Health Net 2007 Annual Report Download - page 13

Provider Relationships
We maintain a network of qualified physicians, hospitals and other health care providers in each of the
states in which we offer network based 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, 2007:
Primary Care Physicians (includes both HMO and PPO physicians) ........... 71,131
Specialist Physicians (includes both HMO and PPO physicians) .............. 203,605
Total ............................................................. 274,736
Under our California HMO and POS plans, all members are required to select a PPG and generally also a
primary care physician from within that group. In our other plans, including all 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. 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 childcare, 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 access” plans under which members are not required to secure prior
authorization for access to network physicians in certain specialty areas, or “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. PPO plans generally do not require prior authorization for specialty care.
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, 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 fee
schedules with specialists. Outside of California, 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 products and the out-of-network
benefits of our POS products, we ordinarily reimburse physicians pursuant to discounted fee-for-service
arrangements. A provider group’s financial instability or failure to pay secondary providers for services rendered
could lead secondary providers to demand payment from us, even though we have made our regular capitated
payments to the provider group. Depending on state law, we could be liable for such claims.
HNCT, our Connecticut HMO, has a contract with the Connecticut State Medical Society IPA (“CSMS-
IPA”). This contract includes an agreed upon compensation budget with negotiated reimbursement rates for
providers and has gain share and pay-for-performance features. Referral authorization and claims administration
are performed by HNCT.
HNFS maintains a network of qualified physicians, facilities, and ancillary providers in the prime service
areas of our TRICARE contract for the North Region. Services are provided on a fee-for-service basis. As of
December 31, 2007, HNFS had 100,477 physicians, 1,913 facilities, and 10,342 ancillary providers in its
TRICARE network.
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