B R U C E W . H U G H E S · PDF fileRegional Home Health and Hospice. Headquartered in Columbia, ... and qualities Beyond Talent. Each year, Palmetto GBA selects an

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[ P r e s i d e n t ’s L e t t e r ]

I t is with great pleasure that I share with you the 2007 annual report of Palmetto GBA. The theme of this year’s report is Beyond Strength, a theme that characterizes who we are as a company. Even when facing challenges unlike any others we have encountered in our forty-two years, Palmetto GBA has continued to perform in a manner that exhibits the high expectations we hold for ourselves. I attribute this success to the people of Palmetto GBA. Our associates demonstrate their commitment to our company’s success by making us stronger, more resilient, and more determined than ever to remain a leader in our field, even when facing daunting obstacles.

While 2007 was very difficult in many respects, it turned out to be a more successful year than anticipated. Financially, both total revenue of $233 million and net income of $5.8 million exceeded expectations. In terms of operational performance, 2007 results were among our best ever, again, a testament to our associates’ commitment and perseverance.

The primary contributor to the better than expected financial results was the retention of work we had expected to phase out in early 2007. Though the core Region C Durable Medical Equipment Regional Carrier (DMERC) contract ended in June, we continued the Statistical Analysis DMERC (SADMERC) and National Supplier Clearinghouse (NSC) functions throughout 2007. Also, as the 1-800 MEDICARE Helpline transitioned to the Beneficiary Contact Center (BCC), we received a significant subcontract to support the BCC.

2007 was very important as we look to the future. Palmetto GBA was awarded a large contract to administer the Medicare Program in the states of California, Hawaii, Nevada, and the Pacific territories as the Jurisdiction 1 A/B Medicare Administrative Contractor (MAC) in late 2007. Additionally, proposals were submitted or discussions continued for prime or subcontractor roles on several other A/B MAC jurisdictions. Proposals were submitted or contracts were renewed for several other contract opportunities.

As we look back, Palmetto GBA, through its associates, demonstrated strength and resolve in 2007. In doing so, a path to a bright future was established. The future will certainly hold challenges but also many opportunities. We remain committed to our mission, vision and values. We stand ready to meet the challenges and capitalize on the opportunities.

[ I n t r o d u c t i o n ]


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Palmetto GBAPARTNERS IN EXCELLENCE

he palmetto tree has been a symbol of strength and stability in South Carolina for more than 200 years. Palmetto GBA introduced a new company logo in November 2007. The palmetto tree remains in our new company logo, reflecting the strength and history of our company and its deep roots in South Carolina. The phrase Partners in Excellence underscores our commitment to serving our customers with the level of excellence and accountability that Palmetto GBA embodies.

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[ I n t r o d u c t i o n ]

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BEYONDTALENT

BEYONDPERFORMANCE

BEYONDINNOVATION

BEYONDGROWTH

BEYONDCOMPLIANCE

n today’s competitive environment, it is imperative that a company exceed their customers’ expectations. Successful companies, those that persevere through the tough times, know that they must perform more efficiently while raising the bar ever higher. Such companies employ committed, energetic workers who hold high expectations for their own performance --- workers who push the company beyond its “comfort zone”. This takes more than mere talent; it takes commitment, creativity, and integrity. At Palmetto GBA, our associates boast skills and experience that move them Beyond Talent. Their operational results achieve levels Beyond Performance; their business-development strategies take the company Beyond Growth. The company’s Total Quality Management program celebrates ideas Beyond Innovation, and our commitment to strong values and organizational integrity place us Beyond Compliance. Palmetto GBA possesses stability and endurance that set us apart. We are Beyond Strength.

[ C o m p a n y O v e r v i e w ]

almetto GBA provides contact center, technical and

administrative services to the Centers for Medicare &

Medicaid Services (CMS), Medicare beneficiaries, and

Medicare providers. Palmetto GBA is the largest and most

diverse Medicare contractor in the nation and is one of

the CMS’s most reliable and long-term business partners.

Palmetto GBA is the only Medicare contractor with

experience in all Medicare business segments: Medicare

Part A, Medicare Part B, Durable Medical Equipment, and

Regional Home Health and Hospice.

Headquartered in Columbia, S.C., Palmetto GBA has more

than 2,000 employees and offices in Florida, Georgia, Illinois

and Ohio. The company serves over 8.3 million Medicare

beneficiaries in all 50 states, and has shown innovation in


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[ C o m p a n y O v e r v i e w ]

order to improve the clinical, business, and customer

service aspects of the Medicare program since its

inception. In 2007, Palmetto GBA processed 98.6

million Medicare claims and paid more than

$29 billion in benefits.

Palmetto GBA’s 42 years of experience makes us

unique among those with Medicare contracts. We

are experts in contact center operations, enterprise

technologies, finance and accounting, health care

policy, and training and development. Our company

strategy demands that we continue to be a leader in

the level and breadth of our services to the CMS and

with new, non-Medicare customers.


BEYONDTALENT

JOY FLEMINGAccounting Tech III,Finance & Accounting

ALONSO CUELLARManager, NSC Enrollment

JOE STRICKLANDManager, HIGLAS

TABBY LYNCHBusiness Analyst II, Part A Medical Review

[ B e y o n d T a l e n t ]


A t Palmetto GBA, we employ the industry’s best, most knowledgeable associates: people who thrive on challenge, people who want to work for a company that provides stability and rewards for that work.

From the newest employee to most veteran,

our associates have an average of 11 years with

the company. And the longer they work for

Palmetto GBA, the better they become, by taking

part in both in-house, professional-development

programs and by using company tuition grants

to attend college courses. During 2007, Palmetto

GBA gave 180 employees a total of $400,000 for

tuition, books, and related educational expenses.

The Palmetto Training Team (PTT) also awarded

38,965 credit hours, which represents an average

of 615 associates participating in an in-house

training event each month.

Palmetto GBA stands committed to rewarding

associates who strive to become better, those who employ personal skills

and qualities Beyond Talent.

Each year, Palmetto GBA selects an Associate of the Year and a Coach of

the Year. Those selected demonstrate exemplary commitment to the

company’s Quality Management System and its Strategic Plan by promoting

high quality throughout the organization, actively working to develop

process improvements, consistently exceeding performance objectives, and

providing superior customer service.

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ASSOCIATE OF THE YEARHEIDI TUGGY was named Associate of the

Year for 2007. A Project Coordinator III for the

finance and accounting staff, Heidi embodies

the qualities of ingenuity, determination, and

initiative. In her nine years with the company,

she has a track record of outstanding

customer service and has helped both her

immediate co-workers and the company

to become more efficient. Heidi has led a

Deltek testing team and developed databases

for Receipts Team deposits, IRS Form 1099

customer service, general customer service,

and key measures.

As team lead for Deltek time and expense testing, Heidi kept team members

informed, coordinated completion of all assignments, and helped identify and

correct difficulties. The Receipts Team deposit database that Heidi designed

and implemented makes it easier to retrieve information, saving the company

an estimated $7,000 annually in time expended. Her IRS Form 1099 customer

service database allows the Banking Team to track call volume and call duration,

improving customer satisfaction.

Colleagues nominating Heidi for the Associate of the Year award said her

“strongest attribute” was that she “is quick to point out things that Palmetto GBA

can do better, faster, or more efficiently” and has been “the cornerstone of many

process improvements”.



COACH OF THE YEARKATHY SPIRES was selected Coach of

the Year for 2007. A Senior Investigator

in the Supplier Audit and Compliance

Unit (SACU) of the National Supplier

Clearinghouse, Kathy oversees the SACU

Operational Team. This team processes

investigations and complaints made

against suppliers. Kathy has worked in

health care for 24 years and possesses

a wealth of work knowledge. Her

nomination letter cites her pursuit of

“innovative ways to improve timeliness,

productivity, and quality,” as well as the

admirable traits of “wisdom, knowledge,

and guidance”.

As a coach, Kathy is committed to developing the skills and knowledge of other

associates. She empowers others to make decisions and to take responsibility for

the outcomes of those decisions. Kathy also leads the work group that develops

and tests changes in all ISO documents for the SACU and has used her extensive

Quality Assurance (QA) experience to help develop a comprehensive internal QA

program for the SACU. Her efforts have helped the SACU exceed standards for

timeliness and to perform consistently above contractual standards.

Kathy also demonstrates consistent commitment to providing superior customer

service. With her coaching, the SACU has continued its aggressive and successful

efforts to fight and prevent fraud. Kathy continually fosters teamwork, process

improvement, and the personal growth of subordinates --- all of which contributes

to the success of Palmetto GBA.

Both Heidi and Kathy truly demonstrate how our associates embody a

commitment to Palmetto GBA that is Beyond Talent.

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TEAM OF THE YEARStanding (L-R): Christy Harmon,Jamarl Ponds, Leslie Stiles,Lisa Rye

Sitting (L-R): Bess Crawford-Dawson, Idella Chestnut, Randi Heyward, Gwendolyn Sabb

Not Pictured: Nancy Baker, Cynthia Newton, Perry Mattox, Mary Pimpleton, Gail Singley

THE NATIONAL TRAINING TEAM

(NTT) was selected 2007 Team

of the Year for Palmetto GBA.

Team members rose above

unusually pressing demands

for their service to offer both

excellent and innovative results.

The NTT supports the CMS and the Beneficiary

Contact Center by providing the training

materials, operating procedures, and job aids

that customer service representatives need to

respond to beneficiary inquiries correctly. The

team boasts an outstanding performance record,

meeting 100 percent of its timeliness objectives

for the year. The NTT also exceeded CMS

requirements in 2007, achieving a 96 percent

score on its customer-satisfaction survey.

The NTT submitted fourteen process

improvements in 2007. Two were selected as a Process Improvement of the Month for

Palmetto GBA, with one of them generating annual company savings of more than $31,000.

The NTT is a knowledgeable, talented and dedicated group who has clearly learned the

value of teamwork. This team consistently exceeds the expectations of the CMS and other

Medicare contractors, while driving excellence in customer service.

Team accomplishmentsfor 2007 also include:Creating and revising training manuals and National Operating Procedures (NOPs) to help the company exceed performance standards.Creating refresher training modules, proficiency tests, and job aids tosupport ongoing and just-in-time BCC operational needs.Providing training to CMS, operations managers and other contractors.Making business process and training curriculum recommendations to CMS.

American Heart Association’sHeart Walk The American Heart Association’s annual Heart Walk promotes heart-healthy living and physical activity. In 2007, employees raised more than $44,000 in donations and walker sponsorships. Employees also were encouraged to wear red on the annual Go Red for Women day to help build awareness and urge women to take concrete action to

reduce their risk of heart disease.

United WayThe United Way is a nonprofit organization that responds to the critical human service needs of a community by distributing community resources. In 2007, Palmetto GBA associates contributed more than $200,000

to the United Way campaign.

Harvest Hope Food Bank The Harvest Hope Food Bank began in 1981 as an emergency food box program. It has become a regional program that collects, stores, and distributes food and related items to more than 300 agencies that feed the needy, elderly, ill families and children in central South Carolina. Palmetto GBA holds an annual food drive for Harvest Hope. During the 2007 drive, Palmetto GBA employees contributed to the 50,000 pounds of food collected by BlueCross BlueShield of SC (BCBSSC). In 2007, Palmetto GBA’s Ohio office contributed more than $9,300 and 1,500 pounds of food to the

Mid-Ohio Food Bank.

The March of DimesThe March of Dimes supports research to prevent birth defects, premature birth, and

infant mortality. Every day, more than 1,300 American babies will be born prematurely, facing an increased risk of death and serious medical complications. Employees at Palmetto GBA raised over $13,000 for the 2007 March of Dimes Walk America

campaign.

Helping Our Troops in the Middle EastThough prized, time off for U.S. Troops can be uneventful. Their favorite magazines from back home are a rare and treasured diversion for our troops. One of Palmetto GBA’s divisions recently began a monthly program of donating and mailing current magazines to a battalion of 1,000 soldiers

serving our country in Iraq.

National Guard Unit Gift BoxesA Palmetto GBA division collected and sent snacks, magazines, puzzles, books and personalized drawings from their children --- enough items to fill 10 boxes -- to National Guard Unit #118 serving in Afghanistan. Associates also gave a 600-minute phone card for the soldiers to share. Soldiers in the unit later said it felt like Christmas had come early when they

received the “goodie boxes.”

American Cancer Society Relay for LifeSeveral Palmetto GBA offices participated in the American Cancer Society’s Relay for Life for the third consecutive year. The Relay for Life raises money for cancer research and honors victims of cancer, survivors and their families. The Augusta, Georgia office raised more than $1,300 for the Relay for Life. The Camden, SC document control area raised more than $3,000.


almetto GBA associates move beyond talent outside of the work place as well.Donating our time, resources and talents to our communities, charitable organizations and those in need truly defines our commitment to generosity and sharing.


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[ B e y o n d P e r f o r m a n c e ]


a almetto GBA does not merely meet industry standards, it raises them. Each person at Palmetto GBA, from associates to company officers, is committed to excellence in customer service, a goal we can reach only through constant innovation and initiative. Our strategy works. It saves time and money by making potentially complicated processes easier, more efficient and productive. Our drive to constantly do things better means our customers know we are dedicated to meeting their needs.

The results of the CMS Provider Satisfaction Surveys highlight our excellent performance. Part A, Palmetto GBA ranked No. 11 out of 22 intermediaries surveyed; Part B, No. 7 of 17 carriers surveyed; Regional Home Health and Hospice Intermediary (RHHI) No. 1 among 4 RHHIs; DMERC, No. 2 among 4 DMERCs surveyed.

Our Comprehensive Error Rate Testing (CERT) scores also demonstrate the Palmetto GBA commitment to exceptional performance on accurate claims processing and benefit payments. In 2007, Palmetto GBA surpassed the national average on three of four

contracts. More significantly, the company error rate was lower than the national average error rate by 56 percent.

Palmetto’s 1-800 MEDICARE Helpline contract received “excellent” CMS performance evaluations for the periods ending January 31 and March 31, 2007. The National Training, Standard Operating Procedures, and Correspondence Intake portions of the 1-800 MEDICARE Helpline contract were extended through September 2007.

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[ B e y o n d P e r f o r m a n c e ]

Palmetto GBA’s eCommerce and Statistical Analysis Data Warehouse (SADWH) departments were part of the team led by QSSI which was awarded the Personal Health Record Pilot for Medicare Fee-for-Service Beneficiaries. This CMS project will develop a Patient Health Record (PHR) that is pre-populated with Medicare claims data. The PHR pilot project will test whether it is feasible to make PHRs available to Fee-for-Service Medicare beneficiaries; evaluate the outreach methods used to encourage PHR adoption; track the frequency of use of the PHRs; and identify the most productive resources and functions of the PHRs. PHR adoption would create an electronic central repository for each Medicare beneficiary’s health information allowing the beneficiary to provide authorized access to physicians, family, or other caregivers.

Healthcare Integrated General Ledger Accounting System (HIGLAS) Transition Support and HIGLAS Training Contracts became fully operational in 2007. Palmetto GBA provided support to five Medicare contractors transitioning to HIGLAS.

PartAPartB(SC) DMERC OH-WV RRB

BI $259,358 $12,798 $22,623,344 N/A $108,466

MSP $307,647,218 $37,960,710 $9,002,992* $78,486,723 $6,146,352

MR $56,032,180 $601,556 N/A $2,161,585 $521,573

TOTAL $363,938,756 $38,575,064 $31,626,336 $80,648,308 $6,776,391

*Savings represent only eight months of FY 2007

urprogramsafeguardactivitiesresultinsignificant

Medicaresavings.ThroughSeptember2007,theworkof

Palmetto GBA resulted in the following Medicare savings:

O

[ B e y o n d P e r f o r m n a c e ]


www.PalmettoGBA.com won a bronze citation in the Spring/Summer 2007 World Wide Web Health Awards because of the outstanding service it provided to health care providers. The Health Information Resource Center established the awards to recognize the nation’s best Web-based providers of consumer health information. Palmetto GBA designed its site for physicians, hospitals, home health agencies, and others who serve Medicare beneficiaries. Each month, www.PalmettoGBA.com averages more than 5.6 million page views and transmits an average of 1.9 million LISTSERV messages.

Palmetto GBA also is actively involved in designing the HIGLAS transition solution for the upcoming A/B MAC transitions. Our staff has worked regularly with the CMS, IBM, the Fiscal Intermediary Standard System, and the Multi Carrier System to find a way to identify HIGLAS workload by state, and systematically transition the workload to the appropriate A/B MAC region.

Palmetto GBA converted its accounting system to the industry leader, Deltek Costpoint, in 2007. Deltek is used by over 12,000 project based businesses. The decision to transition to Deltek was driven by Palmetto GBA’s commitment to meet the needs of our customers in all aspects of contract performance. With this relational database in place, our accounting system provides for improved allocation, monitoring and reporting of costs.

BEYONDGROWTH

TANIA CHACONAdministrative Specialist, Part B Medical Affiars

JENELLE BURKHARDManager, CBIC Web/Systems e-Commerce

BARTLEY BOSWELLProject Coordinator,Special Planning and Projects

[ B e y o n d G r o w t h ]


B usiness development is a core component of our two-fold business strategy at Palmetto GBA. We are committed to the CMS, our primary customer, and wish to expand the relationship by obtaining new CMS contracts to increase our market share. We also take great pride in the expertise developed throughout our many years as a Medicare contractor. We are dedicated to “growing” Palmetto GBA by expanding our non-CMS customer base, targeting other contracts or government agencies that can benefit from our expertise.

Palmetto GBA faced an intense procurement

environment during 2007. Our business

development efforts resulted in the submission

of more proposals for new business in 2007

than ever before. We have enjoyed many

successes from these efforts thus far and we

have high hopes for a number whose results

we do not yet know. Further, we diversified

our customer base beyond our strategic

objectives. Clearly, Palmetto GBA aggressively

pursues business development, going Beyond

Growth.

The CMS awarded the Jurisdiction 1 A/B

Medicare Administrative Contract to Palmetto

GBA in October 2007. Under this five year contract, Palmetto GBA will serve as the

A/B Medicare Administrative Contractor (MAC) for those states and U.S. territories

known as A/B MAC Jurisdiction 1: California, Hawaii, Nevada, American Samoa, Guam,

and the Northern Marianas. The contract has a potential value of approximately $400

million. Palmetto GBA will administer Medicare Parts A and B for the jurisdiction.

Projected Year 1 claim volumes are approximately 9.8 million for Medicare Part A and

approximately 8.4 million for Medicare Part B.

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T he CMS issued the Request For Proposal (RFP) for the Enterprise Systems

Development (ESD) contract in early 2007. Palmetto GBA is a subcontractor

on three teams that were awarded a CMS ESD Indefinite Delivery Indefinite

Quantity (IDIQ) contract. The CMS will use the contracts to procure system-

development and -maintenance services over the next 10 years.

As part of our ESD business development efforts, Palmetto GBA was awarded

a subcontract to provide technical support for the Medicare Advantage

Prescription (MARx) system development and maintenance contract with the

CMS. Palmetto GBA supplies business analysts and subject matter experts under

this contract.

Palmetto GBA was awarded a subcontract to provide Customer Service

Representative (CSR) support for the Beneficiary Contact Center through May

2009. Upon contract award, Palmetto GBA

increased CSR staff by approximately 900

associates. Call volume for 2007 topped 6

million calls. Palmetto GBA will continue to

provide CSR support for general Medicare

and claims lines of business, written

correspondence, knowledge management,

workforce management, performance

management and quality assurance under

this contract.

Palmetto GBA partnered with Companion

Data Services (CDS) in a successful bid for

the National Data Warehouse (NDW) to

support the Beneficiary Contact Center. The overall contract with CDS covers

support and maintenance of the data warehouse. As subcontractor, Palmetto

GBA will provide applications support, including data receipt, Extract–Translate–

Load (ETL) activities, and daily reports to the CMS and call center contractors.



Palmetto GBA was awarded a subcontract to staff and operate a small

call center for the Department of Housing and Urban Development (HUD)

and Federal Emergency Management Agency (FEMA). HUD will service the

Disaster Housing Assistance Program (DHAP). To serve families throughout

the country, HUD issued a small-business contract for a Referral Call Center to

link families displaced by Hurricanes Katrina and Rita with participating local

Public Housing Agencies (PHAs). Palmetto GBA will match and refer families

with participating PHAs, answer questions on DHAP and the Disaster Voucher

Program (DVP) from PHAs and the general public, and assist families who now

participate in or who are eligible for DVP or DHAP.

During 2007, the Single Testing Contract (STC) completed option year 1

of the STC. Under this contract, Palmetto GBA performs beta testing of the

CMS standard systems, including the Fiscal Intermediary Standard System,

the Multi Carrier System, the ViPS Medicare System, Common Working File,

and Healthcare Integrated General Ledger Accounting System. Our primary

goal is to ensure that error-free systems are in production at the Carrier and

Intermediaries levels.

Palmetto GBA continued to perform exceptionally well in 2007 as the Risk

Adjustment and Prescription Drug Data collection contractor and in the

related customer-service center. Under this contract, Palmetto GBA collects all

electronic Risk Adjustment and Prescription Drug data nationwide and handles

related technical customer service. From January 1 to July 31, 2007, Palmetto

GBA processed 1.3 billion transactions under this contract.

BEYONDINNOVATION

MARIA BRAVO-CARRILLOExternal Auditor,Provider AuditAPRIL GREEN

External Auditor,Provider Audit

KENNETH McCULLOUGHManager, Contact Center Support Team

BRIANNA ORTEGA-BROUGHTON, RNPrepay Medical Review Part A

FRANCES HUITechnician, EDI Communications

[ B e y o n d I n n o v a t i o n ]


F or Palmetto GBA, innovation is not simply an examination of how to do things better, it is a fundamental driver of our strategic success. We feel driven by the need for efficiency, for new ways to save our customers time and money. But we don’t satisfy ourselves by merely meeting the customers’ expectations: We go Beyond Innovation.

In 2007, we implemented 26 innovations

suggested by our associates. These innovations

resulted in approximately $1.4 million in savings,

quality improvement of 41.6 percent and

efficiency improvement of 114 percent in the

targeted functional areas.

Some examples of how our associates have moved Beyond Innovation:

The 1-800 Beneficiary Contact Center automated

several reporting processes, improving customer

service and saving the company more than

$300,000. The BCC now can measure and

report quality control scores, track Customer

Service Representative call statistics, store and track monthly reports, and provide

immediate feedback to management.

The Palmetto Learning and Development Team developed Web-based information

to support the Medicare Part A “Going Beyond Diagnosis” series. This series is a

comprehensive approach to communicate Medicare documentation requirements

across the continuum of care. Palmetto is sharing this program with the medical

community on a national level.

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T he Competitive Bidding Implementation Contractor unit found a

way to automate processes formerly done by hand, saving time and

ensuring bid document accuracy. The new process eliminates the need

to print and store reams of paper documents and creates a database for

mining specific data. The innovation produced a cost savings of more

than $320,000.

The National Supplier Clearinghouse (NSC) made it unnecessary to

print and ship coded documents to external customers — a bulky

process. Now, associates at the NSC can simply download information

that customers request onto a CD that can be mailed to the customer.

The CD format cannot be edited, protecting the integrity of the

information as well as patient privacy. The NSC projects the new system

will save more than $19,000 annually in printing and shipping costs.

In 2007, Palmetto GBA enhanced its Quality Management

System (QMS) by implementing a Web-based database

called QMS360. QMS360 tracks customer requirements that

impact our QMS, links and stores all compliance documents,

and automatically prompts management review of changes in

the system. QMS360 helps Palmetto GBA provide standardized

critical business processes, ensuring customer satisfaction and

position Palmetto GBA for future business. The system provides

a framework for continual improvement and a way to instantly

monitor performance.



PROCESS IMPROVEMENT OF THE YEAR

Through our Celebrate Process Improvement program, Palmetto GBA

seeks and rewards associates for their ideas on how to improve the

company. In 2007, Palmetto GBA associates submitted 281 ideas for

process improvement.

From these submissions, senior leadership selected a suggestion by the

Train the Trainer (TTT) team as the 2007 Process Improvement of the

Year. Under the TTT contract, Palmetto GBA provides comprehensive

education and training for A/B MACs, Fiscal Intermediaries, Carriers,

Durable Medical Equipment Regional Carriers, Regional Home Health

and Hospice Intermediaries, the CMS central and regional staff, and

providers on the application of Medicare payment systems. The TTT

contractor is required to conduct several, very large teleconferences, up

to 20,000 participants nationwide. The team suggested Web-based pre-

registration and a new provider for teleconference calls, cutting the cost

of calls in half. These and related process improvements reduced re-bid

costs by 44 percent. In July, the CMS awarded Palmetto GBA a five-year

contract renewal. Since that time, Palmetto GBA has already received a

contract modification to arrange additional teleconferences for the CMS.

TEAM MEMBERS(L-R) Amy Forloines, Barbara Whittaker,Amanda Richardson,Kathryn Padgett

Not Pictured:Brian Stinson

BEYONDCOMPLIANCE

KENNY CROSSCommunications Engineer, Systems & Support/EDI

TAMMY TUCCIPart A S.C. Ombudsman,Provider Outreach and Education

[ B e y o n d C o m p l i a n c e ]


P almetto GBA is a long-term leader in organizational compliance. We have an award-winning compliance program and system of internal controls. The goal of the program, called Our Values, is to educate all associates about our core values: Communication, Innovation, Integrity, People, Quality, Responsibility, and Service.

We know that we cannot ensure our traditional

level of excellence without the commitment of

every associate to the company’s contractual, legal,

regulatory, and ethical goals. The Palmetto GBA

Compliance Unit actively encourages associate

participation in compliance efforts by educating

associates throughout their employment.

Cooperating with other BCBSSC Government

Programs divisions, Palmetto GBA contributes to the

Compliance Common, a bi-monthly online newsletter;

the Government Programs Compliance Handbook,

an online reference source; and the Ethics Almanac,

a collection of cases investigated and resolved by

compliance staff. The Corporate Compliance Program

is structured to encourage continuous dialogue about

corporate integrity and responsibility and how they

relate to each person’s job.

292 0 0 7 A N N U A L R E P O R T

ur strategic direction is clear. We will pursue growth and maintain the exceptional

performance levels that we demand of ourselves. We are committed to our customers and

we will provide thoughtful, professional solutions. We make our business partners and

our company stronger by seeking opportunities to implement significant innovations.

Compliance will continue as our highest priority. Our associates’ talent remains the

cornerstone of our success. Palmetto GBA is Beyond Strength.

[ C o n c l u s i o n ]

KENNY CROSSCommunications Engineer, Systems & Support/EDI

CHRISTOPHER JONESManager,BCC Operations

NICHOLAS SARGENTPart B S.C. Ombudsman,Provider Outreach and Education

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[ B o a r d o f D i r e c t o r s ]

I L E N E H . N A G E LR U S S E L L R E Y N O L D S A S S O C I AT E S , M A N A G I N G D I R E C TO R

M . E D W A R D S E L L E R SC H A I R M A N , B O A R D O F D I R E C TO R S , PA L M E T TO G B A ; P R E S I D E N T, C H A I R M A NA N D C E O, B LU E C R O S S B LU E S H I E L DO F S O U T H C A R O L I N A

B R U C E W. H U G H E SP R E S I D E N T A N D C O O,PA L M E T TO G B A

W I L L I A M R . H O R T O NP R E S I D E N T A N D C O O, G O V E R N M E N T P R O G R A M S , B LU E C R O S S B LU E S H I E L D O F S O U T H C A R O L I N A

T. J E F F R E Y L I T T L E F I E L DV I C E P R E S I D E N T, P G B A , L LC


[ C o r p o r a t e O f f i c e r s ]

ALMETTO GBA’S MISSION is to provide superior quality services to our customers in a

workplace committed to continuous improvement,

uncompromising integrity and respect for all associates.

P

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B R U C E H U G H E SP R E S I D E N T A N DC H I E F O P E R AT I N G O F F I C E R

J O E W R I G H TV I C E P R E S I D E N T A N D C H I E F F I N A N C I A L O F F I C E R

A N N A R C H I B A L DV I C E P R E S I D E N T A N DC O M P L I A N C E O F F I C E R

P A L M E T T O G B A32

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M I K E B A R L O WV I C E P R E S I D E N T,PA R T B O P E R AT I O N S - O H I O / W E S T V I R G I N I A

N E A L B U R K H E A DV I C E P R E S I D E N T, M E D I C A R E I N T E G R I T Y P R O G R A M A N DPA R T A O P E R AT I O N S

E L A I N E M Y E R SV I C E P R E S I D E N T,C U S TO M E R S E R V I C E S T R AT E G I E S


D I C K I E B U T L E RV I C E P R E S I D E N T,S Y S T E M S A N D T E C H S U P P O R T /G O V E R N M E N T P R O G R A M S E D I

R O B I N S P I R E SV I C E P R E S I D E N T,Q U A L I T Y A N D E D U C AT I O N

R E X B R O W NA S S I S TA N T V I C E P R E S I D E N T, Q U A L I T Y A N D E D U C AT I O N


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S H A R O N C O O K - M c E W E NA S S I S TA N T V I C E P R E S I D E N T,PA R T B O P E R AT I O N S -S O U T H C A R O L I N A

J O E J O H N S O NA S S I S TA N T V I C E P R E S I D E N T,E D I S Y S T E M S / G O V E R N M E N T P R O G R A M S

S U S A N P E N D L E YA S S I S TA N T V I C E P R E S I D E N T, C U S TO M E R S E R V I C E S T R AT E G I E S


D E D E E R O W ES E C R E TA R Y

B O B L E I C H T L ET R E A S U R E R

S H E R I T H O M P S O NA S S I S TA N T V I C E P R E S I D E N T,C U S TO M E R S E R V I C E S T R AT E G I E S


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Report of Independent Auditors

Board of Directors Palmetto GBA, LLC

We have audited the accompanying consolidated balance sheets of Palmetto GBA, LLC as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in member’s equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Palmetto GBA, LLC at December 31, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

February 29, 2008

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[ C o n s o l i d a t e d B a l a n c e S h e e t s ]

PALMETTO GBA, LLC (a single-member limited liability company owned by blue cross and blue shield of south carolina) CONSOLIDATED BALANCE SHEETS (in thousands) 2007 2006 Assets Currentassets: Cashandcashequivalents $ 11,126 $ 18,854accountsreceivable,net 48,411 48,562 accountsreceivablefromaffiliates 3,212 4,452 accruedrevenue 26,239 9,323 Prepaidexpenses 142 449

Deferredincometaxes 1,699 2,006

totalcurrentassets 90,829 83,646 Long-termassets: Fixedassets,netofaccumulateddepreciation of$19,687and$18,231in2007and2006,respectively 5,228 6,552 Long-terminvestments 4 - Investmentinaffiliate 2,494 2,255

Deferredincometaxes 789 631

totallong-termassets 8,515 9,438

totalassets $ 99,344 $ 93,084 Liabilities and member’s equity CurrentLIabILItIes: accruedpayroll,taxesandbenefits $ 15,978 $ 19,361 Payabletoparent 7,748 8,497 otherliabilities 25,662 22,731

Deferredincometaxes 26 54

totalcurrentliabilities 49,414 50,643

Long-termLIabILItIes: Deferredincometaxes 22 20

totallong-termliabilities 22 20

member’sequIty: Contributedcapital 27,708 26,038 retainedearnings 22,200 16,383

totalmember’sequity 49,908 42,421

totalliabilitiesandmember’sequity $ 99,344 $ 93,084

December 31,

the accompanying notes are an integral part of these financial statements.

P A L M E T T O G B A

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[ C o n s o l i d a t e d S t a t e m e n t s o f O p e r a t i o n s ]

CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands)

YearendedDecember31, 2007 2006

REvENuE

Totalrevenues $246,411 $ 338,125

ExPENSE

Totalexpenses $ 240,743 $332,326

Gainfromoperations 5,668 5,799Investmentincome,net 1,433 1,936Incomebeforeincometaxes 7,101 7,735

Provisionforincometaxes 1,284 2,849

Netincome $ 5,817 $ 4,886

The accompanying notes are an integral part of these financial statements.

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[ C o n s o l i d a t e d S t a t e m e n t s o f C h a n g e s i n M e m b e r ’s E q u i t y ]

PALMETTO GBA, LLC (a single-member limited liability company owned by blue cross and blue shield of south carolina)

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER’S EQUITY (in thousands)

BalanceJanuary1,2006 $23,789 $11,497 $388 $35,674

Netincome - 4,886 - 4,886Changeinunrealizedgainson securitiesclassifiedas available-for-sale - - (388) (388)

Totalcomprehensiveincome 4,498 Contributionofcapital 2,249 - - 2,249

BalanceDecember31,2006 26,038 16,383 - 42,421 Netincome - 5,817 - 5,817 Contributionofcapital 1,670 - - 1,670

BalanceDecember31,2007 $27,708 $22,200 $- $49,908

Accumulated Other Contributed Retained Comprehensive Capital Earnings Income Total

the accompanying notes are an integral part of these financial statements.


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[ C o n s o l i d a t e d S t a t e m e n t s o f C a s h F l o w s ]

PALMETTO GBA, LLC (a single-member limited liability company owned by blue cross and blue shield of south carolina) CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended December 31,

2007 2006CASH FLOWS FROM OPERATING ACTIVITIES: net income $5,817 $4,886adjustments to reconcile net income to net cash (used in) provided from operating activities:

Depreciation 1,454 1,573 Amortizationonbonds - 20 Lossonfixedassetdisposals 12 - Realizedgainoninvestments - (707) Equityinincomeofaffiliate (239) (363) Deferredincometaxprovision 123 (837)

CHANGES IN OPERATING ASSETS AND LIABILITIES: Decreaseinaccountsreceivable 151 13,152 Decrease(increase)inreceivablesfromaffiliates 1,240 (1,164) Increaseinaccruedrevenue (16,916) (2,960) Decrease(increase)inprepaidexpense 307 (89) Decreaseinaccruedpayroll,taxesandbenefits (3,383) (1,983) Decreaseinpayabletoparent (749) (12,229) Increase(decrease)inotherliabilities 2,931 (1,670)

net cash used in operating activities (9,252) (2,371)

CASH FLOWS FROM INVESTING ACTIVITIES: Fixedassetspurchased (142) (1,422) Investmentsredeemed-held-to-maturity - 744 Investmentssold-available-for-sale - 3,145 Investmentspurchased-held-to-maturity - (110) Investmentspurchased-available-for-sale (4)

net cash provided from (used in) investing activities (146) 2,357

CASH FLOWS FROM FINANCING ACTIVITIES:

Capitalcontributionfromparent 1,670 2,249

net (decrease) increase in cash and cash equivalents (7,728) 2,235 cash and cash equivalents, beginning of year 18,854 16,619

cash and cash equivalents, end of year $11,126 $18,854

supplemental disclosures of cash paid during the year for: Incometaxes $2,759 $1,649

the accompanying notes are an integral part of these financial statements.2 0 0 7 A N N U A L R E P O R T

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[ N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s ]

PALMETTO GBA, LLC(a single-member limited liability company owned by blue cross and blue shield of south carolina)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSdecember 31, 2007

NOTE 1– BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Palmetto GBA, LLC (the Company) is a single-member limited liability company organized on January 1, 1998. The Company’s sole member is Blue Cross and Blue Shield of South Carolina (BCBSSC). The Company is engaged in the business of providing Medicare Part A fiscal intermediary services and Medicare Part B carrier services in various states. These services include health insurance claims processing and payment, customer service for Medicare beneficiaries and health care providers, and payment safeguard functions designed to detect and prevent fraud and abuse in the Medicare program. The Company provides services to Medicare beneficiaries residing in several states, Puerto Rico and the U.S. Virgin Islands. The Company’s major customer is the Centers for Medicare and Medicaid Services (CMS), the federal agency with fiduciary responsibility for the Medicare program.

In 2006, the Company was notified that it was not the successful bidder on the CMS Beneficiary Contact Center task order. In January 2007, the Company was notified that it was not the successful bidder on the DMAC Region C contract with CMS.

In 2007, the company was notified that it was the successful bidder on the CMS J1 AB MAC contract to provide services in California, Nevada, Hawaii and three U.S. territories. Although the award was protested, the protest was resolved in the company’s favor in 2008. This contract will result in annual revenue of approximately $80,000,000. The company also received a sub-contract from Vangent to continue to provide services previously provided to CMS under the CMS 1-800 Helpline task order.

The Company has one wholly-owned subsidiary, Q2 Administrators, LLC (Q2A). Q2A was formed in 2004 and acts as a Qualified Independent Contractor responsible for implementing a new appeals process for Medicare claim denials.

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant accounting policies and the methods of applying those policies are summarized below.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant inter-company balances and transactions have been eliminated in consolidation.


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Cash EquivalEnts

Cash equivalents represent certificates of deposit that have maturities of less than three months at date of purchase and money market fund investments.

FinanCial instrumEnts

The Company holds certain financial instruments as defined by Financial Accounting Standards Board Statement No. 107, including cash and accounts receivable. Management believes that the carrying values of financial instruments approximate fair value.

assEt valuation allowanCEs

The Company recorded an allowance for uncollectible receivables in the amount of $3,000 and $12,000 at December 31, 2007 and 2006, respectively.

FixEd assEts

Fixed assets are stated at cost. Depreciation on new assets purchased is computed using the straight-line method over the estimated useful lives of the respective assets: four to eight years for furniture and fixtures, three to five years for data processing equipment and software, and four years for automobiles. Leasehold improvements are depreciated over the lesser of the remaining lease term or estimated useful life of the asset. Depreciation on used assets purchased is computed by using the straight-line method over the estimated remaining useful lives at the time of purchase of the respective assets.

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Investments

Investments are comprised of common stocks, bonds, United States Government mortgage-backed securities and money market mutual funds. These assets are accounted for in accordance with Financial Accounting Standards Board Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities (“Statement No. 115”). Statement No. 115 requires that fixed maturities are to be classified as either “held-to-maturity,” “available-for-sale,” or “trading.”

Management determines the appropriate classification of its fixed maturity securities at the time of purchase and reevaluates such designation as of each balance sheet date. Fixed maturity securities are classified as held-to-maturity when the Company has the positive intent and ability to hold them to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization as well as interest earned is included in investment income.

Fixed maturity and equity securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in member’s equity. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and interest earned is included in investment income. The cost of securities sold is based on the specific identification method. The Company’s equity investments are substantially concentrated in industrial stocks. Fair values for fixed maturities are based on quoted market prices, where available. For fixed maturities not actively traded, fair values are estimated using values obtained from independent pricing services. The fair values for common stocks are based on quoted market prices.

Investment In affIlIate

The Company has a 25% interest in TriCenturion, Inc. that is accounted for using the equity method. The Company’s proportionate share of earnings or losses of this affiliate are reflected in income as earned and dividends or distributions are credited against investment in affiliate when received.

Assets, liabilities and results of operations for TriCenturion, Inc. were as follows:

(in thousands) Year ended December 31, 2007 2006

Assets $ 14,226 $ 14,388

Liabilities $ 4,548 $ 5,448

Net Income $ 738 $ 1,293


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Revenue Recognition policiesThe Company recognizes revenues based upon allowable costs incurred which are reimbursable under the terms of the following contracts:

Medicare Part A Fiscal Intermediary subcontract between the Company and the Blue Cross Blue Shield Association (BCBSA) (this includes the Regional Home Health Intermediary subcontract)

Medicare Part B Carrier Services contract between the Company and CMS

Durable Medical Equipment Regional Carrier (DMERC) contract between the Company and CMS (this includes the National Supplier Clearinghouse contract and the Statistical Analysis DMERC contract)

National 1-800 Beneficiary Telephone Inquiries (IDIQ) contract between the Company and CMS (this includes the Managed Care Disenrollment task order)

Railroad Retirement Board Part B Carrier contract between the Company and the Railroad Retirement Board

The Company recognizes revenue on the DDI System Access contracts with various third parties when services are performed and billable.

The Company recognizes revenue on the CMS 1-800 Help Line, Vangent, Standardization, Single Testing Contractor, and Encounter Data Customer Service & Support Center contracts on cost plus a fixed fee basis. Award fees for these contracts are recognized upon completion of milestones or when amounts are determinable.

ReclassificationsCertain reclassifications have been made to the 2006 amounts to conform to the 2007 presentation.

income taxesIn June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretations No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109.” FIN 48 prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in the tax return in accordance with SFAS No. 109, “Accounting for Income Taxes.” Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. The accounting provision of FIN 48 will be effective for the Company beginning January 1, 2008. The Company has not yet completed its evaluation of the impact of adoption on the Company’s financial position or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTSdecember 31, 2007

NOTE 2 – FIXED ASSETSFixed assets consist of the following: December 31, 2007 2006(in thousands) Leasehold improvements $ 417 $ 438 Equipment, furniture and fixtures 21,189 21,103 Software 3,288 3,221Automobiles 21 21

24,915 24,783

Accumulated depreciation (19,687) (18,231)

$ 5,228 $ 6,552

Depreciation expense was $1,454,000 and $1,573,000 for the years ended December 31, 2007 and 2006, respectively. Fixed assets and accumulated depreciation for 2006 has been updated to include assets that had been fully depreciated in prior years and to make it consistent with the reporting for fixed assets for 2007.

NOTE 3 - INVESTMENTSThe Company’s long term investments were $4,000 and $0 for the years ended December 31, 2007 and December 31, 2006, respectively.

There were gross realized gains of $0 and gross realized losses of $0 during the year ended December 31, 2007. There were gross realized gains of $781,000 and gross realized losses of $74,000 during the year ended December 31, 2006. No cash or assets are pledged or restricted for any purpose.


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[ N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s ]PALMETTO GBA, LLC(a single-member limited liability company owned by blue cross and blue shield of south carolina)

NOTE 4 - INCOME TAXESThe Company’s operations are included in the consolidated federal income tax return of BCBSSC. Under a written tax-sharing agreement, BCBSSC allocates the tax provision to each company within the consolidated group based upon the company’s proportionate share of the consolidated federal income tax liability computed on a stand-alone basis, multiplied by the total consolidated federal income tax return liability. The Company had income tax payables to BCBSSC of $526,000 and $1,850,000 at December 31, 2007 and 2006, respectively, which are included in net payables to the parent. The Company made payments to BCBSSC for income taxes of $2,759,000 and $1,649,000 during the years ended December 31, 2007 and 2006, respectively.

The Company recognized a provision for income taxes as follows (in thousands):

Year ended December 31, 2007 2006

Current $ 1,161 $ 3,686 Deferred 123 (837)

$ 1,284 $ 2,849

Unrealized losses on investments charged directly to equity have been reduced by an income tax benefit of $209,000 for the year ended December 31, 2006.

The provision for income taxes differs from the amount computed by applying the federal statutory tax rate of 35% to income before income taxes primarily due to changes in the tax contingency reserve, investment in subsidiaries, and benefits derived from filing on a consolidated basis versus separate company basis. The temporary differences that give rise to deferred tax assets and liabilities are primarily related to accrued expenses, fixed assets, and prepaid expenses. There was no valuation allowance at December 31, 2007 and 2006.

Deferred tax assets and liabilities are classified as current and long-term based on the classification of the related asset or liability, as follows (in thousands):

December 31, 2007 2006Deferred tax assets: Current $ 1,699 $ 2,006Long-term 789 631

$ 2,488 $2,637

Deferred tax liabilities: Current $ 26 $ 54Long-term 22 20

$48 $74

Net deferred tax asset $ 2,440 $ 2,563

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NOTE 5 - RELATED PARTIES

The Company is a single-member limited liability company owned by BCBSSC. Certain offices, other facilities and services are provided by BCBSSC pursuant to an administrative services agreement. Expenses associated with the administrative services agreement allocated from BCBSSC to the Company totaled $89,088,000 and $117,583,000 for the years ended December 31, 2007 and 2006, respectively. The Company paid $95,346,000 and $125,400,000 during the years ended December 31, 2007 and 2006, respectively, to BCBSSC for expenses paid on behalf of the Company.

BCBSSC made capital contributions related to the job tax credit to the Company of $1,670,000 and $2,249,000 during the years ended December 31, 2007 and 2006, respectively.

There are certain administrative services provided by the Company to other subsidiaries of BCBSSC. The Company received $9,564,000 and $9,180,000 from various subsidiaries for these services during the year ended December 31, 2007 and 2006, respectively.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

A financial guarantee has been issued by BCBSSC, which equals the Company’s estimated annual net operating expenses multiplied by 8.33%, less current capitalization. This guarantee is estimated to be $0 at December 31, 2007. BCBSSC has also executed an indemnification agreement, pursuant to minimum reserve and other requirements established by the Blue Cross and Blue Shield Association (“BCBSA”). BCBSSC is therefore liable to the Company to the extent of its financial guarantee and to the BCBSA to the full extent of its assets for any claims asserted against the BCBSA resulting from the contractual and financial obligations of the Company arising out of its Medicare Part A subcontract with the BCBSA.

In consideration of the novation of the fiscal intermediary and carrier contracts from BCBSSC to the Company, BCBSSC has issued a financial guarantee which equals 20 percent of the administrative costs of the contracts contained in the Notice of Budget Approval, less current capitalization. This guarantee is estimated to be $0 at December 31, 2007. The financial guarantee agreement remains in effect until both the contracts and intermediary agreement expire, are non-renewed or are terminated.

In addition, BCBSSC has executed a statutorily required financial guarantee of $75,000 on behalf of the Company in order for the Company to obtain a Third Party Administrator’s license pursuant to the South Carolina insurance laws.


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The Company recorded an estimated contingent liability for potential repayments of costs claimed on its contracts with CMS. The liability was $1,868,000 and $1,242,000 at December 31, 2007 and 2006, respectively.

The Company is obligated for additional capital contributions of up to $726,000 to its affiliate, TriCenturion, Inc.

The Company has entered into certain non-cancelable operating leases in excess of one year as of December 31, 2007. The future minimum lease payments required under these leases are as follows (in thousands): Year Amount

2008 $ 10,9312009 8,1862010 1,2252011 8692012 558

$ 21,769

Total rent expense was $9,929,000 and $11,286,000 during the years ended December 31, 2007 and 2006, respectively. The majority of the Company’s leases are guaranteed by BCBSSC.

In the ordinary course of business, there are various legal proceedings pending against the Company. Management believes the aggregate liabilities, if any, arising from legal actions would not have a material adverse effect on the financial position of the Company.

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NOTE 7 - OTHER EMPLOYEE BENEFIT PLANS

The Company’s employees are part of the 401(k) plan sponsored by BCBSSC. Eligible employees may defer up to 50% of their salary and the Company matched 50% of the first 6% deferred in 2007 and 2006. For employees hired after January 1, 2003, there is a 2-year cliff-vesting schedule on the match contribution. For certain employees not covered by the BCBSSC defined benefit pension plan, the Company makes a discretionary contribution to the 401(k) plan which is 50% vested for employees with one year of service and fully vested for employees with two years of service. Employees must be employed on the last day of the year to be eligible for the discretionary contribution, unless terminated during the year due to retirement (age 55 and 5 years of service), death or disability. The discretionary contribution for 2007 and 2006 was 6% of salary.

The cost of providing the 401(k) discretionary contribution was $3,805,000 and $3,867,000 for the years ended December 31, 2007 and 2006, respectively. The pension expense allocated to the Company under the BCBSSC pension plan was $7,216,000 and $8,625,000 for the years ended December 31, 2007 and 2006, respectively.

NOTE 8 - COMPLIMENTARY CREDITS

Due to the delay in payment of the Company’s billings to the Coordination of Benefits Contractor (COBC), CMS authorized the Company to draw additional funds. The Company drew $7,600,000 in 2006 which is classified as a current liability.


CMMI is a registered mark of Carnegie Mellon University.COPC is a registered mark of Customer Operations Performance Center, Inc.

BlueCross and BlueShield are registered marks of the Blue Cross and Blue Shield Association, an Association of Independent Blue Cross and Blue Shield Plans.

The Palmetto GBA logo and Partners in Excellence are registered marks of Palmetto GBA, LLC.

Palmetto GBAPARTNERS IN EXCELLENCE

SM

SM

Documents

B R U C E W . H U G H E S · PDF fileRegional Home Health and Hospice. Headquartered in Columbia, ... and qualities Beyond Talent. Each year, Palmetto GBA selects an