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MEDICAL SERVICE AGREEMENT

DEFINITIONS AND INTRODUCTORY PROVISIONS

ARTICLE  A

Definitions

  In this Medical Service Agreement the underlined words have the meanings indicated:

Section A-l.  Medical Care Program and Additional Parties Affected by Agreement.

(a)  Medical Care Program:   The program of arranging and providing hospital and medical care and related facilities and services primarily on a prepayment basis to Members, and for the benefit of the general community.  The Medical Care Program is conducted cooperatively by Health Plan, Hospitals and Medical Group, and includes all their activities carried on in connection with or incidental to the conduct of such program.

(b)  Physician:  Each licensed physician who is an employee of Medical Group.

(c)  Attending Physician:  The Physician primarily re­spon­si­ble for the care of a Member with respect .to a particular circumstance or condition,  as desig­na­ted by Medical Group.

(d)  Eligible Physician:   Each Physician who is entitled to a share of Net Medical Group Revenue, .except that in applying the provisions of Article K, each such Physician who was an Eligible Physician for only part of the year, or who worked a part-time schedule during the year, or is entitled to more or less than a full share, is counted in proportion to his or her actual service as an Eligible Physician and proportional entitlement to a full share.

(e)  Referral Physician:   Any physician or other person, including any organ­i­za­tion and the phy­si­cians in or employed by the organ­i­za­tion, who provide Medical Services to Members on a referral from or pursuant to a contract with Medical Group. Section A-2.  Health Plan Members and Contracts

(a)  Member:   Each person entitled to Medical Services by reason of a Membership Contract.

(b)  Subscriber:  A Member re­spon­si­ble for payment of Dues, or on whose behalf Dues are paid, by reason of his or her employment or other status, excluding status as a Dependent.

(c)  Dependent:  A Member other than a Subscriber.

(d)  Membership Contract:  The contract under which any Member is entitled to Medical Services to be provided or arranged by Medical Group pursuant to this Agreement.  There are two types of Membership Contracts:

(i)  Group Contract:  A master Membership Contract under which a number of Subscriber Members, together with their respective Dependent Members, are entitled to Medical Services. (ii)  Individual Contract:  A Membership Contract under which a single Subscriber Member and his or her Dependent Members are entitled to Medical Services.

(a)  Service Area:   The service area as defined from time to time in Membership Contracts.

(b)  Medical Services:  All professional outpatient ( including home health) and inpatient services required to satisfy all obligations with respect to these services within the Service Area to Members under Membership Contracts, including services arranged for Members by reason of or incident to their Health Plan membership.  Medical Services do not include Nonmember and Workers ' Compensation Medical Services or services covered by Reimbursement and Service Claims.

(c)  Hospital Services:   All hospital and skilled nursing services required to satisfy all obligations with respect to these services within the Service Area to Members under Membership Contracts, including hospital and skilled nursing services arranged for Members by reason of or incident to their Health Plan membership, including nursing and incidental services customarily furnished by acute care general hospitals and skilled nursing facilities.  Hospital Services do not include Nonmember and Workers' Compensation Hospital Services or services covered by Reimbursement and Service Claims.

(d)  Administrative  Services:  All  support  services  for  the Medical Care Program including, for example, financial and administrative support services, and membership enrollment, membership records, collection of Program Revenue, Reimbursement and Service Claims and other membership relations functions.

(e)  Nonmember and Workers'  Compensation Hospital  Services:

(i)  All services rendered by Hospitals to persons who are not Members. (ii)  All. services to Members rendered by Hospitals that are excluded from the coverage of the applicable Membership Contract.

(i)  All services  rendered by Medical Group to persons who are not Members. (ii)  All services to Members rendered by Medical Group that are excluded from the coverage of the applicable Membership Contract.

(h)  Hospital Service Agreement:  The Hospital Service Agreement in effect at any time between Health Plan and Hospitals.

Section A-4.  Financial and Accounting Matters:

(a)  Ratemaking Forecast :  The annual written forecast for the next calendar year of all Program Revenue and financial requirements and which is used to establish Dues, Supplemental Charges and other charges for the next calendar year.

( b)  Operating  Budget :   The  annual  written  budget which Health Plan and Medical Group agree represents the final budgetary plan for the next calendar year.  The Operating Budget will include, as a minimum, the final forecasted Program Revenue and financial requirements for the next calendar year, including the information required to satisfy and apply the provisions of Articles J and K of this Agreement.  The Operating Budget may be changed only by written agreement between Health Plan and Medical Group.

(c)  Memorandum of Understanding:  The annual written agreement executed by Health Plan and Medical Group defining the basic financial agreement between Health Plan and Medical Group for the calendar year stated therein.

(d)  Capital Budget:  The annual written budget of Health Plan and Hospitals for all expenditures which are forecasted to be recorded as capital assets.

( e)  Program Revenue:   All revenue of Health Plan,  Hospitals or Medical Group except:

(i)  Excluded Revenue. (ii)  Contributions to Capital. (iii)  Gains or losses resulting from sale or other final disposition of capital assets and leasehold improvements acquired or principally utilized to provide services to Members. ( iv)  Amounts paid by one Medical Care Program organ­i­za­tion (Health Plan, Hospitals or Medical Group) to another Medical Care Program organ­i­za­tion.

( f )  Dues:  Periodic payments made by or on behalf of Members pursuant to Membership Contracts.

(g)  Supplemental Charges:  Revenue from or on behalf of Members incident to utilization of Medical Services or Hospital Services.  Supplemental Charges consist of charges to Members in lieu of comprehensive prepaid Dues.

(h)  Medicare Revenue:   Revenue under the Fed­er­al Health Insurance for the Aged and Disabled Act for services provided to Members.

(i)  Miscellaneous .Revenue:   Revenue of Health Plan or Hospitals constituting Program Revenue, other than Dues, Supplemental Charges and Medicare Revenue, which is principally derived in conducting the Medical Care Program.

(j )  Other Revenue:  Revenue of Medical Group  for professionally related activities not constituting the direct provision of health care services,  including expert witness fees, charges for summaries of medical records, charges for filling out claims and other forms, com­pen­sa­tion for teaching during scheduled clinic hours, and similar revenue items, but not interest. 

( k)  Excluded Revenue:  Revenue of Health Plan,  Hospitals or Medical Group from investments (except interest on short-term investments of Health Plan or Hospitals such as savings accounts, which amounts in substance to an offset against interest expense incurred incident to borrowings for the purpose of providing health care facilities), and revenue (not covered under any preceding definition in this Section) from any other activities not related to the conduct of the Medical Care Program, including all donations.

( I )  Contributions to Capital:  Any funds or other things of value received as donations, investments, or otherwise, which are intended and received for capital, rather than. income, account.

(m)  Net Program Revenue:  Program Revenue minus all costs, expenses and other items to be deducted pursuant to Article K of this Agreement.

(n)  Medical Service Costs:  All expenses of Health Plan on account of Medical Services rendered pursuant to this Agreement, plus all other expenses, whether incurred by Health Plan, Hospitals or Medical Group, which are allocable to the operation of outpatient medical care facilities and to providing Medical Services.

(o)  Hospital Service Costs:  All expenses of Health Plan on account .of Hospital Services rendered pursuant to the Hospital Service Agreement, plus all other expenses, whether incurred by Health Plan, Hospitals or Medical Group, which are allocable to the operation of hospital facilities and to providing Hospital Services.

(p)  Administrative Service Costs:  All expenses of Administrative Services, whether incurred by Health Plan, Hospitals or Medical Group.

(q)  Base Compensation to Hospitals:  All amounts paid or obligations incurred to Hospitals under Article G of the Hospital Service Agreement.

(r)  Per Capita Amount:  The amount per Member per month set forth in the Operating Budget and the Memorandum of Understanding and referred to in Article J of this Agreement.

(s)  Per Capita Compensation:  The amount calculated as provided in Section J-2 of this Agreement.

(t)  Base Compensation to Medical Group:  All amounts payable by Health Plan to Medical Group as provided in Article J of this Agreement.

(u)  Planned At Risk Compensation:  The planned amount of At Risk Compensation set forth, or determined in the manner set forth, in the Operating Budget and Memorandum of Understanding.

(v)  At Risk Compensation:  The amount payable by Health Plan to Medical Group under Section K-2 of this Agreement.

(w)  Net Medical Group Revenue:  The amount calculated as provided in Section K-6 of this Agreement.

(x)  Variance In Net Medical Group Revenue:  The variance, if any, between planned and actual Net Medical Group Revenue per Eligible Physician.  If Net Medical Group Revenue exceeds planned Net Medical Group Revenue, the variance is positive, and if it is less than planned Net Medical Group Revenue, the variance is nega­tive.

(y)  Variance In Health Plan Cash Generation:  The variance, if any, between actual cash generation of Health Plan and Hospitals and the amount of planned cash generation to meet the planned capital requirements of Health Plan and Hospitals referred to in Section K-3 (i) of this Agreement.

(z)  Dues Stabilization Reserve:  The Reserve provided for in Section K-10.

Section A-5.  Matters Relating to Claims

(a)  Professional and General Public Liability Claim:  Any tort claim, whenever asserted, against Health Plan, Hospitals, Medical Group or any Physician, or any employee or other representative of Health Plan, Hospitals or Medical Group arising out of, or allegedly arising out of:  

(i)  an activity related to the Medical Care Program or the production of program Revenue, or

(ii)  provision of care by a Physician in other circumstances approved by Medical Group,  

(b)  Contractual Claim:  A claim by a Member, or former or alleged Member, whenever asserted, arising out of, or allegedly arising out of, the failure of Health Plan to perform any contractual obligation under one or more Membership Contracts or out of the failure of Hospitals or Medical Group to perform a respective contractual obligation in respect of a Member during the term of this Agreement, any extension hereof (including acts or omissions occurring during the Interim Period Described in Section I-2), during the term of any prior agreement between Health Plan and Medical Group, or during the term of any prior, existing or future agreement between Health Plan and Hospitals.

(c)  Mixed Claim:  A claim having aspects of both a Professional and General Public Liability Claim and a Contractual Claim.

(d)  Reimbursement and Service Claim:  A claim by a member, or former or alleged Member, for benefits on account of an expense incurred for emergency services for injury or illness as covered under the sections of Membership Contracts relating to (i) services received by Members from medical care programs similar to the Medical Care Program and conducted cooperatively by affiliates of Health Plan, other divisions of Kaiser Foundation Hospitals and contracting medical groups, and (ii) emergency or urgent care received by Members from providers not contracting with Health Plan.

(e)  Residual Claim:  Any other claim of any kind whatever, known or unknown, and whenever arising, asserted against Medical Group or any Physician or any director, officer, employee or any other representative of Medical Group, including any claim by Health Plan other than a claim by Health Plan for breach of this Agreement by Medical Group, based on:  

(i)  an activity related to the Medical Care Program or the production of Program Revenue, or

(ii)  provision of care by a Physician in other circumstances approved by Medical Group, including Medical Group administration.