Health Net 2001 Annual Report Download - page 12

PPG and physician contracts are generally for a period of at least one year and are automatically
renewable unless terminated, with certain requirements for maintenance of good professional standing
and compliance with our quality, utilization and administrative procedures. In California and
Connecticut, PPGs generally receive a monthly ‘‘capitation’’ fee for every member assigned. The
capitation fee represents payment in full for all medical and ancillary services specified in the provider
agreements. In these capitation fee arrangements, in cases where the capitated PPG cannot provide the
health care services needed, such PPGs generally contract with specialists and other ancillary service
providers to furnish the requisite services under capitation agreements or negotiated fee schedules with
specialists. Outside of California, many of our HMOs reimburse physicians according to a discounted
fee-for-service schedule, although several have capitation arrangements with certain providers and
provider groups in their market areas.
For services provided under our PPO and POS products, we ordinarily reimburse physicians
pursuant to discounted fee-for-service arrangements.
HOSPITAL RELATIONSHIPS. Our health plan subsidiaries arrange for hospital care primarily
through contracts with selected hospitals in their service areas. These hospital contracts generally have
multi-year terms and provide for payments on a variety of bases, including capitation, per diem rates,
case rates and discounted fee-for-service schedules.
Covered inpatient hospital care for our HMO members is comprehensive; it includes the services
of physicians, nurses and other hospital personnel, room and board, intensive care, laboratory and x-ray
services, diagnostic imaging and generally all other services normally provided by acute-care hospitals.
HMO or PPG nurses and medical directors are actively involved in discharge planning and case
management, which often involves the coordination of community support services, including visiting
nurses, physical therapy, durable medical equipment and home intravenous therapy.
COST CONTAINMENT. In most HMO plan designs, the primary care physician or PPG is
responsible for authorizing all needed medical care except for emergency medical services. We believe
that this authorization process reduces inappropriate use of medical resources and achieves efficiencies
in cases where reimbursement in based on risk-sharing arrangements.
To limit possible abuse in utilization of hospital services in non-emergency situations, most of our
health plans require that a member obtain certification for specified medical conditions prior to
admission as an inpatient, and the inpatient admission is then subject to continuing review during the
member’s hospital stay. In addition to reviewing the appropriateness of hospital admissions and
continued hospital stays, we play an active role in evaluating alternative means of providing care to
members and encourage the use of outpatient care, when appropriate, to reduce the cost that would
otherwise be associated with an inpatient admission.
QUALITY ASSESSMENT. Quality assessment is a continuing priority for us. Most of our health
plans have a quality assessment plan administered by a committee composed of medical directors and
primary care and specialist physicians. The committees’ responsibilities include periodic review of
medical records, development and implementation of standards of care based on current medical
literature and community standards, and the collection of data relating to results of treatment. All of
our health plans also have a subscriber grievance procedure and/or a member satisfaction program
designed to respond promptly to member grievances. Elements of these subscriber grievance
procedures and member satisfaction programs are incorporated both within the PPGs and within our
health plans.
DIVESTITURES AND OTHER INVESTMENTS
Effective August 1, 2001, we sold our Florida health plan, known as Foundation Health, a Florida
Health Plan, Inc., to Florida Health Plan Holdings II, L.L.C. In connection with the sale, we received
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