrease was principally due
to the reduction in income from continuing operations.
Investing activities used $4,113,000 in fiscal 1995 principally due to
investment of funds received from the infusion of cash from Medicus.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-lived Assets to be Disposed of" ("SFAS No. 121"), issued
in March 1995 and effective for fiscal years beginning after December 15, 1995,
requires the recognition of impairment losses on long-lived assets and certain
intangible assets to be disposed of. The adoption of SFAS No. 121 is not
expected to have a material impact on the Company's financial position or
results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," issued in October 1995, and effective for fiscal
years beginning after December 15, 1995, encourages, but does not require, a
fair value based method of accounting for employee stock options or similar
equity instruments. It also allows an entity to elect to continue to measure
compensation costs using the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25"),
"Accounting for Stock Issued to Employees," but requires pro forma disclosures
of net income and earnings per share as if the fair value method of accounting
had been applied. The Company has elected to continue to measure compensation
cost under APB No. 25 and will comply with the pro forma disclosure requirements
in fiscal 1997.
IMPACT OF INFLATION
To date, the rate of inflation has not had a material impact on the
Company's results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is attached as referenced under
item 14(a).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information required under this Item with respect to directors will be
contained in the section entitled "Election of Directors" in the Company's 1996
Proxy Statement, and is incorporated herein by reference.
18
<PAGE> 21
Information concerning executive officers is set forth in the section
entitled "Executive Officers of the Registrant" in Part I of this Form 10-K
pursuant to Instruction 3 to paragraph (b) of Item 401 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this item will be contained in the section
entitled "Executive Compensation and Other Information" in the Company's 1996
Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this will be contained in the section
entitled "Security Ownership of Certain Beneficial Owners and Management" in the
Company's 1996 Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this item will be contained in the section
entitled "Certain Transactions" in the Company's 1996 Proxy Statement and is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of this Report
The Consolidated Financial Statements and Schedules filed with this
Form 10-K are listed below with their location in this report and are
included in Item 8 above.
<TABLE>
<S> <C>
1. Financial Statements
Report of Independent Accountants.................................................. 25
Consolidated Balance Sheet......................................................... 26
Consolidated Statement of Operations............................................... 27
Consolidated Statement of Changes In Shareholders' Equity.......................... 28
Consolidated Statement of Cash Flows............................................... 29
Notes to Consolidated Financial Statements......................................... 30-48
2 Financial Statement Schedules
PAGE
Schedule I. Condensed Financial Information of the Registrant.................. 49-53
Schedule II. Valuation and Qualifying Accounts................................. 54
</TABLE>
19
<PAGE> 22
All schedules, other than indicated above, are omitted because of the
absence of the conditions under which they are required or because the
information required is shown in the consolidated financial statements
or notes thereon.
(b) Reports on Form 8-K
The Company filed a form 8-K dated March 1, 1996 reporting the Mergers
and Distribution, and on April 30, 1996 filed an amendment on Form
8-K/A to such report which amendment included certain financial
information not available at the time of filing of the original report.
The Report on Form 8-K, as amended, included or incorporated by
reference the following financial statements:
Financial Statements of Registrant (now known as Managed Care
Solutions, Inc.) - Balance Sheets as of November 30, 1995 (unaudited),
May 31, 1995 and 1994, the related Statements of Income and Cash Flows
for the six months ended November 30, 1995 (unaudited) and 1994
(unaudited) and for the years ended May 31, 1995, 1994 and 1993, and
the related Statements of Changes in Stockholders' Equity for the six
months ended November 30, 1995 (unaudited) and for the years ended May
31, 1995, 1994 and 1993, and the related report of independent
accountants.
Ventana Health Systems, Inc. - Balance Sheets as of September 30, 1995,
1994 and 1993, and the related Statements of Income, Changes in
Stockholders' Equity and Cash Flows for the years ended September 30,
1995, 1994 and 1993, and the related independent auditors' reports.
Unaudited Condensed Balance Sheet as of December 31, 1995, and the
related Unaudited Condensed Statements of Income, changes in
Stockholders' Equity and Cash Flows for the three months ended December
31, 1995 and 1994.
Arizona Health Concepts, Inc. - Balance Sheets as of September 30,
1995, 1994 and 1993, and the related Statements of Operations, changes
in Stockholders' Equity (Deficit) and Cash Flows for the years ended
September 30, 1995, 1994 and 1993, and the related auditors' reports.
Unaudited Condensed Balance Sheet as of December 31, 1995, and the
related Unaudited Condensed Statements of Income, Changes in
Stockholders' Equity and Cash Flows for the three months ended December
31, 1995 and 1994.
Financial Statements of Managed Care Solutions, Inc. (now known as
Managed Care Solutions of Arizona, Inc.) - Balance Sheets as of
December 31, 1995 and 1994, the related Statements of Operations and
Cash Flows for the years ended December 31, 1995 and 1994 and the
period from April 1, 1993 (date of inception) to December 31, 1993, and
the related Statements of Changes in Stockholders' Equity (Deficit) for
the years ended December 31, 1995 and 1994 and the period from April 1,
1993 (date of inception) to December 31, 1993, and the related
independent auditors' reports.
20
<PAGE> 23
(c) Exhibits
Exhibit No. Description
2.1 Agreement and Plan of Merger by and among Ventana Health
Systems, Inc., Arizona Health Concepts, Inc., Managed
Care Solutions, Inc., VHS Managed Care Merger Sub, Inc.,
AHC Managed Care Merger Sub, Inc., MCS Managed Care
Merger Sub, Inc. and the registrant (1).
2.2 Distribution Agreement by and between Medicus Systems
Software, Inc. and Medicus Systems Corporation (2).
3.1 Conformed Certificate of Incorporation of the
Registrant, as amended (3)
3.2 Restated Bylaw (4)
10.1 Line of Credit Agreement dated July 11, 1996 as
amended, with First Interstate Bank of Arizona
10.2 (a) Contract between the registrant and San Diego
County, California and amendments thereto(5)
(a)(1) Ninth Amendment to contract between the
registrant and San Diego County, California(6)
(a)(2) Tenth Amendment to contract between the
registrant and San Diego County, California(7)
(a)(3) Eleventh Amendment to contract between the
registrant and San Diego County, California(8)
(a)(4) Twelfth Amendment to contract between the
registrant and San Diego County, California(9)
(a)(5) Thirteenth Amendment to contract between the
registrant and San Diego County, California(10)
(a)(6) Fourteenth Amendment to contract between the
registrant and San Diego County, California
(a)(7) Fifteenth Amendment to contract between the
registrant and San Diego County, California
10.3 Service Agreement between registrant and Medicus System
Software, Inc.
10.4 The Company's 1996 Stock Option Plan*
10.5 The Company's 1995 Stock Option Plan, as amended*
10.6 The Company's 1995 Directors' Stock Option Plan*
10.7 The Company's Employee Stock Purchase Plan*
10.8 Contract between the registrant and Colorado Access(11)
10.9 (a) Contract between Ventana Health Systems and
Arizona Health Care Cost Containment System
Part 1 through Part 5
(a)(1) Amendment 7 to the Contract between Ventana
Health Systems and Arizona Health Care Cost
Containment System
(a)(2) Amendment 8 to the Contract between Ventana
Health Systems and Arizona Health Care Cost
Containment System
(a)(3) Amendment 9 to the Contract between Ventana
Health Systems and Arizona Health Care Cost
Containment System
(a)(4) Amendment 10 to the Contract between Ventana
Health Systems and Arizona Health Care Cost
Containment System
(a)(5) Amendment 11 to the Contract between Ventana
Health Systems and Arizona Health Care Cost
Containment System
10.10 (a) Contract between Arizona Health Systems and
Arizona Health Care Cost Containment Systems
21
<PAGE> 24
(a)(1) Amendment 2 to contract between Arizona Health
Systems and Arizona Health Care Cost
Containment Systems
(a)(2) Amendment 4 to contract between Arizona Health
Systems and Arizona Health Care Cost
Containment Systems
(a)(3) Amendment 5 to contract between Arizona Health
Systems and Arizona Health Care Cost
Containment Systems
(a)(4) Amendment 6 to contract between Arizona Health
Systems and Arizona Health Care Cost
Containment Systems
(a)(5) Amendment 7 to contract between Arizona Health
Systems and Arizona Health Care Cost
Containment Systems
(a)(6) Amendment 9 to contract between Arizona Health
Systems and Arizona Health Care Cost
Containment Systems
(a)(7) Amendment 10 to contract between Arizona Health
Systems and Arizona Health Care Cost
Containment Systems
10.11 (a) First Amendment to contract between registrant
and State of Indiana
(a)(1) Second Amendment to contract between registrant
and State of Indiana
(a)(2) Third Amendment to contract between registrant
and State of Indiana
10.12 (a) Administrative Services contract between
registrant and Community Choice Michigan
(a)(1) First Amendment to Administrative Services
contract between registrant and Community
Choice Michigan
(a)(2) Second Amendment to Administrative Services
contract between registrant and Community
Choice Michigan
10.13 (a) Letter Consulting Agreement between registrant
and Community Choice Michigan
(a)(1) First Amendment to Consulting Agreement between
registrant and Community Choice Michigan
(a)(2) Second Amendment to Consulting Agreement
between registrant and Community Choice
Michigan
10.14 Employment Agreement between the Company and Blaine
Bergeson*
10.15 Employment Agreement between the Company and James A.
Burns*
10.16 Administrative Services Agreement between registrant and
AlohaCare
10.17 Administrative Services contract between registrant and
Community Health Choice of Illinois, Inc.
10.18 Contract between registrant and Benova
10.19 Letter of Credit Agreement dated June 3, 1996 with First
Interstate Bank of Arizona
10.20 Contract between registrant and State of California
Managed Risk Medical Insurance Board
10.21 Contract between registrant and Cornerstone Health
Management Company
10.22 Shareholder Agreement between registrant, Community
Health Care of Illinois and Community Health Choice of
Illinois
10.23 (a) Administrative Services contract between the
registrant and Community Care Plus
(a)(1) First Letter Amendment to the Administrative
Services contract between the registrant and
Community Care Plus
22
<PAGE> 25
(a)(2) Second Letter Amendment to the Administrative
Services contract between the registrant and
Community Care Plus
10.24 Form of Indemnification Contract between the registrant
and its officers and directors (12)*
11 Computation of Per Share Earnings
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedule
- - -------------
* Indicates exhibits which constitute management contracts or
compensatory plans or agreements.
(1) Incorporated by reference to Exhibit 2 to the registrant's Registration
Statement Number 333-558 on Form S-4.
(2) Incorporated by reference to Exhibit 2(b) to the registrant's Report on
Form 8-K dated March 1, 1996, as amended by Form 8-K/A-1 filed on April
30, 1996.
(3) Incorporated by reference to Exhibit 4(a)(5) to the registrant's
Registration Statement Number 333-04981 on Form S-8.
(4) Incorporated by reference to Exhibit 4(b)(3) to the registrant's
Registration Statement Number 333-04981 on Form S-8.
(5) Incorporated by reference to Exhibit 10(6) filed as part of the
Registrant's Statement Number 33-41253.
(6) Incorporated by reference to Exhibit 10(a)(1) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1992.
(7) Incorporated by reference to Exhibit 10(a)(2) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1993.
(8) Incorporated by reference to Exhibit 10(a)(3) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994.
(9) Incorporated by reference to Exhibit 10(a)(4) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994.
(10) Incorporated by reference to Exhibit 10(a)(5) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994.
(11) Incorporated by reference to Exhibit 10(a)(6) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994.
(12) Incorporated by reference to Exhibit 10(g) filed as part of
Registration Statement Number 33-41253.
23
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Phoenix, Arizona.
MANAGED CARE SOLUTIONS, INC.
By: /s/ James A. Burns
--------------------------------
James A. Burns, President
Dated: August 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date set forth above.
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<S> <C> <C>
/s/ James A. Burns Vice Chairman, Chief Executive August 29, 1996
- - --------------------------- Officer, President and Director
James A. Burns (Principal Executive Officer)
/s/ Michael J. Kennedy Vice President and Chief Financial August 29, 1996
- - --------------------------- Officer (Principal Financial and
Michael J. Kennedy Accounting Officer)
Director August 29, 1996
- - ---------------------------
Walter J. McNerney
/s/ Richard C. Jelinek Chairman, Director August 29, 1996
- - ---------------------------
Richard C. Jelinek
/s/ William G. Brown Director August 29, 1996
- - ---------------------------
William G. Brown
/s/ Risa Lavizzo-Mourey Director August 29, 1996
- - ---------------------------
Risa Lavizzo-Mourey
/s/ Henry Kaldenbaugh, M.D. Director August 29, 1996
- - ---------------------------
Henry Kaldenbaugh, M.D.
/s/ John Lingenfelter, M.D. Director August 29, 1996
- - ---------------------------
John Lingenfelter, M.D.
</TABLE>
24
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Managed Care Solutions, Inc.
In our opinion, the consolidated financial statements and schedules listed in
the index appearing under Item 14(a) (1) and (2) present fairly, in all material
respects, the financial position of Managed Care Solutions, Inc. and its
subsidiaries as of May 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended May 31,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Phoenix, Arizona
August 28, 1996
25
<PAGE> 28
MANAGED CARE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
May 31,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including restricted cash
of $3,082,000 as of May 31, 1996 $ 3,804,000 $ 1,475,000
Short-term investments 3,000,000 4,000,000
Accounts and notes receivable and unbilled services, net 4,353,000 1,120,000
Related party accounts and notes receivable 91,000 --
Prepaid expenses and other 832,000 159,000
Deferred taxes, net 169,000 --
Net assets of discontinued operations -- 22,363,000
------------ ------------
Total current assets 12,249,000 29,117,000
Notes receivable 139,000 --
Related party notes receivable 2,783,000 --
Property and equipment, net 4,147,000 155,000
Performance bonds 4,078,000 --
Goodwill, net 3,534,000 --
Deferred taxes, net 73,000 --
Other assets 596,000 2,000
------------ ------------
$ 27,599,000 $ 29,274,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 379,000 $ 84,000
Accrued medical claims 6,331,000 --
Risk pool payable 1,646,000 --
Related party risk pool payable 117,000 --
Accrued expenses 3,609,000 45,000
Loss contract reserve 510,000 --
Due to Medicus Systems Corporation 647,000 --
Current portion of long-term debt 1,650,000 --
------------ ------------
Total current liabilities 14,889,000 129,000
Long-term debt 267,000 --
Related party long-term debt 249,000 --
Deferred income taxes -- 4,000
------------ ------------
Total liabilities 15,405,000 133,000
------------ ------------
Commitments -- --
Stockholders' equity:
Voting preferred stock, $1,000 par value
Authorized, issued and outstanding - 6.85 shares 7,000 --
Common stock, $0.01 par value
Authorized - 10,000,000 shares
Issued - 4,365,000 shares and 6,432,000 shares 44,000 64,000
Capital in excess of par value 14,310,000 16,022,000
Less treasury stock, at cost - 46,000 shares -- (543,000)
Retained earnings (deficit) (2,167,000) 13,598,000
------------ ------------
Total stockholders' equity 12,194,000 29,141,000
------------ ------------
$ 27,599,000 $ 29,274,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE> 29
MANAGED CARE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MAY 31,
---------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 23,192,000 $ 6,190,000 $ 5,332,000
------------ ------------ ------------
Direct cost of operations 21,151,000 4,435,000 3,660,000
Marketing, sales and administrative 4,840,000 1,034,000 704,000
------------ ------------ ------------
Total costs and expenses 25,991,000 5,469,000 4,364,000
------------ ------------ ------------
Operating income (loss) (2,799,000) 721,000 968,000
Interest income 339,000 -- --
------------ ------------ ------------
Income (loss) from continuing
operations before income taxes (2,460,000) 721,000 968,000
Provision (benefit) for income taxes (246,000) 260,000 345,000
------------ ------------ ------------
Income (loss) from continuing operations (2,214,000) 461,000 623,000
Discontinued operations, net of taxes (254,000) 3,025,000 3,225,000
------------ ------------ ------------
Net income (loss) $ (2,468,000) $ 3,486,000 $ 3,848,000
============ ============ ============
Net income (loss) per share
Continuing operations $ (0.82) $ 0.21 $ 0.30
Discontinued operations (0.09) 1.35 1.53
------------ ------------ ------------
$ (0.91) $ 1.56 $ 1.83
============ ============ ============
Weighted average common and
common equivalent shares outstanding 2,702,000 2,235,000 2,106,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE> 30
MANAGED CARE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
------------------------- -------------------------
CAPITAL IN
SHARES PAR VALUE SHARES PAR VALUE EXCESS OF PAR
VALUE
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, MAY 31, 1993 -- $ -- 5,337,000 $ 54,000 $ 4,876,000
Net income -- -- -- -- --
Issuance of common stock:
Employee stock purchase plan -- -- 11,000 -- 112,000
Employee stock option plan, including tax benefits -- -- 35,000 -- 328,000
Public offering, net of expense -- -- 1,000,000 10,000 10,428,000
Vested portion of stock options
applicable to compensation expense -- -- -- -- 11,000
----------- ----------- ----------- ----------- -----------
BALANCE, MAY 31, 1994 -- -- 6,383,000 64,000 15,755,000
Net income -- -- -- -- --
Purchase of treasury stock -- -- -- -- --
Issuance of common stock:
Employee stock purchase plan -- -- 8,000 -- 83,000
Employee stock option plan, including tax benefits -- -- 41,000 -- 172,000
Vested portion of stock options
applicable to compensation expense -- -- -- -- 12,000
Declaration of dividends -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, MAY 31, 1995 -- -- 6,432,000 64,000 16,022,000
Net loss -- -- -- -- --
Purchase of treasury stock -- -- -- -- --
Issuance of preferred stock 6.85 7,000 -- -- --
Issuance of common stock:
Employee stock purchase plan -- -- -- -- (32,000)
Employee stock option plan, including tax benefits -- -- -- -- (227,000)
Vested portion of stock options
applicable to compensation expense -- -- -- -- 8,000
Declaration of dividends -- -- -- --
Three for one reverse stock split -- -- (4,288,000) (43,000) 43,000
Stock issued in acquisition of MCS Companies -- -- 2,225,000 23,000 7,347,000
Distribution of discontinued operations -- -- -- -- (8,789,000)
Retirement of treasury stock -- -- (4,000) -- (62,000)
----------- ----------- ----------- ----------- -----------
BALANCE, MAY 31, 1996 6.85 $ 7,000 4,365,000 $ 44,000 $14,310,000
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
RETAINED
TREASURY EARNINGS TOTAL
STOCK (DEFICIT)
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE, MAY 31, 1993 $ -- $ 7,225,000 $12,155,000
Net income -- 3,848,000 3,848,000
Issuance of common stock:
Employee stock purchase plan -- -- 112,000
Employee stock option plan, including tax benefits -- -- 328,000
Public offering, net of expense -- -- 10,438,000
Vested portion of stock options
applicable to compensation expense -- -- 11,000
----------- ----------- -----------
BALANCE, MAY 31, 1994 -- 11,073,000 26,892,000
Net income -- 3,486,000 3,486,000
Purchase of treasury stock (1,571,000) -- (1,571,000)
Issuance of common stock:
Employee stock purchase plan 87,000 -- 170,000
Employee stock option plan, including tax benefits 941,000 -- 1,113,000
Vested portion of stock options
applicable to compensation expense -- -- 12,000
Declaration of dividends -- (961,000) (961,000)
----------- ----------- -----------
BALANCE, MAY 31, 1995 (543,000) 13,598,000 29,141,000
Net loss -- (2,468,000) (2,468,000)
Purchase of treasury stock (532,000) -- (532,000)
Issuance of preferred stock -- -- 7,000
Issuance of common stock:
Employee stock purchase plan 210,000 -- 178,000
Employee stock option plan, including tax benefits 803,000 -- 576,000
Vested portion of stock options
applicable to compensation expense -- -- 8,000
Declaration of dividends -- (384,000) (384,000)
Three for one reverse stock split -- -- --
Stock issued in acquisition of MCS Companies -- -- 7,370,000
Distribution of discontinued operations -- (12,913,000) (21,702,000)
Retirement of treasury stock 62,000 -- --
----------- ----------- -----------
BALANCE, MAY 31, 1996 $ 0 $(2,167,000) $12,194,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
28
<PAGE> 31
MANAGED CARE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MAY 31,
------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ (2,214,000) $ 461,000 $ 623,000
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Bad debt expense 591,000 -- --
Depreciation and amortization of property and equipment,
software and goodwill 495,000 59,000 34,000
Deferred income taxes (246,000) (6,000) 1,000
Changes in current assets and current liabilities:
Accounts receivable and unbilled services (2,807,000) (62,000) (157,000)
Prepaid expenses and other 417,000 (74,000) 10,000
Accounts payable (1,316,000) (9,000) 70,000
Accrued medical 871,000 -- --
Risk pool payable 711,000 -- --
Related party risk pool payable (198,000) -- --
Accrued expenses 901,000 (86,000) 3,000
Loss contract reserve (32,000) -- --
Other assets and liabilities -- (52,000) (2,000)
------------ ------------ ------------
Net cash (used in) provided by operating activities (2,827,000) 231,000 582,000
------------ ------------ ------------
Cash flows from investing activities:
Acquisition of MCS Companies 1,700,000 -- --
Purchase of property and equipment (1,593,000) (113,000) (44,000)
Sale of property and equipment 20,000 -- --
Purchase of investments (750,000) (4,000,000) --
Maturity/sale of investments 5,475,000 -- --
Related party note receivable (2,000,000) -- --
------------ ------------ ------------
Net cash provided by (used in) investing activities 2,852,000 (4,113,000) (44,000)
------------ ------------ ------------
Cash flows from financing activities:
Cash infusion from related parties 250,000 5,000,000 --
Due to Medicus Systems Corporation 647,000 -- --
Issuance of short-term debt 1,450,000 -- --
Principal payment on long-term debt (50,000) -- --
Issuance of voting preferred stock 7,000 -- --
Sale of common stock -- 267,000 10,889,000
Purchase of treasury stock (532,000) (1,571,000) --
Reissuance of treasury stock 762,000 1,028,000 --
Dividends paid (576,000) (768,000) --
------------ ------------ ------------
Net cash provided by financing activities 1,958,000 3,956,000 10,889,000
------------ ------------ ------------
Net increase in cash and cash equivalents 1,983,000 74,000 11,427,000
Cash and cash equivalents, beginning of period 1,475,000 358,000 (180,000)
Cash allocated from (to) discontinued operations, net 346,000 1,043,000 (10,889,000)
------------ ------------ ------------
Cash and cash equivalents, end of period $ 3,804,000 $ 1,475,000 $ 358,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE> 32
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS:
Managed Care Solutions, Inc. ("MCS" or the "Company"), formerly Medicus Systems
Corporation, was in the business of developing, marketing and supporting
decision support software to hospitals and providing contract management
services to other health care institutions. The Company separated the software
and related lines of business and merged with three companies during the year as
described below.
The Distribution
On March 1, 1996, the Company effected the separation of its managed care
business from its software business through the contribution of the software
business to a wholly-owned subsidiary and the distribution (the Distribution) of
all of the stock in that subsidiary (now known as Medicus Systems Corporation)
to the stockholders on a share-for-share basis. Immediately after the
Distribution, the Company effected a one-for-three reverse stock split (the
Reverse Stock Split). The average shares outstanding and all per share amounts
included in the financial statements and notes thereto have been adjusted
retroactively to reflect the stock split; however, the balance sheet as of May
31, 1995 has not been adjusted.
The Merger
Also on March 1, 1996, following the completion of the Distribution and the
Reverse Stock Split, three wholly-owned subsidiaries of the Company were merged
(the Mergers) with and into three related managed care companies, Managed Care
Solutions, Inc., Ventana Health Systems, Inc., and Arizona Health Concepts, Inc.
(each an Arizona corporation and collectively referred to as the "MCS
Companies"), with the MCS Companies becoming wholly-owned subsidiaries of the
Company.
In the Mergers, stockholders of the MCS Companies received approximately
2,225,000 shares of common stock, $0.01 par value (Common Stock) of the Company,
representing 51% of the Common Stock outstanding immediately after the Mergers
(which shares represent 49.9% of the voting rights of the Company as a result of
6.85 shares of the Company's Voting Preferred Stock being outstanding). The
Company received $15,468,000 in assets from the MCS Companies and assumed
$11,313,000 in liabilities. In connection with the Mergers, the name of the
Company was changed to Managed Care Solutions, Inc.
The Mergers were accounted for under the purchase method and, accordingly, the
results of operations related to the new subsidiaries are included with those of
the Company for periods subsequent to the date of the Mergers. See Note 16 for
presentation of unaudited pro forma information.
30
<PAGE> 33
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company, along with its wholly-owned subsidiary Managed Care Solutions of
Arizona, Inc., provides contract management services to county and state
governmental units and other health care organizations. The Company has fourteen
contracts for services which expire at various dates through the year 2001.
The Company, through its wholly owned subsidiaries Ventana Health Systems, Inc.,
(Ventana) and Arizona Health Concepts, Inc. (AHC), provides health services to
indigent and other eligible populations in certain rural counties in Arizona.
Ventana and AHC are prepaid health plans based in Phoenix, Arizona that derive
substantially all of their revenues through contracts with the Arizona Health
Care Cost Containment System Administration ("AHCCCSA") to provide specified
long-term and acute-care health services, respectively, to qualified members.
The contract periods expire September 30, 2001 and September 30, 1997 for
Ventana and AHC, respectively. Each contract provides for fixed monthly
premiums, based on negotiated per capita enrollee rates. Ventana and AHC
subcontract with nursing homes, hospitals, physicians, and other medical
providers within Arizona to care for Arizona Health Care Cost Containment System
("AHCCCS") members.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue recognition
Revenue from contract services is recognized as the service is performed.
Capitation premiums are recognized as revenue in the month that enrollees are
entitled to health care services.
Sixth Omnibus Budget Reconciliation Act ("SOBRA") supplemental premiums are
payments intended by AHCCCS to cover the costs of maternity care for pregnant
women qualified under
31
<PAGE> 34
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SOBRA. Such premiums are recognized in the month the delivery occurs.
Health care expenses
Monthly capitation payments to primary care physicians and other health care
providers are expensed as incurred. Hospital services are paid based on tiered
per diem rates or outpatient cost-to-charge ratios, as defined by AHCCCSA, less
any applicable discounts. Physician and other medical services are paid on a
capitated or discounted fee-for-service basis. All medical expenses are reported
net of Medicare reimbursements.
The Company receives reinsurance recoveries which are recorded at estimated
amounts due pursuant to the AHCCCS contract. Reinsurance recoveries are
recognized as a percentage of expenses incurred by members whose medical costs
exceed a stated deductible per member per contract year. Recoveries are recorded
as a reduction of medical expenses.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Restricted cash
includes cash equivalents at May 31, 1996 of $2,093,000 and $989,000 for Ventana
and AHC, respectively. These amounts are restricted by AHCCCS for utilization in
the current operations of the individual subsidiary. (See "Restrictions on Fund
Transfers")
Investments
The Company's investments consist primarily of municipal bonds which are
restricted by AHCCCS for utilization in the current operations of Ventana and
AHC (See "Restrictions on Fund Transfers"). Effective June 1, 1994, the Company
adopted Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," (SFAS No. 115). The adoption
of SFAS No. 115 requires that the short-term investments in debt securities held
by the Company classified as "available-for-sale" be measured at fair value. See
Note 3.
Discontinued operations
The software and related lines of business ("Medicus Systems Corporation" or
"Medicus") which were separated as of March 1, 1996 are reported as discontinued
operations as of May 31, 1996 and 1995. Prior years' operating results have also
been reclassified to segregate the discontinued operations. Such operations have
been presented net of income tax (benefit)/expense of $(187,000), $1,701,000 and
$1,876,000 for the years ended May 31, 1996, 1995 and 1994, respectively.
Assets and liabilities of the software and related lines of business consisted
mainly of the following:
32
<PAGE> 35
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
May 31, 1995
------------
<S> <C>
Cash and short-term investments $ 12,624,000
Accounts receivable and unbilled services, net 10,203,000
Other current assets 1,845,000
Software, net 3,881,000
Other non-current assets 2,388,000
Accounts payable and other accrued liabilities (2,450,000)
Deferred revenue (5,014,000)
Non-current deferred income tax liability (1,114,000)
------------
$ 22,363,000
============
</TABLE>
Revenues from Medicus were $23,670,000 for the nine months ended February 29,
1996 and $33,829,000 and $29,153,000 for the years ended May 31, 1995 and 1994,
respectively.
Property and equipment
Property and equipment is recorded at cost less accumulated depreciation.
Depreciation is provided on all furniture, equipment and purchased software
using the straight-line method over the estimated useful lives of the related
assets which range from three to seven years. Leasehold improvements are
amortized using the straight-line method over the shorter of the lease term or
the estimated useful lives of the related assets. Maintenance and repairs are
charged to expense as incurred.
Performance bonds
Pursuant to the contracts with the State of Arizona, the Company is required to
provide either a performance bond or designated substitute to guarantee
performance of the Company's obligations under the contracts. The Company's
securing performance bond consists of cash deposits held by the Arizona State
Treasurer and treasury bills pledged as collateral for a bank letter of credit.
The Company must maintain performance bonds at an amount which approximates the
total monthly capitation revenues. As of May 31, 1996, performance bonds of
$2,057,000 and $2,021,000 were maintained for Ventana and AHC, respectively.
Goodwill
The excess of the acquisition cost over the fair value of the net assets of the
MCS Companies acquired in a purchase transaction on March 1, 1996 has been
included in goodwill and is amortized on a straight-line basis over the period
of expected benefit of ten years. The reported balance as of May 31, 1996 is net
of accumulated amortization of $114,000.
The carrying value of goodwill is assessed for any permanent impairment by
evaluating the
33
<PAGE> 36
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
operating performance and future undiscounted cash flows of the underlying
business. Adjustments are made if the sum of the expected future net cash flows
is less than the carrying value.
Accrued medical claims
Accrued medical claims include amounts billed and not paid and an estimate of
costs incurred for unbilled services provided through the date of the balance
sheet.
Risk pool payable
The Company contracts with certain provider networks based on utilization
control incentive clauses. Incentives, which are based on annual performance,
are estimated monthly and recorded as either a risk pool payable or risk pool
receivable. The risk pool contracts are based on a September 30 year-end, which
coincides with the AHCCCS contract period.
Loss contract reserve
Estimated future health care costs under a group of contracts in excess of
estimated future premiums and reinsurance recoveries on those contracts are
recorded as a loss when determinable.
As of May 31, 1996, the loss contract reserve includes $70,000 for a management
services agreement and $440,000 for AHC. The $70,000 reserve has been reflected
in the results of operations for the year ended May 31, 1996. In conjunction
with the purchase of AHC, the Company recorded a loss contract reserve of
$542,000. Subsequent to the acquisition, the Company incurred costs and expenses
of $102,000. The reserves are being amortized over the remaining life of the
agreements.
Income taxes
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The statement requires an
asset and liability approach for financial accounting and reporting for income
taxes.
Deferred income taxes have been provided for all significant temporary
differences. These temporary differences arise principally from losses and
compensation not yet deductible for tax purposes and the use of accelerated
depreciation methods.
34
<PAGE> 37
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Earnings per share
Earnings per common share have been computed by dividing net income by the
weighted average common equivalent shares outstanding during the period. Common
stock equivalents include shares issuable on the exercise of stock options and
warrants when dilutive, using the treasury stock method from date of grant.
Average shares outstanding and all per share amounts included in the financial
statements and notes thereto have been adjusted retroactively to reflect the
one-for-three reverse stock split effective March 1, 1996.
Restrictions on Fund Transfers
Certain of the Company's operating subsidiaries are subject to state regulations
which require compliance with certain net worth, reserve and deposit
requirements. To the extent the operating subsidiaries must comply with these
regulations, they may not have the financial flexibility to transfer funds to
MCS. MCS's proportionate share of net assets (after inter-company eliminations)
which, at May 31, 1996, may not be transferred to MCS by subsidiaries in the
form of loans, advances or cash dividends without the consent of a third party
is referred to as "Restricted Net Assets". Total Restricted Net Assets of these
operating subsidiaries was $9,295,000 at May 31, 1996, with deposit and reserve
requirements (performance bonds) representing $2,057,000 of the Restricted Net
Assets and net worth requirements, in excess of deposit and reserve
requirements, representing the remaining $7,238,000.
Concentration of credit risk and significant clients
The Company's revenues are generated from contracts with AHCCCS and healthcare
provider organizations, typically governmental entities. Accordingly, as of May
31, 1996 and 1995, all of the Company's trade receivables were from AHCCCS or
entities in this industry.
Approximately 53% of the Company's revenues for 1996 were generated from Ventana
and AHC through the contracts with AHCCCS. Additionally, approximately 16%, 71%
and 84% of the Company's revenues in 1996, 1995 and 1994, respectively, were
generated from one county governmental unit to which the Company provides
contract services. Approximately 10% and 24% of the Company's revenues in 1996
and 1995, respectively, were generated from one state to which the Company
provides contract services.
Fair value of financial instruments
The Company's financial instruments consist primarily of cash, accounts and
notes receivable, accounts payable, other accrued expenses, and debt. These
balances are carried in the financial statements at amounts that approximate
fair value unless separately disclosed in the Notes to
35
<PAGE> 38
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements.
Reclassifications
Certain amounts reported for the year ended May 31, 1995 have been reclassified
to conform to the 1996 presentation.
Unaudited interim financial information
In the opinion of management, all adjustments necessary for a fair presentation
of the financial results for interim periods have been included in the unaudited
financial information. These adjustments are only of a normal and recurring
nature. These interim results of operations are not necessarily indicative of
the results to be expected for the full year.
Recently issued accounting pronouncements
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-lived Assets to be Disposed of" ("SFAS No. 121"), issued in
March 1995 and effective for fiscal years beginning after December 15, 1995,
requires the recognition of impairment losses on long-lived assets and certain
intangible assets to be disposed of. The adoption of this Statement is not
expected to have a material impact on the Company's financial position or
results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," issued in October 1995, and effective for fiscal years beginning
after December 15, 1995, encourages, but does not require, a fair value based
method of accounting for employee stock options or similar equity instruments.
It also allows an entity to elect to continue to measure compensation costs
using the intrinsic value based method of accounting prescribed by Accounting
Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to
Employees" but requires pro forma disclosures of net income and earnings per
share as if the fair value method of accounting has been applied. The Company
has elected to continue to measure compensation cost under APB No. 25 and will
comply with the pro forma disclosure requirements in fiscal 1997.
NOTE 3 -INVESTMENTS:
The Company's short-term investments consist primarily of municipal bonds. The
fair value of investments is based upon quoted market prices. As of May 31,
1996, the fair value of such securities approximated cost.
36
<PAGE> 39
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's short-term investments as of May 31, 1996 had stated maturities as
follows:
<TABLE>
<S> <C>
Due within one year $1,450,000
Due after five years through ten years 650,000
Due after ten years 900,000
----------
$3,000,000
==========
</TABLE>
Actual maturities could differ from contractual maturities because borrowers may
have the right to call or prepay obligations without call or prepayment
penalties. Also, the Company may extend maturities in some cases.
All securities have been classified as current assets as they represent the
investment of cash available for current operations.
NOTE 4- ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE:
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
May 31,
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
Contract management receivables $2,800,000 $1,119,000
Due from AHCCCS 981,000 --
Risk pool receivables 1,036,000 --
Current portion of notes receivable 54,000 --
Interest receivable 95,000 --
Other 11,000 1,000
---------- ----------
4,977,000 1,120,000
Less allowance for doubtful accounts 624,000 --
---------- ----------
Net receivables $4,353,000 $1,120,000
========== ==========
Non-current portion of notes receivable $ 139,000 $ --
========== ==========
</TABLE>
The amounts due from AHCCCS primarily include billed and unbilled reinsurance,
SOBRA, and capitation receivables.
Notes receivable represent a customer's accounts receivable which was converted
into a long-term note. The note accrues interest at a rate of 7% through January
1, 1997 and then prime plus 2%. Payments begin in the month the customer
achieves the stated enrollment goal, such that one third of the principal and
accrued interest shall be paid in eleven monthly installments and the remaining
two-thirds and accrued interest is payable in a lump sum payment during the
thirteenth month after
37
<PAGE> 40
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the first payment.
NOTE 5 -TRANSACTIONS AND RELATIONSHIPS WITH RELATED PARTIES:
Related party accounts and notes receivable consist of the following:
<TABLE>
<CAPTION>
May 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Current portion
Due from stockholders $ 91,000 $ --
---------- ----------
Non-current portion
Due from stockholders 783,000 --
Due from Community Health Choice 2,000,000 --
---------- ----------
Total non-current receivables 2,783,000 --
---------- ----------
$2,874,000 $ --
========== ==========
</TABLE>
The amounts due from stockholders relate to certain employee advances, loans to
stockholders taken against the cash surrender value of life insurance policies
and other loans to stockholders. The Company does not charge interest on
employee advances nor the loans to stockholders which have been taken against
the cash surrender value of the life insurance policies. The interest rate on
other loans to stockholders range from 3.3% to 8% and mature through the year
2000. The loans against the cash surrender value of the life insurance policies
have no stated maturity other than the maturity of the underlying policies.
Community Health Choice ("Choice") is a corporate joint venture formed on April
1, 1996 by the Company and Community Health Care of Illinois ("CHCI") for the
purpose of establishing a Health Maintenance Organization ("HMO"). In
conjunction with the formation, the Company loaned Choice $2 million for the
establishment and maintenance of a reserve fund and to otherwise satisfy the net
worth requirements for a licensed HMO in Illinois. The note payable accrues
interest at prime, 8.25% as of May 31, 1996, and is payable in full on April 19,
2003. The note is secured by the assets of Choice.
The Company owns 49% of the total shares of Choice. The investment in the
corporate joint venture will be accounted for under the equity method by the
Company. As of May 31, 1996 the Company has not made any capital contribution
nor have any earnings been distributed by Choice. The earnings of Choice will be
distributed 50% to the Company and 50% to CHCI. The Company also entered into a
management services agreement with Choice, whereby the Company will provide
administrative support to Choice. The agreement stipulates that no management
fee revenue is earned during the pre-operational phase and during the
operational phase management fee revenues
38
<PAGE> 41
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
are based on percentage of premiums for various membership enrollment levels. As
of May 31, 1996 Choice was still in the pre-operational phase. Subsequent to May
31, 1996, the Company notified Choice that, in the opinion of the Company's
management, Choice should be dissolved and the relationship terminated.
Due to Medicus and related party long-term debt consists of the following:
<TABLE>
<CAPTION>
May 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Current portion
Unsecured amounts payable on
demand to Medicus Systems Corporation,
non-interest bearing $647,000 $ --
Non-current portion
Unsecured amounts due to stockholders and
officers, interest at 8.00%, principal and interest
due on December 31, 2000 249,000 --
-------- --------
Total notes payable $896,000 $ --
======== ========
</TABLE>
The Company owed Medicus Systems Corporation approximately $1,371,000 at the
time of the Distribution.
Medicus has provided to the Company certain legal, data processing, insurance
and administrative services. Effective on the distribution date, Medicus entered
into an administrative services agreement, pursuant to which Medicus agreed to
provide certain administrative services for one year from the effective date of
the agreement. This agreement requires MCS to pay Medicus a fee of $700,000. The
Company has accrued for the remaining amounts due under the administrative
services agreement as of May 31, 1996 as management believes the Company will
not receive any future benefit from the agreement.
The Company has a service agreement with AlohaCare, a Hawaii not-for-profit
corporation whereby the Company will provide all managed care services on behalf
of AlohaCare. AlohaCare has certain management in common with the Company. The
Company collected management fees from AlohaCare of $1,071,000 in fiscal year
1996.
The Company had a risk pool agreement with a shareholder during fiscal year
1996. The Company made payments to the shareholder totaling $257,000 during the
fiscal year. As of May 31, 1996, $117,000 remains unpaid.
39
<PAGE> 42
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In 1996 and 1995, Medicus provided the Company with cash infusions for operating
purposes of $250,000 and $5,000,000, respectively.
NOTE 6 - PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
May 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Machinery and equipment $2,952,000 $ 238,000
Furniture and fixtures 809,000 21,000
Software 765,000 --
Leasehold improvements 145,000 7,000
---------- ----------
4,671,000 266,000
Less - accumulated depreciation and amortization 524,000 111,000
---------- ----------
Net property and equipment $4,147,000 $ 155,000
========== ==========
</TABLE>
NOTE 7 - ACCRUED EXPENSES:
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
May 31,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
Due to AHCCCS $1,665,000 $ --
Accrued service agreement 525,000 --
Accrued compensation and related expenses 446,000 45,000
Deferred revenue 263,000 --
Other accrued expenses 710,000 --
---------- ----------
Total accrued expenses $3,609,000 $ 45,000
========== ==========
</TABLE>
40
<PAGE> 43
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8- LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
May 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Note payable to a bank, interest ranging from 8.25%
to 10.25%, due on demand, secured by municipal bonds $1,200,000 $ --
Note payable to a bank, interest at 8.875%, interest and principal of $17,000
due monthly until maturity on September 30, 1998, secured by equipment
and stockholder guarantees 467,000 --
Note payable to a bank, interest at prime plus .25% (8.5% as of May
31, 1996), interest due monthly, principal due on September 30, 1996,
secured by stockholder guarantees 250,000 --
---------- ----------
1,917,000 --
Less: current portion 1,650,000 --
---------- ----------
Non-current portion of long-term debt $ 267,000 $ --
========== ==========
Scheduled principal payments on long-term debt are as follows:
Fiscal year
1997 $1,650,000
1998 200,000
1999 67,000
-----------
$1,917,0000
===========
</TABLE>
41
<PAGE> 44
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9- COMMITMENTS AND CONTINGENCIES:
The Company has various lease agreements for real and personal property. These
obligations extend through 2001 and in some cases contain renewal options. As of
May 31, 1996, future minimum lease payments for noncancellable operating leases
in excess of one year are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 472,000
1998 332,000
1999 209,000
2000 72,000
2001 3,000
----------
$1,088,000
==========
</TABLE>
Rental expense on all operating leases totaled $400,000, $194,000, and $173,000,
during fiscal years 1996, 1995 and 1994, respectively.
MCS has committed to provide Community Choice Michigan (CCM) a line of credit up
to $500,000 at prime plus 2% to assist CCM in maintaining minimum financial
requirements. No amounts have been provided under the line of credit as of May
31, 1996.
The Company is a defendant in various legal matters arising from normal
business activity. Management believes that the ultimate outcome of these
matters will not have a material effect on the Company's results of operations,
financial position or cash flows.
NOTE 10 - EMPLOYEE AND DIRECTOR BENEFIT PLANS:
The Company provides various health, welfare and disability benefits to its
full-time salaried employees which are funded primarily by contributions. The
Company does not provide postemployment or postretirement health care and life
insurance benefits to its employees.
Stock Option Plans
The Company adopted various stock option plans beginning in 1989 through 1994.
The plans provided for the issuance of shares of common stock to key personnel
and directors. Options granted under all plans become exercisable at various
times and under certain conditions as determined by the Board of Directors, or
its committee, and expire no later than ten years from the date of grant.
In conjunction with the Distribution the options outstanding under these
existing option plans as they related to directors and to employees who became
employees of Medicus after the Distribution were assumed by Medicus. All options
outstanding under these existing option plans as they related to employees who
became employees of MCS after the Distribution remained outstanding. The number
of shares of common stock subject to options and the related exercise prices
were adjusted
42
<PAGE> 45
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as provided by the Distribution agreement. The adjustments were calculated so as
to preserve the economic value of such options subject to adjusting the exercise
price of such options to $3.25 per share (the fair market value of the Company's
common stock at the date of the Distribution and Mergers).
The Company has also adopted 1995 and 1996 Stock Option Plans which provide for
the issuance of up to an aggregate of 750,000 shares of common stock to key
employees and directors of the Company. This authorization includes shares which
became subject to options upon consummation of the Mergers as described above.
During fiscal 1996 options were granted to purchase 686,000 common shares at an
exercise price of $3.25 per share which was fair market value at the date of
grant.
The Company also adopted a 1995 Director's Stock Option Plan which provides for
the issuance of up to an aggregate of 100,000 shares of common stock to
directors of the Company. During fiscal 1996 options were granted to purchase
90,000 common shares at an exercise price of $3.25 per share which was fair
market value at the date of grant.
As of May 31, 1996 the Company has 74,000 options available for grant, and
934,000 options outstanding at exercise prices ranging from $0.21 per share to
$6.25 per share. Of the options outstanding 114,000 are currently exercisable.
Employee Stock Purchase Plan
Prior to the Distribution the Company had an Employee Stock Purchase Plan
providing for the sale of shares of common stock to eligible employees.
Employees could designate up to the lesser of $10,000 or 10% of their
compensation for the purchase of stock. The purchase price was the lesser of 85%
of the fair market value of the stock on either the date of grant of a one year
purchase option or the date the purchase option is exercised. During the years
ended May 31, 1996, 1995, and 1994 6,000, 5,000 and 4,000 shares of common stock
were issued under the plan for an aggregate purchase price of $178,000, $170,000
and $112,000, respectively. In conjunction with the Distribution, Medicus
adopted the existing plan and the obligations under the plan transferred to
Medicus. On April 27, 1996 the Company adopted a new Employee Stock Purchase
Plan. The plan is effective June 1, 1996 and provides for the sale of 300,000
shares of common stock to eligible employees over a three year period with
essentially the same terms as the previous plan.
Retirement savings plan
The Company has a contributory retirement savings plan (401(k) Plan) which
covers eligible employees who qualify as to age and length of service.
Participants may contribute up to 15% of their eligible wages, subject to
maximum contribution limitations imposed by the IRS. The expense
43
<PAGE> 46
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the plan, consisting of discretionary Company contributions, was $30,000,
$28,000 and $11,000 for the years ended May 31, 1996, 1995 and 1994,
respectively. In conjunction with the Distribution, Medicus adopted the existing
plan and the Company adopted a separate 401(k) Plan effective March 1, 1996
which was substantially identical to the existing plan. All obligations under
the plan which pertained to Medicus employees were assumed by Medicus and all
obligations which pertained to employees of the managed care business were
transferred to the Company.
NOTE 11 - INCOME TAXES:
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
Year ended May 31,
-------------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ -- $ 221,000 $ 286,000
State -- 45,000 58,000
--------- --------- ---------
-- 266,000 344,000
--------- --------- ---------
Deferred:
Federal (207,000) (5,000) 1,000
State (39,000) (1,000) --
--------- --------- ---------
(246,000) (6,000) 1,000
--------- --------- ---------
$(246,000) $ 260,000 $ 345,000
========= ========= =========
</TABLE>
A reconciliation of income tax provision (benefit) based on the federal
statutory rate and the Company's actual income tax provision is as follows:
<TABLE>
<CAPTION>
Year ended May 31,
--------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Income tax at the federal statutory rate of 34% $(836,000) $ 245,000 $ 329,000
State taxes, net of federal benefit (90,000) 29,000 38,000
Nondeductible goodwill amortization 39,000 -- --
Nondeductible business meals 19,000 -- --
Officer's life insurance premiums 14,000 -- --
Nontaxable interest income (8,000) -- --
Valuation allowance 626,000 -- --
Other, net (10,000) (14,000) (22,000)
--------- --------- ---------
$(246,000) $ 260,000 $ 345,000
========= ========= =========
</TABLE>
Deferred income tax assets and liabilities were comprised of the following:
44
<PAGE> 47
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
May 31,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Gross deferred tax assets:
Net operating loss $ 667,000 $ --
Reserve for loss contracts 204,000 --
Allowance for bad debt 250,000 --
Accrued service agreement 210,000 --
Compensation not yet deductible
for tax purposes 137,000 --
Deferred revenue recognizable for tax purposes 73,000 --
Other 79,000 --
----------- -----------
Total gross deferred tax assets 1,620,000 --
Deferred tax assets valuation allowance (1,145,000) --
----------- -----------
Net deferred tax assets 475,000 --
----------- -----------
Gross deferred tax liabilities:
Depreciation 217,000 4,000
Other 16,000 --
----------- -----------
Total gross deferred tax liabilities 233,000 4,000
----------- -----------
Net deferred tax assets/(liabilities) $ 242,000 $ (4,000)
=========== ===========
</TABLE>
As of May 31, 1996, the Company has a net operating loss carryforward of
$876,000 which expires in 2011. The Company will be able to utilize its post
merger losses to the extent the Company and its subsidiaries generate post
merger taxable income. The Company also has a net operating loss carryforward of
$792,000 which was generated by a subsidiary prior to the Merger which expire in
2011. The Company will be able to utilize the subsidiary's losses only to the
extent the subsidiary generates post-merger taxable income. The ability of the
Company to utilize these net operating loss carryforwards is dependent upon the
Company and subsidiary generating future taxable income. Additionally, if a
substantial change in the Company's ownership should occur, there would be an
annual limitation on the amount of carryforwards which can be utilized. These
limitations could affect the Company's ability to utilize the entire amount of
its loss carryforwards.
Management has concluded that a deferred tax asset valuation allowance is
required for a portion of the deferred tax assets as it is not more likely than
not that the Company will ultimately realize the full benefit of these deferred
tax assets.
45
<PAGE> 48
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12- STOCKHOLDERS' EQUITY:
On July 8, 1994, the Board of Directors authorized the repurchase of up to
267,000 shares of the Company's common stock to meet the needs of its stock
option plans. During fiscal year 1995, the Company purchased 45,000 shares and
reissued 29,000 shares. During fiscal year 1996, the Company purchased 60,000
shares and reissued 33,000 shares. Treasury stock representing 4,000 shares
outstanding at the date of the Distribution has been retired.
The holders of the Voting Preferred Stock are entitled to 15,000 votes per share
through May 31, 1998, after which they will be entitled to 220 votes per share.
The Voting Preferred Stock has a liquidation preference of $1,000 per share plus
any accrued and unpaid dividends. The Company may redeem the Voting Preferred
Stock at any time after May 31, 1998 at par value plus any accrued dividends.
Holders of the Voting Preferred Stock are entitled to receive quarterly
dividends at an annual rate equal to two percentage points below the prime rate
in effect as of the prior May 31 (7% as of May 31, 1995).
The authorized capital stock of the Company also includes 1,000,000 shares of
Preferred Stock, $.01 par value. No shares of Preferred Stock are currently
outstanding. The Board of Directors has the authority to determine the rights
and preferences of this preferred stock upon its issuance.
NOTE 13- SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
Year ended May 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $ -- $239,000 $275,000
Interest 37,000 -- --
</TABLE>
The Company merged with the MCS Companies on March 1, 1996. In conjunction with
the Merger, assets were acquired and liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $15,468,000
Net liabilities assumed $11,313,000
</TABLE>
NOTE 14- COMPLIANCE WITH REGULATIONS:
As of May 31, 1996 the Company was not in compliance with certain AHCCCS
regulations, specifically with respect to their accumulated deficit. In
accordance with AHCCCS requirements,
46
<PAGE> 49
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Company has notified AHCCCS of their non-compliance and has provided them
with a description of the procedures the Company will implement in order to
improve their current position.
NOTE 15- SUBSEQUENT EVENTS AND LIQUIDITY:
AHC is operating under a three year contract (October 1994 to September 1997).
The agreed-upon rates have resulted in AHC incurring losses. Without a
significant rate increase from AHCCCSA for the third year of the contract,
commencing October 1, 1996, coupled with measurable improvements in medical
expense costs, AHC will continue to incur losses through the end of the contract
term. If adequate rate increases and medical expense improvements appear
unlikely, it is management's intention to terminate this contract on September
30, 1996.
The Company experienced negative cash flows from operations in fiscal 1996
primarily as a result of the loss from continuing operations. Additionally, the
Company has negative working capital of approximately $2,640,000 at May 31,
1996. In an effort to reduce the negative operating cash flows, in July 1996 the
Company reduced its total workforce by approximately 10%. In addition the
Company has implemented stringent controls over other expenses. It is currently
in the process of consolidating its AHC operations by closing two satellite
offices in Arizona. The Company is also considering relocating its corporate
headquarters in an effort to reduce rent expense and more efficiently utilize
the space available.
The Company has been actively pursuing new sources of capital. In August, 1996
the Company signed a letter of intent with Blue Cross/Blue Shield of Texas
("BCBSTX") whereby BCBSTX will invest $3 million in the Company in the form of a
convertible secured loan. The loan has original term of three years with a
renewal option for an additional two years if certain conditions are met. The
loan is secured by various assets of the Company which aggregate a minimum of
150% of the loan value and bears interest at a rate of 8% per annum. Principal
and interest are payable at the end of the initial three year term. The loan is
convertible into the Company's common stock at $3.85 per share. BCBSTX will also
receive a warrant to purchase 100,000 shares of the Company's common stock at
$4.45 per share and has the right of first refusal to participate as an equity
partner in future MCS funding requirements. The transaction is subject to
approval by both parties and is scheduled to close September 1996.
The Company believes that, based on its current projections and the completion
of the BCBSTX transaction, its cash and capital resources will be sufficient to
meet its financial requirements in fiscal 1997. The Company will continue its
efforts to increase revenues, renegotiate existing agreements, and minimize
operating costs. However, the Company can make no assurances that it will meet
its current projections. In the event the Company's future operating results
fall below
47
<PAGE> 50
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
management's expectations, additional sources of working capital funding may be
necessary and difficult to obtain.
NOTE 16- PRO FORMA INFORMATION (UNAUDITED):
The following pro forma summary of the consolidated results of operations gives
effect to the Mergers as if they had occurred as of the beginning of the year
presented, after including the impact of certain adjustments, such as
amortization of intangibles and the income tax effects of AHC being an S
Corporation using an estimated combined federal and state tax rate of 38%,
assuming that a consolidated tax return is filed.
<TABLE>
<CAPTION>
Year ended May 31,
----------------------------
1996 1995
------------ -----------
<S> <C> <C>
Revenues $67,342,000 $51,829,000
Net income (loss) from continuing operations (2,810,000) 1,356,000
Net income (loss) per weighted average common
and common equivalent share outstanding $ (1.04) $ 0.61
</TABLE>
The unaudited pro forma results are not necessarily indicative of what actually
would have occurred if the Mergers had been completed at the beginning of the
periods presented. In addition, they are not intended to be a projection of
future results and do not reflect any of the synergies, additional
revenue-generating services or direct facility operating expense reductions that
might be achieved from combined operations.
NOTE 17 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Unaudited quarterly financial information for the years ended May 31, 1996 and
1995 is supplementally provided in the following summary.
48
<PAGE> 51
MANAGED CARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
August 31, November 30, February 29, May 31,
1995 1995 1996 1996
---------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $1,856,000 $1,998,000 $ 2,493,000 $16,845,000
Total costs and expenses 1,740,000 1,769,000 3,112,000 19,370,000
Operating income (loss) 116,000 229,000 (619,000) (2,525,000)
Income (loss) from continuing operations 153,000 145,000 (345,000) (2,167,000)
Discontinued operations 807,000 (279,000) (782,000) -
Net income (loss) 960,000 (134,000) (1,127,000) (2,167,000)
Net income (loss) per share:
Continuing operations $ 0.07 $ 0.07 $ (0.16) $ (0.50)
Discontinued operations 0.37 (0.13) (0.36) -
---------- ---------- ----------- -----------
$ 0.44 $ (0.06) $ (0.52) $ (0.50)
========== ========== =========== ===========
Three Months Ended
------------------------------------------------------
August 31, November 30, February 28, May 31,
1994 1994 1995 1995
------------------------------------------------------
Revenues $1,508,000 $1,494,000 $1,546,000 $1,642,000
Total costs and expenses 1,226,000 1,243,000 1,373,000 1,626,000
Operating income 282,000 251,000 173,000 16,000
Income from continuing operations 180,000 160,000 115,000 10,000
Discontinued operations 791,000 996,000 598,000 636,000
Net income 971,000 1,156,000 713,000 646,000
Net income per share:
Continuing operations $ 0.09 $ 0.08 $ 0.04 $ -
Discontinued operations 0.35 0.44 0.27 0.29
---------- ---------- ---------- ----------
$ 0.44 $ 0.52 $ 0.31 $ 0.29
========== ========== ========== ==========
</TABLE>
Prior to May 31, 1996, the Company filed quarterly reports on Form 10Q with the
Securities and Exchange Commission which reflected the software division and
related lines of business as the continuing operations and the managed care
business as the discontinued operation. The quarterly financial information
stated above has been restated to reflect the software division and related
lines of business as the discontinued operations and the managed care business
as the continuing operation.
49
<PAGE> 52
MANAGED CARE SOLUTIONS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
- - --------------------------------------------------------------------------------
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
May 31,
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 711,000 $ 1,475,000
Short-term investments - 4,000,000
Accounts and notes receivable and unbilled services, net 2,578,000 1,120,000
Prepaid expenses and other 413,000 159,000
Deferred taxes, net current assets 169,000 -
Net assets of discontinued operations - 22,363,000
------------ ------------
Total current assets 3,871,000 29,117,000
Notes receivable 2,000,000 -
Goodwill, net 3,534,000 -
Property and equipment, net 1,580,000 155,000
Investment in subsidiaries 3,188,000 -
Deferred taxes, net 73,000 -
Other assets 66,000 2,000
------------ ------------
$ 14,312,000 $ 29,274,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 259,000 $ 84,000
Accrued expenses 1,035,000 45,000
Loss contract reserve 70,000 -
Due to Medicus Systems Corporation 647,000 -
Current portion of long-term debt 107,000 -
------------ ------------
Total current liabilities 2,118,000 129,000
Long-term debt - -
Deferred income taxes - 4,000
------------ ------------
Total liabilities 2,118,000 133,000
------------ ------------
Commitments - -
Stockholders' equity:
Voting preferred stock, $1,000 par value
Authorized, issued and outstanding - 6.85 shares 7,000 -
Common stock, $0.01 par value
Authorized - 10,000,000 shares
Issued - 4,365,000 shares and 6,432,000 shares 44,000 64,000
Capital in excess of par value 14,310,000 16,022,000
Less treasury stock, at cost - 46,000 shares - (543,000)
Deficit in earnings of subsidiaries (967,000) -
Retained earnings (deficit) (1,200,000) 13,598,000
------------ ------------
Total stockholders' equity 12,194,000 29,141,000
------------ ------------
$ 14,312,000 $ 29,274,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
50
<PAGE> 53
MANAGED CARE SOLUTIONS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
- - --------------------------------------------------------------------------------
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MAY 31,
-----------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 9,272,000 $ 6,190,000 $ 5,332,000
------------ ------------ ------------
Direct cost of operations 8,858,000 4,435,000 3,660,000
Marketing, sales and administrative 2,078,000 1,034,000 704,000
------------ ------------ ------------
Total costs and expenses 10,936,000 5,469,000 4,364,000
------------ ------------ ------------
Operating income (loss) (1,664,000) 721,000 968,000
Interest income 171,000 - -
Deficit from losses in subsidiaries (967,000) - -
------------ ------------ ------------
Income (loss) from continuing
operations before income taxes (2,460,000) 721,000 968,000
Provision (benefit) for income taxes (246,000) 260,000 345,000
------------ ------------ ------------
Income (loss) from continuing operations (2,214,000) 461,000 623,000
Discontinued operations, net of taxes (254,000) 3,025,000 3,225,000
------------ ------------ ------------
Net income (loss) $ (2,468,000) $ 3,486,000 $ 3,848,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
51
<PAGE> 54
MANAGED CARE SOLUTIONS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
- - --------------------------------------------------------------------------------
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MAY 31,
------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ (2,214,000) $ 461,000 $ 623,000
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Bad debt expense 30,000 - -
Depreciation and amortization of property and
equipment, software and goodwill 288,000 59,000 34,000
Deferred income taxes (246,000) (6,000) 1,000
Interest in losses of subsidiaries 967,000 - -
Changes in current assets and current liabilities:
Accounts receivable and unbilled services (1,488,000) (62,000) (157,000)
Prepaid expenses and other current assets (254,000) (74,000) 10,000
Accounts payable 175,000 (9,000) 70,000
Accrued expenses 968,000 (86,000) 3,000
Loss contract reserve 70,000 - -
Other assets and liabilities (64,000) (52,000) (2,000)
------------ ------------ ------------
Net cash (used in) provided by operating activities (1,768,000) 231,000 582,000
------------ ------------ ------------
Cash flows from investing activities:
Acquisition of MCS Companies (346,000) - -
Purchase of property and equipment (1,661,000) (113,000) (44,000)
Purchase of investments (750,000) (4,000,000) -
Maturity/sale of investments 4,750,000 - -
Related party note receivable (2,000,000) - -
------------ ------------ ------------
Net cash used in investing activities (7,000) (4,113,000) (44,000)
------------ ------------ ------------
Cash flows from financing activities:
Cash infusion from related parties 250,000 5,000,000 -
Due to Medicus Systems Corporation 647,000 - -
Issuance of long-term debt 107,000 - -
Issuance of voting preferred stock 7,000 - -
Sale of common stock - 267,000 10,889,000
Purchase of treasury stock (532,000) (1,571,000) -
Reissuance of treasury stock 762,000 1,028,000 -
Dividends paid (576,000) (768,000) -
------------ ------------ ------------
Net cash provided by financing activities 665,000 3,956,000 10,889,000
------------ ------------ ------------
Net increase in cash and cash equivalents (1,110,000) 74,000 11,427,000
Cash and cash equivalents, Beginning of period 1,475,000 358,000 (180,000)
Cash allocated from (to) discontinued operations, net 346,000 1,043,000 (10,889,000)
------------ ------------ ------------
Cash and cash equivalents, End of period $ 711,000 $ 1,475,000 $ 358,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
52
<PAGE> 55
MANAGED CARE SOLUTIONS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
NOTE TO THE CONDENSED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION:
The condensed financial statements of the registrant ("MCS") should be read in
conjunction with the consolidated financial statements which are included
elsewhere herein. The software and related lines of business, which were
separated as of March 1, 1996, are reported as discontinued operations for all
years presented. The statements do not reflect the financial position and
results of operations of MCS as if it had been a stand-alone operation during
the periods shown. The acquisition of the MCS Companies on March 1, 1996 has
been recorded under the equity method for these condensed financial statements.
53
<PAGE> 56
MANAGED CARE SOLUTIONS, INC.
SCHEDULE II
- - --------------------------------------------------------------------------------
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
-------------------------------------------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other end of
of Period Expenses Accounts Deductions Period
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Description
YEAR ENDED MAY 31, 1994
Allowance for doubtful accounts $ - $ - $ - $ - $ -
Tax Valuation Allowance - - - - -
YEAR ENDED MAY 31, 1995
Allowance for doubtful accounts - - - - -
Tax Valuation Allowance - - - - -
YEAR ENDED MAY 31, 1996
Allowance for doubtful accounts - 24,000 600,000(1) - 624,000
Tax Valuation Allowance - 626,000 519,000(2) - 1,145,000
</TABLE>
(1) Amount represents the allowance for doubtful accounts recorded upon
acquisition of the MCS Companies.
(2) Amount represents the tax valuation allowance recorded upon acquisition of
the MCS Companies.
54
<PAGE> 57
MANAGED CARE SOLUTIONS, INC.
SCHEDULE AND EXHIBIT INDEX
DESCRIPTION
SCHEDULES
I Condensed Financial Information of the Registrant
II Valuation and Qualifying Accounts and Reserves
EXHIBIT NO.
2.1 Agreement and Plan of Merger by and among Ventana Health Systems, Inc.,
Arizona Health Concepts, Inc., Managed Care Solutions, Inc., VHS
Managed Care Merger Sub, Inc., AHC Managed Care Merger Sub, Inc., MCS
Managed Care Merger Sub, Inc. and the registrant (1)
2.2 Distribution Agreement by and between Medicus Systems Software, Inc.
and Medicus Systems Corporation (2).
3.1 Conformed Certificate of Incorporation of the Registrant, as amended
(3)
3.2 Restated Bylaw (4)
10.1 Line of Credit Agreement dated July 11, 1996 as amended, with First
Interstate Bank of Arizona
10.2 (a) Contract between the registrant and San Diego County, California
and amendments thereto(5)
(a)(1) Ninth Amendment to contract between the registrant and San Diego
County, California(6)
(a)(2) Tenth Amendment to contract between the registrant and San Diego
County, California(7)
(a)(3) Eleventh Amendment to contract between the registrant and San
Diego County, California(8)
(a)(4) Twelfth Amendment to contract between the registrant and San
Diego County, California(9)
(a)(5) Thirteenth Amendment to contract between the registrant and San
Diego County, California(10)
(a)(6) Fourteenth Amendment to contract between the registrant and San
Diego County, California
(a)(7) Fifteenth Amendment to contract between the registrant and San
Diego County, California
10.3 Service Agreement between registrant and Medicus System Software, Inc.
10.4 The Company's 1996 Stock Option Plan*
10.5 The Company's 1995 Stock Option Plan, as amended*
10.6 The Company's 1995 Directors' Stock Option Plan*
10.7 The Company's Employee Stock Purchase Plan*
10.8 Contract between the registrant and Colorado Access(11)
<PAGE> 58
10.9 (a) Contract between Ventana Health Systems and Arizona Health Care
Cost Containment System Part 1 through Part 5
(a)(1) Amendment 7 to the Contract between Ventana Health Systems and
Arizona Health Care Cost Containment System
(a)(2) Amendment 8 to the Contract between Ventana Health Systems and
Arizona Health Care Cost Containment System
(a)(3) Amendment 9 to the Contract between Ventana Health Systems and
Arizona Health Care Cost Containment System
(a)(4) Amendment 10 to the Contract between Ventana Health Systems
and Arizona Health Care Cost Containment System
(a)(5) Amendment 11 to the Contract between Ventana Health Systems
and Arizona Health Care Cost Containment System
10.10 (a) Contract between Arizona Health Systems and Arizona Health Care
Cost Containment Systems
(a)(1) Amendment 2 to contract between Arizona Health Systems and
Arizona Health Care Cost Containment Systems
(a)(2) Amendment 4 to contract between Arizona Health Systems and
Arizona Health Care Cost Containment Systems
(a)(3) Amendment 5 to contract between Arizona Health Systems and
Arizona Health Care Cost Containment Systems
(a)(4) Amendment 6 to contract between Arizona Health Systems and
Arizona Health Care Cost Containment Systems
(a)(5) Amendment 7 to contract between Arizona Health Systems and
Arizona Health Care Cost Containment Systems
(a)(6) Amendment 9 to contract between Arizona Health Systems and
Arizona Health Care Cost Containment Systems
(a)(7) Amendment 10 to contract between Arizona Health Systems and
Arizona Health Care Cost Containment Systems
10.11 (a) First Amendment to contract between registrant and State of
Indiana
(a)(1) Second Amendment to contract between registrant and State of
Indiana
(a)(2) Third Amendment to contract between registrant and State of
Indiana
10.12 (a) Administrative Services contract between registrant and
Community Choice Michigan
(a)(1) First Amendment to Administrative Services contract between
registrant and Community Choice Michigan
(a)(2) Second Amendment to Administrative Services contract between
registrant and Community Choice Michigan
10.13 (a) Letter Consulting Agreement between registrant and Community
Choice Michigan
(a)(1) First Amendment to Consulting Agreement between registrant and
Community Choice Michigan
(a)(2) Second Amendment to Consulting Agreement between registrant and
Community Choice Michigan
10.14 Employment Agreement between the Company and Blaine Bergeson*
<PAGE> 59
10.15 Employment Agreement between the Company and James A. Burns*
10.16 Administrative Services Agreement between registrant and AlohaCare
10.17 Administrative Services contract between registrant and Community
Health Choice of Illinois, Inc.
10.18 Contract between registrant and Benova
10.19 Letter of Credit Agreement dated June 3, 1996 with First Interstate
Bank of Arizona
10.20 Contract between registrant and State of California Managed Risk
Medical Insurance Board
10.21 Contract between registrant and Cornerstone Health Management Company
10.22 Shareholder Agreement between registrant, Community Health Care of
Illinois and Community Health Choice of Illinois
10.23 (a) Administrative Services contract between the registrant and
Community Care Plus
(a)(1) First Letter Amendment to the Administrative Services contract
between the registrant and Community Care Plus
(a)(2) Second Letter Amendment to the Administrative Services contract
between the registrant and Community Care Plus
10.24 Form of Indemnification Contract between the registrant and its
officers and directors (12)*
11 Computation of Per Share Earnings
21 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedule
- - --------------------
* Indicates exhibits which constitute management contracts or
compensatory plans or agreements.
(1) Incorporated by reference to Exhibit 2 to the registrant's Registration
Statement Number 333-558 on Form S-4.
(2) Incorporated by reference to Exhibit 2(b) to the registrant's Report on
Form 8-K dated March 1, 1996, as amended by Form 8-K/A-1 filed on April
30, 1996.
(3) Incorporated by reference to Exhibit 4(a)(5) to the registrant's
Registration Statement Number 333-04981 on Form S-8.
(4) Incorporated by reference to Exhibit 4(b)(3) to the registrant's
Registration Statement Number 333-04981 on Form S-8.
(5) Incorporated by reference to Exhibit 10(6) filed as part of the
Registrant's Statement Number 33-41253.
<PAGE> 60
(6) Incorporated by reference to Exhibit 10(a)(1) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1992.
(7) Incorporated by reference to Exhibit 10(a)(2) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1993.
(8) Incorporated by reference to Exhibit 10(a)(3) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994.
(9) Incorporated by reference to Exhibit 10(a)(4) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994.
(10) Incorporated by reference to Exhibit 10(a)(5) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994.
(11) Incorporated by reference to Exhibit 10(a)(6) filed as part of the
registrant's Annual Report on Form 10-K for the fiscal year ended May
31, 1994.
(12) Incorporated by reference to Exhibit 10(g) filed as part of
Registration Statement Number 33-41253.
<PAGE> 1
FIRST INTERSTATE BANK EXHIBIT 10.1
PROMISSORY NOTE
<TABLE>
====================================================================================================
<S> <C> <C>
BORROWER: MANAGED CARE SOLUTIONS, INC. LENDER: FIRST INTERSTATE BANK OF ARIZONA, N.A.
2510 W. DUNLAP AVENUE, SUITE 100 WEST/ CENTRAL BUSINESS BANKING CENTER
PHOENIX, AZ 85021 4000 N. CENTRAL, SUITE 200
P. O. BOX 29754, DEPT. #803
PHOENIX, AZ 85038-9754
====================================================================================================
PRINCIPAL AMOUNT: $250,000.00 INITIAL RATE: 9.250% DATE OF NOTE: JUNE 28, 1995
</TABLE>
PROMISE TO PAY. MANAGED CARE SOLUTIONS, INC. ("BORROWER") PROMISES TO PAY FIRST
INTERSTATE BANK OF ARIZONA, N. A. ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF TWO HUNDRED FIFTY THOUSAND &
00/100 DOLLARS ($250,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH
INTEREST ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST
SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH
ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL
PLUS ALL ACCRUED UNPAID INTEREST ON JUNE 30, 1996. IN ADDITION, BORROWER WILL
PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST BEGINNING JULY 30, 1995,
AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH AFTER
THAT. Interest on this Note is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied in any order at Lender's sole discretion.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the First Interstate Bank of
Arizona, N. A. Prime Rate, which is an index rate that Lender announces from
time to time for pricing certain loans (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans and is set by Lender
in its sole discretion. If the Index becomes unavailable during the term of this
loan, Lender may designate a substitute index after notifying Borrower. Lender
will tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. THE INDEX
CURRENTLY IS 9.000% PER ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL BALANCE OF THIS NOTE WILL BE AT A RATE OF 0.250 PERCENTAGE POINTS OVER
THE INDEX, RESULTING IN AN INITIAL RATE OF 9.250% PER ANNUM. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
<PAGE> 2
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (d) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property, Borrower
makes an assignment for the benefit of creditors, or any proceeding is commenced
either by Borrower or against Borrower under any bankruptcy or insolvency laws.
(e) Any creditor tries to take any of Borrower's property on or in which Lender
has a lien or security interest. This includes a garnishment of any of
Borrower's accounts with Lender. (f) Any of the events described in this default
section occurs with respect to any guarantor of this Note. (g) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 4.250
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender that
amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. THIS NOTE HAS BEEN DELIVERED TO
LENDER AND ACCEPTED BY LENDER IN THE STATE OF ARIZONA. IF THERE IS A LAWSUIT,
BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE
COURTS OF MARICOPA COUNTY, THE STATE OF ARIZONA Subject to the provisions on
arbitration, this Note shall be governed by and construed in accordance with the
laws of the State of Arizona.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title, and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts, and, at Lender's option, to administratively freeze all such accounts
to allow Lender to protect Lender's charge and setoff rights provided on this
paragraph.
<PAGE> 3
06-28-1995 PROMISSORY NOTE
(CONTINUED)
===============================================================================
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested orally by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances under
the line of credit until Lender receives from Borrower at Lender's address shown
above written notice of revocation of their authority: JAMES A. BURNS,
PRESIDENT/ASSISTANT TREASURER. Borrower agrees to be liable for all sums either:
(a) advanced in accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor ceases
doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or (e) Lender in
good faith deems itself insecure under this Note or any other agreement between
Lender and Borrower.
ARBITRATION.
BINDING ARBITRATION. Upon the demand of any party ("Party/Parties"), to
a document (as defined below), whether made before the institution of
any judicial proceeding or not more than 60 days after service of a
complaint, third party complaint, cross-claim or counterclaim or any
answer thereto or any amendment to any of the above, any Dispute (as
defined below) shall be resolved by binding arbitration in accordance
with the terms of this Arbitration Program. A "Dispute" shall include
any action, dispute, claim or controversy of any kind, whether founded
in contract, tort, statutory or common law, equity, or otherwise, now
existing or hereafter arising between any of the Parties arising out
of, pertaining to or in connection with any agreement, document, or
instrument to which this Arbitration Program is attached or in which it
appears or is referenced or any related agreements, documents, or
instruments ("Documents"). Any Party who fails to submit to binding
arbitration following a lawful demand by another Party shall bear all
costs and expenses, including reasonable attorneys' fees, (including
those incurred in any trial, bankruptcy proceeding or on appeal)
incurred by the other Party in obtaining a stay of any pending judicial
proceeding and compelling arbitration of any Dispute. The parties agree
that any agreement, document or instrument which includes, attaches to
or incorporates this Arbitration Program represents a transaction
involving commerce as that term is used in the Federal Arbitration Act,
("FAA") Title 9 United States Code. THE PARTIES UNDERSTAND THAT BY THIS
AGREEMENT THEY HAVE DECIDED THAT THEIR DISPUTES SHALL BE RESOLVED BY
BINDING ARBITRATION RATHER THAN IN COURT, AND ONCE DECIDED BY
ARBITRATION NO DISPUTE CAN LATER BE BROUGHT, FILED OR PURSUED IN COURT.
GOVERNING RULES. Arbitrations conducted pursuant to this Arbitration
Program shall be administered by the American Arbitration Association
("AAA"), or other mutually agreeable administrator ("Administrator") in
accordance with the terms of this Arbitration Program and the
Commercial Arbitration Rules of the AAA. Proceedings hereunder shall be
governed by the provisions of the Federal Arbitration Act (Title 9 of
the United States Code). The arbitrator(s) shall resolve all Disputes
in accordance with the applicable substantive law designated in the
Documents. Judgment upon any award rendered hereunder may be entered in
any court having jurisdiction; provided, however that nothing herein
shall be construed to be a waiver by any party that is a bank of the
protections afforded pursuant to 12 U.S.C. 91 or any similar applicable
state law.
<PAGE> 4
PRESERVATION OF REMEDIES. No provision of, nor the exercise of any
rights under, this arbitration clause shall limit the right of any
Party to: (a) foreclose against any real or personal property
collateral or other security, or obtain a personal or deficiency award;
(b) exercise self-help remedies (including repossession and setoff
rights); or (c) obtain provisional or ancillary remedies such as
injunctive relief, sequestration, attachment, replevin, garnishment, or
the appointment of a receiver from a court having jurisdiction. Such
rights can be exercised at any time except to the extent such action is
contrary to a final award or decision in any arbitration proceeding.
The institution and maintenance of an action as described above shall
not constitute a waiver of the right of any Party to submit the Dispute
to arbitration, nor render inapplicable the compulsory arbitration
provisions hereof. Any claim or Dispute related to exercise of any
self-help, auxiliary or other rights under this paragraph shall be a
Dispute hereunder.
ARBITRATOR POWERS AND QUALIFICATIONS; AWARDS. The Parties agree to
select a neutral "qualified" arbitrator or a panel of "qualified"
arbitrators to resolve any Dispute hereunder. "Qualified" means
practicing attorney, with not less than 10 years practice in commercial
law, licensed to practice in the state of the applicable substantive
law designated in the Documents. A Dispute in which the claims or
amounts in controversy do not exceed $1,000,000.00 shall be decided by
a single arbitrator. A single arbitrator shall have authority to render
an award up to but not to exceed $1,000,000.00 including all damages of
any kind whatsoever, costs, fees, attorneys' fees and expenses.
Submission to a single arbitrator shall be a waiver of all Parties'
claims to recover more than $1,000,000.00. A Dispute involving claims
or amounts in controversy exceeding $1,000,000.00 shall be decided by a
majority vote of a panel of three qualified arbitrators. An arbitration
panel shall be composed of one arbitrator who would be qualified to sit
as a single arbitrator hereunder, one who has at least ten years
experience in commercial lending and one who has at least ten years
experience in the Borrower's industry. The arbitrator(s) shall be
empowered to, at the written request of any Party in any Dispute, (a)
to consolidate in a single proceeding any multiple party claims that
are substantially identical or based upon the same underlying
transaction; (b) to consolidate any claims and Disputes between other
Parties which arise out of or relate to the subject matter hereof,
including all claims by or against borrowers, guarantors, sureties and
or owners of collateral; and (c) to administer multiple arbitration
claims as class actions in accordance with Rule 23 of the Federal Rules
of Civil Procedure. In any consolidated proceeding the first
arbitrator(s) selected in any proceeding shall conduct the consolidated
proceeding unless disqualified due to conflict of interest. The
arbitrator(s) shall be empowered to resolve any dispute regarding the
terms of the arbitration clause, including questions about the
arbitrability of any Dispute, but shall have no power to change or
alter the terms of this Arbitration Program. The prevailing Party in
any Dispute shall be entitled to recover its reasonable attorneys' fees
in any arbitration , and the arbitrator(s) shall have the power to
award such fees. The award of the arbitrator(s) shall be in writing and
shall set forth the factual and legal basis for the award.
<PAGE> 5
06-28-1995 PROMISSORY NOTE
(CONTINUED)
===============================================================================
MISCELLANEOUS. All statutes of limitation applicable to any Dispute
shall apply to any proceeding in accordance with this arbitration
clause. The Parties agree, to the maximum extent practicable, to take
any action necessary to conclude an arbitration hereunder within 180
days of the filing of a Dispute with the Administrator. The
arbitrator(s) shall be empowered to impose sanctions for any Party's
failure to proceed within the times established herein. Arbitrations
shall be conducted in the state of the applicable substantive law
designated in the Documents. The provisions of this Arbitration Program
shall survive any termination, amendment, or expiration hereof or of
the Documents unless the Parties otherwise expressly agree in writing.
Each Party agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosures of information required
in the ordinary course of business of the Parties or as required by
applicable law or regulation. If any provision of this Arbitration
Program is declared invalid by any court, the remaining provisions
shall not be affected thereby and shall remain fully enforceable.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
EFFECTIVE RATE. Borrower agrees to an effective rate of interest that is the
rate specified in this Note plus any additional rate resulting from any other
charges in the nature of interest paid or to be paid in connection with this
Note.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
MANAGED CARE SOLUTIONS, INC.
BY: James A. Burns
James A. Burns, President/Assistant Treasurer
===============================================================================
<PAGE> 6
FIRST INTERSTATE BANK
CHANGE IN TERMS AGREEMENT
<TABLE>
====================================================================================================
<S> <C> <C>
BORROWER: MANAGED CARE SOLUTIONS, INC. LENDER: FIRST INTERSTATE BANK OF ARIZONA, N.A.
2510 W. DUNLAP AVENUE, SUITE 100 WEST/ CENTRAL; BUSINESS BANKING CENTER
PHOENIX, AZ 85021 4000 N. CENTRAL, SUITE 200
P. O. BOX 29754, DEPT. #803
PHOENIX, AZ 85038-9754
====================================================================================================
PRINCIPAL AMOUNT: $250,000.00 DATE OF AGREEMENT: JULY 11, 1996
</TABLE>
DESCRIPTION OF EXISTING INDEBTEDNESS. That certain promissory note executed by
Borrower on June 28, 1995 in the original amount of $250,000.00, as it may have
been amended or renewed from time to time (the "Note").
DESCRIPTION OF THE CHANGE IN TERMS. The maturity date of the existing
indebtedness described above is hereby extended to September 30, 1996 when the
entire unpaid principal balance, all accrued and unpaid interest, and all other
amounts payable thereunder shall be due and payable.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force in effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s) including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.
EFFECTIVE RATE. Borrower agrees to an effective rate of interest that is the
rate specified in this Note plus any additional rate resulting from any other
charges in the nature of interest paid or to be paid in connection with this
Note.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
MANAGED CARE SOLUTIONS, INC.
X Michael J. Kennedy
AUTHORIZED OFFICER
<PAGE> 1
EXHIBIT 10.2(a)(6)
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
COUNTY OF SAN DIEGO CONTRACT NUMBER 41217
THIS FOURTEENTH AMENDMENT is to the Agreement made between the County of San
Diego (hereinafter referred to as "County") and Medicus Systems Corporation
located at 8840 Complex Drive, San Diego, CA 92123 (hereinafter referred to as
"Contractor") for the administration of the County of San Diego, County Medical
Services Program.
WITNESSETH
WHEREAS, Contractor possesses certain skills, experience, education and
competency to perform certain special services, and County desires to engage
Contractor for such special services upon the terms provided; and
WHEREAS, the County Director of Purchasing and Contracting, pursuant to action
of the Board of Supervisors, Item 22 on February 21, 1989, awarded a contract to
the Contractor to provide administration of the County Medical Services (CMS)
Program, for an initial term through June 30, 1992 with an option to extend for
two additional two-year terms; and
WHEREAS, the County, by action of the Board of Supervisors, Item 56 on February
13, 1990, authorized the Director of Purchasing and Contracting to approve,
authorize, and execute a sole source amendment to the County Contract with
Medicus Systems Corporation for day-to-day operations and claims payment related
to AB-75 and SB12/612; and
WHEREAS, the County, by action of the Board of Supervisors, Item 12 on June 12,
1990, authorized the extension of CMS Program contracts for the three-month
period, July 1, 1990 through September 30, 1990; and
<PAGE> 2
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
WHEREAS, the County by action of the Board of Supervisors, Item 5 on September
12, 1990, authorized the extension of CMS Program contracts for the 9 month
period, October 1, 1990 through June 30, 1991; and
WHEREAS, the County by action of the Board of Supervisors, Item 39A on February
26, 1991, directed the Chief Administrative Officer to terminate the CMS Program
by close of business March 5, 1991, effective March 16, 1991, unless adequate
funds were made available from the State; and
WHEREAS, the County by action of the Board of Supervisors, Item 31 on March 5,
1991, set aside action taken on February 26, 1991 to terminate the CMS Program
by March 5, 1991, and instructed the Chief Administrative Officer to send out
notices to terminate the CMS contracts by the end of the day on March 8, 1991,
effective March 19, 1991, unless the State provided the County with binding
assurances that it would provide the County with revenues in the amount of at
least $16,000,000 to pay for the CMS program for the remaining of FY 90-91; and
WHEREAS, the Superior Court in San Diego County on March 18, 1991 ordered a stay
of the Notices of Termination; and
WHEREAS, the State reduced its allocation to the San Diego County CMS Program
for Fiscal Years 1990-91 and 1991-92; and
WHEREAS, a variety of functions are required to be performed by the CONTRACTOR
to close out the CMS Program; and
WHEREAS, the County by action of the Board of Supervisors, Item 6 on June 24,
1991, authorized the extension of CMS Program contracts for the two month
period, July 1, 1991 through August 31, 1991; and
2
<PAGE> 3
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
WHEREAS, the County by action of the Board of Supervisors, Item 39 on July 23,
1991 authorized extension of CMS Program contracts through June 30, 1992; and
WHEREAS, the County by action of the Board of Supervisors, Item 38 on June 2,
1992 authorized extension of CMS Program contracts through June 30, 1993; and
WHEREAS, the County by action of the Board of Supervisors, Item
2, on October 6, 1992, authorized provision of clinic services to HIV+ patients
through CMS community clinics; and
WHEREAS, the County by action of the Board of Supervisors, Minute Order #6 on
February 2, 1993, authorized expansion of the Perinatal Care Network (PCN)
Referral Services; and
WHEREAS, the County by action of the Board of Supervisors on June 29, 1993,
authorized extension of CMS Program contracts through June 30, 1994 (Items #63
and #17), as well as extension of the Perinatal Care Network (Items #17 and
#13), and clinic services for HIV+ patients (Item #20);
WHEREAS, the County by action of the Board of Supervisors on June 21, 1994,
authorized extension of the CMS Program contracts through June 30, 1995 (Item
#28), extension of the contract with Medicus for the Perinatal Care Network
Program (Item #17), and extension of the CARE ACT contracts with the clinics and
with Medicus for clinic services for HIV+ patients (Item #34);
WHEREAS, THE COUNTY BY ACTION OF THE BOARD OF SUPERVISORS ON JUNE 27, 1995,
AUTHORIZED EXTENSION OF THE CMS PROGRAM CONTRACTS THROUGH JUNE 30, 1996 (ITEM #
9), EXTENSION OF THE CONTRACT WITH MEDICUS FOR THE PERINATAL CARE NETWORK
PROGRAM (ITEM # 6), AND EXTENSION OF THE CARE ACT CONTRACTS WITH THE CLINICS AND
WITH MEDICUS FOR CLINIC SERVICES FOR HIV+ PATIENTS (ITEM # 9);
3
<PAGE> 4
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
NOW, THEREFORE, the parties hereto do mutually agree to the terms and conditions
as attached and set forth in this Thirteenth Amendment to the agreement.
1. SECTION 5 CONTRACT TYPE AND PAYMENT is hereby amended in its entirety
as follows:
This Agreement shall be of two types, a cost reimbursement for all
capital equipment acquisitions and a fixed price with redetermination
for all other Contractor cost.
All capital equipment, equipment that has a value of $1000.00 or
greater and a life of three years or greater, shall be preapproved by
the County, shall be competitively acquired, and invoiced within 30
days after receipt and acceptance. All capital equipment shall be kept
in good working order and maintained by the Contractor. It shall be
properly tagged as County fixed assets, and returned or disposed of in
accordance with County fixed assets procedures. COUNTY shall reimburse
the CONTRACTOR the cost provided the item does not exceed the funds
available in the agreed upon capital acquisition amount for the period.
The agreed upon capital acquisition amount for the transition period
and first year through June 30, 1990 is $101,760.00. The agreed upon
capital acquisition amount for the period July 1, 1990 through June 30,
1991 is $15,000.00; the amount for July 1, 1991 through June 30, 1992
is $15,000.00; the amount for July 1, 1992 through June 30, 1993 is
$15,000.00; the amount for July 1, 1993 through June 30, 1994 is
$15,000; the amount for July 1, 1994 through June 30, 1995 is $15,000;
THE AMOUNT FOR JULY 1, 1995 THROUGH JUNE 30,1996 IS $15,000. The County
shall reimburse 100 percent of capital equipment invoices. All other
terms of Section B,
4
<PAGE> 5
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
Item 29, page B-7 of RFP 90231 remain in effect. For AB 75 and SB
12/612 Related Work, the COUNTY and CONTRACTOR agree to an additional
$25,000.00 for capital acquisition from April 1, 1990 through June 30,
1990.
All other cost such as labor, material, rents and leases, consultant
services, etc. for providing the specified services shall be reimbursed
at firm fixed price prorated for monthly payments. The firm fixed price
for the transition period is $210,040.00. This price is to be prorated
as follows: through May 31, 1989, $60,040.00 and through June 30, 1989,
$150,000.00. The firm fixed price with redetermination for the first
year is $2,661,600.00. This price is to be prorated at one twelfth of
the total for each of the twelve months from July 1 to June 30 in the
amount of $221,800.00 per month. The firm price for the work specified
in "Statement of Work for AB 75 and SB12/612 Related Programs"
(attached to the First Amendment) is $334,063.00 for the period March
1, 1990 through June 30, 1990. This price is prorated for each of the
four months from March 1, 1990 to June 30, 1990 in the amount of
$83,515.75 per month.
The firm fixed price for all specified services in Section 2, as
amended, for the first year is $2,661,600 plus $334,063 for a total of
$2,995,663. This amount is to be prorated as follows: July 1989 through
February 1990, $221,800 per month; March 1990 through June 1990,
$221,800 plus $83,515.75 for a total of $305,315.75 per month.
The firm fixed price for administration of the CMS Program for the
period July 1, 1990 through September 30, 1990 is $723,821 (25% of
$2,895,287); this price is to be prorated at one-third of the total for
each of the three months from July 1 to September 30, 1990, in the
amount of $241,274 per month.
5
<PAGE> 6
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
The firm fixed price for administration of the CMS Program for the
period October 1, 1990 through June 30, 1991 is $2,171,465 (the 9 month
portion of $2,895,287); this price is to be prorated for each of the 9
months from October 1 to June 30, in the amount of $241,274 per month;
except in the event the CMS Program is terminated prior to the end of
FY 1990-91, where upon 10 days written notification, the firm fixed
price will be prorated on a daily rate in the amount of $7906 through
June 30, 1991.
The firm fixed price for administration of the CMS Program for the
period July 1, 1991 through August 31, 1991 is $482,548 (the 2 month
portion of $2,895,287); this price is to be prorated for each of the 2
months from July 1, to August 31, 1991 in the amount of $241,274 per
month.
The firm fixed price for administration of the CMS Program for the
period September 1, 1991 through June 30, 1992 is $2,412,739 (the
10-month portion of $2,895,287); this price is to be prorated for each
of the ten months from September 1, 1991 to June 30, 1992 in the amount
of $241,274 per month. In the event the CMS Program is terminated prior
to the end of FY 1991-92, upon 10 days written notification by the
Director of Health Services, Contractor will be paid an additional
three months at $241,274 per month for closeout activities pending
further negotiations.
The firm fixed price for administration of the CMS Program for the
period July 1, 1992 through June 30, 1993 is $2,895,287; this price is
to be prorated for each of the twelve months in the amount of $241,274
per month.
The firm fixed price for administration of the CMS Program for the
period July 1, 1993 through June 30, 1994 is
6
<PAGE> 7
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
$2,895,287; this price is to be prorated for each of the twelve months
in the amount of $241,274 per month.
The firm fixed price for administration of the CMS Program for the
period July 1, 1994 through June 30, 1995 is $2,895,287; this price is
to be prorated for each of the twelve months in the amount of $241,274
per month.
THE FIRM FIXED PRICE FOR ADMINISTRATION OF THE CMS PROGRAM FOR THE
PERIOD JULY 1, 1995 THROUGH JUNE 30, 1996 IS $2,895,287; THIS PRICE IS
TO BE PRORATED FOR EACH OF THE TWELVE MONTHS IN THE AMOUNT OF $241,274
PER MONTH.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) is
$155,000 (25% of $620,000) for the period July 1, 1990 through
September, 1990. This price is prorated for each of the three months
from July 1, 1990 to September 30, 1990 in the amount of $51,666 per
month.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) is
$465,000 (9 months portion of $620,000) for the period October 1, 1990
through June 30, 1991. This price is prorated for each of the nine
months from October 1, 1990 to June 30, 1991 in the amount of $51,666
per month.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1991 through August 31, 1991 is $103,333 (2 months
portion of $620,000). This price is prorated for each of the two months
from July 1, 1991 to August 31, 1991 in the amount of $51,666 per
month.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the
7
<PAGE> 8
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
First Amendment) for the period September 1, 1991 through June 30, 1992
is $516,667 (the 10-month portion of $620,000). This price is prorated
for each of the ten months from September 1, 1991 to June 30, 1992 in
the amount of $51,666 per month. In the event the CMS Program is
terminated prior to the end of FY 1991-92, upon 10 days written
notification by the Director of Health Services, Contractor will be
paid an additional three months at $ 51,666 per month for closeout
activities pending further negotiations.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1992 through June 30, 1993 is $620,000. This price
is prorated for each of the twelve months in the amount of $51,666 per
month.
The firm price for the work specified in "Statement of Work for AB75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1993 through June 30, 1994 is $620,000. This price
is prorated for each of the twelve months in the amount of $51,666 per
month.
The firm price for the work specified in "Statement of Work for AB75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1994 through June 30, 1995 is $620,000. This price
is prorated for each of the twelve months in the amount of $51,666 per
month.
THE FIRM PRICE FOR THE WORK SPECIFIED IN "STATEMENT OF WORK FOR AB75
AND SB12/612 RELATED PROGRAMS" (ATTACHED TO THE FIRST AMENDMENT) FOR
THE PERIOD JULY 1, 1995 THROUGH JUNE 30, 1996 IS $620,000. THIS PRICE
IS PRORATED FOR EACH OF THE TWELVE MONTHS IN THE AMOUNT OF $51,666 PER
MONTH.
The firm fixed price for all specified services in Section 2, as
amended, for the three month period, July 1, 1990 to
8
<PAGE> 9
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
September 30, 1990 is $723,821 plus $155,000 for a total of $878,821.
This amount is to be prorated for each of the three months from July 1,
1990 to September 30, 1990 in the amount of $241,274 plus $51,666 for a
total of $292,940. These amounts are distinct and separate from any
amounts invoiced by the Contractor related to the Second Amendment
("Computer Software Use and Services"), the Fifth Amendment ("Perinatal
Provider Network claims packaging and billing services") or the
[Computer System] Personal Property Lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the nine month period, October 1, 1990 to June 30, 1991 is
$2,171,465 plus $465,000 for a total of $2,636,465. This amount is to
be prorated for each of the nine months from October 1, 1990 through
June 30, 1991 in the amount of $241,274 plus $51,666 for a total of
$292,940; except in the event the CMS Program is terminated prior to
the end of FY 1990-91, where upon 10 days written notification, the
firm fixed price will be prorated on a daily rate in the amount of
$7906 plus $51,666 per month through June 30, 1991. These amounts are
distinct and separate from any amounts invoiced by the Contractor
related to the Second Amendment ("Computer Software Use and Services"),
the Fifth Amendment ("Perinatal Provider Network Claims Packaging and
Billing Services"), or the [Computer System] Personal Property Lease
and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the two month period, July 1, 1991 to August 31, 1991 is
$482,548 plus $103,333 for a total of $585,881. This amount is to be
prorated for each of the two months from July 1, 1991 through August
31, 1991 in the amount of $241,274 plus $51,666 for a total of
$292,940.
9
<PAGE> 10
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
The firm fixed price for all specified services in Section 2, as
amended, for the ten month period, September 1, 1991 to June 30, 1992
is $2,412,739 plus $516,667 for a total of $2,929,406. This amount is
to be prorated for each of the ten months from September 1, 1991
through June 30, 1992 in the amount of $241,274 plus $51,666 for a
total of $292,940. In the event the CMS Program is terminated prior to
the end of FY 1991-92, upon 10 days written notification, the firm
fixed price of $292,940 per month will be prorated for an additional
three months pending further negotiations. These amounts are distinct
and separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network Claims Packaging and Billing
Services"), or the [Computer System] Personal Property Lease and Option
to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the two month period, July 1, 1991 to August 31, 1991 is
$482,548 plus $103,333 for a total of $585,881. This amount is to be
prorated for each of the two months from July 1, 1991 through August
31, 1991 in the amount of $241,274 plus $51,666 for a total of
$292,940.
The firm fixed price for all specified services in Section 2, as
amended, for the ten month period, September 1, 1991 to June 30, 1992
is $2,412,739 plus $516,667 for a total of $2,929,406. This amount is
to be prorated for each of the ten months from September 1, 1991
through June 30, 1992 in the amount of $241,274 plus $51,666 for a
total of $292,940. In the event the CMS Program is terminated prior to
the end of FY 1991-92, upon 10 days written notification, the firm
fixed price of $292,940 per month will be prorated for an additional
three months pending further negotiations. These amounts are distinct
and separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer
10
<PAGE> 11
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network Claims Packaging and Billing Services"), or the [Computer
System] Personal Property Lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the period July 1, 1992 through June 30, 1993 is
$2,895,287 plus $620,000 for a total of $3,515,287. This amount is to
be prorated for each of the twelve months in the amount of $241,274
plus $51,666 for a total of $292,940. These amounts are distinct and
separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network Claims Packaging and Billing
Services"), Section 12 "Medi-Cal Recovery Services, or the [Computer
System] Personal Property Lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the period July 1, 1993 through June 30, 1994 is
$2,895,287 plus $620,000 for a total of $3,515,287. This amount is to
be prorated for each of the twelve months in the amount of $241,274
plus $51,666 for a total of $292,940. These amounts are distinct and
separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network Claims Packaging and Billing
Services"), Section 12 "Medi-Cal Recovery Services", Section 13 "CARE
ACT/CMS Supplemental Pool Services", or the [Computer System] Personal
Property lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the period July 1, 1994 through June 30, 1995 is
$2,895,287 plus $620,000 for a total of $3,515,287. This amount is to
be prorated for each of the twelve months in the amount of $241,274
plus $51,666 for a total of $292,940. These amounts are distinct and
separate from any amounts
11
<PAGE> 12
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
invoiced by the Contractor related to the Second Amendment ("Computer
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network Claims Packaging and Billing Services"), Section 12 "Medi-Cal
Recovery Services", Section 13 "CARE ACT/CMS Supplemental Pool
Services", or the [Computer System] Personal Property lease and Option
to Buy.
THE FIRM FIXED PRICE FOR ALL SPECIFIED SERVICES IN SECTION 2, AS
AMENDED, FOR THE PERIOD JULY 1, 1995 THROUGH JUNE 30, 1996 IS
$2,895,287 PLUS $620,000 FOR A TOTAL OF $3,515,287. THIS AMOUNT IS TO
BE PRORATED FOR EACH OF THE TWELVE MONTHS IN THE AMOUNT OF $241,274
PLUS $51,666 FOR A TOTAL OF $292,940. THESE AMOUNTS ARE DISTINCT AND
SEPARATE FROM ANY AMOUNTS INVOICED BY THE CONTRACTOR RELATED TO THE
SECOND AMENDMENT ("COMPUTER SOFTWARE USE AND SERVICES"), THE FIFTH
AMENDMENT ("PERINATAL PROVIDER NETWORK CLAIMS PACKAGING AND BILLING
SERVICES"), SECTION 12 "MEDI-CAL RECOVERY SERVICES", SECTION 13 "CARE
ACT/CMS SUPPLEMENTAL POOL SERVICES", OR THE [COMPUTER SYSTEM] PERSONAL
PROPERTY LEASE AND OPTION TO BUY.
The price is subject to redetermination any time the number of full
time employees increases or decreases by three or more for any given
month. Prior approval of the County is required for changes that will
result in a redetermination of price. The above redetermination does
not apply to the claims processing requirement as MEDICUS warrants to
take whatever action necessary to insure claims are paid in a timely
manner during the first year of this Agreement at no additional cost to
the County.
Delete the 95 percent payment of services in Item 29. The County shall
reimburse the Contractor 100 percent of the monthly invoice providing
the service is satisfactory to the County and in no event reimburse
less than 95 percent.
12
<PAGE> 13
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
Amounts invoiced but not reimbursed shall be reimbursed within 90 days
or the County must provide within the 90 days a detailed reason why the
funds are being held and when payment can be expected. In no event
shall funds be withheld more than 180 days, except for those subject
Section B, Item 19. All other terms of Section B, Item 29, page B-7 of
RFP 90231 remain in effect.
2. SECTION 10 COMPUTER SOFTWARE USE AND SERVICES, 10.2 and 10.3 are
amended as to payment and to term, respectively, as follows:
10.2 Payment
The maximum costs to be expended by Contractor for the software and
related services is $453,586 for the period May 25, 1990 through June
30, 1991 (as detailed in Exhibit A); and $72,000 for the period July 1,
1991 through June 30, 1992 (as detailed in Exhibit "A-1"); and $100,000
for July 1, 1992 through June 30, 1993 (as detailed in Exhibit "A-2");
and $100,000 for July 1, 1993 through June 30, 1994 (as detailed in
Exhibit "A-3"); and $133,250 for July 1, 1994 through June 30, 1995 (
as detailed in Exhibit "A-4"); and $135,000 FOR JULY 1, 1995 THROUGH
JUNE 30, 1996 (AS DETAILED IN EXHIBIT "A-5"). County agrees to pay
Contractor, without deduction, reservation or offset, within 30 days of
receipt of an invoice from the Contractor. All such Contractor invoices
shall include receipts and documentation of receipt and acceptance of
components of the application software and other related expenses. The
payments shall be paid to Contractor at the address of Contractor set
forth herein or to such other place as Contractor may from time to time
designate in writing.
10.3 Term
13
<PAGE> 14
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
The term of Section 10 shall continue until June 30, 1996.
3. SECTION 11 SERVICES RELATED TO THE COUNTY OF SAN DIEGO PERINATAL
PROVIDER NETWORK, is amended as to scope, term, and payment; and is
amended in its entirety to read as follows:
11. PERINATAL CARE NETWORK/REFERRAL SERVICES
The County requires Contractor to provide perinatal access to Medi-Cal eligible
pregnant women residing in San Diego County, by referring to the Department of
Social Services (DSS) for Medi-Cal and then to a prenatal care provider. The
Contractor shall operate a county wide toll-free telephone line and will conduct
comprehensive screening and assessment for each pregnant woman who calls.
Education, assistance and referrals shall be provided based on identified needs
of the woman. Referrals to the Department of Social Services (Eligibility
Technicians-ETs), prenatal care providers, and other resources shall be based on
geographic location, primary language spoken, and medical risk factors. A
minimum of five thousand (5000) women shall be referred to the Department of
Social Services Income Maintenance Bureau for determination of eligibility and
Medi-Cal certification. A minimum of two thousand (2000) pregnant women shall be
assisted into prenatal care and followed to assure that they continue in care
and access other necessary resources. Fifteen hundred (1500) pregnant women with
psychosocial and medical high risk factors will be referred to Public Health
Nursing for further assessment and care coordination.
11.1 PCN REFERRAL SERVICE
11.1.1 Maintain a county wide, toll-free referral system for
low income, pregnant women that provides streamlined
linkage with Medi-Cal and perinatal providers.
14
<PAGE> 15
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
11.1.2 Refer five thousand (5,000) Medi-Cal eligible
pregnant women to DSS Income Maintenance Bureau for
Determination of Medi-Cal Eligibility and
Certification.
11.1.2.1 Conduct client education on Medi-Cal
requirements in order to facilitate the
application process.
11.1.3 Recruit and maintain a perinatal provider pool who
meet participation criteria: maintain a current PCN
provider listing and profile, on-line and hard copy.
11.1.4 Provide information to the provider pool regarding
PCN services which would benefit their clients.
11.1.5 Make provider referrals according to established
protocols.
11.1.5.1 Refer two thousand (2000) pregnant women
into prenatal care.
11.1.6 Conduct a comprehensive screening and assessment
process which addresses the needs of low income,
pregnant women.
11.1.6.1 Complete a PCN Client Intake Form on each
pregnant client.
11.1.7 Provide information and referrals to community
resources for health and social support services,
such as pregnancy testing, WIC, CHDP, CCS,
immunizations, shelters for
15
<PAGE> 16
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
battered women, substance abuse and smoking cessation
programs.
11.1.8 Identify and refer fifteen hundred (1500) pregnant
women who are at risk for poor birth outcomes due to
health and/or psychosocial factors to Public Health
Nursing for care coordination services.
11.1.9 Collaborate with PCN on clients who are assessed to
have substance use and family violence problems.
11.1.10 Conduct client trimester follow-up according to
approved protocol on clients who contact the Referral
Service and are referred to health and social
services.
11.1.10.1 Conduct postpartum follow-up on clients who
access the Referral Service to collect
birth outcome information and to link
clients to family planning, CHDP,
immunization and other needed services.
11.1.11 Provide monthly tickler packets for each outreach
contractor to facilitate trimester and postpartum
follow up.
11.1.11.1 Collaborate with PCN Outreach Coordinator
to monitor compliance with follow-up.
11.1.12 Provide on going training for Referral Service
personnel on all aspects of perinatal
16
<PAGE> 17
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
comprehensive screening, assessment and referral to
community resources.
11.2 PCN MANAGEMENT INFORMATION SYSTEM
11.2.1 Develop and maintain a Management Information System
that will document, define and evaluate the
activities of the program, client utilization and
provide descriptions of client population.
11.2.2 Work Collaboratively with PCN County's Administrator,
EDS staff and others as needed to develop optimal
database functions.
11.2.3 Under the direction of the County's Administrator,
establish, assign and monitor database security
levels to promote appropriate access and to maintain
database integrity and to assure confidentiality.
11.2.4 Serve as central repository for all hard copy data on
PCN clients, potential PCN clients and non-PCN
clients.
11.2.4.1 Data collection forms include:
- PCN Client Intake Forms
- PM-357 referral printouts
- CHDP questionnaires
- PHN forms
- Monthly Contractor reports
11.2.5 Compile, analyze and report on data from various PCN
programs.
17
<PAGE> 18
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
11.2.6 Provide training as needed for all personnel who
complete PCN Client Intake forms.
11.2.6.1 Prepare and maintain written instructions
on completion of the PCN Client Intake
Form.
11.2.7 Participate in developing and modifying data
collection and reporting forms for use in the PCN.
11.2.8 Prepare regular and adhoc reports on Perinatal
Services, outreach activities and other PCN
activities as agreed upon with PCN administration.
11.2.8.1 Use data from the PCN database to prepare
ad hoc reports and graphics on a wide range
of activities, clients, and trends.
11.2.8.2 Compile data from a variety of sources to
prepare reports on maternal and child
health issues.
11.2.8.3 Prepare the annual PCN report in compliance
with County guidelines.
11.2.9 Work with PCN administration and technical staff to
determine equipment and software needs, make
purchases, and address problems with computer
software and hardware.
11.2.9.1 Monitor data storage and capacity, and
related functions.
18
<PAGE> 19
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
11.2.9.2 Integrate components of the PCN (e.g., PHN,
CHDP, WIC, CCS, etc.) to expand access to
the PCN database and linkage to other
systems.
11.2.10 Represent the PCN at the CMS/PCN Information Systems
meetings and report appropriately.
11.2.11 In collaboration with the County's Community Health
Services, maintain a data collection system and
compile and analyze priority health status and
service indicators for infants, children, youth and
families residing in San Diego County in order to
maintain a data supplement for "Builder Healthier
Futures".
11.2.11.1 Develop a system for ongoing periodic data
collection and analysis.
11.2.11.2 Prepare reports and graphics of the health
indicators and prepare an annual update of
the "Building Healthier Futures" data
supplement.
11.2.12 Collaborate with the PCN Outreach Coordinator to
conduct MCH quarterly time studies to comply with
Federal regulations and mandates.
11.2.12.1 Prepare and distribute all materials for
the FFP time study and provide instruction
for PCN contract personnel.
19
<PAGE> 20
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
11.3 PCN QUALITY ASSURANCE PLAN
11.3.1 Implement a quality assurance system for internal
review and evaluation of Referral Service activities
and protocols, the perinatal provider pool, and the
PCN Management Information System.
11.3.2 Maintain standardized policies and procedures for
data collection, data entry, and data review.
11.3.3 Evidence of on going training for all personnel who
complete PCN Client Intake Form.
11.3.4 Evidence of monthly meetings with the CYF
Administrator to review Referral Service Activities,
Management Information System and quality improvement
issues.
Contractor agrees to abide by the terms of the State MCH
Agreement (attached as Exhibit I, and incorporated as part of
this section) in order to meet funding requirements for State
Maternal and Child Healthcare (MCH), Title V Block Grant
Agreement.
11.4 CONTRACT TYPE AND PAYMENT
This amendment shall be of three types, (1) cost reimbursement for all
system acquisition, development, and contract programming and capital
equipment acquisition costs;
20
<PAGE> 21
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
(2) fixed price for all other Contractor costs; and (3) effective July
1, 1992, fees collected from providers related to Section 11.1.2 (NINTH
AMENDMENT), "PCN Claims Packaging and Medi-Cal Billing Processing". The
total maximum cost to be expended by the Contractor relative to the
Fifth Amendment is $297,315 for the period November 1, 1990 through
June 30, 1991; $425,160 for the period July 1991 through June 30, 1992
(SIXTH AMENDMENT); $400,165 plus $198,220 (Patient and Provider
Referral Service) for a total of $598,385 for July 1, 1992 through June
30, 1993 (NINTH AND ELEVENTH AMENDMENTS); $371,465 plus $188,220
(Patient and Provider Referral Service) for a total of $559,685 for
July 1, 1993 through June 30, 1994 (TWELFTH AMENDMENT); $371,465 plus
$130,000 (Patient and Provider Referral Service) for a total of
$501,465 for July 1,1994 through June 30, 1995 (Thirteenth Amendment).
FOR FY 1995-96, THE TOTAL MAXIMUM COST TO BE SPENT BY CONTRACTOR
RELATIVE TO THIS AMENDMENT IS $525,000 FOR JULY 1, 1995 THROUGH JUNE
30, 1996. These payments are exclusive of any fees collected by
Contractor in accordance with Section 11.3.3 (NINTH AMENDMENT). The
Budget justification for this Amendment is attached as Exhibit 9 for FY
1990-91, Exhibit 9-A for FY 1991-92, as Exhibit 9-B and 9-C for FY
1992-93, as Exhibit 9-D for FY 1993-94, as Exhibit 9-E for FY 1994-95,
AND AS EXHIBIT 9-F FOR FY 1995-96, and is hereby incorporated into this
Amendment.
11.4.1 COST REIMBURSEMENT
The maximum costs to be expended by Contractor for system acquisition,
development, and contract programming and capital equipment acquisition
is $80,000 for the period November 1, 1990 through June 30, 1991; and
$80,000 for the period July 1, 1991 through June 30, 1992; and $35,000
plus
21
<PAGE> 22
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
$10,000 (Patient and Provider Referral Service) for a total of $45,000
for the period July 1, 1992 through June 30, 1993; $10,000 for the
period July 1, 1993 through June 30, 1994; $10,000 for the period July
1, 1994 through June 30, 1995; AND $30,000 FOR THE PERIOD JULY 1, 1995
THROUGH JUNE 30, 1996. Capital equipment is defined as equipment which
has a value of $1000.00 or greater and a life of three years or
greater. All capital equipment shall be kept in good working order and
shall be properly tagged as County fixed assets, and returned or
disposed of in accordance with County fixed asset procedures. All costs
incurred under this section shall be prior approved by the County and
shall be invoiced within 30 days of receipt and acceptance.
11.4.2 FIXED PRICE
All other cost including labor, materials, supplies, rents and leases,
etc. for providing the specified services shall be reimbursed at a firm
fixed price prorated for monthly payments. The firm fixed price for the
work specified in Section 11.1 OF THE FIFTH AMENDMENT is $217,315 for
the period November 1, 1990 through June 30, 1991; $345,160 for the
period July 1, 1991 through June 30, 1992 (SECTION 11.1, SIXTH
AMENDMENT); $365,165 plus $188,220 (Patient and Provider Referral
Service) for a total of $553,385 for the period July 1, 1992 through
June 30, 1993 (SECTION 11.1, NINTH AND ELEVENTH AMENDMENTS); $361,465
plus $188,220 (Patient and Provider Referral Service) for a total of
$549,685 for the period July 1, 1993 through June 30, 1994 (SECTION
11.1, TWELFTH AMENDMENT); $361,465 plus $130,000 (Patient and Provider
Referral Service) for a total of $491,465 for the period July 1, 1994
through June 30, 1995 (SECTION 11.1, THIRTEENTH AMENDMENT); AND
$495,000 FOR THE PERIOD JULY 1, 1995 THROUGH JUNE 30, 1996 (FOURTEENTH
AMENDMENT).
22
<PAGE> 23
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
This price is prorated for each of the eight months from November 1,
1990 to June 30, 1991 in the amount of $27,164.37 for each month;
prorated for each of the twelve months from July 1, 1991 to June 30,
1992 in the amount of $28,763 for each month; prorated for each of the
eight months from July 1, 1992 through February 28, 1993 in the amount
of $30,430 plus $11,518 (Patient and Provider Referral Service) for a
total of $41,948 for each month; prorated for each of the four months
from March 1, 1993 to June 30, 1993 in the amount of $30,430 plus
$24,018 (Patient and Provider Referral Service) for a total of $54,448
for each month; prorated for each of the twelve months from July 1,
1993 through June 30, 1994 in the amount of $30,122 plus $15,685
(Patient and Provider Referral Service) for a total of $45,807 for each
month; prorated for each of the twelve months from July 1, 1994 through
June 30, 1995 in the amount of $30,122 plus 10,833 (Patient and
Provider Referral Service) for a total of $40,955 for each month; AND
PRORATED FOR EACH OF THE TWELVE MONTHS FROM JULY 1, 1995 THROUGH JUNE
30, 1996 IN THE AMOUNT OF $41,250 FOR EACH MONTH.
11.5 TERM
The Term of this Section is from November 1, 1990 until June 30, 1996.
4. SECTION 12 MEDI-CAL RECOVERY SERVICES, 12.2., is amended as to payment
as follows:
12.2 CONTRACT TYPE AND PAYMENT
The fee payable to the Contractor with respect to Medi-Cal payments
received by County as a result of Contractor's scope of work delineated
in Section 12.1, "Medi-Cal Recovery Services", for all but inpatient
hospital services, shall be
23
<PAGE> 24
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
a percentage of the recoveries according to the following schedule:
- For health care services rendered during Fiscal Year 1991/92
(July 1, 1991 to June 30, 1992), 25% of recoveries.
- For health care services rendered during Fiscal Year 1992/93
(July 1, 1992 to June 30, 1993), 15% of recoveries, with a
guaranteed first dollar from these recoveries up to $149,600
to cover staff and system start-up costs for FY 92-93. This
amount will be part of the 15% and will be payable during FY
1993-94; however, if recoveries are less than $149,600, County
will not be responsible for supplementing this amount and
Contractor will recover only up to actual dollars recovered.
For health care services rendered during FY 92-93, 25% of
recoveries, for recoveries received during FY 94-95, AND FY
95-96.
- For health care services rendered during Fiscal Year 1993-94
(July 1, 1993 to June 30, 1994), 15% of recoveries received
during FY 93-94; and 75% of the first $100,000 recovered and
25% of remaining recoveries, for recoveries received during FY
94-95; AND 25% OF RECOVERIES RECEIVED DURING FY 95-96.
- For health care services rendered during Fiscal Year 94-95
(July 1, 1994 to June 30, 1995), 25% of recoveries received
during FY 94-95 AND FY 95-96.
- For health care services rendered during Fiscal Year 95-96
(july 1, 1995 to june 30, 1996), 25% OF RECOVERIES RECEIVED
DURING FY 95-96.
24
<PAGE> 25
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
Payment of Contractor's fees shall be made to Contractor directly from
the Medi-Cal recovery account. On a MONTHLY basis, Contractor shall
submit an invoice to the Department of Health Services, providing
documentation of funds recovered during the period and Contractor's fee
amount for the period. Upon approval of the invoice by the Contract
Administrator, Contractor will transfer amount from the Medi-Cal
recovery account.
In the event the Contractor bills Medi-Cal for inpatient services, and
the recovery is provided directly to a hospital, the Contractor and
hospital(s), with County concurrence, will determine the applicable
fee.
5. SECTION 13 CARE ACT/CMS SUPPLEMENTAL POOL SERVICES, 13.2 and 13.3 is
amended as to payment and term; and is hereby amended to read as
follows:
13.2 Contract Type and Payments
Costs for services provided under Section 13 shall be reimbursed at a
firm fixed price prorated for monthly payments. The firm fixed price
for the period July 1, 1992 through June 30, 1993 is $45,323; for the
period July 1, 1993 through June 30, 1994, the firm fixed price is
$57,356; for the period July 1, 1994 through June 30, 1995, the firm
fixed price is $81,676; AND FOR THE PERIOD JULY 1, 1995 THROUGH MARCH
31, 1996, THE FIRM FIXED PRICE IS $72,219. This price is to be prorated
at one-twelfth of the total for each of the twelve months from July 1,
1992 to June 30, 1993 in the amount of $3,776.92 per month; prorated
for each of the twelve months from July 1, 1993 through June 30, 1994
in the amount of $4,779.67 per month; prorated for each of the twelve
months from July 1, 1994 through June 30, 1995 in the
25
<PAGE> 26
FOURTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
amount of $6,806 per month; AND PRORATED FOR EACH OF THE NINE MONTHS
FROM JULY 1, 1995 THROUGH MARCH 31, 1996 IN THE AMOUNT OF $8,024 PER
MONTH.
13.3 TERM
The term of Section 13 shall continue through June 30, 1996.
6. The changes specified above constitute the only amendments to the
Agreement dated May 30, 1989, as amended by the First Amendment dated
April 9, 1990, the Second Amendment dated May 30, 1990, the Third
Amendment dated July 12, 1990, the Fourth Amendment dated September 17,
1990, the Fifth Amendment dated October 31, 1990, the Sixth Amendment
dated March 19, 1991, the Seventh Amendment dated June 26, 1991, the
Eighth Amendment dated August 30, 1991, the Ninth Amendment dated June
22, 1992, the Tenth Amendment dated October 6, 1992, the Eleventh
Amendment dated April 7, 1993, the Twelfth Amendment dated July 7,
1993; AND THE THIRTEENTH AMENDMENT DATED JULY 5, 1994. All other terms
and conditions of the Agreement, as previously amended remain unchanged
and in full force and effect.
26
<PAGE> 27
CONT.
EXHIBIT 10.2(a)(6)
COUNTY OF SAN DIEGO
DEPARTMENT OF PURCHASING AND CONTRACTING
SERVICE CONTRACT AMENDMENT AUTHORIZATION
AND INDEPENDENT CONTRACTOR AGREEMENT AMENDMENT
DATE July 31, 1995 COUNTY CONTRACT NO. 41217
AMENDMENT NO. 14
To Medicus Systems Corporation, Inc. Contractor. Pursuant to the contract
changes clause, you are directed to make the changes described herein to the
Contract or do the following described work not included in the previous agreed
upon Scope of Work.
Title of Contract or Project Administration of County Medical
----------------------------------------------------
Services (CMS) Program
- - --------------------------------------------------------------------------------
Description of CONTRACT Change and\or Work To Be Done:
Day-to-day administration of the CMS Program as stated on the attached
"Fourteenth Amendment to the Agreement to Provide Administration of the County
Medical Services (CMS) Program."
- - --------------------------------------------------------------------------------
We, the undersigned Contractor, have
given careful consideration to the THIS AMENDMENT IS NOT EFFECTIVE UNTIL
change proposed and hereby agree, if APPROVED BY THE DIRECTOR OF
this proposed change is approved, that PURCHASING AND CONTRACTING.
we will provide all equipment, furnish
all materials, except as may otherwise
be noted above, and perform all services DEPARTMENT REVIEW AND RECOMMENDED
necessary for the work specified herein, APPROVAL:
and will accept as full payment the
price of: $ dollars and agree By: /s/
that the contract time for completion be ----------------------------------
(unadjusted) (adjusted) by calender Date: 8/1/95
days (increase) (decreased). Revised ----------
CONTRACT Total Price is .
By: /s/ APPROVED,
----------------------------------- DIRECTOR OF PURCHASING AND CONTRACTING
Title: Vice President, Medicus Systems
-------------------------------- By: /s/
Authorized Person -----------------------------------
Date: 8-3-95
----------
<PAGE> 1
EXHIBIT 10.2(a)(7)
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
COUNTY OF SAN DIEGO CONTRACT NUMBER 41217
THIS FIFTEENTH AMENDMENT is to the Agreement made between the County of San
Diego (hereinafter referred to as "County") and Medicus Systems Corporation
located at 8840 Complex Drive, San Diego, CA 92123 (hereinafter referred to as
"Contractor") for the administration of the County of San Diego, County Medical
Services Program.
WITNESSETH
WHEREAS, Contractor possesses certain skills, experience, education and
competency to perform certain special services, and County desires to engage
Contractor for such special services upon the terms provided; and
WHEREAS, the County Director of Purchasing and Contracting, pursuant to action
of the Board of Supervisors, Item 22 on February 21, 1989, awarded a contract to
the Contractor to provide administration of the County Medical Services (CMS)
Program, for an initial term through June 30, 1992 with an option to extend for
two additional two-year terms; and
WHEREAS, the County, by action of the Board of Supervisors, Item 56 on February
13, 1990, authorized the Director of Purchasing and Contracting to approve,
authorize, and execute a sole source amendment to the County Contract with
Medicus Systems Corporation for day-to-day operations and claims payment related
to AB-75 and SB12/612; and
WHEREAS, the County, by action of the Board of Supervisors, Item 12 on June 12,
1990, authorized the extension of CMS Program contracts for the three-month
period, July 1, 1990 through September 30, 1990; and
WHEREAS, the County by action of the Board of Supervisors, Item 5 on September
12, 1990, authorized the extension of CMS Program contracts for the 9 month
period, October 1, 1990 through June 30, 1991; and
<PAGE> 2
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
WHEREAS, the County by action of the Board of Supervisors, Item 39A on February
26, 1991, directed the Chief Administrative Officer to terminate the CMS Program
by close of business March 5, 1991, effective March 16, 1991, unless adequate
funds were made available from the State; and
WHEREAS, the County by action of the Board of Supervisors, Item 31 on March 5,
1991, set aside action taken on February 26, 1991 to terminate the CMS Program
by March 5, 1991, and instructed the Chief Administrative Officer to send out
notices to terminate the CMS contracts by the end of the day on March 8, 1991,
effective March 19, 1991, unless the State provided the County with binding
assurances that it would provide the County with revenues in the amount of at
least $16,000,000 to pay for the CMS program for the remaining of FY 90-91; and
WHEREAS, the Superior Court in San Diego County on March 18, 1991 ordered a stay
of the Notices of Termination; and
WHEREAS, the State reduced its allocation to the San Diego County CMS Program
for Fiscal Years 1990-91 and 1991-92; and
WHEREAS, a variety of functions are required to be performed by the CONTRACTOR
to close out the CMS Program; and
WHEREAS, the County by action of the Board of Supervisors, Item 6 on June 24,
1991, authorized the extension of CMS Program contracts for the two month
period, July 1, 1991 through August 31, 1991; and
WHEREAS, the County by action of the Board of Supervisors, Item 39 on July 23,
1991 authorized extension of CMS Program contracts through June 30, 1992; and
2
<PAGE> 3
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
WHEREAS, the County by action of the Board of Supervisors, Item 38 on June 2,
1992 authorized extension of CMS Program contracts through June 30, 1993; and
WHEREAS, the County by action of the Board of Supervisors, Item
2, on October 6, 1992, authorized provision of clinic services to HIV+ patients
through CMS community clinics; and
WHEREAS, the County by action of the Board of Supervisors, Minute Order #6 on
February 2, 1993, authorized expansion of the Perinatal Care Network (PCN)
Referral Services; and
WHEREAS, the County by action of the Board of Supervisors on June 29, 1993,
authorized extension of CMS Program contracts through June 30, 1994 (Items #63
and #17), as well as extension of the Perinatal Care Network (Items #17 and
#13), and clinic services for HIV+ patients (Item #20);
WHEREAS, the County by action of the Board of Supervisors on June 21, 1994,
authorized extension of the CMS Program contracts through June 30, 1995 (Item
#28), extension of the contract with Medicus for the Perinatal Care Network
Program (Item #17), and extension of the CARE ACT contracts with the clinics and
with Medicus for clinic services for HIV+ patients (Item #34);
WHEREAS, the County by action of the Board of Supervisors on June 27, 1995,
authorized extension of the CMS Program contracts through June 30, 1996 (Item #
9), extension of the contract with Medicus for the Perinatal Care Network
Program (Item # 6), and extension of the CARE ACT contracts with the clinics and
with Medicus for clinic services for HIV+ patients (Item # 9);
WHEREAS, THE COUNTY BY ACTION OF THE BOARD OF SUPERVISORS ON MARCH 19, 1996,
AUTHORIZED EXTENSION OF THE CARE ACT CONTRACTS WITH THE
3
<PAGE> 4
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
CLINICS AND WITH MEDICUS FOR CLINIC SERVICES FOR HIV+ PATIENTS (ITEM # 20);
NOW, THEREFORE, the parties hereto do mutually agree to the terms and conditions
as attached and set forth in this Thirteenth Amendment to the agreement.
1. SECTION 5 CONTRACT TYPE AND PAYMENT is hereby amended in its entirety
as follows:
This Agreement shall be of two types, a cost reimbursement for all
capital equipment acquisitions and a fixed price with redetermination
for all other Contractor cost.
All capital equipment, equipment that has a value of $1000.00 or
greater and a life of three years or greater, shall be preapproved by
the County, shall be competitively acquired, and invoiced within 30
days after receipt and acceptance. All capital equipment shall be kept
in good working order and maintained by the Contractor. It shall be
properly tagged as County fixed assets, and returned or disposed of in
accordance with County fixed assets procedures. COUNTY shall reimburse
the CONTRACTOR the cost provided the item does not exceed the funds
available in the agreed upon capital acquisition amount for the period.
The agreed upon capital acquisition amount for the transition period
and first year through June 30, 1990 is $101,760.00. The agreed upon
capital acquisition amount for the period July 1, 1990 through June 30,
1991 is $15,000.00; the amount for July 1, 1991 through June 30, 1992
is $15,000.00; the amount for July 1, 1992 through June 30, 1993 is
$15,000.00; the amount for July 1, 1993 through June 30, 1994 is
$15,000; the amount for July 1, 1994 through June 30, 1995 is $15,000;
the amount for July 1, 1995 through June 30,1996 is $15,000; AND THE
AMOUNT FOR JULY 1, 1996 THROUGH
4
<PAGE> 5
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
DECEMBER 31, 1996 IS $7,500. The County shall reimburse 100 percent of
capital equipment invoices. All other terms of Section B, Item 29, page
B-7 of RFP 90231 remain in effect. For AB 75 and SB 12/612 Related
Work, the COUNTY and CONTRACTOR agree to an additional $25,000.00 for
capital acquisition from April 1, 1990 through June 30, 1990.
All other cost such as labor, material, rents and leases, consultant
services, etc. for providing the specified services shall be reimbursed
at firm fixed price prorated for monthly payments. The firm fixed price
for the transition period is $210,040.00. This price is to be prorated
as follows: through May 31, 1989, $60,040.00 and through June 30, 1989,
$150,000.00. The firm fixed price with redetermination for the first
year is $2,661,600.00. This price is to be prorated at one twelfth of
the total for each of the twelve months from July 1 to June 30 in the
amount of $221,800.00 per month. The firm price for the work specified
in "Statement of Work for AB 75 and SB12/612 Related Programs"
(attached to the First Amendment) is $334,063.00 for the period March
1, 1990 through June 30, 1990. This price is prorated for each of the
four months from March 1, 1990 to June 30, 1990 in the amount of
$83,515.75 per month.
The firm fixed price for all specified services in Section 2, as
amended, for the first year is $2,661,600 plus $334,063 for a total of
$2,995,663. This amount is to be prorated as follows: July 1989 through
February 1990, $221,800 per month; March 1990 through June 1990,
$221,800 plus $83,515.75 for a total of $305,315.75 per month.
The firm fixed price for administration of the CMS Program for the
period July 1, 1990 through September 30, 1990 is $723,821 (25% of
$2,895,287); this price is to be prorated at one-third of the total for
each of the three months from July 1 to September 30, 1990, in the
amount of $241,274 per month.
5
<PAGE> 6
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
The firm fixed price for administration of the CMS Program for the
period October 1, 1990 through June 30, 1991 is $2,171,465 (the 9 month
portion of $2,895,287); this price is to be prorated for each of the 9
months from October 1 to June 30, in the amount of $241,274 per month;
except in the event the CMS Program is terminated prior to the end of
FY 1990-91, where upon 10 days written notification, the firm fixed
price will be prorated on a daily rate in the amount of $7906 through
June 30, 1991.
The firm fixed price for administration of the CMS Program for the
period July 1, 1991 through August 31, 1991 is $482,548 (the 2 month
portion of $2,895,287); this price is to be prorated for each of the 2
months from July 1, to August 31, 1991 in the amount of $241,274 per
month.
The firm fixed price for administration of the CMS Program for the
period September 1, 1991 through June 30, 1992 is $2,412,739 (the
10-month portion of $2,895,287); this price is to be prorated for each
of the ten months from September 1, 1991 to June 30, 1992 in the amount
of $241,274 per month. In the event the CMS Program is terminated prior
to the end of FY 1991-92, upon 10 days written notification by the
Director of Health Services, Contractor will be paid an additional
three months at $241,274 per month for closeout activities pending
further negotiations.
The firm fixed price for administration of the CMS Program for the
period July 1, 1992 through June 30, 1993 is $2,895,287; this price is
to be prorated for each of the twelve months in the amount of $241,274
per month.
The firm fixed price for administration of the CMS Program for the
period July 1, 1993 through June 30, 1994 is
6
<PAGE> 7
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
$2,895,287; this price is to be prorated for each of the twelve months
in the amount of $241,274 per month.
The firm fixed price for administration of the CMS Program for the
period July 1, 1994 through June 30, 1995 is $2,895,287; this price is
to be prorated for each of the twelve months in the amount of $241,274
per month.
The firm fixed price for administration of the CMS Program for the
period July 1, 1995 through June 30, 1996 is $2,895,287; this price is
to be prorated for each of the twelve months in the amount of $241,274
per month.
THE FIRM FIXED PRICE FOR ADMINISTRATION OF THE CMS PROGRAM FOR THE
PERIOD JULY 1, 1996 THROUGH DECEMBER 31, 1996 IS $1,447,644; THIS PRICE
IS TO BE PRORATED FOR EACH OF THE SIX MONTHS IN THE AMOUNT OF $241,274
PER MONTH.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) is
$155,000 (25% of $620,000) for the period July 1, 1990 through
September, 1990. This price is prorated for each of the three months
from July 1, 1990 to September 30, 1990 in the amount of $51,666 per
month.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) is
$465,000 (9 months portion of $620,000) for the period October 1, 1990
through June 30, 1991. This price is prorated for each of the nine
months from October 1, 1990 to June 30, 1991 in the amount of $51,666
per month.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1991 through August 31, 1991 is $103,333 (2 months
portion of $620,000). This
7
<PAGE> 8
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
price is prorated for each of the two months from July 1, 1991 to
August 31, 1991 in the amount of $51,666 per month.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period September 1, 1991 through June 30, 1992 is $516,667 (the
10-month portion of $620,000). This price is prorated for each of the
ten months from September 1, 1991 to June 30, 1992 in the amount of
$51,666 per month. In the event the CMS Program is terminated prior to
the end of FY 1991-92, upon 10 days written notification by the
Director of Health Services, Contractor will be paid an additional
three months at $ 51,666 per month for closeout activities pending
further negotiations.
The firm price for the work specified in "Statement of Work for AB 75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1992 through June 30, 1993 is $620,000. This price
is prorated for each of the twelve months in the amount of $51,666 per
month.
The firm price for the work specified in "Statement of Work for AB75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1993 through June 30, 1994 is $620,000. This price
is prorated for each of the twelve months in the amount of $51,666 per
month.
The firm price for the work specified in "Statement of Work for AB75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1994 through June 30, 1995 is $620,000. This price
is prorated for each of the twelve months in the amount of $51,666 per
month.
The firm price for the work specified in "Statement of Work for AB75
and SB12/612 Related Programs" (attached to the First Amendment) for
the period July 1, 1995 through June 30,
8
<PAGE> 9
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
1996 is $620,000. This price is prorated for each of the twelve months
in the amount of $51,666 per month.
THE FIRM PRICE FOR THE WORK SPECIFIED IN "STATEMENT OF WORK FOR AB75
AND SB12/612 RELATED PROGRAMS" (ATTACHED TO THE FIRST AMENDMENT) FOR
THE PERIOD JULY 1, 1996 THROUGH DECEMBER 31, 1996 IS $309,996. THIS
PRICE IS PRORATED FOR EACH OF THE SIX MONTHS IN THE AMOUNT OF $51,666
PER MONTH.
The firm fixed price for all specified services in Section 2, as
amended, for the three month period, July 1, 1990 to September 30, 1990
is $723,821 plus $155,000 for a total of $878,821. This amount is to be
prorated for each of the three months from July 1, 1990 to September
30, 1990 in the amount of $241,274 plus $51,666 for a total of
$292,940. These amounts are distinct and separate from any amounts
invoiced by the Contractor related to the Second Amendment ("Computer
Software Use and Services"), the Fifth Amendment ("Perinatal Provider
Network claims packaging and billing services") or the [Computer
System] Personal Property Lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the nine month period, October 1, 1990 to June 30, 1991 is
$2,171,465 plus $465,000 for a total of $2,636,465. This amount is to
be prorated for each of the nine months from October 1, 1990 through
June 30, 1991 in the amount of $241,274 plus $51,666 for a total of
$292,940; except in the event the CMS Program is terminated prior to
the end of FY 1990-91, where upon 10 days written notification, the
firm fixed price will be prorated on a daily rate in the amount of
$7906 plus $51,666 per month through June 30, 1991. These amounts are
distinct and separate from any amounts invoiced by the Contractor
related to the Second Amendment ("Computer Software Use and Services"),
the Fifth Amendment
9
<PAGE> 10
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
("Perinatal Provider Network Claims Packaging and Billing Services"),
or the [Computer System] Personal Property Lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the two month period, July 1, 1991 to August 31, 1991 is
$482,548 plus $103,333 for a total of $585,881. This amount is to be
prorated for each of the two months from July 1, 1991 through August
31, 1991 in the amount of $241,274 plus $51,666 for a total of
$292,940.
The firm fixed price for all specified services in Section 2, as
amended, for the ten month period, September 1, 1991 to June 30, 1992
is $2,412,739 plus $516,667 for a total of $2,929,406. This amount is
to be prorated for each of the ten months from September 1, 1991
through June 30, 1992 in the amount of $241,274 plus $51,666 for a
total of $292,940. In the event the CMS Program is terminated prior to
the end of FY 1991-92, upon 10 days written notification, the firm
fixed price of $292,940 per month will be prorated for an additional
three months pending further negotiations. These amounts are distinct
and separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network Claims Packaging and Billing
Services"), or the [Computer System] Personal Property Lease and Option
to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the two month period, July 1, 1991 to August 31, 1991 is
$482,548 plus $103,333 for a total of $585,881. This amount is to be
prorated for each of the two months from July 1, 1991 through August
31, 1991 in the amount of $241,274 plus $51,666 for a total of
$292,940.
10
<PAGE> 11
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
The firm fixed price for all specified services in Section 2, as
amended, for the ten month period, September 1, 1991 to June 30, 1992
is $2,412,739 plus $516,667 for a total of $2,929,406. This amount is
to be prorated for each of the ten months from September 1, 1991
through June 30, 1992 in the amount of $241,274 plus $51,666 for a
total of $292,940. In the event the CMS Program is terminated prior to
the end of FY 1991-92, upon 10 days written notification, the firm
fixed price of $292,940 per month will be prorated for an additional
three months pending further negotiations. These amounts are distinct
and separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network Claims Packaging and Billing
Services"), or the [Computer System] Personal Property Lease and Option
to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the period July 1, 1992 through June 30, 1993 is
$2,895,287 plus $620,000 for a total of $3,515,287. This amount is to
be prorated for each of the twelve months in the amount of $241,274
plus $51,666 for a total of $292,940. These amounts are distinct and
separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network Claims Packaging and Billing
Services"), Section 12 "Medi-Cal Recovery Services, or the [Computer
System] Personal Property Lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the period July 1, 1993 through June 30, 1994 is
$2,895,287 plus $620,000 for a total of $3,515,287. This amount is to
be prorated for each of the twelve months in the amount of $241,274
plus $51,666 for a total of $292,940. These amounts are distinct and
separate from any amounts invoiced by the Contractor related to the
Second Amendment
11
<PAGE> 12
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
("Computer Software Use and Services"), the Fifth Amendment ("Perinatal
Provider Network Claims Packaging and Billing Services"), Section 12
"Medi-Cal Recovery Services", Section 13 "CARE ACT/CMS Supplemental
Pool Services", or the [Computer System] Personal Property lease and
Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the period July 1, 1994 through June 30, 1995 is
$2,895,287 plus $620,000 for a total of $3,515,287. This amount is to
be prorated for each of the twelve months in the amount of $241,274
plus $51,666 for a total of $292,940. These amounts are distinct and
separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network Claims Packaging and Billing
Services"), Section 12 "Medi-Cal Recovery Services", Section 13 "CARE
ACT/CMS Supplemental Pool Services", or the [Computer System] Personal
Property lease and Option to Buy.
The firm fixed price for all specified services in Section 2, as
amended, for the period July 1, 1995 through June 30, 1996 is
$2,895,287 plus $620,000 for a total of $3,515,287. This amount is to
be prorated for each of the twelve months in the amount of $241,274
plus $51,666 for a total of $292,940. These amounts are distinct and
separate from any amounts invoiced by the Contractor related to the
Second Amendment ("Computer Software Use and Services"), the Fifth
Amendment ("Perinatal Provider Network Claims Packaging and Billing
Services"), Section 12 "Medi-Cal Recovery Services", Section 13 "CARE
ACT/CMS Supplemental Pool Services", or the [Computer System] Personal
Property lease and Option to Buy.
THE FIRM FIXED PRICE FOR ALL SPECIFIED SERVICES IN SECTION 2, AS
AMENDED, FOR THE PERIOD JULY 1, 1996 THROUGH DECEMBER 31, 1996 IS
$1,447,644 PLUS $309,996 FOR A TOTAL OF $1,757,640. THIS AMOUNT IS TO
BE PRORATED FOR EACH OF THE SIX MONTHS IN
12
<PAGE> 13
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
THE AMOUNT OF $241,274 PLUS $51,666 FOR A TOTAL OF $292,940.
THESE AMOUNTS ARE DISTINCT AND SEPARATE FROM ANY AMOUNTS INVOICED BY
THE CONTRACTOR RELATED TO THE SECOND AMENDMENT ("COMPUTER SOFTWARE USE
AND SERVICES"), THE FIFTH AMENDMENT ("PERINATAL PROVIDER NETWORK CLAIMS
PACKAGING AND BILLING SERVICES"), SECTION 12 "MEDI-CAL RECOVERY
SERVICES", SECTION 13 "CARE ACT/CMS SUPPLEMENTAL POOL SERVICES", OR THE
[COMPUTER SYSTEM] PERSONAL PROPERTY LEASE AND OPTION TO BUY.
The price is subject to redetermination any time the number of full
time employees increases or decreases by three or more for any given
month. Prior approval of the County is required for changes that will
result in a redetermination of price. The above redetermination does
not apply to the claims processing requirement as MEDICUS warrants to
take whatever action necessary to insure claims are paid in a timely
manner during the first year of this Agreement at no additional cost to
the County.
Delete the 95 percent payment of services in Item 29. The County shall
reimburse the Contractor 100 percent of the monthly invoice providing
the service is satisfactory to the County and in no event reimburse
less than 95 percent.
Amounts invoiced but not reimbursed shall be reimbursed within 90 days
or the County must provide within the 90 days a detailed reason why the
funds are being held and when payment can be expected. In no event
shall funds be withheld more than 180 days, except for those subject
Section B, Item 19. All other terms of Section B, Item 29, page B-7 of
RFP 90231 remain in effect.
2. SECTION 10 COMPUTER SOFTWARE USE AND SERVICES, 10.2 and 10.3 are
amended as to payment and to term, respectively, as follows:
13
<PAGE> 14
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
10.2 Payment
The maximum costs to be expended by Contractor for the software and
related services is $453,586 for the period May 25, 1990 through June
30, 1991 (as detailed in Exhibit A); and $72,000 for the period July 1,
1991 through June 30, 1992 (as detailed in Exhibit "A-1"); and $100,000
for July 1, 1992 through June 30, 1993 (as detailed in Exhibit "A-2");
and $100,000 for July 1, 1993 through June 30, 1994 (as detailed in
Exhibit "A-3"); and $133,250 for July 1, 1994 through June 30, 1995 (as
detailed in Exhibit "A-4"); $135,000 for July 1, 1995 through June
30, 1996 (as detailed in Exhibit "A-5"); AND $64,000 FOR JULY 1, 1996
THROUGH DECEMBER 31, 1996 (AS DETAILED IN EXHIBIT "A-6"). County agrees
to pay Contractor, without deduction, reservation or offset, within 30
days of receipt of an invoice from the Contractor. All such Contractor
invoices shall include receipts and documentation of receipt and
acceptance of components of the application software and other related
expenses. The payments shall be paid to Contractor at the address of
Contractor set forth herein or to such other place as Contractor may
from time to time designate in writing.
10.3 Term
The term of Section 10 shall continue until December 31, 1996.
3. SECTION 12 MEDI-CAL RECOVERY SERVICES, 12.2., is amended as to payment
as follows:
12.2 CONTRACT TYPE AND PAYMENT
The fee payable to the Contractor with respect to Medi-Cal payments
received by County as a result of Contractor's scope
14
<PAGE> 15
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
of work delineated in Section 12.1, "Medi-Cal Recovery Services", for
all but inpatient hospital services, shall be a percentage of the
recoveries according to the following schedule:
- For health care services rendered during Fiscal Year 1991/92
(July 1, 1991 to June 30, 1992), 25% of recoveries.
- For health care services rendered during Fiscal Year 1992/93
(July 1, 1992 to June 30, 1993), 15% of recoveries, with a
guaranteed first dollar from these recoveries up to $149,600
to cover staff and system start-up costs for FY 92-93. This
amount will be part of the 15% and will be payable during FY
1993-94; however, if recoveries are less than $149,600, County
will not be responsible for supplementing this amount and
Contractor will recover only up to actual dollars recovered.
For health care services rendered during FY 92-93, 25% of
recoveries, for recoveries received during FY 94-95, FY 95-96
and FY 96-97.
- For health care services rendered during Fiscal Year 1993-94
(July 1, 1993 to June 30, 1994), 15% of recoveries received
during FY 93-94; and 75% of the first $100,000 recovered and
25% of remaining recoveries, for recoveries received during FY
94-95; 25% of recoveries received during FY 95-96, and FY
96-97.
- For health care services rendered during Fiscal Year 94-95
(July 1, 1994 to June 30, 1995), 25% of recoveries received
during FY 94-95, FY 95-96, and FY 96-97.
15
<PAGE> 16
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
- For health care services rendered during Fiscal Year 95-96
(July 1, 1995 to June 30, 1996), 25% of recoveries received
during FY 95-96 and FY 96-97.
- FOR HEALTH CARE SERVICES RENDERED DURING FISCAL YEAR 96-97
(JULY 1, 1996 TO DECEMBER 31, 1996), 25% OF RECOVERIES
RECEIVED DURING FY 96-97.
Payment of Contractor's fees shall be made to Contractor directly from
the Medi-Cal recovery account. On a monthly basis, Contractor shall
submit an invoice to the Department of Health Services, providing
documentation of funds recovered during the period and Contractor's fee
amount for the period. Upon approval of the invoice by the Contract
Administrator, Contractor will transfer amount from the Medi-Cal
recovery account.
In the event the Contractor bills Medi-Cal for inpatient services, and
the recovery is provided directly to a hospital, the Contractor and
hospital(s), with County concurrence, will determine the applicable
fee.
4. SECTION 13 CARE ACT/CMS SUPPLEMENTAL POOL SERVICES, 13.2 and 13.3 is
amended as to payment and term; and is hereby amended to read as
follows:
13.2 Contract Type and Payments
Costs for services provided under Section 13 shall be reimbursed at a
firm fixed price prorated for monthly payments. The firm fixed price
for the period July 1, 1992 through June 30, 1993 is $45,323; for the
period July 1, 1993 through June 30, 1994, the firm fixed price is
$57,356; for the period July 1, 1994 through June 30, 1995, the firm
fixed
16
<PAGE> 17
FIFTEENTH AMENDMENT TO THE AGREEMENT
TO PROVIDE ADMINISTRATION OF THE
COUNTY OF SAN DIEGO
COUNTY MEDICAL SERVICES PROGRAM
price is $81,676; for the period July 1, 1995 through March 31, 1996,
the firm fixed price is $72,219; AND FOR THE PERIOD APRIL 1, 1996
THROUGH DECEMBER 31, 1996 THE FIRM FIXED PRICE IS $72,219. This price
is to be prorated at one-twelfth of the total for each of the twelve
months from July 1, 1992 to June 30, 1993 in the amount of $3,776.92
per month; prorated for each of the twelve months from July 1, 1993
through June 30, 1994 in the amount of $4,779.67 per month; prorated
for each of the twelve months from July 1, 1994 through June 30, 1995
in the amount of $6,806 per month; prorated for each of the nine months
from July 1, 1995 through March 31, 1996 in the amount of $8,024 per
month; and prorated for each of the nine months from April 1, 1996
through December 31, 1996 in the amount of $8,024 per month.
13.3 TERM
The term of Section 13 shall continue through December 31, 1996.
5. The changes specified above constitute the only amendments to the
Agreement dated May 30, 1989, as amended by the First Amendment dated
April 9, 1990, the Second Amendment dated May 30, 1990, the Third
Amendment dated July 12, 1990, the Fourth Amendment dated September 17,
1990, the Fifth Amendment dated October 31, 1990, the Sixth Amendment
dated March 19, 1991, the Seventh Amendment dated June 26, 1991, the
Eighth Amendment dated August 30, 1991, the Ninth Amendment dated June
22, 1992, the Tenth Amendment dated October 6, 1992, the Eleventh
Amendment dated April 7, 1993, the Twelfth Amendment dated July 7,
1993, the Thirteenth Amendment dated July 5, 1994 AND THE FOURTEENTH
AMENDMENT DATED JULY 31, 1995. All other terms and conditions of the
Agreement, as previously amended remain unchanged and in full force and
effect.
17
<PAGE> 18
CONT.
EXHIBIT 10.2(a)(7)
COUNTY OF SAN DIEGO
DEPARTMENT OF PURCHASING AND CONTRACTING
SERVICE CONTRACT AMENDMENT AUTHORIZATION
AND INDEPENDENT CONTRACTOR AGREEMENT AMENDMENT
DATE April 16 , 19 96 COUNTY CONTRACT NO. 41217
--------------------- --- ------------------
AMENDMENT NO. 15-2
------------------
To Medicus Systems Corporation, Inc. Contractor. Pursuant to the contract
-------------------------------------
changes clause, you are directed to make the changes described herein to the
Contract or do the following described work not included in the previous agreed
upon Scope of Work.
Title of Contract or Project Administration of County Medical Services (CMS)
--------------------------------------------------
Program
- - -------------------------------------------------------------------------------
Description of CONTRACT Change and\or Work To Be Done:
Day-to-day administration of the CMS Program as stated on the attached
"Fifteenth Amendment to the Agreement to Provide Administration of the County
Medical Services (CMS) Program".
- - -------------------------------------------------------------------------------
We, the undersigned Contractor, have THIS AMENDMENT IS NOT EFFECTIVE
given careful consideration to the UNTIL APPROVED BY THE DIRECTOR
change proposed and hereby agree, if OF PURCHASING AND CONTRACTING
this proposed change is approved,
that we will provide all equipment, DEPARTMENT REVIEW AND
furnish all materials, except as may RECOMMENDED APPROVAL:
otherwise be noted above, and perform
all services necessary for the work By /s/ Illegible
specified herein, and will accept as --------------------------------
full payment the price of: S_________
dollars and agree that the contract Date 7/3/96
time for completion be (unadjusted) --------------
(adjusted) by __________ calendar days
(increase) (decreased).
Revised CONTRACT Total Price is
APPROVED,
- - ----------------------------- DIRECTOR OF PURCHASING
AND CONTRACTING
By /s/ Illegible
-------------------------------- By /s/ Illegible
-------------------------------
Title Senior Vice President
----------------------------- Date: 7/14/96
Authorized Person --------------
<PAGE> 1
EXHIBIT 10.3
SERVICES AGREEMENT
This Services Agreement ("Agreement") is made as of the 25th day of
January, 1996, by and between Medicus Systems Software, Inc., a Delaware
corporation ("Medicus"), and Medicus Systems Corporation, a Delaware corporation
("MSC").
Recitals
1. MSC develops, markets and supports a family of specialized
integrated software products utilized by financial administrators, physicians
and nursing executives, health information and other healthcare providers to
capture, structure and analyze clinical, operational and financial information.
2. MSC, through its MCM Managed Care division, offers
administrative services to healthcare programs and providers serving indigent
and Medicaid populations and provides managed care services to managed care
health plans that serve Medicaid populations (the "Managed Care Business").
3. MSC will transfer its assets (other than those assets
associated with the operations of the Managed Care Business) to Medicus in
consideration for all of the shares of capital stock of Medicus. MSC will then
distribute all of the issued and outstanding shares of capital stock of Medicus
to the shareholders of MSC pursuant to the distribution agreement dated January
25, 1996 between Medicus and MSC (the "Distribution").
4. In connection with the Distribution, MSC will change its name
to MCM Managed Care, Inc. and Medicus will change its name to Medicus Systems
Corporation.
5. MSC desires that Medicus assist it in maintaining certain
accounting records, performing certain accounting activities, preparing certain
financial reports required for financial reporting purposes, handling certain
option administration functions, and employee benefit, human resources,
insurance, and recordkeeping services, and providing certain other
administrative support services.
6. MSC desires that Medicus assist it in conducting certain
financial-related activities, including advice regarding access to capital
markets, financial analysis of proposed transactions, budget and forecast
preparation, consultation with respect to presentations to and discussions with
financial analysts, consultation with respect to likely third party reaction to
alternative transaction structures and financial transactions and disclosures,
consultation with respect to crisis control, and other financial matters.
7. Medicus has agreed to enter into an agreement pursuant to
which Medicus would perform such services for MSC upon the terms and subject to
the conditions hereinafter provided.
<PAGE> 2
Agreements
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, as well as other good and valuable consideration,
the sufficiency and receipt of which is hereby acknowledged, the parties hereby
agree as follows:
1. Accounting Services.
1.1 Upon the terms and subject to the conditions set
forth in this Agreement, Medicus shall provide to MSC the following accounting
services (the "Services"):
(a) administration and maintenance of corporation
payroll, and administration of the processing of payroll and
calculation of applicable tax and other withholdings through MSC's
designated payroll service bureau;
(b) administration of accounts payable (including check
generation);
(c) administration and maintenance of a general ledger
trial balance, balance sheet, income statement and certain other
reports by accounting category in accordance with Medicus' standard
accounting policies and consistent with those periodic reports Medicus
customarily prepares in the normal course of its business to manage its
financial affairs;
(d) maintenance of all accounting records supporting MSC
(consistent with the record retention program of Medicus); and
(e) preparation of period end reconciliations and
associated period end journal entries for all balance sheet accounts.
1.2 The Services shall not include any of the following,
each of which is the sole responsibility of MSC:
(a) selection of accounting policies to be applied to
MSC's books and records, however, Medicus will consistently apply the
appropriate policies selected by MSC;
(b) negotiation of terms and conditions between MSC and
suppliers, vendors, and others, such as remittance due dates and
discounts;
(c) signature and final release of trade accounts payable
disbursement checks in excess of $50,000;
(d) final review and approval of annual financial
statements;
2
<PAGE> 3
(e) cash investment activities; however, Medicus will
initiate and manage repetitive and/or fixed cash management activities
as directed in writing by MSC;
(f) approval and coding of invoices for disbursement;
(g) preparation of budgets (except that Medicus will
develop a budget process and calendar to facilitate the preparation of
annual budgets by MSC); and
(h) preparation, filing, or signing of any tax returns
required to be filed by MSC, with the exception of sales and use tax
returns which will be prepared, but not, however, filed or signed by
Medicus.
1.3 MSC agrees to utilize Medicus' designated auditors
and tax consultants for annual audit and tax return preparation activities.
1.4 MSC agrees to utilize Medicus' designated bankers and
credit card processor for all corporate cash management activities.
1.5 MSC agrees to supply Medicus all information,
materials, data, and documents necessary or advisable to properly perform the
Services in such form, format, or media as Medicus may reasonably request, to
make available the officers of MSC to answer any inquiries in connection
therewith, and to cooperate with Medicus in the performance of its duties.
1.6 MSC agrees to effectively apply the policies and
procedures defined in [Medicus Accounting Manual], as the same may be modified
and updated from time to time, on a timely basis, which actions and compliance
shall be a condition to Medicus' obligations hereunder.
1.7 In connection with its performance of the Services,
Medicus shall use its reasonable best efforts to complete and perform the
Services in a satisfactory fashion and in a manner consistent with its
performance of similar services and functions for its own operations.
2. Administrative Services.
2.1 Upon the terms and subject to the conditions set
forth in this Agreement, Medicus shall provide to MSC the following
administrative services (the "Admin. Items").
(a) Bid, negotiate, establish, and administer health,
dental, disability, life, and 401(k) benefit programs and accounts on
behalf of MSC for each covered employee thereof.
(b) Bid, negotiate, establish, and administer a directors
and officers liability insurance program annually on behalf of MSC.
(c) Bid, negotiate, establish, and administer property,
liability, umbrella, and related insurance programs annually on behalf
of MSC.
3
<PAGE> 4
(d) Bid, negotiate, establish, and administer a workers
compensation insurance program annually on behalf of MSC.
(e) Perform claims administration for each of the above
insurance programs.
(f) Perform claims reduction programs for each of the
above insurance programs.
(g) In connection with any stock purchase plan of MSC,
set up and administer option accounts, including option grant
summaries, vesting, and option exercise bookkeeping and administration
for optionees of MSC.
(h) Set up and maintain human resources compliance files
for MSC.
(i) Set up and maintain equipment and facilities
listings.
2.2 MSC agrees to supply Medicus all information,
materials, data, and documents necessary or advisable to properly perform the
Admin. Items in such form, format, or media as Medicus may reasonably request,
to make available the officers of MSC to answer any inquiries in connection
therewith, and to cooperate with Medicus in the performance of its duties.
2.3 In connection with its performance of the Admin.
Items, Medicus shall use its reasonable best efforts to complete and perform the
Admin. Items in a satisfactory fashion and in a manner consistent with its
performance of similar services and functions for its own operations.
3. Financial Services.
3.1 Upon the terms and subject to the conditions set
forth in this Agreement, Medicus shall provide to MSC the following financial
services (the "Finance Services"):
(a) identification, delineation, and analysis of
potential financial transactions, including, but not limited to,
proposed issuances of debt or equity, bank credit relationships, and
proposed mergers, consolidations, sales or purchases of assets,
acquisitions, divestitures, dividends, stock splits and
reclassifications, and similar transactions ("Transactions");
(b) financial advice relating to MSC or any Transaction;
(c) advice relating to negotiations, alternative
structuring, and strategy for proposed Transactions;
(d) assistance in budget and forecast preparation;
(e) consultations and advice as to presentations,
discussions, and disclosures to financial analysts and financial press;
4
<PAGE> 5
(f) consultation and advice as to potential investor,
shareholder, and financial press perceptions and reaction to
Transactions and proposed disclosures; and
(g) advice concerning crisis management and control.
3.2 The Finance Services shall not include any of the
following, each of which is the sole responsibility of MSC.
(a) acting as an underwriter, broker, dealer, salesman,
or agent with respect to any issuance of securities;
(b) acting as an "investment advisor" as defined by the
Investment Advisors Act;
(c) legal advice;
(d) tax or accounting advice;
(e) performing bookkeeping, accounting, or auditing
functions or services; and
(f) drafting of securities disclosure materials.
3.3 MSC agrees to consider Medicus' recommendation of
investment bankers, public relations consultants, press agents, and legal
advisors for financial services.
3.4 MSC agrees to supply Medicus all information,
materials, data, and documents necessary or advisable to properly perform the
Finance Services in such form, format, or media as Medicus may reasonably
request, to make available the officers of MSC to answer any inquiries in
connection therewith, and to cooperate with Medicus in the performance of its
duties.
3.5 In connection with its performance of the Finance
Services, Medicus shall use its reasonable best efforts to complete and perform
the Finance Services in a satisfactory fashion and in a manner consistent with
its performance of similar services and functions for its own operations.
4. Fees and Expense Reimbursement.
4.1 In consideration of the Services, Admin. Items and
Finance Services, MSC agrees to pay to Medicus a fee of $700,000, payable as
follows: $175,000 on each of May 31, 1996, August 31, 1996, November 30, 1996
and February 28, 1997.
4.2 In addition to the payment of fees as specified in
Section 4.1 of this Agreement, MSC shall reimburse Medicus for all non-ordinary,
out-of-pocket expenses incurred by Medicus or its affiliates in connection with
the Services, Admin. Items and Finance Services
5
<PAGE> 6
rendered by Medicus hereunder, including, but not limited to, travel expenses,
legal fees, fees of experts, audit fees, tax fees, payroll service fees, etc.
All non-ordinary, out-of-pocket expenses in excess of $50,000, however, must be
approved by MSC prior to incurring such expense.
5. Term of Services.
5.1 The term of this Agreement shall be for one (1) year
from the effective date hereof unless the parties mutually agree to extend such
term; provided that Medicus may terminate this Agreement without notice and
cease rendering the Services, Admin. Items and Finance Services hereunder 15
days after notice of any non-payment of the fees and expenses provided for
herein when such fees and expenses are due and payable, unless such non-payment
is cured within such 15-day period.
5.2 Termination of this Agreement shall terminate
Medicus' obligations to provide the Services, Admin. Items and Finance Services.
Upon termination of this Agreement, MSC shall pay to Medicus the fees due
Medicus in accordance with Section 4.1 hereof for the Services, Admin. Items and
Finance Services rendered by Medicus through the date of termination and
reimburse Medicus in accordance with Section 4.2 hereof for expenses incurred by
Medicus in connection with the Services, Admin. Items and Finance Services
rendered by Medicus through the date of termination. Upon termination of this
Agreement, Medicus will reasonably cooperate with MSC in the archiving and
retrieval of records and transition of services at MSC's expense.
5.3 This Agreement shall be effective on the date of the
Distribution.
6. Payment of Amounts due Hereunder; Liability.
6.1 Medicus will calculate and MSC hereby authorizes
Medicus to collect through electronic funds transfer, at the end of each monthly
period (the "Accounting Period") the total dollar amount of all fees and
expenses due to Medicus not yet paid.
6.2 Medicus shall not be liable for any cost, damage,
expense, or loss of MSC or any other person or entity arising or resulting,
directly or indirectly, from (i) the failure of Medicus to perform any of the
Services, Admin. Items or Finance Services for MSC hereunder or the
misperformance of any such Services, Admin. Items or Finance Services, except to
the extent such failure to perform or such misperformance is the result of
Medicus' willful misconduct or gross negligence, in which event Medicus'
liability shall not exceed its fee for such Services, Admin. Items or Finance
Services hereunder for the Accounting Period in question (plus, in the case of
employee theft or embezzlement, the limits of its insurance applicable thereto),
or (ii) reliance by MSC on any data or advice Medicus may provide pursuant to
this Agreement. MSC represents that it will make all material financial
decisions concerning itself and the Transactions through the exercise of
independent business judgment of its directors, officers, and employees and that
Medicus and its owners, directors, officers, employees, and agents have no
responsibility or liability therefor. In no event will Medicus be liable for
indirect, incidental, consequential, special, speculative, exemplary, or
punitive damages (including, but not limited to, loss of revenue or profit).
6
<PAGE> 7
6.3 MEDICUS MAKES NO WARRANTY OR REPRESENTATION, EITHER
EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES, ADMIN. ITEMS OR FINANCE
SERVICES PROVIDED HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THEIR ADEQUACY,
QUALITY, PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.
7. Miscellaneous.
7.1 In performing the Services, Admin. Items and Finance
Services set forth in this Agreement, Medicus will have neither expressed nor
implied power to execute agreements on behalf of MSC or in any manner bind MSC
as to any matter not within the scope of this Agreement.
7.2 All notices provided for in this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or sent by overnight express or facsimile transmission or registered or
certified mail, return receipt requested, postage prepaid, and properly
addressed as follows:
If to MSC:
Mr. Richard Jelinek
MCM Managed Care, Inc.
600 S. Cherry Street
Suite 1135
Denver, Colorado 80222
If to Medicus:
Mr. William Cowan
Medicus Systems Corporation
One Rotary Center
Suite 400
Evanston, Illinois 60201-4802
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally or by overnight express
courier or facsimile transmission shall be deemed to have been given on the date
it is so delivered, and any notice delivered by registered or certified mail
delivery service shall be deemed to have been duly given three business days
after it is sent to the intended recipient at the address set forth above.
7.3 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS
THEREOF.
7
<PAGE> 8
7.4 A failure of any party to insist in any instance upon
the strict and punctual performance of any provision of this Agreement shall not
constitute a continuing waiver of such provision. No party shall be deemed to
have waived any rights, power, or privilege under this Agreement or any
provisions hereof unless such waiver shall have been in writing and duly
executed by the party to be charged with such waiver, and such waiver shall be a
waiver only with respect to the specific instance involved and shall in no way
impair the rights of the waiving party or the obligations of the other party or
parties in any other respect or at any other time. If any provision of this
Agreement shall be waived, or be invalid, illegal, or unenforceable, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain binding and in full force and effect.
7.5 This Agreement may be amended or modified only by a
written instrument signed by each of parties hereto.
7.6 This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings, either oral or written, with
respect thereto.
7.7 Nothing contained in this Agreement is intended, nor
shall it be construed, to create any rights in any person not a party to this
Agreement.
7.8 This Agreement may not be assigned by either party
without the prior written consent of the other party.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MEDICUS SYSTEMS SOFTWARE, INC.
By William Cowan
----------------------------------
Title
----------------------------------
MEDICUS SYSTEMS CORPORATION
By Richard Jelinek
----------------------------------
Title
----------------------------------
8
<PAGE> 1
EXHIBIT 10.4
MANAGED CARE SOLUTIONS, INC.
1996 STOCK OPTION PLAN
The purpose of this Stock Option Plan (the "Plan") is to benefit
Managed Care Solutions, Inc. (the "Company") and its subsidiaries through the
maintenance and development of management by offering certain present and future
executive and key personnel a favorable opportunity to become holders of stock
in the Company over a period of years, thereby giving them a permanent stake in
the growth and prosperity of the Company and encouraging the continuance of
their services with the Company or its subsidiaries. Options granted under this
Plan are intended not to qualify as "Incentive Stock Options" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
the Plan shall be construed so as to carry out that intention.
1. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors composed of no fewer than two
"disinterested" "outside" directors designated by the Board of Directors. For
purposes of this Plan, "disinterested" directors shall include directors who
meet the tests for "disinterested administration" of the Plan under the rules
and regulations adopted by the Securities and Exchange Commission under Section
16 of the Securities Exchange Act of 1934 and (b) "outside" directors shall
include directors who meet the tests for "outside director" under the
Regulations adopted by the Internal Revenue Service relating to Section 162 of
the Code, including all of the transition rules thereunder. A majority of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, or acts approved in writing
by all of the members, shall be the acts of the Committee. This Plan is intended
to qualify for exemption from Section 16(b) of the Securities Exchange Act of
1934 and to qualify as performance-based compensation under Section 162 of the
Code and shall be interpreted in such a way as to result in such qualification.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its absolute discretion, (a) to determine the persons to
be granted options under the Plan, (b) to determine the number of shares subject
to each option, (c) to determine the time or times at which options will be
granted, (d) to determine the option price of the shares subject to each option,
which price shall not be less than the minimum specified in Section 4 of the
Plan, (e) to determine the time or times when each option becomes exercisable
and the duration of the exercise period, (f) to prescribe the form or forms of
the agreements evidencing any options granted under the Plan (which forms shall
be consistent with the Plan), (g) to adopt, amend and rescind such rules and
regulations as, in the Committee's opinion, may be advisable in the
administration of the Plan, and (h) to construe and interpret the Plan, the
rules and regulations and the agreements evidencing options granted under the
Plan and to make all other determinations deemed necessary or advisable for the
administration of the Plan. Any decision made or action taken in good faith by
the Committee in connection with the administration, interpretation, and
implementation of the Plan and of its rules and regulations shall, to the extent
permitted by law, be conclusive and binding upon all optionees under the Plan
and upon any person claiming under or through such an optionee, and no director
of the Company shall be liable for any such decision made or action taken by the
Committee.
<PAGE> 2
2. ELIGIBILITY. Options shall be granted only to key employees and
directors (other than members of the Committee) of the Company and its
subsidiaries.
3. GRANTING OF OPTIONS.
(a) The Committee may grant options under which a total of not
more than 200,000 shares of the common stock of the Company may be
purchased from the Company, subject to adjustment as provided in
Paragraph 9 of this Plan.
(b) No options shall be granted under the Plan after the date
ten years following the date of approval of this Plan by the
shareholders of the Company as described in Paragraph 11 of this Plan.
If an option expires or is terminated or canceled unexercised as to any
shares, such released shares may again be optioned (including a grant
in substitution for a canceled option). Shares subject to options may
be made available from unissued or reacquired shares of common stock.
(c) Nothing contained in the Plan or in any option granted
pursuant thereto shall confer upon any optionee any right to be
continued in the employment of the Company or any subsidiary of the
Company, or interfere in any way with the right of the Company or its
subsidiaries to terminate his employment at any time.
4. OPTION PRICE. The option price shall be determined by the
Committee and, subject to the provisions of paragraph 9, shall be not less than
the fair market value, at the time the option is granted, of the stock subject
to the option.
5. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS.
(a) Subject to the provisions of paragraph 7, each option
shall be for such term of not more than ten years as shall be
determined by the Committee at the date of the grant. Each option shall
become exercisable in such installments, at such time or times, and may
be subject to such conditions, including conditions based upon the
performance of the Company, as the Committee may in its discretion
determine at the date of grant.
(b) The Committee may in its discretion (i) accelerate the
exercisability of any option or (ii) at any time before the expiration
or termination of an option previously granted, extend the terms of
such option (including options held by officers) for such additional
period as the Committee, in its discretion, shall determine, except
that the aggregate option period with respect to any option, including
the original term of the option and any extensions thereof, shall never
exceed ten years.
6. EXERCISE OF OPTION.
(a) An option may be exercised by giving written notice to the
Company, attention of the Secretary, specifying the number of shares to
be
2
<PAGE> 3
purchased, accompanied by the full purchase price for the shares to be
purchased in cash or by check, except that the Committee may permit the
purchase price for the shares to be paid, all or in part, by the
delivery to the Company of other shares of common stock of the Company
in such circumstances and manner as it may specify. For this purpose,
the per share value of the Company's common stock shall be the fair
market value at the close of business on the date preceding the date of
exercise.
(b) At the time of exercise of any option, the Committee may,
if it shall determine it necessary or desirable for any reason, require
the optionee (or his heirs, legatees, legal representative, or
alternate payee under a domestic relations order, as the case may be)
as a condition upon the exercise, to deliver to the Company a written
representation of present intention to purchase the shares for his own
account for investment and an agreement not to distribute or sell such
shares in violation of the registration provisions of applicable
securities laws. If such representation and agreement are required to
be delivered, an appropriate legend may be placed upon each certificate
delivered to the optionee upon his exercise of part or all of the
option and a stop transfer order may be placed with the transfer agent.
(c) Each option shall also be subject to the requirement that,
if at any time the Committee determines, in its discretion, that the
listing, registration or qualification of the shares subject to the
option upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the
issue or purchase of shares thereunder, the option may not be exercised
in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
(d) If the Committee shall determine it necessary or desirable
for any reason, an option shall provide that it is contemplated that
the shares acquired through the exercise of the option will not be
registered under applicable federal and state securities laws and that
such shares cannot be resold unless they are registered under such laws
or unless an exemption from registration is available, and the
certificate for any such shares issued upon the exercise of the option
shall bear a legend making appropriate reference to such provisions.
7. TERMINATION OF EMPLOYMENT; EXERCISE THEREAFTER.
(a) If the employment or tenure as a director of any optionee
with the Company or any of its subsidiaries is terminated for any
reason other than death, permanent disability, retirement or cause,
such optionee's option, to the extent the option is exercisable at the
date of termination, shall expire thirty days after the termination of
employment or directorship (or upon the scheduled termination of the
option, if earlier), and all rights to purchase shares pursuant thereto
shall
3
<PAGE> 4
terminate at such time. Temporary absence from employment because of
illness, vacation, approved leave of absence, or transfer of employment
among the Company and its parent or subsidiary corporations, shall not
be considered to terminate employment or to interrupt continuous
employment.
(b) In the event of termination of employment or directorship
because of death or permanent disability (within the meaning of Section
22(e)(3) of the Code), the option may be exercised in full, unless
otherwise provided at the time of grant, without regard to any
installments established under paragraph 5 hereof, by the optionee or,
if he is not living, by his heirs, legatees, legal representative, or
alternate payee pursuant to a domestic relations order, as the case may
be, during its specified term prior to one year after the date of death
or permanent disability. In the event of termination of employment or
directorship because of retirement, the option may be exercised by the
optionee (or, if he dies within three months after such termination, by
his heirs, legatees, legal representative, or alternate payee under a
domestic relations order, as the case may be), at any time during its
specified term prior to three months after the date of such
termination, but only to the extent the option was exercisable at the
date of such termination.
(c) If an optionee is discharged for cause, his option shall
expire forthwith and all rights to purchase shares under it shall
terminate immediately. For this purpose, "discharge for cause" means a
discharge on account of dishonesty, disloyalty or insubordination.
(d) Notwithstanding the foregoing provisions of this paragraph
7, the Committee may in the grant of any option make other and
different provisions with respect to its exercise after the optionee's
termination of employment or directorship.
8. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by
the Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a domestic relations order and each option shall be exercisable
during an Optionee's lifetime only by the Optionee or by the Optionee's legal
representative.
9. ADJUSTMENT.
(a) In the event that the Company's outstanding common stock
is changed by any stock dividend, stock split or combination of shares,
the number of shares subject to this Plan and to options under this
Plan shall be proportionately adjusted.
(b) In case of any capital reorganization, or of any
reclassification of the common stock or in case of the consolidation of
the Company with or the merger of the Company with or into any other
corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any
reclassification of outstanding shares of common stock) or of the sale
of the properties and assets of the Company as, or
4
<PAGE> 5
substantially as, an entirety to any other corporation, the Company, or
the corporation resulting from such consolidation or surviving such
merger or to which such sale shall be made, as the case may be, shall
determine that upon exercise of options granted under the Plan after
such capital reorganization, reclassification, consolidation, merger or
sale there shall be issuable upon exercise of an option a kind and
amount of shares of stock or other securities or property (which may,
as an example, be a fixed amount of cash equal to the consideration
paid to stockholders of the Company for shares transferred or sold by
them) which the holders of the common stock (immediately prior to the
time of such capital reorganization, reclassification, consolidation,
merger or sale) are entitled to receive in such transaction as in the
judgment of the Committee is required to compensate equitably for the
effect of such event upon the exercise rights of the optionees. The
above provisions of this paragraph shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers and sales.
(c) In the event of any such adjustment the purchase price per
share shall be proportionately adjusted.
10. AMENDMENT OF PLAN. The Board of Directors may amend or discontinue
the Plan at any time. However, no such amendment or discontinuance shall (a)
change or impair any option previously granted without the consent of the
optionee, (b) increase the maximum number of shares which may be purchased by
all optionees, (c) change the minimum purchase price, (d) change the limitations
on the option period or increase the time limitations on the grant of options,
or (e) permit the granting of options to members of the Committee.
11. EFFECTIVE DATE. The Plan has been adopted and authorized by the
Board of Directors for submission to the stockholders of the Company. If the
Plan is approved by the affirmative vote of the holders of a majority of the
outstanding voting stock of the Company represented in person or by proxy at a
duly held stockholders' meeting, it shall be deemed to have become effective on
the date of such approval. Options may be granted under the Plan before its
approval by the stockholders, but subject to such approval, and in each such
case the date of grant shall be determined to be the date of the approval of the
Plan by stockholders.
5
<PAGE> 1
EXHIBIT 10.5
MCM
1995 STOCK OPTION PLAN
The purpose of this Stock Option Plan (the "Plan") is to benefit MCM
Managed Care, Inc. (the "Company") and its subsidiaries through the maintenance
and development of management by offering certain present and future executive
and key personnel a favorable opportunity to become holders of stock in the
Company over a period of years, thereby giving them a permanent stake in the
growth and prosperity of the Company and encouraging the continuance of their
services with the Company or its subsidiaries. Options granted under this Plan
are intended not to qualify as "Incentive Stock Options" as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and the Plan
shall be construed so as to carry out that intention.
1. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors composed of no fewer than two
disinterested directors designated by the Board of Directors, provided that the
Committee shall not include any person who has been granted an option under the
Plan or under any other plan of the Company entitling the participants therein
to acquire common stock or options to purchase common stock of the Company at
any time within the 12-month period immediately preceding the date on which such
person becomes a member of the Committee. A majority of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members, shall be the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have full
and final authority, in its absolute discretion, (a) to determine the persons to
be granted options under the Plan, (b) to determine the number of shares subject
to each option, (c) to determine the time or times at which options will be
granted, (d) to determine the option price of the shares subject to each option,
which price shall not be less than the minimum specified in Section 4 of the
Plan, (e) to determine the time or times when each option becomes exercisable
and the duration of the exercise period, (f) to prescribe the form or forms of
the agreements evidencing any options granted under the Plan (which forms shall
be consistent with the Plan), (g) to adopt, amend and rescind such rules and
regulations as, in the Committee's opinion, may be advisable in the
administration of the Plan, and (h) to construe and interpret the Plan, the
rules and regulations and the agreements evidencing options granted under the
Plan and to make all other determinations deemed necessary or advisable for the
administration of the Plan. Any decision made or action taken in good faith by
the Committee in connection with the administration, interpretation, and
implementation of the Plan and of its rules and regulations shall, to the extent
permitted by law, be conclusive and binding upon all optionees under the Plan
and upon any person claiming under or through such an optionee, and no director
of the Company shall be liable for any such decision made or action taken by the
Committee.
2. ELIGIBILITY. Options shall be granted only to key employees and
directors (other than members of the Committee) of the Company and its
subsidiaries.
3. GRANTING OF OPTIONS.
(a) The Committee may grant options under which a total of not
more than 550,000 shares of the common stock of the Company may be
purchased from the Company, subject to adjustment as provided in
Paragraph 9 of this Plan.
(b) No options shall be granted under the Plan after the date
ten years following the date of approval of this Plan by the
shareholders of the Company as described in Paragraph 11 of this Plan.
If an option expires or is terminated or canceled unexercised as to any
shares, such released shares may again be optioned (including a grant
in substitution for a canceled option). Shares subject to options may
be made available from unissued or reacquired shares of common stock.
<PAGE> 2
(c) Nothing contained in the Plan or in any option granted
pursuant thereto shall confer upon any optionee any right to be
continued in the employment of the Company or any subsidiary of the
Company, or interfere in any way with the right of the Company or its
subsidiaries to terminate his employment at any time.
4. OPTION PRICE. The option price shall be determined by the
fCommittee and, subject to the provisions of paragraph 9, shall be not less than
the fair market value, at the time the option is granted, of the stock subject
to the option.
5. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS.
(a) Subject to the provisions of paragraph 7, each option shall
be for such term of not more than ten years as shall be determined by
the Committee at the date of the grant. Each option shall become
exercisable in such installments, at such time or times, and may be
subject to such conditions, including conditions based upon the
performance of the Company, as the Committee may in its discretion
determine at the date of grant.
(b) The Committee may in its discretion (i) accelerate the
exercisability of any option or (ii) at any time before the expiration
or termination of an option previously granted, extend the terms of
such option (including options held by officers) for such additional
period as the Committee, in its discretion, shall determine, except
that the aggregate option period with respect to any option, including
the original term of the option and any extensions thereof, shall never
exceed ten years.
6. EXERCISE OF OPTION.
(a) An option may be exercised by giving written notice to the
Company, attention of the Secretary, specifying the number of shares to
be purchased, accompanied by the full purchase price for the shares to
be purchased in cash or by check, except that the Committee may permit
the purchase price for the shares to be paid, all or in part, by the
delivery to the Company of other shares of common stock of the Company
in such circumstances and manner as it may specify. For this purpose,
the per share value of the Company's common stock shall be the fair
market value at the close of business on the date preceding the date of
exercise.
(b) At the time of exercise of any option, the Committee may,
if it shall determine it necessary or desirable for any reason, require
the optionee (or his heirs, legatees, legal representative, or
alternate payee under a domestic relations order, as the case may be)
as a condition upon the exercise, to deliver to the Company a written
representation of present intention to purchase the shares for his own
account for investment and an agreement not to distribute or sell such
shares in violation of the registration provisions of applicable
securities laws. If such representation and agreement are required to
be delivered, an appropriate legend may be placed upon each certificate
delivered to the optionee upon his exercise of part or all of the
option and a stop transfer order may be placed with the transfer agent.
(c) Each option shall also be subject to the requirement that,
if at any time the Committee determines, in its discretion, that the
listing, registration or qualification of the shares subject to the
option upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the
issue or purchase of shares thereunder, the option may not be exercised
in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
<PAGE> 3
(d) If the Committee shall determine it necessary or desirable
for any reason, an option shall provide that it is contemplated that
the shares acquired through the exercise of the option will not be
registered under applicable federal and state securities laws and that
such shares cannot be resold unless they are registered under such laws
or unless an exemption from registration is available, and the
certificate for any such shares issued upon the exercise of the option
shall bear a legend making appropriate reference to such provisions.
7. TERMINATION OF EMPLOYMENT EXERCISE THEREAFTER.
(a) If the employment or tenure as a director of any optionee
with the Company or any of its subsidiaries is terminated for any
reason other than death, permanent disability, retirement or cause,
such optionee's option, to the extent the option is exercisable at the
date of termination, shall expire thirty days after the termination of
employment or directorship (or upon the scheduled termination of the
option, if earlier), and all rights to purchase shares pursuant thereto
shall terminate at such time. Temporary absence from employment because
of illness, vacation, approved leave of absence, or transfer of
employment among the Company and its parent or subsidiary corporations,
shall not be considered to terminate employment or to interrupt
continuous employment.
(b) In the event of termination of employment or directorship
because of death or permanent disability (within the meaning of Section
22(e)(3) of the Code), the option may be exercised in full, unless
otherwise provided at the time of grant, without regard to any
installments established under paragraph 5 hereof, by the optionee or,
if he is not living, by his heirs, legatees, legal representative, or
alternate payee pursuant to a domestic relations order, as the case may
be, during its specified term prior to one year after the date of death
or permanent disability. In the event of termination of employment or
directorship because of retirement, the option may be exercised by the
optionee (or, if he dies within three months after such termination, by
his heirs, legatees, legal representative, or alternate payee under a
domestic relations order, as the case may be), at any time during its
specified term prior to three months after the date of such
termination, but only to the extent the option was exercisable at the
date of such termination.
(c) If an optionee is discharged for cause, his option shall
expire forthwith and all rights to purchase shares under it shall
terminate immediately. For this purpose, "discharge for cause" means a
discharge on account of dishonesty, disloyalty or insubordination.
(d) Notwithstanding the foregoing provisions of this paragraph 7,
the Committee may in the grant of any option make other and different
provisions with respect to its exercise after the optionee's
termination of employment or directorship.
8. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by
the Optionee otherwise than by will or the laws of descent and distribution or
pursuant to a domestic relations order and each option shall be exercisable
during an Optionee's lifetime only by the Optionee or by the Optionee's legal
representative.
9. ADJUSTMENT.
(a) In the event that the Company's outstanding common stock is
changed by any stock dividend, stock split or combination of shares,
the number of shares subject to this Plan and to options under this
Plan shall be proportionately adjusted.
<PAGE> 4
(b) In case of any capital reorganization, or of any
reclassification of the common stock or in case of the consolidation of
the Company with or the merger of the Company with or into any other
corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any
reclassification of outstanding shares of common stock) or of the sale
of the properties and assets of the Company as, or substantially as, an
entirety to any other corporation, the Company, or the corporation
resulting from such consolidation or surviving such merger or to which
such sale shall be made, as the case may be, shall determine that upon
exercise of options granted under the Plan after such capital
reorganization, reclassification, consolidation, merger or sale there
shall be issuable upon exercise of an option a kind and amount of
shares of stock or other securities or property (which may, as an
example, be a fixed amount of cash equal to the consideration paid to
stockholders of the Company for shares transferred or sold by them)
which the holders of the common stock (immediately prior to the time of
such capital reorganization, reclassification, consolidation, merger or
sale) are entitled to receive in such transaction as in the judgment of
the Committee is required to compensate equitably for the effect of
such event upon the exercise rights of the optionees. The above
provisions of this paragraph shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers and sales.
(c) In the event of any such adjustment the purchase price per
share shall be proportionately adjusted.
10. AMENDMENT OF PLAN. The Board of Directors may amend or discontinue
the Plan at any time. However, no such amendment or discontinuance shall (a)
change or impair any option previously granted without the consent of the
optionee, (b) increase the maximum number of shares which may be purchased by
all optionees, (c) change the minimum purchase price, (d) change the limitations
on the option period or increase the time limitations on the grant of options,
or (e) permit the granting of options to members of the Committee.
11. EFFECTIVE Date. The Plan has been adopted and authorized by the
Board of Directors for submission to the stockholders of the Company. If the
Plan is approved by the affirmative vote of the holders of a majority of the
outstanding voting stock of the Company represented in person or by proxy at a
duly held stockholders' meeting, it shall be deemed to have become effective on
the date of such approval. Options may be granted under the Plan before its
approval by the stockholders, but subject to such approval, and in each such
case the date of grant shall be determined to be the date of the approval of the
Plan by stockholders.
<PAGE> 1
EXHIBIT 10.6
MCM
1995 DIRECTORS' STOCK OPTION PLAN
The purpose of this Directors' Stock Option Plan (the "Plan") is to
benefit MCM Managed Care, Inc. (the "Company") and its subsidiaries by offering
its directors a favorable opportunity to become holders of stock in the Company
over a period of years, thereby giving them a permanent stake in the growth and
prosperity of the Company and encouraging the continuance of their services with
the Company. Options granted under this Plan are intended not to qualify as
"Incentive Stock Options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and the Plan shall be construed so as to carry
out that intention.
1. ADMINISTRATION. The Plan shall be administered by the Board of
Directors, whose interpretation of the terms and provisions of the Plan shall be
final and conclusive.
2. ELIGIBILITY. Options shall be granted only to directors of the
Company who are not officers, employees or more than five percent stockholders
of the Company; provided, however, the director elected as the initial Chairman
of the Board of Directors of the Company after this Plan is approved shall be
eligible to be granted options under this Plan.
3. GRANTING OF OPTIONS.
(a) An option under which a total of 20,000 shares of the common
stock of the Company may be purchased from the Company shall be
automatically granted by the Company, without further action required,
to each director of the Company upon such person's initial election as
director (which shall be deemed to have occurred on the effective date
of the merger of the MCS Companies (as defined in the Agreement and
Plan of Merger dated as of November 20, 1995) with and into
subsidiaries of the Company with respect to directors currently serving
as directors of the Company); provided that, an option under which a
total of 50,000 shares of common stock of the Company may be purchased
from the Company shall be automatically granted by the Company without
further action required to the first director elected Chairman of the
Board of Directors of the Company after the Annual Meeting of
Stockholders at which this Plan is approved; provided that such
director is eligible at that time under the terms of Paragraph 2 of
this Plan, and provided, further, that no person may receive an option
to purchase more than 50,000 shares of common stock pursuant to his
Paragraph 3(a) in any calendar year and provided further that the
aggregate number of shares subject to options granted under this Plan
shall be 110,000. If an option expires or is terminated or canceled
unexercised as to any shares, such released shares may again be
optioned.
(b) Nothing contained in the Plan or in any option granted
pursuant thereto shall confer upon any director any right to continue
serving as a director of the Company or interfere in any way with any
right of the Board of Directors or stockholders of the Company to
remove such director pursuant to the certificate of incorporation or
bylaws of the Company or applicable law.
4. OPTION PRICE. The option price shall be the fair market value of
the shares of Common Stock subject to the option on the date of the grant of
such option. For purposes of this Paragraph, "fair market value" shall be the
closing sales price of the Common Stock reported on the NASDAQ National Market
System (or in the principal national stock exchange on which it is listed or
quotation service on
1
<PAGE> 2
which it is listed) (as reported in the Wall Street Journal, Midwest Edition) on
the date the option is granted (or, if the date of the grant is not a trading
date, on the trading date immediately preceding the date of grant). In the event
that the Common Stock is not listed or quoted on the NASDAQ National Market
System or any other national stock exchange, the fair market value of the shares
of Common Stock for all purposes of this Plan shall be reasonably determined by
the Board of Directors.
5. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS.
(a) Subject to the provisions of paragraph 7, each option shall
be for such term of not more than ten years as shall be determined by
the Committee at the date of the grant. Each option shall become
exercisable with respect to 25% of the shares subject to the option 12
months after the date of its grant and with respect to an additional
25% at the end of each 12-month period thereafter during the succeeding
three years. All or any part of the shares with respect to which the
right to purchase has accrued may be purchased at the time of such
accrual or at any time or times thereafter during the option period.
6. EXERCISE OF OPTION.
(a) An option may be exercised by giving written notice to the
Company, attention of the Secretary, specifying the number of shares to
be purchased, accompanied by the full purchase price for the shares to
be purchased in cash or by check, except that the Board of Directors
may permit the purchase price for the shares to be paid, all or in
part, by the delivery to the Company of other shares of common stock of
the Company in such circumstances and manner as it may specify. For
this purpose, the per share value of the Company's common stock shall
be the fair market value at the close of business on the date preceding
the date of exercise.
(b) At the time of exercise of any option, the Board of Directors
may, if it shall determine it necessary or desirable for any reason,
require the optionee (or his heirs, legatees, or legal representative
or alternate payee under a domestic relations order, as the case may
be) as a condition upon the exercise, to deliver to the Company a
written representation of present intention to purchase the shares for
his own account for investment and an agreement not to distribute or
sell such shares in violation of the registration provisions of
applicable securities laws. If such representation and agreement are
required to be delivered, an appropriate legend may be placed upon each
certificate delivered to the optionee upon his exercise of part or all
of the option and a stop transfer order may be placed with the transfer
agent.
(c) Each option shall also be subject to the requirement that,
if at any time the Board of Directors determines, in its discretion,
that the listing, registration or qualification of the shares subject
to the option upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection
with, the issue or purchase of shares thereunder, the option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors.
2
<PAGE> 3
(d) If the Board of Directors shall determine it necessary or
desirable for any reason, an option shall provide that it is
contemplated that the shares acquired through the exercise of the
option will not be registered under applicable federal and state
securities laws and that such shares cannot be resold unless they are
registered under such laws or unless an exemption from registration is
available, and the certificate for any such shares issued upon the
exercise of the option shall bear a legend making appropriate reference
to such provisions.
7. Termination of Employment; Exercise Thereafter.
(a) If the tenure as a director of any optionee with the Company
or any of its subsidiaries is terminated for any reason other than
death, permanent disability, retirement or cause, such optionee's
option, to the extent the option is exercisable at the date of
termination, shall expire thirty days after the termination of
directorship (or upon the scheduled termination of the option, if
earlier), and all rights to purchase shares pursuant thereto shall
terminate at such time. Temporary absence from acting as director
because of illness, vacation, or approved leave of absence, shall not
be considered to interrupt continuous service as director.
(b) In the event of termination of directorship because of death
or permanent disability (within the meaning of Section 22(e)(3) of the
Code), the option may be exercised in full, unless otherwise provided
at the time of grant, without regard to any installments established
under Paragraph 5 hereof, by the optionee or, if he is not living, by
his heirs, legatees, or legal representative or alternate payee under a
domestic relations order, as the case may be, during its specified term
prior to one year after the date of death or permanent disability. In
the event of termination of directorship because of retirement, the
option may be exercised by the optionee (or, if he dies within three
months after such termination, by his heirs, legatees, legal
representative or alternate payee under a domestic relations order, as
the case may be), at any time during its specified term prior to three
months after the date of such termination, but only to the extent the
option was exercisable at the date of such termination.
(c) If an optionee is removed for cause, his option shall expire
forthwith and all rights to purchase shares under it shall terminate
immediately. For this purpose, "removal for cause" means a discharge on
account of dishonesty, disloyalty or insubordination.
8. NON-TRANSFERABILITY OF OPTIONS. No option shall be transferable by
the optionee otherwise than by will or the laws of descent and distribution or
pursuant to a domestic relations order, and each option shall be exercisable
during any optionee's lifetime only by the Optionee or Optionee's legal
representative.
9. ADJUSTMENT.
(a) In the event that the Company's outstanding common stock is
changed by any stock dividend, stock split or combination of shares,
the number of shares subject to this Plan and to options under this
Plan shall be proportionately adjusted.
3
<PAGE> 4
(b) In case of any capital reorganization, or of any
reclassification of the common stock or in case of the consolidation of
the Company with or the merger of the Company with or into any other
corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any
reclassification of outstanding shares of common stock) or of the sale
of the properties and assets of the Company as, or substantially as, an
entirety to any other corporation, the Company, or the corporation
resulting from such consolidation or surviving such merger or to which
such sale shall be made, as the case may be, shall determine that upon
exercise of options granted under the Plan after such capital
reorganization, reclassification, consolidation, merger or sale there
shall be issuable upon exercise of an option a kind and amount of
shares of stock or other securities or property (which may, as an
example, be a fixed amount of cash equal to the consideration paid to
stockholders of the Company for shares transferred or sold by them)
which the holders of the common stock (immediately prior to the time of
such capital reorganization, reclassification, consolidation, merger or
sale) are entitled to receive in such transaction as in the judgment of
the Committee is required to compensate equitably for the effect of
such event upon the exercise rights of the optionees. The above
provisions of this paragraph shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers and sales.
(c) In the event of any such adjustment the purchase price per
share shall be proportionately adjusted.
10. AMENDMENT OF PLAN. The Board of Directors may amend or discontinue
the Plan at any time, provided, however, that the Plan may not be amended more
than once every six months except to comport with changes in the Code, the
Employee Retirement Income Security Act ("ERISA"), or the rules and regulations
under each. However, no such amendment or discontinuance shall (a) change or
impair any option previously granted without the consent of the optionee, (b)
without the approval of the holders of a majority of the shares of Common Stock
which vote in person or by proxy at a duly held stockholders' meeting, (i)
increase the maximum number of shares which may be purchased by all optionees,
(ii) change the purchase price of any option, or (iii) change the limitations on
the option period or increase the time limitations on the grant of options.
11. EFFECTIVE DATE. The Plan has been adopted and authorized by the
Board of Directors for submission to the stockholders of the Company. If the
Plan is approved by the affirmative vote of the holders of a majority of the
outstanding voting stock of the Company represented in person or by proxy at a
duly held stockholders' meeting, it shall be deemed to have become effective on
the date of such approval. Options may be granted under the Plan before its
approval by the stockholders, but subject to such approval, and in each such
case the date of grant shall be determined to be the date of the approval of the
Plan by stockholders.
4
<PAGE> 1
EXHIBIT 10.7
MANAGED CARE SOLUTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Employee Stock Purchase Plan (the "Plan") is to
benefit Managed Care Solutions, Inc. (the "Corporation") and its subsidiaries by
offering eligible employees a favorable opportunity to become stockholders of
the Corporation over a period of years, thereby giving them a proprietary
interest in the growth and prosperity of the Corporation and encouraging the
continuance of their dedicated services with the Corporation or its
subsidiaries. Pursuant to this Plan, 300,000 shares of authorized but unissued
common stock of the Corporation may be offered for sale to eligible employees
through periodic offerings to be made during the three-year period commencing
June 1, 1996. The Plan will be implemented by three annual offerings of the
Corporation's common stock (the "offerings"), beginning on the first day of June
of 1996, 1997, and 1998, each offering terminating on the May 31st of the
following year.
The Plan is intended to qualify as an Employee Stock Purchase Plan
under Section 423 of the Internal Revenue Code of 1986, as amended, (the "Code")
and the regulations promulgated thereunder.
1. Administration. The Plan will be administered by a Committee
appointed by the Board of Directors. The Committee shall consist of one or more
members of the Board of Directors, none of whom shall be eligible to participate
in the Plan. Its interpretations and decisions with regard thereto shall be
final and conclusive.
2. Eligibility. All employees of the Corporation and its subsidiaries
on the date of any offering (as hereinafter described) shall be eligible to
participate in the Plan, except that the following classes of employees shall
not be eligible:
(a) employees who are not employed as of the first day (June 1st) of
the Plan Year;
<PAGE> 2
(b) employees who would, immediately after the grant of an option
under the Plan, own Corporation stock possessing 5% or more of the
total combined voting power or value of all classes of stock of
the Corporation or its parent or subsidiaries.
For purposes of subparagraph (a), a participating employee who
terminates his or her employment and is subsequently reemployed by the
Corporation or one of its subsidiaries within one year of the termination date
shall be eligible to participate in any offering under this Plan as of the first
day of the Plan Year following the date of such reemployment (as if the employee
were a new employee). Additionally, in determining an employee's employment for
purposes of this Plan, such employee's employment with any business entity, the
assets, business, stock or product line of which is acquired by the Corporation
through purchase, merger or otherwise will be deemed to be employment with the
Corporation, as of the date determined by the Corporation. For purposes of
subparagraph (b) of this Section 2, the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of an employee, and stock which
the employee may purchase under outstanding options shall be treated as stock
owned by the employee. For purposes of this Plan, a subsidiary of the
Corporation shall mean a "subsidiary corporation" as defined in Section 424(f)
of the Internal Revenue Code.
3. Offerings. The Corporation will make one or more annual offerings
to employees to purchase stock under this Plan. Each offering period shall be
one year in duration, during which (or during such portion thereof as an
employee may elect to participate) the amounts of compensation directed pursuant
to Section 4. by an employee (plus the amount of any dividends received on any
shares purchased by the employee under the Plan while such shares are registered
in the name of a custodian appointed pursuant to Section 9 hereof, if any) shall
constitute the measure by which the employee's participation in the offering is
based. For all purposes of this Plan, "Base Compensation" shall mean all cash
payments on account of the employee's employment with the Corporation or its
subsidiaries and shall include: regular wage or salary payments, and extra cash
payments of: overtime premium, shift pay for Saturday, Sunday or holiday work,
and emergency call-in cash payments. Bonuses, commissions and all
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other non-regular compensation, if any, shall be excluded from Base Compensation
for both salaried and hourly employees.
No employee may be granted an option which permits his rights to
purchase stock under this Plan, and any other stock purchase plan of the
Corporation and its parent or subsidiaries, to accrue at a rate which exceeds
$25,000 of the fair market value of such stock (determined at the effective date
of the offering) for each calendar year in which the offering is outstanding at
any time. For purposes of the preceding sentence, the rules set forth in
Section 423 (b)(8) of the Code shall apply.
4. Participation. Subject to the third sentence of Section 7, an
employee eligible on the effective date of any offering may participate in such
offering on any enrollment date by completing and forwarding a payroll deduction
authorization form to the Human Resources Department. The form will authorize a
regular payroll deduction from the employee's direct, after-tax Base
Compensation, and must specify the date on which such deduction is to commence,
which shall be the first day of the Plan Year (June 1st) (or the first date of
employment with Corporation in the case of an acquisition by, or merger of, the
Corporation, if so directed by the Corporation) and may not be retroactive. The
form may also authorize the purchase of additional shares with any dividends
received on any shares purchased by the employee under this Plan while such
shares are registered in the name of a custodian appointed pursuant to Section 9
hereof, if any.
5. Payroll Deductions. The Corporation will maintain payroll
deduction accounts for all participating employees. With respect to any offering
made under this Plan, an employee may authorize a payroll deduction in terms of
whole number percentages from a minimum of 1% up to a maximum of 10% of the
gross, pre-tax Base Compensation an employee receives during the offering period
(or during such portion thereof in which employee may participate).
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Notwithstanding the foregoing, in no event may more than $25,000 be deducted
from an employee's Base Compensation for each offering period.
6. Deduction Terminations. An employee may, at any time, terminate
the employee's payroll deduction by filing a payroll deduction termination form.
The change will not become effective sooner than the next pay period after
receipt of the form by the Human Resources Department. Upon filing such payroll
deduction termination form, the employee shall also be deemed to have elected a
"withdrawal of funds" in accordance with Section 7, below.
7. Withdrawal of Funds. An employee may at any time and for any
reason permanently draw out the balance accumulated in the employee's account
for the Plan Year for which such payroll deduction form is effective and thereby
withdraw from participation in a stock offering for the Plan Year. Upon an
election in accordance with this Section 7, all payroll withdrawals for the Plan
Year shall be returned to the employee as soon as administratively practicable.
An employee may thereafter resume participation again only as of the first day
of the next Plan Year (and/or the first day of each Plan Year thereafter during
the offering period); provided, however, that an employee who is an officer or
director of the Corporation may not thereafter resume participation in that
offering or participate in a subsequent offering prior to the first day of the
Plan Year which occurs more than six months from the date of such withdrawal.
Partial withdrawals will not be permitted.
8. Purchase of Shares. Each employee participating in any offering
under this Plan will be granted an option, upon the effective date of such
offering, for as many full shares of the Corporation's common as can be
purchased by such employee, which shall equal the sum of the following:
(a) the amount of payroll deduction elected by the employee up to 10%
of such employee's pre-tax, Base Compensation received during the
specified offering period, but not to exceed $25,000; and
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(b) the amount of any dividends received on any shares purchased by
the employee under this Plan while such shares are registered in
the name of a custodian appointed pursuant to Section 9 hereof, if
any.
9. Purchase Price of Shares. The purchase price for each share
purchased will be the lesser of 85% of the fair market value (as defined in
Section 11) on the date of the offering (the first day of the Plan Year, or the
nearest prior business day) or 85% of the fair market value at the time the
option is exercised (the last day of the Plan Year, or the nearest prior
business day) (such price hereinafter referred to as the "Subscription Price"),
when there are sufficient funds in the employee's account to purchase one or
more full shares. The employee's account shall be charged for the amount of the
purchase price and ownership of such share or shares shall be appropriately
entered in the books of the Corporation. The Committee may appoint a custodian
to accept custody of such shares on behalf of each participating employee. If no
such custodian is appointed, or at an employee's request, the employee shall be
issued a certificate for any or all of the shares held by the custodian on his
or her behalf by completing a form approved by the Committee.
A participating employee who is an officer or director of the
Corporation may not sell, transfer or dispose of any shares within six months
after such shares have been acquired upon exercise of an option.
A participating employee may not purchase a share under any offering
beyond 12 months from the effective date thereof. Any balance remaining in an
employee's payroll deduction account at the end of an offering period shall be
paid to the employee as soon as practicable. In no event will the balance
returned to the employee exceed the purchase price of one share on the last day
of the last month of the offering period.
10. Registration of Certificates. Any certificates issued to an
employee may be registered only in the name of the employee, or, if the employee
so indicates on the employee's
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payroll deduction authorization form, in the employee's name jointly with a
member of the employee's family, with right of survivorship.
11. Fair Market Value. The "fair market value" for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Exchange or,
if such shares are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the shares are listed or admitted to trading or, if the shares are not
listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or
such other system then in use, or, if on any such date the shares are not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such shares selected
by the Committee. If such prices are not available on a given day, then the
Committee may use the prices of such stock on the next preceding trading day for
which such prices are available.
12. Rights as a Stockholder. None of the rights or privileges of a
stockholder of the Corporation shall exist with respect to shares purchased
under this Plan unless and until a stock certificate with respect to such full
shares shall have been issued to the employee or the custodian on his behalf, if
any.
13. Rights on Retirement, Death or Termination of Employment. In the
event of a participating employee's retirement, death or termination (other than
an authorized leave of
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absence) of employment, no payroll deduction shall be taken from any pay due and
owing to an employee at such time and the balance in the employee's account
shall be paid to the employee or, in the event of the employee's death, to the
employee's estate, as soon as practicable thereafter; provided, however, the
designated beneficiary shall have the option to elect, within sixty (60) days of
the date of the employee's death, to have all amounts previously deducted from
the employee's compensation for the offering period used to purchase shares in
accordance with the terms specified herein.
14. Rights Not Transferable. Rights under this Plan are not
transferable by a participating employee other than by will or the laws of the
descent and distribution, and are exercisable during the employee's lifetime
only by the employee.
15. Application of Funds. All funds received or held by the
Corporation under this Plan may be used for any corporate purpose.
16. Adjustment in Case of Changes Affecting Managed Care Solutions,
Inc. Stock. The number of shares subject to the Plan and to offerings granted
under the Plan shall be adjusted as follows: (a) in the event that the
Corporation's outstanding common stock is changed by any stock dividend, stock
split or combination of shares, the number of shares subject to the Plan and to
offerings theretofore granted thereunder shall be proportionately adjusted; (b)
in the event of any merger or consolidation of the Corporation with any other
corporation or corporations, there shall be substituted for each share of
Managed Care Solutions, Inc. then subject to the Plan, whether or not at the
time subject to outstanding offerings, the number and kind of shares of common
stock or other securities to which the holders of common stock of the
Corporation will be entitled pursuant to the transaction; and (c) in the event
of any other relevant change in the capitalization of the Corporation, the Board
of Directors shall provide for an equitable adjustment in the number of shares
of Managed Care Solutions, Inc. common stock
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subject to the Plan, whether or not then subject to outstanding offerings. In
the event of any such adjustment, the Subscription Price per share shall be
appropriately adjusted.
17. Amendment of the Plan. The Board of Directors may at any time, or
from time to time, amend this Plan in any respect, except that, without the
approval of a majority of the shares of stock of the Corporation then issued and
outstanding and entitled to vote, no amendment shall be made (i) increasing or
decreasing the number of shares approved for this Plan (other than as provided
in Section 16) or (ii) decreasing the purchase price per share (other than as
provided in Section 16).
18. Termination of the Plan. This Plan and all rights of employees
under any offering pursuant to the Plan hereunder shall terminate:
(a) on the day that participating employees become entitled to
purchase a number of shares equal to or greater than the number of
shares remaining available for purchase. If the number of shares
so purchasable is greater than the shares remaining available, the
available shares shall be allocated by the Committee on a pro rata
basis of each participant's direct compensation on that date; or
(b) at any time, at the discretion of the Board of Directors.
No offering hereunder shall be made which shall extend beyond May 31,
1999. Upon termination of this Plan, all amounts in the accounts of
participating employees representing fractional shares shall be carried forward
into the employees' payroll deduction account under a successor Plan, if any, or
refunded as soon as practicable thereafter.
19. Governmental Regulations. The Corporation's obligation to sell
and deliver Managed Care Solutions, Inc. common stock under this Plan is subject
to the approval of any governmental authority required in connection with the
authorization, issuance or sale of such common stock.
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Each option shall also be subject to the requirement that, if at any
time the Corporation determines, in its discretion, that the listing,
registration or qualification of the shares subject to the option upon any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body is necessary or desirable as a
condition of, or in connection with, the issue or purchase of shares thereunder,
the option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable by the Corporation.
20. Purchase of Shares. Purchase of outstanding shares may be made
pursuant to and on behalf of this Plan, upon such terms as the Corporation may
approve, for delivery under this Plan.
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EXHIBIT 10.9
RFP/Contract YH4-0002
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM
Contract between the Arizona Health Care Cost
Containment System Administration (AHCCCSA) and
Ventana Health Systemt, Inc, (the "Program Contractor")
located at 2510 W. Dunlap Avenue, Ste 100 Phoenix AZ 85021.
----------------------------------------------------------------
Business Address City State Zip Code
WHEREAS AHCCCSA is duly authorized to execute and administer Contracts
under A.R.S. Section 36-2932, et. seq.; and
WHEREAS AHCCCSA desires that the Program Contractor deliver services
and the Program Contractor has agreed to deliver services pursuant to the terms
and conditions contained herein;
THEREFORE AHCCCSA and Program Contractor agree to abide by all terms
and conditions set forth in this Contract.
The document, its appendices and attachments, amendments and modifications
approved under Section 24 of these General Provisions, shall constitute the
entire Contract between the parties, and supersede all other understandings,
oral or written related to ALTCS Services.
FOR AND ON BEHALF OF THE ARIZONA FOR AND ON BEHALF OF THE PROGRAM
HEALTH CARE COST CONTAINMENT SYSTEM: CONTRACTOR:
Michael Veit James B. Burns
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Signature Signature
MICHAEL VEIT JAMES A. BURNS
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Typed Name Typed Name
CONTRACTS AND PURCHASING ADMINISTRATOR Chief Executive Officer
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Title Title
Sep 08 1993 June 20, 1996
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Date Date
YH3-0028-03 86-0618309
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CONTRACT I.D. NO. PROGRAM CONTRACTOR
FEDERAL EMPLOYER I.D. NO.
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ARTICLE I
PROGRAM CONTRACTOR'S PERFORMANCE
The Program Contractor shall furnish the personnel, facilities, equipment,
supplies, pharmaceuticals and other items and expertise necessary for, or
incidental to, the provision of ALTCS covered services as specified in AHCCCSA
and ALTCS Rules and at locations specified in Appendix A to ALTCS members
enrolled with the Program Contractor. The Program Contractor, in accordance with
42 CFR 434.30, must provide and make available to all members, emergency
services on a seven-day-a-week, twenty-four-hour-a-day basis and, provided that
prior authorization restrictions are adhered to, cover such services in or out
of the Program Contractor's service area. (A copy of Appendix A is attached
hereto and incorporated herein by reference.)
ARTICLE II
PAYMENT TO PROGRAM CONTRACTOR
In consideration of all services rendered by the Program Contractor under this
Contract, AHCCCSA shall pay the Program Contractor the amount specified in
Appendix B, and such payment shall be subject to the other conditions specified
in this Contract. (A copy of Appendix B is attached hereto and incorporated
herein by this reference.)
ARTICLE III
ALTCS GENERAL PROVISIONS
The parties to this Contract shall be bound by the terms and conditions
contained in the ALTCS "General Provisions" and "Special Provisions" which are
attached hereto and incorporated by this reference. For interpreting the
provisions of this Contract, the following sources shall have precedence in
descending order: the Constitution and laws of the United States, and applicable
federal regulations; the Constitution and laws of Arizona, and applicable state
rules; the terms of this Contract, including all Appendices and duly executed
Amendments; and the Request for Proposals upon which this Contract is based.
ARTICLE IV
REPRESENTATIONS
By signing this Contract, the Program Contractor certifies, under penalty of
law, that the information provided herein is true, correct and complete to the
best of the Program Contractor's knowledge and belief. The Program Contractor
also acknowledges that should investigation at any time disclose any
misrepresentation or falsification, this Contract may be terminated by AHCCCSA
without penalty or further obligation by AHCCCSA. The Program Contractor
certifies that it meets all AHCCCSA's requirements for a state defined health
maintenance organization as specified in the State Plan (which requirements are
hereby incorporated by reference).
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<PAGE> 3
GENERAL PROVISIONS
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1. DEFINITIONS
1.1 AHCCCSA means the Arizona Health Care Cost Containment System
Administration.
1.2 AHCCCS means the Arizona Health Care Cost Containment System as
authorized by A.R.S. Section 36-2903 et seq.
1.3 ALTCS means Arizona Long-Term Care System as authorized by A.R.S.
Section 36-2931 et seq.
1.4 Appendix A is the Appendix to this Contract which contains a
description of the services to be delivered pursuant to this Contract.
1.5 Appendix B is the Appendix to this Contract which contains the
approved reimbursement rate for the delivery of services pursuant to this
Contract.
1.6 Appendix C is the Appendix to this Contract which contains the
standard Subcontract provisions.
1.7 Contract Services means the services to be delivered by the
Program Contractor which are so designated in Appendix A to this Contract,
A.R.S. Sections 36-2938 and 36-2939, and ALTCS Rules.
1.8 Contract Year means the 12 month period from October 1, through
September 30.
1.9 CSDP means the Comprehensive Service Delivery Plan required by
A.R.S. Section 36-2940 and ALTCS Rules.
1.10 Day means a calendar day.
1.11 FFP means federal financial participation of that portion of the
cost of a service of a program funded by the federal government.
1.12 Fiscal Year means the Program Contractor's fiscal year.
1.13 HCFA means the federal Health Care Financing Administration.
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GENERAL PROVISIONS
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GENERAL PROVISIONS
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1.14 Member, as that term is used herein, means an eligible person who
is enrolled with a Program Contractor in the Arizona Long-Term Care System.
1.15 Party means either AHCCCSA or the Program Contractor in its
capacity as a contracting party to this Contract.
1.16 Program Contractor means a county or group of counties, the
Department of Economic Security or any other entity that contracts with AHCCCSA
pursuant to A.R.S. Section 36-2940 or Section 36-2944 to provide Contract
Services to members.
1.17 Provider means a person or some other entity that subcontracts
with a Program Contractor for the delivery of services to members pursuant to
A.R.S. Section 36-2931 et seq.
1.18 Special Provisions means the section of this Contract which
contains Program Contractor-specific terms and conditions. If General Provisions
and Special Provisions conflict, Special Provisions shall govern.
1.19 State means the State of Arizona.
1.20 Subcontract means an agreement entered into by the Program
Contractor with any provider of services under this Contract who agrees to
furnish covered services to members, or with a marketing organization, or any
other organization or person who agrees to perform any administrative function
or service for the Program Contractor specifically related to fulfilling the
Program Contractor's obligations to AHCCCSA under the terms of this Contract.
2. GENERAL REQUIREMENTS
2.1 This Contract shall become effective on the date signed by both
parties or at a different date as specified in the Contract. AHCCCSA shall make
no payment under this Contract until it is executed.
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GENERAL PROVISIONS
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<PAGE> 5
GENERAL PROVISIONS
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2.2 Any action on this Contract shall be brought in an appropriate
court of the State of Arizona.
2.3 The Program Contractor shall obtain and maintain all licenses,
permits, certificates, and professional and general liability and automobile
insurance, disability insurance and worker's compensation. The Program
Contractor shall also satisfy any tax obligations which arise under this
Contract.
2.4 The Program Contractor shall be an independent contractor in the
performance of this Contract, and shall not be considered an officer, employee,
or agent of the State or AHCCCSA by virtue of such contract.
3. RENEWAL OF CONTRACT
3.1 This Contract may be renewed by the mutual consent of the Program
Contractor and Administration for two additional 12-months periods. The terms
and conditions of any Contract renewal shall not be subject to negotiation,
except for monthly capitation rates. It is understood and agreed that any
component of the capitation rate, including the percentage of member months
assumed to be home and community based services (HCBS) for purposes of the
capitation calculation, shall be subject to negotiation. It is further
understood and agreed that each component of the capitation rate may be
increased or decreased up to, but not more than the inflation rate (expressed as
a percentage) for the National Consumer Price Index for all Urban Consumers
(Medical Care) published by the U.S. Department of Labor, Bureau of Labor
Statistics for the twelve (12) months ending June 30 of the contract year
preceding the renewal period under consideration. Any Contract renewal shall be
reduced to writing and executed as a Contract amendment. To be effective, the
Program Contractor's election not to renew this Contract must be reduced to
writing and received by AHCCCSA ninety (90) days prior to the Contract
termination date.
3.2 AHCCCSA will consider negotiating an overall rate of change with
the Program Contractor for the renewal year. In developing the overall rate of
change, AHCCCSA may use applicable inflation factors, quarterly and annual
financial statements submitted by the Program Contractor, and change in the
nursing facility fee-for-service rates. The latter will be used to compute the
increase/decrease in the gross institutional line for capitation. The
computation will examine each individual in the Program Contactor's county
(rural
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GENERAL PROVISIONS
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GENERAL PROVISIONS
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counties may be combined) and assign a nursing cost to the individual. This data
will be summed across individuals and will have capital and other
fee-for-service cost components added to them. This may include add-ons to
compensate facilities for new requirements.
3.3 AHCCCSA may, in a renewal year, use quarterly and annual audited
financial data in lieu of the previous years' capitation component for the gross
institutional line and any other capitation component.
3.4 As a condition of Contract renewal, the Program Contractor shall
comply with the disclosure requirements of 42 C.F.R. Part 455 and AHCCCS and
ALTCS Rules.
3.5 Program Contractor acknowledges and agrees that section 9434 of the
Omnibus Budget Reconciliation Act of 1986 requires prior review and approval by
HCFA of contracts, including renewal periods, in excess of $100,000.
4. COMPLIANCE WITH LAWS, RULES AND REGULATIONS
The Program Contractor shall comply with provisions of federal laws and
regulations governing Title XVIII Medicare Program and Title XIX Medicaid
Program, except for those requirements waived for AHCCCSA by the federal
government. The Program Contractor shall comply with the provisions of Title 36,
Chapter 29, Arizona Revised Statutes, governing both the Arizona Health Care
Cost Containment System and the Arizona Long Term Care System and with all
applicable rules adopted by AHCCCSA pursuant to those statutes. The Program
Contractor shall also comply with all applicable federal, state and local laws,
rules, regulations, policies and executive orders, without limitation to those
designated within this Contract.
5. SEVERABILITY
If any provision of this Contract is held invalid or unenforceable, the
remaining provisions shall continue valid and enforceable to the full extent
permitted by law.
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GENERAL PROVISIONS
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GENERAL PROVISIONS
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6. OTHER CONTRACTS
AHCCCSA may undertake or award other contracts for additional or
related work, and the Program Contractor shall fully cooperate with such other
contractors and AHCCCSA employees or designated agents, and carefully fit its
own work to such other contractor's work. The Program Contractor shall not
commit or permit any act which will interfere with the performance of work by
any other contractor or by Administration employees.
7. ASSIGNMENT OR DELEGATION OF THE CONTRACT
Neither the rights nor the obligations of this Contract may be assigned
or delegated by a Program Contractor in whole or in part without prior written
consent of AHCCCSA.
8. SUBCONTRACTS
8.1 The Program Contractor may provide services under this Contract
through subcontracts with providers. If a Program Contractor utilizes a
subcontractor to perform case management services, that subcontractor shall not
be a provider.
8.2 Subcontracts for services, other than case management, to be
provided under this Contract shall be awarded through competitive proposals in
as nearly the same manner as practical to that provided in A.R.S. Section
41-2534.
8.3 All subcontracts must be in writing. All subcontracts are subject
to review and approval by the Director of AHCCCSA prior to the effective date
thereof and shall include a provision predicating the existence, validity, and
enforceability of the subcontract on its prior written approval by AHCCCSA.
AHCCCSA requires that a copy of all requests for proposals for contracted
services be submitted to AHCCCSA prior to their release. AHCCCSA requires a copy
of all executed subcontracts be submitted by the Program Contractor. If a
standard subcontract format previously approved by AHCCCSA is used, the Program
Contractor need only provide a copy of the signature page from the executed
subcontract. The signature page must include the specialty of the provider.
However, hospital subcontracts, data processing, third-party administrators,
case management and quality
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GENERAL PROVISIONS
7
<PAGE> 8
GENERAL PROVISIONS
- - --------------------------------------------------------------------------------
third-party administrators, case management and quality management subcontracts
shall be submitted to AHCCCSA for their approval prior to their execution.
Furthermore, if any standard subcontract is modified in any way (except in an
amendment which renews the subcontract) AHCCCSA shall require a submission of
the entire subcontract for approval prior to execution of the modification.
8.4 The Program Contractor shall remain legally responsible for
Contract performance whether or not subcontracts are used. No subcontract shall
operate to terminate the legal responsibility of the Program Contractor to
assure that all activities carried out by the subcontractor conform to the
provisions of this Contract.
8.5 All subcontracts shall comply with the applicable provisions of
federal law and regulations governing Title XVIII and Title XIX programs with
the provisions of the laws and regulations of this State governing AHCCCS and
ALTCS, and with all the federal or state laws and regulations applicable to this
service or activity covered by the subcontract. All subcontractors shall meet
the requirements of 42 C.F.R. Section 434.6(b).
8.6 All subcontracts shall contain, at a minimum, the standard AHCCCSA
subcontract provisions set forth in Appendix C to this Contract and such
additional terms as required by AHCCCSA or by ALTCS Rules or by any Special
Provisions of this Contract.
8.7 The Program Contractor shall comply with the provisions of AHCCCSA
and ALTCS Rules and policies and procedures relating to the submission of
disclosure statements for each subcontractor on a periodic basis, but no less
than once a year. At the discretion of the Director, additional or more frequent
disclosure statements may be required.
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GENERAL PROVISIONS
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GENERAL PROVISIONS
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9. RECORDS AND REPORTS
9.1 The Program Contractor shall maintain and preserve for inspection
all books and records relating to Contract Services and expenditures, including
reports to AHCCCSA and working papers used in the preparation of reports to
AHCCCSA. The Program Contractor shall comply with all specifications for record
keeping established by AHCCCSA. All books and records shall be maintained to the
extent and in such detail as required by ALTCS policies and procedures. Records
shall include, but shall not be limited to, financial statements, records
relating to the quality of care, medical records, prescriptions files and other
records specified by AHCCCSA.
9.2 The Program Contractor agrees to make available at the office of
the Program Contractor at all reasonable times during the term of this Contract
and the period set forth in Section 9.3 below any of its records including
files, correspondence and other information pertaining to services and claims
for payment. The Program Contractor shall maintain executed originals of all
subcontracts in its own offices or record, and subcontracts shall be accessible
to AHCCCSA officials within 48 hours of notification. According to law and rule,
such subcontracts shall be deemed public records and from time to time, AHCCCSA
receives requests for viewing of such subcontracts by interested persons. The
Program Contractor shall provide a copy of subcontracts within 48 hours of
request by AHCCCSA. The aforementioned records shall be available for
inspection, audit or reproduction by any authorized representative of AHCCCSA,
the State, the U.S. Department of Health and Human Services or any other federal
agency.
9.3 The Program Contractor shall preserve and make available all
records for a period of five (5) years from the date of final payment under this
Contract.
9.4 All aforementioned records which pertain to eligible persons or
members shall be retained in accordance with the requirements of 45 C.F.R. Part
74, Subpart D.
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GENERAL PROVISIONS
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GENERAL PROVISIONS
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10. FINANCIAL REPORTS AND SANCTIONS
10.1 The Contractor shall comply with all of the following financial
reporting requirements. Throughout the term of this Contract, including any
renewal periods, AHCCCSA shall retain the right to require more detailed and
more frequent financial reporting which may include monthly financial statements
and reports. Failure to provide accurate, complete and timely reports will
result in financial sanctions.
10.2 Certified financial audits shall be in compliance with the ALTCS
Uniform Accounting and Reporting System and Guide for Audits of ALTCS
Contractors and Providers, with ALTCS revenues and expenses reported separate
from all other lines of business or activity. Certified financial audits must be
received by AHCCCSA within ninety (90) days for the preliminary Audit, and
one-hundred-twenty (120) days for the final Audit, of the Program Contractor's
fiscal year end.
Failure to submit an acceptable, timely preliminary Certified
Financial Audit shall result in a penalty each month (or portion thereof), until
such audit is received by AHCCCSA in the amount of $2,500, or one percent (1%)
of one month's capitation, whichever is less. Failure to provide an acceptable,
timely final Certified Financial Audit within 30 days of notification from
AHCCCSA that the preliminary certified audit is acceptable, shall result in a
penalty each month (or portion thereof), until such audit is received by AHCCCSA
in the amount of $5,000 or two percent (2%) of one month's capitation, whichever
is less. Each of these penalties may be refundable at the discretion of the
Director upon submission of the Certified Audits.
10.3 Financial Disclosure Report
This report shall provide complete disclosure of Program
Contractor ownership and control, including objective justification of
reasonableness of all related party transactions. The Report is due with the
audited financial statement.
Failure to submit an acceptable, timely report shall result in a
penalty each month (or portion thereof), until such report is received by
AHCCCSA in the amount of $2,500, or one percent (1%) of one month's capitation,
whichever is less.
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GENERAL PROVISIONS
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GENERAL PROVISIONS
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10.4 Reconciliation Annual Audit Report and Program Contractor
Year-To-Date Financial Report Information.
This report contains a written reconciliation of all differences
between the statement of operations and financial position as reported quarterly
and the corresponding amounts per the audit report. The report is due with the
preliminary and final certified audit.
Failure to submit an acceptable, timely report shall result in a
penalty each month (or a portion thereof), until such report is received by
AHCCCSA in the amount of $2,500 or one percent (1%) of one month's capitation,
whichever is less.
10.5 Annual Analysis of Health Care Costs by Medicare and non-Medicare
classification after audit.
This report shall show the gain/(loss) by Medicare and
non-Medicare classification. The report is due with the preliminary, certified
and audited financial statement.
Failure to submit an accurate, timely report shall result in a
penalty each month (or a portion thereof), until such report is received by
AHCCCSA in the amount of $1,000 or one-half of one percent of one month's
capitation, whichever is less.
10.6 Quarterly Analysis of Health Care Cost by Major Rate
Classification
This report shows, on a quarterly basis, the gain/(loss) by major
rate code. The report is due within 45 days of the end of each calendar quarter.
Failure to submit an accurate, timely report shall result in a
penalty each month (or a portion thereof), until such report is received by
AHCCCSA in the amount of $1,000 or one-half of one percent of one month's
capitation, whichever is less.
10.7 Quarterly Financial Statements
These statements shall be submitted using the format approved by
AHCCCSA and shall include Supplemental Schedules describing all inter-entity
related party transactions. Statements are due withing 45 days after end of each
calendar quarter.
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Failure to provide accurate, timely financial statements or other
reports will result in a penalty each month (or portion thereof), until such
reports are received by AHCCCSA in the amount of $2,500 or one percent (1%) of
one month's capitation, whichever is less.
11. WARRANTY
Program Contractor warrants that all Contract Services performed
hereunder conform to the requirements of this Contract and are performed by
qualified personnel in accordance with generally recognized standards of care.
12. ASSIGNMENT OF OVERCHARGES
The Program Contractor and AHCCCSA recognize that in actual economic
practice, overcharges resulting from antitrust violations are in fact borne by
the purchaser. Therefore, the Program Contractor assigns, without limitation or
qualification, to AHCCCSA all legal and equitable title to any and all claims
for such overcharges the Program Contractor may have which arise under this
Contract.
13. RECOGNITION OF ADMINISTRATION SUPPORT
All advertisements, publications and printed materials which are
produced by the Program Contractor and refer to Contract Services shall state
that such services are funded in part under contract with AHCCCSA and the State
of Arizona.
14. INFRINGEMENT OF PATENTS AND COPYRIGHTS
14.1 The Program Contractor, at its own expense, shall defend any claim
or suit which may be brought against AHCCCSA or the State of Arizona for the
infringement of United States patents or copyrights arising from the Program
Contractor's or AHCCCSA's use of any equipment, materials or information
prepared or developed by the Program Contractor in connection with the
performance of this Contract and in any suit the Program Contractor shall
satisfy any judgment or settlement for such infringement. AHCCCSA shall give the
Program Contractor written notice of such
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claim or suit and full right and opportunity to conduct the defense thereof,
together with full information and reasonable cooperation. This provision shall
not be construed to require any action to be taken or liability to be incurred
by the Program Contractor as a result of the sole, independent and distinct use
by AHCCCSA of equipment, materials or information not prepared or developed by
the Program Contractor.
14.2 If principles of governmental or public law are involved in any
action for infringement of patents or copyrights, AHCCCSA may participate in the
defense of such action at its own expense.
14.3 If in the Program Contractor's opinion the equipment, materials or
information specified in Section 14.2 above is likely to or does become the
subject of a claim of infringement of a United State patent or copyright, then
without diminishing the Program Contractor's obligation to satisfy any final
judgment or settlement, the Program Contractor may, with AHCCCSA's written
consent, substitute other equally suitable equipment, materials and information,
or at the Program Contractor's option and expense, obtain the right for the
Program Contractor and AHCCCSA to continue to use such equipment, materials and
information.
15. OWNERSHIP OF INFORMATION AND DATA
15.1 Any data or information, including all software, documentation and
manuals developed by the Program Contractor pursuant to this Contract shall be
deemed to be owned by AHCCCSA. The Federal Government shall have a royalty-free,
nonexclusive and irrevocable license to reproduce, publish or otherwise use and
to authorize others to use for Federal Government purposes such data or
information system, software, documentation and manuals. Proprietary software
which is provided at established catalogue or market prices and sold or leased
or licensed to the general public shall not be subject to the ownership or
licensing provisions in this section.
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15.2. Data, information and reports collected or prepared by the
Program Contractor in the course of performing its duties and obligations under
this Contract shall be deemed to be owned by AHCCCSA. The ownership provision is
in consideration of the Program Contractor's use of public funds in collecting
and preparing such data, information and reports. These items shall not be used
by the Program Contractor for any independent project of the Program Contractor
or publicized by the Program Contractor without prior written permission of
AHCCCSA. Subject to applicable state and federal laws and regulations, AHCCCSA
shall have the full and complete right to reproduce, duplicate, disclose and
otherwise use all such information. At the termination of the Contract, the
Program Contractor shall make available all such data to AHCCCSA within thirty
(30) days following termination of the Contract or such longer period as
approved by the Director. For purposes of this subsection, the term "data" shall
not include member medical records.
15.3 Except as otherwise provided in this Section, if any copyrightable
or patentable material is developed by Program Contractor in the course of
performance of this Contract, the Federal Government, AHCCCSA and the State of
Arizona shall have a royalty-free nonexclusive and irrevocable right to
reproduce, publish or otherwise use, and to authorize others to use, the work
for state or Federal Government purposes. Additionally, the Program Contractor
shall be subject to the applicable provisions of 45 C.F.R. Part 74 and 45 C.F.R.
Parts 6 and 8 as they pertain to such materials.
16. INDEMNITY AND INSURANCE
16.1 The Program Contractor shall indemnify and hold harmless the State
and AHCCCSA, their agents, officers and employees, against all injuries, deaths,
losses, damages, claims, suits, liabilities, judgments, costs and expenses with
respect to third parties, which may in any manner accrue against the State or
AHCCCSA, their agents, officers or employees, through intentional conduct,
negligence or omission of the Program Contractor, its agents, officers,
employees or of any subcontractor or any other person, firm or corporation
furnishing or supplying work, services, materials or supplies in connection with
the performance of the Program Contractor's obligations under this Contract.
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16.2. The Program Contractor shall at its own expense appear, defend
and pay all charges of attorneys and all costs and other expenses in any action
arising from any such injury, death, loss, damage, claims, suit, liability,
judgment, cost or expense provided that the Program Contractor has been promptly
notified thereof and has the full right to defend same, and if any judgment
shall be rendered against the State or AHCCCSA, their agents, officers or
employees, in any such action, the Program Contractor shall, at its own expense
and attorneys' fees, reimburse the State and AHCCCSA, their agents, officers and
employees for costs and attorney's fees incurred for defense of any action
arising from any such damage, claim, suit, liability, judgment, cost or expense.
16.3 The Program Contractor shall maintain for the duration of this
Contract a policy or policies of professional liability insurance, comprehensive
general liability insurance and commercial automobile liability insurance in an
amount of at least $1,000,000 for each occurrence. Such policy and policies
shall list the State of Arizona and AHCCCSA as an additional insured. The
Program Contractor agrees that any insurance protection required by this
Contract, or otherwise obtained by the Program Contractor, shall not limit the
responsibility of the Program Contractor to indemnify, keep and save harmless
and defend the State and AHCCCSA, their agents, officers and employees as
provided herein. Furthermore, the Program Contractor shall maintain Compensation
Insurance, and all other applicable insurance workers coverage, for itself and
its employees, and AHCCCSA shall have no responsibility or liability for any
such taxes or insurance coverage.
16.4 The State and AHCCCSA shall bear no liability for Program
Contractor's failure or refusal to pay valid claims of subcontractors,
providers, non-contracting providers, or nonproviders. The Program Contractor
shall indemnify and hold harmless the State from such claims and shall bear all
costs in defense of any action over such liability, including attorneys' fees.
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16.5 The State and AHCCCSA shall bear no liability under any other
contract which the Program Contractor may execute with other parties for the
provision of services to either the Program Contractor, to ALTCS members or for
any other purpose(s). The Program Contractor shall indemnify and hold the State
and AHCCCSA harmless from any and all liability arising from these contracts and
shall bear all costs of defense of any action over such liability, including
attorneys' fees.
17. COORDINATION OF BENEFITS
The Program Contractor shall collect or allow its subcontractors to
collect any monies available from third-party payors for services provided to
its members, except for underinsured motorist insurance, third-party liability
insurance and tort fees. Both parties shall provide such information as is
necessary to facilitate coordination of benefits. Such third-party payors
include, but are not limited to, any individual, entity or program that is or
may be liable to pay all or part of the medical expenses incurred by a member.
The Program Contractor shall additionally perform any activities related to
third-party liability required by ALTCS Rules, policies and procedures.
Additionally, the Program Contractor shall perform those activities related to
third-party liability requirements which are identified and prescribed in 42
C.F.R. Part 433, Subpart D. The Program Contractor shall report to AHCCCSA the
amounts of third-party collections in the form and with the frequency as may be
required by the Director of AHCCCSA. AHCCCSA may assume at its discretion,
responsibility for the coordination of certain types of third-party liability.
The distribution of funds collected from third-parties shall be in accordance
with ALTCS Rule, or policies and procedures.
18. ENROLLMENT AND DISENROLLMENT
18.1 Procedures for coverage, enrollment, choice of health
professionals and termination of member enrollment shall be in accordance with
the requirements of 42 C.F.R. Sections 434.27 and 434.29 and ALTCS Rules,
policies and procedures.
18.2 The Program Contractor shall allow each member to choose his
primary care physician in the Program Contractor's network, to the extent that
such choice is possible and appropriate.
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18.3 The Program Contractor recognizes that AHCCCSA is the sole
authority in enrolling and disenrolling members. The Program Contractor shall
not disenroll any member.
19. PROHIBITION AGAINST DISCLOSURE OF CONFIDENTIAL INFORMATION
Confidential information shall be safeguarded pursuant to 42 C.F.R.
Part 431, Subpart F, A.R.S. Sections 36-107, 36-2903(J), 36-2932(I), 41-1959 and
46-135, and AHCCCS and ALTCS Rules.
20. CHANGES IN PERFORMANCE: WAIVERS
20.1. No alteration or variation of the services to be performed by the
Program Contractor under this Contract shall be made without prior written
approval by AHCCCSA. The Program Contractor shall provide AHCCCSA written
notification of any reorganization within two weeks of the reorganization,
unless the reorganization involves services to members, then the Program
Contractor shall request written approval of the reorganization prior to making
the change.
20.2 Failure to exercise any right, power or privilege under this
Contract shall not operate as a waiver thereof, nor shall a singular or partial
exercise thereof preclude any other exercise of that right, power or privilege,
or any other right, power or privilege.
20.3 The waiver of any covenant, condition, duty, obligation or
undertaking contained in or made a part of this Contract shall not be effective
unless the waiver is made in writing by the party which has the right to
performance of the Contract provision. Any forbearance or indulgence in any
other form or manner by either party in either regard whatsoever shall not
constitute a waiver of the Contract, condition, duty, obligation or undertaking
to be kept, performed or discharged by the party to which the same may apply.
Until complete performance or satisfaction of all such covenants, conditions,
duties, obligations and undertakings, the party shall have the right to invoke
any remedy under this Contract, or under law, notwithstanding any such
forbearance or indulgence.
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21. CHANGE IN SCOPE OF CONTRACT SERVICES
The Administration may modify, in writing, the services provided by the
Program Contractor, or may temporarily suspend certain services to be provided
to certain members pursuant to this Contract or may suspend or limit certain
categories of expense for services, by providing thirty (30) days advance notice
to the Program Contractor. Any such modification or suspension of services shall
be reduced to writing as a Contract amendment. Program Contractor acknowledges
that, if at any time, federal monies described in A.R.S. Section 36-2932 are
denied, not renewed or become unavailable for any reason, the Director of
AHCCCSA shall have the authority to suspend the delivery of any and all services
under this Contract. Upon notification of same by the Director of AHCCCSA,
AHCCCSA shall not be liable for the cost of further services.
22. GRIEVANCES AGAINST PROGRAM CONTRACTOR
The Program Contractor shall maintain a system for reviewing and
adjudicating grievances by members, providers, or subcontractors arising from
this Contract or subcontracts thereunder in accordance with applicable ALTCS
Rules and federal regulations. Such grievance system must be approved in
advance, in writing by AHCCCSA. Such system shall, at a minimum, provide for the
prompt resolution of grievances and assure the participation of individuals with
authority to require corrective action.
23. GRIEVANCES BY THE PROGRAM CONTRACTOR AGAINST THE ADMINISTRATION
The exclusive manner with which the Program Contractor shall comply to
assert any claim, grievance, dispute or demand against AHCCCSA shall be the
grievance process specified in ALTCS Rules and the Administrative Procedure Act,
A.R.S. Section 41-1001, et seq.
24. MODIFICATION OR TERMINATION OF THE CONTRACT BY MUTUAL CONSENT
24.1 This Contract may be modified at any time by mutual consent of the
parties, or unilaterally by AHCCCSA when modifications are mandated by changes
in federal or state laws or regulations. Any such modification shall be in
writing and executed by both parties hereto.
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24.2 This Contract may be terminated, in accordance with applicable
state and federal law, at any time by mutual consent of the parties. The Program
Contractor must provide AHCCCSA with at least ninety (90) days notice of said
termination.
25. TERMINATION OF CONTRACT BY AHCCCSA
25.1 AHCCCSA may terminate or suspend this Contract in whole or part
for good cause in accordance with applicable provisions of ALTCS Rules. The
grounds for termination or suspension shall include, but are not limited to, the
grounds specified in this Contract and in applicable ALTCS Rules, or a breach of
this Contract or violation of ALTCS Rules. AHCCCSA shall give written notice to
the Program Contractor of intent to terminate or suspend the Contract. The
notice shall state the effective date of, and the reason for, termination or
suspension.
25.2 AHCCCSA, in addition to the other rights set forth elsewhere in
this Contract, reserves the right to terminate or suspend this Contract in whole
or in part without cause effective thirty (30) days after mailing written notice
of termination or suspension by certified mail, return receipt requested, to the
Program Contractor.
25.3 AHCCCSA, by written notice to the Program Contractor, may
terminate this Contract if it is found, after notice and hearing, that
gratuities in the form of entertainment, gifts or otherwise were offered or
given by the Program Contractor, or any agent or representative of the Program
Contractor to any officer or employee of AHCCCSA with a view towards securing a
contract or securing favorable treatment under the Contract, provided that the
existence of the facts upon which AHCCCSA makes such findings shall be an issue
and may be reviewed by a competent court. If the Contract is terminated under
this subsection, unless the Program Contractor is a governmental agency,
instrumentality, or subdivision thereof, AHCCCSA shall be entitled to, and the
Program Contractor agrees to pay, a penalty in addition to any other damages to
which it may be entitled by law, and to exemplary damages in the amount of three
times the costs incurred by the Program Contractor in providing any such
gratuities to any such officer or employee.
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25.4 AHCCCSA may cancel this Contract without penalty or further
obligation to the State pursuant to A.R.S. Section 38-511, if any person
significantly involved in negotiating, securing, drafting or creating this
Contract on behalf of the State of Arizona is or becomes at any time while this
Contract or any extension of this Contract is in effect, an employee of any
other party to this Contract in any capacity or a consultant to any other party
to this Contract with respect to the subject matter of this Contract.
Cancellation shall be effective when written notice from the Governor is
received by the Program Contractor unless the notice specifies a later time.
25.5 The parties to this Contract acknowledge that the State's fiscal
year ends June 30, and further acknowledge that AHCCCSA may terminate this
Contract without recourse, further obligation or penalty in the event that
insufficient amounts, in the judgment of the Director, are provided by the
county or Federal Government for the ALTCS program to allow continuation of this
Contract.
25.6 In the event this Contract is terminated with cause, AHCCCSA shall
obtain payment for the purpose of paying claims for covered expenses to Program
Contractor's members and any damages AHCCCSA has incurred or may reasonably be
expected to incur by reason of breach of this Contract or violation of ALTCS
Rules. AHCCCSA may additionally require the Program Contractor, at its own
expense, to assist in the training of personnel and may require the Program
Contractor to extend its performance beyond the termination notification period
provided in this section until suitable arrangements have been made by AHCCCSA
for a replacement Program Contractor.
25.7 In the event the Contract is terminated with or without cause, or
expires, the Program Contractor shall assist AHCCCSA in the transition of the
members to other Program Contractors. Such assistance and coordination shall
include, but not be limited to, the forwarding of medical and other records and
the facilitation and scheduling of medically necessary appointments for care and
services. In the event of termination with cause, the cost of reproducing and
forwarding medical charts and other materials shall be born by the Program
Contractor. The Program Contractor
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shall be responsible for providing all reports set forth in this Contract. The
Program Contractor must make provision for continuing all
management/administrative services until the transition of members is completed
and all other requirements of this Contract satisfied. The Program Contractor
will be responsible for the following:
25.7.1 Transfer of requested medically necessary records.
25.7.2 Identification of high risk patients.
25.7.3 Provision of medically necessary transportation.
25.7.4 Provision of prescription refills, to cover a minimum of
five (5) days beyond the Contract termination date, unless other arrangements
with the receiving Program Contractor have been made.
25.7.5 Provision of durable medical equipment for a minimum of
five (5) days beyond the Contract termination date, unless other arrangements
with the receiving Program Contractor have been made.
25.7.6 Notification of subcontractors and members.
25.7.7 Payment of all outstanding obligations for services
rendered to members.
25.7.8 Until AHCCCSA is satisfied that the Program Contractors
paid all such obligations, the Program Contractor shall provide the following
financial reports to AHCCCSA:
25.7.8.1 a monthly claims aging report by
provider/creditor; including Incured But Not Reported (IBNR) amounts;
25.7.8.2 A monthly summary of cash disbursement; and
25.7.8.3 Copies of all bank statements received by the
Program Contractor in the preceding month for Program Contractor's bank
accounts.
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Such reports shall be due on the fifth day of each
succeeding month for the prior month.
25.8 In the event of termination or suspension of the Contract by
AHCCCSA, such termination or suspension shall not affect the obligation of the
Program Contractor to indemnify AHCCCSA for any claim by any third party against
the State of AHCCCSA arising from the Program Contractor's performance of this
Contract and for which the Program Contractor would otherwise be liable under
this Contract.
25.9 Any dispute by the Program Contractor with respect to termination
or suspension to this Contract by AHCCCSA shall be settled in accordance with
exclusive procedures established for grievances in the AHCCCS and ALTCS Rules.
25.10 Any funds advanced to the Program Contractor for coverage of
members for periods after the date of termination shall be returned to AHCCCSA
within thirty (30) days after the date of termination of the Contract. In the
event the Contract is terminated in part, the Program Contractor shall continue
the performance of the Contract to be extended.
26. NON-DISCRIMINATION
26.1 The Program Contractor shall comply with Title VII of the Civil
Rights Act of 1964, as amended, the Age Discrimination and Employment Act, State
Executive Order No. 75-5 and Federal Executive Order No. 11246 which mandate
that all persons, regardless of race, color, religion, sex, age, national origin
or political affiliation shall have equal access to employment opportunities.
The Program Contractor shall comply with Section 503 of the Rehabilitation Act
of 1973, as amended, which prohibits discrimination in the employment or
advancement of employment of qualified persons because of a physical or mental
handicap. The Program Contractor shall comply with Title VI of the Civil Rights
Act of 1964, which prohibits the denial of benefits of or participation in
Contract Services on the basis of race, color, or national origin. The Program
Contractor shall comply with the requirements of Section 504 of the
Rehabilitation Act of 1973, as amended, which prohibits discrimination on the
basis of handicap, in delivering Contract Services.
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26.2 The Program Contractor shall not discriminate against a member on
the basis of health status or need for health services. Furthermore, the Program
Contractor shall comply with 42 C.F.R. Section 434.25(b) regarding
non-discrimination on the basis of health status or need for health services.
27. INFORMATION TO MEMBERS
The Program Contractor shall comply with all provisions specified in
applicable ALTCS Rules and policies and procedures, relating to information to
be provided to members.
28. RIGHT OF INSPECTION
AHCCCSA and the Federal government may evaluate through inspection and
other means, the quality, appropriateness, and timeliness of services provided
under this Contract. The Program Contractor shall comply with all provisions
specified in applicable ALTCS Rules and policies and procedures relating to the
audit of the Program Contractor's records and the inspection of the Program
Contractor's facilities.
29. FUNDING FOR ALTCS
29.1 The parties recognize and agree that funding for this Contract is
provided by the federal government, the State and the counties.
29.2 The Program Contractor recognizes that HCFA has limited the funds
available for Home and Community Based Services. Funds provided for Home and
Community Based Services shall be limited to a fixed percentage.
30. QUALITY MANAGEMENT
The Program Contractor shall at all times during the term of this
Contract maintain an AHCCCSA approved internal quality management system in
accordance with ALTCS Rules and policies and procedures and 42 C.F.R. Section
434.34 and Part 456.
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31. FRAUD AND ABUSE
The Program Contractor shall have the responsibility to report to
AHCCCSA any cases of suspected fraud or abuse by providers, subcontractors,
members or employees. The Program Contractor shall submit in writing the
information to AHCCCSA's Fraud and Abuse Section as soon as practicable after
discovering suspect incidents.
32. CASE MANAGEMENT
The Program Contractor shall maintain an AHCCCSA approved plan for its
case management system. In developing and maintaining this plan, the Program
Contractor must utilize information obtained from the preadmission screening
conducted pursuant to A.R.S. Section 36-2936 in order to determine the types of
services a member should receive.
33. ACCOUNTING SYSTEM
The Program Contractor shall comply with the accounting system
requirements established by the Director of AHCCCSA.
34 SANCTIONS
34.1 The Program Contractor shall be subject to the Director of
AHCCCSA's authority to assess sanctions as provided in ALTCS Rule R9-28-607.
34.2 In the event the Program Contractor provides inappropriate
services to a person determined eligible, AHCCCSA shall have the right to
withhold or forfeit payments to the Program Contractor. The cost of any federal
sanctions placed on AHCCCSA for such errors shall be the minimum sanction
imposed.
35. INCORPORATION BY REFERENCE
35.1 The subject RFP, any amendments hereto, and the Program
Contractor's proposal are hereby incorporated by reference as being part of this
Contract as provided herein.
35.2 To the extent that any provisions of the subject RFP are in
conflict with this Contract, the provisions of this Contract shall control.
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35.3 To the extent that any provisions of the Contractor's proposal are
in conflict with this Contract, the provisions of this Contract shall control.
35.4 To the extent the SPECIAL PROVISIONS of this Contract are in
conflict with the GENERAL PROVISIONS of this Contract, the SPECIAL PROVISIONS
shall control.
36. SPECIALTY CONTRACTS
The Director of AHCCCSA may at any time negotiate or contract on behalf
of Program Contractors and AHCCCSA for specialized hospital and medical
services. If the Director has contracted for such specialized services, the
Program Contractor of record may be required to include such services within
their delivery networks and make contractual modifications necessary to carry
out this Section. Specialty contractors shall take precedence over all other
contractual arrangements between the Program Contractors of record and their
providers. If the Program Contractor's specialty contracts are less costly than
those of AHCCCSA, AHCCCSA may allow the Program Contractor to continue using its
specialty contractors.
37. ENCOUNTER DATA VALIDATION/SANCTIONS
37.1 A sample of claims or claims type data will be compared to
encounters submitted to determine omission error rates pursuant to the
procedures described in this Special Provision.
The Program Contractor shall be assessed penalties for
non-compliance with ALTCS encounter submission standards. The penalties shall be
applied based on the criterion of omission of data. Penalties also shall be
applied for failure to timely correct pended encounters.
37.2 Data validation of encounters will be verified through an audit of
claims or claims type data obtained from the Program Contractor. Data validation
will be performed by reviewing a random sample of claims or claims type data in
order to compare with the Program Contractor's submitted encounter data. The
services to be validated include, but are not limited to, nursing facility
stays, acute medical hospital stays, doctor visits, surgeries, home nursing
service, therapies, personal care and mental health services.
Data validation shall be conducted at least annually. The sample
size, or number of claims to be reviewed, shall be determined using statistical
methods in order to accurately estimate each Program Contractor's omission error
rates.
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37.3 Omission errors shall be determined using sanction criteria
defined below. The omission error rate shall be calculated by dividing the
number of omission errors by the number of claims reviewed for omission. Unless
a 100 percent sample is taken, a ninety-five percent confidence interval shall
be used to account for limitations caused by sampling. The confidence interval
shows the range within which the true error rate is estimated to be. The error
rate used for sanction purposes shall be the lower limit of the confidence
interval. A five percent or less error rate is allowable.
37.4 The following example illustrates the error rate used for sanction
purposes. Assume the validation error rate is twenty percent. The ninety-five
percent confidence interval is the validation error rate plus or minus five
percent. Therefore, the interval ranges from fifteen percent to twenty-five
percent. The error rate used for sanction purposes is fifteen percent, or the
lower limit of the confidence interval. However, a five percent error rate is
allowable. (Note that this is an example only. The actual error rate range
depends on data validation findings.)
Sanction amounts for omission, correctness, and timeliness errors
will be based on the following formula:
S = P x ([L-A]xN)
Where
S = sanction
P = per error sanction amount,
L = lower limit of confidence interval for error rate,
A = allowable error rate, and
N = number of inpatient encounters, ancillary encounters
and long term care encounters (institutional and HCBS) submitted for members
subject to federal financial participation during the time period reviewed. (N
will be adjusted to make up for omitted encounters.) Two Ns apply: one for
nursing facility encounters and one for non-nursing facility encounters.
Using this formula, the per-encounter sanction amounts for
omission errors will be applied to the estimated number of errors for the
Program Contractor to determine the total sanction amount.
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Continuing with the example: The lower limit of the confidence
interval for the omission error rate is 15% (L), the lower limit of the
confidence interval minus the allowable error rate (A=5%) is 10% (L-A), and the
Program Contractor has submitted 48,000 Type A encounters during the review
period. N adjusted for omissions is 56,471. (56,471 minus 15% of 56,471 equals
48,000. The 15% is L, the lower limit of the confidence interval for the
omission error rate.) The total number of omission errors for the Contractor is
([L-A]xN)= .10 x 56,471 = 5,647. The omission sanction amount is $5,647 (5,647 x
P = 5,647 x $1.00). The $1.00 is the per error omission sanction amount.
37.5 Omission of data is defined as an encounter not submitted to
AHCCCSA, or an encounter inappropriately deleted from AHCCCSA's pending
encounter file or historical files in lieu of correction of such record.
A one dollar ($1.00) per encounter error penalty will be assessed
for an omission for non-institutional facility encounters. A five dollar ($5.00)
per encounter error penalty will be assessed for an omission of institutional
encounters.
In the event that the omission error rate found by comparing
encounters and claims type data is less than five percent (5%), the following
penalty may, at the option of AHCCCSA, apply in the following contract year in
lieu of data validation:
Failure to timely submit required encounters for AHCCCSA's
processing cycle will result in a penalty each month, or a portion thereof,
until such encounters are received by AHCCCSA, in the amount of $5,000 or two
percent (2%) of one (1) month's capitation, whichever is less.
37.6 A five dollar ($5.00) per encounter penalty will be assessed for
any pended encounter that is not corrected and returned to AHCCCSA within
forty-five (45) days after notification by AHCCCSA that an encounter has failed
edits.
- - --------------------------------------------------------------------------------
GENERAL PROVISIONS
27
<PAGE> 28
GENERAL PROVISIONS
- - --------------------------------------------------------------------------------
37.7 Penalty provisions shall be applied to encounters received for
services rendered on or after October 1, 1993.
Penalties shall be off-set against the next month's capitation
payment following the assessment of the penalty or an unsuccessful challenge
attempt.
All sanctions shall be placed in a separate sanction fund by
AHCCCSA. At the end of the contract year, AHCCCSA may distribute the funds to a
Program Contractor which has consistently met the submission standards for
encounter data during the contract year. Any distributive shares shall be
determined in accordance with policies and procedures promulgated by AHCCCSA.
- - --------------------------------------------------------------------------------
GENERAL PROVISIONS
28
<PAGE> 29
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION (AHCCCSA)
NOTICE OF REQUEST FOR PROPOSAL (RFP)
REQUEST FOR PROPOSAL NO.: YH3-0028
PROPOSAL DUE DATE: June 21, 1993, 3:00 P.M. Arizona Time
LOCATION: AHCCCSA, Contracts Section , 801 E. Jefferson, Phoenix, Arizona 85034
In accordance with A.R.S. Section 36-2940, proposals for the provision of long
term care, acute medical, and mental health services to eligible ALTCS members
will be received by AHCCCSA at the above specified location, until the time and
date cited. Proposals are sought from health care organizations and any other
public or private entities to provide said services in Apache, Coconino, Gila,
Graham, Greenlee, La Paz, Mohave, Navajo, Santa Cruz and Yuma Counties.
Proposals must be in the actual possession of AHCCCSA on or prior to the time
and date indicated above.
An original and nine (9) copies of each Offeror's proposal must be submitted in
a package with the Request for Proposal number and the Offeror's name and
address clearly indicated on the package. All proposals must be completed in
ink, or typewritten. Additional instructions for preparing a proposal are
provided on the following pages.
A pre-proposal conference will be held in conjunction with this solicitation.
The conference will be conducted on May 5, 1993 at 9:00 A.M. (Arizona Time) at
701 East Jefferson Street, Phoenix, Arizona in the 3rd Floor Conference Room. To
assist in the facilitation of the conference, any questions that an Offeror may
have regarding this RFP must be submitted in writing and received by the
Contracts Supervisor named below no later than 3:00 P.M. on April 28, 1993.
Questions may be submitted via fax transmission to (602) 258-5943.
Offerors are strongly encouraged to carefully read the entire Request for
Proposal. Incomplete proposals may be rejected as nonresponsive.
<PAGE> 30
This project will be partially funded by the Federal Government. All remaining
funds are the responsibility of the State of Arizona and its fifteen counties.
Designated Agency: Arizona Health Care Cost Containment System Administration
Service: Institutional, Home and Community Based, Acute Medical and
Mental Health Services to ALTCS Members
Contract Type: Prepaid Capitated
Contract Term: October 1, 1993 to September 30, 1994 with two (2)
additional one (1) year renewals
Larry Gavel State of Arizona
Contracts Supervisor
Phone (602)234-3655, ext. 1102
Date April 20, 1993 --------------------------------------
Michael Veit
Contracts and Purchasing Administrator
<PAGE> 31
REQUEST FOR PROPOSAL - ALTCS
TABLE OF CONTENTS
PAGE
PART ONE: INTRODUCTION
1. PROGRAM DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . 4
2. ORGANIZATION OF THIS RFP . . . . . . . . . . . . . . . . . . . . 4
3. SCHEDULE OF MAJOR EVENTS . . . . . . . . . . . . . . . . . . . . 5
4. OVERVIEW OF ALTCS . . . . . . . . . . . . . . . . . . . . . . . . 5
5. COMPREHENSIVE SERVICE AND DELIVERY PLAN (CSDP) . . . . . . . . . 6
6. CONTRACT AWARD . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. CONTRACT CONTENT . . . . . . . . . . . . . . . . . . . . . . . . 7
PART TWO: INSTRUCTIONS TO OFFERORS
1. PREPARATION OF PROPOSAL . . . . . . . . . . . . . . . . . . . . . 1
2. TECHNICAL ASSISTANCE . . . . . . . . . . . . . . . . . . . . . . 2
3. PROPRIETARY INFORMATION . . . . . . . . . . . . . . . . . . . . 2
4. RFP AMENDMENTS AND RULES FOR WITHDRAWAL OF PROPOSAL . . . . . . 3
5. QUESTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6. LATE PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. SUBMISSION OF INITIAL PROPOSAL ON MOST FAVORABLE TERMS . . . . . 4
8. PROPOSAL DEADLINE AND PLACE OF ACCEPTANCE . . . . . . . . . . . . 4
9. PROPOSAL OPENING . . . . . . . . . . . . . . . . . . . . . . . .
10. PROPOSAL DISCUSSIONS . . . . . . . . . . . . . . . . . . . . . . 4
11. BEST AND FINAL OFFERS . . . . . . . . . . . . . . . . . . . . . . 5
12. CONTRACT AWARD . . . . . . . . . . . . . . . . . . . . . . . . . 5
13. PROTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
14. INSURANCE REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . 6
15. EVALUATION CRITERIA . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE> 32
REQUEST FOR PROPOSAL - ALTCS
TABLE OF CONTENTS
(Continued)
PAGE
PART THREE: PROGRAM REQUIREMENTS
1. OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. ELIGIBILITY AND ENROLLMENT . . . . . . . . . . . . . . . . . . . 3
3. COVERED SERVICES REQUIREMENTS . . . . . . . . . . . . . . . . . . 7
4. CASE MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. PROVIDER NETWORK DEVELOPMENT AND MANAGEMENT . . . . . . . . . . . 14
6. QUALITY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 17
7. THIRD PARTY LIABILITY REQUIREMENTS . . . . . . . . . . . . . . . 21
8. SHARE OF COST REQUIREMENTS . . . . . . . . . . . . . . . . . . . 23
9. FINANCIAL MANAGEMENT REQUIREMENT . . . . . . . . . . . . . . . . 24
10. DATA MANAGEMENT REQUIREMENT . . . . . . . . . . . . . . . . . . 28
11. MEMBER HANDBOOK REQUIREMENT . . . . . . . . . . . . . . . . . . 38
12. STAFF AND SUPPORT SERVICES REQUIREMENTS . . . . . . . . . . . . . 40
13. GRIEVANCE AND APPEALS REQUIREMENTS . . . . . . . . . . . . . . . 42
<PAGE> 33
REQUEST FOR PROPOSAL - ALTCS
TABLE OF CONTENTS
(Continued)
PART FOUR: PREPARATION OF THE PROPOSAL AND THE COMPREHENSIVE SERVICE AND
DELIVERY PLAN MATERIAL
PAGE
1. PROPOSAL CONTENT AND FORMAT . . . . . . . . . . . . . . . . . . . 1
2. RFP TRANSMITTAL LETTER . . . . . . . . . . . . . . . . . . . . . 2
3. RFP RESPONSE CHECKLIST . . . . . . . . . . . . . . . . . . . . . 3
4. CONTRACT SIGNATURE SHEET . . . . . . . . . . . . . . . . . . . . 3
5. APPENDIX A PROGRAM/ADMINISTRATION . . . . . . . . . . . . . . . . 3
6. RATE DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . 3
7. PROGRAM OPERATIONS NARRATIVE . . . . . . . . . . . . . . . . . . 67
8. CASE MANAGEMENT PLAN . . . . . . . . . . . . . . . . . . . . . . 67
9. SERVICE PROVIDER NETWORK . . . . . . . . . . . . . . . . . . . . 67
10. QUALITY MANAGEMENT . . . . . . . . . . . . . . . 74
11. FINANCIAL MANAGEMENT QUESTIONNAIRE . . . . . . . . . . . . . . . 74
12. DATA MANAGEMENT QUESTIONNAIRE . . . . . . . . . . . . . . . . . 76
13. GRIEVANCE AND APPEALS QUESTIONNAIRE . . . . . . . . . . . . . . . 77
14. MEMBER HANDBOOK . . . . . . . . . . . . . . . . . . . . . . . . . 77
15. THIRD PARTY LIABILITY QUESTIONNAIRE . . . . . . . . . . . . . . . 77
16. SUPPORTIVE HOUSING QUESTIONNAIRE . . . . . . . . . . . . . . . . 77
17. CERTIFICATE OF INSURNANCE . . . . . . . . . . . . . . . . . . . . 77
18. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
<PAGE> 34
REQUEST FOR PROPOSAL - ALTCS
TABLE OF CONTENTS
(Continued)
PART FIVE: ATTACHMENTS
PAGE
1. ALTCS CONTRACT . . . . . . . . . . . . . . . . . . . . . . . . .
General Provisions . . . . . . . . . . . . . . . . . .
Special Provisions . . . . . . . . . . . . . . . . . .
Appendix A- Program/Administration Section . . . . . .
Appendix B- Financial Provisions . . . . . . . . . . .
Appendix C- ALTCS Minimum Subcontract Provisions . . .
2. ALTCS MEMBERS
a. ALTCS MEMBERS ENROLLED DURING JANUARY 1993 . . . . . . . .
b. ALTCS ENROLLMENT/JANUARY 1993 . . . . . . . . . . . . . .
c. ALTCS ELDERLY AND PHYSICALLY DISABLED POPULATION . . . . .
BY COUNTY/FEBRUARY 1992 - JANUARY 1993
d. NUMBER OF ALTCS VENTILATOR DEPENDENT MEMBERS/. . . . . . .
FEBRUARY 1992 - JANUARY 1993
3. ALTCS MINIMUM NETWORK STANDARDS FOR SERVICE AREAS . . . . . . . .
4. CERTIFICATE OF INSURANCE . . . . . . . . . . . . . . . . . . . .
5. ALTCS QUARTERLY GRIEVANCE REPORT . . . . . . . . . . . . . . . .
6. SAMPLE TRANSMITTAL LETTER . . . . . . . . . . . . . . . . . . . .
7. RFP RESPONSE CHECKLIST . . . . . . . . . . . . . . . . . . . . .
8. AVERAGE SHARE OF COST PER FISCAL COUNTY
FOR EPD POPULATION . . . . . . . . . . . . . . . . . . . . . .
9. FORMS 1 THROUGH 18 FOR FINANCIAL MANAGEMENT . . . . . . . . . . .
<PAGE> 35
PART ONE
INTRODUCTION
1. PROGRAM DESCRIPTION
This document constitutes a request for proposals to provide long term
care, acute medical and mental health services to Arizona Long Term Care System
(ALTCS) eligible members in Apache, Coconino, Gila, Graham, Greenlee, La Paz,
Mohave, Navajo, Santa Cruz and Yuma Counties. Services are to be performed in
accordance with the directives set forth in this document, Rules pertaining to
the ALTCS program, the ALTCS Program Management Manual and Federal and State
statutes pertaining to the ALTCS program. Offerors are expected to be completely
familiar with the program requirements set forth in these program documents.
2. ORGANIZATION OF THIS RFP
For ease of use, this document is divided into five parts:
Part One is the Introduction. This section provides a schedule of
critical dates for the RFP process, an overview and the Offeror's
responsibilities if awarded a contract.
Part Two is the Instructions to Offerors. This section covers the basic
conditions and requirements for submitting proposal information, the process
AHCCCSA will use in evaluating offers and contract selection and finalization.
Part Three is the Program Requirements. This section contains a brief
description of the program and management services the Offeror is expected to
provide and the location of instructions on compliance requirements.
Part Four is the Preparation of the Proposal and the Comprehensive
Service and Delivery Plan (CSDP) Material. This section contains the forms and
the directives for providing information on the Offeror's organization and
network. The information provided on the forms and the responses will be used to
make up the final contract and the Offeror's CSDP.
Part Five is the Attachments. This includes a sample Contract,
demographic data, network standards, grievance report and sample certificate of
insurance and Financial Management forms.
3. SCHEDULE OF MAJOR EVENTS
<TABLE>
<S> <C>
RFP Release Date April 20, 1993
Deadline for Pre-Proposal Conference
Questions April 28, 1993
Pre-Proposal Conference May 5, 1993
Deadline for Written Questions May 12, 1993
Deadline for Technical Assistance May 28, 1993
Proposal Due Date (except capitation
rate proposal and Financial Manage-
ment Forms 2, 3 and 4) June 21, 1993
Fee for Service Rates Announced June 29, 1993
Capitation Rate Proposal and Financial
Management Forms 2, 3 and 4 Due Date July 6, 1993
Evaluation of Responses June 21 through August 6, 1993
Contract Negotiations* June 21 through August 16, 1993
</TABLE>
<PAGE> 36
<TABLE>
<S> <C>
Award of Contract August 16 through August 20, 1993
Contract Services Begin October 1, 1993
</TABLE>
* See Part Four, Section 6 for more detail
4. OVERVIEW OF ALTCS
4.1 The Arizona Health Care Cost Containment System Administration
(AHCCCSA) is responsible for administering and regulating ALTCS. The AHCCCSA may
contract with the Offeror to provide Title XIX (Medicaid) long-term care, acute
medical services and mental health services. A contract is first offered to a
county that submits an acceptable proposal. If a county elects not to be a
Program Contractor, or does not submit an acceptable proposal (excluding Pima
and Maricopa counties), private entities are provided an opportunity to respond
to an RFP and, if awarded a contract, shall provide services to eligible members
residing in that county.
The critical features of ALTCS are:
4.1.1 Capitation of the Program Contractor for long-term care,
acute medical and mental health services as opposed to fee-for-service
reimbursement;
4.1.2 Operation of a capitated ventilator-dependent program for
Program Contractors with 500 or more members;
4.1.3 Bundling of long term care, acute medical and mental health
services for effective program management;
4.1.4 Uniform medical eligibility determination through use of a
pre-admission screening process performed by AHCCCSA; and
4.1.5 Use of case management services to increase the
coordination and effectiveness of services provided to members by the Program
Contractor.
4.2 ALTCS is funded through a combination of Federal, State, and county
monies. Federal funding through Title XIX is provided by the Health Care
Financing Administration (HCFA). All health care benefits for elderly and
physically disabled and ALTCS members are funded substantially by Federal and
county monies. The Offeror must recognize that county governments are financing
a portion of this program. However, if a county government waives its right to
be an ALTCS Program Contractor, they are not responsible for delivering Title
XIX services to ALTCS members. This becomes the responsibility of the Program
Contractor awarded the contract for that county. The Program Contractor is
cautioned to take contractual and performance direction only from AHCCCSA.
Should the Program Contractor take such direction from another party, the
Program Contractor shall be solely responsible for the consequences.
5. COMPREHENSIVE SERVICE AND DELIVERY PLAN (CSDP)
<PAGE> 37
5.1 Arizona Revised Statutes (ARS) Section 36-2940(C) requires that
ALTCS Program Contractors (Offerors who are awarded a contract shall be known as
Program Contractors) which deliver ALTCS services shall annually submit a
"comprehensive plan of service delivery". An essential part of this RFP is the
Offeror's response to information which will become the CSDP. This will include
at a minimum:
5.1.1 A description of the Offeror's financial viability;
5.1.2 The Offeror's medical services network;
5.1.3 The Offeror's Case Management system;
5.1.4 The Offeror's Quality Management Review capabilities; and
5.1.5 The support services made available by the Offeror.
5.2 This information along with program narratives will constitute the
Program Contractor's CSDP. The CSDP will be incorporated by reference into the
Program Contractor's contract with AHCCCSA.
5.3 The finalized contract shall be controlling and shall supersede the
provisions of this document or the Program Contractor's submissions, where
provisions are in conflict or inconsistent. This document supercedes the Program
Contractor's submission in the case of provisions not addressed in the final
contract.
6. CONTRACT AWARD
6.1 AHCCCSA will make final contract award determinations on or about
August 16-20, 1993. Resulting contracts will be subject to the terms and
conditions contained within this RFP and certain special conditions designed to
bring the Program Contractor into full compliance with program standards.
6.2 Contracts will begin on October 1, 1993, and terminate on September
30, 1994. These contracts may be renewed for two (2) additional one (1) year
periods. The decision to renew any contract is reserved for the Director of
AHCCCSA.
6.3 AHCCCSA will submit an annual request for renewal of the contract
and the CSDP. It will be a contract obligation of the Program Contractor to
respond within the timelines specified.
6.4 AHCCCSA will make no payment to the Program Contractor for services
beginning October 1, 1993, who has failed to execute a written contract with
AHCCCSA by August 31, 1993.
6.5 The Program Contractor shall accept and execute a written contract
amendment for the renewal period no later than July 15 of each year. AHCCCSA
reserves the right to negotiate with another offeror when a Program Contractor
fails to accept and execute a written agreement by July 15.
<PAGE> 38
7. CONTRACT CONTENT
A sample contract is included as an exhibit in Part Five. The contract
contains the Contract General Provisions which informs Offerors of essential
contract elements. The General Provisions are supplemented by Contract Special
Provisions. Additional Special Provisions may be developed during the RFP
proposal review and evaluation process.
<PAGE> 39
PART TWO
INSTRUCTIONS TO OFFERORS
1. PREPARATION OF PROPOSAL
1.1 Unless otherwise specified, the proposal shall be submitted on the
forms provided in Part Four and Part Five of this RFP package. It is permissible
to duplicate these forms if necessary. Electronically transmitted proposals,
modifications, or withdrawals will not be considered.
1.2 All pages shall be typewritten or machine printed. Each part of the
proposal shall be legible and of sufficient print quality to allow copying of
the document.
1.3 Erasures, interlineations or other modifications in the proposal
shall be initialed in original ink by the authorized person.
1.4 For an offer to be considered by AHCCCSA, please label the lower
left hand corner of the package in which your proposals are delivered with the
following:
Request for Proposal No.: YH3-0028
Closing Date: June 21, 1993
Time: 3:00 P.M., Arizona Time
Sealed Proposal - Do Not Open
Failure to perform as required may result in premature disclosure of
your proposal and disqualification of your offer.
1.5 To the extent possible, the Offeror shall review all applicable
Federal and State laws and rules to gain a better understanding of AHCCCSA.
Copies of State and Federal laws may be obtained from the Department of Library,
Archives and Public Records, 1700 West Washington Street, Old Capitol Building,
3rd floor, Phoenix, Arizona 85007. The phone number is (602)542-3701. Copies of
State rules may be obtained from the Office of the Secretary of State, 1700 West
Washington Street, State Capitol West Wing, Room 101, Phoenix, Arizona 85007.
The phone number is (602)542-4086. The State and Federal laws and the State
Rules may also be found in the Bidder's Library described in 1.6 below.
1.6 In addition to the material addressed in 1.5 above, a document
entitled, "Overview", which provides a summary of AHCCCSA, may be obtained from
AHCCCSA's Public Information Office. The phone number is (602)254-5522,
extension 4099. The following documents may be viewed in the Bidders' Library,
located at 801 E. Jefferson, Contracts and Purchasing Office, Phoenix, Arizona:
I-1
<PAGE> 40
1.6.1 ALTCS Program Management Manual;
1.6.2 AHCCCS Mental Health Policy Manual;
1.6.3 AHCCCSA Encounter Reporting User Manual;
1.6.4 ALTCS Uniform Accounting and Reporting System and Guide for
Audits of ALTCS Contractors and Providers;
1.6.5 Technical Interface Guidelines;
1.6.6 Statement of Requirements for ALTCS Quality Management
Program;
1.6.7 Code of Federal Regulation (CFR), Titles 42 and 45; and
1.6.8 Arizona Revised Statutes
1.6.9 ALTCS Rules;
1.6.10 AHCCCS Rules;
1.6.11 ALTCS Data Validation Reports; and
1.6.12 Other Material as Appropriate.
1.7 AHCCCSA shall not provide any reimbursement for the cost of
developing or submitting a proposal in response to this RFP.
2. TECHNICAL ASSISTANCE
2.1 AHCCCSA may provide technical assistance, but this shall not relieve
the Offeror from performing as specified and required by this RFP. AHCCCSA staff
who may provide technical assistance are not empowered to accept, approve, or
reject any offer. Additionally, they are not able to change or amend any terms
or conditions of this RFP.
2.2 If there should be a conflict between any technical assistance
provided and this RFP, the specifications of this RFP shall control unless and
until this RFP is formally amended. Nothing in this section shall remove the
responsibility of the Offeror to prepare its proposal in accordance with all the
specifications and requirements of this RFP or any amendment(s) hereto.
2.3 All requests for technical assistance must be submitted in writing
to:
Larry Gavel
Division of Business, Finance and Research
Arizona Health Care Cost Containment System
801 East Jefferson
Phoenix, Arizona 85034
2.4 Requests for technical assistance will be accepted through close of
business on May 28, 1993.
3. PROPRIETARY INFORMATION
I-2
<PAGE> 41
All proposals shall become the property of AHCCCSA. The Offeror may
designate certain information to be proprietary in nature by printing the word
"proprietary" on top of any page for which nondisclosure is requested. Final
determinations of nondisclosure rest with AHCCCSA. However, all portions of the
Offeror's proposal, including those which are proprietary, may be provided to
the HCFA and its evaluation contractor.
4. RFP AMENDMENTS AND RULES FOR WITHDRAWAL OF PROPOSAL
4.1 AHCCCSA shall communicate changes to this RFP by an amendment
process. Amendments will be sent to any party that has requested an RFP package.
ALL AMENDMENTS SHALL BE SIGNED, DATED, AND RETURNED WITH THE OFFEROR'S PROPOSAL.
4.2 If explicitly requested and approved by AHCCCSA, amendments,
revisions, and alterations of a submitted proposal shall be accepted after the
proposal is received provided such acceptance is prior to the date for proposal
submission.
4.3 The Offeror may withdraw its proposal provided a written request is
received by AHCCCSA prior to the closing date and time for receipt of proposals.
Telegraphic, mailgram, or facsimile withdrawal will not be considered.
5. QUESTIONS
5.1 The Offeror shall have two (2) opportunities to submit written
questions related to this RFP to AHCCCSA. Questions to be answered at the
pre-proposal conference shall be submitted no later than 3:00 P.M., Arizona
Time, on April 28, 1993. Questions following the pre-proposal conference shall
be submitted no later than 3:00 P.M., Arizona Time, on May 12, 1993. Questions
shall be submitted to the following address:
Larry Gavel
Division of Business, Finance and Research
Arizona Health Care Cost Containment System
801 East Jefferson
Phoenix, AZ 85034; or
Fax: 602-258-5943
5.2 To facilitate AHCCCSA's preparation of responses to the Offeror's
questions, the following process will be followed:
5.2.1 Each question shall be submitted in writing and must be
preceded by a specific reference to the RFP section and page number related to
the question;
I-3
<PAGE> 42
5.2.2 All questions shall be submitted on consecutively numbered
pages;
5.2.3 Each page shall contain a header indicating the name of the
Offeror submitting the question;
5.2.4 General questions unrelated to a specific RFP section shall
be labeled as such; if there are multiple general questions, these may be
submitted on the same page or consecutively numbered pages.
5.3 If amendments are issued in response to the questions, AHCCCSA may,
at its option, consolidate and paraphrase questions for clarity.
5.4 The Offeror's questions shall be faxed or submitted in an envelope
which is clearly marked in the lower left corner with the following:
Questions - RFP No. YH3-0016
Closing Date - April 28, 1993
Time - 3:00 P.M., Arizona Time
6. LATE PROPOSALS
Proposals or modifications received by AHCCCSA after the time and date
specified on the cover page of this RFP shall not be considered except as
provided in A.A.C. R9-28-604 and shall be returned unopened to the Offeror.
7. SUBMISSION OF INITIAL PROPOSAL ON MOST FAVORABLE TERMS
AHCCCSA reserves the right to award any resulting contract without
negotiation and based solely on the price and terms of the proposal as initially
submitted. The Offeror is cautioned to submit its proposal initially on the most
favorable basis.
8. PROPOSAL DEADLINE AND PLACE OF ACCEPTANCE
Unless specified in an amendment, no exceptions shall be made as to the
deadline for proposal submission. The proposal shall be mailed or delivered to
the location stated on the cover page of this RFP.
9. PROPOSAL OPENING
Proposals shall be opened publicly immediately following the proposal
due date and time. The name of each Offeror shall be read publicly and recorded,
but prices shall NOT be read. All other information contained in the proposals
shall be confidential so as to avoid disclosure of contents prejudicial to
competing Offerors during the process of negotiation. Proposals shall not be
subject to public inspection until after contract award.
I-4
<PAGE> 43
10. PROPOSAL DISCUSSIONS
10.1 For the purpose of clarification to ensure full understanding of,
and responsiveness to this RFP, discussions may be conducted with a responsible
Offeror who submits a proposal determined to be reasonably acceptable for
contract award. As used herein, "responsible Offeror" shall mean an Offeror that
has the capability to perform the contract requirements and also has the
integrity and reliability to assure good faith performance. "Responsive Offeror"
shall mean an Offeror who submits a proposal which conforms in all material
respects to this RFP.
10.2 The Offeror shall be accorded fair treatment with respect to any
opportunity for discussion and revision of its proposal. Such revisions shall be
permitted after submission and before contract award for the purpose of
obtaining best and final offers. In conducting discussions, there shall be no
disclosure of any information derived from proposals submitted by competing
Offerors. AHCCCSA shall be the sole authority for selection of proposal
discussion items and such discussions may include interviews or be in writing.
11. BEST AND FINAL OFFERS
AHCCCSA may issue a written request for Best and Final Offers (BFO). The
request shall set forth the date, time, and place. If AHCCCSA makes a
determination that it is advantageous to AHCCCSA to conduct further discussions
or change AHCCCSA's requirements, a second BFO may be requested. After a second
BFO, no further BFO's will be requested. After the second BFO round, if the
Offeror has not submitted an acceptable offer, the Offeror will be offered the
middle of the range for any component where there was no acceptable bid.
12. CONTRACT AWARD
12.1 Award shall be made to the most responsive and responsible Offeror
whose proposal is determined to be the most advantageous to AHCCCSA based on the
evaluation criteria set forth in this RFP.
12.2 Notwithstanding any other provision of the RFP, AHCCCSA expressly
reserves the right to:
12.2.1 Waive any immaterial defect or informality; or
12.2.2 Reject any or all proposals, or portions thereof; or
12.2.3 Reissue an RFP.
12.3 The Offeror awarded a contract shall provide contract services as
an independent contractor and not as an employee or agent of AHCCCSA or the
State of Arizona.
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13. PROTESTS
13.1 Protests shall be filed, and shall be resolved, in accordance with
A.A.C. R9-28-605 A protest shall be in writing and shall be filed with the
AHCCCSA Contracts and Purchasing Administrator. A protest of a solicitation
shall be received at AHCCCSA before the proposal opening date. A protest of a
proposed award or of an award shall be filed within ten (10) days after the
protester knows or should have known the basis of the protest.
A protest shall include:
13.1.1 The name, address and telephone number of the protester;
13.1.2 The signature of the protester or its representative;
13.1.3 Identification of the purchasing agency and the
solicitation or contract number;
13.1.4 A detailed statement of the legal and factual grounds of the
protest including copies of relevant documents; and
13.1.5 The form of relief requested.
13.2 Protests shall be submitted to:
Arizona Health Care Cost Containment System Administration
801 East Jefferson
Phoenix, Arizona 85034
Attention: Contracts and Purchasing Administrator
13.3 An appeal of a decision issued by the AHCCCSA Contracts and
Purchasing Administrator shall be filed with the Director of AHCCCSA within five
(5) days from the date the decision is received. The appellant shall also file a
copy of the appeal with the AHCCCSA Contracts and Purchasing Administrator.
14. INSURANCE REQUIREMENTS
14.1 As part of an Offeror's proposal, a completed Certificate of
Insurance shall be submitted to AHCCCSA for review. Before the award of a
contract with AHCCCSA, a Certificate of Insurance naming the State of Arizona
and AHCCCSA as the "additional insured" shall be submitted. However, the
"additional insured" Certificate is not required for the submittal in response
to this RFP. Written verification from your insurance agency to AHCCCSA may be
acceptable to meet this requirement until a Certificate of Insurance is
available. The Certificate of Insurance shall be sent to AHCCCSA within ten (10)
days of notification of Contract award by the Contracts and Purchasing
Administrator, and prior to commencement of any services under this Contract.
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14.2 The following types and levels of insurance coverage are required
for all contracts with AHCCCSA:
14.2.1 Commercial General Liability: Provides coverage for bodily
injury and property damage to others as a result of accidents on the premises or
from operations of the Program Contractor.
The coverage provided by the Commercial General Liability
policy includes:
14.2.1.1 Premises/Operations Liability
14.2.1.2 Products/Completed Operations Liability
14.2.1.3 Contractual Liability
14.2.1.4 Personal and Advertising Injury Liability
14.2.1.5 Independent Contractors Liability
14.2.1.6 Fire Damage Legal Liability
14.2.1.7 Broad Form Property Damage Liability
14.2.1.8 Host Liquor Liability (When Necessary)
14.2.1.9 Underground, Explosion, Collapse Liability (When
Necessary)
Limits: $1,000,000 Combined Single Limit (CSL) each
occurrence - minimum limits [higher limits may be suggested by the Risk
Management Division, Arizona Department of Administration, depending on the
exposure created by the service(s)].
14.2.2 Commercial Automobile Liability: Provides coverage for
bodily injury and property damage to others resulting from accidents caused by
owned, non-owned or hired vehicles of the Program Contractor. THIS COVERAGE
SHALL BE PROVIDED WHENEVER VEHICLES ARE ASSIGNED TO OR USED BY THE PROGRAM
CONTRACTOR IN CONNECTION WITH THE CONTRACT.
Limits: $1,000,000 CSL each occurrence - minimum limits.
14.2.3 Workers Compensation: Provides coverage to employees of
the Program Contractor for injuries sustained in the course of their employment.
Coverage shall meet the obligations imposed by Federal and State statutes having
jurisdiction and should also include Employer's Liability. Evidence of qualified
self-insured status shall also be accepted.
Limits: Statutory Requirement - $100,000 (minimum) -
Employer's Liability.
14.2.4 Professional Liability: Provides coverage for alleged
professional misconduct or lack of ordinary skills in the performance of a
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professional act or service. Depending on the type of service performed,
coverage should be one of the following types of professional liability
policies:
1-Errors and Omissions 5-Architects Professional
2-Lawyers Professional 6-Accountants Professional
3-Medical Malpractice 7-Teachers Professional
4-Engineers Professional 8-Social Workers Professional
9-Other Professional not
listed above
14.2.5 Limits: $1,000,000 Combined Single Limit (CSL) each
occurrence
14.3 Acceptable forms of Certificates of Insurance:
14.3.1 The State of Arizona Certificate of Insurance form,
Attachment 4 in Part Five. This form has the special conditions which are
required by the Contract already preprinted on the form. The Program
Contractor's agent or broker shall fill in the pertinent policy information and
see that the required special conditions are actually endorsed onto the Program
Contractor's policy; or
14.3.2 A standard insurance industry Certificate of Insurance
called the Acord form. The Acord form Certificate of Insurance does not contain
the preprinted special conditions. These conditions shall be typed in by the
agent or broker. The special conditions are as follows:
"State of Arizona and Arizona Health Care Cost Containment
System Administration are added as additional insureds. It is agreed that
coverages afforded under this Certificate shall be primary and any insurance
carried by the State or any of its agencies, boards, departments or commissions
shall be excess and not contributory insurance to that provided by the named
insured. It is further agreed that no policy shall expire, be canceled or
materially changed to affect the coverage available to the State without thirty
(30) days written notice to the State. THIS CERTIFICATE IS NOT VALID UNLESS
COUNTERSIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE INSURANCE COMPANY."
14.4 In all the above situations, except for Workers Compensation, the
State of Arizona and AHCCCSA shall be named as additional insured as its
interest may appear.
14.5 Any exclusions, restrictions or limitations of any of the coverages
listed above shall be indicated as such on the Certificate of Insurance or by
addendum.
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14.6 Insurance must be provided by carriers rated as "A+" or higher by
A.M. Best rating service.
15. EVALUATION CRITERIA
15.1 Evaluation of proposals is conducted in two steps. First, an
initial review for basic responsiveness to the RFP, where those proposals
classified as "potentially acceptable" are eligible for the second step. In the
second step proposals are evaluated to assess the Offeror's capability to
deliver the proposed services in accordance with the terms and conditions set
forth in this RFP. In the case of multiple, noncounty offerors, this evaluation
is comparative. The award by county will be made to the responsible Offeror
whose proposal is determined to be the most advantageous to AHCCCSA, based on
the following evaluation criteria and corresponding weights:
<TABLE>
<CAPTION>
CRITERIA WEIGHT
-------- ------
<S> <C>
Network 30%
Capitation 30%
Program 20%
Organization 20%
</TABLE>
The remainder of this section describes in detail the elements
considered within each of the four evaluation criteria. For each criteria,
AHCCCSA will rely on Offeror's submittal and on AHCCCSA experience with Offeror.
For existing Offerors this includes, but is not limited to, the results of the
Operational and Financial Review and the Case Management Services Reviews. For
new Offerors, this includes the readiness review to be conducted by the AHCCCSA
Office of Managed Care.
15.2 Network
The evaluation of Offeror's Network will include two (2) major
components;
The Offeror's responsiveness to a network development component,
and responsiveness to a network management component. These components are
described below.
15.2.1 Network Development
This evaluation component examines the network scope, or
range of services included in the Network proposed by the Offeror. Services
proposed are measured against the Covered Services to be offered. It also
examines the extent of the provider network offered through letters of intent
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submitted with the proposal. The Offeror must have and demonstrate a network
that meets or exceeds AHCCCS standards.
15.2.2 Network Management
This evaluation component examines several factors,
including the geographic accessibility of the network, operational hours,
waiting times and availability of appointments within specified time frames in
terms of compliance with standards specified in this RFP, etc.
15.2.3 The evaluation of the network management component will
also examine the criteria and process established by the Offeror to select the
initial network, the subcontracting process and subcontract terms, the methods
and information Offeror will use to improve the network on an ongoing basis, and
the demonstrated commitment of the proposed network to the Offeror as evidenced
by letters of intent.
15.2.4 The capacity of the network will be evaluated (how many
individuals can be served and how many services can be rendered) against the
expected member demand. Offerors who provide insufficient network information to
evaluate capacity will be scored low on this element.
15.2.5 Network selection is expected to consider price and quality.
Networks established through competitive processes and negotiation are expected.
15.2.6 The terms of the subcontracts must include all mandatory
provisions. Handling of special terms will also be evaluated.
15.2.7 The Offeror's plans for ongoing management of the network
will also be evaluated, including how the network is kept informed regarding
program changes, how quality and utilization and price information is used to
make additions/deletions from the network, and how gaps in the network are
addressed.
15.3 Capitation
The evaluation of the Offeror's capitation proposal will include
both an overall evaluation of the long term care, acute and mental health bids
against a range established by county as well as an examination by component as
described below. Where applicable, both an overall and by component evaluation
is conducted of the ventilator dependent capitation. The component evaluation is
comprised of ten (10) elements.
15.3.1 Nursing Facility (Gross Institutional) Component
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The gross institutional component bid will be evaluated
based on a range established around the fee-for-service rate for geographic
areas (Maricopa, Pima, Yuma and Other). The range is overall not by level of
care. Actual member mix for small counties may be used to alter the range for a
particular county if the mix is stable over time.
15.3.2 Share of Cost
Share of cost proposals will be evaluated against the actual
share of cost experience for the six (6) month period beginning October 1, 1992
to March 31, 1993. Known increases in share of cost that result from Social
Security increases will be factored into the evaluation.
15.3.3 Capitation Lag Factor
The capitation lag factor will be based on actual placement
information from the day of enrollment to the day of placement. AHCCCSA will
continue the policy of paying only acute (and mental health) and case management
for individuals not placed in the first 30 days. The factor is a statewide
calculation.
15.3.4 Medicare/Third Party Liability (TPL)
Medicare/TPL deductions proposed by the Offeror are
evaluated against a statewide range established by the actuary.
15.3.5 Home and Community Based Services (HCBS)
HCBS per person proposed spending is evaluated against a
range established by the actuary. The range is based on historical experience in
geographic areas and across areas measured by encounter data adjusted by
clinical and pricing reasonableness tests. Payments to HCBS providers will be
limited to a range around fee for service rates. The range will consider market
availability.
15.3.6 HCBS Mix
HCBS mix is evaluated based on a range of acceptable mix.
Higher HCBS mix proposals are weighted more favorably in the evaluation. Program
Contractors must continue to place appropriate members in HCBS even if the
proposed mix is exceeded. (See Part 5 Appendix B of the Contract, for HCBS
requirements).
15.3.7 Case Management
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Case management fees per member per month that are proposed
by Offeror will be evaluated by AHCCCSA based on required caseloads. Final case
management rates will be set consistent with caseload requirements. The rate is
initially indexed to the HCBS mix. No adjustment is made, however, during HCBS
mix reconciliation as discussed in Part 5, Appendix B of the Contract. Offeror
will be evaluated as to its capacity to meet the caseload standards.
15.3.8 Administration, Profit and Contingencies
Public Offerors are limited to specified percent for
administration. A range will be set by the actuary for private offerors for
administration, profit and contingencies.
15.3.9 Acute Care
Acute care will be evaluated against a range established by
the actuary based on study of encounter data and contractor pricing.
15.3.10 Mental Health
Mental Health will be evaluated against a range established
by the actuary.
For all components the range established by the actuary may
examine price, utilization and number of users as well as per capita expense.
15.4 Program
The evaluation of Offeror's program will examine each program
requirement specified in Part Three including: case management, quality
management, utilization management, membership management (including grievances,
enrollment and handbook), and third party liability collection plans. Most
important among these program elements are case management, quality management
and utilization management.
AHCCCSA will use its experience with the Offeror including the
results of the Operational and Financial Review and the Case Management Services
Review as a factor in evaluation of the Offeror's program.
15.5 Organization
Evaluation of the Offeror's organization includes four (4)
elements: financial evaluation; systems and reporting evaluation; staff
evaluation; and organizational evaluation.
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15.5.1 Financial
The financial evaluation includes an evaluation of the
adequacy of the Offeror's accounting system, financial stability and compliance
with minimum financial requirements, related party standards and disclosures.
15.5.2 Systems and Reporting
This evaluation component examines Offeror's systems and
reporting capability to meet the data management and reporting requirements of
ALTCS. Management systems including the Client Assessment Tracking System (CATS)
interface, claims processing and encounter reporting must be responsive and
capable of providing timely, accurate, and complete information.
15.5.3 Staff
This component examines the Offeror's staff and supervisory
and management structure against the requirements imposed by this RFP. While the
entire staff and management structure is evaluated, three (3) areas receive
greater weight: case management; quality and utilization management; and
financial management. The Offeror must demonstrate that the staff are in place
to comply with AHCCCSA case management staffing ratios. Quality and utilization
management must have appropriate medical direction and staff capacity for all
functions.
15.5.4 Organization
This component examines the extent to which Offeror's :
management functions and responsibilites are clearly
identified and appropriate lines of authority are delineated;
organizational and administrative structure are appropriate
to ALTCS responsibilities; and
operations provide for appropriate information flow from one
part of the organization to another.
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PART THREE
PROGRAM REQUIREMENTS
1. OVERVIEW
1.1 AHCCCSA is a Title XIX demonstration project (operated under Section
1115 of the Social Security Act) originally designed to test alternative
methodologies for provision and financing of acute medical services for Title
XIX eligible members. ALTCS is an extension of this demonstration project under
the federal waiver authority and provides long term care to eligible members.
1.2 ALTCS was implemented in December 1988 for the developmentally
disabled (DD) population and in January 1989 for the elderly and physically
disabled population (EPD).
1.3 Title XIX long term care services include institutional and home and
community based services. ALTCS services represents a bundling of all acute
medical services, long term care services and mental health services. Currently,
only ALTCS members under the age of twenty-one (21) are eligible for mental
health services. For the purposes of this proposal submission, Offerors should
assume that mental health services for those individuals 65 years of age and
over will be covered for the entire contract year. If legislative authority to
revoke the implementation of mental health services for this population is not
passed, the program requirements and capitation will be adjusted accordingly.
ALTCS recipients may also be eligible to receive additional benefits under
Qualified Medicare Beneficiary as discussed in section 2.4 below.
1.4 The ALTCS population consists of individuals who are either DD or
EPD. The Department of Economic Security is the Program Contractor for the
developmentally disabled and the counties or private Program Contractors will
serve the EPD population.
1.5 Both the DD and EPD populations may have individuals who are
identified as ventilator dependent members. These are individuals who are
medically dependent on a ventilator for life support at least six (6) hours per
day and who have been dependent on ventilator support as an inpatient in a
hospital or nursing facility for thirty (30) consecutive days.
1.6 The total ALTCS population has grown from a total of 11,441 in its
first year of operation to a total of 17,113 in January 1993, representing a
fifty percent overall increase. Sixty-five percent (11,167) of the ALTCS
population as of January 1993, are EPD; less than 1% of these are ventilator
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dependent members. Ninety percent (27 of 30) of the EPD ventilator dependent
members reside in Maricopa and Pima counties. The yearly growth rate of the EPD
population is as follows:
<TABLE>
<CAPTION>
Month & Year Number Number Increase Percentage of Growth
------------ ------ --------------- --------------------
<S> <C> <C> <C>
January, 1990 7,675
January, 1991 8,568 + 893 11.6%
January, 1992 9,543 + 975 11.4%
January, 1993 10,905 + 1362 14.3%
</TABLE>
1.7 Attachments 2.a., 2.b., 2.c., and 2.d. in Part Five, of this RFP,
provide a breakdown of the ALTCS population by age group as of February 1, 1993,
growth of the EPD population by county for the last year and a chart
illustrating the number of the ventilator dependent clients by county.
2. ELIGIBILITY AND ENROLLMENT
2.1 Introduction
AHCCCSA will be responsible for eligibility determinations and
enrollment of ALTCS members.
ALTCS serves those individuals who are found eligible for long term
care based on Title XIX eligibility requirements, including both financial and
medical criteria.
2.2 Financial Eligibility
An application for ALTCS may be made at any of AHCCCSA's fourteen
(14) ALTCS eligibility offices located throughout the State. Requests for
applications may be made in person, by phone, or by written request. A
face-to-face interview shall be completed and specific financial eligibility
information shall be collected from the applicant or their authorized or legal
representative at that time. All financial eligibility information shall be
verified through appropriate sources.
2.2.1 The determination of financial eligibility actually includes
financial and non-financial criteria. The non-financial criteria includes state
residency, citizenship/alien status, application for or verification of a social
security number, application for benefits for which they are potentially
eligible except for needs- based programs, assignment of third party rights or
medical support and either be age 65 or over, age 18 or under, disabled, blind,
pregnant
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or a parent of a child who is deprived of parental support and care. The
financial criteria require that specific income and resource limits shall be
met. Chapter 1600 of the ALTCS Program Management Manual, Policy and Procedure,
provides a detailed discussion of financial and non-financial eligibility
criteria.
2.2.2 AHCCCSA shall redetermine the member's eligibility as
established by AHCCCSA guidelines, or at any time when a change in the member's
circumstances warrants a review.
2.3 Medical Eligibility
2.3.1 In order to be eligible for Title XIX benefits in the ALTCS
program, the applicant shall need a level of care comparable to that provided in
a nursing facility, but below that of an acute care setting (hospitalization or
intense rehabilitation) and above that of a supervisory/personal care setting
(intermittent outpatient medical intervention or benevolent oversight).
2.3.2 In the aggregate, the eligible ALTCS member shall have a
functional and/or medical condition that is so impaired as to interfere
substantially with the capacity to remain in the community, and results in long
term limitation of capacity for self care. An individual who meets ALTCS
criteria for Title XIX eligibility shall present with a combination of the
following needs or impairments:
2.3.2.1 Requires nursing care by or under the supervision of
a nurse on a daily basis;
2.3.2.2 Requires regular medical monitoring;
2.3.2.3 Impaired cognitive functioning;
2.3.2.4 Impaired self care activities of daily living;
2.3.2.5 Impaired continence; and/or
2.3.2.6 Psychosocial deficits.
2.3.3 ALTCS eligible individuals have a wide range of functional
and medical problems. Because of this, the Program Contractor shall provide for
a wide range of health related services above the level of room and board,
including medically related social services and mental health services as
defined in ALTCS covered services. ALTCS members enrolled with the Program
Contractor shall generally require one or more long term care services to
maintain or increase functions, protect from infection and injury, prevent
decubitus ulcers and deformities, assist and/or train the member in self care,
and/or provide palliative care during the terminal stages of an illness.
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2.3.4 Medical eligibility will be determined initially and
redetermined pursuant to guidelines established by AHCCCSA. Medical eligibility
is determined only on those members determined to be financially eligible for
ALTCS. Chapter 200 of the ALTCS Program Management Manual outlines the medical
eligibility process, i.e., the Pre-Admission Screening (PAS) process, and
Appendix A of the ALTCS Program Management Manual contains a copy of the
multidimensional assessment tool used. The manual is available for review in the
bidders library.
2.4 Qualified Medicare Beneficiary (QMB) Program
The Medicare Catastrophic Coverage Act (MCCA) of 1988 mandated a
program whereby individuals, including ALTCS eligible members, may be eligible
for additional benefits if found eligible for QMB. ALTCS members shall be
entitled to Medicare Part A if the individual meets certain income and resource
limits. These QMB program limits are discussed in Chapter 1600 of the ALTCS
Program Management Manual.
2.4.1 An ALTCS/QMB member is entitled to payment of the Part A
(if liable for payment) and Part B premiums and shall not be assessed any
charges related to Medicare cost sharing. Medicare cost sharing is defined as
Medicare coinsurance and deductibles or Medicare Health Maintenance
Organization/Competitive Medical Plan (HMO/CMP) co-payments, deductibles and/or
premiums. For a QMB who is enrolled with a Program Contractor, the Program
Contractor shall pay Medicare coinsurance and deductibles or, in the event that
the QMB is enrolled with a Medicare HMO/CMP, the Program Contractor shall pay
the Medicare HMO/CMP co-payments, deductibles and/or premiums.
2.4.2 The Program Contractor shall ensure that any required
Medicare service which is covered by ALTCS is provided to the member by the
Medicare HMO/CMP and not the Program Contractor.
2.4.3 Appendix A of the Contract, found in Part five identifies the
additional Medicare covered services that are available to ALTCS/QMB members.
2.5 Enrollment and Disenrollment
AHCCCSA shall be responsible for enrolling and disenrolling an
ALTCS member with or from a Program Contractor.
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2.5.1 Program Contractors shall adhere to the policies and
procedures regarding the enrollment and disenrollment processes described in
Chapter 1600 of the ALTCS Program Management Manual.
2.5.2 Enrollment and disenrollment actions shall be effective
three (3) days prospective from the date the action is input into the computer
system by AHCCCSA. Exceptions are discussed in Chapter 1600 of the ALTCS Program
Management Manual.
2.6 Request for Change in Enrollment
If an ALTCS member moves to another county which is not in the
current Program Contractor's service area, the current Program Contractor may
request a Program Contractor change by submitting a Program Contractor Change
Request Form (DE-621) to the Program Contractor responsible for the county to
which the member moved and request that the second Program Contractor agree to
accept the ALTCS member. If the second Program Contractor agrees to accept the
member, the agreement (DE-621) will be sent to AHCCCSA for processing.
If the second Program Contractor does not agree to accept the
ALTCS member, the current Program Contractor may request AHCCCSA to review the
request. AHCCCSA will make the final decision. For more detailed information,
refer to Chapter 1600 of the ALTCS Program Management Manual.
2.7 Reporting Changes/Corrections in the ALTCS Eligible Members
Circumstances
The ALTCS Member Change Report Form (7240T) provides the Program
Contractor with a method for notifying the ALTCS eligibility offices and/or
AHCCCSA of changes or corrections to the ALTCS member's information or
circumstances. This includes but is not limited to changes in: demographic
information; placement/living arrangement; third party insurance payor; share of
cost; income; resources; and, a medical condition which could impact medical
eligibility. Refer to Chapter 1600 of the ALTCS Program Management Manual for
more detailed information.
2.8 Out of State Placement/Service
2.8.1 The Program Contractor shall obtain approval from AHCCCSA
prior to placing an ALTCS member out of state.
2.8.2 ALTCS members who are temporarily absent from Arizona are
eligible for acute emergency services only. The Program Contractor shall report
temporary
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<PAGE> 57
absences from the state to the ALTCS eligibility office for a determination of
continued eligibility.
3. COVERED SERVICES REQUIREMENTS
3.1 ALTCS integrates long term care, acute medical and mental health
into a single package to maximize the cost effectiveness of service provision
and continuity of care. The purpose of this section is to define the "covered
services" required to be made available, or provided if medically necessary, to
each ALTCS member. These covered services represent the benefit package for all
ALTCS members. It is the responsibility of the Program Contractor to provide all
covered services and meet all network requirements. Additional information
regarding covered services is included in ALTCS Rules, Article 2, Covered
Services; (R9-28-202, R9-28-204, R9-28-206 and R9-28-1104).
3.2 Acute Medical Services shall include the following services:
3.2.1 Inpatient and outpatient hospital;
3.2.2 Emergency room;
3.2.3 Physician;
3.2.4 Outpatient Health Services, including those services that
may be provided in a Rural Health Clinic or Federally Qualified Health Center;
3.2.5 Laboratory, X-Ray and medical imaging;
3.2.6 Pharmacy;
3.2.7 Medical supplies, durable medical equipment and prosthetic
devices;
3.2.8 Emergency Ambulance;
3.2.9 Medically necessary transportation;
3.2.10 Family Planning, including drugs, supplies, devices and
surgical procedures provided to delay or prevent pregnancy;
3.2.11 Therapies which include, physical, occupational,
respiratory, audiology and speech therapies;
3.2.12 Podiatry;
3.2.13 Private Duty Nursing for ventilator dependent members;
3.2.14 Early and periodic screening, diagnosis and treatment
services for members under the age of 21. These services include all medically
necessary Title XIX services, including dental services, vision services and
organ transplantations and immunosuppressant medications;
3.2.15 Organ Transplantations which are medically necessary are
limited to the following services for members 21 years and older: kidney and
related immunosuppressant medications; cornea, bone, heart with related
immunosuppressant medications; autologous and allogenic bone marrow with related
chemotherapy or radiotherapy;
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3.2.16 Eyeglasses and contact lenses for members 21 years and
older as the sole prosthetic device after a cataract extraction; and,
3.2.17 Emergency dental care, extractions and medically necessary
dentures for members 21 years and older.
3.3 Long term care services shall include case management and the
following services:
3.3.1 Nursing Facility, including Christian Science Sanitoria and
nursing:
3.3.2 Hospice;
3.3.3 Adult Day Health;
3.3.4 Home Delivered Meals;
3.3.5 Home Health Agency Services, including nursing services and
home health aid;
3.3.6 Homemaker;
3.3.7 Personal Care
3.3.8 Respite Care
3.3.9 Group Respite as an alternative to Adult Day Health;
3.3.10 Attendant Care;
3.3.11 Environmental Modifications; and,
3.3.12 Other services, if approved by HCFA and the Director of
AHCCCSA.
3.4 Mental Health Services
ALTCS mental health services for members 21 through 64 years of age
are limited to 72 hours of inpatient services per acute mental health episode,
not to exceed 12 days per contract year. Members who are under the age of 21 or
65 years and older may receive the following mental health services:
3.4.1 Inpatient hospital;
3.4.2 Inpatient Psychiatric Facility for members under 21 years;
3.4.3 Institution for Mental Diseases for members 65 years and
older;
3.4.4 Individual therapy and counseling;
3.4.5 Group and/or family therapy and counseling;
3.4.6 Emergency crisis mental health care;
3.4.7 Evaluation and diagnosis; and,
3.4.8 Psychotropic medications.
3.5 Qualified Medicare Beneficiary Services
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For a QMB member who is enrolled with a Program Contractor, the
Program Contractor shall provide all appropriate ALTCS services as well as
Medicare covered services that are not covered under ALTCS. The additional
Medicare services include, but not limited to, chiropractic services and
Medicare mental health services for members who are between the ages of 21
through 64 years.
3.6 Exclusions and limitations for ALTCS covered services are discussed
in regulations found at A.A.C. R9-22-203 and R9-28-203.
3.7 Therapeutic Leave and Bed Hold. Nursing facilities may also receive
payments for securing their bed during member absences from the nursing facility
for therapeutic leave or for hospitalization. Therapeutic leave shall not exceed
nine (9) days and bed hold twelve (12) days per year. The Program Contractor has
some flexibility in determining therapeutic leave and bed hold and shall
describe proposed coverage and limitations in the proposal. The proposal shall
include a statement that members may, in most cases, return to the same bed.
4. CASE MANAGEMENT
4.1 The Program Contractor shall have an adequate supervisory and
management structure to ensure compliance with policies contained in the ALTCS
Program Management Manual and revisions thereto.
4.1.1 The Program Contractor shall ensure adequate staffing to meet
the case management requirements. Caseloads per case manager shall not exceed,
in the aggregate, 1:55 for HCBS members and 1:120 for institutionalized members,
in accordance with Chapter 300 of the ALTCS Program Management Manual and
revisions thereto. For a mixed population, the number of case managers shall be
based on a weighted average of the case manager to member ratios for HCBS and
institutional members. The weighting factor shall be the number of members in
each setting (HCBS and institutional). No individual case manager shall serve
more than 55 HCBS members or 120 institutionalized recipients, or more than 95
members in a mixed population without prior approval of AHCCCSA. Furthermore,
case managers shall not provide direct care services to ALTCS members and shall
not have non-case management duties and responsibilities which exceed 15 percent
of their time. Staffing must be sufficient to meet case management requirements
during periods of case manager absenteeism (for whatever reason) and turnover.
Staffing shall be sufficient to provide case management to out-of-county members
enrolled with the Program Contractor under the county of fiscal responsibility
requirements, as defined in Chapter 300 of the ALTCS Program Management Manual.
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4.1.2 The Program Contractor shall be responsible for ensuring its
case managers are sufficiently oriented and trained to carry out their
responsibilities.
4.1.3 The Program Contractor shall ensure complete, correct, and
timely entry of data related to placement history, cost effectiveness studies,
and service plans into the Client Assessment and Tracking System (CATS). With
the exception of Program Contractors who currently transmit data to CATS via
tape submission, all data entry shall be on-line. Timely shall mean within 14
working days of the event which gave rise to the transaction, e.g., service
approval by the case manager, placement change, etc. Those Program Contractors
not utilizing on line update to CATS shall have a systems interface in place to
update case management information in CATS. For Program Contractors who are not
on line, case management data shall be updated and monitored within the
following guidelines:
4.1.3.1 Updates shall be made to CATS no less than twice per
calendar month.
4.1.3.2 The acceptable reject rate of data is five percent
(5%) for each submission. All rejects shall be corrected prior to the next
submission of data to CATS.
4.1.4 The Program Contractor shall have an internal monitoring
process which evaluates compliance with ALTCS case management requirements and
follow-up on areas of non-compliance to ensure timely correction. The approach
to the internal monitoring process shall be determined by the Program
Contractor. However, AHCCCSA reserves the right to require changes in the
process in the event the process is ineffective in bringing about needed
changes.
4.2 The Program Contractor shall have a structure and process in place
which ensures that appropriate and cost effective services are identified,
planned, obtained, and monitored by qualified case managers for eligible and
enrolled members.
4.2.1 Case manager means a person who is either a social worker,
licensed registered nurse, or an individual with a minimum of two years
experience in providing case management services to EPD or DD persons. Case
management of ventilator dependent members shall be performed by a dual
disciplinary team consisting of a licensed registered nurse and a social worker.
Case management of eligible members requiring mental health services shall be
performed by an individual who meets the qualifications of a mental health
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professional, unless an initial and quarterly consultation with a qualified
mental health professional is obtained by the case manager.
4.2.2 The case manager shall adhere to policies contained in
Chapter 300 of the ALTCS Program Management Manual and revisions thereto. Such
policies require initial contact with a member within five (5) days of
enrollment with the Program Contractor, initial on-site contact with the member
within ten (10) days of enrollment with the Program Contractor, implementation
of services within 30 days of enrollment with the Program Contractor, and
periodic placement and service reviews in accordance with ALTCS policy, i.e.,
every 30 days for ventilator dependent members (on site), every 90 days for
members in an HCBS setting (on site), and members eligible for acute care only
services (telephone or on site), and 180 days for members in an institutional
setting (on site).
4.2.3 The case manager shall be responsible for developing and
maintaining the member's placement history, developing a cost effective
individualized service plan, providing assistance in resolving problems related
to access to and delivery of services necessary to maintain or improve the
member's health status and functioning and assuring delivery of services.
4.2.4 The case manager shall be responsible for the transition of
and discharge planning for members transferred to another Program Contractor or
terminated from the ALTCS program.
4.3. The Program Contractor shall correct areas of deficiency identified
by AHCCCSA through the case management services review process, shall ensure
members have covered services authorized and on the service plan, and shall
ensure data entry is timely as specified in Section 4.1.3. The Program
Contractor shall submit a corrective action plan to resolve areas of
non-compliance identified in the case management services review. Once the
corrective action plan is approved by AHCCCSA, the corrective action plan shall
be implemented by the Program Contractor. Modifications to the corrective action
plan shall be mutually agreed to by AHCCCSA and the Program Contractor. It is
the expectation of AHCCCSA that the corrective action plans actually result in
the resolution of problems identified.
4.3.1 The case management services review (CMSR) is an ongoing
series of ALTCS Program Contractor reviews that assess the client placement
process, service provision, and case management throughout the ALTCS network.
The CMSR is designed to systematically and routinely assess compliance with
ALTCS program requirements, document the type and level of client resource need
and consumption and compliance with ALTCS performance standards, document the
implementation of
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the Program Contractor's corrective action plan (if any), and assess the
effectiveness of the Program Contractor's corrective action plan.
4.4 The Program Contractor shall ensure that services are provided
within 30 days of enrollment. AHCCCSA will determine compliance requirements
through the CMSR and/or monitoring of CATS data on a monthly basis through the
generation of the No Service Line Report. The No Service Line Report shall be
sent to the Program Contractor for review and follow-up corrective action.
4.5 AHCCCSA will generate a late placement report and send it to the
Program Contractor on a quarterly basis. This report will list ALTCS members
enrolled with the Program Contractor who, according to the AHCCCSA CATS System,
have not been placed after 30 days. The Program Contractor will be requested to
provide a written explanation of the reason the client has not been placed. If
the reason for the non-placement is valid, no action will be taken. If there is
no valid reason, the long term care portion of the capitation for each
non-placed member for which there was no valid reason will be recouped from the
Program Contractor.
AHCCCSA will determine the validity of the reason for non-placement
on a case by case basis prior to any recoupment of capitation.
4.6 The Program Contractor shall ensure enrolled ALTCS members have the
Preadmission Screening and Annual Resident Review (PASARR) Level I and, if
needed, Level II screenings prior to admission to a nursing facility. Level I is
the identification of all individuals who are suspected of having mental illness
or mental retardation, as defined in 42 CFR 483.102. Level II is the function of
evaluating and determining whether nursing facility services and specialized
services are needed. Training on the PASARR requirements shall be provided to
representatives of the Program Contractors and other involved parties, e.g.,
nursing facilities, by AHCCCSA prior to implementation of the requirements.
Failure to have the proper PASARR screening prior to placement of ALTCS members
in a nursing facility may result in federal financial participation (FFP) being
withheld from AHCCCSA. Should withholding of FFP occur, AHCCCSA shall recoup the
withholding from the Program Contractor's capitation payment. The Program
Contractor may, at its option, recoup the withholding from the nursing facility
which admitted the member without the proper PASARR.
4.7 The case manager shall be responsible for determining appropriate
level of care based on member acuity.
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4.8 In those cases in which the Program Contractor fails to meet the
performance standards specified in 4.2., 4.3. and/or 4.4., a financial penalty
may be imposed on the Program Contractor by AHCCCSA in an amount of one percent
(1%) of the Program Contractor's monthly capitation for each day the Program
Contractor fails to met the standard, not to exceed $2,500 per standard for each
day the Program Contractor is not in compliance. The penalty shall be withheld
from the Program Contractor's capitation payment.
5. PROVIDER NETWORK DEVELOPMENT AND MANAGEMENT
NETWORK DEVELOPMENT
5.1 As a contract requirement, DES/DDD shall develop an adequate network
that meets AHCCCSA requirements and member needs. The successful Offeror shall
also demonstrate the capability to manage the network in its contract service
area. The Offeror shall submit, for each service area in which it seeks to
provide ALTCS services, letters of intent to contract for the services listed in
Part Five, Attachment 3, ALTCS Minimum Network Service Area Standards. CSDP's
shall be evaluated on the development of the network submitted with the CSDP, as
well as DES/DDD policies and procedures related to network management. The
successful offeror shall submit to AHCCCSA, on a quarterly basis, any changes in
its network. These changes are to be in a format specified in Part Three,
Section 10.6. Provider Affiliation process.
5.2 DES/DDD must develop and maintain a network capable of delivering
ALTCS covered services to members. Services must be accessible with reasonable
promptness, with respect to geographic location and hours of operation. The
delivery system shall provide available, accessible, and adequate numbers of
facilities, services, locations, professional, allied and para-medical personnel
and personnel for the provision of all covered services, including all emergency
medical care on a 24-hour-a-day, 7-day-a-week basis. The proposed network,
throughout the term of the contract, shall be sufficient to support and maintain
the provision of contract services to ALTCS members within appropriate
timeframes. These timeframes include case manager contact within five (5) days
of enrollment, service provision within thirty (30) days, and service provision
to ventilator dependent members within ten (10) days. The network must also be
maintained to ensure availability of emergency appointment the same day, urgent
care appointments within two (2) days, and routine care appointments within 3
weeks. The Offeror shall have, or provide the following at a minimum:
5.2.1 A designated emergency services facility providing care on
a 24-hour-a-day, 7-day-a-week basis, accessible to members in each contracted
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service area. One or more physicians and one (1) nurse shall be on call or on
duty at such facility at all times.
5.2.2 An emergency services system employing at least one (1)
physician, registered nurse, physician's assistant or nurse practitioner,
accessible to members by telephone 24-hours-a-day, 7-days-a-week, for
information in the event of any emergency, as defined by ALTCS rules, and to
providers who need verification of patient membership and treatment
authorization.
5.2.3 An emergency services call log containing: member's name,
address, telephone number, date of call, time of call, nature of complaint or
problem, and instructions given to the caller.
5.2.4 A written procedure plan for the communication of emergency
services information to the member's primary care physician and other
appropriate organization units.
5.3 In submitting its proposed network and the Offeror's letters of
intent, consistent with the requirements in Attachment 3, Minimum Service Area
Standards, the Offeror must provide the name, address, telephone number and
AHCCCSA provider ID number for each proposed provider in the network.
5.4 The services the provider network shall be responsible for providing
are identified in Part Three, Section 3, Covered Services Requirements.
5.5 An Offeror which intends to use a related party subcontracted
service provider shall obtain prior approval from AHCCCSA.
NETWORK MANAGEMENT
5.6 One of the essential features of the ALTCS program is the Offeror's
system for network management and control. Critical to assessing the Offeror's
network management capabilities will be the Offeror's policies and procedures
for several key areas. These critical areas are as follows:
5.6.1 Ensure that the network of providers meets all service
specifications outlined in the Appendices of the ALTCS Program Management Manual
(place emphasis on PCP and HCBS providers);
5.6.2 Communicate with the network regarding contractual changes and
requirements;
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5.6.3. Monitor and control network compliance with AHCCCSA and
Offeror's policies and rules;
5.6.4. Determine the quality of services delivered by the network
(focus on PCP, HCBS providers, and nursing facilities); and
5.6.5. Provide or arrange for medically necessary covered services
should the network be insufficient within the contracted service area.
5.6.6 Ensure that the network is of sufficient scope to provide
all covered services;
5.6.7 Have mechanisms in place to ensure service accessibility,
including policies and procedures for monitoring appointment procedures
standards, appointment waiting times, and service provision standards;
5.6.8 Monitor network capacity to ensure that there are sufficient
providers (PCPs and other providers) to handle the volume of members;
5.6.9 Have procedures in place for recruitment, selection, and
contracting of providers, that incorporates quality management, utilization, and
pricing information.
5.7 DES/DDD shall specify in the contract or agreement with each
hospital, nursing facility, provider of home health care or personal care
services, hospice program and health plan that each provider complies with the
Federal and State law on advance directives for adult members. At a minimum, the
identified providers shall:
5.7.1 Maintain written policies for adult members receiving care
through their organization and the member's ability to make decisions about
medical care, including the right to accept or refuse medical care and the right
to execute an advance directive;
5.7.2 Provide written information to adult members on the provider's
policies concerning the advance directives;
5.7.3 Document whether or not the adult member has executed an
advance directive;
5.7.4 Note condition the provision of care or discriminate against a
member based on the member's decision to execute or not execute an advance
directive; and
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5.7.5 Provide education for staff on issues concerning advance
directives.
6. QUALITY MANAGEMENT
6.1 The ALTCS Program provides a capitated structure of delivery for
both long term care and acute medical services for its enrolled members. It is
essential in a managed care environment that Program Contractors maintain an
effective quality management (QM) system.
6.2 Quality management combines, under a single umbrella, activities
traditionally referred to as quality assurance, utilization review and risk
management. Also included in QM are newer concepts referred to as continuous
quality assessment and improvement. Planning, assessment, intervention,
continuous monitoring, evaluation, and a feedback loop are critical activities
in the QM process, ensuring improvement of the entire service delivery system.
6.3 Quality management consists of steps taken by DES/DDD to ensure the
quality of its own activities and the oversight of the quality of services
delivered by its providers. The scope of these QM activities involves, 1)
internal operations, 2) HCBS, 3) nursing facility care, 4) acute and ambulatory
care, and 5) mental health services. DES/DDD shall develop a QM plan to
systematically monitor and improve these areas.
6.4 To be effective, QM must be integrated with all aspects of a Program
Contractor's operations, and must ensure participation of appropriate persons in
the process. QM is both a process and an outcome. As such, it must be linked
with service authorization, case management, network development and management,
credentialling, financial and utilization management, risk management and
strategic planning.
6.5 There are three levels of organization and operation participating
in the management of the quality of service delivery to ALTCS members:
6.5.1 AHCCCS/ALTCS;
6.5.2 Program Contractors; and
6.5.3 Providers/Subcontractors (e.g., nursing facilities, home
health agencies, durable medical equipment suppliers, HCBS, ambulatory and acute
care providers)
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6.6 In an effort to develop efficient, cost effective, and
nonduplicative QM, a Program Contractor must also interface with other
participating agencies including, but not limited to: the AHCCCS acute care
health plans, contracted facilities' quality assurance committees, Arizona
Department of Health Services, and Adult Protective Services.
6.7 Quality Management consists of steps taken by DES/DDD to ensure the
quality of its own activities and the oversight of the quality of services
delivered by its providers. A Program Contractor shall set QM standards that are
consistent with AHCCCSA requirements. The components of Program Contractor
Quality Management shall include:
6.7.1 Development and submittal of an annual QM plan;
6.7.2 Development of a QM structure within DES/DDD that ensures the
involvement of appropriate clinical, analytic and administrative staff;
6.7.3 Continuous monitoring and improvement of DES/DDD operations,
including, but not limited to case management, PCP gate-keeping, utilization
management, provider network management, and financial and information
management;
6.7.4 Continuous monitoring and improvement of the services of
DES/DDD's provider network, including nursing facilities, HCBS, acute and
ambulatory services, and mental health services;
6.7.5 Implementation of QM interface with acute care services;
6.7.6 Continuous monitoring and improvement of member outcomes;
6.7.7 Development of a system to track and resolve member problems;
6.7.8 Development of a utilization and risk management plan that:
1) is integrated into the QM program, 2) provides appropriate system controls
for detecting under and over-utilization, 3) ensures compliance with Federal and
State requirements, and 4) compares the practice patterns of providers; and
6.7.9 Quarterly reporting to AHCCCSA on QM activities.
6.8 The Offeror shall develop and submit a proposed QM Plan with its
initial proposal. Thereafter, an annual QM plan that addresses the components
and requirements specified in the Statement of Requirements for ALTCS Program
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Contractor's Quality Management Program. The QM plan and any subsequent
modifications to the plan shall be submitted to AHCCCSA for review and approval.
6.9 DES/DDD shall have a utilization management plan which controls
and improves utilization to ensure that the overall system is efficient and cost
effective. The utilization management plan must, at a minimum, clearly show the
relationship between utilization and QM and ensure compliance with Federal
requirements. Utilization management includes the following activities:
6.9.1 Prior authorization (7 days a week, 24 hours a day);
6.9.2 Concurrent review;
6.9.3 Discharge planning;
6.9.4 Level of care placement review;
6.9.5 Referral management;
6.9.6 Claims review;
6.9.7 Cost effectiveness studies;
6.9.8 Placement and service review;
6.9.9 Case management review;
6.9.10 Provider profiling for pricing and practice patterns;
6.9.11 Review of prescription patterns and drug utilization;
and
6.9.12 Review of prescriptions of Durable Medical Equipment.
6.10 DES/DDD shall attach to its utilization management plan clearly-
defined policies and procedures regarding: 1) authorization and referral
requirements; 2) clinical standards used; 3) restrictions on settings for care;
and, 4) the qualifications of individuals performing utilization management.
Changes in QM policies and procedures will be reported to AHCCCSA.
6.11 DES/DDD's QM program shall be regulated by AHCCCSA. AHCCCSA will
establish standards for this program and assist DES/DDD in achieving the
standards. However, AHCCCSA shall enforce the provisions of ALTCS rules and
policies and procedures when the situation warrants such action.
6.12 Preadmission Screening (PAS) is conducted by AHCCCSA and provides
the parameters of the member's needs for institutionalization. As such, it is
the first line for utilization review. The results of PAS can be used for both
medical eligibility and case management. PAS provides indicators of the level of
placement and the services needed. This, coupled with the case manager's service
plan, provides a baseline for DES/DDD's quality management program. DES/DDD, in
designing a program, shall incorporate PAS and use it as a primary building
block.
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6.13 Inspection of Care (IOC) is another primary building block for
DES/DDD's QM program. Like PAS, IOC will be conducted by AHCCCSA, and the
results will be made available to DES/DDD. IOC is both a utilization and a
quality of care review which consists of an on-site, individual member
assessment. AHCCCSA shall be responsible for determining the appropriateness of
services and quality of care. IOC results can be used by DES/DDD as an indicator
of medical management issues which should be addressed by either the quality
assurance or utilization review programs. In effect, IOC is a feedback activity
to advise DES/DDD on the effectiveness of the QM programs.
6.14 The following reports are required of DES/DDD:
<TABLE>
<CAPTION>
REPORTS DUE DATE SANCTIONS
------- -------- ---------
<S> <C> <C> <C>
6.14.1 Quality Management 30 days $2,500 or
Plan Annual after 1% of monthly
Revision/Update contract capitation,
effective per month
date whichever is
less
6.14.2 Quarterly Quality 30 days $2,500 or
Management Report after 1% of monthly
the end capitation,
of the per month
quarter whichever is
less
6.14.3 Submission of Plan 30 days $2,500 or
of Correction after 1% of monthly
receipt of capitation,
Corrective per month
Actions whichever is
(unless less
otherwise
requested)
6.14.4 Quarterly Inpatient 15 days $2,500 or
Showing Reports after 1% of monthly
the end capitation,
of the per month
quarter whichever is
less
</TABLE>
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7. THIRD PARTY LIABILITY REQUIREMENTS
7.1 AHCCCSA reserves the right to expand third party liability
activities. A Program Contractor may have a role in those activities and shall
cooperate in third party collection activities as determined necessary by
AHCCCSA.
7.2 The Program Contractor shall identify and pursue collection of
reimbursement from all probable sources of third party liability, except for
uninsured and underinsured motorists insurance, first and third party liability
insurance and tort feasors, unless referred by the AHCCCSA for collection.
7.3 The Program Contractor shall identify and notify AHCCCSA in
accordance with A.A.C. R9-28-902 Subsection D, of the potential liability of
uninsured and underinsured motorist insurance, first and third party liability
insurance and tort feasors.
7.4 AHCCCSA shall pursue collection from uninsured and underinsured
motorists insurance, first and third party liability insurance and tort feasors.
The Program Contractor shall cooperate with AHCCCSA or its contractor in its
collection efforts.
7.5 AHCCCSA may retain its third party collections up to 100% of
capitation payments, fee-for-service and reinsurance payments.
7.6 The Program Contractor may retain up to 100% of its third party
collections provided that:
7.6.1 Total payments received do not exceed the total amount of the
Program Contractor's financial liability (total expenditures minus any recipient
share of cost) for the recipient;
7.6.2 ALTCS fee-for-service and reinsurance benefits have not
duplicated the recovery;
7.6.3 Such recovery is not prohibited by State or Federal law; and
7.6.4 The payments are reflected in capitation rates. AHCCCSA may
require Program Contractor to reimburse AHCCCSA up to 100% of third party
payments collected which are not reflected in capitation rates.
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7.7 The disbursement of funds collected from third parties shall be in
accordance with ALTCS rules or policies and procedures.
7.8 The Program Contractor shall report to AHCCCSA the amounts of third
party collections in the form and frequency as may be required by AHCCCSA.
7.9 The Program Contractor shall report to AHCCCSA the payment amounts
made to service providers for hospital or medical care and treatment rendered to
enrolled members for injuries involving liable third parties in the form and
frequency as may be required by AHCCCSA.
7.10 The Program Contractor shall identify any liable third party for
enrolled members.
7.11 The Program Contractor shall communicate any previously unknown
third party liability information to AHCCCSA not later than 30 days from the
date of discovery in a form consistent with AHCCCSA standards.
7.12 The Program Contractor shall reject any or all claims that are
subject to third party payment but do not include an explanation of medical
benefits form.
7.13 Work performed by the Program Contractor shall comply with all
State and Federal laws, AHCCCSA and ALTCS rules, and administrative policies and
procedures applicable to third party liability.
8. SHARE OF COST REQUIREMENTS
8.1 ALTCS members may be required to contribute toward the cost of their
long term care and institutional mental health services. This is the member's
share of cost.
8.2 AHCCCSA is responsible for determining each member's share of cost.
The share of cost is generally calculated by taking the member's gross income
and subtracting certain allowable deductions. The allowable deductions will
differ for members residing in an institutional facility from those residing in
HCBS settings. Most ALTCS members approved for HCBS will not have a share of
cost. Chapter 1600 of the ALTCS Program Management Manual provides additional
information on the share of costs calculations.
8.3 The Program Contractor shall be responsible for collecting and
accounting for the member's share of cost during any month in which there is at
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least one day of enrollment with the Program Contractor. The Program Contractor
has the option of collecting the share of cost from the member or having the
facility collect from the member.
8.4 The Program Contractor shall be responsible for reporting changes in
the member's circumstances impacting share of cost to AHCCCSA in a timely
manner.
8.5 The Program Contractor shall adhere to policies and procedures
provided in Chapter 1600 of the ALTCS Program Management Manual, which provides
a more detailed discussion of share of cost requirements.
8.6 Attachment 8 in Part Five of this RFP provides a breakdown of the
average share of cost by fiscal county for the EDP population.
9. FINANCIAL MANAGEMENT REQUIREMENTS
9.1 Financial management and reporting is used to ensure the financial
integrity of spending under any program and to provide information necessary for
sound program management. Both AHCCCSA and HCFA mandate specific financial
management and reporting standards applicable to Program Contractors to protect
the financial integrity of spending. In addition, financial information must be
available for the Program Contractor to manage the program on an ongoing
operational basis to assess its own financial risk and to determine if members
are receiving necessary services. The Program Contractor shall use such
information to initiate corrective action on an ongoing basis.
9.2 The Program Contractor shall develop a useful and responsive
accural-based financial management and reporting system. Three major data
sources must be integrated to properly account for services provided to members
and reimbursement made to providers:
9.2.1 The Program Contractor shall develop, maintain, and transmit a
long term care service plan for each member which specifies placement and the
services received by each member.
9.2.2 Actual claims payment for services to providers is the second
source of data necessary for financial management and reporting.
9.2.3 Financial management data systems provide the final source of
information.
9.3 At a minimum, the Program Contractor's system shall:
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9.3.1 Integrate program planning assumptions with case-mix (as used
here, the age and sex of the population and utilization rates);
9.3.2 Gather and report data on critical financial indicators (i.e.,
Incurred But Not Reported Claims);
9.3.3 Establish and maintain a financial information base to support
current operations;
9.3.4 Provide information regarding financial status, including all
reporting mandated by law and accounting of HCBS expenditures, to internal
management and AHCCCSA on a regular basis;
9.3.5 Make records available for independent audit;
9.3.6 Ensure that subcontractors and other provider claims are
reimbursed adequately and in a timely manner; and
9.3.7 Monitor nursing facilities, Institution for Mental Disease
(IMD) for members age 65 and older, inpatient psychiatric facilities for members
under age 21, and hospice accounting activities (e.g., trust fund accounting,
member share of cost collection, etc.,) and ensure the financial integrity of
these activities and that records are monitored as required by 42 C.F.R. 483.10.
9.4 In addition to these overall requirements, the Program Contractor's
financial management systems shall meet specific uniform financial management
system standards established by HCFA. These are specified in Federal regulations
in 45 CFR, Part 74. These standards relate to financial reporting on an accrual
basis, adequate identification of the source and application of funds, and
establishment of internal controls and procedures for determining
reasonableness, allowability, and allowability of cost with accounting records
supported by source documentation. These Federal guidelines are incorporated, by
reference, in the contract between Program Contractors and AHCCCSA. The Program
Contractor shall meet these standards in all aspects of its financial management
system.
9.5 The Federal Regulations, Disclosure of Information by Providers and
Fiscal Agents at 42 CFR 455.100 through 455.106, sets forth the minimum
information required on ownership and control, related party transactions and
persons convicted of crimes. The Program Contractor is responsible for
disclosing all required information and justifying all related party
transactions reported. The Chief Executive Officer shall certify to the accuracy
and
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completeness of the disclosures made. The Program Contractor shall
demonstrate that transactions occurring between the provider and a related
party-in-interest are: (1) reasonable, (2) will not adversely impact the fiscal
soundness of the Program Contractor, and (3) were without conflict of interest.
The proof submitted shall relate to the Program Contractor's marketplace and
demonstrate that the transactions are no more than the economic reality which
the marketplace requires.
9.6 Submission requirements for Disclosure of Information are as
follows:
9.6.1 Annually, at fiscal year end, as part of the annual reporting
requirements. Disclosure must be received by AHCCCSA not later than 35 days
after the last day of the fiscal year;
9.6.2 Prior to AHCCCSA entering into or renewing the Program
Contractor's contract;
9.6.3 When a change is contemplated in ownership and control
information previously submitted to AHCCCSA. A change in ownership and/or
control requires the prior approval of the Director of AHCCCSA;
9.6.4 Prior to or upon entering into any related party transaction
not previously reported to AHCCCSA. This requirement is limited to the
transaction(s) involved. Except when advance administrative review is required,
disclosure must be received by AHCCCSA not later then 35 days after the date of
the transaction.
9.6.5 Upon written request of the Director of AHCCCSA. This
requirement is limited to the scope of the request. Disclosure must be received
by AHCCCSA not later than 35 days after the date of the request.
9.7 In addition to the Federal requirements relating to financial
management and reporting, ALTCS rules R9-28 502 through 512, establish reporting
criteria for all ALTCS Program Contractors. These reporting criteria are
codified in the General Provisions of the contract between Program Contractors
and AHCCCSA and in the ALTCS Uniform Accounting and Reporting System and Guide
for Audits of ALTCS Contractors and Providers; specifically, these two
documents, along with the AHCCCSA rules, contain the financial management and
reporting requirements related to an ALTCS contract.
9.8 It is critical that the Program Contractor adhere to generally
accepted accounting procedures and practices in its design of the systems
intended to
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provide these data. Failure to meet the minimum requirements established by HCFA
and AHCCCSA may result in the imposition of financial sanctions by AHCCCSA.
Failure to satisfy these requirements also endangers the health and well-being
of ALTCS members. Should the Program Contractor fail to integrate financial and
service plan data, there is a risk that the member might not receive quality
services in a timely fashion. In any event, the maintenance of sound financial
management data should be a primary component in any successful operation.
9.9 If an Offeror intends to subcontract for management services in its
administration of the ALTCS program, then copies of the subcontract shall be
submitted to AHCCCSA for prior approval. The Offeror shall submit all forms
identified in Part Four, Section 11.3 of this RFP at the time of proposal. In
addition to these forms, the Offeror shall submit the most current audited
financial statement for all management services subcontractors. If the Offeror
is considering more than one subcontractor for a given management service, forms
shall be submitted on all subcontractors under consideration. A management
services subcontractor is defined as a marketing organization or any other
organization or person agreeing to perform any administrative function on
service for the Program Contractor specifically related to securing or
fulfilling the Program Contractor's obligations to AHCCCSA under the terms of
the contract. This shall include, but not be limited to, third-party
administrators, firms or persons who manage operations of the Program Contractor
such as marketing, data processing, claims processing, prior authorization, and
other management functions.
10. DATA MANAGEMENT
10.1 The Program Contractor shall have and demonstrate the capability to
handle all required technical interfaces with AHCCCSA via the media identified
in the following interfaces (refer to the Technical Interface Guidelines
document in the bidder's library for further information. This document, which
will include more specific guidelines, will be provided to Program Contractor
upon contract finalization.)
10.2 DAILY ROSTER PROCESS
10.2.1 Introduction
Daily rosters are produced (seven days-a-week) for each
Program Contractor under contract with AHCCCSA. Rosters identify: (1) new
additions (members) to a Program Contractor for which the Program Contractor
will be responsible in three days, (2) persons newly disenrolled or deceased for
whom the Program Contractor is no longer responsible, and (3) changes to
member's
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demographic data such as name, address or date of birth. Other changes, such as
share of cost and rate code changes, are also communicated via the daily
rosters. Capitation through the end of the month is calculated for all new
enrollments. Since capitation is paid prospectively (see 10.3, Monthly Roster
Process), recoupments are made for any disenrollments for the remainder of the
month.
Rosters are produced in data file format. Program
Contractors, or their service bureaus, have the option of either dialing in to
the AHCCCSA computer system and downloading the data file for batch processing
or having the data transmitted directly to their computer system. Some Program
Contractors also receive paper rosters.
10.2.2 Processing Requirements:
Media
Roster data files for Program Contractors, or service
bureaus, choosing to dial in to the AHCCCSA computer system are downloaded from
the Arizona Department of Administration, Data Center (ADOA-DC) mainframe to the
AHCCCSA Wang VS7310 or VS7150 minicomputers. Program Contractors can then dial
into the VS7310/VS7150 and initiate the transmission of their roster file to
their own computer system.
Direct roster transmission files for Program Contractors, or
their service bureaus, choosing host-to-host transmissions are held on the
ADOA-DC mainframe and are transmitted via a dedicated data communication link to
the Program Contractor/service bureau's computer.
Reporting
In addition to the daily roster, a Rate Code Summary report is
produced. The Rate Code Summary roster provides total dollar amounts by rate
code, and is distributed by AHCCCSA, Division of Business, Finance and Research
(DBF&R) with the capitation checks/remittances.
Testing
Roster file transmissions must be tested in coordination with
AHCCCSA, Information Services Division (ISD) operations staff prior to
production implementation of a new Program Contractor or change in service
bureau, or as a result of roster changes. Typical testing of roster file
transmission takes approximately one week and must be completed prior to
implementation of any new processing arrangement.
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Notes
Roster data, once delivered to the Program Contractor, is
considered legal notification of the Program Contractor's responsibility for
provision of care to AHCCCSA members.
Special attention should be given to the daily capitation process
immediately preceding the monthly capitation, as well as to the daily capitation
process run on the last two days of the month. The daily capitation process
which runs prior to the monthly is referred to as the 'last daily' and will
contain all rate code changes made for the month, as well as any new enrollment,
and disenrollments for the next month. It is important that this last daily be
processed by the Program Contractors before attempting to run the monthly
reconciliation process (see 10.3 Monthly Roster Process.)
10.3 MONTHLY ROSTER PROCESS
10.3.1 Introduction
Monthly rosters are produced the last day of every month for
each Program Contractor under contract with AHCCCSA. Rosters will identify the
total active population for each Program Contractor as of the first of the next
month. Capitation for the next prospective month is calculated for each enrolled
member as of the first of that month. This capitation is always for the full
month; capitation
for subsequent terminations is recouped through the daily
roster process. The Program Contractor shall be responsible for maintaining an
accurate data file of all of their members and should be prepared to complete an
official reconciliation with AHCCCSA on a quarterly basis. The monthly
capitation roster, in addition to providing the next prospective month's
capitation, will be used to reconcile the Program Contractor's member file
against that of AHCCCSA. In order for this reconciliation to be successful, it
is important that all daily transmission files, including the last daily, be
processed prior to the monthly reconciliation. Monthly rosters are produced in
data file format only. Program Contractors, or their service bureaus, have the
option of receiving the monthly rosters on reel or cartridge tape.
10.3.2 Processing Requirements
Media
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Monthly rosters and monthly rate code summary are available
on reel or cartridge tape.
Reporting
In addition to the monthly roster, a Rate Code Summary
report which provides the total dollar amounts by rate code will be produced and
distributed by DBF&R with the capitation checks/remittances. The Rate Code
Summary is also available in electronic format (tape).
Testing
Roster file transmissions must be tested in coordination
with the AHCCCSA ISD operations staff prior to production implementation of a
new Program Contractor, change in service bureau, or as a result of roster
changes. Typical testing of roster file transmission takes approximately one
week and must be completed prior to implementation of any new processing
arrangement.
Notes
Roster data, once delivered to the Program Contractor, is
considered legal notification of the Program Contractor's responsibility for
provision of care to AHCCCSA members.
10.4 MASS ADJUSTMENT PROCESS
10.4.1 Introduction
The mass adjustment process is used as a tool for
administrative adjustment of contracted rates. Previously paid amounts are
recouped, and then repaid at the new rate. From the Program Contractors'
perspective, the mass adjustment resembles the daily roster process in that it
is transaction driven. Special disenroll mass adjustment transactions identify
recoupment, and enroll transactions identify repayment. The mass adjustment
transmission file is identical to that produced via the daily roster process. A
mass adjustment roster, which is different from the daily roster, is also
produced. This roster lists recoupment/repayment amounts and associated dates by
member. Program contractors are notified in writing prior to procuring.
10.4.2 Processing Requirements
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Media
Mass adjustment files are available on tape: either reel or
cartridge.
Reporting
Along with the mass adjustment roster, a mass adjustment
rate code summary report is available. The mass adjustment rate code summary
report is distributed by DBF&R with checks/remittances.
Testing
See 10.2 Daily Roster Process.
10.5 ENCOUNTER DATA SUBMISSION PROCESS
10.5.1 Introduction:
An encounter is a record of a medically related service (or
visit) rendered by a provider registered with AHCCCSA to a member who is
enrolled with a Program Contractor on the date of service. The encounter record
includes (but is not limited to) all services for which the Program Contractor
incurred any financial liability. Denied claims, or claims paid entirely by a
third party, should not be reported as encounters. Submission of encounter data
to the AHCCCSA is a mandatory requirement established by HCFA. The data
contained on an encounter record must meet the requirements as prescribed by
HCFA and accepted by the AHCCCSA.
Encounter data is reported by the Program Contractors on
three different form types: (1) the HCFA-1500 (Form A), (2) the UB-82 (Form B)
and (3) the Universal Drug Form (Form C). Program Contractors are required to
submit encounters for all three (3) form types. Program Contractors are also
required to submit the amount paid for mental health encounters. Paid amount may
be submitted for all encounters. When reporting Encounter data to AHCCCSA,
Program Contractors shall adhere to the tape specifications and guidelines
specified in the AHCCCSA Encounter Reporting User Manual. Changes in or
amendments to the Encounter Reporting User Manual will be distributed as revised
requirements.
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Encounter data must be reported to AHCCCSA within certain
timelines. Encounter data for inpatient hospital charges, i.e. room and board
and ancillary services, requiring medicare filing, must be received by the
AHCCCSA no more than one hundred and eighty (180) days from the end of the month
in which the service was rendered.
All other encounters must be received by the AHCCCSA no more
than one hundred and twenty (120) days from the end of the month in which the
service was rendered.
10.5.2 Processing Requirements
Media
AHCCCSA requires all Program Contractors to use magnetic
tape as the medium to submit encounter data. The use of paper media is not
acceptable. Program Contractors shall use the proper transmittal form when
submitting encounter data to AHCCCSA. The transmittal form provides
authorization for acceptance of the data by AHCCCSA and provides a receipt for
the Program Contractor.
Reporting
Refer to the AHCCCSA Encounter Reporting User Manual for the
encounter reports that are available to the Program Contractors.
Testing
To ensure the success of encounter data submission, a new
Program Contractor must complete a successful testing phase with AHCCCSA before
submitting official ("production") encounter data.
To initiate the test phase with AHCCCSA, the Program
Contractor shall notify the AHCCCSA Encounter Manager and the ISD Encounter Team
Project Leader of its readiness to begin testing tapes.
A minimum of five (5) working days will be required for
AHCCCSA to complete the processing of each tape submitted. All test tapes must
be identified with the word "Test" on the external label.
Technical Assistance and Training:
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To assist Program Contractors in submitting encounter data,
the AHCCCSA Encounter Unit offers training on how to submit tapes, prepare
labels and process paperwork. Trainings are also offered on how to read and
interpret the reports provided by AHCCCSA, and how to use the reports to
understand the status of encounter submissions and pending encounters. Trainings
are offered on common edit problems, and suggestions on how to resolve these
edits are provided. In addition, the Encounter Unit offers on-going technical
assistance to Program Contractors. Inquiries can be made by telephone, fax, or
memorandum. The Encounter Unit also offers specific analysis of pending
encounter files at the request of Program Contractors.
10.6 PROVIDER AFFILIATION PROCESS
10.6.1 Introduction
Provider Affiliation data is required from the Program
Contractor every quarter. This data, which defines the Program Contractor's
provider network by county, is used by AHCCCSA to verify a Program Contractor's
ability to provide adequate care as specified in the contract between AHCCCSA
and the Program Contractor. Each Program Contractor to provider affiliation
record is defined with a begin date, an end date, and specifies whether the
provider is a Primary Care Physician, OB/GYN, or provides Early Periodic
Screening, Detection and Treatment services. Providers may be specified as none,
one, or several of these categories. Specialty codes, representing specialties
such as allergist, optician, or gerontologist may also be submitted, but are not
required.
Provider Affiliation tapes shall be submitted every quarter,
and shall specify provider networks for the next quarter. These tapes are
edited, errors written to an exception report, and accepted data added to the
AHCCCSA database. The exception report is sent to the appropriate Program
Contractor to be used in data correction. All tapes submitted to AHCCCSA,
including correction tapes, must be full-file tapes.
10.6.2 Processing Requirements
Schedules
Provider Affiliation tapes are required at the beginning of
every quarter for the upcoming quarter. The first tape should be received by
AHCCCSA operations (801 E. Jefferson, Phoenix, 4th floor) by October 1 of each
year, and subsequent tapes on January 1, April 1 and July 1. Correction tapes
(full file) shall be submitted as soon as possible after the exception reports
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have been received by the Program Contractor, and the erroneous records
corrected.
Media
Provider Affiliation data must be submitted on tape, either
reel or cartridge. External labels should contain the Program Contractor name,
contents of the tape ("Provider Affiliation"), the quarter for which the data is
being submitted (1st quarter is Oct. 1 through Dec. 31), the blocksize, the
volume serial number (VOL-SER), and whether the tape includes an internal label.
Reporting
The Program Contractor Provider Exception report is produced
each time a tape is received from a Program Contractor. It lists errors (if any)
and is forwarded to the appropriate Program Contractor as a confirmation that
its tape was processed and to aid in error correction (if required).
Testing
A clearly labeled provider affiliation tape ("Test") must be
received by AHCCCSA ISD Operations prior to the first production tape
submission. This test tape should be submitted at least one week prior to the
submission of the production tape.
10.7 MONTHLY PROVIDER TAPE
10.7.1 Introduction
AHCCCSA produces a monthly magnetic tape which contains all
providers registered with the program. This includes all active, terminated, and
suspended providers. For each provider on the tape, information is included
related to demographic data, provider status, categories of service, service
rates, licenses and certifications, specialties, Medicare coverage, restrictions
and service and billing addresses used by the provider. 10.7.2 Processing
Requirements
Media
The Monthly Provider data is available on magnetic tape
only.
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Reporting
None
10.8 CASE MANAGEMENT DATA SUBMISSION PROCESS
10.8.1 Introduction
Case management data is a record of the member's
cost-effectiveness study, the case manager, placement history, case management
review dates, and Title XIX services authorized for and provided to the member,
including third party services. This includes any institution to which room and
board is paid.
Those Program Contractors not utilizing online update to
CATS shall have this system interface in place to update case management
information in CATS.
10.8.2 Processing Requirements
Media
Direct case management transmission files for Program
Contractors choosing host-to-host transmissions take place on the ADOA-DC
mainframe and are transmitted via a dedicated data communication link from the
Program Contractor service bureau's computer.
Magnetic tape is also an acceptable medium for case
management data to be given to AHCCCS.
Reporting
The following reports which identify case management
interface errors are available to the Program Contractors:
10.8.2.1 Program Contractor Transaction Exception Detail
Report - lists all transaction lines with error code(s) received
10.8.2.2 Program Contractor Transaction Error Summary Report
- - - lists all error codes received with the occurrence per code
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10.8.2.3 Program Contractor Transaction Summary Report -
shows percentage of rejects per type of transaction as well as overall reject
rate
Testing
Program Contractor Interfaces must be tested in
coordination with the AHCCCSA/ISD/ALTCS staff prior to production implementation
of a new Program Contractor's batch interface.
10.9 MONTHLY PROCEDURE CODE (HCPCS) TAPE
10.9.1 Introduction
AHCCCSA produces a monthly procedure code (HCPCS) tape
for all Program Contractors. The data on the tape includes all active procedure
codes which have effective end dates on or after January 1, 1989. For each such
procedure code various records are included indicating the procedure
description, pricing information and AHCCCSA coverage information.
10.9.2 Processing Requirements
Media
The Monthly Procedure Code data is sent on magnetic tape
only.
Reporting
None
10.10 PROGRAM CONTRACTOR TO AHCCCSA HOST COMMUNICATIONS
10.10.1 Responsibility for computer terminal hardware and data
communications equipment enabling a Program Contractor access to relevant
AHCCCSA data will be handled in the following manner.
10.10.2 Equipment, materials and labor costs required to
establish initial data access at a primary location will be furnished by
AHCCCSA. AHCCCSA will also be responsible for the on-going maintenance expense
associated with the primary installation.
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10.10.3 Cost for additional equipment (including maintenance) at
the primary site and any additional equipment (except modems) at any other site
shall be the responsibility of the Program Contractor. AHCCCSA will provide
modems for the primary site as well as any additional sites, end-to-end
installation and on-going maintenance for each modem at each site. At the
Program Contractor's request, AHCCCSA will provide assistance in coordinating
with the phone company for the purpose of ordering any additional data circuits,
however the installation cost and the on-going monthly charges will be the
responsibility of the Program Contractor. Any and all additional equipment must
be pre-approved by AHCCCSA prior to installation.
10.10.4 Primary site equipment and services provided by AHCCCSA;
10.10.4.1 Modems at both ends (and any additional
locations),
10.10.4.2 One 4 port communications controller (3x74
compatible),
10.10.4.3 One CRT (3270 compatible dumb terminal),
10.10.4.4 One printer (3287 compatible dot matrix),
10.10.4.5 One 9.6 analog data circuit,
10.10.4.6 All labor and materials to complete initial
installation,
10.10.4.7 On-going maintenance on AHCCCSA provided
equipment,
10.10.4.8 On-going monthly cost of primary site 9.6
analog data circuit,
10.10.4.9 On-going maintenance for all AHCCCSA installed
modems.
10.11 ELIGIBILITY VERIFICATION SYSTEM (EVS)
The automated Eligibility Verification System (EVS) at AHCCCSA
is a service available to AHCCCS providers for obtaining member eligibility and
enrollment verification. AHCCCSA contracts with an outside vendor who provides
terminals in providers' offices. Through these terminals, providers can obtain
specific eligibility and Program Contractor enrollment data without contacting
the AHCCCSA Communications Center. An automated audit trail and a paper printout
are available to the provider for record keeping. This service is available 24
hours a day, and is limited only by downtime required by AHCCCSA production.
11. MEMBER HANDBOOK REQUIREMENTS
11.1 The Program Contractor shall produce and provide printed
information materials to each enrolled member within ten (10) days of
enrollment. All
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informational materials prepared by the Program Contractor shall be approved by
AHCCCSA prior to distribution to members. Information shall be provided in
English and a second language when two-hundred (200) members or five percent
(5%) of the enrolled population, speak the same non-English language. When
AHCCCSA requires the Program Contractor to change covered services, notification
will be provided to the affected member as soon as possible.
11.2 The Member Handbook shall be written at the fourth grade level.
AHCCCSA advises the Program Contractor to investigate the following resources to
determine whether it is meeting the requirements stated in 11.1 above:
11.2.1 Fry Readibility Index;
11.2.2 PROSE, the Readability Analyst (Software developed by
Education Activities, Inc.);
11.2.3 Gunning FOG Index; and
11.2.4 McLaughlin SMOG Index.
11.3 The Member Handbook shall be required to meet AHCCCSA rules for
printed information. The Member Handbook shall include a table of contents,
administrative information explaining operations of the Program Contractor
appointment procedures for, and both covered and non-covered ALTCS services.
11.4 The Member Handbook shall address what to do in case of an
emergency and shall include names, addresses and telephone numbers for members
to receive instructions on obtaining care in case of an emergency. Information
shall be included to explain how to obtain out-of-county moves, grievances,
advance directives and contributions the member can make towards his/her own
health.
11.5 At a minimum, the Member Handbook shall contain the following
language regarding questions, problems and grievances. These items are required
by HCFA.
11.5.1 Q. WHAT IF I HAVE QUESTIONS, PROBLEMS, OR COMPLAINTS ABOUT
(PROGRAM CONTRACTOR NAME)
A. If you have a question or problem, please call __________
_______________________.
If you have a specific complaint about your medical care,
the Case Manager will help you.
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11.5.2 Q. WHAT IF I AM NOT HAPPY WITH THE HELP GIVEN TO ME BY THE
CASE MANAGER?
A. If you do not agree with the answer you receive, you can
tell the Case Manager you want to file a written or oral grievance. The
grievance shall be filed no later than 35 days after the date of the action,
decision, or incident.
(Program Contractor Name) shall make a final decision for
grievances within 30 days of getting your written grievance. A letter will be
mailed to you stating the Program Contractor decision and the reason for the
decision. The letter will tell you how you can appeal the decision if you are
still unhappy. You shall let the Program Contractor know you want to appeal the
decision letter within fifteen (15) days.
A. If you are appealing the Program Contractor decision,
(Program Contractor Name) will send your request for appeal to the AHCCCSA. You
will receive information from AHCCCSA on how your appeal will be handled. The
AHCCCSA will then decide if the Program Contractor decision was correct under
the circumstances.
12. STAFF AND SUPPORT SERVICE REQUIREMENTS
12.1 The Program Contractor shall have in place the organizational and
administrative system capable of implementing ALTCS contractual obligations
which shall include, but not be limited to, the following:
12.1.1 An Administrator to oversee the Program Contractor's
business system;
12.1.2 A Medical Director to ensure that medical decisions are made
by qualified medical personnel;
12.1.3 Sufficient clerical support staff to conduct daily business;
12.1.4 A Grievance Coordinator to investigate AHCCCSA member and
provider complaints and grievances against the Program Contractor;
12.1.5 A Financial Officer to oversee the budget and accounting
system implemented by the Program Contractor;
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12.1.6 Case Managers to coordinate the provisions of services to
clients in HCBS and institutional settings;
12.1.7 Provider representative(s) to coordinate communications
between the Program Contractor, subcontractors, other Program Contractors, and
AHCCCSA;
12.1.8 Claims processors to ensure the timely and accurate
processing and adjudication of original claims, claims corrections letters
(CCLs), resubmission and overall disposition of all claims;
12.1.9 Encounter processors to ensure the timely and accurate
submission of encounter data to AHCCCSA;
12.1.10 Support services staff to ensure the timely and accurate
processing of support service reports/requests (i.e., telephone systems, MIS,
etc.);
12.1.11 A QM Management Coordinator who is a registered nurse with
a current Arizona license;
12.1.12 Prior Authorization staff to authorize medical care; and
12.1.13 A registered nurse with a current Arizona license to
conduct inpatient concurrent review.
12.2 It is the Program Contractor's responsibility to ensure that all
staff have appropriate training, education and experience to fulfill the
requirements of the position. Furthermore, the Program Contractor shall have an
organization capable of supporting these personnel.
13. GRIEVANCE AND APPEALS REQUIREMENTS
13.1 The grievance process represents a vital component of the ALTCS
program as it ensures the operational integrity of the health care delivery
system and the provision of quality health care. By affording expeditious
review, the grievance process provides an alternative resolution of disputes and
disagreements for all participants. State law, as well as Federal law, mandates
implementation of and adherence to a grievance mechanism.
13.2 The Program Contractor shall have a grievance policy for members
and providers which defines their rights regarding any adverse action by the
Program Contractor. The purpose of this section is to define the minimum
requirements of
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the Program Contractor's grievance policy. The Program Contractor shall develop
and maintain a written grievance policy that, at a minimum includes, but is not
limited to, the following:
13.2.1 The grievance procedure shall be provided to members upon
enrollment, to all subcontractors at time of contract, and to non providers
within ten (10) days of the date of receipt of a claim;
13.2.2 The member grievance procedure shall be written in English
and a second language when two hundred (200) members or five (5) percent of the
enrolled population, speaks the same non-English language.
13.2.3 Each nursing facility shall inform each member of the
member's rights and responsibilities in conformity with 42 C.F.R., Part 483
Subpart B.
13.2.4 The nursing facility shall maintain a grievance procedure
consistent with AHCCCSA policies. The grievant in nursing facility grievances
shall be informed that appeals to the Program Contractor are available.
13.2.5 The grievance procedure shall specify that all grievances,
except those challenging claim denials, shall be filed with the Program
Contractor no later than thirty-five (35) days after the date of adverse action
and that all grievances challenging claim denials shall be filed in writing with
the Program Contractor no later than twelve (12) months from the date of service
for which payment is claimed.
13.2.6 Specific individuals shall be appointed with authority to
require corrective action to administer the grievance policy.
13.2.7 A log shall be maintained for all grievances containing
sufficient information to identify the grievant, date of receipt, nature of the
grievance and the date grievance is resolved. The member grievance log shall be
maintained separately from all other logs.
13.2.8 Within five (5) working days of receipt, the grievant shall
be informed by letter that the grievance has been received. This letter shall be
in English and a second language as described in Section 13.2.2 above.
13.2.9 Privacy of the grievance records shall be maintained at all
times, including the transmittal of medical records, if required.
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13.2.10 Each grievance shall be thoroughly investigated using the
applicable statutory, regulatory and contractual provisions as well as the
Program Contractor's policies/procedures, ensuring that facts are gathered from
all parties.
13.2.11 All documentation received and mailed by the Program
Contractor during the grievance process shall be dated.
13.2.12 All grievances shall be filed in a secure, designated area
and be retained for five (5) years following the final decision, judicial appeal
or close of a grievance.
13.2.13 If the Program Contractor's final decision is appealed, all
supporting documentation shall be forwarded to AHCCCSA, Office of Grievance and
Appeals. Such appeal shall be received by AHCCCSA no later than five (5) working
days from the date the Program Contractor receives the appeal or the date of the
oral request from AHCCCSA, Office of Grievance and Appeals. The appeal file must
contain a cover letter that includes, as applicable:
13.2.13.1 Member's or provider's name;
13.2.13.2 Member's or provider's AHCCCSA ID number;
13.2.13.3 Member's or provider's address;
13.2.13.4 Phone number (if available);
13.2.13.5 Date of receipt of grievance and appeal; and
13.2.13.6 Summary of the Program Contractor's actions
undertaken to resolve the grievance and basis thereof.
13.2.14 The following material shall be included in the appeal
file:
13.2.14.1 Written request of the member or provider asking
for the appeal;
13.2.14.2 Copies of the entire file which include the
investigations and/or medical records;
13.2.14.3 Other information that would be necessary for
resolution of the grievance by AHCCCSA (i.e., claim forms evidencing dates of
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receipt; claims summaries indicating submissions, denials, dates, and reasons
for denial; contracts; policies, procedures; phone logs; case notes, etc.).
13.3 A Quarterly Grievance Report shall be submitted to AHCCCSA, Office
of Grievance and Appeals, using the format reflected in Part Five, Attachment 5
to this RFP. Failure to submit the Quarterly Grievance Report within forty-five
(45) days from the end of the quarter shall result in a sanction.
13.4 Any Program Contractor submitting grievances which fail to comply
with one or more of the above-mentioned grievance standards (i.e., failure to
issue a determination within the appropriate time frame, failure to specify the
appropriate appeal time frame, etc.) shall be sanctioned in the amount of
$500.00 per grievance.
13.5 All Program Contractors shall maintain grievance standards in
compliance with the contract provision and ALTCS policies to ensure that both
member and provider disputes are handled competently, expeditiously, and
equitably. Inquiries, i.e., requests for information, are NOT grievances, and
therefore, the grievance standards do not apply.
13.6 The Program Contractor may attempt to use alternative resolution
procedures to resolve disputes presented to the Program Contractor verbally or
in writing. If the Program Contractor elects to use an alternative resolution
process, it shall be administered equally and fairly, and shall be completed
within ten (10) days from receipt of the dispute. If the matter is not resolved
to the member's or provider's satisfaction within the ten (10) day period, or if
the Program Contractor fails to act upon the matter within the ten (10) day
period, the dispute shall be treated as a grievance. The Program Contractor
shall complete the alternative resolution process, if it elects to use such, and
any resulting grievance within a maximum of thirty (30) days, from the date of
the filing of the grievance or dispute, and in no event shall any grievance
process exceed beyond thirty (30) days, whether the Alternative Resolution
Process is utilized or not.
13.7 For member grievances, a notice shall be given to the member when
he or she enrolls and where there is an adverse action affecting his claim
(i.e., a denial, reduction or suspension of medical services). This notice shall
include what action is being taken; reasons for the action; specific regulation
references; a statement of the member's right to a grievance process with the
Program Contractor and a right to an appeal to AHCCCSA for an evidentiary
hearing; the method by which a member can file a grievance with the Program
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Contractor and appeal for a hearing to AHCCCSA; a statement that the
applicant/member can represent himself or herself, have legal counsel, a
relative, friend or other spokesperson represent him or her; and an explanation
that services will continue pending a timely request for hearing.
13.8 No later than ten (10) days from the date that a dispute is
initially presented to the Program Contractor, the Program Contractor shall
inform the member or provider of the Program Contractor's resolution and ask a
member or provider if the resolution is acceptable. In addition:
13.8.1 If acknowledged as acceptable, the matter may be closed; and
13.8.2 If the member or provider states that the resolution is
unacceptable, the Program Contractor shall then treat the dispute as a grievance
where all grievance standards apply, e.g., the dispute is logged in as a
grievance, acknowledgment letters are mailed, a decision is issued within the
appropriate time frames, appeal rights are provided.
13.9 For all disputes where an alternative resolution is proposed, the
Program Contractor shall maintain a permanent record which contains at a
minimum, the following:
13.9.1 The name of the member and provider;
13.9.2 Telephone number and address;
13.9.3 Date the dispute was presented;
13.9.4 Date the resolution was communicated to the member and
provider;
13.9.5 Nature of the dispute;
13.9.6 The resolution offered; and
13.9.7 Whether resolution is accepted or rejected.
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PART FOUR
PREPARATION OF THE PROPOSAL AND THE COMPREHENSIVE SERVICE
AND DELIVERY PLAN MATERIAL
1. Proposal Content and Format
The Offeror's proposal shall include a detailed description of the
techniques and procedures to be used in performing the functions and services
defined in this RFP. This section of the RFP contains essential information for
Offerors in preparing a response to the RFP. The section focuses on the content
of the response; instructions related to the physical submittal of the response
are located in Part Two. The Offeror's proposal shall present sufficient
information to reflect a thorough understanding of the organizational
requirements and a detailed approach and plan for addressing each element
identified below. Proposals that merely paraphrase this RFP or any part(s)
thereof or use such phrases as "will comply" or "standard techniques will be
employed" may be considered unresponsive and may be so rejected.
1.1 One original and nine (9) copies of each proposal shall be submitted
on the forms provided or by following the instructions provided in Part Four.
Proposals shall be submitted in the following order:
1.1.1 Table of Contents for the Proposal;
1.1.2 RFP Transmittal Letter;
1.1.3 RFP Response Checklist;
1.1.4 Contract Signature Sheet;
1.1.5 Appendix A of the Contract;
1.1.6 Rate Development Sheets;
1.1.6.1 Nursing Facilities CRCS Non-Ventilator Dependent
Clients;
1.1.6.2 Nursing Facilities CRCS Ventilator Dependent
Clients;
1.1.6.3 Capitation Lag Factor Worksheet;
1.1.6.4 HCBS CRCS Non-Ventilator Dependent Clients;
1.1.6.5 HCBS CRCS Ventilator Dependent Clients;
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1.1.6.6 HCBS Average Daily Census Worksheet Non-
Ventilator Dependent Clients;
1.1.6.7 HCBS Average Daily Census Worksheet Ventilator
Dependent Clients;
1.1.6.8 Case Management Capitation Rate Calculation
Sheet;
1.1.6.9 Acute Care CRCS Members Without Medicare,
Ventilator Dependent Rate Code Classification;
1.1.6.10 Acute Care CRCS Members Without Medicare,
Non-Ventilator Dependent Rate Code Classification;
1.1.6.11 Acute Care CRCS Members With Medicare,
Non-Ventilator Dependent Rate Code Classification;
1.1.6.12 Acute Care CRCS Members With Medicare,
Non-Ventilator Dependent Rate Code Classification;
1.1.6.13 Acute Medical CRCS Aggregate Rate Calculation
Sheet Non-Ventilator Dependent;
1.1.6.14 Acute Medical CRCS Aggregate Rate Calculation
Sheet Ventilator Dependent;
1.1.6.15 Mental Health Capitation Rate Calculation
Sheet;
1.1.6.16 Mental Health Capitation Rate Worksheet for
Evaluation/Diagnosis;
1.1.6.17 Mental Health Capitation Rate Worksheet for
Avoided Long Term Care Cost;
1.1.6.18 Aggregate Capitation PMPM and Administrative
Cost Factors;
1.1.6.19 Rate Sheet for Net PMPM Capitation;
1.1.6.20 Capitation Rate Sheet Summary;
1.1.7 Program Description;
1.1.8 Case Management Plan;
1.1.9 Service Provider Network Information;
1.1.8.1 Letters of Intent;
1.1.8.2 Subcontracts;
1.1.8.3 Narrative Description;
1.1.8.4 Network Policies and Procedures;
1.1.8.5 Form C, (if applicable);
1.1.10 Quality Management Plan (Including utilization
management plan);
1.1.11 Financial Management Questionnaire Forms 1
through 9 and Forms 10 to 19 (if applicable);
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1.1.12 Data Management Questionnaire;
1.1.13 Grievance and Appeals Questionnaire;
1.1.15 Member Handbook;
1.1.16 Third Party Liability Questionnaire;
1.1.17 Supportive Housing Questionnaire (for Maricopa County only);
1.1.18 Certificate of Insurance;
1.1.19 Conflict of Interest Form (if necessary); and
1.1.20 Amendment(s) (if applicable).
1.2 It is permissible to photocopy the forms that follow or otherwise
duplicate them in the format presented herein.
1.3 Items 1.1.4 and 1.1.5 shall become part of the final contract. Items
1.1.6 through 1.1.16 shall be used to evaluate the Offeror's ability to deliver
the covered services and shall become the Program Contractor's CSDP.
1.4 The instructions for completing the required forms and providing the
necessary information follow.
2. RFP Transmittal Letter
A sample transmittal letter can be found in Part Five as Attachment 6 of
this RFP. The Offeror shall submit a letter following this format.
3. RFP Response Checklist
The Offeror shall complete the RFP checklist found in Part Five,
Attachment 7 of this RFP.
4. Contract Signature Sheet
The contract signature sheet is the first page of the contract found in
Part Five, Attachment 1 of this RFP. The Offeror shall fill in its name and
address and the individual authorized to obligate the Offeror shall sign and
date the signature sheet. If the Offeror's proposal is accepted, the sheet will
be completed on behalf of AHCCCSA and shall be returned to the Offeror,
thereinafter known as the Program
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Contractor, with the General and Special Provisions, Appendix A, B and C. This
shall constitute the entire contract.
5. Appendix A - Program/Administration
Appendix A is part of the contract found in Part Five, Attachment 1 of
this RFP. The Offeror shall complete Sections 1, 5 and 6 as appropriate for its
proposal.
6. Rate Development
6.1 Overview
The Offeror is advised that the bids submitted with the RFP is
inclusive of mental health services for the elderly and physically disabled
(EPD) as defined in Section 3.2, Part Three of this document, ventilator
dependent services, nursing facility services, HCBS and acute medical services.
Two capitation payments are developed: one for the ventilator dependent
population and a second for all other elderly and physically disabled. Program
contractors who expect to have fewer than 500 ALTCS members may propose
alternative payment methods to full capitation for ventilator dependent members
in their proposals. The Program Contractor will be reimbursed in accordance with
the contract provisions of Appendix B.
6.2 Bid Components
The Offeror's bids for services are comprised of the following
components:
6.2.1 Estimated contracted nursing facility rates adjusted for
patient mix;
6.2.2 HCBS persons allowable within the HCFA-imposed HCBS cap and
HCBS per capita expenses, including over-the-counter drugs, medical supplies,
and customized Durable Medical Equipment;
6.2.3 A Capitation Lag factor reflecting service delay between
enrollment date and placement date as reflected on CATS data. The Capitation Lag
factor considers the period between
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enrollment and placement up to 30 days. Delays in placement beyond 30 days are
not considered in the Capitation Lag factor;
6.2.4 Medicare/Third Party recoveries;
6.2.5 Client Share of Cost [based on Assigned Share of Cost, not
actual collections, from the Long Term Care Eligibility Determination System
(LEDS) information for the first six months of FY 1993];
6.2.6 Administration, profit, and contingencies;
6.2.7 Case management expenses;
6.2.8 Acute medical service expenses with Medicare and without
Medicare, including therapies; and
6.2.9 Expenses for mental health services provided to members less
than 21 years of age and members 65 years of age and over.
6.3 Capitation Worksheets
The Offeror shall complete a capitation work sheet for each county
in which they propose to provide ALTCS services since an award will be made to a
single Program Contractor in each county. AHCCCS is aware that certain program
elements may be more readily managed across counties. In the evaluation, a
capitation element, e.g. HCBS mix, may be weighted across counties in which a
Program Contractor proposes, in addition to evaluation by county.
6.4 Capitation Bid Schedule of Events
AHCCCSA releases information on level of May 21
care and nursing minutes for
institutional clients
Capitation Bids Submitted June 21
Letters of Intent Submitted June 21
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Evaluation of Capitation Worksheets June 21-25
Other Feedback July 6
First BFO Due to AHCCCS (If required) July 1
Second BFO Due to AHCCCS (If required) July 15
Publication of Fee-for-Service Nursing July 20
Facility and HCBS Rates
Contracted Nursing Facility August 1
Rates and HCBS Agency
Rates Submitted
Nursing Facility Subcontract
Agreements Submitted August 1
Contracts Awarded August 16 -
August 20
6.5 Nursing Facility Requirements
One key component of the capitation bid is the amount for nursing
facility services. In previous years AHCCCSA has required that the rates
negotiated with subcontracting facilities be included in the capitation proposal
submitted by Offerors. This is no longer a requirement. However, the following
are required:
6.5.1. The Program Contractor shall have in place a mechanism for
competitive, bona fide negotiations with subcontractors. This shall include the
opportunity for face-to-face negotiations. This process shall be consistent with
the process described in this section.
6.5.2. The Offeror shall submit with its bid, letters of intent from
nursing facilities expressing their willingness to engage in contract
discussions. Letters of intent from other
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categories of providers shall also be submitted as described in Section 4.1. of
Part Three.
6.5.3. The Offeror shall submit a proposed gross institutional
component of the capitation rate based on three factors: (1) The offeror's
estimate of the rates which will be paid to subcontracted nursing facilities;
(2) The Offeror's anticipated patient mix as measured by the PAS; and (3) The
Offeror's mix of clients across facilities.
6.5.4. As a result of OBRA 1987, The Offeror shall not pay a nursing
facility based on the facility's classification as skilled nursing facility or
intermediate care facility. Payment must reflect patient characteristics in lieu
of nursing facility characteristics. The Offeror is also mandated to reflect
related OBRA 1987 expenses in payment rates, including those associated with
training and testing of nurse aides. Payment of a single composite payment rate
to a nursing facility, based on patient mix, is acceptable as an alternative to
distinct payments for each patient class.
6.5.5 The Offeror shall accept the risk if rates ultimately are not
consistent with the capitation payment finally negotiated with the AHCCCSA
program. There will be no adjustments to the gross institutional line, up or
down, based on actual subcontractor rates.
6.5.6 Rates ultimately negotiated with sub- contractors must be
submitted to AHCCCS for informational purposes by August 1 of the initial year
and each renewal year.
6.6 Renewal
AHCCCSA will consider negotiating an overall rate of change in the
capitation rate with the Program Contractor for the renewal year. In developing
the overall rate of change, AHCCCSA shall use applicable inflation factors,
quarterly and annual audited financial statements submitted by the Program
Contractor, and increases in the nursing facility fee-for-service rates. The
latter will be used to compute the increase in the gross institutional line for
capitation. The computation will examine each individual in the Program
Contractor county (rural counties
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may be combined) and assign a nursing services cost to the individual. These
data will be summed across individuals and will have capital and other
fee-for-service cost components added to them. This may include add-ons to
compensate facilities for new requirements.
6.6.1 Program Contractors are required, in the case of a nursing
facility whose rate of payment in the renewal year is less than the fee-for-
service rate, to pass on the gross institutional line increase amount at least
to the extent that the fee-for-service rate for the renewal year is reached.
Program Contractors may provide higher rates of increase.
6.6.2 Program Contractors are required to specify in the initial
contracts with nursing facilities the mechanism or methods they will employ to
adjust rates for nursing facilities in the renewal periods. The agreement may be
changed by mutual consent of the Program Contractor and the nursing facility.
This agreement must be in place no later than October 1, 1993.
6.6.3 Program Contractors shall have the ability to negotiate
multiple year contracts with nursing facilities subject to performance
requirements.
6.6.4 AHCCCSA may in a renewal year use quarterly or annual audited
financial data in lieu of the previous year's capitation component for the gross
institutional line and any other capitation component.
6.7 Share of Cost/ Medicare/Other Third-Party Collections
This section clarifies Offeror responsibilities pertaining to share
of cost collections, Medicare, and other third-party collections.
6.7.1 Share of Cost
The Offeror receives capitation payments which deduct the
share of cost which individuals are to contribute to the cost of care. Offerors
may transfer this responsibility to nursing care facilities, Institutions for
Mental Disease for those 65 years of age and older, and Inpatient Psychiatric
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Facilities for those less than 21 years of age, and compensate these facilities
net of the share of cost amount.
6.7.2 Medicare/TPL
The Offeror shall maximize collection of Medicare and other
third party payors on behalf of ALTCS members. The capitation calculation
deducts an estimate of the amount which can be expected to be collected.
6.8 Contractor Payment
6.8.1 The Offeror receives a single weighted rate reflecting the
acute medical services rate with and without Medicare. The composite rate is
based on the two rates weighted for the appropriate Medicare and non-Medicare
percentages. The section entitled "Capitation Proposal Worksheet and
Instructions" is used by the Offeror to construct the capitation proposal. The
Offeror submits two proposals, one for ventilator dependent members and one for
all other ALTCS members. Offerors which expect to serve fewer than 500 members
are not required to submit a capitation proposal for ventilator dependent
members if they are proposing an alternative to capitation.
6.8.2 Acute Medical Services Only Capitation
For members entitled to acute medical services only, payment
for acute care and mental health services will be combined into one rate.
6.8.3 For a discussion of the HCBS assumed mix, see Part 5, Appendix
B of the Contract.
6.8.4 ALTCS capitation may be recouped for members not placed after
30 days. Members not placed shall be paid in accordance with item 6.8.2, "Acute
Medical Services Only Capitation," above.
6.8.5 Capitation may be recouped for duplicate capitation payments
or back to the date of a member's death. In
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no case will capitation be recouped any further back than the contract year
prior to the current contract year.
6.8.6 Approval of Capitation Rates by HCFA
Under the terms of the agreement with the Health Care
Financing Administration (HCFA), capitation rates to Offerors are subject to
approval by HCFA.
6.8.7 Reconciliation of Capitation
Reconciliation occurs only for the number of member months
both in total and against the HCBS cap and Share of Cost as described in
Appendix B of the Contract. No other reconciliation of capitation shall occur
unless specifically required by HCFA or otherwise addressed in this section.
6.9 Civil Monetary Penalties
Under the authority of A.R.S. Section 36-2957, the Director may
assess civil penalties against any person whom he determines has presented or
caused to be presented a claim for an item or service:
6.9.1 That the person knew or had reason to know was not provided as
a claim, or
6.9.2 For which the person knew or had reason to know was false or
fraudulent, that no payment could be made by the system because:
6.9.2.1 The member receiving the claimed services was
not a member on the date for which the claim is being made, or
6.9.2.2 The item or service claimed is substantially in
excess of the needs of the member or of a quality that fails to meet
professionally recognized standards of health care.
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6.9.3 For which the person knew or had reason to know that no
payment could be made by the system because the request for payment is in
violation of an agreement between the person and AHCCCSA or the Offeror.
6.9.4 Relating to or incidental to a physician's service, for
which the person knew or had reason to know that the individual who furnished or
supervised the furnishing of service was not licensed as a physician,
misrepresented to the patient medical specialty board certification or obtained
a license through a material misrepresentation.
A person who knowingly violates this provision is subject, in
addition to any other penalties available by law, to a civil penalty of $2,000
or less for each item or service claimed and is additionally subject to an
assessment not to exceed twice the amount claimed for each item or service.
The Director shall make the determination to assess civil
penalties and collect assessment amounts pursuant to ALTCS Rule 9-28-1002. Any
person adversely affected by the Director's final decision is subject to a
judicial review in accordance with A.R.S. Section 12-901, et seq. Any civil
penalty or assessment imposed by the Director which remains unpaid shall be
collected by the State or AHCCCSA in Maricopa County Superior Court. Matters
which were raised or could have been raised in a hearing before the Director or
in an appeal pursuant to A.R.S. Section 12-90, et seq., may not be raised as a
defense to this civil action.
CAPITATION PROPOSAL WORKSHEETS AND INSTRUCTIONS
1. Overview
It is the intent of AHCCCSA to award contracts to Offerors capable of
providing all covered services to ALTCS members. Contracts are to be awarded on
a county-wide-service (full county) basis.
This section presents the format and instructions for the Offeror to
prepare and submit its capitation proposal. The
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Offeror is cautioned to carefully review this section and follow all
instructions. The forms and format presented in this section must be used by the
Offeror in preparing and submitting the capitation proposal. Failure to perform
as specified may result in rejection of the Offeror's proposal as unresponsive.
In order for an Offeror to be awarded a contract, the Offeror shall submit
and AHCCCSA shall accept a capitation proposal for each service category as
described below. The Offeror shall be reimbursed a single capitation amount
regardless of the long term care placement or acute medical or mental health
services utilization. This reimbursement shall also cover case management and
administrative costs. The Offeror shall be at risk for ALTCS services, except
for the provision of reinsurance for acute medical services which is risk
sharing with the Offeror.
The forms and service categories presented in this section are mandatory.
An Offeror who changes or adjusts this format may have its proposal rejected as
unresponsive.
In developing its bid proposal, the Offeror is instructed to ignore the
new provisions of 2.4.1 and 2.4.2 including:
- The requirement that Program Contractors pay the Medicare HMO/CMP
copayments, deductibles, and/or premiums for members enrolled in Medicare
HMOs/CMPs; and,
- The requirement that Program Contractors shall require members
enrolled in Medicare HMOs/CMPs to seek required Medicare services before
receiving ALTCS services.
These two new requirements will be handled as a program change.
All assumptions must be fully documented. This includes complete
supporting documentation and rationale. At a minimum such documentation and
rationale shall be:
1. Logical and supported by evidence provided by the Offeror;
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2. Clearly stated with all assumptions supported by evidence provided by
the Offeror; 3. Consistent with the assumptions and evidence provided by the
Offeror;
4. Comprehensive and complete with current information used as support;
and
5. Linked to the Offeror's financial plan with cash flow analysis where
necessary to support either the assumptions or the rationale.
The Offeror shall demonstrate that the capitation rates proposed are
actuarially sound. The Offeror may require assistance from an actuary to develop
some of the fundamental assumptions for meeting the criteria defined above.
All attachments shall be clearly identified and included with each
completed form. An Offeror submitting proposals for multiple counties which
merely photocopies its documentation may have its proposal rejected as
unresponsive. Each form (except the final rate form) must have a full and
complete set of assumptions.
The Offeror shall complete and submit a capitation proposal rate sheet for each
service category identified below:
- Nursing Facilities and Specialty Units
- HCBS
- Case Management
- Acute Medical Services
- Mental Health Services for members 65 years of age and older and
for members less than 21 years of age
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- Administration (includes profit, risk, and contingencies)
The net capitation rate from each service category will be combined in the final
form to develop the single capitation rate.
The first set of capitation proposal rate sheets to be completed is for the
nursing facilities and specialty units service category.
NURSING FACILITIES CAPITATION RATE CALCULATION SHEET
1. Overview
The nursing facilities LTC CRCS is used to present the Offeror's
capitation proposal for services delivered in nursing facilities at Class I, II,
III levels of care, institutional hospice and Specialty Care. There are four
elements: (1) Identification (2) Service Cost Calculation (3) Adjustments, and
(4) Net Capitation Rate. The Identification section is used to indicate the
county for which the CRCS was prepared.
The Service Cost Calculation section is used to compute the per member per
month (PMPM) service cost for Class I, II, III, institutional hospice (general
inpatient and/or respite), and Specialty Care. Expected average daily census and
per diem costs are developed for each type of nursing facility identified above.
This data must reconcile with the average daily census and per diem cost
information included in the financial plan.
In preparing the entry for average daily census, the following information
may be of assistance. Average daily census is the number of specific type of
beds that may be filled by ALTCS members during a month. The average daily
census is influenced by the needs of members for a certain level of care.
AHCCCSA's PAS findings may be used as the primary determinant of initial
placement level. In addition, the Program Contractor is required to change the
level of care based on the individual's medical and functional needs. The
Offeror shall manage actual utilization and change in placement through the case
manager. To
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be competitive, the Offeror shall understand effective utilization management in
the long-term care environment and be sensitive to quality of care issues. This
understanding must be reflected in the capitation proposal.
In preparing the per diem cost entry, the following information may be of
assistance. The per diem cost is the average daily cost for the provision of the
specific level of service (Class I, II, III institutional hospice, and Specialty
Care). The average per diem cost entered is based on an analysis of the
Offeror's approach to placement of members and the distribution of high to low
cost facilities.
Determining the distribution of members is necessary because the placement
of members between Class I, II, III, institutional hospice, and Specialty Care
must be accounted for to enable AHCCCSA to evaluate the strategy of the Offeror.
The expected distribution percentage to be used is based on the Offeror's
assumptions regarding the placement of members between the different levels of
care. In preparing the entry for unit cost, the following information may be of
assistance. The unit cost is the average cost for the provision of the specific
service. The unit cost is dependent on the type of contracts and contract
reimbursement methodology the Offeror negotiated with the provider. The unit
cost data entered must be based on these factors.
2. Copayments and Reinsurance
There are no co-payments or reinsurance for nursing facility services.
3. Adjustments
The Adjustment section is composed of two items in preparing the
adjustment data; the Offeror should carefully review ALTCS policies and this RFP
request regarding this item.
a. Member Share of Costs
The first adjustment item is member share of cost. The Offeror is
advised to review the RFP items related to member
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share of cost, and to review Chapter 1600 of the ALTCS Program Management Manual
as it relates to Share of Cost, and prepare an entry for this adjustment.
b. Third-Party Recoveries
The second adjustment item is recoveries due to third- party
liability (TPL). Approximately 86 percent of ALTCS members will be Medicare
eligible. The Offeror shall be required to pursue these benefits of Medicare,
private long term care insurance, Veterans Administration, Medigap and other
health insurance. The member may also have other insurance that will be
available to offset the cost of long term care services. The Offeror shall have
a well managed system for maximizing TPL revenues.
4. Instructions
The following instructions are to be used for completing the nursing
facility CRCS. The Offeror shall complete a nursing facility CRCS for each
service area for which a proposal is submitted. The Offeror shall complete an
nursing facility CRCS for ventilator dependent members as well as non-ventilator
dependent members, unless the Offeror expects to have fewer than 500 ALTCS
members and is proposing an alternative to capitation for ventilator dependent
members.
The following line by line instructions should be followed when completing
each nursing facility CRCS:
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Non-Ventilator Dependent Members Nursing Facility CRCS Instructions
LINE DESCRIPTION
1. Average daily census shall be entered for Class I members. The Offeror's
estimated average expected per diem cost (or rate) that will be contracted for
with these facilities is entered (attach assumptions).
2. Average daily census shall be entered for Class II members. The Offeror's
estimated average expected per diem cost (or rate) that will be contracted for
with these facilities is entered (attach assumptions).
3. Average daily census shall be entered for Class III members. The Offeror's
estimated average expected per diem cost (or rate) that will be contracted for
with these facilities is entered (attach assumptions).
4. Average daily census shall be entered for Specialty Care. The Offeror's
estimated expected per diem cost (or rate) that will be contracted for with
these facilities is entered (attach assumptions).
5. Average daily census shall be entered for members receiving institutional
hospice (general inpatient or short term respite) services. The Offeror's
estimated average expected per diem cost (or rate) that will be contracted for
with these providers is entered (attach assumptions). Offerors must separate
payments for those members with Medicare and those without. Payments here are
gross amounts, not net of Medicare.
In preparing the institutional hospice line item, the following
information may be useful. Per HCFA, Program Contractors may negotiate rates
with hospice providers and are not required to pay the Medicare rates.
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6. Add the average daily census from lines 1, 2, 3, 4, 5a and 5b. Enter the sum
here.
7. Add the monthly cost from lines 1, 2, 3, 4, 5a and 5b. Enter the sum here.
8. Divide line 7 (total monthly cost) by line 6 (total members) and enter the
result here. This is the Per Member Per Month (PMPM) rate for these members.
9. Enter capitation lag factor from worksheet here.
10 Multiply line 9 by line 8.
11. Adjustment shall be entered for member share of cost and Medicare TPL.
12. Add lines 11a and 11b3. Enter the sum here.
13. Subtract line 12 from line 10, and enter the difference here.
Ventilator Dependent Members Nursing Facility CRCS Instructions
LINE DESCRIPTION
Note: There are no Class I, II or III placements for Ventilator Dependent
members. Other than this change, the instructions for Ventilator and
Non-Ventilator Dependent CRCSs are the same.
1. Average daily census shall be entered for Class IV members. The Offeror's
estimated average expected per diem cost (or rate) that will be contracted for
with these facilities is entered (attach assumptions).
2. Average daily census shall be entered for Specialty Care. The Offeror's
estimated expected per diem cost (or rate) that will be contracted for with
these facilities is entered (attach assumptions).
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3. Average daily census shall be entered for ventilator dependent members
receiving institutional hospice (general inpatient or short term respite)
services. The Offeror's estimated average expected per diem cost (or rate) that
will be contracted for with these providers is entered (attach assumptions).
Offerors must separate payments for those members with Medicare and those
without. Payments here are gross amounts, not net of Medicare.
In preparing the institutional hospice line item, the following
information may be useful. Per HCFA, Program Contractors may negotiate rates
with hospice providers and are not required to pay the Medicare rates.
4. Add the average daily census from lines 1, 2, 3a and 3b. Enter the sum here.
5. Add the monthly cost from lines 1, 2, 3a and 3b. Enter the sum here.
6. Divide line 5 (total monthly cost) by line 4 (total members) and enter the
result here. This is the PMPM rate for these members.
7. Enter capitation lag factor from worksheet here.
8 Multiply line 7 by line 6.
9. Adjustment shall be entered for member share of cost and Medicare TPL.
10. Add lines 9a and 9b3. Enter the sum here.
11. Subtract line 10 from line 8, and enter the difference here.
NURSING FACILITIES CRCS
NON VENTILATOR DEPENDENT CLIENTS
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<TABLE>
<CAPTION>
AVERAGE
DAILY PER DIEM
TYPE OF PLACEMENT CENSUS COST
- - ----------------- ------ ----
MONTHLY COST
------------
<S> <C> <C> <C> <C>
1. Class I x x 30.4 =
-------- --------- ----------
2. Class II x x 30.4 =
-------- --------- ----------
3. Class III x x 30.4 =
-------- --------- ----------
4. Specialty Care x x 30.4 =
-------- --------- ----------
5. a. Institutional Hospice x x 30.4 =
with Medicare -------- --------- ----------
b. Institutional Hospice x x 30.4 = ----------
without Medicare -------- ---------
</TABLE>
6. Total Members -------------
7. Total Monthly Cost -------------
8. Facility Costs PMPM: (line 7 divided by line 6) -------------
9. Capitation Lag Factor -------------
* see capitation lag worksheet
10. Total Facility Costs PMPM (line 8 mult. by line 9) -------------
11. Adjustments
a. Member share of Cost -------------
b. Medicare/TPL -------------
IV-20
<PAGE> 113
1) For Hospice with Medicare -------------
2) For Other Medicare/TPL -------------
3) Total = 1) plus 2) -------------
12. Net Adjustments -------------
13. NET NURSING FACILITY CAPITATION RATE = (10) - (12) -------------
- - ----------------------------------------------------- -------------
Prepared by Date
County
----------------------------------------------
NURSING FACILITIES CRCS
VENTILATOR DEPENDENT CLIENTS
<TABLE>
<CAPTION>
AVERAGE
DAILY PER DIEM
TYPE OF PLACEMENT CENSUS COST
- - ----------------- ------ ----
MONTHLY COST
------------
<S> <C> <C> <C> <C>
1. Class IV x x 30.4 =
-------- --------- ----------
2. Specialty Care x x 30.4 =
-------- --------- ----------
3. a. Institutional Hospice x x 30.4 = ----------
with Medicare -------- ---------
</TABLE>
IV-21
<PAGE> 114
<TABLE>
<S> <C> <C>
b. Institutional Hospice x x 30.4 =
without Medicare -------- --------- ----------
</TABLE>
4. Total Members -----------
5. Total Monthly Cost -----------
6. Facility Costs PMPM: (line 5 divided by line 4) -----------
7. Capitation Lag Factor -----------
* see capitation lag worksheet
8. Total Facility Costs PMPM (line 6 mult. by line 7) -----------
9. Adjustments
a. Member share of Cost -----------
b. Medicare/TPL -----------
1) For Hospice with Medicare -----------
2) For Other Medicare/TPL -----------
3) Total = 1) plus 2) -----------
10. Net Adjustments
11. NET NURSING FACILITY CAPITATION RATE = (8) - (10) -----------
- - ----------------------------------------------------- -------------
Prepared by Date
County
----------------------------------------------
IV-22
<PAGE> 115
CAPITATION LAG FACTOR WORKSHEET
This factor is needed to adjust for the time period between the date a new
member is enrolled with a Program Contractor and the date that member enters a
nursing facility. In other words, capitation is based upon providing full
nursing facility services each day, but this usually will not be true in the
first month for a new member. The key parameters that have to be established
are:
1. The average number of days between enrollment and placement for a new
member (NOTE: this cannot exceed 30 days)
2. The average number of new members each month (or else the converse -
the average turnover each month)
3. The average date of enrollment - assume this is the middle of the month
For example, if 2.5 percent of the member population is new each month, with
average lag time of four days before placement, then the lag factor would be:
<TABLE>
<S> <C> <C>
11 days out of
15 days possible x 2.5%(new) .0183
+
30 days out of
30 days possible x 97.5%(continuing) .9750
-----
Capitation Lag Factor .9933
=====
</TABLE>
Please complete the following:
days out of
*15 days possible x _____________% (new) ----------
+
30 days out of
30 days possible x _____________% (continuing) ----------
Capitation Lag Factor ==========
IV-23
<PAGE> 116
* Assuming that there are new members throughout the month, the average day
clients would enter the plan is the 15th of the month.
HCBS CAPITATION RATE COST SHEET
1. Overview
The HCBS CRCS is used to present the Offeror's capitation proposal for
services delivered in an HCBS setting. There are four (4) elements: (1)
Identification, (2) Service Cost Calculation, (3) Adjustments, and (4) Net
Capitation Rate. The Identification section is used to indicate the county for
which the CRCS was prepared.
The Service Cost Calculation section is used to compute the per member per
month (PMPM) service cost for HCBS delivered in an adult foster care, home or
approved alternative setting. Expected units of service and unit cost are
developed for each HCBS component identified on the form. The aggregate HCBS
data must reconcile with the information included in the Offeror's financial
plan.
In preparing the entry for units of service, the following information may
be of assistance. A unit of service is a method to identify the discreet number
of services to be provided to an average (or typical) ALTCS member in any given
month. The units of service delivered to an average member are influenced by the
needs of the member for a certain level of care. In certain counties, the units
of service will be dependent on the availability of the services. The case
manager will also influence utilization in the way the available resources are
tapped. To be competitive, the Offeror must understand effective utilization
management in the long term care environment and be sensitive to quality of care
issues. The final influence on HCBS is the cap imposed by HCFA (on HCBS). AHCCCS
assumes the cap on HCBS mix is 35%. Offerors may use this assumption in
preparing their bids. For a discussion of the cap and of HCBS assumed mix, see
Part 5, Appendix B of the Contract.
IV-24
<PAGE> 117
The following unit of service definitions must be used by the Offeror in
preparing its proposal:
HCBS COMPONENT UNIT OF SERVICE MEASUREMENT
a. Adult Day Health Hour
b. Home Delivered Meals Meal
c. Home Health
1. Aide Visit
2. Skilled Nurse Visit
d. Homemaker Hour
e. Respite Care Hour
f. Transportation Trips per day
g. Personal Care Hour
h. Hospice Day
i. Attendant Care Hour
j. Group Respite Hour
k. Non-customized DME Item
l. Incontinent supplies Item
m. Nutritional supplements Item
n. Over the counter medications Item
o. Other HCBS Specify unit(s)
as appropriate
Therapies are not reported on the HCBS CRCS; they are reported on the
Acute Care CRCS.
In preparing the unit cost entry, the following information may be useful.
The unit cost is the average cost (per unit, i.e., hour, day, meals, trip) for
provision of the type of HCBS. This cost includes all covered services that may
be provided. The unit cost is dependent on the type of contract, contract
reimbursement methodology and number of contracts the Offeror has negotiated to
provide HCBS services. The average cost per unit entered is based on an analysis
of the Offeror's network, distribution of members within the service area, and
any cost control techniques that can be effectively used.
IV-25
<PAGE> 118
In preparing the entry for outpatient hospice (routine or continuous home
care), the Offeror should review the discussion of average daily census and
average per diem cost in the section titled "Nursing Facilities CRCS."
2. Copayments and Reinsurance
There are no co-payments or reinsurance for HCBS.
3. Adjustments
In preparing the entry for the Adjustment section, the Offeror should
review the discussion of adjustment in the section titled "Nursing Facilities
CRCS".
4. Room and Board is not covered for any HCBS setting. Do not include Room and
Board costs in your estimates.
5. In developing the unit cost portion of the proposed rate, the following
information may be useful. Payments to HCBS providers will be limited to a range
around FFS rates. The range will consider market availability.
6. The term "Approved Alternative Settings" refers to the following:
a. Behavioral Health Levels 1 and 2 other than Institutions for Mental
Disease for members age 65 and older and Inpatient Psychiatric Facilities for
members under 21 years of age.
b. Group Home for Traumatic Brain Injured clients, approved by AHCCCSA on
a case by case basis.
c. Supported Living Project (Maricopa County only)
7. Instructions
The following instructions are to be used for completing the HCBS CRCS.
The Offeror shall complete an HCBS CRCS in each service area for which a
proposal is submitted.
IV-26
<PAGE> 119
The Offeror shall complete an HCBS CRCS for ventilator dependent members
as well as non ventilator dependent members, unless the Offeror expects to have
fewer than 500 ALTCS members and is proposing an alternative to capitation for
ventilator dependent members.
The following instructions are to be used for completing both the
ventilator dependent and non-ventilator dependent HCBS CRCS:
LINE DESCRIPTION
1. Units of service and unit cost are entered for the adult day health
component of adult foster care, at home, and approved alternative settings
(attach assumptions).
2. Unit of service and unit cost are entered for the home delivered meals
component of adult foster care, at home and approved alternative settings
(attach assumption).
3. Units of services and unit cost are entered for the home health
services component of adult foster care, at home, and approved alternative
settings. The service component includes aide and skilled nursing.
4. Units of service and unit cost are entered for the homemaker component
of adult foster care, at home, and approved alternative settings (attach
assumption).
5. Units of service and unit cost are entered for the respite care
component of adult foster care, at home, and approved alternative settings
(attach assumptions).
6. Units of service and unit cost are entered for the transportation
component of adult foster care, at home, and approved alternative settings
(attach assumptions). This is to include only transportation for HCBS. Other
medically necessary transportation is to be included in the acute care component
of the capitation rate.
IV-27
<PAGE> 120
7. Units of service and unit cost are entered for the personal care
component of adult foster care, at home, and approved alternative settings
(attach assumptions).
8. Units of service and unit cost are entered for the hospice care
component of adult foster care, at home and approved alternative settings
(attach assumptions). Information must be entered separately for clients with
and without Medicare. In preparing the outpatient hospice line item, the
following information may be useful. Per HCFA, Program Contractors may negotiate
rates with hospice providers and are not required to pay the Medicare rates.
9. Units of service and unit cost are entered for the attendant care
component of adult foster care, at home and approved alternative settings
(attach assumption). Offerors should note that the unit of service for attendant
care is one hour.
10. Units of service and unit cost are entered for the group respite
component of adult foster care, at home, and approved alternative settings
(attach assumptions).
11. Units of service and unit cost are entered for the non- customized DME
component of adult foster care, at home, and approved alternative settings
(attach assumptions).
12. Units of service and unit cost are entered for the incontinent
supplies component of adult foster care, at home, and approved alternative
settings (attach assumptions).
13. Units of service and unit cost are entered for the nutritional
supplements component of adult foster care, at home, and approved alternative
settings (attach assumptions).
14. Units of service and unit cost are entered for the over the counter
medications component of adult foster care, at home, and approved alternative
settings (attach assumptions).
15. Units of service and unit cost are entered for the other HCBS
component of adult foster care, at home, and approved
IV-28
<PAGE> 121
alternative settings. If "other services" are entered, the Offeror shall develop
a summary worksheet which itemizes these services and provides sufficient cost
data to allow examination and verification by AHCCCSA. "Other HCBS" services
shall not duplicate services listed in 1-14 above.
16. Add the PMPM for lines 1-15 and enter the sum for adult foster care,
at home and approved alternative settings in the appropriate space.
17a. Enter the PMPM rate from line 16 for adult foster care and the
expected percentage from the HCBS average daily census worksheet and proceed as
indicated to obtain weighted cost.
17b. Enter the PMPM rate from line 16 for approved alternative settings
and the expected percentage from the HCBS average daily census worksheet and
proceed as indicated to obtain weighted cost.
17c. Enter the PMPM rate from line 16 for at home care and the expected
percentage from the HCBS average daily census worksheet and proceed as indicated
to obtain weighted cost.
17d. Add the weighted cost from lines 17a, 17b, and 17c and enter the sum
here.
18. Adjustment shall be entered for TPL.
19. Subtract line 18c from line 17d and enter the difference here.
IV-29
<PAGE> 122
HCBS CRCS
NON VENTILATOR DEPENDENT CLIENTS
<TABLE>
<CAPTION>
APPROVED
ADULT FOSTER CARE AT HOME ALTERNATIVE SETTINGS
UNITS OF UNIT UNITS OF UNIT UNITS OF UNIT
SERVICE COST PMPM SERVICE COST PMPM SERVICE COST PMPM
<S> <C> <C> <C>
1. ADULT DAY HEALTH X = [ ] X = [ ] X = [ ]
--- --- --- --- --- ---
2. HOME DELIVERED
MEALS X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
3. HOME HEALTH:
a. AIDE X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
b. SKILLED NURSE X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
4. HOMEMAKER X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
5. RESPITE CARE X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
6. TRANSPORTATION* X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
7. PERSONAL CARE X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
8. NON-INSTITUTIONAL
HOSPICE CARE
a. HOSPICE WITH X = [ ] X = [ ] X = [ ]
MEDICARE --- --- --- ---- --- ---
</TABLE>
IV-30
<PAGE> 123
<TABLE>
<S> <C> <C> <C>
b. HOSPICE WITHOUT X = [ ] X = [ ] X = [ ]
MEDICARE --- --- --- ---- --- ---
9. ATTENDANT CARE X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
10.GROUP RESPITE CARE X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
11.NON CUSTOMIZED DME X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
12.INCONTINENT X = [ ] X = [ ] X = [ ]
SUPPLIES --- --- --- ---- --- ---
13.NUTRITIONAL X = [ ] X = [ ] X = [ ]
SUPPLEMENTS --- --- --- ---- --- ---
14.OVER THE COUNTER X = [ ] X = [ ] X = [ ]
MEDICATIONS --- --- --- ---- --- ---
15.OTHER HCBS X = [ ] X = [ ] X = [ ]
--- --- --- ---- --- ---
16. SUBTOTALS [ ] [ ] [ ]
</TABLE>
= SEE OUTPATIENT WORKSHEET
IV-31
<PAGE> 124
EXPECTED** WTD
PMPM DISTRIBUTION = PMPM
17.AGGREGATE HCBS COST
a. PMPM FOR ADULT FOSTER CARE [ ] X [ ] =
-------
b. PMPM FOR APPROVED [ ] X [ ] =
ALTERNATIVE SETTINGS -------
c. PMPM FOR AT HOME CARE [ ] X [ ] =
SETTINGS -------
d. AGGREGATE GROSS RATE (HCBS) [ ]
= SEE WORKSHEET
18.ADJUSTMENT MEDICARE/THIRD PARTY LIABILITY (TPL)
a. FOR HOSPICE WITH MEDICARE [ ]
b. FOR ALL OTHER MEDICARE/TPL [ ]
c. TOTAL ADJUSTMENT = A + B [ ]
19.NET HCBS CAPITATION RATE = (17D) - (18C) [ ]
* REFERS TO TRANSPORTATION FOR HCBS ONLY.
** SEE HCBS AVERAGE DAILY CENSUS WORKSHEET
COUNTY
-------------------------------
IV-32
<PAGE> 125
HCBS CRCS
VENTILATOR DEPENDENT CLIENTS
<TABLE>
<CAPTION>
APPROVED
ADULT FOSTER CARE AT HOME ALTERNATIVE SETTINGS
UNITS OF UNIT UNITS OF UNIT UNITS OF UNIT
SERVICE COST PMPM SERVICE COST PMPM SERVICE COST PMPM
<S> <C> <C> <C>
1. ADULT DAY HEALTH X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
2. HOME DELIVERED
MEALS X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
3. HOME HEALTH:
a. AIDE X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
b. SKILLED NURSE X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
4. HOMEMAKER X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
5. RESPITE CARE X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
</TABLE>
IV-33
<PAGE> 126
<TABLE>
<S> <C> <C> <C>
6. TRANSPORTATION* X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
7. PERSONAL CARE X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
8. NON-INSTITUTIONAL
HOSPICE CARE
a. HOSPICE WITH X = / / X = / / X = / /
MEDICARE --- --- ----- --- --- ----- --- --- -----
b. HOSPICE WITHOUT X = / / X = / / X = / /
MEDICARE --- --- ----- --- --- ----- --- --- -----
9. ATTENDANT CARE X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
10. GROUP RESPITE CARE X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
11. NON CUSTOMIZED DME X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
12. INCONTINENT X = / / X = / / X = / /
SUPPLIES --- --- ----- --- --- ----- --- --- -----
</TABLE>
IV-34
<PAGE> 127
<TABLE>
<S> <C> <C> <C>
13. NUTRITIONAL X = / / X = / / X = / /
SUPPLEMENTS --- --- ----- --- --- ----- --- --- -----
14. OVER THE COUNTER X = / / X = / / X = / /
MEDICATIONS --- --- ----- --- --- ----- --- --- -----
15. OTHER HCBS X = / / X = / / X = / /
--- --- ----- --- --- ----- --- --- -----
16. SUBTOTALS / / / / / /
----- ----- -----
</TABLE>
= SEE OUTPATIENT WORKSHEET
IV-35
<PAGE> 128
<TABLE>
<CAPTION>
EXPECTED** WTD
PMPM DISTRIBUTION = PMPM
<S> <C> <C> <C>
17. AGGREGATE HCBS COST
a. PMPM FOR ADULT FOSTER CARE / / X / / =
------ ------ ------
b. PMPM FOR APPROVED / / X / / =
ALTERNATIVE SETTINGS ------ ------ ------
c. PMPM FOR AT HOME CARE / / X / / =
SETTINGS ------ ------- ------
</TABLE>
d. AGGREGATE GROSS RATE (HCBS) / / = SEE WORKSHEET
------
18. ADJUSTMENT MEDICARE/THIRD PARTY LIABILITY (TPL)
a. FOR HOSPICE WITH MEDICARE / /
------
b. FOR ALL OTHER MEDICARE/TPL / /
------
c. TOTAL ADJUSTMENT = a + b / /
-----
19. NET HCBS CAPITATION RATE = (17D) - (18C) / /
------
* REFERS TO TRANSPORTATION FOR HCBS ONLY.
IV-36
<PAGE> 129
** SEE HCBS AVERAGE DAILY CENSUS WORKSHEET
COUNTY
---------------------------------
IV-37
<PAGE> 130
HCBS AVERAGE DAILY CENSUS WORKSHEET INSTRUCTIONS
THE HCBS AVERAGE DAILY CENSUS WORKSHEET IS USED TO ITEMIZE THE OFFEROR'S
ASSUMPTIONS FOR PLACEMENT OF MEMBERS. THERE ARE TWO (2) ELEMENTS: (1) AVERAGE
DAILY CENSUS, AND (2) TOTAL AVERAGE DAILY CENSUS. THE AVERAGE DAILY CENSUS
SECTION IS USED TO INDICATE THE EXPECTED PLACEMENT IN THE HCBS SERVICE TYPE.
AVERAGE DAILY CENSUS IS THE NUMBER OF MEMBERS TO RECEIVE A SPECIFIC TYPE OF HCBS
(ADULT FOSTER CARE, AT HOME AND APPROVED ALTERNATIVE SETTINGS) DURING A MONTH.
THEREFORE, THE AVERAGE DAILY CENSUS IS THE NUMBER OF MEMBERS EXPECTED TO RECEIVE
THE SPECIFIED SERVICES ON ANY GIVEN DAY DURING A MONTH. OFFERORS ARE ADVISED
THAT TOTAL MEMBER AVERAGE DAILY CENSUS FOR HCBS SHOULD NOT EXCEED 35% OF TOTAL
MEMBERS, CONSISTENT WITH THE EXPECTED HCFA IMPOSED HCBS CAP.
THE PURPOSE OF THIS FORM IS FOR THE OFFEROR TO PRESENT ITS BREAKDOWN OF THE
DISTRIBUTION OF MEMBERS BETWEEN ADULT FOSTER CARE, HCBS AT HOME AND APPROVED
ALTERNATIVE SETTINGS. DETAILED INSTRUCTIONS WILL NOT BE NECESSARY BECAUSE OF THE
DESIGN OF THE FORM.
THE OFFEROR SHALL COMPLETE AND SUBMIT THIS FORM FOR EACH SERVICE AREA
(COUNTY) FOR WHICH A PROPOSAL IS SUBMITTED. THE OFFEROR SHALL COMPLETE THIS FORM
FOR VENTILATOR DEPENDENT CLIENTS AS WELL AS NON VENTILATOR DEPENDENT CLIENTS,
UNLESS THE OFFEROR EXPECTS TO HAVE FEWER THAN 500 ALTCS MEMBERS AND IS PROPOSING
AN ALTERNATIVE TO CAPITATION FOR VENTILATOR DEPENDENT CLIENTS.
IV-38
<PAGE> 131
HCBS AVERAGE DAILY CENSUS WORKSHEET
NON VENTILATOR DEPENDENT CLIENTS
Average
Daily Total Average Expected
Census Daily Census Percentage
1. ADULT FOSTER CARE / =
-------- ------------- ----------
2. HCBS AT HOME / =
-------- ------------- ----------
3. ALTERNATIVE / =
APPROVED SETTINGS -------- ------------- ----------
4. TOTAL AVERAGE DAILY CENSUS
---------------------------------
ENTER EXPECTED PERCENTAGE , EXPRESSED AS A DECIMAL ON THE HCBS CRCS: LINE 17A
FOR ADULT FOSTER CARE, LINE 17B FOR APPROVED ALTERNATIVE SETTINGS, AND LINE 17C
FOR HCBS AT HOME.
COUNTY:
---------------------------------
IV-39
<PAGE> 132
HCBS AVERAGE DAILY CENSUS WORKSHEET
VENTILATOR DEPENDENT CLIENTS
Average
Daily Total Average Expected
Census Daily Census Percentage
1. ADULT FOSTER CARE / =
-------- ------------- ----------
2. HCBS AT HOME / =
-------- ------------- ----------
3. ALTERNATIVE / =
APPROVED SETTINGS -------- ------------- ----------
4. TOTAL AVERAGE DAILY CENSUS
---------------------------------
ENTER EXPECTED PERCENTAGE , EXPRESSED AS A DECIMAL ON THE HCBS CRCS: LINE 17A
FOR ADULT FOSTER CARE, LINE 17B FOR APPROVED ALTERNATIVE SETTINGS, AND LINE 17C
FOR HCBS AT HOME.
COUNTY:
---------------------------------
IV-40
<PAGE> 133
CASE MANAGEMENT CAPITATION PROPOSAL
1. OVERVIEW
THE CASE MANAGEMENT CRCS IS USED TO PRESENT THE OFFEROR'S CAPITATION
PROPOSAL FOR CASE MANAGEMENT SERVICES DELIVERED TO ALTCS MEMBERS. THERE ARE FOUR
(4) ELEMENTS: (1) IDENTIFICATION, (2) SERVICE COST CALCULATION, (3) ADJUSTMENTS,
AND (4) NET CAPITATION RATE. THE IDENTIFICATION SECTION IS USED TO INDICATE THE
COUNTY FOR WHICH THE CM CRCS WAS PREPARED.
THE CASE MANAGEMENT RATE IS ALL INCLUSIVE, ENCOMPASSING ALL MEMBERS
(INCLUDING VENTILATOR DEPENDENT MEMBERS, MEMBERS RECEIVING MENTAL HEALTH
SERVICES, MEMBERS RECEIVING ACUTE MEDICAL SERVICES ONLY, PLUS ALL OTHERS) IN ALL
SETTINGS. EXPECTED HOURS PER MONTH AND HOURLY RATES (UNIT COSTS) ARE DEVELOPED
FOR EACH CASE MANAGEMENT COMPONENT. SINCE ACUTE SERVICES WILL BE COMMON TO ALL
MEMBERS, THE COST OF PROVIDING CASE MANAGEMENT FOR ACUTE SERVICES IS TO BE
INCLUDED IN YOUR HOURS PER MONTH ASSUMPTIONS.
IN PREPARING THE ENTRY FOR HOURS PER MONTH, THE FOLLOWING INFORMATION MAY BE
OF ASSISTANCE. THE NUMBER OF HOURS ENTERED SHOULD BE CONSISTENT WITH THE
OFFEROR'S EXPECTATIONS FOR THE NUMBER OF ALTCS MEMBERS, THE NUMBER OF MEMBERS
RECEIVING MENTAL HEALTH SERVICES, THE DISTRIBUTION OF MEMBERS BETWEEN NURSING
FACILITY (CLASS I, II, III, INSTITUTIONAL HOSPICE, SPECIALTY CARE) AND HCBS
(ADULT FOSTER CARE, AT HOME AND APPROVED ALTERNATIVE SETTINGS), VENTILATOR
DEPENDENT AND ACUTE MEDICAL CARE ONLY AND THE OFFEROR'S CASE LOAD FOR EACH CASE
MANAGER. ESTIMATES MUST BE CONSISTENT WITH THE CASE MANAGEMENT REQUIREMENTS SET
FORTH IN PART THREE. FURTHERMORE, THIS NUMBER WILL BE INFLUENCED BY THE DEGREE
TO WHICH THE OFFEROR'S STAFF IS FAMILIAR WITH THE LONG TERM CARE SERVICE
ENVIRONMENT. TO BE COMPETITIVE, THE OFFEROR SHALL EMPLOY CASE MANAGERS WHO
UNDERSTAND AND CAN REACT TO THE CHANGING NEEDS OF THE ALTCS MEMBER. THE ROLE OF
THE CASE MANAGER IS DEFINED IN THE ALTCS PROGRAM MANAGEMENT MANUAL, CHAPTER 300,
CASE MANAGEMENT POLICIES AND PROCEDURES, AND SHOULD BE REVIEWED PRIOR TO
PREPARING THIS ENTRY. WHEN ESTIMATING THE HOURS PER MONTH, THE OFFEROR IS
IV-41
<PAGE> 134
CAUTIONED NOT TO IGNORE OR UNDERESTIMATE THE BENEFITS OF PAS AND THE DATA
AVAILABLE FROM LEDS/CATS; THESE ELEMENTS, IF PROPERLY UTILIZED, WILL HELP THE
OFFEROR CONTROL THE HOURS EXPENDED FOR EACH AREA. DO NOT LOAD THESE HOURS FOR
CLERICAL OR OTHER OVERHEAD; THESE ELEMENTS ARE INCLUDED IN THE ADMINISTRATIVE
COST SECTION. IF CONTRACT NURSES OR SOCIAL WORKERS ARE TO BE USED (TO INCLUDE
NURSE REGISTRY), THE OFFEROR SHALL ATTACH A SUPPLEMENTAL DOCUMENT WHICH DETAILS
THAT COST COMPONENTS IN THIS (THESE) CONTRACT(S).
IN COMPUTING TRAVEL COSTS, THE OFFEROR SHALL USE THE IRS REIMBURSEMENT RATE
OF 28 CENTS PER MILE. IF THE OFFEROR IS LOCATED IN ANOTHER COUNTY, THE
EMPLOYEE'S PRIMARY OFFICE SITE IS TO BE EITHER THE EMPLOYEE'S HOME, THE COUNTY
SEAT, OR THE LOCATION WHERE AT LEAST 51 PERCENT OF THE EMPLOYEE'S TIME IS SPENT
WHEN IN THE COUNTY FOR WHICH A PROPOSAL IS SUBMITTED.
2. COPAYMENTS AND REINSURANCE
THERE ARE NO CO-PAYMENTS OR REINSURANCE FOR CASE MANAGEMENT SERVICES.
3. INSTRUCTIONS
THE FOLLOWING INSTRUCTIONS SHALL BE USED FOR COMPLETING THE CASE MANAGEMENT
CRCS. THE OFFEROR MUST COMPLETE A CASE MANAGEMENT CRCS FOR EACH SERVICE AREA FOR
WHICH A PROPOSAL IS SUBMITTED (THERE IS NO WITH OR WITHOUT MEDICARE
DISTINCTION). SINCE THE CASE MANAGEMENT CRCS IS INCLUSIVE OF VENTILATOR
DEPENDENT CLIENTS, IT IS NOT NECESSARY TO SUBMIT A SEPARATE CASE MANAGEMENT CRCS
FOR VENTILATOR DEPENDENT CLIENTS, EVEN IF A VENTILATOR DEPENDENT CAPITATION RATE
IS PROPOSED.
THE TERM "MENTAL HEALTH FACILITY" REFERS TO INSTITUTION FOR MENTAL DISEASE
FOR THOSE AGE 65 AND OVER, AND INPATIENT PSYCHIATRIC FACILITY FOR THOSE LESS
THAN AGE 21.
THE FOLLOWING LINE BY LINE INSTRUCTIONS SHALL BE FOLLOWED WHEN COMPLETING
EACH CASE MANAGEMENT CRCS:
LINE DESCRIPTION
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<PAGE> 135
1. HOURS PER MONTH AND THE HOURLY RATE (ADJUSTED - IF A COMBINATION OF
NURSE(S) AND SOCIAL WORKER(S) IS USED) FOR INITIAL REVIEWS IN THE NURSING
FACILITY, HCBS, ACUTE MEDICAL SERVICES ONLY, VENTILATOR DEPENDENT, AND MENTAL
HEALTH FACILITY COMPONENT OF ALTCS IS ENTERED (ATTACH ASSUMPTIONS). IN THE
ASSUMPTIONS, PLEASE STATE THE NUMBER OF NEW MEMBERS EXPECTED AND THE HOURS
REQUIRED PER MEMBER FOR AN INITIAL REVIEW.
2. HOURS PER MONTH AND HOURLY RATE FOR PERIODIC REVIEW (ADJUSTED - IF A
COMBINATION OF NURSE(S) AND SOCIAL WORKER(S) IS USED) IN THE NURSING FACILITY,
HCBS, ACUTE MEDICAL SERVICES ONLY, VENTILATOR DEPENDENT AND MENTAL HEALTH
FACILITY COMPONENT OF ALTCS IS ENTERED (ATTACH ASSUMPTIONS).
3. HOURS PER MONTH AND HOURLY RATE FOR OTHER ONGOING ACTIVITIES (ADJUSTED -
IF A COMBINATION OF NURSE(S) AND SOCIAL WORKER(S) IS USED) IN THE NURSING
FACILITY, HCBS, ACUTE MEDICAL SERVICES ONLY, VENTILATOR DEPENDENT, AND MENTAL
HEALTH FACILITY COMPONENT OF ALTCS IS ENTERED (ATTACH ASSUMPTIONS).
4. ADD LINES, 1, 2, AND 3 FOR HOURS PER MONTH AND COST AND ENTER THE SUM
IN THE APPROPRIATE SPACE.
5A. ENTER THE NURSING FACILITY AVERAGE DAILY CENSUS (LINE 4 FROM NURSING
FACILITY WITH MEDICARE AND WITHOUT MEDICARE CRCS) AND THE COST SUBTOTAL FROM
LINE 4 (NURSING FACILITY) ABOVE.
5B. ENTER THE HCBS AVERAGE DAILY CENSUS (LINE 4 FROM HCBS AVERAGE DAILY
CENSUS WORKSHEET) AND THE COST SUBTOTAL FROM LINE 4 (HCBS) ABOVE.
5C. ENTER THE ACUTE MEDICAL SERVICES ONLY DAILY CENSUS (LINE 4 FROM ACUTE
MEDICAL SERVICES ONLY AVERAGE DAILY CENSUS WORKSHEET) AND THE COST SUBTOTAL FROM
LINE 4 (ACUTE MEDICAL ONLY) ABOVE.
5D. ENTER THE VENTILATOR DEPENDENT AVERAGE DAILY CENSUS AND THE COST
SUBTOTAL FROM LINE 4 (VENTILATOR DEPENDENT) ABOVE.
5E. ENTER THE MENTAL HEALTH FACILITY AVERAGE DAILY CENSUS AND THE COST
SUBTOTAL FROM LINE 4 (MENTAL HEALTH FACILITY) ABOVE.
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6. ADD AVERAGE DAILY CENSUS LINES 5A, 5B, 5C, 5D AND 5E AND ENTER THE SUM
IN THE APPROPRIATE SPACE. ADD THE MONTHLY COST (PRODUCT OF AVERAGE DAILY CENSUS
TIMES COST) FROM LINES 5A, 5B, 5C, 5D AND 5E AND ENTER THE SUM IN THE
APPROPRIATE SPACE. DIVIDE THE MONTHLY COST BY THE AVERAGE DAILY CENSUS AND ENTER
THE RESULT IN THE APPROPRIATE SPACE (THIS IS THE PMPM).
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RESERVE FOR CASE MANAGEMENT CRCS FORM
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ACUTE CARE CRCS
THE ACUTE MEDICAL SERVICES CAPITATION RATE CALCULATION SHEET (AC CRCS)
SHALL BE USED TO PRESENT THE OFFEROR'S CAPITATION PROPOSAL FOR EACH RATE CODE
CLASSIFICATION. THE AC CRCS IS COMPOSED OF FOUR ELEMENTS: (1) IDENTIFICATION,
(2) SERVICE COST CALCULATION, (3) ADJUSTMENTS, AND (4) NET CAPITATION RATE. THE
IDENTIFICATION SECTION IS USED TO INDICATE THE COUNTY AND RATE CODE
CLASSIFICATION FOR WHICH THE AC CRCS WAS PREPARED.
1. OVERVIEW
THE SERVICE COST CALCULATION SECTION IS USED TO COMPUTE THE PER MEMBER PER
MONTH (PMPM) SERVICE COST FOR THE NINE SERVICE TYPES SPECIFIED:
a. HOSPITAL INPATIENT
b. HOSPITAL OUTPATIENT
c. EMERGENCY ROOM
d. PRIMARY CARE PHYSICIAN
e. REFERRAL PHYSICIAN
f. SURGICAL SERVICES
g. PHARMACY
h. THERAPIES
i. OTHER SERVICES, INCLUDING EMERGENCY AND MEDICALLY NECESSARY
TRANSPORTATION
EXPECTED UTILIZATION AND UNIT COST DATA SHALL BE DEVELOPED AND INCLUDED
FOR REQUIRED SERVICE TYPES IDENTIFIED ABOVE. THESE DATA SHALL RECONCILE WITH THE
UTILIZATION AND UNIT COST INFORMATION INCLUDED IN THE FINANCIAL PLAN.
IN PREPARING THE ENTRY FOR UTILIZATION, THE FOLLOWING INFORMATION MAY BE
OF ASSISTANCE. UTILIZATION IS THE NUMBER OF SPECIFIC SERVICES (I.E., HOSPITAL
DAYS OR PHYSICIAN VISITS) PROVIDED DURING A GIVEN TIME PERIOD. UTILIZATION RATES
ARE EXPRESSED PER 1,000 MEMBERS FOR WHICH THE OFFEROR EXPECTS TO RECEIVE
CAPITATION FOR THE GIVEN TIME PERIOD. UTILIZATION RATES
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ARE AFFECTED BY ACTUAL UTILIZATION SYSTEMS, UTILIZATION CONTROL AND MONITORING
THE INTENSITY OF SERVICES. THE UTILIZATION DATA ENTERED IN EACH AC CRCS SHOULD
TAKE THESE FACTORS INTO ACCOUNT. TO BE COMPETITIVE, THE OFFEROR SHALL
DEMONSTRATE THE ABILITY TO EFFECTIVELY MANAGE UTILIZATION AND THUS REDUCE COSTS.
IN PREPARING THE ENTRY FOR UNIT COST, THE FOLLOWING INFORMATION MAY BE OF
ASSISTANCE. UNIT COST IS THE AVERAGE COST FOR THE PROVISION OF THE SPECIFIC
SERVICE (TYPE OF SERVICES). THIS INCLUDES ALL COVERED SERVICES THAT MAY BE
PROVIDED AND IS EXPRESSED AS THE AVERAGE EXPECTED PAYMENT. THE UNIT COST IS
DEPENDENT ON THE TYPE OF CONTRACT AND CONTRACT REIMBURSEMENT METHODOLOGY THE
OFFEROR NEGOTIATED WITH A SUBCONTRACTOR OR PROVIDER (I.E., HOSPITAL, PRIMARY
CARE PHYSICIAN, PHARMACY, ETC.). THE UNIT COST DATA ENTERED IN EACH AC CRCS
SHALL BE BASED ON THE REIMBURSEMENT METHOD(S) NEGOTIATED WITH SUBCONTRACTORS OR
PROVIDERS.
2. CO-PAYMENTS
IN PREPARING THE ENTRY FOR CO-PAYMENTS THE OFFEROR SHALL USE THE
FOLLOWING. THE OFFEROR SHALL BE RESPONSIBLE FOR THE COLLECTION OF CO-PAYMENTS.
THE FOLLOWING ARE EXEMPT FROM COPAYMENT REQUIREMENTS:
1. PRENATAL CARE INCLUDING ALL OBSTETRICAL VISITS.
2. WELL BABY, EPSDT CARE.
3. MEMBERS IN NURSING FACILITIES, INSTITUTION FOR MENTAL DISEASE FOR THOSE
AGE 65 AND OLDER, AND INPATIENT PSYCHIATRIC FACILITY FOR THOSE LESS THAN AGE 21.
4. VISITS SCHEDULED BY A PRIMARY CARE PHYSICIAN OR PRACTITIONER, AND NOT
AT THE REQUEST OF A MEMBER.
5. DRUGS AND MEDICATION.
THE OFFEROR AND MEMBERS SHALL COMPLY WITH THE FOLLOWING CO- PAYMENT
SCHEDULES:
<TABLE>
<CAPTION>
COVERED SERVICES CO-PAYMENT
---------------- ----------
<S> <C>
DOCTOR'S OFFICE OR HOME VISIT AND
DIAGNOSTIC AND REHABILITATIVE X-RAY $1.00
AND LABORATORY SERVICES ASSOCIATED WITH
SUCH VISIT.
</TABLE>
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<TABLE>
<CAPTION>
COVERED SERVICES CO-PAYMENT
---------------- ----------
<S> <C>
NON-EMERGENCY SURGERY $5.00 PER
PROCEDURE
NON-EMERGENCY USE OF THE EMERGENCY ROOM $5.00 PER
VISIT
</TABLE>
THE PROGRAM CONTRACTOR SHALL NOT DENY SERVICES DUE TO A MEMBER'S INABILITY
TO PAY A CO-PAYMENT.
3. ADJUSTMENTS
THE ADJUSTMENTS SECTION IS COMPOSED OF SIX ITEMS. IN PREPARING THE
ADJUSTMENT DATA THE OFFEROR SHALL CAREFULLY REVIEW THE SPECIFICATION OF THIS RFP
REGARDING ANY SPECIFIC ITEM. THE SERVICE OF AN ACTUARY MAY BE USEFUL TO SOME
OFFERORS IN PREPARING THESE DATA.
THE ADJUSTMENT ITEMS ARE REINSURANCE, THIRD PARTY RECOVERIES (TPL),
ADMINISTRATION, RISK/CONTINGENCIES, PROFIT AND SERVICES COVERED BY EITHER A
NURSING FACILITY OR HCBS PROVIDER. AHCCCSA IS SELF-INSURED FOR PURPOSES OF
REINSURANCE. THE "INSURED PARTY" IS THE OFFEROR. THE REINSURANCE LEVEL WILL BE
SET TO BEGIN OCTOBER 1, 1993. REINSURANCE LEVELS WILL BE IN EFFECT FOR ONE YEAR.
a. REINSURANCE
THE OFFEROR, IN PREPARING THE ADJUSTMENT FOR REINSURANCE MAY FIND
THE FOLLOWING INFORMATION USEFUL AND THIS INFORMATION SHALL CONSTITUTE AHCCCSA'S
POLICY ON REINSURANCE.
DEDUCTIBLES:
MARICOPA COUNTY AND PIMA COUNTY
1. WITH MEDICARE PART A: $12,000 PER MEMBER PER CONTRACT YEAR.
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2. WITHOUT MEDICARE PART A: $20,000 PER MEMBER PER CONTRACT YEAR.
OTHER COUNTIES
1. WITH MEDICARE PART A: $5,000 PER MEMBER PER CONTRACT YEAR.
2. WITHOUT MEDICARE PART A: $9,000 PER MEMBER PER CONTRACT YEAR. THE
DEDUCTIBLE SHALL BE CALCULATED BASED ON THE AMOUNT ACTUALLY PAID OR ADJUDICATED
BY THE PROGRAM CONTRACTOR.
REIMBURSEMENT:
AHCCCS WILL REIMBURSE THE PROGRAM CONTRACTOR AT EIGHTY PERCENT
(80%) OF THE PROGRAM CONTRACTOR'S PAYMENT FOR COVERED SERVICES (LESS THIRD PARTY
LIABILITY COLLECTIONS). THE PROGRAM CONTRACTOR SHALL BE RESPONSIBLE FOR THE
REMAINING 20%.
NOTIFICATION:
THE PROGRAM CONTRACTOR MUST NOTIFY THE DEFERRED LIABILITY
/REINSURANCE UNIT IN THE OFFICE OF THE MEDICAL DIRECTOR OF AHCCCSA IN WRITING
WITHIN TWO (2) WORKING DAYS WHEN CHARGES REACH SIXTY PERCENT (60%) OF THE
APPLICABLE DEDUCTIBLE LEVEL; FAILURE TO TIMELY NOTIFY AHCCCSA MAY RESULT IN
DENIAL OF REINSURANCE CLAIMS. AHCCCSA, VIA A CONTRACT, MAY PERFORM CONCURRENT
REVIEW TO DETERMINE APPROPRIATE LEVEL OF UTILIZATION. THE PROGRAM CONTRACTOR
MUST COMPLY WITH ALL PROCEDURES REGARDING SUBMISSION OF REINSURANCE CLAIMS;
FURTHERMORE, THE PROGRAM CONTRACTOR MUST INCLUDE A DISCHARGE SUMMARY WITH ALL
CLAIMS, AN ITEMIZED STATEMENT OF HOSPITAL CLAIMS OVER THE REINSURANCE LEVEL AND
OTHER MEDICAL DOCUMENTATION AS REQUIRED BY AHCCCSA'S OFFICE OF THE MEDICAL
DIRECTOR. THE PURPOSE OF THIS NOTIFICATION IS TO ALLOW AHCCCSA AN OPPORTUNITY
FOR UTILIZATION REVIEW.
ANY COLLECTIONS FROM A THIRD PARTY PAYOR SHALL BE USED TO OFF-SET
ALTCS REIMBURSEMENT UNDER THIS POLICY.
REINSURANCE COVERS ONLY THE FOLLOWING SERVICES:
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a. ACUTE INPATIENT HOSPITALIZATIONS
b. EMERGENCY SERVICES LEADING TO AN ACUTE INPATIENT HOSPITALIZATION.
c. KIDNEY DIALYSIS SERVICES THAT ARE NOT COVERED BY TITLE XVIII
(MEDICARE)
d. TOTAL PARENTERAL NUTRITION (TPN) APPROVED IN WRITING BY THE
AHCCCS MEDICAL DIRECTOR. WRITTEN APPROVAL, WHICH MUST ACCOMPANY CLAIMS
SUBMISSION, SHALL BE BASED UPON MEDICAL DOCUMENTATION SUBMITTED BY THE PROGRAM
CONTRACTOR.
e. CHEMOTHERAPY
f. RADIATION THERAPY
g. SERVICES TO ELIGIBLE MEMBERS UNDERGOING HEART, LIVER, OR BONE
MARROW TRANSPLANTATION IN ACCORDANCE WITH AHCCCS OMD ACUTE CARE POLICIES.
h. SERVICES TO MEMBERS WITH ACQUIRED IMMUNE DEFICIENCY SYNDROME
(AIDS).
SEE THE AHCCCS OMD POLICY ON ALTCS REINSURANCE FOR A LISTING OF
SERVICES INCLUDED. THIS POLICY IS LOCATED IN THE BIDDER'S REFERENCE LIBRARY.
EXCLUDED SERVICES: THOSE SERVICES COVERED UNDER THE USUAL LONG TERM
CARE RATE. ALL LTC SERVICES ARE EXCLUDED INCLUDING SUBACUTE CARE, OTHER NURSING
FACILITY CARE, AND HCBS. REINSURANCE IS APPLICABLE ONLY TO ACUTE MEDICAL CARE
SERVICES. CATASTROPHIC REINSURANCE IS EXCLUDED EFFECTIVE OCTOBER 1, 1993.
MEMBERS SHALL NOT BE DISENROLLED OR PROVIDED LESS THAN THE SCOPE OF
ALTCS COVERED SERVICES BECAUSE OF THEIR NEED FOR ALTCS SERVICES IN EXCESS OF THE
APPLICABLE REINSURANCE DEDUCTIBLE LEVEL.
b. MEDICARE/TPL
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THIRD-PARTY RECOVERIES IS THE SECOND ADJUSTMENT ITEM. APPROXIMATELY
EIGHTY-SIX PERCENT (86%) OF ALTCS MEMBERS WILL BE MEDICARE ELIGIBLE. THE OFFEROR
SHALL PURSUE THESE BENEFITS. EVEN IF A MEMBER DOES NOT HAVE MEDICARE COVERAGE,
THERE MAY BE OTHER TPL AVAILABLE. FOR EXAMPLE, THE MEMBER MAY HAVE INSURANCE
PURCHASED BY EITHER THEMSELVES OR A RELATIVE. THE OFFEROR IS REQUIRED TO PURSUE
THESE ADDITIONAL BENEFITS. THE OFFEROR SHALL HAVE A WELL-MANAGED SYSTEM FOR
MAXIMIZING TPL REVENUE.
c. OTHER FACILITY PROVIDED SERVICES
THIS ADJUSTMENT IS RELATED TO SERVICES THAT ARE ORDERED BY A PRIMARY
CARE PHYSICIAN BUT ARE PROVIDED BY A NURSING FACILITY OR HCBS CONTRACTOR AND ARE
INCLUDED IN THE REIMBURSEMENT RATE PAID TO THAT FACILITY OR CONTRACTOR. SUCH
SERVICES MAY INCLUDE MEDICAL EQUIPMENT, NURSING FACILITY SERVICES OR PHYSICAL,
OCCUPATIONAL OR SPEECH THERAPY (WHICH MAY BE REIMBURSED UNDER A SEPARATE
CONTRACT). THE VALUE OF THESE SERVICES SHALL BE DEDUCTED FROM THE GROSS
CAPITATION RATE.
d. THERE ARE THREE ADMINISTRATIVE ADJUSTMENTS TO THE AGGREGATE
CAPITATION RATE: ADMINISTRATIVE CHARGES, PROFIT AND RISK CHARGES AND
CONTINGENCIES. THE ADMINISTRATIVE CHARGE ADJUSTMENT IS USED TO PRESENT THE
OFFEROR'S COST OF ADMINISTERING THE CONTRACT. THESE CHARGES INCLUDE THE COST OF
MAINTAINING OFFICES, COMPUTER SYSTEMS, MEETING REPORTING REQUIREMENTS,
SUPERVISORY/MANAGEMENT COST AND OTHER CHARGES NORMALLY ACCEPTED IN THE HEALTH
CARE BUSINESS. THE OFFEROR IS REQUIRED TO PRESENT A DETAILED BREAKDOWN OF THOSE
CHARGES AS AN ATTACHMENT; THIS BREAKDOWN MUST BE SUFFICIENT FOR THE
ADMINISTRATION TO EVALUATE THE OFFEROR'S COST STRUCTURE. FAILURE TO PROVIDE A
COMPLETE AND COMPREHENSIVE BREAKDOWN (TO THE POINT OF ITEMIZATION OF CHARGES)
MAY RESULT IN REJECTION OF YOUR PROPOSAL AS UNRESPONSIVE.
THE PROFIT AND RISK CHARGE ADJUSTMENT IS USED TO PRESENT THE
OFFEROR'S ASSESSMENT OF PROFIT RATE NEEDED AND THE RISK OF THIS CONTRACT AS A
FUNCTION OF THIS PROFIT RATE. THIS ADJUSTMENT IS NOT TO BE VIEWED AS A PROFIT
GUARANTEE CHARGE BUT AS A FACTOR TO BE CONSIDERED BY THE OFFEROR IN DEVELOPING
THE TOTAL CAPITATION PROPOSAL.
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THE CONTINGENCIES ADJUSTMENT IS USED TO PRESENT ANY AMOUNT DEEMED
NECESSARY FOR CONTINGENCIES. THIS ADJUSTMENT IS A FUNCTION OF THE PREVIOUS
ADJUSTMENTS AND IS USED TO ALLOCATE A CERTAIN AMOUNT OF THE CAPITATION RATE TO
ACCOUNT FOR CHANGES IN RISK OR OPERATIONS.
THE ADMINISTRATION'S INTENT IS THAT REASONABLE ADJUSTMENTS WILL BE
PERMITTED. IN THIS SENSE, REASONABLE MEANS THAT WHICH IS USUAL, CUSTOMARY OR
GENERALLY AN ACCEPTED PRACTICE. HOWEVER, THE ADMINISTRATIVE ADJUSTMENTS MUST BE
SUPPORTABLE, PROPERLY CLASSIFIED (TO AN ACCOUNT OR A COST CENTER) APPROPRIATE
FOR THE MEMBER POPULATION AND SERVICE DELIVERY REQUIREMENTS. ADMINISTRATIVE
ADJUSTMENTS ENTERED MUST BE DIRECTLY RELATED TO THE ACTUAL COST OF PROVIDING
ACUTE CARE SERVICES TO ALL MEMBERS, INCLUDING THOSE RECEIVING ACUTE MEDICAL
SERVICES ONLY.
4. INSTRUCTIONS
THE FOLLOWING INSTRUCTIONS ARE TO BE USED FOR COMPLETING THE AC CRCS. THE
OFFEROR SHALL COMPLETE AN AC CRCS FOR EACH RATE CODE CLASSIFICATION IN EACH
SERVICE AREA FOR WHICH A PROPOSAL IS SUBMITTED. THE RATE CODE CLASSIFICATIONS
ARE AS FOLLOWS:
MEMBERS WITHOUT MEDICARE
MEMBERS WITH MEDICARE
FOR EACH OF THE TWO RATE CODE CLASSIFICATIONS, THE OFFEROR SHALL SUBMIT
ONE CRCS (PER SERVICE AREA) FOR VENTILATOR DEPENDENT MEMBERS AND ONE CRCS FOR
ALL OTHER MEMBERS.
THE FOLLOWING LINE-BY-LINE INSTRUCTIONS SHOULD BE FOLLOWED WHEN COMPLETING
EACH AC CRCS. EACH COLUMN SHALL BE COMPLETED FOR NURSING FACILITY MEMBERS, HCBS
MEMBERS, AND MEMBERS IN OTHER PLACEMENTS, INCLUDING ACUTE MEDICAL SERVICES ONLY
AND MENTAL HEALTH FACILITY.
LINE DESCRIPTION
1. HOSPITAL INPATIENT UTILIZATION IS TO BE ENTERED BY AVERAGE NUMBER OF DAYS
PER 1,000 MEMBERS. THE UNIT COST IS THE AVERAGE EXPECTED DAILY PAYMENT OR PER
DIEM RATE THAT HAS BEEN CONTRACTED FOR WITH A HOSPITAL (ATTACH ASSUMPTIONS).
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<PAGE> 145
2. THE HOSPITAL OUTPATIENT UTILIZATION IS MEASURED BY NUMBER OF OUTPATIENT
VISITS PER 1,000 MEMBERS. THE UNIT COST IS THE AVERAGE PAYMENT PER VISIT OR
CONTRACTED RATE (ATTACH ASSUMPTIONS).
3. EMERGENCY ROOM UTILIZATION IS MEASURED BY NUMBER OF VISITS PER 1,000
MEMBERS. THE UNIT COST IS THE AVERAGE PAYMENT PER VISIT OR CONTRACT RATE. THERE
IS A $5.00 CO-PAYMENT FOR EMERGENCY ROOM SERVICES. AN ADJUSTMENT FOR THIS
CO-PAYMENT SHALL BE ENTERED (ATTACH ASSUMPTIONS).
4. PRIMARY CARE PHYSICIAN SERVICES INCLUDE OFFICE VISITS AND ANY DIAGNOSTIC AND
X-RAY SERVICES PERFORMED WITHIN THE OFFICE. THE UTILIZATION IS MEASURED BY
NUMBER OF VISITS PER 1,000 MEMBERS. THE UNIT COST IS THE AVERAGE PAYMENT PER
VISIT OR CONTRACT RATE. CO-PAYMENT OF $1.00 WILL BE REQUIRED FOR COVERED
PHYSICIAN SERVICES. THE APPLICABLE CO-PAYMENT ADJUSTMENT MUST BE ENTERED (ATTACH
ASSUMPTION).
5. REFERRAL PHYSICIAN SERVICES INCLUDE ALL SPECIALISTS OR OTHER PHYSICIAN
SERVICES THAT ARE INCURRED AS A RESULT OF REFERRAL BY THE PRIMARY CARE
PHYSICIAN. UTILIZATION AND UNIT COSTS ARE MEASURED IN THE SAME WAY AS PRIMARY
CARE PHYSICIAN SERVICES. AN ADJUSTMENT FOR ALL APPLICABLE CO-PAYMENTS MUST BE
ENTERED (ATTACHED ASSUMPTION).
6. SURGICAL UTILIZATION IS THE NUMBER OF SURGICAL PROCEDURES PER 1,000 MEMBERS.
THE UNIT COST IS THE AVERAGE PAYMENT PER PROCEDURE. A $5.00 CO-PAYMENT FOR ALL
NON-EMERGENCY SURGERIES IS REQUIRED. THE APPLICABLE ADJUSTMENT MUST BE ENTERED
(ATTACH ASSUMPTIONS).
7. PHARMACY UTILIZATION IS MEASURED BY NUMBER OF PRESCRIPTIONS PER 1,000. THE
UNIT COST IS THE AVERAGE PAYMENT PER PRESCRIPTION. THERE IS NO CO-PAYMENT FOR
PHARMACY SERVICES (ATTACH ASSUMPTIONS).
8. THERAPIES IS MEASURED BY THE NUMBER OF VISITS PER 1,000. THE UNIT COST IS THE
AVERAGE PAYMENT PER VISIT. THERE IS NO CO- PAYMENT FOR THERAPY SERVICES.
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9. OTHER SERVICES INCLUDES ALL THOSE COVERED SERVICES NOT INCLUDED ABOVE. THERE
WILL NOT BE UTILIZATION FACTORS AND UNIT COST FOR THIS LINE. OTHER SERVICES
SHALL INCLUDE EMERGENCY TRANSPORTATION AND OTHER MEDICALLY NECESSARY
TRANSPORTATION. IF "OTHER SERVICES" ARE ENTERED, THE OFFEROR SHALL DEVELOP AND
ATTACH A SUMMARY WORKSHEET WHICH ITEMIZES THESE SERVICES AND PROVIDES SUFFICIENT
COST DATA TO ALLOW EXAMINATION AND VERIFICATION BY AHCCCSA.
10. THE GROSS CAPITATION RATE IS THE SUM OF THE SERVICE COSTS FOR LINES 1
THROUGH 9 WEIGHTED FOR LTC MEMBERS, HCBS PLACED MEMBERS, AND MEMBERS IN OTHER
PLACEMENTS, INCLUDING ACUTE MEDICAL SERVICES ONLY AND MENTAL HEALTH FACILITIES.
11. EACH OF THE FOLLOWING ADJUSTMENTS SHALL BE ENTERED ON THE CALCULATION SHEET
ON A PER MEMBER PER MONTH BASIS.
a. FOR THE PURPOSE OF AHCCCSA REINSURANCE, THE INSURED PARTY IS THE
PROGRAM CONTRACTOR. THE REINSURANCE DEDUCTIBLE WILL BE DETERMINED AS PREVIOUSLY
DESCRIBED IN THIS SECTION (ATTACH ASSUMPTIONS).
b. ADJUSTMENT SHALL BE ENTERED FOR THIRD-PARTY RECOVERIES. THIS ADJUSTMENT
WILL BE DETERMINED AS PREVIOUSLY DESCRIBED IN THIS SECTION (ATTACH ASSUMPTIONS).
c. THE VALUE OF ACUTE MEDICAL SERVICES THAT MAY BE PROVIDED BY A NURSING
FACILITY OR HCBS CONTRACTOR.
d. ADJUSTMENT SHALL BE ENTERED FOR ADMINISTRATION. THIS ADJUSTMENT WILL BE
DETERMINED AS PREVIOUSLY DESCRIBED IN THIS SECTION (ATTACH ASSUMPTIONS).
e. ADJUSTMENT SHALL BE ENTERED FOR RISK/CONTINGENCIES. THIS ADJUSTMENT
WILL BE DETERMINED AS PREVIOUSLY DESCRIBED IN THIS SECTION (ATTACH ASSUMPTIONS).
f. ADJUSTMENT SHALL BE ENTERED FOR PROFIT. THIS ADJUSTMENT WILL BE
DETERMINED AS PREVIOUSLY DESCRIBED IN THIS SECTION (ATTACH ASSUMPTIONS).
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12. THE NET ADJUSTMENT IS THE SUM OF ALL ADJUSTMENTS MADE IN LINES 11A-F.
13. THE NET CAPITATION RATE IS THE GROSS CAPITATION RATE (LINE 10) PLUS THE
NET ADJUSTMENT (LINE 12).
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ACUTE CARE CRCS PAGE 1
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ACUTE CARE CRCS PAGE 2
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ACUTE CARE CRCS PAGE 3
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ACUTE CARE CRCS PAGE 4
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ACUTE CARE CRCS PAGE 5
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ACUTE CARE CRCS PAGE 6
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ACUTE CARE CRCS PAGE 7
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ACUTE CARE CRCS PAGE 8
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ACUTE MEDICAL CRCS AGGREGATE RATE CALCULATION SHEET
COUNTY
-----------------------------------
NON VENTILATOR DEPENDENT MEMBERS
1. NET CAPITATION RATE FOR MEMBERS X .14* =
WITHOUT MEDICARE (FROM THE AC CRCS) ------- -------
2. NET CAPITATION RATE FOR MEMBERS X .86* =
WITH MEDICARE (FROM THE AC CRCS) ------- -------
3. AGGREGATE RATE** (SUM OF -------
WEIGHTED CAPITATION ITEMS 1 AND 2)
* THE PERCENTAGES .14 AND .86 ARE THE PROJECTED PROPORTIONAL SPLITS BETWEEN THE
MEMBERS WITHOUT AND WITH MEDICARE.
** THE AGGREGATE RATE WILL BE THE RATE USED TO DETERMINE THE SINGLE CAPITATION
RATE.
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ACUTE MEDICAL CRCS AGGREGATE RATE CALCULATION SHEET
COUNTY
----------------------
VENTILATOR DEPENDENT MEMBERS
1. NET CAPITATION RATE FOR MEMBERS X .14* =
WITHOUT MEDICARE (FROM THE AC CRCS) ------- -------
2. NET CAPITATION RATE FOR MEMBERS X .86* =
WITH MEDICARE (FROM THE AC CRCS) ------- -------
3. AGGREGATE RATE** (SUM OF -------
WEIGHTED CAPITATION ITEMS 1 AND 2)
* THE PERCENTAGES .14 AND .86 ARE THE PROJECTED PROPORTIONAL SPLITS BETWEEN THE
MEMBERS WITHOUT AND WITH MEDICARE.
** THE AGGREGATE RATE WILL BE THE RATE USED TO DETERMINE THE SINGLE CAPITATION
RATE.
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MENTAL HEALTH CRCS
1. INSTRUCTIONS
THE FOLLOWING INSTRUCTIONS ARE TO BE USED FOR COMPLETING THE MH CRCS. THE
OFFEROR MUST COMPLETE AN MH CRCS IN EACH SERVICE AREA FOR WHICH A PROPOSAL IS
SUBMITTED. THE MH CRCS IS INCLUSIVE OF MENTAL HEALTH SERVICES PROVIDED TO
VENTILATOR DEPENDENT AND NON VENTILATOR DEPENDENT CLIENTS. UTILIZATION FACTORS
SHALL BE ENTERED PER USER PER MONTH, I.E., PER MEMBER (AGE LESS THAN 21 OR AGE
65 OR OLDER) WHO IS IN NEED OF MENTAL HEALTH SERVICES. LINES 10 THROUGH 12 ON
THE CRCS TRANSLATE THE COST PER USER PER MONTH INTO A COST PER MEMBER PER MONTH,
I.E., "SPREAD ACROSS" THE WHOLE POPULATION. THE SERVICES THAT ARE INCLUDED IN
EACH SERVICE CATEGORY ARE AS FOLLOWS:
<TABLE>
<CAPTION>
CATEGORY SERVICES UNITS
-------- -------- -----
<S> <C> <C>
INPATIENT HOSPITAL PER DAY
INSTITUTION FOR MENTAL DISEASE PER DAY
FOR PEOPLE 65 YEARS AND OLDER
INPATIENT PSYCHIATRIC FACILITY PER DAY
FOR PEOPLE LESS THAN 21 YEARS
OF AGE.
INDIVIDUAL THERAPY PSYCHIATRIST/ 20-30 MIN
PSYCHOLOGIST 45-50 MIN
60 MIN
OTHER
MENTAL HEALTH
PRACTITIONER 15 MIN
GROUP THERAPY PSYCHIATRIST/FAMILY
PSYCHOLOGIST GROUP 15 MIN
</TABLE>
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OTHER FAMILY
MENTAL HEALTH GROUP
PRACTITIONER 15 MIN
EMERGENCY/CRISIS MENTAL HEALTH
CARE IN A NON-HOSPITAL SETTING 15 MIN
PSYCHOTROPIC MEDICATIONS PRESCRIPTIONS PER SCRIPT
LABORATORY PER TEST
EVALUATION AND COMPREHENSIVE OTHER MENTAL PER HOUR
CLINICAL ASSESSMENT HEALTH
PRACTITIONER
PSYCHOLOGICAL EVALUATION PSYCHOLOGIST PER HOUR
PSYCHIATRIC EVALUATION PSYCHIATRIST PER HOUR
CERTIFICATION OF NEED PSYCHIATRIST PER HOUR
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SERVICES DUPLICATED BY OTHER ALTCS ACUTE OR LONG TERM CARE SERVICES SHALL BE
INCLUDED IN THE APPROPRIATE ACUTE OR LONG TERM CARE CRCS, AND SHALL NOT BE
INCLUDED IN THE MENTAL HEALTH CRCS. THESE DUPLICATED SERVICES INCLUDE:
1. HOSPITAL EMERGENCY ROOM SERVICES;
2. THE FIRST 3 DAYS OF PSYCHIATRIC HOSPITALIZATION;
3. SERVICES PROVIDED TO CLIENTS WITH ORGANIC MENTAL DISEASE EXCEPT FOR THERAPIES
WHICH WILL BE REIMBURSED UNDER MENTAL HEALTH CAPITATION;
4. MEDICALLY NECESSARY TRANSPORTATION.
THE FOLLOWING LINE-BY-LINE INSTRUCTIONS SHOULD BE FOLLOWED WHEN COMPLETING EACH
MH CRCS.
LINE DESCRIPTION
1. HOSPITAL INPATIENT UTILIZATION IS TO BE ENTERED BY NUMBER OF PSYCHIATRIC
HOSPITAL DAYS PER USER PER MONTH. THE UNIT COST IS THE AVERAGE EXPECTED DAILY
PAYMENT OR PER DIEM RATE THAT HAS BEEN CONTRACTED FOR WITH A HOSPITAL (ATTACH
ASSUMPTIONS).
2. INSTITUTION FOR MENTAL DISEASE FOR THOSE 65 YEARS OF AGE AND OLDER IS TO BE
ENTERED BY NUMBER OF DAYS PER USER PER MONTH. THE UNIT COST IS THE AVERAGE
EXPECTED DAILY PAYMENT OR PER DIEM RATE THAT HAS BEEN CONTRACTED FOR WITH AN
IMD.
3. INPATIENT PSYCHIATRIC FACILITY FOR THOSE LESS THAN 21 YEARS OF AGE IS TO BE
ENTERED BY NUMBERS OF DAYS PER USER PER MONTH. THE UNIT COST IS THE AVERAGE
EXPECTED DAILY PAYMENT OR PER DIEM RATE THAT HAS BEEN CONTRACTED FOR WITH AN
RTC.
4. EVALUATION/DIAGNOSIS REFERS TO THE ASSESSMENT OF THE ELIGIBLE PERSON'S
PSYCHIATRIC, PSYCHOLOGICAL, OR SOCIAL CONDITIONS TO DETERMINE IF A MENTAL
DISORDER EXISTS AND IF SO, TO PROVIDE
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DIAGNOSIS FOR DIRECTION OF CARE. UTILIZATION IS MEASURED BY NUMBER OF HOURS PER
USER PER MONTH. THE UNIT COST IS THE WEIGHTED AVERAGE PAYMENTS OR CONTRACTED
RATE BY PSYCHIATRIST, PSYCHOLOGIST, OR OTHER MENTAL HEALTH PRACTITIONER.
5. INDIVIDUAL THERAPY SERVICES INCLUDE VISITS TO EITHER A
PSYCHIATRIST/PSYCHOLOGIST OR OTHER MENTAL HEALTH PRACTITIONER. UTILIZATION IS
MEASURED BY NUMBER OF VISITS PER USER PER MONTH. THE UNIT COST IS THE WEIGHTED
AVERAGE PAYMENT OR CONTRACT RATE, BY LENGTH OF VISIT AND BY
PSYCHIATRIST/PSYCHOLOGIST OR OTHER MENTAL HEALTH PRACTITIONER, PER VISIT (ATTACH
ASSUMPTIONS).
6. GROUP THERAPY SERVICES INCLUDE VISITS TO EITHER A PSYCHIATRIST/PSYCHOLOGIST
OR OTHER MENTAL HEALTH PRACTITIONER. UTILIZATION IS MEASURED BY NUMBER OF VISITS
PER USER PER MONTH. THE UNIT COST IS THE WEIGHTED AVERAGE PAYMENT OR CONTRACT
RATE PER VISIT (ATTACH ASSUMPTIONS).
7. EMERGENCY/CRISIS UTILIZATION IS MEASURED BY NUMBER OF 15 MINUTE UNITS PER
USER PER MONTH. THE UNIT COST IS THE AVERAGE PAYMENT PER 15 MINUTE UNIT OR
CONTRACT RATE (ATTACH ASSUMPTIONS).
8. PSYCHOTROPIC MEDICATION INCLUDES BOTH PRESCRIPTIONS AND LABORATORY.
UTILIZATION IS MEASURED BY THE NUMBER OF PRESCRIPTIONS AND LAB TESTS PER USER
PER MONTH. THE UNIT COST IS THE WEIGHTED AVERAGE PAYMENT PER UNIT OR CONTRACT
RATE (ATTACH ASSUMPTIONS).
9. THE GROSS CAPITATION RATE IS THE SUM OF THEIR SERVICE COSTS FOR LINES 1
THROUGH 8.
10. ADJUSTMENTS:
EACH OF THE FOLLOWING ADJUSTMENTS SHOULD BE ENTERED ON THE CALCULATION
SHEET ON A PER MEMBER PER MONTH BASIS.
a. IN PREPARING THE ENTRY FOR ADJUSTMENTS, THE FOLLOWING INFORMATION MAY
BE OF ASSISTANCE. THERE ARE THREE ADMINISTRATIVE ADJUSTMENTS TO THE AGGREGATE
CAPITATION RATE: ADMINISTRATIVE CHARGES, PROFIT AND RISK CHARGES AND
CONTINGENCIES. THE ADMINISTRATIVE CHARGE ADJUSTMENT IS USED TO PRESENT THE
OFFEROR'S COST OF ADMINISTERING THE CONTRACT. THESE CHARGES INCLUDE THE
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COST OF MAINTAINING OFFICES, COMPUTER SYSTEMS, MEETING REPORTING REQUIREMENTS,
SUPERVISORY/MANAGEMENT COST AND OTHER CHARGES NORMALLY ACCEPTED IN THE HEALTH
CARE BUSINESS. THE OFFEROR IS REQUIRED TO PRESENT A DETAILED BREAKDOWN OF THOSE
CHARGES AS AN ATTACHMENT; THIS BREAKDOWN MUST BE SUFFICIENT FOR THE
ADMINISTRATION TO EVALUATE THE OFFEROR'S COST STRUCTURE. FAILURE TO PROVIDE A
COMPLETE AND COMPREHENSIVE BREAKDOWN (TO THE POINT OF ITEMIZATION OF CHARGES)
MAY RESULT IN REJECTION OF YOUR PROPOSAL AS UNRESPONSIVE.
THE PROFIT AND RISK CHARGE ADJUSTMENT IS USED TO PRESENT THE
OFFEROR'S ASSESSMENT OF PROFIT RATE NEEDED AND THE RISK OF THIS CONTRACT AS A
FUNCTION OF THIS PROFIT RATE. THIS ADJUSTMENT IS NOT TO BE VIEWED AS A PROFIT
GUARANTEE CHARGE BUT AS A FACTOR TO BE CONSIDERED BY THE OFFEROR IN DEVELOPING
THE TOTAL CAPITATION PROPOSAL.
THE CONTINGENCIES ADJUSTMENT IS USED TO PRESENT ANY AMOUNT DEEMED
NECESSARY FOR CONTINGENCIES. THIS ADJUSTMENT IS A FUNCTION OF THE PREVIOUS
ADJUSTMENTS AND IS USED TO ALLOCATE A CERTAIN AMOUNT OF THE CAPITATION RATE TO
ACCOUNT FOR CHANGES IN RISK OR OPERATIONS.
AHCCCSA'S INTENT IS THAT REASONABLE ADJUSTMENTS WILL BE PERMITTED.
IN THIS SENSE, REASONABLE MEANS THAT WHICH IS USUAL, CUSTOMARY OR GENERALLY AN
ACCEPTED PRACTICE. HOWEVER, THE ADMINISTRATIVE ADJUSTMENTS MUST BE SUPPORTABLE,
PROPERLY CLASSIFIED (TO AN ACCOUNT OR A COST CENTER) APPROPRIATE FOR THE MEMBER
POPULATION AND SERVICE DELIVERY REQUIREMENTS. ADMINISTRATIVE ADJUSTMENTS ENTERED
MUST BE DIRECTLY RELATED TO THE ACTUAL COST OF PROVIDING MENTAL HEALTH SERVICES
TO PERSONS LESS THAN 21 YEARS OF AGE AND PERSONS 65 YEARS OF AGE AND OLDER. NOTE
THAT ONLY MENTAL HEALTH ADMINISTRATIVE EXPENSE IS ENTERED ON THIS SHEET.
b. MEMBER SHARE OF COST:
FOR MENTAL HEALTH SERVICES, SHARE OF COST APPLIES ONLY TO: A. IMD
FOR 65 OR OLDER (E.G. ASH) AND B. INPATIENT PSYCHIATRIC FACILITY FOR LESS THAN
21 YEARS OF AGE.
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THE OFFEROR IS ADVISED TO REVIEW THE RFP ITEMS RELATED TO MEMBER
SHARE OF COST AND PREPARE AN ENTRY FOR THIS ADJUSTMENT.
c. APPROXIMATELY 86 PERCENT OF ALTCS MEMBERS WILL BE MEDICARE-ELIGIBLE.
THE OFFEROR WILL BE REQUIRED TO PURSUE THESE BENEFITS OF MEDICARE, PRIVATE LTC
INSURANCE, VETERANS ADMINISTRATION, MEDIGAP AND OTHER HEALTH INSURANCE.
d. THE MEMBER MAY ALSO HAVE OTHER INSURANCE THAT WILL BE AVAILABLE TO
OFFSET THE COST OF MH SERVICES. THE OFFEROR MUST HAVE A WELL-MANAGED SYSTEM FOR
MAXIMIZING TPL RECOVERIES.
e. THE ADJUSTMENT FOR AVOIDED LONG TERM CARE COST IS MADE TO ACCOUNT FOR
THE FACT THAT A MEMBER PLACED IN A MENTAL HEALTH FACILITY WILL NOT RECEIVE FULL
LONG TERM CARE SERVICES. FOR EXAMPLE, IF A MEMBER PLACED IN A MENTAL HEALTH
FACILITY WOULD OTHERWISE HAVE BEEN A NURSING FACILITY RESIDENT, THE CONTRACTOR
WILL EXPEND THE PER DIEM FOR THE MENTAL HEALTH FACILITY, BUT SAVE THE PER DIEM
FOR THE NURSING FACILITY. TO CALCULATE THIS ADJUSTMENT, REFER TO THE WORKSHEET
ENTITLED "MENTAL HEALTH CAPITATION RATE WORKSHEET FOR AVOIDED LONG TERM CARE
COST."
11. THE NET ADJUSTMENT IS THE SUM OF ALL ADJUSTMENTS MADE IN 10A THROUGH 10E.
12. THE NET CAPITATION RATE IS THE GROSS CAPITATION RATE MINUS THE NET
ADJUSTMENTS.
13. a. ENTER THE NUMBER OF MEMBERS AGE 65 OR OLDER WHO WILL NEED MENTAL HEALTH
SERVICES, PLUS THE NUMBER OF MEMBERS LESS THAN AGE 21 WHO WILL NEED MENTAL
HEALTH SERVICES.
b. ENTER THE ESTIMATED TOTAL NUMBER OF ALTCS MEMBERS.
c. DIVIDE a BY b. THIS FIGURE REPRESENTS MEMBERS WHO WILL NEED MENTAL HEALTH
SERVICES AS A PERCENT OF TOTAL ESTIMATED MEMBERS.
14. FINAL MENTAL HEALTH CAPITATION = 12 X 13 c.
EVALUATION/DIAGNOSIS
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EVALUATION/DIAGNOSIS FOR MENTAL HEALTH SERVICES IS COMPRISED OF FOUR DIFFERENT
SERVICES:
1. THE TERM "OTHER MENTAL HEALTH PRACTITIONER" REFERS TO A MENTAL HEALTH
PRACTITIONER OTHER THAN A PSYCHOLOGIST OR A PSYCHIATRIST. EVALUATION AND
CLINICAL ASSESSMENT UTILIZATION BY OTHER MENTAL HEALTH PRACTITIONER IS MEASURED
BY THE NUMBER OF HOURS PER USER PER MONTH. THE UNIT COST IS THE AVERAGE CHARGE
PER EVALUATION OR CONTRACT RATE (ATTACH ASSUMPTIONS).
2. PSYCHOLOGICAL EVALUATION UTILIZATION IS MEASURED BY THE NUMBER OF HOURS PER
USER PER MONTH. THE UNIT COST IS THE AVERAGE CHARGE PER EVALUATION OR CONTRACT
RATE (ATTACH ASSUMPTIONS).
3. PSYCHIATRIC EVALUATION UTILIZATION IS MEASURED BY THE NUMBER OF HOURS PER
USER PER MONTH. THE UNIT COST IS THE AVERAGE CHARGE PER EVALUATION OR CONTRACT
RATE (ATTACH ASSUMPTIONS).
4. CERTIFICATION OF NEED UTILIZATION IS MEASURED BY THE NUMBER OF HOURS PER USER
PER MONTH. THE UNIT COST IS THE AVERAGE CHARGE PER CERTIFICATION OR CONTRACT
(ATTACH ASSUMPTIONS).
SUB TOTAL EVALUATION/DIAGNOSIS IS THE SUM OF LINES 1 - 4.
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MENTAL HEALTH CAPITATION RATE CALCULATION SHEET
<TABLE>
<CAPTION>
UTIL FACTOR PER PMPM
SERVICES USER PER MONTH UNIT COST SERV COST
<S> <C> <C> <C>
1. INPATIENT HOSPITAL ---------- X ---------- = ----------
2. IMD FOR 65+ ---------- X ---------- = ----------
3. INPATIENT ---------- X ---------- = ----------
PSYCHIATRIC FACILITY
FOR LESS THAN 21
4. EVALUATION/DIAGNOSIS ---------- X ---------- = ----------
(FROM WORKSHEET)
5. INDIVIDUAL THERAPY ---------- X ---------- = ----------
6. GROUP THERAPY ---------- X ---------- = ----------
7. EMERGENCY/CRISIS ---------- X ---------- = ----------
8. PSYCHOTROPIC ---------- X ---------- = ----------
MEDICATION
9. GROSS CAPITATION PMPM
---------------
</TABLE>
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10. ADJUSTMENTS
a. ADMIN, RISK/CONTINGENCIES, PROFIT (+) ------------
b. SHARE OF COST (-) ------------
c. MEDICARE (-) ------------
d. TPL (-) ------------
e. AVOIDED LTC COST (-) (FROM WORKSHEET) ------------
11. NET ADJUSTMENTS ============ PMPM
12. NET CAPITATION ============
13.a. ESTIMATED NUMBER OF MEMBERS AGE 65 OR OLDER OR
LESS THAN 21 YEARS OF AGE WHO WILL NEED MENTAL
HEALTH SERVICES ------------
b. ESTIMATED TOTAL MEMBERS ------------
c. DIVIDE a. BY b. ------------
14. FINAL MENTAL HEALTH CAPITATION 13c X 12 = ============
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MENTAL HEALTH CAPITATION RATE WORKSHEET FOR EVALUATION/DIAGNOSIS
UTIL FACTOR PER PMPM
SERVICES USER PER MONTH UNIT COST SERV COST
EVALUATION/DIAGNOSIS
1. EVALUATION AND ---------- X ---------- =
CLINICAL ASSESSMENT --
OTHER MENTAL HEALTH
PRACTITIONER
2. PSYCHOLOGICAL ---------- X ---------- =
EVALUATION
3. PSYCHIATRIC ---------- X ---------- =
EVALUATION
4. CERTIFICATION ---------- X ---------- =
OF NEED
- - --------------------------------
SUB TOTAL EVALUATION/DIAGNOSIS
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MENTAL HEALTH CAPITATION RATE WORKSHEET FOR
AVOIDED LONG TERM CARE COST
HCBS Nursing Facility
1. NUMBER OF CLIENTS TO
BE PLACED IN MENTAL
HEALTH FACILITIES* ----------- -----------------
2. MONTHLY COST PER CLIENT
AVOIDED BY PLACEMENT ----------- -----------------
3. MULTIPLY 1 X 2 ----------- -----------------
4. SUM 3 FOR HCBS PLUS 3 FOR -----------------
INSTITUTIONAL
5. ENTER TOTAL ESTIMATED NUMBER OF CLIENTS -----------------
6. DIVIDE 4 BY 5.
THIS IS THE NET PMPM ADJUSTMENT. -----------------
* REFERS TO INSTITUTION FOR MENTAL DISEASE FOR THOSE AGE 65 AND OLDER, AND TO
INPATIENT PSYCHIATRIC FACILITY FOR THOSE LESS THAN AGE 21.
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AGGREGATE CAPITATION PMPM AND ADMINISTRATIVE COST FACTORS
1. OVERVIEW
THE AGGREGATE CAPITATION RATE SHEET IS USED TO PRESENT THE OFFEROR'S PMPM
CAPITATION PROPOSAL FOR ACUTE MEDICAL SERVICES, MENTAL HEALTH FOR MEMBERS 65
YEARS OF AGE AND OLDER, MENTAL HEALTH SERVICES FOR MEMBERS LESS THAN 21 YEARS OF
AGE, LONG TERM CARE, AND CASE MANAGEMENT SERVICES. IT IS THE SUM OF THESE PMPM
RATES THAT WILL HAVE THE ADMINISTRATIVE COST FACTORS INCLUDED TO DETERMINE THE
NET PMPM CAPITATION RATE. THERE ARE FOUR ELEMENTS: (1) IDENTIFICATION, (2)
AGGREGATE CAPITATION RATE (PMPM) CALCULATION, (3) ADJUSTMENT AND (4) NET
CAPITATION RATE. THE IDENTIFICATION SECTION IS USED TO INDICATE THE COUNTY FOR
WHICH THE NET CAPITATION RATE CALCULATION SHEET WAS PREPARED.
THE AGGREGATE CAPITATION RATE (PMPM) CALCULATION SECTION IS USED TO
COMPUTE THE PMPM COST FOR ACUTE CARE, MENTAL HEALTH FOR MEMBERS 65 YEARS OF AGE
AND OLDER, MENTAL HEALTH SERVICES FOR MEMBERS LESS THAN 21 YEARS OF AGE, LONG
TERM CARE, AND CASE MANAGEMENT. THE AGGREGATE CAPITATION RATES FROM EACH SECTION
ARE ENTERED TO BUILD THE PMPM COST OF ALTCS.
2. ADJUSTMENTS
IN PREPARING THE ENTRY FOR ADJUSTMENTS, THE FOLLOWING INFORMATION MAY BE
OF ASSISTANCE. THERE ARE THREE ADMINISTRATIVE ADJUSTMENTS TO THE AGGREGATE
CAPITATION RATE: ADMINISTRATIVE CHARGES, PROFIT AND RISK CHARGES AND
CONTINGENCIES. THE ADMINISTRATIVE CHARGE ADJUSTMENT IS USED TO PRESENT THE
OFFEROR'S COST OF ADMINISTERING THE CONTRACT. THESE CHARGES INCLUDE THE COST OF
MAINTAINING OFFICES, COMPUTER SYSTEM, MEETING REPORTING REQUIREMENTS,
SUPERVISORY/MANAGEMENT COST AND OTHER CHARGES NORMALLY ACCEPTED IN THE HEALTH
CARE BUSINESS. THE OFFEROR IS REQUIRED TO PRESENT A DETAILED BREAKDOWN OF THOSE
CHARGES AS AN ATTACHMENT; THIS BREAKDOWN MUST BE SUFFICIENT FOR AHCCCSA TO
EVALUATE THE OFFEROR'S COST STRUCTURE. FAILURE TO PROVIDE A COMPLETE AND
COMPREHENSIVE BREAKDOWN (TO THE POINT OF
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ITEMIZATION OF CHARGES) MAY RESULT IN REJECTION OF YOUR PROPOSAL AS
UNRESPONSIVE.
THE PROFIT AND RISK CHARGE ADJUSTMENT IS USED TO PRESENT THE OFFEROR'S
ASSESSMENT OF PROFIT RATE NEEDED AND THE RISK OF THIS CONTRACT AS A FUNCTION OF
THIS PROFIT RATE. THIS ADJUSTMENT IS NOT TO BE VIEWED AS PROFIT GUARANTEE CHARGE
BUT AS A FACTOR TO BE CONSIDERED BY THE OFFEROR IN DEVELOPING THE TOTAL
CAPITATION PROPOSAL.
THE CONTINGENCIES ADJUSTMENT IS USED TO PRESENT ANY AMOUNT DEEMED
NECESSARY FOR CONTINGENCIES. THIS ADJUSTMENT IF A FUNCTION OF THE PREVIOUS
ADJUSTMENTS AND IS USED TO ALLOCATE A CERTAIN AMOUNT OF THE CAPITATION RATE TO
ACCOUNT FOR CHANGES IN RISK OR OPERATION.
AHCCCSA'S INTENT IS THAT REASONABLE ADJUSTMENTS WILL BE PERMITTED. IN THIS
SENSE, REASONABLE MEANS THAT WHICH IS USUAL, CUSTOMARY OR GENERALLY AN ACCEPTED
PRACTICE. HOWEVER, THE ADMINISTRATIVE ADJUSTMENTS SHALL BE SUPPORTABLE, PROPERLY
CLASSIFIED (TO AN ACCOUNT OR A COST CENTER) APPROPRIATE FOR THE MEMBER
POPULATION AND SERVICE DELIVERY REQUIREMENTS. ADMINISTRATIVE ADJUSTMENTS ENTERED
MUST BE DIRECTLY RELATED TO THE ACTUAL COST OF PROVIDING THESE SERVICES.
3. INSTRUCTIONS
THE FOLLOWING INSTRUCTIONS ARE TO BE USED FOR COMPLETING THE RATE
CALCULATION SHEET FOR NET PMPM CAPITATION RATE. THE OFFEROR SHALL COMPLETE A
RATE CALCULATION SHEET FOR EACH SERVICE AREA (COUNTY) FOR WHICH A PROPOSAL IS
SUBMITTED. SEPARATE SHEETS FOR VENTILATOR DEPENDENT CLIENTS ARE REQUIRED UNLESS
THE OFFEROR EXPECTS TO SERVE FEWER THAN 500 MEMBERS.
THE FOLLOWING LINE-BY-LINE INSTRUCTIONS SHOULD BE FOLLOWED WHEN COMPLETING EACH
OF THESE FORMS:
LINE DESCRIPTION
1. ENTER THE AVERAGE DAILY CENSUS FOR NURSING FACILITIES (LINE 6 FROM
NURSING FACILITY CRCS FOR NON VENTILATOR DEPENDENT
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CLIENTS AND LINE 4 FROM NURSING FACILITY CRCS FOR VENTILATOR DEPENDENT CLIENTS):
ENTER PMPM COST FROM NURSING FACILITY AGGREGATE RATE CALCULATION SHEET. MULTIPLY
THESE TWO AND ENTER THE PRODUCT IN THE APPROPRIATE SPACE.
2. ENTER THE AVERAGE DAILY CENSUS FROM HCBS (LINE 4 FROM HCBS AVERAGE
DAILY CENSUS WORKSHEET). ENTER PMPM COST FROM HCBS CRCS (LINE 19). MULTIPLY
THESE TWO AND ENTER THE PRODUCT IN THE APPROPRIATE SPACE.
3. ADD THE AVERAGE DAILY CENSUS AMOUNTS (LINE 1 AND 2) AND ENTER THE SUM
IN THE APPROPRIATE SPACE. ADD THE WEIGHTED COSTS (FROM LINES 1 AND 2) AND ENTER
THE SUM IN THE APPROPRIATE SPACE.
4. ENTER THE AVERAGE DAILY CENSUS FROM LINE 3, ENTER THE WEIGHTED COST
FROM LINE 3. DIVIDE THE WEIGHTED COST BY THE AVERAGE DAILY CENSUS AND ENTER THE
RESULT IN THE APPROPRIATE SPACE.
5. ENTER THE PMPM CAPITATION RATE FROM THE CASE MANAGEMENT CRCS.
6. ADD LINES 4 AND 5 AND ENTER THE SUM HERE.
7a. THE CHARGES FOR ALL ADMINISTRATIVE EXPENSES, OTHER THAN THOSE
ASSOCIATED WITH MENTAL HEALTH AND ACUTE CARE SERVICES, THAT ARE EXPECTED TO BE
INCURRED BY THE OFFEROR IN THE ADMINISTRATION OF ITS OPERATION ARE ENTERED HERE
(ATTACH ASSUMPTIONS).
7b. ALL PROFIT AND RISK CHARGES MUST BE ENTERED HERE (ATTACH ASSUMPTIONS).
7c. ANY AMOUNT DEEMED NECESSARY FOR CONTINGENCIES MUST BE ENTERED HERE
(ATTACH ASSUMPTIONS).
8. ADD LINES 7A, 7B, AND 7C AND ENTER THE SUM HERE.
9. ENTER THE PMPM ACUTE MEDICAL CARE AGGREGATE CAPITATION RATE FROM THE
ACUTE CARE AGGREGATE CRCS.
10. ENTER THE PMPM MENTAL HEALTH RATE FROM THE MH CRCS.
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<PAGE> 172
11. ADD LINES 6, 8, 9 AND 10 AND ENTER THE SUM HERE. THIS IS THE SINGLE
PMPM YOU PROPOSE AS REIMBURSEMENT.
RATE SHEET FOR NET PMPM CAPITATION
Average Daily
Census
PMPM
WEIGHTED
COST
1. AVERAGE DAILY CENSUS -------- X PMPM -------- = ----------
FOR NURSING FACILITIES (FROM NURSING FACILITY AGGREGATE
RATE CALCULATION SHEET)
2. AVERAGE DAILY CENSUS -------- X PMPM -------- = ----------
HCBS
3. SUBTOTAL ---------------- ----------------
4. ------------------------ / ------------------------ = -------------
WEIGHTED COST AVERAGE WEIGHTED PMPM
DAILY CENSUS
5. ENTER CASE MANAGEMENT CAPITATION RATE PMPM --------------
6. GROSS CAPITATION RATE --------------
7. ADJUSTMENTS
a. ADMINISTRATIVE CHARGES + --------------
b. PROFIT AND RISK CHARGES + --------------
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c. CONTINGENCIES + --------------
8. NET ADJUSTMENTS --------------
9. ENTER AGGREGATE CAPITATION RATE (PMPM) FROM --------------
ACUTE CARE AGGREGATE RATE CALCULATION SHEET
10. ENTER MENTAL HEALTH SERVICES CAPITATION RATE (PMPM) --------------
FROM THE MENTAL HEALTH CAPITATION RATE CALCULATION
SHEET.
11. NET CAPITATION RATE (PMPM) ==============
COUNTY:
----------------------------
CAPITATION RATE SHEET SUMMARY FORM
COMPLETE CAPITATION RATE SHEET SUMMARY.
TO COMPLETE THIS FORM, ENTER IN THE APPROPRIATE ROW THE COUNTY(IES) FOR WHICH
THE OFFEROR IS SUBMITTING A PROPOSAL. ENTER IN THE COLUMNS THE APPROPRIATE
CAPITATED RATE FOR EACH ELIGIBILITY CATEGORY.
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<PAGE> 175
7. PROGRAM OPERATIONS NARRATIVE
THE OFFEROR SHALL SUBMIT A DESCRIPTION OF ITS PROPOSED PROGRAM OPERATION
INCLUDING MANAGEMENT APPROACH AND OPERATIONAL STRUCTURE. THE NARRATIVE SHOULD
INCORPORATE OPERATIONAL COMPONENTS OF SERVICE DELIVERY, FINANCIAL MANAGEMENT
AND REPORTING AND QUALITY MANAGEMENT.
8. CASE MANAGEMENT PLAN
THE OFFEROR SHALL DESCRIBE HOW THEY WILL MEET THE CASE MANAGEMENT
REQUIREMENTS SPECIFIED IN PART THREE, SECTION 4. THE DESCRIPTION SHALL INCLUDE
THE NUMBER OF CASE MANAGERS, HOW PROTOCOLS ARE COMMUNICATED AND THE MONITORING
PROCESS TO ENSURE COMPLIANCE WITH PROTOCOLS, PROTOCOLS FOR A PLACEMENT DECISIONS
(INCLUDING ANY PREFERENCE FOR PARTICULAR PROCEDURES), HOW CASE MANAGERS WILL
COORDINATE WITH PRIMARY CARE PHYSICIANS AND PRIOR AUTHORIZATION STAFF, AND HOW
OUT-OF-COUNTY CLIENTS WILL BE MANAGED.
9. SERVICE PROVIDER NETWORK
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9.1 THE OFFEROR SHALL SUBMIT, FOR EACH SERVICE AREA IN WHICH IT SEEKS TO
PROVIDE ALTCS SERVICES, SIGNED LETTERS OF INTENT TO CONTRACT FOR THE SERVICES
LISTED IN PART FIVE, ATTACHMENT 3, ALTCS MINIMUM NETWORK STANDARDS FOR SERVICE
AREAS.
9.2 THE OFFEROR SHALL SUBMIT SUBCONTRACTS OR MODELS OF SUBCONTRACTS FOR
THE FOLLOWING SERVICES:
9.2.1 CONTRACTS BETWEEN RELATED PARTIES;
9.2.2 SUBCONTRACTS FOR FULL OR PARTIAL RISK;
9.2.3 INTERGOVERNMENTAL OR INTERAGENCY AGREEMENTS;
9.2.4 CONTRACTS FOR MANAGEMENT INFORMATION SYSTEMS OR DATA
MANAGEMENT FIRMS;
9.2.5 NURSING FACILITIES;
9.2.6 HCBS PROVIDERS (HOME HEALTH NURSING, ADULT DAY HEALTH CARE,
ADULT FOSTER CARE, HOME HEALTH AIDE);
9.2.7 TITLE XVIII MEDICARE CERTIFIED HOME HEALTH AGENCIES (HHA)
(WHEN A MEDICARE CERTIFIED HOME HEALTH AGENCY DOES NOT EXIST IN THE CONTRACTED
SERVICE AREA, SUBMIT STATE LICENSED HHA. IF NEITHER MEDICARE CERTIFIED OR STATE
LICENSED HHA EXISTS IN THE SERVICE AREA, SUBMIT INDEPENDENT REGISTERED NURSE
CONTRACT FOR PROVIDING SUCH SERVICES.);
9.2.8 ACUTE CARE HOSPITALS;
9.2.9 MENTAL HEALTH PROVIDERS; AND
9.2.10 PRIMARY CARE PHYSICIANS.
9.3 THE OFFEROR SHALL SUBMIT A NARRATIVE DESCRIPTION OF HOW IT WILL MEET
THE NETWORK MANAGEMENT REQUIREMENTS SPECIFIED IN PART THREE, SECTION 5, PROVIDER
NETWORK DEVELOPMENT AND MANAGEMENT. THIS DESCRIPTION MUST ADDRESS EACH OF THE
NINE (9) CRITICAL AREAS LISTED. THE OFFEROR IS ALSO STRONGLY ENCOURAGED TO
SUBMIT POLICIES AND PROCEDURES RELATED TO HOW IT WILL MANAGE EACH OF THESE
AREAS. ADDITIONAL CONSIDERATION IN EVALUATING THE NETWORK MANAGEMENT FACTOR
SHALL BE GIVEN TO OFFERORS WHO PROVIDE AHCCCSA WITH A DEFINED PLAN AND
COMMITMENT FOR IMPROVING THE PROVIDER NETWORK WITHIN THE CONTRACTED SERVICE
AREA. WHERE THERE ARE NETWORK GAPS IN THE SERVICE AREA, OFFERORS MAY IDENTIFY
THOSE GAPS IN SERVICE AVAILABILITY AND ACCESSIBILITY AND DEVELOP AND DOCUMENT A
PLAN FOR IMPROVING THE NETWORK.
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9.4 BY AUGUST 1, 1993, THE OFFEROR SHALL SUBMIT DATA ON ACTUAL RATES TO BE
PAID TO SUBCONTRACTORS ON FORM A FOR NURSING FACILITIES AND INPATIENT
PSYCHIATRIC FACILITIES AND FORM B FOR: HOME HEALTH AGENCIES; ADULT DAY HEALTH
PROVIDERS; HOSPICE PROVIDERS, INCLUDING INPATIENT AND OUTPATIENT HOSPICE; AND,
MENTAL HEALTH PROVIDERS, EFFECTIVE OCTOBER 1, 1993. THIS INFORMATION SHALL BE
SUBMITTED ON AUGUST 1 OF EACH RENEWAL YEAR FOR THE CONTRACT YEAR
BEGINNING OCTOBER 1.
9.5 IF THE OFFEROR PLANS TO USE RELATED PARTY SUBCONTRACTING SERVICE
PROVIDERS, IT MUST SUBMIT FORM C.
9.6 BY OCTOBER 15 OF EACH RENEWAL YEAR, THE PROGRAM CONTRACTOR MUST SUBMIT
DOCUMENTATION OF THE RENEWAL YEAR AGREEMENTS IT HAS REACHED WITH SUBCONTRACTING
NURSING FACILITIES IN ACCORDANCE WITH THE ABOVE.
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FORM A
Rates Paid to Subcontracting Nursing Facilities
Time Period: October 1, 199 to September 30, 199
<TABLE>
<CAPTION>
PER DIEM PER DIEM PER DIEM PROJECTED
PROJECTED PROJECTED
RATE RATE RATE CENSUS* CENSUS* CENSUS* CENSUS
CENSUS CENSUS
NURSING HOME LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1
LEVEL 2 LEVEL 3
<S> <C> <C> <C> <C> <C> <C> <C>
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
</TABLE>
* ACTUAL AVERAGE DAILY CENSUS FOR TIME PERIOD.
FORM A
Rates Paid to Subcontracting Nursing Facilities
For Specialty Services
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Time Period: October 1, 199 to September 30, 199
SPECIALTY SERVICES:
------------------------------------------------------
<TABLE>
<CAPTION>
PER DIEM PER DIEM PER DIEM PROJECTED
PROJECTED PROJECTED
RATE RATE RATE CENSUS* CENSUS* CENSUS* CENSUS
CENSUS CENSUS
NURSING HOME LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1
LEVEL 2 LEVEL 3
<S> <C> <C> <C> <C> <C> <C> <C>
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
- - ------------ ------- -------- ------- ------- ------- ------- -------
</TABLE>
* ACTUAL AVERAGE DAILY CENSUS FOR TIME PERIOD.
FORM A
Rates Paid to
Subcontracting Inpatient Psychiatric Facilities
FACILITY PER DIEM RATE PROJECTED CENSUS
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
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---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
IV-90
<PAGE> 183
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
---------------------- --------------- ---------------------
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FORM B
Other Subcontracting Providers
1. THIS FORM IS TO BE COMPLETED FOR:
1.1 HOME HEALTH AGENCIES;
1.2 ADULT DAY HEALTH PROVIDERS;
1.3 HOSPICE PROVIDERS (INCLUDING INPATIENT AND OUTPATIENT)
1.4 MENTAL HEALTH PROVIDERS.
2. FOR EACH PROVIDER, PLEASE LIST ALL SERVICES RENDERED BY THAT PROVIDER, AND
THE RATE FOR EACH.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PROVIDER SERVICE UNIT PRICE UNIT NAME
---------------------- --------------- --------------------- ---------------------
---------------------- --------------- --------------------- ---------------------
---------------------- --------------- --------------------- ---------------------
</TABLE>
IV-92
<PAGE> 185
<TABLE>
<S> <C> <C> <C> <C>
---------------------- --------------- --------------------- ---------------
---------------------- --------------- --------------------- ---------------
---------------------- --------------- --------------------- ---------------
---------------------- --------------- --------------------- ---------------
---------------------- --------------- --------------------- ---------------
---------------------- --------------- --------------------- ---------------
---------------------- --------------- --------------------- ---------------
---------------------- --------------- --------------------- ---------------
---------------------- --------------- --------------------- ---------------
</TABLE>
IV-93
<PAGE> 186
RFP/Contract No. YH3-0026
-----------
- - -------------------------------- ------- -------------- --------------
- - -------------------------------- ------- -------------- --------------
- - -------------------------------- ------- -------------- --------------
- - -------------------------------- ------- -------------- --------------
Note: Per HCFA, Program Contractors may negotiate rates with hospice
providers and are not required to pay the Medicare rates.
FORM C
Related Party Service Provisions *1
Offeror:
------------------------------------------------------------------------
Subcontractor:
------------------------------------------------------------------
Time Period: October 1, 199 to September 30, 199
-- --
<TABLE>
<S> <C> <C> <C> <C> <C>
(1) (2) (3) (4) (5)*3 (6)*2
</TABLE>
IV - 94
<PAGE> 187
RFP/Contract No. YH3-0026
----------
<TABLE>
<CAPTION>
HCPC/CPT-4 AHCCCS
Service Code Fee Schedule Fee Method of
Description for Service Amount Proposed Provider Selection Justification
<S> <C> <C> <C> <C> <C>
- - --------------------- -------------- -------------- ----------- ------------------- --------------
- - --------------------- -------------- -------------- ----------- ------------------- --------------
- - --------------------- -------------- -------------- ----------- ------------------- --------------
- - --------------------- -------------- -------------- ----------- ------------------- --------------
- - --------------------- -------------- -------------- ----------- ------------------- --------------
- - --------------------- -------------- -------------- ----------- ------------------- --------------
</TABLE>
*1 This form must be completed for all related party subcontractors. This is in
addition to disclosures required in your Annual Disclosure Statement.
IV - 95
<PAGE> 188
RFP/Contract No. YH3-0026
----------
*2 If the price listed in column (4) exceeds that in column (3), attach a
detailed justification. The justification shall include an explanation of why it
is cost effective to provide the service at a price exceeding the AHCCCS fee
schedule. In addition, identify fees charged for similar services from at least
two other non-related parties.
*3 How was the provider selected? Was the provider selected through competitive
bid? If not, what selection method was used and why?
10. Quality Management
------------------
10.1 The Offeror shall submit a quality management plan consistent with
the requirements specified in Statement of Requirements for ALTCS Quality
Management Program. This plan should include the Offeror's utilization
management plan. Attach utilization management policies and procedures for 1)
prior authorization and referral requirements; 2) clinical standards used; 3)
restrictions on settings for care; 4) and the qualifications of individuals
performing utilization management activities.
11. Financial Management Questionnaire
----------------------------------
11.1 The Offeror shall be able to demonstrate initial and continuing
financial viability in order to be awarded a contract. To demonstrate financial
viability, the Offeror shall submit a comprehensive financial plan for the year
ending September 30, 1994 as part of their proposal. This plan shall include
initial financial viability as of October 1, 1993. The development and
IV - 96
<PAGE> 189
RFP/Contract No. YH3-0026
----------
submission of a comprehensive financial plan is necessary for AHCCCSA to assess
the Program Contractor's prospects of financial viability. This financial plan
shall also provide the Offeror with a tool to plan and evaluate their
operations. The Offeror's projected operating statements shall include all
revenues and expenses which are expected to accrue to the Program Contractor.
11.2 The financial plan shall be logical, consistent, computable,
accurate, documented, understandable and realistic. Nursing facility, HCBS, and
physician operating costs shall be consistent with the Offeror's contractual
arrangements. The financial plan shall be compatible with AHCCCSA's standards
and requirements. The computations within the plan shall be accurate;
computations shall be proofed and verified. The justifications for all
assumptions (i.e., institutional per diem costs shall reflect either past
performance, negotiated per diem rates, or accepted community rates) included in
the financial plan shall be documented. The financial plan shall be
understandable: the financial plan shall lend itself to self-explanation with
concise and complete narratives and cross references. The methodologies and
assumptions shall be realistically given to the Offeror's current financial
condition, competition, institutional/physician contracts, effectiveness of
prior authorization system and other critical elements. Failure to meet these
standards may result in the Offeror's proposal being rejected as unresponsive or
more comprehensive financial data may be required to be submitted prior to
contract award.
IV - 97
<PAGE> 190
RFP/Contract No. YH3-0026
----------
Methodology for projection of assets and liabilities shall be included in the
Notes and Disclosures to Financial Statements.
11.3 The basic elements of the financial plan are Forms 1 through 9,
listed below. Forms 1 through 9 can be found in Part 5 of this RFP.
11.3.1 - Form 1 - Financial Questionnaire
11.3.2 - Form 2 - Balance Sheet
11.3.3 - Form 3 - Statement of Revenues and Expenses
11.3.4 - Form 4 - Financial Performance Measures
11.3.5 - Form 5 - Offeror Disclosure Statement
11.3.6 - Form 6 - Organization Specification Questionnaire
11.3.7 - Form 7 - Financial Disclosure Information
11.3.8 - Form 8 - Background Check Information
11.3.9 - Form 9 - Related Party Transaction Questionnaire
11.4 If the Offeror chooses to utilize a management services
subcontractor the following forms shall be completed (the definition of
management services can be found in Part Three, Section 9.9). Forms 10 through
19 can be found in Part 5 of this RFP.
11.6.1 Form 10 - Subcontractor Management Services Descriptive Data
IV - 98
<PAGE> 191
RFP/Contract No. YH3-0026
----------
11.6.2 Form 11 - Subcontractor Organizational Structure
11.6.3 Form 12 - Subcontractor Customer Description
11.6.4 Form 13 - Subcontractor Controlling
11.6.5 Form 14 - Subcontractor Financial Questionnaire
11.6.6 Form 15 - Subcontractor Background Check
11.6.7 Form 16 - Subcontractor Competitive Bid Certificate
11.6.8 Form 17 - Subcontractor Reimbursement Questionnaire
11.6.9 Form 18 - Subcontractor Personnel Experience
11.6.10 Form 19 - Subcontractor Statement
12. DATA MANAGEMENT QUESTIONAIRE
The Offeror shall complete the following questionaire:
12.1 List the type of computer system(s) currently used (in-house or
contracted), e.g. IBM 3090 Compatible.
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
IV - 99
<PAGE> 192
RFP/Contract No. YH3-0026
----------
12.2 What technical media can each of your system(s) or contracted
system(s) currently handle? Please check all types of media under each type of
data that can be received/provided.
MEDIA ROSTER >CONTRACT >ENCOUNTER >PROVIDER >PROCEDURE >CASE MANAGEMENT
SERVICE DATA > RATES > DATA > NETWORK > NETWORK > DATA
PLAN MEMBER > > > > >
ENROLLMENT > > > > >
ETC. > > > > >
> > > > >
- - --------------------- --------- ---------- --------- ---------- ---------------
> > > > >
PC > > > > >
Diskette > > > > >
- - --------------------- --------- ---------- --------- ---------- ---------------
> > > > >
IV - 100
<PAGE> 193
RFP/Contract No. YH3-0026
----------
Magnetic > > > > >
Tape > > > > >
- - --------------------- --------- ---------- --------- ---------- ----------
> > > > >
> > > > >
Cartridge > > > > >
- - --------------------- --------- ---------- --------- ---------- ----------
> > > > >
Host > > > > >
to Host > > > > >
- - --------------------- --------- ---------- --------- ---------- ----------
> > > > >
Other > > > > >
Please List > > > > >
- - --------------------- --------- ---------- --------- ---------- ----------
> > > > >
> > > > >
- - --------------------- --------- ---------- --------- ---------- ----------
IV - 101
<PAGE> 194
> > > > >
> > > > >
-------------------- --------- ---------- --------- ---------- ----------
12.3 Please attach a description of how you will meet the data
management requirements specified in Part III, Section 10. If not currently able
to meet requirements, give timeframes for start-up.
13. Grievance and Appeals Questionnaire
Describe how you will meet the Grievance and Appeals requirements
specified in Part Three, Section 13, of this RFP.
14. Member Handbook
Submit a copy of the Member Handbook you propose to utilize, which
meets the Member Handbook requirements specified in Part Three, Section 11, of
this RFP.
15. Third Party Liability Questionnaire
The Offeror shall describe how they will meet the third party liability
requirements specified in Part Three, Section 7 of this RFP. The description
shall include how the Offeror will: identify liable third parties for enrolled
recipients; pursue
IV - 102
<PAGE> 195
RFP/Contract No. YH3-0026
----------
collection from potentially liable third parties (except uninsured and
underinsured motorist insurance, first and third party liability insurance, and
tort feasors); notify AHCCCSA of the potential liability of uninsured and
underinsured motorist insurance, first and third party liability insurance, and
tort feasors; determine its financial liability for a recipient; disburse funds
collected from third parties; and reject claims that are subject to third party
payments, but do not include an explanation of medical benefits form.
16. Supportive Housing Questionaire (For Maricopa County Only)
16.1 Maricopa County shall submit the following information regarding
supportive housing services, as identified in House Bill 2126;
16.1.1 A list of the supportive housing facilities with which Maricopa
County has contracts and the facilities certification from the Office of Health
Care Licensure, Arizona Department of Health Services; and
16.1.2 A copy of the monthly report that will be submitted to the Long
Term Care Services Review Committee (are identified in HB 2126).
17. Certificate of Insurance
IV - 103
<PAGE> 196
RFP/Contract No. YH3-0026
----------
The Offeror must complete a Certificate of Insurance, Attachment 3, in
Part Five of this RFP, in the amounts stipulated in Part Two, Insurance
Requirements.
18. Amendments
Any amendments to the RFP must be signed, dated and returned with the
proposal.
IV - 104
<PAGE> 197
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM
SOLICITATION, OFFER AND AWARD
Contract No: RFP No: YH6-0012 Date Issued: APRIL 1, 1996
Issued by: AHCCCSA Subject of Solicitation:
Contracts and Purchasing
701 E. Jefferson Ave. LONG-TERM CARE SERVICES
Phoenix, AZ 85034 FOR CY 97 (10/1/96 - 9/30/97)
================================================================================
I. SOLICITATION
Sealed offers (original and 5 copies) for providing the services described
herein will be received at the issuing office (above) until 3:00 p.m. local time
June 14, 1996. For information call:
Mark Renshaw, Contracts and Purchasing Phone: (602) 417-4577
<TABLE>
<CAPTION>
==================================================================================================================
TABLE OF CONTENTS
<S> <C> <C> <C>
A. SOLICITATION, OFFER AND F. LIST OF ATTACHMENTS..................... 48
AWARD FORM................................ 1 G. REPRESENTATIONS &
B. RATES .................................... 2 CERTIFICATIONS.......................... 49-57
C. DEFINITIONS............................... 3-7 H. INSTRUCTIONS TO OFFERORS................ 58-66
D. PROGRAM REQUIREMENTS...................... 8-38 I. EVALUATION FACTORS ..................... 67-69
E. CONTRACT CLAUSES.......................... 39-47 INDEX ......................................... 70-71
==================================================================================================================
</TABLE>
II. OFFER (Must be fully completed by Offeror)
The undersigned Offeror hereby agrees, if this offer is accepted within 120 days
of bid opening to provide all services in accordance with the terms and
requirements stated herein, including all attachments, amendments, and
best-and-final offer (if any).
NAME OF OFFEROR:____________________ PHONE:_________________________
ADDRESS:_____________________________
CITY/STATE:________________Zip: _______
NAME OF PERSON AUTHORIZED
TO SIGN OFFER:_____________________________ TITLE:_________________________
OFFEROR'S SIGNATURE:_______________________DATE:_______________________________
===============================================================================
III. AWARD (To be completed by AHCCCSA)
The offer, including all attachments, amendments and best-and-final offer (if
any), contained herein, is accepted.
NAME OF AHCCCSA CONTRACTING OFFICER: Michael Veit DATE:___________________
SIGNATURE OF AHCCCSA CONTRACTING OFFICER:______________________________________
===============================================================================
1
<PAGE> 198
SECTION B - CAPITATION RATES
The Program Contractor shall provide services as described in this solicitation.
In consideration for these services, the Program Contractor will be paid as
shown below. (The Offeror must enter below its proposed monthly capitation rates
for each county bid.)
<TABLE>
<CAPTION>
PROPOSED CAPITATION RATES
(Per member per month)
<S> <C>
------------------- ---------------------
COUNTY: PROPOSED RATE (PMPM):
------------------- ---------------------
Apache $
------------------- ---------------------
Cochise* $
------------------- ---------------------
Coconino $
------------------- ---------------------
Gila $
------------------- ---------------------
Graham $
------------------- ---------------------
Greenlee $
------------------- ---------------------
La Paz $
------------------- ---------------------
Maricopa** $
------------------- ---------------------
Mojave $
------------------- ---------------------
Navajo $
------------------- ---------------------
Pima** $
------------------- ---------------------
Pinal* $
------------------- ---------------------
Santa Cruz $
------------------- ---------------------
Yavapai* $
------------------- ---------------------
Yuma $
------------------- ---------------------
</TABLE>
* By statute, this county has the right of first refusal to act as sole
program contractor for the county. It has indicated its intention to
continue functioning in this capacity for Contract Year 96-97 and no
competing offers will be considered at this time.
** By statute, this county is required to act as sole program contractor
for the county. No competing offers will be considered at this time.
2
<PAGE> 199
SECTION C - DEFINITIONS
ABUSE (OF MEMBER) Intentional infliction of physical,
emotional or mental harm, caused by
negligent acts or omissions,
unreasonable confinement, sexual abuse
or sexual assault. (See ARS
Section 46-451.)
ABUSE (BY PROVIDER) Provider practices that are
inconsistent with sound fiscal,
business or medical practices, and
result in an unnecessary cost to the
AHCCCS program, or in reimbursement
for services that are not medically
necessary or that fail to meet
professionally recognized standards
for health care. It also includes
recipient practices that result in
unnecessary cost to the AHCCCS
program. (See 42 CFR 455.2)
ADHS Arizona Department of Health Services.
ADULT CARE HOME An ALTCS HCBS approved alternative
residential setting that is licensed
by the Arizona Department of Health
Services to provide room, board,
supervision, personal care and/or
custodial care services for up to 10
adults. (AHCCCS Medical Policy Manual,
Section 1230)
ADULT DAY HEALTH A program that provides planned care
and supervision, recreation and
socialization, personal care, personal
living skills training, group meals,
health monitoring and various
preventive, therapeutic and
restorative health care services.
ADULT FOSTER CARE An ALTCS HCBS approved alternative
residential setting which is certified
by the ADHS to provide room, board,
supervision and coordinaion of
necessary ALTCS HCBS services within a
family type environment for up to four
adult residents. (AHCCCS Medical
Policy Manual, Section 12030)
AGENT Any person who has been delegated the
authority to obligate or act on behalf
of another person or entity.
AHCCCS Arizona Health Care Cost Containment
System as defined by ARS 36-2901, et
seq.
AHCCCSA Arizona Health Care Cost Containment
System Administration
ALTCS The Arizona Long Term Care System
(ALTCS), a program under AHCCCSA that
delivers long term, acute and
behavioral health care services to
eligible members, as authorized by ARS
36-2931 et seq.
AMPM AHCCCS Medical Policy Manual
ATTENDANT CARE A service wherein a certified trained
attendant provides assistance with
homemaking, personal care, general
supervision and companionship.
BEHAVIORAL HEALTH, LEVEL I A behavioral health service agency
licensed by ADHS to provide a
structured treatment setting with
24-hour supervision, on-site medical
services and an intensive behavioral
health treatment program. These
facilities are the highest level of
inpatient behavioral health services
(other than psychiatric
hospitalization) and when considered
an alternative residential setting may
provide mental health crisis
stabilization and/or substance abuse
detoxification.
BEHAVIORAL HEALTH, A behavioral health service agency
licensed by ADHS to provide a
3
<PAGE> 200
LEVEL II structured residential setting with
24-hour supervision and counseling or
other therapeutic activities for
individuals who do not require the
intensity of treatment services or
on-site medical services found in a
Level I behavioral health facility.
BIDDERS' LIBRARY A repository of manuals, statutes,
rules and other reference material
referred to in this RFP, located at
AHCCCS Contracts and Purchasing, 701
E. Jefferson, Phoenix, AZ.
CAPITATION Payment to contractor by AHCCCSA of a
fixed monthly payment per person in
advance for which the contractor
provides a full range of covered
services.
CATEGORICALLY ELIGIBLE MEMBER A member eligible for Medicaid under
ARS 36-2901(4)(b) and 36-2931(5).
CONTINUING OFFEROR An existing ALTCS program contractor
who submits a response to this
solicitation.
CONTRACT YEAR (CY) Corresponds to federal fiscal year
(Oct. 1 through Sept. 30). For
example, Contract Year 97 is 10/1/96 -
9/30/97.
CONVICTED A judgment of conviction has been
entered by a federal, state or local
court, regardless of whether an appeal
from that judgment is pending.
CO-PAYMENT An amount which the member pays
directly to a contractor or provider
at the time covered services are
rendered.
COST AVOIDANCE The process of identifying and
utilizing all sources of third-party
benefits BEFORE SERVICES ARE RENDERED
by the Program Contractor or before
payment is made by the Program
Contractor. (This assumes the Program
Contractor can avoid costs by not
paying until the third party has paid
what it covers first, or having the
third party contracted provider render
the service so that the Program
Contractor is only liable for
coinsurance and/or deductibles.)
COVERED SERVICES ALTCS services to be delivered by the
Program Contractor which are so
designated in Section D of this
contract and the Arizona
Administrative Code R9-28-201 et seq.
CRS Children's Rehabilitative Services
DAYS Calendar days unless otherwise
specified.
DME Durable medical equipment; an item
that can withstand repeated use such
as hospital beds, wheelchairs,
crutches.
DUAL ELIGIBLE QUALIFIED A person, eligible under ARS
MEDICARE BENEFICIARY 36-2971(4), who is entitled to
Medicare Part A insurance, meets
certain income, resource and residency
requirements of the Qualified Medicare
Beneficiary program, and who has been
determined categorically eligible for
full AHCCCS acute, behavioral health
and/or long-term care benefits.
ENCOUNTER An encounter is a record of a
medically related service rendered by
a provider or providers registered
with AHCCCSA to a member who is
enrolled with a program contractor on
the date of service. It includes all
services for which the program
contractor incurred any financial
liability.
ENROLLMENT The process by which a person who has
been determined eligible becomes a
member with a program contractor
subject to the limitations specified
in the AHCCCS Rules.
4
<PAGE> 201
EPSDT Early and Periodic Screening,
Diagnosis and Treatment services for
persons under 21 years of age as
described in AHCCCS Rules R9-22-101
and R9-22-213.
FEE-FOR-SERVICE (FFS) A method of payment to registered
providers on an amount-per-service
basis.
FFP Federal financial participation (FFP)
refers to the contribution that the
federal government makes to the Title
XIX program portion of AHCCCS as
described in AHCCCS Rule R9-28-101
(26).
FISCAL YEAR (STATE) July 1 through June 30.
FISCAL YEAR (FEDERAL) October 1 through September 30.
FRAUD An intentional deception or
misrepresentation made by a person
with the knowledge that the deception
could result in some unauthorized
benefit to himself or some other
person. It includes any act that
constitutes fraud under applicable
state or federal law. (42 CFR 455.2)
HCBS Home and community-based services.
(See Section D.)
HCFA Health Care Financing Administration,
an organization within the U.S.
Department of Health and Human
Services which administers the
Medicare and Medicaid programs.
HEALTH MAINTENANCE ORGANIZATION (HMO) Various forms of plan organization,
including staff and group models, that
meet the HMO licensing requirements of
the federal and/or state government
and offer a full array of health care
services to members on a capitated
basis.
HOME DELIVERED MEALS A service that provides a nutritious
meal containing at least one-third of
the federal recommended daily
allowance for the member, delivered to
the member's place of residence.
HOMEMAKER SERVICE Assistance in the performance of
routine household activities such as
shopping, cooking, running errands,
etc.
HOSPICE A program that provides care to
terminally ill patients who have six
months or less to live. A
participating Hospice must meet
Medicare requirements and have a
written provider contract with the
Program Contractor.
IBNR Incurred But Not Reported liabilities
for services rendered for which claims
have not been received.
IHS Indian Health Service; a division of
the U.S. Public Health Service. It
administers a system of hospitals and
health centers providing health
services to Native Americans and
Native Alaskans.
MANAGEMENT SERVICES SUBCONTRACTOR A person or organization who agrees
to perform any administrative service
for the Program Contractor related to
securing or fulfilling the Program
Contractor's obligations to AHCCCSA
under the terms of the contract.
MATERIAL OMISSION A fact, data or other information
excluded from a report, contract, etc.
the absence of which could lead to
erroneous conclusions following
reasonable review of such report,
contract, etc.
MEDICAID A federal/ state program authorized by
Title XIX of the Social Security Act,
as amended, which provides federal
matching funds for a medical
assistance
5
<PAGE> 202
program for recipients of federally
aided public assistance and SSI
benefits and other specified groups.
Certain minimum populations and
services must be included to receive
FFP; however, a state may, at its
option, include additional populations
and services at state expense and also
receive FFP.
MEDICARE A federal program authorized by Title
XVIII of the Social Security Act, as
amended.
MEMBER For purposes of this solicitation, a
person eligible for ALTCS who is
enrolled with a program contractor.
OFFEROR The organization, entity or person
which submits a proposal in response
to this AHCCCS Request for Proposal.
An offeror who is awarded a contract
becomes a program contractor.
PAS Pre-admission screen; diagnostic tool
administered by an AHCCCS DMS social
worker or nurse to assess, or refer to
a physician for assessment, the
functional, medical, nursing and
social needs of the member.
PASARR Preadmission Screening and Annual
Resident Review. Assessment required
prior to admission to a nursing
facility. Level I is the
identification of members who are
suspected of having mental illness or
mental retardation. Level II
determines whether nursing facility or
specialized services are needed.
PAY AND CHASE Recovery method used by the Program
Contractor to collect from legally
liable third parties AFTER the Program
Contractor pays the member's medical
bills. The service may be provided by
a contracted or noncontracted
provider. Regardless of who provides
the service, pay and chase assumes
that the Program Contractor will pay
the provider, then seek reimbursement
from the third party.
PERSONAL CARE A service that provides assistance
with personal physical needs such as
washing hair, bathing and dressing.
PRIMARY CARE PROVIDER/ An individual responsible for the
PRACTITIONER (PCP) management of the member's health care
that includes, but is not limited to,
a physician who is a family
practitioner, general practitioner,
pediatrician, general internist,
obstetrician, gynecologist, certified
nurse practitioner or, under the
supervision of a physician, a
physician's assistant. The PCP must be
an individual, not a group or
association of persons such as a
clinic.
REINSURANCE A risk-sharing program provided by
AHCCCSA to program contractors for the
reimbursement of certain contract
service costs incurred by a member
beyond a certain monetary threshold.
RELATED PARTY A party that has, or may have, the
ability to control or significantly
influence a program contractor, or a
party that is, or may be, controlled
or significantly influenced by a
program contractor. "Related parties"
include, but are not limited to,
agents, managing employees, persons
with an ownership or controlling
interest in the disclosing entity, and
their immediate families,
subcontractors, wholly-owned
subsidiaries or suppliers, parent
companies, sister companies, holding
companies, and other entities
controlled or managed by any such
entities or persons.
RESPITE CARE A service that provides short-term
care and supervision to relieve
primary caregivers. It is available
24-hours per day and is limited to 30
days per year.
6
<PAGE> 203
RFP Request For Proposal; document
prepared by AHCCCSA which describes
the services required and which
instructs prospective offerors how to
prepare a response (proposal).
STATE PLAN The written agreement between the
State of Arizona and HCFA which
describes how the AHCCCS program meets
HCFA requirements for participation in
the Medicaid program.
SUBCONTRACT An agreement entered into by a program
contractor with a provider of health
care services who agrees to furnish
covered services to members, or with
any other organization or person who
agrees to perform any administrative
function or service for a program
contractor specifically related to
fulfilling the program contractor's
obligations to AHCCCSA under the terms
of this contract.
SUBCONTRACTOR (1) A (1) A person, agency or
organization to which a program
contractor has contracted or delegated
some of its management functions or
responsibilities to provide covered
services to its members; or (2) A
person, agency or organization with
which a fiscal agent has entered into
a contract, agreement, purchase order
or lease (or leases of real property)
to obtain space, supplies, equipment
or services provided under the AHCCCS
agreement.
SUPPORTIVE RESIDENTIAL LIVING CENTER Supportive Residential Living Center
-- An ALTCS HCBS approved alternative
residential setting composed of
individual apartments licensed by ADHS
to provide room, board and general
supervision, as well as coordinate
supportive living services to members
on a 24-hour basis. (AHCCCS Medical
Policy Manual, Section 1230)
THIRD PARTY A person, program or entity that
is or may be, by agreement,
circumstance or otherwise, liable to
pay all or part of the medical
expenses incurred by an AHCCCS member.
THIRD PARTY LIABILITY Resources available from a person,
program or entity that is or may be,
by agreement, circumstance or
otherwise, liable to pay all or part
of the medical expenses incurred by an
AHCCCS member.
TRAUMATIC BRAIN INJURY TREATMENT FACILITY An ALTCS HCBS approved alternative
residential setting which is licensed
by the ADHS as an Unclassified Health
Care Facility and whose purpose is to
provide services for the treatment of
people with traumatic brain injuries.
VENTILATOR DEPENDENT An ALTCS member who is dependent on a
ventilator for respiratory support at
least six hours per day for at least
30 consecutive days.
END OF SECTION C]
7
<PAGE> 204
SECTION D - PROGRAM REQUIREMENTS
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Covered Services........................................................................................... 12
2. Behavioral Health Services
3. Therapeutic Leave And Bed Hold
4. Dental Services............................................................................................ 13
5. Family Planning............................................................................................ 14
6. Emergency Services......................................................................................... 14
7. Children's Rehabilitative Services (Crs)................................................................... 14
8. Altcs Transitional Program................................................................................. 15
9. Case Management............................................................................................ 15
10 Pre-Admission Screening And Annual Resident Review (Pasarr).............................................. 17
11. Quality Management/ Utilization Management................................................................. 17
12. Quality Management/ Utilization Management Reports......................................................... 18
13. Denials Of Services Requiring Prior Authorization.......................................................... 18
14. Member Handbook And Member Communications.................................................................. 19
15. Enrollment And Disenrollment............................................................................... 20
16. Request For Change In Enrollment........................................................................... 20
17. Reporting Changes In Members' Circumstances................................................................ 20
18. Out-Of-State Placement And Medical Services................................................................ 21
19. Advance Directives......................................................................................... 21
20. Staff Requirements And Support Services.................................................................... 21
21. Medical Director........................................................................................... 22
22. Written Policies, Procedures And Job Descriptions.......................................................... 23
23. Provider Manual............................................................................................ 23
24. Network Development........................................................................................ 24
25. Network Management......................................................................................... 24
26. Provider Registration...................................................................................... 25
27. Network Deficiencies....................................................................................... 25
28. Appointment Standards...................................................................................... 25
29. Fraud And Abuse............................................................................................ 25
30. On-Site Reviews............................................................................................ 26
31. Operational And Financial Readiness Reviews................................................................ 27
32. Patient Trust Account Monitoring........................................................................... 27
33. Financial Management....................................................................................... 27
34. Required Financial Reports................................................................................. 28
35. Performance Bond Or Bond Substitute........................................................................ 28
37. Financial Viability Criteria And Performance Measures...................................................... 29
38. Advances, Distributions And Loans.......................................................................... 29
39. Accumulated Fund Deficit................................................................................... 30
40. Hcbs Assumed Mix And Recoupment............................................................................ 30
41. Hospital Reimbursement..................................................................................... 30
42. Ventilator Dependent Reimbursement Rates................................................................... 31
43. Reinsurance................................................................................................ 31
44. Coordination Of Benefits/ Third Party Liability........................................................... 32
45. Medicare Services And Cost Sharing......................................................................... 34
46. Member Share Of Cost...................................................................................... 34
47. Management Services And Distribution Of Funds.............................................................. 35
48. Management Services Subcontractor Audits................................................................... 35
49. Merger, Reorganization And Change Of Ownership............................................................. 35
50. Related Party Transactions................................................................................. 36
</TABLE>
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<TABLE>
<S> <C>
51. Requests For Information.....................................................................................36
52. Data Management..............................................................................................36
53. Data Exchange Requirement....................................................................................36
54. Encounter Data Reporting.....................................................................................36
55. Specialty Contracts..........................................................................................37
56. Sanctions....................................................................................................37
57. Term Of Contract And Option To Renew.......................................................................38
58. Grievance Process And Standards..............................................................................38
59. Quarterly Grievance Report...................................................................................38
60. Legislative Issues...........................................................................................38
</TABLE>
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SECTION D - PROGRAM REQUIREMENTS
BACKGROUND AND INTRODUCTION
1982 - ARIZONA JOINS MEDICAID
In 1982 Arizona introduced its Medicaid program by establishing the Arizona
Health Care Cost Containment System (AHCCCS), a demonstration program based on
principles of managed care. In 1987, the State passed legislation to add
long-term care services to the AHCCCS program by establishing the Arizona Long
Term Care System (ALTCS). Before the ALTCS program was introduced, nursing
facility care for the elderly and physically disabled was provided primarily
through the state's various county governments while the Arizona Department of
Economic Security, in coordination with the Area Agencies on Aging, provided
home and community based services and case management.
ALTCS officially began accepting developmentally disabled members in December
1988; the Department of Economic Security is, by law, the program contractor for
this population. The program for the elderly and physically disabled (EPD)
population was added January 1, 1989. The ALTCS program now administers acute,
long term and behavioral health services in both institutional and home and
community based settings, and provides case management services.
AHCCCSA'S MISSION
The AHCCCS Administration's mission is to administer innovative managed care
programs effectively and efficiently, and to continually improve the
accessibility and delivery of quality health care to members. To do this,
AHCCCSA annually evaluates the performance of its program contractors in the
following areas:
Executive management Case management
Medical direction Provider services
Network management Member services
Behavioral health services Quality management
Utilization management Grievance and appeals
Accounting systems Claims and encounter systems
In the future, performance will be measured against clinical quality management
indicators once baselines are established by the Administration.
WHO'S ELIGIBLE FOR ALTCS? First,the person must be financially eligible.
Anyone may apply for ALTCS at any of the 15 AHCCCS eligibility offices located
throughout the state. The applicant must either be age 65 or older, disabled,
under 18, or pregnant. The applicant must be an Arizona resident, a U.S. citizen
or legal alien, and have countable income and resources below certain
thresholds. Chapter 1600 of the ALTCS Eligibility Policy and Procedures Manual
provides a detailed discussion of all eligibility criteria.
Second, the person must be medically eligible.
Once a person's financial eligibility has been established, a preadmission
screen (PAS) is conducted by an AHCCCS registered nurse, social worker or, by
referral, a physician to evaluate the person's medical status. The PAS is also
used initially to determine whether the person should be placed, or is at risk
of being placed, in a nursing facility or an intermediate care facility for the
mentally retarded. In most cases, AHCCCS will re-evaluate each ALTCS member
annually.
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THE GROWTH OF THE ALTCS PROGRAM
ALTCS services are provided in the 15 counties by program contractors under
contract with AHCCCS. Program contractors coordinate, manage and provide
long-term care services to ALTCS members. Unlike the acute care program,
however, there is currently only one ALTCS program contractor in each county.
The ALTCS population has grown from a total of 9,989 in its first full year to
21,356 as of February 1996, a 114% increase. Of this population, 64% are EPD and
less than 1% of these are ventilator dependent members. The yearly growth of the
EPD population is as follows:
<TABLE>
<CAPTION>
STATE
FISCAL YEAR NUMBER INCREASE % INCREASE
<S> <C> <C> <C> <C>
1990 6,142
1991 7,971 1,829 +29.8 %
1992 8,954 983 +12.3 %
1993 10,145 1,191 +13.3 %
1994 10,984 839 + 8.3 %
1995 12,084 1,100 +10.0 %
1996 (as of 2/96) 13,751 1,667 +13.8%
</TABLE>
THE GROWTH OF Home and Community Based Services (HCBS)
ALTCS members are considered to be "at risk" of institutionalization.
Alternative residential settings have recently been developed, however, in which
some of these members can be safely cared for in a less restrictive setting.
These HCBS alternative residential settings allow placement options other than
the traditional nursing home when the member can no longer safely live at home.
(See Section D, Paragraph 1, for a listing of the alternative settings available
through the ALTCS program.) At first, because of its concern about an
unmanageable surge in demand, HCFA limited the amount Arizona could spend on
HCBS services to 5% of the total ALTCS budget. This limit was later changed from
a cap on spending to a limitation on member months. HCFA has since allowed ALTCS
to increase the HCBS cap by approximately 5% per year so that the cap is now at
40% for HCBS placements. As of December 1995, HCBS members comprised
approximately 35% of the ALTCS EPD population.
HCBS: THE FUTURE OF ALTCS
AHCCCS has supported and encouraged the growth of HCBS in the ALTCS program
through the Supportive Residential Living and Adult Care Home pilot programs.
The growth of HCBS has given members a variety of residential options to choose
from beyond the traditional nursing home. To encourage further growth and
expansion in this area, AHCCCS has established HCBS percentages and a
reimbursement method that rewards those program contractors who excel in the
development and expansion of these settings. In addition, AHCCCSA has requested
federal approval for removing the percentage cap entirely on HCBS placements.
1. COVERED SERVICES
The Program Contractor shall, at a minimum, be responsible for providing the
following acute, long term and behavioral health services in accordance with the
AHCCCS Medical Policy Manual:
ACUTE CARE SERVICES (REF. AHCCCS RULE R9-22-202)
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Inpatient and outpatient hospital
Emergency room
Physician
Outpatient, including those AHCCCS covered services that may be provided
in a rural health clinic or Federally Qualified Health Center
Laboratory, x-ray and medical imaging Prescription drugs, including
psychotropic medications
Medical supplies, durable medical equipment and prosthetic devices
Emergency transportation
Medically necessary transportation
Family Planning, including drugs, supplies, devices and surgical
procedures provided to delay or prevent pregnancy
Medically Necessary Abortions, when the pregnancy would endanger the
life of the mother if the fetus were carried to term, or if the
pregnancy is a result of rape or incest Therapies (physical,
occupational, respiratory, audiologic, speech)
Podiatry
Private Duty Nursing for ventilator dependent members
Early and periodic screening, diagnosis and treatment services for
members under the age of 21. These services include all medically
necessary Title XIX services.
Organ transplants deemed medically necessary are limited to the
following services:
kidney, cornea, bone, heart, lung, heart/lung, liver, autologous
and allogeneic bone marrow with related chemotherapy or
radiotherapy
Eyeglasses and contact lenses for members 21 years and older as the sole
prosthetic device after a cataract extraction
Emergency dental care, extractions and medically necessary dentures for
members 21 years and older.
ACUTE CARE SERVICES - BEHAVIORAL HEALTH(REF. AHCCCS RULE R9-28-1104)
Inpatient hospital
Inpatient Psychiatric Facility for members under 21 years
Institution for mental diseases for members 65 years and older
Individual therapy and counseling
Group and family therapy and counseling
Partial care (Basic and Intensive)
Emergency crisis mental health care
Behavior management
Evaluation
Psychotropic medications, including adjustment and monitoring
LONG TERM CARE SERVICES (REF. AHCCCS RULE R9-28-202)
Nursing Facility, including Christian Science sanitoria and nursing
Hospice
Adult Day Health
Home Delivered Meals
Home Health Agency, including nursing services and home health aide
Homemaker
Personal Care
Respite Care
Group Respite as an alternative to Adult Day Health
Attendant Care
Environmental modifications
LONG TERM CARE - INSTITUTIONAL SETTINGS
Nursing facility
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Institution for Mental Disease (for age 65 and over)
Inpatient Psychiatric Residential Treatment Center (under age 21)
LONG TERM CARE - HCBS ALTERNATIVE RESIDENTIAL SETTINGS
Adult Care Home
Adult Foster Care
Behavioral health, Level I and Level II (Residential Treatment Center;
licensed by ADHS; under age 21) Supportive Residential Living centers
(certified by ADHS - Maricopa County pilot program)
Traumatic Brain Injury treatment facility
Other services and settings, if approved by HCFA and/or the Director of AHCCCSA,
may be added as appropriate. Exclusions and limitations of ALTCS covered
services are discussed in AHCCCS and ALTCS Rules and the AHCCCS Medical Policy
Manual.
2. BEHAVIORAL HEALTH SERVICES
The Program Contractor shall provide medically necessary Title XIX (Medicaid)
behavioral health services to all members in accordance with the AHCCCS Medical
Policy Manual.
Referral for behavioral health services may be made by the Primary Care
Provider, case manager, nursing facility staff, family, guardian, the member, or
by any health care professional in coordination with the case manager assigned
to the member.
The Program Contractor shall develop, monitor and continually evaluate its
processes for timely referral, screening, evaluation and treatment planning for
behavioral health services. The Program Contractor is responsible for training
case managers and providers to identify and screen for members' behavioral
health needs. The initial behavioral health screen for HCBS members must be
performed within seven days of referral. There shall be procedures in place for
ensuring that members' behavioral health services are appropriately provided,
coordinated and tracked by the case manager, PCP and behavioral health providers
and included in the member's individual service plan. Quality management for
behavioral health services must be included in the Program Contractor's Quality
Management Plan and shall meet the quality management requirements of AHCCCSA.
Behavioral health utilization reports shall be submitted quarterly in a format
to be determined by AHCCCSA.
3. THERAPEUTIC LEAVE AND BED HOLD
For therapeutic leave and bed hold policies, refer to the AHCCCS Medical Policy
Manual, Section 1620-21.
4. DENTAL SERVICES
The Program Contractor shall ensure that members under age 21 have direct access
to dental providers. Members may also be referred by their PCPs. Members over
age three and under 21 shall be screened annually by a dentist who will perform
an evaluation and report findings and treatment to the member's PCP or the
Program Contractor. Members under age three shall be screened by their PCP and
referred to a dentist when medically necessary. Dental standards may be found in
the AHCCCS Medical Policy Manual, Section 310.
5. FAMILY PLANNING
The Program Contractor shall provide Family Planning services in accordance with
the AHCCCS Medical Policy Manual, Section 420, to members who choose to delay or
prevent pregnancy. The Program Contractor is responsible for annually notifying
members of reproductive age (12-55 years) of the availability of Family Planning
services.
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6. EMERGENCY SERVICES
The Program Contractor shall provide the following at a minimum:
a. A designated emergency services facility providing care on a 24-hour-a-day,
7-day-a-week basis, accessible to members in each contracted service area. One
or more physicians and one nurse shall be on call or on duty at such facility at
all times.
b. An emergency services system employing at least one physician, registered
nurse, physician's assistant or nurse practitioner, accessible to members by
telephone 24-hours-a-day, 7-days-a-week, for information in the event of any
emergency and to providers who need verification of patient membership and
treatment authorization.
c. An emergency services telephone log containing member's name, address,
telephone number, date of call, time of call, nature of complaint or problem,
and instructions given to the caller.
d. A written procedure for the communication of emergency services information
to the member's primary care physician and other appropriate network elements.
7. CHILDREN'S REHABILITATIVE SERVICES (CRS)
CRS, a program administered by the Arizona Department of Health Services (DHS),
is designed to provide specialty medical and surgical care of a comprehensive
and rehabilitative nature to children who meet CRS financial and medical
eligibility criteria. CRS is not an emergency services program. While attempts
will be made by CRS administrators to accommodate emergency referrals, the
Program Contractor remains ultimately responsible for the provision of all
covered services to its members.
Since CRS is not an entitlement program and eligibility is based on medical
judgment, there is no guarantee that CRS administrators will accept
responsibility for treatment. The Program Contractor shall refer potentially
eligible children to CRS administrators. The referral process is discussed in
the CRS Policy and Procedures Manual, a copy of which may be obtained through
the Contracts and Purchasing Office. The CRS program provides a comprehensive
multi-disciplinary approach to management of CRS-covered conditions, but does
not provide primary care. Eligibility criteria for these services include:
a. Child has a CRS-covered condition as defined in the CRS Policy and
Procedures Manual.
b. Child requires comprehensive multi-disciplinary care.
c. Child has a reasonable potential for rehabilitation.
CRS-covered services will ordinarily include the planned management of the
covered condition, including inpatient care, surgery, therapy, limited DME and
home health care, and social and educational services, as well as periodic
follow-up. Emergency services are not ordinarily covered by CRS, nor is initial
care of newborn infants.
8. ALTCS TRANSITIONAL PROGRAM
The ALTCS Transitional Program is available for members (both
institutional and HCBS) who, at the time of medical reassessment, have improved
either medically, functionally or both to the extent that they no longer need
institutional care, but who still need significant long term care services. For
those members who are living in a medical institution when determined eligible
for the ALTCS Transitional program, the Program Contractor shall arrange for
home and community based placement as soon as possible, but not later than 90
days after the effective date of eligibility.
ALTCS Transitional members are entitled to all ALTCS covered services except for
institutional care* which is not covered unless it's medically necessary. In
such situations, the period of institutionalization may not
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exceed 90 days. If institutional care is expected to exceed 90 days, the Program
Contractor shall request a medical eligibility reassessment (PAS). ALTCS
Transitional members determined by the PAS to be at risk of institutionalization
will be transferred from the ALTCS Transitional Program to the regular ALTCS
program effective the first of the month following the PAS reassessment decision
date.
EPD institutionalized members will continue to be considered institutional
placement until the member is placed in an HCBS setting or expiration of the 90
day period, whichever occurs first. HCBS members will continue to be HCBS
placed. For ALTCS Transitional members who remain institutionalized after the 90
day period, member months will be considered as HCBS member months for the HCBS
recoupment process. (See Section D, Paragraph 40, HCBS Assumed Mix and
Recoupment, for a discussion of the HCBS recoupment process.) Program Contractor
compliance with this program will be monitored through the AHCCCS Office of
Managed Care and the Office of the Medical Director.
9. CASE MANAGEMENT
The Program Contractor shall ensure adequate staffing to meet case management
requirements. The case management caseload size for HCBS and mixed has been
revised and caseload limits have been established for acute care only,
ventilator dependent and hospice. The case management caseload sizes effective
October 1, 1996 are as follows:
____________________________________
* I.e., nursing facility, institution for mental diseases for persons age 65 or
older, inpatient psychiatric facility for persons under the age of 21 or
intermediate care facility for the mentally retarded.
HCBS or Acute1:48 CM visit every 90 days
Nursing Facility (NF) 1:120 CM visit every 180 days
Vent. Dep. and/or Hospice 1:16 CM visit every 30 days
Over a 180 day time period, one case manager could perform 96 HCBS or acute care
visits, 120 NF visits, or 96 ventilator dependent or hospice visits.
The formula for the mixed caseload assumes the following:
1. 96 HCBS or Acute visits (48 members) = 120 NF visits (120 members) = 96
VD or Hospice visits (16 members)
2. The equivalency of the factors used in the mixed caseload formula are:
HCBS or Acute: 96 / 48 = 2
NF:96 / 120 = .8
VD or Hospice: 96 / 16 = 6
In order to calculate a mixed case load the following formula is used:
(# of HCBS and Acute clients x 2) + (# of NF clients x .8) + (# of VD and
Hospice clients x 6) = 96 or less
As an example of the formula above:
(30 HCBS x 2) + (22 NF x .8) + (3 VD x 6) = 95.6
60 + 17.6 + 18 = 95.6
Case management ratios will be reviewed annually to determine if adjustment is
warranted. "Case manager" means a person who is either a degreed social worker,
licensed registered nurse, or one with a minimum of two years experience in
providing case management services to EPD or DD persons. Case managers
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shall not provide direct care services to members and shall not spend more than
15 % of their time on Title XIX activities other than case management. Staffing
must be sufficient to cover case manager absenteeism, turnover and out-of-county
members.
The case manager shall make initial contact with the member within five days of
enrollment, initial on-site contact with the member within 10 days of
enrollment, and ensure initiation of necessary services and placement within an
appropriate setting within 30 days of enrollment. The case manager shall also
conduct periodic placement and service reviews every 30 days for ventilator
dependent members (on-site), every 30 days for Adult Care Home, and every 90
days for HCBS (on-site) or acute care only members (telephone or on-site), and
180 days for members in an institutional setting (on-site). The case manager
shall be responsible for determining placement based on member acuity with input
from the member (or member's representative), the Primary Care Provider, the
Program Contractor's Medical Director and/or the PAS. The case manager shall
also develop and maintain the member's placement history, a cost-effective
individualized service plan, and help resolve problems in the delivery of needed
services.
The case manager shall be responsible for the transition of and discharge
planning for members transferred to another Program Contractor or disenrolled
from the ALTCS program.
Case management of ventilator dependent members shall be performed by a team
consisting of a licensed registered nurse and a social worker. Case management
of members requiring behavioral health services shall be performed by a
behavioral health professional unless the case manager obtains an initial and
quarterly consultation with a qualified behavioral health professional.
The Program Contractor shall ensure complete, correct and timely entry of data
related to placement history, cost effectiveness studies and service plans into
the Client Assessment and Tracking System (CATS). "Timely" shall mean within 14
days of the event which gave rise to the transaction (e.g., service approval by
the case manager, placement change). Unless the Program Contractor is currently
transmitting data to CATS by tape, all data entry shall be on-line. If the
Program Contractor is not currently on-line, it must have a systems interface in
place so it can update the case management information no less than twice per
month. The acceptable reject rate of data is 5% for each submission. All rejects
must be corrected prior to the next submission of data to CATS.
The Program Contractor shall provide AHCCCSA a description of the internal
monitoring of its case management program and shall include the results of this
monitoring covering the previous 12 months. The Program Contractor shall include
those findings where improvement was indicated and the steps it has taken to
resolve deficiencies. Both the internal monitoring process and results will be
evaluated by AHCCCSA during on-site reviews.
AHCCCSA will generate a late placement report and send it to the Program
Contractor on a quarterly basis. This report will list members enrolled with the
Program Contractor who, according to the AHCCCSA CATS System, have not been
placed within 30 days of enrollment with the Program Contractor. The Program
Contractor will be requested to provide a written explanation of the reason the
client has not been placed. If the reason for the non-placement is deemed valid,
no action will be taken. If there is insufficient reason, or no long-term care
services were provided, the Program Contractor will be paid for acute care
services, case management services and administration only for each unplaced
member retroactive to the date of enrollment. If late placement or initiation of
service becomes a persistent problem with the Program Contractor, AHCCCSA
reserves the right to impose sanctions for non-compliance.
Even though the Program Contractor has up to 30 days to initiate services and
place a new member, AHCCCSA's performance standard is two weeks. For future
awards and contract renewals, AHCCCSA will evaluate the Program Contractor
against the two-week standard. For details on Case Management requirements, see
the AHCCCS Medical Policy Manual, Chapters 1200, 1500, 1600 and Appendix F.
10. PRE-ADMISSION SCREENING AND ANNUAL RESIDENT REVIEW (PASARR)
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The Program Contractor shall ensure members have the Preadmission Screening and
Annual Resident Review (PASARR) Level I and, if needed, Level II screenings
prior to admission to a nursing facility. Level I is the identification of
members who are suspected of having mental illness or mental retardation. Level
II determines whether nursing facility or specialized services are needed.
Failure to have the proper PASARR screening prior to placement of members in a
nursing facility may result in federal financial participation (FFP) being
withheld from AHCCCSA. Should withholding of FFP occur, AHCCCSA will recoup the
withheld amount from the Program Contractor's next capitation payment. The
Program Contractor may, at its option, recoup the withholding from the nursing
facility which admitted the member without the proper PASARR.
11. QUALITY MANAGEMENT/ UTILIZATION MANAGEMENT
The Program Contractor shall maintain an AHCCCSA-approved internal quality
management/ utilization management system and plan in accordance with ALTCS
Rules, the AHCCCS Medical Policy Manual and federal regulations found at 42 CFR
434.34 and Part 456; this RFP document does not contain all the QM/UM
requirements. The Program Contractor shall respond to quality of care issues in
accordance with the time limits specified in AHCCCSA correspondence concerning
the individual issues.
The Program Contractor shall ensure all EPSDT eligible children receive services
in accordance with the AHCCCS Medical Policy Manual, Chapter 400, including the
required EPSDT screens. The Program Contractor shall participate in any annual
study requested by AHCCCSA and shall cooperate in the collection of quality
indicator data as needed, including chart reviews. AHCCCSA reserves the right to
add required clinical indicators and set standards for compliance. The current
ALTCS quality indicators are:
Influenza immunization among nursing facilities
Sacral/ Coccygeal pressure ulcers
Psychotherapeutic agents
Hospitalization and emergency room utilization
Activities of daily living
Fractures related to falls
The Program Contractor shall monitor activities related to the performance of
the provider network. These activities shall include, but not be limited to,
provider profiling in the areas of emergency room, hospital and pharmacy
utilization. The Program Contractor shall share provider profiling and
utilization information on a regular basis with individual providers. The
Program Contractor shall comply with all other medical audit provisions as
required by AHCCCS Rule R9-28-513.
12. QUALITY MANAGEMENT/ UTILIZATION MANAGEMENT REPORTS
The Program Contractor shall submit the following periodic reports:
<TABLE>
<CAPTION>
REPORT: DUE DATE:
<S> <C>
QM/ UM Plan 45 days after contract effective date
QM/ UM Plan Evaluation November 15, each year
Quarterly Inpatient Showing Reports 15 days after the end of each quarter
Submission of Plan of Correction 30 days after receipt of notice to correct
AIDS/ HIV Notification Telephone as each case is identified or report all cases 30
days after the end of each quarter
EPSDT Progress Report First day of each quarter
Maternity Care Plan November 1, each year
EPSDT Participation Plan November 1, each year
Pregnancy Termination Report End of the month following pregnancy termination
Behavioral Health Utilization Report 30 days after the end of each quarter
Provider Affiliation Tape 30 days after the end of each quarter
</TABLE>
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13. DENIALS OF SERVICES REQUIRING PRIOR AUTHORIZATION
When a service requiring prior authorization is denied, the Program Contractor
shall ensure the member is notified of the reasons for the denial. This
notification must be given to the member verbally or mailed to the member within
three working days from the date the decision to deny is made. Chapter 300 of
the AHCCCS Medical Policy Manual contains further detail on notification
requirements. AHCCCSA reserves the right to change the notification requirements
at any time during the term of this contract.
14. MEMBER HANDBOOK AND MEMBER COMMUNICATIONS
All member informational materials (e.g. member handbooks, newsletters,
brochures) prepared by the Program Contractor shall be approved by AHCCCSA prior
to distribution to members. Information shall be provided in English and a
second language when 200 members or 5% of the Program Contractor's enrolled
population, whichever is greater, speak the same non-English language. The
Program Contractor is solely responsible for determining the necessity of this
second-language requirement. All written communications shall be written at the
fourth grade level. Suggested reference material to determine whether this
requirement is being met are:
Fry Readability Index
PROSE, the Readability Analyst (Software developed by Education
Activities, Inc.)
Gunning FOG Index
McLaughlin SMOG Index.
When there are program or service changes, the Program Contractor will provide
notification to the affected members at least 14 days before the change goes
into effect.
The Program Contractor shall produce and provide a Member Handbook to each
member within 10 days of enrollment. The Member Handbook shall be prepared in
accordance with AHCCCSA rules for printed information and shall explain, at a
minimum, the following:
a. A table of contents
b. Covered and non-covered services
c. Operations of the Program Contractor
d. How to contact Member Services and a description of its function
e. How to contact the case manager
f. How to select and change PCPs
g. Appointment procedures
h. What to do in case of an emergency including names, addresses and
telephone numbers for members to call for instructions. In a
life-threatening situation, the member handbook should instruct members
to use the emergency medical services (EMS) available and/or activate
EMS by dialing 9-1-1.
i. Out-of-county and out-of-state moves
j. Grievance process and procedures
k. Advance directives
l. Contributions the member can make towards his or her own health
m. How to obtain emergency transportation and medically necessary
transportation.
n. EPSDT services
o. Maternity and family planning services
p. Behavioral health services
q. Coordination with Medicare and other potentially liable third parties
r. For members with Medicare coverage: indicate Medicare additional covered
services, services not generally covered by Medicare, reference to the
Medicare handbook "Other Things You Should Know About Medicare" which
describes dual coverage (Medicare/Medicaid, QMB's, etc.)
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s. Member's share of cost
Regardless of the format chosen by the Program Contractor, the member handbook
must be written in a type-style and size that can be easily read by members of
varying degrees of visual impairment. At a minimum, the member handbook shall
also contain the following questions and answers, along with the two paragraphs
that follow.
These items are required by HCFA:
Q. What if I have questions, problems, or complaints about
[Program Contractor ]?
A. If you have a question or problem, please call ___________. If
you have a specific complaint about your medical care, the Case Manager will
help you.
Q. What if I am not happy with the help given to me by the Case
Manager?
A. If you do not agree with the answer you receive, you may tell
the Case Manager you want to file a written or oral grievance. The grievance
must be filed no later than 35 days after the date of the action, decision, or
incident.
[Program Contractor name] will make a final decision within 45 days of getting
your written grievance. A letter will be mailed to you stating our decision and
the reason for the decision. The letter will tell you how you can appeal the
decision if you are still unsatisfied. You must let us know you want to appeal
within 15 days of being notified of our decision.
If you decide to appeal, we will send your request for appeal to AHCCCS. You
will receive information from AHCCCS on how your appeal will be handled. AHCCCS
will then decide if our decision was correct under the circumstances.
15. ENROLLMENT AND DISENROLLMENT
AHCCCSA is responsible for enrolling and disenrolling ALTCS members and for
providing notification of same to the Program Contractor. The effective date of
enrollments and disenrollments with the Program Contractor is two days after the
date the Program Contractor receives notification. Exceptions to the
disenrollment policy are discussed in ALTCS Eligibility Policy and Procedures
Manual, Chapter 1600.
16. REQUEST FOR CHANGE IN ENROLLMENT
If a member moves out of the current Program Contractor's service area, the
current Program Contractor may request a program contractor change by submitting
a Program Contractor Change Request Form (DE-621) to the program contractor
responsible for the member's new county of residence and request that the new
program contractor agree to accept the member. If the new program contractor
agrees to accept the member, the DE-621 will be sent to AHCCCSA for processing.
If the new program contractor does not agree to accept the ALTCS member, the
current program contractor may request AHCCCSA to review the request. AHCCCSA
will make the final decision. The Program Contractor shall comply with all
timelines as required in AHCCCS policy. For more detailed information, refer to
the ALTCS Eligibility Policy and Procedures Manual, chapter 1600.
17. REPORTING CHANGES IN MEMBERS' CIRCUMSTANCES
The ALTCS Member Change Report Form (7240T) provides the Program Contractor with
a method for notifying the ALTCS eligibility offices and AHCCCSA of changes or
corrections to the member's circumstances. This includes but is not limited to
changes in residence, living arrangements, third party payers, share of cost,
income or resources; a medical condition which could affect eligibility, or the
member's death. See the ALTCS Eligibility Policy and Procedures Manual, chapter
1600.
18. OUT-OF-STATE PLACEMENT AND MEDICAL SERVICES
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The Program Contractor shall obtain prior written approval from AHCCCSA before
placing a member in an institutional setting outside the state and notify
AHCCCSA once placement has been completed. ALTCS members who are temporarily
absent from Arizona are eligible for acute emergency services only. The Program
Contractor shall report temporary absences from the state to the ALTCS
eligibility office for a determination of continued eligibility.
19. ADVANCE DIRECTIVES
The Program Contractor shall specify in its contracts or agreements with each
hospital, nursing facility, home health agency and hospice program that each
provider comply with federal and state law on advance directives for adult
members. At a minimum, the identified providers shall:
a. Maintain written policies and provide written information for adult
members regarding their ability to make decisions about medical care,
including the right to accept or refuse medical care and the right to
execute an advance directive
b. Document whether or not the adult member has executed an advance
directive
c. Not condition the provision of care or discriminate against a member
because of the member's decision to execute or not execute an advance
directive
d. Provide education for staff on issues concerning advance directives
20. STAFF REQUIREMENTS AND SUPPORT SERVICES
The Program Contractor shall have in place the organizational, management and
administrative systems capable of fulfilling all contract requirements. At a
minimum, the following staff are required:
a. A full-time ADMINISTRATOR to oversee the entire operation of the
Program Contractor
b. A MEDICAL DIRECTOR who is an Arizona-licensed physician. The Medical
Director shall be actively involved in all major clinical program
components of the Program Contractor. The Medical Director shall devote
sufficient time to the Program Contractor's operations to ensure timely
medical decisions, including after-hours consultation as needed
c. A full-time FINANCIAL OFFICER to oversee the budget and accounting
systems implemented by the Program Contractor
d. A QUALITY MANAGEMENT/ UTILIZATION MANAGEMENT COORDINATOR who is an
Arizona-licensed registered nurse, physician or physician's assistant
e. A BEHAVIORAL HEALTH COORDINATOR who has a combination of a minimum of a
bachelors degree in a behavioral health related field as well as a
minimum of two years training and experience in actual behavioral
health services delivery
f. PRIOR AUTHORIZATION STAFF to authorize medical care 24 hours per day, 7
days per week. This staff shall be directly supervised by an
Arizona-licensed registered nurse, physician or physician's assistant
g. CONCURRENT REVIEW STAFF to conduct inpatient concurrent review. This
staff shall consist of an Arizona-licensed registered nurse, physician,
physician's assistant or an Arizona-licensed practical nurse
experienced in concurrent review and under the direct supervision of a
registered nurse, physician or physician's assistant.
h. CASE MANAGEMENT COORDINATOR (OR MANAGER) or CASE MANAGERS to coordinate
the provision of services to members in HCBS and institutional settings
i. PROVIDER SERVICE STAFF to coordinate communications between the Program
Contractor and its subcontractors. There shall be sufficient Provider
Services staff to enable providers to receive prompt resolution to
their problems or inquiries.
j. CLAIMS ADMINISTRATOR and CLAIMS PROCESSORS to ensure the timely and
accurate processing of original claims, claims correction letters,
resubmissions and overall adjudication of claims
k. ENCOUNTER PROCESSORS to ensure the timely and accurate processing and
submission to AHCCCSA of encounter data and reports
l. A GRIEVANCE COORDINATOR who will manage and adjudicate member and
provider grievances
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m. CLERICAL AND SUPPORT STAFF as necessary to ensure proper functioning of
the Program Contractor's operation.
The Program Contractor shall inform AHCCCSA, Office of Managed Care, in writing
within seven days of learning of an intended resignation in any of the following
key positions. In addition, AHCCCSA may require the Program Contractor to
provide a written plan for filling the vacant position, including expected
timelines.
- Administrator
- Medical Director
- Financial Officer
- Quality Management Coordinator
- Case Management Coordinator
- Claims Administrator
- Behavioral Health Coordinator
- Grievance Coordinator
The Program Contractor shall ensure that all staff have appropriate training,
education and experience to fulfill the requirements of the position.
21. MEDICAL DIRECTOR
The Program Contractor shall have on staff a Medical Director who is currently
licensed in Arizona as a Medical Doctor or Doctor of Osteopathic Medicine. The
Medical Director shall be responsible for:
a. The development, implementation and medical interpretation of medical
policies and procedures to guide and support the provision of medical
care to members. This includes, among others, policies pertaining to
prior authorization, concurrent review, claims review, discharge
planning, credentialling and referral management.
b. Oversight of provider recruitment activities
c. Reviewing all providers' applications and submit recommendations to
those with contracting authority regarding credentialling and
reappointment of all physicians prior to the physician's contracting
(or renewal of contract) with the Program Contractor
d. Oversight of provider profiling, including utilization management
activities. Administration of all medical activities of the Program
Contractor
f. Continuous assessment and improvement of the quality of care provided
to members (e.g. quality of care issues, quality indicators, annual
medical study)
g. The development and implementation of the quality management plan and
serving as Chairperson of Quality Management Committee
h. Oversight of provider education, inservice training and orientation
i. Assuring that adequate staff and resources are available for the
provision of proper medical care to members
j. Attending quarterly ALTCS Medical Director meetings.
During periods when the Medical Director is not available, the Program
Contractor shall have adequate back-up physician staff to provide competent
medical direction.
22. WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS
The Program Contractor shall develop and maintain written policies, procedures
and job descriptions for each functional area of its health plan, consistent in
format and style. The Program Contractor shall maintain written guidelines for
developing, reviewing and approving all policies, procedures and job
descriptions, as appropriate, in order to ensure all contract requirements are
being met.
All policies and procedures shall be reviewed at least annually to ensure that
the Program Contractor's current practices reflect written policies. Review
dates shall be documented on the policy. Reviewed policies shall be
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dated and signed by the Program Contractor's appropriate manager, coordinator,
director or administrator. All medical and quality management policies must be
approved and signed by the Contractor's Medical Director.
Job descriptions shall be reviewed at least annually to ensure that current
duties performed by the employee reflect written requirements. Review dates
shall be documented on the job descriptions.
23. PROVIDER MANUAL
The Program Contractor shall develop, distribute and maintain a provider manual.
The Program Contractor shall document the approval of the provider manual by its
Administrator and Medical Director and shall maintain documentation which
verifies that the provider manual is reviewed at least annually. The Program
Contractor shall ensure that each provider (individual or group that submits
claim and encounter data) is issued a copy of the provider manual. At a minimum,
the provider manual must contain information on the following:
a. A table of contents
b. Introduction to the Program Contractor which explains its organization
and administrative structure
c. Provider responsibilities and the Program Contractor's expectation of
the provider such as gatekeeping activities, etc.
d. Overview of the Program Contractor's Provider Services department and
function
e. Listing and description of covered and non-covered services,
requirements and limitations
f. Emergency room utilization (appropriate and non-appropriate use of the
emergency room)
g. Behavioral health services
h. The Program Contractor's policy regarding PCP assignments
i. Referrals to specialists and other providers
j. Grievance process and procedures
k. Billing and encounter submission information
- indicate which form, UB92, HCFA 1500, or Form C is to be used
for services
- indicate which fields are required for a claim to be
considered acceptable by the Program Contractor. A completed
sample of each form shall be included
l. Program Contractor's written policies and procedures which affect the
provider(s) and/or the provider network
m. Claims re-submission policy and procedure
n. Reimbursement rate
o. Explanation of remittance advice
p. Prior authorization procedures
q. Claims medical review
24. NETWORK DEVELOPMENT
The Program Contractor shall develop and maintain a provider network that is
sufficient to provide all covered services to ALTCS members. It shall ensure
covered services are provided promptly and are reasonably accessible in terms of
location and hours of operation. There shall be sufficient professional and
paramedical personnel for the provision of all covered services, including
emergency medical care on a 24-hour-a-day, 7-day-a-week basis. The proposed
network shall be sufficient to provide covered services within designated time
and distance limits.
If a service or setting is not available or is inadequate, the Offeror must
submit with its proposal an action plan for the creation, recruitment or other
activities designed to establish the service or setting.
The Program Contractor shall develop and submit with the proposal its plan for
the further development and expansion of Home and Community Based Services. This
plan must address all HCBS services and settings as described in Section D,
Paragraph 1, Covered Services and must be updated annually and submitted to
AHCCCSA, Office of Managed Care no later than Oct. 31 each year.
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25. NETWORK MANAGEMENT
The Program Contractor shall have policies and procedures in place that pertain
to all service specifications described in the AHCCCS Medical Policy Manual,
Chapter 1200. These include, but are not limited to, policies on how the Program
Contractor will:
a. Communicate with the network regarding contractual and/or program
changes and requirements
b. Monitor and control network compliance with policies and rules of
AHCCCSA and the Program Contractor
c. Evaluate the quality of services delivered by the network
d. Provide or arrange for medically necessary covered services should the
network become temporarily insufficient within the contracted service
area
e. Monitor network capacity to ensure that there are sufficient providers
to handle the volume of members
f. Provide respite care
g. Ensure service accessibility, including monitoring appointment
procedures standards, appointment waiting times, and service provision
standards
h. Recruit, select, credential, re-credential and contract with providers
in a manner that incorporate quality management, utilization, office
audits and provider profiling.
i. Manage or share risk with providers
j. Provide training for its providers and maintain records of such
training
k. Provide eligibility information and prior authorization 24 hours per
day, 7 days per week.
The Program Contractor shall comply with the provider network and staffing
requirements described in the AHCCCS Medical Policy Manual, Chapter 600.
The Program Contractor shall comply with medical policy and standards related to
care coordination described in the AHCCCS Medical Policy Manual, Chapter 500.
The Program Contractor shall submit monthly to AHCCCSA, Office of
Managed Care, a report noting additions and deletions to the provider network.
26. PROVIDER REGISTRATION
The Program Contractor shall ensure that all its subcontractors have registered
with AHCCCSA as approved service providers and have received AHCCCS Provider ID
Numbers. A Provider Participation Agreement must be signed with each provider
who does not also participate as an AHCCCS FFS provider and retained in
Contractor's files. The provider registration process must be completed in order
for the Program Contractor to report services a subcontractor renders to
enrolled members and for Contractor to be paid reinsurance.
27. NETWORK DEFICIENCIES
The Program Contractor shall develop and maintain throughout the term of this
contract a provider network sufficient to provide all ALTCS covered services and
approved settings to members. In the event any network deficiency should occur,
i.e. a covered service or setting becomes unavailable, the Program Contractor
shall take immediate action to correct it. If the Program Contractor is unable
to contract with a provider to remedy the deficiency within 30 days from the
date the covered service or setting becomes unavailable, it shall promptly
notify the ALTCS Manager, Office of Managed Care, of the circumstances making it
unable to correct the network deficiency. Refer to Attachment B, Service Area
Minimum Network Standards.
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28. APPOINTMENT STANDARDS
The Program Contractor shall have procedures in place that ensure:
a. Emergency appointments the same day or within 24 hours of the member's
phone call or other notification, or as medically appropriate
b. Urgent care appointments within two days
c. Routine care appointments within 21 days
d. Routine dental appointments within 30 days
For SPECIALTY REFERRALS, the Program Contractor shall be able to provide:
a. Emergency appointments within 24 hours of referral
b. Urgent care appointments within 3 days of referral
c. Routine care appointments within 30 days of referral
For BEHAVIORAL HEALTH SERVICES, the Program Contractor shall be able to provide
appointments as follows:
a. Emergency appointments within 24 hours of request
b. Non-emergency appointments within 7 days of request
If the Program Contractor needs to provide medically-necessary transportation to
a member, the Program Contractor shall require its transportation provider to
schedule the transportation so that the member arrives no sooner than one hour
before the appointment and does not have to wait more than one hour after making
the call to be picked up after the appointment.
29. FRAUD AND ABUSE
The Program Contractor is responsible for reporting all cases of suspected fraud
and abuse or inappropriate practices by subcontractors, members or employees.
The Program Contractor shall provide written notification of such incidents to
AHCCCSA, Internal Audit and Program Investigation Unit. The Program Contractor
shall develop programs to detect and prevent fraud and abuse and shall cooperate
with AHCCCSA as requested to investigate fraud and abuse cases. For a full
description of the Program Contractor's responsibilities, see the AHCCCS Health
Plans and Program Contractors - Policy for Prevention, Detection and Reporting
of Fraud and Abuse which is available in the Bidders' Library and incorporated
herein by reference.
The AHCCCS policy on fraud and abuse is currently under review and will likely
be revised to include more specific requirements regarding the prevention and
detection of fraud and abuse. Upon contract award the Program Contractor shall
participate in a fraud and abuse workgroup which will consist of representatives
from acute care health plans, program contractors, AHCCCSA, the Attorney
General's office, and the Health Care Financing Administration. The purpose of
the workgroup is to explore ways to minimize the occurrence of fraud and abuse
within the AHCCCS system and to recommend updates and revisions to the policy.
The population served in the long-term care program is very vulnerable,
particularly in the area of abuse. The Program Contractor shall develop specific
controls to prevent and detect member abuse.
30. ON-SITE REVIEWS
In accordance with AHCCCS Rule R9-28-513, AHCCCSA will conduct operational
reviews at least once every three years for the purpose of, but not limited to,
ensuring program compliance. The type and duration of the review will be solely
at the discretion of AHCCCSA. The reviews will identify areas where improvements
can be made and make recommendations accordingly, monitor the Program
Contractor's progress towards implementing mandated programs and provide the
Program Contractor with technical assistance if necessary. Except in cases where
advance notice is not possible or advance notice may render the review less
useful, AHCCCSA will give the Program Contractor at least two weeks advance
notice of the date of the on-site review. AHCCCSA may
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conduct a review in the event the Program Contractor undergoes a merger,
reorganization, changes ownership or makes changes in three or more key staff
positions within a 12-month period.
In preparation for the reviews, the Program Contractor shall cooperate fully
with AHCCCSA and the AHCCCSA Review Team by forwarding in advance such policies,
procedures, job descriptions, contracts, records, logs and other material that
AHCCCSA may request. Any documents not requested in advance by AHCCCSA shall be
made available upon request of the Review Team during the course of the review.
Program Contractor personnel as identified in advance shall be available to the
Review Team at all times during AHCCCSA on-site review activities. While
on-site, the Program Contractor shall provide the Review Team with work space,
access to a telephone, electrical outlets and privacy for conferences.
Certain documentation submission requirements may be waived at the discretion of
AHCCCSA if the Program Contractor obtains NCQA accreditation. The Program
Contractor must submit the entire NCQA report to AHCCCSA for such waiver
consideration.
The operations review is conducted by an AHCCCS review team comprised of staff
from the Office of Managed Care, the Office of the Medical Director and
Grievance and Appeals. The team will evaluate the Program Contractor's
performance and compliance with AHCCCS policies, rules and the terms of this
contract. The review will look at all aspects of operations including, but not
limited to:
Case management Quality management
Utilization management Medical direction
Grievance process Claims processing
Encounter reporting Provider and member services
Network management Executive and financial management
Performance will be evaluated by reviewing case files, quality and utilization
management plans, meeting minutes, policies, manuals, reports, handbooks and
other relevant material. The Program Contractor will be furnished a draft copy
of the Review Report and given an opportunity to comment on any review findings
prior to AHCCCSA finalizing the report. Where there are outstanding
deficiencies, the Program Contractor may be required to submit a corrective
action plan without the opportunity to comment on the draft report.
Recommendations made by the Review Team to bring the Program Contractor into
compliance with federal, state, AHCCCS, and/or RFP requirements, must be
implemented by the Program Contractor. AHCCCSA may conduct a follow-up review or
require a corrective action plan to determine the Program Contractor's progress
in implementing recommendations and achieving program compliance. Follow-up
reviews may be conducted at any time after the initial review.
The Program Contractor shall submit a corrective action plan to improve areas of
non-compliance identified in the review. Once the corrective action plan is
approved by AHCCCSA, it shall be implemented by the Program Contractor.
Modifications to the corrective action plan must be agreed to by both parties.
Review findings may be used in the scoring of subsequent bid proposals submitted
by that Program Contractor.
31. OPERATIONAL AND FINANCIAL READINESS REVIEWS
AHCCCSA may conduct Operational and Financial Readiness Reviews on any or all
offerors, either before award as part of the proposal evaluation, or after award
to assess the new Program Contractor's readiness to provide contract services. A
new Program Contractor will be permitted to commence operations only if the
Readiness Review factors are met to AHCCCSA's satisfaction.
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32. PATIENT TRUST ACCOUNT MONITORING
The Program Contractor shall monitor trust fund accounts for institutionalized
members to ensure that expenditures from a member's trust fund comply with
federal and state regulations. Suspected incidents of fraud involving the
management of these accounts must be reported in accordance with Section D,
Paragraph 29, Fraud and Abuse.
33. FINANCIAL MANAGEMENT
Both AHCCCSA and HCFA require specific financial management and reporting
standards to protect the financial integrity of spending under the ALTCS
program. In addition, financial information must be available for the Program
Contractor to manage the program, to assess its own financial risk and to
determine if members are receiving necessary services. At a minimum, the Program
Contractor's system shall:
a. Gather and report data on critical financial indicators (e.g., Incurred
But Not Reported Claims)
b. Establish and maintain a financial information base to support current
operations
c. Provide information regarding financial status, including all reporting
mandated by law and accounting of HCBS expenditures, to internal
management and AHCCCSA on a regular basis
d. Make records available for independent audit
e. Ensure that subcontractors are reimbursed promptly and correctly
f. Monitor nursing facilities and other institutional patient trust
accounts
g. Monitor records in accordance with 42 CFR 483.10
In addition, the Program Contractor's financial management systems must meet
specific standards established by HCFA. These are specified in 45 CFR, Part 74,
which is incorporated herein by reference.
34. REQUIRED FINANCIAL REPORTS
The Program Contractor shall comply with all financial reporting requirements
contained in the Reporting Guide for Long-Term Care Program Contractors with the
Arizona Health Care Cost Containment System. The Guide, which may be found in
the Bidders' Library, contains a complete listing of all monthly, quarterly and
annual reporting requirements including due dates for each report.
35. PERFORMANCE BOND OR BOND SUBSTITUTE
The Program Contractor shall be required to provide a performance bond of
standard commercial scope issued by a surety company doing business in this
state, an irrevocable letter of credit, or a cash deposit to AHCCCSA for as long
as the Program Contractor has AHCCCS-related liabilities of $50,000 or more
outstanding, or 15 months following the termination date of this contract,
whichever is later, to guarantee: (1) payment of the Program Contractor's
obligations to providers, and (2) performance by the Program Contractor of its
obligations under this contract. The performance bond shall be in a form
acceptable to AHCCCSA and payable to the Arizona Health Care Cost Containment
System Administration, an agency of the State of Arizona. In the case of an
irrevocable letter of credit the letter shall be issued by:
a. A bank doing business in this state and insured by the Federal Deposit
Insurance Corporation, or
b. A savings and loan association doing business in this state and insured
by the Federal Savings and Loan Insurance Corporation, or
c. A credit union doing business in this state and insured by the National
Credit Union Administration.
In the event of a default by the Program Contractor, AHCCCSA shall, in addition
to any other remedies it may have under this contract, obtain payment under the
performance bond or substitute security for the purposes of the following:
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a. Paying any damages sustained by providers, contracted or otherwise,
because of a breach of the Program Contractor's obligations under this contract,
b. Reimbursing AHCCCSA for any payments made by AHCCCSA on behalf of the
Program Contractor, and
c. Reimbursing AHCCCSA for any extraordinary administrative expenses
incurred by reason of a breach of the Program Contractor's obligations under
this contract, including, but not limited to, expenses incurred after
termination of this contract for reasons other than the convenience of the state
by AHCCCSA.
In the event AHCCCSA agrees to accept substitute security in lieu of the
performance bond, irrevocable letter of credit or cash deposit, the Program
Contractor agrees to execute any and all documents and perform any and all acts
necessary to secure and enforce AHCCCSA's security interest in such substitute
security including, but not limited to, security agreements and necessary UCC
filings pursuant to the Arizona Uniform Commercial Code. In the event such
substitute security is agreed to and accepted by AHCCCSA, the Program Contractor
acknowledges that it has granted AHCCCSA a security interest in such substitute
security to secure performance of its obligations under this contract. The
Program Contractor is solely responsible for establishing the credit-worthiness
of all forms of substitute security. AHCCCSA may, after written notice to the
Program Contractor, withdraw its permission for substitute security, in which
case the Program Contractor shall provide AHCCCSA with a form of security
described above.
36. AMOUNT OF PERFORMANCE BOND
The initial amount of the performance bond shall be equal to 110% of the total
capitation payment expected to be paid in the month of November or as determined
by AHCCCSA. This requirement must be satisfied by the Program Contractor no
later than 15 days after notification by AHCCCSA of the amount required.
Thereafter, AHCCCSA shall evaluate the enrollment statistics of the Program
Contractor on a monthly basis. If there is an increase in capitation payment
that exceeds 10% of the initial performance bond amount, AHCCCSA may require an
increase in the amount of the performance bond. The Program Contractor shall
have 15 days following notification by AHCCCSA to increase the amount of the
performance bond. The performance bond amount that must be maintained after the
contract term shall be the lesser of (a) the bond amount on the last day of the
contract; or (b) the total amount of AHCCCS-related liabilities outstanding.
37. FINANCIAL VIABILITY CRITERIA AND PERFORMANCE MEASURES
AHCCCSA has established the following financial viability criteria and
performance measures that the Program Contractor shall adhere to. These
standards are subject to change as AHCCCSA deems appropriate:
a. CURRENT RATIO Standard: At least 1.00
(Current assets divided by current liabilities)
b. EQUITY PER MEMBER Standard: At least $2,000
(Equity, less on-balance sheet performance bond, divided
by the number of members at the end of the period.)
c. GROSS MEDICAL EXPENSES PERCENTAGE Standard: No more than 90%
(Gross medical expenses divided by total revenue)
d. TOTAL ADMINISTRATIVE COST PERCENTAGE Standard: No more than 8%
(Total administrative expenses, excluding
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income taxes, divided by total revenue.)
e. RECEIVED BUT UNPAID CLAIMS DAYS OUTSTANDING Standard: No more than 30 days
(Received but unpaid claims divided by the average daily
medical expenses for the period, net of sub-capitation expense)
f. TOTAL MEDICAL CLAIMS DAYS OUTSTANDING Standard: No more than 90 days
(Total medical claims liability divided by the average daily
medical expenses for the period, net of sub-capitation expense)
38. ADVANCES, DISTRIBUTIONS AND LOANS
The Program Contractor shall not, without the prior written approval of AHCCCSA,
make any advances to a related party, or any distribution, loan or loan
guarantee to any entity, including another fund or line of business within its
organization. Requests for prior approval shall be submitted to the Office of
Managed Care.
39. ACCUMULATED FUND DEFICIT
The Program Contractor and its owners shall fund any accumulated fund deficit
through capital contributions in a form acceptable to AHCCCSA within 60 days
after receipt by AHCCCSA of the final audited financial statement. The amount of
any accumulated fund deficit will be determined in accordance with the Program
Contractor's annual audited financial statements.
40. HCBS ASSUMED MIX AND RECOUPMENT
The Program Contractor's capitation rate is based in part on the assumed ratio
("mix") of HCBS member months to the total number of member months (i.e. HCBS +
institutional). At the end of the contract year, AHCCCSA will compare the actual
HCBS member months to the assumed HCBS percentage that was used to calculate the
capitation rate for that year. If the Program Contractor's actual HCBS
percentage is greater than the assumed percentage, AHCCCSA will recoup (or
reimburse) the difference between the institutional capitation rate and the HCBS
capitation rate for the number of member months which exceeded (or was less
than) the assumed percentage. This reconciliation will be made in accordance
with the following schedule:
Percent in excess of assumed percentage: Amount to be recouped:
0 - .5 percentage points 0% of capitation overpayment
.51 - 1.99 percentage points 20% "
2 or more percentage points 30% "
If the Program Contractor's actual HCBS percentage is less than the assumed
percentage, AHCCCSA will reimburse a portion of the difference between the
institutional rate and the HCBS capitation rate for the number of member months
lower than the assumed percentage. This reimbursement will be made in accordance
with the following schedule:
Percent lower than assumed percentage: Amount to be reimbursed:
0 - .5 percentage points 0% of capitation underpayment
.51 - 1.99 percentage points 20% "
2 or more percentage points 30% "
The Program Contractor shall not exceed the statewide cap established by HCFA
and shall not implement an HCBS waiting list without prior written approval from
AHCCCSA.
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41. HOSPITAL REIMBURSEMENT
The Program Contractor shall reimburse hospitals for member care based on one of
the following rate methods:
a. AHCCCS Fee for Service Hospital Reimbursement Rate
Inpatient: AHCCCS hospital-specific tiered per diem rates
Outpatient: AHCCCS hospital-specific cost-to-charge ratio
multiplied by allowed charges,
OR:
b. Subcontracted rate (The aggregate of subcontracted rates must not
exceed what would have been paid had the AHCCCS Fee for Service Hospital
Reimbursement rate been used.)
Within seven days of subcontracting with a hospital, the Program Contractor
shall submit a copy of the subcontract, including all rates, terms and
conditions, to AHCCCSA, Office of Managed Care. This submittal shall include
documentation that the negotiated rate will, when considered in the aggregate,
be the same or less than what would have been paid under Paragraph a above. To
aid in making this determination, the Program Contractor shall require their
independent auditor to evaluate the reasonableness of their assumptions as part
of the annual audit.
The Program Contractor shall reimburse out of state hospitals at the lowest of
the following rates for inpatient and outpatient services:
a. Negotiated discounted rate, or
b. Arizona average cost-to-charge ratio multiplied by allowed charges, or
c. Medicaid rate in effect in the state in which the hospital is located
at the time services are provided.
The Program Contractor may conduct prepayment and postpayment medical reviews of
all hospital claims. Inpatient tiered per diem rates and outpatient
cost-to-charge ratios will be adjusted in accordance with ARS 36-2903.01 (J).
For a more complete description of the guidelines for hospital reimbursement,
refer to applicable statutes and rules, copies of which may be found in the
Bidders' Library.
42. VENTILATOR DEPENDENT REIMBURSEMENT RATES
The Program Contractor will be paid on a capitated basis for
ventilator-dependent (VD) members. Two different capitation rates will be paid,
one for members who are placed in Home and Community Based Services, the other
for members who are placed in approved ALTCS institutional settings. These rates
are set by AHCCCSA and are included on the capitation bid disk. In addition,
each ventilator-dependent member shall have an annual evaluation by a
pulmonologist to assess the prospects of weaning the member from dependency on
the ventilator. A copy of this evaluation shall be promptly forwarded to
AHCCCSA's ventilator-dependent coordinator.
AHCCCSA will make capitation payments to the Program Contractor monthly in
advance of the performance of services. The capitation rate paid each month will
be the capitation rate for ventilator dependent members placed in Home and
Community Based Services. On a quarterly basis, AHCCCSA will reimburse the
Program Contractor the difference in capitation rates for those ventilator
dependent members who were placed in institutions. For example:
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<TABLE>
<S> <C> <C>
HCBS VD capitation rate: $5,000
Institutional VD capitation rate: $12,000
Institutional VD member months for quarter 35
Additional capitation due Program Contractor:
35 x ($12,000 - $5,000) = $245,000
</TABLE>
43. REINSURANCE
Reinsurance is a stop-loss program provided by AHCCCSA to the Program Contractor
for the partial reimbursement of covered inpatient facility medical services
incurred for a member beyond an annual deductible. AHCCCSA is self-insured for
the reinsurance program which has an initial deductible level and a subsequent
coinsurance percentage. For dates of service after 10/1/96 (under regular
reinsurance), the Program Contractor will be reimbursed at 75% of allowable
charges over the following deductibles:
<TABLE>
<S> <C>
Urban county, with Medicare Part A $12,000
Urban county, without Medicare $20,000
Rural county, with Medicare Part A $ 5,000
Rural county, without Medicare $ 9,000
Behavioral Health/ Traumatic Brain Injury [To be determined]
</TABLE>
Regular reinsurance covers acute inpatient hospitalizations (i.e. anything
billed on a UB92). Effective 10/1/96, members considered by the AHCCCS Office of
the Medical Director (OMD) to be high-cost behavioral health or Traumatic Brain
Injured will be covered under regular reinsurance. Services for these members
must be approved in advance by OMD for the Program Contractor to qualify for
reinsurance reimbursement. Services to members identified as being
catastrophically eligible in accordance with OMD policies will be covered under
a special catastrophic program instead of the regular reinsurance program.
Catastrophic reinsurance coverage for transplants is limited to 85% of the
AHCCCS contract amount for the transplant services rendered, or 85% of the
Contractor-paid amount, whichever is lower. Catastrophic reinsurance for
hemophiliacs is covered at 85% of the Contractor-paid amount. The AHCCCS
contracted transplantation rates are available in the Bidders' Library.
AHCCCSA uses inpatient encounter data to determine regular reinsurance benefits.
Reimbursement for regular reinsurance benefits will be made to the Program
Contractor monthly. AHCCCSA will also provide for a reconciliation of
reinsurance payments in the case where encounters used in the calculation of
reinsurance benefits are subsequently adjusted or voided.
Encounter data will not be used to determine catastrophic reinsurance benefits.
However, this does not relieve the Program Contractor of the responsibility for
submitting encounters for catastrophic reinsurance services. The Program
Contractor must submit catastrophic reinsurance claims in accordance with the
AHCCCS Reinsurance Policy/Procedure Manual. All catastrophic reinsurance claims
shall be subject to medical review by AHCCCSA or its designee.
Medical review on regular reinsurance cases will be determined based on
statistically valid random sampling. The AHCCCS Office of the Medical Director
will generate the sampling and will notify the Program Contractor of
documentation needed for the retrospective medical review process to occur at
the Program Contractor's offices. The results of the medical review sampling
will be extrapolated to the Program Contractor's entire regular reinsurance
reimbursement population. A partial recoupment of reinsurance reimbursements
made to the Program Contractor may occur based on the results of the medical
review sampling.
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44. COORDINATION OF BENEFITS/ THIRD PARTY LIABILITY
COST AVOIDANCE - The Program Contractor shall cost-avoid all claims or services
that are subject to third-party payment and may deny a service to a member if it
knows that a third party (i.e. other insurer) will provide the service. However,
if the third-party insurer requires the member to pay any co-payments or
deductibles, the Program Contractor is responsible for making these payments,
even if the services are provided outside of the Program Contractor's network.
(The Program Contractor must decide whether it is more cost-effective to provide
the service within its network or pay coinsurance and deductibles for a service
outside its network. For continuity of care, the Program Contractor may also
choose to provide the service within its network.) If the Program Contractor
knows that the third party insurer will neither pay for nor provide the covered
service, and the service is medically necessary, the Program Contractor shall
not deny the service nor require a written denial letter. If the Program
Contractor does not know whether a particular service is covered by the third
party, and the service is medically necessary, the Program Contractor shall
contact the third party and determine whether or not such service is covered
rather than requiring the member to do so.
The requirement to cost-avoid applies to all AHCCCS covered services. For
pre-natal care and preventive pediatric services, AHCCCS may require the Program
Contractor to provide such service and then coordinate payment with the
potentially liable third party ("pay and chase"). In emergencies, the Program
Contractor shall provide the necessary services and then coordinate payment with
the third-party payer. The Program Contractor shall also provide medically
necessary transportation so the member can receive third-party benefits.
Further, if a service is medically necessary, the Program Contractor shall
ensure that its cost avoidance efforts do not prevent a member from receiving
such service.
COST RECOVERIES - If the Program Contractor was not aware of third-party
coverage at the time services were rendered or paid for, or was unable to cost
avoid, the Program Contractor shall proceed as follows:
The Program Contractor shall identify all potentially liable third parties and
pursue reimbursement from them except in the following circumstances (unless
referred to the Program Contractor by AHCCCS or AHCCCSA's authorized
representative):
<TABLE>
<S> <C>
Uninsured/ underinsured motorist insurance First and third-party liability insurance
Tortfeasors Adoption recovery
Estate recovery Worker's Compensation
</TABLE>
The Program Contractor shall, however, report any cases involving the above
circumstances to AHCCCSA's authorized representative should the Program
Contractor identify such a situation. See AHCCCS Rule R9-28-902, C and D.
The Program Contractor shall cooperate with AHCCCSA's authorized representative
in all collection efforts and is encouraged to contract with this representative
to better facilitate overall third-party collections. As part of its efforts,
the Program Contractor is responsible for performing all research and
investigation and payment of lien-filing related costs for total plan cases.
The Program Contractor may retain up to 100% of its third-party collections if
all of the following conditions exist:
1. Total collections received do not exceed the total amount of
the Program Contractor's financial liability for the member (total expenditures
minus any member share of cost).
2. There are no payments made by AHCCCS related to
fee-for-service, reinsurance or administrative costs (i.e. lien filing, etc.).
3. Such recovery is not prohibited by state or federal law
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REPORTING - The Program Contractor may be required to report case level detail
of third-party collections and cost avoidance. The Program Contractor shall
notify AHCCCSA's authorized representative within five working days of the
identification of a third-party liability case with known reinsurance (often
referred to as joint liability cases). The Program Contractor shall communicate
any known change in health insurance information, including Medicare, to the
ALTCS local office not later than 10 days from the date of discovery using the
form designated in the ALTCS Eligibility Policy and Procedures Manual, Chapter
1600.
45. MEDICARE SERVICES AND COST SHARING
AHCCCS has members enrolled who are eligible for both Medicare and Medicaid
services. These members are referred to as "dual eligibles" and include persons
who are Qualified Medicare Beneficiaries (QMB) and non-QMB eligible persons. QMB
eligible persons are entitled to all covered Medicaid services and, in addition,
may receive the following Medicare services which are not covered by AHCCCS or
differ in scope or limitation:
Chiropractic services
Inpatient psychiatric services
Psychological services
Inpatient and outpatient occupational coverage
Respite services
Any new services which are added to the Medicare program and which are
not covered by AHCCCS
For all dual eligible persons, the Program Contractor shall be responsible for
providing all AHCCCS covered services and pay all Medicare coinsurance and
deductibles for Medicare services which are covered by AHCCCS and provided on a
fee-for-service basis within the Program Contractor's network.
For QMB eligible persons, the Program Contractor shall be responsible for paying
the Medicare coinsurance and deductibles for Medicare services not covered by
AHCCCS described above which are provided on a fee-for-service basis.
Since Medicaid is the payer of last resort, all Medicare covered services which
are provided to dual eligibles who are not enrolled in a Medicare TEFRA Risk HMO
shall be billed to Medicare or any other third party liability source.
If a dual eligible is enrolled with a Medicare TEFRA Risk HMO, Medicare will not
reimburse the Program Contractor for Medicare covered services provided by the
Program Contractor. Therefore, the Program Contractor shall refer the member to
the Medicare TEFRA Risk HMO for all Medicare covered services and shall not be
responsible for the payment of any Medicare copayments, deductibles or premiums
assessed by the Medicare TEFRA Risk HMO. The Program Contractor shall be
responsible for any Medicaid covered services not provided by the Medicare TEFRA
Risk HMO.
46. MEMBER SHARE OF COST
ALTCS members are required to contribute toward the cost of their care based on
their income. Some members, either because of their limited income or the
methodology used to determine the share of cost, do not have to pay a share of
cost. Generally, only institutionalized ALTCS members currently have a share of
cost.
Effective 10/1/96, subject to adoption of administrative rule, the share of cost
for members in an HCBS alternative residential setting will allow for a Personal
Needs Allowance (PNA). This PNA will be the same as for institutional members.
This will allow for a PNA equal to the institutional rate of 15% of the SSI
maximum for an individual ($70.50 as of 1/96). This is a reduction from the
current PNA rate of 300% of the SSI maximum ($1410 as of 1/96) for members
residing in Alternative Residential Settings. A room and board
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amount as charged, not to exceed $800 per month, and all other share of cost
deductions described in ARS 36-2932 (O) will be allowed.
The Program Contractor receives monthly capitation payments which incorporate an
assumed deduction for the share of cost which members contribute to the cost of
care. The Program Contractor is responsible for collecting their members' share
of cost. The Program Contractor has the option of collecting the share of cost
or delegating this responsibility to the provider. The Program Contractor may
transfer this responsibility to nursing facilities, Institutions for Mental
Disease for those 65 years of age and older, or Inpatient Psychiatric Facilities
for those under 21 years of age, and compensate these facilities net of the
share of cost amount. If the Program Contractor delegates this responsibility to
the provider, the provider contract must spell out complete details of both
parties' obligations in share of cost collection. The Program Contractor must
establish a process for collecting the share of cost from HCBS members.
At the end of the contract year, AHCCCSA will compare actual Share of Cost
assignment to the Share of Cost assignment assumed in the calculation of the
capitation rate. Assumed Share of Cost will be fully reconciled to actual Share
of Cost Assignment, and AHCCCSA will either recoup or refund the total
difference, as applicable. This share of cost reconciliation may, at AHCCCSA's
sole discretion, be performed more frequently than once per year.
47. MANAGEMENT SERVICES AND DISTRIBUTION OF FUNDS
All proposed management services subcontracts, MIS subcontracts, corporate cost
allocation plans, proposals to adjust management fees, and proposals for the
distribution of funds which may affect plan equity must be approved in advance
by AHCCCSA, Office of Managed Care. Cost allocation plans must be submitted with
the proposed management fee agreement. AHCCCSA reserves the right to perform a
thorough review of actual management fees charged and/or corporate allocations
made. If the fees or allocations are determined to be unjustified or excessive,
amounts may be subject to repayment to the Program Contractor. In addition, the
Program Contractor may be placed on monthly financial reporting and financial
sanctions may be imposed.
48. MANAGEMENT SERVICES SUBCONTRACTOR AUDITS
All management services subcontractors are required to have an annual financial
audit. A copy of this audit shall be submitted to AHCCCSA, Office of Managed
Care, within 120 days after the subcontractor's fiscal year end.
49. MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP
A proposed merger, reorganization or change in ownership of the Program
Contractor shall require prior approval of AHCCCSA and a subsequent contract
amendment. The Program Contractor must submit a detailed merger, reorganization
and/or transition plan to AHCCCSA, Office of Managed Care, for AHCCCSA review.
The purpose of the plan review is to ensure uninterrupted services to members,
evaluate the new entity's ability to perform the contract requirements, ensure
that services to members are not diminished and that major components of the
organization and AHCCCS programs are not adversely affected by such merger,
reorganization or change in ownership.
50. RELATED PARTY TRANSACTIONS
Any proposed subcontract involving a related party or entity requires prior
approval from AHCCCSA, Office of Managed Care. The minimum information required
on ownership and control in related party transactions is set by federal law (42
CFR 455.100 through 455.106) and the Program Contractor shall disclose all
required information, justify all related party transactions reported, and
certify the accuracy and completeness of the disclosures made. The Program
Contractor shall demonstrate that transactions occurring between the provider
and a related party-in-interest are reasonable, will not adversely affect the
fiscal soundness of the Program Contractor, and do not present a conflict of
interest.
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51. REQUESTS FOR INFORMATION
AHCCCSA may, at any time during the term of this contract, request financial or
other information from the Program Contractor. Upon receipt of such requests for
information, the Program Contractor shall provide complete information as
requested no later than 30 days after the receipt of the request unless
otherwise specified in the request itself.
52. DATA MANAGEMENT
The Program Contractor shall have the capability for all required technical
interfaces with AHCCCSA. Refer to the AHCCCS Technical Interface Guidelines in
the Bidder's Library for further information. A copy of these guidelines will be
provided to the Program Contractor upon contract award.
53. DATA EXCHANGE REQUIREMENT
The Program Contractor shall exchange data with AHCCCSA in accordance with the
AHCCCS Technical Interface Guidelines. The Program Contractor is responsible for
any incorrect data, delayed encounter data submission and any penalty applied
due to error, omission, deletion, or erroneous insert caused by data it
submitted. Any data that does not meet the standards required by AHCCCSA shall
not be accepted by AHCCCSA. The Program Contractor is responsible for
identifying any inconsistencies immediately upon receipt of data from AHCCCSA.
If any unreported inconsistencies are subsequently discovered, the Program
Contractor shall correct its records at its own expense.
AHCCCSA may require the Program Contractor to provide to AHCCCSA original
evidence of service rendered and PCP assignments in a form appropriate for
electronic data exchange. The Program Contractor shall be provided with a
security code for use in all data transmissions. The Program Contractor agrees
that by using its security code, it certifies that any data transmitted is
accurate and truthful, to the best of its knowledge.
54. ENCOUNTER DATA REPORTING
The accurate and timely reporting of encounter data is crucial to the success of
the ALTCS program. AHCCCSA uses encounter data to:
Pay reinsurance benefits
Set fee-for-service and capitation rates
Determine disproportionate share payments to hospitals
Evaluate quality of care through quality indicators developed with
encounter data
The Program Contractor shall submit encounter data to AHCCCSA whenever a
contract service has been performed and must be provided by electronic media.
This requirement is a condition of the HCFA grant award.
Formatting and specific requirements for encounter data are described in AHCCCS
Encounter Reporting User Manual and AHCCCS Technical Interface Guidelines,
copies of which may be found in the Bidders' Library. Data must be organized
into the PMMIS AHCCCSA-supplied formats. The Encounter Record Submission
Standards are included herein as Attachment C.
Service codes have been established for all six alternative residential (HCBS)
settings. The Program Contractor will be required to use these codes in CATS and
with their Encounter reporting effective October 1, 1996. These six settings
(and therefore the service codes) are considered to include Title XIX services
as follows:
Adult Care Home: Personal care and homemaker services.
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Supportive Residential Living: Personal care, homemaker and nursing
services
Adult Foster Care: Personal care and homemaker services;
may include nursing services if the
Adult Foster Care sponsor is a
registered nurse.
Level I Behavioral Health Facility: Personal care, homemaker, behavior
management and nursing services.
Level II Behavioral Health Facility: Personal care, homemaker and behavior
management services.
Unclassified Health Care Facility for Personal care, homemaker and nursing
services. the Treatment of Brain
Injured:
55. SPECIALTY CONTRACTS
The Director of AHCCCSA may at any time negotiate or contract on behalf of the
Program Contractor and AHCCCSA for specialized hospital and medical services
such as organ transplants. If the Director has contracted for such specialized
services, the Program Contractor may be required to include such services within
its delivery networks and make contractual modifications necessary to carry out
this section. Specialty contracts shall take precedence over all other
contractual arrangements between the Program Contractor and its providers. If
the Program Contractor's specialty contracts are less costly than those of
AHCCCSA, AHCCCSA may allow the Program Contractor to continue using its
specialty contractors.
56. SANCTIONS
If the Program Contractor violates any provision stated in law, AHCCCS Rules,
AHCCCS policies and procedures, or this contract, AHCCCSA may suspend, refuse to
renew, or terminate this contract or any related subcontracts in accordance with
the terms of this contract and applicable law and regulations, including AHCCCS
Rule R9-28-607. AHCCCSA may, in addition to these remedies, impose sanctions in
accordance with the provisions of this contract, applicable law and regulations.
Written notice will be provided to the Program Contractor specifying the
sanction to be imposed, the grounds for such sanction and either the length of
suspension or the amount of payment to be withheld.
57. TERM OF CONTRACT and OPTION TO RENEW
The term of this contract shall be 10/1/96 through 9/30/97. In addition, AHCCCSA
reserves the sole option to extend the term of the contract, not to exceed a
total contracting period of three years. The terms and conditions of any such
contract extension shall remain the same as the original contract, as amended.
Any contract extension shall be through contract amendment. During the term of
this contract, the total contracting period may be increased through legislative
action from three to five years.
When AHCCCSA issues an amendment to extend the contract, the provisions of such
extension will be deemed to have been accepted 60 days from the date of mailing
by AHCCCSA, even if the extension has not been signed by the Program Contractor,
unless within that time the Program Contractor notifies AHCCCSA in writing that
it refuses to sign the extension or modification. AHCCCSA will then initiate
contract termination proceedings.
58. GRIEVANCE PROCESS AND STANDARDS
The Program Contractor shall have in place a written grievance policy for
members and providers which defines their rights regarding any adverse action by
the Program Contractor. This written policy shall be in accordance with
applicable federal and state law and AHCCCS Rules and policies including, but
not limited to, ALTCS Rules R9-28-802 through 804. Details of the AHCCCS
grievance policy requirements and the Alternative Resolution Process are
included herein as Attachment H. The Program Contractor shall maintain a
complaint log pertaining to its program, services and provision of care.
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59. QUARTERLY GRIEVANCE REPORT
A Quarterly Grievance Report shall be submitted to AHCCCSA, Office of Grievance
and Appeals and must be received no later than 45 days after the end of each
quarter.
60. LEGISLATIVE ISSUES
The Arizona Legislature will be considering several bills which will have an
impact on AHCCCSA and Program Contractors. AHCCCSA reserves the right to
incorporate additional services or programs prior to the award of this contract
(through RFP amendment) or subsequent to the awarding of this contract (through
contract amendment or a separate RFP). The proposed 1996 AHCCCS Omnibus Bill
includes the following provisions:
a. INPATIENT HOSPITAL REIMBURSEMENT - Currently, AHCCCS health plans and
program contractors may negotiate inpatient hospital reimbursement rates or
default to the AHCCCS tiered per diem rate. Since AHCCCS wants to encourage more
competitive rates, the default option will be removed in Maricopa and Pima
counties and health plans and program contractors operating in those two
counties will be required to negotiate inpatient hospital rates directly with at
least one hospital in Maricopa or Pima county, as appropriate.
b. ALTCS PREADMISSION SCREENING PROCESS - This would explicitly allow a
physician to review ALTCS eligibility cases and make a final decision based on
medical judgment.
c. LUNG AND HEART/LUNG TRANSPLANTS - Various technical amendments to the
October 1995 legislation which authorized these transplants and an extended
eligibility process will be enacted.
d. SUBMITTAL DATE FOR DISPROPORTIONATE SHARE (DSH) PAYMENT DATA -
Currently, DSH payments are based on data received from the health plans and
hospitals as of July 1, 1995. AHCCCSA is requesting that this date be changed to
December 31 to allow the health plans and hospitals additional time to submit
accurate and complete data.
e. MEMBER FRAUD - Current AHCCCS statutes on member fraud will be amended
to include criminal and civil penalties for anyone who aids and abets fraudulent
activities.
f. CONTRACT STATUTES - Maximum terms for ALTCS and acute care contracts
would be extended to five years from the present four years (for acute) and
three years (for ALTCS). Also, the term "Invitation For Bid" would be replaced
by the more appropriate "Request For Proposal".
g. EXTEND RULE-MAKING EXEMPTION - In 1994, the Legislature authorized a
one-year exemption from rule-making so that AHCCCS could implement a
Medicare/Medicaid dual eligible waiver and an on-reservation managed care pilot
program waiver. Since HCFA has not approved these waivers, AHCCCS will request
that the rule-making exemption be extended to June 30, 1997.
h. EFFECTIVE DATE OF ENROLLMENT - Effective date of Program Contractor
responsibility would be the date it received notification of the new member from
AHCCCSA. Current effective date is two days after the date of notification.
Other AHCCCS-related issues which may be introduced by interested parties will:
- - - Use tobacco tax money for various reasons. Provide temporary financial
assistance to Gila, Cochise, Pinal, and Santa Cruz counties and set up a
legislative committee to explore permanent relief.
- - - Authorize Supported Residential Living Centers as permanent settings
under ALTCS.
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- - - Select two AHCCCS health plans in Maricopa County to provide Title XIX
and general behavioral health and substance abuse services to AHCCCS eligible
persons.
[END OF SECTION D]
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SECTION E - CONTRACT CLAUSES
TABLE OF CONTENTS
[TO BE REVISED FOR FINAL DRAFT]
<TABLE>
<S> <C>
Advertising And Promotion Of Contract................................................................................ 36
Americans With Disabilities Act...................................................................................... 40
Applicable Law...................................................................................................... 34
Assignment And Delegation............................................................................................ 35
Audit................................................................................................................ 38
Authority............................................................................................................ 34
Changes.............................................................................................................. 39
Compliance With Applicable Laws, Rules And Regulations.............................................................. 35
Conflict Of Interest................................................................................................. 40
Contract Interpretation And Amendment................................................................................ 34
Covenant Against Contingent Fees..................................................................................... 39
Disclosure Of Confidential Information............................................................................... 41
Disputes............................................................................................................. 39
Effective Date....................................................................................................... 38
General Indemnification.............................................................................................. 35
Gratuities........................................................................................................... 36
Incorporation By Reference........................................................................................... 39
Indemnification -- Patent And Copyright.............................................................................. 35
Insurance............................................................................................................ 38
No Guaranteed Quantities............................................................................................. 40
Non-Discrimination................................................................................................... 38
Non-Exclusive Remedies............................................................................................... 38
Payments............................................................................................................. 35
Property Of The State................................................................................................ 36
Records.............................................................................................................. 34
Relationship Of Parties.............................................................................................. 35
Right Of Offset...................................................................................................... 37
Right To Assurance................................................................................................... 36
Right To Inspect Plant Or Place Of Business.......................................................................... 39
Severability......................................................................................................... 34
Subcontracts......................................................................................................... 35
Suspension Or Debarment.............................................................................................. 37
Termination - Availability Of Funds.................................................................................. 37
Termination For Conflict Of Interest................................................................................. 36
Termination For Convenience.......................................................................................... 37
Termination For Default.............................................................................................. 37
Third Party Antitrust Violations..................................................................................... 36
Transition Activities................................................................................................ 40
Type Of Contract..................................................................................................... 40
</TABLE>
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SECTION E - CONTRACT CLAUSES
1. APPLICABLE LAW
Arizona Law - The law of Arizona applies to this contract including, where
applicable, the Uniform Commercial Code, as adopted in the State of Arizona.
Implied Contract Terms - Each provision of law and any terms required by law to
be in this contract are a part of this contract as if fully stated in it.
2. AUTHORITY
This contract is issued under the authority of the Contracting Officer who
signed this contract. Changes to the contract, including the addition of work or
materials, the revision of payment terms, or the substitution of work or
materials, directed by an unauthorized state employee or made unilaterally by
the Program Contractor are violations of the contract and of applicable law.
Such changes, including unauthorized written contract amendments, shall be void
and without effect, and the Program Contractor shall not be entitled to any
claim under this contract based on those changes.
3. CONTRACT INTERPRETATION AND AMENDMENT
No Parol Evidence - This contract is intended by the parties as a final and
complete expression of their agreement. No course of prior dealings between the
parties and no usage of the trade shall supplement or explain any term used in
this contract.
No Waiver - Either party's failure to insist on strict performance of any term
or condition of the contract shall not be deemed a waiver of that term or
condition even if the party accepting or acquiescing in the non-conforming
performance knows of the nature of the performance and fails to object to it.
Written Contract Amendments - The contract shall be modified only through a
written contract amendment within the scope of the contract signed by the
procurement officer on behalf of the State.
4. RECORDS
Under ARS Section 35-214 and Section 35-215 the Program Contractor shall retain,
and shall contractually require eacH subcontractor to retain all data and other
records relating to the acquisition and performance of the contract for a period
of five years after the completion of the contract. All records shall be subject
to inspection and audit by the State at reasonable times. Upon request, the
Program Contractor shall produce a copy of any or all such records.
5. SEVERABILITY
The provisions of this contract are severable to the extent that any provision
or application held to be invalid shall not affect any other provision or
application of the contract which may remain in effect without the invalid
provision or application.
6. RELATIONSHIP OF PARTIES
The Program Contractor under this contract is an independent contractor. Neither
party to this contract shall be deemed to be the employee or agent of the other
party to the contract.
7. ASSIGNMENT AND DELEGATION
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The Program Contractor shall not assign any right nor delegate any duty under
this contract without prior written approval of the Contracting Officer, who
will not unreasonably withhold such approval.
8. GENERAL INDEMNIFICATION
The Program Contractor shall defend, indemnify and hold harmless the State from
any claim, demand, suit, liability, judgment and expense (including attorney's
fees and other costs of litigation) arising out of or relating to injury,
disease, or death of persons or damage to or loss of property resulting from or
in connection with the negligent performance of this contract by the Program
Contractor, its agents, employees, and subcontractors or anyone for whom the
Program Contractor may be responsible. The obligations, indemnities and
liabilities assumed by the Program Contractor under this paragraph shall not
extend to any liability caused by the negligence of the State or its employees.
The Program Contractor's liability shall not be limited by any provisions or
limits of insurance set forth in this contract. The State shall reasonably
notify the Program Contractor of any claim for which it may be liable under this
paragraph.
9. INDEMNIFICATION -- PATENT AND COPYRIGHT
The Program Contractor shall defend, indemnify and hold harmless the State
against any liability including costs and expenses for infringement of any
patent, trademark or copyright arising out of contract performance or use by the
State of materials furnished or work performed under this contract. The State
shall reasonably notify the Program Contractor of any claim for which it may be
liable under this paragraph.
10. SUBCONTRACTS
All subcontracts entered into by the Program Contractor are subject to prior
review and approval by AHCCCSA, Contracts and Purchasing, and shall incorporate
by reference the terms and conditions of this contract. Each subcontract must
contain verbatim all the provisions of Attachment A, Minimum Subcontract
Provisions. In addition, each subcontract must contain the following:
a. Full disclosure of the method and amount of compensation or other
consideration to be received by the subcontractor.
b. Identification of the name and address of the subcontractor.
c Identification of the population, to include patient capacity, to be
covered by the subcontractor.
d. The amount, duration and scope of medical services to be provided, and
for which compensation will be paid.
e. The term of the subcontract including beginning and ending dates,
methods of extension, termination and renegotiation.
f. The specific duties of the subcontractor relating to coordination of
benefits and determination of third-party liability.
g. A description of the subcontractor's patient, medical and cost record
keeping system.
h. Specification that the subcontractor shall cooperate with quality
assurance programs and comply with the utilization control and review procedures
specified in 42 C.F.R. Part 456, as implemented by AHCCCSA.
i. A provision that the subcontractor agrees to identify Medicare and
other third-party liability coverage and to seek such Medicare or third-party
liability payment before submitting claims to the Contractor/ Program
Contractor.
j. A provision stating that a merger, reorganization or change in
ownership of a subcontractor that is related to or affiliated with the
Contractor/ Program Contractor shall require a contract amendment and prior
approval of AHCCCSA.
k. Procedures for enrollment or re-enrollment of the covered population.
l. A provision that the subcontractor shall be fully responsible for all
tax obligations, Worker's Compensation Insurance, and all other applicable
insurance coverage obligations which arise under this subcontract, for itself
and its employees, and that AHCCCSA shall have no responsibility or liability
for any such taxes or insurance coverage.
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m. A provision that the subcontractor must obtain any necessary
authorization from the Contractor or AHCCCSA for services provided to eligible
and/or enrolled members.
n. A provision that the subcontractor must comply with encounter reporting
and claims submission requirements as described in the subcontract.
11. COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS
The materials and services supplied under this contract shall comply with all
applicable federal, state and local laws, and the Program Contractor shall
maintain all applicable licenses and permits.
12. PAYMENTS
The Program Contractor shall be paid as specified in the contract. Payment must
comply with requirements of ARS Title 35. AHCCCSA reserves the option to make
payments to the Program Contractor by wire or NACHA transfer and will provide
the Program Contractor at least 30 days notice prior to the effective date of
any such change.
13. ADVERTISING AND PROMOTION OF CONTRACT
The Program Contractor shall not advertise or publish information for commercial
benefit concerning this contract without the prior written approval of the
Contracting Officer.
14. PROPERTY OF THE STATE
Any materials, including reports, computer programs and other deliverables,
created under this contract are the sole property of AHCCCSA. The Program
Contractor is not entitled to a patent or copyright on those materials and may
not transfer the patent or copyright to anyone else. The Program Contractor
shall not use or release these materials without the prior written consent of
AHCCCSA.
15. THIRD PARTY ANTITRUST VIOLATIONS
The Program Contractor assigns to the State any claim for overcharges resulting
from antitrust violations to the extent that those violations concern materials
or services supplied by third parties to the Program Contractor toward
fulfillment of this contract.
16. RIGHT TO ASSURANCE
If AHCCCSA, in good faith, has reason to believe that the Program Contractor
does not intend to perform or continue performing this contract, the procurement
officer may demand in writing that the Program Contractor give a written
assurance of intent to perform. The demand shall be sent to the Program
Contractor by certified mail, return receipt required. Failure by the Program
Contractor to provide written assurance within the number of days specified in
the demand may, at the State's option, be the basis for terminating the
contract.
17. TERMINATION FOR CONFLICT OF INTEREST
AHCCCSA may cancel this contract without penalty or further obligation if any
person significantly involved in initiating, negotiating, securing, drafting or
creating the contract on behalf of AHCCCSA is, or becomes at any time while the
contract or any extension of the contract is in effect, an employee of, or a
consultant to, any other party to this contract with respect to the subject
matter of the contract. The cancellation shall be effective when the Program
Contractor receives written notice of the cancellation unless the notice
specifies a later time.
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18. GRATUITIES
AHCCCSA may, by written notice to the Program Contractor, immediately terminate
this contract if it determines that employment or a gratuity was offered or made
by the Program Contractor or a representative of the Program Contractor to any
officer or employee of the State for the purpose of influencing the outcome of
the procurement or securing the contract, an amendment to the contract, or
favorable treatment concerning the contract, including the making of any
determination or decision about contract performance. AHCCCSA, in addition to
any other rights or remedies, shall be entitled to recover exemplary damages in
the amount of three times the value of the gratuity offered by the Program
Contractor.
19. SUSPENSION OR DEBARMENT
AHCCCSA may, by written notice to the Program Contractor, immediately terminate
this contract if it determines that the Program Contractor has been debarred,
suspended or otherwise lawfully prohibited from participating in any public
procurement activity.
20. TERMINATION FOR CONVENIENCE
AHCCCSA reserves the right to terminate the contract in whole or in part at any
time for the convenience of the State without penalty or recourse. The
Contracting Officer shall give written notice by certified mail, return receipt
requested, to the Program Contractor of the termination at least 90 days before
the effective date of the termination. Upon receipt of the written notice, the
Program Contractor shall stop all work and immediately notify all subcontractors
to do the same. In the event of termination under this paragraph, all documents,
data and reports prepared by the Program Contractor under the contract shall
become the property of and be delivered to AHCCCSA. The Program Contractor shall
be entitled to receive just and equitable compensation for work in progress,
work completed and materials accepted before the effective date of the
termination.
21. TERMINATION FOR DEFAULT
AHCCCSA reserves the right to terminate the contract in whole or in part due to
the failure of the Program Contractor to comply with any term or condition of
the contract or to make satisfactory progress in performing the contract. The
Contracting Officer shall mail written notice of the termination and the
reason(s) for it to the Program Contractor by certified mail, return receipt
requested.
Upon termination under this paragraph, all documents, data, and reports prepared
by the Program Contractor under the contract shall become the property of and be
delivered to AHCCCSA on demand.
AHCCCSA may, upon termination of this contract, procure, on terms and in the
manner that it deems appropriate, materials or services to replace those under
this contract. The Program Contractor shall be liable for any excess costs
incurred by AHCCCSA in re-procuring the materials or services.
22. TERMINATION - AVAILABILITY OF FUNDS
Funds are not presently available for performance under this contract beyond the
current fiscal year. No legal liability on the part of AHCCCSA for any payment
may arise under this contract until funds are made available for performance of
this contract.
23. RIGHT OF OFFSET
AHCCCSA shall be entitled to offset against any amounts due the Program
Contractor any expenses or costs incurred by AHCCCSA concerning the Program
Contractor's non-conforming performance or failure to perform the contract.
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24. NON-EXCLUSIVE REMEDIES
The rights and the remedies of AHCCCSA under this contract are not exclusive.
25. AUDIT
At any time during the term of this contract, the Program Contractor's or any
subcontractor's books and records shall be subject to audit by AHCCCSA and,
where applicable, the federal government, to the extent that the books and
records relate to the performance of the contract or subcontracts.
26. NON-DISCRIMINATION
The Program Contractor shall comply with State Executive Order No. 75-5, which
mandates that all persons, regardless of race, color, religion, sex, national
origin or political affiliation, shall have equal access to employment
opportunities, and all other applicable federal and state laws, rules and
regulations, including the Americans with Disabilities Act. The Program
Contractor shall take positive action to ensure that applicants for employment,
employees, and persons to whom it provides service are not discriminated against
due to race, creed, color, religion, sex, national origin or disability.
27. EFFECTIVE DATE
The effective date of this contract shall be the date that the Contracting
Officer signs the award page (page 1) of this contract.
28. INSURANCE
A certificate of insurance naming the State of Arizona and AHCCCSA as the
"additional insured" must be submitted to AHCCCSA within 10 days of notification
of contract award and prior to commencement of any services under this contract.
This insurance shall be provided by carriers rated as "A+" or higher by the A.M.
Best Rating Service. The following types and levels of insurance coverage are
required for this contract:
a. Commercial General Liability: Provides coverage of at least $1,000,000
for each occurrence for bodily injury and property damage to others as a result
of accidents on the premises of or as the result of operations of the Program
Contractor.
b. Commercial Automobile Liability: Provides coverage of at least
$1,000,000 for each occurrence for bodily injury and property damage to others
resulting from accidents caused by vehicles operated by the Program Contractor.
c. Workers Compensation: Provides coverage to employees of the Program
Contractor for injuries sustained in the course of their employment. Coverage
must meet the obligations imposed by federal and state statutes and must also
include Employer's Liability minimum coverage of $100,000. Evidence of qualified
self-insured status will also be considered.
d. Professional Liability (if applicable): Provides coverage for alleged
professional misconduct or lack of ordinary skills in the performance of a
professional act of service. The above coverages may be evidenced by either one
of the following:
a. The State of Arizona Certificate of Insurance: This is a form with the
special conditions required by the contract already pre-printed on the form. The
Program Contractor's agent or broker must fill in the pertinent policy
information and ensure the required special conditions are included in the
Program Contractor's policy.
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b. The Acord form: This standard insurance industry certificate of
insurance does not contain the pre-printed special conditions required by this
contract. These conditions must be entered on the certificate by the agent or
broker and read as follows:
The State of Arizona and Arizona Health Care Cost Containment System are hereby
added as additional insureds. Coverages afforded under this Certificate shall be
primary and any insurance carried by the State or any of its agencies, boards,
departments or commissions shall be in excess of that provided by the insured
Program Contractor. No policy shall expire, be canceled or materially changed
without 30 days written notice to the State. This Certificate is not valid
unless countersigned by an authorized representative of the insurance company.
29. DISPUTES
The exclusive manner for the Program Contractor to assert any claim, grievance,
dispute or demand against AHCCCSA shall be in accordance with AHCCCS Rule
R9-28-804(C). Pending the final resolution of any disputes involving this
contract, the Program Contractor shall proceed with performance of this contract
in accordance with AHCCCSA's instructions, unless AHCCCSA specifically, in
writing, requests termination or a temporary suspension of performance.
30. RIGHT TO INSPECT PLANT OR PLACE OF BUSINESS
AHCCCSA may, at reasonable times, inspect the part of the plant or place of
business of the Program Contractor or subcontractor which is related to the
performance of this contract, in accordance with ARS Section 41-2547.
31. INCORPORATION BY REFERENCE
This solicitation and all attachments and amendments, the Program Contractor's
proposal, best and final offer accepted by AHCCCSA, and any approved
subcontracts are hereby incorporated by reference into the contract.
32. COVENANT AGAINST CONTINGENT FEES
The Program Contractor warrants that no person or agency has been employed or
retained to solicit or secure this contract upon an agreement or understanding
for a commission, percentage, brokerage or contingent fee. For violation of this
warranty, AHCCCSA shall have the right to annul this contract without liability.
33. CHANGES
AHCCCSA may at any time, by written notice to the Program Contractor, make
changes within the general scope of this contract. If any such change causes an
increase or decrease in the cost of, or the time required for, performance of
any part of the work under this contract, the Program Contractor may assert its
right to an adjustment in compensation paid under this contract. The Program
Contractor must assert its right to such adjustment within 30 days from the date
of receipt of the change notice. Any dispute or disagreement caused by such
notice shall constitute a dispute within the meaning of Paragraph 29 (this
Section ), and be administered accordingly.
34. TYPE OF CONTRACT
Firm Fixed-Price
35. AMERICANS WITH DISABILITIES ACT
People with disabilities may request special accommodations such as
interpreters, alternative formats or assistance with physical accessibility.
Requests for special accommodations must be made with at least three days prior
notice by calling (602) 417-4577.
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36. WARRANTY OF SERVICES
The Program Contractor warrants that all services provided under this contract
will conform to the requirements stated herein. AHCCCSA's acceptance of services
provided by the Program Contractor shall not relieve the Program Contractor from
its obligations under this warranty. In addition to its other remedies, AHCCCSA
may, at the Program Contractor's expense, require prompt correction of any
services failing to meet the Program Contractor's warranty herein. Services
corrected by the Program Contractor shall be subject to all of the provisions of
this contract in the manner and to the same extent as the services originally
furnished.
37. NO GUARANTEED QUANTITIES
AHCCCSA does not guarantee the Program Contractor any minimum or maximum
quantity of services or goods to be provided under this contract.
38. TRANSITION ACTIVITIES
Upon the expiration of this contract, AHCCCSA anticipates a continued need for
the services described herein. In the event the new contract is awarded to a
different program contractor, the outgoing Program Contractor shall work closely
with the incoming program contractor's personnel and AHCCCSA staff to ensure an
efficient transfer of duties and responsibilities. All transition activities
will be coordinated by AHCCCSA and a transition plan will be developed to
facilitate the transfer. AHCCCSA reserves the right to determine which, if any,
unfinished projects will remain with the outgoing Program Contractor for
completion.
39. CONFLICT OF INTEREST
The Program Contractor shall not undertake any work that represents a potential
conflict of interest, or which is not in the best interest of AHCCCSA or the
State without prior written approval by AHCCCSA. The Program Contractor shall
fully and completely disclose any situation which may present a conflict of
interest. If the Program Contractor is now performing or elects to perform
during the term of this contract any services for any AHCCCS health plan,
provider or Program Contractor or an entity owning or controlling same, the
Program Contractor shall disclose this relationship prior to accepting any
assignment involving such party
40. DISCLOSURE OF CONFIDENTIAL INFORMATION
The Program Contractor shall not, without prior written approval from AHCCCSA,
either during or after the performance of the services required by this
contract, use, other than for such performance, or disclose to any person other
than AHCCCSA personnel with a need to know, any information, data, material, or
exhibits created, developed, produced, or otherwise obtained during the course
of the work required by this contract. This nondisclosure requirement shall also
pertain to any information contained in reports, documents, or other records
furnished to the Program Contractor by AHCCCSA.
[END OF SECTION E]
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SECTION F - LIST OF ATTACHMENTS
Attachment A - Subcontract provisions
Attachment B - Service area minimum network standards
Attachment C - Encounter record submission standards
Attachment D - Management services subcontractor statement
Attachment E - Sample letter of intent
Attachment F - Instructions for preparing capitation disk
Attachment G - Instructions for preparing nursing home network disk
Attachment H - Grievance process and standards
Attachment I - Service area maps
Attachment J - Offeror's checklist
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SECTION G - REPRESENTATIONS AND CERTIFICATIONS
1. CERTIFICATION OF ACCURACY OF INFORMATION PROVIDED
By signing this offer the Offeror certifies, under penalty of law, that the
information provided herein is true, correct and complete to the best of
Offeror's knowledge and belief. Offeror also acknowledges that should
investigation at any time disclose any misrepresentation or falsification, any
subsequent contract may be terminated by AHCCCSA without penalty to or further
obligation by AHCCCSA.
2. CERTIFICATION OF NON-COERCION
By signing this offer the Offeror certifies, under penalty of law, that it has
not made to any provider any requests or inducements not to contract with
another potential program contractor in relation to this solicitation.
3. CERTIFICATION OF COMPLIANCE - ANTI-KICKBACK / LABORATORY TESTING
By signing this offer, the Offeror certifies that it has not engaged and will
not engage in any violation of the Medicare Anti-Kickback or the "Stark I" and
"Stark II" laws governing related-entity and compensation therefrom. If the
Offeror provides laboratory testing, it certifies that it has complied with and
has sent to AHCCCSA simultaneous copies of the information required to be sent
to the Health Care Financing Administration. (See 42 USC Sections 1320a-7b,
PL 101-239, PL 101-432, and 42 CFR Section 411.361.)
4. AUTHORIZED SIGNATORY
Authorized Signatory for _____________________________________________________
[OFFEROR'S Name]
_____________________________________ , ______________________________
[INDIVIDUAL'S Name] [Title]
is the person authorized to sign this contract on behalf of Offeror.
5. OFFEROR'S MAILING ADDRESS
AHCCCSA should address all notices relative to this offer to the attention of:
________________________________________________________________________
Name Title
________________________________________________________________________
Address Telephone Number
________________________________________________________________________
City State ZIP
6. ORGANIZATION STRUCTURE
The Offeror must complete and return this questionnaire on organization
structure. Include all items requested in this section. Make sure that each
questionnaire item is completed and that full disclosure is made. When making
attachments to this section, please refer to the question number and the item
heading.
a. ORGANIZATION CHART Attach a copy of the Offeror's staff organization
chart, setting forth lines of authority, responsibility and communication which
will pertain to this proposal. Provide an overall organizational chart and
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separate organizational charts for each functional area which includes the
number of current or proposed full-time employees in each area.
b. IF OTHER THAN A GOVERNMENT AGENCY, WHEN WAS YOUR ORGANIZATION FORMED?
___________________
c. LICENSE/CERTIFICATION Attach a list of all licenses and certifications
(e.g. federal HMO status or State certifications) your organization maintains.
Use a separate sheet of paper listing the license requirements and the renewal
dates.
Have any licenses in accordance with ARS Section 20-1065 et. seq., been denied,
revoked or suspended within the paSt 10 years? Yes _____ No _____ If yes, please
explain on a separate sheet.
d. CIVIL RIGHTS COMPLIANCE DATA Has any federal or state agency ever made
a finding of noncompliance with any civil rights requirements with respect to
your program? Yes _____ No_____ If yes, please explain on a separate sheet.
e. HANDICAPPED ASSURANCE Does your organization provide assurance that no
qualified handicapped person will be denied benefits of or excluded from
participation in a program or activity because the Offeror's facilities
(including subcontractors) are inaccessible to or unusable by handicapped
persons? (Note: Check local zoning ordinances for handicapped requirements).
Yes____ No____ If yes, describe on a separate sheet how such assurance is
provided. If no, describe how your organization is taking affirmative steps to
provide assurance.
f. PRIOR CONVICTIONS List on a separate sheet all felony convictions
within the past 15 years of any key personnel (i.e., Administrator, financial
officers, major stockholders or those with controlling interest, etc.). Failure
to make full and complete disclosure shall result in the rejection of your
proposal.
g. FEDERAL GOVERNMENT SUSPENSION/EXCLUSION Has Offeror been suspended or
excluded from any federal government programs for any reason? Yes_____ No_____
If yes, please explain on a separate sheet.
7. FINANCIAL PLANNING
a. ORGANIZATIONAL STRUCTURE - The Offeror must describe the entity that is
requesting to contract with AHCCCSA. An entity is defined as any unit, existing
or to be formed, for which financial statements could be prepared in accordance
with generally accepted accounting principles. Offeror's description of the
entity shall include, at a minimum, the following:
The date the entity was or will be formed and its legal status as an
entity (i.e., Individual, Partnership, Corporation). Offeror's description
should clearly identify the entity's relationship to any other organization.
The name of accounting firm or individual who performed the audit, if
entity is currently audited. Attach a copy of the most recent audited financial
statements. If entity has not been audited within the last two years, or has
never been audited, please attach a copy of the most recent annual unaudited
financial statements.
Explanation of how the initial capitalization and performance bond
requirements, as described in Section D of this solicitation, will be met.
Description of the principal allocation techniques used or proposed
to be used for allocating indirect costs (including administrative costs)
reflected in the entity's financial statements.
A list of the types of liability insurance covering your entity.
Include the amount of coverage and the name and address of the carrier.
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A description of any suits, judgments, tax deficiencies, claims or
any other contingencies pending against the Offeror. Indicate the assessed and
expected financial impact for each item.
The date and type of each bankruptcy if the Offeror or its owner(s)
has ever filed bankruptcy
c. RECEIVED BUT UNPAID CLAIMS (RBUCS) AND INCURRED BUT NOT RECEIVED (IBNRS)
Describe the method to be used for evaluating the claims liability for claims
received by the Offeror but not yet adjudicated. These claims are more commonly
referred to by AHCCCSA as Received But Unpaid Claims (RBUCs).
Describe the method to be used for evaluating the claims liability for IBNR
claims. This description should address the frequency that projections are
performed and major data sources used in the IBNR calculation. The description
should also include how the Offeror will validate the accuracy of the IBNR
amounts.
The Offeror shall provide a copy of their IBNR procedures and a summary of their
IBNR practices. These procedures and practices must adequately support Offeror's
response to the above IBNR descriptions.
c. CLAIMS PROCESSING SYSTEM - Describe in detail how you will assure
encounter data is submitted to AHCCCSA within the standards established in
Attachment C. Describe your claims processing system. Offeror's description
shall include a description of:
- - - Security and access controls to the processing system, both physical
and software
- - - Claim processor edit overrides available and the reporting and
monitoring of the use of the overrides, including authorization procedures and
procedures for the review of the reported over-rides.
- - - Use of prior authorizations including authority to make changes to
prior authorizations
- - - Audit trails produced for claims adjustments.
- - - Timelines for claims payments
- - - Post-payment review of processed claims
- - - Medical claims review
- - - Remittance advice
d. FINANCIAL PROJECTIONS - Offeror must submit prospective financial
statements for each of the three years ending September 30, 1997, 1998, and
1999. Additionally, current program contractors responding to this solicitation
must also submit prospective financial statements for the year ending September
30, 1996. The prospective financial statements shall include all applicable
information on the Balance Sheet, the Statement of Revenue and Expenses and
Changes in Plan Equity.
Fields that are not completed on the financial projections will be assumed to be
zero. The financial projections must be consistent with the service areas the
Offeror has requested and the capitation rates bid by the Offeror for the
requested areas. Assumptions used in preparing the financial projections should
be clearly stated.
e. WAS AN ACTUARIAL FIRM USED TO ASSIST IN DEVELOPING CAPITATION RATES?
Yes_____ No_____
If yes, what is name of actuary and actuarial firm?_________________
F. DID A FIRM OR ORGANIZATION PROVIDE THE OFFEROR WITH ANY ASSISTANCE IN MAKING
THIS OFFER (TO INCLUDE DEVELOPING CAPITATION RATES OR PROVIDING ANY OTHER
TECHNICAL ASSISTANCE)? Yes_____ No_____ If yes, what is the name of this firm or
organization?
_______________________________________________________________________________
Name
_______________________________________________________________________________
Address City State
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g. HAS THE OFFEROR CONTRACTED OR ARRANGED FOR MANAGEMENT INFORMATION
SYSTEMS, SOFTWARE OR HARDWARE, FOR THE TERM OF THE CONTRACT? Yes_____ No_____ If
yes, is the Management Information System being obtained from a vendor? Yes
_____ No_____ If yes, please provide on a separate sheet the vendor's name, the
vendor's background with AHCCCSA, the vendor's background with other HMOs, and
the vendor's background with other Medicaid programs.
8. FINANCIAL DISCLOSURE STATEMENT
Offeror must provide the following information as required by 42 CFR 455.103.
This Financial Disclosure Statement shall be prepared as of 3/31/96. However,
continuing offerors who have filed the required Financial Disclosure Statement
within the last 12 months need not complete this section if no significant
changes have occurred since the last filing.
LIST THE NAME AND ADDRESS OF EACH PERSON WITH AN OWNERSHIP OR CONTROLLING
INTEREST, AS DEFINED BY 42 CFR 455.101, IN THE ENTITY SUBMITTING THIS OFFER:
Percent of
Name Address Ownership or Control
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
LIST THE NAME AND ADDRESS OF EACH PERSON WITH AN OWNERSHIP OR CONTROL INTEREST
IN ANY SUBCONTRACTOR IN WHICH THE DISCLOSING ENTITY HAS DIRECT OR INDIRECT
OWNERSHIP OF 5% OR MORE:
Percent of
Name Address Ownership or Control
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
NAMES OF ABOVE PERSONS WHO ARE RELATED TO ONE ANOTHER AS SPOUSE, PARENT, CHILD
OR SIBLING:
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
LIST THE NAME OF ANY OTHER DISCLOSING ENTITY IN WHICH A PERSON WITH AN OWNERSHIP
OR CONTROL INTEREST IN THE DISCLOSING ENTITY ALSO HAS AN OWNERSHIP OR CONTROL
INTEREST:
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
LIST THE OWNERSHIP OF ANY SUBCONTRACTOR WITH WHOM THE OFFEROR HAS HAD BUSINESS
TRANSACTIONS TOTALING MORE THAN $25,000 DURING THE 12-MONTH PERIOD ENDING ON THE
DATE OF THE REQUEST:
Describe Ownership Type of Business Dollar Amount
of Subcontractors Transaction with Provider of Transaction
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
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LIST ANY SIGNIFICANT BUSINESS TRANSACTIONS, AS DEFINED IN 42 CFR 455.101,
BETWEEN THE OFFEROR AND ANY WHOLLY-OWNED SUPPLIER OR BETWEEN THE OFFEROR AND ANY
SUBCONTRACTOR DURING THE FIVE-YEAR PERIOD ENDING ON THE DATE OF THE OFFER:
Describe Ownership Type of Business Dollar Amount
of Subcontractors Transaction with Provider of Transaction
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
LIST THE NAME OF ANY PERSON WHO HAS OWNERSHIP OR CONTROL INTEREST IN THE
OFFEROR, OR IS AN AGENT OR MANAGING EMPLOYEE OF THE OFFEROR AND HAS BEEN
CONVICTED OF A CRIMINAL OFFENSE RELATED TO THAT PERSON'S INVOLVEMENT IN ANY
PROGRAM UNDER MEDICARE, MEDICAID OR THE TITLE XX SERVICES PROGRAM SINCE THE
INCEPTION OF THOSE PROGRAMS:
Name Address Title
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
LIST NAME AND ADDRESS OF EACH CREDITOR WHOSE LOANS OR MORTGAGES EXCEED 5% OF
TOTAL OFFEROR EQUITY AND ARE SECURED BY ASSETS OF THE OFFEROR'S COMPANY.
Description Amount
Name Address of Debt of Security
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
9. RELATED PARTY TRANSACTIONS OMC]
LIST THE NAMES AND ADDRESSES OF THE BOARD OF DIRECTORS OF THE OFFEROR.
Name/Title Address
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
LIST NAMES AND TITLES OF THE 10 HIGHEST COMPENSATED MANAGEMENT PERSONNEL
INCLUDING BUT NOT LIMITED TO THE CHIEF EXECUTIVE OFFICER, THE CHIEF FINANCIAL
OFFICER, BOARD CHAIRMAN, BOARD SECRETARY, AND BOARD TREASURER:
Name Title
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
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DESCRIBE TRANSACTIONS BETWEEN THE OFFEROR AND ANY RELATED PARTY IN WHICH A
TRANSACTION OR SERIES OF TRANSACTIONS DURING ANY ONE FISCAL YEAR EXCEEDS THE
LESSER OF $10,000 OR 2% OF THE TOTAL OPERATING EXPENSES OF THE DISCLOSING
ENTITY. LIST PROPERTY, GOODS, SERVICES AND FACILITIES IN DETAIL NOTING THE
DOLLAR AMOUNTS OR OTHER CONSIDERATION FOR EACH TRANSACTION AND THE DATE THEREOF.
INCLUDE A JUSTIFICATION AS TO (1) THE REASONABLENESS OF THE TRANSACTION, (2) ITS
POTENTIAL ADVERSE IMPACT ON THE FISCAL SOUNDNESS OF THE DISCLOSING ENTITY, AND
(3) THAT THE TRANSACTION IS WITHOUT CONFLICT OF INTEREST:
a) THE SALE, EXCHANGE OR LEASING OF ANY PROPERTY:
Description of Name of Related Party Dollar Amount for
Transaction and Relationship Reporting Period
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Justification:
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
b) THE FURNISHING OF GOODS, SERVICES OR FACILITIES FOR CONSIDERATION:
Description of Name of Related Party Dollar Amount for
Transaction and Relationship Reporting Period
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Justification:
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
c) DESCRIBE ALL TRANSACTIONS BETWEEN OFFEROR AND ANY RELATED PARTY WHICH
INCLUDES THE LENDING OF MONEY, EXTENSIONS OF CREDIT OR ANY INVESTMENT IN A
RELATED PARTY. THIS TYPE OF TRANSACTION REQUIRES REVIEW AND APPROVAL IN ADVANCE
BY THE OFFICE OF THE DIRECTOR:
Description of Name of Related Party Dollar Amount for
Transaction and Relationship Reporting Period
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Justification:
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
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d) LIST THE NAME AND ADDRESS OF ANY INDIVIDUAL WHO OWNS OR CONTROLS MORE THAN
10% OF STOCK OR THAT HAS A CONTROLLING INTEREST (I.E.FORMULATES, DETERMINES OR
VETOES BUSINESS POLICY DECISIONS):
Has Controlling
Owner Or Interest?
Name Address Controller Yes / No
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
10. OFFEROR'S ADMINISTRATIVE FUNCTIONS SUBCONTRACTORS
Offeror must identify any organizational or administrative functions (e.g.
claims processing, marketing, automated data processing, accounting) or key
personnel (e.g. administrator, medical director, chief financial officer, etc.)
which are subcontracted.
Subcontractor's Name:__________________________________________________________
Address:_______________________________________________________________________
Method Of Payment:_____________________________________________________________
Function Performed:____________________________________________________________
Estimated Value Of Contract: 10/1/96 - 9/30/97 $_______________
10/1/97 - 9/30/98 $______________________
10/1/98 - 9/30/99 $______________________
Subcontractor's Name:__________________________________________________________
Address:_______________________________________________________________________
Method Of Payment:_____________________________________________________________
Function Performed:____________________________________________________________
Estimated Value Of Contract: 10/1/96 - 9/30/97 $_______________
10/1/97 - 9/30/98 $______________________
10/1/98 - 9/30/99 $______________________
Subcontractor's Name:__________________________________________________________
Address:_______________________________________________________________________
Method Of Payment:_____________________________________________________________
Function Performed:____________________________________________________________
Estimated Value Of Contract: 10/1/96 - 9/30/97 $______________
10/1/97 - 9/30/98 $______________________
10/1/98 - 9/30/99 $______________________
Subcontractor's Name:__________________________________________________________
Address:_______________________________________________________________________
Method Of Payment:_____________________________________________________________
Function Performed:____________________________________________________________
Estimated Value Of Contract: 10/1/96 - 9/30/97 $______________
10/1/97 - 9/30/98 $______________________
10/1/98 - 9/30/99 $______________________
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11. OFFEROR'S KEY PERSONNEL
Indicate the names of the persons filling the following positions and the date
(month/year) they began, or will begin, their staff assignment. In addition, the
Offeror must attach detailed professional resumes for all key personnel to
include, at a minimum, the following:
<TABLE>
<CAPTION>
Position: Name: Starting Date: # of AHCCCS
hours per
week
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Administrator
- - -----------------------------------------------------------------------------------------------------
Medical Director
- - -----------------------------------------------------------------------------------------------------
Financial Officer
- - -----------------------------------------------------------------------------------------------------
Quality Mgt. Coordinator
- - -----------------------------------------------------------------------------------------------------
Case Management Coordinator
- - -----------------------------------------------------------------------------------------------------
Claims Administrator
- - -----------------------------------------------------------------------------------------------------
Behavioral Health Coordinator
- - -----------------------------------------------------------------------------------------------------
Grievance Coordinator
- - -----------------------------------------------------------------------------------------------------
</TABLE>
[END OF SECTION G]
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SECTION H - INSTRUCTIONS TO OFFERORS
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Proposal Content and Format..................................................... 59
2. AHCCCSA Bidders' Library........................................................ 59
3. Proprietary Information......................................................... 60
4. Prospective Offerors' Inquiries................................................. 60
5. Prospective Offerors' Conference................................................ 60
6. Federal Deadline for Signing Contract........................................... 61
7. Withdrawal of Proposal.......................................................... 61
8. Amendments to RFP............................................................... 61
9. General Matters................................................................. 61
10. Provider Network and Network Management......................................... 61
11. Capitation Rate................................................................. 62
12. Program Operations.............................................................. 62
13. Organization.................................................................... 64
14. Certificate of Insurance........................................................ 65
15. Data Management................................................................. 65
16. Amendments...................................................................... 65
17. Submission of Initial Proposal on Most Favorable Terms.......................... 66
18. Proposal Opening................................................................ 66
19. Proposal Discussions............................................................ 66
20. Best and Final Offers........................................................... 66
21. Award of Contract............................................................... 66
22. RFP Milestone Dates............................................................. 67
</TABLE>
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SECTION H - INSTRUCTIONS TO OFFERORS
Note: This RFP document does not describe the entire ALTCS program in complete
detail. The Offeror, therefore, is encouraged to make use of the Bidders'
Library and review the material incorporated by reference throughout the
document. See Paragraph 2 below.
CONTINUING OFFERORS ONLY: For items below followed by an asterisk [*], a
continuing ALTCS offeror must submit its proposal for that item only if its most
recent operational/ financial review revealed deficiencies and the offeror's
subsequent corrective action plan was not approved by AHCCCSA. The continuiing
offeror must also submit its proposal for that item if there have been
significant changes since the last operational/ financial review.
If the continuing offeror is deferring to its most recen
operational/financialreview to meet a requirement shown with an asterisk, it
must be indicated by entering "PER REVIEW" in the "Offeror's Page #" column of
the Offeror's Checklist. If the continuing offeror is proposing to expand into a
new service area, it must submit the asterisked items for the new service area.
1. PROPOSAL CONTENT AND FORMAT
The Offeror's proposal should present a detailed approach and plan for
addressing each element identified and described in this RFP. The information
must be presented in the order prescribed in Paragraphs 9 through 15 and again
in the Offerors' Checklist (Attachment J). Proposals that merely paraphrase
elements of this RFP or use such phrases as "will comply" or "standard
techniques will be employed" may be deemed unresponsive. AHCCCSA will not
provide any reimbursement for the cost of developing or submitting a proposal in
response to this RFP. One original and five copies of each proposal shall be
submitted in the format outlined below. Proposals received after the time and
date indicated on the front page of this solicitation will not be considered.
All proposals shall be organized as outlined in the checklist, forms and
computer disks provided in this solicitation. The checklist will serve as the
table of contents and the notes at the beginning of the checklist (Attachment J)
give specific instructions for new and continuing offerors. The Offeror must
indicate on the checklist the specific page numbers where material may be found
on the individual items. All pages of the Offeror's proposal must be numbered
consecutively, including attachments, appendices, exhibits, etc. The proposal
must be submitted in three-ring loose-leaf binders with the "spine" of each
binder clearly labeled to identify the Offeror, the contents of the binder, the
inclusive page numbers of that binder, and the number of the binder within the
series (e.g. "Vol. 2 of 4").
The binder containing the capitation and provider network computer disks must be
clearly identified on the outside of the binder. Sealed proposals must be
received at AHCCCSA no later than 3:00 pm, June 14, 1996.
Erasures, interlineations or other modifications in the proposal shall be
initialed in ink by the person authorized to sign the offer. AHCCCSA shall not
reimburse the Offeror the cost of proposal preparation.
2. AHCCCSA BIDDERS' LIBRARY
The Bidders' Library contains reference material on AHCCCS and ALTCS policies
and performance requirements to assist the Offeror in preparing a thorough and
realistic response to this solicitation. References are made throughout this
solicitation to materials in the Bidders' Library and all such materials are
incorporated into the contract by reference. The Bidders' Library is located at
701 E. Jefferson, Phoenix, AZ. Please contact Mark Renshaw at (602) 417-4577 for
further information and appointment times. The following documents are available
for viewing or copying in the Bidders' Library:
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ALTCS Eligibility Policy and Procedure Manual
AHCCCS Medical Policy Manual
AHCCCS Encounter Reporting User Manual
ALTCS Uniform Accounting and Reporting System and Guide for Audits of
ALTCS Contractors and Providers
AHCCCS Technical Interface Guidelines
Statement of Requirements for ALTCS Quality Management Program
Code of Federal Regulations (CFR), Titles 42 and 45 Arizona Revised
Statutes
ALTCS Rules
AHCCCS Rules
AHCCCS Fee-for-Service Capped Fee Schedule
AHCCCS Policy for Prevention, Detection and Reporting of Fraud and
Abuse
AHCCCS Reinsurance Manual
HCBS Cap Report
Long-Term Care Placement Report
Enrollment Report (last two years)
Transplantation rates
3. PROPRIETARY INFORMATION
All proposals shall become the property of AHCCCSA. The Offeror may designate
certain information to be proprietary in nature by printing the word
"proprietary" on top of each page for which nondisclosure is requested. Final
determinations of nondisclosure rest with AHCCCSA; however, all portions of the
Offeror's proposal, including those which are proprietary, may be provided to
the HCFA and its evaluation contractor.
4. PROSPECTIVE OFFERORS' INQUIRIES
Any questions related to this solicitation must be directed to Mark Renshaw,
AHCCCS Contracts and Purchasing, 701 E. Jefferson, Ph. All questions submitted
in writing to AHCCCSA, Contracts and Purchasing, by April 19, 1996 will be
combined and answered in a single RFP amendment shortly thereafter. oenix, AZ
85034. The Offeror shall not contact or ask questions of other AHCCCSA staff
unless authorized to do so by the Contracting Officer. Cite page, section and
paragraph number when submitting questions
5. PROSPECTIVE OFFERORS' CONFERENCE
A Prospective Offerors' Conference will be held on Monday, April 15, 1996 from
1-3 p.m. at the 701 E. Jefferson, 3rd Floor Gold Room. The purpose of this
conference will be to clarify the contents of this solicitation, answer
questions from prospective offerors, and offer general guidance on the required
format of all proposals. Any doubt regarding the contents or requirements of
this solicitation or any apparent omission or discrepancy should be presented at
or before this conference. AHCCCSA will then determine the appropriate action
necessary and issue a written amendment to the solicitation, if appropriate.
6. FEDERAL DEADLINE FOR SIGNING CONTRACT
The federal Health Care Financing Administration (HCFA) has imposed strict
deadlines for finalization of contracts in order to qualify for federal
financial participation. This contract, completed and signed by both parties,
must be available for submission to HCFA prior to the beginning date of the
contract term (Oct. 1, 1996), but in no case later than November 1, 1996. All
public entity offerors must ensure that the approval of this contract is placed
on appropriate agendas well in advance to ensure compliance with this deadline.
Any withholding of federal funds caused by the Offeror's failure to comply with
this requirement shall be borne in full by the Offeror.
7. WITHDRAWAL OF PROPOSAL
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At any time prior to the proposal due date and time, the Offeror (or designated
representative) may withdraw its proposal. Telegraphic or mailgram withdrawals
will not be considered.
8. AMENDMENTS TO RFP
Amendments may be issued subsequent to the issue date of this solicitation.
Receipt of solicitation amendments must be acknowledged by signing and returning
the signature page of the amendment to AHCCCSA.
[PARAGRAPHS 9 THROUGH 15 PERTAIN TO THE PROPOSAL REQUIREMENTS AS THEY APPEAR IN
ATTACHMENT J, OFFEROR'S CHECKLIST:]
9. GENERAL MATTERS
Complete and submit the Offeror's signature page (cover page of this document).
Complete and submit the Offeror's Checklist. Review and understand the
Certification of Non-coercion.
10. NETWORK
Provider Network - The Offeror shall have in place an adequate network of
providers capable of meeting all contract requirements. Attachment B lists the
minimum network requirements by service area. The Offeror shall provide in its
proposal information concerning its entire provider network for all service
areas whether the proposal is for a continuing service area or an expansion of
service areas. Submit both the nursing facility network disk and hard copy. A
hard copy roster of the acute care, HCBS and behavioral health providers shall
be submitted in the format listed below. Signed letters of intent or contract
signature pages must accompany the provider listings as evidence of an agreement
between the Offeror and provider. Attachment E, Sample Letter of Intent, is the
only acceptable format for these letters. AHCCCSA may verify any or all
submitted letters of intent or contracts.
Nursing Facility Network - The nursing facility network disk screens contain the
names of the nursing facilities listed alphabetically by county. See Attachment
G and the network disk for detailed instructions.
Acute care, HCBS and Behavioral Health - The Offeror shall submit a roster by
county of acute care, HCBS and behavioral health providers for Contract Year
96-97. In addition to the roster, signed letters of intent or contract signature
pages must be submitted in the same order as the names listed on the provider
roster. The roster shall appear in the same order and use the same headings as
the Sample Letter of Intent provider listing (Attachment E). For example, start
with Acute Care Hospital which is #2 on the listed provider types in the Sample
Letter of Intent and list all the hospitals for which letters of intent or
contracts have been obtained. This should be followed by Psychiatric Hospital
which is #3 on the listed provider types in the Sample Letter of Intent.
Continue the provider listing through Hospice Service Providers. Include the
following information in the roster listing: provider name, address including
street, city, state, and zip code and telephone number.
Network Maps (Maricopa And Pima Counties Only) - The Offeror must demonstrate
the ability to provide Primary Care Provider (PCP) and pharmacy services in
metropolitan Phoenix and Tucson according to certain maximum travel distances.
Attachment I to this solicitation consists of two maps (Phoenix and Tucson) each
of which shows a geographical boundary. The Offeror's network must be such that
a member residing within the boundary area would not have to travel more than
five miles to see a PCP or pharmacy. A member residing outside the boundary area
(but within the total area shown on the map) must not have to travel more than
10 miles to see such providers. (See Mapping Instructions which follow.)
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Mapping Instructions: The Offeror must use the maps provided (Attachment I) to
indicate the location of each PCP and pharmacy in its proposed network for
metropolitan Phoenix and Tucson. The Offeror should use color coded dots, red
for PCP's and green for pharmacies. The Offeror may place one red dot in the zip
code with a number indicating the number of proposed subcontracts for PCP's
within that zip code. Similarly, the Offeror may place a green dot in the
particular zip code with a number indicating the number of pharmacies proposed
for that zip code area. Since the color on dots is not distinguishable when
photocopied, the Offeror should place colored dots on not only the original but
also on all five required copies, or supply colored copies.
Network Development - The Program Contractor must develop and maintain an
adequate provider network to provide all covered services. Where there is a
deficiency in the provider network, identify the deficiency and submit your plan
for correcting it. Submit a description of your current Home and Community Based
Services program, as well as your plan for further developing these services.
Address, at a minimum, the following areas:
Attendant Care
Personal Care
Homemaker
Adult Day Health
Home Health Agency Services, including nursing and home health aide
Group Respite as an alternative to Adult Day Health
Environmental modifications
Home-delivered meals
Submit a separate description of your proposals for providing alternative
residential settings to include, at a minimum:
Adult Foster Care
Adult Care Homes (pilot program)
Supportive Residential Living (pilot program)
Traumatic Brain Injury facilities
Behavioral Health levels I and II
Network Management - Submit a narrative description, or copies of your policies
and procedures, indicating how you will meet the network management requirements
specified in Section D, Paragraphs 24 through 28. The description must describe
in detail the internal monitoring process pertaining to frequency, problem
identification, corrective action plan, follow-up, sanctions and cause for
provider termination.
Provider manual - Submit one manual in a separate binder labeled "Provider
Manual".
11. CAPITATION RATE
Capitation is a fixed per member monthly payment to the Program Contractor for
the provision of covered services to members. It is an actuarially sound amount
to cover expected utilization and costs in a risk-sharing managed care
environment. In addition, AHCCCSA offers reinsurance programs to protect the
Program Contractor from unusual and unforeseen expenses.
The Offeror must demonstrate that the capitation rates proposed are actuarially
sound. That is, the Offeror, if awarded a contract, should be able to keep
utilization at or below its proposed levels and to subcontract for unit costs
that average at or below the amounts shown on its Capitation Rate Calculation
Sheet disk. The Offeror may require assistance from an actuary to develop some
of the fundamental assumptions for meeting the criteria defined above.
To facilitate the preparation of its capitation proposals, AHCCCSA will provide
the offeror with a copy of the Data Supplement Book, to be available April 15 or
shortly thereafter. This book should not be used as the sole
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source of information in preparing the capitation proposal. The Offeror is
solely responsible for research, preparation and documentation of its capitation
proposal.
The Offeror must submit its capitation proposal using the AHCCCSA capitation bid
disk. Attachment F to this RFP contains detailed instructions for using the
computer disk program.
12. PROGRAM OPERATIONS
Medical Director - Submit the position description or a copy of the contract.
Case Management Structure Plan - A new offeror, or a continuing offeror bidding
on a new service area, must describe how it will meet ALTCS case management
requirements. (See Section D, Paragraph 9, Case Management.) A continuing
offeror must submit this case management plan if the 1994-96 case management
services review indicated deficiencies and the subsequent corrective action plan
was not approved by AHCCCSA. A continuing offeror must also submit its case
management plan if there have been significant management or organizational
changes since the last services review or plan submittal.
The description shall include the number of case managers, how case management
assignments are made and how protocols are communicated. Describe the monitoring
process to ensure compliance with protocols of case management ratios, data
entry, member contact timelines, member record content, placement decisions
(including any preference for particular procedures), how case managers will
coordinate with primary care physicians and prior authorization staff, how
out-of-county clients will be managed and member transition to AHCCCS acute care
health plans.
Quality Management/ Utilization Management - A new offeror, or a continuing
offeror bidding on a new service area, must submit a quality management plan
addressing the requirements specified in the AHCCCS Medical Policy Manual. (Also
see Section D, Paragraph 11, Quality Management/ Utilization Management.) This
plan should include the Offeror's utilization management plan. Attach
utilization management policies and procedures for (1) prior authorization and
referral requirements, (2) clinical standards used, (3) restrictions on settings
for care, and (4) the qualifications of individuals performing utilization
management activities.
A continuing offeror must submit the quality management plan if the 1994-96 case
management services review indicated deficiencies and the subsequent corrective
action plan was not approved by AHCCCSA. A continuing offeror must also submit
its quality management plan if there have been significant management or
organizational changes since the last services review or plan submittal.
Grievance and Appeals - The Offeror must submit specific information describing
how it will meet the requirements outlined in Attachment H, Grievance Process
and Standards.
Member Transition and Program Contractor Changes policy - Submit relevant
policies and procedures.
Member Handbook and Communications - Submit a copy of the current or proposed
member handbook.
Behavioral Health Services - Submit the behavioral health services plan that
includes, but is not limited to, referral process, treatment planning and
coordination, staff and provider training in the identification of and screening
for behavioral health needs, quality and utilization management.
13. ORGANIZATION
Section G - Complete all questionnaire items and submit all materials required
in Section G, including authorized signatory, functional organization chart,
resumes of key personnel (submit position description if vacant), licenses,
certifications, description of organizational entity, description of claims
processing, RBUC/ IBNR method,
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financial projections, financial disclosure statements, administrative
functions/ management/ MIS subcontractor statements and related party
transactions.
Financial Viability Standards - Calculate and submit the financial viability and
performance measures based on your financial projections.
Performance Bond or Bond Substitute - Submit your plan for meeting this
requirement including the type of bond to be posted, source of funding and
timeline for meeting the requirement.
Patient Trust Account Policy and Procedure - Submit a copy of your policy for
monitoring these accounts.
TPL/ COB Procedures - Submit a copy of your policy that addresses third party
liability requirements.
Share of Cost Collection Policy - Submit copy of policy that describes the
collection of the member's share of cost.
Fraud and Abuse - Submit a copy of your policy pertaining to the prevention and
detection of fraud and abuse.
Model Subcontracts - Submit copies of the following model subcontracts:
a. Contracts between related parties
b. Subcontracts for full or partial risk, or withholds
c. Contracts for management information systems or data
management firms
d. Primary care physicians
e. Attendant Care and Home Health agencies
f. Behavioral health providers
g. Nursing facilities
h. Alternative residential care facilities (described in
Section D, Paragraph 1, Covered Services)
i. Dental services
14. CERTIFICATE OF INSURANCE
The Offeror shall submit a properly completed Certificate of Insurance in
accordance with the requirements of Section E, Paragraph 28, Insurance.
15. DATA MANAGEMENT
The Offeror shall submit a description of how it will meet the data management
requirements specified in Section D, Paragraph 52, Data Management. If not
currently able to meet requirements, submit an appropriate timeline for
start-up.
16. AMENDMENTS
The Offeror shall sign and submit with its offer all amendments to this
solicitation.
17. SUBMISSION OF INITIAL PROPOSAL ON MOST FAVORABLE TERMS
AHCCCSA reserves the right to award a contract without negotiation based solely
on the price and terms of the proposal as initially submitted. The Offeror is
therefore advised to submit its best offer initially.
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18. PROPOSAL OPENING
Proposals will be opened publicly immediately following the proposal due date
and time. The name of each offeror will be read publicly and recorded, but no
other information contained in the proposals will be disclosed. Proposals will
not be available for public inspection until after contract award.
19. PROPOSAL DISCUSSIONS
Discussions may be conducted with a responsible offeror who submits a proposal
determined to be reasonably susceptible of contract award. As used here,
"responsible offeror" means an offeror that has the capability to perform the
contract requirements and also the integrity and reliability to assure good
faith performance. In conducting discussions, there will be no disclosure of any
information derived from competing proposals. AHCCCSA will have sole discretion
in selecting proposal discussion items and such discussions may include
interviews or be in writing. At the end of discussions, the offeror may be
permitted the opportunity to revise its proposal for the purpose of obtaining
its best and final offer.
20. BEST AND FINAL OFFERS
If in the best interest of the State, AHCCCSA will issue a written request for a
Best and Final Offer (BFO) setting forth the date , time and place for its
submission. The purpose of the request for a BFO is to allow the Offeror an
opportunity to resubmit bids for rate components not previously accepted by
AHCCCSA. In addition, AHCCCSA will disclose to the Offeror which of its bid rate
components are acceptable (within or below the actuarial rate range), and which
are not acceptable (above the actuarial rate range).
The BFO must be submitted on the computer disk provided by AHCCCSA. The Offeror
whose final bid rate components fall below the bottom of the actuarial rate
range will have its rates increased to the bottom of the component rate range.
The Offeror whose final bid rate components are above the actuarial rate range
will be offered a rate in the bottom half of the component rate range. If the
Offeror does not submit a notice of withdrawal or a BFO, its immediate previous
offer will be considered its best and final offer. The Offeror will not be
allowed to adjust upward a previously accepted component rate bid.
21. AWARD OF CONTRACT
Award will be made to the offeror whose proposal is determined to be the most
advantageous to AHCCCSA based on the evaluation factors set forth in Section I
of this RFP. Final capitation rates are subject to approval by HCFA.
Notwithstanding any other provision of this solicitation, AHCCCSA expressly
reserves the right to:
a. Waive any immaterial mistake or informality;
b. Reject any or all proposals, or portions thereof; and/or
c. Reissue a Request for Proposals
A response to this RFP is an offer to contract with AHCCCSA based upon the
terms, conditions, scope of work and specifications of the RFP. Proposals do not
become contracts unless and until they are accepted by the contracting officer.
A contract is formed when the AHCCCSA Contracting Officer provides written
notice of award to the successful offeror(s). The final contract consists of the
terms and conditions of the RFP, amendments to the RFP, the Offeror's last BFO,
and subsequent contract modifications, if any.
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22. RFP MILESTONE DATES
The following is the anticipated schedule of events regarding the solicitation
process:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------- --------------------------
Activity Date
- - ----------------------------------------------------------- --------------------------
<S> <C>
Solicitation issued 4/1/96
- - ----------------------------------------------------------- --------------------------
Offerors' Conference 4/8/96
- - ----------------------------------------------------------- --------------------------
RFP-related questions due (if any) 4/19/96
- - ----------------------------------------------------------- --------------------------
Technical Assistance Conference 5/6/96
- - ----------------------------------------------------------- --------------------------
Proposals due 6/14/96
- - ----------------------------------------------------------- --------------------------
Awards made 7/15/96
- - ----------------------------------------------------------- --------------------------
Contract term begins 10/1/96
- - ----------------------------------------------------------- --------------------------
</TABLE>
[END OF SECTION H]
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SECTION I - EVALUATION FACTORS SELECTION PROCESS
AHCCCSA has developed a scoring process which is designed to evaluate fairly an
offeror's ability to provide cost-effective, high quality contract services in a
managed care setting. The following factors, weighted as shown, will be
evaluated.
Provider Network and Management 30%
Program 30%
Capitation 25%
Organization 15%
Provider Network and Capitation will be scored by county. Organization and
Program will be scored in the aggregate for all counties bid by the Offeror.
Contracts will be awarded to qualified Offerors whose proposals are deemed to be
most advantageous to the State in accordance with [Section H, Paragraph 21.]
AHCCCSA will consider its experience with continuing ALTCS Offerors and
contracted health plans in evaluating their proposals in the areas of Provider
Network, Program and Organization. The results of the most recent Operational
and Financial Reviews performed by AHCCCSA through April 1996 will be used in
the evaluation process. AHCCCSA may also conduct New Offeror Reviews.
AHCCCSA reserves the right to waive immaterial defects or omissions in this
solicitation or submitted proposals.
ALL OF THE COMPONENTS LISTED BELOW WILL BE EVALUATED AGAINST CORRESPONDING
STATUTES, AHCCCSA RULES, REGULATIONS, POLICIES AND THE REQUIREMENTS CONTAINED IN
THIS RFP. THE OFFEROR'S CHECKLIST (ATTACHMENT J) CONTAINS RFP REFERENCES FOR
EACH OF THESE ITEMS:
PROVIDER NETWORK DEVELOPMENT AND MANAGEMENT
The provider network will be evaluated and scored with reference to the
Offeror's network development and network management. "Network development" is
defined as the process of negotiating contractual relationships with a
sufficient number of providers able to competently perform defined covered
services within a given area in accordance with AHCCCS standards (e.g.
appointment times).
1. Nursing facility network
AHCCCSA will use the automated Nursing Facility Network Program to evaluate and
score the nursing facility network. Within the program, the Offeror must
indicate the nursing facilities for which it has signed letters of intent or
contracts for Contract Year 96-97. The Offeror must submit the signed letters of
intent and/or the contract signature pages for Contract Year 96-97 as part of
its proposal.
Extra consideration will be given for letters of intent or contracts that
specify payment rates, share of cost collection agreements, and certain types of
risk relationships. The share of cost collection agreement will be evaluated
based on delineation of responsibility of both parties in the collection of the
members' share of cost. Mere delegation of this responsibility to the provider
will not result in any extra credit or consideration in the scoring process. The
agreement must demonstrate due diligence on the part of both parties. The
Offeror will receive extra consideration for entering risk-sharing agreements
with its nursing homes. To receive extra consideration, the risk agreement must
align the incentives of the Offeror and the nursing home in placing the member
at the appropriate level of care, including moving the member to an HCBS setting
if appropriate. The risk agreements must not encourage underutilization or
violate any federal or state regulations.
2. Acute, HCBS, behavioral health network
3. HCBS development plan
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4. Provider network deficiency plan - The Offeror's plan will be evaluated to
determine if the Offeror has identified network deficiencies and has
established an action plan to address the deficiencies.
5. Network management policies and procedures
6. Provider Manual
CAPITATION RATE
The Offeror must submit its capitation rate bid by county. The components of
this rate bid that will be evaluated and scored are:
1. Nursing facility
2. HCBS
3. Acute care
3. Administration
4. Risk, contingencies and profit
The components will be weighted for scoring based upon their relative importance
to the overall program. The lowest bid for each component will receive the
maximum allowable points. However, if a bid is below the actuarial rate range,
the bid will be evaluated as if it is at the bottom of the acruarial rate range.
No additional points will be given for bids below the actuarial rate range.
Conversely, the highest bid (within or above the actuarial rate range) for each
component will receive the least number of points.
PROGRAM OPERATIONS
1. The Medical Director's job description and/or contract
2. Case management plan, policies and procedures
3. Quality Management/Utilization Management plans and policies
4. Grievance policies
5. Member transition policy which includes program contractor changes
6. Member handbook and communications policies and procedures
7. Behavioral health services plan and policies
ORGANIZATION
1. Functional organization chart and resumes of key personnel
2. Claims and encounter processing system
3. RBUC/ IBNR methods
4. Financial projections
5. Financial viability standards based on the financial projections
6. Performance bond or bond substitute
7. Administrative cost allocation
8. Patient Trust Account policy and procedure - Evaluation will consider
whether the Offeror has an active role in monitoring patient trust
accounts.
9. TPL/COB policies and procedures - Evaluation will consider the Offeror's
cost avoidance and cost recovery methods.
10. Share of Cost collection policy - Evaluation will consider whether the
Offeror's and provider's responsibility in the collection of the member
share of cost is clearly specified.
11. Fraud and abuse policy
12. Model subcontracts
[END OF SECTION I]
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ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
SOLICITATION AMENDMENT Page 1 of 2
================================================================================
AMENDMENT NUMBER: SOLICITATION NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
1 YH6-0012 October 1, 1996 OMC/ LTC
================================================================================
OFFEROR'S NAME AND ADDRESS:
================================================================================
PURPOSE OF AMENDMENT: (1) To clarify which behavioral health and Traumatic Brain
Injury costs are covered under reinsurance; (2) to amend the instructions for
preparing the nursing home roster (Attachment G) to delete all references to a
nursing home network diskette, which will not be used; (3) to change the date of
the Technical Assistance Conference.
================================================================================
THE SOLICITATION REFERENCED ABOVE IS AMENDED AS FOLLOWS:
(1) Page 2 of this amendment contains a revision of Section D,
Paragraph 43, Reinsurance. The changes are indicated as either deleted
text (shown like this) or added text (shown like this). The purpose of
the revision is to clarify that the only behavioral health/TBI costs
which qualify for reinsurance are those identified as part of the
institutional or HCBS setting, and which have been authorized in
advance by AHCCCSA. No other ALTCS covered services (except for acute
inpatient hospitalizations) qualify for reinsurance reimbursement.
(2) Attachment G is replaced in its entirety by Attachment G (First
Revision), attached hereto. There will be no nursing facility computer
disk issued and offerors will use instead the county-by-county rosters
included in the new Attachment G. All references to use or preparation
of the nursing facility network disk are hereby deleted.
(3) The Technical Assistance Conference, if necessary, originally
scheduled for Monday, May 6, has been re-scheduled for Friday, May 10
at 3 pm in the Arizona Room (701 E. Jefferson).
NOTE TO OFFERORS:
Please enter name and address above, complete signature block below and send a
copy of this page only to:
Mark Renshaw
AHCCCSA, Contracts and Purchasing
701 E. Jefferson
Phoenix, AZ 85034
================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL
SOLICITATION REMAIN UNCHANGED AND IN FULL EFFECT.
================================================================================
SIGNATURE OF AUTHORIZED SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
REPRESENTATIVE:
================================================================================
TYPED NAME: TYPED NAME: MICHAEL VEIT
================================================================================
TITLE: TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
================================================================================
DATE: DATE:
================================================================================
<PAGE> 263
43. REINSURANCE
Reinsurance is a stop-loss program provided by AHCCCSA to the Program Contractor
for the partial reimbursement of covered inpatient facility medical services
incurred for a member beyond an annual deductible. AHCCCSA is self-insured for
the reinsurance program which has an initial deductible level and a subsequent
coinsurance percentage. For dates of service after 10/1/96 (under regular
reinsurance), the Program Contractor will be reimbursed at 75% of allowable
charges over the following deductibles:
<TABLE>
<CAPTION>
<S> <C>
Urban county, with Medicare Part A $ 12,000
Urban county, without Medicare $ 20,000
Rural county, with Medicare Part A $ 5,000
Rural county, without Medicare $ 9,000
Behavioral Health/ Traumatic Brain Injury 0
=======================================================
</TABLE>
Regular reinsurance covers acute inpatient hospitalizations (i.e. anything
billed on a UB92). Effective 10/1/96, however, members considered by the AHCCCS
Office of the Medical Director (OMD) to be high-cost behavioral health or
Traumatic Brain Injured (TBI) will also be covered under regular reinsurance.
Services Placement into an institutional or HCBS setting for these members must
be approved in advance by OMD for the Program Contractor to qualify for
reinsurance reimbursement. Behavioral Health/ TBI reinsurance will cover the
institutional or HCBS setting only. Acute care services and all other ALTCS
services are not covered by reinsurance for this population. The Program
Contractor will be reimbursed at 75% of allowable charges with no deductible.
Services to members identified as being catastrophically eligible in accordance
with OMD policies will be covered under a special catastrophic program instead
of the regular reinsurance program. Catastrophic reinsurance coverage for
transplants is limited to 85% of the AHCCCS contract amount for the transplant
services rendered, or 85% of the Contractor-paid amount, whichever is lower.
Catastrophic reinsurance for hemophiliacs is covered at 85% of the
Contractor-paid amount. The AHCCCS contracted transplantation rates are
available in the Bidders' Library.
AHCCCSA uses inpatient encounter data to determine regular reinsurance benefits.
Reimbursement for regular reinsurance benefits will be made to the Program
Contractor monthly. AHCCCSA will also provide for a reconciliation of
reinsurance payments in the case where encounters used in the calculation of
reinsurance benefits are subsequently adjusted or voided.
Encounter data will not be used to determine catastrophic reinsurance benefits.
However, this does not relieve the Program Contractor of the responsibility for
submitting encounters for catastrophic reinsurance services. The Program
Contractor must submit catastrophic reinsurance claims in accordance with the
AHCCCS Reinsurance Policy/Procedure Manual. All catastrophic reinsurance claims
shall be subject to medical review by AHCCCSA or its designee.
Medical review on regular reinsurance cases will be determined based on
statistically valid random sampling. The AHCCCS Office of the Medical Director
will generate the sampling and will notify the Program Contractor of
documentation needed for the retrospective medical review process to occur at
the Program Contractor's offices. The results of the medical review sampling
will be extrapolated to the Program Contractor's entire regular reinsurance
reimbursement population. A partial recoupment of reinsurance reimbursements
made to the Program Contractor may occur based on the results of the medical
review sampling.
<PAGE> 264
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
SOLICITATION AMENDMENT
================================================================================
AMENDMENT NUMBER: SOLICITATION NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
2 YH6-0012 October 1, 1996 OMC/ LTC
================================================================================
OFFEROR'S NAME AND ADDRESS:
================================================================================
PURPOSE OF AMENDMENT: (1) To answer questions from prospective offerors
pertaining to the ALTCS RFP; (2) to make certain changes to the RFP text based
on these questions.
================================================================================
THE SOLICITATION REFERENCED ABOVE IS AMENDED AS FOLLOWS:
This amendment has two purposes. The first is to make actual changes
to the text of the RFP. The second is to answer questions from
offerors in order to clarify existing text. The actual changes to the
text are described on pages 2-3 of this amendment and are followed by
the 30-page "ALTCS RFP - Questions and Answers". Attached also are
revised Attachments B (Minimum Network Standards), C (Encounter
Submission Standards) and E (Sample Letter of Intent).
NOTE TO OFFERORS:
Please enter name and address above. A copy of this signature page only must be
submitted with your proposal.
================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL
SOLICITATION REMAIN UNCHANGED AND IN FULL EFFECT.
================================================================================
SIGNATURE OF AUTHORIZED SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
REPRESENTATIVE:
================================================================================
TYPED NAME: TYPED NAME: MICHAEL VEIT
================================================================================
TITLE: TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
================================================================================
DATE:
DATE: MAY 6, 1996
================================================================================
1
<PAGE> 265
<TABLE>
<CAPTION>
====================================================================================================================================
CHANGES TO THE RFP TEXT:
- - --------- --------- ---------------------------------------- ------------------------------------- ---------------------------------
RFP RFP
PAGE PARA. OLD TEXT: NEW TEXT: PURPOSE OF CHANGE:
- - --------- --------- ---------------------------------------- ------------------------------------- ---------------------------------
<C> <C> <C> <C> <C>
15 D.9 The case manager shall make initial The case manager shall make initial To clarify that the five and ten
contact with the member within five contact with the member within five day periods referred to here are
days of enrollment, initial on-site working days of enrollment, initial working days, not calendar days.
contact with the member within 10 days on-site contact with the member
of enrollment within 10 working days of
enrollment.
- - --------- --------- ---------------------------------------- ------------------------------------- ---------------------------------
19 D.14 [Program Contractor name] will make a [Program Contractor name] will To make the RFP consistent with
final decision within 45 days of make a final decision within 30 AHCCCS Rules and clarify that the
getting your written or oral days of getting your written or member may file a grievance.
grievance oral grievance. orally as well as in writing and
that the Program Contractor must
make a final decision on the
grievance within 30 days, not 45.
- - --------- --------- ---------------------------------------- ------------------------------------- ---------------------------------
19 D.15 The effective date of enrollments and The effective date of enrollment To correct an error in the RFP
disenrollments with the Program with the Program Contractor is two regarding the disenrollment
Contractor is two days after the date days after notification to the effective date.
the Program Contractor receives Program Contractor. Disenrollment
notification. is effective the end of the month
of discontinuance.
- - --------- --------- ---------------------------------------- ------------------------------------- ---------------------------------
24 D.28 For BEHAVIORAL HEALTH SERVICES, the For BEHAVIORAL HEALTH SERVICES, To change appointment standards
Program Contractor shall be able to the Program Contractor shall be for behavioral health services.
provide appointments as follows: able to provide appointments as
a. Emergency appointments within follows:
24 hours of request a. Emergency appointments within
b. Non-emergency appointments 24 hours of referral.
within 7 days of request b. Behavioral Health Screening
within seven days of referral for
HCBS members.
c. Non-emergency appointments for
nursing home residents: within
30 days of referral.
d. Non-emergency appointments for
HCBS members: within 30 days
of behavioral health screening.
- - --------- --------- ---------------------------------------- ------------------------------------- ---------------------------------
24 D.29 The Program Contractor is responsible The Program Contractor is To delete the requirement of
for reporting all cases of suspected responsible for reporting all cases reporting "inappropriate
fraud and abuse or inappropriate of suspected fraud and abuse by practices" by subcontractors,
practices by subcontractors, members subcontractors, members or members or employees.
or employees. employees.
- - --------- --------- ---------------------------------------- ------------------------------------- ---------------------------------
28 D.37a "Current ratio" is defined as "Current "Current ratio" is defined as To make the definition of
assets divided by current liabilities. "Current assets divided by current "current asset" consistent with
liabilities. Current assets include that used in the acute care
any long-term investments that can program.
be converted to cash within 24
hours without significant penalty
(i.e. greater than 20%).
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 266
CHANGES TO THE RFP TEXT (CONT'D):
<TABLE>
<CAPTION>
- - ------ ------- ---------------------------------------- ---------------------------------------- -----------------------------------
<C> <C> <C> <C> <C>
28 D.37b "Equity per member" is defined as "Equity per member" is defined as To make the definition of "equity
"Equity, less on-balance sheet "Equity, divided by the number of per member" consistent with that
performance bond, divided by the members at the end of the period." used in the acute care program.
number of members at the end of the
period."
- - ------ ------- ---------------------------------------- ---------------------------------------- -----------------------------------
Atch All Partial care services are required as Partial care services are required as To correct an error in the original
B "County-wide coverage" "Facility Location". See revised RFP.
Attachment B included herein.
- - ------ ------- ---------------------------------------- ---------------------------------------- -----------------------------------
Atch 2 (No reference) AHCCCSA reserves the right to change To clarify that AHCCCSA may change
C these sanction amounts during the term sanction amounts should
of the contract. circumstances warrant.
- - ------ ------- ---------------------------------------- ---------------------------------------- -----------------------------------
Atch 3 Current language makes no sanction See revised Attachment C included Attachment C has been revised to
C exceptions for AHCCCS errors herein. clarify the program contractor's
sanction liability.
- - ------ ------- ---------------------------------------- ---------------------------------------- -----------------------------------
Atch (No reference.) See revised Attachment E, Letter of All offerors must use the revised
E Intent, enclosed herein. Letter of Intent which adds the
Yes _____ No_____". If yes is
checked, the offeror must attach
documentation that addresses rates,
share of cost collection and/or
risk arrangements. The offeror
may add this documentation for
Letters of Intent that have already
been completed prior to this
amendment decision.
====================================================================================================================================
</TABLE>
5
<PAGE> 267
ALTCS RFP - QUESTIONS AND ANSWERS
NOTE: Below the "Page #" in the left-hand column is the paragraph reference.
"D.7", for example, means "Section D, Paragraph 7" of the RFP. "Def" refers to
Section C, Definitions.
Page: Offeror:
1 APIPA Q: Will the final contract document contain the RFP with a
signature and rate page on top (like the current acute
care contracts) or a separate written contract document
that incorporates the RFP?
A: The RFP document, when signed on the front page by both
parties, becomes the contract, just as in the acute care
contracts. Rates will be entered in Section B (page 2) of
the RFP.
3 APIPA Q: What is meant by the term "recipient practices" in this
Def definition of "abuse (by provider)"? Is "recipient"
referring to provider actions, member actions, or both?
A: This definition, taken verbatim from the Code of Federal
Regulations, refers to actions taken by both providers and
members, or "recipients". The term to be defined, then,
should not have been limited to "abuse (by provider)", but
rather "abuse".
3 APIPA Q: Is an Adult Care Home required to coordinate necessary
Def ALTCS HCBS services as required in the definition of Adult
Foster Care below?
A: Refer to the AHCCCS Medical Policy Manual, Chapter 1200,
Section 1230.
3 APIPA Q: Is an Adult Foster Care home required to provide personal
Def care and/or custodial care services as required in the
definition of Adult Care Home above?
A: Refer to the AHCCCS Medical Policy Manual, Chapter 1200,
Section 1230.
3 APIPA Q: What is the definition of "custodial care services"?
Def A: This term is not included in the definition of Adult
Foster Care.
3 APIPA Q: Is the definition of an "adult" to mean an individual 21
Def years of age or older for this type of facility?
(Definitions: Adult Foster Care)
A: Age 18 and over is considered an adult.
3 APIPA Q: What are the minimum certification requirements for
Def "attendants" providing Attendant Care services to members?
A: Refer to the AHCCCS Medical Policy Manual, Chapter 1200,
Section 1240 and Chapter 1500, Section 1540.
3 APIPA Q: Will it be the program contractors' responsibility to
Def "credential" Attendant Care providers for necessary
certifications and experience?
A: Yes. Refer to the AHCCCS Medical Policy Manual, Chapter
1200, Section 1240 and Chapter 1500, Section 1540.
3 APIPA Q: Please define "companionship" and indicate to what extent
Def it is a covered service? (Definitions: Attendant Care)
A: Refer to the AHCCCS Medical Policy Manual, Chapter 1200,
Section 1240 and Chapter 1500, Section 1540.
4 APIPA Q: What is the definition of and/or required specifications
Def to be a "contractor"? Is the term intended to be
synonymous with "Program Contractor" (not defined)?
A: We don't understand the purpose of your question. Please
re-state it with reference to a real or likely
misunderstanding of a solicitation provision.
6
<PAGE> 268
4 APIPA Q: Please clarify that the definition of a "program
Def contractor" is defined by the second sentence of the
definition provided for the term "offeror".
A: Your interpretation is correct; however, a program
contractor may also be created by legislative mandate.
4 APIPA Q: Given that program contractors are required to initiate
Def services within the timeframes outlined in this Request
for Proposal, is it reasonable to require program
contractors to have all third party benefits identified
and contracted for purposes of cost avoidance prior to
rendering services? Please comment and provide additional
clarification. (Definitions: Cost Avoidance)
A: Yes, if possible; it is not the intent of this provision
to prevent or delay the delivery of services.
4 APIPA Q: Will AHCCCSA add "or one of its subcontractors" after
Def "Program Contractor" in the second line? (Definitions:
Cost Avoidance)
A: We do not believe it is necessary. Our contract is with
program contractors; it is their responsibility.
4 APIPA Q: In this definition, as presented, encounters submitted by
Def providers for services rendered but denied payment by a
program contractor for various administrative reasons in
the normal course of claims processing would not be
reported to AHCCCSA. Even if an encounter is denied, would
not AHCCCSA want to receive information that a covered
services was provided but denied for administrative
reasons (i.e., a record do the occurrence of an encounter
event), in order to more appropriately reflect utilization
another databases for analysis and rate setting purposes,
regardless of an encounter's payment status? (Definitions:
Encounter)
A: The definition of "encounter" includes all data of an
encounter whether or not a financial liability was
included. The definition states "It includes all services
for which the program contractor incurred any financial
liability." If there is financial liability associated
with the event, it must be reported as an encounter. This
language does not preclude the program contractor from
reporting encounters of a non-covered service, no
financial liability, alternative health care, covered by
third party, etc. In fact, we encourage reporting these
encounters for our use in quality management, utilization,
quality indicators, rate setting, capitation and
additional purposes.
4 APIPA Q: Please clarify that the "rules" as referred to in this
Def definition are referenced in A.A.C. R9-28-3xx et seq.?
(Definitions: Enrollment)
A: These are addressed in A.A.C. Article 4, R9-28-402,
R9-28-405.
4 APIPA Q: What is the definition of and requirements for a
Def "registered provider"? Who performs the registration
process and how is this information made available to
program contractors? (Definitions: FFS)
A: An AHCCCS registered provider is an entity (individual or
organization) that has an active AHCCCS provider ID and
provides AHCCCS covered services within the scope of
practice as defined by federal, state and local law and
regulations and AHCCCS policy for the provider type. If a
provider's ID number is inactive, AHCCCS will not pay FFS
claims or accept encounters for services that provider may
render to AHCCCS members. A provider receives an AHCCCS
provider ID number by submitting a completed AHCCCS
provider registration application, other applicable
required forms, and signed Provider Participation
Agreement. The provider must meet all minimum requirements
for the provider type including licensure and/or
certification. The AHCCCS Provider Registration Unit
performs the provider registration process and provides a
monthly tape to the health plans and program contractors
that contains information on AHCCCS registered providers.
4 APIPA Q: Please clarify that Home Delivered Meals would only be
Def available to members receiving HCBS services in their own
homes (i.e. not institutionalized or not residing in an
HCBS approved alternative residential setting).
7
<PAGE> 269
A: Refer to the AHCCCS Medical Policy Manual, Chapter 1200,
Section 1240.
4 APIPA Q: Please clarify that Homemaker Services, as defined here,
Def may be performed through Attendant Care services described
above. If not, please provide detail as to the
distinctions in the services to be provided by these two
(2) provider types.
A: Refer to the AHCCCS Medical Policy Manual, Chapter 1200,
Section 1240, and Chapter 1500, Section 1540.
5 MMCS Q: In the past, MMCS has allowed members to use their
Def Medicare benefits with any Medicare approved hospice. Does
this definition of Hospice now restrict the member's
choice in only using a program contractor's approved
network for hospice services?
A: This definition only applies to situations where the
hospice service is covered under Medicaid. This does not
prevent a member from electing to use his or her Medicare
hospice benefit.
6 APIPA Q: What is the definition of an "AHCCCS DMS"? (Definitions:
Def PAS)
A: AHCCCS DMS means Arizona Health Care Cost Containment
System, the Division of Member Services.
6 APIPA Q: Is the term "member", as used in this definition of PAS,
Def to refer to an individual initially applying for ALTCS
program benefits (i.e. is performed as part of an initial
application for ALTCS benefits in accordance with the
terms of the last paragraph on page 9)?
A: "Member" refers, in this circumstance, to "applicant or
member". The PAS is used to determine initial (applicant)
and ongoing (members) medical eligibility as specified in
section D., pages 9 and 10.
7 APIPA Q: What is the definition of a "Primary Caregiver?"
Def (Definitions: Respite Care)
A: "Primary caregivers" refers to individuals who are the
member's usual caregivers. This generally refers to
non-paid family members and significant others involved in
the member's care.
7 APIPA Q: What is the definition of the term "Fiscal Agent"? Is it
Def meant to be synonymous with the term "Agent" as
previously defined? (Definitions: Subcontractor)
A: "Fiscal agent" refers to an agent authorized to commit or
obligate funds on behalf of another.
7 APIPA Q: What is the definition of the term "Supportive Living
Def Services"? (Definitions: Supportive Residential Living
Center)
A: Refer to the AHCCCS Medical Policy Manual, Chapter 1200,
Section 1230.
9 APIPA Q: Please clarify the combination of conditions that would
Intro. satisfy the word "either" in the second sentence. Would
not pregnant individuals be first referred to apply for
SOBRA benefits administered under the Acute Care Program?
A: It is true that most AHCCCS eligible pregnant women would
be covered under the acute care program. However, if a
pregnant woman is determined to be at risk of
institutionalization as determined by the PAS and meets
all other ALTCS eligibility criteria, she could be found
eligible for the ALTCS program and receive her ALTCS
coverage through the program contractor. One of the Title
XIX eligibility requirements is for an individual to be
categorically related to the federal program; either as an
aged individual (age 65), a disabled individual (which
includes blindness), a dependent child (under age 18 or
age 18 and a full time student expecting to graduate by
age 19), a parent of a dependent child, or pregnant. These
requirements apply both to the acute and long term care
programs.
9 MMCS Q: Has the ALTCS definition of who we serve changed (e.g.
Intro. pregnant)?
A: See answer above.
8
<PAGE> 270
9 APIPA Q: How are the circumstances of age and the conditions listed
Intro. associated with "financial eligibility"? Please clarify
that these circumstances represent separate eligibility
requirements used in combination with the financial
thresholds to determine eligibility for ALTCS Program
benefits.
A: The ALTCS Financial Eligibility decision includes
financial (income, resources) as well as non-financial
eligibility requirements such as age 65 or older,
disabled, blind, under 18 or pregnant, U.S. citizen,
Arizona resident, having a social security number and
assigning rights to third party payment sources. All of
these requirements must be met; in addition, financial
eligibility criteria and medical eligibility criteria must
be met. See Chapter 1600 of the ALTCS Eligibility Policy
and Procedures Manual.
9 APIPA Q: In and /or under what circumstances would AHCCCSA not
Intro. perform an annual PAS evaluation? Or is this meant to
refer to a PASARR?
A: Annual PAS reassessments are not completed in certain
circumstances. These are discussed in A.A.C. R9-28-305,
Reassessments.
10 MMCS Q: Is 1996 expected to have a 13.8% growth?
Intro. A: After further research on ALTCS historical enrollment
data, AHCCCS has determined that the projected growth of
the ALTCS EPD population is between 6-8% during the state
fiscal year ending 6/30/96.
10 APIPA Q: What is the status of AHCCCSA's application to HCFA for
Intro. the removal of the HCBS placements cap? Please confirm, if
possible, the statement made at the Offeror's Conference
that the CY 97 statewide HCBS cap may be set at 45%, up 5%
from the current year. What HCBS rate cap should offerors
use in preparing their bid responses?
A: AHCCCSA has requested to have the HCBS cap eliminated;
this request is still pending. At the Offeror's
Conference, AHCCCSA staff indicated that, in the past,
when requests to eliminate the cap have been made, HCFA
has increased the cap 5%. If this occurs, then the new cap
would be 45%. Offerors should use the HCBS percentage set
for each county.
10 APIPA Q: The RFP states that the State has requested federal
Intro. approval for removing the percentage cap entirely on HCBS
placements. If this cap is removed, what impact will this
decision have on the pre-determined HCBS placement
distribution percentage noted on the capitation disk?
A: None
10 TEMM Q: Does AHCCCSA view the growth and expansion of HCBS
Intro. services as unlimited? What consideration has AHCCCSA
given to HCBS reaching its maximum potential within given
geographical areas? What consideration has AHCCCSA given
to the limited resources in rural counties in establishing
the HCBS percentages?
A: AHCCCSA does not view the growth and expansion of services
as unlimited. However, AHCCCSA believes that due to
expanding network, alternative settings and the
realignment of financial incentives, HCBS placement will
experience growth. AHCCCSA will continue to monitor growth
trends by geographic area to determine when HCBS placement
may be reaching maximum potential. AHCCCSA recognized
urban and rural differences when applying the percentage
add-on to the HCBS placement distribution for capitation
purposes.
11 APIPA Q: Is the term "Private Duty Nursing" to incorporate service
D.1 availability of 24 hours per day, 7 days per week? If
yes, is this required in all cases, or can a program
contractor establish parameters in each case based on
need?
A: Yes, if services are cost effective. Refer to the AHCCCS
Medical Policy Manual, Chapter 1200, Section 1240 and
Chapter 1500, Section 1520.
11 CHS Q: Long-Term Care - HCBS Alternative Residential Settings:
D.1 AHCCCS Rule R9-28-202 does not specifically refer to a
Traumatic Brain Injury Treatment Facility. Can AHCCCSA
clarify the
<PAGE> 271
exact facilities and locations referred to? If this is a
"treatment facility," is it not an Institutional Setting,
such as a Rehabilitation Institute?
A: These are health care facilities with an unclassified
license for the treatment of people with head injuries.
"Unclassified" is a catch-all term for any health care
facility that does not fit into one specific ADHS
licensure type (e.g., nursing care institution, adult care
home). There are two known facilities in the Phoenix
metropolitan area operated by NovaCare. We are not aware
of any program contractors using these settings.
12 PHS Q: What are the quality management requirements of AHCCCSA
D.2 A: Quality Management for program contractors is defined in
Chapter 1000 of the AHCCCS Medical Policy Manual.
12 APIPA Q: Are members allowed to self-refer for behavioral health
D.2 services? If so, is there a limitation as to how many
times a member may self-refer (and for types of services,
if applicable) for behavioral health services in a twelve
(12) month period?
A: Yes, members are allowed to self refer; there are no
limits on Title XIX services. Should a member make
repeated self-referrals that are not medically necessary,
the case manager and behavioral health coordinator should
make every attempt to educate the member. There should be
clear tracking and documentation in such situations.
12 APIPA Q: Do all behavioral health services, regardless of referral
D.2 source, require coordination through the member's ALTCS
Case Manager?
A: The case manager is responsible for knowing of and
coordinating all services received. The program contractor
must establish a system that includes case manager
notification of any behavioral health service.
12 APIPA Q: Does AHCCCSA have available a copy of the standardized,
D.2 initial HCBS members' behavioral heath screening tool to
be used by program contractors? If so, will such a copy be
available for review by offerors in the Bidders Library?
Can a program contractor modify the tool to capture
additional information, as warranted?
A: There is no such screening tool. Program contractors must
develop and use their own assessment tools at the initial
assessments and reassessments.
12 APIPA Q: A behavioral health screen for HCBS members is required
D.2 within seven days of referral. Does this refer to the
referral for HCBS services or the referral specifically
for behavioral health services?
A: A behavioral health screen for HCBS members is required
within seven days of referral for behavioral health
services. A behavioral health screen within seven days is
not required for members in nursing home facilities as the
member is in a safe environment. The referral generated
from that source, i.e. the PCP or other staff, indicates
that the member has already been screened. Determination
that services are needed is evidenced by the referral. For
nursing home referrals, services must begin within thirty
days.
13 APIPA Q: Is the log only for calls from members seeking information
D.6 in the event of an emergency?
A: The log is for members seeking emergency services.
14 CHS Q: Please clarify the difference between "medically
D.8 necessary" institutional care and Respite Care.
Currently, in the CATS coding for an HCBS member placed
temporarily in a nursing home would be the respite code.
Please clarify the period of institutionalization. The
ALTCS Policy referring to Transitional Members states that
the period of institutionalization may not exceed "90 days
per admission", whereas the RFP states "90 days."
A: Respite Care is for providing rest and relief for family
members caring for the member who normally resides at
home. An ALTCS-T member per the PAS no longer meets the
criteria for the institutional level of care. The nursing
facility (NF) revenue code for Respite Care is not to be
used for ALTCS-T members unless it is for the purpose of
respite. When an ALTCS-T member's
10
<PAGE> 272
condition changes and requires medically necessary NF
services, the appropriate NF revenue code should be used.
The 90 days is per admission as stated in the policy.
14-16 MMCS Q: For a continuing offeror, will ALTCS grant a short
D.9 transition period (e.g. 60 days) to meet the mandated
caseload sizes?
A: Offerors were made aware of this requirement more than
five months before the beginning of Contract Year 96-97,
which gives the continuing offeror adequate notice to meet
this requirement
14-16 APIPA Q: Who will be performing the program contractor's annual
D.9 case management ratio review? What tools and measurement
criteria will be used in performing this review?
A: Each contract year AHCCCSA staff reviews the
appropriateness of the current case management ratios.
Input from program contractors, data from other states,
and overall case management performance are given
consideration when determining if adjustments are
warranted.
14-16 APIPA Q: Given that membership levels and service placements
D.9 (levels of care and settings) may change monthly, would
AHCCCSA approve changes in case management ratios by
program contractors monthly to better serve members'
needs, based on the information included in the Monthly
Roster report?
A: No.
14-16 APIPA Q: What is the definition of "case management" (not included
D.9 in Section C - Definitions)?
A: Refer to the AHCCCS Medical Policy Manual, Chapter 1600.
14-16 APIPA Q: If an Adult Care Home is considered to be an approved HCBS
D.9 alternative residential setting (Section D definition),
please provide information to justify a required service
review every 30 days as opposed to 90 days for HCBS
service settings. If the 30 days service review timeframe
is appropriate for Adult Care Home placed members, how is
the 60 day differential factored into the case management
caseload sizes listed above? Is the 30 day service review
timeframe also required for other defined approved HCBS
alternative residential settings?
A: The legislation for the pilot program requires on-site
visits every 30 days by the case manager.
14-16 APIPA Q: Within what timeframe is a Case Manager required to obtain
D.9 the initial behavioral health professional's consultation
for a member requiring behavioral health services, in
order to coordinate behavioral health services delivery?
A: The case manager would not delay the delivery of any
necessary behavioral health services if a behavioral
health professional was not available for consultation at
the time the service was identified and needed. Initial
consultation should occur within at least 5 working days;
however, consultation should occur sooner if the situation
were urgent.
14-16 APIPA Q: What are the penalties AHCCCSA may impose if services are
D.9 initiated between the 14 and 30 day service initiation
standards? On its face this appears to be a contradiction
- is it AHCCCSA's intent that services for potentially
complex cases be initiated within 4 calendar days of the
initial on-site contact, if it occurs on the 10th calendar
day from enrollment (within standard)? For example, for
on-site contacts that occur on a Friday preceding a Monday
holiday, is it AHCCCSA's intent that a program contractor
would only have one (1) calendar day to coordinate and
initiate services?
A: There will be no penalties. Future awards and contract
renewals will evaluate program contractors against the two
week standard. This is to encourage program contractors to
see members and determine needs before the 10 days. Any
cases that have complex needs may require services to be
initiated expeditiously so that hospitalization and other
high cost services can be prevented.
14-16 APIPA Q: How will the CATS 5% acceptable data error rate be
D.9 monitored? What are the potential penalties if the error
rate is exceeded?
A: This standard does not apply to program contractors who
enter data directly on the CATS.
11
<PAGE> 273
14-16 APIPA Q: For current program contractors who are on-line with CATS,
D.9 does AHCCCSA anticipate any system changes, interface
modification or other requirements to CATS for CY97?
A: The Technical Interface Guidelines were distributed to all
current program contractors and are available in the
bidders library.
14-16 APIPA Q: In reference to program contractors transmitting to CATS
D.9 in lieu of using an on-line terminal will program
contractors be required to continue using the on-line
terminal or can they opt to develop some other data
capture process and submit on tape? If so, what are the
advantages and/or disadvantages of doing this?
A: The program contractor should retain one terminal or PC
with dial-in access to facilitate processing or reviewing
of data exceptions encountered while processing the file
transmission. Data exceptions are identified on an
exception report that is created at the time the program
contractor interface process attempts to apply the service
plan and placement data to the ALTCS database. Maricopa
County and DES/DDD benefit from the program contractor
interface because it eliminated the need to enter the case
management information twice, once for the CMP service
plan and once for their internal use. Maricopa County and
DES/DDD have an electronic link between the AHCCCS system
and their systems. They receive their exception reports
electronically immediately following the processing of
their data transmissions. Therefore, they are able to
identify and resolve data exceptions the day after their
transmissions are processed. The primary disadvantage for
the program contractor is the requirement that they
develop a new application or modify existing applications
to create the file for input to the program contractor
interface. Additionally, program contractors need to
consider how they will handle data exceptions that will
result from the processing of their transmission file.
14-16 CHS Q: Please define AHCCCSA's method of establishing the program
D.9 contractor's rate, per member per month, for Case
Management. CHS has been unable to access the underlying
calculations on the disk which was provided by AHCCCS.
A: Assumption for HCBS mix, case load, salary, benefits and
travel have been included in a calculation model which is
available on the capitation bid disk (press F-1 when on
the case management amount).
14-16 CHS Q: The paragraph describing case manager initial contact with
D.9 the members states that, "the case manager shall make
initial contact with the member within five days of
enrollment, initial on-site contact with the member within
10 days of enrollment,...." Because the definition of
"days" by the RFP in "calendar days, unless otherwise
specified, "this conflicts with Chapter 1600 of the AHCCCS
Manual which allows for "working days." If the intention
is indeed "calendar days" , this will be even more
problematic since there will be no more prospective notice
of enrollment.
A: The language should read "five working days" and "10
working days".
14-16 CHS Q: Late Placement Report: What mechanism will be used for
D.9 evaluating the reason as to whether the explanation for
the non-placement of a client is valid? What type of
notice will the program contractor receive prior to
retroactive adjustment, and what time frames will apply?
A: AHCCCS will use its judgment in determining whether the
explanation for non-placement of a client is valid. As
examples, a valid reason might be a client who is
uncooperative; an invalid reason might be a lengthy wait
caused by an inadequate provider network. The program
contractor will receive a late placement list quarterly
and will have two weeks to respond to the notice.
Retroactive adjustments will depend on the circumstances
of each case.
14-16 TEMM Q: Will AHCCCS revise the AHCCCS Medical Policy Manual,
D.9 Chapter 1200, 1500, 1600 and Appendix F to reflect the
"AHCCCSA performance standard of two weeks" to initiate
services during the term of this contract? If future
awards and contract renewals are evaluated against
"AHCCCSA's performance standard", at what point in time is
this standard to begin?
A: The appropriate policy manual sections will be revised.
The standard is to begin October 1, 1996 and will be
evaluated by the case management review process and other
methods that are appropriate.
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14-16 PINAL Q: Page 16, Paragraph 2, states: "timely entry of data
D.9 related to placement history cost effectiveness studies
and service plans into the Client Assessment and Tracking
System (CATS). "Timely" shall mean within 14 days of the
event which gave rise to the transaction (e.g. service
approval by the case manager, placement change)." AHCCCS
Medical Policy Manual, Chapter 1600 ALTCS Case Management,
Policy 1620, Case Management Responsibilities, Page
1620-21.H. states "The case manager is responsible to
update information in the CATS (CA160, CA161, and CA165)
within five working days of the reassessment." Please
clarify which time line AHCCCSA requires of program
contractors.?
A: The RFP statement is correct. The policy manual will be
revised.
14-16 PINAL Q: Page 14, AHCCCSA has increased allowable caseload sizes
D.9 effective October 1, 1996. Can you describe what
methodology AHCCCSA used to determine these caseload
sizes? Were methodologies currently in use considered,
such as the methodology described in the Spring 1996 issue
of the Journal of Case Management, Volume 5, Number 1, "A
Method to Determine Case Manager Caseloads in Long-Term
Care", by Cynthia Zelff Massie?
A: AHCCCS surveyed several state Medicaid agencies about
their case management ratios for nursing facility and HCBS
members. A review of literature related to case management
ratios was also performed. At the operational reviews,
AHCCCSA received feedback on caseload sizes from case
managers during that portion of the review. AHCCCSA also
reviewed data from case management service reviews
regarding timeliness, quality of care issues and unmet
needs by placement type.
16 APIPA Q: How and with what frequency will AHCCCSA monitor and
D.10 review PASARR screening to determine potential FFP
recoupments?
A: AHCCCSA monitors the PASARR program annually. HCFA also
monitors the PASARR program annually. FFP withholding
could occur if inappropriate admission without the proper
PASARR screening is identified during either of these
reviews. Cases for withholding can also be referred by the
Division of Developmental Disabilities and Arizona
Department of Health Services.
16 PHS Q: (a) What is the status of the current ALTCS quality
D.11 indicator project? (b) In regard to the listed quality
indicators, what will be the program contractor's
responsibilities and the time frames required? (c) What
are the indicator descriptions for activities of daily
living and fractures related to falls?
A: (a) The Office of the Medical Director is currently in the
process of revising timelines for the Quality Indicators
and other Quality Management projects. (b & c). Refer to
the June 1995 draft of the ALTCS E/PD Clinical Quality
Indicators for PC responsibilities and descriptions of the
indicators.
16 APIPA Q: For the current quality indicators listed in this
D.11 paragraph, what are the applicable compliance standards or
benchmarks for each that will be required to be maintained
by program contractors?
A: See above response.
17 MMCS Q: Why was the due date for the quarterly Behavioral Health
D.12 Utilization Report moved from 60 days after the end of the
quarter to 30 days after the end of the quarter? Does
AHCCCS realize that this will negatively impact the
accuracy of the reports because not all claims are
received and processed within this timeframe?
A: The requirements for this report are being developed.
Reporting deadlines may be changed and will be determined
at a later date.
17 PHS Q: Why is the provider affiliation tape listed as part of the
D.12 QM/UM reporting requirements?
A: AHCCCS administrative decision.
17 APIPA Q: Isn't AHCCCS under court order to require notice for more
D.13 than just prior authorization denials? If yes, please
describe the additional requirements, the status of the
litigation, the applicability of
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the case to ALTCS program contractors and whether bid
and/or capitation rate adjustments will be allowed or
awarded based on notice requirements in addition to those
specifically listed in the RFP.
A: Program contractors are required to comply with 42
CFR 431.200 et seq. The cases presently in litigation
involve notifications pertaining to eligibility actions
and to terminations, suspensions or reductions in services
related to prior authorization decisions. AHCCCSA is
currently in the process of responding to the court on
these issues and will keep program contractors apprised of
these developments.
18 APIPA Q: How will AHCCCSA monitor program contractors' successful
D.14 implementation of the second language requirement for
member communications? What standards and/or criteria will
be applied?
A: It is up to the program contractor to have knowledge of
their members' needs regarding second language printing
requirements. During review of member material and the
operational and financial reviews, AHCCCSA will ask the
program contractor how it determines the need for material
to be presented in a second language.
18 TEMM Q: Will the "14 days before the change goes into effect"
D.14 notification requirement be waived by AHCCCS if the
program contractor is not notified by AHCCCS of program or
service changes within 30 days before the change goes into
effect?
A: Except for unusual circumstances, such as emergency
legislation, AHCCCSA may waive the 14 day notification
requirement if AHCCCSA has failed to notify the program
contractors of a program or service change in a timely
fashion. AHCCCSA will impose an appropriate notification
date for these situations.
18 TEMM Q: The statement "[Program Contractor name] will make a final
D.14 decision within 45 days of getting your written grievance"
contradicts R9-28-802.B.4, which states "a final decision
shall be rendered by the program contractor on all
grievances within 30 days of filling" and R9-28-802.B.2,
which states "all grievances shall be filed orally or in
writing."? Please clarify.
A: The Rule citations addressed in your question are
correct. All grievances must be adjudicated within
30 days of filing, unless the grievant agrees to an
extension. Member grievances may be filed orally or
in writing. The sentence is changed to read
"[Program Contractor name] will make a final
decision within 30 days of getting your written or
oral grievance."
20 PHS Q: Where is the documentation to be kept related to whether
D.19 or not the adult member has executed advance directives?
What is the definition of an adult member?
A: The member's case record from the applicable institution
should contain this information. An adult member is anyone
18 and older.
20 MMCS Q: How does AHCCCS define concurrent review activities?
D.20 A: Any activities performed by concurrent review staff that
are necessary to determine the appropriateness of stay in
an inpatient hospital setting.
20 MMCS Q: Since JCAHO mandates hospitals to perform discharge
D.20 planning, can this function be delegated?
A: Yes, but the program contractor is ultimately responsible
for those activities. Discharge planning can be delegated
to hospital staff; however, any delegated activities must
be monitored to assure appropriate D/C planning. The
program contractor must assure that the CM or other
designated staff are involved with the discharge planning
process.
20 MMCS Q: May a program contractor subcontract UR/concurrent review
D.20 functions?
A: Yes; however, it cannot be to an entity that would have a
conflict of interest, (e.g., hospital). There must be a
process in place to monitor any of these delegated
activities.
20 MMCS Q: For which populations is the program contractor
D.20 responsible for concurrent review (i.e., ALTCS members
without Medicare and/or TPL, all ALTCS members regardless
of primary payer)?
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A: The program contractor is responsible for concurrent
review of any member for whom the program contractor has
the primary payment responsibility. When there is another
primary payer, the case manager or other designated staff
need to be involved to ensure a safe and appropriate
discharge plan.
22 CHS Q: Please clarify whether the Provider Manual must be sent to
D.23 out-of-network providers. Many times an out-of-network
provider only provides a service one time, and the
provider would not even be interested in receiving the
provider Manual.
A: The Provider Manual must be sent to all contracted
providers only.
23 PHS Q: "The proposed network shall be sufficient to provide
D.24 covered services within designated time and distance
limits." Where are these limits defined?
A: The distance limits pertain to Pima and Maricopa counties
only. This requirement is stated on page 62, in the last
sentence of the second paragraph under "Network Maps".
Appointment standards are stated in Section D, Paragraph
28.
23 APIPA Q: For an offeror's proposed network, what are the designated
D.24 time and distance limits, by county, for the provision of
covered services as referred to at the end of the first
paragraph?
A: See above response.
23 APIPA Q: Please confirm that monthly provider network changes will
D.25 be required to be submitted to AHCCCSA in addition to the
quarterly network tape changes submitted, as referenced in
paragraph 12, page 17 (provider affiliation tape). If so,
what medium (tape, hard copy) will be required for these
monthly submissions? Also when will the monthly provider
network changes report submission be due at AHCCCSA (not
listed in paragraph 12, page 17)?
A: The reporting mechanism for the monthly submission will be
discussed at a future program contractor meeting in order
to obtain program contractor input on this report. The
format, medium and submission due dates will be
established during this discussion. The provider
affiliation tape will continue to be submitted quarterly.
23 CHS Q: Previous reporting requirements for network changes were
D.25 required quarterly. If there are no additional additions
or deletions to the network within a month, is a report
required, or is this report required only if there are
additions/deletions?
A: See above response.
23 PHS Q: We currently submit a listing of the provider network on
D.25 the quarterly provider affiliation network report. Is the
monthly report a change of policy and if so, what is the
reporting mechanism?
A: See above response.
24 CHS Q: Please clarify why the program contractor must require a
D.26 copy of the Provider Participation Agreement, since AHCCCS
maintains copies of all of these agreements at the time
that they assign a Provider number, and any subcontractor
that the program contractor uses must have a Provider
Number. The program contractor may not be aware if the
provider is an AHCCCS Fee-for-Service provider or not.
A: It is the program contractor's responsibility to ensure
all subcontractors have a current AHCCCS Provider ID
number. The second sentence of Section 26 is deleted and
replaced with the sentence "The program contractor shall
retain a copy of each subcontractors' AHCCCSA Provider
Participation Agreement."
24 MMCS Q: This clause states that "The program contractor shall
D.27 develop and maintain a provider network sufficient to
provide all ALTCS covered services and approved
settings..." Does this mean that each program contractor
must provide and/or have a contract for all approved
settings regardless of level of need and/or cost?
A: The program contractor shall develop and maintain a
provider network sufficient to provide all ALTCS covered
services and settings. The program contractor shall make
every effort to contract for all approved settings and
services. This paragraph also requires the program
contractor to
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report the circumstances making it unable to correct the
network deficiency.
24 MMCS Q: How does the requirement that all non-emergency behavioral
D.28 health appointments be provided within 7 days reconcile
with the requirement on page 12, #2 , that states that the
behavioral health screening for HCBS members must be
performed within seven days of referral. Does the standard
also apply to nursing facility residents? Does the
screening satisfy the requirement for an appointment? Does
the requirement that treatment begin within 30 days of the
referral continue to apply?
A: Page 24, Paragraph 28, Appointment Standards, behavioral
health services, b. Non-emergency appointments is
incorrect. It should read:
For BEHAVIORAL HEALTH SERVICES, the Program Contractor
shall be able to provide appointments as follows:
a. Emergency appointments within 24 hours of referral.
b. Behavioral Health Screening within seven days of
referral for HCBS members.
c. Non-emergency appointments for nursing home
residents: within 30 days of referral.
d. Non-emergency appointments for HCBS members: within
30 days of behavioral health screening.
The screening does NOT satisfy the requirement for an
appointment UNLESS an additional service is provided by a
behavioral health professional. For example if a
psychiatrist does the screening and determines that
medication is required and provides a prescription at that
time, then the first service has been delivered.
24 CHS Q: Behavioral Health Services, b. Non-emergency appointments.
D.28 It is unreasonable to have a higher standard for non-
emergency behavioral health service appointments than for
non-emergent Primary Care or Specialty appointments. There
is not a wealth of Behavioral Health providers, such as
psychiatrists or counselors, particularly in the rural
areas, and their schedules are as busy as other
specialists or primary care providers?
A: See above response.
24 APIPA Q: What are the appointment standards for pregnant members?
D.28 A: Refer to the AHCCCS Medical Policy Manual, Chapter 400,
Section 410.
24 APIPA Q: What is the legal basis to require the reporting of
D.29 "inappropriate practices by subcontractors, members or
employees?" This far exceeds any statutory or regulatory
authority that we are familiar with and violates the
spirit of a rational approach to the appropriate
responsibilities toward fraud and abuse between AHCCCSA
and its contractors. The problems raised by this wording
include what is or is not an appropriate practice that
must be reported, how do program contractors train
employees on the requirement, how can program contractors
comply with this requirement which will mandate that each
provider, member and employee be viewed with suspicion,
and yet still respond to the needs of each with a customer
service orientation. Please give serious consideration to
deleting this phrase or replacing it with "a pattern of
inappropriate practices by a subcontractor, member or
employee that would likely constitute fraud or abuse."
A: The phrase "or inappropriate practices" is hereby deleted.
The amended sentence will read: "The Program Contractor is
responsible for reporting all cases of suspected fraud and
abuse by subcontractors, members, or employees."
24 TEMM Q: Since AHCCCSA requires the program contractor to forward
D.30 copies in advance of the review of requested policies,
procedures, job descriptions, contracts, records, logs and
other material and requires program contractor personnel
to be available at all times during the review, can
AHCCCSA (except in the cases noted in the RFP) give the
program contractor more advanced
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notice than two weeks?
A: AHCCCSA may request specific documents to be forwarded
prior to the review. In most cases, AHCCCSA asks for very
few documents to be forwarded in advance and asks only
that these documents be available during the review. The
requested items are documents that the program contractors
should have developed. AHCCCSA will give at least two
weeks notice. When there are problems with scheduling,
AHCCCSA will work with the program contractors to try to
re-schedule.
24 TEMM Q: What scoring methodology is applied to the review finding
D.30 if they are used in subsequent bid proposals?
A: The results of the Operational and Financial Reviews are
evaluated to assess the program contractors' compliance
with AHCCCSA contract requirements, policies, rules and
regulations as contained on the review report.
26 APIPA Q: What will be the RFP response evaluation weight given to
D.31 an offeror's Operational and Financial Readiness Review
(OFRR) when these reviews may not be performed for all
offerors (both new and continuing)? How is this possible
scoring weight built into the evaluation criteria and
scoring formula delineated in Section I - Evaluation
Factors Selection Process?
A: The Operational and Financial Readiness Reviews may be
conducted to assess a new program contractor. A new
program contractor is considered to be an offeror who is
bidding on ALTCS for the first time or a continuing
offeror who is bidding on a county where they currently
are not the program contractor. Therefore, it is not
necessary to perform readiness reviews on all offerors.
The purpose of the readiness review is to determine
whether the new program contractor is ready to provide
services by October 1, 1996. The readiness review is not
factored into the RFP scoring.
26 APIPA Q: If OFRRs are to be performed, please confirm that they
D.31 would occur in the timeframe between the response
submission date (6/14/96) and the planned contracts award
date (7/15/96).
A: If the Operational and Financial Readiness Reviews are
performed, they will occur between 6/17/96 and 9/30/96.
Although AHCCCSA reserves the right to conduct the reviews
of new offerors before the contract award, the readiness
reviews are usually conducted after award.
26 APIPA Q: Please define "AHCCCSA's satisfaction" with regards to new
D.31 offerors. What criteria and standards will be used and
required to be met to measure such "satisfaction"? To what
extent will AHCCCSA require demonstrated abilities to
satisfy AHCCCSA versus commitments or promises?
A: AHCCCSA uses an evaluation tool similar to the Operational
and Financial Review tool to assess the offeror's ability
to operate as a program contractor. The evaluation
includes a review of the provider network, provider
network management processes, program operations such as
staffing, case management procedures, claims processing,
behavioral health program, etc. During this review AHCCCSA
will verify that all actions proposed to be done (in the
offeror's proposal) have in fact been done.
26 APIPA Q: 33. c. Please confirm that the reporting to AHCCCSA on "a
D.33 regular basis" will follow the terms outlined in paragraph
34 following.
A: Yes, regular basis refers to the reporting guidelines
identified in the Reporting Guide for Long-Term Care
Program Contractors with the Arizona Long Term Care System
effective 10/1/96.
26 APIPA Q: 33 f. Please define the term "other institutional" as used
D.33 in this requirement.
A: For example, Arizona State Hospital.
27 APIPA Q: Can AHCCCSA define or provide examples of a reorganization
D.34 that applies here?
A: Your question does not correspond to this RFP citation.
27 APIPA Q: What types of substitute security will be acceptable?
D.35 What criteria will be used to evaluate whether a bond
substitute is sufficient?
A: Performance bond guidelines (effective March 1, 1995) were
distributed to all acute care and long
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term care contractors. The guidelines clearly identify
acceptable substitute securities. A copy of the guidelines
is available in the Bidder's Library.
28 APIPA Q: Please clarify that the "month of November" referred to
D.36 means "November 1996"?
A: "month of November" refers to November 1996.
28 APIPA Q: In reference to the phrase "or as determined by AHCCCSA"
D.36 in the first sentence, by what other criteria will AHCCCSA
use to reasonably determine the performance bond amount?
A: At this time, AHCCCS uses the November capitation payment
as the basis to determine the initial amount of the
performance bond for all contractors. However, AHCCCS
reserves the right to modify this requirement at any time
during the term of the contract.
28 YCLTC Q: Can a Resolution of the Yavapai County Board of Supervisor
D.36 Pledging to Provide Financial Backing as an ALTCS Program
Contractor, passed and adopted on June 14, 1993, meet the
requirements for Performance Bond Substitute?
A: If the resolution passed and adopted June 14, 1993 has no
expiration or is not tied to a particular contract or
contract cycle, and it is the intention of the County to
continue to pledge and provide financial backing, the
resolution can be used to meet the performance bond
requirement.
28 APIPA Q: Under what circumstances may AHCCCSA "deem appropriate" to
D.37 change financial viability criteria and performance
measures? Would all changes be consistently applied to all
program contractors?
A: There are many factors which could cause a change in the
viability standards. For example, equity per member
generally represents approximately one month of
capitation. This standard could change if capitation rates
were significantly increased or decreased. Changes in
viability factors would be consistently applied if
appropriate. At the current time, the standards are
consistent for all contractors. However, depending on the
change it may be appropriate to recognize factors such as
urban/rural differences or program size.
28 APIPA Q: 37. a. Current Ratio: Will AHCCCSA consider changing the
D.37 definition of this ratio to make it consistent with the
Acute definition which allows contractors to include as
current assets any long term investments that can be
converted to cash within 24 hours without significant
penalty (i.e. greater than 20%)?
A: Yes, both definitions are identical. Yes, both definitions
are identical. "Current assets" include any long-term
investments that can be converted to cash within 24 hours
without significant penalty (i.e. greater than 20%).
2 APIPA Q: 37. b. Equity Per Member: Will AHCCCSA consider changing
D.37 the definition of this measure to make it consistent with
the current measure and the Acute measure which does not
require contractors to reduce the equity amount by the
balance of the on-balance sheet performance bond?
A: Both definitions are identical. AHCCCSA will continue to
take performance bonds into account when considering
approval for distributions of equity.
28 PINAL Q: Equity per member is defined by AHCCCS as "equity, less
D.37 on-balance sheet performance bond, divided by the umber of
members at the end of the period." Did the definition of
equity per member change since the last contract period?
A: See above response.
28 APIPA Q: 37. c. Total Administrative Cost Percentage: I) This
D.37 measure has remained the same since the prior RFP, yet
AHCCCSA continues to increase the administrative
requirement of program contractors (i.e. program
contractors must establish a process for collecting the
share of costs from HCBS members). Will AHCCCSA consider
increasing this percentage in light of the current program
requirements? II) In addition, will AHCCCSA please clarify
the proper expense classification of case management
costs. Are case management costs to be classified as
administrative or program expenses?
A: The administrative standard will remain 8 %. As identified
in the Reporting Guide for Long-Term
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Care Program Contractors with the Arizona Long Term Care
System effective October 1, 1996, case management costs
are considered administrative expenses.
28 APIPA Q: 37. d. Please define/delineate the expenses includable in
D.37 the term "Total Administrative Expenses".
A: As identified in the Reporting Guide for Long-Term Care
Program Contractors with the Arizona Long Term Care System
effective October 1, 1996, administrative expenses are
identified as Compensation, Case Management, Data
Processing, Management Fees, Insurance, Interest Expense,
Occupancy (Rent/Utilities), Depreciation and Other. Others
may include but are not limited to legal fees, audit fees,
bank fees and other expenses associated with the overall
management and operation of the Program Contractor.
28 PINAL Q: According to AHCCCS, what is the definition of performance
D.37 bond, and what purpose does it serve?
A: Please refer to page 27 paragraph 35 of this solicitation
for performance bond definition and purpose. You may also
refer to Performance Bond Guidelines available in the
Bidder's Library.
28 PINAL Q: What is the purpose for the additional $2,000 equity per
D.37 member above the performance bond requirement of 110% of
the December 1994 capitation payment?
A: Equity per member is used to provide additional financial
assurances. As stated on page 28 paragraph 36, initial
performance bond amounts shall be based on capitation
payments expected to be paid in the month of November or
as determined by AHCCCSA. This has been clarified to
indicate November 1996.
28 PINAL Q: Do these requirements reflect what is stated in ARS
D.37 36-2952 which states that "...If there are any unexpected
monies remaining in the fund at the end of any fiscal
year, the county shall carry over such monies to the next
fiscal year to be used only to provide services pursuant
to this article or to pay all or any part of the county's
share of the total nonfederal part of the actual costs of
the Arizona Long-Term Care System?
A: Yes.
28 PINAL Q: Although we realize the wisdom in maintaining a reasonable
D.37 amount of member equity, how is reasonable member equity
determined?
A: Equity per member is calculated as approximately one
month's capitation per member.
28 PINAL Q: Total Administrative Cost Percentage as defined by AHCCCS
D.37 is "total administrative expenses, excluding income taxes,
divided by total revenue". The standard is set at "no more
than 8%." In previous years, AHCCCS has determined
administrative costs according to the percent of HCBS
clients served. ALTCS programs serving a higher percent of
HCBS clients were given a higher capitation rate in the
administrative line item to cover additional expenses. If
this will continue to be the practice for determining
acceptable administrative expenses, it seems that
uniformly applying the 8% standard might be misleading.
For example, programs capitated at 8 percent due to a
higher HCBS mix who spend 8 percent on administrative
costs will not appear as favorable in this areas as
programs capitated at 7 percent, but who are also spending
8 percent on administrative costs. When evaluating
financial viability criteria for the total administrative
cost percentage, how will AHCCCS adjust for these
differences? A: Offerors will be evaluated on their
ability to meet the standard.
28 APIPA Q: For organizations with multiple lines of AHCCCS business,
D.38 will it be necessary for indirect cost allocation
methodologies to be approved in advance by AHCCCS' Office
of Managed Care prior to the contract start date?
A: Yes.
28 APIPA Q: Upon receipt by AHCCCS' Office of Managed Care, what are
D.38 the approval turnaround timeframes and requirements to be
met? What information should be included in such a
request?
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A: Approval for distributions, advances or loaning of
equity funds requires approval from the Director of
AHCCCS which is generally accomplished within two
weeks from the date of receipt of the request.
Information to include in the request will vary
depending on the type of request. For example,
requests for a loan would require at minimum the
amount, the reason for the loan, terms and interest
rates. If the program contractor is unclear what to
include in a particular request, it should contact
the AHCCCS Office of Managed Care prior to
submitting the request for approval.
28 APIPA Q: Is prior approval needed for a distribution of
D.38 profits or equity in excess of requirements to a
program contractor's owners? If so, what criteria
will be used?
A: Yes, prior approval is required for all
distributions of equity or profit. Criteria may
include, but not be limited to, amount of total
equity, existence of outstanding loans and
compliance with other viability standards.
29 MMCS Q: Is the HCBS cap expected to increase by the same %
each subsequent year of the contract?
D.40 A: HCBS percentage will be reevaluated each subsequent
year of the contract, and may not increase at the
same ratio or "by the same amount."
29 APIPA Q: Under what circumstances, when a program contractor
D.40 exceeds its contracted (assumed) HCBS percentage,
will a program contractor be reimbursed amounts,
rather than having amounts recouped?
A: Never. Based on the recoupment/reimbursement
schedule on page 29 of the RFP, a program
contractor would not be reimbursed when it exceeds
the assumed HCBS mix. Reimbursement only occurs
when the program contractor's mix is below the
assumed mix per the schedule on page 29 of the RFP.
29 CHS Q: Please define AHCCCSA's method of assigning the
HCBS percentage to the program contractors. Can the
D.40 reconciliation be accomplished every six months,
and can it be done within thirty days of the end of
the period?
A: HCBS percentage was calculated on a county specific
basis using actual placement year to date as of
January 1996. A percentage to accommodate growth
trends and alternative settings was added.
Reconciliation's will be completed at the end of
the contract period when CATS data is considered to
be complete.
29 TEMM Q: Please define AHCCCSA's methodology for calculating
D.40 the assumed ratio "mix" of HCBS member months.
A: See above response.
29 APIPA Q: Program contractors are not allowed to enter into
D.41 hospital reimbursement arrangements that when, in
the aggregate, the subcontracted rates exceed what
would have been paid had the AHCCCS Fee ForService
Hospital Reimbursement rate been used. In light of
the fact that AHCCCSA's Fee for Service Hospital
Reimbursement rates will not be made available
until after the RFP submission deadline, how will
the State address the potential situation that a
prospective bidder has unknowingly subcontracted
with a hospital or nursing facility a reimbursement
package that in the aggregate exceeds the AHCCCS
Fee For Service Hospital reimbursement rate and
this subcontract was included as part of the
program contractor's RFP response?
A: Program contractors may not reimburse a hospital
more, in the aggregate, than what AHCCCS would pay,
in the aggregate, under the hospital tiered per
diem system. The inpatient hospital rates will be
adjusted effective 10/1/96 for inflation and length
of stay, as was done 10/1/95. These new rates will
not be available prior to the proposal due date of
6/14/96. Therefore, offerors should use caution in
developing their contracts with hospitals.
29 APIPA Q: What is anticipated at the time this question is
D.41 answered regarding AHCCCSA's "disentanglement"
legislation? How will this section change in
response? Will bidders be allowed a bid or program
change in response to the likely impact of the
legislation? Please view this question generally
and in light of a Program contractor in a rural
county that uses a Maricopa
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or Pima County hospital for tertiary services.
A: SB 1283 (AHCCCS Omnibus) which addresses
disentanglement legislation is effective 10/1/97.
Implementation of this legislation will be handled
through a contract amendment if necessary.
29 TEMM Q: Are hospital contracts which reimburse the hospital
D.41 at the tiered per diems for inpatient servicesand
AHCCCS specific cost-to-charge ratio required to be
submitted to the AHCCCSA, Office of Managed Care?
If hospital contracts are approved by AHCCCSA,
Contracts and Purchasing, in compliance with
Section E, Paragraph 10, Subcontracts, are they
also required to be submitted to the Office of
Managed Care? A: All contracts should be submitted
to the AHCCCSA, Contracts and Purchasing Office.
30 APIPA Q: Based on the language contained in this paragraph
D.42 and the verbal answer provided at the Offerors
Conference, please confirm that the Ventilator
Dependent member capitation rates are not open or
subject to the bidding process under this
solicitation.
A: Ventilator Dependent rates have been set by AHCCCSA
and are not open or subject to the bidding process
under this solicitation.
30 APIPA Q: Please define the term "approved ALTCS
institutional settings" as referred to in this
paragraph.
D.42 A: Refer to Chapter 1200 of the AHCCCS Medical Policy
Manual.
30 APIPA Q: Please confirm that the cost for a Ventilator
D.42 Dependent member's annual pulmonologist evaluation
is to be borne by the program contractor.
A: That is correct.
30 CHS Q: The Ventilator Dependent Reimbursement capitation
D.42 rates do not appear to include any allocation for
risk, when assessed against actual costs for
services for non-Medicare covered clients. For
example, in reviewing costs for our previous
institutional vent-dependent client, the costs for
institutional, acute, and administration were at
$12,000. Our current HCBS vent-dependent client has
a secondary insurance, but the costs, would be
approximately $6,000 if there were no secondary
insurance. As a small plan, there are not enough
vent-dependent clients to "spread" the risk. If no
adjustment is possible, can AHCCCSA allow plans to
receive reinsurance after some monthly deductible
for services that are not normally covered by
reinsurance? A: To determine capitation rates for
ventilator dependent clients, AHCCCS reviewed
current rates paid, surveyed all existing
contractors and reviewed past encounter analyses.
AHCCCS is currently conducting an additional
encounter study to verify rates established. At
this time, AHCCCS is not considering a reinsurance
program for ventilator dependent clients.
30 CHS Q: Can the reconciliation be accomplished every month,
D.42 and can it be done within thirty days of the end
of the period?
A: The ventilator dependent reconciliation for
placement will be conducted on a quarterly basis.
30 TEMM Q: The first sentence indicates "the Program
D.42 Contractor will be paid on a capitated basis for
ventilatordependent members, however R9-28-710.D
stipulates "Program contractors shall be paid on a
fee-for-service basis for approved services
rendered to ventilator dependent individuals."
Please clarify.
A: AHCCCSA will request a rule change to allow for the
capitation of ventilator dependent members in all
counties; however, the RFP provision takes effect
10/1/96 regardless of the status of the rule change
request.
30 TEMM Q: Placement data is required to be entered in CATS by
D.42 the program contractor for each member. Since the
placement data is available to AHCCCSA on
ventilator dependent clients, why are all
ventilator dependent clients reimbursed at the Home
and Community Based Services capitation rate
instead of the actual placement capitation rate? If
AHCCCSA cannot reimburse the program contractor on
the actual placement of the ventilator dependent
client, can the reconciliation of capitation rake
place on a monthly versus a quarterly basis due to
the potential impact on the
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program contractor?.
A: The AHCCCS system is not currently programmed to
accept two rates (HCBS and Institutional) for
ventilator dependent clients. AHCCCSA will continue
to reconcile for placement of ventilator dependent
clients on a quarterly basis.
30 PINAL Q: According to the capitation rates set by AHCCCS,
D.42 the average HCBS costs for ventilator dependent
members should be $5,000 per month, and for
institutional members, $12,000 per month. During
the 1995-96 contract year, Pinal County Long-Term
Care served two ventilator dependent members at an
average cost of $1,594 per day, or $48,458 per
month during their status as ventilator dependent
members. Additionally, $90,000 was reimbursed
through reinsurance for acute care expenses
incurred during the thirty days prior to achieving
ventilator dependent status. Given the difference
between our actual costs of $48,458 per monthly and
the $12,000 per month for institutional ventilator
dependent clients given in the ALTCS RFP, we have
the following questions: How did AHCCCS determine
the monthly capitation rates for ventilator
dependent members?. Will these members be
reinsurable? Does the monthly amount include all
services, or only certain categories of service as
determined by AHCCCS?
A: To determine ventilator dependent capitation rates,
AHCCCS reviewed current rates paid, surveyed all
existing contractors and reviewed past encounter
analysis. AHCCCSA is currently conducting an
additional encounter study to verify the rates
established. Ventilator Dependent clients are
eligible for regular acute inpatient
hospitalization reinsurance. For more information
on reinsurance coverage please refer to the AHCCCS
Reinsurance Policy/Procedure Manual. The rates
established by AHCCCSA for ventilator dependent
clients include all services.
30-31 PHS Q: What will be the procedure and time frames for
D.43 approval of services and reinsurance for behavioral
health/TBI clients?
A: AHCCCS staff is currently developing the policy and
procedures for this process.
30-31 APIPA Q: (1) When will AHCCCSA determine the deductible for
D.43 Behavioral Health/Traumatic Brain Injury (BH/TBI)?
(2) If the deductible is determined after the bids
are due, will bidders be allowed to adjust their
rates accordingly? Please specify what services are
and are not included under the BH/TBI category.
(3) What criteria will the OMD use to (One) approve
or deny services in this category; and (Two)
determine what is or is not subject to reinsurance?
(4) What is the timeframe in which the OMD will
respond?
(5) Also, will retrospective approval be given? In
as many instances, whether behavioral health
services are "high cost" is not known until after
treatment has been initiated.
(6) Is the AHCCCSA suggesting here that a program
contractor as the OMD for authorization at the
onset of any behavioral health or traumatic brain
injury service to preserve a claim for reinsurance?
(7) What steps will AHCCCSA take here to avoid the
confusion and inconsistencies that were experienced
with the sick newborn deferred liability system?
A: (1) There is no deductible - please see Amendment
#1.
(2) N/A; see above.
(3-5) AHCCCSA is in the process of developing a
policy that will address these issues. The policy
will be available on or before 5/20/96.
(6) This reinsurance is related to placement only.
OMD should be notified of placement of members in
high cost settings.
(7) The policy that is being developed will contain
detailed information in order to avoid any
confusion.
30-31 APIPA Q: Please define the term "catastrophically eligible"
D.43 (not defined in Section C - Definitions). What are
are the Office of the Medical Director Manual cite
for the special catastrophic program?
A: Catastrophic coverage is defined in R9-22-101,
Rules, Definition, "catastrophic coverage
limitation" and R9-22-503, Reinsurance, J-1.2.3.
Catastrophic coverage is defined in the
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AHCCCSA Reinsurance Policy and Procedure Manual.
Currently, major organ transplants and hemophilia
are considered catastrophic.
30-31 APIPA Q: What will be the frequency and duration of the
D.43 retrospective medical review process for regular
HCBS reinsurance cases?
A: Quarterly audits or until claims are submitted in
the system. In the event a Program Contractor has
no claims submitted for the contract year, a site
visit will be scheduled to review the program.
30-31 APIPA Q: What formula and associated variables will be used
D.43 in extrapolating the sample results to the program
contractor's regular ALTCS reinsurance reimbursable
population?
A: A random sample (25%) of claims meeting the
reinsurance threshold. A case is opened for a
member with the first hospitalization and would
continue for any additional hospitalizations that
member would have. If a case is initiated during
one quarter (continue hospitalization), but the
member is not discharged until the second or third
quarter, all medical documentation and claims for
that hospitalization are reviewed.
30-31 APIPA Q: Will the extrapolation of the sampling results and
D.43 possible partial reimbursement be applied only to
the test period under review?
A: See pages 2-16, Chapter 2, Section 9 of the AHCCCSA
Reinsurance Policy/Procedure Manual.
30-31 APIPA Q: Will identified recoupable amounts be effected
D.43 through a monthly capitation payment adjustment or
another means?
A: Amounts will be recouped through adjustments to
capitation payments.
30-31 MMCS Q: (1) What is the process by which program
D.43 contractors must obtain prior authorization for
potentially high cost behavioral health/TBI
individuals?
(2) Will the process accommodate placements that
must be done on an emergency basis?
(3) Please explain how the following will be
handled: A member is receiving behavioral health
services at a level that is not expected to reach
the reinsurance threshold. A change in condition
occurs and the member requires additional services
that will likely reach the threshold. The program
contractor requests and receives approval from
AHCCCS to include the individual in the reinsurance
program.
(4) Will the costs incurred prior to the approval
be considered "allowable" for the purposed of
reinsurance?
(5) Will all cost be included in the reinsurance
rate, in other words, are all behavioral health
costs for services and settings counted including
Level I, Level II, facilities for persons with TBI,
all behavioral health procedure codes, medications,
IMD, specialized behavioral health nursing facility
units, adult care home for persons with TBI, crisis
services, etc.?
(6) Will reinsurance for BH/TBI be based on
encounter data or will there be some other
reporting mechanism?
(7) Will periodic approval be required in order to
maintain a person in the BH/TBI reinsurance program
after initial approval has been granted?
(8) What is the intent of AHCCCS by requiring prior
authorization for reinsurance for expensive
services or settings?
(9) When AHCCCS reviews a request for inclusion in
the reinsurance program, what criteria will be used
in the decision-making process?
(10) In other words, will AHCCCS utilize purely
financial criteria or will it use clinical
criteria?
A: (1) This will be covered in the TBI policy that
will be released on or before 5/20/96.
(2) Yes, OMD will accommodate these placements
that must be done on an emergency basis.
(3-5) This will be covered in the TBI policy.
(6) It is anticipated that the data will be
reported manually similar to the catastrophic
reinsurance method. The policy will detail the
submission requirements.
(7) This will be covered in the TBI policy.
(8) The purpose of prior authorization is to reduce
risk that may be incurred as this service has the
potential for being high cost.
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(9) This will be covered in the TBI policy.
(10) This will be covered in the TBI policy .
31-32 APIPA Q: Does AHCCCSA mean "deny authorization and/or
D.44 reimbursement for a service" when the RFP states
"deny a service?" What is the legal authority for
denying authorization for a medically necessary
covered service because of the existence of other
coverage? On page 32, first full paragraph, what if
the their party insurer refused to divulge or
respond in a timely manner on whether the service
is covered? In the paragraph just above Cost
Recoveries, is it correct to assume that the
obligation to transport for third party benefits
extends only to trips for ALTCS covered services?
A: "May deny a service" is an option which may be
used in order to coordinate benefits. The program
contractor may deny the provision of services,
including the payment. Authorization means that a
service is necessary. Services cannot be denied if
it jeopardizes the member's health. AHCCCS is the
payer of last resort pursuant to ARS 36-2903.G.
Provision of transportation to coordinate benefits
applies to all covered services.
31-32 APIPA Q: Please identify AHCCCSA's authorized representative
for third party collections?
D.44 A: Health Management Systems, Inc., and its corporate
affiliate, HHL Financial Services, Inc.
31-32 APIPA Q: Please provide detail, on a pro-forma or model,
D.44 basis of an acceptable third party collections
subcontract with AHCCCSA's authorized
representative.
A: This is available in Bidder's Library.
31-32 APIPA Q: Under what circumstances and frequency will a
D.44 program contractor be required to report case level
detail of third party collections and cost
avoidance (i.e. as per the terms of paragraph 34)?
Does AHCCCSA have any specific reporting format to
be used?
A: Specific reporting requirements are to be
determined.
33 APIPA Q: Will AHCCCSA notify program contractors of any new
D.45 Medicare services which are not covered by AHCCCSA?
A: As AHCCCSA becomes aware of new Medicare services
not covered by ALTCS, Program Contractors will be
notified.
33 APIPA Q: Please provide a listing of all Medicare TEFRA Risk
D.45 HMO's in Arizona by county, if available.
A: We regret we don't have this information available.
33 CHS Q: Please define the difference in scope or limitatio
D.45 of inpatient psychiatric services, psychological
services, inpatient and outpatient occupational
coverage, or respite services for QMB eligible
persons versus Medicaid services, or refer to the
specific citation which describes those services.
A: For information on the scope of inpatient
psychiatric services, refer to Section 1812(c) and
(e), 1861(c) and (f), and additional information
contained in Part A Coverage--Inpatient Psychiatric
Hospital Services. Copies of these documents
labeled as items #2, #3, #5 and #13 are in the
binder labeled "Medicare/Social Security Act" in
the Bidder's Library. For information on
psychological services, refer to Section
1832(a)(2)(B)(iii), 1861(b)(4) and additional
information contained in Part B
Benefits--Psychiatrists and Psychologists, Part B
Benefits--Qualified Psychologist and Clinical
Social Worker Services, and Inpatient Hospital
Coverage--Psychologist and Physical Therapists.
Copies of these documents labeled as items #1, #3,
#8, #9 and #11 are in the binder labeled "Medicare
Social Security Act" in the Bidder's Library. For
Information on inpatient and outpatient
occupational coverage, refer to Section
1832(a)(2)(C), 1861(g) and (p), 1833(g) and
additional information contained in Inpatient
Hospital Coverage--Psychologist and Physical
Therapist, Inpatient Hospital Coverage--Coverage
Issues-Occupational Therapy, and Part A
Coverage--Other Diagnostic and Therapeutic Items or
Services. Copies of these documents labeled as
items #1, #4, #6, #7, #11, #12 and #14 are in the
binder labeled "Medicare/Social Security Act"
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in the Bidder's Library. The document, Part B
Benefits--Mental Health Services and (and Partial
Hospitalization Coverage) which provides
information on psychiatric services, psychological
services and occupational therapy services are
labeled as item #10 are in the binder labeled
"Medicare/Social Security Act" in the Bidder's
Library. The sole reference we located regarding
respite is provided under Respite Care in the
section on Hospice Services. A copy of this
information is labeled as item #15, and is in the
binder labeled Medicare/Social Security Act" in the
Bidder's Library.
33 PHS Q: What does inpatient and outpatient occupational
coverage mean?
D.45 A: See above response.
33 PINAL Q: Paragraph 5, states: "If a dual eligible is
D.45 enrolled with a Medicare TEFRA Risk HMO, Medicare
will not reimburse the Program Contractor for
Medicare covered services provided by the Program
Contractor. Therefore the Program Contractor shall
refer the member to the Medicare TEFRA risk HMO for
all Medicare Covered services and shall not be
responsible for the payment of any Medicare
copayments, deductibles or premiums assessed by the
Medicare TEFRA Risk HMO. The Program Contractor
shall be responsible for any Medicaid covered
services not provided by the Medicare TEFRA Risk
HMO." Currently program contractors are responsible
for deductibles and Co-Pays. Please explain this
shift in policy and who is responsible for the
deductibles and co-pays. PCLTC's concerns that the
TEFRA Risk HMO and its providers will not provide
services if they don't received the c0-payment. A:
AHCCCS is requesting clarification from HCFA at
this time regarding deductible and co-pays. As soon
as there is a definitive ruling on this issue,
AHCCCS will notify all offerors.
33 APIPA Q: Please confirm the verbal statement made at the
D.46 Offerors Conference that the last sentence of the
first paragraph, "The Program Contractor must
establish a process for collecting the share of
cost from HCBS members." , refers only to those
HCBS members residing in alternative residential
settings.
A: The sentence quoted generally refers to those HCBS
members residing in alternate residential settings.
However, if an HCBS member has an "income only
trust" and therefore actually has more income than
the $1,410.00 income maximum, he or she may have a
share of cost. Example: Mrs. Brown has monthly
income of $1,800 per month. Allowable deductions
include $1,410 personal needs allowance if in her
own home, $50 medical insurance premium
$ 1800
- 1410 monthly income deductions
- 50
--------
$ 340 share of cost
If this member resided in an alternative
residential setting, the Share of cost would be:
$ 70.50 personal needs allowance
700.00 room and board charge
50.00 medical insurance
--------
$ 820.50 deductions
$1800.00 monthly income
- 820.50
--------
$ 979.50 share of cost
33 APIPA Q: Are program contractors to consider the "actual
D.46 share of cost assignment" to be the amount as shown
as the share of cost by member per the monthly
Member Roster report?
A: Yes.
33 APIPA Q: Will the potential recoupment of amounts identified
D.46 from the annual share of cost reconciliation be
accomplished through a capitation payment
adjustment?
A: Share of cost recoupment will be made through
deductions to capitation payments.
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33 APIPA Q: How often will AHCCCSA change/adjust a member's
D.46 assumed share of cost during a (12) month period,
or is the assumed share of cost an average per
member per month by county?
A: The share of cost on the capitation rate
calculation sheets (CRCS) will be reviewed
annually.
33 APIPA Q: Will AHCCCSA please provide the details, formula,
D.46 etc. of its share of cost reconciliation procedure?
What date will be utilized?
A: The reconciliation is completed by county and
compares actual Share of Cost assignments (dollars)
for the contract year divided by total member
months (not including ventilator dependent) for the
contract year. This amount is compared to the Share
of Cost assumption used in the capitation rate and
will result in either a recoupment or refund of the
difference. As indicated in the RFP, the
reconciliation will occur at the end of the
contract year, or more frequently if deemed
necessary by AHCCCSA.
33 APIPA Q: How will AHCCCSA be providing the HCBS share of
D.46 cost information to program contractors? Will the
HCBS share of cost be provided on the daily member
roster the same as the current share of cost
information, with a separate action code define the
change or update?
A: The share of cost for HCBS members will be included
on the ALTCS Member Roster as is currently being
done for institutionalized members. The possible
need for any specific coding different from what is
in place will be considered.
33 APIPA Q: Will the share of cost be adjusted if a member is
D.46 HCBS and then, due to medical necessity, becomes
institutionalized during the month, or vice versa?
How will a program contractor receive the changes
related to this potential share of cost adjustment?
A: Yes, changes in the member's living arrangement
(placement) may cause a change in the member's
share of cost. Anytime a change in the member's
circumstances requires an adjustment to the
member's share of cost, this change is done
prospectively and is reflected on the program
contractor's Member Roster.
33 APIPA Q: Is it correct to presume that the implementation of
D.46 any HCBS share of cost will occur monthly and
that is may also change monthly as it presently
does for institutionalized members?
A: Yes, share of cost is always assessed for a monthly
amount, and changes in the member's circumstances
may require a change in the member's share of cost.
Generally, these are changes in the member's
placement, member's income, or in the share of cost
allowable deductions. Elements affecting the share
of cost are discussed in more detail in the ALTCS
Eligibility Policy and Procedures Manual, Chapter
1600.
33 TEMM Q: Please define AHCCCSA's methodology for calculating
D.46 the assumed deduction for share of cost
A: Actual Share of Cost (SOC) assignments for the
period 10/95 through 1/96 were divided by total
member months for the same time period. A cost of
living adjustment was also applied.
33 MMCS Q: Program contractors must establish process for
D.46 collecting SOC from HCBS members - Are we correct I
assuming you are speaking about alternative
residential settings R&B only?
A: Yes.
34 APIPA Q: The definition of "Management Services
D.47 Subcontractor" on page 5 extends the requirement
for approval to a contract for "any administrative
service" needed to fulfill the program contractor's
obligations. We can understand the need to know of
and approve all of this information as it related
to securing a contract through this bid process.
However, such a requirement could become burdensome
for both AHCCCSA and Program contractors after
contracts are awarded. would AHCCCSA consider
limiting the approval requirement to contracts
above a threshold amount, say $5,000 annually, or
to contracts directly related to management of the
program contractor or some specific requirement(s)
under Section D of the RFP?
A: All management services contracts as defined in the
RFP must be submitted to AHCCCSA for approval.
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34 APIPA Q: What types of financial sanctions may be imposed by
D.47 AHCCCSA resulting from implementation of this
paragraph?
A: Sanctions are determined on a case-by-case basis.
See p.36, paragraph 56 of the RFP.
34 PINAL Q: "All management services subcontractors are
D.48 required to have an annual financial audit. A copy
of this audit shall be submitted to AHCCCSA, Office
of Managed Care, within 120 days after the
subcontractor's fiscal year." What exactly is
AHCCCS requiring in this section? Does AHCCCS
require an independent audit performed by an
independent accountant not affiliated with the
program contractor? Will AHCCCS accept compiled or
reviewed financial statements? Furthermore, are
there standards specific to AHCCCS that must be
included in the audit? Must every management
service subcontractor have an audit or are there
income criteria that would determine who must have
the audit conducted?
A: AHCCCSA is requiring a certified financial audit.
The audit may be conducted by the same firm that
completes the offeror's financial audit, but should
not be an employee of the offeror. AHCCCS will not
accept compiled or reviewed financial statements.
If services billed by the management services
subcontractor are less than $50,000 annually,
AHCCCSA will waive the requirement for an audit.
35 APIPA Q: Will AHCCCSA consider adding the words "or agreed
D.51 to by the Administration and Program Contractor" at
the end of the sentence?
A: No.
35 APIPA Q: Please describe the data exchange penalties
D.53 referred to in this paragraph?
A: At this time, the only penalties related to the
data exchange requirements include those for data
validation studies and pended encounters. However,
as indicated in Section D, Paragraph 56 of the RFP,
AHCCCS may sanction Program Contractors for any
non-compliance with data exchange requirements.
`
35 APIPA Q: Please define the term "contract services". Is the
D.54 term to be synonymous with "encounters" or more
all encompassing such as "covered services"?
A: At this time, the only penalties related to the
data exchange requirements are for data validation
studies and pended encounters. However, as
indicated in the RFP, AHCCCS may sanction Program
Contractors for any non-compliance with data
exchange requirements.
36 APIPA Q: In those cases where AHCCCSA will require program
D.55 contractors to use a specialty contractor, will
AHCCCSA commit to program contractor input in
advance into the need for and selection of a
specialty contractor? Is cost the only basis upon
which a program contractor does not have to sue a
mandated specialty contractor?
A: This section now pertains solely to organ
transplants. In the future it may include other
situations. As long as the services that the
Program Contractor are able to contract for are
equivalent, cost would be the predominant
consideration. Quality of care concerns and past
performance by a provider would also be considered.
36 APIPA Q: Are sanctions determined on a case-by-case basis
D.56 per occurrence, or does AHCCCSA have specified
sanctions for specific types of contract
"non-compliance" with delineated AHCCCSA standards?
if so, please identify such sanctions and their
frequency of applications, amounts imposed, etc.
A: Sanctions are determined on a case-by-case basis.
37 APIPA Q: With regards to the second paragraph, a contract
D.57 clause that makes failure to timely sign a contract
as grounds for termination is inconsistent with
AHCCCSA's stated historical and continuing
contracting philosophy of collaboration,
partnership and fairness. This is especially true
when there is no obligation on AHCCCSA to discuss
proposed modifications upon renewal with a program
contractor. Consequently, we strongly suggest
removal of this section in its entirety. At a
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minimum, we suggest deletion of the words "or
modification" from the second paragraph and the
addition of a sentence that says the Administration
and a program contractor may mutually agree to
extend a contract while formal contract extensions
and the terms thereof are being discussed.
A: In law and in public policy, the state always
reserves the right to unilaterally amend or
terminate its contracts for any reason and the
contractor has the related right to present a claim
for appropriate compensation. In most situations,
however, AHCCCSA solicits contractor input and
agreement before amending any contract.
37 APIPA Q: Based on this paragraph, is it AHCCCSA's intent
D.57 that any amendments to this contract are to be
accepted by program contractor without any
potential prior negotiation to reach mutually
acceptable concurrence of the times and
expectations to be included?
A: See above response.
37 APIPA Q: In the last paragraph beginning "Other AHCCCS
D.60 related issues ... will ...", please explain the
potential use of tobacco tax monies for various
reasons. Would the use of these Moines be
restricted to specific disease states, transplants,
rate codes or have any qualifying restrictions?
Would these monies be provided based on membership
levels in the counties of Cochise, Gila, Pinal and
Santa Cruz? Would these monies be provided in
addition to the capitation rate and how much would
a program contractor receive such monies? Is there
a potential for other counties to be considered for
relief, related to tobacco tax monies funding?
A: When the RFP was prepared, AHCCCS did not know
whether any new tobacco tax legislation would be
passed by the legislature. The legislative session
ended April 20 and the legislature passed HB. 2508,
a new premium sharing program funded with tobacco
tax monies that will impact the AHCCCS acute care
program. It is not available to ALTCS eligible
persons. The premium sharing program will be
designed by a special legislative committee for
non-AHCCCS, uninsured residents of the United
States and Arizona who have income up to 300% of
the federal poverty level. Individuals who choose
to enroll in the premium sharing program must pay a
still-undetermined amount to contribute to the cost
of the premiums. It is envisioned that services for
this new population will be provided by AHCCCS
acute care health plans. If the legislative
committee decides to proceed with the cost sharing
program and it is implemented on October 1, acute
care contract amendments will be issued. In SB
1060, the legislature provided $1 million in
financial relief to four counties (Gila, Pinal,
Santa Cruz and Pinal) in a direct appropriation to
assist them with their contributions to the ALTCS
program. Money is not available to AHCCCS or the
program contractors.
37 APIPA Q: 60. h. Effective Date of Enrollment:
D.60h (1) will AHCCCSA provide prospective bidders with
the historical cost experience of new members up
until they became the responsibility of the program
contractors? (2) Assuming the Legislature does not
address the proposed change to the effective date
of enrollment prior to the RFP submission deadline,
will AHCCCSA provide guidance as to how prospective
bidders should address this situation in their
capitation proposals? For example, should
prospective bidders build their capitation proposal
under the assumption that the effective date for
program contractors for new members will be the
date of notification or two days after the date of
notification. (3) Assuming the Legislature does
change the effective date of enrollment for program
contractors to the date of notification subsequent
to the RFP submission deadline and prospective
bidders were instructed to prepare their bids
assuming the effective date of enrollment for
Program contractors would continue to be two days
after the date of notification, what is the
AHCCCSA's plan for incorporating this change into
the bid process? Will prospective bidders be
allowed to adjust their previously submitted bids?
A: Offerors should develop their capitation proposals
under the assumption that the effective date for
program contractors will continue to be two days
after the date of notification.
40 APIPA Q: Will AHCCCSA consider requiring both parties to
E.3 sign to modify the contract by amendment?
A: Since the state reserves the right to unilaterally
amend the contract, signing by both parties is not
required.
28
<PAGE> 290
41 APIPA Q: Will AHCCCSA concur adding "or as otherwise
E.7 provided under this Agreement" to the end of this
clause?
A: Since no "otherwise provided" provision appears in
the RFP, adding the terminology you're recommending
would serve no purpose.
41 APIPA Q: Please delete "or anyone for whom the Program
E.8 Contractor may be responsible." This clause is
overly broad, vague and unnecessary given the list
of those from who AHCCCSA is protected by the other
terms in the indemnification.
A: If the program contractor is "responsible" for a
person's performance under this contract, that
person's performance should certainly come under
the purview of the general indemnification clause.
We do not agree that it is overly broad, vague or
unnecessary.
41 APIPA Q: For clarification add "by Program Contractor"
between "performed" and "under."
E.9 A: Your recommended revision would distort the meanin
of this paragraph. Work performed by
subcontractors is also included within the meanin
of "work performed".
41 APIPA Q: 10. g. What is meant by a "description" of a
E.10 subcontractor's patient, medical and cost
recordkeeping systems, in terms of level of detail?
A: The description must be sufficient to allow AHCCCSA
to determine whether it is adequate to meet
federal, state and contract requirements.
41 APIPA Q: 10. j. Is it to be assumed that a related party is
E.10 one that receives $25,000 or more in payments for
services provided in a (12) month period, as per 42
CFR 455.100 et seq.?
A: The "$25,000 or more in payments" provision is
unrelated to the definition of a "related party."
Please see Section C, Definitions.
42 APIPA Q: Please define the term "NACHA".
E.12 A: NACHA" stands for "National Automated Clearing
House Association". A NACHA transfer is a wire
transfer routed through an administrative service
NACHA) to the payee's bank.
44 APIPA Q: Will AHCCCSA provide an opportunity to cure a
E.21 default? If so, will it commit to one in the
contract?
A: The purpose of this paragraph is only to define a
right reserved to the state, not to describe a
process precedent to the exercise of that right.
44 APIPA Q: Will AHCCCSA consider making this provision to the
E.24 program contractor, as well?
A: Yes.
44 APIPA Q: Will AHCCCSA provide advance written notice of its
E.25 intent to offset?
A: Yes.
46 APIPA Q: Please clarify that this is a monthly, capitated
E.34 payment contract based on an amount per member per
month payment mechanism, rather than a "Firm Fixed
Price" contract, as presently stated per this
paragraph.?
A: The term "firm, fixed-price" used in this paragraph
is correct. A firm, fixed-price contract is one in
which the compensation is stated and agreed to by
the parties ("firm") and the price or prices stated
are not subject to automatic adjustment (e.g.
indexing, escalation, COL increases) during the
term of the contract ("fixed-price"). All of our
capitated contracts are firm, fixed-price
contracts.
46 APIPA Q: Will AHCCCSA commit to requiring itself to request
E.36 correction in writing?
A: The manner of requiring correction of services will
depend on the circumstances of each case.
47 APIPA Q: Please add that the requirements of this paragraph
E.40 do not apply to summary data as described in ALTCS
Rule 9-28-514.
29
<PAGE> 291
A: That is correct. The restrictions upon disclosure
of information do not apply to summary data and
other reports which do not identify individuals by
name.
49 APIPA Q: The Offerors Mailing Address is not included on the
G.5 Section J checklist. For Section J purposes, where
in an offerors response would AHCCCSA prefer to
have this item located (e.g. Part I - General
Matters)?
A: The Offerors Mailing Address is included in
Section G. The completion of Section G is a
required submission on the Offeror's Checklist
under "V. Organization".
50 APIPA Q: 7. d. Financial Projections:
G.7 (1) Will AHCCCSA please provide an acceptable
reporting format for the required financial
projections? (2) Can the required financial
projections be prepared on a combined service area
basis or are separate projections be prepared on a
combined service area basis or are separate
projections required for each service area bid?
A: AHCCCS will not provide a format for financial
projections. Financial projections should include a
balance sheet, statement of revenues and expenses,
and changes in plan equity as defined by the
Reporting Guide for Long-Term Care Program
Contractors with the Arizona Long Term Care System
effective October 1, 1996, available in the
Bidder's Library. Financial statements may be
prepared on a combined service area basis.
52 APIPA Q: For the purpose of submitting an appropriate
G.8 Financial Disclosure Statement, is a change in
corporate form, as opposed to an operational
reorganization which occurred between the most
recent fiscal year end date and 3/31/96, be
considered a "significant change" requiring
preparation of a 3/31/96 Financial Disclosure
Statement for a continuing offeror?
A: A change of this nature would be considered
significant. The offeror should prepare a 3/31/96
Financial Disclosure Statement.
54 APIPA Q: If a continuing offeror has filed a "Related Party
G.9 Transactions" form with its most recent annual
Financial Disclosure Statement, is it necessary to
prepare and resubmit this information, or may the
information be considered communicated as through
the instructions for paragraph e.8 above?
A: If a continuing offeror has filed a financial
disclosure statement including related party
transactions within the last twelve months and has
not undergone significant changes, a new related
party transaction form need not be submitted.
However, if the offeror has undergone a significant
change and is submitting a disclosure statement for
the period ended 3/31/96, a related party
transaction form for the same time period should be
submitted.
54 APIPA Q: How far back in the past should bidders report
related party transaction under this paragraph?
G.9 A: Twelve months; same requirement in G8, Financial
Disclosure Statement.
60 MMCS Q: Is 4-19-96 the last possible date for questions or
H.4 just for questions to be answered in the amendment?
A: Just for questions to be answered in the amendment.
After that date, written questions will be answered
individually. A question that results in any change
or significant clarification to the solicitation
will be communicated to all prospective offerors by
an amendment to the RFP.
61-63 APIPA Q: Please confirm, clarify and provide examples of the
H.10 subcontracting risk arrangements AHCCCSA would
like included, as discussed verbally at the
Offerors Conference.
A: An example of a risk arrangement contract between a
program contractor and a nursing facility that
would qualify for extra consideration follows:
Program contractor provides a financial incentive
to the nursing facility to identify members to the
program contractor's case manager that can be
stepped down from the current level of care or
discharged from the facility into an HCBS setting.
30
<PAGE> 292
61-63 APIPA Q: Please confirm that a Letter of Intent will have an
H.10 equal evaluation weight as to a signed contract in
the network scoring process, as discussed at the
Offerors Conference.
A: The letter of intent will have the same weight as a
signed contract in the network scoring process.
61-63 APIPA Q: Please confirm that only one copy of an offerors
H.10 Provider Manual is required to be submitted to
satisfy the instructions of this RFP. (I.e. that
one original and five copies are required; however,
only one Provider Manual is requested).
A: Only one copy of the offeror's Provider Manual is
required.
63 APIPA Q: Please confirm from the Offerors Conference that
hard copies of an offerors CRCS by county are to be
H.11 included in the submitted copies, in addition to
the one (1) capitation bid disk.
A: Offerors are required to submit hard copies of
their capitation bid by county. Please see
Attachment F, Page F-1, last sentence of the first
paragraph.
63 APIPA Q: What is meant by "clinical standards used" and
"restrictions on settings for care"?
H.12 A: "Clinical standards used" refers to the clinical
standards that would be used for establishing
utilization management policies and procedures.
"Restrictions on settings for care" refers to the
need to identify in utilization management policies
and procedures any restriction of services based
upon settings for care.
66 YCLTC Q: For counties that have first right of refusal and
no competitive bids, why must they go through Best
H.20 and Final Offer process? Why not offer the
mid-point rate and avoid the costly negotiation
process?
A: Best and Final Offers (BFO's) are at the sole
discretion of the AHCCCSA. As indicated in this
solicitation, BFO's are an opportunity for the
offeror to resubmit rate components not previously
accepted by AHCCCSA. If the offeror has made an
acceptable bid on all components, or is willing to
accept the components set at the lower half of the
actuarial rate range, the offeror need not submit a
BFO if one is offered.
67 VHS Q: On Paragraph 1, entitled "Nursing facility
network," the second sub-paragraph states that
"Extra consideration will be given for letters of
intent that specify payment rates, share cost
collection agreements, and certain types of risk
relationships." It is not clear how respondents to
the RFP should document these "extra consideration"
items since the Sample Letter of Intent (Attachment
E of the RFP) contains language specifying that no
alterations to the Letter of Intent are permitted.
A: Your suggestion has been adopted for use and has
been incorporated in the revised Attachment E,
Letter of Intent, included herein. All offerors
shall submit the revised Letter of Intent which
includes the entry "Summary of Terms Attached? Yes
_____ No_____". If yes is checked, the offeror must
attach documentation that addresses rates, share of
cost collection and/or risk arrangements. The
offeror may add this documentation for Letters of
Intent that have already been completed prior to
this amendment decision.
67 PINAL Q: The offeror must submit the signed letters of
intent and/or the contract signature pages for
Contract Year 96-97 as part of its proposal. PCLTC
has many contracts which only need to be renewed
for 1996-97, do we need the letters of intent for
renewable contracts?
A: Yes.
67 TEMM Q: Please clarify the statement "extra consideration..
..given for letters of intent or contracts that
specify payment rates, share of cost collection
agreements, and certain types of risk
relationships." What does "extra consideration"
mean? Please provide examples.
A: "Extra consideration" refers to the points awarded
in the scoring process. For example, a letter of
intent or contract for nursing facilities with
specific payment rates, share of cost collection
agreements, and risk arrangements will be awarded
more points.
Atch B PHS Q: Why are partial care services required county wide
versus facility location?
A: This was an error and has been corrected. Please
see the revised Attachment B in this amendment.
31
<PAGE> 293
Atch B MMCS Q: (1) Partial Care: Please explain why AHCCCS has
determined partial care to be county-wide vs.
facility location?
(2) Behavior Management: Can the fact that the
program contractor provides county-wide personal
care, also satisfy the requirement of providing
county-wide behavioral management (behavior
management = personal care)?
(3) How will county-wide coverage be scored?
(4) Pharmacy: Gila Bend - There are no pharmacies
in Gila Bend to my knowledge.
A: (1) Partial Care should be listed as "Facility
Location" on all applicable pages of Attachment B.
(2) No. While behavioral management and personal
care are essentially the same services, the
services providers are not. You must have the
capability of providing behavior management, with
providers that meet the qualifications for behavior
management providers, in approved service settings
(including home) county-wide.
(3) The offeror must indicate if the service is
county wide. If the service cannot be established
county wide, the Program Contractor must explain as
described on page 62, "Network Development"
(4) There is no pharmacy in Gila Bend, so this
requirement is deleted. Nevertheless, the offeror
must have a pharmacy system capable of providing
medication to outlying areas of the service area.
Atch B APIPA Q: Attachment B refers to a network disk. Please
confirm that the network disk requirement has been
deleted and that the paper roster referenced on
page 62 (Section H) is the only network
requirement, along with the amended Attachment G.
Will AHCCCSA also be modifying the Section J
checklist to reflect this change? Atch B A: The
network disk requirement has been deleted. A
completed paper roster for the nursing facility
network, revised Attachment G and the roster
described on page 62, "Acute care, HCBS and
Behavioral Health" are the required submission for
the provider network. Attachment J, Offeror's
Checklist, has been revised to reflect this change
and is included in this amendment.
Atch C CHS Q: In some cases, pends can be a result of AHCCCS
systems limitations. In those instances, the
program contractors work with AHCCCS staff to try
to correct the pended encounter. There should be no
sanctions in these instances, as long as the
program contractor has made every effort to try to
correct the pended encounter. Please clarify if
additional language can be inserted to this effect?
Atch C A: See revised Attachment C, included herein.
Atch F PHS Q: What is the formula used to calculate the PMPM cost
from the Annualized Units per 1,000 member x Unit
Cost?
A: PMPM is calculated as follows: Annualized Units
multiplied by Unit Cost divided by 12,000 = PMPM.
Atch F PHS Q: How was the HCBS percentage derived and how will
this percentage be determined in subsequent years?
A: HCBS percentage was calculated on a county-specific
basis using year-to-date information as of
January 1996. A percentage to accommodate growth
trends and alternative settings was added. HCBS
percentage in the subsequent contract years will be
reevaluated and revised accordingly.
Atch F APIPA Q: In the main worksheet of the bidding section of the
capitation disk, AHCCCSA provided the following,
pre-determined factors:
HCBS and Institutional Placement Distribution
Percentages
Case Management Per Member Per Month (PMPM)
Patient Share of Cost (PSOC) PMPM
Vent Dependent Capitation PMPM (Home and
Institutional)
Would AHCCCSA please define how these factors were
calculated? What assumptions, variables, were used
in calculating these factors?
32
<PAGE> 294
Atch F A: HCBS and Institutional Percentage: This percentage
was calculated on a county specific basis using
actual placements year to date as of January 1996.
A percentage to accommodate growth trends and
alternative settings was added.
Case Management PMPM: Assumptions for HCBS mix,
case load, salary, benefits and travel have been
included in a calculation model which is available
on the capitation bid disk (press F-1 when on the
case management amount).
Ventilator Dependent: To determine capitation rate
for ventilator dependent clients AHCCCS reviewed
current rates paid, surveyed all existing
contractors and reviewed past encounter analysis.
AHCCCSA is currently conducting an additional
encounter study to verify the rates established.
Atch F APIPA Q: Do the HCBS placement distribution percentages
noted on the capitation disk represent the federal
cap? If not, what are the federal cap percentages
for HCBS placements and would AHCCCSA please
explain the rationale for setting the HCBS
placement distribution percentages at rates
different from the federal cap percentages?
A: The HCBS placement distribution does not represent
the federal cap. The federal cap is currently 40 %
with a request to lift the cap entirely. AHCCCSA
did not set the HCBS placement at the federal cap
as it would be difficult for the majority of
contractors to achieve. There is no requirement
from HCFA to establish capitation rates at the
federal cap.
Atch F YCLTC Q: Is the "surgical services" line item required or
can data be included in Specialists and Primary
Care Physician line items?
A: Offerors should use the designated line items
whenever possible.
Atch F YCLTC Q: In the Acute & HCBS worksheets, can projections be
net of Medicare/TPL and then eliminate the need for
Medicare/TPL projections (i.e., Line 18 Acute).
A: Acute and HCBS costs should be reported gross of
Medicare/TPL.
Atch F YCLTC Q: Under "Case Management Assumptions", why were
projections used for HCBS mix but not for total
number? We have seen a 4% increase in the last two
months and anticipate growth that would allow for
at least one additional case management position
over assumption level, as well as increasing
supervision from .9 to full-time. If this can be
demonstrated at time of Best & Final Offer, will we
be able to adjust Case Management line item?
Atch F A: For purposes of the capitation bid disk, AHCCCSA
will not revise the enrollment amount used in the
case management calculation.
Atch G TEMM Q: Please provide examples of the types of agreements
between nursing facilities and program contractors
which would qualify for "extra credit or
consideration in the scoring process."
A: Two examples of an agreement between a nursing
facility and a program contractor related to
the collection of share of cost that would
qualify for extra consideration follows:
Example #1: Program contractor has
delegated the share of cost collection function to
the nursing facility. After unsuccessful attempts
by the facility to collect the share of cost from
the member, the program contractor agrees to send
written notification to the member. The
notification is expected to reasonably increase the
probability of the collection of the member share
of cost.
Example # 2: The program contractor has retained
the share of cost collection function. After
unsuccessful attempts to collect share of cost from
the member, the nursing facility agrees to perform
specified procedures that are expected to increase
the probability of the collection of the member
share of cost.
Atch I PINAL Q: Paragraph one states , The Offeror must
submit the signed letters of intent and /or the
contract signature pages for Contract Year 96-97 as
part of its proposal. PCLTC has many contracts
which only need to be renewed for 1996-97, do we
need the letters of intent for renewable contracts?
Atch I A: Yes.
33
<PAGE> 295
Atch J PHS Q: On the Check List (Page J-2), V.
Organization-Financial Disclosure Statement does
not have an *. However, on page 52 #8, it states
"continuing offers who have filed the required
financial disclosure statements within the last 12
months need to complete this section if no
significant changes have occurred since the last
filing. Is the disclosure statement required?
A: If the offeror has filed a financial disclosure
statement within the last 12 months and has not had
a significant change, the offeror is not required
to complete a financial disclosure statement as of
3/31/96.
APIPA Q: Will there be unique numeric plan ID numbers
assigned to each county for the ALTCS members, or
would existing plan ID numbers be utilized if a
program contractor is a continuing offeror with
existing ALTCS members?
A: Existing plan ID numbers will be used if a program
contractor is a continuing offeror with existing
ALTCS members.
YCLTC Q: Could following RFP FORMS be provided on disk to
facilitate completion by using word processors?
Section G - Representation and Certifications;
Attachment D - Management Services Subcontractor
Statement; Attachment G - Nursing Facility Network
Roster; Attachment J -Offeror's Checklist.
A: Subject to availability of staff, AHCCCSA will
provide this or any other available text on disk
(Word 6.0 for Windows) at a charge of $25. per
disk. AHCCCSA makes no warranties of compatibility
regarding any material provided on disk. All such
requests may be submitted to Mark Renshaw,
Contracts and Purchasing, and must be received by
COB May 10, 1996.
Amdt APIPA Q: Will AHCCCSA please clarify the reinsurance program
for Behavioral Health/Traumatic Brain Injury #1
(BH/TBI) members?
A: This will be covered in the TBI policy.
APIPA Q: Are the acute costs incurred for BH/TBI members
covered under regular reinsurance?
A: Acute care costs that would normally occur under
regular reinsurance would be covered.
APIPA Q: How are prospective bidders to factor in BH/TBI
reinsurance (non-acute) for institutionalized
BH/TBI members on the capitation disk? The
capitation disk as presented does not include an
area to address reinsurance on the institutional
worksheet, only on the HCBS worksheet.
A: There is no reinsurance for institutional services.
BH/TBI costs should be included on the HCBS
worksheet.
TEMM Q: Please clarify "acute care services and all other
ALTCS services are not covered by reinsurance for
this population."
A: Members with behavioral health/TBI qualify for
reinsurance reimbursement under the regular
reinsurance program for acute inpatient
TEMM Q: Do acute inpatient hospitalizations for the
behavioral health/TBI qualify for reinsurance
reimbursement?
A: Acute care costs that would normally occur under
regular reinsurance would be covered.
34
<PAGE> 296
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
SOLICITATION AMENDMENT Page 1 of 2
<TABLE>
<CAPTION>
================================================================================================================
AMENDMENT NUMBER: SOLICITATION NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
<S> <C> <C> <C>
3 YH6-0012 October 1, 1996 OMC/ LTC
================================================================================================================
OFFEROR'S NAME AND ADDRESS:
================================================================================================================
PURPOSE OF AMENDMENT: To make various changes to the solicitation and to advise offerors regarding new policy.
================================================================================================================
</TABLE>
THE SOLICITATION REFERENCED ABOVE IS AMENDED AS FOLLOWS:
(1) Section D, Paragraph 43, Reinsurance, of the RFP, refers to policies under
development regarding high-cost behavioral health and traumatic brain-injured
members. These draft policies have been approved by the Office of the Medical
Director and are incorporated by reference into the RFP. A copy of the policies
are enclosed with this amendment.
- - --------------------------------------------------------------------------------
(2) Section D, Paragraph 54, Encounter Data Reporting, includes an incomplete
list of services for "Level I Behavioral Health Facility" and "Level II
Behavioral Health Facility". The complete list of services is as follows:
Level I Behavioral Health Facility: Personal care, homemaker, behavior
management, partial care and
nursing services.
Level II Behavioral Health Facility: Personal care, homemaker, behavior
management, partial care and
nursing services.
- - --------------------------------------------------------------------------------
(3) Section D, Paragraph 57, Term of Contract and Option to Renew, second
sentence, is changed from "three years" to "five years" as a result of recent
legislation which extends the maximum total contracting period for ALTCS
contracts.
- - --------------------------------------------------------------------------------
(4) An addendum to Attachment F (Instructions for Preparing the Capitation Disk)
to reflect the new Behavioral Health/TBI policy is included as page 2 of this
amendment.
- - --------------------------------------------------------------------------------
(5) Amendment #2, page 25 contains the following question which was answered
incorrectly. The correct answer is as follows:
APIPA Q: Please define the term "contract services". Is the term to
be synonymous with "encounters" or more all encompassing such
as "covered services"?
A: The term "contract services" is synonymous with "covered
services".
- - --------------------------------------------------------------------------------
(6) Attachment J, Offeror's Checklist, was added to the RFP for the convenience
of offerors. If a requirement is stated anywhere in the RFP text, this statement
takes precedence over an apparent omission of that requirement in the Offeror's
Checklist.
================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL
SOLICITATION REMAIN UNCHANGED AND IN FULL EFFECT.
<TABLE>
<S> <C>
=====================================================================================
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
=====================================================================================
TYPED NAME: TYPED NAME: MICHAEL VEIT
=====================================================================================
TITLE:
TITLE: CONTRACTS & PURCHASING
ADMINISTRATOR
=====================================================================================
DATE: DATE:
=====================================================================================
</TABLE>
<PAGE> 297
Page 2 of 2
ADDENDUM TO ATTACHMENT F (INSTRUCTIONS FOR PREPARING THE CAPITATION DISK):
TBI/BH EXPENSES AND REINSURANCE
As indicated in the new AHCCCS policy included with this amendment (AMPM,
Chapter 1200, Policy # 1250), program contractors are provided reinsurance
coverage for specific services and settings for Traumatic Brain Injured and
high-cost behavioral health (TBI/BH) members. Offerors should refer to the
following to incorporate expenses and reinsurance into their capitation bids.
NURSING FACILITY WORKSHEET - Offerors should not enter any expenses for those
members considered to be TBI/BH and possibly eligible for reinsurance coverage
on the Nursing Facility worksheet. Facility related expenses for these members
will be reported on the HCBS Worksheet.
HCBS WORKSHEET - Offerors should use lines # 10 and # 11 to report TBI/BH
related expenses for those members eligible for the TBI/BH specific reinsurance.
Expenses reported on these two lines should include all institutional or HCBS
expenses anticipated for OMD-approved TBI/BH members. This amount should be a
total facility, own home or approved residential setting per member per month
cost. Do not include acute care services which should be recorded on the Acute
Care worksheet.
Offerors should provide written documentation to support assumptions used for
lines # 10 and #11. Assumptions must be detailed enough to support the per
member per month cost calculations for lines #10 and #11.
A projected offset for reinsurance revenue should be entered on the reinsurance
line. This is a deduction to the overall HCBS per member per month cost. This
line item is for TBI/BH related reinsurance only. Offerors should prepare
written documentation including utilization assumptions which correspond to the
assumptions used to calculate cost on lines #10 and #11. Refer to Amendment # 1
for deductible and percentage coverage amounts.
ACUTE CARE WORKSHEET - Expenses for TBI/ BH members should be blended in with
the acute expenses for all other acute care services.
<PAGE> 298
EXHIBIT 10.9(a)(1)
ALTCS Renewal
Contract Year 95-96
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 31
<TABLE>
<CAPTION>
================================================================================================
<S> <C> <C> <C>
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
07 YH3-0028-03 (ALTCS) October 1, 1995 OMC/ LTC
================================================================================================
</TABLE>
CONTRACTOR'S NAME AND ADDRESS:
James Burns, CEO
Ventana Health Systems
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
===============================================================================
PURPOSE OF AMENDMENT: (A) To extend the ALTCS contract for the period 10/1/95 -
9/30/96; (B) to restate contract requirements in simplified format; (C) to
incorporate changes to contract requirements.
===============================================================================
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
A. EXTENSION OF CONTRACT - In accordance with General Provision 3, Renewal of
Contract, this contract is extended for the period 10/1/95 - 9/30/96. The
Program Contractor's response AFFIRMING OR DECLINING THE EXTENSION must be
received by AHCCCSA no later than 3 pm, August 28, 1995.
B. CONTRACT RESTATEMENT - Pages 3-31 of this amendment, entitled "ALTCS Program
Requirements", represent a complete restatement of all contract requirements.
The original requirements, as modified by later amendments, have been restated
in simplified format in order to ensure both parties' understanding.
C. CHANGES IN REQUIREMENTS - In accordance with General Provision 24,
Modification or Termination of the Contract by Mutual Consent, various changes
in contract requirements are described in this amendment. Throughout the
restatement of contract requirements (pages 3-31) the Program Contractor will
find sections of text shown in gray shading such as this. The text shaded in
this manner represents a new or a changed requirement. In its response to this
contract amendment, the Program Contractor must specifically address these, and
ONLY these, new or changed requirements and detail how it proposes to comply
with them. A summary sheet of all new and changed requirements is included as
page 2 of this amendment.
================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
================================================================================
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
James Burns Michael Veit
================================================================================
TYPED NAME: JAMES BURNS TYPED NAME: MICHAEL VEIT
================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING
ADMINISTRATOR
================================================================================
DATE: 8/21/95 DATE: 9/15/95
================================================================================
</TABLE>
1
<PAGE> 299
ALTCS Renewal
Contract Year 95-96
SUMMARY OF CHANGES TO PROGRAM REQUIREMENTS
<TABLE>
<S> <C> <C>
SUBJECT OF CHANGE CAN BE FOUND AT: SUMMARY OF CHANGE
1. Behavioral health services Overview, p.3 All ALTCS members eligible for behavioral health
services, regardless of age.
- - ----------------------------------------------------------------------------------------------------------------------------
2. Covered transplants Covered Services, p.4 Liver transplants now a covered service for members 21
and over
- - ----------------------------------------------------------------------------------------------------------------------------
3. Behavioral health services Covered Services, p.5 Additions to covered services
- - ----------------------------------------------------------------------------------------------------------------------------
4. Staffing changes Staff Requirements, p.6 7-day notice required for changes in key positions
- - ----------------------------------------------------------------------------------------------------------------------------
5. HCBS program Network Management, p.8 Addition of pilot programs to HCBS
- - ----------------------------------------------------------------------------------------------------------------------------
6. Gaps in provider network Network Deficiencies, p.8 Must notify AHCCCSA if unable to contract.
- - ----------------------------------------------------------------------------------------------------------------------------
7. On-site reviews On-Site reviews, p.10 Scope of on-site reviews has been expanded.
- - ----------------------------------------------------------------------------------------------------------------------------
8. Benefits for improved patients ALTCS Transitional Program, New program allows patients to receive services after
p.13 improvement in condition.
- - ----------------------------------------------------------------------------------------------------------------------------
9. Quality management Quality Management, p.17 New guidelines for QM program; new study of HCBS
required
- - ----------------------------------------------------------------------------------------------------------------------------
10. QM reporting QM Reports, p.17 Changed reporting requirements
- - ----------------------------------------------------------------------------------------------------------------------------
11. Notice of service denials Denials of Service, p.17 Must notify member within 3 days of denials of service
- - ----------------------------------------------------------------------------------------------------------------------------
12. Financial reporting Financial Reports, p.19 Simplified requirement: Program Contractor to provide
- - ----------------------------------------------------------------------------------------------------------------------------
13. Increases in management fees Management Services p.20 Increase in fees and changes that affect plan equity
must be approved in advance by AHCCCSA.
- - ----------------------------------------------------------------------------------------------------------------------------
14. Collection responsibilities Coordination of May have to pay for research, investigation and
Benefits, p.21 lien-filing costs; must cost-avoid claims, et al.
- - ----------------------------------------------------------------------------------------------------------------------------
15. HCBS mix HCBS Assumed Mix, p.24 May not exceed HCFA cap
- - ----------------------------------------------------------------------------------------------------------------------------
16. Method of payment Method of Payment, p.31 AHCCCSA may elect to pay by wire or
NACHA transfer.
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
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ALTCS PROGRAM REQUIREMENTS
OVERVIEW
The ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM (AHCCCS) is a demonstration
project operated under Section 1115 of the Social Security Act and is designed
as a managed care alternative for the provision of Medicaid services. THE
ARIZONA LONG TERM CARE SYSTEM (ALTCS) is an extension of this project and
provides long term care to its Developmentally Disabled (DD) and Elderly and
Physically Disabled (EPD) members. The Department of Economic Security is the
program contractor for the developmentally disabled; the counties or private
program contractors serve the EPD population. Both the DD and EPD populations
may have members who are ventilator dependent.
ALTCS offers both INSTITUTIONAL and HOME AND COMMUNITY BASED SERVICES and
includes all acute care, long term care and behavioral health services.
Currently, only ALTCS members under age 21 and over 64 are eligible for
behavioral health services. However, effective 10/1/95, every ALTCS member,
regardless of age, is eligible for behavioral health services. ALTCS members may
also be eligible for additional benefits as Qualified Medicare Beneficiaries as
discussed in this document.
The total ALTCS population has grown from a total of 9,989 in its first full
year to 20,361 in State Fiscal Year 96, a 104% increase. 65 % of the ALTCS
population is EPD and less than 1% of these are ventilator dependent members.
The yearly growth rate of the EPD population is as follows:
<TABLE>
<CAPTION>
Fiscal Year Number Number Increase % Increase
<S> <C> <C> <C>
1990 6,142
1991 7,971 1,829 +29.8 %
1992 8,954 983 +12.3 %
1993 10,145 1,191 +13.3 %
1994 10,984 839 + 8.3 %
1995 12,084 1.100 +10.0 %
1996 13,140 1,056 + 8.7 %
</TABLE>
1. COVERED SERVICES
The Program Contractor shall be responsible for providing acute, long term and
behavioral health services. These services are summarized as follows:
ACUTE CARE SERVICES
Inpatient and outpatient hospital
Emergency room
Physician
Outpatient Health Services, including those services that may be
provided in a Rural Health Clinic or Federally Qualified Health
Center
Laboratory, X-Ray and medical imaging
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Pharmacy
Medical supplies, durable medical equipment and prosthetic devices
Emergency Ambulance
Medically necessary transportation
Family Planning, including drugs, supplies, devices and surgical
procedures provided to delay or prevent pregnancy
Medically Necessary Abortions, when the pregnancy would endanger the
life of the mother if the fetus were carried to term, or if the
pregnancy is a result of rape or incest, as described in the OMD
Policy Manual, Section 410.3.2
Therapies (physical, occupational, respiratory, audiologic, speech)
Podiatry
Private Duty Nursing for ventilator dependent members
Early and periodic screening, diagnosis and treatment services for
members under the age of 21. These services include all
medically necessary Title XIX services, including dental
services, vision services, organ transplants and
immunosuppressant medications
Organ transplants deemed medically necessary are limited to the
following services: kidney, cornea, bone, heart, liver with
related immunosuppressant medications; autologous and allogenic
bone marrow with related chemotherapy or radiotherapy
Eyeglasses and contact lenses for members 21 years and older as the sole
prosthetic device after a cataract extraction
Emergency dental care, extractions and medically necessary dentures for
members 21 years and older.
LONG TERM CARE SERVICES
Nursing Facility, including Christian Science Sanitoria and nursing
Hospice
Adult Day Health
Home Delivered Meals
Home Health Agency, including nursing services and home health aide
Homemaker
Personal Care
Respite Care
Group Respite as an alternative to Adult Day Health
Attendant Care
Environmental Modifications
Other services, if approved by HCFA and/ or the Director of AHCCCSA,
as appropriate.
BEHAVIORAL HEALTH SERVICES
Inpatient hospital
Inpatient Psychiatric Facility for members under 21 years
Institution for mental diseases for members 65 years and older
Individual therapy and counseling
Group and family therapy and counseling
Partial care
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Emergency crisis mental health care
Behavior management
Evaluation
Psychotropic medications, including adjustment and monitoring
Exclusions and limitations of ALTCS covered services are discussed in
regulations found at A.A.C. R9-22-203 and R9-28-203.
2. STAFF REQUIREMENTS AND SUPPORT SERVICES
The Program Contractor shall have in place the organizational, management and
administrative systems capable of fulfilling all contract requirements. At a
minimum, the following staff are required:
a. An ADMINISTRATOR to oversee the entire operation of the Program
Contractor
b. A MEDICAL DIRECTOR to ensure that medical decisions are made by
qualified medical personnel
c. A GRIEVANCE COORDINATOR to investigate member and provider complaints
and grievances against the Program Contractor
d. A FINANCIAL OFFICER to oversee the budget and accounting systems of the
Program Contractor
e. A QUALITY MANAGEMENT COORDINATOR who is a registered nurse currently
licensed in Arizona
f. CASE MANAGERS to coordinate the provisions of services to clients in
HCBS and institutional settings
g. PROVIDER REPRESENTATIVES to coordinate communications between the
Program Contractor, subcontractors, other Program Contractors, and
AHCCCSA
h. CLAIMS PROCESSORS to ensure the timely and accurate processing of
original claims, claims corrections letters, resubmission and overall
disposition of all claims
i. ENCOUNTER PROCESSORS to ensure the timely and accurate submission of
encounter data to AHCCCSA
j. SUPPORT SERVICES STAFF to ensure the timely and accurate processing of
support service reports and requests (e.g., telephone systems, MIS);
k. PRIOR AUTHORIZATION staff to authorize medical care
l. A CONCURRENT REVIEW registered nurse currently licensed in Arizona.
m. Sufficient CLERICAL SUPPORT STAFF to conduct daily business
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The Program Contractor shall inform AHCCCSA, Office of Managed Care, in writing
within seven days of staffing changes in the following key positions:
- Administrator
- Medical Director
- Financial Officer
- Quality Management Coordinator
- Grievance Coordinator
The Program Contractor shall ensure that all staff have appropriate training,
education and experience to fulfill the requirements of the position.
3. BEHAVIORAL HEALTH SERVICES
The Program Contractor shall provide medically necessary Title XIX (Medicaid)
behavioral health services to all members in accordance with the ALTCS Program
Management Manual and Behavioral Health Policy Manual.
The Program Contractor shall contract with behavioral health providers who meet
Arizona Department of Health Services (ADHS) licensure or certification
standards and who are registered as behavioral health providers with AHCCCSA.
The Program Contractor shall ensure each provider is qualified to provide the
services for which they are contracting. The Program Contractor may, at its
option, contract with ADHS or Regional Behavioral Health Authorities for the
provision of behavioral health services. If such contracts are used, the Program
Contractor shall be responsible for actively monitoring quality of care,
provision of services and case management to ensure compliance with AHCCCSA
quality management and utilization management standards.
Referral for behavioral health services may be made by the Primary Care
Provider, case manager, nursing facility staff, family or the member himself (or
herself).
The Program Contractor shall develop, monitor and continually evaluate its
processes for timely referral, screening, evaluation and treatment planning for
behavioral health services. There shall be procedures in place for ensuring that
members' behavioral health services are appropriately provided, coordinated and
tracked by the case manager, PCP and behavioral health providers and included in
the member's individual service plan.
Quality management for behavioral health services must be included in the
Program Contractor's Quality Management Plan and shall meet the quality
management requirements of AHCCCSA.
The Program Contractor shall ensure that its provider network contains
sufficient behavioral health providers to provide services under this contract
and that its providers comply with appointment standards and other provider
requirements in this contract and the Behavioral Health Policy Manual.
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ALTCS Renewal
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4. PARTIAL CARE AND BEHAVIOR MANAGEMENT
Partial Care/ Adult Day Health Services and Behavioral Management/ Personal Care
are essentially the same. However, the service providers are not. Partial Care
and Behavioral Management providers are behavioral health-oriented while Adult
Day Health and Personal Care providers are Long Term Care-oriented. Therefore
the "W" codes for Partial Care (W2000, 2001, 1002, 2003) and Behavioral
Management (W2200, 22201, 2202) shall be used by the Program Contractor to
indicate the behavioral health orientation. These codes shall be used in both
encounter and CATS submissions. The Program Contractor shall not provide Partial
Care and Adult Day Health nor Behavioral Management and Personal Care
simultaneously.
5. NETWORK DEVELOPMENT
The Program Contractor shall develop and maintain a provider network that meets
AHCCCSA requirements and member needs. For each service area in which it seeks
to provide ALTCS services, the offeror shall submit letters of intent from
prospective providers of the covered services listed above. In submitting its
proposed network, the offeror must provide the name, address, telephone number
and AHCCCSA provider ID number for each prospective provider. (See attachment,
Minimum Service Area Requirements.) After contract award, the Program Contractor
shall submit to AHCCCSA a quarterly provider affiliation tape, noting any
changes in its provider network. (See attachment, Provider Affiliation Reporting
Process.)
The Program Contractor shall ensure covered services are provided promptly and
are reasonably accessible in terms of location and hours of operation. There
shall be sufficient professional and paramedical personnel for the provision of
all covered services, including all emergency medical care on a 24-hour-a-day,
7-day-a-week basis. The proposed network shall be sufficient to support and
maintain the provision of covered services within appropriate time periods.
6. NETWORK MANAGEMENT
The Program Contractor shall have policies and procedures in place that pertain
to all service specifications described in the Appendices of the ALTCS Program
Management Manual (APMM). These include, but are not limited to, policies on how
the Program Contractor will:
a. Communicate with the network regarding contractual changes and
requirements
b. Monitor and control network compliance with policies and rules of
AHCCCSA and the Program Contractor
c. Determine the quality of services delivered by the network
d. Provide or arrange for medically necessary covered services should the
network become insufficient within the contracted service area
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ALTCS Renewal
Contract Year 95-96
e. Ensure that the network is sufficient to provide all covered services to
all covered members
f. Monitor network capacity to ensure that there are sufficient providers
to handle the volume of members
g. Have mechanisms in place to ensure service accessibility, including
policies and procedures for monitoring appointment procedures standards,
appointment waiting times, and service provision standards
h. Have procedures in place for recruitment, selection and contracting of
providers that incorporate quality management, utilization and pricing
information.
The Program Contractor shall comply with the provider network and staffing
requirements described in the OMD Policy Manual, Chapter 600.
The Program Contractor shall comply with medical policy and standards related to
care coordination described in the OMD Policy Manual, Chapter 500.
The Program Contractor shall submit a description of its Home and Community
Based Services program which addresses, at a minimum, the following areas:
a. Attendant Care
b. Personal Care
c. Homemaker
d. Adult Day Health
e. Home Health Agency Services, including nursing and home health aide
f. Group Respite as an alternative to Adult Day Health
g. Environmental modifications
h. Home-delivered meals
i. Adult care homes (pilot)
j. Supportive residential living (pilot, Maricopa County only)
The description shall include the requirements described above and shall
describe in detail the internal monitoring process pertaining to frequency,
problem identification, corrective action plan, follow-up, sanctions and cause
for provider termination.
The Program Contractor shall not contract with a nursing facility that only
accepts acuity level 2 or 3 patients and transfers or denies admission to acuity
level 1 patients.
7. NETWORK DEFICIENCIES
The Program Contractor shall develop and maintain throughout the term of this
contract a provider network sufficient to provide all ALTCS covered services and
approved settings to members. In the event any network deficiency (i.e. a "gap"
in coverage) should occur, the Program Contractor shall take
8
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ALTCS Renewal
Contract Year 95-96
immediate action to correct it. If the Program Contractor is unable to contract
with a provider to remedy the deficiency in a timely manner, it shall promptly
notify AHCCCSA, Office of Managed Care, of the circumstances making it unable to
correct the network deficiency.
8. CASE MANAGEMENT
The Program Contractor shall ensure adequate staffing to meet case management
requirements. Caseloads per case manager shall not exceed, in the aggregate,
1:55 for HCBS members and 1:120 for institutionalized members. For a mixed
population, the number of case managers shall be based on a weighted average of
the case manager to member ratios for HCBS and institutional members. No case
manager shall serve more than 55 HCBS or 120 institutionalized members, nor more
than 95 members in a mixed population without prior approval of AHCCCSA.
"Case manager" means a person who is either a degreed social worker, licensed
registered nurse, or one with a minimum of two years experience in providing
case management services to EPD or DD persons. Case managers shall not provide
direct care services to members and shall not have non-case management duties
and responsibilities which exceed 15 percent of their time. Staffing must be
sufficient to cover case manager absenteeism, turnover and out-of-county
members.
The case manager shall make initial contact with the member within five days of
enrollment, initial on-site contact with the member within 10 days of
enrollment, and beginning of services within 30 days of enrollment. The case
manager shall also conduct periodic placement and service reviews every 30 days
for ventilator dependent members (on site), every 90 days for HCBS (on-site) or
acute care only members (telephone or on-site), and 180 days for members in an
institutional setting (on-site). See the APMM, Chapter 300.
The case manager shall develop and maintain the member's placement history, a
cost effective individualized service plan, and help resolve problems in the
delivery of needed services.
The case manager shall be responsible for the transition of and discharge
planning for members transferred to another Program Contractor or disenrolled
from the ALTCS program.
Case management of ventilator dependent members shall be performed by a team
consisting of a licensed registered nurse and a social worker. Case management
of members requiring behavioral health services shall be performed by a
behavioral health professional unless the case manager obtains an initial and
quarterly consultation with a qualified behavioral health professional.
The Program Contractor shall ensure complete, correct and timely entry of data
related to placement history, cost effectiveness studies and service plans into
the Client Assessment and Tracking System (CATS). "Timely" shall mean within 14
working days of the event which gave rise to the transaction (e.g., service
approval by the case manager, placement change). Unless the Program Contractor
is currently transmitting data to CATS by tape, all data entry shall be on-line.
If the Program Contractor is not currently on-line, it must have a systems
interface in place so it can update the case management information no less than
twice per month. The acceptable reject rate of data is 5% for each submission.
All rejects must be corrected prior to the next submission of data to CATS.
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ALTCS Renewal
Contract Year 95-96
The Program Contractor shall provide AHCCCSA a description of the internal
monitoring of its case management program and shall include the results of this
monitoring covering the previous 12 months. The Program Contractor shall include
those findings where improvement was indicated and the steps it has taken to
resolve deficiencies.
AHCCCSA will generate a late placement report and send it to the Program
Contractor on a quarterly basis. This report will list members enrolled with the
Program Contractor who, according to the AHCCCSA CATS System, have not been
placed within 30 days of enrollment with the Program Contractor. The Program
Contractor will be requested to provide a written explanation of the reason the
client has not been placed. If the reason for the non-placement is deemed valid,
no action will be taken. If there is insufficient reason, or no long-term care
services were provided, the long term care portion of the capitation for each
such non-placed member will be recouped from the end of the 30-day period to the
date of placement.
9. PRE-ADMISSION SCREENING (PAS)
The case manager shall be responsible for determining appropriate level of care
based on member acuity with input from the Primary Care Provider or the Program
Contractor's Medical Director. The initial PAS and reassessment determine the
level of care based on the assessment performed at that time. The Program
Contractor is responsible for making any necessary changes thereafter based on
the member's acuity.
10. PRE-ADMISSION SCREENING AND ANNUAL RESIDENT REVIEW (PASARR)
The Program Contractor shall ensure members have the Preadmission Screening and
Annual Resident Review (PASARR) Level I and, if needed, Level II screenings
prior to admission to a nursing facility. Level I is the identification of
members who are suspected of having mental illness or mental retardation. Level
II determines whether nursing facility or specialized services are needed.
Failure to have the proper PASARR screening prior to placement of members in a
nursing facility may result in federal financial participation (FFP) being
withheld from AHCCCSA. Should withholding of FFP occur, AHCCCSA shall recoup the
withheld amount from the Program Contractor's capitation payment. The Program
Contractor may, at its option, recoup the withholding from the nursing facility
which admitted the member without the proper PASARR.
11.. ON-SITE REVIEWS
In accordance with AHCCCS Rule R9-28-513, AHCCCSA will conduct operational,
financial, case management, quality management and utilization management
reviews at least once every contract term for the purpose of (but not limited
to) ensuring program compliance. The reviews will identify areas where
improvements can be made and make recommendations accordingly, monitor the
Program Contractor's progress towards implementing mandated programs and provide
the Program Contractor with technical assistance if necessary.
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ALTCS Renewal
Contract Year 95-96
The type and duration of the review will be solely at the discretion of AHCCCSA.
Except in cases where advance notice is not possible or advance notice may
render the review less useful, AHCCCSA will give the Program Contractor at least
three weeks advance notice of the date of the on-site review.
In preparation for the reviews, the Program Contractor shall cooperate fully
with AHCCCSA and the AHCCCSA Review Team by forwarding in advance such policies,
procedures, job descriptions, contracts, records, logs and other material that
AHCCCSA may request. Any documents not requested in advance by AHCCCSA shall be
made available upon request of the Review Team during the course of the review.
Program Contractor personnel as identified in advance shall be available to the
Review Team at all times during AHCCCSA on-site review activities. While
on-site, the Program Contractor shall provide the Review Team with work space,
access to a telephone, electrical outlets and privacy for conferences.
Certain documentation submission requirements may be waived at the discretion of
AHCCCSA if the Program Contractor obtains NCQA accreditation. The Program
Contractor must submit the entire NCQA report to AHCCCSA for such waiver
consideration.
The Program Contractor will be furnished a draft copy of the Review Report and
given an opportunity to comment on any review findings prior to AHCCCSA
finalizing the report. Review findings may be used in the scoring of subsequent
bid proposals submitted by that Program Contractor. Recommendations made by the
Review Team to bring the Program Contractor into compliance with federal, State,
AHCCCS, and/or RFP requirements, must be implemented by the Program Contractor.
AHCCCSA may conduct a follow-up review or require a corrective action plan to
determine the Program Contractor's progress in implementing recommendations and
achieving program compliance. Follow-up reviews may be conducted at any time
after the initial review. The Program Contractor shall submit a corrective
action plan to improve areas of non-compliance identified in AHCCCSA's case
management services review. Once the corrective action plan is approved by
AHCCCSA, it shall be implemented by the Program Contractor. Modifications to the
corrective action plan must be agreed to by both parties.
AHCCCSA may conduct a review in the event the Program Contractor undergoes a
merger, reorganization, changes ownership or makes changes in three or more key
staff positions within a 12-month period.
The Program Contractor shall comply with all other medical audit provisions as
required by AHCCCS Rule R9-28-513.
The Office of Managed Care and the Office of the Medical Director will perform
the on-site reviews which will consist of the following:
(1) CASE MANAGEMENT SERVICE REVIEWS
The case management services review (CMSR) evaluates the client placement
process, service provision and case management throughout the Program
Contractor's network. It shall include, but not be limited to:
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ALTCS Renewal
Contract Year 95-96
Case management file review
Caseload monitoring
Assess documentation of quarterly on-site visits and telephone contacts
Assess case file documentation of progress toward goals and objectives
Assess referrals for appropriateness and timeliness
Assess timelines of initial Case Management visit, service plan
development, service delivery
Member interviews
Provider interviews
Assess adequacy of provider services to members
(2) QUALITY MANAGEMENT/ UTILIZATION MANAGEMENT REVIEWS
Shall include, but not be limited to:
Medical case file review
Review of the utilization of acute care, long term care and behavioral
health services
Assess continuity of medical care
Interview a representative sample of members at the members'
residences.
Assess member perception of care provided
Assess identification of quality of care concerns
Assess service appropriateness
Assess service adequacy
Assess timeliness of services provided
(3) OPERATIONAL AND FINANCIAL REVIEWS
Shall include, but not be limited to:
Member services
Provider services
Provider network management
Executive management
Financial management and reporting
Claims/ encounter process and management
Medical direction
Grievance and appeals process
12. THERAPEUTIC LEAVE AND BED HOLD
Nursing facilities may receive payment for holding a member's bed during
absences from the facility for therapeutic leave or for hospitalization.
Therapeutic leave shall not exceed nine days and bed hold
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ALTCS Renewal
Contract Year 95-96
12 days per contract year. The Program Contractor has some flexibility in
determining therapeutic leave and bed hold and shall describe proposed coverage
and limitations in its proposal.
The Program Contractor shall ensure that when a member is transferred for
hospitalization or therapeutic leave, the nursing facility provides the member,
family member or legal representative written notice stating the duration of the
bed hold authorized by the Program Contractor. In emergency transfers, such
notice shall be provided within 24 hours of the transfer.
For bed hold and therapeutic leave pertaining to behavioral health placements,
refer to the AHCCCS Behavioral Health Policy Manual, Chapter 200.
13. ATTENDANT CARE PROGRAM
Quality of care concerns were identified in the ALTCS Attendant Care program
during Contract Year 1993-1994. In order to address those concerns, the
following steps are being taken:
a. All Attendant Care providers' provision of care shall be monitored and
assessed on-site by the Program Contractor no more than five working days after
initial assignment and every month for the first quarter. This assessment shall
then be done at least quarterly thereafter. All existing Attendant Care
providers' provision of care shall be monitored and assessed on-site by the
Program Contractor at least quarterly.
b. Members identified as having skilled nursing needs (pressure sores, surgical
wounds, tube feedings, etc.) shall be assigned to a Home Health Agency for
provision of skilled nursing assessment and care. The Home Health Agencies shall
be required by the Program Contractor to provide written progress reports on
care provided to members and the reports shall be incorporated into the case
management file. The case manager shall promptly notify the member's PCP of any
adverse findings.
c. Based on individual needs (e.g. bed-bound, quadriplegic, paraplegic and
diabetic members) members shall have skin assessments performed. Skin integrity
shall be documented in the member's case management file and reported to the
case manager's supervisor and the member's PCP.
14. DENTAL SERVICES
The Program Contractor shall ensure that members under age 21 have direct access
to dental providers. Members may also be referred by their PCPs. Members over
age three and under 21 shall be screened annually by a dentist who will perform
an evaluation and report findings and treatment to the member's PCP or the
Program Contractor. Members under age three shall be screened by their PCP and
referred to a dentist when medically necessary. Dental standards may be found in
the OMD Policy Manual.
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15. FAMILY PLANNING
The Program Contractor shall provide Family Planning services in accordance with
the OMD Policy Manual, Section 420, to members who choose to delay or prevent
pregnancy. The Program Contractor is responsible for annually notifying members
of reproductive age (12-55 years) of the availability of Family Planning
services.
16. ALTCS TRANSITIONAL PROGRAM
The ALTCS Transitional Program is a program for members (both institutional and
HCBS) who have improved either medically, functionally, or both to the extent
that they no longer need the level of care provided by a nursing facility or
ICF-MR but who continue to require significant long-term care services. The
transitional program allows those members who meet the ALTCS Transitional
criteria as determined by the PAS to continue to receive all ALTCS covered
services that are medically necessary. For details on this program, refer to the
recent amendment to our contract effective September 1, 1995.
17. ADVANCE DIRECTIVES
The Program Contractor shall ensure that all its providers comply with federal
and state law on advance directives for adult members. At a minimum, these
providers shall:
a. Maintain written policies and provide written information for adult members
and their ability to make decisions about medical care, including the right
to accept or refuse medical care and the right to execute an advance
directive
b. Document whether or not the adult member has executed an advance directive
c. Not condition the provision of care or discriminate against a member because
of the member's decision to execute or not execute an advance directive
d. Provide education for staff on issues concerning advance directives
18. APPOINTMENT STANDARDS
The Program Contractor shall have procedures in place that ensure:
a. Emergency appointments the same day as the member's phone call or other
notification
b. Urgent care appointments within two days
c. Routine care appointments within 21 days
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19. EMERGENCY SERVICES
The Offeror shall provide the following at a minimum:
a. A designated emergency services facility providing care on a 24-hour-a-day,
7-day-a-week basis, accessible to members in each contracted service area.
One or more physicians and one nurse shall be on call or on duty at such
facility at all times.
b. An emergency services system employing at least one physician, registered
nurse, physician's assistant or nurse practitioner, accessible to members by
telephone 24-hours-a-day, 7-days-a-week, for information in the event of any
emergency and to providers who need verification of patient membership and
treatment authorization.
c. An emergency services call log containing: member's name, address, telephone
number, date of call, time of call, nature of complaint or problem, and
instructions given to the caller.
d. A written procedure for the communication of emergency services information
to the member's primary care physician and other appropriate network
elements.
20. MEMBER HANDBOOK
The Program Contractor shall produce and provide printed materials to each
member within 10 days of enrollment. All informational materials prepared by the
Program Contractor shall be approved by AHCCCSA prior to distribution to
members. Information shall be provided in English and a second language when 200
members or 5% of the Program Contractor's enrolled population, whichever is
greater, speak the same non-English language. When there are program or service
changes, the Program Contractor will provide notification to the affected
members at least 14 days before the change goes into effect.
The Member Handbook shall be written at the fourth grade level. Suggested
reference material to determine whether this requirement is being met are:
Fry Readability Index
PROSE, the Readability Analyst (Software developed by Education
Activities, Inc.)
Gunning FOG Index
McLaughlin SMOG Index.
The Member Handbook shall be required to meet AHCCCSA rules for printed
information and shall cover, at a minimum, the following:
a. A table of contents
b. Covered and non-covered services
c. Operations of the Program Contractor
d. Appointment procedures
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e. What to do in case of an emergency including names, addresses and
telephone numbers for members to call for instructions
f. Out-of-county and out-of-state moves
g. Grievances
h. Advance directives
i. Contributions the member can make towards his or her own health
Regardless of the format chosen by the Program Contractor, the member handbook
must be written in a type-style and size that can be easily read by members with
varying degrees of visual impairment. At a minimum, the member handbook shall
also contain the following questions and answers, along with the two paragraphs
that follow. These items are required by HCFA:
Q. What if I have questions, problems, or complaints about [Program
Contractor]?
A. If you have a question or problem, please call . If you
have a specific complaint about your medical care, the Case
Manager will help you.
Q. What if I am not happy with the help given to me by the Case
Manager?
A. If you do not agree with the answer you receive, you may tell the
Case Manager you want to file a written or oral grievance. The
grievance must be filed no later than 35 days after the date of
the action, decision, or incident.
[Program Contractor name] will make a final decision within 30 days of
getting your written grievance. A letter will be mailed to you stating
our decision and the reason for the decision. The letter will tell you
how you can appeal the decision if you are still unsatisfied. You must
let us know you want to appeal the decision within 15 days.
If you decide to appeal our decision, we will send your request for
appeal to AHCCCS. You will receive information from AHCCCS on how your
appeal will be handled. AHCCCS will then decide if our decision was
correct under the circumstances.
21. DENIALS OF SERVICES REQUIRING PRIOR AUTHORIZATION
When a service requiring prior authorization is denied, the Contractor shall
ensure the member is notified verbally or in writing of the reasons for the
denial within three working days from the date the decision to deny is
made. Chapter 800 of the AHCCCS Medical Policy Manual contains further detail on
notification requirements.
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22. ENROLLMENT AND DISENROLLMENT
AHCCCSA is responsible for enrolling and disenrolling ALTCS members. An
enrollment or disenrollment action shall be effective three days after it is
input into the computer system by AHCCCSA. See details discussed in the APMM,
Chapter 1600.
23. REQUEST FOR CHANGE IN ENROLLMENT
If a member moves out of the current Program Contractor's service area, the
current Program Contractor may request a program contractor change by submitting
a Program Contractor Change Request Form (DE-621) to the program contractor
responsible for the member's new county of residence and request that the new
program contractor agree to accept the member. If the new program contractor
agrees to accept the member, the DE-621 will be sent to AHCCCSA for processing.
If the new program contractor does not agree to accept the ALTCS member, the
current program contractor may request AHCCCSA to review the request. AHCCCSA
will make the final decision. For more detailed information, refer to the APMM,
Chapter 1600.
24. REPORTING CHANGES IN MEMBERS' CIRCUMSTANCES
The ALTCS Member Change Report Form (7240T) provides the Program Contractor with
a method for notifying the ALTCS eligibility offices and AHCCCSA of changes or
corrections to the member's circumstances. This includes but is not limited to
changes in residence, living arrangements, third party payers, share of cost,
income, resources or a medical condition which could affect eligibility. See the
APMM, Chapter 1600.
25. OUT-OF-STATE PLACEMENT AND MEDICAL SERVICES
The Program Contractor shall obtain approval from AHCCCSA before placing a
member outside the state and notify AHCCCSA once placement has been completed.
ALTCS members who are temporarily absent from Arizona are eligible for acute
emergency services only. The Program Contractor shall report temporary absences
from the state to the ALTCS eligibility office for a determination of continued
eligibility.
26. QUALITY MANAGEMENT
The Program Contractor shall maintain an AHCCCSA-approved internal quality
management system and plan in accordance with ALTCS Rules, the APMM, OMD Policy
Manual and federal regulations found at 42 CFR 434.34 and Part 456. The Program
Contractor shall respond to quality of care issues in accordance with the time
limits specified in AHCCCSA correspondence concerning the individual issues.
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The Program Contractor shall ensure all EPSDT eligible children receive services
in accordance with the OMD Policy Manual, Chapter 400, including the required
EPSDT screens. AHCCCSA shall conduct a follow-up on-site review to verify
contract requirements are being met.
The Program Contractor is required to develop and complete during this contract
year a medical study focusing on its Home and Community Based Services program.
A description of the proposed study shall be submitted to AHCCCSA, Office of the
Medical Director, ALTCS Unit no later than 10/31/95. The report of the completed
study shall be submitted no later than 5/1/96.
27. QUALITY MANAGEMENT REPORTS
The Program Contractor shall submit the following periodic reports:
REPORT DUE DATE
QM/ UM Plan 45 days after contract effective date
QM/ UM Plan Evaluation November 15, each year
Quarterly Inpatient Showing Reports 15 days after the end
of each quarter
Submission of Plan of Correction 30 days after receipt of notice
to correct
AIDS/ HIV Notification Telephone as each case is identified
or report all cases 30 days after the
end of each quarter
EPSDT Progress Report First day of each quarter
Maternity Care Plan November 1, each year
EPSDT Participation Plan November 1, each year
Pregnancy Termination Report End of the month following
pregnancy termination
28. FINANCIAL MANAGEMENT
Both AHCCCSA and HCFA mandate specific financial management and reporting
standards to protect the financial integrity of spending under the ALTCS
program. In addition, financial information must be available for the Program
Contractor to manage the program, to assess its own financial risk and to
determine if members are receiving necessary services. The Program Contractor
shall continually use such information to initiate corrective action as
appropriate.
The Program Contractor shall develop an accrual-based financial management and
reporting system incorporating three major data sources:
a. A long term care service plan for each member which specifies placement
and the services received by each member
b. Actual claims payment to providers
c. Financial management data systems
At a minimum, the Program Contractor's system shall:
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a. Integrate program planning assumptions with case-mix (as used here, the
age and sex of the population and utilization rates)
b. Gather and report data on critical financial indicators (e.g., Incurred
But Not Reported Claims)
c. Establish and maintain a financial information base to support current
operations
d. Provide information regarding financial status, including all reporting
mandated by law and accounting of HCBS expenditures, to internal
management and AHCCCSA on a regular basis
e. Make records available for independent audit
f. Ensure that subcontractors are reimbursed promptly and correctly
g. Monitor nursing facilities, institutions for mental disease for members
65 and older, inpatient psychiatric facilities for members under age 21,
and hospice accounting activities (e.g., trust fund accounting)
h. Monitor records in accordance with 42 CFR 483.10
In addition, the Program Contractor's financial management systems must meet
specific standards established by HCFA. These are specified in 45 CFR, Part 74
which is incorporated herein by reference.
29. FINANCIAL DISCLOSURE STATEMENT
A Financial Disclosure Statement must be completed and returned to AHCCCSA when
any of the following events occur:
a. At the end of every fiscal year. (Disclosure must be received by AHCCCSA
not later than 35 days after the last day of the fiscal year.)
b. Prior to AHCCCSA entering into or renewing this contract
c. When a change is contemplated in ownership and control of the
contracting entity. A change in ownership or control requires the prior
approval of the Director of AHCCCSA.
d. Prior to or upon entering into any related party transaction not
previously reported to AHCCCSA. Except when advance administrative
review is required, disclosure must be received by AHCCCSA not later
then 35 days after the date of the transaction.
e. Upon written request by the Director of AHCCCSA. Disclosure must be
received by AHCCCSA not later than 35 days after the date of the
request.
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30. FINANCIAL REPORTS
Throughout the term of this contract, the Program Contractor shall submit the
following periodic reports to AHCCCSA:
a. ANNUAL CERTIFIED FINANCIAL REPORT - This must be prepared by a certified
public accountant and submitted not later than 120 days after the end of the
Program Contractor's fiscal year. Such certified public accountants shall be
independent of the Program Contractor, its subcontractors and their officers and
directors, and any affiliates.
b. QUARTERLY FINANCIAL STATEMENTS - These reports must be submitted to AHCCCSA
no later than 45 days after the end of the reporting period. The ends of the
reporting periods are 12/31, 3/31, 6/30 and 9/30.
c. FINANCIAL DISCLOSURE REPORT - This report shall provide complete disclosure
of Program Contractor ownership and control, including objective justification
of reasonableness of all related party transactions. The Report is due with the
audited financial statement.
d. RECONCILIATION ANNUAL AUDIT REPORT AND PROGRAM CONTRACTOR YEAR-TO-DATE
FINANCIAL REPORT - This report contains a written reconciliation of all
differences between the statement of operations and financial position as
reported quarterly and the corresponding amounts per the audit report. The
report is due with the preliminary and final certified audit.
e. ANNUAL ANALYSIS OF HEALTH CARE COSTS BY MEDICARE AND NON-MEDICARE
CLASSIFICATION AFTER AUDIT - This report shall show the gain or loss by Medicare
and non-Medicare classification. The report is due with the preliminary,
certified and audited financial statement.
f. QUARTERLY ANALYSIS OF HEALTH CARE COST BY MAJOR RATE CLASSIFICATION - This
report shows, on a quarterly basis, the gain or loss by major rate code. The
report is due within 45 days of the end of each calendar quarter.
All financial statements submitted to AHCCCSA shall identify separately all
ALTCS transactions including allocations of overhead and other shared expenses
as applicable. The Program Contractor shall provide supplemental schedules as
requested by AHCCCSA. See the "ALTCS Uniform Accounting and Reporting System and
Guide for Audits of ALTCS Contractors and Providers" available in the Bidders
Library.
31. MANAGEMENT SERVICES AND DISTRIBUTION OF FUNDS
All proposed management services subcontracts, corporate cost allocation plans,
proposals to increase management fees, and proposals for the distribution of
funds which may affect plan equity must be approved in advance by AHCCCSA
Contracting Office. Cost allocation plans must be submitted with the proposed
management fee agreement. AHCCCSA reserves the right to perform a thorough
review of actual management fees charged or corporate allocations made. If the
fees or allocations are
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determined to be unjustified or excessive, amounts may be subject to repayment
to Contractor, Contractor may be placed on monthly financial reporting, and
financial sanctions may be imposed.
32. MANAGEMENT SERVICES SUBCONTRACTOR AUDITS
All management services subcontractors are required to have an annual financial
audit. A copy of this audit shall be submitted to AHCCCSA, Office of Managed
Care, within 120 days after the subcontractor's fiscal year end.
33. COORDINATION OF BENEFITS/ THIRD PARTY LIABILITY
The Program Contractor shall identify and pursue collection of reimbursement
from all probable sources of third party liability except for uninsured and
underinsured motorists insurance, first and third party liability insurance, and
tortfeasors, unless referred by AHCCCSA's authorized representative. It shall
also identify and notify AHCCCSA of the potential liability of uninsured and
underinsured motorist insurance, first and third party liability insurance and
tortfeasors in accordance with ALTCS Rule R9-28-902 Subsections C and D.
AHCCCSA's authorized representative will pursue collection from uninsured and
underinsured motorists insurance, estates, first and third party liability
insurance and tortfeasors. The Program Contractor shall cooperate with AHCCCSA's
authorized representative in its collection efforts and may be responsible for
performing all research and investigation needed for collection and payment of
lien-filing related costs. The Program Contractor shall notify AHCCCSA's
authorized representative within five working days of the identification of a
third-party liability case with known reinsurance or of the closure of any
cases.
AHCCCSA may retain its third party collections up to 100% of capitation
payments, fee-for-service and reinsurance payments. If collection efforts are
successful, AHCCCSA will distribute to the Program Contractor any funds
remaining after full payment of AHCCCSA claims and related administrative costs.
The Program Contractor may retain up to 100% of its third party collections if
all the following conditions exist:
a. Total collections received do not exceed the total amount of the Program
Contractor's financial liability (total expenditures minus any member
share of cost) for the member
b. ALTCS fee-for-service and reinsurance benefits have not duplicated the
recovery
c. Such recovery is not prohibited by state or federal law
d. The collections are reflected in capitation rates. AHCCCSA may require
the Program Contractor to reimburse AHCCCSA up to 100% of third party
payments collected which are not reflected in capitation rates.
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The disbursement of funds collected from third parties shall be in accordance
with ALTCS rules, policies and procedures. The Program Contractor shall report
to AHCCCSA the amounts of third party collections as may be required by AHCCCSA.
It shall also report the amounts paid to providers for hospital or other
services rendered to members for injuries involving liable third parties as
required by AHCCCSA. The Program Contractor shall communicate any known change
in health insurance information, including Medicare, to AHCCCSA not later than
10 days from the date of discovery in a form consistent with the AHCCCSA
standards.
The Program Contractor shall cost-avoid all claims that are subject to third
party payment. An explanation of medical benefits form or some form of
verification that services are not covered must accompany the claim.
34. QUALIFIED MEDICARE BENEFICIARY (QMB) PROGRAM
The Program Contractor shall provide all ALTCS services to dually eligible ALTCS
Qualified Medicare Beneficiaries. In addition, the following Medicare services
shall be made available through referral by a Primary Care Provider:
a. Chiropractic services
b. Inpatient psychiatric services
c. Psychological services
d. Any new services added to the Medicare program not covered by ALTCS.
35. PAYMENT OF MEDICARE COINSURANCE AND DEDUCTIBLES
The Program Contractor is responsible for paying Medicare coinsurance and
deductible amounts for Medicare covered services for Medicaid/ Medicare
eligibles including Medicaid eligibles who are also Qualified Medicare
Beneficiaries (ALTCS/ QMB duals) unless the services were obtained outside the
Program Contractor's network. For ALTCS/ QMB duals, this includes coinsurance
and deductible amounts for Medicare covered services which are not Medicaid
covered services. This applies to members receiving Medicare services on a
fee-for-service basis and includes coinsurance and deductibles on Medicare
covered services, such as chiropractic services, even though these services are
not covered by Medicaid. This provision does not apply to ALTCS members enrolled
in a Medicare HMO.
36. SHARE OF COST
Share of Cost is calculated on a per member per month basis as follows:
S = T/M
Where S = Share of Cost PMPM, T = Total Assigned Share of Cost dollars and M =
member months
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At the end of the contract year, AHCCCSA will compare actual Share of Cost
assignment to the Share of Cost assignment assumed in the calculation of the
capitation rate. Assumed Share of Cost will be fully reconciled to Actual Share
of Cost Assignment, and AHCCCSA will either recoup or refund the total
difference, as applicable.
37. REINSURANCE
Reinsurance is a stop-loss program provided by AHCCCSA to the Program Contractor
for the partial reimbursement of covered inpatient facility medical services
incurred for a member beyond an annual deductible. AHCCCSA is self-insured for
the reinsurance program which is characterized by an initial deductible level
and a subsequent coinsurance percentage. For regular reinsurance, the Program
Contractor will be reimbursed at 80% of allowable charges over the following
deductibles:
Urban county, with Medicare Part A $12,000
Urban county, without Medicare $20,000
Rural county, with Medicare Part A $ 5,000
Rural county, without Medicare $ 9,000
Regular reinsurance covers only acute inpatient hospitalizations. Services to
members undergoing heart, liver or bone marrow transplants in accordance with
OMD policies will be covered under a special CATASTROPHIC program instead of the
regular reinsurance program. In addition, the following services are excluded
from regular reinsurance coverage:
a. Emergency services which lead to an acute inpatient hospitalization but
which are not reflected on the inpatient bill. (Emergency services
which are reflected on the inpatient bill will be covered by regular
reinsurance as described above.)
b. Kidney dialysis
c. Total parenteral nutrition
d. Chemotherapy
e. Radiation therapy
f. Services to members with Acquired Immune Deficiency Syndrome (AIDS),
except for inpatient services which are covered under regular
reinsurance as described above.
Catastrophic reinsurance coverage for transplants is limited to 85% of the
AHCCCS contract amount for the transplant services rendered, or 85% of the
Contractor-paid amount, whichever is lower.
Effective with dates of service 10/1/94 and later, AHCCCSA will use inpatient
encounter data to determine regular reinsurance benefits. Reimbursement for
regular reinsurance benefits will be made to the Program Contractor monthly.
AHCCCSA will also provide for a reconciliation of reinsurance payments in the
case where encounters used in the calculation of reinsurance benefits are
subsequently adjusted or voided.
Encounter data will not be used to determine catastrophic reinsurance benefits.
However, this does not relieve the Program Contractor of the responsibility for
submitting encounters for catastrophic
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reinsurance services. The initial claims for reimbursement under the
catastrophic reinsurance program must be filed no later than June 30th of the
year following the contract year. Catastrophic reinsurance claims that are
submitted within this time limit and are denied or adjusted, may be corrected
until September 30th of the year following the contract year, the deadline for
the submission of a clean claim. All catastrophic reinsurance claims for dates
of service 10/1/94 and later must be submitted in accordance with the AHCCCS
Reinsurance Policy/Procedure Manual.
All reinsurance claims shall be subject to medical review by AHCCCSA or its
designee.
38. VENTILATOR DEPENDENT REIMBURSEMENT RATES
Payment to Program Contractors for ventilator-dependent members shall be made as
follows:
a. Contractors with fewer than 500 total enrolled members will be paid a monthly
amount for case management costs for ventilator-dependent members, plus fee for
service reimbursement for all other medically necessary services for
ventilator-dependent members.
b. Contractors with 500 or more enrolled members will be paid on a prepaid
capitated basis for ventilator-dependent members. Two different capitation rates
will be paid, one for members who are placed in Home and Community Based
Services, the other for members who are placed in institutions.
AHCCCSA shall make capitation payments to the Program Contractor on a monthly
basis in advance of the performance of services. The amount paid each month
shall be the capitation rate for ventilator dependent members placed in Home and
Community Based Services. On a quarterly basis, AHCCCSA will calculate the
amount due to the Contractor for capitation for ventilator dependent members
placed in institutions, and will reimburse the Contractor the difference between
capitation paid and the capitation due. For example:
<TABLE>
<S> <C> <C>
HCBS capitation: $5,000
Institutional capitation $10,000
HCBS member months for quarter 30
Institutional member months for quarter 35
Amount already paid for institutionalized
members 35 X $5,000 = $175,000
Total amount due to Contractor for
institutionalized members:
(35 MMs x $10,000 PMPM) $350,000
Amount now due to Contractor
($350,000 owed less $175,000
already paid): $175,000
</TABLE>
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39. HCBS ASSUMED MIX AND RECOUPMENT
At the end of the contract year, AHCCCSA shall compare actual HCBS member months
for the entire contract year to the HCBS assumed mix, i.e., to the HCBS mix that
was assumed in calculation of the capitation rate for that contract year. If the
Program Contractor's actual mix is more than the HCBS assumed mix, AHCCCSA shall
recoup a portion of the difference between institutional and HCBS capitation for
member months which exceeded the HCBS assumed mix. This recovery shall be made
in accordance with the following schedule:
<TABLE>
<CAPTION>
Excess Mix Recoupment
<S> <C>
0 - .24 percentage points 0%
.25 - .49 percentage points 20%
.50 - .74 percentage points 40%
.75 -1.49 percentage points 60%
1.5 or more percentage points 80%
</TABLE>
The Program Contractor shall neither exceed the statewide cap of 40% established
by HCFA nor implement an HCBS waiting list without prior written approval from
AHCCCSA.
40. HOSPITAL REIMBURSEMENT
The Program Contractor shall reimburse hospitals for member care based on one of
the following rate methods:
a. AHCCCS Fee for Service Hospital Reimbursement Rate
Inpatient: AHCCCS hospital-specific tiered per diem rates
Outpatient: AHCCCS hospital-specific cost-to-charge ratio
multiplied by allowed charges,
OR:
b. Subcontracted rate (The aggregate of subcontracted rates must not
exceed what would have been paid had the AHCCCS Fee for Service
Hospital Reimbursement rate been used.)
Within seven days of subcontracting with a hospital, the Program Contractor
shall submit a copy of the subcontract, including all rates, terms and
conditions, to AHCCCSA, Office of Managed Care. This submittal shall include
documentation that the negotiated rate will, when considered in the aggregate,
be the same or less than what would have been paid under Paragraph a above. To
aid in making this determination, the Program Contractor shall require their
independent auditor to evaluate the reasonableness of their assumptions as part
of the annual audit.
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Contractor shall reimburse out of state hospitals at the lowest of the following
rates for inpatient and outpatient services:
a. Negotiated discounted rate, or
b. Arizona average cost-to-charge ratio multiplied by allowed charges, or
c. Medicaid rate in effect in the state in which the hospital is located
at the time services are provided.
The Contractor may conduct prepayment and postpayment medical reviews of all
hospital claims. Inpatient tiered per diem rates and outpatient cost-to-charge
ratios will be adjusted in accordance with A.R.S. 36-2903.01 (J).
41. SANCTIONS
If the Program Contractor violates any provision stated in law or this contract,
AHCCCSA may suspend, refuse to renew, or terminate this contract or any related
subcontracts in accordance with the terms of this contract and applicable law
and regulations.
AHCCCSA may, in addition to these remedies, impose monetary sanctions in
accordance with the provisions of this contract, applicable law and regulations.
Written notice will be provided to the Program Contractor specifying the
sanction to be imposed, the grounds for such sanction and either the length of
suspension or the amount of payment to be withheld.
42. MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP
A proposed merger, reorganization or change in ownership of Contractor health
plan shall require prior approval of AHCCCSA and a subsequent contract
amendment. Contractor must submit a detailed merger, reorganization and/or
transition plan to AHCCCSA Contracting Office for AHCCCSA review. The purpose of
the plan review is to ensure uninterrupted services to members, evaluate the new
entity's ability to support the provider network, ensure that services to
members are not diminished and that major components of the organization and
AHCCCS programs are not adversely affected by such merger, reorganization or
change in ownership.
43. REQUESTS FOR INFORMATION
AHCCCSA may, at any time during the term of this contract, request financial or
other information from the Program Contractor. Upon receipt of such requests for
information, the Program Contractor shall provide complete information as
requested no later than 30 days after the receipt of the request unless
otherwise specified in the request itself.
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44. RELATED PARTY TRANSACTIONS
Any proposed subcontract involving a related party or entity requires prior
approval from AHCCCSA. The minimum information required on ownership and control
in related party transactions is set by federal law (42 CFR 455.100 through
455.106) and the Program Contractor shall disclose all required information,
justify all related party transactions reported, and certify the accuracy and
completeness of the disclosures made. The Program Contractor shall demonstrate
that transactions occurring between the provider and a related party-in-interest
are reasonable, will not adversely affect the fiscal soundness of the Program
Contractor, and do not present a conflict of interest.
45. DATA MANAGEMENT
The Program Contractor shall have the capability for all required technical
interfaces with AHCCCSA. Refer to the AHCCCS Technical Interface Guidelines in
the Bidder's Library for further information. These guidelines will be provided
to the Program Contractor upon contract award.
46. DATA EXCHANGE REQUIREMENT
The Program Contractor shall exchange data with AHCCCSA in accordance with the
AHCCCS Technical Interface Guidelines.
The Program Contractor is responsible for any incorrect data, delayed encounter
data submission and any penalty applied due to error, omission, deletion, or
erroneous insert caused by data it submitted. Any data that does not meet the
standards required by AHCCCSA shall not be accepted by AHCCCSA.
The Program Contractor is responsible for identifying any inconsistencies
immediately upon receipt of data from AHCCCSA. If any unreported inconsistencies
are subsequently discovered, the Program Contractor shall correct its records at
its own expense.
The Program Contractor shall provide to AHCCCSA original evidence of service
rendered and PCP assignments in a form appropriate for electronic data exchange.
The Program Contractor shall be provided with a security code for use in all
data transmissions. The Program Contractor agrees that by using its security
code, it certifies that any data transmitted is accurate and truthful, to the
best of its knowledge.
AHCCCSA intends to implement the ANSI X-12 Electronic Data Interchange (EDI)
standards for transactions related to health care according to the schedule
published by the ANSI X-12 Working Group for EDI (WEDI). These capabilities will
be added over time beginning with the 270/271 eligibility/benefit inquiry and
information transactions, the 835/837 claim payment and claim submission
transactions and the 276/277 claim status transactions. The above transactions
are intended to be used by the AHCCCS Fee-For-Service providers. AHCCCSA is not
planning to convert
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encounter reporting to the EDI standards during the next contract year. The
Technical Interface Guidelines will be updated as these standards are
implemented.
47. CHILDREN'S REHABILITATIVE SERVICES (CRS)
CRS, a program administered by the Arizona Department of Health Services (DHS),
is designed to provide specialty medical and surgical care of a comprehensive
and rehabilitative nature to children who meet CRS financial and medical
eligibility criteria. CRS is not an emergency services program. While attempts
will be made by CRS administrators to accommodate emergency referrals, the
Program Contractor remains ultimately responsible for the provision of all
covered services to its members.
Since CRS is not an entitlement program and eligibility is based on medical
judgment, there is no guarantee that CRS administrators will accept
responsibility for treatment. The Program Contractor shall refer potentially
eligible children to CRS administrators. The referral process is discussed in
the CRS Policy and Procedures Manual. a copy of which may be obtained through
the Contracts and Purchasing Office.
The CRS program provides a comprehensive multi-disciplinary approach to
management of CRS-covered conditions, but does not provide primary care.
Eligibility criteria for these services include:
a. Child has a CRS-covered condition as defined in the CRS Policy and
Procedures Manual.
b. Child requires comprehensive multi-disciplinary care.
c. Child has a reasonable potential for rehabilitation.
CRS-covered services will ordinarily include the planned management of the
covered condition, including inpatient care, surgery, therapy, limited DME and
home health care, and social and educational services, as well as periodic
follow-up. Emergency services are not ordinarily covered by CRS, nor is initial
care of newborn infants.
48. GRIEVANCE PROCESS AND STANDARDS
The Program Contractor shall have a written grievance policy for members and
providers which defines their rights regarding any adverse action by the Program
Contractor. This policy shall include, at a minimum, the following:
a. The grievance procedure shall be provided to members upon enrollment,
to all subcontractors at time of contract, and to non providers within
10 days of the date of receipt of a claim
b. The member grievance procedure shall be written in English and a second
language when 200 members or 5% of the enrolled population, whichever
is greater, speaks the same non-English language.
c. Each nursing facility shall inform each member of the member's rights
and responsibilities in accordance with 42 CFR, Part 483 Subpart B.
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d. The nursing facility shall maintain a grievance procedure consistent
with AHCCCSA policies. The grievant in nursing facility grievances
shall be informed that appeals to the Program Contractor are available.
e. The grievance procedure shall specify that all grievances, except those
challenging claim denials, shall be filed with the Program Contractor
no later than 35 days after the date of adverse action and that all
grievances challenging claim denials shall be filed in writing with the
Program Contractor no later than 12 months from the date of service for
which payment is claimed.
f. Specific individuals shall be appointed with authority to require
corrective action to administer the grievance policy.
g. A log shall be maintained for all grievances containing sufficient
information to identify the grievant, date of receipt, nature of the
grievance and the date grievance is resolved. The member grievance log
shall be maintained separately from all other logs.
h. Within five working days of receipt, the grievant shall be informed by
letter that the grievance has been received. This letter shall be in
English and a second language as described above.
i. Privacy of the grievance records shall be maintained at all times,
including the transmittal of medical records, if required.
j. Each grievance shall be thoroughly investigated using the applicable
statutory, regulatory and contractual provisions as well as the Program
Contractor's policies and procedures, ensuring that facts are gathered
from all parties.
k. All documentation received and mailed by the Program Contractor during
the grievance process shall be dated.
l. All grievances shall be filed in a secure, designated area and be
retained for five years following the final decision, judicial appeal
or close of a grievance.
m. If the Program Contractor's final decision is appealed, all supporting
documentation shall be forwarded to AHCCCSA, Office of Grievance and
Appeals. Such appeal shall be received by AHCCCSA no later than five
working days from the date the Program Contractor receives the appeal
or the date of the oral request from AHCCCSA, Office of Grievance and
Appeals. The appeal file must contain a cover letter that includes, as
applicable:
Member's or provider's name
Member's or provider's AHCCCSA ID number
Member's or provider's address Phone number (if available)
Date of receipt of grievance and appeal
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Summary of the Program Contractor's actions undertaken to resolve
the grievance and basis thereof.
n. The following material shall be included in the appeal file:
Written request of the member or provider asking for the appeal
Copies of the entire file which include the investigations and/or
medical records;
Other information that would be necessary for resolution of the
grievance by AHCCCSA
49. ALTERNATIVE RESOLUTION PROCESS
The Program Contractor may attempt to use alternative resolution procedures to
resolve disputes presented to the Program Contractor verbally or in writing. If
the Program Contractor elects to use an alternative resolution process, it shall
be administered equally and fairly and shall be completed within 30 days from
receipt of the dispute. If the matter is not resolved to the member's or
provider's satisfaction within the 30-day period, or if the Program Contractor
fails to act upon the matter within the 30-day period, the dispute shall be
treated as a grievance. The Program Contractor shall complete the alternative
resolution process, if it elects to use such, and any resulting grievance within
45 days from the date of the filing of the grievance or dispute, and in no event
shall any grievance process exceed 45 days, whether the Alternative Resolution
Process is utilized or not.
If the alternative resolution process is used, then no later than 30 days from
the date a dispute is initially presented to the Program Contractor, the Program
Contractor shall inform the member or provider of the Program Contractor's
resolution and ask the member or provider if the resolution is acceptable. If
acceptable, the matter may be closed.
If the member or provider states that the resolution is unacceptable, the
Program Contractor shall then treat the dispute as a grievance where all
grievance standards apply, e.g., the dispute is logged in as a grievance,
acknowledgment letters are mailed, a decision is issued within the appropriate
time, appeal rights are provided.
For all disputes where an alternative resolution is proposed, the Program
Contractor shall maintain a permanent record which contains at a minimum, the
following:
The name of the member and provider
Telephone number and address
Date the dispute was presented
Date the resolution was communicated to the member and provider
Nature of the dispute
The resolution offered
Whether resolution is accepted or rejected
The Program Contractor shall be responsible and accountable to AHCCCSA for any
trends in deficiencies identified through accumulated member and provider
grievances. Upon request by
30
<PAGE> 328
ALTCS Renewal
Contract Year 95-96
AHCCCSA, the Program Contractor shall promptly supply all information relevant
to such identified trends and shall include also its plans for correcting the
deficiencies noted.
50. QUARTERLY GRIEVANCE REPORT
A Quarterly Grievance Report shall be submitted to AHCCCSA, Office of Grievance
and Appeals and must be received no later than 45 days after the end of each
quarter.
51. METHOD OF PAYMENT TO PROGRAM CONTRACTOR
AHCCCSA reserves the right to make payments to the Program Contractor by wire or
NACHA transfer. AHCCCSA agrees to provide the Program Contractor a minimum 30
days notice prior to the effective date of any such change.
[END OF SECTION D]
31
<PAGE> 329
EXHIBIT 10.9(a)(2)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
<TABLE>
<CAPTION>
========================================================================================
<S> <C> <C> <C>
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
8 YH3-0028-03 Sept. 1, 1995 ALTCS
========================================================================================
CONTRACTOR'S NAME AND ADDRESS:
James Burns, CEO
Ventana Health Systems
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
========================================================================================
PURPOSE OF AMENDMENT: Initiation of the ALTCS Transitional program
========================================================================================
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
Effective Sept. 1, 1995, the Program Contractor shall implement the
ALTCS Transitional program in accordance with the program description
on pages 2 through 6 of this amendment.
========================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT REMAIN
UNCHANGED AND IN FULL EFFECT.
========================================================================================
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
James Burns Michael Veit
========================================================================================
TYPED NAME: JAMES BURNS TYPED NAME: MICHAEL VEIT
========================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
========================================================================================
DATE: 9/29/95 DATE: Aug 29 1995
========================================================================================
</TABLE>
<PAGE> 330
ATTACHMENT G: ALTCS TRANSITIONAL PROGRAM
l. OVERVIEW
ALTCS Transitional is a program for currently eligible ALTCS members
(both those in nursing facilities/intermediate care facility for the
mentally retarded (ICF/MR) and those receiving home and community based
services) who have improved either medically, functionally or both to
the extent that they are no longer at risk of institutionalization at a
NF or an ICF-MR level of care but who continue to require significant
long term care services. The ALTCS Transitional program allows those
members who meet the ALTCS Transitional criteria as determined by the
preadmission screening, to continue to receive all ALTCS covered
services that are medically necessary. The PAS reassessment has
determined that NF services including ICF-MR are not medically
necessary.
Currently, ALTCS members who fail the PAS when a PAS reassessment is
completed are discontinued from the ALTCS program. With the approved
waiver, ALTCS members meeting the Transitional criteria will remain
ALTCS eligible in the ALTCS Transitional program. The ALTCS Transitional
program is not available to ALTCS applicants.
II. PROGRAM
A. Financial Eligibility requirements do not change. Current
procedures for reporting changes in the member's circumstances
including living arrangement (where the member lives) to the
Bureau of Eligibility (BOE) will be followed.
B. Medical Eligibility (PAS) - Client Assessment and Tracking System
(CATS) will be modified to allow a second scoring of the PAS
criteria in determining the member's level of care. The ALTCS
Transitional criteria will consist of:
1. EPD
a. Need assistance with 3 out of 5 ADLs (transferring, eating,
dressing, bathing and toileting).
b. Has a diagnosis of Alzheimer's disease, organic brain
syndrome, dementia, Parkinson's disease or head trauma
which impacts activities of daily living.
c. Meet specific score on the items in the emotional and
cognitive functioning category.
NOTE: Members who are under the age of 6 and who are not DD
will be referred for review.
2. DD
a. Has a diagnosis of moderate, severe or profound
retardation.
b. Meets the reduced scoring threshold established for the
ALTCS Transitional.
c. Additional criteria may be established following the Pilot
results.
2
<PAGE> 331
C. Services Package will remain the same except nursing
facility/ICF-MR services are no longer medically necessary and
supported employment services will be added for the DD population.
For those members who reside in a NF/ICF-MR when determined
eligible for the ALTCS Transitional program, the program
contractor will need to arrange for HCBS placement as soon as
possible within 90 days. Refer to section J. for policy concerning
a short-term NF/ICF-MR stay.
D. Effective Date of member's eligibility for the ALTCS Transitional
program will be the first of the month following the PAS decision
date, in accordance with the member roster cut off date.
E. Member Notification will be generated from CATS, with a copy being
sent to the program contractor. The notice, in accordance with the
requirements of 42 CFR 431.210-431.213, will
- include an explanation of the change in status to the ALTCS
Transitional program;
- advise the member that they will continue to receive all
medically necessary services;
- notify members who are in a nursing facility or ICF-MR that
their case manager will be contacting them to discuss and plan
for the move from the NF to a home and community base setting;
- advise members of their appeal rights.
The notices will be printed at Central Office and distributed to
the Bureau of Eligibility for review and mailing.
F. Notification to Program Contractor
1. In addition to receiving a copy of the notice to the member,
the ALTCS Transitional status will be reflected on the Program
Contractor's (PC) monthly member roster.
2. Copy of the PAS which is sent to the PC, will identify the
ALTCS Transitional member.
3. Copy of the new monthly report, ALTCS TRANSITIONAL PROGRAM
MEMBERS BY PROGRAM CONTRACTOR, will be sent to the program
contractor . The report will be sorted by PC, county, time
period (within 90 days and after 90 days) and placement. The
report will include the member's name, AHCCCS ID, time period,
days in the program, PAS disposition date, date the member
entered the program and the member's current placement.
G. Program Contractor Compliance
1. HCBS Members
Upon being notified of the change in the member's status, the
case manager shall discuss the issue with the member and/or
member's legal or authorized representative to insure the
member's understanding of the change.
3
<PAGE> 332
2. NF/ICF-MR Members
Upon being notified of the change in the member's status, the
case manager must discuss the change in level of care and need
to move the member with the member's PCP. Arrangements must be
made to move these members to an HCBS setting as soon as
possible.
Program contractors must comply with requirements of 42 CFR
483.12, as appropriate.
Failure to move the member within the allowable timeframe
will be considered a PC compliance issue and fall under
regular PC monitoring procedures as part of the Case
Management Services Review (CMSR). The Office of the Medical
Director will receive a copy of the management report
discussed in Section F. to assist in the monitoring of this
program.
H. Identification and Tracking of the Population in the System
- A new level of care (LOC) code "V" (Ventilator Dependent - SNF
III) will be added to CATS; the existing LOC "T" will be
converted from SNF III to ALTCS Transitional. All LOC "T"
stored on the CATS database at the time of ALTCS Transitional
implementation will be converted to "V". The revised LOC-T
will represent a LOC below the ICF level and eligibility for
ALTCS Transitional.
- A new on-line screen CA-080 ALTCS Transitional Program
Maintenance will be created which will include the effective
start and end dates of the ALTCS Transitional Program for the
ALTCS member.
- Additional management report will be developed. This report
will include the number of ALTCS members in the ALTCS
Transitional program on a monthly basis and will include the
start and end dates of the 90-day period for institutionally
placed members.
- ALTCS placement reports will be modified to include the number
of days a member is in the ALTCS Transitional program for the
placement. Placement should reflect the correct placement for
the month.
- The HCBS Tracking Report will be modified to include the
member months in the ALTCS Transitional program. Transitional
members are counted in the 40% HCBS cap.
- A new contract type may be added to PMMIS in the future.
I. Capitation
There will be no changes in the current capitation payments for both
the EPD and DD populations. The PC will receive the same capitation
for the ALTCS Transitional members as they did before the member was
transferred to the ALTCS Transitional program.
4
<PAGE> 333
EPD institutionalized members will continue to be considered
institutional placement until the member is placed in an HCBS setting
or expiration of the 90 day period, whichever occurs first. HCBS
members will continue to be HCBS placement. For ALTCS Transitional
members who remain institutionalized after the 90 day period, member
months will be considered as HCBS MMS for the HCBS recoupment process.
Example:
Regular HCBS MMs = 200
ALTCS Transitional MMS = 10
HCBS Cap (assumed MX) = 190 MMs
MMS subject to recoupment (per the schedule in the year 13 renewal
document) 210 actual - 190 assumed = 20
For DD, the population will be divided into 2 groups, full LTC services
and acute only, just as it is currently. The rate will differ for
placed (full LTC) vs unplaced (acute only) DD clients just as it does
currently. Within each of those 2 groups, there are 2 possible
medically eligible categories, ALTCS Transitional and regular ALTCS.
Data from the first year will be collected and evaluated for possible
changes in capitation reimbursement. Required data will be added to the
Placement Reports and HCBS Tracking Report to provide a method for
collection of the data needed. Additional ad-hoc reports will be
developed as needed.
J. Short-term NF Stay
A short-term nursing facility stay will be available to ALTCS
Transitional HCBS members whose condition worsens to the extent that NF
services are temporarily medically necessary. The PC can place the
ALTCS member in a NF, and remain in compliance, provided the stay does
not exceed 90 continuous days at any one admission.
The PC should request AHCCCS to complete a PAS reassessment if they
think the ALTCS Transitional member will need extended NF care (longer
than 90 days). If the member is determined to be at risk of
institutionalization based on the PAS reassessment, the member's status
will be changed from the ALTCS Transitional program to the regular
ALTCS program effective with the first day of the following month.
CATS will be able to track these situations through the placement and
revenue codes entered in CATS by the program contractor and through the
PAS reassessments.
III. PILOT TEST
In August, 1995, AHCCCS will complete both the new DD PAS tools and the
current DD tool on ALTCS DD members on which a reassessment is being
completed to validate the criteria for the ALTCS Transitional program.
The results of the pilot will be evaluated and any revisions to the
criteria will be made.
5
<PAGE> 334
IV. IMPLEMENTATION PLAN
A. ALTCS Transitional program has been approved by HCFA. No new members
will be added after 10/1/97.
B. ALTCS Transitional Program will be implemented 9/1/95.
C. AHCCCS met with Program Contractors on July 27, 1995 to discuss
implementation plans. PC's will be required to include their
implementation plan with their ALTCS renewal document.
D. Necessary system changes will be completed in July and August, 1995.
Revisions may be required after the August pilot.
E. ALTCS Transitional rule package was completed and submitted in June,
1995.
. F. Policy and procedures manual material will be finalized and distributed
in August, 1995.
G. Training of PAS assessors will be completed in July and August, 1995.
Designated OGA and DES/DDD staff will be trained in September, 1995.
H. PC compliance review will begin in the October - December 1995 quarter.
I. Demonstration evaluation criteria was determined to not be needed.
6
<PAGE> 335
EXHIBIT 10.9(a)(3)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
<TABLE>
<CAPTION>
==========================================================================================
<S> <C> <C>
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
9 YH3-0028-03 Oct. 1, 1995 ALTCS
==========================================================================================
CONTRACTOR'S NAME AND ADDRESS:
James Burns, CEO
Ventana Health Systems
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
==========================================================================================
PURPOSE OF AMENDMENT: To revise capitation rates for Contract Year 95-96.
==========================================================================================
</TABLE>
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
The Programs Contractor's new capitation rates effective 10/1/95 are as follows:
<TABLE>
<CAPTION>
COUNTY ACUTE ONLY* TOTAL LTC VENT. DEP, INSTITUTIONAL VENT. DEP.-HCBS
------ ----------- --------- ------------------------ ---------------
<S> <C> <C> <C> <C>
Apache 371.69 1,670.17 11,753.51 6,321.88
------------------------------------------------------------------------------------------------------
Gila 320.36 2,109.67 11,733.48 6,301.85
------------------------------------------------------------------------------------------------------
Graham 351.39 1,966.87 11,754.78 6,323.15
------------------------------------------------------------------------------------------------------
Greenlee 424.06 2,108.81 11,953.65 6,394.88
------------------------------------------------------------------------------------------------------
La Paz 330.70 1,986.01 11,738.75 6,307.12
------------------------------------------------------------------------------------------------------
Mohave 329.94 1,821.35 11,743.64 6,312.01
------------------------------------------------------------------------------------------------------
Navajo 349.67 1,878.26 11,763.50 6,331.87
------------------------------------------------------------------------------------------------------
Santa Cruz 346.90 1,986.61 11,992.70 6,327.47
------------------------------------------------------------------------------------------------------
* "Actue Only" includes acute care, behavioral health and case management
services
==========================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
==========================================================================================
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
James Burns Michael Veit
==========================================================================================
TYPED NAME: JAMES BURNS TYPED NAME: MICHAEL VEIT
==========================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
==========================================================================================
DATE: 9/28/95 DATE: Oct 30 1995
==========================================================================================
</TABLE>
<PAGE> 336
EXHIBIT 10.9.(a)(4)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
<TABLE>
<CAPTION>
=======================================================================================
<S> <C> <C> <C>
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
10 YH3-0028-03 Oct. 17, 1995 ALTCS
=======================================================================================
CONTRACTOR'S NAME AND ADDRESS:
James Burns, CEO
Ventana Health Systems
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
=============================================================================================
PURPOSE OF AMENDMENT: To expand covered services to include lung and heart/lung transplants.
=============================================================================================
</TABLE>
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
Effective 10/17/95, AHCCCS members are entitled to receive lung and
heart/lung transplants. (Ref. Arizona Senate Bill 1001.) For these
transplants, AHCCCS will reimburse the Contractor 100% of the lesser of
(1) the AHCCCS contracted rate, or (2) the Contractor-paid amount.
NOTE: PLEASE SIGN, DATE AND
RETURN BOTH ORIGINALS TO: MARK RENSHAW
AHCCCS CONTRACTS AND PURCHASING
701 E. JEFFERSON
PHOENIX, AZ 85034
================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
================================================================================
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
James Burns Michael Veit
=======================================================================================
TYPED NAME: JAMES BURNS TYPED NAME: MICHAEL VEIT
=======================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
=======================================================================================
DATE: 12/12/95 DATE: Dec 15 1995
=======================================================================================
</TABLE>
<PAGE> 337
EXHIBIT 10.9(a)(5)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
<TABLE>
<CAPTION>
===========================================================================================
<S> <C> <C> <C>
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
11 YH3-0028-03 Oct. 1, 1995 ALTCS
===========================================================================================
===========================================================================================
CONTRACTOR'S NAME AND ADDRESS:
James Burns, CEO
Ventana Health Systems
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
===========================================================================================
PURPOSE OF AMENDMENT: To clarify QMB coinsurance and deductible requirements.
===========================================================================================
</TABLE>
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
Paragraph 34, Qualified Medicare Beneficiary (QMB) Program, and Paragraph 35,
Payment of Medicare Coinsurance and Deductibles, are hereby deleted and replaced
with the following paragraph:
34. MEDICARE SERVICES AND COST SHARING
AHCCCS has members enrolled who are eligible for both Medicare and Medicaid
services. These members are referred to as "dual eligibles" and include persons
who are Qualified Medicare Beneficiaries (QMB) and non-QMB eligible persons. QMB
eligible persons are entitled to all covered Medicaid services and, in addition,
may receive the following Medicare services which are not covered by AHCCCS or
differ in scope or limitation:
Chiropractic services Inpatient and outpatient
occupational coverage
Inpatient psychiatric services Respite services
Psychological services Any new services added to the
Medicare program which are not
covered by AHCCCS
For all dual eligible persons, the Program Contractor shall be responsible for
providing all AHCCCS covered services and pay all Medicare coinsurance and
deductibles for Medicare services which are covered by AHCCCS and provided on a
fee-for-service basis within the Program Contractor's network. For QMB eligible
persons, the Program Contractor shall be responsible for paying the Medicare
coinsurance and deductibles for Medicare services not covered by AHCCCS
described above which are provided on a fee-for-service basis.
Since Medicaid is the payer of last resort, all Medicare covered services which
are provided to dual eligibles who are not enrolled in a Medicare TEFRA Risk HMO
shall be billed to Medicare or any other third party liability source.
If a dual eligible is enrolled with a Medicare TEFRA Risk HMO, Medicare will not
reimburse the Program Contractor for Medicare covered services provided by the
Program Contractor. Therefore, the Program Contractor shall refer the member to
the Medicare TEFRA Risk HMO for all Medicare covered services and shall not be
responsible for the payment of any Medicare copayments, deductibles or premiums
assessed by the Medicare TEFRA Risk HMO. The Program Contractor shall be
responsible for any Medicaid covered services not provided by the Medicare TEFRA
Risk HMO.
<TABLE>
<S> <C>
===========================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
===========================================================================================
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
James Burns Michael Veit
===========================================================================================
TYPED NAME: JAMES BURNS TYPED NAME: MICHAEL VEIT
===========================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING
ADMINISTRATOR
===========================================================================================
DATE: 5/21/96 DATE: May 23 1996
===========================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.10(a)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION (AHCCCSA)
SOLICITATION, OFFER AND AWARD
Contract No.YH5-0001- RFP No. YH5-0001 Date Issued 3/7/94
Issued by: Contracts & Purchasing This project will be approximately
AHCCCSA 54% funded by the federal government.
801 E. Jefferson Ave. The State of Arizona and its counties
Phoenix, AZ 85034 will fund the balance.
I. SOLICITATION
Sealed offers (original and 7 copies) for providing the services described
herein will be received at the issuing office (above) until no later than 3:00
p.m. local time June 1, 1994.
FOR INFORMATION CALL:
Michael Veit, Contracting Officer Phone: (602) 254-5522 ext. 1100
TABLE OF CONTENTS
DESCRIPTION: PAGE(S): DESCRIPTION: PAGE(S)
A. SOLICITATION, OFFER AND F. LIST OF ATTACHMENTS .... 73-74
AWARD FORM ............ 1-2 G. REPRESENTATIONS, CERTI-
B. CAPITATION RATES ....... 3-4 FICATIONS, STATEMENTS.... 75-92
C. DEFINITIONS ........... 5-10 H. INSTRUCTIONS, CONDITIONS
D. PROGRAM REQUIREMENTS .. 11-52 NOTICES TO OFFERORS ..... 93-108
E. CONTRACT CLAUSES ..... 53-72 I. EVALUATION FACTORS ...... 109-114
J. INDEX.................... 189-190
II. OFFER (Must be fully completed by offeror)
The undersigned offeror hereby agrees, if this offer is accepted by 9/1/94, to
provide all services for which prices are offered at the prices stated in
Section B in accordance with all requirements stated in the solicitation.
NAME OF OFFEROR: Arizona Health Concepts, Inc NAME OF PERSON AUTHORIZED
TO SIGN OFFER:
ADDRESS: 2510 W. Dunlap, Suite 100
Phoenix, AZ Zip 85021
Blaine J. Beregson
------------------
TITLE:
PHONE: (602) 943-5660 Chief Executive Officer
OFFEROR'S SIGNATURE: DATE: June 1, 1994
----------------------------
III. AWARD (To be completed by AHCCCSA)
The offer, including attachments and amendments contained herein, is accepted.
NAME OF AHCCCSA CONTRACTING OFFICER: Michael Veit DATE: 7/20/94
------------------------
SIGNATURE OF AHCCCSA CONTRACTING OFFICER: Michael Veit
------------------------
<PAGE> 2
SECTION B - CAPITATION RATES
1. Contractor shall provide services as described in this solicitation.
2. The following capitation rate table, shown for example only, will be
generated by the capitation rate computer program, described in
Attachment F. Offeror must complete one such rate table for each county
it is bidding. Offeror should insert between this page and the following
page the computer-generated printout of all such proposed rate tables.
3. Attachment B, Service Area Minimum Network Standards, describes location
requirements by county and allows offerors to select cross-over areas
and zip codes to be serviced. Offeror must complete the appropriate
sheet for each county bid and insert the completed sheet(s) immediately
behind the computer-generated printouts described above.
4. Offeror does ________ does ________ not include family planning services,
which are optional, in its proposed covered services. (See Section G,
Paragraph 2)
___________________________________
SAMPLE ONLY:
PROPOSED CAPITATION RATES:
(1) COUNTY:____________________
RATE CODE CAPITATION RATE CAPITATION PAYMENT
CLASSIFICATION PER MEMBER PER MONTH PER SOBRA BIRTH
AFDC $__________
SSI with Medicare __________
SSI without Medicare __________
MI/MN with Medicare __________
MI/MN without Medicare __________
Children's Care Program __________
S.O.B.R.A. Supplemental $__________
<PAGE> 3
SECTION C - DEFINITIONS
ADP Automated Data Processing. Refers to computer
hardware, software and related equipment.
AGENT Any person who has been delegated the authority
to obligate or act on behalf of a provider.
AHCCCS Arizona Health Care Cost Containment System as
defined by ARS 36-2903, et seq.
AHCCCSA Arizona Health Care Cost Containment System
Administration
AHCCCS BENEFITS See "COVERED SERVICES"
AHCCCS MEMBER See "MEMBER"
ALTCS The Arizona Long Term Care System (ALTCS), a
program under AHCCCSA that delivers long term,
acute and behavioral health care services to
eligible members, as authorized by A.R.S.
36-2931.
AMBULATORY CARE Preventive, diagnostic and treatment
services provided on an outpatient basis by
physicians, nurse practitioners, physician
assistants and other primary care providers.
AT RISK Refers to the period of time that member is
enrolled with a contractor and during which time
Contractor is responsible to provide AHCCCS
covered services under capitation.
BIDDERS' LIBRARY A repository of manuals, statutes, rules
and other reference material referred to in this
RFP, located at the AHCCCS office in Phoenix.
BOARD CERTIFIED An individual who has successfully
completed all prerequisites of the respective
specialty board and successfully passed the
required examination for certification.
<PAGE> 4
CAPITATION Payment to contractors, by AHCCCSA, of a fixed
monthly payment per person in advance for which
the contractor provides a full range of covered
services.
CATEGORICALLY A member who is eligible for Medicaid.
ELIGIBLE MEMBER
COMPETITIVE A state procurement system used to select
BID PROCESS contractors to provide covered services
on a geographic (i.e., county specific) basis.
CONTRACT SERVICES See "COVERED SERVICES"
CONTRACT YEAR (CY) Corresponds to federal fiscal year
(Oct. 1 through Sept. 30). For example, Contract
Year 95 is 10/1/94 - 9/30/95.
CONTRACTOR A person, organization or entity agreeing
through a direct contracting relationship with
AHCCCSA to provide those goods and services
specified by contract in conformance with the
requirements of such contract and AHCCCS Rules.
CONVICTED A judgment of conviction has been entered by a
Federal, State or local court, regardless of
whether an appeal from that judgment is pending.
CO-PAYMENT An amount which the member pays directly to a
contractor or provider at the time covered
services are rendered.
COUNTY CONTRIBUTION Amount of funds contributed to the AHCCCS fund
by each Arizona county based on funding formulas
established by law.
COVERED SERVICES Health care services to be delivered by a
contractor which are so designated in Section D
of this contract and also Arizona Administrative
Code R9-22-202 et seq.
CRS Children's Rehabilitative Services (See Section
D, Para.30)
DAYS Calendar days unless otherwise specified.
<PAGE> 5
DHS Arizona Department of Health Services.
DIRECTOR The Director of AHCCCSA.
DISCLOSING ENTITY An AHCCCS provider or a fiscal agent.
DME Durable medical equipment; an item that can
withstand repeated use such as hospital beds,
wheelchairs, crutches.
DUAL ELIGIBLE A person who is entitled to Medicare Part A
QUALIFIED MEDICARE insurance, meets certain income, resource and
BENEFICIARY residency requirements of the Qualified
Medicare Beneficiary program, and who has been
determined categorically eligible for full
AHCCCS benefits.
ELIGIBILITY A process of determining, through
DETERMINATION a written application, including required
documentation, whether an applicant meets the
qualifications for federal (categorical) and/or
state only eligibility.
ENCOUNTER An encounter is a record of a medically related
service rendered by a provider or providers
registered with AHCCCSA to a member who is
enrolled with a contractor on the date of
service. It includes all services for which the
contractor incurred any financial liability.
ENROLLMENT The process by which a person who has been
determined eligible becomes a member with a
contractor subject to the limitations specified
in the AHCCCS Rules.
EPSDT Early and Periodic Screening, Diagnosis and
Treatment services for persons under 21 years of
age as described in AHCCCS Rule R9-22-101.
FEE-FOR-SERVICE A method of payment to registered providers on
(FFS) an amount-per service basis.
FFP Federal financial participation (FFP) refers to
the contribution that the Federal government
makes to the Title XIX program portion of
AHCCCS.
<PAGE> 6
FISCAL YEAR (FY) The budget year - Federal Fiscal Year: October 1
through September 30; State fiscal year: July 1
through June 30.
GATEKEEPER Primary care provider who is primarily
responsible for all medical treatment rendered;
makes referrals as necessary and monitors the
member's treatment.
GROUP OF Two or more health care professionals who
PRACTITIONERS practice their profession at a common location
(whether or not they share common facilities,
common supporting staff, or common equipment).
HCFA Health Care Financing Administration, an
organization within the Department of Health and
Human Services, a Federal agency.
HEALTH MAINTENANCE Various forms of plan organization, including
ORGANIZATION (HMO) staff and group models, that meet the HMO
licensing requirements of the Federal and/or
State government and offer a full array of
health care services to members on a capitated
basis.
IBNR Incurred But Not Reported claims; liability for
services rendered for which claims have not been
received.
IHS Indian Health Service (IHS) is a division of the
U.S. Public Health Service. It administers a
system of hospitals and health centers providing
health services to Native Americans and Native
Alaskans.
MANAGING EMPLOYEE A general manager, business manager,
administrator, director, or other individual who
exercises operational or managerial control
over, or who directly or indirectly conducts the
day-to-day operation of an institution,
organization or agency.
MANAGEMENT SERVICES A person or organization who agrees to perform
SUBCONTRACTOR any administrative function or service for the
Contractor specifically related to securing or
fulfilling the Contractor's obligations to
AHCCCSA under the terms of the contract.
<PAGE> 7
MATERIAL OMISSION A fact, data or other information
excluded from a report, contract, etc. the
absence of which could lead to erroneous
conclusions following reasonable review of such
report, contract, etc.
MEDICAID A Federal/State program authorized by Title XIX
of the Social Security Act, as amended, which
provides Federal matching funds for a medical
assistance program for recipients of federally
aided public assistance and SSI benefits and
other specified groups. Certain minimal
populations and services must be included to
receive FFP; however, states may optionally
include certain additional populations and
services at State expense and also receive FFP.
MEDICARE A Federal program authorized by Title XVIII of
the Social Security Act, as amended.
MEMBER For purposes of this solicitation, a person
eligible for AHCCCS who is enrolled with a
Contractor.
NON-CONTRACTING PROVIDER A provider who has a contract or subcontract
within the AHCCCS system and renders covered
services to an eligible person or member to whom
such provider bears no contractual obligation.
NONPROVIDER A person or entity who provides hospital or
medical care but does not have a contract or
subcontract within the system.
OFFEROR The organization, entity or person which submits
a proposal in response to the AHCCCS Request for
Proposal. An offeror who is awarded a contract
becomes a Contractor.
PREPAID CAPITATION A method by which a Contractor is paid in
advance to deliver covered services for the
duration of a contract
<PAGE> 8
to members based on a fixed rate per member
notwithstanding (a) the actual number of members
who receive care from the provider, and (b) the
amount of health care services provided to any
member. A prospectively paid, fixed monthly
premium per person which covers a specified set
of benefits; a cost containment alternative to
fee-for- service.
PRIMARY CARE PROVIDER/ An individual responsible for the management of
PRACTITIONER (PCP) the member's health care that includes, but is
not limited to, a physician who is a family
practitioner, general practitioner,
pediatrician, general internist, obstetrician,
gynecologist, certified nurse practitioner or,
under the supervision of a physician, a
physician's assistant. The PCP must be an
individual, not a group or association of
persons, such as a clinic.
RATE CODE Classification for capitation payment purposes.
There are seven rate codes into which AHCCCS
members are grouped: 1) AFDC, 2) SSI with
Medicare, 3) SSI without Medicare, 4) MN/MI with
Medicare, 5) MN/MI without Medicare, 6)
Children's Care Programs and 7) S.O.B.R.A.
Mothers.
REINSURANCE A risk-sharing program provided by AHCCCSA to
contractors for the reimbursement of certain
contract service costs incurred by a member
beyond a certain monetary threshold.
RELATED PARTY A party that has, or may have, the ability to
control or significantly influence a contractor,
or a party that is, or may be, controlled or
significantly influenced by a contractor.
"Related parties" include, but are not limited
to, agents, managing employees, persons with an
ownership or controlling interest in the
disclosing entity, and their immediate families,
subcontractors, wholly-owned subsidiaries or
suppliers, parent companies, sister companies,
holding companies, and
<PAGE> 9
other entities controlled or managed by any such
entities or persons.
RFP Request For Proposal; document prepared by
AHCCCSA which describes the services required
and which instructs prospective offerors how to
prepare a response (proposal).
SCOPE OF SERVICES See "COVERED SERVICES"
STATE The State of Arizona.
STATE PLAN The written agreement between the State of
Arizona and HCFA which describes how the AHCCCS
program meets all HCFA requirements for
participation in the Medicaid program.
SUBCONTRACT An agreement entered into by Contractor with a
provider of health care services who agrees to
furnish covered services to members, or with a
marketing organization, or with any other
organization or person who agrees to perform any
administrative function or service for
Contractor specifically related to fulfilling
Contractor's obligations to AHCCCSA under the
terms of this contract.
SUBCONTRACTOR (1) A person, agency or organization to which a
contractor has contracted or delegated some
of its management functions or
responsibilities to provide covered services
to its members; or
(2) A person, agency or organization with which
a fiscal agent has entered into a contract,
agreement, purchase order or lease (or
leases of real property) to obtain space,
supplies, equipment or services provided
under the AHCCCS agreement.
YEAR See "Contract Year".
END OF SECTION C
<PAGE> 10
SECTION D - PROGRAM REQUIREMENTS
TABLE OF CONTENTS
PARAGRAPH SUBJECT PAGE
1. Scope of services................................................... 13
2. Delivery of services................................................ 14
3. Nursing facilities.................................................. 16
4. Enrollment and disenrollment........................................ 16
5. Medical policies.................................................... 19
6. Primary care provider standards..................................... 21
7. Emergency services.................................................. 22
8. Staff requirements and support services............................. 22
9. Written policies, procedures and job descriptions................... 24
10. Medical director.................................................... 24
11. Encounter data reporting............................................ 25
12. Encounter data reporting deadlines.................................. 26
13. Periodic report requirements........................................ 26
14. Required financial reports.......................................... 27
15. Financial viability criteria/ performance measures.................. 27
16. Quality management and utilization management (QM/UM)............... 28
17. Provider registration............................................... 28
18. Medical records..................................................... 29
19. Member surveys...................................................... 29
20. Open enrollment..................................................... 30
21. Transition of members............................................... 30
22. Member handbook..................................................... 31
23. Provider manual..................................................... 33
24. Appointment standards............................................... 34
25. Grievance process and standards..................................... 35
26. Quarterly grievance report.......................................... 37
27. Referral procedures and standards................................... 37
28. Operational and financial reviews................................... 37
29. Operational and financial readiness reviews......................... 39
30. Children's Rehabilitative Services (CRS)........................... 39
31. Hospital reimbursement.............................................. 40
32. Behavioral health services......................................... 41
33. Dissemination of information........................................ 43
34. Coordination of benefits/ third party liability..................... 43
35. Cost sharing........................................................ 44
36. Marketing plans..................................................... 44
37. Specialty contracts................................................. 44
38. Advances, distributions and loans................................... 45
39. Accumulated fund deficit............................................ 45
40. Monthly roster reconciliation....................................... 45
41. Data exchange requirement........................................... 46
42. Subcontracts........................................................ 47
43. Management services subcontractors.................................. 48
44. Management services subcontractor audits............................ 48
<PAGE> 11
45. Merger, reorganization and change of ownership...................... 48
46. Requests for information............................................ 49
47. Performance bond or bond substitute................................. 49
48. Amount of performance bond.......................................... 50
49. Federally Qualified Health Centers (FQHC)........................... 50
50. Contract compliance sanction (penalty) alternative.................. 52
51. Initial minimum capitalization requirements......................... 52
<PAGE> 12
SECTION D - PROGRAM REQUIREMENTS
1. SCOPE OF SERVICES
Contractor is to provide covered services to AHCCCS members in accordance with
all applicable federal, State and local laws, rules, regulations and policies,
including services listed in this document, listed by reference in attachments,
and AHCCCS policies referenced in this document.
The covered services to be delivered to members during the term of this contract
are described in detail in AHCCCS Rules R9-22-202 et seq., and are as follows:
A. ACUTE MEDICAL SERVICES
1) Inpatient and outpatient hospital
2) Emergency room
3) Physician
4) Outpatient Health Services, including those services that may be
provided in a Rural Health Clinic or Federally Qualified Health
Center
5) Laboratory, X-Ray and medical imaging
6) Pharmacy
7) Medical supplies, durable medical equipment and prosthetic devices
8) Emergency ambulance
9) Medically necessary transportation
10) Family Planning (optional), including drugs, supplies, devices and
surgical procedures provided to delay or prevent pregnancy. Referral
services if Family Planning not provided (See Section G, Paragraph 2)
11) Therapies which include, physical, occupational, respiratory,
audiology and speech therapies
12) Podiatry
13) Private duty nursing
14) Early and periodic screening, diagnosis and treatment services for
members under the age of 21. These services include all medically
necessary Title XIX services for categorically eligible members.
<PAGE> 13
Services, including transplantation and behavioral health, are
limited for non-categorically eligible members. See OMD Policy Manual
for specific limitations.
15) Organ transplantations which are medically necessary are limited to
the following services for members 21 years and older: kidney and
related immunosuppressant medications, cornea and bone. Heart with
related immunosuppressant medications; and autologous and allogenic
bone marrow with related chemotherapy or radiotherapy are limited to
categorically eligible members.
16) Eyeglasses and contact lenses for members 21 years and older as the
sole prosthetic device after a cataract extraction.
17) Emergency dental care, extractions and medically necessary dentures
for members 21 years and older.
18) Home health services in lieu of hospitalization
19) Nursing facility services in lieu of hospitalization not to exceed 90
days. See Section D, Paragraph 3, Nursing Facilities.
B. BEHAVIORAL HEALTH SERVICES
Title XIX covered behavioral health services are available to the following
populations once they have been determined categorically eligible:
1) Members under the age of 18
2) Seriously Mentally Ill (SMI) eligible members age 18 and older
3) Non-SMI eligible members age 18, 19 and 20
AllAHCCCS eligible members are entitled to the first 72 hours of emergency
behavioral health services if member is not identified as enrolled in
the ADHS Behavioral Health Program.
(See Section D, Paragraph 32 for details on covered behavioral health
services.)
<PAGE> 14
C. QUALIFIED MEDICARE BENEFICIARY SERVICES
In addition, the following shall be made available through referral by a
primary care provider to members who are Dual Eligible Qualified
Medicare Beneficiaries. These services are limited in accordance with
A.R.S. 36-2974:
1) Chiropractic services
2) Inpatient psychiatric services
3) Psychological services
4) Inpatient and outpatient occupational therapy
5) Respite services
2. DELIVERY OF SERVICES
Covered and excluded services for members are listed in AHCCCS Rule R9-22-202
and R9-22-203. Contractor is solely responsible for the provision of covered
services. Covered services must be medically necessary and provided by, or under
the direction of, a primary care provider. Contractor shall provide the same
standard of care for all members regardless of the member's eligibility
category.
To ensure mainstreaming of AHCCCS members, Contractor shall take affirmative
action so that members are provided covered services without regard to race,
color, creed, sex, religion, age, national origin, ancestry, marital status,
sexual preference, or physical or mental handicap, except where medically
indicated. Examples of prohibited practices include, but are not limited to, the
following:
a. Denying or not providing a member any covered service or availability
of a facility.
b. Providing to a member any covered service which is different, or is
provided in a different manner or at a different time from that
provided to other members, other public or private patients or the
public at large except where medically necessary.
<PAGE> 15
c. Subjecting a member to segregation or separate treatment in any
manner related to the receipt of any covered service; restricting a
member in any way in his or her enjoyment of any advantage or
privilege enjoyed by others receiving any covered service.
d. The assignment of times or places for the provision of services on
the basis of the race, color, creed, religion, age, sex, national
origin, ancestry, marital status, sexual preference, income status,
AHCCCS membership, or physical or mental handicap of the participants
to be served.
If Contractor knowingly executes a subcontract with a provider with the intent
of allowing or permitting the subcontractor to implement barriers to care (i.e.
the terms of the subcontract are more restrictive than this contract),
Contractor will be in default of its contract.
Contractor shall have a delivery system that meets AHCCCSA standards as defined
in this solicitation. Contractor must insure that this delivery system provides
available, accessible and adequate numbers of facilities, locations and
personnel for the provision of covered services, including all emergency medical
care on a 24-hour-a-day, 7-day-a-week basis. AHCCCSA reserves the right to waive
certain network requirements, if said waiver is determined to be in the best
interest of the State.
Contractor shall submit information quarterly regarding its provider network.
This information shall be submitted in the format described in the document
titled AHCCCS Contracted Health Plan Technical Interface Guidelines which may be
found in the Bidders' Library. This data is to be submitted to AHCCCSA on the
tenth working day of each calendar quarter.
Any material changes in Contractor's provider network must be approved in
advance by AHCCCSA, Office of Managed Care. The Office of the Medical Director
will assess changes in Contractor's provider network for potential impact on
members' health care.
<PAGE> 16
Contractor shall notify AHCCCSA, Office of Managed Care, within one working day
of any unexpected changes that would impair its provider network. This
notification shall include (1) information about how the change will affect the
delivery of covered services, and (2) Contractor's plans for maintaining the
quality of member care if the provider network change is likely to result in
deficient delivery of covered services.
3. NURSING FACILITIES
Contractor shall provide nursing facility services for short-term convalescent
care not to exceed 90 days in a contract year. These services must be in lieu of
hospitalization. Contractor may have members residing in nursing facilities
assigned to them who are not eligible for ALTCS but are eligible for covered
services as provided under this contract. Services must be provided in licensed
facilities certified under Titles XVIII and XIX. The Contractor shall not deny
such nursing facility services if the nursing facility is unable to obtain prior
authorization in situations where MN/MI eligibility and ALTCS eligibility
overlap and the member is enrolled with an AHCCCS acute care contractor. The
Contractor's payment responsibility described above applies only in situations
where the nursing facility has not been notified in advance of the member's
enrollment with an AHCCCS acute care contractor.
4. ENROLLMENT AND DISENROLLMENT
Eligibility for the various AHCCCS coverage groups is determined by one of the
following agencies:
Social Security Administration (SSA)
SSA determines eligibility for the Supplementary Security Income (SSI) cash
program. SSI Cash recipients are automatically eligible for AHCCCS
coverage.
<PAGE> 17
Department of Economic Security (DES)
DES determines eligibility for the Aid to Families with Dependent Children
(AFDC) cash program (AFDC Cash recipients are automatically eligible for
AHCCCS coverage), AFDC and SSI Medical Assistance Only (MAO) groups and
the Eligible Assistance Children (EAC) State program.
Arizona's 15 Counties
Each County determines eligibility for the Medically Needy/Medically
Indigent (MN/MI) and the Eligible Low Income Children (ELIC) State
Program.
AHCCCS acute care eligible members are enrolled with contractors in accordance
with the rules set forth in R9-22-333, R9-22-334, R9-22-335, R9-22-337,
R9-22-339, R9-22-340, R9-22-342 and R9-22-707.
a. Health Plan Choice
All members except those eligible under the MN/MI State program have a
choice of available contractors. If there is only one contractor
available for the member's county or zip code, no choice is offered.
Upon notification of a member's eligibility, AHCCCSA sends to the member
an enrollment choice letter, instructions on How to Choose a Health Plan
and the telephone number to call to enroll. A listing of the available
contractors and their telephone numbers are included with instructions
to members to call the contractors directly with specific questions
concerning the contractors' health plan. Members who do not make a
choice by the sixteenth day from the date on the enrollment letter are
automatically assigned to an available contractor using the method
applied to the MN/MI population.
AHCCCSA assigns MN/MI eligible members to an available contractor based on
family continuity or through AHCCCSA's auto-assignment algorithm. These
members do not get a choice until the open enrollment period.
<PAGE> 18
An exception to the above enrollment policies is that previously eligible
and enrolled members who have been disenrolled for less than 90 days
will be automatically enrolled with the same contractor if that
contractor is still available.
b. Newborns
Newborns of AHCCCS eligible mothers who were enrolled at the time of the
child's birth and whose newborn notification was received by AHCCCSA in
a timely manner will be enrolled with the mother's contractor.
Categorically eligible mothers of newborns are sent a letter advising
them of their right to choose a different contractor for their child;
otherwise the child will remain with the mother's contractor.
Newborns of MN/MI mothers are enrolled with the mother's contractor for a
minimum of 30 days up to a maximum of 60 days.
The enrollment date for the newborn with the mother's contractor is
dependent upon the timeliness of the contractor's notification to
AHCCCSA of the newborn's birth. When determining the number of days from
the date of birth to date of notification, the day after birth is
considered to be day "one".
1) If notification is within three days of the date of the newborn's
birth, the newborn is enrolled effective the date of birth.
2) If notification is from four through 30 days after date of birth, the
newborn is enrolled effective the date of notification.
3) If notification is more than 30 days after date of birth, the
categorical newborn is enrolled effective three days after
notification.
AHCCCS Rules R9-22-342 and R9-22-707 contain additional information concerning
newborn enrollment and payment.
<PAGE> 19
c. Enrollment Guarantees
Upon initial capitated enrollment as a categorical eligible member or as an
Eligible Assistance Child (EAC), the member is guaranteed a minimum of
five full months of continuous enrollment.
Upon termination of categorical or EAC eligibility, the enrollment
guarantee is granted if the member has not had at least five continuous
months of capitated enrollment as a categorical or EAC following the
month in which the initial categorical or EAC enrollment began.
Enrollment guarantees do not apply to American Indians who choose Indian
Health Services (IHS) as their health plan. The enrollment guarantee
applies a maximum of one time per member as a categorical member and one
time as an EAC member.
If a member changes from one contractor to another within the enrollment
guarantee period, the remainder of the guarantee period applies to the
new contractor.
AHCCCS Rule R9-22-337 describes the reasons for which the enrollment
guarantee may be terminated.
d. American Indians
American Indians eligible under any coverage group other than MN/MI, on or
off-reservation, have a choice of Indian Health Services (IHS) or any
available contractor. If choice is not made within the specified time
limit, American Indian members living on-reservation will be assigned to
IHS and American Indian members living off-reservation will be assigned
to an available contractor using AHCCCSA's family continuity policy and
auto-assignment algorithm.
American Indians may change from IHS to a contractor or from a contractor
to IHS once a year in addition to the open enrollment period.
<PAGE> 20
American Indian members eligible under the MN/MI coverage group living
on-reservation will be assigned to Indian Health Services (IHS) and
those living off-reservation will be assigned to a contractor using
regular MN/MI enrollment policy.
AHCCCSA is the sole authority in enrolling and disenrolling members. The
Contractor shall not disenroll any member.
5. MEDICAL POLICIES
The Office of the Medical Director (OMD) Policy Manual has been issued, is
hereby incorporated by reference and is available in the Bidders' Library.
Additional requirements include the following EPSDT services:
A. EPSDT Participation
The Contractor shall ensure that members under age 21 are receiving the
required EPSDT screens in accordance with the AHCCCS periodicity
schedule. (See OMD Policy Manual.)
The Contractor shall achieve a 65% participation rate for EPSDT eligible
children for Contract Year 95 (10/1/94 - 9/30/95). HCFA's goal is to
achieve 80% participation in the EPSDT program by October 1, 1996.
The Contractor shall submit to AHCCCSA, Office of the Medical Director,
within 30 days from the beginning date of the contract a comprehensive
plan to increase member participation in the EPSDT program. The plan
must be reviewed and approved by AHCCCSA and shall include at a minimum
the following components:
1. Program monitoring
2. Program evaluation
3. Member outreach
4. Provider education
<PAGE> 21
The Contractor shall submit to AHCCCSA, office of the Medical Director, a
quarterly progress report that outlines the advances achieved in
reaching the established goals. For continuing offerors, AHCCCSA will no
longer require submission of the semi-annual EPSDT Quality Management
Report.
B. DENTAL SERVICES
The Contractor shall ensure that enrolled members under age 21 have direct
access to dental providers. Enrolled members may also be referred by
their PCPs. Enrolled members over age three shall be screened annually
by a dentist who will perform an evaluation and report findings and
treatment to the member's PCP and/or the Contractor. Enrolled members
under age three shall be screened by their PCP and referred to a dentist
when medically necessary.
Dental standards may be found in the OMD Policy Manual which is
incorporated herein by reference and which may be found in the Bidders'
Library.
C. IMMUNIZATIONS
AHCCCSA will conduct annual immunization audits of Contractor based on
random sampling to assess the immunization status of children under the
age of six.
Contractor shall provide all assistance necessary to complete the audits in
a timely and efficient manner, including locating the medical records
and immunization histories of selected sample children and collecting
general office visit information.
ForContract Year 95 (10/1/94 - 9/30/95), Contractor shall achieve the
following immunization rates for children below age six:
Diphtheria, Tetanus, Pertussis vaccine (DTP) - 65% 4 doses
Oral polio vaccine (OPV) - 70% 3 doses
Measles, Mumps, Rubella vaccine (MMR) - 70% 1 dose
<PAGE> 22
The immunization audits will be conducted to verify rates achieved and
the results will be published. If Contractor has not achieved CY 95
immunization goals, it shall submit a corrective action plan to AHCCCSA
within 30 days of receipt of notification of its immunization rates.
AHCCCSA may conduct a follow-up on-site review.
6. PRIMARY CARE PROVIDER STANDARDS
To the extent required by this contract, the Contractor shall offer its members
freedom of choice in selecting a Primary Care Provider (PCP). At a minimum, the
Contractor shall have or provide one full-time equivalent (FTE) PCP per 2,500
members. For purposes of determining equivalency requirements, practitioners
defined in AHCCCS Rule R9-22-101 shall be designated as 0.5 FTE and physicians
as 1 FTE. The number of members assigned to a PCP shall be decreased by the
Contractor if necessary to maintain the appointment availability standards and
to avoid the PCP having a caseload or medical practice composed predominantly of
AHCCCS members. The Contractor must subcontract with PCPs and other health care
providers according to the service area standards identified in Attachment B.
When a new member has been assigned to the Contractor, the Contractor shall
inform the individual in writing of the enrollment. The Contractor shall include
with the enrollment notification a list of all the Contractor's available PCPs
and the process for selection, as well as the process for changing the PCP
assignment, should the member desire to do so.
The Contractor shall ensure that newly enrolled members are advised of their PCP
assignment within 10 days of enrollment in accordance with AHCCCS Rule
R9-22-518. The Contractor shall have a system to monitor and ensure that each
member has a PCP assignment and that the Contractor's data regarding PCP
designation is current.
The PCP is held accountable for supervising, coordinating and providing initial
and primary care to each assigned member. In addition, the PCP is responsible
for initiating referrals for specialty care, maintaining continuity of each
<PAGE> 23
member's health care and maintaining the member's medical record which includes
documentation of all services provided to the member by the PCP, as well as any
specialty or referral services. The Contractor shall notify the PCP of all
services, reported as encounters, by providers other than the PCP for the PCP's
assigned members.
PCPs and specialists who provide inpatient services to the Contractor's enrolled
members shall have admitting and treatment privileges in a minimum of one
general acute care hospital that is under subcontract with the Contractor and is
located within the Contractor's service area.
The Contractor shall ensure that a maternity care provider is designated for
each enrolled pregnant woman for the duration of her pregnancy and postpartum
care. Such designation shall be consistent with the freedom of choice
requirements for selecting health care professionals while ensuring that
continuity of care is not compromised. Maternity services shall be provided in
accordance with the AHCCCS OMD Policy Manual.
7. EMERGENCY SERVICES
Contractor shall have and/or provide the following as a minimum:
a. Emergency services facility adequately staffed by qualified medical
professionals to provide pre-hospital, emergency care on a
24-hour-a-day, 7-day-a-week basis, for the sudden onset of a medically
emergent condition as defined by AHCCCS Rule R9-22-101. Contractor is
encouraged to contract with or employ the services of non-emergency
facilities (e.g. urgent care centers) to address member non-emergency
care issues occurring after regular office hours or on weekends.
Contractor shall be responsible for developing guidelines for member
education to insure the appropriate utilization of emergency room
services.
b. Triage services provided to members on initiation of emergency care,
provided that the services were medically necessary to assess and
determine whether an emergency medical condition exists.
<PAGE> 24
c. Designated emergency transportation system, defined as 9-1-1, fire,
police, or other locally established system to provide rapid response
for medical emergency calls. Transportation will be undertaken to the
nearest appropriate facility capable of meeting the member's medical
needs.
8. STAFF REQUIREMENTS AND SUPPORT SERVICES
Contractor shall have in place the organization, management and administrative
systems capable of fulfilling all contract requirements. At a minimum, the
following staff are required:
a. A full-time Administrator to oversee the entire operation of the health
plan;
b. A Medical Director who shall be an Arizona-licensed physician. The Medical
Director shall be actively involved in all major clinical program
components of the Contractor's health plan. The Medical Director shall
devote sufficient time to Contractor's health plan to ensure timely medical
decisions, including after-hours consultation as needed;
c. A full-time Chief Financial Officer to oversee the budget and accounting
systems implemented by Contractor;
d. A Quality Management/ Utilization Management Coordinator who is an
Arizona-licensed registered nurse, physician or physician's assistant;
e. A Maternal Health/ EPSDT Coordinator who shall be an Arizona-licensed
registered nurse, physician or physician's assistant; or have a Master's
degree in Health Services, Public Health or Health Care Administration;
f. A Behavioral Health Coordinator who shall have a combination of a minimum
of a bachelors degree in a behavioral health related field as well as a
minimum of two years training and experience in actual behavioral health
services delivery;
<PAGE> 25
g. Prior Authorization staff to authorize medical care 24 hours per day, 7
days per week. This staff shall be directly supervised by an
Arizona-licensed registered nurse, physician or physician's assistant;
h. Concurrent Review staff to conduct inpatient concurrent review. This staff
shall consist of an Arizona-licensed registered nurse, physician,
physician's assistant or an Arizona-licensed practical nurse experienced in
concurrent review and under the direct supervision of a registered nurse,
physician or physician's assistant.
i. Member Service staff to coordinate communications with members and act as
member advocates. There shall be sufficient Member Service staff to enable
members to receive prompt resolution to their problems or inquiries;
j. Provider Service staff to coordinate communications between Contractor and
its subcontractors. There shall be sufficient Provider Services staff to
enable providers to receive prompt resolution to their problems or
inquiries;
k. Claims Processors to ensure the timely and accurate processing of original
claims, claims correction letters, resubmissions and overall adjudication
of claims;
l. Encounter Processors to ensure the timely and accurate processing and
submission to AHCCCSA of encounter data and reports;
m. A Grievance Coordinator who will manage and adjudicate member and provider
grievances; and
n. Clerical and support staff to ensure appropriate functioning of the
Contractor's operation.
Contractor shall inform AHCCCSA, Office of Managed Care, in writing within seven
days of staffing changes in the following key positions:
<PAGE> 26
- Administrator
- Medical Director
- Chief Financial Officer
- Quality Management/ Utilization Management Coordinator
- Provider Services manager
- Member Services manager
- Claims Administrator
- Maternal Health/ EPSDT Coordinator
- Grievance Coordinator
- Behavioral Health Coordinator
Contractor shall ensure that all staff have appropriate training, education,
experience and orientation to fulfill the requirements of the position.
9. WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS
Contractor shall develop and maintain written policies, procedures and job
descriptions for each functional area of its health plan, consistent in format
and style. Contractor shall maintain written guidelines for developing,
reviewing and approving all policies, procedures and job descriptions.
Contractor shall also provide policy and procedure manuals to providers, as
appropriate, in order to ensure all contract requirements are being met.
All policies and procedures shall be reviewed at least annually to ensure that
Contractor's current practices reflect written policies. Reviewed policies shall
be dated and signed by the Contractor's appropriate manager, coordinator,
director or administrator. All medical and quality management policies must be
approved and signed by the Contractor's Medical Director.
Job descriptions shall be reviewed at least annually to ensure that current
duties performed by the employee reflect written requirements.
<PAGE> 27
10. MEDICAL DIRECTOR
Contractor shall have on staff a Medical Director who is currently licensed in
Arizona as a Medical Doctor or Doctor of Osteopathic Medicine. The Medical
Director shall be responsible for:
a. The development, implementation and medical interpretation of medical
policies and procedures to guide and support the provision of medical care
to members;
b. Oversight of provider recruitment activities;
c. Reviewing all providers' applications and submit recommendations to those
with contracting authority regarding credentialling and reappointment of
all physicians prior to the physician's contracting (or renewal of
contract) with Contractor health plan;
d. Continuing surveillance of the performance of providers in their provision
of health care to members;
e. Administration of all medical activities of the Contractor;
f. Continuous assessment and improvement of the quality of care provided to
members;
g. Serving as Chairperson of Quality Management Committee;
h. Oversight of provider education, inservice training and orientation;
i. Assuring that adequate staff and resources are available for the provision
of proper medical care to members;
j. Attending AHCCCS Medical Director meetings.
<PAGE> 28
11. ENCOUNTER DATA REPORTING
Contractor shall submit encounter data to AHCCCSA acknowledging that a contract
service has been performed. This requirement is in accordance with the terms and
conditions of the HCFA grant award.
Encounter data must be provided to AHCCCSA by electronic media. Formatting and
specific requirements for encounter data are described in the AHCCCS Encounter
Reporting User Manual and AHCCCS Contracted Health Plan Technical Interface
Guidelines, copies of which may be found in the Bidders' Library .
Whether using magnetic tape or direct automated data exchange, data must be
organized into the PMMIS AHCCCSA-supplied formats.
The Encounter Record Submission Standards and Penalty Provisions are included
herein as Attachment C.
12. ENCOUNTER DATA REPORTING DEADLINES
Encounter data for all contract services must be received by AHCCCSA no more
than 240 days from the end of the month in which the service was rendered. See
AHCCCS Encounter Reporting User Manual for additional information regarding
deadlines.
13. PERIODIC REPORT REQUIREMENTS
AHCCCSA, under the terms and conditions of its HCFA grant award, requires
periodic reports, encounter data, and other information from Contractor. The
submission of late, inaccurate, or otherwise incomplete reports shall constitute
failure to report subject to the penalty provisions described in this contract.
Standards applied for determining adequacy of required reports are as follows:
<PAGE> 29
a. Timeliness - Reports or other required data shall be received on or before
scheduled due dates.
b. Accuracy - Reports or other required data shall be prepared in strict
conformity with appropriate authoritative sources and/or AHCCCS defined
standards.
c. Completeness - All required information shall be fully disclosed in a
manner that is both responsive and pertinent to report intent with no
material omissions.
AHCCCS requirements regarding reports, report content and frequency of
submission of reports are subject to change at any time during the term of the
contract. Contractor shall comply with all changes specified by AHCCCSA.
Contractor may be entitled to additional payments because of such added contract
requirements.
Contractor shall be responsible for continued reporting beyond the term of the
contract. For example, processing claims and reporting encounter data will
likely continue beyond the term of the contract because of lag time in filing
source documents by subcontractors.
Contractor shall maintain books and records relating to covered services and
expenditures including reports to AHCCCSA and working papers used in the
preparation of reports to AHCCCSA. Contractor shall comply with all
specifications for record keeping established by AHCCCSA. All books and records
shall be maintained to the extent and in such detail as required by AHCCCS Rules
and policies. Records shall include but not be limited to financial statements,
records relating to the quality of care, medical records, prescription files and
other records specified by AHCCCSA.
Contractor agrees to make available at its office at all reasonable times during
the term of this contract and the period set forth in paragraphs a. and b. below
any of its records for inspection, audit or reproduction by any authorized
representative of AHCCCSA, State or federal government.
<PAGE> 30
Contractor shall preserve and make available all records for a period of five
years from the date of final payment under this contract except as provided in
paragraphs a. and b. below:
a. If this contract is completely or partially terminated, the records
relating to the work terminated shall be preserved and made available
for a period of five years from the date of any such termination.
b. Records which relate to grievances, disputes, litigation or the
settlement of claims arising out of the performance of this contract, or
costs and expenses of this contract to which exception has been taken by
AHCCCSA, shall be retained by Contractor for a period of five years
after the date of final disposition or resolution thereof.
14. REQUIRED FINANCIAL REPORTS
Contractor shall comply with all financial reporting requirements contained in
the Reporting Guide for Acute Health Care Contractors with the Arizona Health
Care Cost Containment System. The Guide, which may be found in the Bidders'
Library, contains a complete listing of all monthly, quarterly and annual
reporting requirements including due dates for each report.
15. FINANCIAL VIABILITY CRITERIA/ PERFORMANCE MEASURES
AHCCCSA has established the following financial viability criteria/ performance
measures that Contractor shall adhere to:
a. Current Ratio
Current asset divided by current liabilities.
Standard - At least 1.00
b. Equity per Member
Equity, less on-balance sheet performance bond, divided by the number of
members at the end of the period.
Standard - At least $170
<PAGE> 31
c. Gross Medical Expenses Percentage
Gross medical expenses divided by total revenue.
Standard - No more than 90.5%
d. Total Administrative Cost Percentage
Total administrative expenses, excluding income taxes, divided by total
revenue.
Standard - No more than 7.5%
e. Received But Unpaid Claims Days Outstanding
Received but unpaid claims divided by the average daily medical expenses
for the period, net of sub-capitation expense.
Standard - No more than 45 days
f. Total Medical Claims Days Outstanding
Total medical claims liability divided by the average daily medical
expenses for the period, net of sub-capitation expense.
Standard - No more than 90 days
16. QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT (QM/UM)
Contractor shall provide to members quality medical care regardless of payer
source or eligibility category. Contractor shall institute processes to assess,
plan, implement and evaluate quality improvement activities. Contractor must
maintain a written QM/UM plan which details plans for compliance with the OMD
Policy Manual, including all reporting requirements, which is incorporated
herein by reference and may be found in the Bidders' Library.
Contractor shall report all standardized clinical outcome indicators as
described in the OMD Policy Manual.
<PAGE> 32
17. PROVIDER REGISTRATION
Contractor will ensure that all its subcontractors register with AHCCCSA as an
approved service provider and receive an AHCCCS Provider ID Number. A provider
agreement must be signed with each provider who does not also participate as an
AHCCCS FFS provider and retained in Contractor's files. This provider
registration process must be completed in order for Contractor to report
services a subcontractor renders to enrolled members and for Contractor to be
paid reinsurance.
18. MEDICAL RECORDS
The member's medical record is the property of the provider who generates the
record. Each member is entitled to a copy of his or her medical record.
Contractor shall have written policies and procedures to maintain the
confidentiality of all medical records. AHCCCSA shall be afforded prompt access
to all members' medical records whether electronic or paper.
Contractor shall have written policies and procedures for the maintenance of
medical records so that those records are documented accurately and in a timely
manner, are readily accessible, and permit prompt and systematic retrieval of
information.
Contractor shall have written standards for documentation on the medical record
for legibility, accuracy and plan of care which comply with the OMD Policy
Manual, a copy of which may be found in the Bidders' Library.
Contractor shall have written plans for providing training and evaluating
providers' compliance with Contractor's medical records standards.
Medical records shall be maintained in a detailed and comprehensive manner which
conforms to good professional medical practice, permits effective professional
medical review and medical audit processes, and which facilitates an adequate
system for follow-up treatment. Medical records must be legible, signed and
dated.
<PAGE> 33
When a member changes PCPs, his or her medical records or copies of medical
records must be forwarded to the new PCP within 10 working days from receipt of
request.
AHCCCSA is not required to obtain written approval from a member before
requesting the member's medical record from the PCP or any other agency.
19. MEMBER SURVEYS
AHCCCSA may conduct annually a survey of a representative sample of Contractor's
membership. AHCCCSA will design a questionnaire to assess accessibility,
availability and continuity of care with PCPs; communication between members and
Contractor; and general member satisfaction with the AHCCCS program. To ensure
comparability of results, all members will receive the same set of questions.
AHCCCSA will consider suggestions from Contractor for questions to be included
in this survey. The results of these surveys will be published. In addition,
Contractor is encouraged to perform its own annual member survey.
20. OPEN ENROLLMENT
AHCCCSA conducts an open enrollment for members once per contract year, usually
in August or September. AHCCCSA may hold additional open enrollments on a
limited basis as deemed necessary. During open enrollment members may change
contractors subject to the availability of other contractors within their area.
Members are mailed a printed enrollment form and may choose a new contractor by
taking the form to an AHCCCSA enrollment site or contacting AHCCCSA by telephone
to complete the enrollment process. If the member does not participate in open
enrollment, no change of contractor will be made and the member's current
contractor remains valid for the new contract year provided the contractor's
contract is renewed.
<PAGE> 34
21. TRANSITION OF MEMBERS
When members are transitioned between contractors, the relinquishing contractor
shall submit to the receiving contractor critical medical information about
transitioning members prior to the transition such as whether the member is:
a. Hospitalized
b. Pregnant
c. Receiving dialysis
d. Chronically ill (e.g. diabetic, hemophilic, HIV positive)
e. Receiving significant outpatient treatment, medications or medically
necessary transportation
f. On an apnea monitor
g. Receiving behavioral health services
h. Receiving Children's Rehabilitative Services
i. Involved in major organ or tissue transplantation
j. Scheduled for surgery or post-surgical follow-up on a date subsequent to
transition
k. Scheduled for prior-authorized procedures and/or therapies on a date
subsequent to transition
l. Waiting for expiration of 30-day period for signed sterilization consent
forms
Critical information shall include:
a. PCP assignment
b. Specialist(s)
c. Current inpatient or outpatient services
d. Prescription medications
e. Durable medical equipment
When a member changes contractors while hospitalized, the relinquishing
contractor shall notify the hospital of the change prior to the transition.
Notification shall include instruction that the hospital must contact the
receiving contractor for authorization of a continued hospital stay. In the
event the relinquishing contractor fails to provide such notification to the
<PAGE> 35
hospital, the relinquishing contractor shall be responsible for payment of
covered hospital services rendered to the member.
22. MEMBER HANDBOOK
Contractor shall produce and provide printed information to each member or
family within 10 days of enrollment. All informational materials prepared by
Contractor shall be approved by AHCCCSA prior to distribution to members.
Information shall be provided in English and a second language when 200 members
or 5% of the Contractor's enrolled population, whichever is greater, are
non-English speaking. When there are program or service site changes
notification will be provided to the affected members at least 14 days before
implementation. Contractor shall maintain documentation verifying that the
member handbook is reviewed at least once a year.
The member handbook shall be written at a 4th grade level. Suggested reference
material to determine whether this requirement is being met are:
- - - Fry Readability Index
- - - PROSE The Readability Analyst (software developed by Education Activities,
Inc.)
- - - Gunning FOG Index
- - - McLaughlin SMOG Index
At a minimum the member handbook shall include:
a. A table of contents
b. A description of all available contract services and an explanation of any
service limitations or exclusions from coverage and a notice stating that
Contractor will be liable only for those services authorized by Contractor.
c. Information on what to do when family size changes
d. How to obtain a PCP, including a list of the names, telephone numbers and
service site addresses of PCPs available for selection by the member and a
description of the selection process
<PAGE> 36
e. How to change PCPs
f. How to make, change and cancel appointments with a PCP
g. List of applicable co-payments (including a statement stating that care
will not be denied due to lack of co-payment). The member handbook must
clearly state that members cannot be billed for covered services (other
than applicable co-payments) and under what circumstances a member may be
billed for non-covered services.
h. The process of referral to specialists and other providers
i. How to contact Member Services and a description of its function
j. What to do in case of an emergency and instructions for receiving advice on
getting care in case of an emergency. In a life-threatening situation, the
member handbook should instruct members to use the emergency medical
services (EMS) available and/or activate EMS by dialing 9-1-1.
k. How to obtain emergency transportation and medically necessary
transportation.
l. EPSDT services
m. Maternity and family planning services
n. Behavioral health services
o. Out of county/ out of state moves
p. Grievance procedures
q. Contributions the member can make towards his/her own health, member
responsibilities, appropriate and inappropriate behavior, and any other
information deemed essential by Contractor or AHCCCS.
Regardless of the format chosen by Contractor, the member handbook must be
printed in a type-style and size which can easily be read by members with
varying degrees of visual impairment. At a minimum, the member handbook shall
also contain the following language regarding questions, problems and grievances
(Ref. AHCCCS Rule 9-22-518):
Q. What if I have any questions, problems or complaints about _______________
Health Plan?
A. If you have a question or problem, please call _______________ and ask to
talk to a Member Representative. They are there to help you.
<PAGE> 37
A. If you have a specific complaint about your medical care, the Member
Representative will help you.
Q. What if I'm not happy with the help given to me by the Member
Representative?
A. If you are unhappy with the answer you receive, you can tell the Member
Representative you want to file a written or oral grievance. The grievance
must be filed not later than 35 days after the date of the action,
decision, or incident.
A. Health Plan will make a final decision for grievances within 30
days of receiving your written grievance. A letter will be mailed to you
stating the health plan's decision and the reason for the decision. The
letter will tell you how you can appeal the decision if you are still
unhappy. You must let the health plan know you want to appeal the decision
letter.
A. If you are appealing the health plan's decision, Health Plan
will send your request for appeal to the AHCCCSA. You will receive
information from AHCCCSA on how your appeal will be handled. AHCCCSA will
then decide if the Contractor's decision was correct under the
circumstances.
23. PROVIDER MANUAL
Contractor shall develop, distribute and maintain a provider manual. Contractor
shall document the approval of the provider manual by Contractor's Administrator
and Medical Director and shall maintain documentation which verifies that the
provider manual is reviewed at least annually. Contractor shall ensure that each
provider (individual or group which submits claim and encounter data) is issued
a copy of the provider manual.
At a minimum, Contractor's provider manual must contain information on the
following:
<PAGE> 38
a. Introduction to the Contractor which explains the Contractor's organization
and administrative structure
b. Provider responsibility and the Contractor's expectation of the provider
c. Overview of the Contractor's Provider Service department and function
d. Listing and description of covered and non-covered services, requirements
and limitations
e. Emergency room utilization (appropriate and non-appropriate use of the
emergency room
f. EPSDT Services
g. Maternal/ Child Health Services
h. Behavioral Health Services
i. The Contractor's policy regarding PCP assignments
j. Referrals to specialists and other providers
k. Grievance and appeal rights
l. Billing and encounter submission information
- indicate which form, UB92, HCFA 1500, or Form C is to be used for
services
- indicate which fields are required for a claim to be considered
acceptable by the Health Plan. A completed sample of each form shall
be included
m. Contractor's written policies and procedures which affect the provider(s)
and/or the provider network
n. Claims re-submission policy and procedure
o. Reimbursement rate
p. Explanation of remittance advice
q. Prior authorization requirement
r. Claims medical review
24. APPOINTMENT STANDARDS
Contractor shall have procedures in place that ensure:
a. Emergency PCP appointments are available the same day;
b. Urgent care PCP appointments are available within two days;
<PAGE> 39
c. Routine care appointments are available within 21 days.
For specialty referrals and dental appointments, Contractor shall be able to
provide:
a. Emergency appointments within 24 hours of referral;
b. Urgent care appointments within three days of referral;
c. Routine appointments within 30 days of referral.
For maternity care, the Contractor shall be able to provide initial prenatal
care appointments for enrolled pregnant members as follows:
a. First trimester - within 14 days of request
b. Second trimester - within seven days of request
c. Third trimester - within three days of request
d. High risk pregnancies - within three days of identification of high risk to
the Contractor or maternity care provider, or immediately if an emergency
exists.
For behavioral health services to members 18-20 years of age, non-seriously
mentally ill, the Contractor shall be able to provide appointments as follows:
a. Emergency - within 24 hours of request
b. Non-emergency - within seven days of request
Contractor shall monitor the adequacy of its appointment processes and reduce
the unnecessary use of alternative methods such as emergency room visits.
Contractor shall monitor and ensure that a member's waiting time at the PCP or
specialist office is no more than 45 minutes, except when the provider is
unavailable due to an emergency.
Contractor shall have established written procedures for disseminating its
appointment standards to the network and it must assign a specific member of its
organization to ensure compliance with these standards by the network.
<PAGE> 40
Contractor shall have written policies and procedures, about which it educates
its provider network, about appointment time requirements. Contractor shall
monitor compliance with appointment standards and shall have a corrective action
plan when appointment standards are not met.
25. GRIEVANCE PROCESS AND STANDARDS
Contractor shall have in place a written grievance policy for members and
providers which defines their rights regarding any adverse action by Contractor.
This written policy shall be in accordance with applicable federal and State law
and AHCCCS Rules and policy including, but not limited to, AHCCCS Rules
R9-22-512; R9-22-518(A); R9-22-802; and R9-22-804. It shall include the
following provisions:
a. The grievance procedure will be provided to members upon enrollment, to all
subcontractors at time of contract, and to non-contracting providers within
10 days of the date of receipt of the claim.
b. Specific individual(s) are appointed with authority to require corrective
action to administer the grievance policy.
c. A log is maintained for all grievances containing sufficient information to
identify the grievant, date of receipt, nature of the grievance and the
date grievance is resolved.
d. Within five working days of receipt, the grievant is informed by letter
that the grievance has been received. The letter must also be in a second
language when 200 members or 5% of the Contractor's enrolled population,
whichever is greater, is non-English speaking.
e. Each grievance is thoroughly investigated using the applicable statutory,
regulatory and contractual provisions as well as Contractor's policies and
procedures, ensuring that facts are gathered from all parties.
<PAGE> 41
f. All documentation received and mailed by Contractor during the grievance
process is dated.
g. All grievances are filed in a secure, designated area and are retained for
five years following the final decision, judicial appeal or close of a
grievance.
h. A copy of Contractor's final decision will be either hand-delivered or
delivered by certified mail to all parties whose interest has been
adversely affected by the decision. The final decision shall be mailed to
all other parties by regular mail. The date of the final decision shall be
the date of personal delivery or, if mailed, the postmark date of the
mailing. The final decision must include, and describe in detail, the
following:
1) the nature of the grievance;
2) the issues involved;
3) the reasons supporting Contractor's decision including references to
applicable statute, rule and procedure;
4) the grievant's right to appeal Contractor's decision to AHCCCSA by
filing the appeal to Contractor no later than 15 days after the date
of Contractor's final decision. This must also be written in a second
language, if applicable.
i. If Contractor's final decision is appealed, all supporting documentation
must be received by AHCCCSA, Office of Grievance and Appeals no later than
five working days from the date Contractor receives the appeal or from the
date of the oral or written request from AHCCCSA, Office of Grievance and
Appeals. The appeal file must contain a cover letter that includes:
1) grievant's name;
2) grievant's AHCCCS I.D. number;
3) grievant's address; and
4) phone number (if available);
5) date of receipt of grievance and appeal;
<PAGE> 42
6) summary of Contractor's actions undertaken to resolve the grievance
and basis thereof;
j. The following material shall be included in the appeal file:
1) written request of the grievant asking for the appeal;
2) copies of the entire file which include the investigations and/or
medical records; and Contractor's grievance decision; and
3) other information used by Contractor to resolve the grievance and
that would be necessary to AHCCCSA to resolve the grievance.
k. Contractor may attempt to use alternative resolution procedures to resolve
disputes presented to Contractor verbally or in writing. If Contractor
elects to use an alternative resolution process, it must be administered
and completed within 30 days from receipt of the dispute. If the matter is
not resolved to the grievant's satisfaction within the 30-day period, the
dispute must then be adjudicated using the grievance standards contained
above. However, Contractor must render the written grievance decision
within a maximum of 45 days from the date of the initial filing of the
grievance or dispute unless a longer period was agreed to by the parties
involved.
l. For all disputes where an alternative resolution is proposed, Contractor
must inform the grievant of Contractor's resolution and ask the grievant if
the resolution is acceptable no later than 30 days from the date that the
dispute is initially presented to Contractor. If acknowledged as
acceptable, the matter may be closed. If the member or provider states that
the resolution is unacceptable, Contractor must then treat the dispute as a
formal grievance and abide by the standards contained above.
m. For all disputes where an alternative resolution is proposed, Contractor
must maintain a separate log, complying with paragraphs c. and g. above.
26. QUARTERLY GRIEVANCE REPORT
<PAGE> 43
Contractor shall submit a Quarterly Grievance Report to AHCCCSA, Office of
Grievance and Appeals, using the Quarterly Grievance Report Format on file in
the Bidder's Library. The Quarterly Grievance Report must be received by the
AHCCCSA, Office of Grievance and Appeals, no later than 45 days from the end of
the quarter.
27. REFERRAL PROCEDURES AND STANDARDS
Contractor shall have adequate written procedures regarding referrals to
specialists to include, as a minimum, the following:
a. Use of referral forms clearly identifying the Contractor
b. A system for resolving disputes regarding the referrals
c. Having a process in place that ensures the member's PCP receives all
specialist and consulting reports
d. A referral plan for any member who is about to lose eligibility and who
requests information on low-cost or no-cost health care services.
28. OPERATIONAL AND FINANCIAL REVIEWS
In accordance with AHCCCS Rule R9-22-521, AHCCCSA will conduct Operational and
Financial Reviews at least once every 12 months for the purpose of (but not
limited to) ensuring operational and financial program compliance. The Reviews
will identify areas where improvements can be made and make recommendations
accordingly, monitoring Contractor's progress towards implementing mandated
programs and providing Contractor with technical assistance if necessary.
The type and duration of the Operational and Financial Review will be solely at
the discretion of AHCCCSA. Except in cases where advance notice is not possible
or advance notice may render the review less useful, AHCCCSA will give
<PAGE> 44
Contractor at least three weeks advance notice of the date of the on-site
review.
In preparation for the on-site Operational and Financial Reviews, Contractor
shall cooperate fully with AHCCCSA and the AHCCCSA Review Team by forwarding in
advance such policies, procedures, job descriptions, contracts and logs that
AHCCCSA may request. Any documents not requested in advance by AHCCCSA shall be
made available upon request of the Review Team during the course of the review.
Contractor personnel as identified in advance shall be available to the Review
Team at all times during AHCCCSA on-site review activities. While on-site,
Contractor shall provide the Review Team with work space, access to a telephone,
electrical outlets and privacy for conferences.
Certain documentation submission requirements may be waived at the discretion of
AHCCCSA if Contractor is obtaining NCQA accreditation. Contractor must submit
entire NCQA report to AHCCCSA for such waiver consideration.
Contractor will be furnished a copy of the Operational and Financial Review
Report and given an opportunity to comment on any review findings prior to
AHCCCSA publishing the final report. Operational & Financial Review findings may
be used in the scoring of subsequent bid proposals by that Contractor.
Recommendations made by the Review Team review in order to bring Contractor in
compliance with federal, State, AHCCCS, and/or RFP requirements, must be
implemented by the Contractor. AHCCCSA may conduct a follow-up Operational and
Financial Review to determine Contractor's progress in implementing
recommendations and achieving program compliance. Follow-up reviews may be
conducted at any time after the initial Operational and Financial Review.
AHCCCSA may conduct an Operational and Financial Review in the event Contractor
undergoes a merger, reorganization, changes ownership or makes changes in three
or more key staff positions (Medical Director, Administrator, Chief Financial
Officer, Maternal Health/ EPSDT Coordinator, QM/UM Coordinator) within a
12-month period.
Contractor shall comply with all other medical audit provisions as required by
AHCCCS Rule R9-22-521.
<PAGE> 45
29. OPERATIONAL AND FINANCIAL READINESS REVIEWS
AHCCCSA may conduct Operational and Financial Readiness Reviews on all
successful offerors. The Readiness Reviews will be conducted prior to the start
of business for the contract year beginning 10/1/94. The purpose of Readiness
Reviews is to assess new contractors' readiness and ability to provide contract
services to members at the start of the contract year. A new contractor will be
permitted to commence operations only if the Readiness Review factors are met to
AHCCCSA's satisfaction.
30. CHILDREN'S REHABILITATIVE SERVICES (CRS)
CRS, a program administered by the Arizona Department of Health Services (DHS),
is designed to provide specialty medical and surgical care of a comprehensive
and rehabilitative nature to children who meet CRS financial and medical
eligibility criteria. CRS is not an emergency services program. While attempts
will be made by CRS administrators to accommodate emergency referrals,
Contractor remains ultimately responsible for the provision of all covered
services to their members.
Since CRS is not an entitlement program and eligibility is based on medical
judgment, there is no guarantee that CRS administrators will accept
responsibility for treatment. Contractor shall refer potentially eligible
children to CRS administrators. The referral process is discussed in the CRS
Policy and Procedures Manual, available in the Bidders' Library.
The CRS program provides a comprehensive multi-disciplinary approach to
management of CRS-covered conditions, but does not provide primary care.
Eligibility criteria for these services include:
a. Child has a CRS-covered condition as defined in the CRS Policy and
Procedures Manual.
b. Child requires comprehensive multi-disciplinary care.
<PAGE> 46
c. Child has a reasonable potential for rehabilitation.
CRS-covered services will ordinarily include the planned management of the
covered condition, including inpatient care, surgery, therapy, limited DME and
home health care, and social and educational services, as well as periodic
follow-up. Emergency services are not ordinarily covered by CRS, nor is initial
care of newborn infants.
31. HOSPITAL REIMBURSEMENT
Contractor shall reimburse hospitals for member care based on one of the
following rate methods:
a. AHCCCS Fee-For-Service Hospital Reimbursement Rate
- Inpatient: AHCCCS hospital-specific tiered per diem rates
- Outpatient: AHCCCS hospital-specific cost-to-charge ratio multiplied
by allowed charges, or
b. The Subcontract Rate (The aggregate of subcontract rates must not exceed
what would have been paid had the AHCCCS Fee-For-Service Hospital
Reimbursement Rate been used.)
Within seven days of subcontracting with a hospital, Contractor shall submit a
copy of this agreement, including all rates, terms and conditions, to AHCCCSA,
Office of Managed Care. This submittal shall include documentation that this
negotiated rate agreement will, when considered in the aggregate, be the same or
less than what would have been paid under Paragraph a above. To aid in making
this determination, Contractor shall require their independent auditor to
evaluate the reasonableness of their assumptions as part of the annual audit.
AHCCCSA plans to eliminate the outpatient cost-to-charge ratio payment system
effective 10/1/95. The structure of the new outpatient system is yet to be
determined.
<PAGE> 47
Effective 10/1/94, and annually thereafter, inpatient hospital-specific tiered
per diem rates will be adjusted in accordance with A.R.S. 36-2903.01 (J).
Contractor shall reimburse out-of-state hospitals at the lowest of the following
rates for inpatient and outpatient services:
a. Negotiated discounted rate, or
b. Arizona average cost-to-charge ratio multiplied by allowed charges, or
c. Medicaid rate in effect in the state in which the hospital is located at
the time services are provided.
The Contractor may conduct prepayment and postpayment medical reviews of all
hospital claims including outlier claims. Erroneously paid claims are subject to
recoupment.
For a more complete description of the guidelines for hospital reimbursement,
please consult the Bidders' Library for applicable statutes and rules.
32. BEHAVIORAL HEALTH SERVICES
Title XIX covered behavioral health services are available to the following
populations once they have been determined categorically eligible:
a. Members under the age of 18
b. Seriously Mentally Ill (SMI) eligible members age 18 and older
c. Non-SMI eligible members age 18, 19 and 20
Under Age 18 and SMI:
The Contractor is responsible for referring categorically eligible children
under the age of 18 and SMI eligible members age 18 and older to the Arizona
Department of Health Services (ADHS) for the provision of Title XIX covered
behavioral health services. ADHS contracts with Regional Behavioral Health
Authorities (RBHAs) for the provision of Title XIX covered behavioral health
services. The Contractor is responsible for coordination of care with the ADHS
<PAGE> 48
RBHAs in accordance with Chapter 1500 of the AHCCCS Mental Health Policy Manual,
a copy of which may be found in the Bidders' Library.
The Contractor is also responsible for communicating with the ADHS RBHAs, if
appropriate, regarding any medications that the PCP has prescribed.
Non-SMI, Age 18, 19 and 20:
The Contractor is responsible for providing Title XIX covered behavioral health
services to categorically eligible non-SMI members age 18, 19 and 20 in
accordance with AHCCCS Rule R9-22-1204 and Chapter 200 of the AHCCCS Mental
Health Policy Manual. Covered services include: inpatient hospital, inpatient
psychiatric facility for individuals under the age of 21, individual therapy and
counseling, group and/or family therapy and counseling, psychotropic medication
adjustment and monitoring, partial care, emergency crisis services, behavior
management, psychosocial rehabilitation, screening, evaluation and diagnosis,
case management and psychotropic medications.
Referrals:
Categorically eligible members age 18, 19 and 20 may be referred directly for
the provision of behavioral health services by the Primary Care Physician (PCP),
family members, self-referrals, schools, other service providers, and members of
the community and State agencies as well as the Contractor's staff. The same
referral procedures (including appointment and utilization standards) which are
applicable to other health care services apply to behavioral health services.
Individual Service Plan:
The Contractor is responsible for developing an Individual Service Plan (ISP)
for all categorically eligible members age 18, 19 and 20 requiring inpatient
behavioral health services. It is also recommended that an ISP be developed for
any other members needing extended care (greater than 12 weeks) or intensive
care (more than one visit per week). The ISP is to be included as part of the
member's medical record.
<PAGE> 49
Case Management, Case Coordination:
The Contractor is responsible for providing case management services, when
medically necessary. Case management services may vary in scope and frequency,
depending on the eligible person's intensity of need. Case management services
consist of a set of services and activities through which appropriate and
cost-effective Title XIX covered services are identified, planned, coordinated,
obtained, monitored and continuously evaluated.
Case coordination is provided to categorically eligible members age 18, 19 and
20 who are in need of behavioral health services but who do not require case
management services which are more intensive. Case coordination is limited to
basic ISP development, identification of service providers, monitoring, updates
and follow-up, when necessary.
Quality Management Requirements:
Quality management for behavioral health services must be integrated into the
Contractors quality management plans and must meet the quality management
requirements established by AHCCCSA.
Provider Network:
The Contractor is responsible for contracting with behavioral health providers
who meet ADHS licensure and/or certification standards and who are registered as
a behavioral health provider with AHCCCSA. The Contractor may, at its option,
contract with ADHS RBHAs for the provision of behavioral health services. The
Contractor must ensure that a sufficient number of qualified behavioral health
providers are in their provider network and that providers comply with
subcontracting, appointment standards and other provider related requirements in
this document.
Notification Requirements:
<PAGE> 50
The Contractor is responsible for notifying AHCCCSA monthly of members referred
and receiving behavioral health services. The information is to be submitted to
the AHCCCS Office of Policy Analysis and Coordination using the reporting format
developed by AHCCCSA and available in the Bidders' Library.
Encounter Reporting:
The Contractor is responsible for filing encounter data for behavioral health
services in accordance with Section D, paragraph 11.
33. DISSEMINATION OF INFORMATION
Contractor shall assist AHCCCSA from time to time, as requested by AHCCCSA, in
the dissemination of health education information prepared by AHCCCSA, or the
federal government, to its members. The cost of such dissemination shall be
borne by Contractor.
All advertisements, publications and printed materials which are produced by
Contractor and refer to covered services shall state that such services are
funded under contract with AHCCCSA .
34. COORDINATION OF BENEFITS/ THIRD PARTY LIABILITY
The Contractor shall coordinate benefits in accordance with ARS 36-2903.G so
that costs for services otherwise payable by the Contractor are cost avoided or
recovered from liable first or third-party payors specified in AHCCCS Rules
R9-22-1002.A. The Contractor may require subcontractors to be responsible for
coordination of benefits for services provided pursuant to this contract.
The Contractor shall collect or allow its subcontractors to collect any payments
available from health insurers such as Medicare or private health insurance for
services provided to its members. The Contractor shall notify AHCCCSA's Member
File Integrity Section within 10 working days of any known change in its
member's health insurance coverage.
<PAGE> 51
AHCCCS has contracted with a private firm to provide its third party liability
recovery functions. This firm shall be AHCCCSA's authorized representative.
The Contractor shall collect or allow its subcontractors to collect any monies
available from third-party payors, except for uninsured and underinsured
motorist insurance, first and third-party liability insurance and tortfeasors,
unless referred by AHCCCSA's authorized representative. When such categories of
first and third-party liability are identified by the Contractor or its
subcontractors, it shall be reported to AHCCCSA's authorized representative in
accordance with AHCCCS Rules R9-22-1002 D. and E.
If AHCCCSA's authorized representative determines that AHCCCSA has not incurred
or paid any claims related to the case, the case will be referred to the
Contractor for collection. The Contractor may be responsible for performing all
research and investigation needed for collection and payment of lien filing
related costs. The Contractor shall notify AHCCCSA's authorized representative
within five working days of the closure of any cases. If AHCCCSA has or expects
to pay any claims related to the case, then collection efforts, including claims
paid by the Contractor, will be handled by AHCCCSA's authorized representative.
If collection efforts are successful, AHCCCSA will distribute any funds
remaining to the Contractor, after full payment of AHCCCSA claims and related
administrative costs.
The Contractor shall provide such information as is necessary to facilitate
coordination of benefits. Additionally, the Contractor shall perform any
activities related to third-party liability (TPL) required by AHCCCS Rules
R9-22-1001 and 1002.
The Contractor shall notify AHCCCSA's authorized representative within five
working days of identifying a third-party liability case with known reinsurance.
35. COST SHARING
<PAGE> 52
Contractor is responsible for the collection of co-payments from members in
accordance with AHCCCS Rule R9-22-711.
36. MARKETING PLANS
Contractor shall submit proposed marketing plans and materials to AHCCCSA for
prior approval in accordance with AHCCCS Health Plan Marketing Policy, a copy of
which is available in the Bidders' Library.
37. SPECIALTY CONTRACTS
AHCCCSA may at any time negotiate or contract on behalf of Contractor and
AHCCCSA for specialized hospital and medical services. AHCCCSA will consider
existing Contractor resources in the development and execution of specialty
contracts. AHCCCSA may require Contractor to modify its delivery network to
accommodate the provisions of specialty contracts. Specialty contracts shall
take precedence over and supersede existing and future subcontracts for services
that are subject to specialty contracts. AHCCCSA may consider a waiver for
Contractor from inclusion in a specialty contract if such exclusion is
determined to be in the best interest of the State.
During the term of specialty contracts, AHCCCSA may act as an intermediary
between Contractor and specialty contractors to enhance the cost effectiveness
of service delivery. AHCCCSA reserves the right to make direct payments to
specialty contractors on behalf of Contractor. Adjudication of claims related to
such payments provided under specialty contracts shall remain the responsibility
of the Contractor. AHCCCSA may provide technical assistance prior to the
implementation of any specialty contracts.
AHCCCSA shall provide at least 60 days advance written notice to Contractor
prior to the implementation of any specialty contract.
38. ADVANCES, DISTRIBUTIONS AND LOANS
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Contractor shall not, without the prior approval of AHCCCSA, make any advances
to a related party or subcontractor. Contractor shall not, without similar
approval, make any distribution, loan or loan guarantee to any entity, including
another fund or line of business within its organization. Requests for approval
are to be submitted to the Office of Managed Care.
39. ACCUMULATED FUND DEFICIT
Contractor and its owners shall fund any accumulated fund deficit through
capital contributions in a form acceptable to AHCCCSA within 60 days after
receipt by AHCCCSA of the final audited financial statements. The amount of any
accumulated fund deficits shall be determined in accordance with Contractor's
annual audited financial statements.
40. MONTHLY ROSTER RECONCILIATION
AHCCCSA produces daily roster updates identifying new members and changes to
members' demographic, eligibility and enrollment data which Contractor shall use
to update its member records. The daily roster which is run prior to the monthly
roster is referred to as the "last daily" and will contain all rate code changes
made for the prospective month, as well as any new enrollment and
disenrollments. This roster contains the information used by AHCCCSA to produce
the monthly capitation payment for the next month.
The monthly roster is produced two days before the end of every month. The
roster will identify the total active population for Contractor as of the first
day of the next month. Contractor will reconcile their member files with the
AHCCCS monthly roster. After reconciling the monthly roster information,
Contractor resumes posting daily roster updates beginning with the last two days
of the month. The last two daily rosters are different from the regular daily
rosters in that they pay and/or recoup capitation into the next month.
<PAGE> 54
Refer to the AHCCCS Contracted Health Plan Technical Interface Guidelines
available in the Bidders' Library for additional information.
41. DATA EXCHANGE REQUIREMENT
Contractor is authorized to exchange data with AHCCCSA relating to the
information requirements of this contract and as required to support the data
elements to be provided AHCCCSA in the format specified in the AHCCCS Contracted
Health Plan Technical Interface Guidelines which is available in the Bidders'
Library. The information so recorded and submitted to AHCCCSA shall be in
accordance with all procedures, policies, rules, or statutes in effect during
the term of this contract. If any of these procedures, policies, rules,
regulations or statutes are hereinafter changed both parties agree to conform to
these changes following appropriate notification to both parties by AHCCCSA.
Contractor is responsible for any incorrect data, delayed submission or payment
(to Contractor or its Subcontractors), and/or penalty applied due to any error,
omission, deletion, or erroneous insert caused by Contractor-submitted data. Any
data that does not meet the standards required by AHCCCSA shall not be accepted
by AHCCCSA.
Contractor is responsible for identifying any inconsistencies immediately upon
receipt of data from AHCCCSA. If any unreported inconsistencies are subsequently
discovered, Contractor shall be responsible for the necessary adjustments to
correct its records at its own expense.
Contractor shall accept from AHCCCSA original evidence of eligibility and
enrollment in a form appropriate for electronic data exchange.
Contractor shall provide to AHCCCSA original evidence of service rendered and
PCP assignments in a form appropriate for electronic data exchange.
Contractor shall be provided with a Contractor-specific security code for use in
all data transmissions made in accordance with contract requirements. Each data
transmission by Contractor shall include Contractor's security code.
<PAGE> 55
Contractor agrees that by use of its security code, it certifies that any data
transmitted is accurate and truthful, to the best of Contractor's knowledge.
Contractor further agrees to indemnify and hold harmless the State of Arizona
and AHCCCSA from any and all claims or liabilities, including but not limited to
consequential damages, reimbursements or erroneous billings and reimbursements
of attorney fees incurred as a consequence of any error, omission, deletion or
erroneous insert caused by Contractor in the submitted input data. Neither the
State of Arizona nor AHCCCSA shall be responsible for any incorrect or delayed
payment to the Contractors's AHCCCS services providers (subcontractors)
resulting from such error, omission, deletion, or erroneous input data caused by
Contractor in the submission of AHCCCS claims
The publication AHCCCS Contracted Health Plan Technical Interface Guidelines
describes the specific technical and procedural requirements for interfaces
between AHCCCS and Contractor and its subcontractors. Contractor is responsible
for complying with all technical requirements as stated in this manual as well
as any subsequent changes to the manual. A copy may be found in the Bidders
Library.
AHCCCSA intends to implement the ANSI X-12 Electronic Data Interchange (EDI)
standards for transactions related to health care according to the schedule
published by the ANSI X-12 Working Group for EDI (WEDI). The latest WEDI report
is available in the Bidders' Library. Contractor shall participate in the
implementation of transaction sets, identifiers, coding and edit rules,
protocols and other operational aspects as required. Contractor should also
encourage its provider to implement the applicable ANSI EDI standards.
During the first quarter of CY 95, Contractor shall provide a comprehensive EDI
plan with implementation targeted no later than 10/1/95.
The EDI network for AHCCCSA contractors and providers will, to the extent
possible, be developed on top of existing telecommunications technology in a
competitive, privately funded environment where cooperation, integrity, and
coordination is encouraged.
<PAGE> 56
42. SUBCONTRACTS
Contractor shall be legally responsible for contract performance whether or not
subcontracts are used. No subcontract shall operate to terminate the legal
responsibility of Contractor to assure that all activities carried out by the
subcontractor conform to the provisions of this contract. Subject to such
conditions, any function required to be provided by Contractor pursuant to this
contract may be subcontracted to a qualified person or organization. All such
subcontracts must be in writing.
All subcontracts are subject to review and approval by AHCCCSA prior to the
effective dates thereof. The following subcontracts shall be submitted to
AHCCCSA Contracting Office for prior approval:
a. Automated data processing
b. Third-party administrators
c. Management Services (See also Section D, Paragraphs 43 & 44)
d. Model subcontracts
Contractor shall maintain a fully executed original of all subcontracts which
shall be accessible to AHCCCSA within two working days of request by AHCCCSA. A
subcontract is voidable and subject to immediate cancellation by AHCCCSA in the
event any subcontract pertinent to "a" through "d" above is implemented without
the prior written approval of AHCCCSA.
All subcontracts shall comply with the applicable provisions of federal and
State laws, regulations and policies.
43. MANAGEMENT SERVICES SUBCONTRACTORS
All proposed management services subcontracts and/or corporate cost allocation
plans must be approved in advance by AHCCCSA Contracting Office as described in
Paragraph 42 above. Cost allocation plans must be submitted with the proposed
management fee agreement. AHCCCSA reserves the right to perform a thorough
review of actual management fees charged and/or corporate allocations made. If
<PAGE> 57
the fees or allocations actually paid out are determined to be unjustified or
excessive, amounts may be subject to repayment to Contractor, Contractor may be
placed on monthly financial reporting, and/or financial sanctions may be
imposed.
44. MANAGEMENT SERVICES SUBCONTRACTOR AUDITS
All management services subcontractors are required to have an annual financial
audit. A copy of this audit shall be submitted to AHCCCSA, Office of Managed
Care, within 120 days of the subcontractor's fiscal year end.
45. MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP
A proposed merger, reorganization or change in ownership of Contractor health
plan shall require prior approval of AHCCCSA and a subsequent contract
amendment. Contractor must submit a detailed merger, reorganization and/or
transition plan to AHCCCSA Contracting Office for AHCCCSA review. The purpose of
the plan review is to ensure uninterrupted services to members, evaluate the new
entity's ability to support the provider network, ensure that services to
members are not diminished and that major components of the organization and
AHCCCS programs are not adversely affected by such merger, reorganization or
change in ownership.
46. REQUESTS FOR INFORMATION
AHCCCSA may, at any time during the term of this contract, request financial or
other information from Contractor. Upon receipt of such requests for
information, Contractor shall provide complete information as requested no later
than 30 days after the receipt of the request unless otherwise specified in the
request itself.
47. PERFORMANCE BOND OR BOND SUBSTITUTE
<PAGE> 58
Contractor shall be required to provide a performance bond of standard
commercial scope issued by a surety company doing business in this State, an
irrevocable letter of credit, or a cash deposit ("Performance Bond") to AHCCCSA
for as long as Contractor has AHCCCS-related liabilities of $50,000 or more
outstanding, or 15 months following the effective date of this contract,
whichever is later, to guarantee: (1) payment of the Contractor's obligations to
providers, non-contracting providers, and non-providers; and (2) performance by
Contractor of its obligations under this contract. The Performance Bond shall be
in a form acceptable to AHCCCSA. The Performance Bond shall be payable to the
Arizona Health Care Cost Containment System Administration, an agency of the
State of Arizona. In the case of an irrevocable letter of credit the letter
shall be issued by:
a. A bank doing business in this State and insured by the Federal Deposit
Insurance Corporation, or
b. A savings and loan association doing business in this State and insured by
the Federal Savings and Loan Insurance Corporation, or
c. A credit union doing business in this State and insured by the National
Credit Union Administration.
In the event of a default by Contractor, AHCCCSA shall, in addition to any other
remedies it may have under this contract, obtain payment under the Performance
Bond or substitute security for the purposes of the following:
a. Paying any damages sustained by providers, noncontracting providers and
nonproviders by reason of a breach of Contractor's obligations under this
contract,
b. Reimbursing AHCCCSA for any payments made by AHCCCSA on behalf of
Contractor, and
c. Reimbursing AHCCCSA for any extraordinary administrative expenses incurred
by reason of a breach of Contractor's obligations under this contract,
including, but not limited to, expenses incurred after termination of this
contract for reasons other than the convenience of the State by AHCCCSA.
<PAGE> 59
In the event AHCCCSA agrees to accept substitute security in lieu of the
Performance Bond, irrevocable letter of credit or cash deposit, Contractor
agrees to execute any and all documents and perform any and all acts necessary
to secure and enforce AHCCCSA's security interest in such substitute security
including, but not limited to, security agreements and necessary UCC filings
pursuant to the Arizona Uniform Commercial Code. In the event such substitute
security is agreed to and accepted by AHCCCSA, Contractor acknowledges that it
has granted AHCCCSA a security interest in such substitute security to secure
performance of its obligations under this contract. Contractor is solely
responsible for establishing the credit-worthiness of all forms of substitute
security. AHCCCSA may, after written notice to the Contractor, withdraw its
permission for substitute security, in which case Contractor shall provide
AHCCCSA with a form of security described above.
48. AMOUNT OF PERFORMANCE BOND
The initial amount of the Performance Bond shall be equal to 110% of the total
capitation payment expected to be paid in the month of November or as determined
by AHCCCSA. The total capitation amount shall include S.O.B.R.A. supplemental
payments. This requirement must be satisfied by Contractor not later than 15
days after notification by AHCCCSA of the amount required. Thereafter, AHCCCSA
shall evaluate the enrollment statistics of Contractor on a monthly basis. If
there is an increase in capitation payment that exceeds 10% of the performance
bond amount, AHCCCSA may require an increase in the amount of the Performance
Bond. Contractor shall have 15 days following notification by AHCCCSA to
increase the amount of the Performance Bond. The Performance Bond amount that
must be maintained after the contract term shall be the lesser of (a) the bond
amount on the last day of the contract; or (b) the total amount of
AHCCCS-related liabilities outstanding.
49. FEDERALLY QUALIFIED HEALTH CENTERS (FQHC)
Contractor is encouraged to use FQHCs in Arizona to provide covered services and
must comply with the federal mandates in OBRA 89 and OBRA 90. This
<PAGE> 60
legislation gives FQHCs the option to require state Medicaid programs to
reimburse the FQHC at 100% of reasonable costs for the services delivered. As
Arizona's alternative to Medicaid, AHCCCSA and its contractors are required to
comply with this legislation.
At the time of contracting, the Contractor must offer the FQHC the option to
elect reasonable cost reimbursement for categorically eligible members. This
provision should be within the contract between the FQHC and the Contractor. If
the FQHC does not elect reasonable cost reimbursement, the FQHC waives the
opportunity to receive reasonable cost reimbursement for that contract period.
No retroactive elections shall be permitted.
However, if the FQHC elects reasonable cost reimbursement, the Contractor must
notify the AHCCCSA Office of Managed Care within seven days of the subcontract
signing. If the FQHC elects reasonable cost reimbursement, the Contractor may,
at its discretion, pay reasonable cost reimbursement, or pay using some other
method of payment, such as capitation, since the requirement to pay reasonable
costs applies to the State Medicaid Agency, not to the Contractor.
For example, the Contractor could contract with a FQHC which has elected
reasonable cost reimbursement. The method of payment, however, throughout the
contract period could be capitation. At the end of the year, the Contractor and
FQHC would complete certain reporting requirements which would enable AHCCCSA to
determine reasonable costs, and compare to what was actually paid by the
Contractor through capitation . AHCCCSA would reimburse the FQHC if the
capitation payments were less than reasonable costs. Likewise, AHCCCSA would
recoup payments in excess of reasonable costs.
The Contractor shall make capitation payments equal to, or greater than, the
amount defined by AHCCCSA for a FQHC electing reasonable cost reimbursement. In
determining the amount of the capitation payments made by the Contractor to the
FQHC, AHCCCSA will value the per member per month capitation payment at a rate
which approximates the average rate being paid by the Contractor in the
community to other similar providers. If there are no other providers from which
to develop an average rate, other means will be used to determine the average
for the area. If the actual capitation rate paid by the Contractor to
<PAGE> 61
the FQHC is less than the average rate being paid by the Contractor to other
providers, the Contractor must reimburse the FQHC for this difference. AHCCCSA
would reimburse the difference between reasonable cost and the average
capitation rate.
The Contractor shall adhere to the AHCCCS Federally Qualified Health Centers
Cost Report Instructions- General Instructions which describes the reporting
requirements applicable to Contractors contracting with a FQHC that elects cost
reimbursement. A copy of these requirements is available in the Bidder's
Library.
HCFA currently recognizes the following FQHCs:
- - - Clinica Adelante
- - - West Pinal Family Health Center
- - - Valley Health Center
- - - United Community Health Center
- - - Mariposa Community Health Center
- - - Lake Powell Medical Center
- - - Mountain Park Health Center
- - - El Rio Santa Cruz Neighborhood Health Center
- - - Indian Community Health Services, Inc.
- - - Traditional Indian Alliance
- - - Native Americans for Community Action, Inc.
50. CONTRACT COMPLIANCE SANCTION (PENALTY) ALTERNATIVE
AHCCCSA may suspend, deny, refuse to renew, or terminate this contract or any
related subcontracts in accordance with the terms of this contract and
applicable law and regulations. AHCCCSA may, in addition to these remedies,
impose monetary sanctions in accordance with the provisions of this contract,
applicable law and regulations if Contractor violates any provision stated in
law or this contract.
<PAGE> 62
Written notice will be provided to Contractor specifying the sanction to be
imposed, the grounds for such sanction and either the length of suspension or
the amount of capitation prepayment to be withheld. Contractor may appeal the
decision to impose a sanction in accordance with AHCCCS Rule R9-22-804.
51. INITIAL MINIMUM CAPITALIZATION REQUIREMENTS
In order to be considered for contract award, Offeror must meet a minimum
capitalization requirement of $1,500,000 which may be met in part by a letter of
credit not to exceed $750,000. This requirement is in addition to the
Performance Bond requirements defined in Paragraphs 47 and 48 of this Section.
END OF SECTION D
<PAGE> 63
SECTION E - CONTRACT CLAUSES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
PARAGRAPH # SUBJECT PAGE
1. Warranty................................................................. 55
2. Assignment of overcharges................................................ 55
3. Order of precedence...................................................... 55
4. Independent contractor................................................... 55
5. Compliance with laws, rules and regulations.............................. 55
6. Changes in performance: waivers.......................................... 56
7. Unenforceable provisions................................................. 56
8. Cooperation with other contractors....................................... 56
9. Assignment of contract and bankruptcy.................................... 57
10. Infringement of patents and copyrights................................... 57
11. Ownership of information and data........................................ 57
12. Indemnity to the state................................................... 58
13. Insurance................................................................ 59
14. Prohibition against disclosure of confidential information............... 59
15. Grievance by the contractor against AHCCCSA.............................. 60
16. Contract extensions and modifications.................................... 60
17. AHCCCSA right to operate contractor...................................... 60
18. Termination for default.................................................. 61
19. Termination for the convenience of the government........................ 61
20. Termination for procurement integrity violations......................... 61
21. Termination - availability of funds...................................... 62
22. Termination - transition of members...................................... 62
23. Nondiscrimination........................................................ 63
24. Audits and inspections................................................... 64
25. Right of inspection...................................................... 64
26. Fraud and abuse.......................................................... 64
27. Lobbying................................................................. 65
28. Compensation............................................................. 65
29. Method of payment........................................................ 65
30. Monthly capitation....................................................... 66
31. Capitation adjustments................................................... 67
32. Reinsurance.............................................................. 67
33. Auto-assignment algorithm................................................ 69
</TABLE>
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SECTION E - CONTRACT CLAUSES
1. WARRANTY
Contractor warrants that all medical and administrative services performed under
this contract conform to the requirements of this contract and are performed by
qualified personnel in accordance with generally accepted medical practice.
2. ASSIGNMENT OF OVERCHARGES
Contractor hereby assigns to AHCCCSA any and all claims for overcharges
resulting from anti-trust violations.
3. ORDER OF PRECEDENCE
The parties to this contract shall be bound by all terms and conditions
contained herein. For interpreting such terms and conditions the following
sources shall have precedence in descending order: The Constitution and laws of
the United States, and applicable federal regulations; the Constitution and laws
of Arizona, and applicable State rules; the terms of this contract, including
all attachments and executed amendments and modifications; and the Request for
Proposals upon which this contract is based.
4. INDEPENDENT CONTRACTOR
Contractor shall be an independent contractor in the performance of this
contract and shall not be considered an officer, employee, or agent of the State
of Arizona by virtue of this contract.
5. COMPLIANCE WITH LAWS, RULES AND REGULATIONS
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<PAGE> 66
Contractor shall obtain and maintain all licenses, permits, certificates, and
professional and general liability and automobile insurance coverages necessary
to do business and render services under this contract, and shall comply with
all applicable laws regarding safety, unemployment insurance, disability
insurance and worker's compensation.
Contractor shall comply with provisions of federal laws and regulations
governing the Title XIX Medicaid program, except for those requirements waived
for AHCCCSA by the federal government. Contractor shall comply with the
provisions of A.R.S. Section 36-2901 et.seq., governing the Arizona Health Care
Cost Containment System, and with all applicable AHCCCS Rules. Contractor shall
also comply with all applicable federal, state and local laws, rules,
regulations, standards and executive orders, without limitation to those
designated within this contract.
6. CHANGES IN PERFORMANCE: WAIVERS
No alteration or variation of the services to be performed by Contractor shall
be made without prior written approval of AHCCCSA.
Failure to exercise any right, power or privilege under this contract shall not
operate as a waiver thereof, nor shall a singular or partial exercise thereof
preclude any other exercise of that right, power or privilege or any other
right, power or privilege.
The waiver of any covenant, condition, duty, obligation or undertaking contained
in or made a part of this contract shall not be effective unless the waiver is
made in writing by the party which has the right to performance of the contract
provision. Any forbearance or indulgence in any other form or manner by either
party in any regard whatsoever shall not constitute a waiver of the covenant,
condition, duty, obligation or undertaking to be kept, performed or discharged
by the party to which the same may apply. Until complete performance or
satisfaction of all such covenants, conditions, duties, obligations and
undertakings, the other party shall have the right to invoke
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any remedy available under this contract, or under law, notwithstanding any such
forbearance or indulgence.
7. UNENFORCEABLE PROVISIONS
If any provision of this contract is held invalid or unenforceable, the
remaining provisions shall continue valid and enforceable to the full extent
permitted by law.
8. COOPERATION WITH OTHER CONTRACTORS
AHCCCSA may award other contracts for additional work related to this contract
and Contractor shall fully cooperate with such other contractors and AHCCCSA
employees or designated agents, and carefully fit its own work to such other
contractors' work. Contractor shall not commit or permit any act which will
interfere with the performance of work by any other contractor or by AHCCCSA
employees.
9. ASSIGNMENT OF CONTRACT AND BANKRUPTCY
Neither the rights nor the obligations of this contract may be assigned by
Contractor in whole or in part without the prior written consent of AHCCCSA.
This contract is voidable and subject to immediate cancellation by AHCCCSA upon
Contractor becoming insolvent or filing proceedings in bankruptcy or
reorganization under the United States Code, or assigning rights or obligations
under this contract without the prior written consent of AHCCCSA.
10. INFRINGEMENT OF PATENTS AND COPYRIGHTS
Contractor, at its own expense, shall defend any claim or suit which may be
brought against AHCCCSA or the State of Arizona for the infringement of United
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States patents or copyrights arising from Contractor's or AHCCCSA's use of any
equipment, materials, or information prepared or developed by Contractor in
connection with performance of this contract and Contractor shall satisfy any
final judgment or settlement for such infringement. AHCCCSA shall give
Contractor written notice of such claim or suit and full right and opportunity
to conduct the defense thereof, together with full information and reasonable
cooperation. This provision shall not be construed to require any action to be
taken or liability to be incurred by Contractor as a result of the sole,
independent and distinct use of equipment, materials or information by AHCCCSA.
If principles of governmental or public law are involved in any action for
infringement of patents or copyrights, AHCCCSA may elect to participate in the
defense of such action at its own expense.
If in Contractor's opinion the equipment, materials or information specified
above is likely to or does become the subject of a claim of infringement of a
United States patent or copyright, then without diminishing Contractor's
obligation to satisfy any final judgment or settlement, Contractor may, with
AHCCCSA's written consent, substitute other equally suitable equipment,
materials and information, or at Contractor's option and expense, obtain the
right for Contractor and AHCCCSA to continue the use of such equipment,
materials and information.
11. OWNERSHIP OF INFORMATION AND DATA
Any data or information system, including all software, documentation and
manuals, developed by Contractor pursuant to this contract, shall be deemed to
be owned by AHCCCSA. The federal government reserves a royalty-free,
nonexclusive, and irrevocable license to reproduce, publish, or otherwise use
and to authorize others to use for federal government purposes, such data or
information system, software, documentation and manuals. Proprietary software
which is provided at established catalog or market prices and sold or leased to
the general public shall not be subject to the ownership or licensing provisions
of this section.
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Data, information and reports collected or prepared by Contractor in the course
of performing its duties and obligations under this contract shall be deemed to
be owned by AHCCCSA. The ownership provision is in consideration of Contractor's
use of public funds in collecting or preparing such data, information and
reports. These items shall not be used by Contractor for any independent project
of Contractor or publicized by Contractor without the prior written permission
of AHCCCSA. Subject to applicable state and federal laws and regulations,
AHCCCSA shall have full and complete rights to reproduce, duplicate, disclose
and otherwise use all such information. At the termination of the contract,
Contractor shall make available all such data to AHCCCSA within 30 days
following termination of the contract or such longer period as approved by
AHCCCSA, Office of the Director. For purposes of this subsection, the term
"data" shall not include member medical records.
Except as otherwise provided in this section, if any copyrightable or patentable
material is developed by Contractor in the course of performance of this
contract, the federal government, AHCCCSA and the State of Arizona shall have a
royalty-free, nonexclusive, and irrevocable right to reproduce, publish, or
otherwise use, and to authorize others to use, the work for state or federal
government purposes. Contractor shall additionally be subject to the applicable
provisions of 45 CFR Part 74 and 45 CFR Parts 6 and 8.
12. INDEMNITY TO THE STATE
Contractor shall indemnify and hold harmless the State and AHCCCSA, their
agents, officers and employees, against all injuries, deaths, losses, damages,
claims, suits, liabilities, judgments, costs and expenses with respect to third
parties, which may in any manner accrue against the State or AHCCCSA, their
agents, officers or employees, through intentional conduct, negligence or
omission of Contractor, its agents, officers, employees or of any subcontractor
or any other person, firm or corporation furnishing or supplying work, services,
materials or supplies in connection with the performance of Contractor's
obligations under this contract.
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Contractor shall, at its own expense, appear, defend and pay all charges of
attorneys and all costs and other expenses in any action arising from any such
injury, death, loss, damage, claim, suit, liability, judgment, cost or expense
provided that Contractor has been promptly notified thereof and has the full
right to defend same, and if any judgment shall be rendered against the State or
AHCCCSA, their agents, officers or employees, in any such action, Contractor
shall, at its own expense, satisfy and discharge the same. In the event
Contractor fails or refuses to appear, defend and pay such costs, expenses and
attorneys' fees, Contractor shall reimburse the State and AHCCCSA, their agents,
officers and employees for costs and attorneys' fees incurred for defense of any
action arising from any such damage, claim, suit, liability, judgment, cost or
expense.
The State of Arizona and AHCCCSA shall bear no liability for Contractor's
failure or refusal to pay valid claims of subcontractors, providers,
noncontracting providers (as defined in AHCCCS Rule R9-22-101), or nonproviders,
i.e. providers of emergency medical services. Contractor shall indemnify and
hold the State and AHCCCSA harmless from any and all liability arising from such
claims and shall bear all costs in defense of any action over such liability,
including attorneys' fees.
The State of Arizona and AHCCCSA shall bear no liability under any other
contracts which Contractor may execute with other parties for the provision of
services to either the Contractor, to AHCCCS members or for any other
purpose(s). Contractor shall indemnify and hold the State and AHCCCSA harmless
from any and all liability arising from these contracts and shall bear all costs
of defense of any action over such liability, including attorneys' fees.
13. INSURANCE
Contractor shall maintain for the duration of this contract a policy or policies
of professional liability insurance, comprehensive general liability insurance
and automobile liability insurance in an amount of at least $1,000,000 for each
occurrence. Contractor agrees that any insurance protection required by this
contract, or otherwise obtained by Contractor,
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shall not limit the responsibility of Contractor to indemnify, keep and save
harmless and defend the State and AHCCCSA, their agents, officers and employees
as provided herein. Furthermore, Contractor shall be fully responsible for all
tax obligations, Worker's Compensation Insurance, and all other applicable
insurance coverage, for itself and its employees, and AHCCCSA shall have no
responsibility or liability for any such taxes or insurance coverage.
14. PROHIBITION AGAINST DISCLOSURE OF CONFIDENTIAL INFORMATION
Confidential information shall be safeguarded pursuant to 42 C.F.R. Part 431,
Subpart F, A.R.S. Sections 36-107, 36-2903, 41-1959 and 46-135, AHCCCS Rule
R9-22-512 and the AHCCCS Records Disclosure Policy. All the foregoing are hereby
incorporated by reference and may be found in the Bidders' Library.
15. GRIEVANCE BY THE CONTRACTOR AGAINST AHCCCSA
The exclusive manner for Contractor to assert any claim, grievance, dispute or
demand against AHCCCSA shall be in accordance with the applicable provisions of
AHCCCS Rule R9-22-804.
16. CONTRACT EXTENSIONS AND MODIFICATIONS
AHCCCSA reserves the sole option to extend the term of the contract for up to
two additional one-year periods. The terms and conditions of any such contract
extension shall remain the same as the original contract as amended. If,
however, AHCCCSA elects to increase the capitation rate for any rate code
category, such capitation rate shall not be increased for the extension period
more than the inflation rate recognized by the Arizona Legislature.
Any contract extension or modification shall be reduced to writing and executed
as a contract amendment. Whenever AHCCCSA issues formal contract extensions or
modifications to be signed by the Contractor, the provisions of such extensions
or modifications will be deemed to have been accepted 60 days from the date of
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mailing by AHCCCSA, even if the extensions or modifications have not been signed
by the Contractor, unless within that time the Contractor notifies AHCCCSA in
writing that it refuses to sign the extension or modification. AHCCCSA will
then initiate contract termination proceedings.
The AHCCCSA Contracting Officer may at any time, by written notice to
Contractor, make changes within the general scope of this contract. If any such
change causes an increase or decrease in the cost of, or the time required for,
performance of any part of the work under this contract, Contractor may assert
its right to an adjustment in compensation paid under this contract. The
Contractor must assert its right to such adjustment within 30 days from the date
of receipt of the change notice.
17. AHCCCSA RIGHT TO OPERATE CONTRACTOR
If, in the judgment of AHCCCSA, Contractor's performance is in material breach
of the contract or Contractor is insolvent, AHCCCSA may directly operate
Contractor to assure delivery of care to members enrolled with Contractor until
cure by Contractor of its breach, by demonstrated financial solvency or until
the successful transition of those members to other contractors.
18. TERMINATION FOR DEFAULT
AHCCCSA may terminate or suspend this contract in whole or part for default of
Contractor in accordance with applicable provisions of this contract, AHCCCS
Rule R9-22-405 and/or AHCCCS policies. The grounds for termination or suspension
shall include, but are not limited to, the grounds specified in this contract
and in applicable AHCCCS Rules or policies, or a breach of this contract or
violation of AHCCCS Rules or policies. AHCCCSA shall give written notice to
Contractor of its intent to terminate or suspend the contract. The notice shall
state the effective date of, and reason for, termination or suspension. In the
event AHCCCSA terminates or suspends this contract in whole or part as provided
in this section, AHCCCSA may procure, upon such terms and in such manner as it
may deem appropriate, services similar to those so
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terminated or suspended, and Contractor shall be liable to AHCCCSA for any
excess costs incurred by AHCCCSA for such services, including all costs of
re-procurement, during the remainder of the contract term.
In the event the contract is terminated for default, AHCCCSA shall obtain
payment under the Performance Bond or bond substitutes, for the purpose of
paying claims for covered services to members assigned to a new contractor, and
any damages AHCCCSA has incurred or may reasonably be expected to incur by
reason of breach of this contract or violation of AHCCCS Rules or AHCCCS
policies. AHCCCSA may additionally require Contractor, at Contractor's expense,
to assist in the training of personnel, and may require Contractor to extend its
performance beyond the termination notification periods provided in this section
until suitable arrangements have been made by AHCCCSA for a replacement
contractor.
In the event the contract is terminated in part, Contractor shall continue the
performance of the contract to the extent not terminated.
19. TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT
AHCCCSA, in addition to other rights set forth elsewhere in this contract,
reserves the right to terminate or suspend this contract in whole or in part
without cause effective 30 days after mailing written notice of such termination
or suspension by certified mail to Contractor.
20. TERMINATION FOR PROCUREMENT INTEGRITY VIOLATIONS
AHCCCSA may, by written notice to Contractor, terminate this contract if it is
found, after notice and hearing, that gratuities in the form of entertainment,
gifts, or otherwise were offered or given by Contractor, or any agent or
representative of Contractor, to any employee of AHCCCSA with a view toward
securing a contract or securing favorable treatment under the contract, provided
that the existence of the facts upon which AHCCCSA makes such findings shall be
in issue and may be reviewed in any competent court. If the contract
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is terminated under this subsection, unless Contractor is a governmental agency,
instrumentality or subdivision thereof, AHCCCSA shall be entitled to a penalty
in addition to any other damages to which it may be entitled by law, and to
exemplary damages.
AHCCCSA may cancel this contract without penalty or further obligation to the
State pursuant to ARS Section 38-511.
21. TERMINATION - AVAILABILITY OF FUNDS
The parties to this contract acknowledge that the State's Fiscal Year ends June
30, and further acknowledge that AHCCCSA may terminate this contract without
recourse, further obligation or penalty in the event that insufficient amounts
are appropriated by the State or federal government for the continuation of the
AHCCCS program.
22. TERMINATION - TRANSITION OF MEMBERS
In the event the contract, or any portion thereof, is terminated for any reason,
or expires, Contractor shall assist AHCCCSA in the transition of members to
other contractors. Such assistance and coordination shall include, but not be
limited to, the forwarding of medical and other records and the facilitation and
scheduling of medically necessary appointments for care and services. The cost
of reproducing and forwarding medical charts and other materials shall be borne
by Contractor. Contractor shall be responsible for providing all reports set
forth in this contract. Contractor must make provision for continuing all
management and administrative services until the transition of members is
completed and all other requirements of this contract are satisfied.
Contractor will be responsible for the following:
a. Identification and transition of chronically ill, high risk and
hospitalized members, and members in their last four weeks of pregnancy.
b. Transfer of requested medical records.
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c. Provision of prescription refills, to cover a minimum of five days beyond
the contract termination date, unless other arrangements with the receiving
contractor have been made.
d. Provision of durable medical equipment (DME) for a minimum of five days
beyond the contract termination date, unless other arrangements with the
receiving contractor have been made.
1) Customized DME is considered to belong to the member and stays with
the member when there is a change of contractors.
2) Non-customized DME may be reclaimed by the Contractor when the member
no longer requires the equipment if a system is in place for
refurbishing and reissuing the equipment. If no such system is in
place, the non-customized DME is considered the property of the
member.
e. Notification of subcontractors and members.
f. Payment of all outstanding obligations for medical care rendered to
members.
g. Until AHCCCSA is satisfied that Contractor has paid all such obligations,
Contractor shall provide the following reports to AHCCCSA:
1) A monthly claims aging report by provider/creditor including IBNR
amounts;
2) A monthly summary of cash disbursements;
3) Copies of all bank statements received by Contractor.
Such reports shall be due on the fifth day of each succeeding month for the
prior month.
h. In the event of termination or suspension of the contract by AHCCCSA, such
termination or suspension shall not affect the obligation of Contractor to
indemnify AHCCCSA for any claim by any third party against the State or
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AHCCCSA arising from Contractor's performance of this contract and for
which Contractor would otherwise be liable under this contract.
i. Any dispute by Contractor with respect to termination or suspension of this
contract by AHCCCSA shall be exclusively governed by the provisions of this
section, Paragraph 15.
j. Any funds advanced to Contractor for coverage of members for periods after
the date of termination shall be returned to AHCCCSA within 30 days of
termination of the contract.
23. NONDISCRIMINATION
Contractor shall comply with Title VII of the Civil Rights Act of 1964, as
amended, the Age Discrimination in Employment Act, State Executive Order No.
75-5 and Federal Executive Order No. 11246 which mandate that all persons,
regardless of race, color, religion, sex, age, national origin or political
affiliation, shall have equal access to employment opportunities. Contractor
shall comply with Section 503 of the Rehabilitation Act of 1973, as amended, and
the Americans With Disabilities Act which prohibits discrimination in the
employment or advancement in employment of qualified persons because of physical
or mental handicap. Contractor shall comply with Title VI of the Civil Rights
Act of 1964, which prohibits the denial of benefits of or participation in
covered services on the basis of race, color, or national origin. Contractor
shall comply with the requirement of Section 504 of the Rehabilitation Act of
1973, as amended, which prohibits discrimination on the basis of handicap in
delivering covered services.
24. AUDITS AND INSPECTIONS
The Contractor shall comply with all provisions specified in applicable AHCCCS
Rule R9-22-521 and AHCCCS policies and procedures relating to the audit of
Contractor's records and the inspection of Contractor's facilities. Contractor
shall fully cooperate with AHCCCSA staff and allow them reasonable access to
Contractor's staff, subcontractors, members, and records.
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25. RIGHT OF INSPECTION
AHCCCSA and the federal government may evaluate through on-site inspection or
other means, the quality, appropriateness and timeliness of services performed
under this contract.
26. FRAUD AND ABUSE
It shall be the responsibility of Contractor to report all cases of suspected
fraud and abuse, inappropriate practices or inconsistency by subcontractors,
members or employees. Contractor shall provide written notification of such
incidents to AHCCCSA, Internal Audit and Program Investigation Unit.
For detailed information on detecting and reporting such incidents, refer to
"AHCCCS Internal Audit/ Program Investigations Policy for Detecting and
Reporting Unusual Incidents and Member Fraud or Abuse" which is available in the
Bidders' Library and incorporated herein by reference.
27. LOBBYING
No funds paid to Contractor by AHCCCSA, or interest earned thereon, shall be
used for the purpose of influencing or attempting to influence an officer or
employee of any federal or State agency, a member of the United States Congress
or State Legislature, an officer or employee of a member of the United States
Congress or State Legislature in connection with awarding of any federal or
state contract, the making of any federal or State grant, the making of any
federal or State loan, the entering into of any cooperative agreement, and the
extension, continuation, renewal, amendment or modification of any federal or
State contract, grant, loan, or cooperative agreement. Contractor shall disclose
if any funds other than those paid to the Contractor by AHCCCSA have been used
or will be used to influence the persons and entities indicated above and will
assist AHCCCSA in making such disclosures to HCFA.
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28. COMPENSATION
The method of compensation under this contract shall be prepaid capitation,
S.O.B.R.A. supplement, third party liability, lien recoveries and reinsurance
payments, as described and defined within this contract and appropriate laws,
regulations or policies.
Subject to the availability of funds, AHCCCSA shall reimburse Contractor in
accordance with the terms of this contract provided that Contractor's
performance is in accordance with the terms and conditions of this contract.
29. METHOD OF PAYMENT
Payments made by AHCCCSA to Contractor are conditioned upon the receipt by
AHCCCSA of applicable, accurate and complete reports required to be submitted by
Contractor under this contract and AHCCCS Rules.
All funds received by Contractor pursuant to this contract shall be separately
accounted for in accordance with generally accepted accounting principles and
procedures.
Except for funds received from the collection of permitted co-payments, the only
source of payment to Contractor for the services provided hereunder is the
Arizona Health Care Cost Containment System Fund, as described in ARS Section
36-2913. An error discovered by the State with or without an audit in the amount
of fees paid to Contractor will be subject to adjustment or repayment by
Contractor by making a corresponding decrease in a current Contractor's payment
or by making an additional payment by AHCCCSA to the Contractor.
Except for changes made specifically in accordance with this contract, the rates
set forth in Section B shall not be subject to renegotiation or modification
during the contract period.
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No payment due Contractor by AHCCCSA may be assigned by Contractor. This section
shall not prohibit AHCCCSA at its sole option from making payment to a fiscal
agent hired by Contractor.
Contractor shall collect any required co-payment from members but service will
not be denied for inability to pay the co-payment. Except for permitted
co-payments, Contractor or its subcontractors shall not bill or attempt to
collect any fee from, or for, a member for the provision of covered services.
Any required co-payments collected shall belong to Contractor.
30. MONTHLY CAPITATION
AHCCCSA will make capitation payments to Contractor on a monthly basis in
advance of the performance of services by Contractor for members enrolled with
Contractor on a prepaid capitated basis pursuant to this contract. For each
member enrolled with Contractor on the first of the month the Contractor shall
receive a prepaid, per member, per month payment as payment in full for any and
all services provided to the member which constitute covered services. Payment
shall be deposited as near to the first day of the month as is practicable,
except that payment shall not be deposited later than the fifth working day of
the month for which payment is due.
When the Contractor has an eligible S.O.B.R.A. woman who delivers during an
enrollment period, it will be entitled to a S.O.B.R.A. payment. The Contractor
is responsible for meeting the newborn notification requirements defined in
AHCCCS Rule R9-22-707 before this payment will be made to the Contractor.
Where payments are made by electronic funds transfer, AHCCCSA shall not be
liable for any error or delay in transfer nor indirect or consequential damages
arising from the use of the electronic funds transfer process. Any charges or
expenses imposed by the bank for transfers or related actions shall be borne by
Contractor. Except for adjustments made to correct errors in payment, any
savings remaining to Contractor as a result of favorable claims experience and
efficiencies in service delivery at the end of the contract term may be kept by
Contractor.
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Contractor shall receive additional payments such as lien recoveries, third
party payments and/or reinsurance payments to which it is entitled pursuant to
AHCCCS Rules and AHCCCS policies and procedures.
31. CAPITATION ADJUSTMENTS
For members enrolled at any time after the beginning of the month's payment
cycle, capitation will be paid in advance and prorated through the remainder of
the month of enrollment.
If Contractor is in any manner in default in the performance of any obligation
under this contract, AHCCCSA may, at its option and in addition to other
available remedies, adjust the amount of payment until there is satisfactory
resolution of the default.
Contractor shall reimburse AHCCCSA and/or AHCCCSA may deduct from future monthly
capitation for any portion of a month during which the Contractor was not at
risk due to, for example, disenrollment or the death of a member or a duplicate
capitation. Capitation will not be recouped any further back than the first day
of the preceding contract year, in accordance with any law, rule, or regulation
change.
AHCCCSA may, at its option, review the effect of a program change and determine
if a capitation adjustment is needed. In these instances the adjustment will be
prospective with assumptions discussed with Contractor prior to modifying
capitation rates. Contractor may request a review of a program change if it
believes the program change was not equitable; AHCCCSA will not unreasonably
withhold such a review.
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32. REINSURANCE
Reinsurance is a stop-loss program provided by AHCCCSA to Contractor for the
partial reimbursement of covered inpatient facility medical services incurred
for a member beyond an annual deductible. Per diem rates paid for nursing
facility services, including room and board, provided in lieu of hospitalization
for up to 90 days in any contract year shall be eligible for reinsurance
coverage (see AHCCCS Rule R9-22-203 subsection B for excluded services).
AHCCCSA is self-insured for the reinsurance program. The program is
characterized by an initial deductible level and a subsequent coinsurance
percentage. The coinsurance percent is the rate at which AHCCCSA will reimburse
Contractor for covered medical costs incurred above the deductible.
The reinsurance program also includes a special CATASTROPHIC program that
encompasses members diagnosed with hemophilia and members who receive covered
organ and tissue transplantation including heart, bone marrow and other organ
transplantation. For additional detail and restrictions see AHCCCS Rule
R9-22-202. Kidney, cornea, and bone transplantation services are not eligible
for catastrophic reinsurance coverage but are eligible under the regular
(non-catastrophic) reinsurance program. Catastrophic reinsurance coverage for
transplants is limited to 85% of the AHCCCS contract amount for the
transplantation services rendered, or 85% of the Contractor-paid amount,
whichever is lower. The AHCCCS contracted transplantation rates will be
available in the Bidders' Library after April 15, 1994.
When an eligible member is identified as being catastrophically eligible due to
a hemophilia diagnosis, all medically necessary covered services provided during
the contract year shall be eligible for reimbursement at 85% of the Contractor's
paid amount.
Effective with dates of service 10/1/94 and later, AIDS-related services are not
covered under the catastrophic reinsurance program. However, AIDS-related
inpatient facility medical services will be eligible for regular reinsurance
coverage.
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The deductible level is based on the Contractor's statewide AHCCCS acute care
enrollment as of October 1st each contract year for all rate codes and counties.
There is no deductible for catastrophic reinsurance cases.
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REGULAR REINSURANCE
<TABLE>
<CAPTION>
Statewide Plan Enrollment Deductible Coinsurance %
- - ---------------------------------------- ----------------- ---------------------
<S> <C> <C>
0 - 9,999 $20,000 75%
10,000 - 49,999 $35,000 75%
50,000 and over $50,000 75%
CATASTROPHIC REINSURANCE
All Contractors $0 85%
</TABLE>
Effective with dates of service 10/1/94 and later, AHCCCSA will use inpatient
encounter data to determine regular reinsurance benefits. Reimbursement for
regular reinsurance benefits will be made to Contractor once each quarter.
AHCCCSA will also provide for a reconciliation of reinsurance payments in the
case where encounters used in the calculation of reinsurance benefits are
subsequently adjusted or voided.
Encounter data will not be used to determine catastrophic reinsurance benefits.
However, this does not relieve Contractor of the responsibility for submitting
encounters for catastrophic reinsurance services. The initial claims for
reimbursement under the catastrophic reinsurance program must be filed no later
than June 30th of the year following the contract year. Catastrophic reinsurance
claims that are submitted within this time limit and are denied or adjusted, may
be corrected until September 30th of the year following the contract year, the
deadline for the submission of a clean claim. All catastrophic reinsurance
claims for dates of service 10/1/94 and later must be submitted in accordance
with the AHCCCS Reinsurance Policy/Procedure Manual.
Medical review on regular reinsurance cases will be determined based on
statistically valid random sampling. The AHCCCS Office of the Medical Director
will generate the sampling and will notify Contractor of documentation needed
for the retrospective medical review process to occur at the Contractor's
offices. The results of the medical review sampling will be extrapolated to the
entire regular reinsurance reimbursement population of Contractor. A partial
recoupment of reinsurance reimbursements made to Contractor may occur based on
the results of the medical review sampling. All catastrophic claims will be
subject to medical review by AHCCCSA.
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Effective with dates of service 10/1/94 and later, AHCCCSA will discontinue the
deferred liability program. However, inpatient facility services that would have
been eligible under the previous deferred liability program will now be eligible
for reimbursement under the reinsurance program and subject to the applicable
reinsurance deductibles. Capitation rate ranges used during the negotiation
process have been adjusted to reflect the elimination of deferred liability.
33. AUTO-ASSIGNMENT ALGORITHM
Members who do not have the right to choose a contractor or members who have the
right to choose but do not exercise this right, are assigned to contractors
through an auto-assignment algorithm. The algorithm is a mathematical formula
used to distribute members to the various contractors in a manner that is
predictable and consistent with AHCCCSA goals. The algorithm favors those
contractors with lower capitation rates.
All contractors within a given county will have a placement in the algorithm and
will receive members accordingly. What varies, however, is the number of members
each contractor receives through the algorithm. A contractor with a more
favorable placement will receive proportionally more members. Conversely, a
contractor with a less favorable placement in the algorithm will receive
proportionally fewer members.
A contractor's placement in the algorithm is based upon its INITIAL capitation
rates bid and its FINAL capitation rates bid. Each bid is weighted equally. For
example, the contractor bidding the lowest acceptable initial capitation rate in
a particular county will receive the most favorable placement in the algorithm
for the initial bid placement. This same contractor may receive a less favorable
placement in the final rate bid. Following are the details regarding the
calculation of the target percentage points.
Development of the Target Percentage
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There are two components to the development of the target percentage:
1. Initial bid submitted by the contractor, and
2. The final bid submitted by the contractor.
The initial bid component will assign a number of points to each contractor
based on a ranking of the acceptable initial bids for the zip code, for each
rate code. Bids below the bottom of the rate range will be assigned the bottom
of the rate range for development of the target percentages. The points will be
assigned as follows:
Counties with two contractors
67 points to the lowest bid
33 other
County with five contractors
55 points to the lowest bid
25 - 2nd lowest
10 - 3rd lowest
6 - 4th lowest
4 - 5th lowest
County with ten contractors
35 points to the lowest bid
20 - 2nd lowest
10 - 3rd lowest
8 - 4th lowest
7 - 5th lowest
6 - 6th lowest
5 - 7th lowest
4 - 8th lowest
3 - 9th lowest
2 - 10th lowest
Contractors that have equal bids, in a zip code for the same rate code, will
each be given 50% of the two positions combined.
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The final bid component will assign a number of points to each contractor based
on the lowest accepted final bid for the zip code, for each rate code. Bids
below the bottom of the rate range will be assigned the bottom of the rate range
for development of the target percentages.
The BASE represents the number of available points assigned to each offeror (in
total, 100 points). All offerors start with the same base (100 divided by number
of offerors). The base is adjusted upwards or downwards, depending upon the
offeror's bid relative to other offerors' bids. For example, the offeror with
the lowest bid does not lose any base points but rather is given additional base
points. These additional base points come from high bid offerors who have lost
points for having a high bid. The points will be assigned as follows:
BASE - (((X - Y) / Y) * 200)
(Not less than 5%)
BASE = 100 / The number of awarded Contracts in the zip code.
X = Contractor's final bid rate in the zip code
Y = Lowest final bid rate in the zip code, but not lower than the bottom of the
rate range.
All points subtracted from the BASE will be given to contractors as follows:
Counties with two contractors
All points to the contractor with the lowest bid
Counties with five contractors
75% of the points to the lowest bidder and 25% to the second lowest bidder
Counties with 10 contractors
60% of the points to the lowest bidder, 30% to the second lowest bidder
and 10% to the third lowest bidder.
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The two components will be combined as follows to give the target percentage for
each contractor, by zip code, by rate code.
(Initial Bid Points + Final Bid Points)
- - --------------------------------------- = TARGET PERCENTAGE
Total Points in the County (Not less than 5%)
Algorithm Assignment
The algorithm employs a data table and a formula to assign cases (a case may be
a member or a household of members) to contractors using the target percentages
developed above. The algorithm data table consists of all the zip codes in the
state, all contractors serving each zip code area, and the target percentage.
The contractor farthest away from its target percentage, the largest negative
difference, is assigned the next case. The equation used is:
(t / T) - P = d
t = The total members assigned to the zip code per rate code category for the
contractor.
T= The total members assigned to the zip code per rate code category, all
contractors combined.
P = The target percentage of members for the rate code for the contractor.
d = The difference.
The algorithm is calculated after each assignment to give a new difference for
each contractor. When more than one contractor has the same difference, and the
contractors' differences are lower than all other contractors, the contractor
with the lowest Health Plan I.D. Number will be assigned the case.
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The member population assigned by the algorithm includes:
1. Noncategorical members (except Eligible Assistance Children) that are newly
eligible to the AHCCCS program.
2. Members that are categorically eligible (plus Eligible Assistance Children)
and did not choose a contractor within the prescribed time limits.
3. Noncategorical members who have been enrolled with a contractor but have
changed zip codes and the previous contractor is not available in the new
zip code.
4. Noncategorical members who were previously enrolled with a contractor that
is not a current contractor.
5. Noncategorical members with a break in eligibility of 90 days or greater.
END OF SECTION E
<PAGE> 89
SECTION F - LIST OF ATTACHMENTS
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
Attachment A - Subcontract Provisions.................................................... 115-122
Attachment B - Service Area Minimum Network Requirements................................. 123-164
Attachment C - Encounter Record Submission Standards..................................... 165-170
Attachment D - Management Services Subcontractor Statement............................... 171-180
Attachment E - Sample Letter of Intent................................................... 181-182
Attachment F - Instructions for Preparing Capitation
Proposal on Computer Disk................................................. 183-185
Attachment G - Table of Member Months Paid by Rate Code
and by County as of 2/1/94 ............................................... 186-187
INDEX ................................................................................... 189-190
</TABLE>
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<PAGE> 90
SECTION G - REPRESENTATIONS, CERTIFICATIONS
AND OTHER STATEMENTS OF OFFERORS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH # SUBJECT PAGE
- - ----------- ------- ----
<S> <C>
1. Certification of accuracy of information provided................................. 77
2. Family planning services.......................................................... 77
3. Authorized signatory.............................................................. 77
5. Statement of organization structure............................................... 78
6. Financial planning................................................................ 79
7. Financial disclosure statement.................................................... 83
8. Related party transactions........................................................ 86
9. Optional geographic area capacity request......................................... 89
10. Offeror's administrative functions subcontractors................................. 90
11. Offeror's key personnel........................................................... 91
</TABLE>
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<PAGE> 92
SECTION G - REPRESENTATIONS, CERTIFICATIONS
AND OTHER STATEMENTS OF OFFERORS
1. CERTIFICATION OF ACCURACY OF INFORMATION PROVIDED
By signing this offer, Offeror certifies, under penalty of law, that the
information provided herein is true, correct and complete to the best of
Offeror's knowledge and belief. Offeror also acknowledges that should
investigation at any time disclose any misrepresentation or falsification, any
subsequent contract may be terminated by AHCCCSA without penalty to or further
obligation by AHCCCSA. Offeror certifies that it meets all AHCCCSA's
requirements for a State-defined health maintenance organization as specified in
the State Plan (hereby incorporated by reference).
2. FAMILY PLANNING SERVICES
If the Offeror chooses NOT to offer Family Planning services if awarded a
contract, it must subsequently refer those members to AHCCCSA for
fee-for-service coverage of their family planning needs in accordance with
AHCCCS OMD Policy Manual.
3. AUTHORIZED SIGNATORY
Authorized Signatory for Offeror__________________________________:
OFFEROR Name
______________________________________, ______________________________
INDIVIDUAL'S Name Title
is the person authorized to sign this contract on behalf of Offeror who is
responsible for the delivery of covered services during the term of this
contract.
4. OFFEROR'S MAILING ADDRESS
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<PAGE> 93
AHCCCSA shall address all notices relative to this offer to the attention of:
____________________________________ _____________________________________
Name Title
____________________________________ _____________________________________
Address Telephone Number
____________________________________ _____________________ ______________
City State ZIP
5. STATEMENT OF ORGANIZATION STRUCTURE
Instructions:
Offeror must complete and return this Organization Structure Statement. Include
all items requested in this section. Make sure that each questionnaire item is
completed and that full disclosure is made.
When making attachments to this section, please refer to the question number and
the item heading.
a. Organization Chart
Attach a copy of the Offeror's staff organizational chart, setting forth
lines of authority, responsibility and communication which will pertain to
this proposal. Provide an overall organizational chart and separate
organizational charts for each functional area.
b. If other than a government agency:
(1) When was your organization formed?__________________________________
c. License/Certification
(1) Attach a list of all licenses and certifications (e.g. Federal HMO
status or State certifications) your organization maintains. Use a
separate sheet of paper using the following format:
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<PAGE> 94
SERVICE COMPONENT LICENSE/REQUIREMENT RENEWAL DATE
----------------- ------------------- ------------
(2) Have any licenses in accordance with A.R.S. Section 20-1065 et. seq.,
been denied, revoked or suspended within the past 10 years?
Yes_________ No_________ If yes, please explain on a separate sheet.
d. Civil Rights Compliance Data
Has any federal or state agency ever made a finding of noncompliance with
any relevant civil rights requirements with respect to your program?
Yes_________ No__________ If yes, please explain on a separate sheet.
e. Handicapped Assurance
Does your organization provide assurance that no qualified handicapped
person will be denied benefits of or excluded from participation in a
program or activity because the Offeror's facilities (including
subcontractors) are inaccessible to or unusable by handicapped persons?
(note: Check with Local Zoning ordinances for handicapped requirements).
Yes_______ No_______
If yes, briefly describe how such assurance is provided.
If no, briefly describe how your organization is taking affirmative steps
to provide assurance.
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<PAGE> 95
f. Prior Convictions
List all felony convictions within the past 15 years of any key personnel
(i.e., Administrator, Financial Officers, major stockholders or those with
controlling interest, etc.,). Failure to make full and complete disclosure
shall result in the rejection of your proposal.
g. Federal Government Suspension/Exclusion
Has Offeror been suspended or excluded from any federal government programs
for any reason?
Yes_________ No_________ If yes, please explain:
6. FINANCIAL PLANNING
a. Organizational Structure
The Offeror must describe the entity that is requesting to contract with
the State. An entity is defined as any unit, existing or to be formed, for
which financial statements could be prepared in accordance with generally
accepted accounting principles.
Offeror's description of the entity shall include, as a minimum, the
following:
Provide the date the entity was or will be formed and its legal status as
an entity (i.e., Individual, Partnership, Corporation). Offeror's
description should clearly identify the entity's relationship to any other
organization.
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<PAGE> 96
Provide name of accounting firm or individual who performed the audit, if
entity is currently audited. Attach a copy of the most recent audited
financial statements.
If entity has not been audited within the last two years, or has never been
audited, please attach a copy of the most recent annual unaudited financial
statements.
Explain how the initial capitalization and performance bond requirements,
as described in Section D of this solicitation, will be met.
Describe principal allocation techniques used or proposed to be used for
allocating indirect costs reflected in the entity's financial statements.
Include a list of the types of liability insurance covering your entity.
Include the amount of coverage and the name and address of the carrier.
Describe any suits, judgments, tax deficiencies, claims or any other
contingencies pending against the offeror. Indicate the assessed and
expected financial impact for each item.
If the offeror or its owner(s) has ever gone through a bankruptcy, provide
the date and type (for example Chapter 11) of each bankruptcy.
b. Received But Unpaid Claims (RBUCs) and Incurred But Not Received (IBNRs)
Describe the method to be used for evaluating the claims liability for
claims received by the offeror but not yet adjudicated. These claims are
more commonly referred to by AHCCCSA as Received But Unpaid Claims (RBUCs).
Describe the method to be used for evaluating the claims liability for IBNR
claims. This description should address the frequency that projections are
performed and major data sources used in the IBNR calculation. The
description should also include how the Offeror will validate the accuracy
of the IBNR amounts.
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<PAGE> 97
The offeror shall provide a copy of their IBNR procedures and a summary of
their IBNR practices. These procedures and practices must adequately
support offeror's response to the above IBNR descriptions.
c. Claims processing system
Describe your claims processing system. Offeror's description shall include
a description of:
Access controls to the processing system, both physical and software.
Claim processor edit overrides available and the reporting and monitoring
of the use of the overrides, including authorization procedures and
procedures for the review of the reporting.
Use of prior authorizations including authority to make changes to prior
authorizations.
Audit trails produced for claims adjustments.
Post-payment review of processed claims.
Describe in detail how you will assure encounter data is submitted to
AHCCCSA within the standards established in Attachment C.
d. Financial Projections
Contractors must submit prospective financial statements for each of the
three years ending September 30, 1995, 1996, and 1997. Additionally,
current AHCCCS contractors responding to this solicitation must also submit
prospective financial statements for the year ending September 30, 1994.
The prospective financial statements shall include all applicable
information on the following reports, as detailed in the Reporting Guide
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<PAGE> 98
for Acute Health Care Contractors with the Arizona Health Care Cost
Containment System, a copy of which is available in the Bidders' Library:
- Balance Sheet
- Statement of Revenue and Expenses and Changes in Plan Equity
- Enrollment Table
Fields that are not completed on the financial projections will be assumed
to be zero.
The financial projections must be consistent with the service areas the
offeror has requested and the capitation rates bid by the offeror for the
requested areas.
Assumptions used in preparing the financial projections should be clearly
stated.
As a data source, Attachment G contains a table showing member months paid
by rate code and by county, as of February 1, 1994, for use in preparing
projections. Offerors should consider the number of awards to be made, as
discussed in Section H of this Solicitation, Award of Contract, when using
this information. Existing offerors should consider current member month
information and current distribution of members by rate code in preparing
projections.
e. Was an actuarial firm used to assist in developing capitation rates?
Yes_________ No_________
If yes, what is name of actuary and actuarial firm.
_____________, _______________________________________
Actuary Actuarial Firm
f. Did a firm or organization provide the Offeror with any assistance in
making this offer (to include developing capitation rates or providing any
other technical assistance)?
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<PAGE> 99
Yes__________ No_________
If yes, what is the name of this firm or organization?
______________________________________________________________
Name
______________________________________________________________
Address
g. Has the Offeror contracted or arranged for Management Information Systems,
software or hardware, for the term of the contract?
Yes_________ No_________
If yes, is the Management Information System being obtained from a vendor?
Yes_________ No_________
If yes, please provide:
(1) Vendor's name,
(2) The vendor's background with AHCCCSA
(3) The vendor's background with other HMOs
(4) The vendor's background with other Medicaid programs
7. FINANCIAL DISCLOSURE STATEMENT
Offeror must provide the following information as required by 42 CFR 455.103.
This Financial Disclosure Statement shall be prepared as of 3/31/94. However,
continuing offerors who have filed the required Financial Disclosure Statement
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<PAGE> 100
within the last 12 months need not complete this section if no significant
changes have occurred since the last filing.
List the name and address of each person with an ownership or control interest,
as defined by 42 CFR 455.101, in the disclosing entity:
<TABLE>
<CAPTION>
Percent of
Name Address Ownership or Control
- - ---- ------- --------------------
<S> <C> <C>
_________________________________________________ ___________
_________________________________________________ ___________
_________________________________________________ ___________
_________________________________________________ ___________
</TABLE>
List the name and address of each person with an ownership or control interest
in any subcontractor in which the disclosing entity has direct or indirect
ownership of 5% or more:
<TABLE>
<CAPTION>
Percent of
Name Address Ownership or Control
- - ---- ------- --------------------
<S> <C> <C>
_________________________________________________ ___________
_________________________________________________ ___________
_________________________________________________ ___________
_________________________________________________ ___________
</TABLE>
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<PAGE> 101
Names of persons named above who are related to another as spouse, parent, child
or sibling:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
List the name of any other disclosing entity in which a person with an ownership
or control interest in the disclosing entity also has an ownership or control
interest:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
List the ownership of any subcontractor with whom the Offeror has had business
transactions totalling more than $25,000 during the 12-month period ending on
the date of the request:
<TABLE>
<CAPTION>
Describe Ownership Type of Business Dollar Amount
of Subcontractors Transaction with Provider of Transaction
- - ----------------- ------------------------- --------------
<S> <C> <C>
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
</TABLE>
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<PAGE> 102
List any significant business transactions, as defined in 42 CFR 455.101,
between the Offeror and any wholly-owned supplier or between the Offeror and any
subcontractor during the five-year period ending on the date of the offer:
Describe Ownership Type of Business Dollar Amount
of Subcontractors Transaction with Provider of Transaction
- - ----------------- ------------------------- --------------
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
List the name of any person who has ownership or control interest in the
Offeror, or is an agent or managing employee of the Offeror and has been
convicted of a criminal offense related to that person's involvement in any
program under Medicare, Medicaid or the Title XX services program since the
inception of those programs:
<TABLE>
<CAPTION>
Name Address Title
- - ---- ------- -----
<S> <C> <C>
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
</TABLE>
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<PAGE> 103
List name and address of each creditor whose loans or mortgages exceed 5% of
total Contractor equity and are secured by assets of the Contractor's health
plan.
<TABLE>
<CAPTION>
Description Amount
Name Address of Debt of Security
---- ------- ----------- -----------
<S> <C> <C> <C>
________________________________________________ ___________ ___________
________________________________________________ ___________ ___________
________________________________________________ ___________ ___________
________________________________________________ ___________ ___________
________________________________________________ ___________ ___________
________________________________________________ ___________ ___________
</TABLE>
8. RELATED PARTY TRANSACTIONS
List the names and addresses of the Board of Directors of the Offeror.
<TABLE>
<CAPTION>
Name/Title Address
---------- -------
<S> <C>
_____________________________________________ ________________________________
_____________________________________________ ________________________________
_____________________________________________ ________________________________
_____________________________________________ ________________________________
_____________________________________________ ________________________________
</TABLE>
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<PAGE> 104
List names and titles of the 10 highest compensated management personnel
including but not limited to the Chief Executive Officer, the Chief Financial
Officer, Board Chairman, Board Secretary, and Board Treasurer:
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
_________________________ _______________________________________________
_________________________ _______________________________________________
_________________________ _______________________________________________
_________________________ _______________________________________________
</TABLE>
Describe transactions between the Offeror and any related party in which a
transaction or series of transactions during any one fiscal year exceeds the
lesser of $10,000 or 2% of the total operating expenses of the disclosing
entity. List property, goods, services and facilities in detail noting the
dollar amounts or other consideration for each transaction and the date thereof.
Include a justification as to (1) the reasonableness of the transaction, (2) its
potential adverse impact on the fiscal soundness of the disclosing entity, and
(3) that the transaction is without conflict of interest:
a) The sale, exchange or leasing of any property:
<TABLE>
<CAPTION>
Description of Name of Related Party Dollar Amount for
Transaction and Relationship Reporting Period
- - -------------- --------------------- -----------------
<S> <C> <C>
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
</TABLE>
Justification
- - -------------
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
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<PAGE> 105
b) The furnishing of goods, services or facilities for consideration:
<TABLE>
<CAPTION>
Description of Name of Related Party Dollar Amount for
Transaction and Relationship Reporting Period
- - -------------- --------------------- -----------------
<S> <C> <C>
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
</TABLE>
Justification
- - -------------
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
c) Describe all transactions between Offeror and any related party which
includes the lending of money, extensions of credit or any investment in
a related party. This type of transaction requires review and approval
in advance by the Office of the Director:
<TABLE>
<CAPTION>
Description of Name of Related Party Dollar Amount for
Transaction and Relationship Reporting Period
- - -------------- --------------------- -----------------
<S> <C> <C>
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
</TABLE>
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<PAGE> 106
Justification
- - -------------
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
d) List the name and address of any individual who owns or controls more
than 10% of stock or that has a controlling interest (i.e.formulate,
determine or veto business policy decisions, etc.,):
<TABLE>
<CAPTION>
HAS CONTROLLING
INTEREST?
NAME ADDRESS OWNER OR CONTROLLER YES NO
- - ---- ------- ------------------- ---------------
<S> <C> <C> <C>
</TABLE>
9. OPTIONAL GEOGRAPHIC AREA CAPACITY REQUEST
The Geographic Area Capacity Request provides the format for requesting
geographic area membership capacity caps. The membership capacity caps will only
be accepted for an entire county.
AHCCCSA is unable to guarantee an exact number of members to Contractor. If a
MCC is granted to Contractor, AHCCCSA reserves the right to only "turn on or
off" enrollment when it is convenient to AHCCCSA. This means that Contractor's
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<PAGE> 107
enrollment may be much lower than the membership capacity cap requested before
new enrollment is allowed. Also, AHCCCSA may need to let Contractor's enrollment
rise higher than the membership capacity cap requested before enrollment is
ceased. AHCCCSA will assume no responsibility or liability for any consequences
due to this process. If Contractor requests and is granted a membership capacity
cap, Contractor assumes all risks.
Maximum enrollment capacity requests by Offeror will be considered, but only in
the best interests of AHCCCSA and the State. Offerors submitting capacity limit
requests do so at the risk of having their proposals rejected in affected
counties.
During any period a membership capacity cap is in effect, Contractor will be
closed to any freedom of choice, open enrollment or auto-assigned members;
Contractor will be open for family adds and members who regain eligibility
within 90 days.
Geographic Area Capacity Request
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------
County Maximum Members Requested
- - ------------------------------------------------------------------------
<S> <C>
Apache
- - ------------------------------------------------------------------------
Cochise
- - ------------------------------------------------------------------------
Coconino
- - ------------------------------------------------------------------------
Gila
- - ------------------------------------------------------------------------
Graham
- - ------------------------------------------------------------------------
Greenlee
- - ------------------------------------------------------------------------
La Paz
- - ------------------------------------------------------------------------
Maricopa
- - ------------------------------------------------------------------------
Mohave
- - ------------------------------------------------------------------------
Navajo
- - ------------------------------------------------------------------------
Pima
- - ------------------------------------------------------------------------
Pinal
- - ------------------------------------------------------------------------
Santa Cruz
- - ------------------------------------------------------------------------
Yavapai
- - ------------------------------------------------------------------------
Yuma
- - ------------------------------------------------------------------------
TOTAL
---------------------------
</TABLE>
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<PAGE> 108
10. OFFEROR'S ADMINISTRATIVE FUNCTIONS SUBCONTRACTORS
Offeror must identify any organization/administrative functions (i.e., Claims
Processing, Marketing, Automated Data Processing, Accounting, etc.,) or key
personnel (Administrator, Medical Director, Chief Financial Officer, etc.,)
which are subcontracted.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ESTIMATED
VALUE OF VALUE OF VALUE OF
CONTRACT CONTRACT CONTRACT
NAME AND METHOD OF ADMINISTRATIVE (10/1/94- (10/1/95- (10/1/96-
BUS. ADDRESS PAYMENT FUNCTION PERFORMED 9/30/95) 9/30/96) 9/30/97)
- - ------------ --------- ------------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C>
</TABLE>
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<PAGE> 109
11. OFFEROR'S KEY PERSONNEL
Indicate the names of the persons filling the following positions and the date
(month/year) they began, or will begin, their present staff assignment. In
addition, the Offeror must attach detailed professional resumes for all key
personnel to include, as a minimum, the following:
<TABLE>
<CAPTION>
Position Name Starting Date
-------- ---- -------------
<S> <C> <C>
Administrator:
----------------------------------------------- ---------------------
Medical Director:
----------------------------------------------- ---------------------
Chief Financial Officer:
----------------------------------------------- ---------------------
QM/UM Coordinator:
----------------------------------------------- ---------------------
Provider Services Manager:
----------------------------------------------- ---------------------
Member Services Manager:
----------------------------------------------- ---------------------
Maternal Health/EPSDT Coordinator:
----------------------------------------------- ---------------------
</TABLE>
END OF SECTION G
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<PAGE> 110
SECTION H - INSTRUCTIONS TO OFFERORS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH # SUBJECT PAGE
- - ----------- ------- ----
<S> <C>
1. Contents of offeror's proposal...................................... 95
2. Prospective offerors' inquiries..................................... 99
3. Prospective offerors' conference.................................... 100
4. Late proposals...................................................... 100
5. Withdrawal of proposal.............................................. 100
6. Amendments to RFP................................................... 100
7. Best and final offers (BFO)......................................... 100
8. Award of contract................................................... 102
9. Whole-county proposals.............................................. 103
10. Cross-over areas.................................................... 103
11. RFP milestone dates................................................. 104
12. AHCCCS Bidders' Library............................................. 104
13. Electronic data interchange (EDI)................................... 104
14. Legislative issues.................................................. 104
15. Offerors' checklist................................................. 107
</TABLE>
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SECTION H - INSTRUCTIONS, CONDITIONS AND NOTICES TO OFFERORS
OVERVIEW OF REQUEST FOR PROPOSAL (RFP) PROCESS
AHCCCSA is a Governor's Cabinet level organization within the Arizona state
government structure that oversees the delivery of health care services to
nearly 500,000 Arizona residents. AHCCCSA is funded through federal, state and
county monies to provide a package of services to indigent and categorical
members. AHCCCSA enters into contracts with private and public health plans
through a competitive bid process to deliver services in all fifteen counties in
Arizona. In addition, AHCCCSA works with the Department of Economic Security,
Department of Health Services, and Indian Health Services and Indian Tribal
governments to deliver covered services to special member groups. A discussion
of AHCCCSA's functions and structure can be found in the Overview of AHCCCS in
the Bidder's Library.
1. CONTENTS OF OFFEROR'S PROPOSAL
All proposals shall be organized as described in this section on the forms and
computer disk provided in this solicitation. All pages of Offeror's proposal
shall be numbered sequentially. It is permissible to copy forms if required.
Telegraphic proposals or mailgrams will not be considered.
Erasures, interlineations or other modifications in the proposal shall be
initialed in original ink by the authorized person signing the offer.
AHCCCSA shall not reimburse an Offeror the cost of proposal preparation.
It is the responsibility of the Offeror to examine the entire solicitation
package and seek clarification of any requirement that may not be clear and to
check all responses for accuracy before submitting a proposal. Negligence in
preparing an offer confers no right of withdrawal after due time and date.
All proposals shall become the property of AHCCCSA. Offeror may designate
certain information to be proprietary in nature by typing the word
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<PAGE> 113
"proprietary" on top of every page for which nondisclosure is requested. Final
determinations of nondisclosure, however, rest with the AHCCCSA Director.
However, all portions of the Offeror's proposal, even pages which are
proprietary, will be provided to HCFA and its evaluation contractor.
All proposals shall be organized according to the following major categories:
I. General Matters
II. Network Information/ Network Management
III. Capitation
IV. Program Operations
V. Organization
Each section shall be separated by a divider and contain all information
requested in this solicitation. Numbering of pages should continue in sequence
through each separate section. For example, "Network" would begin with the page
number following the last page number in "Capitation". Each section shall begin
with a table of contents.
Proposals submitted that are not in conformance with the guidelines described
herein will not be considered.
I. General Matters
See "Submission Requirements for Offerors Checklist" for information to be
submitted under this section.
II. Capitation
Capitation is a fixed (per member) monthly payment to Contractor for the
provision of covered services to members. It is an actuarially sound amount to
cover expected utilization and costs for the individual rate codes in a
risk-sharing managed care environment. In addition, AHCCCSA offers reinsurance
programs to provide Contractor with protection from unusual and unforeseen
costs.
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<PAGE> 114
Offeror must demonstrate that the capitation rates proposed are actuarially
sound. In general terms, this means that the Offeror who is awarded a contract
should be able to keep utilization at or below its proposed levels and that it
will be able to contract for unit costs that average at or below the amounts
shown on its Capitation Rate Calculation Sheet. The Offeror may require
assistance from an actuary to develop some of the fundamental assumptions for
meeting the criteria defined above.
To facilitate the preparation of its capitation proposals, AHCCCSA will provide
each offeror with a Data Supplement Book. This book should not be used as the
sole source of information in making decisions concerning the capitation
proposal. Each offeror is solely responsible for research, preparation, and
documentation of its capitation proposal.
Offerors must submit their capitation proposals using the AHCCCSA computer disk
bid. Attachment F to this solicitation contains detailed instructions for using
the computer disk program.
Offeror must prepare and submit its capitation proposal assuming a $20,000
deductible level for regular reinsurance for all rate codes in all counties.
AHCCCSA will provide a table of PM/PM reinsurance adjustments to be made to
capitation rates for those contractors whose actual deductible level exceeds
$20,000. (See Section E, Para. 33 for discussion on reinsurance.)
III. Network Information/ Network Management
Network Information:
The Offeror shall have in place an adequate network of providers capable of
meeting contract requirements. Attachment B lists minimum network requirements
by service area. The Offeror shall provide in its proposal information
concerning its entire acute care provider network for all service areas whether
the proposal is for a continuing service area or an expansion of service areas.
Existing contractors may submit, on electronic media, their existing network.
Data formats must be in accordance with AHCCCS electronic specifications as
noted in AHCCCS Contracted Health Plan Technical Interface Guidelines. A copy
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<PAGE> 115
of these specifications is available in the Bidder's Library. For continuing
offerors, the second quarter provider affiliation tape, due 4/15/94, will be
used unless the offeror submits a more current tape with its proposal, due
6/1/94. New offerors must submit completed Letters of Intent from all providers
as evidence of its proposed network. Attachment E, Sample Letter of Intent, is
the only acceptable format for these letters. A continuing offeror seeking an
expansion of service area must also submit Letters of Intent from all providers
in its proposed new area. AHCCCSA may, at its option, verify any or all
submitted Letters of Intent by telephone or mail.
Offerors bidding on Maricopa and/or Pima counties must submit the appropriate
map (included in Attachment B) with PCP and Pharmacy locations clearly plotted.
Network Management:
Management of the provider network will be evaluated by reviewing Offeror's
policies and procedures related to:
a) Credentialling the provider network (particularly PCPs, OB/GYNs, and EPSDT
providers).
b) Communication with the provider network regarding contractual changes, new
requirements, routine issues, eligibility, etc.
c) Monitoring and control of the provider network's compliance with AHCCCSA
and Offeror's rules and policies.
d) Monitoring and planning for provider network capacity issues.
Offeror must submit detailed policies and procedures related to the above areas
with particular attention to how Offeror plans to manage the network in Contract
Year (CY) 95.
IV. Program Operations
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<PAGE> 116
Evaluation of Offeror's program will include an examination of the
responsiveness of Offeror's proposal to the requirements of this RFP and all
AHCCCSA policies. Offeror must include detailed descriptions of how it plans to
meet these requirements in CY 95, particularly in the areas of:
a) Executive management and staff
b) Medical direction (role of Medical Director)
c) Member services
d) Provider services
e) Quality management/ Utilization Management
f) Maternal child health/ EPSDT/ Family Planning
g) Grievance and appeals
h) Behavioral health
Offeror may provide policies and procedures and/or detailed narrative
descriptions. Examples include, but are not limited to: member communication,
EPSDT tracking, maternal compliance, concurrent review, medical policies.
Offerors must provide a copy of their written grievance process for both members
and providers which defines members' and providers' grievance rights regarding
any perceived adverse action. See Section D, Paragraph 25 for grievance policy
standards.
Additionally, Offeror must submit a QM/UM plan which details plans for
compliance with the AHCCCSA Quality Management/Utilization Management Plan
incorporated herein by reference and which may be found in the Bidders' Library.
V. Organization
Organization refers to the Offeror's ability to perform the administrative tasks
necessary to support the requirements identified throughout this RFP. Offeror
must ensure that the financial planning statement, located in Section G of this
solicitation, is thoroughly completed. For a continuing offeror, the Year XII
Operational and Financial Reviews will be used as part of the evaluation of the
new proposal submitted for CY 95. For a new offeror, a New
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<PAGE> 117
Offeror Review may be conducted and similarly used to evaluate the new offeror's
prospective ability to meet the organizational requirements.
Offerors must also submit model subcontracts for each provider type. These
models must include all required provisions found in Attachment A of this
solicitation and all provisions agreed to between the Offeror and its
subcontractors. If a continuing offeror has not made any changes to its model
subcontract, the continuing offeror may submit a statement that certifies this
fact in lieu of submitting model subcontract forms.
Notwithstanding the above, AHCCCSA will require specific review of certain
contracts. Offerors shall submit the following type contracts with their
response to this solicitation to AHCCCSA: Full or partial risk contracts;
contracts that require physician withholds; dental contracts (regardless of
reimbursement method); contracts with Federally Qualified Health Centers
(FQHCs); contracts with its owner hospitals and related physician groups;
contracts with any related party and contracts with management companies, to
include MIS or data management firms and all other management firms.
If Offeror has retained the services of any management services organization,
that organization is required to complete and return as part of Offeror's
proposal the Management Services Subcontractor Statement, included herein as
Attachment D. This attachment may be duplicated in the event more than one such
organization has been retained.
Offeror is also to attach to its proposal a copy of the management services
contract(s) and all amendments, if any, covering CY 95.
2. PROSPECTIVE OFFERORS' INQUIRIES
Any questions related to this solicitation must be directed to Michael Veit,
AHCCCSA Contracting Officer. Offerors shall not contact or ask questions of
other AHCCCSA staff unless authorized by the Contracting Officer. Questions may
either be submitted in writing prior to the Prospective Offerors' Conference
(submit by 4:45 p.m. on March 21, 1994) or at the Prospective
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Offerors' Conference. Questions submitted by the deadline above will be
addressed at the Prospective Offerors' Conference. Questions submitted in
advance must be typed, enclosed in a sealed envelope and addressed to the above
contracting officer. The envelope must be marked "RFP Questions- Acute Care".
Questions that cannot be answered at the Prospective Offerors' Conference will
be answered within a reasonable period of time by letter. Any correspondence
pertaining to this solicitation should refer to the appropriate RFP, page and
paragraph numbers.
3. PROSPECTIVE OFFERORS' CONFERENCE
A Prospective Offerors' Conference will be held on March 30, 1994 from 8:30 a.m.
until 3:00 p.m., at the 701 E. Jefferson, 3rd Floor Conference Room. The purpose
of this conference will be to clarify the contents of this solicitation in order
to avoid any misunderstandings regarding AHCCCSA requirements and offer
technical assistance. Any doubt as to the contents and requirements of this
solicitation or any apparent omission or discrepancy should be presented at this
conference. AHCCCSA will then determine the appropriate action necessary and
issue a written amendment to the solicitation, if any.
The tentative agenda of the March 30 Prospective Offerors' Conference is as
follows:
8:30 - 10:00 Questions and answers
10:00 - 10:30 Discussion on proposed waiver and mental health
10:30 - 12:00 Overview of Data Book
12:00 - 1:15 Lunch Break
1:15 - 3:00 Overview of Reinsurance
4. LATE PROPOSALS
Late proposals will not be considered.
5. WITHDRAWAL OF PROPOSAL
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At any time prior to the proposal due date and time, Offeror (or designated
representative) may withdraw its proposal. Telegraphic or mailgram withdrawals
will not be considered.
6. AMENDMENTS TO RFP
Amendments may be issued subsequent to the issue date of this solicitation.
Receipt of solicitation amendments must be acknowledged by signing and returning
the signature page of the amendment to AHCCCSA.
7. BEST AND FINAL OFFERS (BFO)
The purpose of a BFO round is to allow offerors an opportunity to resubmit bids
for rate codes not previously accepted by AHCCCSA. If it is considered in the
best interest of the State, AHCCCSA will issue a written request to all offerors
for a best and final offer. This request will notify them of the date, time and
place for the submission of their offers. In addition, AHCCCSA will disclose to
each offeror which of its bid rates are acceptable (within or below actuarial
rate range), and which are not acceptable (above the actuarial rate range). All
offerors whose final bid rates fall below the bottom of the actuarial rate range
will have their rates increased to the bottom of that rate range after the final
BFO. If an offeror does not submit a notice of withdrawal or a best and final
offer, its immediate previous offer will be considered its best and final offer.
All BFOs must be submitted on the computer disk provided by AHCCCSA. AHCCCSA
will limit the number of BFO rounds if it is in the best interest of the State.
Offerors will be permitted, within the restrictions and limitations defined
below, to adjust upward a capitation rate for a rate code that was previously
accepted to offset the reduction of a capitation rate in another rate code in
the first BFO round only. These restrictions and limitations include, but are
not limited to:
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a. An offeror will be allowed to adjust upward a previously accepted rate code
bid only during the first BFO round;
b. The weighted amount of BFO increase cannot exceed the weighted amount of
BFO reduction. AHCCCSA will furnish the Offeror the enrollment percentages,
by rate code, by county, to be used in determining the weighted amount.
Should the weighted amount of the adjustment exceed the weighted amount of
the BFO reduction, AHCCCSA shall reject the first BFO and the adjustment
(costing the Offeror the loss of the first BFO round in that county). Since
a rate code can only be adjusted during the first BFO round, the Offeror
will lose the opportunity to make an upward capitation adjustment to
previously accepted rate code bids in that county;
Forexample, assume that MN/MI without Medicare was the rate code where a
BFO was needed and the offeror reduced this rate by $10.00 PMPM. Also
assume the MN/MI without Medicare rate code accounted for 9% of the members
in the county.
Weighted Average Capitation Reduction - 9% X $10.00 = $.90
Assume the rate code adjusted upward was AFDC and this rate code was
increased by $2.00 PMPM. Also assume this rate code accounted for 50% of
the members in the county.
Weighted Average Capitation Increase - 50% X $2.00 = $1.00
Therefore, the BFO would be rejected because the weighted amount of the BFO
adjustment exceeded the weighted amount of the BFO reduction.
c. If an adjustment during the initial BFO round causes the Offeror to exceed
the upper range of any rate code, AHCCCSA will reject the adjustment and
return the (adjusted) rate code to the initial capitation rate bid by the
Offeror. Since a previously accepted rate code bid can only be adjusted
during the first BFO round, the Offeror will lose the opportunity to make
an upward capitation adjustment for this rate code.
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d. AHCCCSA reserves the sole right to accept or reject any adjustment. The
Offeror by submitting an adjustment to a rate code is requesting
approval by AHCCCSA; such approval shall not be automatic.
Capitation Rates Offered after the BFOs
As stated above, AHCCCSA may limit the number of BFO rounds. After the final BFO
round is complete, provided it is in the best interest of the state, AHCCCSA
will cease issuing BFO requests. At this point, should the Offeror have a rate
code(s) without an accepted capitation rate, AHCCCSA shall offer a capitation
rate to the Offeror. The capitation rate offered will be somewhere in the bottom
half of the rate range (specific placement to be determined by AHCCCSA and its
actuaries). Note that all rates offered in this manner shall be identical for
all offerors in the same county and rate code.
8. AWARD OF CONTRACT
Notwithstanding any other provision of this solicitation, AHCCCSA expressly
reserves the right to:
1) Waive any immaterial mistake or informality;
2) Reject any or all proposals, or portions thereof; and/or
3) Reissue a Request for Proposals
A response to this Request for Proposals is an offer to contract with AHCCCSA
based upon the terms, conditions, scope of work and specifications of the RFP.
Proposals do not become contracts unless and until they are accepted by the
contracting officer. A contract is formed when the AHCCCSA Contracting Officer
provides written notice of award(s) to the successful offeror(s). The contract
has its inception in the award document, eliminating a formal signing of a
separate contract. For that reason, all of the terms and conditions of the
contract are contained in this solicitation, solicitation amendments and
subsequent contract modifications, if any, signed by the contracting officer.
AHCCCSA may also, at its option, modify any requirements described herein. All
offerors will be promptly notified of award.
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AHCCCSA reserves the right to specify and/or modify the number of contracts to
be awarded in any service area. AHCCCSA anticipates awarding contracts as
follows:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------
County Number of Contracts
=====================================================================
<S> <C>
Maricopa Maximum of 10
- - ---------------------------------------------------------------------
Pima Maximum of 5
- - ---------------------------------------------------------------------
All Others Maximum of 2 each
- - ---------------------------------------------------------------------
</TABLE>
An existing contractor in Maricopa or Pima county who is not awarded a new
contract may, at AHCCCSA's option, elect to have its enrollment capped. If
AHCCCSA approves such an enrollment cap, the contractor would continue to serve
its existing members but receive no new ones. The enrollment cap will not be
lifted during the term of this contract unless it is determined to be in the
best interests of the State.
9. WHOLE-COUNTY PROPOSALS
AHCCCSA has determined that the provision of covered services to eligible
populations in the entire geographic area of each county will reduce costs and
stabilize risk sharing. AHCCCSA encourages offerors to submit proposals
providing the full range of covered services in the above counties and to
develop their proposals on a county-wide basis. AHCCCSA shall give full-county
proposals preference during the evaluation process.
For Maricopa and Pima counties offerors must, at a minimum, bid on the entire
Metropolitan Phoenix and/or Metropolitan Tucson areas.
10. CROSS-OVER AREAS
Attachment B contains cross-over areas recognized by AHCCCSA. The Offeror may
bid to include a geographical area outside the county (cross-over area). As a
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general rule, the cross-over area should be within twenty miles of the bid
county.
11. RFP MILESTONE DATES
The following is the schedule of events regarding the solicitation process:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------
Activity Date(s)
====================================================================================
<S> <C>
PMMIS Technical Interface Meeting March 11, 1994
- - ------------------------------------------------------------------------------------
Technical Assistance Questions Due March 21, 1994
- - ------------------------------------------------------------------------------------
Prospective Offerors Conference and Technical Assistance Session March 30, 1994
- - ------------------------------------------------------------------------------------
RFP Amendment Issued, if necessary April 15, 1994
- - ------------------------------------------------------------------------------------
Proposals Due June 1, 1994
- - ------------------------------------------------------------------------------------
Contracts Awarded on or about July 11, 1994
- - ------------------------------------------------------------------------------------
</TABLE>
Below is the tentative schedule for the first two BFO rounds, if necessary:
<TABLE>
<CAPTION>
Issue Date Due Date
---------- --------
<S> <C> <C>
BFO Round #1 June 3, 1994 June 10, 1994
BFO Round #2 June 20, 1994 June 24, 1994
</TABLE>
12. AHCCCSA BIDDERS' LIBRARY
The Bidders' Library contains critical reference material on AHCCCS policies and
performance requirements. References are made throughout this solicitation to
material in the Bidders' Library and offerors are responsible for the contents
of such referenced material as if they were printed in full herein. All such
material is incorporated into the contract by reference.
The Bidders' Library is located at 801 E. Jefferson, Phoenix, AZ. Please contact
Michael Veit at 254-5522 ext. 1100 for further information and appointment
times.
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13. ELECTRONIC DATA INTERCHANGE (EDI)
Offeror shall attach a one-page description of its plan to implement health
care-related ANSI X-12 EDI transactions in accordance with Section D, Paragraph
45.
14. LEGISLATIVE ISSUES
The Arizona Legislature is currently considering several bills which may have an
impact on AHCCCSA and the Contractor. AHCCCSA reserves the right to incorporate
additional services and/or programs prior to the award of this contract (through
RFP amendment) or subsequent to the awarding of this contract (through contract
amendment or a separate RFP). Legislative bills include:
a. A proposal to transfer responsibility for all behavioral health services
for both Title XIX and non-Title XIX eligible persons (including persons
who are not eligible for AHCCCS) to AHCCCSA. Behavioral health services
will be available to Title XIX eligible adults age 21 and older in the
acute care program on October 1, 1995.
b. A proposal to streamline Title XIX acute care eligibility by basing it on
100% of the federal poverty level and a simplified resource test; to allow
elderly or physically disabled persons who are dually eligible for both
Medicare and Medicaid services the choice to receive all Medicare and
Medicaid services through one of the AHCCCS Health Plans; and to implement
a managed care demonstration program in one of the three Indian Health
Service areas.
c. An omnibus bill which includes the following provisions that impact the
acute care program:
- repeals the mandatory coverage of personal care services for acute
care only originally scheduled to become effective October 1, 1994;
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- provides AHCCCS members and Contractor peer review committees with
legal protections similar to other health care entities and hospital
quality assurance review committees;
- removes the requirement for prior authorization of ambulance
transportation in response to 911 calls
d. A proposal to extend coverage for family planning services only for
S.O.B.R.A. eligible women for two years after they lose eligibility.
Vaccine For Children (VFC) Program
Federal legislation passed in 1993 (OBRA-93) amended Title XIX of the Social
Security Act and created the Vaccine For Children (VFC) program which takes
effect October 1, 1994. Through this program the federal government will
purchase, and make available to states free of charge, vaccines for children
under age 19 who are: Title XIX eligible or Native American; not insured or
insured under a policy that does not cover immunizations (only if the vaccine is
provided by a FQHC). Any provider licensed by the State to administer
immunizations will be able to register with the State as a "VFC provider" and
receive free vaccines. State program dollars to purchase vaccines will not be
necessary since vaccines will be provided by the federal government.
While AHCCCS is in the process of planning for implementation of the VFC
program, many questions are still unanswered. HCFA has not provided any guidance
on what the program requirements will be. Therefore, the impact of the VFC
program has not been included in this RFP nor should the program be taken into
account by the Offeror when submitting the RFP response. RFP or contract
amendments to address the VFC program will be executed once the requirements are
finalized.
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SUBMISSION REQUIREMENTS FOR OFFERORS
CHECK LIST
(NOTE: In the second column, the letter indicates the Section and the number
indicates the paragraph within that Section.)
<TABLE>
<CAPTION>
<S> <C>
Requirement Described in:
- - ----------- -------------
GENERAL MATTERS
1. RFP page 1, Section II completed A. II
2. Submission Requirements for Offerors-Checklist --
3. Affidavit of Non-Coercion Attachment E.
NETWORK INFORMATION/NETWORK MANAGEMENT
1. Network Listing - (electronic media and/or letters of intent) H.1
2. Network Management - Policies and Procedures H.1
3. Network Maps Attachment B
4. Geographic Area Capacity Request (if applic.) G.9
CAPITATION
1. Capitation Rate Proposal B.2
2. Capitation Rate Proposal (computer disk) B.2
3. Family Planning Services Election B.4
4. Service Area Minimum Standards Attachment B
PROGRAM OPERATIONS
1. Program Policies and Procedures H.1
------
2. Quality Management/Utilization Management Plan - Section H H.1
------
3. Grievance Policy H.1
------
ORGANIZATION
1. Staff/functional organizational chart G.5
------
2. Overall organizational chart G.5
------
3. List of licenses and certifications G.5
------
4. Resumes for all key personnel G.11
------
5. Description of organizational entity G.6
------
6. RBUCs/IBNRs methods G.6
------
7. Claims Processing Systems G.6
------
8. Financial Projections G.6
------
9. Section G of Solicitation (Representations, certifications
------ and other statements of offerors) G.
10. Model subcontracts H.1
11. Subcontracts identified in section H.1 H.1
12. EDI implementation plan H.13
13. Attachment D - Management Services Subcontractor Statement Attachment D
</TABLE>
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SECTION I - EVALUATION FACTORS AND SELECTION PROCESS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH # SUBJECT PAGE
- - ----------- ------- ----
<S> <C>
1. Provider network..................................................................................... 111
2. Capitation........................................................................................... 112
3. Program.............................................................................................. 112
4. Organization......................................................................................... 113
</TABLE>
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SECTION I - EVALUATION FACTORS AND SELECTION PROCESS
AHCCCSA has established a scoring methodology which is designed to evaluate
fairly an Offeror's ability to provide cost-effective, high-quality contract
services in a managed care setting. The following factors, listed in descending
order of importance, will be evaluated:
1. Provider Network
2. Capitation
3. Program
4. Organization
Capitation and provider network will be scored by county. Organization and
program will be scored statewide, not specific to any county. The scores
received for each of the four components will be weighted together to derive a
final score for an Offeror, by county. Contracts will be awarded to qualified
Offerors whose proposals are deemed to be most advantageous to the State in
accordance with Section H, Paragraph 8, Award of Contracts.
AHCCCSA will consider its experience with continuing offerors as a factor in
evaluating their proposals in the areas of provider network, program and
organization. The results of the Year XII Operational and Financial Reviews
performed by AHCCCSA staff will be evaluated and scored. AHCCCSA may also
conduct New Offeror Reviews.
Full-county proposals shall be given preference during the evaluation process
and offerors who submit capacity limit requests (see Section G, Paragraph 9)
shall do so at the risk of having their proposals rejected in the affected
counties.
AHCCCSA reserves the right to waive immaterial defects or omissions in this
solicitation or submitted proposals.
1. PROVIDER NETWORK
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The provider network will be evaluated and scored with reference to the
Offeror's network development and network management. Network development is
defined as the process of developing contractual arrangements with a sufficient
number of providers capable of delivering high-quality covered contract services
to AHCCCS members within a given service area in accordance with AHCCCSA
standards (e.g., appointment times). AHCCCSA will use the Health Plan
Affiliation Magnetic Tape Submission and/or completed letters of intent to
evaluate and score network development. The Offeror's network will be evaluated
by service and by site in each county in which the Offeror bids. The Offeror
should note that Attachment B of this solicitation identifies minimum standards
for an Offeror's network.
Network management is defined as the process by which the Offeror certifies,
monitors, evaluates and communicates with its network. AHCCCSA will evaluate and
score the Offeror's submitted policies and procedures relative to the following
areas:
a. Communication with provider network
b. Monitoring and control of the provider network's compliance with AHCCCSA
and Offeror's policies
c. Monitoring and planning for network capacity issues
2. CAPITATION
The Offeror will submit initial capitation bids by rate code grouping within a
county. These initial bids will be evaluated and scored. The lowest bid for a
specific county and rate code grouping will receive the maximum allowable
points. If a bid is below the actuarial rate range the bid will be evaluated as
if it is at the bottom of the actuarial rate range. No additional points will be
given for bids below the actuarial rate range. Conversely, the highest bid
(within or above the actuarial rate range) will receive the least number of
points.
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The final bids will be evaluated and scored using the same methodology as was
used to score the initial bids. The initial and final bids will receive equal
weighting for evaluation and scoring.
3. PROGRAM
AHCCCSA will evaluate the Offeror's responsiveness to the requirements of this
solicitation and AHCCCSA policies. In particular, the Offeror's responses to the
following will be evaluated:
a. Executive management and staff
b. Medical direction (role of Medical Director)
c. Member services
d. Provider services
e. Quality management
f. Maternal child health/ EPSDT/ Family Planning
g. Grievance and appeals
h. Behavioral health
i. Other areas
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4. ORGANIZATION
Organization refers to the Offeror's prospective ability to perform the
administrative tasks necessary to support the requirements identified in this
solicitation. The completed financial planning statement, located in Section G
of this solicitation, will be evaluated and scored. The Financial Viability
Criteria, defined in Section D, Paragraph 15, will also be used in evaluating
the Offeror's proposal.
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1 ATTACHMENT A - AHCCCSA APPROVED SUBCONTRACT PROVISIONS
1. EVALUATION OF QUALITY, APPROPRIATENESS, OR TIMELINESS OF SERVICES
The Arizona Health Care Cost Containment System Administration ("AHCCCSA") or
the U.S. Department of Health and Human Services may evaluate, through
inspection or other means, the quality, appropriateness or timeliness of
services performed by the Subcontractor under this subcontract.
2. RECORDS AND REPORTS
The Subcontractor shall maintain all forms, records, reports, working papers
used in the preparation of reports, files, correspondence, financial statements,
records relating to the quality of care, medical records, prescription files,
statistical information and other records specified by AHCCCSA, for purposes of
audit and program management. The Subcontractor shall comply with all
specifications for record-keeping established by AHCCCSA. All books and records
shall be maintained to the extent and in such detail as will properly reflect
each service provided and all net costs, direct and indirect, of labor,
materials, equipment, supplies and services, and other costs and expenses of
whatever nature for which payment is made by the Contractor to the
Subcontractor. Such material shall be subject to inspection and copying by the
State, AHCCCSA and the U.S. Department of Health and Human Services during
normal business hours at the place of business of the person or organization
maintaining the records.
The Subcontractor agrees to make available at the office of the Subcontractor at
all reasonable times during the periods set forth below any of its records for
inspection, audit or reproduction by any authorized representative of the State
or federal government.
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The Subcontractor shall preserve and make available all records for a period of
five years from the date of final payment under this subcontract except as
provided in paragraphs (1) and (2) below.
(1) If this subcontract is completely or partially terminated, the records
relating to the work terminated shall be preserved and made available
for a period of five years from the date of any such termination.
(2) If disputes, litigations or the settlement of claims arising out of the
performance of this subcontract, or costs and expenses of this
subcontract as to which exception has been taken by the State are not
disposed of within five years from the date of final payment under this
contract, the records shall be retained by the Subcontractor until such
disputes, litigations, claims or exceptions have been disposed of.
The Subcontractor shall provide all reports requested by AHCCCSA, and all
information from its records relating to the performance of this Subcontract
which AHCCCSA may reasonably require. The Subcontractor reporting requirements
hereunder may include but are not limited to timely and detailed utilization
statistics, information and reports. The Subcontractor shall certify to its
Contractor that it has not engaged in conduct prohibited by Section 1128B of the
Social Security Act (42 U.S.C. 1320a-7b).
3. LIMITATIONS ON BILLING AND COLLECTION PRACTICES
The Subcontractor shall not bill or attempt to collect from any AHCCCS member
for providing any AHCCCS covered services except for co-payments permitted by
AHCCCS Rule R9-22-702.
4. ASSIGNMENT OF RIGHTS AND RESPONSIBILITIES
No payment due the Subcontractor under this Subcontract may be assigned without
the prior approval of AHCCCSA. No assignment of the duties of this Subcontract
shall be valid unless prior written approval is received from AHCCCSA.
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5. AHCCCSA APPROVAL OF SUBCONTRACTS, AMENDMENTS OR TERMINATIONS
This Subcontract is subject to prior approval by AHCCCSA. Subcontractor shall
notify AHCCCSA in the event of any prospective amendment or termination during
the term hereof. Any such amendment or termination is subject to the prior
approval by AHCCCSA. Approval of the Subcontract may be rescinded by the
Director of AHCCCSA for violation of federal or state laws or rules.
6. WARRANTY OF SERVICES
The Subcontractor, by execution of this Subcontract, warrants that it has the
ability, authority, skill, expertise and capacity to perform the services
specified hereunder in connection with the AHCCCS Program.
(Rev. 12/23/94)
7. SUBJECTION OF SUBCONTRACT
The terms of this Subcontract shall be subject to the applicable material terms
and conditions of the contract existing between Contractor and AHCCCSA for
provision of AHCCCS services.
8. COOPERATION OF SUBCONTRACTOR
The Subcontractor specifically acknowledges that AHCCCSA may undertake or award
other contracts for additional or related work to the work performed by the
Subcontractor, and that the Subcontractor shall fully cooperate with such other
Contractors and Subcontractors and State employees, and carefully fit its own
work to such other Contractors' or Subcontractors' work. The Subcontractor shall
not commit or permit any act which will interfere with the performance of work
by any other Contractor, or Subcontractor or by state employees.
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9. INDEMNIFICATION BY SUBCONTRACTOR
The Subcontractor agrees to hold harmless the State, all State officers and
employees, AHCCCSA and employees of AHCCCSA and all AHCCCS members in the event
of nonpayment by the Contractor to the Subcontractor. The Subcontractor shall
further indemnify and hold harmless the State and AHCCCSA, and their agents,
officers and employees against all injuries, deaths, losses, damages, claims,
suits, liabilities, judgments, costs and expenses which may in any manner accrue
against the State or AHCCCSA, or their agents, officers or employees, through
the intentional conduct, negligence or omission of the Subcontractor, its
agents, officers, employees or Contractors.
10. MAINTENANCE OF LICENSING TO DO BUSINESS AND PROVIDE SERVICES
The Subcontractor shall obtain and maintain all licenses, permits and authority
necessary to do business and render services under this Subcontract, and, if
applicable, shall comply with all laws regarding safety, unemployment insurance,
disability insurance and worker's compensation.
11. COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS
The Subcontractor shall comply with all federal, state and local laws, rules,
regulations, standards and executive orders governing performance of duties
under this subcontract, without limitation to those designated within this
Subcontract.
12. COMPLIANCE WITH TITLE XIX AND A.R.S. 36-2901, ET SEQ.
The Subcontractor shall comply with provisions of federal laws and regulations
governing the Title XIX Program, except for those requirements waived for the
State by the federal government. The Subcontractor shall comply with the
provisions of ARS Section36-2901 et.seq., governing the Arizona Health Care Cost
Containment System and with all applicable rules promulgated by AHCCCSA.
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13. SEVERABILITY
If any provision of these standard subcontract terms and conditions is held
invalid or unenforceable, the remaining provisions shall continue valid and
enforceable to the full extent permitted by law.
14. VOIDABILITY OF SUBCONTRACT
This subcontract is voidable and subject to immediate termination by AHCCCSA
upon the Subcontractor becoming insolvent or filing proceedings in bankruptcy or
reorganization under the United States Code, or upon assignment or delegation of
the Subcontract without AHCCCSA's prior written approval.
15. CONFIDENTIALITY REQUIREMENT
Confidential information shall be safeguarded pursuant to 42 CFR Part 431,
Subpart F, ARS SectionSection36-107, 36-2903, 41-1959 and 46-135, and AHCCCS
Rule R9-22-512.
16. GRIEVANCE PROCEDURES
Any grievances filed by the subcontractor shall be adjudicated in accordance
with AHCCCS Acute Care Rules, Article 8.
17. TERMINATION OF SUBCONTRACT
AHCCCSA may, by written notice to the Subcontractor, terminate this subcontract
if it is found, after notice and hearing by the State, that gratuities in the
form of entertainment, gifts, or otherwise were offered or given by the
Subcontractor, or any agent or representative of the Subcontractor, to any
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officer or employee of the State with a view towards securing a contract or
securing favorable treatment with respect to the awarding, amending or making of
any determinations with respect to the performing of such Subcontract; provided,
that the existence of the facts upon which the State makes such findings shall
be in issue and may be reviewed in any competent court. If the subcontract is
terminated under this section, unless the Contractor is a governmental agency,
instrumentality or subdivision thereof, AHCCCSA shall be entitled to a penalty
in addition to any other damages to which it may be entitled by law and to
exemplary damages in the amount of three times the cost incurred by the
Subcontractor in providing any such gratuities to any such officer or employee.
18. PRIOR AUTHORIZATION/UTILIZATION REVIEW
Contractor and Subcontractor shall develop, maintain and use a system for Prior
Authorization and Utilization Review which is consistent with AHCCCS Rules and
the Contractor's policies.
19. NON-DISCRIMINATION REQUIREMENTS
The Subcontractor shall comply with Title VII of the Civil Rights Act of 1964,
as amended, the Age Discrimination In Employment Act, State Executive Order 75-5
and Federal Executive Order 11246 which mandates that all persons, regardless of
race, color, religion, sex, age, national origin or political affiliation, shall
have equal access to employment opportunities. If applicable, the Subcontractor
shall comply with Section 503 of the Rehabilitation Act of 1973, as amended
which prohibits discrimination in the employment or advancement of the
employment of qualified persons because of physical or mental handicap. If
applicable, the Subcontractor shall comply with Title VI of the Civil Rights Act
of 1964, which prohibits the denial of benefits of or participation in covered
services on the basis of race, color or national origin. If applicable, the
Subcontractor shall comply with the requirement of Section 504 of the
Rehabilitation Act of 1973, as amended which
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prohibits discrimination on the basis of handicap in delivering covered
services.
20. COMPLIANCE WITH AHCCCSA RULES RELATING TO AUDIT AND INSPECTION
The Subcontractor shall comply with AHCCCSA Rule R9-22-403 relating to the audit
of the Subcontractor's records and the inspection of the Subcontractor's
facilities.
21. CERTIFICATION OF TRUTHFULNESS OF REPRESENTATION
By execution of this Subcontract, the Subcontractor and Contractor certify to
AHCCCSA that all representations set forth herein are true to the best of their
knowledge.
22. CONFLICT IN INTERPRETATION OF PROVISIONS
In the event of any conflict in interpretation between provisions of the
Subcontract and these AHCCCSA Standard Subcontract Terms and Conditions, these
AHCCCSA Standard Subcontract Terms and Conditions shall govern.
23. ADDITIONAL SUBCONTRACT CONTENT REQUIREMENTS
In addition to the above provisions, each Subcontract must contain the
following:
a. Full disclosure of the method and amount of compensation or other
consideration to be received by the Subcontractor.
b. Identification of the name and address of the Subcontractor.
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<PAGE> 139
c. Identification of the population, to include patient capacity, to be
covered by the Subcontractor.
d. The amount, duration and scope of medical services to be provided, or for
which compensation will be paid.
e. The term of the Subcontract.
f. The specific duties of the Subcontractor relating to determination of
third-party liability and coordination of benefits.
g. A description of the Subcontractor's patient medical record and cost record
keeping systems.
h. Participation requirements for subcontractors regarding the Quality
Management/Utilization Management programs.
i. A provision that the Subcontractor agrees to identify Medicare and other
third-party liability coverage and to seek such Medicare or third-party
liability payment before submitting claims to the Contractor.
24. REQUIREMENTS RELATING TO MERGER, REORGANIZATION, AND OWNERSHIP CHANGE
A merger, reorganization or change in ownership of a subcontractor that is
related or affiliated to the Contractor shall constitute a contract amendment
and shall require prior approval of AHCCCSA.
25. ENCOUNTER DATA REQUIREMENT
If Subcontractor does not bill Contractor for individual services, (e.g.,
Subcontractor is capitated), Subcontractor shall submit encounter data to the
Contractor in a form acceptable to AHCCCSA.
122
<PAGE> 140
26. LABORATORY SERVICES
The Clinical Laboratory Improvement Amendment (CLIA) of 1988 requires
laboratories and other facilities that test human specimens to obtain either a
CLIA Waiver or CLIA Certificate in order to obtain reimbursement from the
Medicare and Medicaid (AHCCCS) programs. In addition, they must meet all the
requirements of 42 CFR 493, Subpart A.
To comply with these requirements, AHCCCSA requires all clinical laboratories to
provide verification of CLIA Licensure or Certificate of Waiver during the
provider registration process. Failure to do so shall result in either a
termination of an active provider ID number or denial of initial registration.
These requirements apply to all clinical laboratories.
Pass-through billing or other similar activities with the intent of avoiding the
above requirements are prohibited. Contractor may not reimburse providers who do
not comply with the above requirements.
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS
INSTRUCTIONS:
Offerors shall have in place an adequate network of providers capable of meeting
contract requirements. The information that follows describes the service area
minimum network standards by county. Offerors may either bid for a full county
or by zip code, excluding Maricopa and Pima Counties. In Maricopa and Pima
Counties, the minimum bid is the metropolitan area of each county, as defined in
the maps included in this solicitation. AHCCCSA ENCOURAGES FULL COUNTY BIDS AS
DEFINED HEREIN. FULL COUNTY BIDS WILL BE GIVEN PREFERENCE IN THE EVALUATION
PROCESS.
Offerors may also bid cross-over areas. Cross-over areas result from patterns of
care whereby a member enrolled in one county "crosses over" into an adjoining
county to actually receive care. AHCCCSA has defined certain acceptable
cross-over areas. Offerors may also propose additional cross-over areas with
justification that supports the need for a cross-over. The most common
justification for a cross-over area relates to geographical accessibility of
care. In certain instances, a member must travel a much greater distance to
receive services within their assigned county if the member was not allowed to
cross-over into an adjoining county to receive services. Offerors may not bid
for just a cross-over; the bid must include at least one of the counties
included in the cross-over area. For purposes of capitation rate setting, the
rate awarded for the county will also be awarded for the cross-over area. There
shall be no rates specific to cross-over areas only. If an Offeror bids both
counties covering the cross-over area, the rate awarded in the cross-over area
shall be the higher of the rates awarded in the two counties included in the
cross-over area.
Split zip codes occur in some counties. Split zip codes are those zip codes
which physically reside in two different counties. Enrollment for members
residing in these zip codes is based upon county of residence. Offerors shall be
responsible for providing services to those members residing in the portion of
the zip code that lies in the county for which the Offeror has agreed to provide
services.
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<PAGE> 143
The Offeror should complete the forms that follow for each county the offeror
wishes to provide services. Detailed instructions follow.
1. Offeror must identify each county they will bid. Forms (entitled "Service
Area Minimum Standards - County : XXXX") have been provided for each
county. If an offeror is not bidding in a particular county, a line should
be drawn through the form to clearly indicate that the offeror is not
proposing to provide services in that particular county.
2. The Offeror must select either a full county bid or individual zip bids.
Please check one box only. A full county bid does not include cross-over
bids.
3. If the Offeror has selected a full county bid, the minimum services and
sites for a full county bid is described in the adjacent column. Offerors
must ensure that their submitted network information, as described in
Section H of this Solicitation, supports the minimum services and sites
described.
4. If the Offeror has selected an individual zip bid, each zip code for which
the offeror proposes to provide services must be checked off. Offerors
should use their judgement and include justification as to the minimum
services and sites required for the applicable zip codes in order to meet
the requirements of this Solicitation.
5. If the Offeror elects to provide services in a cross-over area(s), the
Offeror must check the box at the top of the cross-over column, for each
cross-over selected. The minimum standards for each cross-over area are in
addition to those minimum requirements for a full county bid. Offerors must
ensure that their submitted network information supports the minimum
services and sites described for the cross-over area.
6. Upon completion of the "Service Area Minimum Network Standards - County:
XXXX" forms, the Offeror should carefully review the capitation and network
proposals to ensure that there are no inconsistencies.
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<PAGE> 144
7. Offeror shall also plot their proposed network, using the maps provided in
this solicitation. This requirement applies only to metropolitan Phoenix
and Tucson. See specific instructions under "Mapping of Network".
8. Completed "Service Area Minimum Network Standards-County: XXXX" forms
should be inserted in Section B, with capitation rates, in the Offeror's
response to this Solicitation. Maps may be inserted as an attachment.
Additional zip codes not included on the attached forms should be inserted on an
attached page using the same format as AHCCCSA has provided. Offeror's selecting
full county bids shall be responsible for any zip codes omitted from these
listings and/or added by the U.S. Postal Office during the term of this
contract.
Other requirements
If outpatient specialty services (OB/GYN, family planning, if providing,
internal medicine, and pediatrics) are not included in the primary care provider
contract, at least one subcontract is required for each of these specialties in
the service sites specified. General surgeons must be available within 50 miles
of service site.
In Maricopa and Pima Counties, the Offeror must demonstrate the ability to
provide primary care provider and pharmacy services to members according to the
following standards:
Within boundary: distance no greater than 5 miles
Outside boundary: distance no greater than 10 miles
Boundaries are described on the metropolitan Phoenix and Tucson maps provided in
this solicitation.
Mapping of Network
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<PAGE> 145
The Offeror should use the maps provided with this Solicitation to plot their
proposed networks for Metropolitan Phoenix and Tucson. Only Primary Care
Provider and Pharmacy Services should be plotted.
Offerors should use color coded dots (one color for primary care provider
services and one color for pharmacy services). It is acceptable for the offeror
to place one dot in the zip code with a number encoded that indicates the number
of proposed subcontracts for primary care provider services within that zip
code. Similarly, the Offeror should place a different color dot in the
particular zip code with a number encoded which represents the number of
pharmacies proposed for that zip code area.
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<PAGE> 147
ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: APACHE
<TABLE>
<CAPTION>
CROSSOVER #1 - MEMBER RESIDENCE ZIP CROSSOVER #2 - MEMBER RESIDENCE ZIP
COUNTY ZIP CODES / / 85930 MCNARY / / 85940 VERNON / / 86502 CHAMBERS / / 86509 NAVAJO
================================================================================================================================
/ / FULL COUNTY BID MINIMUM SERVICES & SITES MINIMUM SERVICES AND SITES MINIMUM SERVICES AND SITES
/ / INDIVIDUAL ZIP BIDS FOR FULL COUNTY BID FOR CROSSOVER #1 FOR CROSSOVER #2
================================================================================================================================
<S> <C> <C> <C>
/ / 85920 1. HOSPITAL 1. HOSPITAL 1. HOSPITAL
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 85924 Springerville Show Low Show Low
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 85925
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 85927
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 85932 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 85936 St. Johns Show Low Holbrook
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 85938 Sanders
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 85943 Springerville/Eager
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86028
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86503
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86504 3. PHARMACY 3. PHARMACY 3. PHARMACY
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86505 St. Johns Show Low Holbrook
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86506 Springerville/Eager
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86507
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86508
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86511
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86512 4. AMBULANCE 4. AMBULANCE 4. AMBULANCE
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86514 St. Johns Show Low Holbrook
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86515 Springerville/Eager
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86535
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86538
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86540 5. DENTAL SERVICES 5. DENTAL SERVICES 5. DENTAL SERVICES
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86544 Springerville/Eager Show Low Holbrook
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86545 St. Johns
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86547
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86549
- - --------------------------------------------------------------------------------------------------------------------------------
/ / 86556
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: COCHISE
<TABLE>
<CAPTION>
COUNTY ZIP CODES
================================================================
/ / FULL COUNTY BID MINIMUM SERVICES & SITES
/ / INDIVIDUAL ZIP BIDS FOR FULL COUNTY BID
================================================================
<S> <C>
/ / 85602 1. HOSPITAL
- - ----------------------------------------------------------------
/ / 85603 Benson/Willcox
- - ----------------------------------------------------------------
/ / 85605 Douglas
- - ----------------------------------------------------------------
/ / 85606 Sierra Vista/Bisbee
- - ----------------------------------------------------------------
/ / 85607 2. PRIMARY CARE PROVIDER
- - ----------------------------------------------------------------
/ / 85608 Benson
- - ----------------------------------------------------------------
/ / 85609 Bisbee
- - ----------------------------------------------------------------
/ / 85610 Douglas
- - ----------------------------------------------------------------
/ / 85613 Sierra Vista
- - ----------------------------------------------------------------
/ / 85615 Willcox
- - ----------------------------------------------------------------
/ / 85616 3. PHARMACY
- - ----------------------------------------------------------------
/ / 85617 Benson
- - ----------------------------------------------------------------
/ / 85620 Bisbee
- - ----------------------------------------------------------------
/ / 85621 Douglas
- - ----------------------------------------------------------------
/ / 85625 Sierra Vista
- - ----------------------------------------------------------------
/ / 85626 Willcox
- - ----------------------------------------------------------------
/ / 85627 4. AMBULANCE
- - ----------------------------------------------------------------
/ / 85630 Benson
- - ----------------------------------------------------------------
/ / 85632 Bisbee
- - ----------------------------------------------------------------
/ / 85635 Douglas
- - ----------------------------------------------------------------
/ / 85636 Sierra Vista
- - ----------------------------------------------------------------
/ / 85638 Willcox
- - ----------------------------------------------------------------
/ / 85644 5. DENTAL SERVICES
- - ----------------------------------------------------------------
/ / 85655 Benson/Willcox
- - ----------------------------------------------------------------
/ / 85670 Bisbee
- - ----------------------------------------------------------------
/ / 85671 Douglas
- - ----------------------------------------------------------------
Sierra Vista
- - ----------------------------------------------------------------
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: COCONINO
<TABLE>
<CAPTION>
CROSSOVER #1 - MEMBER RESIDENCE ZIP CROSSOVER #2 - MEMBER RESIDENCE ZIP
COUNTY ZIP CODES / / 85931 FOREST LAKES / / 86035 LEUPP
==================================================================================================================================
/ / FULL COUNTY BID MINIMUM SERVICES & SITES MINIMUM SERVICES AND SITES MINIMUM SERVICES AND SITES
/ / INDIVIDUAL ZIP BIDS FOR FULL COUNTY BID FOR CROSSOVER #1 FOR CROSSOVER #2
==================================================================================================================================
<S> <C> <C> <C>
/ / 86001 1. HOSPITAL 1. HOSPITAL 1. HOSPITAL
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86002 Flagstaff Payson Winslow
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86003 Kanab, Utah
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86004 Page
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86009 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86011 Flagstaff Payson Winslow
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86012 Kanab, Utah
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86014 Page
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86015 Sedona
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86016 Williams
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86017 3. PHARMACY 3. PHARMACY 3. PHARMACY
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86018 Flagstaff Payson Winslow
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86020 Kanab, Utah
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86022 Page
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86023 Sedona
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86024 Williams
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86036 4. AMBULANCE 4. AMBULANCE 4. AMBULANCE
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86038 Flagstaff Payson Winslow
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86040 Kanab, Utah
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86044 Page
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86045 Williams
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86046 5. DENTAL SERVICES 5. DENTAL SERVICES 5. DENTAL SERVICES
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86052 Flagstaff Page Payson Winslow
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86053 Kanab, Utah Sedona
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86336 Williams
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86351
- - ----------------------------------------------------------------------------------------------------------------------------------
/ / 86435
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: GILA
<TABLE>
<CAPTION>
CROSSOVER #1 - MEMBER CROSSOVER #2 - MEMBER CROSSOVER #3 - MEMBER
COUNTY ZIP CODES RESIDENCE ZIP RESIDENCE ZIP RESIDENCE ZIP
/ / 85273 SUPERIOR / / 85235 HAYDEN / / 85931 FOREST LAKES
/ / 85292 WINKLEMAN
====================================================================================================================================
/ / FULL COUNTY BID MINIMUM SERVICES & SITES MINIMUM SERVICES AND SITES MINIMUM SERVICES AND SITES MINIMUM SERVICES AND
/ / INDIVIDUAL ZIP CODE BID FOR FULL COUNTY BID FOR CROSSOVER #1 FOR CROSSOVER #2 SITES FOR CROSSOVER #3
====================================================================================================================================
<S> <C> <C> <C> <C>
/ / 85501 1. HOSPITAL 1. HOSPITAL 1. HOSPITAL 1. HOSPITAL
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85502 Globe/Miami Claypool/Globe/Miami Claypool/Globe/Miami Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85532 Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85539
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85541
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85542 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85544 Claypool/Globe/Miami Claypool/Globe/Miami Kearny Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85545 Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85547
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85550
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85553 3. PHARMACY 3. PHARMACY 3. PHARMACY 3. PHARMACY
- - ------------------------------------------------------------------------------------------------------------------------------------
/ / 85554 Globe/Miami Claypool/Globe/Miami Kearny Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
Hayden/Winkleman
- - ------------------------------------------------------------------------------------------------------------------------------------
Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
4. AMBULANCE SERVICE 4. AMBULANCE 4. AMBULANCE 4. AMBULANCE
- - ------------------------------------------------------------------------------------------------------------------------------------
Claypool/Globe/Miami Claypool/Globe/Miami Kearny Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
5. DENTAL 5. DENTAL 5. DENTAL 5. DENTAL
- - ------------------------------------------------------------------------------------------------------------------------------------
Claypool/Globe/Miami Claypool/Globe/Miami Kearny Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
Payson
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: GRAHAM
<TABLE>
<CAPTION>
COUNTY ZIP CODES MINIMUM SERVICES & SITES
- - ---------------------------- FOR FULL COUNTY BID
/ / FULL COUNTY BID
/ / INDIVIDUAL ZIP BIDS
==============================================================
<S> <C>
/ / 85530 1. HOSPITAL
- - --------------------------------------------------------------
/ / 85531 Safford
- - --------------------------------------------------------------
/ / 85535
- - --------------------------------------------------------------
/ / 85536 2. PRIMARY CARE PROVIDER
- - --------------------------------------------------------------
/ / 85543 Safford
- - --------------------------------------------------------------
/ / 85546
- - --------------------------------------------------------------
/ / 85548 3. PHARMACY
- - --------------------------------------------------------------
/ / 85551 Safford
- - --------------------------------------------------------------
/ / 85552
- - --------------------------------------------------------------
/ / 85643 4. AMBULANCE
- - --------------------------------------------------------------
Safford
- - --------------------------------------------------------------
5. DENTAL SERVICES
- - --------------------------------------------------------------
Safford
- - --------------------------------------------------------------
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: GREENLEE
<TABLE>
<CAPTION>
COUNTY ZIP CODES MINIMUM SERVICES & SITES
- - ---------------------------- FOR FULL COUNTY BID
/ / FULL COUNTY BID
/ / INDIVIDUAL ZIP BIDS
=================================================================================
<S> <C>
/ / 85533 1. HOSPITAL
- - ---------------------------------------------------------------------------------
/ / 85534 Contract/Letter of Agreement with Hospital
within one hour's driving time from Morenci
- - ---------------------------------------------------------------------------------
/ / 85540
- - ---------------------------------------------------------------------------------
/ / 85922 2. PRIMARY CARE PROVIDER
- - ---------------------------------------------------------------------------------
Morenci
- - ---------------------------------------------------------------------------------
3. PHARMACY
- - ---------------------------------------------------------------------------------
Morenci/Clifton
- - ---------------------------------------------------------------------------------
4. AMBULANCE
- - ---------------------------------------------------------------------------------
Clifton
- - ---------------------------------------------------------------------------------
5. DENTAL SERVICES
- - ---------------------------------------------------------------------------------
Morenci
- - ---------------------------------------------------------------------------------
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: LA PAZ
<TABLE>
<CAPTION>
COUNTY ZIP CODES MINIMUM SERVICES & SITES
- - ---------------------------- FOR FULL COUNTY BID
/ / FULL COUNTY BID
/ / INDIVIDUAL ZIP BIDS
===========================================================
<S> <C>
/ / 85325 1. HOSPITAL
- - -----------------------------------------------------------
/ / 85328 Parker
- - -----------------------------------------------------------
/ / 85334
- - -----------------------------------------------------------
/ / 85344 2. PRIMARY CARE PROVIDER
- - -----------------------------------------------------------
/ / 85346 Parker
- - -----------------------------------------------------------
/ / 85348
- - -----------------------------------------------------------
/ / 85357 3. PHARMACY
- - -----------------------------------------------------------
/ / 85359 Parker
- - -----------------------------------------------------------
/ / 85371
- - -----------------------------------------------------------
4. AMBULANCE
- - -----------------------------------------------------------
Parker
- - -----------------------------------------------------------
5. DENTAL SERVICES
- - -----------------------------------------------------------
Parker
- - -----------------------------------------------------------
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: MARICOPA
<TABLE>
<CAPTION>
CROSSOVER #1 - MEMBER CROSSOVER #2 - MEMBER RESIDENCE ZIP
RESIDENCE ZIP
COUNTY ZIP CODES / / 85217, 85219, 85220 / / 85324 BLACK CANYON
APACHE JUNCTION CITY/ROCK SPRINGS
=================================================================================================================
/ /FULL COUNTY BID MINIMUM SERVICES & SITES MINIMUM SERVICES AND SITES MINIMUM SERVICES AND
/ /METROPOLITAN AREA BID FOR FULL COUNTY BID FOR FULL CROSSOVER #1 SITES FOR CROSSOVER #2
=================================================================================================================
1. HOSPITAL 1. HOSPITAL 1. HOSPITAL
- - -----------------------------------------------------------------------------------------------------------------
Phoenix Metro Area Mesa Phoenix
- - -----------------------------------------------------------------------------------------------------------------
Wickenburg
- - -----------------------------------------------------------------------------------------------------------------
2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - -----------------------------------------------------------------------------------------------------------------
El Mirage Glendale Mesa Phoenix
- - -----------------------------------------------------------------------------------------------------------------
Chandler/Gilbert Mesa
- - -----------------------------------------------------------------------------------------------------------------
Gila Bend Phoenix
- - -----------------------------------------------------------------------------------------------------------------
Guadalupe Tempe
- - -----------------------------------------------------------------------------------------------------------------
Peoria Wickenburg
- - -----------------------------------------------------------------------------------------------------------------
Scottsdale Buckeye
- - -----------------------------------------------------------------------------------------------------------------
Apache Junction
- - -----------------------------------------------------------------------------------------------------------------
Avondale/Laveen/Tolleson
- - -----------------------------------------------------------------------------------------------------------------
3. PHARMACY 3. PHARMACY 3. PHARMACY
- - -----------------------------------------------------------------------------------------------------------------
Buckeye El Mirage Mesa Phoenix
- - -----------------------------------------------------------------------------------------------------------------
Chandler/Gilbert Glendale
- - -----------------------------------------------------------------------------------------------------------------
Peoria Mesa
- - -----------------------------------------------------------------------------------------------------------------
Scottsdale Phoenix
- - -----------------------------------------------------------------------------------------------------------------
Wickenburg Tempe
- - -----------------------------------------------------------------------------------------------------------------
Apache Junction
- - -----------------------------------------------------------------------------------------------------------------
Avondale/Laveen/Tolleson
- - -----------------------------------------------------------------------------------------------------------------
South Phoenix
- - -----------------------------------------------------------------------------------------------------------------
4. AMBULANCE SERVICE 4. AMBULANCE 4. AMBULANCE
- - -----------------------------------------------------------------------------------------------------------------
Phoenix Metro Area Mesa Phoenix
- - -----------------------------------------------------------------------------------------------------------------
5. DENTAL 5. DENTAL 5. DENTAL
- - -----------------------------------------------------------------------------------------------------------------
Buckeye Tempe Mesa Phoenix
- - -----------------------------------------------------------------------------------------------------------------
Chandler/Gilbert Glendale
- - -----------------------------------------------------------------------------------------------------------------
El Mirage Peoria
- - -----------------------------------------------------------------------------------------------------------------
Mesa Scottsdale
- - -----------------------------------------------------------------------------------------------------------------
Phoenix
- - -----------------------------------------------------------------------------------------------------------------
<CAPTION>
CROSSOVER #3 - MEMBER RESIDENCE ZIP
/ / 85332
CONGRESS/CONTELLATION/OCTAVE/STANTON/YARNELL/CASTLE
HOT SPRINGS
===================================================
MINIMUM SERVICES AND SITES
FOR CROSSOVER #3
===================================================
<S> <C>
1. HOSPITAL
- - ----------------------------------------------------
Phoenix/Wickenburg
- - ----------------------------------------------------
- - ----------------------------------------------------
2. PRIMARY CARE PROVIDER
- - ----------------------------------------------------
Phoenix/Wickenburg
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
3. PHARMACY
- - ----------------------------------------------------
Phoenix/Wickenburg
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
4. AMBULANCE
- - ----------------------------------------------------
Phoenix/Wickenburg
- - ----------------------------------------------------
5. DENTAL
- - ----------------------------------------------------
Phoenix/Wickenburg
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
- - ----------------------------------------------------
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: MOHAVE
<TABLE>
<CAPTION>
======================================================================================================================
COUNTY ZIP CODES CROSSOVER - MEMBER RESIDENCE ZIP
[ ] #1 86434 (YAVAPAI COUNTY) NELSON
[ ] #2 86434 (YAVAPAI COUNTY) YAMPAI
[ ] #3 86337 SELIGMAN
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] FULL COUNTY BID MINIMUM SERVICES & SITES FOR FULL
[ ] INDIVIDUAL ZIP BIDS COUNTY SERVICES AND SITES FOR CROSSOVERS 1, 2 AND 3
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 85360 1. HOSPITAL 1. HOSPITAL
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86021 Kingman Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86401 Lake Havasu City
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86402 St. George
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86403
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86404 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86405 Bullhead City/Riviera Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86406 Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86411 Lake Havasu City
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86412 St. George
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86413
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86426 3. PHARMACY 3. PHARMACY
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86427 Bullhead City/Riviera Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86429 Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86430 Lake Havasu City
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86431 St. George
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86432
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86433 4. AMBULANCE 4. AMBULANCE
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86434 Bullhead City/Riviera Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86436 Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86437 Lake Havasu City
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86438 St. George
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86439
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86441 5. DENTAL SERVICES 5. DENTAL
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86442 Bullhead City/Riviera Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86443 Kingman
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86444 Lake Havasu City
- - ----------------------------------------------------------------------------------------------------------------------
[ ] 86445 St. George
=============================================================================================================================
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: NAVAJO
<TABLE>
<CAPTION>
=============================================================================================================================
CROSSOVER - MEMBER RESIDENCE ZIP
COUNTY ZIP CODES [ ] #1 85930 MCNARY [ ] #3 86502 CHAMBERS
[ ] #2 85940 VERNON [ ] #4 86035 LEUPP
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] FULL COUNTY BID
[ ] INDIVIDUAL ZIP BIDS SERVICES & SITES SERVICES AND SITES FOR CROSSOVERS 1, 2, 3, AND 4
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] 85901 1. HOSPITAL 1. HOSPITAL
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85911 Show Low Crossovers #1, #2 and #3 - Show Low
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85912 Winslow Crossover #4 - Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85923
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85926 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85928 Holbrook Crossovers #1 and #2 - Show Low
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85929 ShowLow/Pinetop/Lakeside Crossover #3 - Holbrook
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85933 Snowflake/Taylor Crossover #4 - Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85934 Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85935
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85937 3. PHARMACY 3. PHARMACY
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85939 Holbrook Crossovers #1 and #2 - Showlow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85941 Showlow/Pinetop/Lakeside Crossover #3 - Holbrook
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85942 Snowflake/Taylor Crossover #4 - Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85943 Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86025
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86029 4. AMBULANCE 4. AMBULANCE
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86030 Holbrook Crossovers #1 and #2 - Showlow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86031 Showlow/Pinetop/Lakeside Crossover #3 - Holbrook
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86032 Snowflake/Taylor Crossover #4 - Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86033 Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86034
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86039 5. DENTAL SERVICES 5. DENTAL
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86042 Holbrook Crossovers #1 and #2 - Showlow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86043 Showlow/Pinetop/Lakeside Crossover #3 - Holbrook
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86047 Snowflake/Taylor Crossover #4 - Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86054 Winslow
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 86510
=============================================================================================================================
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: PIMA
<TABLE>
<CAPTION>
================================================================================================================================
CROSSOVER - MEMBER RESIDENCE ZIP
COUNTY ZIP CODES [ ] #1 85645 AMADO [ ]#3 85738 ORACLE JUNCTION
[ ] #2 85601 ARIVACA
- - --------------------------------------------------------------------------------------------------------------------------------
[ ] FULL COUNTY BID MINIMUM SERVICES AND SITES FOR FULL
[ ] METROPOLITAN AREA BIDS COUNTY BID SERVICES & SITES FOR CROSSOVERS 1, 2, AND 3
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. HOSPITAL 1. HOSPITAL
- - --------------------------------------------------------------------------------------------------------------------------------
Tucson Crossovers #1 & #3 - Tucson
- - --------------------------------------------------------------------------------------------------------------------------------
Crossover #2 - Nogales
- - --------------------------------------------------------------------------------------------------------------------------------
2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - --------------------------------------------------------------------------------------------------------------------------------
Ajo Crossovers #1 & #3 - Tucson
- - --------------------------------------------------------------------------------------------------------------------------------
Marana Crossover #2 - Nogales
- - --------------------------------------------------------------------------------------------------------------------------------
Tucson
- - --------------------------------------------------------------------------------------------------------------------------------
Green Valley/Continental
- - --------------------------------------------------------------------------------------------------------------------------------
Catalina
- - --------------------------------------------------------------------------------------------------------------------------------
3. PHARMACY 3. PHARMACY
- - --------------------------------------------------------------------------------------------------------------------------------
Ajo Oro Valley Crossovers #1 & #3 - Tucson
- - --------------------------------------------------------------------------------------------------------------------------------
Tucson Crossover #2 - Nogales
- - --------------------------------------------------------------------------------------------------------------------------------
Marana
- - --------------------------------------------------------------------------------------------------------------------------------
Green Valley/Continental
- - --------------------------------------------------------------------------------------------------------------------------------
4. AMBULANCE 4. AMBULANCE
- - --------------------------------------------------------------------------------------------------------------------------------
Tucson Crossovers #1 & #3 - Tucson
- - --------------------------------------------------------------------------------------------------------------------------------
Crossover #2 - Nogales
- - --------------------------------------------------------------------------------------------------------------------------------
5. DENTAL 5. DENTAL
- - --------------------------------------------------------------------------------------------------------------------------------
Ajo Catalina Crossovers #1 & #3 - Tucson
- - --------------------------------------------------------------------------------------------------------------------------------
Tucson Crossover #2 - Nogales
- - --------------------------------------------------------------------------------------------------------------------------------
Marana Oro Valley
- - --------------------------------------------------------------------------------------------------------------------------------
Green Valley/Continental
================================================================================================================================
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: PINAL
<TABLE>
=============================================================================================================================
COUNTY ZIP CODES CROSSOVER - MEMBER RESIDENCE ZIP
#1 [ ] 85273 SUPERIOR
#2 [ ] 85217, 85219, 85220 APACHE JUNCTION
#3 [ ] 85235 HAYDEN; #4 [ ] 85292 WINKELMAN
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] FULL COUNTY BID MINIMUM SERVICES AND SITES FOR FULL
[ ] INDIVIDUAL ZIP BIDS COUNTY BID SERVICES AND SITES FOR CROSSOVERS 1, 2, 3, AND 4
- - ----------------------------- ------------------------------------------------------------------------------------------------
[ ] 85221 1. HOSPITAL 1. HOSPITAL
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85222 Casa Grande Crossover #1 - Claypool/Globe/Miami
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85223 Florence Crossover #2 - Mesa
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85228 Kearny Crossover #3 & #4 - Claypool/Globe/Miami
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85230
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85231 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85232 Apache Junction Casa Grande Crossover #1 - Claypool/Globe/Miami
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85237 Coolidge Eloy Crossover #2 - Mesa
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85239 Florence Kearny Crossover #3 & #4 - Kearny
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85241 Mammoth/San Manuel/Oracle
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85245
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85247
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85272 3. PHARMACY 3. PHARMACY
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85278 Apache Junction Casa Grande Crossover #1 - Claypool/Globe/Miami
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85279 Coolidge Eloy Crossover #2 - Mesa
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85291 Florence Kearny Crossover #3 & #4 - Kearny
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85618 Mammoth/San Manuel/Oracle
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85623
- - -----------------------------------------------------------------------------------------------------------------------------
[ ] 85631
- - -----------------------------------------------------------------------------------------------------------------------------
4. AMBULANCE 4. AMBULANCE
- - -----------------------------------------------------------------------------------------------------------------------------
Casa Grande Crossover #1 - Claypool/Globe/Miami
- - -----------------------------------------------------------------------------------------------------------------------------
Florence Crossover #2 - Mesa
- - -----------------------------------------------------------------------------------------------------------------------------
Kearny Crossover #3 & #4 - Kearny
- - -----------------------------------------------------------------------------------------------------------------------------
Mammoth/San Manuel/Oracle
- - -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------
5. DENTAL SERVICES 5. DENTAL
- - -----------------------------------------------------------------------------------------------------------------------------
Apache Junction Casa Grande Crossover #1 - Claypool/Globe/Miami
- - -----------------------------------------------------------------------------------------------------------------------------
Coolidge Florence Crossover #2 - Mesa
- - -----------------------------------------------------------------------------------------------------------------------------
Kearny Crossover #3 & #4 - Kearny
- - -----------------------------------------------------------------------------------------------------------------------------
Mammoth/San Manuel/Oracle
=============================================================================================================================
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: SANTA CRUZ
<TABLE>
<CAPTION>
===============================================================================================================================
CROSSOVER #1 - CROSSOVER #2 -
MEMBER RESIDENCE ZIP MEMBER RESIDENCE ZIP
COUNTY ZIP CODES [ ] 85645 AMADO [ ] 85601 ARIVACA
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] FULL COUNTY BID MINIMUM SERVICES & SITES FOR FULL MINIMUM SERVICES AND SITES FOR MINIMUM SERVICES AND
[ ] INDIVIDUAL ZIP CODE BID COUNTY BID CROSSOVER #1 SITES FOR CROSSOVER #2
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[ ] 85611 1. HOSPITAL 1. HOSPITAL 1. HOSPITAL
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] 85621 Nogales Tucson Nogales
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] 85624
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] 85628
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] 85637
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] 85640 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER 2. PRIMARYCAREPROVIDER
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] 85646 Nogales Tucson Nogales
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] 85648 Patagonia
- - -------------------------------------------------------------------------------------------------------------------------------
[ ] 85662
- - -------------------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------------------
3. PHARMACY 3. PHARMACY 3. PHARMACY
- - -------------------------------------------------------------------------------------------------------------------------------
Nogales Tucson Nogales
- - -------------------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------------------
4. AMBULANCE SERVICE 4. AMBULANCE 4. AMBULANCE
- - -------------------------------------------------------------------------------------------------------------------------------
Nogales Tucson Nogales
- - -------------------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------------------
5. DENTAL 5. DENTAL 5. DENTAL
- - -------------------------------------------------------------------------------------------------------------------------------
Nogales Tucson Nogales
- - -------------------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------------------
===============================================================================================================================
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: YAVAPAI
<TABLE>
<CAPTION>
===================================================================================================================================
COUNTY ZIP CODES CROSSOVER - MEMBER RESIDENCE ZIP CROSSOVER-MEMBER RESIDENCE ZIP
[ ] #1 85324 ROCK SPRINGS/ [ ]#3 86434(YAVAPAICOUNTY)
BLACK CANYON CITY NELSON
[ ] #2 85332 [ ]#4 86434(YAVAPAICOUNTY)
YAMPAI
CONGRESS/CONSTELLATION/OCTAVE/STANTON/ [ ]#5 86337 SELIGMAN
YARNELL/CASTLE HOT SPRINGS
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] FULL COUNTY BID SERVICES AND SITES FOR CROSSOVERS SERVICES AND SITES FOR
[ ] INDIVIDUAL ZIP BIDS SERVICES & SITES 1 AND 2 CROSSOVERS 3, 4 AND 5
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[ ] 85324 1. HOSPITAL 1. HOSPITAL 1. HOSPITAL
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 85362 Cottonwood Crossover #1 - Wickenburg/Phoenix Kingman
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86301 Prescott Crossover #2 - Wickenburg/Phoenix
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86302
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86303
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86304 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER 2. PRIMARY CARE PROVIDER
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86309 Camp Verde Crossover #1 - Wickenburg/Phoenix Kingman
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86312 Cottonwood Crossover #2 - Wickenburg/Phoenix
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86313 Prescott
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86314 Prescott Valley
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86320 Sedona
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86321
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86322 3. PHARMACY 3. PHARMACY 3. PHARMACY
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86323 Camp Verde Crossover #1 - Wickenburg/Phoenix Kingman
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86324 Cottonwood Crossover #2 - Wickenburg/Phoenix
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86325 Prescott
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86326 Prescott Valley
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86327 Sedona
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86329
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86330 4. AMBULANCE 4. AMBULANCE 4. AMBULANCE
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86331 Cottonwood Crossover #1 - Wickenburg/Phoenix Kingman
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86332 Prescott Crossover #2 - Wickenburg/Phoenix
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86333
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86334
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86335 5. DENTAL SERVICES 5. DENTAL 5. DENTAL
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86337 Cottonwood Crossover #1 - Wickenburg/Phoenix Kingman
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86338 Prescott Crossover #2 - Wickenburg/Phoenix
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86340 Prescott Valley
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86341 Sedona
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86342
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] 86343
===================================================================================================================================
</TABLE>
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ATTACHMENT B - SERVICE AREA MINIMUM NETWORK STANDARDS - COUNTY: YUMA
COUNTY ZIP CODES MINIMUM SERVICES & SITES
====================================== FOR FULL COUNTY BID
[ ] FULL COUNTY BID
[ ] INDIVIDUAL ZIP BIDS
============================================================================
[ ] 85333 1. HOSPITAL
- - ----------------------------------------------------------------------------
[ ] 85336 Yuma
- - ----------------------------------------------------------------------------
[ ] 85347
- - ----------------------------------------------------------------------------
[ ] 85349 2. PRIMARY CARE PROVIDER
- - ----------------------------------------------------------------------------
[ ] 85350 Somerton
- - ----------------------------------------------------------------------------
[ ] 85352 Wellton
- - ----------------------------------------------------------------------------
[ ] 85356 Yuma
- - ----------------------------------------------------------------------------
[ ] 85364
- - ----------------------------------------------------------------------------
[ ] 85365 3. PHARMACY
- - ----------------------------------------------------------------------------
[ ] 85366 Yuma
- - ----------------------------------------------------------------------------
[ ] 85367
- - ----------------------------------------------------------------------------
[ ] 85369 4. AMBULANCE
- - ----------------------------------------------------------------------------
Yuma
- - ----------------------------------------------------------------------------
5. DENTAL SERVICES
- - ----------------------------------------------------------------------------
Yuma
============================================================================
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ATTACHMENT B - CROSSOVERS PROPOSED BY OFFERORS
<TABLE>
<CAPTION>
==============================================================================================================
PROPOSED COUNTY
CROSSOVER ZIP CODES:
SERVICES AND SITES (INCLUDE FULL ADDRESS AND COUNTY) JUSTIFICATION
- - -----------------------------
RESIDENCE
==============================================================================================================
<S> <C> <C>
1. COUNTY 1. HOSPITAL(S)
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
2. ZIP CODE(S)/CITY(IES) 2. PRIMARY CARE PROVIDERS
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
3. PHARMACY(IES)
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
4. AMBULANCE
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
5. DENTAL SERVICES
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
==============================================================================================================
</TABLE>
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ATTACHMENT C: ENCOUNTER RECORD SUBMISSION STANDARDS AND PENALTY PROVISIONS
1. DATA VALIDATION SANCTION CRITERIA
All Contractors shall submit encounter data. Contractors will be assessed
penalties for noncompliance with encounter submission standards. The penalties
will be applied based on the criteria of timeliness, correctness and omission of
data. Penalties also will be applied for failure to timely correct pended
encounters.
The allowable error rate for all continuing Contractors will be 5% for each type
of error (timeliness, correctness and omission). Sanctions will be applied when
Contractor exceeds the allowable error rate.
Data Validation studies will be performed on first-year contractors but such
contractors will be exempt from the above sanctions during their first year of
operation under this contract.
There will be two data validation studies:
Study A:
Data validation of "Type A" (HCFA 1500) encounters is verified through an audit
of the medical record. Data validation is performed by reviewing a random sample
of members' medical record entries in order to compare recorded utilization
information to Contractor's submitted encounter data. This study will determine
timeliness, correctness and omission errors.
Study B:
Data validation of "Type B" or "UB-92" encounters is verified through an audit
of maternal hospitalizations reported to AHCCCSA through the Newborn Report
System. Data validation is performed by reviewing a random sample of maternal
hospitalizations contained in the Newborn Report System in order to compare
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<PAGE> 180
recorded utilization information to Contractor's submitted encounter data. This
study will determine omission errors.
Data validation will be conducted at least yearly. The sample size, or number of
medical record entries to be reviewed, will be determined using statistical
methods in order to accurately estimate Contractor's timeliness, correctness and
omission error rates.
Timeliness, correctness and omission errors will be determined using criteria
defined below. Timeliness error rates will be calculated by dividing the number
of timeliness errors by the number of entries reviewed for timeliness.
Correctness and omission error rates will be calculated in the same manner. A
95% confidence interval will be used to account for limitations caused by
sampling. The confidence interval shows the range within which the true error
rate is estimated to be. The error rate used for sanction purposes will be the
lower limit of the confidence interval minus the allowable error rate.
The following example illustrates the error rate used for sanction purposes.
Assume, for example, that the validation error rate is 20%. The 95% confidence
interval is the validation error rate plus or minus 5%. Therefore, the interval
ranges from 15% to 25%. The lower limit of the confidence interval is 15%.
However, a 5% error rate is allowable. Thus, the sanctionable error rate is 10%.
(Note that this is an example only. The actual error rate range depends on Data
Validation findings.)
Sanction amounts for omission, correctness, and timeliness errors will be based
on the following formula:
S = P x ([ L-A ] x N )
Where: S = sanction,
P = per error sanction amount,
L = lower limit of confidence interval for error rate,
A = allowable error rate; and
N= number of encounters submitted for members subject to federal
financial participation during the time period reviewed. Two N's
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<PAGE> 181
apply. For Study A, the number of "Type A" or "HCFA - 1500"
encounters will be used. For Study B, the number of "Type B" or
"UB-92" encounters will be used. (N will be adjusted to make up
for omitted encounters.)
Using this formula, the per-encounter sanction amounts for timeliness,
correctness and omission errors as determined from the sample will be applied to
the estimated number of total errors for Contractor in order to determine the
total sanction amount.
Continuing with the example: The lower limit of the confidence interval for the
omission error rate is 15% (L), the lower limit of the confidence interval minus
the allowable error rate (A=5%) is 10% (L-A), and Contractor has submitted
48,000 Type A encounters during the review period. N adjusted for omissions is
56,471. (56,471 minus 15% of 56,471 equals 48,000. The 15% is L, the lower limit
of the confidence interval for the omission error rate.) The total number of
omission errors is ( [L-A] X N ) = .10 X 56,471 = 5,647. The omission sanction
amount is $5,647 ([5,647 X P] = 5,647 X $1.00). The $1.00 is the per error
omission sanction amount. The same formula will be applied to timeliness and
correctness error rates, using appropriate per-error sanction amounts, to
determine the total sanction.
The services to be validated include but are not limited to inpatient
hospitalizations, office visits and surgeries.
TIMELINESS - Contractor shall submit encounter data in a timely manner.
Timeliness of data is based on the time elapsed between the date the service is
rendered and the date of receipt of the encounter data by AHCCCSA. All encounter
data, including inpatient encounters requiring Medicare filing, must be received
by AHCCCSA no later than 240 days after the end of the month in which the
service was rendered.
For all encounters for which timeliness is evaluated for dates of service on or
after 10/1/94, including inpatient encounters requiring Medicare approval, a
sanction of 50 cents ($.50) per encounter error will be assessed if the
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<PAGE> 182
encounter record is received by AHCCCSA more than 240 days after the end of the
month in which the service was rendered.
For data validation reviews, AHCCCSA will select all pended and approved
encounters for the contract year to be studied 240 days after the end of the
contract year. Once AHCCCSA has selected Contractor's encounter data for data
validation studies, no subsequent encounter data submissions for the period
being studied will be considered in determining the data validation results.
CORRECTNESS OF DATA - A correct encounter contains a complete and accurate
description of AHCCCS covered services provided to a member. A sanction of
twenty cents ($0.20) per encounter error will be assessed if the encounter is
incomplete or incorrectly coded.
OMISSION OF DATA - Omission of data is defined as an encounter not submitted to
AHCCCSA or an encounter inappropriately deleted from AHCCCSA's pending encounter
file or historical files in lieu of correction of such record.
In Study A, $1.00 per encounter error penalty will be assessed for an omission
of a Type A or HCFA 1500 encounter.
In Study B, a $5.00 per encounter error penalty will be assessed for an omission
of a Type B or UB-92 encounter.
For both timeliness and omission errors, AHCCCSA will consider information
provided by Contractor which tends to indicate that such error was due to a
delay in receipt of a clean claim within the period allowed under AHCCCS Rules.
Under Rule R9-22-705-A, Contractor is not required to pay claims for covered
services that are submitted more than six months after the date of the service
for which payment is claimed or that are submitted as clean claims more than 12
months after the date of service for which payment is claimed.
2. PEND CORRECTION CRITERIA
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<PAGE> 183
Contractor shall resolve all pended encounters within 100 days of the processing
date of the data. The processing date is the date of the encounter cycle in
which the encounter initially pended. A sanction of $3.00 each month will be
assessed for every encounter pended for more than 100 days except when due to
AHCCCSA error. Determining errors as they apply to pended encounter records will
be done as follows:
When Contractor has provided written notification to AHCCCSA that the resolution
of the pended encounter is likely dependent upon AHCCCSA rather than Contractor,
AHCCCSA will respond in writing within 30 days of receipt of such notification.
The AHCCCSA response will identify the status of each pending encounter problem
or issue in question. AHCCCSA errors are those pended encounters for which
AHCCCSA acknowledges that the pended encounter is an AHCCCSA error requiring a
system change, table update or further research by AHCCCSA.
Pended encounters will NOT qualify as AHCCCSA errors if AHCCCSA reviews
Contractor's notification and requests Contractor to research the issue and
provide additional substantiating documentation, or if AHCCCSA disagrees with
Contractor's claim of AHCCCSA error.
Prior to assessment of sanctions, Contractor will be notified in writing by
AHCCCSA of the total number of encounters pended more than 100 days and the
number of such encounters not subject to sanction because of AHCCCSA error.
Contractor will not have sanctions assessed for pended encounters which AHCCCSA
agrees in writing to research. However, if a pended encounter being researched
by AHCCCSA is later determined not to be caused by AHCCCSA error, Contractor may
be sanctioned retroactively $3.00 each month for every encounter pended more
than 100 days.
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<PAGE> 184
3. PENALTY PROVISIONS
Penalty provisions shall be applied to encounters received for services rendered
on or after October 1, 1994. Penalties will be offset against the next month's
capitation payment following the assessment of the penalty or an unsuccessful
challenge attempt.
All sanctions will be placed in the AHCCCS fund and accounted for separately. At
the end of the contract year AHCCCSA may distribute the funds to the contractors
which have consistently met the submission standards for encounter data during
the contract year. Any distributive shares shall be determined in accordance
with policies and procedures promulgated by AHCCCSA.
Failure to timely provide AHCCCSA with medical records necessary for data
validation may result in a sanction of $1,000 for each missing medical record.
Contractors shall be responsible for continued reporting beyond the term of the
contract. For example, processing and reporting of encounter data will likely
continue beyond termination of the contract because of lag time in filing source
documents by subcontractors.
Contractor may file a written challenge to sanctions assessed by AHCCCSA not
more than 35 days after Contractor receives written notice of sanction.
Sanctions shall not apply to encounter errors successfully challenged.
Challenges will be reviewed by AHCCCSA's Data Validation Review Challenge
Committee and a written decision will be rendered no later than 60 days from the
date of receipt of a timely challenge. A challenge must be filed on a timely
basis and a decision must be rendered by AHCCCSA prior to filing a grievance
pursuant to Article 8, AHCCCS Rules.
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<PAGE> 186
ATTACHMENT D - MANAGEMENT SERVICES SUBCONTRACTOR STATEMENT
All Management Services Subcontractors are required to have a financial audit. A
copy of this audit must be filed with AHCCCSA within 120 days of Subcontractor's
fiscal year end. Failure to file a copy may result in withdrawal of AHCCCSA
approval.
A Management Services Subcontractor is defined as a marketing organization or
any other organization or person agreeing to perform any administrative function
or service for the Contractor specifically related to securing or fulfilling the
Contractors obligations to AHCCCSA under the terms of the contract. This shall
include but not be limited to third-party administrators, firms or persons who
manage operations of the Offeror such as marketing, automatic data processing,
claims processing, quality management, utilization management, prior
authorization and other management functions.
Attach to this proposal a fully executed copy of the Management Subcontract for
Contract Year 95 (10/1/94 - 9/30/95). If the existing subcontract is for
multiple terms, Offeror must attach the original management subcontract and all
amendments.
When making attachments to this section, please refer to the question number and
the item heading.
MANAGEMENT SERVICES SUBCONTRACTOR STATEMENT
NAME OF BUSINESS ________________________________
ADDRESS _________________________ CITY_____________ STATE_______ ZIP ______
PHONE NO._______________________
1. Type of Business (check appropriate box)
/ / Individual / / Partnership / / Corporation / / Joint Venture
/ / Government / / Other (Describe)
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<PAGE> 187
If a corporation, indicate type:__________________________________________
2. Incorporated in the State of:
_________________________________________________________
(Complete if corporation)
3. If incorporated in a State other than Arizona, do you have a certificate to
do business in the State of Arizona? / / Yes / / No
4. If yes, type of certificate and with what agency/administration is it
filed:
______________________________________________________
5. Who is your Statutory Agent for the State of Arizona:
Name __________________________________________
Address _______________________________________
Zip _______________
Phone No. _____________________________________
6. Parent Company and Employer Identification Number
For the purpose of this RFP, a parent company is defined as one which
either owns or controls the activities and basic business policies of the
Management Services Subcontractor. To own another company means the parent
company must own at least a majority (more than 50%) of the voting rights
in the company. To control another company, such ownership is not required;
if such company is able to formulate, determine, or veto business policy
decisions of the Management Services Subcontractor, such other company is
considered the parent company of the Management Services Subcontractor.
Is the Management Services Subcontractor owned or controlled by a parent
company as described above? Yes / / No / /
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<PAGE> 188
If yes, the Management Services Subcontractor shall insert in the space
below the name and main office address of the parent company.
______________________________________
Name
______________________________________
Address State Zip
7. Organization Chart
Attach a copy of your staff functional organizational chart, setting forth
lines of authority, responsibility and communication which will pertain to
this proposal.
8. If other than a government agency:
When was your organization formed? ________________________________________
If your organization is a corporation, attach a list of the names and
addresses of the Board of Directors.
9. License/Certification
Attach a list of all licenses and certifications your organization is
required to maintain. Use a separate sheet of paper using the following
format:
SERVICE COMPONENT LICENSE/REQUIREMENT RENEWAL DATE
----------------- ------------------- ------------
If any licenses have been denied, revoked or suspended within the past 10
years, please explain.
10. Administrative Agents
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<PAGE> 189
Is your agency acting as the administrative agent for any other agency
organization? Yes ______ No ______
If yes, describe the relationship in both legal and functional aspects.
11. Civil Rights Compliance Data
Has any federal or state agency ever made a finding of noncompliance with
any relevant civil rights requirement with respect to your company?
Yes ______ No ______ If yes, please explain.
12. Prior Convictions
Are there any felony convictions of any key personnel (i.e., Chief
Executive Officer, Plan Managers, Financial Officers, major stockholders or
those with controlling interest, etc.) within the past 15 years?
Yes ______ No______ If yes, please explain.
13. Does your company have any ownership or control interest of 5% or more
(i.e., able to formulate, determine, vote or influence business policy
decisions, etc.) in another organization?
Yes _______ No ______
If yes, list each organization's name and address and the percentage of
ownership and/or control.
<TABLE>
<CAPTION>
PERCENT OF
NAME ADDRESS OWNERSHIP OR CONTROL
- - ---------------------------------------------- --------------------
<S> <C>
- - ---------------------------------------------- -------------------
- - ---------------------------------------------- -------------------
- - ---------------------------------------------- -------------------
- - ---------------------------------------------- -------------------
- - ---------------------------------------------- -------------------
- - ---------------------------------------------- -------------------
- - ---------------------------------------------- -------------------
</TABLE>
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<PAGE> 190
14. Do those who own or control your company have any ownership or control
interest of 5% or more (i.e., able to formulate, determine, veto or
influence business policy decisions, etc.) in another organization?
Yes _______ No ________
If yes, list each organization's name and address, the percentage of
ownership or control, and the names of those with the common ownership or
control interest:
<TABLE>
<CAPTION>
PERCENT OF
NAME ADDRESS OWNERSHIP OR CONTROL
<S> <C>
- - ----------------------------------------------- --------------------
- - ----------------------------------------------- --------------------
- - ----------------------------------------------- --------------------
- - ----------------------------------------------- --------------------
- - ----------------------------------------------- --------------------
- - ----------------------------------------------- --------------------
- - ----------------------------------------------- --------------------
- - ----------------------------------------------- --------------------
</TABLE>
15. Has your company ever been suspended or excluded from any federal program
for any reason? Yes _______ No ________ If yes, please attach explanation.
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<PAGE> 191
16. Subcontractor's Customer Description Proposal
For each of your principal customers* provide the following:
<TABLE>
<CAPTION>
CUSTOMER NAME SUBCONTRACTOR % OF TOTAL TIME CUSTOMER PRINCIPAL
AND ADDRESS REVENUE MANAGING CUSTOMER BUSINESS
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
174
<PAGE> 192
* A principal customer is one that generates 5% or more of Gross Annual Sales.
17. Subcontractor's Personnel Experience Statement
Please provide resumes for all key personnel describing professional
experience and education including continuing educational courses taken
during the last three years.
18. Subcontractor Controlling Interest Proposal
Please provide the name and address of any individuals or organizations
with an ownership or controlling interest (i.e., able to formulate,
determine or veto business policy decisions, etc.). You may include those
whose ownership or control interest is less than 5%.
<TABLE>
<CAPTION>
HAS CONTROLLING
INTEREST
NAME ADDRESS OWNED OR CONTROLLED YES NO
---- ------- ------------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
19. Subcontractor Financial Statement
a. Is your accounting system based on a cash or accrual method?
(a) Cash / /
(b) Accrual / /
(c) Other / / Give a brief explanation.
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<PAGE> 193
b. Does your organization prepare an annual financial statement?
Yes _______ No _______. If yes, provide a copy of the latest report.
c. Are interim financial statements prepared? Yes ______ No _______ If
yes, How often are they prepared? __________________________________
Are footnotes and supplementaryschedules an integral part of the
statements? Yes _______ No _______
Provide a copy of the latest statements including all necessary data
to support your answers above.
d. Is your organization audited by an independent accounting
firm/accountant? Yes ______ No ______
If yes, how often are audits conducted? _________
By whom are they conducted? Provide name, address and telephone
number:___________________________________________________________
Please attach a copy of the latest audited financial statements.
e. Do you have any uncorrected audit exceptions? Yes ______ No ______
If yes, please explain the action being taken to correct the
exceptions.
f. Does your organization have an accounting manual? Yes _____ No ______
If no, please explain if you have proper accounting policies and
procedures, and how you provide for the dissemination of such
accounting policies and procedures within your organization and what
controls exist to ensure the integrity of your financial information.
The Offeror agrees to furnish copies of such written accounting
policies and procedures for inspection upon request from AHCCCSA.
g. Are management letters on internal controls issued by the accounting
firm? Yes _______ No _______
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<PAGE> 194
If yes, attach a copy of the management letter from the latest audit.
This must be on the auditor's letterhead and the Offeror, by its
submission, certifies the letter is unaltered.
If no, please provide a comprehensive description of internal control
systems. You are responsible for instituting adequate procedures
against irregularities and improprieties and enforcing adherence to
generally accepted accounting principles.
h. Does your organization have a formal basis to distribute/allocate
costs reflected in your financial statement? Yes _____ No ______
Please explain principal allocation techniques used or proposed to be
used. Indicate the allocation base used for each type of cost
allotment.
i. Indicate the types of liability insurance does your organization
maintains.
State the amount of coverage and the name and address of the carrier.
j. Please attach a complete analysis of revenues and expenses by business
segment (lines of business) and by geographic area (within Arizona and
outside Arizona) for your company or your company's owners.
k. Are there any suits, judgments, tax deficiencies, or claims pending
against your organization? Yes ______ No _______
If yes, briefly describe each item and indicate the dollar amount,
either actual or estimated.
177
<PAGE> 195
l. In the last 12 months has your firm or organization paid any bonuses,
provided any gifts over a dollar value of $500, or in any other way
provided a financial reward, over and above salary, to any staff
member, board member or other personnel associated with the firm or
organization? Yes ______ No _______
If yes, describe to whom it was given, the type of reward, its value
and source(s) of revenue.
20. Subcontractor's Background Check Information
All Management Services Subcontractors must provide sufficient information
concerning key personnel to enable AHCCCSA to conduct background checks.
Please attach a list of all key personnel giving the following information
for each:
a. Name
b. All other names ever used
c. Social Security Account Number
d. Date of Birth
e. Place of Birth
f. All addresses for the last 10 years
g. Ever suspended from any federal program for any reason?
If yes, please explain.
21. Subcontractor Restriction of Competition Statement
In connection with the Management Services Subcontractor's participation in
this procurement, the Management Services Subcontractor (to include its
employees) to the best of its knowledge and belief:
178
<PAGE> 196
a. has not disclosed and will not knowingly disclose the prices, or any
matter relating to such prices, to any other offeror or with any
competitor;
b. has not attempted and will not make any attempt to induce any other
person or firm to submit or not to submit a proposal for the purpose
of restricting competition.
___________________________________________
Management Services Subcontractor Signature
___________________________________________
Print Name and Title
The Management Services Subcontractor shall insert in the applicable space
below, if the Management Services Offeror has no parent company, its own
employer's identification number (Federal social security number used on
employer's quarterly federal tax return, U.S. Treasury Department Form
941), or, if he has a parent company, the employer's identification number
of the parent company.
Management Services Subcontractor
Employer Identification No. ______________________________
Parent Company's
Employer Identification No. _______________________________________
179
<PAGE> 197
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180
<PAGE> 198
ATTACHMENT E - SAMPLE LETTER OF INTENT
[NO ALTERATIONS OR CHANGES PERMITTED. PROVIDER MUST SUBMIT A SEPARATE LETTER
OF INTENT FOR EACH SERVICE SITE OR AHCCCS ID#. THIS LETTER IS SUBJECT TO
VERIFICATION BY AHCCCSA.]
The provider signing below is willing to enter into contract negotiations with
[offeror's name], for provision of covered services to AHCCCS members enrolled
with [offeror's name]. This provider intends to sign a contract with [offeror's
name] if [offeror's name] is awarded an AHCCCS contract beginning 10/1/94 in the
provider's service area and an acceptable agreement can be reached between the
provider and [offeror's name]. Signing this letter of intent does not obligate
the provider to sign a contract with [offeror's name].
The following information is furnished by the provider:
1. AHCCCS IDENTIFICATION NUMBER____________________________________
2. YOUR PRINTED NAME (person, corp. etc)___________________________
3. ADDRESS (WHERE SERVICES WILL BE PROVIDED)_______________________
___________________________________________ ZIP CODE____________
4. COUNTY__________________________________________________________
5. TELEPHONE ___________________ 6. FAX ___________________________
7. CHECK ALL THAT APPLY:
____ A. Primary care Physician:____Family Practice
____General Practice
____Internal Medicine
____Pediatrician
____ B. Physician- Specialist-specify________________________________
____ C. Hospital
____ D. Pharmacy
____ E. Laboratory
____ F. Medical Imaging
____ G. Emergency Transportation (air or ground)
____ H. Medically Necessary Transportation
____ I. Nursing Facility
____ J. Dentist
____ K. Therapy (specify PT,OT,Speech, Respiratory) _________________
____ L. Behavioral Health Provider (specify) ________________________
____ M. Podiatrist
____ N. Durable Medical Equipment
____ O. Home Health Agency
____ P. Home Infusion Provider
____ Q. Chiropractor
____ R. Clinic
____ S. Optometrist/ Optician
____ T. FQHC
____ U. Other (please specify) ______________________________________
181
<PAGE> 199
8. PROVIDER SIGNATURE ___________________________ TITLE __________________
9. PRINTED NAME OF SIGNER _____________________________________
10. DATE SIGNED _____________________________
182
<PAGE> 200
AFFIDAVIT OF NON-COERCION
INSTRUCTIONS
AHCCCSA requests the following information to further evaluate the proposed
provider networks in response to this solicitation:
1. Please certify, by completing the attached form, Affidavit of Non-Coercion,
that you or your management company have not requested or induced any
provider not to contract with another potential bidder.
2. Have you been unable to obtain a letter of intent from any provider because
that provider stated it wanted to maintain an exclusive relationship with
another bidder? If so, please provide details in writing.
Please provide the completed Affidavit of Non-Coercion and written reply, if
applicable, as part of your response to this solicitation.
*********************************************************
AFFIDAVIT OF NON-COERCION
Company Name: ____________________________________________________
Address: ____________________________________________________
__________________________________ ZIP CODE_________
The persons, corporation or company who testifies to the following statement,
having first been duly sworn, deposes and says:
To the best of my knowledge, no requests or inducements have been made to
any provider not to contract with another potential provider in relation to
the Arizona Health Care Cost Containment System RFP #YH5-0001.
Signed : __________________________
Name : __________________________
Title : __________________________
Subscribed and sworn to before me the ____ day of ______ 1994.
_________________________________________
Signature of Notary Public in and for the
County of _____________________________
State of ______________________________
My Commission expires :_______________
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<PAGE> 201
ATTACHMENT F: INSTRUCTIONS FOR PREPARING CAPITATION PROPOSALS
INTRODUCTION:
All capitation bids must be submitted to AHCCCSA on the AHCCCS Capitation Rate
Calculation Sheet (CRCS) Bid Disk. All best and final offer bids must also be
submitted on the AHCCCS CRCS bid disk. A CRCS must be completed for each rate
code in each county that the Offeror is bidding. Offeror will also use the CRCS
bid disk to print and submit Section B, Capitation Rates, of the Request for
Proposal (RFP).
HELP SCREENS:
The Year 13 CRCS Bid Disk has help screens available to answer questions every
step of the way. Offeror can access the help screens at any time by pressing the
F1 key. In addition, the program contains on-screen instructions for each
screen.
GETTING STARTED:
The Year 13 CRCS bid disk program requires approximately 525K bytes of available
main memory to run properly. Boot your machine to the DOS prompt. Insert the
Year 13 CRCS Bid Disk. Change the default drive to the disk drive containing the
Year 13 CRCS Bid Disk by typing "A:" or "B:" (whichever drive contains the Year
13 Bid Disk) and press the (Enter) key. Type "CRCS" and press the (Enter) key.
This will initiate the program and will bring up the main menu.
MAIN MENU OPTIONS:
The main menu to the Year 13 CRCS bid disk offers the following seven options:
1. Bidding Input or Edit capitation rate data
2. Summary Display previously calculated net capitation rates for all rate
codes and all counties
3. Print Send detail and/or summary information to the printer
4. Submit/Copy Copy capitation bids to diskette for submission of data to
AHCCCS
5. Supplement Browse through sections of RFP directly related to this bid
program
6. Utilities Set screen colors, change printer destination, bulk erase data,
etc.
7. Exit Leave this program
FORMAT OF CAPITATION RATE CALCULATION SHEETS:
The CRCS for all rate codes, except SOBRA women, have three screens requiring
data input. Screen 1 of 3 contains the following bid elements: 1) Hospital
184
<PAGE> 202
Inpatient, 2) Hospital Outpatient, 3) Emergency Room, 4) Primary Care, 5)
Referral Physician, 6) Surgical Services, and 7) Pharmacy. Offeror will have
to enter: annual utilization units per 1,000 members, cost per unit, and co-
pay amounts (where applicable) for each of the seven bid elements listed
above. The program will automatically calculate the per member per month
(PMPM) amount for each of these bid elements.
Screen 2 of 3 for all rate codes, except SOBRA women, contains the following bid
elements: 1) Lab, X-ray, and Medical Imaging, 2) Family Planning, 3) Physical
Therapy, 4) DME and Oxygen, 5) NF and Home Health Care, 6) Ambulance and
Medically Necessary Transportation, 7) Dental, 8) Mental Health (18 - 20 yrs
old, non-SMI), and 9) Miscellaneous. Offeror shall enter the PMPM amount for
each of these 9 bid elements.
Screen 3 of 3 for all rate codes, except SOBRA women, contains the following
bid elements: 1) Reinsurance, 2) Third Party Recoveries, 3) Administration
Charges, 4) Profit and Contingencies. Offeror shall enter the PMPM amount for
each of these 4 bid elements. The program will automatically calculate the
Net Capitation rate based on data entered.
The SOBRA women rate codes are capitated on a monthly basis at the AFDC
capitation rate for their county of residence. The SOBRA CRCS to be completed by
Offeror is for the SOBRA Supplement payment only. Contractor will be eligible to
receive the SOBRA Supplement payment upon the birth of a child to a SOBRA
eligible women enrolled with Contractor.
The CRCS for the SOBRA Supplement is comprised of 2 screens requiring data
input. Screen 1 of 2 for the SOBRA Supplement contains the following bid
elements: 1) Hospital Inpatient, 2) Lab and Testing, 3) Transportation, 4)
Pharmacy, 5) OB/GYN, 6) Specialist/Anesthesia, and 7) Other. Elements 1
through 4 require utilization units and unit costs to be entered for a vaginal
delivery and separately for a cesarean delivery. The program computes the
amount per birth automatically for these elements. Offeror shall enter the
per birth amount directly for bid elements 5 through 7.
Screen 2 of 2 for the SOBRA Supplement contains the following bid elements:
1) Third Party Recoveries, 2) Administration Charges,
3) Profit and Contingencies. Offeror shall enter the per birth amounts for
vaginal and cesarean deliveries for each of these bid elements. The Offeror
must enter the percent of vaginal deliveries expected (must be between 50.00
and 100.00 percent). The program will calculate the weighted average SOBRA
Supplement bid automatically.
TECHNICAL NOTES:
The following is a list of miscellaneous technical notes which may be helpful to
the Offeror:
- - - Decimal points must be entered manually
- - - Help screens can be accessed at any time by pressing the F1 key
- - - Before saving or copying data to a new disk make sure the new disk is
formatted
185
<PAGE> 203
- - - Within the CRCS screens, the PAGE UP key will take you to the previous
screen
- - - Within the CRCS screens, the PAGE DOWN key will take you to the next screen
- - - Use the UP AND DOWN ARROW keys to scroll vertically through the data entry
fields within the CRCS screens
- - - Use TAB and SHIFT TAB to Scroll horizontally through the data entry fields
within the CRCS screens
- - - Within the CRCS screens the F3 key takes you to the previous rate code for
the county
- - - Within the CRCS screens the F4 key takes you to the next rate code for the
county
- - - Within the CRCS screens the F7 key takes you to the previous county (same
rate code)
- - - Within the CRCS screens the F8 key takes you to the next county (same rate
code)
- - - Within the CRCS screens the F10 key will save the data that has been
entered/edited and return to main CRCS menu
- - - The ESC key cancels the function or menu in progress
- - - Calculations are rounded to 2 decimal places whenever a calculated result
produces more than 2 decimal places
INSTALLING CRCS BID DISK ON A NETWORK OR HARD DRIVE
The CRCS Bid Disk can be copied to a directory on a network or a local PC hard
drive merely by copying all of the files on the disk to a directory. If the
program is installed on a network, care must be taken to allow only one person
at a time to use the program or a loss of bid data could occur. To run the
program on a local PC hard drive, you must first switch over to the drive and
directory where the program is located before running the program for it to run
properly.
LISTING OF FILES INCLUDED ON THE BID DISK
The following files are included on the CRCS Bid Disk:
CRCS.EXE - The CRCS bid program
R.DAT - Data file containing the section of the RFP that directly pertains
to this bid disk
H.DAT - Help file used by the bid program
HP.DAT - Supplementary help file
DATA.DAT - Data file containing your bids. This file can be copied to a
diskette manually or menu option #4 in the CRCS Bid Program will copy
it for you.
If you have any technical questions relating to the operation or functions of
the Year 13 CRCS Bid Disk call Mike Purvis at (602) 254-5522, extension 7033.
186
<PAGE> 204
ATTACHMENT G - MEMBER MONTHS PAID BY RATE CODE AND COUNTY (AS OF 2/1/94)
<TABLE>
<CAPTION>
County: Rate Code: Member Months Paid:
------- ---------- -------------------
<S> <C> <C>
Apache AFDC 1,221
SSI w/ med 165
SSI w/o med 385
Child programs 775
MN/MI w/ med 3
MN/MI w/o med 147
SOBRA mothers 68
Cochise AFDC 6,983
SSI w/ med 754
SSI w/o med 1,019
Child programs 3,784
MN/MI w/ med 51
MN/MI w/o med 1,201
SOBRA mothers 332
Coconino AFDC 3,256
SSI w/ med 321
SSI w/o med 638
Child programs 3,121
MN/MI w/ med 36
MN/MI w/o med 616
SOBRA mothers 350
Gila AFDC 2,128
SSI w/ med 199
SSI w/o med 359
Child programs 1,226
MN/MI w/ med 5
MN/MI w/o med 263
SOBRA mothers 148
Graham AFDC 1,908
SSI w/ med 223
SSI w/o med 249
Child programs 1,098
MN/MI w/ med 7
MN/MI w/o med 312
SOBRA mothers 93
Greenlee AFDC 529
SSI w/ med 37
SSI w/o med 74
Child programs 247
MN/MI w/ med 2
MN/MI w/o med 61
SOBRA mothers 30
La Paz AFDC 879
SSI w/ med 91
</TABLE>
187
<PAGE> 205
<TABLE>
<S> <C>
SSI w/o med 145
Child programs 605
MN/MI w/ med 5
MN/MI w/o med 226
SOBRA mothers 59
</TABLE>
<PAGE> 206
<TABLE>
<CAPTION>
County: Rate Code: Member Months Paid:
------- ---------- -------------------
<S> <C> <C>
Maricopa AFDC 117,740
SSI w/ med 8,959
SSI w/o med 18,093
Child programs 56,410
MN/MI w/ med 465
MN/MI w/o med 18,116
SOBRA mothers 6,126
Mohave AFDC 5,571
SSI w/ med 401
SSI w/o med 762
Child programs 4,535
MN/MI w/ med 35
MN/MI w/o med 956
SOBRA mothers 475
Navajo AFDC 2,576
SSI w/ med 263
SSI w/o med 483
Child programs 2,067
MN/MI w/ med 9
MN/MI w/o med 326
SOBRA mothers 219
Pima AFDC 34,594
SSI w/ med 3,595
SSI w/o med 6,658
Child programs 18,761
MN/MI w/ med 252
MN/MI w/o med 6,700
SOBRA mothers 1,889
Pinal AFDC 8,150
SSI w/ med 720
SSI w/o med 1,119
Child programs 3,955
MN/MI w/ med 53
MN/MI w/o med 1,171
SOBRA mothers 340
Santa Cruz AFDC 1,821
SSI w/ med 440
SSI w/o med 542
Child programs 2,306
MN/MI w/ med 10
MN/MI w/o med 349
SOBRA mothers 160
Yavapai AFDC 3,615
SSI w/ med 554
SSI w/o med 939
Child programs 3,116
MN/MI w/ med 32
</TABLE>
189
<PAGE> 207
<TABLE>
<S> <C> <C>
MN/MI w/o med 899
SOBRA mothers 371
Yuma AFDC 7,741
SSI w/ med 612
SSI w/o med 971
Child programs 6,945
MN/MI w/ med 43
MN/MI w/o med 913
SOBRA mothers 702
</TABLE>
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<PAGE> 208
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191
<PAGE> 209
INDEX
<TABLE>
<CAPTION>
SUBJECT PAGE
- - ------- ----
<S> <C>
ACCUMULATED FUND DEFICIT................................................... 45
ADVANCES, DISTRIBUTIONS AND LOANS.......................................... 45
AHCCCS BIDDERS' LIBRARY.................................................... 104
AHCCCSA RIGHT TO OPERATE CONTRACTOR........................................ 60
AMENDMENTS TO RFP.......................................................... 100
AMOUNT OF PERFORMANCE BOND................................................. 50
APPOINTMENT STANDARDS...................................................... 34
ASSIGNMENT OF CONTRACT AND BANKRUPTCY...................................... 57
ASSIGNMENT OF OVERCHARGES.................................................. 55
AUDITS AND INSPECTIONS..................................................... 64
AUTHORIZED SIGNATORY....................................................... 77
AUTO-ASSIGNMENT ALGORITHM.................................................. 69
AWARD OF CONTRACT.......................................................... 102
BEHAVIORAL HEALTH SERVICES................................................ 41
BEST AND FINAL OFFERS (BFO)................................................ 100
CAPITATION................................................................. 112
CAPITATION ADJUSTMENTS..................................................... 67
CERTIFICATION OF ACCURACY OF INFORMATION PROVIDED.......................... 77
CHANGES IN PERFORMANCE: WAIVERS............................................ 56
CHILDREN'S REHABILITATIVE SERVICES (CRS).................................. 39
COMPENSATION............................................................... 65
COMPLIANCE WITH LAWS, RULES AND REGULATIONS................................ 55
CONTENTS OF OFFEROR'S PROPOSAL............................................. 95
CONTRACT COMPLIANCE SANCTION (PENALTY) ALTERNATIVE......................... 52
CONTRACT EXTENSIONS AND MODIFICATIONS...................................... 60
COOPERATION WITH OTHER CONTRACTORS......................................... 56
COORDINATION OF BENEFITS/ THIRD PARTY LIABILITY............................ 43
COST SHARING............................................................... 44
CROSS-OVER AREAS........................................................... 103
DATA EXCHANGE REQUIREMENT.................................................. 46
DELIVERY OF SERVICES....................................................... 14
DISSEMINATION OF INFORMATION............................................... 43
ELECTRONIC DATA INTERCHANGE (EDI).......................................... 104
EMERGENCY SERVICES......................................................... 22
ENCOUNTER DATA REPORTING................................................... 25
ENCOUNTER DATA REPORTING DEADLINES......................................... 26
ENROLLMENT AND DISENROLLMENT............................................... 16
FAMILY PLANNING SERVICES................................................... 77
FEDERALLY QUALIFIED HEALTH CENTERS (FQHC).................................. 50
FINANCIAL DISCLOSURE STATEMENT............................................. 83
FINANCIAL PLANNING......................................................... 79
FINANCIAL VIABILITY CRITERIA/ PERFORMANCE MEASURES......................... 27
FRAUD AND ABUSE............................................................ 64
GRIEVANCE BY THE CONTRACTOR AGAINST AHCCCSA................................ 60
GRIEVANCE PROCESS AND STANDARDS............................................ 35
HOSPITAL REIMBURSEMENT..................................................... 40
INDEMNITY TO THE STATE..................................................... 58
INDEPENDENT CONTRACTOR..................................................... 55
INFRINGEMENT OF PATENTS AND COPYRIGHTS..................................... 57
INITIAL MINIMUM CAPITALIZATION REQUIREMENTS................................ 52
</TABLE>
192
<PAGE> 210
<TABLE>
<S> <C>
INSURANCE................................................................. 59
LATE PROPOSALS............................................................ 100
LEGISLATIVE ISSUES........................................................ 104
LOBBYING.................................................................. 65
MANAGEMENT SERVICES SUBCONTRACTOR AUDITS.................................. 48
MANAGEMENT SERVICES SUBCONTRACTORS........................................ 48
MARKETING PLANS........................................................... 44
MEDICAL DIRECTOR.......................................................... 24
MEDICAL POLICIES.......................................................... 19
MEDICAL RECORDS........................................................... 29
MEMBER HANDBOOK........................................................... 31
MEMBER SURVEYS............................................................ 29
MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP............................ 48
METHOD OF PAYMENT......................................................... 65
MONTHLY CAPITATION........................................................ 66
MONTHLY ROSTER RECONCILIATION............................................. 45
NONDISCRIMINATION......................................................... 63
NURSING FACILITIES........................................................ 16
OFFEROR'S ADMINISTRATIVE FUNCTIONS SUBCONTRACTORS......................... 90
OFFEROR'S KEY PERSONNEL................................................... 91
OPEN ENROLLMENT........................................................... 30
OPERATIONAL AND FINANCIAL READINESS REVIEWS............................... 39
OPERATIONAL AND FINANCIAL REVIEWS......................................... 37
OPTIONAL GEOGRAPHIC AREA CAPACITY REQUEST................................. 89
ORDER OF PRECEDENCE....................................................... 55
ORGANIZATION.............................................................. 113
OWNERSHIP OF INFORMATION AND DATA......................................... 57
PERFORMANCE BOND OR BOND SUBSTITUTE....................................... 49
PERIODIC REPORT REQUIREMENTS.............................................. 26
PRIMARY CARE PROVIDER STANDARDS........................................... 21
PROGRAM................................................................... 112
PROHIBITION AGAINST DISCLOSURE OF CONFIDENTIAL INFORMATION................ 59
PROSPECTIVE OFFERORS' CONFERENCE.......................................... 100
PROSPECTIVE OFFERORS' INQUIRIES........................................... 99
PROVIDER MANUAL........................................................... 33
PROVIDER NETWORK.......................................................... 111
PROVIDER REGISTRATION..................................................... 28
QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT (QM/UM)..................... 28
QUARTERLY GRIEVANCE REPORT................................................ 37
REFERRAL PROCEDURES AND STANDARDS......................................... 37
REINSURANCE............................................................... 67
RELATED PARTY TRANSACTIONS................................................ 86
REQUESTS FOR INFORMATION.................................................. 49
REQUIRED FINANCIAL REPORTS................................................ 27
RFP MILESTONE DATES....................................................... 104
RIGHT OF INSPECTION....................................................... 64
SCOPE OF SERVICES......................................................... 13
SPECIALTY CONTRACTS....................................................... 44
STAFF REQUIREMENTS AND SUPPORT SERVICES................................... 22
STATEMENT OF ORGANIZATION STRUCTURE....................................... 78
SUBCONTRACTS.............................................................. 47
TERMINATION - AVAILABILITY OF FUNDS....................................... 62
TERMINATION FOR DEFAULT................................................... 61
TERMINATION FOR PROCUREMENT INTEGRITY VIOLATIONS.......................... 61
TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT......................... 61
</TABLE>
193
<PAGE> 211
<TABLE>
<S> <C>
TERMINATION - TRANSITION OF MEMBERS........................................... 62
TRANSITION OF MEMBERS......................................................... 30
UNENFORCEABLE PROVISIONS...................................................... 56
WARRANTY...................................................................... 55
WHOLE-COUNTY PROPOSALS........................................................ 103
WITHDRAWAL OF PROPOSAL........................................................ 100
WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS............................. 24
</TABLE>
194
<PAGE> 212
EXHIBIT 10.10(a)(1)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
<TABLE>
<CAPTION>
======================================================================================================
<S> <C> <C> <C>
1. AMENDMENT NUMBER: 2. CONTRACT NUMBER: 3. EFFECTIVE DATE OF AMENDMENT: 4. PROGRAM:
02 YH5-0001-04 October 1, 1994 OMC
======================================================================================================
5. CONTRACTOR'S NAME AND ADDRESS:
Arizona Health Concepts
2510 W. Dunlap, Suite 100
Phoenix, AZ 85021
=========================================================================================================
PURPOSE: To clarify application of Zip code cross-over to the per member per month capitation rate table.
=========================================================================================================
</TABLE>
7. The above referenced contract is hereby amended to replace the rate table in
Section B, Capitation Rates, with the following rate table:
<TABLE>
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COUNTY AFDC SSI W/ SSI W/O MNMI W/ MNMI W/O CCP SOBRA
MEDICARE MEDICARE MEDICARE MEDICARE SUP PAY
- - -------------------------------------------------------------------------------------------------------
GILA (1) 107.38 115.21 285.63 205.22 276.31 84.54 4313.63
- - -------------------------------------------------------------------------------------------------------
MARICOPA (2) 111.46 122.45 305.39 218.03 297.39 92.15 4694.18
- - -------------------------------------------------------------------------------------------------------
YAVAPAI (3) & (4) 104.73 115.12 286.11 205.22 276.31 83.15 4348.56
- - -------------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
(1) Includes cross-over Zip codes 85235 and 85292.
(2) Includes cross-over Zip code 85220.
(3) Includes cross-over Zip codes 85324, 86434, 86337 and 85332.
(4) Includes Zip code 86336, see amendment no. 01.
============================================================================
8. EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL
CONTRACT NOT HERETOFORE CHANGED AND/OR AMENDED REMAIN UNCHANGED AND IN FULL
EFFECT.
IN WITNESS WHEREOF THE PARTIES HERETO SIGN THEIR NAMES IN AGREEMENT.
<TABLE>
=========================================================================================================
<S> <C>
9. NAME OF CONTRACTOR/PROVIDER: 10. ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM
ARIZONA HEALTH CONCEPTS
=========================================================================================================
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
Blaine Bergeson Michael Veit
=========================================================================================================
TYPED NAME: BLAINE BERGESON TYPED NAME: MICHAEL VEIT
=========================================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING
ADMINISTRATOR
=========================================================================================================
DATE: 11/11/94 DATE: NOV 17 1994
=========================================================================================================
</TABLE>
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EXHIBIT 10.10(a)(2)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
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<S> <C> <C> <C>
1. AMENDMENT NUMBER: 2. CONTRACT NUMBER: 3. EFFECTIVE DATE OF AMENDMENT: 4. PROGRAM:
04 YH5-0001-04 October 1, 1994 OMC
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5. CONTRACTOR'S NAME AND ADDRESS:
Arizona Health Concepts
2510 W. Dunlap, Suite 100
Phoenix, AZ 85021
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PURPOSE: TO ADD CONTRACT CLAUSE DEFINING THE TERM OF THE CONTRACT, AND ADD INSURANCE REQUIREMENTS TO THE
MINIMUM SUBCONTRACT PROVISIONS.
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</TABLE>
7. The above referenced contract is hereby modified
A. By adding contract clause 34, Term of Contract.
"34. TERM OF CONTRACT
The term of this contract is October 1, 1994 to September 30, 1995."
B. The minimum subcontract provisions are revised by adding
clause 27, Insurance. A copy of the complete provisions
including adds clause 27 is attached.
<TABLE>
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EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
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<S> <C>
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
Blaine Bergeson Michael Veit
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TYPED NAME: BLAINE BERGESON TYPED NAME: MICHAEL VEIT
========================================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
========================================================================================================
DATE: 4-13-95 DATE: APR 18 1995
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<PAGE> 214
EXHIBIT 10.10(a)(3)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
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AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
5 YH5-0001-04 June 1, 1995 OMC
=================================================================================================
CONTRACTOR'S NAME AND ADDRESS:
Blaine Bergeson, CEO
Arizona Health Concepts
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
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PURPOSE OF AMENDMENT: To change reinsurance payments to a monthly basis.
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THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
Beginning May , 1995, AHCCCSA will make reinsurance payments to the Contractor
monthly instead of quarterly.
NOTE: Please sign, date and return both originals to: Mark Renshaw
AHCCCS Contracts and
Purchasing
701 E. Jefferson
Phoenix, AZ 85034
===============================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
<TABLE>
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<S> <C>
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
Blaine Bergeson Michael Veit
=================================================================================================
TYPED NAME: BLAINE BERGESON TYPED NAME: MICHAEL VEIT
=================================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING
ADMINISTRATOR
=================================================================================================
DATE: 7/17/96 DATE: 7/10/96
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</TABLE>
<PAGE> 215
EXHIBIT 10.10(a)(4)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
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<S> <C> <C> <C>
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
6 YH5-0001-04 October 1, 1995 OMC
====================================================================================================================================
CONTRACTOR'S NAME AND ADDRESS:
Blaine Bergeson, CEO
Arizona Health Concepts
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
====================================================================================================================================
PURPOSE OF AMENDMENT: To extend the term of the contract for one year and to amend Section D, Program Requirements.
====================================================================================================================================
</TABLE>
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
The contract term is hereby extended for the period 10/1/95 - 09/30/96
in accordance with Section E, Paragraph 16.
The contract requirements are hereby amended in accordance with Section
E, Paragraph 16, Pages 11-52 of the original contract (RFP) are hereby
deleted and replaced by the attached pages 11-47. These new pages
contain changed program requirements which are shown as either text
(shaded like this) or deleted text ( lined through like this) . All
amendments to the original contract have been incorporated into these
new pages and are not shown as new or changed requirements since the
Contractor has already received notice of them. The following page
contains a summary of the new changes.
By signing this contract amendment, the Contractor is (1) agreeing to
perform for an additional year according the terms of the contract as
amended, and (2) agreeing to the new and changed requirements contained
herein.
<TABLE>
====================================================================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
====================================================================================================================================
<S> <C>
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
Blaine Bergeson Michael Veit
====================================================================================================================================
TYPED NAME: BLAINE BERGESON TYPED NAME: MICHAEL VEIT
====================================================================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
====================================================================================================================================
DATE: 9/19/95 DATE: 10/2/95
====================================================================================================================================
</TABLE>
<PAGE> 216
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Scope of Services................................................... 12
2. Delivery of Services................................................ 14
3. Nursing Facilities.................................................. 15
4. Enrollment and Disenrollment........................................ 16
5. Medical Policies.................................................... 18
6. Primary Care Provider Standards..................................... 19
7. Emergency Services.................................................. 20
8. Staff Requirements and Support Services............................. 21
9. Written Policies, Procedures and Job Descriptions................... 22
10. Medical Director.................................................... 23
11. Encounter Data Reporting............................................ 23
12. Encounter Data Reporting Deadlines.................................. 23
13. Periodic Report Requirements........................................ 24
14. Required Financial Reports.......................................... 25
15. Financial Viability Criteria/ Performance Measures.................. 25
16. Quality Management and Utilization Management (QM/UM)............... 25
17. Provider Registration............................................... 26
18. Medical Records..................................................... 26
19. Member Surveys...................................................... 27
20. Open Enrollment..................................................... 27
21. Transition of Members............................................... 27
22. Member Handbook..................................................... 28
23. Provider Manual..................................................... 30
24. Appointment Standards............................................... 30
25. Grievance Process and Standards..................................... 31
26. Quarterly Grievance Report.......................................... 33
27. Referral Procedures and Standards................................... 33
28. Operational and Financial Reviews................................... 34
29. Operational and Financial Readiness Reviews......................... 34
30. Children's Rehabilitative Services (CRS)........................... 35
31. Hospital Reimbursement.............................................. 35
32. Behavioral Health Services.......................................... 36
33. Dissemination of Information........................................ 38
34. Coordination of Benefits/ Third Party Liability..................... 38
35. Cost Sharing........................................................ 39
36. Marketing Plans..................................................... 39
37. Specialty Contracts................................................. 39
38. Advances, Distributions, Loans and Investments...................... 40
39. Accumulated Fund Deficit............................................ 40
40. Monthly Roster Reconciliation....................................... 40
41. Data Exchange Requirement........................................... 40
42. Subcontracts........................................................ 42
43. Management Services Subcontractors.................................. 42
44. Management Services Subcontractor Audits............................ 43
45. Merger, Reorganization and Change of Ownership...................... 43
46. Requests for Information............................................ 43
47. Performance Bond or Bond Substitute................................. 43
48. Amount of Performance Bond.......................................... 44
49. Federally Qualified Health Centers (FQHC)........................... 44
50. Sanctions........................................................... 45
51. Initial Minimum Capitalization Requirements......................... 46
52. Claims Payment System............................................... 46
53. Vaccine for Children Program........................................ 46
54. Advance Directives.................................................. 46
</TABLE>
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1. SCOPE OF SERVICES
The Contractor is to provide covered services to AHCCCS members in accordance
with all applicable federal, State and local laws, rules, regulations and
policies, including services listed in this document, listed by reference in
attachments, and AHCCCS policies referenced in this document.
The covered services to be delivered to members during the term of this contract
are described in detail in AHCCCS Rules R9-22-202 et seq. and the AHCCCS Medical
Policy Manual, and are as follows:
ACUTE MEDICAL SERVICES
1) Inpatient and outpatient hospital
2) Emergency room
3) Physician
4) Outpatient Health Services, including those services that may be
provided in a Rural Health Clinic or Federally Qualified Health
Center
5) Laboratory, X-Ray and medical imaging
6) Pharmacy
7) Medical supplies, durable medical equipment and prosthetic
devices
8) Emergency ambulance
9) Medically necessary transportation
10) Family Planning (optional), including drugs, supplies, devices
and surgical procedures provided to delay or prevent pregnancy.
Referral services if Family Planning not provided (See Section G,
Para.2)
11) Abortion in cases of rape or incest or to save the life of the
mother
12) Therapies which include, physical, occupational, respiratory,
audiology and speech therapies
13) Podiatry
14) Private duty nursing, if medically necessary
15) Early and periodic screening, diagnosis and treatment services
for members under the age of 21 including transplantations and
behavioral health.
16) Organ transplantations which are medically necessary are limited
to the following services for members 21 years and older: kidney
and related immunosuppressant medications, cornea and bone, heart
with related immunosuppressant medications; autologous and
allogenic bone marrow with related chemotherapy or radiotherapy
and liver transplants with related immunosuppressant medications.
17) Eyeglasses and contact lenses for members 21 years and older as
the sole external prosthetic device after a cataract extraction.
18) Emergency dental care, extractions and medically necessary
dentures for members 21 years and older.
19) Home health services in lieu of hospitalization
20) Nursing facility services in lieu of hospitalization not to
exceed 90 days. See Section D, Paragraph 3, Nursing Facilities.
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BEHAVIORAL HEALTH SERVICES
Title XIX covered behavioral health services are available to all categorically
eligible members. For non-categorical members (MN/MI, EAC, ELIC) services are
limited to the first 72 hours of emergency behavioral health services. See
Section D, Paragraph 32 and the AHCCCS Behavioral Health Policy Manual for
details on covered behavioral health services.
QUALIFIED MEDICARE BENEFICIARY SERVICES
In addition, the following Medicare-covered services shall be provided by, or
through referral from, a primary care provider to members who are Dual Eligible
Qualified Medicare Beneficiaries (QMB Dual Eligibles). A QMB Dual Eligible
member is defined as a person who is eligible to receive services both as a
Qualified Medicare Beneficiary and as an AHCCCS member. These services are
limited in accordance with A.R.S. 36-2974 and Chapter 29 of the Arizona
Administrative Code:
1) Chiropractic services
2) Inpatient psychiatric services
3) Psychological services
4) Inpatient and outpatient occupational therapy
5) Respite services
AHCCCS is the payer of last resort. Covered services must first be billed to
Medicare and/or any other third party liability source.
The Contractor is responsible for paying all Medicare coinsurance and
deductibles for Medicare covered services for QMB Dual Eligibles. This applies
to members enrolled with an AHCCCS Acute Care contractor but not enrolled in a
Medicare HMO (i.e. Medicare fee-for-service) and includes coinsurance and
deductibles on Medicare covered services, such as chiropractic services, even
though these services are not covered by Medicaid. QMB Dual Eligibles are
identified by rate code on the Capitation/ Enrollment rosters.
For members who qualify for both Medicare and Medicaid but are not QMB Dual
Eligibles, the Contractor is responsible for payment of Medicare coinsurance and
deductibles for all AHCCCS covered services.
AHCCCSA has requested a waiver from HCFA for this population. The Contractor
should refer to the waiver request document for additional details and possible
impact on Contractor operations.
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2. DELIVERY OF SERVICES
Covered and excluded services for members are listed in AHCCCS Rule R9-22-202
and R9-22-203. Contractor is solely responsible for the provision of covered
services. Covered services must be medically necessary and provided by, or under
the direction of, a primary care provider. The Contractor shall provide the same
standard of care for all members regardless of the member's eligibility
category. When a service requiring prior authorization is denied, the Contractor
shall ensure the member is notified either verbally or in writing of the reasons
for the denial within three working days from the date the decision to deny is
made. Chapter 300 of the Medical Policy Manual contains further detail on
notification requirements.
To ensure mainstreaming of AHCCCS members, the Contractor shall take affirmative
action so that members are provided covered services without regard to race,
color, creed, sex, religion, age, national origin, ancestry, marital status,
sexual preference, or physical or mental handicap, except where medically
indicated. Examples of prohibited practices include, but are not limited to, the
following:
a. Denying or not providing a member any covered service or availability
of a facility.
b. Providing to a member any covered service which is different, or is
provided in a different manner or at a different time from that
provided to other members, other public or private patients or the
public at large except where medically necessary.
c. Subjecting a member to segregation or separate treatment in any manner
related to the receipt of any covered service; restricting a member in
any way in his or her enjoyment of any advantage or privilege enjoyed
by others receiving any covered service.
d. The assignment of times or places for the provision of services on the
basis of the race, color, creed, religion, age, sex, national origin,
ancestry, marital status, sexual preference, income status, AHCCCS
membership, or physical or mental handicap of the participants to be
served.
If the Contractor knowingly executes a subcontract with a provider with the
intent of allowing or permitting the subcontractor to implement barriers to care
(i.e. the terms of the subcontract are more restrictive than this contract), the
Contractor will be in default of its contract.
If the Contractor identifies a problem involving discrimination by one of its
providers, it shall promptly intervene and implement a corrective action plan.
Failure to take prompt corrective measures may place the Contractor in default
of its contract.
The Contractor shall have a delivery system that meets AHCCCSA standards as
defined in this solicitation. The Contractor must insure that this delivery
system provides available, accessible and adequate numbers of facilities,
locations and personnel for the provision of covered services, including all
emergency medical care on a 24-hour-a-day, 7-day-a-week basis. AHCCCSA reserves
the right to waive certain network requirements, if said waiver is determined to
be in the best interest of the State.
The Contractor shall submit information quarterly regarding its provider
network. This information
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shall be submitted in the format described in the document titled AHCCCS
Contracted Health Plan Technical Interface Guidelines which may be found in the
Bidders' Library. This data is to be submitted to AHCCCSA on the tenth working
day of each calendar quarter. The Contractor must enter into a written agreement
with any provider the Contractor reasonably anticipates will be providing
services on its behalf more than 25 times during the contract year. Exceptions
to this requirement include the following:
a) If a contracted provider refers to a non-contracted provider
(e.g. lab tests, anesthesia, etc.), a written agreement is not
required.
b) If a provider who provides services more than 25 times during the
contract year refuses to enter into a written agreement with the
Contractor, the Contractor shall submit documentation of such
refusal to AHCCCS Office of Managed Care within seven days of its
final attempt to gain such agreement.
Any other exceptions to this requirement must be approved by AHCCCS Office of
Managed Care.
All material changes in the Contractor's provider network must be approved in
advance by AHCCCSA. A material change is defined as one which affects, or can
reasonably be foreseen to affect, the Contractor's ability to meet the
performance and network standards as described in this solicitation. The Office
of Managed Care must be notified of planned material changes in the provider
network before the change process has begun, for example before issuing a 60-day
termination notice to a provider. The notification shall be made within one
working day if the change is unexpected. The Office of the Medical Director will
assess proposed changes in the Contractor's provider network for potential
impact on members' health care and provide a written response to the Contractor
within 14 days of receipt of request. For emergency situations, AHCCCSA will
expedite the approval process.
The Contractor shall notify AHCCCSA, Office of Managed Care, within one working
day of any unexpected changes that would impair its provider network. This
notification shall include (1) information about how the change will affect the
delivery of covered services, and (2) the Contractor's plans for maintaining the
quality of member care if the provider network change is likely to result in
deficient delivery of covered services.
3. NURSING FACILITIES
The Contractor shall provide nursing facility services for short-term
convalescent care not to exceed 90 days in a contract year. These include
Skilled Nursing Facility level services with 24-hour medical supervision and
Intermediate Care Facility level services with 24-hour supervised care. The
Contractor may have members residing in nursing facilities assigned to them who
are not eligible for ALTCS but are eligible for covered services as provided
under this contract. Services must be provided in licensed facilities certified
under Titles XVIII and XIX. The Contractor shall not deny such nursing facility
services if the nursing facility is unable to obtain prior authorization in
situations where MN/MI eligibility and ALTCS eligibility overlap and the member
is enrolled with an AHCCCS acute care contractor. In such situations, the
Contractor shall impose reasonable authorization requirements. The Contractor's
payment responsibility described above applies only in situations where the
nursing facility has not been notified in advance of the member's enrollment
with an AHCCCS acute care contractor.
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To further illustrate, when ALTCS eligibility overlaps AHCCCS acute care
enrollment, the acute care enrollment takes precedence. Although the member
could be ALTCS eligible for this time period, there is no ALTCS enrollment that
occurs on the same days as AHCCCS acute enrollment. The acute care health plan
is responsible for payment of services while the member is enrolled with that
health plan. The AHCCCS health plan is not responsible for the full 90 days of
nursing facility coverage if ALTCS enrollment occurs before the 90 days has
ended.
4. ENROLLMENT AND DISENROLLMENT
Eligibility for the various AHCCCS coverage groups is determined by one of the
following agencies:
SOCIAL SECURITY ADMINISTRATION (SSA)
SSA determines eligibility for the Supplementary Security Income (SSI)
cash program. SSI Cash recipients are automatically eligible for AHCCCS
coverage.
DEPARTMENT OF ECONOMIC SECURITY (DES)
DES determines eligibility for the Aid to Families with Dependent
Children (AFDC) cash program (AFDC Cash recipients are automatically
eligible for AHCCCS coverage), AFDC Medical Assistance Only (MAO)
groups (including SOBRA women and children) and the Eligible Assistance
Children (EAC) State program.
Effective 7/1/95, AHCCCSA determines eligibility for the SSI/MAO
groups.
ARIZONA'S 15 COUNTIES
Each County determines eligibility for the Medically Needy/Medically
Indigent (MN/MI) and the Eligible Low Income Children (ELIC) State
Program.
AHCCCS acute care eligible members are enrolled with contractors in
accordance with the rules set forth in R9-22-333, R9-22-334, R9-22-335,
R9-22-337, R9-22-339, R9-22-340, R9-22-342 and R9-22-707.
HEALTH PLAN CHOICE
All members except those eligible under the MN/MI, EAC or ELIC state programs
have a choice of available contractors. If there is only one contractor
available for the member's county or zip code, no choice is offered. Upon
notification of a member's eligibility, AHCCCSA sends to the member an
enrollment choice letter, instructions on How to Choose a Health Plan and the
telephone number to call to enroll. A listing of the available contractors and
their telephone numbers are included with instructions to members to call the
contractors directly with specific questions concerning the contractors' health
plan. Members who do not make a choice by the sixteenth day from the date on the
enrollment letter are automatically assigned to an available contractor using
the method applied to the MN/MI population.
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AHCCCSA assigns MN/MI eligible members to an available contractor based on
family continuity or through AHCCCSA's auto-assignment algorithm. These members
do not get a choice until the open enrollment period.
An exception to the above enrollment policies is that previously eligible and
enrolled members who have been disenrolled for less than 90 days will be
automatically enrolled with the same contractor if that contractor is still
available. NEWBORNS
Newborns of AHCCCS eligible mothers who were enrolled at the time of the child's
birth and whose newborn notification was received by AHCCCSA in a timely manner
will be enrolled with the mother's contractor. Categorically eligible mothers of
newborns are sent a letter advising them of their right to choose a different
contractor for their child; otherwise the child will remain with the mother's
contractor.
Newborns of MN/MI mothers are enrolled with the mother's contractor for a
minimum of 30 days up to a maximum of 60 days.
The enrollment date for the newborn with the mother's contractor is dependent
upon the timeliness of the contractor's notification to AHCCCSA of the newborn's
birth. When determining the number of days from the date of birth to date of
notification, the day after birth is considered to be day "one".
1) If notification is within three days of the date of the newborn's birth, the
newborn is enrolled effective the date of birth.
2) If notification is from four through 30 days after date of birth, the newborn
is enrolled effective the date of notification.
3) If notification is more than 30 days after date of birth, the categorical
newborn is enrolled effective three days after notification.
AHCCCS Rules R9-22-342 and R9-22-707 contain additional information concerning
newborn enrollment and payment.
ENROLLMENT GUARANTEES
Upon initial capitated enrollment as a categorical eligible member or as an
Eligible Assistance Child (EAC), the member is guaranteed a minimum of five full
months of continuous enrollment.
Upon termination of categorical or EAC eligibility, the enrollment guarantee is
granted if the member has not had at least five continuous months of capitated
enrollment as a categorical or EAC following the month in which the initial
categorical or EAC enrollment began. Enrollment guarantees do not apply to
American Indians who choose Indian Health Services (IHS) as their health plan.
The enrollment guarantee applies a maximum of one time per member as a
categorical member and one time as an EAC member.
If a member changes from one contractor to another within the enrollment
guarantee period, the remainder of the guarantee period applies to the new
contractor.
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AHCCCS Rule R9-22-337 describes the reasons for which the enrollment guarantee
may be terminated.
AMERICAN INDIANS
American Indians eligible under any coverage group other than MN/MI, on or
off-reservation, have a choice of Indian Health Services (IHS) or any available
contractor. If choice is not made within the specified time limit, American
Indian members living on-reservation will be assigned to IHS and American Indian
members living off-reservation will be assigned to an available contractor using
AHCCCSA's family continuity policy and auto-assignment algorithm.
American Indians may change from IHS to a contractor or from a contractor to IHS
once a year in addition to the open enrollment period.
American Indian members eligible under the MN/MI coverage group living
on-reservation will be assigned to Indian Health Services (IHS) and those living
off-reservation will be assigned to a contractor using regular MN/MI enrollment
policy.
AHCCCSA is the sole authority in enrolling and disenrolling members. The
Contractor shall not disenroll any member for any reason.
5. MEDICAL POLICIES
The AHCCCS Medical Policy Manual has been issued, is hereby incorporated by
reference and is available in the Bidders' Library. Additional requirements
include the following EPSDT services:
EPSDT PARTICIPATION
The Contractor shall ensure that members under age 21 are receiving the required
EPSDT screens in accordance with the AHCCCS periodicity schedule (See AHCCCS
Medical Policy Manual.)
The Contractor shall ensure that it has achieved a 65% participation rate for
the period 10/1/94 - 9/30/95. The goal for Contract Year 96 (10/1/95 - 9/30/96)
is 75% participation for EPSDT eligible children. "Participation" is defined as
one initial or periodicity visit and will be measured using encounter data.
If the Contractor has not achieved the 75% participation rate by 9/30/96,
it shall submit a corrective action plan to AHCCCSA within 30 days of
notification by AHCCCSA of its actual participation rate. AHCCCSA may conduct a
follow-up onsite review and/or impose financial sanctions for non-compliance.
The Contractor shall submit to AHCCCSA, Office of the Medical Director, within
30 days from the beginning date of the contract a comprehensive plan to increase
member participation in the EPSDT program. The plan must be reviewed and
approved by AHCCCSA and shall include at a minimum the following management
components:
Program monitoring and evaluation
Member outreach
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Provider education
The Contractor shall submit to AHCCCSA, Office of the Medical Director, a
quarterly progress report that outlines the advances achieved in reaching the
established goals.
DENTAL SERVICES
The Contractor shall ensure that enrolled members under age 21 have direct
access (i.e. no referral necessary) to dental providers. Enrolled members may
also be referred by their PCPs. Enrolled members age three and over shall be
screened annually by a dentist who will perform an evaluation and report
findings and treatment to the member's PCP and/or the Contractor. Enrolled
members under age three shall be screened by their PCP and referred to a dentist
when medically necessary.
Dental standards may be found in the AHCCCS Medical Policy Manual which is
incorporated herein by reference and which may be found in the Bidders' Library.
IMMUNIZATIONS
AHCCCSA will conduct annual immunization audits of the Contractor based on
random sampling to assess the immunization status of two-year-old children.
The Contractor shall provide all assistance necessary to complete the audits in
a timely and efficient manner, including a staff RN liaison to assist in field
work, locating the medical records and immunization histories of selected sample
children and conducting medical chart reviews. If medical records are missing
for more than 5% of the sample group, the Contractor is subject to sanction by
AHCCCSA.
For Contract Year 96 (10/1/95 - 9/30/96), the AHCCCS goal is for the Contractor
to achieve the following immunization rates for two-year-old children:
Diphtheria, Tetanus, Pertussis vaccine (DTP) - 70% 4 doses
Oral polio vaccine (OPV) - 75% 3 doses
Measles, Mumps, Rubella vaccine (MMR) - 80% 1 dose
H. Influenza, Type B (HIB) - 80% 1 dose
Hepatitis B (Hep B) - 75% 3 doses
Combined 3-antigen rate (4 DTP, 3 OPV, 1 MMR) 70%
The immunization audits will be conducted to verify rates achieved and the
results will be published. If the Contractor has not achieved CY 96
immunization goals, it shall submit a corrective action plan to AHCCCSA within
30 days of receipt of notification of its immunization rates. AHCCCSA may
conduct a follow-up on-site review or impose monetary sanctions for
non-compliance.
6. PRIMARY CARE PROVIDER STANDARDS
To the extent required by this contract, the Contractor shall offer its members
freedom of choice in selecting a Primary Care Provider (PCP). At a minimum, the
Contractor shall have or provide one full-time
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equivalent (FTE) PCP per 2,500 members. This standard refers to total AHCCCS
members and must be adjusted as necessary by the Contractor in order to meet the
appointment availability standards. The number of members assigned to a PCP
shall be decreased by the Contractor if necessary to maintain the appointment
availability standards. The Contractor must subcontract with PCPs and other
health care providers according to the service area standards identified in
Attachment B.
When a new member has been assigned to the Contractor, the Contractor shall
inform the member in writing of his enrollment and of his PCP assignment within
10 days of the Contractor's receipt of notification of assignment by AHCCCSA.
The Contractor shall include with the enrollment notification a list of all the
Contractor's available PCPs and the process for changing the PCP assignment,
should the member desire to do so. The Contractor shall confirm any PCP change
in writing to the member. Members may make both their initial PCP selection and
any subsequent PCP changes either verbally or in writing. The Contractor shall
have a system to monitor and ensure that each member has a PCP assignment and
that the Contractor's data regarding PCP designation is current. The PCP is held
accountable for supervising, coordinating and providing initial and primary care
to each assigned member. In addition, the PCP is responsible for initiating
referrals for specialty care, maintaining continuity of each member's health
care and maintaining the member's medical record which includes documentation of
all services provided to the member by the PCP, as well as any specialty or
referral services. The Contractor shall establish policies and procedures to
ensure that PCPs are adequately notified of specialty and referral services.
Hospitals and clinics shall not use the hospital or clinic provider ID number
when billing AHCCCS or Acute Care contractors for services provided by
physicians, physician assistants, nurse practitioners, certified nurse midwives,
certified registered nurse anesthetists and surgical assistants. Each of the
practitioners shall be identified as the service provider by their AHCCCS
provider ID number on the claim/encounter submitted to AHCCCSA. The hospital or
clinic may be identified as the group biller on the claim or encounter if the
necessary group billing authorization has been signed by the practitioner as
part of the provider registration process.
FQHCs are subject to the same requirements as clinics and hospitals with regard
to practitioner services. AHCCCS does not cover services provided by interns and
residents as billable practitioner services.
PCPs and specialists who provide inpatient services to the Contractor's enrolled
members shall have admitting and treatment privileges in a minimum of one
general acute care hospital that is under subcontract with the Contractor and is
located within the Contractor's service area.
The Contractor shall ensure that a maternity care provider is designated for
each enrolled pregnant woman for the duration of her pregnancy and postpartum
care. A maternity care provider may be a Family Practitioner, a General
Practitioner or an Obstetrician, but must have OB hospital privileges. A
pregnant woman may choose or be assigned a PCP who provides OB services. Such
designation shall be consistent with the freedom of choice requirements for
selecting health care professionals while ensuring that continuity of care is
not compromised. Maternity services shall be provided in accordance with the
AHCCCS Medical Policy Manual.
7. EMERGENCY SERVICES
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The Contractor shall have and/or provide the following as a minimum:
a. Emergency services facility adequately staffed by qualified medical
professionals to provide pre-hospital, emergency care on a
24-hour-a-day, 7-day-a-week basis, for the sudden onset of a medically
emergent condition as defined by AHCCCS Rule R9-22-101. The Contractor
is encouraged to contract with or employ the services of non-emergency
facilities (e.g. urgent care centers) to address member non-emergency
care issues occurring after regular office hours or on weekends. The
Contractor shall be responsible for developing guidelines for member
education to insure the appropriate utilization of emergency room
services.
b. Triage services provided to members on initiation of emergency care,
provided that the services were medically necessary to assess and
determine whether an emergency medical condition exists.
c. Designated emergency transportation system, defined as 9-1-1, fire,
police, or other locally established system to provide rapid response
for medical emergency calls. Transportation will be undertaken to the
nearest appropriate facility capable of meeting the member's medical
needs.
8. STAFF REQUIREMENTS AND SUPPORT SERVICES
The Contractor shall have in place the organization, management and
administrative systems capable of fulfilling all contract requirements. At a
minimum, the following staff are required. If the proposed staff member will be
working on AHCCCS requirements less than full-time, indicate the percentage of
time the staff member will be spending on AHCCCS requirements. Include also the
other duties such staff member will be performing:
a. A full-time Administrator to oversee the entire operation of the health
plan
b. A Medical Director who shall be an Arizona-licensed physician. The
Medical Director shall be actively involved in all major clinical
program components of the Contractor's health plan. The Medical
Director shall devote sufficient time to Contractor's health plan to
ensure timely medical decisions, including after-hours consultation as
needed
c. A full-time Chief Financial Officer to oversee the budget and
accounting systems implemented by the Contractor
d. A Quality Management/ Utilization Management Coordinator who is an
Arizona-licensed registered nurse, physician or physician's assistant;
e. A Maternal Health/ EPSDT Coordinator who shall be an Arizona-licensed
registered nurse, physician or physician's assistant; or have a
Master's degree in Health Services, Public Health or Health Care
Administration;
f. A Behavioral Health Coordinator shall be a registered nurse, licensed
by the State of Arizona, with two years of behavioral health
experience, or a person with a Bachelor's degree in a behavioral health
related field and two years training and experience in actual
behavioral health services
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delivery. Extensive experience in a behavioral health-related field may
substitute for the above, subject to prior approval by AHCCCSA.
g. Prior Authorization staff to authorize medical care 24 hours per day, 7
days per week. This staff shall be directly supervised by an
Arizona-licensed registered nurse, physician or physician's assistant;
h. Concurrent Review staff to conduct inpatient concurrent review. This
staff shall consist of an Arizona-licensed registered nurse, physician,
physician's assistant or an Arizona-licensed practical nurse
experienced in concurrent review and under the direct supervision of a
registered nurse, physician or physician's assistant.
i. Member Service staff to coordinate communications with members and act
as member advocates. There shall be sufficient Member Service staff to
enable members to receive prompt resolution to their problems or
inquiries;
j. Provider Service staff to coordinate communications between the
Contractor and its subcontractors. There shall be sufficient Provider
Services staff to enable providers to receive prompt resolution to
their problems or inquiries; k. Claims Processors to ensure the timely
and accurate processing of original claims, claims correction letters,
resubmissions and overall adjudication of claims;
k. Claims Processors to ensure the timely and accurate processing of
original claims, claims correction letters, resubmissions and overall
adjudication of claims;
l. Encounter Processors to ensure the timely and accurate processing and
submission to AHCCCSA of encounter data and reports;
m. A Grievance Coordinator who will manage and adjudicate member and
provider grievances; and
n. Clerical and support staff to ensure appropriate functioning of the
Contractor's operation.
The Contractor shall inform AHCCCSA, Office of Managed Care, in writing within
seven days of staffing changes in the following key positions:
- Administrator
- Medical Director
- Chief Financial Officer
- Quality Management/ Utilization Management Coordinator
- Provider Services manager
- Member Services manager
- Claims Administrator
- Maternal Health/ EPSDT Coordinator
- Grievance Coordinator
- Behavioral Health Coordinator
The Contractor shall ensure that all staff have appropriate training, education,
experience and orientation to fulfill the requirements of the position.
9. WRITTEN POLICIES, PROCEDURES AND JOB DESCRIPTIONS
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The Contractor shall develop and maintain written policies, procedures and job
descriptions for each functional area of its health plan, consistent in format
and style. The Contractor shall maintain written guidelines for developing,
reviewing and approving all policies, procedures and job descriptions.
All policies and procedures shall be reviewed at least annually to ensure that
the Contractor's current practices reflect written policies. Reviewed policies
shall be dated and signed by the Contractor's appropriate manager, coordinator,
director or administrator. All medical and quality management policies must be
approved and signed by the Contractor's Medical Director.
Job descriptions shall be reviewed at least annually to ensure that current
duties performed by the employee reflect written requirements.
10. MEDICAL DIRECTOR
The Contractor shall have on staff a Medical Director who is currently licensed
in Arizona as a Medical Doctor or Doctor of Osteopathic Medicine. The Medical
Director shall be responsible for:
a. The development, implementation and medical interpretation of medical
policies and procedures to guide and support the provision of medical
care to members
b. Oversight of provider recruitment activities
c. Reviewing all providers' applications and submit recommendations to
those with contracting authority regarding credentialling and
reappointment of all physicians prior to the physician's contracting
(or renewal of contract) with the Contractor health plan
d. Continuing surveillance of the performance of providers in their
provision of health care to members as described in the AHCCCS Medical
Policy Manual, Chapter 900.
e. Administration of all medical activities of the Contractor
f. Continuous assessment and improvement of the quality of care provided
to members
g. Serving as Chairperson of Quality Management Committee
h. Oversight of provider education, inservice training and orientation
i. Assuring that adequate staff and resources are available for the
provision of proper medical care to members as discussed in Chapter 900
of the AHCCCS Medical Policy Manual
j. Attending AHCCCS Medical Director meetings
11. ENCOUNTER DATA REPORTING
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The Contractor shall submit encounter data to AHCCCSA acknowledging that a
contract service has been performed. This requirement is in accordance with the
terms and conditions of the HCFA grant award.
Encounter data must be provided to AHCCCSA by electronic media. Formatting and
specific requirements for encounter data are described in the AHCCCS Encounter
Reporting User Manual and AHCCCS Contracted Health Plan Technical Interface
Guidelines, copies of which may be found in the Bidders' Library .
Whether using magnetic tape or direct automated data exchange, data must be
organized into the PMMIS AHCCCSA-supplied formats. The Encounter Record
Submission Standards and Penalty Provisions are included herein as Attachment C.
12. ENCOUNTER DATA REPORTING DEADLINES
Encounter data for all contract services must be received by AHCCCSA no more
than 240 days from the end of the month in which the service was rendered. See
AHCCCS Encounter Reporting User Manual for additional information regarding
deadlines.
13. PERIODIC REPORT REQUIREMENTS
AHCCCSA, under the terms and conditions of its HCFA grant award, requires
periodic reports, encounter data, and other information from the Contractor. The
submission of late, inaccurate, or otherwise incomplete reports shall constitute
failure to report subject to the penalty provisions described in this contract.
Standards applied for determining adequacy of required reports are as follows:
TIMELINESS Reports or other required data shall be received on or
before scheduled due dates.
ACCURACY Reports or other required data shall be prepared in
strict conformity with appropriate authoritative
sources and/or AHCCCS defined standards.
COMPLETENESS All required information shall be fully disclosed in a
manner that is both responsive and pertinent to report
intent with no material omissions.
AHCCCS requirements regarding reports, report content and frequency of
submission of reports are subject to change at any time during the term of the
contract. The Contractor shall comply with all changes specified by AHCCCSA. The
Contractor may be entitled to additional payments because of such added contract
requirements.
The Contractor shall be responsible for continued reporting beyond the term of
the contract. For example, processing claims and reporting encounter data will
likely continue beyond the term of the contract because of lag time in filing
source documents by subcontractors.
The Contractor shall maintain books and records relating to covered services and
expenditures including reports to AHCCCSA and working papers used in the
preparation of reports to AHCCCSA. The Contractor shall comply with all
specifications for record keeping established by AHCCCSA. All books and records
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shall be maintained to the extent and in such detail as required by AHCCCS Rules
and policies. Records shall include but not be limited to financial statements,
records relating to the quality of care, medical records, prescription files and
other records specified by AHCCCSA.
The Contractor agrees to make available at its office at all reasonable times
during the term of this contract and the period set forth in paragraphs a. and
b. below any of its records for inspection, audit or reproduction by any
authorized representative of AHCCCSA, State or federal government.
The Contractor shall preserve and make available all records for a period of
five years from the date of final payment under this contract except as provided
in paragraphs a. and b. below:
a. If this contract is completely or partially terminated, the records
relating to the work terminated shall be preserved and made available
for a period of five years from the date of any such termination.
b. Records which relate to grievances, disputes, litigation or the
settlement of claims arising out of the performance of this contract,
or costs and expenses of this contract to which exception has been
taken by AHCCCSA, shall be retained by the Contractor for a period of
five years after the date of final disposition or resolution thereof.
14. REQUIRED FINANCIAL REPORTS
The Contractor shall comply with all financial reporting requirements contained
in the Reporting Guide for Acute Health Care Contractors with the Arizona Health
Care Cost Containment System. The Guide, which may be found in the Bidders'
Library, contains a complete listing of all monthly, quarterly and annual
reporting requirements including due dates for each report.
15. FINANCIAL VIABILITY CRITERIA/ PERFORMANCE MEASURES
AHCCCSA has established the following financial viability criteria/ performance
goals:
CURRENT RATIO Current assets divided by current
liabilities. "Current assets" includes any
long-term investments that can be converted
to cash within 24 hours without significant
penalty (i.e., greater than 20%).
Standard: At least 1.00
EQUITY PER MEMBER Equity divided by the number of members at
the end of the period.
Standard: At least $150
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MEDICAL EXPENSE RATIO Total medical expenses divided by total
capitation+SOBRA+TPL
Standard: 88-91%
ADMINISTRATIVE COST PERCENTAGE Total administrative expenses (excluding
income taxes), divided by total revenue
(including interest income).
Standard: No more than 9%
RECEIVED BUT UNPAID CLAIMS Received but unpaid claims divided by the
(DAYS OUTSTANDING) average daily medical expenses for the
period, net of sub-capitation expense.
Standard: No more than 45 days
AHCCCSA is currently working with all health plans to develop additional
financial performance measures that may be used to evaluate the Contractor's
performance under this contract.
16. QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT (QM/UM)
The Contractor shall provide to members quality medical care as described in the
AHCCCS Medical Policy Manual, Chapter 900, regardless of payer source or
eligibility category. The Contractor shall institute processes to assess, plan,
implement and evaluate quality improvement activities. The Contractor shall
submit its quality of care study proposal(s) as required Chapter 900, Standard 2
in the AHCCCS Medical Policy Manual by November 15 of each contract year. The
study results shall be submitted to AHCCCS, Office of the Medical Director,
within 90 days of the end of each contract year.
The Contractor must maintain a written QM/UM plan which details plans for
compliance with the AHCCCS Medical Policy Manual, including all reporting
requirements, which is incorporated herein by reference and may be found in the
Bidders' Library.
The Contractor shall report all standardized clinical outcome indicators as
described in the AHCCCS Medical Policy Manual, Chapter 900.
17. PROVIDER REGISTRATION
The Contractor will ensure that all its subcontractors register with AHCCCSA as
an approved service provider and receive an AHCCCS Provider ID Number. A
provider agreement must be signed with each provider and retained in the
Contractor's files. This provider registration process must be completed in
order for the Contractor to report services a subcontractor renders to enrolled
members and for the Contractor to be paid reinsurance.
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18. MEDICAL RECORDS
The member's medical record is the property of the provider who generates the
record. Each member is entitled to one copy of his or her medical record. The
Contractor shall have written policies and procedures to maintain the
confidentiality of all medical records. AHCCCSA shall be afforded prompt access
to all members' medical records whether electronic or paper.
The Contractor shall have written policies and procedures for the maintenance of
medical records so that those records are documented accurately and in a timely
manner, are readily accessible, and permit prompt and systematic retrieval of
information.
The Contractor shall have written standards for documentation on the medical
record for legibility, accuracy and plan of care which comply with the AHCCCS
Medical Policy Manual, a copy of which may be found in the Bidders' Library.
The Contractor shall have written plans for providing training and evaluating
providers' compliance with the Contractor's medical records standards.
Medical records shall be maintained in a detailed and comprehensive manner which
conforms to good professional medical practice, permits effective professional
medical review and medical audit processes, and which facilitates an adequate
system for follow-up treatment. Medical records must be legible, signed and
dated.
When a member changes PCPs, his or her medical records or copies of medical
records must be forwarded to the new PCP within 10 working days from receipt of
the request for transfer of the medical records.
AHCCCSA is not required to obtain written approval from a member before
requesting the member's medical record from the PCP or any other agency. The
Contractor may obtain a copy of a member's medical records without written
approval of the member if the reason for such request is directly related to the
administration of the AHCCCS program.
Information related to fraud and abuse may be released so long as protected
HIV-related information is not disclosed. (A.R.S. 36-664I)
19. MEMBER SURVEYS
AHCCCSA may conduct annually a survey of a representative sample of the
Contractor's membership. AHCCCSA will design a questionnaire to assess
accessibility, availability and continuity of care with PCPs; communication
between members and the Contractor; and general member satisfaction with the
AHCCCS program. To ensure comparability of results, the questions to the members
will be the same for all contractors. AHCCCSA will consider suggestions from the
Contractor for questions to be included in this survey. The results of these
surveys will become public information and available to all interested parties
upon request. In addition, the Contractor is encouraged to perform its own
annual member survey. Such Contractor surveys must be approved in advance by
AHCCCSA.
20. OPEN ENROLLMENT
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AHCCCSA conducts an open enrollment for members once per contract year, usually
in August or September. AHCCCSA may hold additional open enrollments on a
limited basis as deemed necessary. During open enrollment members may change
contractors subject to the availability of other contractors within their area.
Members are mailed a printed enrollment form and may choose a new contractor by
contacting AHCCCSA to complete the enrollment process. If the member does not
participate in open enrollment, no change of contractor will be made (except for
approved changes under the Change of Plan policy) for the new contract year
provided the Contractor's contract is renewed and the member continues to live
in the Contractor's service area.
21. TRANSITION OF MEMBERS
The Contractor shall comply with the Member Transition for Open Enrollment
policy distributed by AHCCCSA in August, 1995.
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22. MEMBER HANDBOOK
The Contractor shall produce and provide printed information to each member or
family within 10 days of receipt of notification of the enrollment date. All
informational materials prepared by the Contractor shall be approved by AHCCCSA
prior to distribution to members. Information shall be provided in English and a
second language when 200 members or 5% of the Contractor's enrolled population,
whichever is greater, are non-English speaking. (AHCCCSA will advise the
Contractor when and if this requirement applies.) When there are program or
service site changes notification will be provided to the affected members at
least 14 days before implementation. The Contractor shall maintain documentation
verifying that the member handbook is reviewed at least once a year.
The member handbook shall be written at a 4th grade level. Suggested reference
material to determine whether this requirement is being met are:
- Fry Readability Index
- PROSE The Readability Analyst (software developed by Education
Activities, Inc.)
- Gunning FOG Index
- McLaughlin SMOG Index
At a minimum the member handbook shall include:
a. A table of contents
b. A description of all available contract services and an explanation of
any service limitations or exclusions from coverage and a notice
stating that the Contractor will be liable only for those services
authorized by the Contractor.
c. Information on what to do when family size changes
d. How to obtain a PCP, including a list of the names, telephone numbers
and service site addresses of PCPs available for selection by the
member and a description of the selection process. The PCP listing may
be included in a separate publication but this separate must be
provided with the member handbook.
e. How to change PCPs
f. How to make, change and cancel appointments with a PCP
g. List of applicable co-payments (including a statement stating that care
will not be denied due to lack of co-payment). The member handbook must
clearly state that members cannot be billed for covered services (other
than applicable co-payments) and under what circumstances a member may
be billed for non-covered services.
h. The process of referral to specialists and other providers
i. How to contact Member Services and a description of its function
j. What to do in case of an emergency and instructions for receiving
advice on getting care in case of an emergency. In a life-threatening
situation, the member handbook should instruct members to use the
emergency medical services (EMS) available and/or activate EMS by
dialing 9-1-1.
k. How to obtain emergency transportation and medically necessary
transportation.
l. EPSDT services
m. Maternity and family planning services
n. Behavioral health services; in particular, notification to members of
the added behavioral health services effective 10/1/95. This
notification may, at the Contractor's option, be done in a separate
communication to members.
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o. Out of county/ out of state moves
p. Grievance procedures, including a clear explanation of the member's
right to file a grievance and to appeal any decision that affects the
member's receipt of covered services.
q. Contributions the member can make towards his/her own health, member
responsibilities, appropriate and inappropriate behavior, and any other
information deemed essential by the Contractor or AHCCCS.
r. How to access after-hours care (urgent care).
Regardless of the format chosen by the Contractor, the member handbook must be
printed in a type-style and size which can easily be read by members with
varying degrees of visual impairment. At a minimum, the member handbook shall
also contain the following language regarding questions, problems and grievances
(Ref. AHCCCS Rule 9-22-518):
Q. What if I have any questions, problems or complaints about
_____________ Health Plan?
A. If you have a question or problem, please call _____________ and ask to
talk to a Member Representative. They are there to help you.
A. If you have a specific complaint about your medical care, the Member
Representative will help you.
Q. What if I'm not happy with the help given to me by the Member
Representative?
A. If you are unhappy with the answer you receive, you can tell the Member
Representative you want to file a written or oral grievance. The
grievance must be filed not later than 35 days after the date of the
action, decision, or incident.
A. ______________ Health Plan will make a final decision for grievances
within 30 days of receiving your written grievance. A letter will be
mailed to you stating the health plan's decision and the reason for the
decision. The letter will tell you how you can appeal the decision if
you are still unhappy. You must let the health plan know you want to
appeal the decision letter.
A. If you are appealing the health plan's decision, ______________
Health Plan will send your request for appeal to the AHCCCSA. You will
receive information from AHCCCSA on how your appeal will be handled.
AHCCCSA will then decide if the Contractor's decision was correct under
the circumstances.
23. PROVIDER MANUAL
The Contractor shall develop, distribute and maintain a provider manual which
must be approved in advance by AHCCCSA. For continuing offerors, the provider
manual must be submitted for approval even if it has been previously approved by
AHCCCSA. The Contractor shall document the approval of the provider manual by
the Contractor's Administrator and Medical Director and shall maintain
documentation which verifies that the provider manual is reviewed at least
annually. The Contractor shall ensure that each contracted provider is issued a
copy of the provider manual and is encouraged to distribute a provider manual to
any individual or group that submits claim and encounter data. The Contractor
remains liable for
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ensuring that all providers, whether contracted or not, meet the applicable
AHCCCS requirements such as covered services, billing, etc. At a minimum, the
Contractor's provider manual must contain information on the following:
a. Introduction to the Contractor which explains the Contractor's
organization and administrative structure
b. Provider responsibility and the Contractor's expectation of the
provider
c. Overview of the Contractor's Provider Service department and function
d. Listing and description of covered and non-covered services,
requirements and limitations
e. Emergency room utilization (appropriate and non-appropriate use of the
emergency room
f. EPSDT Services
g. Maternal/ Child Health Services
h. Behavioral Health Services
i. The Contractor's policy regarding PCP assignments
j. Referrals to specialists and other providers
k. Grievance and appeal rights
l. Billing and encounter submission information
- indicate which form, UB92, HCFA 1500, or Form C is to be used for
services
- indicate which fields are required for a claim to be considered
acceptable by the Health Plan. A completed sample of each form
shall be included
m. Contractor's written policies and procedures which affect the
provider(s) and/or the provider network
n. Claims re-submission policy and procedure
o. Reimbursement
p. Explanation of remittance advice
q. Prior authorization requirement
r. Claims medical review
24. APPOINTMENT STANDARDS
For purposes of this section, "urgent" is defined as an acute but not
necessarily severe disorder with the patient being in danger if not attended to.
The Contractor shall have procedures in place that ensure the following
standards are met:
Emergency PCP appointments - same day
Urgent care PCP appointments - within two days
Routine care PCP appointments - within 21 days
For SPECIALTY REFERRALS and DENTAL APPOINTMENTS, the Contractor shall be able to
provide:
Emergency appointments - within 24 hours of referral
Urgent care appointments - within 3 days of referral
Routine care appointments - within 30 days of referral
For MATERNITY CARE, the Contractor shall be able to provide initial prenatal
care appointments for enrolled pregnant members as follows:
First trimester - within 14 days of request
Second trimester - within 7 days of request
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Third trimester - within 3 days of request
High risk pregnancies - within 3 days of identification of high risk to
the Contractor or maternity care provider, or
immediately if an emergency exists.
For BEHAVIORAL HEALTH SERVICES to members 18-20 years of age, non-seriously
mentally ill, the Contractor shall be able to provide appointments as follows:
Emergency - within 24 hours of request
Non-emergency - within 7 days of request
If the Contractor needs to provide medically-necessary transportation to a
member, the Contractor shall require its transportation provider to schedule the
transportation so that the member arrives no sooner than one hour before the
appointment and does not have to wait more than one hour after making the call
to be picked up.
The Contractor shall monitor the adequacy of its appointment processes and
reduce the unnecessary use of alternative methods such as emergency room visits.
The Contractor shall monitor and ensure that a member's waiting time at the PCP
or specialist office is no more than 45 minutes, except when the provider is
unavailable due to an emergency.
The Contractor shall have established written procedures for disseminating its
appointment standards to the network and it must assign a specific member of its
organization to ensure compliance with these standards by the network.
The Contractor shall have written policies and procedures on educating its
provider network about appointment time requirements. The Contractor shall
monitor compliance with appointment standards and shall have a corrective action
plan when appointment standards are not met.
25. GRIEVANCE PROCESS AND STANDARDS
The Contractor shall have in place a written grievance policy for members and
providers which defines their rights regarding any adverse action by the
Contractor. This written policy shall be in accordance with applicable federal
and State law and AHCCCS Rules and policy including, but not limited to, AHCCCS
Rules R9-22-512; R9-22-518(A); R9-22-802; and R9-22-804. It shall include the
following provisions:
a. The grievance procedure will be provided to members upon enrollment, to
all subcontractors at time of contract, and to non-contracting
providers within 10 days of the date of receipt of the claim. For
non-contracting providers, the grievance procedure may be mailed with
the remittance advice provided the remittance is sent within 45 days of
receipt of claim.
b. Specific individual(s) are appointed with authority to require
corrective action to administer the grievance policy.
c. A log is maintained for all grievances containing sufficient
information to identify the grievant, date of receipt, nature of the
grievance and the date grievance is resolved.
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d. Within five working days of receipt, the grievant is informed by letter
that the grievance has been received. The letter must also be in a
second language when 200 members or 5% of the Contractor's enrolled
population, whichever is greater, is non-English speaking.
e. Each grievance is thoroughly investigated using the applicable
statutory, regulatory and contractual provisions as well as the
Contractor's policies and procedures, ensuring that facts are gathered
from all parties.
f. All documentation received and mailed by Contractor during the
grievance process is dated.
g. All grievances are filed in a secure, designated area and are retained
for five years following the final decision, judicial appeal or close
of a grievance.
h. A copy of the Contractor's final decision will be either hand-delivered
or delivered by certified mail to all parties whose interest has been
adversely affected by the decision. The final decision shall be mailed
to all other parties by regular mail. The date of the final decision
shall be the date of personal delivery or, if mailed, the postmark date
of the mailing. The final decision must include, and describe in
detail, the following:
1) the nature of the grievance;
2) the issues involved;
3) the reasons supporting the Contractor's decision including
references to applicable statute, rule and procedure;
4) the grievant's right to appeal the Contractor's decision to
AHCCCSA by filing the appeal to the Contractor no later than 15
days after the date of the Contractor's final decision. This must
also be written in a second language, if applicable.
i. If the Contractor's final decision is appealed, all supporting
documentation must be received by AHCCCSA, Office of Grievance and
Appeals no later than five working days from the date the Contractor
receives the appeal or from the date of the oral or written request
from AHCCCSA, Office of Grievance and Appeals. The appeal file must
contain a cover letter that includes:
1) grievant's name
2) grievant's AHCCCS I.D. number
3) grievant's address
4) phone number (if available)
5) date of receipt of grievance and appeal
6) summary of the Contractor's actions undertaken to resolve the
grievance and basis thereof
j. The following material shall be included in the appeal file:
1) written request of the grievant asking for the appeal;
2) copies of the entire file which include the investigations and/or
medical records; and the Contractor's grievance decision; and
3) other information used by the Contractor to resolve the grievance
and that would be necessary to AHCCCSA to resolve the grievance.
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k. The Contractor may attempt to use alternative resolution procedures to
resolve disputes presented to the Contractor verbally or in writing. If
the Contractor elects to use an alternative resolution process, it must
be administered and completed within 30 days from receipt of the
dispute. If the matter is not resolved to the grievant's satisfaction
within the 30-day period, the dispute must then be adjudicated using
the grievance standards contained above. However, the Contractor must
render the written grievance decision within a maximum of 45 days from
the date of the initial filing of the grievance or dispute unless a
longer period was agreed to by the parties involved.
l. For all disputes where an alternative resolution is proposed, the
Contractor must inform the grievant of the Contractor's resolution and
ask the grievant if the resolution is acceptable no later than 30 days
from the date that the dispute is initially presented to the
Contractor. If acknowledged as acceptable, the matter may be closed. If
the member or provider states that the resolution is unacceptable, the
Contractor must then treat the dispute as a formal grievance and abide
by the standards contained above.
m. For all disputes where an alternative resolution is proposed, the
Contractor must maintain a separate log, complying with paragraphs c.
and g. above.
26. QUARTERLY GRIEVANCE REPORT
The Contractor shall submit a Quarterly Grievance Report to AHCCCSA, Office of
Grievance and Appeals, using the Quarterly Grievance Report Format on file in
the Bidder's Library. The Quarterly Grievance Report must be received by the
AHCCCSA, Office of Grievance and Appeals, no later than 45 days from the end of
the quarter.
27. REFERRAL PROCEDURES AND STANDARDS
The Contractor shall have adequate written procedures regarding referrals to
specialists to include, as a minimum, the following:
a. Use of referral forms clearly identifying the Contractor
b. A system for resolving disputes regarding the referrals
c. Having a process in place that ensures the member's PCP receives all
specialist and consulting reports
d. A referral plan for any member who is about to lose eligibility and who
requests information on low-cost or no-cost health care services.
28. OPERATIONAL AND FINANCIAL REVIEWS
In accordance with AHCCCS Rule R9-22-521, AHCCCSA will conduct Operational and
Financial Reviews at least once every 12 months for the purpose of (but not
limited to) ensuring operational and financial program compliance. The Reviews
will identify areas where improvements can be made and make
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recommendations accordingly, monitoring the Contractor's progress towards
implementing mandated programs and providing the Contractor with technical
assistance if necessary.
The type and duration of the Operational and Financial Review will be solely at
the discretion of AHCCCSA. Except in cases where advance notice is not possible
or advance notice may render the review less useful, AHCCCSA will give the
Contractor at least three weeks advance notice of the date of the on-site
review. In preparation for the on-site Operational and Financial Reviews, the
Contractor shall cooperate fully with AHCCCSA and the AHCCCSA Review Team by
forwarding in advance such policies, procedures, job descriptions, contracts and
logs that AHCCCSA may request. Any documents not requested in advance by AHCCCSA
shall be made available upon request of the Review Team during the course of the
review. The Contractor personnel as identified in advance shall be available to
the Review Team at all times during AHCCCSA on-site review activities. While
on-site, the Contractor shall provide the Review Team with work space, access to
a telephone, electrical outlets and privacy for conferences.
Certain documentation submission requirements may be waived at the discretion of
AHCCCSA if the Contractor is obtaining NCQA accreditation. The Contractor must
submit entire NCQA report to AHCCCSA for such waiver consideration.
The Contractor will be furnished a copy of the Operational and Financial Review
Report and given an opportunity to comment on any review findings prior to
AHCCCSA publishing the final report. Operational & Financial Review findings may
be used in the scoring of subsequent bid proposals by that Contractor.
Recommendations made by the Review Team review in order to bring the Contractor
in compliance with federal, State, AHCCCS, and/or RFP requirements, must be
implemented by the Contractor. AHCCCSA may conduct a follow-up Operational and
Financial Review to determine the Contractor's progress in implementing
recommendations and achieving program compliance. Follow-up reviews may be
conducted at any time after the initial Operational and Financial Review.
AHCCCSA may conduct an Operational and Financial Review in the event the
Contractor undergoes a merger, reorganization, changes ownership or makes
changes in three or more key staff positions (Medical Director, Administrator,
Chief Financial Officer, Maternal Health/ EPSDT Coordinator, QM/UM Coordinator)
within a 12-month period.
The Contractor shall comply with all other medical audit provisions as required
by AHCCCS Rule R9-22-521.
29. OPERATIONAL AND FINANCIAL READINESS REVIEWS
AHCCCSA may conduct Operational and Financial Readiness Reviews on all
successful offerors and will, subject to the availability of resources, provide
technical assistance as appropriate. The Readiness Reviews will be conducted
prior to the start of business for the contract year beginning 10/1/94. The
purpose of Readiness Reviews is to assess new contractors' readiness and ability
to provide contract services to members at the start of the contract year. A new
contractor will be permitted to commence operations only if the Readiness Review
factors are met to AHCCCSA's satisfaction.
30. CHILDREN'S REHABILITATIVE SERVICES (CRS)
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CRS, a program administered by the Arizona Department of Health Services (DHS),
is designed to provide specialty medical and surgical care of a comprehensive
and rehabilitative nature to children who meet CRS financial and medical
eligibility criteria. CRS is not an emergency services program. While attempts
will be made by CRS administrators to accommodate emergency referrals, the
Contractor remains ultimately responsible for the provision of all covered
services to its members.
Since CRS is not an entitlement program and eligibility is based on medical
judgment, there is no guarantee that CRS administrators will accept
responsibility for treatment. The Contractor shall refer potentially eligible
children to CRS administrators. The referral process is discussed in the CRS
Policy and Procedures Manual, available in the Bidders' Library.
The CRS program provides a comprehensive multi-disciplinary approach to
management of CRS-covered conditions, but does not provide primary care.
Eligibility criteria for these services include:
a. Child has a CRS-covered condition as defined in the CRS Policy and
Procedures Manual.
b. Child requires comprehensive multi-disciplinary care.
c. Child has a reasonable potential for rehabilitation.
CRS-covered services will ordinarily include the planned management of the
covered condition, including inpatient care, surgery, therapy, limited DME and
home health care, and social and educational services, as well as periodic
follow-up. Emergency services are not ordinarily covered by CRS, nor is initial
care of newborn infants.
31. HOSPITAL REIMBURSEMENT
The Contractor shall reimburse hospitals for member care based on one of the
following rate methods:
a. AHCCCS Fee-For-Service Hospital Reimbursement Rate
- Inpatient: AHCCCS hospital-specific tiered per diem rates
- Outpatient: AHCCCS hospital-specific cost-to-charge ratio multiplied
by allowed charges,
OR:
b. The Subcontract Rate (The aggregate of subcontract rates must not
exceed what would have been paid had the AHCCCS Fee-For-Service
Hospital Reimbursement Rate been used.)
Within seven days of subcontracting with a hospital, the Contractor shall submit
a copy of this agreement, including all rates, terms and conditions, to AHCCCSA,
Assistant Director, Office of Managed Care. This submittal shall include
documentation that this negotiated rate agreement will, when considered in the
aggregate, be the same or less than what would have been paid under Paragraph a
above. To aid in making this determination, the Contractor shall require their
independent auditor to evaluate the reasonableness of their assumptions as part
of the annual audit.
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Effective 10/1/94, and annually thereafter, inpatient hospital-specific tiered
per diem rates will be adjusted in accordance with A.R.S. 36-2903.01 (J).
The Contractor shall reimburse out-of-state hospitals at the lowest of the
following rates for inpatient and outpatient services:
a. Negotiated discounted rate, or
b. Arizona average cost-to-charge ratio multiplied by allowed charges, or
c. Medicaid rate in effect in the state in which the hospital is located
at the time services are provided.
The Contractor may conduct prepayment and postpayment medical reviews of all
hospital claims including outlier claims. Erroneously paid claims are subject to
recoupment. For a more complete description of the guidelines for hospital
reimbursement, please consult the Bidders' Library for applicable statutes and
rules.
32. BEHAVIORAL HEALTH SERVICES
Title XIX covered behavioral health services are available to all categorically
eligible members:
UNDER AGE 18; AGE 21 AND OVER; SMI:
The Contractor is responsible for referring categorically eligible members under
the age of 18, age 21 and older, and SMI members of any age to the Arizona
Department of Health Services (ADHS) for the provision of Title XIX covered
behavioral health services. ADHS contracts with Regional Behavioral Health
Authorities (RBHAs) for the provision of Title XIX covered behavioral health
services. The Contractor is responsible for coordination of care with the ADHS
RBHAs in accordance with Chapter 1500 of the AHCCCS Behavioral Health Policy
Manual, a copy of which may be found in the Bidders' Library.
The Contractor is also responsible for communicating with the ADHS RBHAs, if
appropriate, regarding any medications that the PCP has prescribed.
NON-SMI, AGE 18, 19 AND 20:
The Contractor is responsible for providing Title XIX covered behavioral health
services to categorically eligible non-SMI members age 18, 19 and 20 in
accordance with AHCCCS Rule R9-22-1204 and the AHCCCS Behavioral Health Policy
Manual. Covered services include: inpatient hospital, inpatient psychiatric
facility for individuals under the age of 21, individual therapy and counseling,
group and/or family therapy and counseling, psychotropic medication adjustment
and monitoring, partial care, emergency crisis services, behavior management,
psychosocial rehabilitation, screening, evaluation and diagnosis, case
management and psychotropic medications.
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REFERRALS:
Categorically eligible members age 18, 19 and 20 may be referred directly for
the provision of behavioral health services by the Primary Care Physician (PCP),
family members, self-referrals, schools, other service providers, and members of
the community and State agencies as well as the Contractor's staff. The same
referral procedures (including appointment and utilization standards) which are
applicable to other health care services apply to behavioral health services.
INDIVIDUAL SERVICE PLAN:
The Contractor is responsible for developing an Individual Service Plan (ISP)
for all categorically eligible members age 18, 19 and 20 requiring inpatient
behavioral health services. It is also recommended that an ISP be developed for
any other members needing extended care (greater than 12 weeks) or intensive
care (more than one visit per week). The ISP is to be included as part of the
member's medical record.
CASE MANAGEMENT, CASE COORDINATION:
The Contractor is responsible for providing case management services, when
medically necessary. Case management services may vary in scope and frequency,
depending on the eligible person's intensity of need. Case management services
consist of a set of services and activities through which appropriate and
cost-effective Title XIX covered services are identified, planned, coordinated,
obtained, monitored and continuously evaluated.
Case coordination is provided to categorically eligible members age 18, 19 and
20 who are in need of behavioral health services but who do not require case
management services which are more intensive. Case coordination is limited to
basic ISP development, identification of service providers, monitoring, updates
and follow-up, when necessary.
QUALITY MANAGEMENT REQUIREMENTS:
Quality management for behavioral health services must be integrated into the
Contractors quality management plans and must meet the quality management
requirements established by AHCCCSA.
PROVIDER NETWORK:
The Contractor is responsible for contracting with behavioral health providers
who meet ADHS licensure and/or certification standards and who are registered as
a behavioral health provider with AHCCCSA. The Contractor may, at its option,
contract with ADHS RBHAs for the provision of behavioral health services. The
Contractor must ensure that a sufficient number of qualified behavioral health
providers are in their provider network and that providers comply with
subcontracting, appointment standards and other provider related requirements in
this document.
NOTIFICATION REQUIREMENTS:
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The Contractor is responsible for notifying AHCCCSA monthly of members referred
and receiving behavioral health services. The information is to be submitted to
the AHCCCS Office of Managed Care using the reporting format developed by
AHCCCSA and available in the Bidders' Library.
ENCOUNTER REPORTING:
The Contractor is responsible for filing encounter data for behavioral health
services in accordance with Section D, paragraph 11.
33. DISSEMINATION OF INFORMATION
The Contractor shall assist AHCCCSA from time to time, as requested by AHCCCSA,
in the dissemination of health education information prepared by AHCCCSA, or the
federal government, to its members. The cost of such dissemination shall be
borne by the Contractor.
All advertisements, publications and printed materials which are produced by the
Contractor and refer to covered services shall state that such services are
funded under contract with AHCCCSA .
34. COORDINATION OF BENEFITS/ THIRD PARTY LIABILITY
The Contractor shall coordinate benefits in accordance with ARS 36-2903.G so
that costs for services otherwise payable by the Contractor are cost avoided or
recovered from liable first or third-party payers specified in AHCCCS Rules
R9-22-1002.A. The Contractor may require subcontractors to be responsible for
coordination of benefits for services provided pursuant to this contract.
The Contractor shall collect or authorize its subcontractors to collect any
payments available from health insurers such as Medicare or private health
insurance for services provided to its members. The Contractor shall notify
AHCCCSA's Member File Integrity Section within 10 working days of any known
change in its member's health insurance coverage.
AHCCCS has contracted with a private firm to provide its third party liability
recovery functions. This firm shall be AHCCCSA's authorized representative.
The Contractor shall collect or authorize its subcontractors to collect any
monies available from third-party payers, except for worker's compensation,
uninsured and underinsured motorist insurance, first and third-party liability
insurance and tortfeasors. Collection in these instances are permitted only if
referred by AHCCCSA's authorized representative. When such categories of first
and third-party liability are identified by the Contractor or its
subcontractors, it shall be reported to AHCCCSA's authorized representative in
accordance with AHCCCS Rules R9-22-1002 D. and E.
If AHCCCSA's authorized representative determines that AHCCCSA has not incurred
or paid any claims related to the case, the case will be referred to the
Contractor for collection. The Contractor may be responsible for performing all
research and investigation needed for collection and payment of lien filing
related costs. The Contractor shall notify AHCCCSA's authorized representative
within five working days
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of the closure of any cases. If AHCCCSA has or expects to pay any claims related
to the case, then collection efforts, including claims paid by the Contractor,
will be handled by AHCCCSA's authorized representative. If collection efforts
are successful, AHCCCSA will distribute any funds remaining to the Contractor,
after full payment of AHCCCSA claims and related administrative costs.
AHCCCSA or its authorized representative will recover monies from estates and
for cases involving adoptions. The Contractor and its subcontractors shall
provide such information necessary to assist in determining the dollar amount of
the recovery and to facilitate the coordination of benefits. Additionally, the
Contractor shall perform any activities related to third-party liability (TPL)
required by AHCCCS Rules R9-22-1001 and 1002.
The Contractor shall notify AHCCCSA's authorized representative within five
working days of identifying a third-party liability case with known reinsurance.
Effective 10/1/95, the Contractor shall be responsible for performing research,
investigation, lien filing and other tasks necessary for the collection of
"total plan" cases. Total plan cases are those recovery cases involving
uninsured and underinsured motorist insurance, first and third party liability
insurance, and tortfeasors where there is no AHCCCSA financial liability
(fee-for-service or reinsurance) for medical services related to the injury.
35. COST SHARING
The Contractor is responsible for the collection of co-payments from members in
accordance with AHCCCS Rule R9-22-711.
36. MARKETING PLANS
The Contractor shall submit proposed marketing plans and materials to AHCCCSA
for prior approval in accordance with the AHCCCS Health Plan Marketing Policy, a
copy of which is available in the Bidders' Library.
37. SPECIALTY CONTRACTS
AHCCCSA may at any time negotiate or contract on behalf of the Contractor and
AHCCCSA for specialized hospital and medical services. AHCCCSA will consider
existing Contractor resources in the development and execution of specialty
contracts. AHCCCSA may require the Contractor to modify its delivery network to
accommodate the provisions of specialty contracts. Specialty contracts shall
take precedence over and supersede existing and future subcontracts for services
that are subject to specialty contracts. AHCCCSA may consider a waiver for the
Contractor from inclusion in a specialty contract if such exclusion is
determined to be in the best interest of the State.
During the term of specialty contracts, AHCCCSA may act as an intermediary
between the Contractor and specialty contractors to enhance the cost
effectiveness of service delivery. AHCCCSA reserves the right to
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make direct payments to specialty contractors on behalf of the Contractor.
Adjudication of claims related to such payments provided under specialty
contracts shall remain the responsibility of the Contractor. AHCCCSA may provide
technical assistance prior to the implementation of any specialty contracts.
AHCCCSA shall provide at least 60 days advance written notice to the Contractor
prior to the implementation of any specialty contract.
38. ADVANCES, DISTRIBUTIONS, LOANS AND INVESTMENTSAND INVESTMENTS
The Contractor shall not, without the prior approval of AHCCCSA, make any
advances to a related party or subcontractor. The Contractor shall not, without
similar approval, make any distribution, loan or loan guarantee to any entity,
including another fund or line of business within its organization. All
investments, other than investments in U.S. Government securities or
Certificates of Deposit, also require AHCCCSA prior approval. (See the Reporting
Guide for Acute Care Contractors for alternatives to the prior approval of
individual investments.) All requests for prior approval are to be submitted to
the Office of Managed Care.
39. ACCUMULATED FUND DEFICIT
The Contractor and its owners shall fund any accumulated fund deficit through
capital contributions in a form acceptable to AHCCCSA within 60 days after
receipt by AHCCCSA of the final audited financial statements. The amount of any
accumulated fund deficits shall be determined in accordance with the
Contractor's annual audited financial statements.
40. MONTHLY ROSTER RECONCILIATION
AHCCCSA produces daily roster updates identifying new members and changes to
members' demographic, eligibility and enrollment data which the Contractor shall
use to update its member records. The daily roster which is run prior to the
monthly roster is referred to as the "last daily" and will contain all rate code
changes made for the prospective month, as well as any new enrollment and
disenrollments.
The monthly roster is produced two days before the end of every month. The
roster will identify the total active population for the Contractor as of the
first day of the next month. This roster contains the information used by
AHCCCSA to produce the monthly capitation payment for the next month. The
Contractor will reconcile their member files with the AHCCCS monthly roster.
After reconciling the monthly roster information, the Contractor resumes posting
daily roster updates beginning with the last two days of the month. The last two
daily rosters are different from the regular daily rosters in that they pay
and/or recoup capitation into the next month.
Refer to the AHCCCS Contracted Health Plan Technical Interface Guidelines
available in the Bidders' Library for additional information.
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41. DATA EXCHANGE REQUIREMENT
The Contractor is authorized to exchange data with AHCCCSA relating to the
information requirements of this contract and as required to support the data
elements to be provided AHCCCSA in the format specified in the AHCCCS Contracted
Health Plan Technical Interface Guidelines which is available in the Bidders'
Library. The information so recorded and submitted to AHCCCSA shall be in
accordance with all procedures, policies, rules, or statutes in effect during
the term of this contract. If any of these procedures, policies, rules,
regulations or statutes are hereinafter changed both parties agree to conform to
these changes following appropriate notification to both parties by AHCCCSA.
The Contractor is responsible for any incorrect data, delayed submission or
payment (to the Contractor or its Subcontractors), and/or penalty applied due to
any error, omission, deletion, or erroneous insert caused by
Contractor-submitted data. Any data that does not meet the standards required by
AHCCCSA shall not be accepted by AHCCCSA.
The Contractor is responsible for identifying any inconsistencies immediately
upon receipt of data from AHCCCSA. If any unreported inconsistencies are
subsequently discovered, the Contractor shall be responsible for the necessary
adjustments to correct its records at its own expense.
The Contractor shall accept from AHCCCSA original evidence of eligibility and
enrollment in a form appropriate for electronic data exchange.
Upon request by AHCCCSA, the Contractor shall provide to AHCCCSA updated PCP
assignments in a form appropriate for electronic data exchange.
The Contractor shall be provided with a Contractor-specific security code for
use in all data transmissions made in accordance with contract requirements.
Each data transmission by the Contractor shall include the Contractor's security
code. The Contractor agrees that by use of its security code, it certifies that
any data transmitted is accurate and truthful, to the best of the Contractor's
knowledge. The Contractor further agrees to indemnify and hold harmless the
State of Arizona and AHCCCSA from any and all claims or liabilities, including
but not limited to consequential damages, reimbursements or erroneous billings
and reimbursements of attorney fees incurred as a consequence of any error,
omission, deletion or erroneous insert caused by the Contractor in the submitted
input data. Neither the State of Arizona nor AHCCCSA shall be responsible for
any incorrect or delayed payment to the Contractors's AHCCCS services providers
(subcontractors) resulting from such error, omission, deletion, or erroneous
input data caused by the Contractor in the submission of AHCCCS claims
The publication AHCCCS Contracted Health Plan Technical Interface Guidelines
describes the specific technical and procedural requirements for interfaces
between AHCCCS and the Contractor and its subcontractors. The Contractor is
responsible for complying with all technical requirements as stated in this
manual as well as any subsequent changes to the manual. A copy may be found in
the Bidders Library.
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The costs of software changes are included in administrative costs paid to the
Contractor. There is no separate payment for software changes. A PMMIS systems
contact will be assigned after contract award.
AHCCCSA will work with the health plans as they evaluate EDI options. AHCCCSA
would also consider health plan proposals to jointly issue a Request for
Proposals for a value-added network (VAN) to provide the EDI for AHCCCS
fee-for-service claims.
AHCCCSA does not intend to continue at this time with the statewide EDI
implementation for encounters.
42. SUBCONTRACTS
The Contractor shall be legally responsible for contract performance whether or
not subcontracts are used. No subcontract shall operate to terminate the legal
responsibility of the Contractor to assure that all activities carried out by
the subcontractor conform to the provisions of this contract. Subject to such
conditions, any function required to be provided by the Contractor pursuant to
this contract may be subcontracted to a qualified person or organization. All
such subcontracts must be in writing.
All subcontracts are subject to review and approval in writing by AHCCCSA prior
to the effective dates thereof. The following subcontracts shall be submitted to
AHCCCSA Contracting Office for prior approval at least 30 days prior to the
effective date of the subcontract:
a. Automated data processing
b. Third-party administrators
c. Management Services (See also Section D, Paragraphs 43 & 44)
d. Model subcontracts
The Contractor shall maintain a fully executed original of all subcontracts
which shall be accessible to AHCCCSA within two working days of request by
AHCCCSA. A subcontract is voidable and subject to immediate cancellation by
AHCCCSA in the event any subcontract pertinent to "a" through "d" above is
implemented without the prior written approval of AHCCCSA.
All subcontracts shall comply with the applicable provisions of federal and
State laws, regulations and policies.
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The Contractor shall not include covenant-not-to-compete requirements in its
provider agreements. Specifically, the Contractor shall not contract with a
provider and require that the provider not provide services for any other AHCCCS
contractor.
43. MANAGEMENT SERVICES SUBCONTRACTORS
All proposed management services subcontracts and/or corporate cost allocation
plans must be approved in advance by AHCCCSA Contracting Office as described in
Paragraph 42 above. Cost allocation plans must be submitted with the proposed
management fee agreement. AHCCCSA reserves the right to perform a thorough
review of actual management fees charged and/or corporate allocations made. If
the fees or allocations actually paid out are determined to be unjustified or
excessive, amounts may be subject to repayment to the Contractor, the Contractor
may be placed on monthly financial reporting, and/or financial sanctions may be
imposed.
44. MANAGEMENT SERVICES SUBCONTRACTOR AUDITS
All management services subcontractors are required to have an annual financial
audit. A copy of this audit shall be submitted to AHCCCSA, Office of Managed
Care, within 120 days of the subcontractor's fiscal year end. If services billed
by a consultant or actuary are less than $50,000, AHCCCSA will waive the
requirement for an audit of that consultant or actuary.
45. MERGER, REORGANIZATION AND CHANGE OF OWNERSHIP
A proposed merger, reorganization or change in ownership of the Contractor
health plan shall require prior approval of AHCCCSA and a subsequent contract
amendment. The Contractor must submit a detailed merger, reorganization and/or
transition plan to AHCCCSA Contracting Office for AHCCCSA review. The purpose of
the plan review is to ensure uninterrupted services to members, evaluate the new
entity's ability to support the provider network, ensure that services to
members are not diminished and that major components of the organization and
AHCCCS programs are not adversely affected by such merger, reorganization or
change in ownership.
46. REQUESTS FOR INFORMATION
AHCCCSA may, at any time during the term of this contract, request financial or
other information from the Contractor. Upon receipt of such requests for
information, the Contractor shall provide complete information as requested no
later than 30 days after the receipt of the request unless otherwise specified
in the request itself.
47. PERFORMANCE BOND OR BOND SUBSTITUTE
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The Contractor shall be required to provide a performance bond of standard
commercial scope issued by a surety company doing business in this State, an
irrevocable letter of credit, or a cash deposit ("Performance Bond") to AHCCCSA
for as long as the Contractor has AHCCCS-related liabilities of $50,000 or more
outstanding, or 15 months following the effective date of this contract,
whichever is later, to guarantee: (1) payment of the Contractor's obligations to
providers, non-contracting providers, and non-providers; and (2) performance by
the Contractor of its obligations under this contract. The Performance Bond
shall be in a form acceptable to AHCCCSA as described in Performance Bond
Guidelines - Office of Managed Care.
In the event of a default by the Contractor, AHCCCSA shall, in addition to any
other remedies it may have under this contract, obtain payment under the
Performance Bond or substitute security for the purposes of the following:
a. Paying any damages sustained by providers, noncontracting providers and
nonproviders by reason of a breach of the Contractor's obligations
under this contract,
b. Reimbursing AHCCCSA for any payments made by AHCCCSA on behalf of the
Contractor, and
c. Reimbursing AHCCCSA for any extraordinary administrative expenses
incurred by reason of a breach of the Contractor's obligations under
this contract, including, but not limited to, expenses incurred after
termination of this contract for reasons other than the convenience of
the State by AHCCCSA.
In the event AHCCCSA agrees to accept substitute security in lieu of the
Performance Bond, irrevocable letter of credit or cash deposit, the Contractor
agrees to execute any and all documents and perform any and all acts necessary
to secure and enforce AHCCCSA's security interest in such substitute security
including, but not limited to, security agreements and necessary UCC filings
pursuant to the Arizona Uniform Commercial Code. In the event such substitute
security is agreed to and accepted by AHCCCSA, the Contractor acknowledges that
it has granted AHCCCSA a security interest in such substitute security to secure
performance of its obligations under this contract. The Contractor is solely
responsible for establishing the credit-worthiness of all forms of substitute
security. AHCCCSA may, after written notice to the Contractor, withdraw its
permission for substitute security, in which case the Contractor shall provide
AHCCCSA with a form of security described above.
48. AMOUNT OF PERFORMANCE BOND
The initial amount of the Performance Bond shall be equal to 110% of the total
capitation payment expected to be paid in the month of November or as determined
by AHCCCSA. The total capitation amount shall include S.O.B.R.A. supplemental
payments. This requirement must be satisfied by the Contractor not later than 15
days after notification by AHCCCSA of the amount required. Thereafter, AHCCCSA
shall
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evaluate the enrollment statistics of the Contractor on a monthly basis. If
there is an increase in capitation payment that exceeds 10% of the performance
bond amount, AHCCCSA may require an increase in the amount of the Performance
Bond. The Contractor shall have 15 days following notification by AHCCCSA to
increase the amount of the Performance Bond. The Performance Bond amount that
must be maintained after the contract term shall be sufficient to cover all \
outstanding liabilities and will be determined by AHCCCSA.
49. FEDERALLY QUALIFIED HEALTH CENTERS (FQHC)
The Contractor is encouraged to use FQHCs in Arizona to provide covered services
and must comply with the federal mandates in OBRA 89 and OBRA 90. This
legislation gives FQHCs the option to require state Medicaid programs to
reimburse the FQHC at 100% of reasonable costs for the services delivered. As
Arizona's alternative to Medicaid, AHCCCSA and its contractors are required to
comply with this legislation.
At the time of contracting, the Contractor must offer the FQHC the option to
elect reasonable cost reimbursement for categorically eligible members. This
provision should be within the contract between the FQHC and the Contractor. If
the FQHC does not elect reasonable cost reimbursement, the FQHC waives the
opportunity to receive reasonable cost reimbursement for that contract period.
No retroactive elections shall be permitted.
However, if the FQHC elects reasonable cost reimbursement, the Contractor must
notify the AHCCCSA Office of Managed Care within seven days of the subcontract
signing. If the FQHC elects reasonable cost reimbursement, the Contractor may,
at its discretion, pay reasonable cost reimbursement, or pay using some other
method of payment, such as capitation, since the requirement to pay reasonable
costs applies to the State Medicaid Agency, not to the Contractor.
For example, the Contractor could contract with a FQHC which has elected
reasonable cost reimbursement. The method of payment, however, throughout the
contract period could be capitation. At the end of the year, the Contractor and
FQHC would complete certain reporting requirements which would enable AHCCCSA to
determine reasonable costs, and compare to what was actually paid by the
Contractor through capitation. AHCCCSA would reimburse the FQHC if the
capitation payments were less than reasonable costs. Likewise, AHCCCSA would
recoup payments in excess of reasonable costs.
The Contractor shall make capitation payments equal to, or greater than, the
amount defined by AHCCCSA for a FQHC electing reasonable cost reimbursement. In
determining the amount of the capitation payments made by the Contractor to the
FQHC, AHCCCSA will value the per member per month capitation payment at a rate
which approximates the average rate being paid by the Contractor in the
community to other similar providers. If there are no other providers from which
to develop an average rate, other means will be used to determine the average
for the area. If the actual capitation rate paid by the Contractor to the FQHC
is less than the average rate being paid by the Contractor to other providers,
the Contractor must reimburse the FQHC for this difference. AHCCCSA would
reimburse the difference between reasonable cost and the average capitation
rate.
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The Contractor shall adhere to the AHCCCS Federally Qualified Health Centers
Cost Report Instructions- General Instructions which describes the reporting
requirements applicable to the Contractors contracting with a FQHC that elects
cost reimbursement. A copy of these requirements is available in the Bidder's
Library.
Included among the FQHCs currently recognized by HCFA are the following:
- Clinica Adelante
- West Pinal Family Health Center
- Valley Health Center
- United Community Health Center
- Mariposa Community Health Center
- Lake Powell Medical Center
- Mountain Park Health Center
- El Rio Santa Cruz Neighborhood Health Center
- Indian Community Health Services, Inc.
- Traditional Indian Alliance
- Native Americans for Community Action, Inc.
50. SANCTIONS
AHCCCSA may suspend, deny, refuse to renew, or terminate this contract or any
related subcontracts in accordance with the terms of this contract and
applicable law and regulations. AHCCCSA may, in addition to these remedies,
impose monetary sanctions in accordance with the provisions of this contract,
applicable law and regulations if the Contractor violates any provision stated
in law or this contract. Written notice will be provided to the Contractor
specifying the sanction to be imposed, the grounds for such sanction and either
the length of suspension or the amount of capitation prepayment to be withheld.
the Contractor may appeal the decision to impose a sanction in accordance with
AHCCCS Rule R9-22-804.
51. INITIAL MINIMUM CAPITALIZATION REQUIREMENTS
In order to be considered for contract award, a new offeror must meet a minimum
capitalization requirement of $1,500,000, regardless of the number of counties
bid, which may be met in part by a letter of credit not to exceed $750,000. This
requirement is in addition to the Performance Bond requirements defined in
Paragraphs 47 and 48 of this section.
The capitalization requirements may be applied toward meeting the equity per
member requirement (see Section D, Paragraph 15) and may be used for operations
of the Contractor if prior approved by AHCCCSA.
52. CLAIMS PAYMENT SYSTEM
47
<PAGE> 253
The Contractor shall develop and maintain a claims processing system capable of
processing, cost-avoiding and paying claims in accordance with AHCCCS Rule
R9-22-705, a copy of which may be found in the Bidders' Library. Remittance
advices accompanying the Contractor's payments to providers must contain
sufficient detail to fully explain the payment including the composition of the
net amount of the payment. If payment is being denied, there must be sufficient
detail to fully explain the reasons for denial.
53. VACCINE FOR CHILDREN PROGRAM
Federal legislation passed in 1993 (OBRA 93) amended Title XIX of the Social
Security Act and created the Vaccine for Children (VFC) program which became
effective 10/1/94. Through this program the federal government purchases, and
makes available to the states free of charge, vaccines for children under age 19
who are Title XIX eligible (or Native American) and not insured, or whose
insurance does not cover immunizations. Any provider licensed by the State to
administer immunizations may register with the State as a "VFC provider" and
receive free vaccines. State money to purchase vaccines is not necessary since
the program is 100% funded by the federal government. The Contractor shall
comply with all VFC requirements.
54. ADVANCE DIRECTIVES
The Contractor shall specify in the contract or agreement with each hospital,
nursing facility, provider of home health care or personal care services that
the provider must comply with federal and State law regarding advance directives
for adult members. At a minimum, the providers shall:
a. Maintain written policies for adult members receiving care through
their organization regarding the member's ability to make decisions
about medical care, including the right to accept or refuse medical
care and the right to execute an advance directive.
b. Provide written information to adult members regarding the provider's
policies concerning advance directives.
c. Document whether the adult member has executed an advance directive.
d. Not condition the provision of care or discriminate against a member
because of his or her decision to execute or not execute an advance
directive.
e. Provide education for staff on issues concerning advance directives.
END OF SECTION D
48
<PAGE> 254
EXHIBIT 10.10(a)(5)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
<TABLE>
<CAPTION>
============================================================================================
<S> <C> <C> <C>
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
7 YH5-0001-04 October 1, 1995 OMC
============================================================================================
CONTRACTOR'S NAME AND ADDRESS:
Blaine Bergeson, CEO
Arizona Health Concepts
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
============================================================================================
PURPOSE OF AMENDMENT: To revise capitation rates for Contract Year 95/96.
============================================================================================
</TABLE>
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
The new capitation rates effective 10/1/95 are as follows:
<TABLE>
<CAPTION>
COUNTY AFDC SSI WITH SSI W/O MNMI With MNMI W/O CCP SOBRA KICK
- - -------- ------ ------ ------ ------ ------ ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GILA 111.12 118.93 304.50 212.41 289.75 88.63 4443.04
MARICOPA 115.32 126.38 324.85 225.60 311.46 96.46 4835.01
YAVAPAI 108.38 118.83 304.99 212.41 289.75 87.19 447.02
</TABLE>
*** PLEASE SIGN AND DATE BELOW AND RETURN ALL COPIES TO: AHCCCSA, CONTRACTS &
PURCHASING, 701 E. JEFFERSON, PHOENIX, AZ 85034
================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
================================================================================
<TABLE>
<CAPTION>
<S> <C>
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
Blaine Bergeson Michael Veit
============================================================================================
TYPED NAME: BLAINE BERGESON TYPED NAME: MICHAEL VEIT
============================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
============================================================================================
DATE: 10/6/95 DATE: Nov 06 1995
============================================================================================
</TABLE>
<PAGE> 255
EXHIBIT 10.10(a)(6)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1
<TABLE>
<CAPTION>
=================================================================================================
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
<S> <C> <C> <C>
9 YH5-0001-10 October 17, 1995 OMC
=================================================================================================
CONTRACTOR'S NAME AND ADDRESS:
Blaine J. Bergeson, CEO
Arizona Health Concepts
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
=================================================================================================
PURPOSE OF AMENDMENT: To expand covered services to include lung and heart/ lung transplants.
=================================================================================================
</TABLE>
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
Effective 10/17/95, AHCCCS members are entitled to receive lung and
heart/lung transplants. (Ref. Arizona Senate Bill 1001.). for these
transplants, AHCCCS will reimburse the Contractor 100% of the lesser of
the (1) the AHCCCS contracted rate, or (2) the Contractor-paid amount.
NOTE: Please sign, date and return both originals to:
Mark Renshaw
AHCCCS Contracts and Purchasing
701 E. Jefferson
Phoenix, AZ 85034
<TABLE>
<CAPTION>
=================================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
=================================================================================================
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
<S> <C>
Blaine Bergeson Michael Veit
=================================================================================================
TYPED NAME: BLAINE BERGESON TYPED NAME: MICHAEL VEIT
=================================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
=================================================================================================
DATE: 12/2/95 DATE: 12/12/95
=================================================================================================
</TABLE>
<PAGE> 256
EXHIBIT 10.10.(a)(7)
ARIZONA HEALTH CARE COST CONTAINMENT SYSTEM ADMINISTRATION
DIVISION OF BUSINESS AND FINANCE
CONTRACT AMENDMENT Page 1 of 1
<TABLE>
<CAPTION>
==============================================================================================
<S> <C> <C> <C>
AMENDMENT NUMBER: CONTRACT NUMBER: EFFECTIVE DATE OF AMENDMENT: PROGRAM:
10 YH5-0001-04 Oct. 1, 1995 ACUTE
==============================================================================================
CONTRACTOR'S NAME AND ADDRESS:
Blaine Bergeson, CEO
Arizona Health Concepts
2510 W. Dunlap, Ste 100
Phoenix, AZ 85021
==============================================================================================
PURPOSE OF AMENDMENT: To clarify QMB coinsurance and deductible requirements.
==============================================================================================
</TABLE>
THE CONTRACT REFERENCED ABOVE IS AMENDED AS FOLLOWS:
The subparagraph on page 13 of the contract renewal amendment titled "Qualified
Medicare Beneficiary Services" is hereby deleted and replaced with the
following:
MEDICARE SERVICES AND COST SHARING
AHCCCS has members enrolled who are eligible for both Medicare and Medicaid
services. These members are referred to as "dual eligibles" and include persons
who are Qualified Medicare Beneficiaries (QMB) and non-QMB eligible persons. QMB
eligible persons are entitled to all covered Medicaid services and, in addition,
may receive the following Medicare services which are not covered by AHCCCS or
differ in scope or limitation:
Chiropractic services Inpatient and outpatient
occupational coverage
Inpatient psychiatric services Respite services
Psychological services Any new services added to the
Medicare program which are not
covered by AHCCCS
For all dual eligible persons, the Contractor shall be responsible for providing
all AHCCCS covered services and pay all Medicare coinsurance and deductibles for
Medicare services which are covered by AHCCCS and provided on a fee-for-service
basis within the Contractor's network. For QMB eligible persons, the Contractor
shall be responsible for paying the Medicare coinsurance and deductibles for
Medicare services not covered by AHCCCS described above which are provided on a
fee-for-service basis.
Since Medicaid is the payer of last resort, all Medicare covered services which
are provided to dual eligibles who are not enrolled in a Medicare TEFRA Risk HMO
shall be billed to Medicare or any other third party liability source.
If a dual eligible is enrolled with a Medicare TEFRA Risk HMO, Medicare will not
reimburse the Contractor for Medicare covered services provided by the
Contractor. Therefore, the Contractor shall refer the member to the Medicare
TEFRA Risk HMO for all Medicare covered services and shall not be responsible
for the payment of any Medicare copayments, deductibles or premiums assessed by
the Medicare TEFRA Risk HMO. The Contractor shall be responsible for any
Medicaid covered services not provided by the Medicare TEFRA Risk HMO.
<TABLE>
<CAPTION>
==============================================================================================
EXCEPT AS PROVIDED FOR HEREIN, ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT
REMAIN UNCHANGED AND IN FULL EFFECT.
==============================================================================================
SIGNATURE OF AUTHORIZED REPRESENTATIVE: SIGNATURE OF AHCCCSA CONTRACTING OFFICER:
<S> <C>
Blaine Bergeson Michael Veit
==============================================================================================
TYPED NAME: BLAINE BERGESON TYPED NAME: MICHAEL VEIT
==============================================================================================
TITLE: CEO TITLE: CONTRACTS & PURCHASING ADMINISTRATOR
==============================================================================================
DATE: 5/28/96 DATE: 6/3/96
==============================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.11
FIRST AMENDMENT
TO
CONTRACT FOR SERVICES
BETWEEN OFFICE OF MEDICAID POLICY AND PLANNING
AND
MEDICUS SYSTEMS CORPORATION
This AMENDMENT to the above-referenced contract is made and entered
into by and between the State of Indiana, Office of Medicaid Policy and
Planning, (hereinafter called "Office"), 402 West Washington Street, Room W382,
Indianapolis, Indiana 46204, and Medicus Systems Corporation, One Rotary Center,
Suite 400, Evanston, Illinois 60201-4802 (hereinafter called "Contractor").
WHEREAS, the State of Indiana and Medicus Systems Corporation have
previously entered into a contract for a term beginning January 3, 1994 and
ending January 2, 1996 (hereinafter "the original contract") for services in
conjunction with the administration of the Indiana Medicaid Primary Care Case
Management Program;
WHEREAS, the parties desire to further extend the duties to be
performed by the Contractor to include providing additional staff and services;
NOW THEREFORE, the parties enter into this FIRST AMENDMENT for the
consideration set out below, all of which is deemed to be good and sufficient
consideration in order to make this FIRST AMENDMENT a binding legal instrument.
1. The term of this amendment is December 1, 1994, through January 2,
1996.
Page 1 of 5
<PAGE> 2
2. The parties agree that this First Amendment is duly executed
pursuant to paragraph 8 of the original contract.
3. The parties hereby ratify and incorporate herein each term and
condition set out in the original contract, as well as all written matters
incorporated therein except as specifically provided for herein below by this
FIRST AMENDMENT.
4. The parties agree that Paragraph 2 of the original contract is
amended to include the additional services set out in the Medicus Letter and
PCCM Budget Addendum, incorporated herein by reference as Appendix "A".
5. The parties agree that, in consideration of the services to be
performed by the Contractor as delineated in Appendix "All", the Contractor will
be paid an amount not to exceed Eight Hundred, Forty Thousand, Four Hundred
Fifty-five Dollars ($840,455.00).
6. The parties agree that Paragraph 3 of the original contract is
amended to increase the total remuneration under the contract to an amount not
to exceed Three Million, Three Hundred Twenty-Eight Thousand, Four Hundred
Seventy-Nine Dollars ($3,328,479.00).
7. (a) The Contractor hereby covenants and agrees to make a good faith
effort to provide and maintain during the term of this Agreement a drug-free
workplace, and that it will give written notice to the Office and the Indiana
Department of Administration within ten (10) days after receiving actual notice
that an employee
Page 2 of 5
<PAGE> 3
of the Contractor has been convicted of a criminal drug violation occurring in
the Contractor's workplace.
(b) In addition to the provisions of subparagraph (a) above, if the
total contract amount set forth in the Agreement is in excess of Twenty-Five
Thousand Dollars ($25, 000), the Contractor hereby further agrees that this
Agreement is expressly subject to the terms, conditions and representations
contained in the Drug Free Workplace certification executed by the Contractor in
conjunction with the Agreement and which is appended as an Attachment hereto.
(c) It is further expressly agreed that the failure of the
Contractor to in good faith comply with the terms of subparagraph (a) above, or
falsifying or otherwise violating the terms of the certification referenced in
subparagraph (b) above shall constitute a material breach of this Agreement, and
shall entitle the State to impose sanctions against the Contractor including,
but not limited to, suspension of contract payments, termination of this
Agreement and/or debarment of the Contractor from doing further business with
the State for up to three (3) years.
8. The Contractor, by the signature of its duly authorized
representative to the attached Non-Collusion Affidavit, swears, affirms, and
gives assurance that there has been no collusion between the Contractor and any
State employee, officer, or agent in the awarding of this Contact Amendment and
that the Contractor has,
Page 3 of 5
<PAGE> 4
prior to the execution of said Affidavit, caused an inquiry to be made of all
interested employees, agents, or representatives of the Contractor.
Page 4 of 5
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this amendment.
For the Contractor: For the State of Indiana:
/s/ Sandra Lichty, PhD James M. Verdier
- - ------------------------- -------------------------
Sandra Lichty James M. Verdier
Vice President Assistant Secretary
Medicus Systems Corporation Office of Medicaid Policy and
Planning
DATE: November 29,1994 DATE: 11/30/94
-------------------- --------------------
APPROVED: APPROVED:
/s/ Jean S. Blackwell /s/ Jerry D. McQueen Jr.
- - ------------------------- -------------------------
Jean S. Blackwel,Director William Shrewsberry
State Budget Agency Commissioner
Department of Administration
DATE: 1/6/95 DATE: DEC/4,1994
-------------------- --------------------
APPROVED: APPROVED:
/s/ Jean S. Blackwell /s/ G. Douglas Seidman, Deputy
- - ------------------------- -------------------------
Jean S. Blackwell, Chair Pamela Carter
Data Processing Oversight Attorney General of
Commission Indiana
DATE: 1/6/95 DATE: 1/12/95
-------------------- --------------------
Page 5 of 5
<PAGE> 6
EXHIBIT 10.11(a)(1)
SECOND AMENDMENT
TO
CONTRACT FOR SERVICES
BETWEEN OFFICE OF MEDICAID POLICY AND PLANNING
AND
MEDICUS SYSTEMS CORPORATION
This SECOND AMENDMENT to the above-referenced contract is made and
entered into by and between the State of Indiana, through the Office of Medicaid
Policy and Planning [hereinafter called "Office"], of the Indiana Family and
Social Services Administration, 402 West Washington Street, Room W382,
Indianapolis, Indiana 46204, and Medicus Systems Corporation [hereinafter called
"Contractor"], One Rotary Center, Suite 400, Evanston, Illinois 60201-4802.
WHEREAS, the State of Indiana and Medicus Systems Corporation have
previously entered into a contract for a term beginning January 3, 1994, and
ending January 2, 1996 [hereinafter "the original contract"] for services in
conjunction with the administration of the Indiana Medicaid Primary Case
Management Program;
WHEREAS, the State of Indiana and Medicus Systems Corporation have
previously entered into a first amendment for a contract term beginning December
1, 1994 and ending January 2, 1996 to further extend the duties to be performed
by the Contractor to include providing additional staff and services;
WHEREAS, the parties desire to further extend the duties to be performed
by the Contractor to include a contract extension of an additional four months
and to raise the consideration under this contract to reflect the consideration
for the contract term extension;
WHEREAS, the parties have agreed to add new language required by the
Health Care Financing Administration and a new compliance with civil rights
clause required by the Indiana Department of Administration;
NOW THEREFORE, the parties enter into this SECOND AMENDMENT for the
consideration set out below, all of which is deemed to be good and sufficient
consideration in order to make this SECOND AMENDMENT a binding legal instrument.
1. The parties hereby ratify and incorporate herein each term and condition
set out in the original contract and the first amendments as well as all
written matters incorporated therein except as specifically provided for
by this SECOND AMENDMENT.
2. The term of this amendment is January 3, 1996 through April 30, 1996.
3. The parties agree that this Second Amendment is duly executed
1 of 5
<PAGE> 7
pursuant to paragraph 8 of the original contract.
4. The parties agree that, in consideration of the services to be performed
by the Contractor as delineated in the original contract and in the
first amendment, the Contractor will be paid an amount not to exceed
eight hundred twenty-seven thousand, one hundred sixty dollars
($827,160.00).
5. The parties agree that Paragraph 3 of the original contract is amended
to increase the total remuneration under the original contract, the
first amendment and this second amendment to an amount not to exceed
four million, one hundred fifty-five thousand, six hundred and
thirty-nine dollars ($4,155,639.00).
6. The Office will provide the above-specified funding on a reimbursement
basis, with the Contractor submitting claims directly to the attention
of Judith E. Becherer, Director of Program Operations - Long Term Care
within the Office at the following address:
State of Indiana
Family and Social Services Administration
Office of Medicaid Policy and Planning
402 West Washington Street, Rm W382
Indianapolis, Indiana 46204
All bills must be received by the tenth (10th) day of the month
following the month which is being billed to insure payment at the end
of that month.
7. The parties agree that the original contract and the first amendment are
amended to include the following language that is required by the Health
Care Financing Administration:
a. Access to Records. The Contractor shall maintain all books,
documents, papers and records which are directly pertinent to this
contract and shall make such materials available at all reasonable times
during the contract period and for three (3) years from the date of
final payment under the contract or until all pending matters are
closed, whichever date is later, for inspection by the State of Indiana,
or any other duly authorized representative of the State of Indiana or
the Federal government.
b. Environmental Standards. If the total contract amount set forth
in the contract is in excess of $100,000.00, the Contractor shall comply
with all applicable standards, orders, or requirements issued under
section 305 of the Clean Air Act (42 USC 7606), section 508 of the Clean
Water Act (33 USC 1368), Executive Order 11738, and Environmental
Protection Agency regulations (40 CFR Part 15), which prohibit the use
under non-exempt Federal contracts of facilities included on the EPA
List of Violating Facilities. The Contractor shall
2 of 5
<PAGE> 8
report any violations of this paragraph to the State of Indiana and to
the United States Environmental Protection Agency Assistant
Administrator for Enforcement.
8. The parties agree that Paragraph 12 of the original contract is deleted
and replaced with the following:
Compliance with Civil Rights Laws. The Contractor hereby assures that it
will comply with all Federal and Indiana Civil Rights Laws, including,
but not limited to, I.C. 22-9-1-10, to the end that it shall not
discriminate against any employee or applicant for employment, to be
employed in the performance of this contract, with respect to his/her
hire, tenure, terms, conditions or privileges of employment or any
matter directly or indirectly related to employment, because of his/her
race, color, religion, sex, handicap, national origin, ancestry or
status as a veteran. The Contractor understands that the State of
Indiana is a recipient of federal funds. Pursuant to that understanding,
the Contractor, and its subcontractors, if any, agree that if the
Contractor employs 50 or more employees and does at least $50,000 worth
of business with the State of Indiana and is not exempt, the Contractor
will comply with the affirmative action reporting requirements of 41 CFR
60-1.7. Breach of this covenant may be regarded as a material breach of
the contract. The State of Indiana shall comply with Section 202 of
Executive Order 11246, as amended, 41 CFR 60-741, as amended, which are
incorporated herein by specific reference.
9. The parties agree that this Second Amendment to the parties' original
contract has been duly prepared and executed pursuant to Paragraph 8 of
the original contract.
10. (a) The Contractor hereby covenants and agrees to make a good faith
effort to provide and maintain during the term of this Contract a
drug-free workplace, and that it will give written notice to the
contracting state agency and the Indiana Department of Administration
with ten (10) days after receiving actual notice that an employee of the
Contractor has been convicted of a criminal drug violation occurring in
the Contractor's workplace.
(b) In addition to the provisions of subparagraph (a) above, if the
total contract amount set forth in the Contract is in excess of $25,000,
the Contractor hereby further agrees that this Contract is expressly
subject to the terms, conditions and representations contained in the
Drug-Free Workplace certification executed by the Contractor in
conjunction with the Contract and which is appended as an Attachment
hereto.
(c) It is further expressly agreed that the failure of the Contractor to
in good faith comply with the terms of subparagraph (a) above, or
falsifying or otherwise violating the terms of the certification
referenced in subparagraph (b) above shall constitute a material breach
of this Contract, and
3 of 5
<PAGE> 9
shall entitle the State of Indiana to impose sanctions against the
Contractor including, but not limited to, suspension of contract
payment, termination of this Contract and/or debarment of the Contractor
from doing further business with the State of Indiana for up to three
years.
11. The Contractor, by the signature of its duly authorized representative
to the attached Non-Collusion Affidavit, swears, affirms, and gives
assurance that there has been no collusion between the Contractor and
any State of Indiana employee, officer, or agent in the awarding of this
contract and that the Contractor has, prior to the execution of said
Affidavit, caused an inquiry to be made of all interested employees,
agents, or representatives of the Contractor.
4 of 5
<PAGE> 10
WHEREOF, the parties have executed this Contract.
For the Contractor: For the State of Indiana:
[SIG] [SIG]
- - ------------------------------------- -------------------------------------
Sandra Lichty James M. Verdier
Vice President Assistant Secretary
Medicus Systems Corporation Office of Medicaid Policy Planning
Date: [ILLEGIBLE] Date: 1/9/96
-------------------------------- --------------------------------
APPROVED: APPROVED:
[SIG] [SIG]
- - ------------------------------------- -------------------------------------
Katherine L. Davis, Director William Shrewsberry
State Budget Agency Commissioner
Department of Administration
Date: 1/31/96 Date: Jan. 23, 1996
-------------------------------- --------------------------------
APPROVED: APPROVED AS TO FORM AND LEGALITY
[SIG] [SIG]
- - ------------------------------------- -------------------------------------
Katherine L. Davis, Chair Pamela Carter
Data Processing Oversight Commission Attorney General of Indiana
Date: 1-31-96 Date: February 1, 1996
-------------------------------- --------------------------------
5 of 5
<PAGE> 11
EXHIBIT 10.11(a)(2)
THIRD AMENDMENT
TO
CONTRACT FOR SERVICES
BETWEEN OFFICE OF MEDICAID POLICY AND PLANNING
AND
MANAGED CARE SOLUTIONS, INC.
This THIRD AMENDMENT to the above-referenced contract is made and
entered into by and between the State of Indiana, through the Office of
Medicaid Policy and Planning [hereinafter called "Office"], of the Indiana
Family and Social Services Administration, 402 West Washington Street, Room
W382, Indianapolis, Indiana 46204, and Managed Care Solutions [hereinafter
called "Contractor"], 2510 West Dunlap, Suite 300, Phoenix, AZ 85021.
WHEREAS, the State of Indiana and Medicus Systems Corporation have
previously entered into a contract for a term beginning January 3, 1994, and
ending January 2, 1996 [hereinafter "the original contract"] for services in
conjunction with the administration of the Indiana Primary Care Case Management
Program;
WHEREAS, the State of Indiana and Medicus Systems Corporation entered
into a first amendment for a contract term beginning December 1, 1994 and
ending January 2, 1996 to further extend the duties to be performed by the
Contractor to include providing additional staff and services;
WHEREAS, the State of Indiana and Medicus Systems Corporation entered
into a second amendment for a contract term beginning January 3, 1996 through
April 30, 1996 to extend the duties to be performed by the Contractor to
include a contract extension of four additional months, to raise the
consideration to reflect this contract term extension, and to add new language
required by the Health Care Financing Administration and a new compliance with
civil rights clause required by the Indiana Department of Administration;
WHEREAS, the managed care division of Medicus Systems Corporation has
ceased to exist due to the managed care division's tax-free spin-off from
software division of Medicus Systems Corporation and the managed care division's
simultaneous merger with three managed care companies to form the newly-created
Managed Care Solutions, Inc. that has assumed all of the duties and liabilities
of Medicus Systems Corporation under this contract, as of March 1, 1996, the
date of said dissolution and organization;
WHEREAS, the parties desire to further extend the duties to be
performed by the Contractor to include duties associated with the
implementation of the third year of the Hoosier Healthwise program, including
the extension of duties in the areas of quality improvement, provider
services, hotline/customer services, benefit advocates and information systems;
Page 1 of 5
<PAGE> 12
NOW THEREFORE, the parties enter into this THIRD AGREEMENT for the
consideration set out below, all of which is deemed to be good and sufficient
consideration in order to make this THIRD AMENDMENT a binding legal instrument.
1. The parties hereby ratify and incorporate herein each term and condition
set out in the original contract, first amendment, and second amendment,
as well as all written matters incorporated therein except as
specifically provided for by this THIRD AMENDMENT.
2. The term of this amendment is May 1, 1996 through January 2, 1997.
3. The parties agree that Paragraph 2 of the original contract is amended
to include the following expansion of services from the original
contract as described in the Contractor's "Hoosier Healthwise Final
Project Proposal-Year Three", incorporated herein by reference as
Exhibit A:
- Expansion of Service Area: The Contractor will provide services
to a total of ninety-two counties. This includes seventy-seven
new counties in addition to the fifteen counties in which the
Contractor provided services under the original contract.
- Quality Improvement: The Contractor will provide an expansion
of quality improvement functions and additional staff to provide
services to the Primary Care Case Management (PCCM) Program and
Risk Based Managed Care (RBMC) Program.
- Provider Services: The Contractor will provide additional
coordination with EDS, the Medicaid fiscal agent contractor,
and Maxicare Indiana, Inc. and Healthsource Indiana Managed Care
Plan, Inc., the managed care organization contractors, including
additional staff to cover the 92 counties and to provide
education on both the PCCM and RBMC programs.
- Hotline/Customer Services: The Contractor will hire additional
staff to provide enhanced education and enrollment
responsibilities, including changes and disenrollment, and
on-line data entry.
- Benefit Advocates: The Contractor will increase the number of
benefit advocates by hiring additional staff to provide services
to the 92 counties. The benefit advocates will educate
recipients about both Indiana managed care programs: PCCM and
RBMC. The Contractor will also provide enhanced case management
tools and quality improvement activities.
Page 2 of 5
<PAGE> 13
- Information Systems: The Contractor will provide enhanced
reporting functions and additional linkage/communication to EDS,
the Medicaid fiscal agent contractor.
4. The parties agree that, in consideration of the services to be performed
by the Contractor as delineated in Paragraph 3 and Exhibit A of this
Third Amendment, the Contractor will be paid an amount not to exceed
three million, one hundred twenty-four thousand, and fifty-two dollars
($3,124,052.00) as delineated in the Contractor's Project Budget,
incorporated herein by reference as Exhibit B.
5. The parties agree that Paragraph 3 of the original contract is amended
to increase the total remuneration under the contract and the First,
Second, and this THIRD AMENDMENT to an amount not to exceed seven
million, two hundred and seventy-nine thousand, six hundred and
ninety-one dollars ($7,279,691.00).
6. The Office will provide the above-specified funding on a reimbursement
basis, with the Contractor submitting claims directly to the attention
of Judith E. Becherer, Director of Program Operations--Long Term Care
within the Office.
All bills must be received by the tenth (10th) day of the month
following the month which is being billed to insure payment at the end
of that month.
7. The parties agree that this THIRD Amendment to the parties' original
contract has been duly prepared and executed pursuant to Paragraph 8 of
the original contract.
8. (a) The Contractor hereby covenants and agrees to make a good faith
effort to provide and maintain during the term of this Contract a
drug-free workplace, and that it will give written notice to the
contracting state agency and the Indiana Department of Administration
within ten (10) days after receiving actual notice that an employee of
the Contractor has been convicted of a criminal drug violation occurring
in the Contractor's workplace.
(b) In addition to the provisions of subparagraph (a) above, if the
total contract amount set forth in the Contract is in excess of $25,000,
the Contractor hereby further agrees that this Contract is expressly
subject to the terms, conditions and representations contained in the
Drug-Free Workplace certification executed by the Contractor in
conjunction with the Contract and which is appended as an Attachment
hereto.
(c) It is further expressly agreed that the failure of the Contractor
to in good faith comply with the terms of subparagraph (a) above, or
falsifying or otherwise violating the terms of the certification
referenced in subparagraph (b) above shall constitute a material breach
of this Contract, and shall entitle the State of Indiana to impose
sanctions against
Page 3 of 5
<PAGE> 14
the Contractor including, but not limited to, suspension of contract
payment, termination of this Contract and/or debarment of the Contractor
from doing further business with the State of Indiana for up to three
years.
9. The Contractor, by the signature of its duly authorized representative
to the attached Non-Collusion Affidavit, swears, affirms, and gives
assurance that there has been no collusion between the Contractor and
any State of Indiana employee, officer, or agent in the awarding of this
contract and that the Contractor has, prior to the execution of said
Affidavit, caused an inquiry to be made of all interested employees,
agents, or representatives of the Contractor.
Page 4 of 5
<PAGE> 15
WHEREOF, the parties have executed this Contract.
For the Contractor: For the State of Indiana:
/s/ RICK JELINEK /s/ JAMES M. VERDIER
- - ------------------------------------- -------------------------------------
Rick Jelinek James M. Verdier
Senior Vice President Assistant Secretary
East Regional Director Office of Medicaid Policy Planning
Managed Care Solutions, Inc.
Date: 6/11/96 Date: 6/17/96
-------------------------------- --------------------------------
APPROVED: APPROVED:
/s/ KATHERINE L. DAVIS /s/ JAY D. McQUEEN
- - ------------------------------------- -------------------------------------
Katherine L. Davis, Director For William Shrewsberry
State Budget Agency Commissioner
Department of Administration
Date: 8/9/96 Date: Aug. 5, 1996
-------------------------------- --------------------------------
APPROVED: APPROVED AS TO FORM AND LEGALITY
[SIG] /s/ G. DOUGLAS SEIDMAN, DEPUTY
- - ------------------------------------- -------------------------------------
For Katherine L. Davis, Chair Pamela Carter
Data Processing Oversight Commission Attorney General of Indiana
Date: 7/26/96 Date: 8/12/96
-------------------------------- --------------------------------
5 of 5
<PAGE> 1
EXHIBIT 10.12(a)
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
COMMUNITY CHOICE MICHIGAN
AND
MANAGED CARE SOLUTIONS
This Administrative Services Agreement is made and entered in to be
effective as of the first (1st) day of December, 1995 by and between, COMMUNITY
CHOICE MICHIGAN (hereinafter "Plan"), and MANAGED CARE SOLUTIONS, INC.
(hereinafter "MCS").
W I T N E S S E T H :
WHEREAS, the Plan was formed by certain health care providers for the
purpose, among other things, of operating as a qualified health plan under a
managed care program administered by the State Medicaid Agency (SMA) of the
State of Michigan.
WHEREAS, the Plan desires to engage MCS to provide administrative
services under the direction of the Plan's Board of Directors and President in
connection with the operation of the Plan Program.
WHEREAS, MCS and the Plan intend to enter into an agreement pursuant to
which MCS would lend to the Plan certain amounts from time to time up to
$500,000 in the aggregate, and as partial security therefor, the Plan shall
withhold part of its capitation payments in a reserve fund to serve as a
guarantee fund for such loans;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
I. DEFINITIONS
A. The Plan Program. "The Plan Program" shall mean all
administrative and medical care delivery components and systems necessary for
the Plan to provide or arrange for the provision of Covered Services to Members.
B. The Program. "The Program" shall mean the State of Michigan
Medical Assistance Program for the provision of Covered Services to Medicaid
recipients in a managed care delivery setting, as it exists from time to time.
C. Covered Services. "Covered Services" shall mean those
services, equipment and supplies which a Member is entitled to receive as
defined by CCM in its Evidence of Coverage, as it exists from time to time.
D. Implementation Date. "Implementation Date" shall mean the date
the Plan Program becomes operational and the Plan is obligated to commence the
provision of Covered Services to Members.
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E. Participating Providers. "Participating Providers" shall mean
duly licensed physicians, hospitals, health professionals, facilities, and other
health care providers which have entered into a contract with the Plan for the
provision of Covered Services to Members.
F. Evidence of Coverage. "Evidence of Coverage" means the
document approved by the SMA and issued by CCM to a Member which sets forth
Covered Services, exclusions, limitations, and other terms and conditions.
G. Members. "Members" shall refer to those individuals who are
eligible for coverage under the Program and who have enrolled in the Plan.
H. State Medicaid Agency. "State Medicaid Agency" (SMA) shall
mean that agency, division or department of State Government responsible for
administration of its State Medicaid Program pursuant to Title XIX of the Social
Security Act and applicable state law.
II. MCS RESPONSIBILITIES
A. Plan Approval. MCS' duties are described in this Section II.
In discharging these duties, MCS shall at all times be subject to the authority
of and operate under the direction of the Plan's Board of Directors and
President. Nothing in this Agreement is intended to or shall be construed to
diminish the authority of the Board of Directors of the Plan to manage the
business and affairs of the corporation. MCS shall make regular reports to the
Board and the Board shall adopt policies which detail when MCS may contractually
bind the Plan without prior approval of the Board.
B. Pre-Operational Phase: SMA Related Activities.
1. Generally. During the pre-operational phase, MCS will
prepare or will assist in the preparation of information and data necessary for
the Plan to be approved to sign a contract with the SMA to provide Covered
Services to Members pursuant to the Program. MCS shall, on behalf of the Plan,
respond in a timely manner to any and all SMA requests for additional
information or clarification of materials in the Plan's Application for approval
to sign a contract with the SMA, subject to the Plan's approval of any such
response.
2. Negotiations With the SMA. MCS shall provide
assistance and support to the Plan in its negotiations with the SMA concerning
participation in the Program.
C. Pre-Operational Duties: Preparation for Plan Program Start Up.
MCS shall perform necessary pre-operational services so that the Plan
may commence Plan Program operations on the Implementation Date as established
by the SMA. All pre-operational costs shall be reimbursed in accordance with the
Letter Agreement entered into between the Michigan Primary Care Association and
Managed Care Solutions on May 2, 1995, as amended on December 12, 1995.
Pre-operational services shall include, but are not limited to:
1. Office site and equipment selection;
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<PAGE> 3
2. Selection and installation of computer hardware,
software and related equipment;
3. Staff selection and training, subject to Section
II.D.1 below;
4. Development of marketing programs, if directed by the
Plan
5. Development of Plan policy and procedures;
6. Development of provider network, including but not
limited to:
a. Negotiating.
b. Beginning the process of credentialing
providers.
c. Contracting.
These services are more fully described in Section
II.D.2 below.
7. Education of providers and their staff regarding the
Plan Program;
8. Establishment of utilization and quality assurance
programs;
9. Acting as a liaison with the SMA including
negotiation of any and all contracts;
10. Preparation of all materials necessary to submit a
complete application to sign a contract to provide
services on a managed care basis to the SMA.
11. Preparation of member handbooks and other required
items;
12. Preparation of provider handbooks and other required
items.
D. Administrative Services.
After the Implementation Date, MCS shall provide administrative
services necessary to the operation of the Plan Program or which are required by
any contract between the SMA and the Plan or contracts between the Plan and
Participating Providers. MCS' responsibilities shall include, but not be limited
to, the following:
1. General Management Duties. MCS shall be responsible
for the day-to-day management of the Plan. MCS shall take actions necessary for
the proper administration and management of the Plan Program, so long as such
actions are consistent with, and not in conflict with, the provisions of this
Agreement and any contract between the SMA and the Plan, and pursuant to
policies and procedures consistent with this Agreement adopted by the Plan Board
of Directors from time to time. MCS shall employ such individuals as are
necessary to carry out its duties under this Agreement. MCS shall recommend to
the Board of Directors of the Plan an individual to serve as the Plan's Chief
Executive Officer. The individual approved shall serve at the pleasure of the
Board, which may remove the Chief Executive Officer by a simple majority vote.
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<PAGE> 4
2. Contracting With Providers. MCS shall be responsible
for recruiting, negotiating, and contracting on behalf of the Plan with such
providers of services as necessary to provide Covered Services to Members as
required by any contracts between the SMA and the Plan. Provider contracts shall
be between the Plan and the Participating Providers. While it is understood that
there is no absolute guarantee that MCS will be able to contract on behalf of
the Plan with all such providers, MCS shall make reasonable efforts to recruit
and contract with such necessary providers and shall dedicate sufficient
resources to contract with such providers.
All contracts with Participating Providers shall be
in a form and contain such provisions as are acceptable to the Plan and shall
set forth the method and amount of reimbursement to Participating Providers, and
shall specify that the providers shall be subject to all requirements contained
in any contract between the SMA and the Plan, and all applicable provisions of
this Agreement.
3. Claims Processing and Payment. MCS shall pay claims
to providers for all Covered Services rendered to Members in accordance with
contracts entered into between Participating Providers and the Plan any contract
between the SMA and the Plan, and this Agreement. The amount of reimbursement to
providers shall take into account any co-payment, deductible or co-insurance
amounts which Members are or may in the future be required to pay under the
Program. Unless otherwise directed by the Plan, MCS shall have the authority and
discretion to interpret the requirements of the contract between the SMA and the
Plan, and the contracts between the Plan and Participating Providers with
respect to payment of claims to providers. Claims payments shall be made by
checks or drafts signed by MCS as the Plan's dispersing agent out of the account
established in accordance with Section II.C.4. hereof.
4. Bank Account; Accounting and Finance Duties. MCS
shall establish and maintain a bank account in the name of the Plan with a
financial institution selected by the Plan Board of Directors ("the Bank") for
the purpose of depositing all receipts from any source therein, including but
not limited to capitation payments and reinsurance payments, and paying all
expenses of the Plan Program, including payment of provider claims. MCS shall be
responsible for performing all day-to-day financial and accounting functions of
the Plan, including preparation of financial statements, accounts
payable/receivable administration, and banking arrangements. MCS shall also be
responsible for any required financial and regulatory reporting to the SMA. MCS
shall provide regular internal financial and other reports to the Plan Board of
Directors as appropriate to assist the Plan in operating its managed care
programs and to comply with federal and state laws and regulations.
5. Litigation. This section defines and describes the
responsibilities of the parties in Plan Benefits Litigation and Other
Litigation. "Plan Benefits Litigation" is a claim made or action commenced by a
health care provider or a Member seeking declaratory or injunctive relief or
provider reimbursement arising out of an allegation that a service, equipment or
supply is a Covered Service under a Member's Evidence of Coverage which should
be provided or paid for by the Plan. Any claim or action which is not Plan
Benefits Litigation is "other Litigation." A claim for compensatory or exemplary
damages arising in, out of or in connection with "Plan Benefits Litigation is
"Other Litigation."
a. If either MCS or the Plan becomes aware of
Plan Benefits Litigation, it shall promptly
notify the other party. The Plan shall,
4
<PAGE> 5
with MCS' advice and input, determine
whether to cover or pay the disputed claim
or proceed with Plan Benefit Litigation.
In the event the Plan determines to proceed
with Plan Benefits Litigation, the Plan
shall retain counsel and direct the response
to the Plan Benefits Litigation. The Plan
shall be responsible for assuming the cost,
liability and expense attributable to Plan
Benefits Litigation.
b. If either MCS or the Plan becomes aware of
Other Litigation, it shall promptly notify
the other party. In Other Litigation against
MCS, the Plan or both parties, each party
shall be responsible for providing and
paying for its own defense unless the
parties otherwise agree. Nothing in this
Section 5.b is intended or shall be
construed to limit in any way either party's
rights to assert a claim and recover damages
from the other party.
6. Coordination of Benefits; Third Party Liabilities;
Reinsurance. MCS shall be responsible for coordination of benefits and
third-party recoveries as required under the provisions of the contract between
the SMA and the Plan. MCS shall be responsible for the following:
a. Recovering or coordinating medical expenses
incurred by Members from all third-party
liability resources on behalf of the Plan
and depositing any amounts recovered in the
bank account established pursuant to Section
II.C.4 above;
b. Establishing and maintaining a file of
Members' third-party liability information;
c. Receiving third-party liability information
from the SMA and updating the Members' files
on a timely basis;
d. Informing the SMA of third-party liability
information discovered during the course of
business operations;
e. Providing the SMA with required reports
relating to amounts recovered from
third-parties;
f. Recovering reinsurance revenues payable to
the Plan from the SMA and /or other
Reinsurers.
7. Case Management. MCS shall be responsible for
performing case management services. MCS shall ensure that each Member has
chosen or is assigned a primary care provider who shall assess the Member's
health care needs and shall provide services to meet those needs either directly
or through referrals to other Participating Providers or, if necessary, to
appropriate providers outside the Plan. MCS shall implement a system for the
directing, coordinating, monitoring and tracking of the Covered Services
rendered to each member. This system shall include, but not be limited to, the
following:
5
<PAGE> 6
a. Ensuring that medically necessary services
are accessible and can be provided on a
timely basis;
b. Providing Members with clear and adequate
information on how to obtain services;
c. Assisting Members to obtain the services
prescribed by their primary care providers
and other authorized providers.
8. Facilitation of Services. MCS shall facilitate the
provision of Covered Services by Participating Providers by:
a. Providing the Plan and Participating
Providers with Member enrollment and
eligibility information; and
b. Maintaining telephone lines as required for
the purpose of determining enrollment and
eligibility information upon admission to an
emergency facility or hospital emergency
room.
c. Providing staff to answer telephone
inquiries concerning enrollment and
eligibility during reasonable hours and on
the days required by the Plan's Board of
Directors.
9. Program Coverage Information. MCS shall prepare and
forward to all Participating Providers, a summary of Covered Services which are
required to be provided under the Plan Program. Such summary shall be consistent
with the contract between the Plan and the SMA and the Evidence of Coverage and
shall include schedules of Covered Services and any applicable exclusions or
limitations affecting the provision of Covered Services, applicable co-insurance
and deductibles, and any other information relevant to the rendering of Covered
Services by providers. The summary of Covered Services may be included in the
provider handbook prepared by MCS.
10. Quality Assurance. MCS shall be responsible for
developing and maintaining a Quality Assurance Program in compliance with the
requirements of the contract between the SMA and the Plan.
11. Utilization Management. MCS shall be responsible for
developing and maintaining a Utilization Management Program. The Utilization
Management Program shall determine whether the level, type, and cost of benefits
provided are appropriate to the health care needs of Members on an ongoing
basis.
12. Credentialing. MCS shall credential and recredential
Participating Providers rendering health care services to Members as described
in the Plan's credentialing policies and procedures, as adopted by the Board of
Directors from time to time.
13. Information Systems and Ownership of Data. MCS shall
develop and maintain and use as of the Implementation Date an automated
management information system as necessary for the efficient operation of the
Plan Program and as required by the contract
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<PAGE> 7
between the SMA and the Plan, and this Agreement. All Plan specific data encoded
in MCS' computer system is owned by the Plan and shall not be disclosed to any
third party except as strictly necessary to provide services as required by this
Agreement. MCS agrees to maintain a system to physically backup the data on a
daily basis and store it off-site. In the event the contract between MCS and the
Plan is terminated, all Plan data will be promptly transferred to or as directed
by the Plan by MCS' Information Services & Technology (IST) staff using industry
standard electronic media. After the transfer is completed, all such Plan data
shall be removed from MCS' computer system and no electronic or hard copies of
same may be retained by MCS. The Plan or its designee shall notify MCS if Plan
data needs to be converted in order to be encoded into a different management
information system. MCS shall consult and work with the Plan or its designee to
the extent reasonable and customary in such circumstances to convert the data at
no extra expense to the Plan; provided however, that the Plan shall pay for
expenses associated with the conversion if the conversion requires more than 100
hours of professional staff time. The Plan shall not be charged for any
conversion services provided by MCS. All other aspects of the automated
management information system remain the exclusive property of MCS.
14. Reports to and Liaison with the SMA, Other State and
Federal Agencies. MCS shall be responsible for making reports to the SMA which
are required by the contract between the Plan and the SMA and to act as a
liaison to the SMA for the general purpose of regulatory compliance. MCS shall
also be responsible for making all required reports to Michigan HMO licensing
agencies and to the Health Care Financing Administration. Reports shall be made
at such times as are required by the SMA or other regulatory agency and such
reports shall be on forms provided by and/or in format acceptable to the SMA or
the other agency.
15. Reports to The Plan. MCS shall report to the
President and Board of Directors of the Plan on a regular basis and at such
times as are required by this Agreement and Plan policies and procedures and as
reasonably requested by the President or Board of Directors of the Plan. MCS
shall report to the Plan on any and all matters relating to the administration
of the Plan Program as requested by the President or the Board of Directors for
the Plan.
16. Member Services. MCS shall be responsible for
providing all Member services as are necessary to the administration of the
Plan's Program or as are required by any and all contracts between the SMA and
the Plan, and this Agreement.
17. Insurance Requirements.
a. Professional Liability Insurance. During the
term of this Agreement, the Plan shall maintain, at its sole cost and expense, a
policy of HMO-type professional liability insurance acceptable to MCS with
coverage limits in the minimum amount of $1,000,000 per incident and $3,000,000
in the annual aggregate. MCS shall be named as an additional insured on said
professional liability insurance policy. In addition, the Plan shall purchase a
"tail policy" with the same policy limits following the effective date of
termination of the foregoing policy in the event the policy is a "claims made"
policy.
b. Comprehensive Liability Insurance. MCS and
the Plan each shall maintain, at the sole cost and expense of each, throughout
the term of this Agreement, a policy of general or public liability insurance
acceptable to the other party in the minimum amount of
7
<PAGE> 8
$1,000,000 per occurrence and $3,000,000 in the annual aggregate. Each shall
name the other party as an additional insured on said policy.
c. Proof of Insurance. Each party shall furnish
the other with evidence of such insurance, including certificates of insurance
and complete copies of insurance policies, upon the other's request. Each party
shall provide the other with a minimum of 30 days prior written notice in the
event any of the insurance policies required by this Agreement are canceled,
changed or restricted in any way.
18. Grievance Procedure. MCS shall maintain separate
grievance procedures to process Member and Provider complaints.
19. Member Satisfaction. MCS shall administer
periodically, but not less frequently than annually, Member satisfaction surveys
to measure the level of satisfaction of Members receiving Covered Services from
Participating Providers. The development and administration of such surveys
shall be at the sole cost of MCS.
III. ADMINISTRATIVE FEE
A. Operational Phase. The Plan shall pay MCS an Administrative Fee
beginning on the Implementation Date. The Administrative Fee is set forth in
Exhibit A, Management Fee Schedule: Community Choice Michigan.
The monthly Administrative Fee will be estimated and paid before the
tenth day of the month. Any adjustments based on the actual membership figures
will be made to the subsequent months payment.
MCS shall be responsible, in return for receiving the Administrative
Fee, to assume all costs associated with the administration of the Plan Program,
except for the following expenses which shall be the responsibility of the Plan:
a. Covered Services;
b. Legal services of the Plan;
c. Actuarial services of the Plan;
d. All insurance premiums for the Plan;
e. Board fees, etc.;
f. Expenses relating to the corporate existence
of the Plan;
g. Independent outside audit and tax services of
the Plan;
h. Advertising and marketing expenses of the
Plan;
8
<PAGE> 9
i. Any income, property, premium or other taxes
of the Plan and any assessments or license
fees.
j. Any other expenses clearly related to the
business of the Plan as an independent
corporate entity;
B. Loan Guaranty Reserve Fund. The Plan intends to withhold an
amount equal to 2% of capitation payments from State (the 2% Withhold") in part
to meet state mandated capital requirements and in part to form a separate
guaranty fund securing the Plan's obligation to repay amounts borrowed from MCS
and all interest accrued thereon and all amounts owed to MCS for consulting fees
and interest accrued thereon. The Plan agrees and authorizes MCS to withhold
each month an amount equal to $.50 per member per month from the 2% Withhold and
to place such monies in an interest bearing account (the "Guaranty Reserve
Fund"). During the period that any obligation exists for MCS to lend money to
the Plan or as long as any consulting fees and interest thereon remain unpaid,
the Guaranty Reserve fund shall be under the exclusive control of MCS. Upon any
default of the Plan to repay principal and interest pursuant to any promissory
note or loan agreement, or upon the Plan's failure to repay accrued consulting
fees pursuant to the parties' agreement, MCS may immediately withdraw from the
Guaranty Reserve Fund all amounts to satisfy the amount owed by the Plan. When
MCS' obligation to lend the Plan money ends and all outstanding principal and
accrued interest thereon and all accrued consulting fees and accrued interest
have been paid by the Plan to MCS, MCS shall return any balance remaining in the
Guaranty Reserve Fund to the Plan.
IV. WARRANTIES. MCS warrants that it will in good faith make all reasonable
effort to provide services so that the Plan operates in accordance with the
state and federal laws and regulations and this contract.
V. TERM AND TERMINATION.
A. Term. This Agreement shall be effective on the date of its execution
first set forth above and shall be effective during the period necessary to
complete the Plan's pre-operational activities and shall then be in full force
and effect through the first five years of the Program. The first year of the
Program shall be deemed to have begun on the first day of the month in which
administrative fee is paid to MCS pursuant to Section III.B. above. Provided,
the Plan may terminate this Agreement effective the end of the third year by
giving written notice to MCS at least one hundred-eighty (180) days prior to the
end of the third year; if the Plan does not give such notice to MCS, this
Agreement shall continue in full force and effect for the entire five year term
as set forth hereinabove. Except as set forth below, this agreement is otherwise
irrevocable during the term hereof.
B. Termination. This Agreement may be terminated upon the following:
1. Automatically in the event the Plan is notified by the
SMA that its application to sign a contract to provide
Covered Services on a managed care basis under the
Program has not been accepted, and the Plan Board of
Directors decides not to continue the application or to
reapply within a reasonable time.
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<PAGE> 10
2. Upon notice by the Plan, in the event any officer,
director or principal shareholder of MCS is suspended
or excluded from participating in any federal or state
program in any state. MCS shall immediately notify the
Plan of the occurrence of any event described in this
subparagraph.
3. At any time upon the written mutual consent of both
parties.
4. In the event the contract between the SMA and the Plan
is terminated for any reason or the Plan's
participation in the Program is otherwise terminated,
in which case termination shall be effective as of the
termination date of the Plan's participation in the
Program.
5. Immediately upon the filing of a bankruptcy petition by
either party or upon the failure of either party to
obtain any license, registration or approval required
under state or federal law that is material to the
operation of the Plan Program.
6. If after ninety days written notice of a material
breach of MCS' obligations hereunder, during which time
MCS has failed to cure the breach, the Plan may
terminate this Agreement; provided, however, that no
termination may take place pursuant to this paragraph
until all principal and interest owed to MCS by the
Plan pursuant to any loan is paid in full.
C. Obligations in Event of Termination.
1. Upon termination of this Agreement, if the Plan continues to
operate, the Plan shall purchase those fixed assets acquired and used by MCS to
administer the Plan at a price equal to the book value of such assets at the
termination date; the Plan shall also agree to assume any lease of office space
or equipment being utilized for Plan operations.
2. In the event of termination of this Agreement for any reason,
MCS shall cooperate with the person or entity selected by the Plan to assume
administration of the Plan.
3. In the event of termination of this Agreement MCS shall
provide the Plan with all copies of records in MCS' possession directly and
specifically relating to the Plan Program and which are necessary for the
continued operation of the Plan Program, or shall forward such records to a
successor administrator as directed by the Plan. MCS' obligations under this
paragraph shall include providing data and data conversion services as required
by Section II.D.13 above.
VI. MISCELLANEOUS
A. Confidentiality. MCS agrees to safeguard the confidentiality of all
data pertaining to this Agreement and Covered Services rendered to Members.
Member medical information and medical records shall be kept confidential and
may be disclosed only in accordance with Michigan law. MCS shall also conduct
the Plan's credentialing and quality assurance activities in a manner which
qualifies for all professional practice review protections against liability,
discovery
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<PAGE> 11
and admissibility available under the Michigan Public Health Code and the Health
Care Quality Improvement Act.
B. Relationship of the Parties. In the performance of the work, duties
and obligations of the parties pursuant to this Agreement, the parties shall, at
all times, be acting and performing as independent contractors. No relationship
of employer and employee, or partners or joint ventures is created by this
Agreement, and neither party may therefore make any claim against the other
party for social security benefits, workers' compensation benefits, unemployment
insurance benefits, vacation pay, sick leave or any other employee benefit of
any kind. Each party shall maintain unemployment and workers compensation
coverage for its own employees. In addition, neither party shall have any power
or authority to act for or on behalf of, or to bind the other except as herein
expressly granted, and no other or greater power or authority shall be implied
by the grant or denial of power or authority specifically mentioned herein.
C. Assignment/Subcontracting. Neither party shall have the right to
assign, delegate or subcontract any of its rights or obligations hereunder
without the prior written consent of the other party.
D. Notices. Except as set forth herein, all notices required or
permitted to be given hereunder, shall be in writing and shall be sent by United
Stated mail, certified or registered, return receipt requested, postage prepaid,
to the parties hereto at their respective addresses set forth on the signature
page hereto, or such other address as may be fixed in accordance with the
provisions hereof. Except as set forth herein, if mailed in accordance with the
provisions of this paragraph, such notice shall be deemed to be received three
(3) business days after mailing.
E. Headings. The headings of the various sections of this Agreement are
inserted merely for the purpose of convenience and do not expressly or by
implication limit, define or extend the specific terms of the section so
designated.
F. Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, nor be
construed to be, a waiver of any subsequent breach thereof.
G. Applicable Law. This Agreement shall be governed in all respects by
the laws of the State of Michigan.
H. Invalid Provisions. If, for any reason, any provision of this
Agreement is or shall be hereafter determined by law, act, decision, or
regulation of a duly constituted body or authority, to be in any respect
invalid, such determination shall not nullify any of the other terms and
provisions of this Agreement and, unless otherwise agreed to in writing by the
parties, then, in order to prevent the invalidity of such provision or
provisions of this Agreement, the said provision or provisions shall be deemed
automatically amended in such respect as may be necessary to conform this entire
Agreement with such applicable law, act, decision, rule or regulation.
I. No Third-Party Beneficiary. This Agreement is entered into by and
between the Plan and MCS and for their benefit. There is not intent by either
party to create or establish third-party beneficiary status or rights or their
equivalent in any Member, subcontractor, or other
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<PAGE> 12
third party, and no such third party shall have any right to enforce any right
or enjoy any benefit created or established under this Agreement.
J. Arbitration. In the event that any dispute relating to this
Agreement arises between MCS and the Plan, the dispute shall be resolved by
binding arbitration in accordance with the Rules of Commercial Arbitration of
the American Arbitration Association. In no event may the arbitration be
initiated more than one year after the date on party first gave written notice
of the dispute to the other party. The arbitration shall be held in Lansing,
Michigan or in such other location as the parties may mutually agree upon. The
arbitrator shall have no power to award punitive or exemplary damages or vary
the terms of this Agreement and shall be bound by controlling law. Judgment upon
an arbitration award rendered may be entered by any court having jurisdiction
thereof.
K. Review and Audit. MCS will at all times make available for review
and audit by either the Plan or its designee its files, books, procedures and
records (including computer terminal access to same) pertaining to the Plan
Program or the services provided by MCS under this Agreement. In addition, MCS
shall make available for interview with the auditor those personnel with
material involvement or responsibility with respect to the services provided by
MCS under this Agreement.
L. Entire Agreement; Amendment. This Agreement and all exhibits hereto
shall constitute the entire agreement relating to the subject matter hereof
between the parties hereto, and supersedes all other agreements, written or
oral, relating to the subject matter hereof. This Agreement may be amended by
mutual agreement of the parties, provided that such amendment is reduced to
writing and signed by both parties.
M. Exhibits. Any exhibits attached to this Agreement are an integral
part of this Agreement and are incorporated herein by reference.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement to be effective
as of the day and year first set forth above.
THE PLAN
By Neal G. Colburn Date: December 13. 1995
--------------------
Its President
ADDRESS FOR NOTICES:
1200 East Michigan, Ste C
East Lansing, MI 48823
MANAGED CARE SOLUTIONS, INC.
By James A. Burns Date: December 15, 1995
--------------------
Its President
ADDRESS FOR NOTICES:
2510 W. Dunlap Ave., Suite 100
Phoenix, AZ 85021
13
<PAGE> 14
EXHIBIT A:
MANAGEMENT FEE SCHEDULE: COMMUNITY CHOICE MICHIGAN
================================================================================
Number of Plan Members per Month
================================================================================
<TABLE>
<CAPTION>
PMPM
Capitation Revenue Less Than 15,000* First 20,000 Next 20,000 Excess of 40,000
- - ------------------ ----------------- ------------ ----------- ----------------
<S> <C> <C> <C>
$150 & above Cost 9.6% 7.7% 6.7%
$145 - $149.99 Cost 10.2% 8.0% 7.2%
$140 - $144.99 Cost 10.5% 8.2% 7.4%
$135 - $139.99 Cost 11.0% 8.5% 7.6%
$130 - $134.99 Cost 11.3% 8.7% 7.8%
$125 - $129.99 Cost 11.9% 9.2% 8.1%
$120 - $124.99 Cost 12.4% 9.5% 8.5%
$115 - $119.99 Cost 12.9% 9.9% 8.9%
$110 - $114.99 Cost 13.4% 10.4% 9.2%
$105 - $109.00 Cost 14.1% 10.8% 9.6%
$100 - $104.99 Cost 14.5% 11.4% 10.0%
$ 95 - $ 99.99 Cost 15.0% 11.6% 10.4%
$ 90 - $ 94.99 Cost 15.4% 11.8% 10.6%
$ 85 - $ 89.99 Cost 15.7% 12.0% 10.8%
$ 80 - $ 84.99 Cost 16.0% 12.3% 11.0%
$ 75 - $ 79.99 Cost 16.3% 12.5% 11.2%
$ 70 - $ 74.99 Cost 16.6% 12.8% 11.5%
$ 65 - $ 69.99 Cost 17.0% 13.1% 11.7%
$ 60 - $ 64.99 Cost 17.3% 13.3% 11.9%
$ 55 - $ 59.99 Cost 17.6% 13.5% 12.1%
$ 50 - $ 54.99 Cost 17.9% 13.8% 12.3%
</TABLE>
* If enrollment is less than 15,000 members, the Plan shall approve a negotiated
expense budget, which shall serve as MCS's definition of "cost".
NOTE: The Management Fee is calculated each month based on the actual average
enrollment and actual PMPM Capitation Revenue yield for that month on an accrual
basis. An example follows for a Plan with 50,000 average members and revenue of
$130 PMPM:
<TABLE>
<CAPTION>
Membership Segment Fee Schedule% Proportion of Members Weighted Management Fee
- - ------------------ ------------- --------------------- -----------------------
<S> <C> <C> <C>
First 20,000 11.3% .400 4.52%
Next 20,000 8.7% .400 3.48%
Next 10,000 7.8% .200 1.56%
---- ----
50,000 Members 1.00 9.56%
</TABLE>
Risk Sharing If the plan implements substantial risk sharing with its
participating providers, Managed Care Solutions (MCS) is willing to consider
assuming a risk position as follows:
Downside Risk: MCS will fund 10% of Risk Pool losses not to exceed
10% of its Management Fee.
Upside Risk: MCS will receive 10% of Risk Pool profits not to
exceed 10% of its Management Fee.
Risk Sharing between MCS and Plan shall only apply when both parties agree to
risk sharing and an amendment to this Agreement is effected in accordance with
Paragraph V. L of this Agreement.
Initials: NGC Date: 12-18-95 Plan
Initials: JB Date: 12-15-95 MCS
14
<PAGE> 15
EXHIBIT 10.12(a)(1)
AMENDMENT ONE TO ADMINISTRATIVE SERVICES AGREEMENT
EXHIBIT A:
MANAGEMENT FEE SCHEDULE: COMMUNITY CHOICE MICHIGAN
================================================================================
Number of Plan Members per Month
================================================================================
<TABLE>
<CAPTION>
PMPM
Capitation Revenue Less Than 15,000* First 20,000 Next 20,000 Excess of 40,000
- - ------------------ ----------------- ------------ ----------- ----------------
<S> <C> <C> <C> <C>
$150 & above Cost 9.6% 7.7% 6.7%
$145 - $149.99 Cost 10.2% 8.0% 7.2%
$140 - $144.99 Cost 10.5% 8.2% 7.4%
$135 - $139.99 Cost 11.0% 8.5% 7.6%
$130 - $134.99 Cost 11.3% 8.7% 7.8%
$125 - $129.99 Cost 11.9% 9.2% 8.1%
$120 - $124.99 Cost 12.4% 9.5% 8.5%
$115 - $119.99 Cost 12.9% 9.9% 8.9%
$110 - $114.99 Cost 13.4% 10.4% 9.2%
$105 - $109.00 Cost 14.1% 10.8% 9.6%
$100 - $104.99 Cost 14.5% 11.4% 10.0%
$ 95 - $ 99.99 Cost 15.0% 11.6% 10.4%
$ 90 - $ 94.99 Cost 15.4% 11.8% 10.6%
$ 85 - $ 89.99 Cost 15.7% 12.0% 10.8%
$ 80 - $ 84.99 Cost 16.0% 12.3% 11.0%
$ 75 - $ 79.99 Cost 16.3% 12.5% 11.2%
$ 70 - $ 74.99 Cost 16.6% 12.8% 11.5%
$ 65 - $ 69.99 Cost 17.0% 13.1% 11.7%
$ 60 - $ 64.99 Cost 17.3% 13.3% 11.9%
$ 55 - $ 59.99 Cost 17.6% 13.5% 12.1%
$ 50 - $ 54.99 Cost 17.9% 13.8% 12.3%
</TABLE>
* If enrollment is less than 15,000 members, the Plan shall approve a negotiated
expense budget, which shall serve as MCS's definition of "cost".
NOTE: The Management Fee is calculated each month based on the actual average
enrollment and actual PMPM Capitation Revenue yield for that month on an accrual
basis. An example follows for a Plan with 50,000 average members and revenue of
$130 PMPM:
<TABLE>
<CAPTION>
Membership Segment Fee Schedule % Proportion of Members Weighted Management Fee
- - ------------------ -------------- --------------------- -----------------------
<S> <C> <C> <C>
First 20,000 11.3% .400 4.52%
Next 20,000 8.7% .400 3.48%
Next 10,000 7.8% .200 1.56%
---- ----
50,000 Members 1.00 9.56%
</TABLE>
Initials: NGC Date: 5-22-96 Plan
Initials: JAB Date: 5-22-96 MCS
<PAGE> 16
EXHIBIT 10.12(a)(2)
AMENDMENT TWO TO MANAGEMENT SERVICE AGREEMENT
This agreement is entered into this 26TH day of August , 1996 by and among
MANAGED CARE SOLUTIONS, INC. ("MCS"), a Delaware corporation and COMMUNITY
CHOICE MICHIGAN ("Plan"), a not-for profit Michigan corporation.
WHEREAS, MCS and the Plan have entered into a Management Services Agreement
effective December 1, 1995, pursuant to which MCS will provide administrative
services for the Plan in the delivery of all medical and administrative
functions for the provision of covered services to members, under the managed
care program administered by the State of Michigan Medicaid Agency (MSA);
WHEREAS, MCS and the Plan have amended Exhibit A of the aforementioned
agreement, in an agreement dated May 22, 1996 to supersede the previous Exhibit,
to reflect language revisions required by the State of Michigan Insurance
Bureau;
WHEREAS, the Management Services Agreement includes a provision for negotiation
of a fee schedule for Administrative Services provided in the event that
enrollment does not exceed 15,000 members;
WHEREAS, Plan enrollment is not anticipated to exceed 15,000 members upon
commencement of Plan operations on August 1, 1996.
NOW THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Exhibit A of the Management Services Agreement is hereby amended as follows:
Effective August 1, 1996, administrative fees will be paid to MCS according to
the schedule below, when the Plan has an actual enrollment of less than 15,000
members in a given calendar month:
<TABLE>
<S> <C>
Month 1 Cost plus 8%
Month 2 Cost plus 6%
Month 3 Cost plus 4%
Month 4 Cost plus 2%
Month 5 and thereafter Cost plus 0%
</TABLE>
2. At such time as enrollment reaches 15,000 members, reimbursement will revert
to the Exhibit A: Fee Schedule, signed by both parties on May 22, 1996. If
enrollment should exceed 15,000 members for a period and then decrease below
15,000 members, payment will commence with the next applicable Month from the
point previously terminated in the schedule in Paragraph 1 above.
3. "Cost" as referenced above shall not exceed an average of $200,000 per month
for the entire time period membership is less than 15,000 members. Cost will
include all expenses incurred in the administration and delivery of covered
services rendered to plan members, including a $1.50 per member per month (PMPM)
fee assessed for corporate overhead expenses.
<PAGE> 17
4. For the initial month of Plan operations, MCS will withdraw projected costs
in the amount of $165,000 plus 8% from Plan revenues no later than the 15th of
the first month. Thereafter, by the 15th of each month, MCS will submit a
detailed listing of actual costs (including $1.50 PMPM overhead) incurred during
the previous month. Reconciliation and payment will occur within two working
days, with payment comprising the current month's estimated costs of $165,000
with the applicable percentage increase as denoted in Paragraph 1 above, and the
reconciled balance of the previous month's costs, to the extent that total costs
for the periods combined do not exceed an average of $200,000. Any funds not
paid in the reconciliation process in order to retain average costs at $200,000
or less may be added into a subsequent month's reconciliation, so long as the
average for all periods does not exceed $200,000.
5. Notwithstanding the provisions of Paragraph 4 above, total reimbursement for
administrative expenses in any one month may exceed $200,000, if the added
percentage to actual costs calculation per the schedule in Paragraph 1 exceeds
$200,000, and/or the reconciliation of funds permits a reimbursement greater
than $200,000 in a given month for costs incurred and averaged over more than
one period.
Example:
Month 1 payment = $165,000 + 8% = 178,200.
Month 2: Actual expenses for Month 1 received = $180,000; Month 1
reconciliation: $15,000 (180,000 - 165,000) x 8%. Month 2 payment:
($15,000 x 1.08) + ($165,000 x 1.06) = $191,100.
Month 3: Actual expenses for Month 2 received = $230,000 (may only apply
$220,000 so as not to exceed an average of $200,000); Month 2
reconciliation: $55,000 (220,000 - 165,000) x 6%. Month 3 payment:
($55,000 x 1.06) = ($165,000 x 1.04) = $229,900.
Month 4: Actual expenses for Month 3 received = $150,000 (add $10,000
reduction from previous month for total of $160,000; average for three
months = $180,000 + 220,000 + 160,000 = 186,666); Month 3 reconciliation
: $-5,000 (160,000 - 165,000) x 1.04. Month 4 payment (-$5,000 x 1.04) +
($165,000 x 1.02) = $163,100.
6. MCS and the Plan agree that no other provisions or obligations in the
Management Services Agreement or any other agreement previously entered into
between the two parties shall be altered or any other way revised pursuant to
this Agreement.
MANAGED CARE SOLUTIONS, INC.
By James A. Burns
------------------------------
Date August 26, 1996
------------------------------
COMMUNITY CHOICE MICHIGAN
By Neal G. Colburn
------------------------------
Date August 7, 1996
------------------------------
<PAGE> 1
EXHIBIT 10.13(a)
[MICHIGAN PRIMARY CARE ASSOCIATION LETTERHEAD]
May 2, 1995
Jim Burns, President
Managed Care Solutions
2510 West Dunlap Avenue Suite 100
Phoenix, AZ 85021
Dear Jim,
This letter confirms our agreement to engage Managed Care Solutions to develop
and license an HMO comprising Michigan's Community and Migrant Health Centers,
and to obtain a Medicaid contract to serve Medicaid patients. This HMO will be
organized as a non-profit corporation, controlled by the Community Health
Centers.
This letter incorporates the terms set forth in your letters to Judy Martin of
March 30, April 7 and April 12. We are establishing a maximum charge of
consultant fees of $360,000, and a total project cost of $498,000, excluding
reserves. We enter this agreement with the understanding that you can
accomplish HMO licensure and secure a Medicaid contract for this amount.
Our contract with you is based on the assumption that we will secure funds to
develop and operate the HMO. We have adequate funds for you to begin this task.
We rely on securing an Integrated Service Network grant of $250,000 from the
Public Health Service. We are seeking additional funds to provide operating
funds and working capital.
The term of this agreement begins on this date, and terminates when the HMO is
formed and ready to operate. It is our intent to issue a Request for Proposals
for management of the HMO, to which you will be invited to respond.
We retain the right to terminate this agreement if:
a. We are unable to secure adequate funds to complete the project.
b. It becomes evident to the Michigan Primary Care Association that
organization of an HMO is not feasible or in the best interests of
the Centers.
c. There is substantial lack of progress towards HMO licensure,
according to the time frame set forth in the referenced letters from
Managed Care Solutions.
We would terminate the agreement in writing, and pay you for expenses incurred
before notice of termination.
We look forward to working with you, and are prepared to begin the project
immediately.
Sincerely,
Accepted
/s/ Kim E. Sibilsky /s/ Jim Burns
- - --------------------------- ---------------------------------
Kim Sibilsky Jim Burns
Executive Director President, Managed Care Solutions
Date May 2, 1995
<PAGE> 2
EXHIBIT 10.13(a)(1)
AMENDMENT ONE
TO CONSULTING AGREEMENT
The Letter Agreement entered into between the Michigan Primary Care Association
(MPCA) and Managed Care Solutions, Inc. (MCS) is amended, effective November 1,
1995, as follows:
"The consulting fees established in Paragraph 3 of the March 30, 1995
letter are decreased to the following levels:
LABOR:
------
<TABLE>
<CAPTION>
Maximum Daily Rate
Regardless of Hours
Level Consulting Group Hourly Rate Worked per Day
- - ----- ---------------- ----------- -------------------
<S> <C> <C> <C>
I President, CEO, Physicians $140 $1,150
II CFO, CIO, Executive Director $100 $850
Business/Network Development
Director (Project Manager)
III Other managers, planning staff, $75 $600
programmers & analysts
IV Word processing (only for time $20 N/A"
consumed on major proposals
and license applications)
</TABLE>
MANAGED CARE SOLUTIONS, INC. MICHIGAN PRIMARY CARE ASSOCIATION
- - ---------------------------- ---------------------------------
By James A. Burns By Neal G. Colburn
------------------- ---------------------------
Its President Its President
------------------- ---------------------------
Date December 15, 95 Date December 13, 1995
------------------- ---------------------------
<PAGE> 3
EXHIBIT 10.13(a)(2)
AMENDMENT TWO
TO CONSULTING AGREEMENT
This Agreement is entered into this 12th day of December , 1995, by and
among MANAGED CARE SOLUTIONS, INC. ("MCS"), an Arizona corporation, THE MICHIGAN
PRIMARY CARE ASSOCIATION (the "Association"), a Michigan not-for-profit
corporation, and COMMUNITY CHOICE MICHIGAN ("Community Choice"), a Michigan
not-for-profit corporation.
WHEREAS, MCS and the Association have entered into a letter agreement
dated May 2, 1995 (the "Letter Agreement"), pursuant to which MCS would provide
consulting services in connection with the formation of Community Choice and the
Association would pay MCS consulting fees for such services;
WHEREAS, Community Choice would derive direct benefit from such
consulting services after December 1, 1995 and desires to undertake payment for
such services;
WHEREAS, the Association desires to assign the obligations and benefits
under the Letter Agreement to Community Choice;
NOW THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. The Association assigns the obligations and benefits under the
Letter Agreement to Community Choice; MCS agrees to the assignment; Community
Choice accepts the assignment.
2. The Letter Agreement is hereby amended to the effect that beginning
December 1, 1995, Community Choice shall be bound by all of the terms and
conditions thereof to the same extent as the Association was so bound thereby.
3. The Association agrees that nothing in this Agreement eliminates,
alters or reduces its liability pursuant to the Letter Agreement to pay all
consulting fees to MCS accrued before December 1, 1995.
4. The parties agree that beginning December 1, 1995, all consulting
fees earned by MCS pursuant to the Letter Agreement shall be deferred and paid
by Community Choice in the following manner:
<PAGE> 4
a. The existing balance of unpaid fees shall earn interest at
seven per cent (7%) per annum.
b. Beginning with the first payment of management fees pursuant
to the Administrative Services Agreement, an amount equal to
one-twelfth of the principal amount of the unpaid fees plus
all interest earned thereon shall be added to the monthly
management fee paid to MCS, so that the entire balance of
unpaid fees and all interest earned thereon will have been
paid within eleven months following the first payment.
MANAGED CARE SOLUTIONS, INC.
By James A. Burns
----------------------
Date December 15, 1995
----------------------
THE MICHIGAN PRIMARY CARE
ASSOCIATION
By Kim Sibilsky
----------------------
Date December 12, 1995
----------------------
COMMUNITY CHOICE MICHIGAN
By Neal G. Colburn
----------------------
Date December 13, 1995
----------------------
2
<PAGE> 5
[MANAGED CARE SOLUTIONS LETTERHEAD]
March 30, 1995
Judy Martin
Michigan Primary Care Association
1200 East Michigan Avenue, Suite C
East Lansing, MI 48823
Dear Judy:
The following is our response to your 3/29/95 memorandum regarding "Network
Development in Michigan:"
1. TIMETABLE. The timetable, as described on page 9 of the Program
Action Plan, calls for Network Development to begin on April 15, 1995. This
aspect of the project can be met and the HMO licensing application can probably
still be submitted by May 15, 1995 as called for in the Program Action Plan if
the corporation, a basic network, and financing has been established (some
fairly big "ifs"). The timetable is very aggressive in terms of the turnaround
expected from the Michigan HMO licensing authority and depending on how long
that agency takes to examine the application will probably be the major
determinant whether the time frames slip. If everything goes very well and near
perfect, the optimistic time frame of October 1, 1995 for your first Medicaid
HMO enrollment can be accomplished. We believe the range of probable dates for
program completion will range from October 1, 1995 to March 31, 1996. We can
begin network development as early as April 20, 1995.
2. PERSONNEL. The project manager for the Michigan project would be
Gene Dameron. Mr. Dameron has extensive network development and managed care
expertise, particularly in his prior positions as the Executive Director
for two Arizona Medicaid HMOs. The personnel who will work on the bulk of
the various phases of the project, including network development, the HMO
licensing application, the State Medicaid Agency application, and
pre-operational activities, are as follows:
Jim Burns, President
Blaine Bergeson, Chief Executive Officer
Patrick Brennan, Chief Financial Officer
Jerry Witherspoon, Chief Information Officer
Faye Newsome, Claims/Operation Director
Rhonda Brede, Executive Director, Ventana Health Systems
Maggi Bradley, Executive Director, Arizona Health Concepts
Rod Taylor, Director of Governmental Affairs
Tony Solem, Director of Product Analysis & Development
Vicki Miller, Planning & Development Coordinator
<PAGE> 6
The resumes for these individuals have been enclosed. Mr. Dameron will
spend the greatest amount of time on-site, primarily in the network development
stages. Other individuals will work on-site from time to time to assist with
network development and to research information relative to HMO and Medicaid
agency applications, but such on-site work will be minimized to save travel
costs. We anticipate that the majority of work related writing and composing
the HMO and Medicaid agency applications will be performed at our Phoenix
office and closely coordinating progress milestones with you, which will be
cost effective for the overall project.
3. BUDGET. We know that the MPCA is concerned about preserving its
available resources for this project. Accordingly, we are proposing the
following arrangements for this project:
* A significant discount from our usual consulting fees.
* Certain services provided at no charge.
* The discounted fees will be billed against a set fee (the
"Consultant Project Budget") up to a specified maximum
number of labor hours.
The Consultant Project Budget (fees paid to MCS) is as follows:
<TABLE>
<CAPTION>
Maximum Consultant Project Budget - Michigan PCA Managed Care Development Project
- - ---------------------------------------------------------------------------------
Professional Materials Legal Actuarial Total Maximum
Project Function Labor & Travel Fees Fees Expenses Hours*
- - ---------------- ------------ --------- ----- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
HMO License
Application 36,000 4,000 5,000 -- 45,000 330 hours
Network
Development 44,000 10,000 15,000 -- 69,000 360 hours
Risk Sharing
Relationships 10,000 2,000 5,000 20,000 37,000 80 hours
Medicaid Agency
Proposal 24,000 3,000 4,000 8,000 39,000 290 hours
Pre-Operational
Tasks 90,000 44,000 -- -- 134,000 950 hours
------- ------ ------ ------ ------- -----------
TOTAL COSTS 204,000 63,000 29,000 28,000 324,000 2,010 hours
</TABLE>
* The actual billings by Managed Care Solutions will be the lesser of the
Consultant Project Budget of $324,000 or actual time, materials,
actuarial/legal fees and travel, up to a maximum labor commitment of 2,010
hours from MCS staff. IF the total project entails more than 2,010 hours of MCS
staff labor, such costs will be reimbursed to MCS at its discounted fee
schedule as shown below. The outside consulting actuarial fees are in addition
to MCS staff labor time and are estimated at a level to purchase 80 to 100
hours of the time of an actuary to analyze Michigan capitation rates and
proposed payment fee arrangements with key providers such as hospitals.
<PAGE> 7
The pre-operational costs assigned to MCS include design work for
marketing materials and printing of a basic marketing brochure (not to exceed
10,000 copies), but do not include external marketing programs such as direct
face to face sales, radio/TV/media advertising, billboards, and the like. The
pre-operational costs absorbed by MCS also assume that office space is rented
60 days prior to the beginning of health plan operations, not to exceed $6,000
per month.
You had also mentioned there may be a need to analyze proposed
contracts with hospitals in Michigan. We will perform, at no charge between
April 1, 1995 and May 31, 1995, three (3) non-legal desk reviews of any such
proposed hospital contractual agreements.
The MCS Consulting Fee Schedule for the Michigan project is as follows
(amounts to be billed against the Consultant Project Budget stated above):
LABOR:
<TABLE>
<CAPTION>
Maximum Daily Rate Regardless
Level Consulting Group Hourly Rate of Hours Worked per Day
----- ---------------- ----------- -----------------------------
<S> <C> <C> <C>
I President, CEO, Physicians $ 160 $ 1,300
II CFO, CIO, Executive Director,
Business/Network Development $ 120 $ 1,000
Director (Project Manager)
III Other managers, planning
staff, programmers & analysts $ 80 $ 650
IV Word processing (only for
time consumed on major
proposals and license $ 25 N/A
applications)
</TABLE>
Note: Travel time in the air between Phoenix and Detroit airports will
be charged at 30% of the above rates.
MATERIALS & TRAVEL:
1. Travel: At MCS's costs (lodging limited to $75.00 per day).
2. Incidental office supplies; copying; clerical and word processing
not connected to major proposals and license applications):
No charge
3. Printing of Marketing Brochures (up to 10,000): At MCS's cost
4. Other Out-of-Pocket Expenses Not Listed Above (should be minimal):
At MCS's cost
The actual Consultant Project Budget may be less than as estimated above if the
MPCA and/or CHCs perform some of the network development activities. In this
case, the Consultant Project Budget may be reduced to a level in the $275,000
range. If the new HMO has a good initial membership base (more than 15,000
members) it is likely that Pre-operational expenses will be higher, but this is
more good news than anything else as such costs will be recouped quickly from
your initial cash flow and profits. The MPCA can also expect to incur expenses
outside of the Consultant Project Budget that are directly associated with the
development of the health plan, such as the following:
<PAGE> 8
incorporation expense; insurance; legal expense; marketing and advertising,
etc. These additional expenses may be in the range of $40,000 to $90,000.
4. CAPITALIZATION. We certainly agree that you should attempt to have
a majority interest in the HMO to be formed. I mentioned earlier that we have
had fruitful discussions with an investment banker and a large insurance
company which have expressed an interest in funding a Michigan HMO. The
investment banking company seems particularly amenable to a scenario such as
the following that might ease your mind in a situation where you cannot attract
adequate equity capital on your own.
If you do not have the funds to establish a pure majority stock
ownership interest in the HMO, you can achieve the equivalent through an
arrangement in which CHCs have equal representation on the Board of
Directors. We believe there are ways in this, your "least favorite
scenario," for CHCs to still come out a big winner. For example, we
think CHCs have the leverage and attactiveness in the marketplace to own
only 20% of an HMO, yet have 50% Board representation, a 50% split of
the HMO profit, and a perpetual place in the HMO provider network. In
this scenario, and only if it becomes a necessity, you still will have
maintained control of the HMO company and rights to half the profits.
We are not advocating the above scenario, but wish to point out there
are some very attractive alternative arrangements that are far superior to
total dependence upon straight contract arrangements with HMOs which, in the
long run, give CHCs no guarantees regarding access to patients and program
savings, especially on the hospital side of the equation.
We are pleased to submit this proposal to the Michigan PCA. Managed
Care Solutions has significant development, start-up and management experience
in both the Arizona and Hawaii Medicaid markets. In Hawaii, our management of
AlohaCare has been a real success story for CHCs where the vast majority of
Medicaid patients are assigned to six CHCs on the islands of Oahu, Kauai, and
Hawaii. If you have any questions regarding our proposal, please call me at
your earliest convenience.
Sincerely,
/s/ Jim
Jim Burns
President
<PAGE> 9
[MANAGED CARE SOLUTIONS LETTERHEAD]
April 7, 1995
Judy Martin
Michigan Primary Care Association
1200 E. Michigan Ave., Suite C
East Lansing, MI 48823
Dear Judy:
You have asked me to respond to our willingness to accept non-compete
provisions in any ultimate arrangement with a MCPA sponsored HMO or MSO.
We have always been willing to sign non-compete agreements. In fact, during our
negotiations with parties other than MPCA regarding doing business with CHCs,
we were always agreeable to signing agreements with substantial non-competition
provisions if Managed Care Solutions became the management company for a CHC
network or HMO. If you are told anything different by anyone it will not be an
accurate statement.
I can state categorically that Managed Care Solutions will agree to work
exclusively with a Michigan HMO sponsored by CHCs within its service area if we
are selected as the management firm. This will apply to any of the following
lines of business entered by such a CHC sponsored HMO:
* Acute Care Medicaid
* Medicare
* Commercial (employer and individual products)
Such exclusivity would not apply to Long Term Care Medicaid, which is a small
(usually about 5% of all Medicaid patients) specialty niche that we have
developed extensively in Arizona and plan to export to a variety of states in
the next several years. LTC Medicaid patients are probably rarely seen in CHC
settings and do not represent the primary patient base CHCs are seeking in the
managed care marketplace. However, there may be specific communities where it
makes sense to include a CHC physician, such as an internist, in a LTC provider
network. If a CHC had a home health agency and/or Personal Care services
function (I think this is uncommon), again it would be appropriate to enter
into sub-contractual arrangements with such a CHC.
<PAGE> 10
Page Two
April 7, 1995
We believe Michigan CHCs are superbly equipped and positioned to develop a
strong HMO. Managed Care Solutions would be pleased to help with further
development and eventually with plan management.
It may be worthwhile for key officials of our company to visit with MPCA, on
your turf, to discuss how we approach and strategize managed care arrangements
to the benefit of CHCs. Our Executive Director of AlohaCare, Mike Tweedell, is
a former CHC Executive Director and it may be useful to the MPCA to hear from
Mike directly how we have successfully put into place a very successful model in
Hawaii, and how such a model is readily transferable in form and concept to
Michigan.
We look forward to hearing from you soon regarding the development of your
managed care organization.
Sincerely,
/s/ Jim
Jim Burns
President
<PAGE> 11
[MANAGED CARE SOLUTIONS LETTERHEAD]
April 12, 1995
Judy Martin
Michigan Primary Care Association
1200 East Michigan Ave, Suite C
Lansing, MI 48823
Dear Judy:
As you will see later in this correspondence, we think the overall cost of your
managed care development project (including CHC-level hardware/software
connectivity) will fall in the range of $350,000 to $400,000. Following are
responses to the questions in your fax of 4/11/95:
1. Legal Issues
We think the legal services described in the proposal should be
supplied primarily, if not wholly, by local Michigan counsel. MPCA, with our
assistance as necessary, should select who to use for legal services, probably
with the view that the selected law firm will ultimately be legal counsel for
the HMO entity. It is possible that we may use other out-of-state law firm(s)
for advise with regard to proposed provider contracts and risk sharing
arrangements, but we think the best choice is to find and stick with local
Michigan counsel.
The $29,000 legal fees estimate did not include the cost of
incorporating the new entity. At the top of page 4 of our 3/30/95 proposal was
a reference to $40,000 to $90,000 in expenses outside of the Consultant
Project Budget which would be for items such as incorporation expense.
2.CHC-Level Hardware/Software Systems
Our $44,000 materials and travel estimate for the pre-operational phase
and includes items such as office rental, supplies, phone, utilities, travel,
etc. It does not include the $48,000 or so required to effect the
hardware/software connectivity at your individual CHCs, an item which MPCA did
include in its proposed ISN budget. The CHC-level hardware/software
connectivity is not an expense of the ultimate HMO entity, rather is what is
needed at each CHC to "tap into" the HMO's member eligibility and
claims/encounter system. If your ISN grant can pay for this expense that is
great; otherwise, the expense per CHC is not formidable (about $2,300 per site)
and can probably be absorbed in their operational budget if so desired.
3.Payment Schedule
We are flexible regarding payment terms. We usually bill at the
conclusion of each month for that month's activity and are paid within 15 days
of billing. For example, for the month ending 4/30/95, we would bill MPCA for
April activity on about 5/5/95 and expect payment about 5/20/95.
<PAGE> 12
Page Two
April 12, 1995
Looking at your managed care development project globally, we think total
expenditures will fall in these ranges if Managed Care Solutions is selected
for the Consultant Project Budget aspect:
<TABLE>
<CAPTION>
Item of Expense Low Middle Range High
- - --------------- ------- ------------ -------
<S> <C> <C> <C>
Consultant Project Budget (MCS) 285,000 324,000 360,000
Corporate development costs 40,000 60,000 90,000
CHC-level system connectivity 0 48,000 48,000
------- ------- -------
TOTAL EXPENSE 325,000 432,000 498,000
</TABLE>
The "low" estimate assumes that some level of network development is performed
by MPCA and the CHCs, and, that CHCs absorb the cost of hardware/software
connectivity in their operational budgets.
The "middle range" estimate assumes that MCS's consultant hours come in as
projected and that the CHC-level hardware/software connectivity is paid via the
ISN grant.
The "high" estimate assumes that MPCA and CHCs are unable to participate to any
great degree in network development and that the project in its entirety takes
longer than projected to complete because of delays, bottlenecks, and other
factors that cannot now be accurately forecasted. I think the "high" side
estimate is an unlikely occurrence.
If you want to include the CHC-level software/hardware costs in the managed
care development budget and MPCA/CHCs participate some in network development,
we believe the total costs will fall in the range of $350,00 to $400,000. Thus,
it looks like the combined efforts of internal fundraising and the ISN grant
should be able to cover development costs. Also, at some point in time in this
process you will have attracted additional start-up and equity capital which
could be used to a small degree to fund development costs in excess of these
estimates.
I hope we have adequately addressed your issues and questions. Please give me a
call if you need any clarification or have other questions.
Sincerely,
/s/ Jim Burns
- - -----------------------
Jim Burns
President
<PAGE> 1
Exhibit 10.14
MCM Managed Care, Inc.
One Rotary Center
Evanston, Illinois 60201
March 1, 1996
Mr. Blaine Bergeson
Managed Care Solutions, Inc.
2510 West Dunlap Avenue, #100
Phoenix, Arizona 85021
Dear Blaine:
This letter constitutes an employment agreement between us whereby MCM
Managed Care, Inc. (formerly Medicus Systems Corporation ("MCM")), has agreed to
employ you and you have agreed to serve as President and Chief Executive Officer
of MCM. In this capacity you will be a member of the Executive Strategy Team and
will serve in accordance with the bylaws of MCM.
Any voluntary termination by you (other than for cause) shall
constitute a breach hereof and similarly any termination of your employment by
MCM (other than for cause) shall constitute a breach hereof. For purposes of
this letter, voluntary termination by you "for cause" shall mean a termination
on account of a willful material breach by MCM of any agreement between you and
MCM; and voluntary termination by MCM "for cause" shall mean termination on
account of gross negligence, dishonesty, willful material breach of an agreement
with MCM, or violation of any reasonable rule or regulation of MCM of which you
have been advised in writing.
Your salary during your employment will be $175,000 annually (or such
increased amount as we may agree). You will also receive the same benefit
package as other MCM employees, except that you will be eligible for 26 days of
paid time off on an annual basis (in addition to regularly scheduled MCM
holidays).
In the event that MCM determines that separation of your employment is
necessary, MCM agrees to provide you with severance compensation if you are
terminated by MCM for any reason other than cause. Severance compensation is
defined as salary at the rate of $175,000 annually and health insurance. If your
employment terminates, you will receive severance compensation for a period of
one year from the date of termination. In no event will your severance pay
exceed six months if at the time of termination MCM has not had net income after
<PAGE> 2
Mr Blaine Bergeson
March 1, 1996
Page 2
taxes during the preceding 12 months of at least $1,000,000. In addition, no
severance compensation will be due with respect to any voluntary termination on
your part.
Concurrently with the execution of this letter, MCM has granted you ten
year stock options in the standard MCM form to purchase 150,000 shares, such
options subject to vesting in four annual installments of 25%. If you terminate
your employment at any time, your options will expire thirty days following such
termination. All options will also terminate immediately if you breach your
employment agreement or if you are terminated for cause (as defined in this
letter) at any time.
As a condition to your employment, you will execute MCM's Standard Key
Employee Nondisclosure Agreement.
We have agreed that you will start as a full time employee concurrently
with the consummation of the mergers of wholly owned subsidiaries of MCM into
Managed Care Solutions, Inc., Ventana Health Systems, Inc., and Arizona Health
Concepts, Inc.
Again, I would like to take this opportunity to say how excited I am
about working together with you to develop MCM into one of the significant and
most profitable companies in our industry.
Please confirm your agreement and acceptance with the provisions of
this letter by signing and returning the enclosed copy of this letter where
indicated.
Sincerely,
/s/ William W. Cowan
----------------------
William W. Cowan
Vice President
ACCEPTED AND AGREED:
/s/ Blaine Bergeson
- - --------------------
Blaine Bergeson
<PAGE> 1
EXHIBIT 10.15
MCM Managed Care, Inc.
One Rotary Center
Evanston, Illinois 60201
March 1, 1996
Mr. James A. Burns
Managed Care Solutions, Inc.
2510 West Dunlap Avenue, #100
Phoenix, Arizona 85021
Dear Jim:
This letter constitutes an employment agreement between us whereby MCM
Managed Care, Inc. (formerly Medicus Systems Corporation ("MCM")), has agreed to
employ you and you have agreed to serve as Vice Chairman of MCM. In this
capacity you will be a member of the Executive Strategy Team and will serve in
accordance with the bylaws of MCM. You will be employed for a minimum period of
three years.
Any voluntary termination by you (other than for cause) prior to March
1, 1999, shall constitute a breach hereof and similarly any termination of your
employment by MCM (other than for cause) prior to that date shall constitute a
breach hereof. For purposes of this letter, voluntary termination by you "for
cause" shall mean a termination on account of a willful material breach by MCM
of any agreement between you and MCM; and voluntary termination by MCM "for
cause" shall mean termination on account of gross negligence, dishonesty,
willful material breach of an agreement with MCM, or violation of any reasonable
rule or regulation of MCM of which you have been advised in writing.
Your salary during your employment will be $175,000 annually (or such
increased amount as we may agree). You will also receive the same benefit
package as other MCM employees, except that you will be eligible for 26 days of
paid time off on an annual basis (in addition to regularly scheduled MCM
holidays).
In the event that MCM determines that separation of your employment is
necessary, MCM agrees to provide you with severance compensation if you are
terminated by MCM for any reason other than cause. Severance compensation is
defined as salary at the rate of $175,000 annually and health insurance. If your
employment terminates during the first two years from your employment date, you
will receive severance compensation through March 1, 1999. If your employment
terminates after two years from your employment date but prior to March 1, 1999,
you will receive severance compensation for a period of one year from the date
of termination. If
<PAGE> 2
Mr. James A. Burns
March 1, 1996
Page 2
your employment terminates after March 1, 1999, you will receive severance
compensation until March 1, 2000; if your employment terminates after September
1, 1999 but before March 1, 2000 you will receive severance compensation for a
period of six months. In no event will your severance pay exceed six months of
your then current compensation if at the time of termination MCM has not had net
income after taxes during the preceding 12 months of at least $1,000,000. In
addition, no severance compensation will be due with respect to any voluntary
termination on your part.
Concurrently with the execution of this letter, MCM has granted you ten
year stock options in the standard MCM form to purchase 150,000 shares, such
options subject to vesting in four annual installments of 25%. If you terminate
your employment at any time, your options will expire thirty days following such
termination. All options will also terminate immediately if you breach your
employment agreement or if you are terminated for cause (as defined in this
letter) at any time.
As a condition to your employment, you will execute MCM's Standard Key
Employee Nondisclosure Agreement.
We have agreed that you will start as a full time employee concurrently
with the consummation of the mergers of wholly owned subsidiaries of MCM into
Managed Care Solutions, Inc., Ventana Health Systems, Inc., and Arizona Health
Concepts, Inc.
Again, I would like to take this opportunity to say how excited I am
about working together with you to develop MCM into one of the significant and
most profitable companies in our industry.
Please confirm your agreement and acceptance with the provisions of
this letter by signing and returning the enclosed copy of this letter where
indicated.
Sincerely,
/s/ William W. Cowan
-------------------------
William W. Cowan
Vice President
ACCEPTED AND AGREED:
/s/ James A. Burns
- - ---------------------------
James A. Burns
<PAGE> 1
EXHIBIT 10.16
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN ALOHACARE AND
MANAGED CARE SOLUTIONS, INC.
This Administrative Services Agreement is made and entered
to be effective as of the 1st day of January, 1994 by and between ALOHACARE, a
Hawaii not-for-profit corporation and MANAGED CARE SOLUTIONS, INC., an Arizona
business corporation duly authorized to conduct business as a foreign
corporation in Hawaii ("MCS") .
W I T N E S S E T H
WHEREAS, AlohaCare was formed by certain community health
centers and other Hawaii-based health care providers for the purpose of
operating as a qualified health plan under the State of Hawaii Health QUEST
Program;
WHEREAS, AlohaCare desires to submit a proposal to provide
medical, limited dental and behavioral health services under the QUEST Project;
and
WHEREAS, AlohaCare desires to engage MCS to prepare its
proposal to participate as a qualified health plan under the QUEST Project and
to provide administrative services in connection with the operation of the
AlohaCare Program in the event Alohacare is awarded a contract under the QUEST
Project.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:
I. DEFINITIONS
A. AlohaCare Program. "AlohaCare Program" shall mean
1
<PAGE> 2
all administrative and medical care delivery components and systems available
through AlohaCare as necessary for AlohaCare to provide or arrange for the
provision of the required medical, dental and behavioral health services to
QUEST Project eligible persons who receive coverage through AlohaCare.
B. QUEST Project. "QUEST Project" shall mean the State
of Hawaii Demonstration Project for the provision of medical, dental and
behavioral health services through a managed care delivery system to individuals
covered by the State's Medicaid Aid to Families with Dependent Children
(AFDC-related) programs, General Assistance program and State Health Insurance
Program.
C. Covered Services. "Covered Services" shall mean those
medical, dental and behavioral health services to which Members are entitled
under the QUEST Program as detailed in the Request for Proposal and in any
contract between DHS and AlohaCare.
D. Department of Human Services ("DHS"). "DHS" shall
mean the State of Hawaii Department of Human Services which is responsible for
the administration of the QUEST Project.
E. Implementation Date. "Implementation Date"
shall mean the date the AlohaCare Program becomes operational and Alohacare
is obligated to commence the provision of covered Services to Members.
F. "Participating Providers". "Participating
Providers" shall mean duly licensed physicians, other health professionals,
facilities, and healthcare providers which have entered into a contract with
AlohaCare for the provision of Covered
2
<PAGE> 3
Services to Members.
G. Request For Proposal ("RFP") . "RFP" or
"Request For Proposal" shall refer to the Hawaii Health QUEST Request For
Proposal for QUEST Health Plan and any amendments thereto, a copy of which is
annexed hereto and made a part hereof as Exhibit "A".
H. Recipients or Members. "Recipients" or
"Members" shall refer to those individuals who are eligible for coverage under
the QUEST Project and who have enrolled in the AlohaCare Program.
II. MCS RESPONSIBILITIES
A. Preparation of Proposal.
1. Generally. The parties acknowledge MCS has
prepared AlohaCare's proposal to participate as a qualified health plan under
the QUEST Project, and has submitted the same to DHS on February 4, 1994. MCS
represents that the proposal meets all material proposal requirements set forth
in the RFP and any other applicable DHS rules and regulations. MCS shall, on
behalf of AlohaCare, respond in a timely manner to any and all DHS requests for
additional information or clarification of proposal terms, subject to
AlohaCare's written approval of any such response.
2. Negotiations With DHS. MCS shall provide all
necessary assistance and support to AlohaCare in its negotiations with DHS
concerning the QUEST Project.
B. Pre-Operational Duties. In the event AlohaCare is
awarded a contract by DHS to participate in the QUEST Project, MCS shall perform
all necessary pre-operational services so that
3
<PAGE> 4
AlohaCare may commence operation as a qualified health plan on or before August
1, 1994. MCS shall deliver to AlohaCare on or before July 1, 1994 a detailed
written status report setting forth in detail the organizational and
administrative systems and provider contractual relationships in place for
AlohaCare to meet its obligations under the QUEST Project and to contain
healthcare costs, and the remaining tasks to be completed before the QUEST
Implementation Date and thereafter. MCS shall ensure that all tasks are
completed before the Implementation Date which are necessary so that the
AlohaCare will operate in material conformance with the requirements of the RFP,
DHS rules and regulations, any contract between AlohaCare and DHS, and this
Agreement. Pre-operational services shall include, but not be limited to:
1. Office site and equipment selection;
2. Installation of computer hardware, software
and related equipment;
3. Staff selection and training;
4. Development of plan policy and procedures;
5. Development of adequate provider network
including but not limited to:
a. Negotiations.
b. Credentialing.
c. Contracting.
6. Education of providers and their staff
regarding QUEST and AlohaCare programs.
4
<PAGE> 5
7. Establishment of utilization and quality
assurance programs.
8. Acting as a liaison with DHS including
negotiation of any and all contracts.
9. Preparation of member handbooks,
identification cards and other required
items.
10. Preparation of provider handbooks and other
required items.
C. Administrative Services. MCS shall provide all
administrative services that are necessary to the operation of the AlohaCare
Program or which are required by the RFP, any contract between DHS and AlohaCare
and as fully set forth herein. MCS's responsibilities shall specifically
include, but not be limited to, the following:
1. General Management Duties. MCS shall be
responsible for the day-to-day management of the AlohaCare Program. MCS shall
take any and all actions which are necessary or proper for the administration
and management of the AlohaCare Program, so long as such actions are consistent
with, and not in conflict with, the provisions of this Agreement, the RFP, any
contract between DHS and AlohaCare or the express direction of the AlohaCare
President or Board of Directors. MCS shall act as a liaison between DHS and
AlohaCare. MCS shall employ such individuals as are necessary to carry out its
duties under this Agreement, including at least the following:
a. Executive Director;
5
<PAGE> 6
b. Medical Director.
The Executive Director, the Medical Director and such other
individuals whose job responsibilities so require, shall at all times dedicate
their full time on-site in Hawaii during the Pre-Operational Phase and through
the term of this Agreement. It is understood that MCS intends to employ certain
other individuals in the administration of the AlohaCare Program at sites which
are not in the State of Hawaii.
The selection of persons to fill the positions of the
Executive Director and Medical Director must be approved by the AlohaCare Board
of Directors, which approval will be granted or denied within a reasonable
time. MCS shall promptly replace any person who is employed in the management
and administration of the AlohaCare Program upon request of the AlohaCare Board
of Directors for good cause as determined by the AlohaCare Board of Directors in
its reasonable discretion.
2. Contracting With Providers. MCS shall be
responsible for recruiting, negotiating and contracting on behalf of AlohaCare
with such providers of medical, dental and behavioral health services as
necessary to provide all Covered Services to members as required by the RFP and
any contracts between DHS and AlohaCare. Provider contracts shall be between
AlohaCare and the providers and all such contracts must be executed by an
AlohaCare officer. While it is understood that there is no absolute guarantee
that MCS will be able to contract on behalf of AlohaCare
6
<PAGE> 7
with all such providers, MCS shall make every possible effort to recruit and
contract with such necessary providers and shall dedicate sufficient Resources
so as to ensure that all possible efforts to contract with such providers have
been undertaken. Subject to the foregoing, MCS shall be responsible for ensuring
that Covered Person have access to a sufficient number of Participating Provides
in appropriate locations in accordance with DHS standards and reasonable
standards established by AlohaCare. At a minimum, MCS shall contract with a
sufficient number of licensed providers to ensure appropriate access of Members
to the following types of Covered Services:
a. Inpatient hospital services;
b. Outpatient hospital services;
c. Twenty-four (24) hour, seven days per week
emergency services;
d. Urgent care services;
e. Ambulance services;
f. Primary care physician services;
g. Physician specialty services;
h. Pharmacy Services;
i. Laboratory services;
j. Radiology services;
k. Physical occupational, audiology and speech
and language therapy services;
l. Limited dental services;
m. Behavioral health services (e.g.
7
<PAGE> 8
psychiatrists, psychologists, social
workers, counselors and nurses trained in
psychiatry);
n. Ancillary services (e.g. optometrists,
podiatrists, nurse practitioners and nurse
mid-wives);
o. Home health services;
p. Durable medical equipment and medical
supplies; and
q. Transportation services.
All contracts with Participating Providers shall be in a form
and contain such provisions as are acceptable to AlohaCare and AlohaCare's legal
counsel and shall set forth the method and amount of reimbursement to
Participating Providers, and shall specify that the providers shall be subject
to all requirements contained in the RFP, any contract between DHS and AlohaCare
and all applicable provisions of this Agreement. It is intended that the
corporate members of AlohaCare whose service areas are within AlohaCare's QUEST
Service Area shall be Participating Providers in the AlohaCare Program, subject
to meeting AlohaCare's credentialing standards.
3. Claims processing and Payment. MCS shall pay claims
to providers for all Covered Services rendered to Members in accordance with
contracts entered into between Participating Providers and AlohaCare, and in
accordance with the RFP, any contract between DHS and AlohaCare and this
Agreement. The amount
8
<PAGE> 9
of reimbursement to providers shall take into account any co-payment, deductible
or co-insurance amounts which Members are required to pay by DHS under the QUEST
Project. Unless otherwise directed by AlohaCare, MCS and the Medical Director
shall have the authority and discretion to interpret the requirements of the
RFP, the contract between DHS and AlohaCare and provider contracts with respect
to payment of claims to providers. Claims payments shall be made by checks or
drafts signed by MCS as AlohaCare's dispersing agent out of the account
established in accordance with Section II.C.5. hereof.
4. Internal Controls. MCS will maintain and implement
internal controls to ensure the integrity of all receipts and disbursements made
by MCS pursuant to this Agreement. This will include, but not be limited to,
internal control procedures to ensure compliance with the following standards:
a. QUEST benefits are disbursed only for
eligible Members.
b. Amounts are paid for procedures covered by
the QUEST Project in appropriate amounts and
supported by appropriate documentation.
c. Amounts are paid only for services rendered
to Members by qualified healthcare
professionals.
d. There are no duplicate payments.
e. Coordination of benefits, including
9
<PAGE> 10
subrogation, if necessary, with other
payors, whether public or private, is
performed effectively and in accordance with
QUEST Project requirements.
f. Claims are paid consistent with applicable
pre-certification, authorization or
concurrent review requirements.
g. Claims are processed pursuant to appropriate
procedure and/or diagnosis codes, with
system protections to detect upcoding or
unbundling of procedures.
Upon request, MCS will provide AlohaCare or AlohaCare's designee with a written
description of all such internal control procedures including internal review
routines.
5. Bank Account. MCS shall establish and maintain a bank
account in the name of AlohaCare with ("the Bank") for the purpose of depositing
all receipts from any source therein, including capitation payments and
reinsurance payments from DHS, and for paying all expenses of the AlohaCare
Program, including payment of provider claims. The following procedures will be
used to handle the account:
a. On a scheduled basis, checks and applicable
explanations of benefits will be produced by
MCS from the claims approved.
10
<PAGE> 11
b. Funding of the account will take place on a
daily basis by depositing all receipts from
any source therein, including capitation and
reinsurance payments from DHS.
c. Copies of the monthly account
reconciliation, check register and listing
of payments broken out by category will be
forwarded to the President of AlohaCare
monthly.
6. Plan Benefits Litigation. If a demand is asserted or
litigation proceedings or arbitration is commenced ("Plan Benefits Litigation")
by a Member or healthcare provider to recover QUEST benefits against MCS,
AlohaCare or both parties, the following shall apply:
a. If either MCS or AlohaCare becomes aware of
the asserted Plan Benefits Litigation, it
shall promptly notify the other party.
AlohaCare shall, with MCS' advice and input,
determine whether to pay the disputed claims
or proceed with Plans Benefit Litigation.
b. In the event AlohaCare determines to proceed
with Plan Benefits Litigation, AlohaCare
shall retain counsel and direct the response
to the Plan Benefits
11
<PAGE> 12
Litigation. AlohaCare shall be responsible
for assuming the cost attributable to Plan
Benefits litigation, except where MCS elects
or is required due to a conflict of interest
to retain separate counsel, and subject to
MCS meeting the standard of performance set
forth in Section V.A.
7. Coordination of Benefits, Third Party Liabilities.
MCS shall be responsible for coordination of benefits and third-party recoveries
as required under the provisions of the RFP and under any contract between DHS
and AlohaCare. MCS shall, specifically, be responsible for the following:
a. Recovering medical expenses incurred by
Members from all third-party liability
resources on behalf of AlohaCare and
depositing such amounts recovered in the
bank account described in paragraph I. C. 5
above;
b. Establishing and maintaining a file of
Members third-party liability information;
c. Receiving third-party liability information
from DHS and updating the Members' files on
a timely basis;
d. Informing DHS of third-party liability
12
<PAGE> 13
information discovered during the course of
business operations;
e. Providing DHS with monthly reports of the
total amounts recovered from third-parties
and providing DHS upon demand, medical
expense and third-party liability recoveries
by Members;
f. Submitting fee-for-service claims for
Members with "free no-fault" motor vehicle
insurance coverage; and
g. Developing procedures for determining when
to pursue third-party liability recovery,
which procedures shall be subject to the
approval of AlohaCare.
8. Case Management. MCS shall be responsible for
performing case management services in accordance with the RFP and in accordance
with all contracts between DHS and AlohaCare. MCS shall ensure that each Member
has chosen or is assigned a primary care provider who shall assess the Member's
health care needs and shall provide services to meet those needs either directly
or through referrals to other providers participating in the AlohaCare Program.
MCS shall implement a system for the direction, coordination, monitoring and
tracking of the Covered Services rendered to each member. The case management
system shall include, but not be limited to, the following:
a. Ensuring that all medically necessary
13
<PAGE> 14
services are accessible and can be provided
on a timely basis so that continuity of care
is achieved;
b. Providing Members with clear and adequate
information on how to obtain services;
C. Ensuring that Members receive adequate
information to allow them to make medically
informed decisions about their health needs;
d. Assisting Members to obtain the services
prescribed by their primary care providers
and assuring that the services are received
and provided in a timely manner; and
e. Assisting Members with understanding and
following the medical care prescribed for
them.
9. Facilitation of Services. MCS shall take the
following actions with respect to the AlohaCare Program to facilitate the
provision of Covered Services by Participating Providers:
a. Providing AlohaCare and Participating
Providers with on-line computer access to
Member enrollment and eligibility
information;
b. To the extent on-line computer access to
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<PAGE> 15
Member enrollment and eligibility
information is not available, verifying by
telephone, the eligibility of persons
claiming to be Members; and
c. Maintaining a telephone hotline as required
by Section 41.110 of the RFP for the
purpose of determining enrollment and
eligibility information upon admission to
an emergency facility or hospital
emergency room.
10. Program Coverage Information. MCS shall prepare and
forward to AlohaCare and all Participating Providers, a summary of Covered
Services which are required to be provided under the QUEST Project. Such summary
shall include schedules of Covered Services and any applicable exclusions or
limitations affecting the provision of covered services, applicable copayments,
co-insurance and deductibles, and any other information relevant to the
rendering of Covered Services by providers.
11. Ouality Assurance. MCS shall be responsible for
developing and maintaining a Quality Assurance Program in compliance with the
requirements of the RFP, and with any contract between DHS and AlohaCare. At a
minimum of the Quality Assurance Program shall conform in all respects to the
requirements set forth in Section 40.520 of the RFP.
12. Utilization Management. MCS shall be responsible for
developing and maintaining a Utilization Management
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<PAGE> 16
Program in compliance with the requirements of the RFP, and with any contract
between DHS and AlohaCare. The Utilization management Program shall determine
whether the level, type and cost of benefits provided are appropriate to the
health care needs of Members on an on-going basis.
13. Credentialing. MCS shall credential and recredential
each Participating Provider rendering healthcare services to Members as
described in the AlohaCare RFP proposal. MCS shall require each Participating
Provider to comply with such procedures and guidelines prior to obtaining and
maintaining the status as a Participating Provider. MCS shall insure that, at
all times during the term of this Agreement, each Participating Provider
rendering healthcare services to Members is duly licensed in accordance with the
appropriate State Licensure Board and that failure to maintain such licensure
shall result in prompt termination by MCS of such Participating Provider.
14. Information Systems. MCS shall develop and maintain
as of the Implementation Date an automated management information system as
necessary for the efficient operation of the AlohaCare Program and as required
by the RFP, any contract between DHS and AlohaCare and this Agreement.
15. Reports to DHS. MCS shall be responsible for making
any and all reports to DHS which are required by the RFP, by any and all
contracts between DHS and AlohaCare and by this Agreement. Reports shall be made
at such times as are required by DHS and such reports shall be in a format
acceptable to DHS and
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AlohaCare. Such reports shall include, but not be limited to the following:
a. Encounter data as described in Section
40.820 of the RFP;
b. Reports regarding the Quality Assurance
Program as required by Section 40.540 of
the RFP;
c. Reports regarding changes in Recipient
status as required by Section 41.010 of the
RFP;
d. Reports regarding coordination of benefits
and third-party liability as required by
Section 40.730 of the RFP; and
e. Reports regarding financial information as
required by Section 40.900 of the RFP.
16. Reports to AlohaCare. MCS shall report to the
President arid Board of Directors of AlohaCare on a regular basis and at such
times as are reasonably requested by the President or Board of Directors of
AlohaCare. MCS shall report to AlohaCare on any and all matters relating to the
administration of the AlohaCare program as requested by the President on the
Board of Directors for AlohaCare. At a minimum, the following reports shall be
provided on a monthly basis by the 20th day of the month for the preceding
month:
a. Claims payments by vendor.
b. Reports relating to the Bank Account as
required by Section II.C.5. of this
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Agreement.
c. All reports required to be forwarded to DHS
as set forth in Section II.C.11. of this
Agreement.
d. Summary of utilization data and utilization
management activities for the previous
month.
e. Summary of quality assurance data and
activities for the previous month.
f. AlohaCare financial statements prepared in
accordance with generally accepted
accounting principles.
g. Enrollment data by primary care provider.
h. Summary of Member and provider complaints
and responsive action initiated.
Additionally, MCS shall submit the following reports to the
President and Board of Directors of AlohaCare on a quarterly and annual basis in
a format acceptable to AlohaCare which summarizes:
a. Utilization and enrollment data by aid
category and island.
b. Claim lag reports.
c. Specific procedure utilization reports.
d. Such other reports as are reasonably
requested by AlohaCare.
17. Fixed Assets. MCS shall be responsible for
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purchasing, at its own expense, the equipment, fixtures and supplies as are
necessary and proper to the efficient operation and administration of the
AlohaCare Program or which are required to comply with the requirements of the
RFP, any contract between DHS and AlohaCare and this Agreement. Such fixed
assets shall include any computer hardware and software information systems
necessary for the administration of the AlohaCare Program or necessary to comply
with the reporting requirements herein. A list of such assets and the budgeted
cost for the purchase of the same is set forth in Exhibit C.
18. Member Services. MCS shall be responsible for
providing all Member services as are necessary to the administration of the
AlohaCare Program or as are required by the RFP, any and all contracts between
DHS and AlohaCare and this Agreement. Such Member services shall include, but
not be limited to:
a. Enrollment of Recipients as required by
Section 40.300 of the RFP.
b. Preparation and dissemination of educational
materials as required by Section 41.200 of
the RFP.
19. Performance Bond. In the event AlohaCare is awarded a
QUEST contract by DHS, MCS shall arrange to obtain a performance bond for
AlohaCare as required by Section 61.700 of the RFP. MCS shall assume the
financial responsibility for $200,000 of the amount of such performance bond or
other credit facility obtained in lieu of said performance bond.
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20. Insurance Requirements.
a. AlohaCare Professional Liability Insurance.
During the term of this Agreement, AlohaCare shall maintain, at its sole cost
and expense, a policy of HMO-type professional liability insurance acceptable to
MCS with coverage limits in the minimum amount of $1,000,000 per incident and
$1,000,000 in the annual aggregate. MCS shall be named as an additional insured
on said professional liability insurance policy. In addition, AlohaCare shall
purchase a "tail policy" with the same policy limits following the effective
date of termination of the foregoing policy in the event the policy is a "claims
made" policy.
b. MCS Comprehensive Insurance. MCS and
AlohaCare each shall maintain, at the sole cost and expense of each, throughout
the term of this Agreement, a policy of general liability insurance acceptable
to the other party in the minimum amount of $1,000,000 per occurrence and
$1,000,000 in the annual aggregate. Each shall name the other party as an
additional insured on said policy.
c. Proof of Insurance. Each party shall furnish
the other with evidence of such insurance, including certificates of insurance
and complete copies of insurance policies, upon the other's request. Each party
shall provide the other with a minimum of 30 days prior written notice in the
event any of the insurance policies required by this Agreement are canceled,
changed or restricted in any way.
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21. Complaint Resolution Procedure. MCS shall
maintain a complaint resolution procedure to process Member and provider
complaints. MCS' complaint resolution procedure is described in Exhibit H.
22. Member Satisfaction. MCS shall administer
periodically, but no less frequently than annually, Member satisfaction surveys
intended to measure the level of satisfaction of members perceived in receiving
Covered Services from Participating Providers. The development and
administration of such surveys shall be at the sole cost of MCS. The form of
Member satisfaction surveys shall be subject to the approval of AlohaCare. The
survey information so obtained shall be used as a method of measuring the
effectiveness of MCS.
III. ADMINISTRATIVE FEE
A. Preparation of Proposal. AlohaCare shall pay to MCS
$15,000 for services rendered in preparation of the AlohaCare QUEST proposal, to
be paid upon DHS acceptance of the final proposal and confirmation from DHS that
said proposal is complete and complies with DHS requirements.
B. Pre-Operational Phase. AlohaCare shall pay to MCS for
services rendered in the pre-operational phase in accordance with the budget set
forth in Exhibit A to this Agreement.
C. Operational Phase. MCS shall be paid an
administrative fee as set forth below once the AlohaCare Program becomes
operational:
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1. Base Administrative Fee. If AlohaCare is
awarded a QUEST contract, it shall pay a monthly administrative fee as follows:
a. If enrollment is less than 15,000 members
(all membership is measured in terms of "member months"), then AlohaCare shall
pay MCS $30,000 plus the Per Member per Month (PMPM) fee shown in Paragraph
C.1.b below.
b. Once enrollment exceeds 15,000 member
months, then AlohaCare shall pay MCS only the PMPM fee listed below:
First 10,000 Member Months $12.00 PMPM
Next 20,000 Member Months 10.50 PMPM
Member Months in excess of 30,000 9.00 PMPM
Member months are calculated by dividing the total number of days in a
given month that Members were eligible by the number of days in that month.
The current month's administrative fee will be paid before the tenth
day of the month. The administrative fee for the first month of the contract
will be estimated and adjusted in the following month to reflect actual per
member per month figures.
MCS shall be responsible, in return for receiving the administrative
fee, to assume all costs associated with the administration of the AlohaCare
Program, except for the following expenses which shall be the responsibility of
AlohaCare:
a. Covered Services.
b. Legal Services of AlohaCare.
c. Actuarial services of AlohaCare.
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d. Expenses relating to the corporate
existence of AlohaCare.
e. Audit and Tax services of AlohaCare.
2. Shared Risk Arrangement. The parties agree to share
risk in the manner set forth on Exhibit B.
3. DHS Reports. MCS shall be responsible for the full
amount of any penalty assessed by DHS for failure to submit any report or
reports required by the RFP or by any contract between DHS and AlohaCare in a
timely or accurate fashion including, but not limited to, financial information
required under Section 40.900 of the RFP, encounter data required under Section
40.820 of the RFP, reports regarding quality assurance under Section 40.500 of
the RFP, reports regarding changes in Member status required under Section
41.010 of the RFP and reports regarding coordination of benefits and third-
party liability as required under Section 40.730 of the RFP.
IV. TERM AND TERMINATION.
A. Term. This Agreement shall be effective on the date
of its execution first set forth above and shall be effective during the period
necessary to complete and submit the AlohaCare QUEST proposal to DHS. In the
event AlohaCare is awarded a QUEST contract by DHS, this Agreement shall
continue and shall be in full force and effect through the duration of the
contract between DHS and AlohaCare, but not to exceed a period of two years from
the Implementation Date, unless this Agreement is terminated sooner as set forth
below in Section IV.B. below.
B. Termination. This Agreement may be terminated upon
the following:
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1. Automatically in the event AlohaCare is notified by
DHS that its proposal to DHS to participate as a
qualified health plan under the QUEST project has not
been accepted;
2. Upon notice by AlohaCare to MCS in the event of the
sale of a controlling interest in MCS or sale of
substantially all of MCS's assets to a party who is
not an MCS shareholder at the time this Agreement is
executed.
3. Upon notice by AlohaCare, in the event any officer,
director or principal shareholder of MCS is suspended
or excluded from participating in any federal or
state program in any state, or in the event MCS's
financial condition is such that an independent
auditor has concluded or would conclude, upon review,
that MCS is unable to continue in business as a going
concern.
4. At any time upon the written mutual consent of both
parties.
5. Upon the failure of either party to correct any
failure to perform under the terms of this Agreement
after 60 days written notice from the other party.
6. In the event the contract between DHS and AlohaCare
is terminated for any reason or
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AlohaCare's participation in the QUEST Project is
otherwise terminated, in which case termination shall
be effective as of the termination date of
AlohaCare's participation in the QUEST Program.
7. Immediately upon the filing of a bankruptcy petition
by either party or upon the failure of either party
to obtain any license, registration or approval
required under state or federal law that is material
to the operation of the AlohaCare Program.
C. Obligations in Event of Termination.
1. Upon termination of this Agreement, AlohaCare shall
purchase the fixed assets acquired by MCS as described in Exhibit C at a price
equal to the book value of such assets; provided that AlohaCare shall not be
obligated to purchase fixed assets at book value in the event termination is
pursuant to Section IV B.1, B.2, B.3, B.5 (i.e., if termination is the result of
an MCS default), or B.7 above.
2. In the event of termination of this Agreement for any
reason, MCS shall cooperate with the person or entity selected by AlohaCare to
assume administration of the AlohaCare Program.
3. Upon request of the AlohaCare, MCS will process
claims incurred after the Implementation Date, and prior to the effective date
of termination, for a period of six months. During
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such six month period, AlohaCare shall pay MCS a claims processing fee of $1.00
per claim.
4. In the event of termination of this Agreement MCS
shall provide AlohaCare with all copies of records in MCS, possession directly
and specifically relating to the AlohaCare Program and the QUEST Project and
which are necessary for the continued operation of the AlohaCare Program, or
shall forward such records to any successor administrator as directed by
AlohaCare. Records shall be provided in electronic form, disk or tape medium,
and/or hard copy, as determined by AlohaCare. MCS shall not retain copies of any
records relating to the AlohaCare Program and the QUEST Project in any format.
V. MISCELLANEOUS
A. Standard of Performance. In carrying out its obligations
under this Agreement, MCS shall discharge its duties with the skill, care,
prudence and diligence under the circumstances then prevailing that a prudent
healthcare benefits administrator acting in a like capacity and familiar with
such matters would have used.
B. Confidentiality. MCS agrees to safeguard the
confidentiality of all data pertaining to this Agreement and Covered Services
rendered to Members. All work product, files, data, reports, contracts,
agreements, ledgers, materials and other information related to the AlohaCare
Program, including all enrollment and claims data, are the property of AlohaCare
and shall be deemed confidential and may not be disclosed by MCS without the
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written consent of AlohaCAre, except in fulfillment of the requirements of this
Agreement or upon lawful order of a court or public authority which order
compels obedience under penalty of contempt or fine or impairment or loss of the
right to do business. In the event of any requested disclosure, MCS shall
immediately notify AlohaCare in writing detailing the circumstances and extent
of such requested disclosure. Work product shall mean all information, or data,
whether expressed in writing, orally, electronically or otherwise, which is
conceived, developed or acquired by either party as a result of or in connection
with the AlohaCare Program.
C. Relationship of the Parties. In the performance of the
work, duties and obligations of the parties pursuant to this Agreement, the
parties shall, at all times, be acting and performing as independent
contractors. No relationship of employer and employee, or partners or joint
venturers is created by this Agreement, and neither party may therefore make any
claim against the other party for social security benefits, workers'
compensation benefits, unemployment insurance benefits, vacation pay, sick
leave or any other employee benefit of any kind. In addition, neither party
shall have any power or authority to act for or on behalf of, or to bind the
other except as herein expressly granted, and no other or greater power or
authority shall be implied by the grant or denial of power or authority
specifically mentioned herein.
D. Assignment/Subcontracting. Neither party shall have the
right to assign, delegate or subcontract any of its rights or
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obligations hereunder without the prior written consent of the other party.
E. Notices. Except as set forth herein, all notices required
or permitted to be given hereunder, shall be in writing and shall be sent by
United States mail, certified or registered, return receipt requested, postage
prepaid, to the parties hereto at their respective addresses set forth on the
signature page hereto, or such other address as may be fixed in accordance with
the provisions hereof. Except as set forth herein, if mailed in accordance with
the provisions of this paragraph, such notice shall be deemed to be received
three (3) business days after mailing.
F. Headings. The headings of the various sections of this
Agreement are inserted merely for the purpose of convenience and do not
expressly or by implication limit, define or extend the specific terms of the
section so designated.
G. Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, nor be
construed to be, a waiver of any subsequent breach thereof.
H. Applicable Law. This Agreement shall be governed in all
respects by the laws of the State of Hawaii, without regard to Hawaii's choice
of law statutes or decision.
I. Invalid Provisions. If, for any reason, any provision of
this Agreement is or shall be hereafter determined by law, act, decision, or
regulation of a duly constituted body or authority, to be in any respect
invalid, such determination shall
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not nullify any of the other terms and provisions of this Agreement and, unless
otherwise agreed to in writing by the parties, then, in order to prevent the
invalidity of such provision or provisions of this Agreement, the said provision
or provisions shall be deemed automatically amended in such respect as may be
necessary to conform this entire Agreement with such applicable law, act,
decision, rule or regulation.
J. No Third-Party Beneficiary. This Agreement is entered into
by and between AlohaCare and MCS and for their benefit. There is no intent by
either party to create or establish third-party beneficiary status or rights or
their equivalent in any Member, subcontractor, or other third party, and no such
third party shall have any right to enforce any right or enjoy any benefit
created or established under this Agreement.
K. Exhibits. The exhibits attached to this Agreement are an
integral part of this Agreement and are incorporated herein by reference.
L. Board of Directors. The AlohaCare By-Laws shall provide
that during the term of this Agreement, one person designated by MCS shall be
elected as a member of the Board of Directors of AlohaCare, so long as MCS has
not defaulted in the performance of its obligations hereunder.
M. Approval By DHS. This contract is subject to the approval
of DHS. This contract shall become null and void to the extent that it, at any
time, does not receive such approval by DHS.
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N. Arbitration. In the event that any dispute relating to
this Agreement arises between MCS and AlohaCare, the dispute shall be
resolved by binding arbitration in accordance with the Rules of Commercial
Arbitration of the American Arbitration Association. In no event may the
arbitration be initiated more than one year after the date one party first gave
written notice of the dispute to the other party. The arbitration shall be held
in Honolulu, Hawaii or in such other location as the parties may mutually agree
upon. The arbitrator shall have no power to award punitive or exemplary damages
or vary the terms of this Agreement and shall be bound by controlling law.
0. Compliance with Law. MCS represents and warrants that MCS
and its operations, programs, policies, guidelines and procedures are currently
in compliance with, and throughout. the term of this Agreement, shall remain, in
compliance with all applicable federal, state, local laws and regulations. MCS
shall maintain any and all licenses necessary to perform under the terms of this
Agreement. MCS shall provide prompt notice to AlohaCare in the event it is
advised by any regulatory body that its operations are not in compliance with
applicable law or regulations.
P. Exclusivity. Without the prior written consent of
AlohaCare, during the term of this Agreement, MCS shall not contract, either
directly or indirectly, with any other party to provide services in connection
with the QUEST Project.
Q. Review and Audit. MCS will at all times make available for
review and audit by either AlohaCare or its designee its files, books,
procedures and records (including computer
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terminal access to same) pertaining to the AlohaCare Program or the services
provided by MCS under this Agreement. In addition, MCS shall make available for
interview with the auditor those personnel with material involvement or
responsibility with respect to the services provided by MCS under this
Agreement. In the event such an audit reveals deficiencies or default, in the
judgment of the auditor, related to the management or administration functions
of MCS, MCS shall promptly develop a detailed action plan to cure such
deficiency or default. A copy of the action plan shall be submitted to
AlohaCare, and MCS, within a reasonable time as determined by the auditor, shall
implement at its own cost, all reasonable enhancements, improvements, procedures
or corrections identified as a result of the audit. MCS shall also provide
AlohaCare with MCS' unaudited financial statements on a quarterly basis and a
copy of an annual audited financial statement within 90 days of the close of
each fiscal year. This provision shall survive the termination of this Agreement
for a period of two years, except that MCS's financial statement need only be
provided for periods during the term hereof.
R. Entire Agreement; Amendment. This Agreement and all
exhibits hereto shall constitute the entire agreement relating to the subject
matter hereof between the parties hereto, and supersedes all other agreements,
written or oral, relating to the subject matter hereof. This Agreement may be
amended by mutual agreement of the parties, provided that such amendment is
reduced to writing and signed by both parties.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year first set forth above.
ALOHACARE ATTEST
By /s/ Michael D. Tweedell
-------------------------------- ------------------------------------
Michael D. Tweedell Secretary
President
Date: April 25, 1994
-----------------------------
ADDRESS FOR NOTICES:
- - -----------------------------------
- - -----------------------------------
- - -----------------------------------
MANAGED CARE SOLUTIONS, INC.
By /s/ Blaine Bergeson
-------------------------------- ------------------------------------
Blaine Bergeson Secretary
Chief executive officer
Date: April 25, 1994
-----------------------------
ADDRESS FOR NOTICES:
- - -----------------------------------
- - -----------------------------------
- - -----------------------------------
32
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EXHIBIT 10.17
MANAGEMENT SERVICES AGREEMENT
BETWEEN
MANAGED CARE SOLUTIONS, INC. AND
COMMUNITY HEALTH CHOICE OF ILLINOIS, INC.
This AGREEMENT is made as of June, 1996, by and between Managed Care
Solutions, Inc., a Delaware corporation ("MCS"), and Community Health Choice of
Illinois, Inc, a Delaware corporation ("CHOICE"), in consideration of the mutual
covenants of the Parties set forth below, and for other good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged by
the Parties.
W H E R E A S:
(a) MCS is a Delaware corporation duly authorized to do business in the
State of Illinois and possesses the corporate authority to deliver certain
administrative and management services to managed care organizations, including,
but not limited to, Health Maintenance Organizations ("HMOS").
(b) CHOICE is a Delaware corporation duly authorized to do business in
the State of Illinois for the purpose of conducting a business which is intended
to operate as a licensed HMO qualified to participate in the Illinois Medicaid
Program (or any successor program thereto) and otherwise to qualify to contract
or arrange for health services at full risk under Illinois law.
<PAGE> 2
(c) CHOICE is owned by and is the product of a joint venture between
Community Health Care of Illinois, Inc., an Illinois not for profit corporation
("CHCI") and MCS.
(d) CHOICE wishes to purchase certain management and administrative
services from MCS in order to facilitate entry into and maintenance of Contracts
(as defined in Part 1 hereof), and MCS wishes to deliver such management and
administrative services to CHOICE.
NOW, THEREFORE, IT IS AGREED BY AND BETWEEN MCS AND CHOICE AS FOLLOWS:
1
DEFINITIONS
As used herein, the following terms shall have the meanings ascribed to
them in this Part
1:
1.1 Bankrupt or Insolvent - as it relates to either Party, means any of the
following:
1.1.1 The filing of an application of such Party for, or a consent
to, the appointment of a trustee of such Party's assets, or the
entry of an order, judgment or decree by any court of competent
jurisdiction appointing a trustee of such Party's assets, if
such order, judgment or decree continues in effect for a period
of 60 consecutive calendar days;
1.1.2 The filing by such Party of a voluntary bankruptcy petition in
any bankruptcy proceeding or a pleading in any court of record
admitting in writing the inability to pay such Party's debts as
they come due;
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1.1.3 The filing against such Party of a bankruptcy petition in any
bankruptcy proceeding, if such petition has not been dismissed
after a period of 60 consecutive calendar days;
1.1.4 The filing by such Party of an answer admitting the material
allegations of, or consenting to, or defaulting in answering a
bankruptcy petition filed in any bankruptcy proceeding; or
1.1.5 The making by such Party of a general assignment for the
benefit of creditors.
1.2 Business - conducting a business which operates as an HMO duly
qualified to participate in the Illinois Medicaid program or otherwise
qualified to contract at full risk under Illinois law.
1.3 Clean Claim - a new or resubmitted claim for reimbursement that
includes all information required for adjudication.
1.4 Contract - any contract between CHOICE and a Payor, or entered into on
behalf of CHOICE with a Payor, pursuant to which CHOICE shall provide
or arrange for the provision of Health Care Services.
1.5 Covered Services - those Health Care Services for which a Payor is
obligated to pay pursuant to the terms, conditions and limitations set
forth in the applicable Contract.
1.6 Executive Officers of CHOICE - the Chief Executive Officer, Vice
President of Finance, and Vice President for Medical Affairs of CHOICE.
1.7 Health Care Services - health care services or products rendered, sold
or arranged for by or on behalf of CHOICE. The term includes, but is
not limited to, Institutional Health
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Services, as well as physician, diagnostic, therapeutic, dental and
pharmaceutical services or supplies.
1.8 HMO - Health Maintenance Organization.
1.9 Institutional Health Services - those non-physician inpatient and/or
outpatient health care services which are offered to the public
ordinarily by an Institutional Health Services Provider.
1.10 Institutional Health Services Provider - an entity which is
specifically licensed (if subject to licensure) to provide and bill for
non-physician inpatient and/or outpatient health care services,
including but not limited to the non-physician services of a general
acute care or specialty hospital, nursing home, home health agency,
ambulatory surgical treatment center, substance abuse treatment center,
Federally Qualified Health Center, mental health center, hospice, or
comprehensive outpatient rehabilitation facility.
1.11 CHOICE's Clinical Committee - that committee created by Section 4.4 of
CHOICE's Bylaws.
1.12 Operational Phase - the period of time of the venture between CHCI and
MCS which shall begin when CHOICE enrolls its first individual member
and continues for the duration of this Agreement.
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1.13 Parties - MCS and CHOICE.
1.14 Payor - those certain commercial insurance carriers, workers'
compensation carriers, employers (including employers with self-insured
plans) or other entities providing commercial insurance coverage, as
well as any local, state, or federal governmental entity in its
capacity as payor under any governmental health benefits programs,
including, but not limited to, Medicaid, Medicare or CHAMPUS, which are
obligated to make payments for Covered Services.
1.15 Pre-Operational Phase - the period of time which commenced on December
21, 1995, when CHCI and MCS initially agreed to proceed with the
venture, and which will end when CHOICE, as a licensed HMO, enrolls its
first individual member.
1.16 Pre-Organizational Expenses - has the same meaning ascribed to it in
Exhibit A "Pre-Organizational Expenses" attached hereto and
incorporated herein.
1.17 Provider - an Institutional Health Services Provider, a health care
practitioner, or a group of health care practitioners practicing in
partnership, limited liability company or corporate form, and which
Institutional Health Services Provider, practitioner or group is
licensed under applicable State of Illinois laws, and has entered into
an agreement with CHOICE to provide or arrange for the provision of
Covered Services.
1.18 Provider Agreement - an agreement between CHOICE and a Provider under
which the Provider renders Covered Services to individuals entitled to
such services under a Contract.
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PART 2
DUTIES OF MCS
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Part 2.1 Subject to any approval and oversight authorities held by the Board of
Directors of CHOICE (the "CHOICE Board") or the shareholders of CHOICE,
and in accordance with the terms of this Agreement, including, but not
limited to, the detailed "Schedule of MCS Services" set forth in
Exhibit B and Schedule 1 thereto, (collectively referred to herein as
"EXHIBIT B"), which is attached hereto and made a part hereof, MCS
shall have full time day to day managerial responsibility for all
aspects of the Business. MCS shall, when furnishing MCS personnel to
render services to CHOICE under this Agreement (which furnished MCS
personnel are sometimes referred to herein as "MCS STAFF"), ensure
that: (1) MCS Staff are furnished in sufficient number and with
sufficient continuity to reasonably satisfy the obligations of MCS
under this Agreement; and (2) the education, training, and
qualifications of MCS Staff are sufficient to reasonably satisfy the
obligations of MCS under this Agreement. MCS Staff located in Illinois
and assigned to CHOICE shall not be reassigned unilaterally by MCS to
projects other than CHOICE, but instead MCS shall coordinate in advance
any such reassignments with the Chief Executive Officer of CHOICE. Each
service performed by MCS must be performed in accordance with the
"Timetable" for such service and in accordance with the "Performance
Criteria" for the service, each as set forth in Exhibit B hereto.
Failure of MCS to: (1) comply with the material terms of this
Agreement, including, but not limited to this Part 2; or (2) perform in
a timely manner each service detailed on Exhibit B shall, as provided
herein, constitute a breach by MCS of this Agreement, subject to
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Section 6.3.1 hereof. The services to be performed by MCS include,
without limitation, the following:
Part 2.1.1 The services of MCS corporate staff in overseeing and
implementing the strategic, marketing and administrative
organization and development of CHOICE.
Part 2.1.2 The development of an administrative staff that is, to the
fullest extent feasible, located in Illinois. MCS shall
employ all CHOICE staff, and the following shall apply:
Part 2.1.2.1 all CHOICE staff shall report to the Chief
Executive Officer of CHOICE;
Part 2.1.2.2 the Chief Executive Officer of CHOICE shall
report, be accountable directly to and have a
direct fiduciary relationship with the CHOICE
Board, and also shall report, and be
accountable directly to the President of MCS
with respect to MCS duties hereunder;
Part 2.1.2.3 2.19.7.3 the CHOICE Board shall have the
authority to approve the hiring, dismissal
and annual performance evaluations and
compensation adjustments for the Executive
Officers of CHOICE; and
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Part 2.1.2.4 the Chief Executive Officer of MCS shall report
directly and be accountable to the entire
CHOICE Board with respect to MCS duties
hereunder.
Part 2.1.3 The establishment, as set forth in Exhibit B hereto, of
local office(s) to provide sales, customer service and
provider relations functions.
Part 2.1.4 A comprehensive Financial Administration Program, the
specific details of which and timing for development and/or
implementation of are set forth in Exhibit B hereto. Each
element of the Financial Administration Program shall be
developed by MCS and submitted for approval to the CHOICE
Board. All data processing components of the Financial
Administration Program shall be coordinated between the
corporate offices of MCS and the CHOICE offices in Illinois.
The Financial Administration Program shall include, without
limitation, the following:
Part 2.1.4.1 An Enrollment System to process all additions,
deletions and changes to the membership files,
produce and distribute membership cards and
membership materials, and generate all monthly
billings.
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Part 2.1.4.2 A Claims Processing System to process all
referrals, receive and adjudicate all Clean
Claims, assign claims to appropriate accounts,
remit adjudicated and approved payments to
providers within thirty (30) calendar days
after receipt, and otherwise process claims in
accordance with Exhibit B attached hereto and
made a part hereof.
Part 2.1.4.3 A Coordination of Benefits System to discover,
track, and adjudicate all claims involving COB
and subrogation.
Part 2.1.4.4 A Financial System which provides all accounts
payable, accounts receivable, and special
ledger accounts, as well as the preparation of
monthly financial reports and both regular and
special management reports. The Vice President
of Financial Affairs of CHOICE, or such other
individual as designated by the Choice Board,
shall be responsible for the day-to-day
management of the financial affairs of CHOICE
with administrative or other assistance from
MCS.
Part 2.1.4.5 A process for budget and cost analysis to
facilitate preparation of proposed budgets and
variance analyses.
Part 2.1.4.6 A process to analyze and evaluate the risks of
enrolling certain groups and establishing an
appropriate pricing strategy.
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Part 2.1.4.7 An MIS package to support all automated systems
required to perform CHOICE operations including
the financial, marketing, and medical
management programs. The MIS software package
provided by MCS and known as MC1 shall be used
by MCS in performing these services to CHOICE,
except, however, if the CHOICE Board, in its
sole discretion, reasonable determines that the
use by MCS of MC1 constitutes or will
constitute "cause" for terminating this
Agreement as defined in Section 6.3.1 hereof,
the CHOICE Board may, as part of a "Corrective
Action Plan" as defined in Section 6.3 hereof,
require MCS to use a software system other than
MC1.
Part 2.1.5 Support and assistance to CHOICE and CHOICE's Clinical
Committee in the development and implementation of a Medical
Services Program. The Medical Services Program shall be
developed by MCS and submitted for approval to the CHOICE
Board. The Medical Services Program shall include each of
the following, all in adherence to the criteria set forth in
Exhibit B hereto:
Part 2.1.5.1 The development of Contracts, as well as the
appropriate credentialing of Providers.
Part 2.1.5.2 A system of referral pre-authorization.
Part 2.1.5.3 A system of hospital pre-authorization,
concurrent review and discharge planning.
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Part 2.1.5.4 A Provider relations program.
Part 2.1.5.5 A Quality Assurance Program which would meet
the standards for NCQA Accreditation and/or of
the Illinois State Medicaid Program.
Part 2.1.5.6 The organization of the Clinical Committee as
may be appropriate.
Part 2.1.6 MCS shall purchase and own tangible property, equipment and
furnishings reasonably required for the operation of the
Business, provided that CHOICE or CHCI shall have the
option, in its discretion, to purchase some or all such
tangible property, equipment and/or furnishings that has
been designated solely for CHOICE operations on a
depreciated basis in the event this Agreement is terminated,
MCS transfers its Shares in CHOICE, or CHOICE is dissolved.
CHOICE may, however, secure tangible property in its own
right, subject to the approval of the CHOICE Board or
stockholders of CHOICE, as the case may be. Subject to Part
10 of this Agreement, and notwithstanding anything to the
contrary herein, CHOICE shall own all provider contracts and
intangible property associated with the Business.
Part 2.2 MCS shall, prior to contracting or sub-contracting with any third party
for services to be provided to CHOICE under this Agreement, submit such
contract or subcontract to the CHOICE Board for its prior approval. The
CHOICE Board may require that any or all such contracts or
sub-contracts contain such provisions as to allow CHOICE to assume
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MCS' rights under the contract or subcontract in the event this
Agreement is terminated as provided herein.
Part 2.3 MCS shall not be engaged in the delivery or performance of Health Care
Services and shall have no authority to or fiduciary responsibility
for, nor shall it exercise control or direction over the manner or
method by which Providers deliver Health Care Services, except,
however, MCS may make certain clinical recommendations to CHOICE.
Part 2.4 MCS shall ensure that any employees, agents, representatives or
independent contractors of MCS shall adhere to all obligations imposed
upon MCS under this Agreement and the Exhibits hereto. MCS shall ensure
that it includes any contractual relationships with such
representatives provisions sufficient to satisfy the obligations of
this Section 2.4 and, in addition, MCS must furnish to such
representatives information regarding the obligations under this
Agreement to ensure compliance with same.
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PART 3
EXPENSES TO BE PAID BY MCS
Part 3.1 Pre-Operational Phase - MCS shall: (a) pay or reimburse CHCI for all
expenditures incurred by CHCI in connection with the development of the
Business or the formation of CHOICE in accordance with the terms of the
Preorganizational Agreement; (b) pay or reimburse CHOICE for all
expenditures incurred by CHOICE in connection with the development of
the Business or the formation of CHOICE in accordance with the terms of
the Preorganizational Agreement; and (c) assume Pre-Organizational
Expenses and startup expenses of the Business, all the foregoing in an
amount up to $3,000,000 in accordance with the detailed schedule and
payment, reimbursement and record keeping process set forth in Exhibit
A hereto. CHOICE and MCS agree that such coverage of expenses by MCS
induced CHOICE to enter into this Agreement, and that MCS' compensation
under this Agreement reflects its coverage of such expenses.
Part 3.2 Operational Phase - MCS shall cover all direct and indirect costs
associated with its rendering of services under this Agreement and for
the administration of the Business, including, without limitation, the
purchase and/or lease of personal property and the lease of real
property (such real property lease expenses including without
limitation that certain Lease entered into May 1, 1996 by CHCI for
office space located at 650 South Clark Street (Suite 300), Chicago,
Illinois. However, the following expenses shall be the responsibility
of CHOICE:
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Part 3.2.1 Covered Services;
Part 3.2.2 Legal services of CHOICE (except for legal expenses directly
associated with establishment of CHOICE and startup of the
Business, which shall be borne by MCS);
Part 3.2.3 Ongoing expenses relating to the maintenance of CHOICE as a
corporate entity;
Part 3.2.4 Actuarial services of CHOICE;
Part 3.2.5 Insurance premiums for CHOICE;
Part 3.2.6 Audit and tax services of CHOICE;
Part 3.2.7 Advertising and marketing expenses of CHOICE;
Part 3.2.8 Any income, property, premium or other taxes of CHOICE
and any assessments or license fees; and
Part 3.2.9 Any other expenses clearly related to the ongoing business
of CHOICE as an independent corporate entity.
Part 3.3 If MCS, with the express advance approval of the CHOICE Board, performs
or pays for the services in Section 3.2 hereof, CHOICE shall reimburse
MCS for the reasonable cost or value of such services.
PART 4
DUTIES OF CHOICE
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Part 4.1 CHOICE shall be responsible to compensate MCS as set forth in Part 6 of
this Agreement, as may be periodically amended from time to time.
Part 4.2 CHOICE shall be responsible for the day-to-day management of the
financial affairs of CHOICE.
Part 4.3 CHOICE shall furnish any and all information, data and documentation as
is reasonably necessary for MCS to perform its services under this
Agreement. CHOICE shall furnish MCS with access during reasonable
business hours to all information, books, business records, data and
information systems of CHOICE reasonably necessary for MCS to perform
its services under this Agreement.
Part 4.4 CHOICE shall ensure that any employees, agents, representatives or
independent contractors of CHOICE shall adhere to all obligations
imposed upon CHOICE under this Agreement. CHOICE shall ensure that it
includes in any contractual relationships with such representatives
provisions sufficient to satisfy the obligations of this Section 4.4
and, in addition, CHOICE must furnish to such representatives
information regarding the obligations under this Agreement to ensure
compliance with same.
PART 5
COMPENSATION
MCS shall be compensated for its services under this Agreement by
CHOICE as follows:
Part 5.1 Pre-Operational Phase - MCS shall not receive compensation hereunder
during the Pre-Operational Phase. MCS acknowledges and agrees that the
compensation to be received
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by MCS during the Operational Phase includes reasonable compensation
for services rendered during the Pre-Operational Phase, and that MCS'
obligations under this Agreement, including, but not limited to, MCS'
obligations during the Pre-Operational Phase, are binding and
enforceable. MCS and CHOICE agree that MCS' overall compensation under
this Agreement has been established to reflect the fact that MCS shall
not receive compensation during the Pre-Operational Phase.
Part 5.2 Operational Phase.
Part 5.2.1 In any month the actual Member Months of CHOICE is below
20,000, MCS shall be paid the greater of 15% of plan
premium/capitation or $50,000.
Part 5.2.2 In any month the actual Member Months of CHOICE is 20,000 or
more, MCS shall be paid according to the following schedule:
<TABLE>
<CAPTION>
MCS Compensation (As a
----------------------
For Member Premium % of Total PMPM Mini-
---------- ------------------ ----------
Months: Revenue) Will Be: mum Will Be:
------- ----------------- ------------
<S> <C> <C>
0 through 75,000 (First Layer) 12% $12.60
75,001 through 100,000 (Second Layer) 10% $10.50
Greater than 100,000 (Third Layer) 8% $ 8.40
</TABLE>
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<PAGE> 18
The preceding schedule reflects tiered compensation, so that
differential percentages will at all times apply to the
First Layer, Second Layer and Third Layer of Member Months.
"Member Months" means, in any given month, a fraction, (A)
the numerator of which is the aggregated number of days of
such month in which Member enrollees are eligible for
coverage under CHOICE's plan, and (B) the denominator of
which is the number of days in such month.
Part 1.1.1 MCS may receive as compensation an agreed upon percentage of
risk pool funds as set forth in Exhibit C attached hereto
and made part hereof.
PART 2
TERM AND TERMINATION
Part 2.1 The initial term of this Agreement shall be seven (7) years, unless
earlier terminated. The Agreement thereafter shall be renewed for
additional one (1) year terms, unless either Party gives the other
Party one hundred eighty (180) calendar days advance written notice of
its intent not to renew.
Part 2.2 This Agreement may be terminated at any time upon the written mutual
consent of both Parties.
Part 2.3 Either Party may terminate this Agreement for "cause", as defined
herein, which has not been cured within the time frame stated in a
"Corrective Action Plan" as provided herein. Upon the determination of
a Party hereto that "cause" for termination of this Agreement exists,
that Party shall serve a written Corrective Action Plan upon the other
Party. Such
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Corrective Action Plan shall include, without limitation: (a) a
statement of date by which the "cause" must be rectified (the "Cure
Date"), which date shall be determined solely by the Party serving the
Corrective Action Plan but shall be not less than thirty (30) calendar
days from the date that the Corrective Action Plan is served; (b) the
nature of the "cause"; and (c) the actions that must be taken to cure
the "cause". At the option of the Party serving a Corrective Action
Plan, such Corrective Action Plan may include a statement that if the
"cause" is not rectified by the Cure Date, it is the intention of the
Party serving such Corrective Action Plan immediately to terminate this
Agreement. A Party terminating this Agreement for failure to meet a
Cure Date must do so in writing to the other Party. The Corrective
Action Plan may, at the sole discretion of the Party serving the
Corrective Action Plan, specify dates prior to the Cure Date by which
intermediate curative actions must be completed ("Intermediate Cure
Dates"). Any such specification of Intermediate Cure Dates should be
designed to structure the Corrective Action Plan in the event that the
"cause" giving rise to the service of the Corrective Action Plan will,
in the sole discretion of the Party serving such Corrective Action
Plan, require multiple sequential steps to rectify. The Party that
served a Corrective Action Plan may, upon written notice to the other
Party, terminate this Agreement not less than thirty (30) days
following the failure of the other Party to meet an Intermediate Cure
Date. The following shall constitute "cause" as used in this Section:
Part 2.3.1 MCS' failure to satisfy any of its obligations under this
Agreement, including, but not limited to, meeting the
Timetable and/or Performance Criteria standards
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set forth in this Agreement and Exhibit B hereof. In
establishing any Corrective Action Plan in regard to MCS'
failure to satisfy this Section 6.3.1, CHOICE shall
reasonably consider whether such failure has: (1) been
caused by circumstances beyond MCS' control, including as a
result of the actions of any state regulatory agency; or (2)
occurs during the early stages of the Operational Phase.
Part 2.3.2 The requirement by a Payor which is an agency of or
otherwise affiliated with a State (a "State Payor") that as
a prerequisite to the State Payor entering into a contract
with CHOICE, CHOICE replace MCS as the provider of
management services to CHOICE; or
Part 2.3.3 Either Party's material failure to abide by all applicable
state and federal laws and regulations that pertains to it.
Part 2.4 The CHOICE Board may by simple majority vote determine any action or
decision of CHOICE under Section 6.3 of this Agreement, subject to any
applicable conflict of interest limitations on voting in CHOICE's
Bylaws.
Part 2.5 Notwithstanding any other provision herein, this Agreement shall
automatically terminate upon:
Part 2.5.1 either Party becoming Bankrupt or Insolvent;
Part 2.5.2 loss of insurance coverage by either Party; or
Part 2.5.3 a judgement of fraud, willful misconduct, or criminal
conviction for a felony or crime of moral turpitude against
an officer or director of either Party up thorough the date
of termination.
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Part 2.6 In the event that this Agreement is terminated the Parties shall:
Part 2.6.1 cooperate to effectively and expeditiously transition
responsibilities thereunder to the party or parties assuming
the management of CHOICE; and
Part 2.6.2 remain responsible to pay any amounts owed the other Party
up through the date of termination, except that this section
shall not serve to accelerate or otherwise alter any loans
between the Parties hereto.
Part 2.7 In the event that this Agreement is terminated, MCS shall ensure that
either CHOICE or CHCI, at the sole determination of the CHOICE Board,
will be able to license or otherwise acquire rights to use the MIS
software package(s) provided by MCS under this Agreement, including,
but not limited to MC1. Any agreement between MCS and a third party by
which MCS secures the use of an MIS system for purposed of this
Agreement shall include provisions to facilitate the requirements of
this Section 6.6.
PART 3
INSURANCE/INDEMNIFICATION
Part 3.1 Both CHOICE and MCS shall secure and at all times maintain
comprehensive general and professional liability insurance and other
appropriate forms of insurance coverage at minimum limits as required
by law and as is then customary and reasonable given their respective
businesses and activities.
Part 3.1.1 Each Party shall provide to the other Party satisfactory
evidence of such comprehensive general and professional
liability coverage as required above and that such insurance
coverage is effective as of the effective date of this
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<PAGE> 22
Agreement. Evidence of such insurance coverage shall be
provided by each Party to the other Party annually
thereafter.
Part 3.1.2 Each Party shall give to the other Party at least thirty
(30) calendar days advance notice in writing of any proposed
cancellation, termination or modification of such insurance.
Such insurance policy or policies shall contain an
endorsement requiring the insurer(s) of the Parties hereto
to likewise give notice as stated herein.
Part 3.2 Each Party hereto (the "Indemnifying Party") agrees to indemnify,
defend and hold harmless the other (the "Indemnified Party"), its
officers, directors, employees, agents, representatives and assigns,
of, from and against any claim, action, loss, cost, damages, expense
(including legal fees and costs) and liability arising out of the
action or inaction pursuant to this Agreement by the Indemnifying
Party, its employees, agents, representatives, independent contractors
and assigns, excepting only such liability that is solely attributable
to the willful misconduct, or reckless omission or commission in
performing its duties hereunder of the Indemnified Party, its
employees, agents, representatives, independent contractors and
assigns.
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Part 3.3 The Parties acknowledge that certain legal issues, claims or actions
may arise under this Agreement that actually or potentially involve
both Parties and their respective employees, agents or representatives.
The Parties agree to cooperate in good faith to address any such
issues, to the extent such cooperation does not violate any applicable
laws, cause the breach of any other contractual duties of either Party,
compromise legal interests of or protections afforded to either Party,
or jeopardize the confidentiality of communications or information
regarding such issues.
PART 4
REGULATORY APPROVALS
Part 4.1 MCS shall procure, on behalf of CHOICE, all licenses, certifications,
registrations and other federal, Illinois or local regulatory approvals
required in order for CHOICE to operate the Business, including, but
not limited to, an HMO license and any other federal and state
certifications necessary or appropriate to operate as a qualified HMO
under the Illinois Medicaid Program (or any successor program thereto),
and shall use its reasonable efforts to ensure that CHOICE is in
compliance with all applicable regulatory requirements. In the proposed
CHOICE annual operating budget, MCS shall include all costs associated
with procurement of necessary regulatory approvals and compliance with
regulatory requirements, but need not include any capital reserve
requirements for the continued HMO licensure or Medicaid certification
of CHOICE in Illinois.
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Part 4.2 MCS agrees that at all times during the term of this Agreement, MCS
shall be in good standing as a business corporation and maintain in
full force and effect any certificates, licenses and registrations
required by federal, state and local authorities.
Part 4.3 CHOICE agrees that at all times during the term of this Agreement,
CHOICE shall be in good standing as a business corporation.
Part 4.4 Each Party shall provide the other Party, upon request, with evidence
of its good standing, certifications and licenses and with copies of
its most recent annual or other reports filed with state or federal
regulatory agencies.
Part 4.5 Each Party agrees to notify the other Party immediately in the event
any good standing, certification, licensure or registration referred to
above is suspended or limited.
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Part 4.6 Each Party agrees to do nothing during the term hereof which shall
jeopardize the good standing or ability to maintain in full force and
effect such certificates, licenses or registrations of the other Party.
PART 5
EXCLUSIVITY
Part 5.1 Except as noted in this Section 9.1, for the term of this Agreement,
MCS shall not, in any "CHOICE Market" (as defined herein), itself
engage in, or render services to, any business in direct competition
with CHOICE. "CHOICE Markets" are defined as: (1) the State of
Illinois; and (2) the States of Kentucky, Iowa, Wisconsin, and Missouri
upon the good faith designation by the CHOICE Board that CHOICE will be
commencing business activities in the such state within one-hundred
eighty (180) days. Notwithstanding the provisions of this Section 9.1,
in the event that MCS is already doing business in one of the
above-listed states at the time that the CHOICE Board designates that
state as a CHOICE Market, MCS may continue to do business in that
state.
Part 5.2 This Agreement in no way restricts or limits the ability of CHCI and/or
members of CHCI to contract or otherwise enter into any relationship of
any sort.
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Part 5.3 CHOICE shall not enter into agreements with any management company
other than MCS without the consent of MCS, unless CHOICE receives
written notice from a State Payor as defined in Section 6.3.2, hereof
that the addition of another management company or the replacement of
MCS as the management company is required to assure that CHOICE shall
provide the required performance under a Contract.
PART 6
CONFIDENTIAL MATERIALS
Part 6.1 The Parties acknowledge and agree that as a result of the various
agreements which shall be entered into by and among CHOICE, MCS, CHCI
and members of CHCI, they and their employees, agents and
representatives may become informed of, and have access to, valuable
and "confidential information" concerning one another's business
activities.
Part 6.2 The term "confidential information" shall mean all information of a
business or technical nature which is owned or developed either by
CHOICE, MCS, CHCI and/or members of CHCI, which has not been made
generally available to the public, which has been identified by the
originating party(s) as "confidential", and which is disclosed to or
learned by one or more of the other parties exclusively in the course
of the performance of services under any agreement between or among the
parties or as a result of their participation in CHOICE.
Part 6.3 The Parties acknowledge and agree that confidential information, even
though it may be used in connection with the performance of services
under any agreement between or
26
<PAGE> 27
among the Parties or disclosed by virtue of the relationship of the
Parties to each other, shall remain the sole and exclusive property of
the Party who owns or develops or developed such confidential
information, and that no confidential information shall be disclosed to
a person other than CHOICE, MCS, CHCI or members of CHCI without the
express written consent of the Party who owns or develops such
confidential information. The Parties expressly acknowledge and agree
that any and all clinical and patient information shall be and remain
the confidential information of the applicable Provider.
27
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Part 6.4 Any services which are performed for CHOICE by MCS shall not result in
the establishment of confidential information that is owned by CHOICE
unless prior to the time that such services commence, CHOICE, pursuant
to a determination by the CHOICE Board, informs MCS, in writing, that
the performance of such services are intended to create a proprietary
interest in such information. Any such proprietary information so owned
by CHOICE which is derived substantially from the confidential
information of MCS shall be deemed jointly owned by MCS and CHOICE.
Part 6.5 MCS agrees that all data encoded in MCS' computer systems that is
germane to CHOICE (the "CHOICE Data") is owned by CHOICE. In the event
of termination of this Agreement, whether with or without cause, MCS
shall cause its Information Services & Technology (IST) staff to
transfer all of the CHOICE Data to CHOICE using industry standard
electronic media. All other of the automated management information
systems used by MCS to render services to CHOICE under this Agreement
shall, in the event of termination of this Agreement, whether with or
without cause, remain the property of MCS.
PART 7
NOTICE OF ACTION
Part 7.1 MCS acknowledges that certain regulatory, administrative, and/or legal
issues, claims or actions (an "Action") may arise that could impair the
ability of MCS to perform under this Agreement. MCS agrees to inform
the Chair of the Board of CHOICE of the any
28
<PAGE> 29
such Action, whether or not actually commenced, within the first
business day of the notification of MCS of the same. Unless the nature
of the Action precludes such acts, the Chief Executive Officer of
CHOICE shall: (a) receive from MCS a copy of any notice of Action
provided by MCS under this Section 11.1 and of any other relevant prior
or subsequent documents; and (b) be fully informed on an ongoing and
timely basis, of MCS' response to or defense of the Action.
PART 8
ACCESS TO MCS' BOOKS AND RECORDS
Part 8.1 With respect to the services that MCS provides to CHOICE, MCS shall:
(a) keep, in accordance with Exhibit B, "Schedule of MCS Services",
complete and accurate records and books of account regarding CHOICE and
the Business; and (b) shall make reports to the CHOICE Board regarding
such records and books of account not less often than quarterly, or
more often if so requested by the CHOICE Board.
Part 8.2 CHOICE shall have the right to audit, at its expense and during normal
business hours, MCS' books and records for CHOICE.
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PART 9
INDEPENDENT CONTRACTOR
Part 9.1 Notwithstanding any other provisions of this Agreement, each Party
is acting independently of the other Party and the provisions of
this Agreement shall not be construed as meaning that the Parties
hereto are acting as the agents or employees of the other Party
hereof, but, in fact, each Party recognizes that it is acting in the
capacity of an independent contractor.
PART 10
OTHER PERSONS NOT A PARTY
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Part 10.1 No person or party shall have any rights under this Agreement, if
he, she or it is not a Party hereto. This Agreement is not intended
to, and shall not, create any rights in any person, including a
Payor or Provider who is not a signatory hereto. The covenants,
undertakings, and agreements set forth in this Agreement shall be
solely for the benefit of, and shall be enforceable only by the
Parties hereto.
PART 11
AMENDMENTS
Part 11.1 This Agreement shall not be amended, altered, changed or assigned at
any time without the express written consent of each of the Parties
hereto and any such amendments of this Agreement shall be by written
amendment signed by each of the Parties and made a part of this
Agreement, which right shall terminate at the same time as this
Agreement.
PART 12
NOTICES
Part 12.1 Any notice required under the terms of this Agreement shall be by
United States certified mail with postage prepaid, return receipt
requested and addressed as follows:
If to MCS: If to CHOICE:
Managed Care Solutions, Inc. Community Health Choice
2510 West Dunlap, Suite 300 of Illinois, Inc
Phoenix, AZ 85021 650 S. Clark street, Suite 300
Attention: Chief Executive Chicago, Illinois 60605
Officer Attention: Chief Executive
Officer
With a Copy to:
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<PAGE> 32
Laird, Schneck, Lindfors & Smyth With a Copy to:
1440 East Missouri, Suite 250 Vedder, Price, Kaufman & Kammholz
Phoenix, AZ 85014 222 North LaSalle Street
Attention: Stephen Smyth Chicago, Illinois 60601
Attention: Anne M. Murphy
and any such notice shall be effective upon the earlier of: (a)
receipt by the Party to whom it is addressed; or (b) three (3)
working days after notice is sent.
Part 1.1 Parties may change the address to which notices are to be sent by
providing notice pursuant to this Part 16.
PART 2
REFERENCES AND SECTION HEADINGS
Part 2.1 Any reference to the singular shall include reference to the plural,
and vice versa. References to the male gender shall include the
female gender and vice versa. Part headings are intended for
purposes of description only and shall not be used for purposes of
interpretation of this Agreement.
PART 3
SEVERABILITY AND SUPERVENING LAW
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Part 3.1 The invalidity or unenforceability of any term or provision of this
Agreement shall not impair or affect any other provision hereof
which shall remain in full force and effect, except that the Parties
recognize that this Agreement at all times is to be subject to
applicable state, local, and federal law. The Parties further
recognize that this Agreement shall be subject to amendment in such
laws and regulations and to new legislation. Any provisions of the
law that invalidate, or otherwise are inconsistent with, the terms
of this Agreement or that would cause one or both of the Parties to
be in violation of law, shall be deemed to have superseded such
terms of this Agreement, provided however, that the Parties shall
exercise their best efforts to accommodate the terms and intent of
this Agreement to the greatest extent possible consistent with the
requirements of law. In the event the Parties are unable to
accommodate the terms and intent of this Agreement to the greatest
extent possible consistent with the amended requirements of law,
then this event shall be an additional "cause" for termination
hereunder.
PART 4
ENTIRE AGREEMENT
Part 4.1 This Agreement constitutes the entire contract for management
services between MCS and CHOICE. This Agreement supersedes any and
all previous agreements between the Parties relating thereto,
although it does not preclude further express agreements between
them.
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PART 5
SURVIVAL OF TERMINATION
Part 5.1 It is the express intention and agreement of the Parties hereto that
provisions of this Agreement imposing obligations subsequent to
termination of the Agreement shall survive the termination of this
Agreement for any reason. These provisions include without
limitation, Parts 3, and 10 (including all component Sections and
Subsections thereof) and Sections 6.5, 7.2 and 7.3 (including all
Subsections thereof).
PART 6
GOVERNING LAW AND FORUM SELECTION
Part 6.1 This Agreement shall be governed by Illinois law without regard to
choice of law or conflict of law principles thereof.
Part 6.2 Any and all claims arising out of this Agreement shall be filed and
adjudicated in state and/or federal courts located in the State of
Illinois.
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PART 7
ASSIGNMENT
Part 7.1 MCS or CHOICE shall not assign its rights or obligations under this
Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day
and year first appearing above.
MANAGED CARE SOLUTIONS, INC., a Delaware Corporation
By:_____________________________
Its:_______________________
COMMUNITY HEALTH CHOICE OF ILLINOIS, INC., A Delaware Corporation
By:_____________________________
Its:_______________________
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<PAGE> 1
EXHIBIT 10.18
BENOVA MANAGED CARE SOLUTIONS LLC OPERATING AGREEMENT
PARTIES: BENOVA, INC. ("Benova")
An Oregon corporation
MANAGED CARE SOLUTIONS, INC. ("MCS")
a Delaware corporation
DATED: Effective April 25, 1996
RECITAL:
The parties desire to organize a limited liability company pursuant to
the New York Limited Liability Company Law (the "Act") and the terms of this
Operating Agreement (the "Agreement").
AGREEMENT:
The parties agree as follows:
Section 1. Formation
1.1 Formation. The parties (individually a "Member" and
collectively the "Members") agree to form a limited liability company (the
"Company") pursuant to the Act for the purposes set forth in this Agreement.
1.2 Name. The name of the Company shall be Benova Managed Care
Solutions LLC.
1.3 Business Purposes. The purposes of the Company shall include
the following: (i) to apply for, enter into and carry out the terms of a
Medicaid enrollment broker contract with the State of New York department of
health, Office of Managed Care as presented in the RFP OMC-96-1 (the "New York
Contract"); (ii) to incur indebtedness, secured or unsecured, in carrying out
any purpose of the Company; and (iii) any other activities that are necessary
or appropriate to protect or enhance the assets of the Company or are necessary
or incidental to the foregoing purposes. The Company shall have the authority
to do all thins necessary or convenient to accomplish its purpose and operate
its business. The Company may engage in any lawful business permitted by the
Act or the laws of any jurisdiction in which the Company may do business.
1.4 Term. The Company shall commence its existence on April 25,
1996, the date of filing of the Articles of Organization (the "Effective Date")
and shall continue to exist until the earlier of (i) December 31, 2096 or (ii)
the date of the expiration of the New York Contract (including all renewals).
1-LLC OPERATING AGREEMENT
<PAGE> 2
1.5 No Partnership Intended for Nontax Purposes. the Members have
formed the Company as a limited liability company under the Act and do not
intend to form a partnership, corporation or other type of entity. The Members
do not intend to be partners to each other (except for tax purposes) or
partners as to any other person.
1.6 Title. All real and personal property owned or leased by the
Company shall be held in the name of the Company and not in the names of the
individual Members.
Section 2. Capital
2.1 Capital Contributions. On the Effective Date, each Member shall
contribute to the Company, as a capital contribution, the following:
Member Contribution
MCS $104,000
Benova $ 56,000
2.2 No Additional Capital Contributions. The Members shall not be
required to make additional contributions to the capital of the Company.
2.3 Interest. No interest shall be paid by the Company on the
capital contributions of the Members or on the respective balances in the
Capital Accounts (defined in Section 7.6) of the Members.
2.4 Return of Capital Contributions. A Member may withdraw capital
from the Company only with the prior consent of the other Member. To the extent
that any distribution which any Member is entitled to receive from the Company
pursuant to Section 4 would constitute a return of capital, each of the Members
consents to the return of such capital. Except as provided in Section 9, a
Member shall not have the right to demand and receive property other than cash
in return for the Member's capital contribution. Each member shall look solely
to the assets of the Company for the return of the Member's capital
contribution, and if the assets of the Company are insufficient to return the
Member's capital contribution, such Member shall have no recourse against the
other Member.
2.5 Loans from Members. MCS agrees to loan funds in a total amount
not to exceed $3,000,000 to the Company from time to time as requested by the
Manager and in amounts determined by the Manager to be reasonable or
appropriate for the requirements of the Company, including, but not limited to,
amounts to provide for start-up expenses with respect to the New York Contract
incurred prior to the generation of revenues. MCS shall provide the funds
within ten days of receipt of the request from the Manager. Each loan shall
bear interest at the rate of 12 percent per annum, shall be subordinated to the
bank or other third party debt financing of the Company ("Third Party Debt") if
required by the third party lender, shall be
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nonrecourse, shall be secured by a security interest in the accounts receivable
of the Company (which security interest shall be subordinated to the security
interest of the bank or other third party lender of the Company) and shall be
repaid with respect to interest monthly and with respect to principal as
provided in Section 4. Each loan shall be evidenced by a promissory note, which
shall state the amount borrowed, the interest rate and the terms of payment. No
such loan shall increase the interest of MCS in the capital of the Company,
affect the Capital Account balance of MCS or affect MCS's share of the profits
and losses of the Company.
2.6 RFP Expenses
2.6.1 In the event the New York Contract is awarded to the Company,
Benova shall be reimbursed by the Company an amount equal to $245,000 for the
costs and expenses ("RFP Expenses") incurred by Benova prior to the Effective
Date with respect to the RFP OMC-96-1. The Company shall reimburse such amount
to Benova on or before July 1, 1996. The RFP Expenses incurred after the
Effective Date shall be the obligation of the Company.
2.6.2 In the event the New York Contract is not awarded to the
Company, Benova shall be reimbursed by the Company an amount equal to $206,000
for RFP Expenses incurred by Benova prior to the Effective Date and by Benova,
for the benefit of the Company, from the Effective Date until and including
June 5, 1996. The Company shall reimburse such amount to Benova on or before
July 1, 1996. The RFP Expenses incurred after June 5, 1996 shall be the
obligation of the Company.
SECTION 3. ALLOCATION OF PROFITS AND LOSSES
3.1 Profit and Loss Determination. The profits and losses of the Company
for each fiscal year shall be determined as of the end of each fiscal year by
the Company's accountants in accordance with those principles of the accrual
method of accounting which are employed in the preparation of the federal
income tax informational return filed by the Company for that fiscal year.
3.2 General Allocation. Except as provided in Section 3.3, the profits
and losses of the Company shall be allocated between the Members in proportion
to their respective Ownership Interests (defined in Section 3.4).
3.3 Transfer of Interest by Member During Fiscal Year. If a Member
transfers all or part of such Member's interest in the Company during any
fiscal year by sale, exchange, transfer, assignment, operation of law, or any
other manner, the profits or loss of the Company allocable to the interest so
transferred shall be prorated between the transferor and the transferee in
accordance with Section 706(c)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"); provided, however, that gain or loss realized on the
sale, exchange, transfer or other disposition of an asset of the Company shall
be allocated to the owner of such
3-LLC OPERATING AGREEMENT
<PAGE> 4
interest on the date of such sale, exchange, transfer or other disposition
subject to Section 706(c)(2) of the Code.
3.4 Ownership Interests. Except as provided in Section 3.5, the
Ownership Interests of the Members shall be as follows:
<TABLE>
Member Percentage
<S> <C>
MCS 65
Benova 35
</TABLE>
3.5 Adjustment to Ownership Interests. In the event the Benova/MCS
Joint Venture is awarded the California Contract (defined in the Benova/MCS
Joint Venture Agreement dated March 26, 1996), the Ownership Interest of the
Members shall be adjusted effective as of the Effective Date to be as follows:
<TABLE>
Member Percentage
<S> <C>
MCS 50
Benova 50
</TABLE>
Further, the capital contributions set forth in Section 2.1 shall be adjusted
so that the capital contribution of MCS and Benova shall be $80,000 each.
SECTION 4. DISTRIBUTIONS
Distributions shall be made to the Members as follows:
First, the Members shall review the financial operations and
cash position of the Company from time to time (but not less frequently than
quarterly) and may distribute any cash of the Company that is in excess of the
amount that the Members mutually determine to be reasonably needed by the
Company. Distributions shall be allocated between the Members in proportion to
their respective Ownership Interests; and
Second, to the extent cash resources are available (as
determined by the mutual consent of the Members), the Company shall make
payments to MCS of principal and accrued, but unpaid, interest, with respect to
outstanding loans made to the Company pursuant to Section 2.5.
SECTION 5. MEMBERS
5.1 Authority to Act. No Member shall have any power or authority to
bind the Company unless the Member is the Manager and acts in accordance with
Section 6.
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<PAGE> 5
5.2 Voting Rights of Members. The Members shall have the right to vote
only with respect to the following matters:
(a) The election of a Manager as provided in Section 6.1.4;
(b) the approval of annual budgets;
(c) The incurrence of any Third Party Debt of the Company outside of
the ordinary course of business of the Company or the incurrence of any Third
Party Debt of the Company in the ordinary course of business in an amount
greater than set forth on the applicable annual budget;
(d) The determination to modify or expand the purpose of the Company;
(e) The sale, exchange, transfer or other disposition of all or
substantially all of the assets of the Company;
(f) The purchase or other acquisition of any property not provided for
in the annual budget;
(g) The making of an additional capital contribution to the Company;
(h) An amendment to the Articles of Organization or this Agreement; and
(i) such other matters as specifically provided in this Agreement.
5.3 Actions of Members.
5.3.1 Meetings. A meeting of the Members shall be called by the
Manager for the purpose of voting on any matter described in Section 5.2 or for
any other purpose. A meeting of the Members shall be called by the Manager not
less frequently than every four months. Unless otherwise designated by the
Manager, the location for any meeting of the Members shall be 1220 SW Morrison
Street, Suite 700, Portland, Oregon 97204. Written notice stating the place,
day and hour of the meeting and the purpose or purposes for which the meeting
is called shall be delivered to each Member not less than five days nor more
than 20 days before the date of the meeting, personally, by mail or by telefax,
by or at the direction of the Manager. When any notice is required to be given
to any Member, a waiver in writing signed by the person entitled to such a
notice shall be equivalent to the giving of such notice. With respect to
meetings, any or all Members may participate in the meeting by, or may conduct
the meeting through, use of any means of communication by which all Members
participating may simultaneously hear each other. A Member participating in
such a meeting is deemed to be present in person at such meeting.
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<PAGE> 6
5.3.2 Manner of Acting. All determinations to be made by the Members
shall be by an affirmative vote of both of the Members unless the vote of a
lesser proportion is otherwise required by the Act, the Articles of
Organization or this Agreement. In making determinations, no Member shall
unreasonably withhold its consent or approval nor act in a manner that has the
effect of frustrating the purpose of the Company. Unless otherwise required
under applicable law or under this Agreement, any Member, who has an interest
in the outcome of any particular matter upon which the Members vote or consent,
may vote or consent upon any such matter and its vote or consent, as the case
shall be, shall be counted in the determination of whether the matter was
approved by the Members.
5.3.3 Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of the Members may be taken without a
meeting if the action is evidenced by one or more written consents describing
the action taken, signed by all of the Members and delivered to the Company for
inclusion in the minutes or for filing with the Company records. Action taken
under this Section 5.3.3 is effective when the first Member has signed the
consent, unless the consent specifies a different effective date. the record
date for determining Members entitled to take action without a meeting shall be
the date the first Member signs a written consent.
5.4 Guaranties.
5.4.1 The Members shall guaranty the obligations of the Company
with respect to the New York Contract as required by the terms of the New
York Contract.
5.4.2 The Members shall guaranty any Third Party Debt of the
Company if required by the third party lender.
5.5 Performance Board. MCS shall provide for the benefit of the Company
and the Members a performance bond in the amount of $1,000,000 or other
security satisfactory under the New York Contract. The cost of the performance
bond shall be paid by the Company.
5.6 Other Business Activity. Except as provided in this Section 5.6,
this Agreement shall not preclude a Member (or the affiliate of a Member) from
engaging directly or indirectly in any other business, including, without
limitation, any business which is similar to the business of the Company or
results in direct or indirect competition with the Company. No Member (or the
affiliate of a Member) shall engage directly or indirectly in any other
business that would cause the Company to breach or otherwise be in default
under the New York Contract. No Member shall have any right to participate in
any manner in the income earned by or accruing to another Member (or any
affiliate of another Member) from the conduct of any other business. A Member
shall not be accountable to the Company or the other Members for any investment
or business opportunity of which the Member becomes aware by reason of the
affairs of the Company.
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<PAGE> 7
5.7 Liabilities of Members. No Member shall be personally liable
for any debt, obligation or liability of the Company by reason of being a
Member.
5.8 Representations.
5.8.1 Representations of Benova. Benova represents and
warrants to MCS and to the Company that in reviewing this proposal prior to
entering into this Agreement, Benova carefully evaluated the Agreement and the
terms and conditions of the business which is contemplated under the Agreement.
Benova was afforded the opportunity to ask questions and receive answers
concerning the proposal and to obtain any additional information which MCS
possessed or could acquire without unreasonable effort or expense. All
inquiries which Benova made for information were answered to its satisfaction.
Benova understands this Agreement provides limited voting rights. Benova is
experienced with the development of business programs such as that contemplated
under the Agreement, and Benova has such knowledge and experience in financial
and business matters to enable it to utilize the information made available to
it to make an informed investment decision with respect to its participation in
the Company.
5.8.2 Representations of MCS. MCS represents and warrants to
Benova and to the Company that in reviewing this proposal prior to entering
into this Agreement, MCS carefully evaluated the Agreement and the terms and
conditions of the business which is contemplated under the Agreement. MCS was
afforded the opportunity to ask questions and receive answers concerning the
proposal and to obtain any additional information which Benova possessed or
could acquire without unreasonable effort or expense. All inquiries which MCS
made for information were answered to its satisfaction. MCS understands this
Agreement provides limited voting rights to any Member other than Benova, as
Manager. MCS is experienced with the development of business programs such as
that contemplated under the Agreement, and MCS has such knowledge and
experience in financial and business matters to enable it to utilize the
information made available to it to make an informed investment decision with
respect to its participation in the Company.
SECTION 6. MANAGER
6.1 Selection.
6.1.1 Manager. The Manager of the Company shall be Benova. The
term of the Manager shall be indefinite. In the event of the resignation or
removal of the Manager, the Members shall elect a successor Manager in
accordance with Section 6.1.4.
6.1.2 Resignation. The Manager may resign at any time by giving
notice to the Members. The resignation shall be effective at such time as shall
be specified in the notice. The resignation of the Manager shall not affect the
Manager's rights as a Member and shall not constitute a withdrawal from the
Company as a Member.
7 - LLC OPERATING AGREEMENT
<PAGE> 8
6.1.3 Removal. The Member who is not the Manager shall have the right
to remove the Manager in the event the Manager commits an act or omission that
constitutes gross negligence and has a materially adverse effect on the
Company. In the event such act or omission of the manager is correctable, then
as a precondition to exercising the right of removal, the Member who is not a
Manager shall provide the Manager with written notice and a reasonable period
of time (but not less than 20 business days) to remedy the grossly negligent
act or omission. Further, no act or omission by the Manager shall constitute
gross negligence if such act or omission is a result of (i) there being
insufficient cash funds in the company or (ii) any act omission by the Member
who is not the Manager that has the effect of frustrating the purpose of the
company. the removal of the manager shall not affect the manager's rights as a
Member and shall not constitute a withdrawal from the company as a Member.
6.1.4 Election. In the event of the resignation or removal of the
Manager, the members shall elect a successor manager.
6.2 Management Rights of Manager. Subject to the voting rights of the
Members set forth in Section 5.2, the Manager shall have full and exclusive
responsibility and control over the management of the business and internal
affairs of the Company and full and exclusive authority and power to do any and
all things necessary or incidental to the management of the business and
internal affairs of the company.
6.3 Specific Rights and Powers. The Manager shall have all specific
rights and powers required for or appropriate to the management of the
company's business and internal affairs which, by way of illustration but not
by way of limitation, shall include the following rights and powers:
(a) To manage and operate the business of the company and to employ
persons or engage independent contractors with respect to such
management and operation of the business of the company (including, but
not limited to, supervisory personnel up to and including a general
manager of the operation) on such terms and for such compensation as
the Manager may reasonably determine, subject to Section 6.6;
(b) Subject to the provisions of this Agreement, to incur indebtedness,
secured or unsecured, for any purpose of the company, but only to the
extent the annual budget approved by the Members pursuant to Section
5.2(b) provides for such indebtedness;
(c) To obtain insurance reasonably necessary for proper for the
protection of the Company, for the conservation of the assets of
the company or for any purpose beneficial to the Company;
(d) To employ attorneys, accountants and other professionals on
behalf of the Company;
8 - LLC OPERATING AGREEMENT
<PAGE> 9
(e) To pay, collect, compromise, arbitrate, resort to legal action for
or otherwise adjust claims or demands of or against the Company;
provided, however, no action with respect to any claim or demand in
excess of $25,000 shall be taken by the manager without the prior
approval of the Member who is not the Manager;
(f) To negotiate and enter into all agreements, contracts, leases
or other documents in connection with the management, maintenance or
operation of the business and assets of the Company;
(g) To execute on behalf of the Company all documents, including,
without limitation, checks, notes, instruments, assignments, leases,
security agreements, financing statements, contracts and agreements,
which execution of such documents by the manager shall be sufficient
to bind the Company;
(h) To authorize any agent or employee of the Company to act for
and on behalf of the Company in all matters incidental to the foregoing
rights and powers; and
(i) to have all other rights and powers that are necessary or
incidental to the foregoing rights and power or that may be necessary
or appropriate to protect or enhance the assets of the Company.
6.4 Provision of Services. In managing the business and internal
affairs of the Company, the manager shall provide the Company with use of its
Medicaid broker systems, methods, procedures, processes, software and related
information necessary to implements and operate the New York Contract. In
addition, the manager shall make available systems for the administration of
the Company, including accounting and other record keeping systems.
6.5 Competition.
6.5.1 For services rendered in managing the business and internal
affairs of the Company, the Manager shall receive as compensation 17 percent
of the first $500,000 of monthly gross revenues of the Company and 7 percent of
the monthly gross revenues of the company in excess of $500,000; provided,
however, in the event the Ownership Interests of the Members are adjusted as
provided in Section 3.5, the compensation of the Manager set forth above shall
be adjusted, and the Manager shall receive as compensation 8 percent of the
monthly gross revenues of the Company. For purposes of this Agreement, "monthly
gross revenues" shall mean the gross revenues of the Company during each
calendar month. Such compensation shall be considered a guaranteed payment
under Section 708(c) of the Code for determining the profits and losses of the
Company.
6.5.2 For services rendered in procuring fixed assets for the Company,
the Manager shall receive a monthly compensation an amount equal to five
percent of the cost of the fixed assets acquired during a calendar month;
provided, however, the compensation under this Section 6.5.2 shall be payable
only to the extent the Company is reimbursed for such
9 - LLC OPERATING AGREEMENT
<PAGE> 10
compensation by the State of New York under the New York contract. Such
compensation shall be considered a guaranteed payment under Section 707(c) of
the Code for the purpose of determining the profits and losses of the Company.
6.6 Personnel. In the event the Manager desires to retain the
employees of Benova or in the event MCS desires to have the Manager retain the
employees of MCS (the employees of Benova and MCS being the "Personnel") to
provide services to the Company with respect to special projects, including
software modifications and enhancements, business process redesign and
improvement, and other special projects, the Member desiring to have its
Personnel retained shall (1) provide prior written notice to the other Member
describing the special project and demonstrating the need for the special
project and (2) obtain the consent of the other Member for the retention of the
Personnel. The fees charged for such Personnel shall be commensurate with the
fees for the Personnel allocable by Benova or MCS, respectively, in accounting
for special projects. The consideration payable to the Manager pursuant to
Section 6.5 and the distributions to the Members pursuant to Section 4 shall
not be reduced by the amount payable for Personnel pursuant to this Section 6.6.
6.7 Reimbursement. The Manager shall be reimbursed monthly for
those costs and expenses to be borne by the Company that have been paid or
incurred by the Manager on behalf of the Company. However, the Manager shall
not be reimbursed for overhead expenses paid or incurred by the Manager in
connection with the administration of its business or any expenses incurred by
the Manager in conducting its business that is unrelated to the Company.
6.8 Exculpation. The Manager shall not be personally liable for
any debt, obligation or liability of the Company merely by reason of being a
Manager and shall not be liable for any reason to the Company or the Members
for monetary damages for conduct as a Manager, except for (i) acts or omissions
not in good faith which involve intentional misconduct or a knowing violation
of law or (ii) any transaction from which the Manager derives an improper
personal benefit.
6.9 Devotion of Time. The Manager shall devote so much of its time
to the business and internal affairs of the Company as in its judgment is
reasonably required.
SECTION 7. ACCOUNTING MATTERS
- - -----------------------------
7.1 Books of Account. At all times during the existence of the
Company, the Manager shall cause to be kept complete and accurate books of
account that reflect all of the Company's operations and transactions in
accordance with the accrual method of accounting. All of such books of account
shall be available at the principal office of the Company for inspection and the
making of copies by the Members of their representatives at reasonable times.
Such books of account shall be maintained and preserved during the term of the
Company and for four years thereafter.
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<PAGE> 11
7.2 Method of Accounting; Accountants. The Company shall use the
accrual method of accounting for reporting purposes and for income tax
purposes. The Manager shall select the certified public accountant for the
Company.
7.3 Fiscal Year. The fiscal year and taxable year of the Company
shall be the fiscal year ending on June 30.
7.4 Expenses. The Company shall bear all costs and expenses
attributable to the conduct of the business and internal affairs of the Company.
7.5 Income Tax Matters.
7.5.1 Informational Returns. The Manager shall arrange for
the preparation and filing of all necessary informational tax returns for the
Company. The Company shall furnish to each Member within ninety (90) days after
the end of each fiscal year a copy of the informational tax returns of the
Company, including all schedules applicable to the Member.
7.5.2 Tax Elections. The Members intend that the Company
will be taxed as a partnership for federal and state tax purposes. No election
shall be made by any Member to be exclused from the application of the
provisions of Subchapter K of the Code pursuant to Section 761(a) thereof. The
Manager (i) may cause the Company to file an election in accordance with the
applicable Treasury Regulations under Section 754 of the Code to cause the
basis of the Company's assets to be adjusted for federal income tax purposes as
provided by Section 734(b) or 743(b) of the Code and (ii) may revalue the
assets of the Company, adjusting the Capital Accounts accordingly, pursuant to
Treas. Reg. Section 1.704-1(b)(2)(iv)(f).
7.5.3 Tax Matters Member. The Manager shall be the "tax
matters partner" of the Company pursuant to Section 6231(a) of the Code.
7.6. Capital Accounts. The Company shall maintain a capital accunt
(a "Capital Account") for each Member on a cumulative basis. Each Member's
Capital Account shall be terermined in accordance with Treas. Reg. Section
1.704-1(b)(2)(iv), including, but not limited to, the following:
(a) The ammount of cash and the fair market value of assets (net of
liabilities assumed by the Company and liabilities to which the assets are
subject) contributed to the capital of the Company by the Member; plus
(b) The Member's allocable share of any income or gains (including
income or gains exempt from tax) of the Company pursuant to Treas. Reg.
Section 1.704-1(b)(2)(iv)(b)(3); less
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<PAGE> 12
(c) The Member's allocable share of any losses or deductions of the
Company pursuant to Section 3 as adjusted in accordance with Treas. Reg.
Section 1.704-1(b)(2)(iv)(b)(7); less
(d) The amount of cash and the fair market value of assets (net of
liabilities assumed by such Member and liabilities to which the assets are
subject) distributed to such Member; and less
(e) Such Member's allocable share of expenditures of the Company
not deductible in computing its taxable income and not properly chargeable
to capital account pursuant to Section 705(a)(2)(B) of the Code.
Upon a sale, exchange transfer, assignment, gift or other disposition of an
interest in the Company, the Capital Account associated with the interest so
transferred, whether such Capital Account has a positive or negative balance,
shall be transferred to the transferee of such interest.
7.7 Adjustment of Gross Asset Values. The adjusted bases for
federal income tax purposes of assets of the Company or, if applicable, the
values of assets of the Company pursuant to this Section 7, shall be adjusted
to equal the respective gross fair market values of such assets, as determined
by the Manager, as of the following times:
(a) The acquisition of an additional interest in the Company by any
new or existing Member in exchange for more than a de minimis capital
contribution;
(b) The distribution by the Company to a Member, whether
withdrawing or continuing, of more than a de minimis amount of assets of
the Company as consideration for an interest in the Company; and
(c) The termination of the Company for federal income tax purposes
pursuant to Section 708(b)(1)(B) of the Code.
If the value of an asset has been determined or adjusted pursuant to this
Section 7.7, such value thereafter shall be adjusted by the depreciation taken
into account with respect to such asset for purposes of computing the profits
and losses of the Company. If the values of assets of the Company are adjusted
pursuant to this Section 7.7, the Capital Accounts of the Members shall be
adjusted simultaneously to reflect the aggregate net adjustment as if the
Company recognized gain or loss equal to the amount of such aggregate net
adjustment.
7.8 Modification. The provisions of Sections 7.6 and 7.7 and other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Treasury Regulation Section 1.704(b) and shall be
interpreted and applied in a manner consistent with such Treasury Regulation.
In the event the Manager determines, based on the advice of the Company's
accountant, that it is prudent to modify the manner in which Capital Accounts,
or any debits or credits thereto, are computed in order to comply with such
Treasury Regulation,
12 - LLC OPERATING AGREEMENT
<PAGE> 13
the Manager may make such modification, so long as it is not likely to have a
material effect on the amount distributable to any Member pursuant to Section 9
upon the dissolution and winding up of the Company.
7.9 Reserves. The Manager shall from time to time establish,
modify or extinguish reserves for working capital, for capital improvement
requirements and for unknown or unfixed liabilities or contingencies of the
Company.
7.10 Bank Accounts. The bank accounts of the Company shall be
maintained in such banking institutions as the Manager shall determine. All
Company funds shall be deposited in such bank accounts in the Company's name,
and the funds of the Company shall not be commingled with the funds of any
other person. Withdrawals from such bank accounts shall be made only by the
authorization and signature of the Manager or the authorization and signature
of such other persons as the Manager shall designate.
SECTION 8. RESTRICTIONS ON WITHDRAWAL AND TRANSFER
- - --------------------------------------------------
8.1 No Right of Withdrawal. A Member shall not have any right to
withdraw from the Company.
8.2 Restrictions on Transfer. The "Transfer" by a Member of all or
any portion of an interest in the Company, whether now owned or later acquired,
shall not be permitted without the prior written consent of the other Member,
which consent is in such Member's sole discretion and may be arbitrarily
withheld. Any Transfer of all or any portion of an interest in the Company in
violation of this Section 8.2 shall be void and without legal effect. As used
in this Section 8, a Transfer shall mean any sale, exchange, assignment, gift,
pledge, grant of a security interest, transfer by operation of law, sale by
legal process under execution, attachment or foreclosure or any other change of
legal or beneficial ownership (whether voluntary or involuntary). Further, a
Transfer shall include, but not be limited to, an assignment to a corporation,
partnership, limited liability company, trust or other form of entity.
8.3 Securities Law Restrictions. Each Member acknowledges that
interests in the Company have not been registered under the Securities Act of
1933 in reliance upon an exemption from registration and that the resale or
other transfer of an interest in the Company by a Member is restricted by
applicable provisions of the Securities Act of 1933. AN INTEREST IN THE COMPANY
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF BY A MEMBER IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL SATISFACTORY TO THE MANAGER THAT REGISTRATION UNDER THE SECURITIES ACT
OF 1933 IS NOT REQUIRED. Each Member agrees that an interest in the Company may
not be offered for sale, sold, transferred, pledged or otherwise disposed of
unless the interest is registered under the Securities Act of 1933 and
applicable state securities laws or unless an exemption from registration is
otherwise available.
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SECTION 9. TERMINATION
- - ----------------------
9.1 Events of Termination. The Company shall dissolve and its
affairs shall be wound up upon the first to occur of the following events (a
"Termination Event"):
(a) The date set forth in Section 1.4;
(b) The sale, exchange, transfer or other disposition of all of the
assets of the Company;
(c) The filing by a Member of articles of dissolution or their
equivalent or the involuntary dissolution and termination of existence of a
Member;
(d) The Member (i) makes an assignment for the benefit of creditors,
(ii) files a voluntary petition in bankruptcy, (iii) is adjudicated a
bankrupt or insolvent, (iv) files a petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, (v)
files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against the Member in any
proceeding of the foregoing nature or (vi) seeks, consents to, or
acquiesces in the appointment of a trustee, receiver or liquidator of all
or any substantial part of the Member's assets); or
(e) The Company does not have two or more Members.
9.2 Distribution of Company Assets. Upon the occurrence of a
Termination Event under Section 9.1, the Manager shall wind up the affairs of
the Company, shall liquidate the assets of the Company and shall distribute the
assets of the Company as promptly as possible but in an orderly and
businesslike manner so as not to cause undue sacrifice. The Manager, in its
sole discretion, may determine not to sell all or any portion of the assets of
the Company, in which event such assets shall be distributed in kind pursuant
to this Section 9. The proceeds of sale (and all other assets of the Company)
shall be applied and distributed in the following order of priority:
(a) To creditors, including Members who are creditors, to the extent
permitted by law, in satisfaction of liabilities of the Company;
(b) To the setting up of any reserves which the Manager determines
to be reasonably necessary for contingent, unliquidated or unforeseen
debts, liabilities or obligations of the Company or of the Members arising
out of or in connection with the Company. Such reserves, in the discretion
of the Manager, may be paid over to an escrow agent selected by the Manager
to be held by such escrow agent for the purposes of disbursing such
reserves to satisfy the debts, liabilities and obligations of the Company,
and at the expiration of such period as the Manager may reasonably deem
advisable, distributing any remaining balance as provided in subparagraph
(c) below;
14 - LLC OPERATING AGREEMENT
<PAGE> 15
provided, however, that, to the extent that it shall have been
necessary, by reason of applicable law or regulation, to create any
reserves prior to any distribution which would otherwise have been
made under this Section 9.2 and, by reason thereof, a distribution
under subparagraph (a) above has not been made, then any balance
remaining shall first be distributed pursuant to subparagraph (a)
above.
(c) To Members in the amount of the positive balances in
their respective Capital Accounts as determined after taking into
account all Capital Account adjustments through the end of the taxable
year in which the termination occurs. If the amount available for such
distribution to the Members is insufficient, then payment shall be made
pro rata among the Members in the same proportion that the positive
balance in the Capital Account of each Member bears to the aggregate
amount of the positive balances in the Capital Account of all Members.
With respect to the distribution of the assets of the Company to the
Members, Benova, at its sole option, may require the distribution in
kind of the New York Contract to Benova.
9.3 Distribution in Kind. Any assets of the Company distributed
in kind to the Members upon the occurrence of a Termination Event under Section
9.1 shall be treated as though such assets were sold. The difference between the
fair market value of each asset distributed in kind and its book value shall be
treated as gain or loss on the sale of the asset or decrease in the Capital
Accounts of the Members which results from the allocation of such hypothetical
gain or loss shall be reflected in the distributions made to the Members
pursuant to Section 9.2(c).
9.4 No Restoration of Negative Capital Account Balance. If, at
the time of any liquidation and distribution of the assets of the Company in
accordance with Section 9.2, distributions and allocations for all taxable
years, including the taxable year during which the liquidation and distribution
occurs, such Member shall not be required to make a capital contribution to the
Company to restore such deficit balance to zero.
15 - LLC OPERATING AGREEMENT
<PAGE> 16
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, including, without limitation, the making,
performance, or interpretation of this Agreement, shall be settled by
arbitration. Notice of demand for arbitration (the "Notice") shall be provided
in writing to the other party. The arbritation shall be conducted in Portland,
Oregon, in accordance with the then current commercial arbritation rules of the
American Arbritation Association, but shall not be submitted to the American
Arbritation Association. The arbritation shall be held before a single
arbritator mutually selected by the parties. Unless the parties otherwise
agree, the arbitrator shall be an attorney knowledgeable in the field of
business law. If the parties cannot agree on an arbitrator within 30 days of
the giving of the Notice, the selection of the arbritrator shall be made by the
presiding judge of the Multnomah County Circuit Court. The result of the
arbritation shall be binding on the parties.
10.2 Attorney's Fees. If any arbritation, suit or action is filed by
any party to enforce this Agreement or otherwise with respect to the subject
matter of this Agreement, the party prevailing on an issue shall be entitled to
recover with respect to such issue, in addition to costs, reasonable attorney's
fees incurred in preparation or in prosecution or defense of such arbritation,
suit or action as fixed by the arbitrator or trial court, and if any appeal is
taken from the decision of the trial court, reasonable attorneys' fees as fixed
by the appellate court.
10.3 Notices. All notices or communications of any kind which may be
required or permitted to be given to the Company or to any Member under the
terms of this Agreement shall be in writing and shall be served personally or
by mailing a copy by certified or registered mail, postage prepaid with return
receipt requested, to the appropriate party at following address:
To the Company: 1220 SW Morrison Street
Suite 700
Portland, OR 97204
To a Member: at the address of such Member on the records of the
Company.
All notices and communications which are served by mail shall be deemed to be
given at the expiration of the third day after the date of mailing. The address
to which notices or communications shall be delivered or mailed may be changed
from time to time by giving written notice served to the other Members as
provided in this Section 10.3.
10.4 Binding Nature. The provisions of this Agreement shall be
binding upon an inure to the benefit of all the parties of their successors and
assigns (to the extent provided in this Agreement).
16 - LLC OPERATING AGREEMENT
<PAGE> 17
10.5 Counterparts. This Agreement may be executed in several
counterparts each of which shall be deemed an original, and the counterparts
shall together constitute one and the same agreement, notwithstanding that all
of the parties are not signatory to the original or the same counterpart.
10.6 Affiliates. For purposes of this Agreement, an "affiliate" of a
Member shall mean any person that controls, is controlled by or under common
control with such Member.
10.7 Person. for purposes of this Agreement, a "person" shall mean an
individual, corporation, partnership, limited liability company, trust or other
form of entity or association.
10.8 Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement and the application
of such term or provision to persons or circumstances other than those to which
it is held invalid or unenforceable shall not be affected thereby, and each
term or provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10.9 Amendments. Subject to the approval of the Members, this Agreement
may be amended only by an instrument in writing.
10.10 Execution. Each of the parties shall execute, acknowledge and
deliver any instruments necessary to carry out the purposes of this Agreement.
10.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
10.12 Integration. This Agreement and the Statement of Benova/MCS LLC
dated April 26, 1996 contain the entire agreement and understanding of the
parties with respect to the subject matter of this Agreement and supersede all
prior and contemporaneous agreements among them with respect to the subject
matter of this Agreement.
BENOVA, INC. MANAGED CARE SOLUTIONS, INC.
/s/ Colleen A. Cain /s/ Blaine J. Bergson
By:________________________ By: ________________________
Title: President Title: President
<PAGE> 1
EXHIBIT 10.19
First Interstate Bank of Arizona
International Banking Services
100 W. Washington Dept. 806
Phoenix, AZ 85003
THIS CREDIT IS FORWARDED BY AIRMAIL/COURIER
IRREVOCABLE STANDBY LETTER OF CREDIT
DATE OF ISSUE: 03JUN96 CREDIT NUMBER: S500146
DATE AND PLACE OF EXPIRY:
03NOV96 AT OUR COUNTERS
BENEFICIARY: APPLICANT:
COLORADO ACCESS Managed Care Solutions, Inc.
600 S. CHERRY STREET, SUITE 800 2510 W. Dunlap, Suite 100
DENVER, CO 80222 Phoenix, AZ 85021
C/O DAVID WEST
UP TO AN AGGREGATE AMOUNT OF USD ******************250,000.00
TWO HUNDRED FIFTY THOUSAND AND 00/100
DEAR SIRS:
WE HEREBY ISSUE IN YOUR FAVOR THIS STANDBY LETTER OF CREDIT WHICH IS AVAILABLE
BY YOUR DRAFTS AT Sight
DRAWN ON FIRST INTERSTATE BANK
BEARING THE CLAUSE "DRAWN UNDER FIRST INTERSTATE BANK, LETTER OF CREDIT NO.
S500146."
ACCOMPANIED BY THE FOLLOWING DOCUMENT(S):
BENEFICIARY'S STATEMENT PURPORTEDLY SIGNED BY AN OFFICER, INDICATING THE
LETTER OF CREDIT NUMBER AND STATING:
"A) MANAGED CARE SOLUTIONS, INC., IS IN MATERIAL DEFAULT UNDER THIS
AGREEMENT AND HAS NOT CURED SUCH DEFAULT AFTER WRITTEN NOTICE THEREOF."
OR
"B) THAT MANAGED CARE SOLUTIONS, INC., HAS CEASED TO CONTINUE ITS
BUSINESS."
OR
"C) THAT MANAGED CARE SOLUTIONS, INC., HAS INCURRED MORE THAN $60,000.00 IN
PENALTIES IN ANY SIC MONTH PERIOD FOR FAILURE TO MEET THE SPECIFIC PERFORMANCE
STANDARDS SET FORTH IN THE AGREEMENT BETWEEN MANAGED CARE SOLUTIONS, INC., AND
COLORADO ACCESS (THE AGREEMENT) IN SUB PARAGRAPHS 2.8A, 2.8B AND 2.8C"
OR
* CONTINUED ON NEXT PAGE *
<PAGE> 2
CONTINUATION OF L/C REFERENCE S500146
"D) THAT MANAGED CARE SOLUTIONS, INC., HAS MADE AN ERRONEOUS PAYMENT AS
DESCRIBED IN SECTION 3.13 CAUSING A LOSS TO COLORADO ACCESS NOT FULLY RECOVERED
BY THE COLLECTION EFFORTS OF MANAGED CARE SOLUTIONS, INC. AND RECOVERED UNDER
SECTION 3.13 OF THE AGREEMENT."
OR
"E) THAT MANAGED CARE SOLUTIONS, INC., IS UNRESPONSIVE TO CONTINUED NOTICES
OF NON-PERFORMANCE DELIVERED ACCORDING TO THE TERMS OF THE AGREEMENT."
WE HEREBY ENGAGE WITH YOU THAT DRAFTS AND / OR DOCUMENTS DRAWN IN CONFORMITY
WITH THE TERMS OF THIS CREDIT WILL BE DULY HONORED ON PRESENTATION TO: First
Interstate Bank of Arizona International Banking Services 100 W. Washington
Dept. 806 Phoenix, AZ 85003.
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS DOCUMENTARY CREDIT IS SUBJECT
TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION)
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500, ("UCP").
VERY TRULY YOURS,
FIRST INTERSTATE BANK
BY R. D. Clark BY Dan Hunt
---------------------------- ----------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
<PAGE> 1
EXHIBIT 10.20
APPROVED BY THE ATTORNEY GENERAL
STANDARD AGREEMENT CONTRACT NUMBER AM.NO.
96MP031
STD. 2 (REV. 6-96) --------------------------------
CONTRACTORS FEDERAL I.D. NUMBER
36-3338328
--------------------------------
THIS AGREEMENT, made and entered into this 1st day of July, 1996, in the State
of California, by and between State of California, through its duly elected or
appointed, qualified and acting
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
TITLE OF OFFICER ACTING FOR STATE AGENCY
Executive Director Managed Risk Medical Insurance Board, hereafter called the State and
- - ----------------------------------------------------------------------------------------------------------------------
Managed Care Solutions, Inc. , hereafter called the Contractor.
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WITNESSETH: That the Contractor for and in consideration of the covenants,
conditions, agreements and stipulations of the State hereinafter expressed,
does hereby agree to furnish to the State services and materials as follows:
(Set forth service to be rendered by Contractor, amount to be paid Contractor,
time for performance or completion, and attach plans and specifications, if
any.)
This Agreement is made for the purpose of providing targeted outreach services
to women and families about the Access for Infants and Mothers Program,
hereinafter referred to as AIM. This Agreement is entered into pursuant to
Chapter 278, Statutes of 1991 and updated by Chapter 195, Statutes of 1994 (Part
6.3 of Division 2 of Insurance Code)
CONTINUED ON 16 SHEETS, EACH BEARING NAME OF CONTRACTOR AND CONTRACT NUMBER.
- - ------------------------------------------------------------------------------
The provisions on the reverse side hereof constitute a part of this
agreement. IN WITNESS WHEREOF, this agreement has been executed by the parties
hereto, upon the date first above written.
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATE OF CALIFORNIA CONTRACTOR
- - --------------------------------------------------------------------------------------------------
<S> <C>
AGENCY CONTRACTOR (if other than an individual,
state whether a corporation, partnership, etc.)
Managed Risk Medical Insurance Board Managed Care Solutions, Inc.
- - --------------------------------------------------------------------------------------------------
BY (AUTHORIZED SIGNATURE) BY (AUTHORIZED SIGNATURE)
/s/ RICHARD FIGUEROA /s/ MICHAEL TWEEDELL
- - --------------------------------------------------------------------------------------------------
PRINTED NAME OF PERSON SIGNING PRINTED NAME OF PERSON SIGNING
Richard Figueroa Michael Tweedell,
Western Regional Vice President
- - --------------------------------------------------------------------------------------------------
TITLE ADDRESS
Deputy Director 8840 Complex Drive, #300, San Diego, CA 92123
==================================================================================================
<S> <C> <C> <C>
AMOUNT ENCUMBERED BY PROGRAM/CATEGORY (CODE AND TITLE) FUND TITLE DEPARTMENT OF GENERAL
THIS DOCUMENT SERVICES USE ONLY
$619,752 Local Assistance PIF
- - --------------------------------------------------------------------------------------------
PRIOR AMOUNT ENCUMBERED (OPTIONAL USE)
FOR THIS DOCUMENT
- - -------------------------------------------------------------------------------------------- EXEMPT FROM DGS
TOTAL AMOUNT ENCUMBERED ITEM CHAPTER STATUTE FISCAL YEAR APPROVAL PER
TO DATE SECTION 12696,
4280-309-602 199 1996 96/97 INSURANCE CODE
------------------------------------------------------------
OBJECT OF EXPENDITURE (CODE AND TITLE)
$519,752 0100-02200-751
- - ------------------------------------------------------------------------------------------------
I hereby certify upon my own personal T.B.A. NO. B.R. NO.
knowledge that budgeted funds are available
for the period and purpose of the expenditure
stated above.
- - ------------------------------------------------------------------------------------------------
SIGNATURE OF ACCOUNTING OFFICER DATE
/s/ 7/24/96
================================================================================================
CONTRACTOR STATE AGENCY DEPT. OF GEN. SER. CONTROLLER 99 54245
</TABLE>
<PAGE> 2
MRMIB/Managed Care Solutions, Inc. Page 2 of 11
Agreement #96MP031
I. CONTRACTOR RESPONSIBILITIES
A. Outreach Duties
The Contractor agrees to provide direct, targeted outreach
services to potential subscribers of the AIM Program, and to
businesses, service agencies, employee and other organizations
which have contacts with potential subscribers. Specific
services and service goals are contained in Exhibit A, entitled
AIM Outreach Service Components, which is hereby made a part of
this Agreement by this reference.
B. Program Goals
The Contractor shall develop and implement outreach services
using the following primary project goals:
1. Improve knowledge of, and therefore access to, the AIM
Program for potential eligibles, targeted toward areas
with a high percentage of uninsured births.
2. Improve knowledge of the AIM Program among local
organizations and health providers who are in continuing
contact with potentially eligible women and their
families. This may include training key organizations to
assist potential applicants in completing AIM Program
applications.
C. Targeted Areas
The Contractor shall focus outreach activities on those
geographic target areas within its region identified by the
State and the Contractor. The Contractor's region shall consist
of San Diego and Imperial Counties. The Contractor shall review
lists, to be provided by the State, of zip codes with high
incidents of uninsured births, and using the Contractor's own
experience and knowledge, update as needed, its list of target
zip codes. The State retains the right to refocus the target
areas within the Contractor's region, upon written notice to the
Contractor. The Contractor is responsible on an ongoing basis,
for informing the State of other, potential target areas, based
on it's knowledge of the economic and social characteristics of
it's region, to assist the State in better focusing efforts.
D. Outreach Materials
Most printed outreach materials will be developed and provided
by the State. However, any auxiliary materials developed by the
Contractor in order to implement it's outreach plan, and which
contain information on the AIM Program, are subject to prior
review by the State. Such materials shall contain
<PAGE> 3
MRMIB/Managed Care Solutions, Inc. Page 3 of 11
Agreement #96MP031
a statement to the effect that production was funded under a
contract with the State of California.
E. Bilingual Capacity
The Contractor shall utilize staff who are bilingual in English
and Spanish to perform actual outreach activities. The number
of bilingual staff required is set forth in Exhibit A. The
State may require the Contractor to utilize staff with other
language capabilities in order to assure target goals. This
will be implemented through an amendment to this Agreement if
targeting in languages other than English and Spanish results in
increased costs. Contractor shall have the capacity to
translate Contractor developed materials into Spanish, and other
required languages.
F. Progress Reports
The Contract shall provide monthly progress reports to the
State. Progress reports shall quantify and summarize outreach
activities delivered during the prior month progress made toward
developing uncompleted project services and activities and be
accompanied by any supporting materials. The report shall be
expressed in terms of the project objectives set forth in
Exhibit A, in a format to be provided by the State. The State
will be basing it's monthly payments on the timely submission
and completeness of the reports.
G. Final Report
The Contractor shall prepare a final report, after June 30,
1996, which will summarize the Contractor's activities back to
the start of the project, and discuss and evaluate outreach
activities and strategies which worked and did not work. The
report is due one month after the completion of the Contract.
H. Coordination and Cooperation
The Contractor shall cooperate as necessary with contractors
selected in other regions, with Healthcare Alternatives
Corporation, the AIM Program's enrollment contractor, MOB Media,
the AIM Program's print media advertising agency, which is a
subcontractor under this Agreement, and the Department of Health
Service's Baby-Cal media outreach program. Contractor staff
will attend a maximum of three all-contractor meetings, to be
coordinated by the State, to exchange information and ideas.
One will be held at the onset of the project, another will be
held near the halfway point in this Agreement's term and a third
will be held near the close of the Agreement's term. In
addition, the Contractor shall coordinate AIM outreach
activities throughout the development and implementation of
outreach services under this Agreement.
<PAGE> 4
MRMIB/Managed Care Solutions, Inc. Page 4 of 11
Agreement #96MP031
I. Subcontract Liaison
The Contractor shall subcontract with MOB Media of Irvine,
California to provide for print outreach, and shall be
responsible for monitoring the Subcontractor, and reporting on
MOB Medial's progress in the Monthly reports. Specific details
are contained in Exhibit A.
J. Health Insurance
The Contractor shall provide a health insurance benefit to all
staff - both full and part-time, who are engaged in this
project, and funded through this Agreement. Such coverage shall
be consistent with the coverage provided Contractor employees in
ongoing operations.
K. Liaison
The Contractor shall provide a liaison person for the
implementation of this Agreement, who shall also be entitled to
deal with any disputes arising from carrying out the terms and
conditions of this Agreement. The Contractor shall notify the
State of any change of the liaison person in writing.
II. STATE RESPONSIBILITIES
A. Provision of Materials
The State will provide the Contractor with AIM Program
application brochures, AIM information pamphlets, AIM one page
mailers, the camera ready copy of the MOB Media advertising copy
and any other printed statewide outreach materials developed by
the State during the term of this Agreement. The State will
review for approval any printed materials developed by the
Contractor under this Agreement.
B. Training
The State will provide as necessary, training for Contractor
staff on the general scope, rules and eligibility criteria for
the AIM Program, and provide the Contractor with any relevant
changes to the Program during the term of this Agreement.
<PAGE> 5
MRMIB/Managed Care Solutions, Inc. Page 5 of 11
Agreement #96MP031
C. Coordination and Cooperation
The State will assist the Contractor in coordinating activities
with other contractors, and will organize the contractor
coordination meetings.
D. Liaison
The State shall provide a liaison person for the implementation
of this Agreement, who shall also be entitled to deal with any
disputes arising from carrying out the terms and conditions of
this Agreement. The State will notify the Contractor of any
change of the liaison person in writing.
III. TERM OF AGREEMENT
The term of this Agreement shall be from July 1, 1996 through
June 30, 1997.
IV. FISCAL PROVISIONS
A. Maximum Amount
The maximum amount of this Agreement shall not exceed $619,752.
B. Payment Provisions
The contractor shall be paid upon the satisfactory provision of
services, monthly in arrears, for the actual cost of providing
those services during the previous month. Payments shall be in
accordance with Exhibit B, entitled Project Budget, which is
hereby incorporated by reference. The Budget is divided into
three major categories -- Personnel Services, Subcontracting and
Support Services. The contractor may make changes as necessary
to implement the Agreement, within each major category. However,
shifting of funds from one category to another shall require
prior State approval in writing.
C. Invoice Format
The Contractor shall submit signed invoices on a monthly basis,
on a format to be specified by the State. The invoices shall
detail the actual expenses for the month, in accordance with
Exhibit B, and identify the contract number. Invoices shall
accompany the monthly progress report, and shall be sent to the
following address:
Managed Risk Medical Insurance Board
818 K Street, Suite 200
Sacramento, CA 95814
<PAGE> 6
MRMIB/Managed Care Solutions, Inc. Page 6 of 11
Agreement #96MP031
D. Per Diem and Travel Expenses
Any per diem, mileage and/or travel expenses allowable under
this Agreement shall be paid at rates which do not exceed the
rates allowed for non-represented employees of the Managed Risk
Medical Insurance Board. The State will notify the Contractor
of these rates and of any changes to the rates.
E. Prior To Fiscal Year
It is mutually agreed between the parties that this Agreement
may have been signed before ascertaining the availability of
funds for the 1996/97 State Fiscal Year. This Agreement is
valid and enforceable only if sufficient funds are made
available through the State Budget for the purposes of this
program. This Agreement is subject to any additional
restrictions, limitations, or conditions enacted in statute by
the State Legislature which may affect the provision, terms or
funding of this Agreement in any manner. It is mutually agreed
that if the State Legislature does not appropriate sufficient
funds for this program, the Agreement shall be amended to
reflect any reduction in funds and enrollment shall be curtailed
by the State proportionately.
F. Quality and Financial Audits
1. The Contractor shall maintain for three (3) years after
final payment of this Agreement adequate books, accounts
and records, and prepare all financial statements in
accordance with Generally Accepted Accounting Principles
unless otherwise noted in such information, and in
compliance with the regulations of any governmental or
regulatory authority having jurisdiction over the
Contractor, and permit employees or agents of the State
at such reasonable times to inspect Contractor's
facilities, and to examine, audit and make copies and
memoranda of Contractor's books, accounts and records
relating to this Agreement.
2. The Contractor shall submit to the State a copy of it's
most recent annual Certified Public Accountant (CPA)
report. The CPA report shall be submitted to the state
within thirty (30) calendar days of it's receipt by the
Contractor.
3. The State may make periodic audits, at it's expense,
regarding the quantity and quality of services rendered
under this Agreement, and the Contractor's fiscal
management. The State may also audit and examine
records and accounts which pertain directly or
indirectly to the Contractor (including any parent
organization). The Contractor shall
<PAGE> 7
MRMIB/Managed Care Solutions, Inc. Page 7 of 11
Agreement #96MP031
cooperate with such auditors; however, such audit shall
not interfere with the administration of the Contractor.
4. Audit review may be undertaken directly by the State, or
by the Office of the State Auditor, or by third parties
engaged by the State, including accountants, consultants
and physicians. The Contractor shall cooperate fully
with the State or any such third party in connection
with such audit review.
5. Any third party auditor shall not be involved in or be
subsidiary to a business engaged in activities
competitive to Contractor. The State and the State's
auditor shall maintain the confidentiality of trade
secret or proprietary information that may be disclosed
or uncovered during the course of an audit.
6. Contractor shall have the opportunity, prior to the
release of the audit report, to review the draft and to
include in the report it's responses to issues raised by
the report.
V. GENERAL PROVISIONS
A. Contract Modification
This Agreement may be amended by mutual consent of both parties
in writing.
B. Contract Termination
1. This Agreement may be terminated by either party upon
thirty (30) days' written notice to the other party.
2. In addition to the State's right to terminate for
convenience, the State may also terminate this
Agreement, in whole or in part, should the Contractor
default in performance and fail to rectify such default
within a period of thirty (30) days after receipt from
the State of a written notice specifying the nature of
such default.
3. The AIM Program has a capped appropriation, and
therefore, a capped enrollment. If the State determines
that AIM enrollment has reached its cap, the State has
the discretion, upon fifteen days written notice, to
either terminate or suspend this Agreement. During the
suspension, the Contractor is under no obligation to do
AIM outreach, and the State is under no obligation to
pay, except for valid costs incurred prior to the
suspension. The State shall lift the suspension if
enrollment is reopened and the State determines the need
for additional outreach.
<PAGE> 8
MRMIB/Managed Care Solutions Inc. Page 8 of 11
Agreement #96MP031
C. Public Assistance Hiring Preference
If the maximum amount of this Agreement exceeds $200,000, the
Contractor shall give priority consideration in filling
vacancies for positions funded by this contract to recipients of
California public assistance programs, in accordance with the
criteria and exemption set forth in Section 10353 of the Public
Contract Code, and Sections 11200 and 11349 of the Welfare and
Institutions Code.
D. Non-Discrimination Compliance
1. The Contractor's signature affixed hereon shall
constitute a certification under penalty of perjury
under the laws of the State of California that the
Contractor has, unless exempted, complied with
nondiscrimination program requirements of Government
Code Section 12990 (a-f) and Title 2, California
Administrative Code, Section 8103.
2. The Non-Discrimination Clause (STD 17A) is attached as
Exhibit C and made a part of this Agreement by this
reference.
E. National Labor Relations Board Certification
It is understood that the Contractor swears under penalty of
perjury that no more than one final unappealable finding of
contempt of court by a federal court has been issued against the
Contractor within the immediately preceding two-year period
because of the Contractor's failure to comply with an order of a
federal court requiring the Contractor to comply with an order
of the National Labor Relations Board.
F. Drug Free Workplace
By signing this Agreement, the Contractor hereby certifies under
penalty of perjury under the laws of the State of California
that the Contractor will comply with the requirements of the
Drug-Free Workplace Act of 1990 (Government Code Section 8350 et
seq.) and will provide a drug free workplace by taking the
following actions:
(1) Publish a statement notifying employees that unlawful
manufacture, distribution, dispensation, possession, or
use of a controlled substance is prohibited and
specifying actions to be taken against employees for
violations.
(2) Establish a Drug-Free Awareness program to inform
employees about:
a. The dangers of drug abuse in the workplace;
<PAGE> 9
MRMIB/Managed Care Solutions Inc. Page 9 of 11
Agreement #96MP031
b. The organization's policy of maintaining a
drug-free workplace;
c. Any available counseling, rehabilitation, and
employee assistance programs; and,
d. Penalties that may be imposed upon employees
for drug abuse violations.
(3) Every employee who works on the proposed contract will:
a. Receive a copy of the company's drug-free
workplace policy statement; and,
b. Agree to abide by the terms of the company's
statement as a condition of employment on the
contract.
G. Confidentiality
The Contractor shall protect the confidentiality of any income
or medical information made known to the Contractor, by any
potential program applicants met in the course of the project.
H. Copyright Protection
Contractor agrees to grant to the State a royalty-free,
nonexclusive and irrevocable license to publish, translate,
reproduce, deliver, perform, dispose of and to authorize others
to do so, all data, electronic data processing software, and all
program forms and public informational materials, which are
covered by copyright and were specifically developed by the
Contractor for the implementation of this Agreement and funded
by the State. Such license shall be effective only to the extent
that the Contractor has the right to grant such license without
becoming liable to pay compensation to others because of such
grant.
I. Contractor Federal Employer/Contractor ID Number
The Contractor is hereby notified of its responsibility to use
the assigned Contractor Federal Identification Number contained
on the front page of the Agreement on each subsequent contract
entered into with the State of California.
<PAGE> 10
MRMIB/Managed Care Solutions Inc. Page 10 of 11
Agreement #96MP031
J. Subcontracts
The Contractor shall obtain prior written approval from the
State before subcontracting any of the services delivered under
this Agreement, which is not already part of the Agreement. Any
subcontracting will be subject to all applicable provisions of
this contract, and all applicable State and Federal regulations.
The Contractor shall be held responsible by the State for the
performance of any subcontractor.
K. Inventory of Equipment
The State reserves title to all equipment of any kind purchased
from, advanced, or reimbursed by, funds from the State, and not
fully consumed in the performance of this Agreement. Inventory
and disposition of such equipment is subject to the provisions
of this paragraph, as well as paragraphs 1, 2, and 3 below:
1. The Contractor shall, at the request of the State,
submit an inventory of equipment purchased under this
Agreement.
2. At the termination of this Agreement, the Contractor
shall provide a final inventory to the State and shall,
at that time, query the State as to the State's
requirements for returning said equipment. Final
disposition of such equipment shall be at State expense
and in accordance with State instructions issued
immediately after the receipt of the final inventory.
3. Before equipment purchases made by the Contractor are
reimbursed by the State, the Contractor must submit
copies of paid vendor receipts, identifying the purchase
price, a description of the item, the serial number,
model number and location of the equipment during the
contract term. These receipts shall be attached to the
Contractor's invoice for the month in which the
equipment was purchased.
L. Minority/Women/Disabled Veterans Business Enterprises
The Contractor is encouraged to identify and certify the use of
minority and/or women owned business enterprises and disabled
veteran business enterprises as subcontractors and/or suppliers
by the Contractor in accordance with Section 10115 et seq. of
the Public Contract Code. Copies of all such subcontracts
relevant to this Agreement must be made available to the State
by the Contractor upon a request by an authorized representative
of the State. The Contractor understands that the State or its
delegate will have the right to review, obtain and copy all
records pertaining to performances of the contract, concerning
the compliance with the Public Contract Code 10115, et seq.
Contractor further agrees to maintain such records for a period
of three (3) years after final
<PAGE> 11
MRMIB/Managed Care Solutions Inc. Page 11 of 11
Agreement #96MP031
payment under the contract. The Contractor agrees to provide
the State with any relevant information requested and shall
permit the State access to its premises upon reasonable notice
during normal business hours for the purposes of interviewing
employees and inspecting and copying such books, records,
accounts, and other material that may be relevant to such
compliance.
M. Americans With Disabilities Act
By signing this contract, the Contractor assures the State that
it complies with the Americans with Disabilities Act (ADA) of
1990, (42 U.S.C. 12101 et seq.), applicable regulations and
guidelines issued pursuant to the ADA.
N. Reverse Side
The reverse of STD 2, Standard Agreement, is hereby incorporated
by this reference.
<PAGE> 12
MRMIB/Managed Care Solutions Inc. Exhibit A
Agreement #96MP031 Page 1 of 4
AIM OUTREACH SERVICE COMPONENTS
A. Zip Code Targets
Maintain and update the list of target zip codes, major shifts in the
list are to be reviewed and approved by the State.
B. Spanish Speaking Capability
Utilize at least one Spanish/English speaking outreach worker, of the
two budgeted for the project.
C. Recontracts of Previous Sites
Re-contract, educate, and provide updated materials to all organizations
contracted during the first three phases of AIM outreach. The following
is a brief summary of each phase.
Phase One (July 1996 through October 1996) included: health care
providers (clinics, public health centers, pregnancy, testing centers,
hospitals, chiropractors, immunization programs, perinatal providers,
EWIC, pediatric and obstetric nurses), Medi-Cal eligibility workers, PCN
outreach workers, public health nurses and community representatives,
media, daycare centers in target zip codes, small businesses (yogurt
shops, Baltimore Bagels, infant and maternity resale stores), government
offices (city & county libraries, EDD), schools and universities (head
start, community colleges, SDSU and UCSD, vocational schools, city
schools).
Phase Two (November 1996 through February 1997) included: community
agencies (churches, child care centers, women's resource centers,
800-number hotlines, pediatric and CHDP providers, PCN providers,
substance abuse programs, smoking cessation programs, migrant education
programs, adult education, non-profit human/health agencies), government
agencies (INS, city and county recreation centers, DMV), small
businesses and employer groups (chambers of commerce, business
improvement districts, personnel/human resource associations, temporary
agencies, chiropractors, hair and nail salons, restaurants, retail
stores, children's stores, large franchises and corporations, employment
training programs), media, specialized outreach (Latinos,
African-Americans, Asians).
Phase Three (March 1997 through June 1997) included: business and
employer groups (pharmacies, grocery, retail, restaurants, hotels,
caterers, resorts, theme parks, airlines, travel agents, port authority,
business/trade associations, women-owned businesses, infant/maternity
occupations, insurance agents), community agencies (Lamaze/parenting
classes, adoption agencies, police departments, city newsletters, update
city/county recreation centers and libraries, update DSS Medi-Cal
workers), schools (PTA, update daycare centers, college health centers,
newspapers, and specified college classes), health care providers
(update community clinics, public health centers, pregnancy testing
centers, hospitals, immunization programs, perinatal and
<PAGE> 13
MRMIB/Managed Care Solutions, Inc. Exhibit A
Agreement #96MP031 Page 2 of 4
pediatric providers/nurses), specialized outreach (minority owned
businesses and professional groups).
D. Computer Activities
Enhance computer activities for more effective outreach.
1. Create a computer database which encompasses all organizations
contacted during the first three phases of AIM outreach for
re-contact information, record keeping, tracking, etc.
2. Utilize the Internet for computerized outreach to businesses,
community organizations, and the media.
E. Aim Training Workshops
Develop and implement a series of AIM training workshops, modeled after
workshops presented by California Health Collaborative, for the
following groups: local health care providers, chiropractors, workshops
held to blanket San Diego and Imperial Counties (Imperial, South Bay,
North County, and San Diego med-city area). Additional workshops will
be planned if an appropriate level of need/interest is recognized. The
goals of the workshops are: to encourage targeted/invited groups to
promote Aim to their clients/patients; to provide education and a forum
for answering questions regarding the program; to demonstrate how to
determine AIM eligibility, and to demonstrate how to assist clients
completing the AIM application.
F. Focused Training
Conduct a formal education campaign for AIM providers, contracted
health plans, and potential AIM enrollees.
1. AIM Providers: Develop a provider booklet/manual which outlines
the AIM program in detail. Indicate the proper procedure for
assisting patients/potential enrollees with the AIM application
and stress the importance of making appropriate selections
(healthplan, provider) to insure they can continue to see that
patient. Stress that AIM is not Medi-Cal and encourage them to
make sure their office staff is aware and informing callers
that they are AIM providers. Extend invitations to the
physicians and office staff to attend a local AIM workshop and
provide a phone listing of contracts for questions or problems.
2. AIM Enrollees: Develop an enroller booklet/manual for new AIM
enrollees which outlines the AIM program, how to make
selections, and how managed care works (defining the terms HMO,
PCP, etc. explaining such things as the referral process to a
specialist, the difference between health plan and medical
group, etc.) in addition, a listing of participating medical
groups, including phone numbers and locations, will be
provided. This booklet will be sent to the potentially
eligible woman with her application and will allow her to make
more informed choices.
3. Contracted Health Plans: Contact the local representatives of
the contracted AIM health plans for San Diego and Imperial
Counties. Offer to conduct a formal
<PAGE> 14
MRMIB/Managed Care Solutions, Inc. Exhibit A
Agreement #96MP031 Page 3 of 4
presentation to educate their staff about the AIM Program and
the application assistance fee. Invite representatives to the
AIM training workshops and develop a detailed list of AIM
provides. Note: If a change of health plan occurs, education
regarding the new health plans, providers, and facilities will
be a primary component of outreach efforts.
G. Professional Associations
Increase outreach to professional associations with special emphasis on
insurance agents and human resource managers. Seek out appropriate
professional conventions and networking opportunities for attendance and
participation by AIM outreach workers. Invite the above groups to attend
an AIM workshop to increase their understanding of the program and to
further encourage them to promote the program to their clients and
staff.
H. Business
Continue outreach to businesses with a special focus on the retail
industry. Contact mall management companies to disseminate AIM
information to store managers. Contact and work with the local company
that organized traveling health fairs (providing health screenings,
education, resources, etc.) and arrange for AIM to be included in lunch
hour events at local business sites.
I. Community Events
Continue to seek out appropriate community events to assist in the
promotion of the AIM Program in San Diego and Imperial Counties. Some
examples would be: health fairs, children's events, community street
fairs/festivals, networking receptions, appropriate conventions (human
resource, insurance, women's issues etc.).
J. Direct Media
Continue an extensive AIM media campaign in San Diego and Imperial
Counties. This would include the following:
1. Re-contact all television stations with a proposed AIM news
story using the contract renewal or change in health plan (if
appropriate), as a new angle. In addition, ask that the
previously submitted PSA be kept in rotation since the contract
has been extended.
2. Develop a new series of radio public service announcements to be
submitted every six weeks to all stations in San Diego and
Imperial Counties.
3. Develop and submit a press release to all newspapers in San
Diego and Imperial Counties. Capitalize on the contract renewal,
change in health plan (if appropriate), and satisfaction survey
as new angles for a story.
4. Research other forms of media advertising and submit proposals
to the State for approval to implement. Some ideas include: on
screen movie theater ads, AIM advertisement on Cloud 9 Shuttle
(commuter vans), AIM advertisements in Coaster station and/or on
the San Diego commuter train.
<PAGE> 15
MRMIB/Managed Care Solutions Inc. Exhibit A
Agreement #96MP031 Page 4 of 4
5. Continue to contact organizations to encourage/request including
AIM information and/or articles in their newsletter.
6. Develop custom AIM materials and advertisements as appropriate.
K. Statewide Media Coordination
1. Purchase, as directed by the State, statewide print media
through MOB Media, Incorporated.
2. Purchase a statewide computer generated super market/drug store
computer generated check out coupon system, through MOB Media.
3. The State will coordinate the scheduling of runs with the
subcontractor.
L. Outcomes Collection
Collect contact and outcome data from the Contractor's own project and
from the State to be used for ongoing evaluation on the project's
strategies and the monthly report.
<PAGE> 16
MRMIB/Managed Care Solutions Inc. Exhibit B
Agreement #96MP031 Page 1
AIM OUTREACH PROJECT BUDGET
REGION 1
JULY 1, 1996-JUNE 30, 1997
A. PERSONNEL COSTS
FTE Annual Salary Salary/Benefits
Project Supervisor 0.15 63,000 9,450
Outreach Workers 2 35,500 71,000
Admin Support 0.1 31,500 3,150
Total Salaries 83,600
Benefits and Employer Taxes (@24.5% of Salaries) 20,482
Total Personnel Costs 104,082
B. SUBCONTRACTOR COSTS
MOB Media Print and Coupon
Campaigns, Development and Buys: 454,752
C. SUPPORT COSTS
1. Travel:
Mileage (1,000 miles per month @ .30 cents per mile 3,600
Lodging and Per Diem 1,000
2. Telephone Service 2,400
3. Supplies 2,718
4. Computer Upgrades
Software 900
Hardware Upgrade 800
5. Postage 3,000
6. Photocopying & Printing 1,000
7. Supplies (for Outreach Workshops, etc.) 2,500
8. Promotional Items 3,600
9. Paid Media Advertising 2,500
10. Exhibitor/Conference Fees 1,600
11. Prorated Office Space 6,900
(500 sq ft @ $1.15/sq ft)
12. Professional Associations 400
13. Professional Development 500
14. MCS, Inc. Indirect & Overhead 27,500
Total Support Costs $60,918
-------
TOTAL PROJECT BUDGET $619,752
<PAGE> 17
MRMIB/Managed Care Solutions, Inc. Attachment C
Agreement #96MP031
NONDISCRIMINATION CLAUSE
(OCP - 1)
1. During the performance of this contract, contractor and its
subcontractors shall not unlawfully discriminate, harass or allow
harassment, against any employee or applicant for employment because of
sex, race, color, ancestry, religious creed, national origin, physical
disability (including HIV and AIDS), mental disability, medical
condition (cancer), age (over 40), marital status, and denial of family
care leave. Contractors and subcontractors shall insure that the
evaluation and treatment of their employees and applicants for
employment are free of such discrimination and harassment. Contractors
and subcontractors shall comply with the provisions of the Fair
Employment and Housing Act (Government Code, Section 12900 et seq.) and
the applicable regulations promulgated thereunder (California
Administrative Code, Title 2, Section 7285.0 et seq.). The applicable
regulations of the Fair Employment and Housing Commission Implementing
Government Code, Section 12990, (a-f), set forth in Chapter 5 of
Division 4 of Title 2 of the California Code of Regulations are
incorporated into this contract by reference and made a part hereof as
if set forth in full. Contractor and its subcontractors shall give
written notice of their obligations under this clause to labor
organizations with which they have a collective bargaining or other
agreement.
2. This contractor shall include the nondiscrimination and compliance
provisions of this clause in all subcontractors to perform work under
the contract.
<PAGE> 1
EXHIBIT 10.21
CONSULTING AGREEMENT
This Agreement is effective this 1st day of March, 1996, by and
between Managed Care Solutions, Inc. (hereinafter "MCS"), an Delaware
corporation, and Cornerstone Health Management Company (hereinafter "CHM"), a
Delaware corporation.
RECITALS
Whereas, MCS has developed an ancillary services product,
including but not limited to, training and management techniques, specifically
prepared management and training materials, documents and computer software
(hereinafter "MCS Ancillary Services Product") that can be used to establish an
ancillary services system. Such ancillary services system will effectively allow
hospitals to efficiently and cost effectively provide ancillary services,
including but not limited to, occupational therapy, speech therapy, physical
therapy, respiratory therapy, diagnostic imaging, laboratory and pharmacy
services to nursing homes and extended care facilities (hereinafter "ECFs").
Whereas, CHM has a desire to develop an ancillary services
product, and the techniques and materials in order for CHM to establish
agreements with hospitals that will improve such hospitals ability to provide
ancillary services to ECFs.
Whereas, CHM desires to enter the business of comprehensive
ancillary services management by using MCS's consulting services that will
provide CHM access to the MCS Ancillary Services Product.
Whereas, MCS is willing to provide consulting services to CHM
and to provide CHM access to the MCS Ancillary Services Product pursuant to the
terms of this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth
herein, the parties do hereby agree as follows:
1. Scope of Services Provided by MCS.
---------------------------------
CHM hereby contracts with MCS to perform the services and
provide the MCS Ancillary Services Product, set forth in Exhibit A attached
hereto, in a timely manner, in accordance with the terms and conditions set
forth in this Agreement. CHM acknowledges that the proprietary billing and
reporting computer software that CHM will be allowed to use will not be
delivered by MCS until after March 15, 1996.
2. Payment.
-------
CHM agrees to pay MCS as follows:
<PAGE> 2
A. Payment Upon Execution.
----------------------
CHM shall pay MCS Two Hundred and Twenty-five Thousand
Dollars ($225,000.00) by wire transfer on March 1, 1996.
B. Payment of Additional Fee.
-------------------------
An additional fee of Two Hundred Thousand Dollars
($200,000.00) shall be pay by CHM to MCS as follows:
1) $10,000 shall be due and payable immediately
upon the execution by CHM of its first ten (10) hospital
management agreements whereby CHM will be providing
management services to hospitals in order for hospitals
to implement an ancillary services program with ECFs
(hereinafter the "CHM Hospital Management Agreements").
A total of $100,000 shall be paid pursuant to this
subparagraph 1;
2) After CHM executes each of its first ten (10)
CHM Hospital Management Agreements with a hospital
(hereinafter "Participating Hospital"), $5,000 shall be
due and payable when each Participating Hospital
thereafter enters its first agreement to provide
ancillary services to an ECF. A total of $50,000 shall
be paid by CHM to MCS pursuant to this subparagraph 2;
3) At the time a Participating Hospital first
generates $500,000 of gross revenue from its ancillary
services provided to ECFs over a consecutive twelve
month period, $5,000 shall be due and payable by CHM to
MCS. A total of $50,000 shall be paid by CHM to MCS
pursuant to this subparagraph 3;
4) Payment to MCS is due within fifteen (15) days
after each condition is satisfied in subparagraphs 1-3
above.
5) Notwithstanding anything herein to the contrary,
if this Agreement terminates or is terminated for any
reason other than due to a breach by MCS prior to the
full payment of the $200,000 additional fee, the balance
of the $200,000 owing at the time of such termination
shall be payable to MCS on the effective date of such
termination. In the event that this Agreement terminates
or is terminated due to a breach by MCS, the balance of
the $200,000 owing at the time of such termination shall
not be payable to MCS.
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<PAGE> 3
C. Revenue Sharing From CHM Hospital Management Agreements.
-------------------------------------------------------
As CHM enters agreements with hospitals to manage the
hospitals ancillary services performed for ECFs, and as
MCS provides consulting services pursuant to the terms
of this Agreement for such CHM Hospital Management
Agreements, MCS and CHM agree that the gross revenue
generated from such CHM Hospital Management Agreement
for ancillary services shall be divided and distributed
as follows:
1) For the first year following the execution of
this Agreement:
65% to CHM
35% to MCS
2) For the second year following the execution of
this Agreement:
75% to CHM
25% to MCS
3) For the third year following the execution of
this Agreement:
80% to CHM
20% to MCS
"Gross revenues" from the CHM Hospital Management
Agreements shall be defined as the aggregate amount of
monies paid by a hospital under a CHM Hospital
Management Agreement, executed during the term of this
Agreement, without any reduction due to expenses, costs,
or liabilities associated with such CHM Hospital
Management Agreements. MCS and CHM shall continue to
share the gross revenue generated from all CHM Hospital
Management Agreements executed during the term of this
Agreement for a period ending three years after the date
of this Agreement, notwithstanding that the term of a
CHM Hospital Management Agreement may extend beyond the
term of this Agreement or that this Agreement has been
terminated prior to the expiration of such three year
period.
3. Term of Agreement.
-----------------
Subject to Paragraph 11, this Agreement shall become effective
upon the date executed by the parties and shall continue in effect for fifteen
years or until otherwise terminated in accordance with this Agreement.
3
<PAGE> 4
4. Location of Service Rendered
MCS agrees to send and provide adequate personnel to any location
that is reasonably necessary to perform the consulting, management and
training services set forth in Paragraph 1 above. MCS's personnel shall be
available for consultation during the hours normally worked by CHM's employees
unless otherwise agreed between the parties and in special circumstances, MCS's
personnel shall also be available to CHM during evening meeting hours and other
reasonable times, when reasonably requested by CHM.
5. CHM Liaison.
CHM agrees to assign a CHM employee to act as a liaison to MCS
throughout the term of this Agreement. In addition, personnel required pursuant
to any CHM Hospital Management Agreement in order to properly administer the
billing process for the hospitals will be the responsibility of CHM. Other CHM
employees will be assigned responsibilities, as deemed appropriate by both
parties, in order to fulfill the terms of this Agreement and to properly
perform services under each CHM Hospital Management Agreement. CHM shall bear
the cost associated with providing adequate personnel necessary to properly
perform services under the various CHM Hospital Management Agreements.
6. Agreement Not to Compete.
A. Limitations On Where MCS Can Compete.
During the term of this Agreement, MCS agrees not to compete
with CHM by performing any of the services or providing the
products described in Paragraph 1 on its own behalf, or for
any other person or entity, within a 25 mile radius of any
hospital that CHM has an existing management agreement at the
time this Agreement is executed or within a 25 mile radius of
any hospital with whom CHM enters into a CHM Hospital
Management Agreement during the term of this Agreement. A list
of the hospitals with which CHM already has a management
agreement, and the addresses of those hospitals, is attached
hereto as Exhibit B. Notwithstanding anything herein to the
contrary, MCS is not restricted from entering agreements
with other entities in competition with CHM is the following
geographical areas:
1) New Orleans, Louisiana
2) Denver, Colorado
3) Denton, Texas
4
<PAGE> 5
4) San Antonio, Texas
5) Salt Lake City, Utah
6) Columbus, Mississippi
B. Confidential Information
Each party acknowledges that in the course of its relationship with the
other party as set forth hereunder, it will be come acquainted with
confidential information belonging to the other party. Each party
acknowledges that such information constitutes valuable, special and
unique property of the other party. this information relates to the
methods of each party's operations, management techniques, training
techniques and information, computer software programs, information
regarding analysis of productivity, information regarding reimbursement
by Medicare and other methodology related to the implementation of
hospital management agreements which allow hospitals to effectively
provide ancillary services to ECFs. Each party agrees that it will not,
nor will any of its employees, agents, officers, directors or any other
entity with which it has an affiliation, without the written consent
of the other party, disclose or make any use of such confidential
information except as may be required in the course of performing
the terms of this Agreement. In the event of a breach or a threatened
breach by a party of the provisions of this subparagraph, the other
party shall be entitled to an injunction retraining the breaching
party from disclosing, or using, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting a
non-breaching party from pursuing any other remedies available to it
due to such breach or threatened breach by the other party, including
the recovery of damages. The covenants set forth in this subparagraph
B shall be construed as agreements independent of other provisions of
this Agreement. Notwithstanding anything herein to the contrary,
upon the termination of this agreement, if CHM has not defaulted in
any of its obligations set forth in this Agreement, CHM shall have the
unrestricted license to use any techniques, materials, and/or documents
provided to CHM and set forth on Exhibit A. However, these rights
granted CHM upon termination of this Agreement are not exclusive to CHM.
The license granted in this subparagraph B does not apply to any
computer software programs (see subparagraph E below).
C. Restrictions on CHM.
All CHM Hospital Management Agreements entered by CHM during the
5
<PAGE> 6
term of this Agreement shall be effected by this Agreement. CHM shall
not make any such agreements with hospitals during the term of this
Agreement that do not allow payment to MCS pursuant to the terms of
Paragraph 2(C) above. Notwithstanding anything herein to the contrary,
1) if CHM does not already have a CHM Hospital Management Agreements
with a particular hospital, or 2) if there have been no negotiations
between CHM and a hospital for purposes of entering a CHM Hospital
Management Agreement, or 3) if there is no intention of CHM
negotiating or entering a CHM Hospital Management Agreement with a
particular hospital within the next twelve (12) months, then CHM is
free to negotiate an agreement with a particular hospital wherein
CHM would manage only respiratory therapy ancillary services for that
hospital. If one or more of these three conditions is satisfied,
then revenues generated from the management of such respiratory therapy
ancillary services are not subject to Paragraph
2(c) above.
D. Other Agreements Made By MCS.
Notwithstanding anything herein to the contrary, except for the
restrictions set forth in subparagraph 6(A) above, MCS is not prohibited
nor restricted in any way from entering an agreement with other persons
or entities to perform the same or similar services and to provide the
same or similar information as that which is set forth in Paragraph 1
above.
E. Computer Software License.
Upon the termination of this Agreement, if CHM has not defaulted in
any of its obligations set forth in this Agreement, CHM shall have
the right to acquire a non-exclusive license to use the computer
software included in the MCS Ancilary Services Product. The computer
license will be terminable by CHM upon sixty (60) days prior written
notice and available to CHM for a price to be paid by CHM to MCS in
an amount not to exceed $2,500 per hospital with whom CHM has a CHM
Hospital Management Agreement, per year. If CHM desires to acquire
such a license, CHM will also be required to execute a computer
software license agreement with MCS at that time. Included in such
software license will be the obligation of MCS to update and maintain
the software at no aditional charge to CHM.
7. Relationship.
The relationship between the parties hereto should not in any way be
construed as a partnership or a joint venture. Neither party shall be liable
for the actions, debts or expenses of the other unless specifically set forth
herein. CHM has contracted with MCS for MCS to solely
6
<PAGE> 7
provide the consulting services as set forth in Paragraph 1, providing CHM with
the expertise, management and training skills necessary for CHM to effectively
implement and perform ancillary services management agreements with various
hospitals wherein CHM will provide management to various hospitals.
8. Costs.
Each party agrees that it will bear its own costs and expenses related
to the performance of its respective duties and the performance of the terms as
set forth in this Agreement.
9. Prohibition Against Self-Referral.
CHM understands and agrees that it may not direct or otherwise unduly
influence the flow or referral of patients to facilities that would violate any
provisions of the law, such as prohibitions against self-referral under the
federal Medicare and Medicaid programs. CHM understands, agrees and will ensure
that patients be given full and free choice of facilities, and that because
CHM and a facility have an agreement for the provision of ancillary services
does not mean or imply that such facility will receive in any way a guaranteed
flow of patient referrals from CHM.
10. Indemnity.
CHM agrees to indemnify, protect and save MCS, its officers, directors,
employees and agents, harmless from and against all claims, actions, and suits,
whether groundless or otherwise, from and against any and all liabilities,
losses, damages, judgments, costs, penalties, taxes, assessments, charges,
attorneys fees and other expenses of every nature and character which MCS
suffers or incurs or to which it may be subject or for which it may be liable
as a result of (a) CHM or any hospital with which CHM has contracted,
performing ancillary services, including but not limited to, occupational
therapy, speech therapy, physical therapy, respiratory therapy, laboratory
services and/or pharmacy services except in those incidences where such claims,
actions and/or suits are caused by the negligence or willful misconduct of MCS
or by the malfunction or defectiveness of any CMS Ancillary Services Product,
or (b) CHM violating any directors, employees and agents, harmless from and
against any and all liabilities, losses, damages, judgements, costs, penalties,
taxes, assessments, charges, attorneys fees and other expenses of every nature
and character which CHM suffers or incurs or to which it may be subject or for
which it may be liable as a result of (a) the negligence or willful misconduct
of MCS or the malfunction or defectiveness of MCS Ancillary Services Product,
or (b) violating any of the terms of this Agreement.
7
<PAGE> 8
11. Termination.
Either party may elect to terminate this Agreement at any time the
other party materially breaches this Agreement by providing thirty days
written notice to the breaching party. If the breaching party cures its breach
during that thirty day period of time, the Agreement shall remain in effect
through the remaining term of the Agreement. In addition, either party may
terminate this Agreement at any time after the third anniversary date hereof,
without cause, by giving the other party sixty (60) days prior written notice.
Subject to Paragraph 6E, upon termination of this Agreement by either party,
prior to the expiration of the fifteen year term of this Agreement (hereinafter
"Premature Termination"), any books, records, files, forms, reports, accounts,
management procedure manuals, training procedure manuals, computer software
programs or any other documentation provided by MCS to CHM (in this paragraph
these items shall collectively be referred to as "documents") shall be
immediately returned by CHM to MCS. Upon Premature Termination of the
Agreement, CHM shall have no further right to use any such documents, and/or
the MCS Ancillary Services Product, regardless of the party responsible for the
breach or alleged breach, other than as provided in Paragraph 6E above.
12. Disclaimer Of Revenue Projections.
CHM is not relying upon any business plan or projections done by MCS, or
any other verbal or written representations and/or warranties regarding the
potential for income that can be earned by CHM, using the MCS Ancillary Service
Product.
13. Applicable Law.
The Agreement shall be subject to and governed by the laws of the State
of Texas, regardless of the fact that one or more of the parties now is or may
become a resident of a different state.
14. Counterparts.
The Agreement may be executed in one or more parts, all of which taken
together shall constitute one instrument.
15. Entire Agreement.
The terms of this Agreement constitute the entire agreement between the
parties, and the parties represent that there are no collateral agreements or
side agreements not otherwise provided for within the terms of this Agreement.
8
<PAGE> 9
16. Execution of Documents.
The parties agree to execute all documents that may be necessary to
carry out the intent and purposes of the Agreement.
17. Good Faith - Attorney's Fees and Costs.
If either party fails to comply with any of the provisions of the
Agreement and the other party takes action to enforce such provisions or to
enforce any payment stipulated to in the Agreement, the losing party will pay
to the prevailing party reasonable costs and expenses, including attorney's
fees as determined by the court or arbitrator.
18. Interpretation.
Whenever any word is used in the Agreement in the masculine gender, it
shall also be construed as being used in the feminine and neuter genders, and
singular usage shall include the plural and vice versa, all as the context
shall require.
19. Marginal Headings.
The marginal headings of the paragraphs of this Agreement are for
convenience only, and are not to be considered a part of the Agreement or used
in determining its content or context.
20. Modification.
Any modification or amendment of the Agreement shall be in writing and
shall be executed by all parties.
21. Partial Invalidity.
If any provision of the Agreement is held to be invalid or
unenforceable, all the remaining provisions shall nevertheless continue in full
force and effect.
22. Assignment.
This Agreement shall not be assigned without the prior written consent
of the other party, which consent shall not be unreasonably withheld.
23. Waiver.
Any waiver by any party of a breach of any provision of the Agreement
shall not operate as or be construed as a waiver of any subsequent breach
thereof.
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
MANAGED CARE SOLUTIONS, INC.
BY: James A. Burns
-------------------------
ITS: Vice Chairman
------------------------
CORNERSTONE HEALTH MANAGEMENT
COMPANY
BY: Dennis A. Johnston
-------------------------
ITS: Chief Executive Officer
-------------------------
10
<PAGE> 1
EXHIBIT 10.23A
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN THE PLAN AND
MANAGED CARE SOLUTIONS, INC.
This Administrative Services Agreement is made and entered in to be
effective as of the 22nd day of May, 1995 by and between Alliance for Community
Health d.b.a. Community Care, a not-for-profit Missouri Corporation (hereinafter
"Plan"), and MANAGED CARE SOLUTIONS, INC. (hereinafter "MCS").
W I T N E S S E T H :
WHEREAS, the Plan was formed by certain health care providers for the
purpose of operating as a qualified health plan under a managed care program
administered by the State Medicaid Agency (SMA) of the State of Missouri,
hereinafter called "The Program".
WHEREAS, the Plan desires to engage MCS to provide administrative
services in connection with the operation of the Plan Program.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
I. DEFINITIONS
A. The Plan Program. "The Plan Program" shall mean all
administrative and medical care delivery components and systems available
through the Plan as necessary for the Plan to provide or arrange for the
provision of the required medical, dental, and behavioral health services to
those Program eligible recipients who receive coverage through the Plan.
B. The Program. "The Program" shall mean the State of Missouri
Program for the provision of medical, dental, and behavioral health services to
Medicaid recipients in a managed care delivery setting.
C. Covered Services. "Covered Services" shall mean those
medical, dental, and behavioral health services to which Members are entitled
under the Program as detailed in the Request for Proposal and in any contract
between the State Medicaid Agency and the Plan.
D. Implementation Date. "Implementation Date" shall mean the
date the Plan Program becomes operational and the Plan is obligated to commence
the provision of Covered Services to Members.
E. Participating Providers. "Participating Providers" shall
mean duly licensed physicians, hospitals, health professionals, facilities, and
other health care providers
1
<PAGE> 2
which have entered into a contract with the Plan for the provision of Covered
Services to Members.
F. Request for Proposal ("RFP"). "RFP" or "Request For
Proposal" shall refer to the SMA's Request For Proposal for the Program and any
amendments thereto.
G. Recipients or Members. "Recipients" or "Members" shall
refer to those individuals who are eligible for coverage under the Program and
who have enrolled in the Plan.
H. State Medicaid Agency. "State Medicaid Agency" (SMA) shall
mean that agency, division or department of State Government responsible for
administration of its State Medicaid Program pursuant to Title XIX of the Social
Security Act and applicable state law.
II. MCS RESPONSIBILITIES
A. Pre-Operational Phase.
1. Generally. The parties acknowledge MCS will
prepare or will assist in the preparation of information and data to participate
as a qualified health plan under the Program during the Pre-Operational Phase
period. MCS shall, on behalf of the Plan, respond in a timely manner to any and
all SMA requests for additional information or clarification of proposal terms,
subject to the Plan's approval of any such response.
2. Negotiations With the SMA. MCS shall provide
assistance and support to the Plan in its negotiations with the SMA concerning
the Program.
B. Pre-Operational Duties. MCS shall perform necessary
pre-operational services so that the Plan may commence operation as a qualified
health plan on the Implementation Date as established by the SMA. All
pre-operational costs shall be reimbursed in accordance with Section III.A of
this agreement. Pre-operational services shall include, but are not limited to:
1. Office site and equipment selection;
2. Installation of compute hardware, software and
related equipment;
3. Staff selection and training;
4. Development of marketing programs if directed by
the Plan;
5. Development of Plan policy and procedures;
2
<PAGE> 3
6. Development of provider network, including but
not limited to:
a. Negotiating.
b. Credentialing.
c. Contracting.
7. Education of providers and their staff regarding
Plan programs;
8. Establishment of utilization and quality
assurance programs;
9. Acting as a liaison with the SMA including
negotiation of any and all contracts;
10. Preparation of member handbooks and other
required items;
11. Preparation of provider handbooks and other
required items;
C. Administrative Services. MCS shall provide administrative
services necessary to the operation of the Plan Program or which are required by
the RFP or any contract between the SMA and the Plan, and contracts between the
Plan and Participating Providers. MCS's responsibilities shall include, but not
be limited to, the following:
1. General Management Duties. MCS shall be
responsible for the day-to-day management of the Plan. MCS shall take actions
necessary for the proper administration and management of the Plan Program, so
long as such actions are consistent with, and not in conflict with, the
provisions of this Agreement, the RFP, and any contract between the SMA and the
Plan. MCS shall employ such individuals as are necessary to carry out its duties
under this Agreement.
2. Contracting With Providers. MCS shall be
responsible for recruiting, negotiating, and contracting on behalf of the Plan
with such providers of medical, dental, and behavioral health services as
necessary to provide Covered Services to Members as required by the RFP and any
contracts between the SMA and the Plan. Provider contracts shall be between the
Plan and the Participating Providers. While it is understood that there is no
absolute guarantee that MCS will be able to contract on behalf of the Plan with
all such providers, MCS shall make reasonable efforts to recruit and contract
with such necessary providers and shall dedicate sufficient resources to
contract with such providers.
All contracts with Participating Providers shall be
in a form and contain such provisions as are acceptable to the Plan and shall
set forth the method and amount of reimbursement to Participating Providers, and
shall specify that the providers shall be subject to all requirements contained
in the RFP, any contract between the SMA and the Plan, and all applicable
provisions of this Agreement.
3. Claims Processing and Payment. MCS shall pay
claims to providers for all Covered Services rendered to Members in accordance
with contracts entered
3
<PAGE> 4
into between Participating Providers and the Plan, the RFP, any contract between
the SMA and the Plan, and this Agreement. The amount of reimbursement to
providers shall take into account any co-payment, deductible or co-insurance
amounts which Members are required to pay under the Program. Unless otherwise
directed by the Plan, MCS and the Medical Director shall have the authority and
discretion to interpret the requirements of the RFP, the contract between the
SMA and the Plan, and the contracts between the Plan and providers with respect
to payment of claims to providers. Claims payments shall be made by checks or
drafts signed by MCS as the Plan's dispersing agent out of the account
established in accordance with Section II.C.4. hereof. MCS shall pay claims from
its Phoenix, Arizona Office for at least the first year of this Agreement.
4. Bank Account; Accounting and Finance Duties. MCS
shall establish and maintain a bank account in the name of the Plan with
________________________ ("the Bank") for the purpose of depositing all receipts
from any source therein, including capitation payments and reinsurance payments
form the SMA, and for paying all expenses of the Plan Program, including payment
of provider claims. MCS shall be responsible for performing all day to day
financial and accounting functions of the Plan, including preparation of
financial statements, accounts payable/receivable administration, and banking
arrangements. MCS shall also be responsible for any required financial and
regulatory reporting to the SMA and to the Missouri Department of Insurance.
5. Plan Benefits Litigation. If a demand is asserted
or a litigation/arbitration proceeding is commenced ("Plan Benefits Litigation")
by a Member or health care provider to recover benefits against MCS, the Plan or
both parties, the following shall apply:
a. If either MCS or the Plan becomes
aware of the asserted Plan Benefits
Litigation, it shall promptly notify
the other party. The Plan shall,
with MCS's advice and input,
determine whether to pay the
disputed claims or proceed with Plan
Benefit Litigation.
b. In the event the Plan determines to
proceed with Plan Benefits
Litigation, the Plan shall retain
counsel and direct the response to
the Plan Benefits Litigation. The
Plan shall be responsible for
assuming the cost attributable to
Plan Benefits Litigation.
6. Coordination of Benefits; Third Party Liabilities;
Reinsurance. MCS shall be responsible for coordination of benefits and
third-party recoveries as required under the provisions of the RFP and under any
contract between the SMA and the Plan. MCS shall be responsible for the
following:
a. Recovering or coordinating medical
expenses incurred by Members from
3all third-party liability resources
on behalf
4
<PAGE> 5
of the Plan and depositing any
amounts recovered in the bank
account;
b. Establishing and maintaining a file
of Members' third-party liability
information;
c. Receiving third-party liability
information from the SMA updating
the Members' files on a timely
basis;
d. Informing the SMA of third-party
liability information discovered
during the course of business
operations;
e. Providing the SMA with required
reports relating to amounts
recovered from third-parties;
f. Recovering reinsurance revenues
payable to the Plan from the SMA
and/or other Reinsurers.
7. Case Management. MCS shall be responsible for
performing case management services in accordance with the RFP and in accordance
with the contract between the SMA and the Plan. MCS shall ensure that each
Member has chosen or is assigned a primary care provider who shall assess the
Member's health care needs and shall provide services to meet those needs either
directly or through referrals to other participating providers. MCS shall
implement a system for the directing, coordinating, monitoring and tracking of
the Covered Services rendered to each member. This system shall include, but not
be limited to, the following:
a. Ensuring that medically necessary
services are accessible and can be
provided on a timely basis;
b. Providing Members with clear and
adequate information on how to
obtain services;
c. Assisting Members to obtain the
services prescribed by their primary
care providers and other authorized
providers.
8. Facilitation of Services. MCS shall facilitate the
provision of Covered Services by Participating Providers by:
a. Providing the Plan and Participating
Providers with Member enrollment and
eligibility information; and
b. Maintaining telephone lines as
required by the RFP for the purpose
of determining enrollment and
eligibility information upon
admission to an emergency facility
or hospital emergency room.
5
<PAGE> 6
9. Program Coverage Information. MCS shall prepare
and forward to all Participating Providers, a summary of Covered Services which
are required to be provided under the Plan Program. Such summary shall include
schedules of Covered Services and any applicable exclusions or limitations
affecting the provision of Covered Services, applicable co-payments,
co-insurance and deductibles, and any other information relevant to the
rendering of Covered Services by providers. The summary of Covered Services may
be included in the provider handbook prepared by MCS.
10. Quality Assurance. MCS shall be responsible for
developing and maintaining a Quality Assurance Program in compliance with the
requirements of the RFP, and with any contract between the SMA and the Plan. At
a minimum the Quality Assurance Program shall conform to the requirements set
forth in the RFP.
11. Utilization Management. MCS shall be responsible
for developing and maintaining a Utilization Management Program in compliance
with the requirements of the RFP, and with any contract between the SMA and the
Plan. The Utilization Management Program shall determine whether the level,
type, and cost of benefits provided are appropriate to the health care needs of
Members on an ongoing basis.
12. Credentialing. MCS shall credential and
recredential each Participating Provider rendering health care services to
Members as described in the Plan's RFP proposal.
13. Information Systems. MCS shall develop and
maintain as of the Implementation Date an automated management information
system as necessary for the efficient operation of the Plan Program and as
required by the RFP, any contract between the SMA and the Plan, and this
Agreement.
14. Reports to and Liaison with the SMA. MCS shall be
responsible for making reports to the SMA which are required by the RFP and to
act as a liaison to the SMA for the general purpose of regulatory compliance.
Reports shall be made at such times as are required by the SMA and such reports
shall be in format acceptable to the SMA. Such reports shall include, but not be
limited to the following:
a. Encounter data as described in the
RFP;
b. Reports regarding the Quality
Assurance Program as required by the
RFP;
c. Reports regarding changes in
Recipient status as required by the
RFP;
d. Reports regarding coordination of
benefits and third-party liability
as required by the RFP; and
6
<PAGE> 7
e. Reports regarding financial
information as required by the RFP.
15. Reports to The Plan. MCS shall report to the
President and Board of Directors of the Plan on a regular basis and at such
times as are reasonably requested by the President or Board of Directors of the
Plan. MCS shall report to the Plan on any and all matters relating to the
administration of the Plan Program as requested by the President or the Board of
Directors for the Plan.
16. Member Services. MCS shall be responsible for
providing all Member services as are necessary to the administration of the
Plan's Program or as are required by the RFP, any and all contract between the
SMA and the Plan, and this Agreement. Such Members services shall include, but
not be limited to:
a. Enrollment of Recipients as required
by the RFP.
b. Preparation and dissemination of
educational materials as required by
the RFP.
17. Insurance Requirements.
a. Professional Liability Insurance. During
the term of this Agreement, the Plan shall maintain, at its sole cost and
expense, a policy of HMO-type professional liability insurance acceptable to MCS
with coverage limits in the minimum amount of $1,000,000 per incident and
$1,000,000 in the annual aggregate. MCS shall be named as an additional insured
on said professional liability insurance policy. In addition, the Plan shall
purchase a "tail policy" with the same policy limits following the effective
date of termination of the foregoing policy in the event the policy is a "claims
made" policy.
b. Comprehensive Liability Insurance. MCS
and the Plan each shall maintain, at the sole cost and expense of each,
throughout the term of this Agreement, a policy of general liability insurance
acceptable to the other party in the minimum amount of $1,000,000 per occurrence
and $1,000,000 in the annual aggregate. Each shall name the other party as an
additional insured on said policy.
c. Proof of Insurance. Each party shall
furnish the other with evidence of such insurance, including certificates of
insurance and complete copies of insurance policies, upon the other's request.
Each party shall provide the other with a minimum of 30 days prior written
notice in the event any of the insurance policies required by this Agreement are
canceled, changed or restricted in any way.
18. Complaint Resolution Procedure. MCS shall
maintain a complaint resolution procedure to process Member and Provider
complaints.
19. Member Satisfaction. MCS shall administer
periodically, but not less frequently than annually, Member satisfaction surveys
to measure the level of satisfaction of
7
<PAGE> 8
Members receiving Covered Services from Participating Providers. The development
and administration of such surveys shall be at the sole cost of MCS.
III. ADMINISTRATIVE FEE
A. Pre-Operational Phase. The Plan shall pay MCS for services
rendered in the pre-operational phase as follows:
<TABLE>
<CAPTION>
Consulting Labor Costs:
<S> <C>
Category Hourly Rate
-------- -----------
MCS Principal: President, CEO, Medical Director $140
Other MCS Managers 90
Programmers/Systems Analysis 75
Other non-management professional staff 50
Clerical staff (word processing) 20
Employee Labor, Fringe & Related Costs:
Employees hired to work in St. Louis
specifically for the CC program: At MCS cost + 10%
Other Costs:
Outside Consultants At MCS cost, not to
exceed $140 per hour.
Travel & Other Out-of -Pocket Expenses: At MCS cost
Routine Office Supplies, Long Distance Calls from
Arizona, copying costs, and other expendable
items No charge
</TABLE>
8
<PAGE> 9
The pre-operational phase for MCS activity is estimated to consume 1,210 hours
of labor time. Actual MCS labor expended on the project may be more or less than
the estimated 1.210 hours. Estimated cost for MCS activities during the
pre-operational phase is as follows:
<TABLE>
<CAPTION>
Function Labor Cost Out-of-Pocket TOTAL COST Maximum Hours*
- - -------- ---------- ------------- --------- --------------
<S> <C> <C> <C> <C>
Provider Contract-
ing and Network 22,000 4,000 26,000 200
Development
Analysis of cost
and utilization data
for Risk Pool con- 8,000 1,000 9,000 60
tracting purposes
Pre-Operational
Staffing and 72,000 24,000 96,000 950
Operations
TOTALS 102,000 29,000 131,000 1,210
</TABLE>
* MCS will devote a maximum of 1,210 hours to Community Care's pre-operational
activities for the prices stated herein above. Any hours beyond the 1,210
maximum limit are billable at the hourly rates shown above. If less than 1,210
hours are required for pre-operational activities, MCS shall only bill for
actual hours worked. MCS's pre-operational duties do not include marketing costs
or expenses for outside professionals such as attorneys and actuaries.
B. Operational Phase. The Plan shall pay MCS an administrative
fee as set forth below once the Plan Program becomes operational:
1. Base Administrative Fee. The Plan shall pay a
monthly administrative fee as follows:
Management Fee:
First 25,000 members 12.0% of capitation revenue
Next 15,000 members 11.0% of capitation revenue
Next 30,000 members 10.0% of capitation revenue
Members in excess of 70,000 8.8% of capitation revenue
Example: If CC has 50,000 members in any given month, the Management
fee shall be computed as follows:
First 25,000 members 12.0%
Next 15,000 members 11.0%
Next 10,000 members 10.0%
------------------- -----
50,000 members 11.3% = weighted average
Management Fee
9
<PAGE> 10
If Plan enrollment is less than 20,000 member months, the above
schedule shall not apply and Administrative Fees paid to MCS shall be MCS's cost
plus 10%.
An average year-to-date Plan capitation revenue per member per month
will be calculated by dividing total year-to-date Plan capitation revenues by
total year-to-date member months. The average year-to-date Plan capitation
revenue per member month will be used in calculating the monthly administrative
fee. Member months are calculated by dividing the total number of days Members
were eligible by the number of days in that month.
The monthly Base Administrative Fee will be estimated and paid before
the tenth day of the month. Any adjustments based on the actual member month
figures will be made to the subsequent month's payment.
MCS shall be responsible, in return for receiving the Base
Administrative Fee, to assume all costs associated with the administration of
the Plan Program, except for the following expenses which shall be the
responsibility of the Plan:
a. Management Information System (see
paragraph 3 and 4 below)
b. Salary, fringe benefits, travel,
educational and all other expenses
of the Chief Executive Officer.
c. Office equipment and furniture.
d. Covered Services;
e. Legal Services of the Plan;
f. Actuarial Services of the Plan;
g. All insurance premiums for the Plan;
h. Board fees, etc.;
i. Expenses relating to the corporate
existence of the Plan;
j. Audit and tax services of the Plan;
k. Advertising and marketing expenses
of the Plan;
l. Any income, property, premium or
other taxes of the Plan and any
assessments or license fees.
m. Any other expenses clearly related
to the business of the Plan as an
independent corporate entity.
10
<PAGE> 11
2. Shared Risk Agreement. The parties agree to share risk in
the following manner:
The Plan shall institute "Risk Pools" among its providers which
represent specific amounts budgeted for medical costs each Plan fiscal year. If
the combined Plan Risk Pools experience a surplus (i.e., medical costs are less
than the Risk Pool budget), MCS shall receive 10 % of such surplus not to exceed
10% of MCS's Base Administrative Fee. If the combined Plan Risk Pools experience
a deficit (i.e., medical costs are more than the Risk Pool budget), MCS shall be
liable for 10% of such deficit not to exceed 10% of MCS's Base Administrative
Fee. If the Plan fails to institute a Risk Pool budgeting process which, in
MCS's opinion, does not constitute significant risk sharing arrangements with
critical Participating Providers, this shared risk arrangement between MCS and
the Plan shall not be operative.
3. MANAGED CARE ONE MIS System Fee (as defined in the April
24, 1995 MCS proposal, Exhibit 2)
Year One: $2.65 PMPM for all months in which enrollment is
-------- below 40,000 Members and $2.60 PMPM for all
months in which enrollment exceeds 40,000
members. An installation fee $72,000 shall be
payable in two equal installments as follows:
$36,000 no later than June 1, 1995, and, an
additional $36,000 by the latest of the following
dates: August 1, 1995 or the date upon which the
Plan accepts its first enrollment. (the Implementation
Date)
After one Year:
<TABLE>
<CAPTION>
Membership Level Year 2 Year 3 Year 4 Year 5
---------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Less than 40,000 $2.75 $2.85 $3.00 $3.10
40,000 to 49,000 $2.60 $2.70 $2.80 $2.90
50,000 to 59,999 $2.50 $2.60 $2.70 $2.80
60,000 to 69,999 $2.40 $2.50 $2.60 $2.70
70,000 to 79,999 $2.30 $2.40 $2.50 $2.60
80,000 to 99,999 $2.15 $2.25 $2.35 $2.45
100,000 or more $1.95 $2.05 $2.15 $2.25
</TABLE>
11
<PAGE> 12
4. Fees for Other Hardware/Software Not Included in
the MANAGED CARE ONE Package. (as defined in the April 24, 1995 MCS proposal,
Exhibit 2)
Year One: $0.60 PMPM
After Year One:
<TABLE>
<CAPTION>
Membership Level Year 2 Year 3 Year 4 Year 5
---------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Less than 40,000 $0.60 $0.60 $0.65 $0.70
40,000 to 49,999 $0.55 $0.55 $0.55 $0.60
50,000 to 59,999 $0.50 $0.50 $0.55 $0.55
60,000 to 69,999 $0.45 $0.45 $0.50 $0.50
70,000 to 79,999 $0.40 $0.40 $0.45 $0.45
80,000 to 99,999 $0.30 $0.35 $0.40 $0.40
100,000 or more $0.25 $0.25 $0.30 $0.30
</TABLE>
IV. TERM AND TERMINATION.
A. Term. This Agreement shall be effective on the date of its
execution first set forth above and shall be effective during the period
necessary to complete the Plan's pre-operational activities and shall then be in
full force and effect through the first five years of the Program.
B. Termination. This Agreement may be terminated upon the
following:
1. Automatically in the event the Plan is
notified by the SMA that its proposal to the
SMA to participate as a qualified health
plan under the Program has not been
accepted.
2. Upon notice by the Plan, in the event any
officer, director or principal shareholder
of MCS is suspended or excluded from
participating in any federal or state
program in any state.
3. At any time upon the written mutual consent
of both parties.
4. Upon the failure of either party to correct
any failure to perform under the terms of
this Agreement after sixty (60) days written
notice from the other party.
5. In the event the contract between the SMA
and the Plan is terminated for any reason or
the Plan's participation in the Program is
otherwise terminated, in which case
termination shall be effective as of the
termination date of the Plan's participation
in the Program.
12
<PAGE> 13
6. Immediately upon the filing of a bankruptcy
petition by either party or upon the failure
of either party to obtain any license,
registration or approval required under
state or federal law that is material to the
operation of the Plan Program.
C. Obligations in Event of Termination.
1. Upon termination of this Agreement, the Plan shall
purchase those fixed assets acquired and used by MCS to administer the Plan at a
price equal to the book value of such assets at the termination date.
2. In the event of termination of this Agreement for
any reason, MCS shall cooperate with the person or entity selected by the Plan
to assume administration of the Plan.
3. In the event of termination of this Agreement MCS
shall provide the Plan with all copies of records in MCS's possession directly
and specifically relating to the Plan Program and which are necessary for the
continued operation of the Plan Program, or shall forward such records to a
successor administrator as directed by the Plan.
V. MISCELLANEOUS
A. Confidentiality. MCS agrees to safeguard the
confidentiality of all data pertaining to this Agreement and Covered Services
rendered to Members.
B. Relationship to the Parties. In the performance of the
work, duties and obligations of the parties pursuant to this Agreement, the
parties shall, at all times, be acting and performing as independent
contractors. No relationship of employer and employee, or partners or joint
ventures is created by this Agreement, and neither party may therefore make any
claim against the other party for social security benefits, workers'
compensation benefits, unemployment insurance benefits, vacation pay, sick leave
or any other employee benefit of any kind. In addition, neither party shall have
any power or authority to act for or on behalf of, or to bind the other except
as herein expressly granted, and no other greater power or authority shall be
implied by the grant or denial of power or authority specifically mentioned
herein.
C. Assignment/Subcontracting. Neither party shall have the
right to assign, delegate or subcontract any of its rights or obligations
hereunder without the prior written consent of the other party.
D. Notices. Except as set forth herein, all notices required
or permitted to be given hereunder, shall be in writing and shall be sent by
United States mail, certified or registered, return receipt requested, postage
prepaid, to the parties hereto at their respective addresses set forth on the
signature page hereto, or such other address as may be fixed in accordance with
the provisions hereof. Except as set forth herein, if mailed in accordance with
13
<PAGE> 14
the provisions of this paragraph, such notice shall be deemed to be received
three (3) business days after mailing.
E. Headings. The headings of the various sections of this
Agreement are inserted merely for purpose of convenience and do not expressly or
by implication limit, define or extend the specific terms of the section so
designated.
F. Waiver of Breach. The waiver by either party of a breach or
violation of any provision of this Agreement shall not operate as, nor be
construed to be, a waiver of any subsequent breach thereof.
G. Applicable Law. This Agreement shall be governed in all
respects by the laws of the State of Missouri.
H. Invalid Provisions. If, for any reason, any provision of
this Agreement is or shall be hereafter determined by law, act, decision, or
regulation of a duly constituted body or authority, to be in any respect
invalid, such determination shall not nullify any of the other terms and
provisions of this Agreement and, unless otherwise agreed to in writing by the
parties, then, in order to prevent the invalidity of such provision or
provisions of this Agreement, the said provision or provisions shall be deemed
automatically amended in such respect as may be necessary to conform this entire
Agreement with such applicable law, act, decision, rule or regulation.
I. No Third-Party Beneficiary. This Agreement is entered into
by and between the Plan and MCS and for their benefit. There is not intent by
either party to create or establish third-party beneficiary status or rights or
their equivalent in any Member, subcontractor, or other third party, and no such
third party shall have any right to enforce any right or enjoy any benefit
created or established under this Agreement.
J. Arbitration. In the event that any dispute relating to this
Agreement arises between MCS and Plan, the dispute shall be resolved by binding
arbitration in accordance with the Rules of Commercial Arbitration of the
American Arbitration Association. In no event may the arbitration be initiated
more than one year after the date on party first gave written notice of the
dispute to the other party. The arbitration shall be held in St. Louis, Missouri
or in such other location as the parties may mutually agree upon. The arbitrator
shall have no power to award punitive or exemplary damages or vary the terms of
this Agreement and shall be bound by controlling law.
K. Review and Audit. MCS will at all times make available for
review and audit by either Plan or its designee its files, books, procedures and
records (including computer terminal access to same) pertaining to the Plan
program or the services provided by MCS under this Agreement. In addition, MCS
shall make available for interview with the auditor those personnel with
material involvement or responsibility with respect to the services provided by
MCS under this Agreement.
14
<PAGE> 15
L. Entire Agreement; Amendment. This Agreement and all
exhibits hereto shall constitute the entire agreement relating to the subject
matter hereof between the parties hereto, and supersedes all other agreements,
written or oral, relating to the subject matter hereof. This Agreement may be
amended by mutual agreements of the parties, provided that such amendment is
reduced to writing and signed by both parties.
M. Exhibits. Any exhibits attached to this Agreement are an
integral part of this Agreement and are incorporated herein by reference.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the day and year set forth above.
THE PLAN
By Betty Jean Kerr
----------------------------------
Date: May 22, 1995
---------------
ADDRESS FOR NOTICES:
5701 Delmar
- - -----------------------------
St. Louis, Missouri 63112
- - -----------------------------
MANAGED CARE SOLUTIONS, INC.
By James A. Burns Its President
---------------------------------- -------------
Date: May 18, 1995
-----------------
2510 W. Dunlap Ave, Suite 100
Phoenix, Az 85021
15
<PAGE> 16
EXHIBIT 10.23(a)(1)
LAIRD, SCHNECK, LINDFORS & SMYTH, P.C.
MISSOURI COMMONS
1440 EAST MISSOURI, AVE., SUITE 250
PHOENIX, ARIZONA 85014-2405
March 1, 1996
VIA FACSIMILE - 314-241-8624
AND MAIL
David M. Harris, Esquire
Greensfelder, Hemker & Gale, P.C.
1800 Equitable Building
10 South Broadway
St. Louis, MO 63102
RE: Community Care Plus
Dear David:
This letter sets forth an outline of Managed Care Solutions' proposal
to turn over all management functions to CCP. This is in response to the
parties' inability to come to terms on the issue of compensation with respect to
the proposed transfer of MCS employees to CCP. I do not believe we will be able
to agree on a fair adjustment. MCS now proposes a larger turnover of management
function in connection with the employee transfer.
1. General Description.
MCS will agree to cease all management responsibility pursuant to the
Administrative Services Agreement, except for MIS, claims and finance functions.
These retained functions are more specifically described below. In other words,
CCP will assume complete responsibility for all employees, member services,
provider services, contracting, medical management, grievance and
administration, among other things, and MCS will have responsibility for only
the retained functions, with no residual responsibility for any of its former
duties. Any agreement entered into between the parties will specify that CCP
will bear the burden of properly inputting and maintaining clean provider data
so that claims can be properly processed by MCS. As we discussed in our meetings
in Phoenix, MCS will be unable to properly pay provider claims and capitation
without reliable data and clean claims.
<PAGE> 17
2. Payment.
Payment will be based not on a per-member per-month basis, but rather
on the number of eligible plan members as determined on the first day of each
month in which services are provided by MCS to CCP. In other words, payment is
due in advance. The fee will be due on the 5th day of the month. If payment is
not made on the 5th day of the month, no provider checks will be paid until the
fee is paid. The agreement will provide that upon CCP's failure to timely pay
MCS in full, MCS will notify State of Missouri Medicaid of its intention to
terminate the contract within 15 days.
The fees for the retained services are as follows on a per eligible
member basis:
<TABLE>
<S> <C>
MIS - $3.15
Claims - $2.90
Finance - $1.00
</TABLE>
Any consulting services beyond the retained services will be charged on
an hourly basis as follows:
<TABLE>
<S> <C>
Executives $200
Directors $175
Managers $125
Other Staff $100
</TABLE>
MC1 system enhancements or report requests specific to CCP will be
proposed as a project fee dependent on the specific request. All other costs
will be billed at cost plus 15%. Costs include lease payments on office space,
cellular phones and pagers, insurance, telephone related costs, office supplies
and other costs paid by MCS related to CCP. Upon CCP securing a CFO and other
financial systems, many of these costs can be transitioned to CCP.
Consulting and cost bills will be payable 10 days after the invoice
date. Late payments will be subject to an 18% per annum interest and penalty
provision.
3. Retained Services. MCS will provide the following services.
a. MIS:
- - - Maintaining the MC1 system and hardware including local and wide-area
networks in both Phoenix and St. Louis as currently exist.
- - - All data transfers to and from the State of Missouri Managed Care+
program including but not limited to member and provider file
transfers.
- - - All data transfers to and from the pre-established contractors which
include People's Health Center, St. Louis Comprehensive Health Center,
Family Care Health Center, DPS, Delta Dental, UBS, VSP, and Nurseline.
- - - Excluded are data conversion costs over and above a data cut to the new
vender in the format accepted by GTE for the Missouri Medicaid MC+
program.
<PAGE> 18
b. Claims Services:
- - - Input and processing of clean claims.
- - - Encountering all claim data to the State of Missouri.
- - - Providing claim payment reports to CCP showing weekly activity.
- - - Generating remits and checks which are drawn on the CCP claims account
and sending to CCP CEO for review and mailing.
c. Finance Functions:
- - - Coordinating reinsurance recoveries from State of Missouri.
- - - Maintenance of accounts payable system.
- - - Maintenance of CCP general ledger.
- - - Compilation of monthly financial statements including IBNR
calculations.
- - - Reporting package to CEO including accrual based balance sheet,
profit and loss statement and risk pool statements; profit and loss
statement based on actual paid claims data, and lag schedules.
- - - Process and issue monthly capitation payments drawn on the CCP claims
account to all capitated providers, and provide an exception/error
report and detail capitation schedules to the CEO.
Any agreement modifying the Administrative Services Agreement will have
to be very specific about what is and is not included in the retained functions.
MCS suggests that the parties terminate this modified arrangement by August 31,
1996, or sooner if CCP is able to obtain an alternative MIS provider before that
time.
I believe the foregoing represents a reasonable basis for continuing
operation of the plan while a transition of the retained functions is being
negotiated.
Sincerely,
LAIRD, SCHNECK, LINDFORS & SMYTH, P.C.
By
Stephen G. Smyth
Attorney at Law
SGS/bd
<PAGE> 19
EXHIBIT 10.23(a)(2)
GREENSFELDER, HEMKER & GALE, P.C. 2000 EQUTABLE BUILDING
ATTORNEYS AT LAW 10 SOUTH BROADWAY
ST. LOUIS, MISSOURI 63102-1774
March 6, 1996
TELEFAX
Stephen G. Smyth, Esq.
Laird, Schneck, Lindfors & Smyth, P.C.
Missouri Commons
1440 East Missouri Avenue, Suite 250
Phoenix, Arizona 85014-2405
Dear Steve,
At your suggestion, the principals of CCP and MCS have been discussing
the proposal outlined in your letter dated March 1, 1996. These discussion have
led to an agreement which CCP has requested that I set forth below and to be
confirmed by MCS's signature this afternoon. The understanding is as follows:
1. The ASA is amended to reflect the following contract
arrangements.
2. MCS shall cease providing all management services,
except for MIS and Claims services effective the
close of business today.
(A) MCS agrees that it is responsible to
finalize all claims received up to and
including today's date as though it is under
the unamended ASA. In other words, there
will be no consulting charges for the
processing of those claims.
(B) All clean claims received from St. Louis
Comprehensive Center and People's Health
Center by MCS as of this date shall be fully
processed by March 15, 1996. By fully
processed it is meant that the claims will
be paid with a remittance advice. All
non-clean claims will be identified prior to
March 15, 1996 and that CCP Provider
Services will at least be contacted by March
15, 1996 to resolve such non-clean claims.
<PAGE> 20
(C) For all claims received hereafter, all clean
claims shall be fully processed within
thirty calendar days. All non-clean claims
shall be returned to CCP Provider Services
within thirty days.
(D) Upon completion of the tasks specified in
paragraph 1(B), CCP shall pay MCS the
February, 1996 management fee. The amount of
payment will be $279,000, as to which all
parities reserve all rights thereto.
(E) For all Claims/MIS services from march 1,
1996 forward, CCP shall pay MCS a fee of
$6.05 pmpm calculated, billed and paid as
follows. On the fourteenth day of the month,
or the next business day, MCS shall charge
its fee based the prior month's member
months. Invoices are deemed received when
faxed to Dr. Malone at CCP. Said invoice
shall be paid by CCP writing seven days of
receipt. If not paid within seven days of
receipt, MCS shall be entitled to halt the
processing of any claims for CCP.
(F) Those MIS/Claims services to be provided
are defined at paragraphs 3(a) and 3 (b)
of your letter of March 1, 1996 and are
fully incorporated herein.
3. CCP shall be responsible effective March 1, 1996, for
the office lease, office costs, cellular phones and
pagers, insurance, telephone costs and the like. Any
prepaid expenses shall be subject of an adjustment
payment by CCP to MCS on a pro rata basis. CCP shall
pay all St. Louis based MCS employees' salaries from
March 1, 1996 to March 6, 1996.
4. All documents for functions other than MIS/Claims
shall be turned over to CCP, including any copies
thereof.
5. In the event CCP requests services beyond MIS/Claims
services, such service will be charged on an hourly
basis as follows by MCS:
<PAGE> 21
<TABLE>
<S> <C>
Executives - $200
Directors - $175
Manager - $125
Other Staff - $75
</TABLE>
Invoices for consulting services shall be made by MCS on no
more often than a two week cycle. An invoice for consulting
services must show the date of service, amount of time spent
to the tenth of the hour, and a narrative of work performed.
CCP shall have ten days upon receipt of an invoice for
consulting services. Late payments shall be subject to an 18%
per annum interest charge.
6. All St. Louis-based MCS employees shall be
transferred to CCP effective the end of business
March 6, 1996. MCS agrees to indemnify CCP for any
claims by past or present employees based on events
prior to transfer. CCP agrees to indemnify MCS for
any claim by present or future employees based on the
event of transfer and all events subsequent to
transfer.
7. The parties agree that these MIS/Claim functions will
be terminated by CCP on or before, at CCP's
discretion, August 31, 1996.
Yours very truly,
GREENSFELDER, HEMKER & GALE, P.C.
By
David M. Harris
<PAGE> 1
EXHIBIT 10.22
================================================================================
STOCKHOLDERS AGREEMENT
BY AND AMONG
COMMUNITY HEALTH CARE OF ILLINOIS,
MANAGED CARE SOLUTIONS, INC.
AND
COMMUNITY HEALTH CHOICE OF ILLINOIS, INC.
APRIL 18, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C>
1. DEFINITIONS............................................................................................ 2
a. Agreement..................................................................................... 2
b. Authorized Officer............................................................................ 2
c. Bankrupt or Insolvent......................................................................... 2
d. Class A Directors............................................................................. 3
e. Class B Directors............................................................................. 3
f. Code.......................................................................................... 3
g. Corporate Acceptance Period................................................................... 3
h. Corporation................................................................................... 4
i. Fair Market Value............................................................................. 4
j. Management Agreement.......................................................................... 4
k. MCS Class B Shares............................................................................ 4
l. Offer to Sell................................................................................. 4
m. Organizational Documents...................................................................... 5
n. Preorganizational Expenses.................................................................... 5
o. Shares........................................................................................ 5
p. Stockholder................................................................................... 5
q. Stockholder Acceptance Period................................................................. 5
r. Subordinated Promissory Note.................................................................. 5
s. Transferor.................................................................................... 6
t. Valuation Date................................................................................ 6
u. Value Per Share............................................................................... 6
2. ALL CAPITAL STOCK AFFECTED............................................................................. 6
3. RESTRICTION ON TRANSFER................................................................................ 6
4. VOLUNTARY TRANSFER..................................................................................... 7
5. INVOLUNTARY TRANSFER................................................................................... 7
a. Termination of Management Agreement Based On MCS' Fraud or Willful Misconduct................. 7
b. Bankruptcy or Insolvency of a Stockholder..................................................... 8
c. Termination of Interest for Cause............................................................. 8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6. PURCHASE PROCEDURE..................................................................................... 9
a. Acceptance of Offer........................................................................... 9
b. Offers not Accepted........................................................................... 10
c. Determination of Purchase Price............................................................... 11
d. Terms of Closing.............................................................................. 12
e. Bona Fide Offer to Purchase Entire Interest in Corporation.................................... 12
7. PURCHASE OPTION........................................................................................ 13
8. REORGANIZATION, MERGER, CONSOLIDATION, OR SALE OF A SUBSTANTIAL PORTION OF THE ASSETS.................. 13
a. Merger, Consolidation or Sale of Assets....................................................... 13
b. Stock Dividend, Stock Split or Exchange of Stock.............................................. 13
9. ENDORSEMENT OF STOCK CERTIFICATES...................................................................... 14
10. MANAGEMENT OF THE CORPORATION.......................................................................... 14
a. By-laws....................................................................................... 14
b. Election of Directors......................................................................... 14
c. Resignation as Director....................................................................... 15
d. Officers...................................................................................... 15
e. Management of the Corporation................................................................. 15
f. No Issuance of Additional Shares.............................................................. 15
11. DISSOLUTION EVENTS..................................................................................... 16
12. AUDITED FINANCIAL STATEMENTS........................................................................... 17
13. CONFIDENTIALITY........................................................................................ 17
a. Treatment of Confidential Information......................................................... 17
b. Term of Confidentiality Obligation............................................................ 17
c. Confidential Information that Becomes Public.................................................. 18
14. SPECIFIC PERFORMANCE................................................................................... 18
15. REPRESENTATIONS OF EACH STOCKHOLDER.................................................................... 19
16. PROVISIONS RELATING TO LOANS TO CORPORATION............................................................ 20
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
17. NOTICES................................................................................................ 20
18. TERM................................................................................................... 22
19. INTEGRATION; AMENDMENT................................................................................. 22
20. NO WAIVER.............................................................................................. 23
21. SEVERABILITY........................................................................................... 23
22. SUCCESSORS AND ASSIGNS................................................................................. 23
23. CONFLICT WITH DOCUMENTS................................................................................ 23
24. COSTS, FEES AND EXPENSES............................................................................... 24
25. REGULATORY COMPLIANCE.................................................................................. 24
26. GOVERNING LAW.......................................................................................... 24
27. SECTION HEADINGS....................................................................................... 25
28. COUNTERPARTS........................................................................................... 25
</TABLE>
iii
<PAGE> 5
STOCKHOLDERS AGREEMENT
THIS AGREEMENT is made as of the 18th day of April 1996 by and among
COMMUNITY HEALTH CARE OF ILLINOIS, an Illinois not-for-profit corporation
("CHCI"), and MANAGED CARE SOLUTIONS, INC., a Delaware corporation ("MCS"), each
sometimes hereinafter individually referred to as a "Stockholder" and together
referred to as the "Stockholders," and by each of them with Community Health
Choice of Illinois, Inc., a Delaware corporation duly qualified to do business
in Illinois (the "Corporation"). Stockholders and the Corporation are sometimes
hereinafter collectively referred to as the "Parties.
R E C I T A L S
A. Contemporaneously with execution of this Agreement, CHCI is
being issued in the aggregate 102 shares of the Corporation's Class A common
stock, no par value (the "Class A Stock") and MCS is being issued in the
aggregate 98 shares of the Corporation's Class B common stock, no par value (the
"Class B Stock"), which is all of the issued and outstanding shares of capital
stock of the Corporation.
B. Stockholders deem it in their best interests and in the best
interest of the Corporation to enter into this Agreement and to make provisions
to protect the Corporation from interference by third parties in its management
and operation, to maintain harmonious management and avoid conflict among them
respecting the business and to insure continuity of management of the
Corporation.
<PAGE> 6
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual obligations between and among Stockholders and the Corporation contained
herein, the Parties hereby agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have
the meanings ascribed to them in this Article 1:
a. Agreement. "Agreement" means this Stockholders Agreement.
b. Authorized Officer. "Authorized Officer" means the president
or chief executive officer of any corporate Stockholder and vice president or
other officer duly authorized by the board of directors of such Stockholder to
be an Authorized Officer under this Agreement.
c. Bankrupt or Insolvent. "Bankrupt or Insolvent" means as it
relates to any Stockholder, any of the following:
(1) The filing of an application of such Stockholder for,
or a consent to, the appointment of a trustee of such Stockholder's
assets, or the entry of an order, judgment or decree by any court of
competent jurisdiction appointing a trustee of such Stockholder's
assets, if such order, judgment or decree continues in effect for a
period of 60 consecutive days;
2
<PAGE> 7
(2) The filing by such Stockholder of a voluntary
bankruptcy petition in any bankruptcy proceeding or a pleading in any
court of record admitting in writing the inability to pay such
Stockholder's debts as they come due;
(3) The filing against such Stockholder of a bankruptcy
petition in any bankruptcy proceeding, if such petition has not been
dismissed after a period of 60 consecutive days;
(4) The filing by such Stockholder of an answer admitting
the material allegations of, or consenting to, or defaulting in
answering a bankruptcy petition filed in any bankruptcy proceeding;
(5) The making by such Stockholder of a general
assignment for the benefit of creditors; or
(6) The attachment of such Stockholder's shares of stock
of the Corporation, if such attachment continues in effect for a period
of 30 consecutive days.
d. Class A Directors. "Class A Directors" means the Directors of
the Corporation who shall have been elected from the slate of Directors
nominated by the holder of the Class A Stock.
e. Class B Directors. "Class B Directors" means the Directors of
the Corporation who shall have been elected from the slate of Directors
nominated by the holder of the Class B Stock.
f. Code. "Code" means the Internal Revenue Code of 1986, as
amended.
3
<PAGE> 8
g. Corporate Acceptance Period. "Corporate Acceptance Period"
means the 90-day period commencing six months after receipt by the Corporation
of an Offer to Sell.
h. Corporation. "Corporation" means Community Health Choice of
Illinois, Inc., a Delaware corporation duly qualified to do business in
Illinois, and any other corporation with which the Corporation is merged or
consolidated.
i. Fair Market Value. "Fair Market Value" means the fair market
value under all the circumstances using commercially reasonable valuation
standards, as shall be determined by a third party appraiser selected by both
MCS and CHCI (or if no such appraiser can be agreed upon, then by an appraiser
selected by an agreed upon third party, or if no such third party can be agreed
upon, then by an appraiser selected by CHCI).
j. Management Agreement. "Management Agreement" means the
Management and Service Agreement of even date herewith between MCS and the
Corporation relating to the business and affairs of the Corporation.
k. MCS Class B Shares. "MCS Class B Shares" means all the shares
of the Corporation's Class B Stock which are from time to time owned by MCS.
l. Offer to Sell. "Offer to Sell" means the offer made (or deemed
to have been made under the terms of this Agreement) to the Corporation and the
other Stockholder by a Stockholder desiring to transfer or encumber any Shares
pursuant to any applicable section of this Agreement which shall (other than a
deemed Offer to Sell) be in writing and shall include the number of shares which
the Transferor intends to sell, transfer or encumber, as the case may be, the
name and address of the prospective purchaser, transferee or lienor, the terms
of such sale,
4
<PAGE> 9
transfer or encumbrance, and a copy of any written agreement or other document
setting forth the information herein required. The Offer to Sell shall be sent
to the Corporation and to Stockholders in accordance with the notice provisions
of this Agreement.
m. Organizational Documents. "Organizational Documents" means the
Certificate of Incorporation, By-laws, minutes of the organizational meetings of
Stockholders and the Board of Directors of the Corporation, this Agreement and
the Preorganizational Subscription Agreement.
n. Preorganizational Expenses. "Preorganizational Expenses" means
(1) documented expenses incurred by any Party prior to execution of this
Agreement with respect to the organization of the Corporation or development of
the business of the Corporation, and which are set forth in Exhibit A attached
hereto and made a part hereof and (2) documented organizational expenses
incurred after execution of this Agreement but prior to enrollment of members in
the Corporation with respect to the organization of the Corporation or
development of the business of the Corporation, and which are contained in the
joint development budget attached hereto as Exhibit B attached hereto and made a
part hereof.
o. Shares. "Shares" means the shares of capital stock of any
preference, class or series of the Corporation now or hereafter issued and
outstanding.
p. Stockholder. "Stockholder" means any person or entity owning
from time to time any Shares and who is or becomes a party to this Agreement.
q. Stockholder Acceptance Period. "Stockholder Acceptance Period"
means the 75 day period commencing six months after receipt by the Corporation
of an Offer to Sell.
5
<PAGE> 10
r. Subordinated Promissory Note. "Subordinated Promissory Note"
means the aggregate $2,000,000 principal amount Subordinated Promissory Note of
even date herewith made by the Corporation in favor of MCS to evidence its
indebtedness in respect of the loan by MCS made pursuant to Section 16 hereof.
s. Transferor. "Transferor" means any Stockholder desiring to
sell, convey, transfer or otherwise dispose of or encumber Shares or who is
deemed to have made an Offer to Sell hereunder.
t. Valuation Date. "Valuation Date" means the last day of the
month preceding the month in which an Offer to Sell has been received or deemed
to have been received.
u. Value Per Share. "Value Per Share" means the quotient of X
divided by Y, where:
"X" equals the Fair Market Value of the Corporation
as of the Valuation Date; and
"Y" equals the number of issued and outstanding
shares of Common Stock of the Company on a fully diluted basis as of the
Valuation Date.
2. ALL CAPITAL STOCK AFFECTED. All Shares now or hereafter owned
or subscribed to by Stockholders, as well as any voting trust or other
certificate representing such shares or a beneficial interest therein, shall be
subject to the terms of this Agreement. The Corporation shall not issue any
additional shares of capital stock to any person or entity not a party to this
Agreement unless (a) such person or entity agrees in writing, prior to such
issuance,
6
<PAGE> 11
with the Corporation and the other Stockholders to be bound as if an original
signatory hereto and (b) the Corporation and the other Stockholders agree to
such issuance.
3. RESTRICTION ON TRANSFER. No Stockholder shall transfer or
encumber any Shares that may now or hereafter be owned by such Stockholder,
except in accordance with the provisions of this Agreement; provided, however,
that Stockholders owning in the aggregate 100% of the Shares may agree in
writing to waive this restriction.
4. VOLUNTARY TRANSFER. Absent prior written consent of all
Stockholders, if any Stockholder desires to sell, convey, transfer or otherwise
dispose of or encumber such Stockholder's Shares under any circumstances either
by way of operation of law, gift, assignment, pledge or hypothecation, such
Stockholder shall first make an Offer to Sell such Stockholder's Shares.
Notwithstanding anything to the contrary contained herein, a Stockholder may
pledge or hypothecate such Stockholder's Shares without the consent of the other
Stockholders if the pledgee or lienholder agrees that, in the event the pledged
Shares are foreclosed upon, such pledgee or lienholder shall offer to sell such
Shares to the other Stockholders and the Corporation in accordance with Section
6 hereof. Acceptance of the offer, the form and amount of purchase price, the
other terms and conditions of the closing of such purchase and survival of the
offer will be governed by the terms and conditions set forth in Section 6 of
this Agreement.
7
<PAGE> 12
5. INVOLUNTARY TRANSFER.
a. Termination of Management Agreement Based On MCS'
Fraud or Willful Misconduct. In the event that the Management Agreement with MCS
shall be terminated by CHCI based on the fraud or willful misconduct of MCS, MCS
shall be deemed to have made an Offer to Sell any and all of the Shares then
owned MCS. Acceptance of the offer, the form and amount of purchase price, the
other terms and conditions of the closing of such purchase and survival of the
offer will be governed by Section 6 hereof and such terms and conditions shall
be applied as if MCS made an Offer to Sell as of the date that the Management
Agreement shall have ceased to have been in full force and effect.
b. Bankruptcy or Insolvency of a Stockholder. If any
Stockholder shall become Bankrupt or Insolvent and as a result of such
insolvency proceeding, a court ordered sale or other transfer of Shares of a
Stockholder is required, then and only in such event, such Stockholder shall be
deemed automatically to have made an Offer to Sell all of such Stockholder's
Shares and shall send a written notice to the Corporation and to the other
Stockholders setting forth the circumstances of the bankruptcy or insolvency.
Acceptance of the offer, the form and amount of purchase price, the other terms
and conditions of the closing of such purchase and survival of the offer will be
governed by the terms and conditions set forth in Section 6 of this Agreement
and such terms and conditions shall be applied as if Stockholder had made an
Offer to Sell as of the date of the occurrence of the bankruptcy or insolvency.
8
<PAGE> 13
c. Termination of Interest for Cause. In the event that
all of either the Class A Directors or the Class B Directors vote at a meeting
of the Board of Directors in favor of a finding that MCS or CHCI, respectively,
has:
(1) Acted in a manner inconsistent with its
fiduciary obligations to the Corporation set forth in Article
XIII of the By-laws;
(2) Failed to appoint Directors when required to
do so hereunder or under the other Organizational Documents;
(3) Committed an illegal act or engaged in
conduct which reasonably may be deemed illegal or prejudicial
to the continuation of the business and affairs of the
Corporation, if it is determined that such illegality or
prejudice is reasonably deemed not correctable;
(4) Does not at all times maintain minimum
general or professional liability insurance coverage required
under the terms of the Management Agreement; or
(5) Failed to make any additional capital
contribution approved by the Board in accordance with the
By-laws,
then MCS or CHCI, as applicable, shall be deemed to have made an Offer to Sell
any or all of its Shares. Acceptance of the offer, the form and amount of
purchase price, the other terms and conditions of the closing of such purchase
and survival of the offer will be governed by Section 6
9
<PAGE> 14
hereof and such terms and conditions shall be applied as if MCS or CHCI, as
applicable, made an Offer to Sell as of the date of the vote of such Directors
in favor of the foregoing finding.
6. PURCHASE PROCEDURE.
a. Acceptance of Offer. Except as otherwise expressly
provided in this Agreement, an Offer to Sell shall be accepted as follows:
(1) By Stockholder. Pursuant to an Offer to
Sell, the remaining Stockholder may, at its option, within
Stockholder Acceptance Period, elect to purchase some or all
of the offered Shares. Stockholder shall exercise this
election to purchase by notice thereof to the Transferor and
the Corporation, specifying the number of shares which the
remaining Stockholder is willing to purchase and a date for
the closing of the purchase which shall not be more than 30
days after the date of the giving of such notice.
(2) By Corporation. If the remaining Stockholder
does not purchase all of the Shares offered by the Transferor
pursuant to an Offer to Sell by the expiration of Stockholder
Acceptance Period (or within the period specified in such
purchase notice), the Corporation may, at its option within
the Corporate Acceptance Period, elect to purchase the Shares
offered by the Transferor and not purchased by the remaining
Stockholder. The election shall be exercised by written notice
thereof to the Transferor specifying the number of Shares
which the
10
<PAGE> 15
Corporation is willing to purchase and a date for closing of
the purchase, which date shall not be more than 30 days after
the date of the giving of such notice.
b. Offers not Accepted. If the Offer to Sell is not
accepted by the Parties, or in the event the aggregate total of acceptance by
the purchasing Parties is for less than the number of the Shares offered, the
Transferor may make a sale or transfer of all of the Shares which are the
subject of the Offer to Sell to the prospective transferee named in the Offer to
Sell and in strict accordance with the terms therein stated, provided that in
connection with any sale, such sale shall be consummated as follows:
(1) Such Shares shall be transferred to the
prospective purchaser within 30 days after the expiration of
the Corporate Acceptance Period;
(2) Such transferee shall agree in writing,
prior to such transfer, with the Corporation and Stockholders
to be bound by all the terms and provisions of this Agreement
as though such transferee were an original signatory hereto;
and
(3) Such transferee shall comply with the
requirements of Section 6.d. below.
If the Transferor shall fail to make such sale within 30 days following the
expiration of the Corporate Acceptance Period, the Shares offered shall again
become subject to all the restrictions of this Agreement.
11
<PAGE> 16
a. Determination of Purchase Price.
(1) Except as otherwise provided in this
Agreement, the Corporation and each Stockholder agree that the
purchase price per Share sold and purchased pursuant to this
Agreement shall be (i) in the case of an Offer to Sell based
upon a bona fide offer from a third party, not affiliated with
the Transferor, the price offered by the prospective purchaser
named in the Offer to Sell or (ii) in the case of an Offer to
Sell pursuant to Section 5.a. hereof, seventy-five percent
(75%) of the Value Per Share or (iii) in all other cases, the
Value Per Share. The Value Per Share determined pursuant to
Section 1 of this Agreement shall be binding and conclusive
upon all Parties and the expenses of such determination shall
be borne by the Corporation. The Corporation and Stockholders
may at any time and from time to time by a written agreement
supersede the valuation provisions of this Subsection 6.b.(1)
by agreeing among themselves to a specified value per share
which shall govern purchases hereunder for the time period
specified in such written agreement.
(2) Notwithstanding anything to the contrary
contained in this Agreement, with respect to an Offer to Sell
made or deemed to have been made solely pursuant to Section
5.b., Stockholder shall have the right to seek and obtain,
within the first six months following such Offer to Sell, a
bona fide offer from a third party not affiliated with such
Stockholder. In the event such a third
12
<PAGE> 17
party offer is received by and is acceptable to such
Stockholder within such six month period, the provisions of
this Section as they relate to a proposed voluntary transfer
of Shares pursuant to Section 4 shall apply (and not the
provisions of Section 5.b. hereof).
b. Terms of Closing. The following terms and conditions
shall apply to each purchase and sale of the Shares:
(1) The purchase price for Shares sold and
purchased pursuant to this Agreement shall be paid in full by
certified or bank cashier's check at the closing;
(2) Transferor shall deliver certificates
representing the Shares duly endorsed to or at the direction
of the purchaser thereof free and clear of all liens and other
encumbrances; and
(3) Unless the prospective purchaser is already
a Stockholder or is the Corporation, the prospective purchaser
shall cause to be delivered such written evidence that the
proposed transfer will not (a) violate applicable federal or
state securities laws or (b) adversely affect the business or
affairs of the Corporation, including obtaining or continuing
applicable regulatory approvals and licenses, as counsel to
the Corporation may reasonably require.
13
<PAGE> 18
c. Bona Fide Offer to Purchase Entire Interest in
Corporation. Notwithstanding anything to the contrary contained herein, in the
event any Stockholder receives a bona fide offer from a third party not
affiliated with such Stockholder to acquire such Stockholder's Shares and such
offer is acceptable to such Stockholder but contingent on the purchase by the
third party of all the Shares of the Corporation, the other Stockholders shall
be obligated to either (i) sell their Shares to the offeror upon the terms and
conditions set forth in the Offer to Sell or (ii) purchase the Shares of the
Transferor at a price equal to 110% of the price per share set forth in the
Offer to Sell within 60 days from the date notice of such offer is received by
Stockholders.
2. PURCHASE OPTION. From and after the date which is seven (7)
years after the date of execution of this Agreement, the Corporation shall have
an option to purchase all, but not less than all, of the MCS Class B Shares at
their aggregate Value Per Share. The Corporation may exercise its option to
purchase the MCS Class B Shares by delivery of written notice to Stockholders
making reference to the option granted under this Agreement and specifying the
date upon which delivery of the MCS Class B Shares shall be made against payment
in full of the purchase price therefor all in accordance with Section 6.d.
hereof.
3. REORGANIZATION, MERGER, CONSOLIDATION, OR SALE OF A
SUBSTANTIAL PORTION OF THE ASSETS. This Agreement shall apply and extend to:
a. Merger, Consolidation or Sale of Assets. The stock of
any corporation with which the Corporation is merged or consolidated without
regard to which corporation is the
14
<PAGE> 19
survivor and to shares which the Corporation may receive and distribute if it
sells all or substantially all of its assets for shares.
b. Stock Dividend, Stock Split or Exchange of Stock. The
shares of any class issued by the Corporation as a stock dividend or stock split
of, or in exchange for, Shares subject to this Agreement, whether by way of
reorganization, reclassification or other means and any options to purchase any
shares of any class of capital stock which the Corporation is now or hereafter
authorized to issue. The foregoing shall not limit, or be construed so as to
limit, the general provisions of Sections 2 or 3 of this Agreement.
4. ENDORSEMENT OF STOCK CERTIFICATES. Each certificate of capital
stock of the Corporation and each voting trust or other certificate now or
hereafter held by Stockholders shall be stamped on the face or back thereof with
a legend in substantially the following form:
"The shares represented by this Certificate
are held subject to a certain Stockholders Agreement and may
not be transferred except in accordance with the terms
thereof. A copy of Stockholders Agreement will be furnished by
the Corporation upon request."
5. MANAGEMENT OF THE CORPORATION. During the term of this
Agreement and so long as CHCI and MCS are Stockholders of the Corporation, the
affairs of the Corporation shall be managed as follows:
15
<PAGE> 20
a. By-laws. Stockholders agree to vote all of their
Shares against amending the By-laws of the Corporation as in effect as of the
date of this Agreement, except as all of Stockholders may approve unanimously in
writing.
b. Election of Directors. Stockholders agree to take
such action as may be necessary or appropriate to cause the slate of Class A
Directors nominated by CHCI, and the slate of Class B Directors nominated by
MCS, to be elected as the sole Directors of the Corporation.
c. Resignation as Director. Stockholders agree that if a
Stockholder voluntarily or involuntarily ceases to be a Stockholder of the
Corporation, the Class A Directors, if CHCI ceases to be a Stockholder, or the
Class B Directors, if MCS shall cease to be a Stockholder, shall automatically
be deemed to have resigned as Directors of the Corporation and Stockholders
further agree to vote all of their Shares to cause the resulting vacancy on the
Board of Directors to be filled by the nominee of Stockholder, if any, who
purchases all of the Shares formerly owned by the former Stockholder.
d. Officers. Through and including the date that is
seven (7) years after the execution date of this Agreement, Stockholders agree
to take such action as may be necessary or appropriate to cause the Chair of the
Board of Directors of the Corporation to be the person as is designated from
time to time by CHCI. Stockholders agree to take such action as may be necessary
or appropriate to cause the Chief Executive Officer to be the person as is
designated from time to time by the Board of Directors of the Corporation
16
<PAGE> 21
e. Management of the Corporation. The conduct of the
day-to-day business of the Corporation will be under the authority of the Chief
Executive Officer, subject to the direction of the Board of Directors. In
addition to matters requiring approval of the Board of Directors under
applicable law and of the Stockholders under the Certificate of Incorporation,
the taking of any Fundamental Action (as defined in Article III of the By-laws)
shall require approval by not less than two-thirds (2/3) in number of the Board
of Directors.
f. No Issuance of Additional Shares. Other than the 102
shares of the Class A Stock and the 98 shares of the Class B Stock, the
Corporation shall not issue any shares of capital stock on or after the date of
this Agreement without the prior written approval of each Stockholder.
6. DISSOLUTION EVENTS. In the event that either (a) the
Corporation shall fail to become licensed or qualified under Illinois law to
provide managed care services at full risk on or before June 30, 1997 or (b) the
Board of Directors shall send written notice of a Final Deadlock pursuant to
Section 3.13 of the By-laws, Stockholders shall vote all of their Shares and
exert their best efforts to effect the orderly dissolution of the Corporation
and distribution of its assets in accordance with applicable law and, to the
extent consistent therewith, the assets of the Corporation on dissolution and
wind-up shall be applied first to the expenses of the wind-up, liquidation and
dissolution, including the right of the liquidator or liquidating committee to
set up such cash reserves as it may deem reasonably necessary for any contingent
or unforeseen liabilities or obligations of the Corporation, and thereafter all
of the remaining assets of the Corporation shall be distributed in the following
order:
17
<PAGE> 22
(1) To all creditors, be they Stockholders or otherwise,
in order of priority as provided by law; and
(2) The balance to the Stockholders based upon their
percentage ownership in the Corporation; provided, however, that each
Stockholder who shall have originally acquired Shares on the date of
this Agreement shall have the option to acquire property previously
contributed by such Stockholder or directly derived from property
contributed or licensed to the Corporation by such Stockholder at its
Fair Market Value. The non-interested Stockholder shall also have an
opportunity for seven (7) days thereafter to acquire such property at
such cost should the interested Stockholder not exercise its option
within seven (7) days of the determination of Fair Market Value.
18
<PAGE> 23
7. AUDITED FINANCIAL STATEMENTS. Unless the Board determines not
to have its financial statements audited, the Corporation shall cause the
independent certified public accountants selected by the Board of Directors to
prepare audited financial statements for the Corporation in accordance with
generally accepted accounting principles consistently applied for each fiscal
year of the Corporation. The Corporation shall cause its annual financial
statements to be delivered to each Stockholder and Director of the Corporation
within 120 days of the end of each fiscal year end of the Corporation.
8. CONFIDENTIALITY.
a. Treatment of Confidential Information. Except with
the express written consent of the Board of Directors of the Corporation, no
Party will disclose (or will permit any of its employees, affiliates,
independent contractors or any other parties to disclose) in any manner
Confidential Information received from or with respect to the other Parties to
third parties except to affiliates and professionals retained by such party to
review the Confidential Information (such as attorneys and accountants who are
in the business of advising the Parties); provided, however, that all third
parties to whom such Confidential Information is disclosed shall agree to be
bound by the terms and conditions contained herein with respect to the
confidential treatment of such Confidential Information.
b. Term of Confidentiality Obligation. The Parties'
obligation not to use or disclose Confidential Information shall extend for a
period of five years beyond the term of this Agreement or such greater period as
agreed to by the Parties. Confidential Information furnished under the terms of
this Agreement by any Party shall remain the property of the
19
<PAGE> 24
furnishing Party and shall, upon request (which may be at any time), be returned
forthwith to the furnishing Party or be destroyed, together with all copies made
whether by a Party or another to whom such information has been made available.
Upon request, any Party will provide to the others a certificate as to the
return or destruction of Confidential Information.
c. Confidential Information that Becomes Public. The
obligation to maintain the confidentiality of Confidential Information shall not
apply to information which as of the date hereof is in the public domain by
publication or otherwise (unless publication is made by the Party required to
maintain the Confidential Information as confidential). In the event any Party
receives a request from any governmental authority to disclose any information
resulting from the discussions and negotiations hereunder, such Party will
promptly notify the other Parties of such request, prior to disclosure so that
the Party may seek an appropriate protective order to take other protective
action, or waive compliance with this Agreement. If in the absence of a
protective order or waiver hereunder, the Party in the reasonable opinion of its
legal counsel is required to disclose any Confidential Information or otherwise
stand liable for contempt or suffer other penalty, the Party may disclose the
Confidential Information provided, however, that the disclosing party (i) shall
give the nondisclosing party written notice of the Confidential Information to
be so disclosed as far in advance of its disclosure as is practicable, (ii)
shall furnish only that portion of the Confidential Information which is legally
required, and (iii) shall use best efforts to obtain an order or other reliable
assurance that confidential treatment will be accorded to the Confidential
Information.
20
<PAGE> 25
9. SPECIFIC PERFORMANCE. Each Party hereto acknowledges that it
will be impossible to measure in money the damage to the other Party if a Party
hereto fails to comply with the obligations imposed by this Agreement, that, in
the event of any such failure, the other Party will not have an adequate remedy
at law or in damages. Accordingly, each Party hereto agrees that injunctive
relief or other equitable remedy, in addition to remedies at law or in damages,
is the appropriate remedy for any such failure and will not oppose the granting
of such relief on the basis that the other Party has an adequate remedy at law.
Each Party hereto agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
Party's seeking or obtaining such equitable relief. In addition to all other
rights or remedies with which any Party hereto may have against any Party hereto
who defaults in the performance of such Party's obligations under the Agreement,
such defaulting Party shall be liable to the non-defaulting Party for all
litigation costs and attorneys' fees incurred by the non-defaulting Party in
connection with the enforcement of any of the non-defaulting Party's rights or
remedies against the defaulting Party. Therefore, if any Party hereto shall
institute any action or proceeding to enforce the provisions hereof, any person
(including the Corporation) against whom such action or proceeding is brought
hereby waives the claim or defense therein that there is an adequate remedy at
law, and such person shall not urge in any such action or proceeding the claim
or defense that such remedy at law exists.
10. REPRESENTATIONS OF EACH STOCKHOLDER. Each Stockholder
severally represents that (a) such Stockholder has the complete and unrestricted
power and unqualified right to enter into and perform the terms of this
Agreement, (b) this Agreement
21
<PAGE> 26
constitutes a legal, valid and binding agreement with respect to such
Stockholder, enforceable against such Stockholder in accordance with its terms
and (c) such Stockholder owns the number of Shares indicated in the Recitals to
this Agreement, and has the sole and unrestricted voting power with respect to
such Shares.
11. PROVISIONS RELATING TO LOANS TO CORPORATION.
a. Concurrently with the execution of this Agreement,
MCS shall loan to the Corporation the principal sum of TWO MILLION AND NO 100THS
DOLLARS ($2,000,000) in exchange for the execution and delivery by the
Corporation to MCS of the Subordinated Promissory Note. In their sole
discretion, Stockholders may agree in the future to loan additional monies to
the Corporation at an interest rate not to exceed such Stockholder's cost of
borrowing such funds, or if such funds are not borrowed, at such Stockholder's
average cost of borrowing similar amounts for similar periods of time; provided,
however, that the interest rate to be charged on such loans shall be approved in
writing by the Board of Directors.
b. The Parties agree to conduct the business of the
Corporation in good faith and in a manner so that the Corporation is expected to
be in a position to pay the Subordinated Promissory Note in accordance with its
terms on the dates set for such payment of the Subordinated Promissory Note
either through available cash on hand or the borrowing capability of the
Corporation.
12. NOTICES. All notices, consents, requests, demands and other
communications hereunder shall be in writing and shall be deemed duly given to
any Party or parties (a) upon delivery to the address of the Party or parties as
specified below if delivered in person or by
22
<PAGE> 27
courier or if sent by certified or registered mail (return receipt requested),
or (b) upon dispatch if transmitted by telecopy or other means of facsimile
transmission, in each case addressed as follows:
If to the Corporation:
Community Health Choice of Illinois Inc.
650 S. Clark Street, Suite 300
Chicago, Illinois 60605
Attention: Patsy Crawford
Telephone: (312) 922-4501
Telecopier: (312) 922-6358
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Attn: Anne M. Murphy and Drew J. Scott
Telephone: (312) 609-7591
Telecopier: (312) 609-5005
If to CHCI:
Community Health Care of Illinois, Inc.
650 S. Clark Street, Suite 300
Chicago, IL 60605
Attention: Patsy Crawford
Telephone: (312) 922-4501
Telecopier: (312) 922-6358
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Attn: Anne M. Murphy and Drew J. Scott
Telephone: (312) 609-7591
Telecopier: (312) 609-5005
23
<PAGE> 28
If to MCS:
Managed Care Solutions, Inc.
2540 West Dunlop, Suite 100
Phoenix, Arizona 85021
Attention: Blaine Bergeson
Telephone: (602) 943-5660
Telecopier: (602) 943-5512
with a copy to:
Laird, Schneck, Linfors & Smyth
1440 East Missouri, Suite 250
Phoenix, Arizona 85014
Attention: Stephen Smyth
Telephone: (602) _________
Telecopier: (602) _________
The parties hereto may designate such other address or telecopy number
by written notice in the aforesaid manner.
1. TERM. This Agreement shall continue to be in full force and
effect so long as either (a) at least two Stockholders hold, directly or
indirectly, Shares subject hereto or (b) the obligations of the Parties hereto
have not been fulfilled.
24
<PAGE> 29
2. INTEGRATION; AMENDMENT. This Agreement and the other
Organizational Documents collectively constitute the entire agreement and
understanding among the Parties relating to the subject matter hereof and
supersede all prior agreements, including without limitation that certain Term
Sheet and Preorganizational Agreement dated as of March 29, 1996. This Agreement
may not be modified, altered or amended except by an agreement in writing signed
by an Authorized Officer of each of the Parties hereto.
3. NO WAIVER. No Party's failure at any time or times hereafter
to require strict performance by another Party of any provision of this
Agreement shall waive, affect or diminish any right of such Party thereafter to
demand strict compliance and performance therewith. None of the undertakings,
agreements, warranties, covenants or representations contained in this Agreement
shall be deemed to have been suspended or waived unless such suspension or
waiver is by an instrument in writing by each affected Party and specifying such
suspension or waiver is given pursuant to the requirements of this Section .
4. SEVERABILITY. If any provision of this Agreement or the
application thereof to any Party or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other Parties or circumstances will not be affected thereby and the
provisions of this Agreement shall be severable in any such instance.
5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective permitted successors and assigns of
the Parties hereto. This provision, however, shall not be deemed to modify
Section 3 hereof.
25
<PAGE> 30
6. CONFLICT WITH DOCUMENTS. The provisions of the other
Organizational Documents are incorporated in this Agreement by this reference
thereto. Except as otherwise expressly provided by specific reference to the
applicable provision of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in the other
Organizational Documents, the provision contained in this Agreement shall govern
and control.
7. COSTS, FEES AND EXPENSES. In accordance with this Agreement on
or prior to the date hereof and thereafter upon demand by CHCI and/or the
Corporation therefor, MCS shall pay or reimburse CHCI and/or the Corporation for
and/or incur or assume up to SEVEN HUNDRED THOUSAND AND NO 100THS DOLLARS
($700,000.00) of Preorganizational Expenses. MCS acknowledges and agrees that
the obligation to pay and cover the Preorganizational Expenses is a binding
obligation regardless of whether the business of the Corporation is finalized or
successful and that the enforceability of this provision survives termination or
expiration of this Agreement.
8. REGULATORY COMPLIANCE. Upon execution of this Agreement, MCS
shall promptly and diligently seek to procure, by application, assignment or
other appropriate means, all licenses and governmental approvals which may be
necessary for the Corporation to conduct its business, including, without
limitation, an HMO license and any other permits, licenses or certificates as
may be required under any Illinois or federal law and/or regulation, and any
other federal and state certifications necessary or appropriate to operate as a
qualified HMO under the Illinois Medicaid program (or any successor program
thereto).
26
<PAGE> 31
9. GOVERNING LAW. This Agreement and the other Organizational
Documents shall be governed and controlled by the laws of the State of Delaware
without regard to principles of conflict of laws.
10. SECTION HEADINGS. Section headings used in this Agreement are
for convenience only and shall not effect the construction or interpretation of
this Agreement.
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
27
<PAGE> 32
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the day and date written above.
COMMUNITY HEALTH CARE OF
ILLINOIS, an Illinois not-for-profit
corporation
By: Robert Klutts
--------------------------------
Its: Chairman
---------------------------
MANAGED CARE SOLUTIONS, INC.,
a Delaware corporation
By: Blaine Bergeson
--------------------------------
Its: President and CEO
--------------------------
COMMUNITY HEALTH CHOICE OF
ILLINOIS, INC., a Delaware corporation
By: Robert Klutts
--------------------------------
Its: Chairman
--------------------------
28
<PAGE> 1
MANAGED CARE SOLUTIONS, INC.
EXHIBIT 11
- - --------------------------------------------------------------------------------
STATEMENTS OF COMPUTATION OF COMMON AND
COMMON EQUIVALENT SHARES AND EARNINGS PER SHARE (1)
<TABLE>
<CAPTION>
MAY 31, MAY 31, MAY 31,
1994 1995 1996
------------ ----------- -----------
<S> <C> <C> <C>
Income(loss) from continuing operations $ 623,000 $ 461,000 $(2,214,000)
Discontinued operations, net of taxes 3,225,000 3,025,000 (254,000)
----------- ----------- -----------
Net income (loss) $ 3,848,000 $ 3,486,000 $(2,468,000)
=========== =========== ===========
Weighted-average common shares outstanding 2,106,000 2,280,000 2,827,000
Treasury stock repurchased - (45,000) (125,000)
----------- ----------- -----------
Weighted-average common and common
equivalent shares outstanding 2,106,000 2,235,000 2,702,000
=========== =========== ===========
Net income (loss) per share (2)
Continuing operations $ 0.30 $ 0.21 $ (0.82)
Discontinued operations 1.53 1.35 (0.09)
----------- ----------- -----------
$ 1.83 $ 1.56 $ (0.91)
=========== =========== ===========
</TABLE>
(1) This exhibit should be read in conjunction with "Summary of Significant
Accounting Policies - Earnings Per Share" in Note 2 to the Managed Care
Solutions, Inc. financial statements.
(2) Fully dilutive earnings per share have not been presented as amounts are the
same as the primary earnings per share.
<PAGE> 1
Exhibit 21
MANAGED CARE SOLUTIONS
SUBSIDIARIES
<TABLE>
<CAPTION>
State of Ownership
Subsidiary Incorporation %
- - ---------- ------------- ---------
<S> <C> <C>
Arizona Health Concepts, Inc. Arizona 100%
Managed Care Solutions of Arizona, Inc. Arizona 100%
Ventana Health Systems, Inc. Arizona 100%
Community Health Choice, Inc. Delaware 49%
Benova Managed Care Solutions, LLC New York 65%
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-04981, No. 33-42905, No. 33-56826, No. 33-76720,
and No. 33-92042) of Managed Care Solutions, Inc. of our report dated August 28,
1996 appearing in this Form 10-K.
PRICE WATERHOUSE LLP
Phoenix, Arizona
August 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,804,000
<SECURITIES> 3,000,000
<RECEIVABLES> 4,977,000
<ALLOWANCES> 624,000
<INVENTORY> 0
<CURRENT-ASSETS> 12,249,000
<PP&E> 4,671,000
<DEPRECIATION> 524,000
<TOTAL-ASSETS> 27,599,000
<CURRENT-LIABILITIES> 14,889,000
<BONDS> 1,917,000
0
7,000
<COMMON> 44,000
<OTHER-SE> 12,194,000
<TOTAL-LIABILITY-AND-EQUITY> 27,599,000
<SALES> 23,192,000
<TOTAL-REVENUES> 23,192,000
<CGS> 0
<TOTAL-COSTS> 21,151,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 591,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,460,000)
<INCOME-TAX> (246,000)
<INCOME-CONTINUING> (2,214,000)
<DISCONTINUED> (254,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,468,000)
<EPS-PRIMARY> (0.91)
<EPS-DILUTED> (0.91)
</TABLE>
