Sec. 101.9. Provisions required in health care provider agreements that transfer financial risk

(a) Every financial risk transfer agreement between an insurer and a health care provider shall specify that:

(1) the health care provider's in-network capitation from the insurer must first be used for medical and hospital services to be rendered by the health care provider and its participating providers which derive from the financial risk transfer agreement with the insurer, as well as necessary administrative costs associated with such services;

(2) the health care provider agrees that the superintendent, and the insurer, shall have the right, from time to time, to inspect the health care provider's books and records and that the superintendent may examine under oath any officer or agent of such provider with respect to its use of the in-network capitation funds received from the insurer and the provider's compliance with the terms and conditions of the financial risk transfer agreement and the provisions of this Part;

(3) the health care provider agrees that on an annual basis, it will submit within 120 days of the close of its fiscal year, to the insurer and the superintendent, a financial statement in a form prescribed by the superintendent, sworn to under penalty of perjury by the health care provider's chief financial officer, showing the health care provider's financial condition at the close of its fiscal year, together with an opinion of an independent certified public accountant (CPA) on the financial statement of such health care provider. When reviewing the financial condition of the health care provider the CPA's certification shall represent whether the liabilities of the health care provider make adequate provision for any additional liability that may insure to the health care provider by virtue of its assumption of risk under a financial risk transfer agreement or any similar transaction. The amount and adequacy of any such liability (and a description of the procedures used by the CPA to determine such liability) shall be disclosed and commented upon by the CPA in its certification. The CPA shall also test check and report on the safeguards adopted by the health care provider to ensure its compliance with requirements of paragraph (1) of this subdivision. In rendering the required opinion, the CPA may take into consideration the financial position of a guaranteeing parent corporation, provided that the terms and conditions of such guarantee have been reviewed by the CPA. In such cases, the opinion of the CPA on the health care provider's financial statement shall state to what extent, if any, the CPA relied upon the guarantee when rendering its opinion and to what extent the CPA reviewed the financial position of the parent corporation. A copy of the consolidated financial statement of the guaranteeing parent corporation for the same fiscal year together with an opinion of an independent CPA on such financial statement shall be attached to the CPA's opinion on the health care provider's financial statement. Such financial statement and opinion shall be available for public inspection at the office of the superintendent and the principal office of the insurer;

(4) in-network capitation payments from the insurer to the health care provider must be made on a monthly basis;

(5) no payment to the health care provider shall be made by the insurer prior to the first day of the month for which the payment relates;

(6) in the event the insurer will be providing administrative services for the health care provider in conjunction with such provider's assumption of financial risk, then such services and the resulting charges must be set forth in writing (as part of the financial risk transfer agreement or in a separate agreement) and if such services include the remittance of claim payments due to participating providers then such payments must be disbursed from the health care provider's bank account; and

(7) in addition to any other contractual provision affecting termination of the agreement, that upon a satisfactory demonstration to the superintendent that the health care provider is not, in a material way, adhering to the terms and conditions of the financial risk transfer agreement, or the provisions of this Part; or that the health care provider's condition is such that the further transaction of its business will be hazardous to the insurer's subscribers; then with the approval of the superintendent the insurer may make all or part of any monthly in-network capitation payments due under the financial risk transfer agreement into an escrow account approved by the superintendent which amounts shall remain in escrow until such time as the superintendent determines that the health care provider is complying with the terms and conditions of the financial risk transfer agreement, or the provisions of this Part; or, after notice and an opportunity to be heard, the superintendent determines (with the advice of the commissioner in the case of an entity possessing a certificate of authority under article 44 of the Public Health Law) that it is in the best interest of subscribers to immediately terminate such agreement. Any determination by the superintendent shall provide for the distribution of the funds held in this escrow account and for the disposition of any financial security deposit.

(b) Contracts with health care providers entered into by insurers licensed pursuant to the Insurance Law shall also include any other provisions required by the Insurance Law or any regulations thereunder and provider contracts entered into by entities certified by article 44 of the Public Health Law shall continue to be subject to all the applicable requirements contained in said article and 10 NYCRR 98-1.