"ALL SECTIONS MARKED WITH TWO ASTERISKS ("**") REFLECT PORTIONS WHICH HAVE
BEEN REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION BY PROSPECT MEDICAL HOLDINGS, INC. AS PART OF A REQUEST FOR
CONFIDENTIAL TREATMENT."
PACIFICARE CHOICE AMENDMENT TO
PACIFICARE IPA COMMERCIAL SERVICES AGREEMENT
The undersigned parties to the PacifiCare IPA Commercial Services Agreement
(the "Agreement") by and between PacifiCare, Inc. ("PacifiCare") and Santa
Xxx-Tustin Physician's Group, Inc. ("IPA") do hereby amend the Agreement with
reference to the following facts:
WHEREAS, PacifiCare intends to introduce a point-of-service benefit plan
known as "PacifiCare Choice" for certain select employer groups beginning in
1993;
WHEREAS, PacifiCare Choice will consist of the PacifiCare Health Plan, plus
a separate supplemental indemnity plan offered through an insurance company or
through self-insured employers to cover Out-of-Network Services, as defined
below;
WHEREAS, IPA shall provide or arrange Health Care Services to PacifiCare
Choice Subscribers under the same terms and conditions as other PacifiCare
Health Plan Subscribers;
WHEREAS, IPA shall have no financial responsibility for Out-of-Network
Services; and
WHEREAS, PacifiCare and IPA desire to allow IPA to participate
in savings realized from Out-of-Network Services through
implementation of a Pacificare Choice Control Program.
NOW THEREFORE, the Agreement shall be amended as follows:
1. The following definitions shall be added to Section One of the Agreement.
PACIFICARE CHOICE - is a health plan consisting of the PacifiCare
Health Plan, plus the Out-of-Network Indemnity Plan.
OUT-OF-NETWORK INDEMNITY PLAN - is a supplemental health plan offered
as part of the PacifiCare Choice by an insurance company or a self-insured
employer which provides limited coverage for Out-of-Network Services.
PACIFICARE IN-NETWORK PLAN - is the PacifiCare Health Plan that is
sold in conjunction with the Out-of-Network Indemnity Plan as part of
PacifiCare Choice.
CONVENTIONAL PLAN - is the PacifiCare Health Plan which is NOT sold as
part of the PacifiCare Choice.
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IN-NETWORK SERVICES - are Health Care Services which are provided or
arranged by IPA to PacifiCare Choice Subscribers pursuant to the PacifiCare
Health Plan.
OUT-OF-NETWORK MEDICAL SERVICES - are the Health Care Services
summarized in Attachment A2 obtained by PacifiCare Choice Subscribers which
are not provided or authorized by IPA in accordance with the PacifiCare
Health Plan.
OUT-OF-NETWORK HOSPITAL SERVICES - are the Health Care Services
summarized in Attachment A1 obtained by PacifiCare Choice Subscribers which
are not arranged or coordinated by IPA in accordance with the PacifiCare
Health Plan, and which do not qualify as Emergency Services.
OUT-OF-NETWORK SERVICES - are Out-of-Network Medical Services and
Out-of-Network Hospital Services. Out-of-Network Services are covered
in part under the Out-of-Network Indemnity Plan, but are not covered under
the PacifiCare Health Plan. IPA shall have no financial responsibility for
Out-of-Network Services.
2. Section 3.07.01 shall be added to read as follows:
3.07.01 COLLECTION OF CHARGES FOR OUT-OF-NETWORK SERVICES
Notwithstanding anything to the contrary in Section 3.07 or elsewhere in
the Agreement, if an IPA Member Physician or Specialist Physician provides
Out-of-Network Services to a PacifiCare Choice Subscriber, IPA shall
xxxx the Out-of-Network Indemnity Plan carrier for such services and agrees
to accept full reimbursement at the following [ ** ] to be utilized
with the [ ** ]:
Medicine [ ** ]
Surgery [ ** ]
Radiology [ ** ]
Pathology [ ** ]
Anesthesia [ ** ]
For services provided which are not included in the [ ** ], or are not
listed above, IPA agrees to accept reimbursement at [ ** ] of the
provider's [ ** ].
2
If an IPA Member Physician or Specialist Physician provides Out-of-Network
Services to a PacifiCare Choice Subscriber who has selected or has been
assigned to IPA as his or her Participating Medical Group, prior to
providing Out-of-Network Services, IPA shall obtain written authorization
from the PacifiCare Choice Subscriber in the form attached hereto as
Exhibit 1. IPA shall not encourage Subscribers to receive Medically
Necessary Services from Outside Providers. Breach of this Section 3.07.01
shall constitute cause for termination of this Agreement.
3. Paragraph 3.29 shall be added to read as follows:
3.29 PACIFICARE CHOICE CONTROL PROGRAM - IPA agrees to participate in
and have the rights and responsibilities applicable to the PacifiCare
Choice Control Program as set forth in Attachment A6, attached hereto and
incorporated herein.
4. The following shall be added to Attachment C: CAPITATION PAYMENT RATES:
PACIFICARE CHOICE CAPITATION PAYMENTS
Capitation Payments for PacifiCare Choice Plan Subscribers will be
determined in the same manner as for Conventional Plan Subscribers, except
as provided in this paragraph. IPA's Capitation Payment for PacifiCare
Choice Plan Subscribers shall equal the Percent of Premium specified in
this Attachment C multiplied by [ ** ] of the Normal Community Premium
billed by PacifiCare each month for coverage of Subscribers designating
IPA as their Participating Medical Group, less the percent specified for
the Individual Stop Loss Program noted in Attachment A3. The Normal
Community Premium is a prospectively determined community rate established
in accordance with federal regulations for each PacifiCare Health Plan.
3
5. Attachment A6 PACIFICARE CHOICE CONTROL PROGRAM shall be added
to read as follows:
See Exhibit 2 attached hereto and incorporated herein by
this reference.
The effective date of this Amendment shall be January 1, 1993.
By signing below, both parties hereto have executed and agreed to
this Amendment.
PACIFICARE, INC IPA Santa Xxx-Tustin Physicians
Grp., Inc.
By: /s/ Xxxxx Xxxxxxx By: /s/ Xx. Xxxxxx X. Xxxxx
------------------------------ -----------------------------
Date: 1/14/93 Date: 12/23/92
---------------------------- ---------------------------
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EXHIBIT 1
ACKNOWLEDGMENT FOR OUT-OF-NETWORK SERVICES
FOR PACIFICARE CHOICE SUBSCRIBERS
My signature below represents my acknowledgment and recognition that the
services I am requesting from (DOCTOR'S NAME) are not covered by under my
PacifiCare Health Plan. The requested services are not covered because (1) the
services are not emergency services and they have not been authorized by my
participating medical group physician or (2) the services are specifically
excluded under my PacifiCare Health Plan.
I further understand that if coverage for the requested services is available
under my Out-of-Network supplemental coverage, this coverage may be subject to
substantial deductibles and copayments.
--------------------------------
(patient's name)
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EXHIBIT 2
ATTACHMENT A6
PACIFICARE CHOICE CONTROL PROGRAM
The PacifiCare Choice Control Program is designed to provide a financial
incentive for the control of In-Network Hospital Services and Out-of-Network
Services.
PacifiCare Choice Subscriber member months and related In-Network Hospital
Service expenses shall not be included in calculating the Conventional Hospital
Control Program described in Attachment A5.
CHOICE BUDGET
THE CHOICE BUDGET - The Choice Budget shall consist of two components: When a
Conventional Plan is sold in conjunction with the PacifiCare Choice Plan, the
Choice Budget for such PacifiCare Choice Subscribers shall be established as
[ ** ]; when a Conventional Plan is NOT sold in conjunction with the
PacifiCare Choice Plan, the Choice Budget for such PacifiCare Choice
Subscribers shall be established as [ ** ]. The Choice Budget assumes the
PacifiCare Choice Plan sold requires a deductible no greater than [ ** ], a
[ ** ] coinsurance for all Out-of-Network services, and In-Network Hospital
Services do not require Subscriber copayments (i.e. 880, 1500 plans). IPA'S
EARNED CHOICE BUDGET will be determined by adjusting each of the above two
budget components to reflect the Choice Budget values for the actual plan mix
of Pacificare Choice Subscribers assigned to IPA, and calculating the average
in accordance the following table:
CHOICE BUDGET VALUES FOR
PACIFICARE CHOICE PLAN SOLD IN CONJUNCTION WITH CONVENTIONAL PLAN
O-O-N O-O-N IN NETWORK HOSPITAL SERVICES
DEDUCTIBLE COINSURANCE NO COPAY WITH COPAY
----------- ----------- -------- ----------
[ ** ] [ ** ] [ ** ] [ ** ]
[ ** ] [ ** ] [ ** ] [ ** ]
[ ** ] [ ** ] [ ** ] [ ** ]
[ ** ] [ ** ] [ ** ] [ ** ]
6
CHOICE BUDGET VALUES FOR
PACIFICARE CHOICE PLAN SOLD WITHOUT CONVENTIONAL PLAN
O-O-N O-O-N IN NETWORK HOSPITAL SERVICES
DEDUCTIBLE COINSURANCE NO COPAY WITH COPAY
----------- ----------- -------- ----------
[ ** ] [ ** ] [ ** ] [ ** ]
[ ** ] [ ** ] [ ** ] [ ** ]
[ ** ] [ ** ] [ ** ] [ ** ]
[ ** ] [ ** ] [ ** ] [ ** ]
Charges applied against the Choice Budget will consist of:
- In-Network Hospital Services costs incurred during the period of
calculation for which PacifiCare has received a claim and paid net of
discounts; In-Network Hospital Services incurred prior to the period
of calculation and paid during the current period; and for quarterly
interim calculations, In-Network Hospital Services incurred during the
period for which PacifiCare has received a claim but has not paid,
less an average aggregate discount factor (for year end calculations,
only paid claims will be included); LESS Subscriber claim costs in
excess of the In-Network Hospital Services reinsurance deductible
specified above;
- Claims paid charges for Out-of-Network Services incurred during the
current period; and paid claim charges for Out-of-Network Services
incurred but not included in prior period Choice Control Program
calculations; LESS
- Third party liability and coordination of benefit recoveries for
In-Network and Out-of-Network Services that are received during the
period of calculation
SAVINGS DISTRIBUTION
In the event that total charges are less than the earned Choice Budget, IPA
shall be entitled to participate in a capitation restoration program, whereby
IPA shall receive [ ** ]. Distribution to IPA under this capitation
restoration program shall be limited to the savings available pursuant to the
Choice Control Program calculation. Additionally, IPA shall receive [ ** ]
of any remaining savings, if any, after the IPA capitation restoration
distribution.
IPA is not at financial risk in the event that total charges exceed the earned
Choice Budget.
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PERIODIC CALCULATIONS
The PacifiCare Choice Control Program shall be administered on an IPA specific
basis. For IPAs with multiple IPA Facilities, the program shall be calculated
for each IPA Facility, however savings and payment distributions shall be based
on IPA's consolidated results.
Cumulative calculations of the PacifiCare Choice Control Program results will be
based on calendar quarters in conjunction with Conventional Plan Hospital
Control Program calculations, which are within sixty (60) days of the end of
each calendar quarter except for the fourth quarter for which no calculation or
payment will be made in anticipation of the year end settlement. Interim
distribution payments will be limited to sixty percent (60%) of calculated
savings to account for incurred but not received claims.
Year end calculations and payments of the PacifiCare Choice Control Program
shall be made within one hundred fifty (150) days of the end of each calendar
year.
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