EXHIBIT 10.31
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT dated this 1st day of January, 1992, by and between
WELCARE INTERNATIONAL MANAGEMENT CORPORATION, ("WelCare"), a Georgia
corporation, and CONSOLIDATED RESOURCES HEALTH CARE FUND VI, a Georgia limited
partnership ("Owner").
W I T N E S S E T H:
WHEREAS, WelCare is engaged in providing nursing home management and
technical services to nursing homes throughout the United States and desires to
provide such services to Owner by this Agreement; and
WHEREAS, Owner owns a 118 bed nursing home in Camp Point, Illinois,
hereinafter sometimes referred to as the "Facility";
WHEREAS, Owner has investigated various alternative arrangements
respecting the management of the nursing home and has concluded that the
alternative of employing WelCare is most desirable considering both cost and
quality of service; and
WHEREAS, owner desires to employ WelCare by this Agreement, to manage the
nursing home; and
WHEREAS, it is the joint goal of WelCare and Owner to:
(a) operate the nursing home on a sound financial basis;
(b) provide high quality of services to residents of the nursing home;
(c) establish an excellent public image for the nursing home;
(d) establish high quality staffing of the nursing home;
(e) institute sound financial accounting systems;
(f) institute internal controls through budgeting procedures;
(g) prevent loss of revenues through sound billing procedures;
(h) control the cash position of the nursing home through sound collection
methods; and
(i) take such other steps as are necessary to provide high quality health
care to the residents of the nursing home.
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, Owner does hereby employ WelCare to perform the duties and to provide
the services hereinafter described and WelCare does hereby accept such
employment on the terms and conditions hereinafter set out.
SECTION ONE: RETENTION OF AUTHORITY BY OWNER
1.1 Control Retained in Board. Owner, acting through its general partners,
shall at all times exercise control over the assets and operation of the nursing
home and WelCare shall perform the duties herein required to be performed by it
as the agent of Owner and in accordance with the reasonable policies and
directives of Owner.
1.2 Methods of Operation. WelCare shall make substantial changes in the
method of operating the nursing home only after timely notification to, and with
the consent of Owner. Changes made to conform to governmental laws, regulations
and ordinances shall not be deemed "substantial" for the purposes of this
agreement.
1.3 Reports. WelCare shall cause to be presented to Owner monthly reports
on the financial condition of the nursing home and steps being taken to
implement this Agreement, periodic written progress reports summarizing
WelCare's management decisions and the results thereof, and such other reports
as WelCare shall deem appropriate to keep Owner informed as to the status and
condition of the nursing home.
1.4 General Management. Subject to the foregoing, Owner hereby delegates
to WelCare the general authority to supervise and manage the day-to-day
operations of the nursing home and to perform the specific duties hereinafter
set out.
SECTION TWO: MANAGEMENT OF THE NURSING HOME
2.1 Executive Operating Committee. To assure adequate liaison between
Owner and WelCare, WelCare shall create an Executive Operating Committee which
shall consist of (1) a member of the WelCare Staff, (2) the Administrator of the
nursing home, and (3) a representative of Owner to be selected by Owner. The
Executive Operating Committee shall meet at least quarterly, keep minutes of its
proceedings, and shall have the following duties:
(a) To see that the highest medical, ethical and professional standards
are maintained within the nursing home.
(b) To see that all residents admitted to the nursing home receive the
best possible patient care.
(c) To see that all federal, state and local regulations are met or
exceeded, in the name of and on behalf of the Owner.
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(d) To act in an advisory capacity in the overall operation of the nursing
home.
2.2 Maintenance of Standards.
2.21 Standard of Health Care. WelCare shall endeavor to perform all
of the duties herein required of it in such manner as to assure that the nursing
home meets as high a standard of health care as is consistent with the policies
adopted by Owner and the resources available to the nursing home.
2.22 Quality Controls. WelCare shall activate and maintain, on a
continuing basis, its Quality Assurance Program to provide objective
measurements of the quality of health care provided by the nursing home and in
connection therewith shall utilize such techniques as patient questionnaires and
interviews, physician questionnaires and interviews, and survey inspections.
2.23 Staff Specialists. In addition to the other managerial services
provided for herein, WelCare shall make available to the nursing home for
consultation and advice its staff specialists in such fields as accounting,
auditing, budgeting, dietary services, environmental control, food management,
maintenance, nursing, personnel, pharmacy operations, public relations,
purchasing, quality assurance, systems and procedures and third party
reimbursement.
2.24 Government Regulations. WelCare shall, at the Facility's
expense, cause all things to be done in and about the nursing home necessary to
comply with the requirements of any statute, ordinance, law, rule, regulation or
order of any governmental or regulatory body having jurisdiction in the
premises, respecting the use of the nursing home, maintenance, or operation
thereof, and with all orders and requirements of the local Board of Fire
Underwriters or any other body which may hereafter exercise similar functions.
2.25 Licenses and Permits. WelCare shall apply for, obtain and
maintain, in the name of and at the expense of Owner, all licenses and permits
required in connection with the management and operation of the nursing home.
2.26 Rights of Residents. WelCare shall exercise reasonable care not
to release medical records of residents to unauthorized persons, and if the
nursing home receives a subpoena for the production of the medical records of a
patient, WelCare shall see that the resident is promptly informed of that fact.
2.27 Resident Services. Prior to instituting any change in the scope
or level of services offered by the nursing home, WelCare shall inform and
obtain the approval of Owner.
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2.3 Fiscal Matters.
2.31 Preparation and Acceptance of Annual Budget. WelCare shall
supervise preparation of an annual budget conforming to Medicare/Medicaid
regulations which sets out anticipated income, expenses and capital expenditures
and shall cause the budget to be presented to Owner 30 days prior to the
commencement of each fiscal year for its acceptance, rejection, or modification.
Upon acceptance of such budget, or any modification thereof, by Owner, duly
recorded in minutes of the Executive Operating Committee, such budget shall
serve as a guide for the financial operation of the nursing home during the
ensuing year.
2.32 Accounting Records. WelCare shall establish, supervise, direct
and maintain the operation of a suitable nursing home accounting system and
shall cause to be prepared and delivered to Owner financial statements as
follows:
(a) On or before thirty (30) days after the close of each month, a
statement of income and expenses showing the results of the operation of the
nursing home for the preceding month and of the fiscal year to date.
(b) On or before one hundred twenty (120) days after the close of each
fiscal year, a balance sheet, related statement of income showing the results of
the operation of the nursing home during said fiscal year, and statement of
changes in financial position which, if requested by Owner, shall be certified
by an independent certified public accounting firm to be selected by Owner, and
having annexed thereto a computation of the Management Fees for such twelve
month period. Fees of the independent public accounting firm shall be borne by
the Facility.
2.33 Deposit and Disbursement of Funds. WelCare, in the Facility's
name and as agent for Owner, shall deposit in a nursing home bank account all
receipts and monies arising from the operation of the Facility and shall
disburse and pay all costs and expenses of the Facility, inclusive of Management
Fees and other charges payable to WelCare under this Agreement, from said
accounts on behalf and in the name of the Facility and Owner, in such amounts
and at such times as shall be appropriate or necessary. WelCare shall specify
the identity of signatories to nursing home bank accounts and the number of
signatures required for checks of various amounts.
2.34 Collection of Accounts. WelCare shall supervise and direct the
collection of all accounts due the Facility and shall take all reasonable steps
necessary to minimize the amount of bad debts.
2.35 Legal Actions. WelCare shall, with approval of Owner, institute
in the name and at the expense of Owner, any and all legal actions or
proceedings necessary to collect charges,
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rent or other income due the nursing home or to oust or dispossess tenants or
other persons unlawfully in possession under any lease, license or concession
agreement, and to collect damages for the breach thereof or default thereunder
by the tenant or licensee or concessionaire.
2.36 Rates. WelCare and Owner recognize the importance of
maintaining room and other rates which enable the Facility to pay its
obligations but minimize the cost of health care. From time to time, WelCare
will recommend to Owner, for approval, rate structures which take into account
the financial obligations of the Facility and the level of rates at other
comparable nursing homes nearby and the importance of providing quality health
care at minimal cost.
2.37 Insurance. The establishment and maintenance of insurance
coverage of the Facility and its operations, against all hazards, shall be the
responsibility of Owner, but WelCare shall, at Owner's request, arrange for the
design and installation of an appropriate insurance program for the Facility.
WelCare shall incur no liability for the omission or inadequacy of any insurance
coverage. Upon the request of Owner, WelCare shall furnish evidence of a
fidelity bond in the amount of $50,000 insuring Owner against defalcation by any
of WelCare employees in the handling of Owner funds hereunder. WelCare shall
also furnish evidence of professional lability insurance coverage in an amount
not less than $1,000,000.
2.38 Working Capital. The Owner shall provide working capital for
the Facility. WelCare shall render such counsel to the Owner as WelCare in its
discretion shall deem appropriate to assist Owner in securing working capital
loans for the Facility.
2.4 Contracts and Purchases.
2.41 Food and Supplies. WelCare shall purchase such food, beverages,
equipment, operating supplies and other materials and supplies in the name of
Owner and for the account of the Facility as may be needed from time to time for
the maintenance of the Facility.
2.42 Prices. In order to minimize the cost of supplies and services
to the Facility, WelCare shall offer to Owner participation in such of WelCare
national purchasing contracts as may be appropriate.
2.43 Certain Agreements. WelCare shall, in the name of and for the
account of Owner, negotiate and enter into such term agreements as it may deem
necessary or advisable, for the furnishing of services, concessions and supplies
for the maintenance and operation of the Facility. WelCare will obtain the
approval of Owner prior to entering into any such agreement involving an initial
expenditure of more than $2,000 by the nursing home.
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2.44 Repairs and Renewals. WelCare shall, with approval of Owner, in
the name of and for the account of Owner, negotiate, contract for and supervise
such repair and renewal of the physical property and equipment of the nursing
home as shall be necessary to keep and maintain the same in good working order
and condition. WelCare will obtain the approval of Owner prior to commencing an
repair or renewal involving more than $5,000.00.
2.45 Capital Improvements. WelCare shall, in the name of and for the
account of Owner, negotiate and contract for and supervise the installation of
all capital improvements related to the operation of the nursing home at its
present site, including the leasing of equipment, for which provision is made in
the budget. In the event Owner desires to undertake a major expansion of the
nursing home in the future, WelCare will make a presentation to Owner concerning
an appropriate Development Agreement relating thereto.
2.5 Employees.
2.51 General. Except as hereinafter specifically provided, WelCare
shall have direct responsibility for recruiting, hiring, training, promoting,
assigning and discharging all operating and service personnel necessary for the
proper operation and maintenance of the Facility. All such employees shall be
employees of the Facility and Owner and shall not be employees of WelCare.
2.52 Employee Identification. Notwithstanding the fact that
employees are employees of Owner, WelCare shall utilize its own "Employee
Handbook" in the facility. The purpose is to:
1) Unify employees.
2) Provide identification with the management.
3) Utilize experience for the management company in establishing policies,
work rules, employee benefits, etc.
2.53 Employee Benefits. WelCare shall establish appropriate employee
benefits for the employees of Owner under the management of WelCare and at the
cost of the Facility and Owner. These benefits shall be described in the WelCare
Employee Handbook.
2.54 Pay Scales. WelCare shall be responsible for general changes in
the pay scale paid employees, both throughout the nursing home or within one or
more selected classifications.
2.55 Special Employees. WelCare shall provide the nursing home with
a qualified licensed Administrator acceptable to Owner. The nursing home
Administrator shall be an employee of and compensated by WelCare, but WelCare
shall be reimbursed monthly by Owner, for all compensation inclusive of salary,
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fringe benefits, bonus and approved reimbursable business expenses paid to such
administrator, such amount, except for expenses which shall be charged in
arrears, being due and payable in advance on the 5th day of each month. Fringe
benefits shall include the employer's contribution to F.I.C.A., unemployment
compensation, and other employment taxes, bonuses, xxxxxxx'x compensation, group
life and accident and health insurance premiums, disability coverage, and other
benefits.
2.7 Operational Plan and Reports.
2.71 Operational Plan. Not applicable.
2.72 Occupancy Plan. Not applicable.
2.73 Financial Plan. Not applicable.
2.74 Staffing Plan. Not applicable.
2.75 Public Relations Plan. WelCare shall have direct responsibility
for maintaining satisfactory public relations between the facility and the
community. All costs incurred for items relating to the Public Relations Plan
shall be expenses of the Facility. Programs shall include, but not be limited
to:
A. Pre-Opening Phase - Not applicable.
B. Post-Opening Phase
1) Establish working relationship with local media.
2) Provide local media a minimum of one release per month.
3) Provide speaker and program services to local area community and
civic organizations.
4) Create an active volunteer organization.
5) Host at least one event each year to which the general public is
invited.
2.76 Management Reports and Meetings. WelCare shall, through the
Executive Operating Committee and WelCare staff members when appropriate, render
periodic management reports to and hold periodic meetings with Owner. These
services shall include:
A. Reports
1) Weekly
a) Census and statistical report
b) Cash position report
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2) Monthly
a) Administrator's report to management
b) Regional Manager's report on facility
c) Financial statements
3) Quarterly
a) Management evaluation
4) Annually
a) Audited financial statements
b) Certified Medicaid cost report
B. Meetings
1) Weekly
WelCare's staff and Administrator
2) Monthly
Administrator and Facility Staff
3) Quarterly
a) WelCare staff and owner
b) WelCare staff and administrative group
2.77 Agreement of Parties to Operational Plan. WelCare and Owner
shall mutually agree to the Operational Plan set forth in Section 2.7. Upon
agreement duly recorded in the minutes of the executive committee, the Plan
shall become the operational guide for the facility.
2.78 Facility Identification. Not applicable.
SECTION THREE: MANAGEMENT FEES AND ADDITIONAL PAYMENTS
3.1 Amount. During each of the first five (5) years of this agreement,
Owner shall pay to WelCare in the manner as provided below, Management Fees
equal to 6% of the "Net Revenue" derived from the operation of the Facility
during the year concerned. In each year thereafter, Owner shall pay to WelCare
Management Fees equal to 6% of the "Net Revenue" derived from the operation of
the Facility. The term "Net Revenue" shall mean the gross revenue from
operations, less contractual adjustments determined on an accrual basis, in
accordance with general accepted accounting principles as applied to the nursing
home industry.
3.2 Monthly Payments. The Management Fee shall be due in advance on the
first day, and be paid no later than the tenth day of each month, and shall be
calculated by multiplying the number of patient days in the preceding month,
times the Net Revenues of the nursing home per patient day for the fiscal year
to date as
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shown on the most recent previous monthly statement of income and expense
provided under Section 2.32(a) hereof, times 6%.
3.3 Annual Adjustment. Within fifteen (15) days after delivery of the
audited annual financial statements of the nursing home, Owner shall pay to
WelCare or WelCare shall pay to Owner such amount as is necessary to make the
amount of said fees paid with respect to the year equal to the amount of
Management Fees shown to be due by the annual audit provided in Section 2.32(b)
hereof.
3.4 Additional Payments For Services; Preoperational Fee. Not applicable.
SECTION FOUR: MISCELLANEOUS
4.1 Term. The term of this Agreement shall commence on January 1, 1992
and, unless sooner terminated in accordance with the provisions of paragraph 4.2
below, shall extend for 5 years thereafter, and shall be renewable for 2
successive additional terms of 5 years each at the option of WelCare. Unless
WelCare shall give to Owner, at least ninety (90) days prior to the expiration
of the preceding term, notice of its election not to renew this Agreement for an
additional term, this Agreement shall be deemed to be automatically renewed.
4.2 Termination. Either party may terminate this Agreement at any time
without penalty upon sixty days written notice to the other party.
4.3 Status of Employees After Termination. For the one year period
commencing with the date of the termination or expiration of the term hereof
pursuant to Section 4.2, Owner shall not employ or engage, directly or
indirectly, any employee of WelCare of its affiliates, including, but not
limited to the Nursing Home Administrator, without the approval of WelCare,
provided Owner may re-employ persons who were employed by Owner on the date
hereof.
4.4 Notices. Any notice or other communications by either party to the
other shall be in writing and shall be delivered personally or mailed, postage
prepaid, via registered or certified mail, to the addresses shown below:
TO: Owner TO: WelCare
0000 Xxxxxxx Xxxxxx 0000 Xxxxxxx Xxxxxx
Xxxxx 000 Xxxxx 000
Xxxxxxx, Xxxxxxx 00000 Xxxxxxx, Xxxxxxx 00000
Attn: J. Xxxxxxx Xxxxx Attn: J. Xxxxxxx Xxxxx
or to such other address, and to the attention of such other person or officer,
as either party may designate in writing hereunder.
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4.5 Modification and Changes. This Agreement cannot be changed or modified
except by instrument in writing executed by both parties.
4.6 Assignment by WelCare. WelCare shall have the right to assign this
Agreement to an affiliate or a wholly or majority owned subsidiary.
4.7 Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provision of this Agreement.
4.8 Governing Law. This Agreement shall be deemed to have been made and
shall be construed and interpreted in accordance with the laws of the State of
Georgia.
4.9 Access to Books and Records. This provision shall only apply if:
(1) this contract and the services furnished pursuant to it are within the
terms of Section 952 of the Omnibus Reconciliation Act of 1980, as defined in
implementing regulations issued by the Department of Health and Human Services
(HHS), and (2) the value or cost of this contract equals $10,000 or more over a
twelve month period.
If the above conditions are met, WelCare agrees that, until the expiration of
four years after the furnishing of services pursuant to this contract, it shall,
upon written request, make available to the Secretary of the Department of HHS
or the Secretary's duly authorized representatives, or upon request to the
Comptroller General or the Comptroller General's duly authorized
representatives, the contract and such books, documents and records that are
necessary to certify the nature and extent of costs under this contract. The
availability of WelCare's books, documents and records shall be subject at all
times to such criteria and procedures for seeking or obtaining access as may be
promulgated by the Secretary of HHS in regulations, and other applicable laws.
WelCare's disclosure under this paragraph shall not be construed as a waiver of
any other legal rights to which WelCare may be entitled under law or
regulations.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as of the date first above written.
CONSOLIDATED RESOURCES HEALTH CARE
FUND VI
By: Consolidated Resources VI,
Inc., Its General Partner
By: /s/ J. Xxxxxxx Xxxxx
-------------------------------------
J. Xxxxxxx Xxxxx, President
WELCARE INTERNATIONAL MANAGEMENT
CORPORATION
By: /s/ J. Xxxxxxx Xxxxx
-------------------------------------
J. Xxxxxxx Xxxxx, President
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STATE OF GEORGIA
COUNTY OF XXXXXX
Before me, Xxxxxx X. Xxxxx, a Notary Public in and for the State and
County aforesaid, personally appeared J. Xxxxxxx Xxxxx, with whom I am
personally acquainted, and who upon oath acknowledged himself to be President of
Consolidated Resources VI, Inc., the general partner of Consolidated Resources
Health Care Fund VI, the within named bargainor, a Georgia limited partnership,
and that he as such President, being authorized so to do, executed the foregoing
instrument for the purposes therein contained by signing the name of the general
partner of the limited partnership by said J. Xxxxxxx Xxxxx, as such President.
WITNESS my hand and seal at Atlanta, Georgia this 1 day of May , 1992.
/s/ Xxxxxx X. Xxxxx
-----------------------------------------
NOTARY PUBLIC
My Commission Expires:
7-30-95
STATE OF GEORGIA
COUNTY OF XXXXXX
Before me, Xxxxxx X. Xxxxx, a Notary Public in and for the State and
County aforesaid, personally appeared J. Xxxxxxx Xxxxx, with whom I am
personally acquainted, and who upon oath acknowledged himself to be President of
WelCare International Management Corporation, the within named bargainor, a
Georgia corporation, and that he as such President, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by said J. Xxxxxxx Xxxxx, as such President.
WITNESS my hand and seal at Atlanta, Georgia this 1 , day of May , 1992.
/s/ Xxxxxx X. Xxxxx
-----------------------------------------
NOTARY PUBLIC
My Commission Expires:
7-30-95
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SCHEDULE 10.31
CHMC has entered into agreements substantially identical to Exhibit 10.31
as follows:
1. Management Agreement dated March 20, 1992 with River Hills South
Investors, L.P. for Milwaukee, Wisconsin facility.
2. Management Agreement dated July 1, 1992 with Consolidated Resources
Health Care Fund VI for Shreveport, Louisiana facility. Material details in
which this agreement differs from Exhibit 10.31 are that this agreement
terminates on July 1, 2012, and this agreement has no renewal provisions.
3. Management Agreement dated October 1, 1993 with Consolidated Resources
Health Care Fund IV for Hoisington, Kansas facility. Material details in which
this agreement differs from Exhibit 10.31 are that this agreement terminates on
October 1, 2013, and this agreement has no renewal provisions.
4. Management Agreement dated September 1, 1991 with Consolidated
Resources Health Care Fund IV for Emporia, Kansas facility.
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