"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."
1992 AMENDMENT TO
IPA COMMERCIAL SERVICES AGREEMENT
The Undersigned parties to the PacifiCare IPA Commercial Services Agreement
between PacifiCare of California ("PacifiCare") and Santa Xxx-Tustin Physicians
Group, Inc. ("IPA") do hereby amend said Agreement as follows:
1. Paragraph 1.03 is amended in full to read as follows:
1.03 CATASTROPHIC CASE - is any single medical condition, including
complications arising from such medical condition, where the total cost of
Health Care Services to treat such condition is expected to exceed [ ** ]
per condition, regardless of payment source.
2. Paragraph 3.02 is amended in full to read as follows:
3.02 STANDARDS - All Medical Services arranged for or provided by IPA and
its Member Physicians shall be provided by professional personnel and at
physical facilities according to generally accepted standards of medical
practice and management in the community. IPA further agrees to provide or
arrange for Referrals to Specialist Physicians and facilities as are necessary,
appropriate, and in accordance with generally accepted standards of medical
practice in the community in compliance with the standards developed by
PacifiCare's Quality Assurance Committee. If IPA contracts with Specialist
Physicians to provide Medical Services under this Agreement, IPA shall require
such Specialist Physicians to provide IPA with the credentialing information set
forth herein. IPA shall obtain and maintain information concerning each Member
Physician's and Specialist Physician's education, training, references,
malpractice liability insurance, hospital staff status, hospital clinical
privileges, and hospital staff reappointment dates. Such information shall be
kept in a form prescribed by or acceptable to PacifiCare. Upon request, the
credentialing information shall be made available to PacifiCare for review or
copying.
IPA acknowledges and agrees that it shall report Member Physicians or
Specialist Physicians as required by the California Business and Professions
Code Section 805 ("Section 805"). IPA further agrees to maintain and demonstrate
to PacifiCare upon request compliance with the following:
3.02.01 IPA shall use best efforts to ensure that its Member Physicians
and Specialist Physicians are licensed by the State of California and have
current Drug Enforcement Agency ("DEA") registration. IPA shall immediately
notify PacifiCare in writing of any of the following actions taken by or against
a Member
1
Physician or Specialist Physician: (i) the surrendering, revocation, or
suspension of a license; (ii) the surrendering, revocations, or suspension of
current DEA registration; (iii) any filing pursuant to Section 805; (iv) any
filing pursuant to the National Practitioner Data Bank; (v) the filing of any
malpractice claim of more than ten thousand dollars ($10,000) and (vi) a
change in hospital staff status or hospital clinical privileges, including
any restrictions or limitations.
3.02.02 In the event that it is determined by PacifiCare that IPA does
not obtain and maintain the information set forth in paragraph 3.02, IPA agrees
to assist PacifiCare in obtaining credentialing information concerning each
Member Physician's and Specialist Physician's education, training, references,
malpractice liability insurance, hospital staff status, hospital clinical
privileges, and hospital staff reappointment dates. IPA shall obtain from each
Member Physician and Specialist Physician a signed waiver, acceptable to
PacifiCare, allowing PacifiCare access to such credentialing information at any
acute care hospital or health care facility. If IPA is unable to obtain a signed
waiver from a Member Physician or Specialist Physician, IPA shall obtain the
credentialing information directly from the acute care hospital or health care
facility and make such information available to PacifiCare upon request for
review and copying.
3.02.03 IPA agrees to provide access to continuing education programs
for its Member Physicians and Specialist Physicians in accordance with the
standards established by the California Medical Association for continuing
education. The content and delivery of such continuing education programs shall
be in the discretion and judgement of IPA, in order to maintain high standards
for the delivery of Medical Services pursuant to this Agreement. IPA further
agrees to gather, correlate, and distribute to its Member Physicians and
Specialist Physicians, information regarding professional medical activities and
developments which IPA believes may be of assistance in providing Medical
Services pursuant to this Agreement.
3.02.04 IPA agrees to provide reasonable evidence that all nurses and
other ancillary and paramedical personnel who are employed by and contract with
IPA or Specialist Physicians are properly licensed by the State of California.
3. Paragraph 5.02 is amended in full to read as follows:
5.02 ADDITIONAL PAYMENTS - Pacificare and IPA agree to provide payments to
each other in accordance with the terms of the following programs, if
applicable: Hospital Control Program, Individual Stop-Loss Program, Pharmacy
Control Program, Mammography Reimbursement Program, AIDs Stop-Loss Program and
Adverse Selection Program as specified in Attachments A5, A3, E, C, F and H
2
respectively, incorporated in full herein by reference.
To the extent that each party owes an amount to the other party in the risk
programs noted above, IPA agrees that PacifiCare shall combine the results of
all applicable risk programs such that one aggregate payment is payable to or
receivable from IPA. A fully detailed accounting of the results of each program
shall accompany the aggregate payment or notice of amount due.
4. Paragraph 12.10 is amended to read as follows:
12.10 TRANSFER OF SUBSCRIBERS - Subscribers requests for transfer from IPA
shall be in writing and subject to approval by PacifiCare based on the criteria
set forth in the PacifiCare Policy and Procedures Manual. PacifiCare reserves
the right to transfer a Subscriber for any reason.
IPA may request transfer of Subscribers for cause, or if the capacity of IPA is
over burdened such that the provision of Medical Services as required pursuant
to this Agreement adversely is affected.
5. Attachment A4 COST OF CARE - is amended in full as follows:
See Exhibit 1, attached hereto and incorporated herein by the reference.
6. Attachment A5 HOSPITAL CONTROL PROGRAM is amended in full as follows:
See Exhibit 2, attached hereto and incorporated herein by this reference.
7. Attachment B MEDICAL AND HOSPITAL GROUP AND INDIVIDUAL SUBSCRIBER
AGREEMENTS is amended to add the new Group Subscriber Agreement as Attachment
B-1 as follows:
See Exhibit 5, attached hereto and incorporated herein by this reference.
It is understood and agreed that the new Group Subscriber Agreement attached as
Attachment B-1 will replace the current Attachment B as each employer group
executes the new Subscriber Agreement approximate to the employers' annual
renewal date.
8. Attachment C CAPITATION PAYMENT RATES regarding Durable Medical Equipment
and Maternity Payments is amended to read as follows:
MATERNITY PAYMENTS
For term pregnancies delivered within nine (9) months of a
3
Subscriber's initial assignment to IPA, PacifiCare shall pay IPA [ ** ] at
the time of processing the inpatient obstetrical claim.
9. Attachment E PHARMACY CONTROL PROGRAM is amended in full as
follows:
See Exhibit 3, attached hereto and incorporated herein by this
reference.
10. Attachment F, AIDS STOP LOSS PROGRAM is amended in full as
follows:
See Exhibit 4, attached hereto and incorporated herein by this
reference.
11. Attachment G, DIVISION OF FINANCIAL RESPONSIBILITY
to be amended if required
The effective date of this Amendment is January 1, 1992
By signing below, both parties hereto have executed and agreed to
this Amendment.
PACIFICARE, INC IPA Santa Xxx-Tustin Physicians
Gr. Inc.
By: /s/ Xxxxx Xxxxxxx By: /s/ Xx. Xxxxxx X. Xxxxx
------------------------------ -----------------------------
Xxxxx X. Xxxxx, Vice President
Date: 1/14/93 Date: 12/23/92
---------------------------- ---------------------------
4
EXHIBIT 1
ATTACHMENT A4
COST OF CARE
(medical group version)
For purposes of this Agreement, the Cost of Care for Medical Services
rendered by IPA to Subscribers shall equal:
a) [ ** ] of the fees charged by IPA to IPA's fee-for-service
patients for the same or similar services, if the same or similar services
are rendered by Member Physicians who practice at IPA Facilities; or
b) [ ** ] of the fees actually paid, if the services are rendered by
Specialist Physicians or Outside Providers.
IPA shall provide PacifiCare with a copy of IPA's fee-for-service fee
schedule and shall notify PacifiCare thirty (30) days prior to the effective
date of any changes in such fee schedule. The amount of increase of IPA's
fees shall be limited to [ ** ] per year for purposes of any calculations
pursuant to this Agreement, regardless of the actual percentage increase in
IPA's fees each year.
IPA shall notify PacifiCare of the existence and payment or discount
provisions of any agreements between IPA and Specialist Physicians and Outside
Providers who render Medical Services to Subscribers.
5
LA/OR/SD EXHIBIT 2
ATTACHMENT A5
1992-HOSPITAL CONTROL PROGRAM
1. INTRODUCTION
The Hospital Control Program is designed to provide a financial incentive for
the control of inpatient, in-area Emergency Services and selected other
outpatient services. When actual incurred costs, when compared to a
predetermined budget, are favorable, the savings are shared with the IPA.
Conversely, when actual incurred costs exceed the budget, the IPA shares the
additional costs. Risk limitations are included at both the individual
Subscriber claim level (through the payment of a reinsurance premium for
specific stop loss) and at the aggregate level (through a percentage
limitation on overall shared savings or losses) to mitigate extraordinary
performance fluctuations.
2. BUDGET
DOLLARS $PMPM
-------------
Inpatient Hospital [ ** ]
Utilization Rate 215 days PTMPY
Perdiems, net of discounts:
Regular Plans [ ** ]
880 Plan [ ** ]
[ ** ]
Emergency Room and Ambulance Services [ ** ]
Outpatient Surgery and other Services [ ** ]
Selected OP Services from Capitation [ ** ]
(Chemotherapy, Dialysis, home health etc)
Urgent Care Center Agreement (if applicable) [ ** ]
Hospital Control Program Payout Pool [ ** ]
-------
SUB-TOTAL [ ** ]
Reinsurance Program Deductible [ ** ] [ ** ]
Coinsurance [ ** ]
-------
TOTAL BUDGET PMPM [ ** ]
-------
-------
6
The total budget PMPM to be used for settlement purposes shall be calculated by
applying the IPA's specific composite age/sex factor to the budgeted amounts for
Inpatient Hospital, Emergency and Ambulance Services, Outpatient Surgery
Services, and Selected Outpatient Services. The composite age/sex factor will be
calculated by multiplying the IPA's member months within each age/sex category
listed below and dividing the sum of these numbers by IPA's total member months.
The age/sex adjusted dollar figure will be added to the other Hospital Control
Program budget components.
AGE/SEX AGE/SEX
CATEGORY FACTOR
-------- ------
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
3. ACTUAL COSTS
Actual costs are defined for purposes of this Program as:
a. Hospital Services incurred during the period of calculation for
which PaciflCare has received a claim and paid net of discounts,
b. For quarterly interim calculations, Hospital Services incurred
during the period of calculation 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),
c. Hospital Services incurred prior to the period of calculation,
and paid during the current period,
LESS;
d. Subscriber claim costs in excess of the reinsurance deductible
specified in the budget above,
e. Third party recoveries received during the period of calculation
that are associated with current or prior period calculation periods.
7
4. CALCULATION OF SAVINGS AND LOSSES
The inpatient hospital component of the budget is stated assuming [ ** ] of
the Subscribers enrolled in the 880 Plan and [ ** ] of the Subscribers in
all other plans. The earned budget will be adjusted to reflect the actual
number of Subscribers who enrolled in the 880 and non-880 plans based upon
PacifiCare's Member Month Moving Analysis Report for the period (MB0530). The
MB0530 Report is a report that reflects actual eligible Subscribers by
benefit plan for the period as adjusted for retroactive eligibility
terminations and additions reported during the period as of the report's run
date. Therefore, the actual earned budget may be greater or less than the net
budget indicated in this Attachment.
5. DISTRIBUTION OF SAVINGS - In the event that actual costs are less than
the earned budget, then the IPA shall receive the share of savings relative
to the bed days per thousand Subscribers per year (PTMPY) indicated in the
following sliding scale schedule:
Bed Days/Outpt. Surgery IPA % SHARE OF SAVINGS
PTMPY Limited to 15 % of Earned Budget
----------------------- --------------------------------
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
For the purpose of this calculation, "Bed Days/Outpt. Surgery" shall be defined
as acute inpatient days plus outpatient surgeries, net of any acute inpatient
days or outpatient surgeries which are covered under the reinsurance program, or
are paid through a third party recovery, or through coordination of benefits.
6. DISTRIBUTION OF DEFICIT - If actual costs are greater than the earned
budget, then the IPA will be liable for [ ** ] of the amount lost up to the
maximum payment specified below;
MAXIMUM DEFICIT PAYMENT: [ ** ]
7. PERIODIC CALCULATIONS - Cumulative calculations of the Hospital Control
Program results will be based on calendar quarters. Interim calculations and
payments will be made 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 final year end settlement. Calculations will
8
be made in accordance with the contractual terms above and the amount of
PacifiCare's quarterly payments to IPA will be sixty percent (60%) of the amount
due in order to adjust for incurred Hospital Service claims not yet received by
PacifiCare.
In the event that the interim calculation reflects a cumulative loss for the
IPA, no interim payment will be due from IPA in the first quarter that a loss
results. However, if a cumulative loss is reflected for two consecutive
quarters, the IPA will make an interim payment of sixty percent (60%) of the
cumulative amount due to PacifiCare. Such payment to PacifiCare shall be due
within fifteen (15) days of the IPA's receipt of such notice from PacifiCare.
A calendar year-end calculation of the Hospital Control Program shall be made by
PacifiCare and payment to the appropriate party shall be made within one hundred
twenty (120) days of the end of the calendar year.
8. MONTHLY REPORTING - PacifiCare will distribute a report monthly , on or
before the 15th, that lists the payments made during the previous month for
services included in the Hospital Control Program.
9. SPECIAL CONDITIONS FOR EMERGENCY SERVICES - If the IPA and/or its
participating physicians direct a PacifiCare Subscriber to use the
emergency room of a hospital, and PacifiCare determines that the use of those
services were not Emergency Services as defined in this Agreement, PacifiCare
reserves the right to deduct the professional component of the PacifiCare
payment from the IPA's capitation as a penalty for improper referral. When an
inappropriate referral for emergency care has been determined by PacifiCare, a
written Conformance Request will be forwarded to the IPA. The Conformance
Request will serve as notice that all subsequent inappropriate referrals will
have the penalty applied.
10. Any hospital or emergency expenses that are considered third party
liability, Workers Compensation claim, or coordination of benefits claims, shall
be included in the calculations. If, at a later date, these claims are collected
then an adjustment will be made in the calculations.
11. Calculations shall not include hospital admissions which are not authorized
by IPA and which are not Emergency Services.
9
EXHIBIT 3
ATTACHMENT E
1992 PHARMACY CONTROL PROGRAM
The purpose of the Pharmacy Control Program (PCP) is to provide an incentive to
the IPA to xxxxxx the efficient utilization of prescription services. The IPA is
given the opportunity to share in savings realized by IPA maintaining or
improving specific utilization goals outlined below.
STANDARD INCENTIVE PROGRAM
GENERIC PERCENTAGE INCENTIVE - The Pharmacy Control Program shall be indexed
to PacifiCare's [ ** ]. For every percentage point IPA exceeds PacifiCare's
[ ** ] PacifiCare shall pay IPA an amount per member per month in
accordance with the following scale:
Payout Factor Prescription Rate (1)
------------- --------------------
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
[ ** ] [ ** ]
(*) [ ** ]
Formulary Bonus - If IPA qualifies for a generic percentage rate payment as
outlined above, a bonus payment of [ ** ] shall be paid for every [ ** ]
IPA's formulary utilization percentage rate exceeds [ ** ] up to a maximum
of [ ** ]. [ ** ]
10
(1992 Pharmacy Control Program continued)
IPA agrees to participate in a generic substitution and formulary program
established by PacifiCare's Formulary Advisory Committee.
UTILIZATION AND CALCULATION REPORTS
PacifiCare shall provide quarterly utilization reports showing IPA's generic
percentage, prescription rate and formulary percentage along with a
comparison to [ ** ]. PacifiCare shall provide semi-annual Pharmacy Control
Program calculations and incentive payments. The first payment shall be for
the six months ending June 30, 1992 and shall be paid within sixty days of
this date. The final calculation and incentive payment shall be cumulative
for the twelve months ending December 31, 1992 and shall be paid within one
hundred twenty days of year end.
In the event that IPA receives a semi-annual incentive payment that is greater
than the cumulative twelve month calculated amount, PacifiCare shall be due a
refund of the difference.
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EXHIBIT 4
ATTACHMENT F
AIDS STOP LOSS PROGRAM
PacifiCare agrees to provide additional financial protection to IPA for the cost
of Medical Services rendered to Subscribers who have AIDS. Subscribers who are
eligible for this program are as follows:
Subscribers who are admitted to a hospital for the treatment of an
opportunistic infection and have been diagnosed with clinical AIDS.
Once PacifiCare's Medical Services Department has verified that a Subscriber
meets the definition above, further expenses for Medical Services associated
with the Subscriber's AIDS care will be paid by PacifiCare as defined by Cost of
Care in Attachment A4 hereto. To receive reimbursement, IPA must submit a Stop
Loss claim to PacifiCare indicating the date the Subscriber became eligible for
the AIDS Stop Loss Program and the expenses incurred on behalf of the Subscriber
after the effective date. IPA may include claims under the AIDS Stop Loss
Program commencing on the date the Subscriber was admitted to the hospital, or
on the date home health care was provided the Subscriber in-lieu of
hospitalization, pursuant to the eligibility criteria noted above. Expense for
Medical Service pertaining to AIDS care rendered from January 1 1992, through
December 31, 1992 only will be included in the AIDS Stop Loss Program. A final
claim must be filed for such Medical Services by March 31, 1993 to be included
in this AIDS Stop Loss Program.
All claims submitted for consideration under the AIDS Stop Loss Program must be
processed and coordinated in a confidential manner. Inquiries for determining
such procedures should be directed to PacifiCare's Medical Director.
12
