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Article XIV

PRIOR APPROVAL AND PRIOR NOTICE

FOR SUBCONTRACTING AND DATA PROCESSING CHANGES

A. The Plan shall not enter into any subcontract with a third party to perform any of the functions and duties set forth in this agreement unless such subcontract received the prior written approval of the Secretary and the Intermediary.

B. The Plan may enter into subcontracts not controlled by paragraph A above, which are necessary for the performance of the work required under this agreement, except that the prior written approval of the Secretary and the Intermediary shall be required for any subcontract entered into in whole or part for the administration of the Medicare program when:

1. The estimated cost to Medicare over the term of such subcontract will exceed $_ irrespective of the percentage of the cost of such subcontract to be charged to Medicare.

2. For purposes of subparagraph 1 of this paragraph, the estimated cost to Medicare of a lease of real property for a term of more than one year shall be the amount of the rental payment estimated to be allocable to Medicare for the first year of the lease.

In the event that said subcontract is entered into jointly with another Medicare contractor, the Plan shall secure the prior written approval of the Secretary and the Intermediary if the aggregate amount of said subcontract attributable to Medicare exceeds the higher of the individual amount assigned to either party.

Where the total monetary amount of the subcontract attributable to Medicare is not specifically identifiable at the time the subcontract is entered into, but could reasonably be anticipated to exceed in the aggregate the limits set forth in subparagraph B(1) of this Article, then the Secretary's and the Intermediary's prior written approval shall be required. In the event the aggregate costs to be charged to this agreement under a subcontract which at its inception did not require the prior approval of the Secretary exceeds, or it becomes apparent will exceed, the amount set forth in subparagraph B(1) of this Article, the Plan shall immediately request approval of the Secretary and the Intermediary to continue with the subcontract and if the Secretary or the Intermediary disapproves such continuance, the Pian shall then terminate it at the earliest date permitted under the wording of the subcontract itself.

C. Where the Plan submits a proposed subcontract for the approval of the Intermediary and the Secretary, such approval shall be deemed to be granted unless the Secretary notifies the Intermediary and the Plan within 60 days of his receipt thereof that such proposed subcontract is disapproved.

D. The Plan shall provide the Secretary and the Intermediary with written notice as described in Article XVI at least 60 days in advance of any planned automated data processing systems or operations change involving the Medicare claims process where the estimated cost to Medicare either for (1) the conversion and implementation of the planned change or (2) the increase in operating costs during the first twelve months of operation of the planned change exceeds the threshold amount specified in paragraph B above. The Plan shall not implement the change without prior written approval of the Secretary and the Intermediary. Approval of any proposed change, including subcontracts related thereto, shall be deemed to be granted unless the Secretary notifies the Intermediary and the Plan of his disapproval within 60 days of his receipt of notice of the proposed change or proposed subcontract. If the Plan proceeds with the proposed change or proposed subcontract related thereto without the prior approval of the Secretary, if required, the United States will not be obligated to reimburse the Plan for costs incurred with respect to such change or subcontract prior to the date of such approval unless so stipulated.

E. Prior written approval given by the Secretary under any of the provisions of this Article shall not be construed to constitute a determination of the allowability or unallowability of any costs under this agreement unless so stipulated.

F. Any subcontract entered into under this Article requiring the prior written approval of the Secretary, which is subsequently modified, amended, or renewed, shall be resubmitted for the Secretary's approval prior to such modification, amendment, or renewal.

G. With respect to any subcontract entered into under this Article requiring the prior written approval of the Secretary, the United States shall not be obligated to reimburse the Plan for any costs incurred prior to the date of the Secretary's approval unless so stipulated.

H. The requirements for prior written approval may be waived by the Secretary when the exigencies are such that requiring prior written approval would be administratively impracticable and such waiver is secured in advance of the execution of the subcontract or the implementation of any proposed change as described in paragraph D of this Article. Both the waiver and the request for waiver should be made by telephone or telegraph with later confirmation by letter.

I. Without regard to the requirements of prior approval under this Article, the Plan shall give the Secretary and the Intermediary advance notification of any subcontract which provides for payment on a cost-plus-fixed-fee-basis, regardless of amount, or any fixed price subcontract which results in payment by the Secretary of more than $25,000.

Article XV
SUBCONTRACTING

A. The provisions of this article unless otherwise stipulated shall apply to subcontracting under this agreement without regard for the requirements of prior approval.

B. It is the policy of the Government to procure property and services from responsible sources at fair and reasonable prices calculated to result in the lowest ultimate cost to the Government. In order to achieve this objective, competitive proposals shall be utilized to the maximum practical extent. C. Where competition is not available or does not yield reasonable subcontract prices, the Plan shall also be required to undertake appropriate price analysis in accordance with Part 1-3.807-2(b) of the Federal Procurement Regulations and to undertake cost analysis in accordance with Part 1-3.807-2(c) of the Federal Procurement Regulations in all subcontracts subject to the approval of the Secretary under paragraph B of Article XIV.

D. For any subcontract or modification of a subcontract entered into or renewed under this agreement, where the estimated cost to Medicare under the subcontract exceeds $100,000 and is not based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law or regulation, the Plan shall in accordance with Parts 1-3.807-3 and 1-3.807-4 of the Federal Procurement Regulations, require the subcontractor to submit written cost or pricing data and certify that the cost or pricing data submitted was accurate, complete, and current prior to the entry into the subcontract or modification of a subcontract. The Plan further agrees, through inclusion in all such subcontracts to require subcontractors to maintain full and complete accounting records to support cost or pricing data submitted as aforesaid, to require subcontractors to provide for full access by the Plan, the Secretary, and the Comptroller General of the United States for the purpose of examining the accuracy of cost or pricing data submitted as aforesaid, and in accordance with Parts 1-3.807-5, and 1-3.814-3 of the Federal Procurement Regulations to agree to a reduction in price if the cost or pricing data submitted is found to be defective.

E. Any subcontract under paragraph A of Article XIV, or any subcontract entered into or renewed involving automated data processing systems or services, shall provide to the Secretary or his representative:

1. The right to inspect fully any and all work performed or being performed thereunder directly by the subcontractor or through arrangement with another party;

2. The right to obtain and use freely any data acquired or utilized by the subcontractor in the development and processing of claims or carrying out its functions under the subcontract;

3. The right to review without limitation all systems documentation, program logic, operating manuals, and all other operating methods and procedures involved in the performance of functions and duties under this agreement. Further, if more than 50 percent of the cost of development thereof has been paid out of Government funds, the Secretary shall have use of such information for health care or health care financing programs under the Act.

F. Any subcontract under paragraph A of Article XIV, or any subcontract entered into or renewed under this agreement providing for the development of, or study of the feasibility for development of, a data processing system (including an automated data processing system), management procedures, internal or Medicare program instructional material or operating methods shall specify that the work product so produced shall inure to and remain the property of the Plan if more than 50 percent of the cost or price of such subcontract is to be paid from funds for the administration of programs under the Act, and, further, that the Secretary or his representative shall have the right of free and unrestricted use without further cost.

G. Any subcontract under paragraph A of Article XIV or any subcontract entered into or renewed under this agreement involving automated data processing systems or services which required prior approval must provide that no lower tier subcontract for the performance of any functions or duties or parts thereof of such subcontracts, can be entered into without prior written approval of the Secretary and the Intermediary. Further, such subcontracts must provide for the Comptroller General of the United States and the Secretary (including their duly authorized representatives) the same right to examine subcontractor records as is provided in Article XX B of this agreement.

H. Any agreement between the Plan and a medical consultant engaged by the Plan to review Medicare claims or health care utilization or to perform related services shall be deemed not to constitute a subcontract for purposes of this agreement.

I. The Plan agrees to insert in its subcontracts under this agreement the applicable articles of Appendix A.

J. The Plan agrees that no subcontract under this agreement shall provide for payment on a costplus-a-percentage-of-cost basis.

K. It is understood and agreed that the foregoing provisions of this Article are not by way of limitation upon the Secretary's right, at the time of prior approval, to require the Plan to specify other terms and conditions requisite upon subcontractors performing functions and duties under this agreement.

Article XVI
DATA PROCESSING

A. In submitting data processing proposals for approval of the Secretary, such notification as required in Article XIV D shall include:

1. the design specifications and cost analysis of the proposed change; and

2. documentation that such change or process is needed and is cost effective.

B. When subcontracting, pursuant to Article XV, the Plan shall design data systems specifications, equipment performance requirement specifications, and other specifications to foster free and open competition and opportunity to responsible suppliers, including manufacturers, leasing companies and third party vendors.

Article XVII

NOMINATION, OR WITHDRAWAL OF NOMINATION

BY A PROVIDER OF SERVICES

A. The Intermediary may add other providers to the list of providers served by the Plan, except that no such provider of services may be added without the prior consent of the Plan.

B. Deletions and additions to the list of providers resulting from the provisions of paragraph A of this Article shall be made on a timely basis.

Article XVIII

COMPLEMENTARY INSURANCE

A. The Plan's complementary insurance claims process may be integrated with its Medicare insurance claims process in accordance with Regulations and General Instructions. When the insurance processes are totally or partially integrated, all direct costs shall be charged to the appropriate line of business and indirect costs shall be prorated on appropriate allocation bases consistent with the Plan's established principles of allocating indirect costs as stipulated in Article XIII B. Where the claims processes are separate, the Plan will bear the costs of transferring to its own operation, data needed on a routine or occasional basis in a manner prescribed by the Regulations and General Instructions. Where agreement has not been reached between the Intermediary and the Secretary on cost determinations concerning complementary insurance matters, these disputes will be subject to the fiscal disputes procedure of Article VI.

B. The Medicare claims information which the Plan has access to for its own complementary insurance program may be disclosed to itself and to other complementary insurers but only in accordance with section 1106 of the Act and the regulations prescribed thereunder.

Article XIX

DIRECT COMMUNICATION WITH THE PLANS

The Secretary may communicate with the Plan concerning all matters covered under this agreement. The Secretary agrees that announcement of new policy will be communicated to the Intermediary prior to any distribution of such policy to the Plan. The Secretary will give the Intermediary concurrent notice when written communications are directed to the Plans and when significant issues arise.

Article XX
EXAMINATION OF RECORDS

A. The Plan shall maintain adequate accounting records covering the use of funds under this agreement. The Plan agrees that the Intermediary, the Secretary and the Comptroller General of the United States (including their duly authorized representatives), until the expiration of three years after final

payment for the term of this agreement or of the time periods for the particular records specified in Part 1-20 of the Federal Procurement Regulations (41-CFR Part 1-20), whichever expires earlier, shall have access to and the right to examine, upon reasonable notice and at all reasonable times, any directly pertinent books, documents, papers, and records of the Plan, and those of any parent, affiliated or subsidiary organization performing under formal or informal arrangement any services or furnishing any supplies or equipment to the Plan, involving transactions related to this agreement. B. The Plan further agrees to include in all subcontracts under this agreement a provision to the effect that the subcontractor agrees that the Secretary and the Comptroller General of the United States (including their duly authorized representatives), until the expiration of 3 years after final payment under the subcontract, or of the time period for the particular records specified in Part 1-20 of the Federal Procurement Regulations (41 CFR Part 1-20), whichever expires earlier, shall have access to and the right to examine, upon reasonable notice and at all reasonable times, any directly pertinent books, documents, papers. and records of such subcontractors, and those of any parent, affiliated or subsidiary organization performing under formal or informal arrangement involving transactions related to the subcontract. For purposes of this Article, the term "subcontract" excludes (1) purchase orders not exceeding $2,500, and (2) subcontracts or purchase orders for public utility service at published rates established for uniform application to consumers.

C. The periods of access and examination described in paragraphs A and B, above, for records which relate to (1) appeals under the "Disputes" clause of this agreement, (2) litigation or the settlement of claims arising out of the performance of this agreement, or (3) costs and expenses of this agreement as to which exception has been taken by the Comptroller General or any of his duly authorized representatives, shall continue until such appeals, litigation, claims or exceptions have been disposed of. D. Each period this agreement is in effect, shall be a separate term of this agreement for purposes of this Article and "final payment" for a term of this agreement shall be deemed to have occurred on the date of the closing agreement in paragraph H of Article VI, setting forth the final administrative costs for the final period of such term.

Article XXI

INSPECTION AND EVALUATION

A. The Secretary and Intermediary shall have the right to appraise Plan performance under this agreement. The Secretary shall also have the right at all reasonable times, and upon reasonable notice to the Intermediary and the Plan to inspect, or otherwise evaluate the work performed or being performed hereunder and the premises in which it is being performed. Pursuant thereto, the Secretary shall have the right to maintain onsite representatives on the premises of the Plans.

B. If any inspection or evaluation is made by the Secretary on the premises of the Intermediary or the Plan, or onsite representatives of the Secretary are maintained on the premises of the Intermediary or Plans, the Intermediary shall provide and shall require his subcontractor to provide all reasonable facilities and assistance for the safety and convenience of the Secretary's representatives in the performance of their duties. All inspections and evaluations by the Secretary's representatives shall be performed in such a manner as will not unduly delay the work. If a written report of such inspection or evaluation is prepared which reflects deficiencies and/or proposes corrective action to be taken by the Intermediary or the Plan, a copy shall be furnished to the Intermediary and the Plan. Any corrective action determined by the Secretary to be taken by the Intermediary or the Plan as a result of such inspection or evaluation shall be communicated directly to the Intermediary and the Plan.

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