Health Net 2009 Annual Report Download - page 14

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. 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.
In our PPO plans, members are not required to select a primary care physician and generally do not require
prior authorization for specialty care. 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.
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, 2009, HNFS had 135,141 physicians, 2,492 facilities, and 13,190 ancillary providers in its
TRICARE network.
Our behavioral health subsidiary, MHN, maintains a provider network comprised of approximately 46,526
psychiatrists, psychologists and other clinical categories of providers nationwide. Substantially all of these
providers are contracted with MHN on an individual or small practice group basis and are paid on a discounted
fee-for-service basis. Members who wish to access certain behavioral health services contact MHN and are
referred to contracted providers for evaluation or treatment services. Generally, authorization for such services is
for a limited number of appointments and must be renewed by MHN based on medical necessity. If a member
needs inpatient services, MHN maintains a network of approximately 1,435 facilities.
In addition to the physicians that are in our networks, we have also entered into agreements with various
third parties that have networks of physicians contracted to them (“Third Party Networks”). In general, under a
Third Party Network arrangement, Health Net is licensed by the third party to access its network providers and
pay the claims of these physicians pursuant to the pricing terms of their contracts with the Third Party Network.
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 hospital-based care for our 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. Our nurses and
medical directors are involved in a wide variety of medical management activities on behalf of our HMO and, to
a somewhat lesser extent, PPO members. These activities can include 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.
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