Health Net 2013 Annual Report Download - page 14

12
Divested Operations and Services Segment
Prior to the first quarter of 2012, our Divested Operations and Services reportable segment included the
operations of our businesses that provided administrative services to UnitedHealth Group and its affiliates in connection
with the Northeast Sale, which was completed on December 11, 2009. For information about the Northeast Sale, see
Note 3 to our consolidated financial statements included as part of this Annual Report on Form 10-K (our "consolidated
financial statements").
Due to the sale of our Medicare PDP business on April 1, 2012, starting with the first quarter of 2012, Divested
Operations and Services reportable segment also included transition-related revenues and expenses related to the sale of
our Medicare PDP business to an affiliate of CVS Caremark. We provided Medicare PDP transition-related services to
CVS Caremark in connection with the transaction. For information about the sale of our Medicare PDP business, see
"—Western Region Operations Segment—Medicare Products," above.
As of December 31, 2012, we had substantially completed the administration and run-out of both our divested
businesses.
Provider 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, 2013. We have a
number of physicians who are contracted providers for both HMOs and PPOs in our Western Region Operations, as
follows:
Primary Care Physicians (includes both HMO and PPO physicians)...................................... 23,004
Specialist Physicians (includes both HMO and PPO physicians) ........................................... 107,572
Total......................................................................................................................................... 130,576
Under our California HMO and POS plans, all members are required to select, or otherwise will be assigned to, a
PPG and generally also a primary care physician from within the PPG. 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 and PPG contracts) to specialists and hospitals.
Additionally, our tailored network products utilize a network that is smaller than our broader HMO network but
contains a comprehensive array of physicians, specialists, hospitals and ancillary providers. 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.
PPG and physician contracts generally are 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 payment for every
member assigned to it. The capitation payment represents payment in full for all medical and ancillary services
specified in the provider agreements. For these capitation payment 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.