"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."
1995 AMENDMENT TO
IPA MEDICARE SHARED RISK SERVICES AGREEMENT
The undersigned parties to the PacifiCare IPA Medicare Shared Risk Services
Agreement ("Agreement") between PacifiCare of California ("PacifiCare") and
Santa Xxx Xxxxxx Physicians Group, Inc. ("IPA") do hereby amend the Agreement
as set forth herein. Except as otherwise specifically provided, terms
utilized herein shall have the meanings set forth in the Agreement. Except as
specifically amended herein, the Agreement shall remain unchanged and in full
effect.
1. Paragraph 3.17, RECIPROCITY AGREEMENTS, is amended in full to read as
follows:
3.17 RECIPROCITY AGREEMENTS - IPA agrees to develop agreements among
PacifiCare's Participating Medical Groups to assure reciprocity of health
care among the Participating Medical Groups for PacifiCare Subscribers.
IPA shall accept non-emergency or specialty Referrals from such other
Participating Medical Groups and such other Participating Medical Groups
shall be required to accept non-emergency or specialty Referrals from IPA.
Payment for the foregoing Referrals shall be no greater than the Cost of
Care Rates described in Attachment A4.
2. Paragraph 5.05, REINSURANCE, is added to read as follows:
5.05 REINSURANCE - The purpose of the reinsurance program described
herein is to limit IPA's risk for Hospital Services under the Hospital
Control Program to a specified amount per Subscriber per Year (the
"Reinsurance Deductible") in return for a payment of a Reinsurance
Premium. For the 1995 calendar year, the Reinsurance Deductible shall be
[ ** ] per Subscriber per Year and the Reinsurance Premium shall equal
[ ** ] of the Monthly HCFA Payment per Subscriber per month.
Notwithstanding Section 12.12, PacifiCare may amend the Reinsurance
Premium and Reinsurance Deductible on an annual basis effective each
January 1 by providing sixty (60) days prior written notice to IPA.
Reinsurance claims shall be calculated at the Cost of Care values as set
forth in Attachment A5, Sections c.1, c.2, and c.3 of this Agreement.
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3. Paragraph 5.06, MOST FAVORED PLAN, is added to read as follows:
5.06 MOST FAVORED PLAN - IPA represents that, during the term of this
Agreement, the compensation rates payable under this Agreement are and
shall continue to be equal to or less than the rates charged under other
IPA agreements for the provision of services to enrollees of health care
service plans ("Competing Plan Agreements"), when such rates are adjusted
to reflect different risk levels and programs under the Competing Plan
Agreements (the "Adjusted Rates"). If at any time IPA agrees or has
agreed to accept lower Adjusted Rates under a Competing Plan Agreement than
the rates set forth in this Agreement, or any amendment hereto, IPA shall
immediately notify PacifiCare in writing of such agreement and the
applicable lower Adjusted Rates. Within thirty (30) days thereafter,
PacifiCare and IPA shall meet to discuss implementation of new
compensation rates under this Agreement which shall be equal to or less
than the Adjusted Rates accepted under the Competing Plan Agreement. If the
parties fail to agree to implementation procedures for the new rates
within thirty (30) days of the effective date of the Competing Plan
Agreement, the compensation rates under this Agreement will be lowered
upon notice to IPA from PacifiCare to equal the lower Adjusted Rate. The
new compensation rates shall be effective the date the lower Adjusted
Rates become effective under the Competing Plan Agreement. IPA's failure
to notify PacifiCare of the acceptance of lower Adjusted Rates from a
Competing Plan shall be grounds for termination of this Agreement by
PacifiCare pursuant to Section 7.01.01(d).
4. Attachment A1, HOSPITAL SERVICES, Paragraph 10.d., OTHER HOSPITAL
SERVICES, is added to read as follows:
e. Self injectable medications.
5. Attachment A3, INDIVIDUAL STOP LOSS PROGRAM, is amended in part as follows:
2. Deductible and Premium: For the 1995 calendar year, the ISL
Deductible shall equal [ ** ] per Subscriber per year and the ISL
Premium shall equal [ ** ] of the Net Premium per Subscriber per
month. Notwithstanding Section 12.12, PacifiCare may amend the ISL
Premium and ISL Deductible on an annual basis effective each January
1 by providing sixty (60) days prior written notice to IPA.
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6. Attachment A5, HOSPITAL INCENTIVE PROGRAM, is amended in full as follows:
Please refer see Exhibit 1 attached hereto and incorporated herein by
this reference.
7. Attachment C, COMPENSATION, is amended in part as follows:
A. BENEFIT WITHHOLD
PacifiCare shall retain [ ** ] of the revenue received each month
from HCFA to fund the following Subscriber benefits. These benefits are
outlined more specifically in the Secure Horizons Medical and Hospital
Subscriber Agreement.
1) Outpatient prescription drugs
2) Acute hospital days greater than 150 per year
3) Respite Care
4) Immunosuppressive Drugs
5) Mammography (see Section E below)
IPA shall be given the opportunity to share in any savings which
may be present in the Utilization Control Program as described in
Attachment A5.
In addition, upon implementation of the Secure Horizons preventative
dental benefit, PacifiCare shall retain an additional [ ** ] of the
revenue received each month from HCFA to fund the preventative dental
benefit.
B. MONTHLY HCFA PAYMENT
PacifiCare shall pay IPA [ ** ] of the Monthly HCFA Payment, less the
applicable ISL Premium identified in Attachment A3 as payment for
Individual Stop Loss coverage. The percent of monthly HCFA Payment
stated above includes [ ** ] which is the value of IPA's covenant not
to compete as outlined in Section 9 of this Agreement. Should IPA breach
the covenant not to compete, PacifiCare shall reduce the percent of
monthly HCFA Payment by this [ ** ] commencing the month in which the
breach occurs. It is understood that any existing Medicare Risk
arrangements that the IPA currently has in effect does not constitute a
breach for this purpose. The payment per Subscriber per month by
PacifiCare to IPA shall be increased or decreased to reflect increases
or decreases made by HCFA in the Monthly HCFA Payment. PacifiCare shall
make monthly retroactive adjustments to reflect adjustments made by
HCFA, if any.
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PacifiCare shall provide IPA appropriate documentation in support of the
actual Capitation Payment made. Should IPA desire additional billing
information, PacifiCare shall make available for inspection other mutually
agreed upon documents, upon thirty (30) days prior written notice from
IPA. IPA shall have the right to reasonably audit PacifiCare's books and
records directly relating only to IPA's Capitation Payment determinations
upon thirty (30) days prior written notice at IPA's sole expense.
THE EFFECTIVE DATE OF THIS AMENDMENT IS JANUARY 1, 1995
By signing below, both parties hereto have executed and agreed to this
Amendment.
PACIFICARE, INC. IPA
By: /s/ Xxxxx Xxxx By: /s/ Xxxxxx X. Xxxxx
---------------------------------- ---------------------------------
Xxxxx Xxxx, SENIOR VICE PRESIDENT,
GENERAL MANAGER
Date: 1-29-95 Date: 1/19/95
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EXHIBIT 1
ATTACHMENT A5
UTILIZATION CONTROL PROGRAM
---------------------------
As an incentive for the cost effective provision of Hospital Services,
In-Area Emergency Services and other selected services, PacifiCare and IPA
shall establish a Utilization Control Program. The Utilization Control
Program shall utilize a Withhold Amount, as defined below, and shall be
calculated by comparing the Budget to the Expenses, as such terms are defined
below.
A. WITHHOLD AMOUNT - PacifiCare shall withhold from IPA's monthly Capitation
Payment an amount equal to [ ** ] of the Monthly HCFA Payment to apply to
IPA's share of Budget Deficits, if any. PacifiCare may prospectively adjust
the Withhold Amount on a quarterly basis based upon the results of the
Utilization Control Program calculation. If the Agreement is terminated or
non-renewed pursuant to Section 6 or Section 7 of the Agreement, PacifiCare
may choose to adjust the Withhold Amount at the time that the notice of
termination or non-renewal is served.
B. BUDGET - The Budget shall equal the sum of 1. and 2. below:
1. For Hospital Services, [ ** ] of the Monthly HCFA Payment for those
Subscribers designating IPA as their Participating Medical Group ("IPA
Subscribers"), MINUS [ ** ] of the Monthly HCFA Payment in
consideration of the Reinsurance Program as set forth in subsection (c)
(4) herein.
2. For outpatient prescription drugs and other Benefit Withhold Services,
[ ** ] of the monthly revenue received from HCFA for Subscribers who
have designated IPA as their Participating Medical Group, plus [ ** ]
per member per month rebate for drugs ("Drug Rebate") ordered through
Prescription Solutions during calendar year 1995. Notwithstanding
Section 12.12, PacifiCare may amend the Drug Rebate on an annual basis
effective each January 1 by providing sixty (60) days prior written
notice to IPA.
C. EXPENSES - Expenses shall be valued as the total of the following:
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1. INPATIENT EXPENSE AT HOSPITAL - Inpatient costs for Hospital Services
rendered at Hospital, valued at the amount paid to Hospital by
PacifiCare; plus,
2. NON-INPATIENT EXPENSES AT HOSPITAL - Other Hospital Services provided
by Hospital other than inpatient services, valued at the amount paid
to Hospital by PacifiCare; plus,
3. HOSPITAL SERVICES NOT PROVIDED AT HOSPITAL - The actual amount paid
by PacifiCare for Hospital Services not provided by Hospital; MINUS
4. REINSURANCE LIMIT - Any amount of Hospital Services Expense, as
defined in subsection (c)(1) through (3) above, in excess of the
Reinsurance Deductible specified in Paragraph 5.04 of this
Agreement; MINUS,
5. COORDINATION OF BENEFITS - Any amount received by PacifiCare from
third parties as the result of coordination of benefits and
third party recoveries for Hospital Services; plus,
6. Outpatient prescription drugs; plus
7. Acute hospital days greater than [150] per year; plus
8. Respite Care; plus,
9. Immunosuppressive drugs; plus,
10. Mammography (see Section E of Attachment C)
D. PAYMENTS TO IPA UNDER UTILIZATION CONTROL PROGRAM
1. BUDGET EXCEEDS EXPENSES - In the event the annual Budget exceeds
annual Expenses, PacifiCare shall pay IPA the Withhold Amount, if
any, plus an amount equal to [ ** ] of the amount by which the
annual Budget exceeds annual Expenses [ ** ].
2. EXPENSES EXCEED BUDGET - In the event that annual Expenses exceed
annual Budget, PacifiCare shall pay IPA the Withhold Amount, if any,
minus an amount equal to [ ** ] of the amount by which Expenses
exceed the Budget [ ** ].
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To the extent that the portion of the calculated deficit for which
IPA is responsible exceeds the Withhold Amount, IPA shall not be
entitled to any of the Withhold Amount. After the Withhold Amount has
been exceeded, any remaining portion of the deficit for which IPA is
responsible shall be carried forward into the succeeding term. An
amount equal to this remaining portion of the deficit will be withheld
from IPA's monthly Capitation Payment, using a mutually agreed upon
payment schedule, not to exceed [ ** ].
Should this Agreement terminate leaving no successive term to carry
forward an existing deficit amount, such deficit amount shall be due
and payable by IPA to PacifiCare within [ ** ] days of the effective
date of termination of this Agreement.
E. SETTLEMENT OF UTILIZATION CONTROL PROGRAM PAYMENTS
PacifiCare shall make interim Utilization Control Program calculations and
payments, if any, on a quarterly basis within sixty (60) days after the
end of each calendar quarter from the Effective Date. Quarterly payments
will be made to IPA based on the calculations specified in subsection (D)
above. The Expense figure used in quarterly incentive program
calculations shall also include an "Incurred But Not Reported" factor in
order to account for outstanding Medical Services claims. PacifiCare
shall make an annual Utilization Control Program payment to IPA within
one hundred and fifty (150) days of the end of each Year.
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