"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."
POINT-OF-SERVICE AMENDMENT
TO IPA MEDICARE SHARED RISK SERVICES AGREEMENT
The undersigned parties to the IPA Medicare Shared Risk Services Agreement
(the "Agreement") by and between PacifiCare of California ("PacifiCare") and
Prospect Medical Group, Inc. ("IPA") do hereby amend the Agreement with
reference to the following facts:
WHEREAS, PacifiCare intends to introduce the Secure Horizons
Point-of-Service Plan, as defined below, beginning in 1996;
WHEREAS, IPA shall provide or arrange Health Care Services to Secure
Horizons Point-of-Service Plan Subscribers under the same terms and conditions
as other Secure Horizons Health Plan Subscribers;
WHEREAS, IPA shall have no financial responsibility for Out-of-Network
Services; and
WHEREAS, PacifiCare and IPA desire to establish a Secure Horizons
Point-Of-Service Control Program for the purpose of providing a financial
incentive for the control of Out-of-Network Services.
NOW THEREFORE, the Agreement shall be amended as follows:
1. The following definitions shall be added to Section One of the
Agreement.
SECURE HORIZONS POINT-OF-SERVICE PLAN - is a Secure Horizons Health
Plan under which Subscribers are entitled to coverage for both In-Network
Services and Out-of-Network Services.
CONVENTIONAL PLAN - is the Secure Horizons Health Plan which does not
provide coverage for Out-of-Network Services.
IN-NETWORK SERVICES - are [Health Care Services] which are (a)
provided or arranged by IPA under the provisions set forth in the Agreement
for coverage of Conventional Plan Subscribers; or (b) received from an
Outside Provider following an authorization from IPA; or (c) Emergency
Services.
IN-NETWORK HOSPITAL SERVICES - are In-Network Services which are also
Hospital Services and which are provided to a Secure Horizons
Point-of-Service Plan Member.
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OUT-OF-NETWORK MEDICAL SERVICES - are the Health Care Services
summarized in Attachment A2 obtained by Secure Horizons Point-Of-Service
Plan Subscribers which are not provided, arranged or authorized by IPA in
accordance with the procedures for the Conventional Secure Plan and which
do not qualify as Emergency Services.
OUT-OF-NETWORK HOSPITAL SERVICES - are the Health Care Services
summarized in Attachment A1 obtained by Secure Horizons Point-Of-Service
Plan Subscribers which are not provided, arranged or authorized by IPA in
accordance with the procedures for the Conventional 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. 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 Secure Horizons Point-Of-Service Plan
Subscriber, IPA shall xxxx PacifiCare or PacifiCare's designee for payment
for such services and agrees to accept full reimbursement at [ ** ] of
the Medicare Locality Fee Schedule for Participating Providers as published
by the Part B carrier. Neither IPA nor its Member Physicians shall
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 3.31 shall be added to read as follows:
3.31 SECURE HORIZONS POINT-OF-SERVICE PLAN CONTROL PROGRAM - IPA
agrees to participate in the Secure Horizons Point-Of-Service Plan Control
Program as set forth in Attachment A6, attached hereto and incorporated
herein.
4. Attachment A6 SECURE HORIZONS POINT-OF-SERVICE PLAN CONTROL
PROGRAM shall be added to read as follows:
See Exhibit 1 attached hereto and incorporated herein by this
reference.
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5. The following shall be added to Attachment C, COMPENSATION,
Section B, MONTHLY HCFA PAYMENT:
SECURE HORIZONS POINT-OF-SERVICE PLAN CAPITATION PAYMENTS
Capitation Payments for Secure Horizons Point-Of-Service 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 Secure
Horizons Point-Of-Service Plan Subscribers shall equal the Percent of the
Monthly HCFA Payment specified in this Attachment C, multiplied by
[ ** ].
SECURE HORIZONS POINT-OF-SERVICE PLAN COVENANT NOT TO COMPETE
IPA will receive an additional [ ** ] of the Monthly HCFA Payment in
recognition of IPA's agreement not to enter into any contractual
arrangements, other then the contractual arrangement set forth in this
amendment, to provide or arrange Medical Services to Medicare beneficiaries
who are Subscribers or enrollees of a Point-Of-Service Plan under a health
maintenance organization, competitive medical plan or other similar entity
that contracts with HCFA on a risk basis. This additional [ ** ]
capitation is not included in the amount stated above and is not subject to
any withhold or deductions. If IPA enters into a contractual relationship
with any other Medicare Risk Reimbursement Plan to provide or arrange
Medical Services under a Point-Of-Service Plan, PacifiCare will decrease
the monthly capitation payment by this [ ** ] commencing the
month in which this breach occurs.
The effective date of this Amendment shall be July 1, 1996.
By signing below, both parties hereto have executed and agreed to
this Amendment.
PACIFICARE OF CALIFORNIA IPA
By: /s/ Xxxxx Xxxx By: /s/ Xxxxx XxXxxxxx
-------------------------- ----------------------------
Date: Date: 6-11-96
-------------------------- ----------------------------
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Exhibit 1
ATTACHMENT A6
SECURE HORIZONS POINT-OF-SERVICE PLAN CONTROL PROGRAM
1. INTRODUCTION
The Secure Horizons Point-of-Service Plan Control Program is designed to provide
a financial incentive for the control of In-Network Hospital Services and
Out-of-Network Services provided to Secure Horizons Point-Of-Service Plan
Members.
Secure Horizons Point-of-Service Plan Subscriber months and related In-Network
Hospital Service expenses shall not be included in calculating the Conventional
Utilization Control Program described in Attachment A5.
2. DEFINITIONS
The following terms shall have the meanings set forth below when utilized in
this Attachment A6.
a. SECURE HORIZONS POINT-OF-SERVICE PLAN BUDGET - shall equal [ ** ] of the
Monthly HCFA Payment, less [ ** ] of the Reinsurance Premium specified in
Paragraph 5.04 of this Agreement for In-Network Hospital Services
reinsurance.
b. ACTUAL COSTS consist of:
i. 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 reinsurance deductible specified above; PLUS
ii. Claims paid charges for Out-of-Network Services incurred during the
current period; and claims paid charges for Out-of-Network Services
incurred but not included in prior period Secure Horizons
Point-of-Service Plan Control Program calculations; LESS
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iii. Third party liability and coordination of benefit recoveries for
In-Network Hospital Services and Out-of-Network Services that are
received during the period of calculation.
c. BUDGET SAVINGS - is the difference between the Secure Horizons
Point-of-Service Plan Budget and Actual Costs, to the extent
Actual Costs are less than the Secure Horizons Point-of-
Service Budget.
3. SAVINGS DISTRIBUTION
To the extent Budget Savings are available, such savings shall be shared between
IPA and PacifiCare as follows:
IPA shall receive the difference between actual Capitation Payments for
Secure Horizons Point-of-Service Plan Subscribers for the period and the
amount of Capitation Payments the IPA would have received if the Secure
Horizons Point-of-Service Plan Subscribers were enrolled in the Conventional
Plan. The above distribution to IPA shall be limited to the Budget Savings
available pursuant to the Secure Horizons Point-of-Service Plan Control
Program calculation. Additionally, IPA shall receive [ ** ] of any
remaining Budget Savings after reimbursing IPA up to the Conventional Plan
Capitation Payment amount.
4. BUDGET DEFICITS. IPA shall have no financial responsibility in the event
that Actual Costs exceed the Secure Horizons Point-Of-Service Plan Budget.
5. PERIODIC CALCULATIONS - The Secure Horizons Point-Of-Service Plan 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,
Budget Savings and payment distributions shall be based on IPA's consolidated
results.
Cumulative calculations of the Secure Horizons Point-Of-Service Plan Control
Program results will be based on calendar quarters and shall be calculated
within one hundred and twenty (120) 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 made within one hundred and twenty (120) days following the
end of each quarter, except for the fourth quarter, and will be limited to
[ ** ] of calculated Budget Savings to account for incurred but not
received claims. Year-end calculations and payments of the Secure Horizons
Point-of-Service Plan Control Program shall be made within one hundred eighty
(180) days of the end of each calendar year.
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