Health Net 2003 Annual Report Download - page 10

Provider Relationships and Responsibilities
Physician Relationships
Under many of our HMO plans and POS plans, and primarily in California, members are required to select a
participating physician group (“PPG”) and a primary care physician from within that group. In our other plans, including
most of our plans outside of California, members may be required to select a primary care physician from the broader
HMO network panel of primary care physicians. Some HMO “open access” plans and PPO plans do not require the
member to select a primary care physician. The primary care physicians and PPGs assume overall responsibility for the
care of members. Medical care provided directly by such physicians includes the treatment of illnesses not requiring
referral, and may include physical examinations, routine immunizations, maternity and child care, and other preventive
health services. The primary care physicians and PPGs are responsible for making referrals (approved by the HMO’s or
PPG’s medical director as required under the terms of our various plans) to specialists and hospitals. Certain of our HMOs
offer enrollees “open panels” under which members may access any physician in the network, or network physicians in
certain specialties, without first consulting their primary care physician.
The following table sets forth the number of primary care and specialist physicians contracted either directly with our
HMOs or through our contracted PPGs as of December 31, 2003:
Primary Care Physicians (includes both HMO and PPO physicians) .......................... 44,572
Specialist Physicians (includes both HMO and PPO physicians) ............................. 99,395
Total ............................................................................ 143,967
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 to it. 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. Our
Connecticut HMO has a capitation contract with the Connecticut Medical Society IPA. However, all administration,
referral authorization and claims administration is performed by our Connecticut health plan. Physicians are paid on a fee-
for-service basis and reinsurance is provided by Health Net Services (Bermuda), Ltd., a wholly-owned subsidiary of the
Company, to the IPA if claims exceed a specified aggregate limit. Outside of California and Connecticut, most 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 or annual terms with automatic renewals 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 hospital-based
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.
Ancillary and Other Provider Relationships
Our health plan subsidiaries arrange for ancillary and other provider services, such as ambulance, laboratory,
radiology and home health primarily through contracts with selected providers in their service areas. These contracts
8