Health Net 2004 Annual Report Download - page 11

Other Department of Defense Contracts
During 2004, HNFS managed two behavioral health services subcontracts which support prime contracts issued by the
Department of Defense’s Quality of Life Office. Under these subcontracts, HNFS and MHN have teamed together to provide family
counseling and domestic abuse victim advocacy to members of the U.S. military and their families at certain Department of Defense
locations in the United States, Germany and Italy. The services provided under these subcontracts are not TRICARE benefits and are
provided independently from the services provided under our TRICARE contract for the North Region. Total revenue for these
subcontracts as of December 31, 2004 was $5,595,939.
Veterans Affairs
During 2004, HNFS administered 17 contracts with the U.S. Department of Veterans Affairs to manage community based
outpatient clinics in 12 states. HNFS also managed 21 other contracts with the U.S. Department of Veterans Affairs in 135 locations
and one contract with the U.S. Marshals Service for claims re-pricing services. Total revenues for our Veterans Affairs business were
approximately $20.1 million as of December 31, 2004, representing a 17.5% increase over 2003. These revenues are derived from
service fees received and have no insurance risk associated with them.
Provider Relationships and Responsibilities
We maintain a network of qualified physicians, hospitals and other health care providers in each of the states we offer managed
care products and services.
Physician Relationships
The following table sets forth the number of primary care and specialist physicians contracted either directly with our HMOs or
through our contracted participating physician groups (“PPGs”) as of December 31, 2004:
Under many of our HMO plans and POS plans, and primarily in California, members are required to select a 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.
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. Under a capitation fee arrangement, we pay a provider group a fixed amount per member on a regular basis and the
provider group accepts the risk of the frequency and cost of member utilization of professional services. 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
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Primary Care Physicians (includes both HMO and PPO physicians) 49,621
Specialist Physicians (includes both HMO and PPO physicians)
108,215
Total 157,836