Exhibit 10.1
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN ALOHACARE, INC. AND
LIFEMARK CORPORATION
This Agreement (the "Agreement") is entered into this 7th day of October,
1999 by AlohaCare, Inc. ("AlohaCare"), a Hawaii nonprofit corporation, and
Lifemark Corporation ("Lifemark"), a Delaware corporation.
RECITALS
A. Lifemark has provided administrative services to AlohaCare since 1994
pursuant to an Administrative Services Agreement dated January 1, 1994, as
amended (the "First ASA", for the purpose of AlohaCare operating as a health
care plan in the State of Hawaii's QUEST program; and,
B. The parties wish to enter into a new administrative services agreement.
Now therefore, in consideration of the mutual covenants set forth herein, the
parties agree as follows:
1.0 TERM AND TERMINATION.
1.1 This Agreement shall be effective as of August 1, 1999 and shall
terminate on July 31, 2000, unless earlier terminated pursuant to provisions set
forth below.
1.2 This Agreement may be terminated at any time upon the written mutual
consent of both parties.
1.3 Either party may terminate this Agreement for a material breach which
has not been cured within 30 days from the date on which one party receives
written notice of a material breach by the other party; provided however, if the
material breach involves failure to pay Administrative Fees when due, the Cure
Period shall be 10 days, except if AlohaCare withholds payment during the cure
period when Lifemark has failed in a material way to provide certain
administrative services, AlohaCare may withhold only a portion of the
Administrative Fee proportionate to the amount of services alleged not to have
been delivered. Upon completion of cure, AlohaCare shall pay the amount withheld
within 5 days.
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1.4 This Agreement shall be terminated in the event the existing contract
or any amendments between DHS and AlohaCare are terminated for any reason or
AlohaCare's participation in the Program is otherwise terminated, in which case
termination shall be effective as of the termination date of AlohaCare's
participation in the Program.
1.5 This Agreement shall be terminated immediately upon the filing of a
bankruptcy petition by either party or upon the failure of either party to
obtain any license, registration or approval required under state or federal law
that is material to the operation of AlohaCare.
1.6 Upon termination of this Agreement, Lifemark shall have the same duty
to cooperate as set forth in Section IV(C)(2) of the First ASA and to transition
those administrative services for which it has retained responsibility (as
further described in Section 6.0, below). Such duty to cooperate shall include,
but not be limited to, transferring all AlohaCare financial records related to
the administrative services provided pursuant to this Agreement and the First
ASA, transmitting all AlohaCare data in a readable format, and preparing and
transmitting of HEDIS and QUEST required reports due during the reporting
periods prior to the termination date and the quarterly QUEST reports related to
the June 30, 2000 period end, which are due August 15, 2000. All other reports
shall be the responsibility of AlohaCare. In addition to the foregoing,
following the termination date, Lifemark will provide up to 50 hours of
consulting on the following projects:
1.6.1 The RFA dispute with QUEST
1.6.2 The University Health Care Associates contract issues
1.6.3. The litigation involving Vision Service Plan
1.6.4 The dispute involving Xx. Xxxx
1.6.5 The WCCHC claims reconciliation
1.6.6 The University OB/GYN claims reconciliation
2.0 SERVICES. Lifemark shall provide to AlohaCare all administrative services
described in the First ASA (a copy of which is attached hereto as Attachment A;
all terms used in this Agreement shall be defined as set forth in the First ASA
unless otherwise defined herein) (the "Full Services") as of August 1, 1999
until the earlier of (a) July 31, 2000 or (b) the Transfer Date (as defined in
Paragraph 4 hereof) in the same fashion and to the same extent as set forth in
the First ASA. The Full Services do not include consulting services in
connection with AlohaCare's self management, preparation of a response to a
Request For Proposal from the State of Hawaii, or any other matter not described
in the First ASA. The time period referenced in the preceding sentence shall be
known as the "Full Service Period." The period beginning the day after the
Transfer Date and ending July 31, 2000, shall be known as the "Partial Service
Period," during which Partial Services (as defined in Paragraph 6.0 hereof)
shall be provided by Lifemark to AlohaCare. In addition, if the Aged, Blind and
Disabled population is added to AlohaCare's membership pursuant to AlohaCare's
QUEST contract during the Full Service Period, then Lifemark will provide the
same administrative services for these new members as it does for AlohaCare's
existing members at the time that such new members are added.
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3.0 PAYMENT FOR FULL SERVICES. During the Full Service Period, AlohaCare shall
pay to Lifemark a fee for the Full Services (the "Full Service Fee") in an
amount equal to [x]* of the capitation paid to AlohaCare by the State of Hawaii
each month. AlohaCare agrees to pay to Lifemark [x]* of (i) payments, if any,
denominated as Risk Factor Adjustment ("RFA") payments; (ii) payment to
AlohaCare of amounts attributable to RFA withheld from monthly capitation during
the Full Service Period(but not during periods before or after the Full Service
Period); and (iii) payments to AlohaCare resulting from a recalculation of RFA
pertaining to the Full Service Period, within 5 days of receipt of such payments
from the State of Hawaii for months during the Full Service Period, regardless
of when such monies are finally paid. In the event that the State of Hawaii
requires AlohaCare to repay monies based upon (i) a reconciliation of
AlohaCare's enrollment during the term of this Agreement; or(ii) a recalculation
of the RFA pertaining to the Full Service Period (but not to periods before or
after the Full Service Period then Lifemark shall remit within 5 days receipt of
notice from AlohaCare(which shall include a full explanation of the basis of the
adjustment and the documentation from the State of Hawaii pertaining to the
adjustment) [x]* of such amount due the State of Hawaii regardless of when such
adverse adjustment is made. Upon request of Lifemark, AlohaCare shall respond to
Lifemark's request for an accounting of all capitation and RFA payments received
from the State of Hawaii or for other pertinent documents from the State of
Hawaii. Payment of the Full Service Fee shall be made before the 10th day of
each month during the Full Service Period.
4.0 PARTIAL PREPAYMENT OF THE FULL SERVICE FEE. Immediately upon execution of
the Agreement and as an absolute condition to Lifemark performing any obligation
hereunder, AlohaCare shall pay Lifemark [$x]* (the "Advanced Payment") by wire
transfer as a partial prepayment of the Full Service Fee. Lifemark shall repay
to AlohaCare the Advanced Payment, plus annual compounded interest of [x]*, less
[x]* which represents the parties' reasonable estimate of what Lifemark's share
of the RFA would be,
*CONFIDENTIAL TREATMENT REQUESTED
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in full within 5 days of the termination date of this Agreement except for sums,
if any, previously and properly deducted by Lifemark. Lifemark shall pay
AlohaCare the difference between the holdback amount and the actual payment of
its RFA share within 5 days of payment of its RFA share. If Lifemark's share of
the RFA exceeds the holdback amount, AlohaCare shall pay to Lifemark within 5
days of payment of the RFA the difference between the holdback amount and [x]*
of the RFA.
5.0 EVENTS OCCURRING ON THE TRANSFER DATE OR UPON TERMINATION.
5.1 DEFINITION OF "TRANSFER DATE". The "Transfer Date" is the termination
date or the day that AlohaCare takes all of the following actions: (i) hires the
Lifemark employees described in Paragraph 5.2 hereof; (ii) purchases the assets
described in Paragraph 5.3 hereof; and (iii) assumes the leases, contracts and
obligations described in Paragraph 5.4 hereof. The Transfer Date shall occur
only on the first day of the month except in the event that this Agreement is
terminated pursuant to Paragraph 1.0, above, in which event the Transfer Date
shall be the same day as the day on which the Agreement is terminated pursuant
to Paragraph 1.0, above. AlohaCare agrees to take the foregoing actions only on
a single day and shall not endeavor to accomplish less than all of such actions
on days other than a single Transfer Date.
5.2 TRANSFER OF EMPLOYEES. On the earlier of the Transfer Date or on the
date this Agreement is terminated pursuant to Paragraph 1.0 hereof, Lifemark
will terminate the employment of each of its employees in Hawaii (except on the
Transfer Date, Lifemark will not terminate its Technical Support Coordinator and
AlohaCare agrees to hire such employee on the termination date, subject to
satisfactory performance as determined by AlohaCare in its sole discretion) and
AlohaCare will hire such employees as it chooses as of such date; provided
however that AlohaCare will give Lifemark 15 business days notice of its intent
not to hire a current Lifemark employee. AlohaCare hereby indemnifies Lifemark
against all liability arising out of or related to claims made by an employee
arising after the Transfer Date or the termination date, as the case may be, in
connection with his or her employment by AlohaCare. Lifemark hereby indemnifies
AlohaCare against all liability arising out of or related to claims made by an
employee arising before the Transfer Date or the termination date, as the case
may be, in connection with his or her employment by Lifemark. AlohaCare and
Lifemark shall cooperate with each other with respect to the transfer of the
employees and neither shall take any action with respect to such transfer
without the other's prior consent.
*CONFIDENTIAL TREATMENT REQUESTED.
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5.3 PURCHASE OF LIFEMARK ASSETS. On the earlier of the Transfer Date or the date
this Agreement is terminated pursuant to Paragraph 1.0 hereof, AlohaCare shall,
at Net Book Value, purchase, except for the assets described below, every asset
used by Lifemark in AlohaCare's offices or operations as of such date, including
but not limited to all office equipment and supplies, computer hardware,
telephone systems, furniture, fixtures, leasehold improvements, and all prepaid
items listed in Attachment B, at the value set forth on Lifemark's most current
balance sheet as of November 1, 1999 (the contemplated Transfer Date) or such
other Transfer Date or the date this Agreement is terminated. AlohaCare
acknowledges that it is purchasing these assets "as is" and without warranty of
any kind from Lifemark as to the condition, life expectancy or utility of such
assets; provided however, that all computers are warranted to properly recognize
and process dates after December 31, 1999. Any computer sold to AlohaCare that
does not properly recognized and process dates after December 31, 1999 will be
deemed to have no net book value. AlohaCare may not purchase the Sun Sparc 1000
server and the accompanying tape drive, which Lifemark will remove from
AlohaCare's offices after July 31, 2000.
5.4 ASSUMPTION OF LIFEMARK LEASES, CONTRACTS AND HAWAII BASED OPERATIONAL
EXPENSES. On the earlier of the Transfer Date or the date this Agreement is
terminated pursuant to Paragraph 1.0 hereof, AlohaCare shall assume all real
property, personal property and equipment leases as set forth on Attachment C
hereto and hereby indemnifies Lifemark against all liability arising out of any
such agreements after the Transfer Date related to an event which occurs after
the Transfer Date.
6.0 POST-TRANSFER DATE SERVICES. During the period following the Transfer Date
until July 31, 2000 (the "Partial Service Period"), Lifemark shall provide
administrative services to AlohaCare (the "Partial Services") in the same
fashion pursuant to the First ASA including, but not limited to,:
6.1 PLAN FINANCE SERVICES. Plan Finance Services include third party
recovery services, reinsurance filings, monthly, quarterly and annual financial
reporting, regulatory reporting to Department of Health Services and the
Department of Insurance, risk pool reporting, claim lag reports, medical
payables functions, including capitation and claims payment (but not claims
processing), cash management and maintenance of bank and investment accounts.
Plan Finance Services during the Partial Service Period do not include
non-medical related accounts payable, payroll services, human resources services
and employee benefits services
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6.2 INFORMATION SYSTEM SERVICES. Lifemark shall provide information
systems services, including support and maintenance services, to AlohaCare
through the software system Managed Care One in the same fashion and to the same
extent as during the term of the First ASA. Lifemark agrees to make all
necessary alterations or upgrades to Managed Care One to allow AlohaCare (i) to
provide covered services to service (to the same extent and in the same fashion
as if such members were added during the term of the First ASA) aged, blind or
disabled members that are added to AlohaCare's membership during the term of
this Agreement and (ii) to comply with its QUEST contract; provided, however,
that, in the event that substantial changes are required to Managed Care One's
systems reporting capability, Lifemark shall discuss with QUEST officials
alternative means of providing the same information.
6.3 CREDENTIALING. Lifemark shall provide credentialing services to
AlohaCare in the same fashion and to the same extent as during the term of the
First ASA provided, however, that Lifemark shall assist AlohaCare in complying
with the corrective action plan set forth in the letter from QUEST officials
listing deficiencies in AlohaCare's credentialing procedures in place as of July
1, 1999.
6.4 SPECIAL PROJECTS. Lifemark shall continue to provide all
administrative services necessary in order to complete certains pecial projects,
which commenced prior to the expiration of the First ASA, prior to the
termination of this Agreement on July 31, 2000. Such special projects are listed
in Attachment D. Notwithstanding the foregoing, if such special project(s) can
not be completed prior to July 31, 2000, then Lifemark shall continue to provide
administrative services to complete projects pursuant to Section 1.6, above.
6.5 EXCLUSIONS FROM PARTIAL SERVICES. The following services, all of which
are included in Full Services, are excluded from Partial Services: claims
processing and auditing functions performed in Hawaii on the effective date of
this Agreement, complaint or grievance coordination, utilization review, quality
management, medical management, member services, provider services and
contracting (except the financial analysis necessary for such activities), human
resources, benefits administration, insurance administration services,
consulting services relating to the transition to self management, preparation
of a response to a Request for Proposal issued by the State of Hawaii, all
accounting functions, including administrative accounts payable and payroll
services. Administrative services not enumerated in this Section 6.5 shall be
provided by Lifemark if such services had previously been provided routinely
under the First ASA.
6. SOFTWARE LICENSES. After the Transfer Date until July 31, 2000,
Lifemark will allow AlohaCare to use the licenses presently in place in personal
computers that were in the AlohaCare office as of July 31, 1999. AlohaCare
agrees that after July 31, 2000 it will have purchased all necessary licenses
from all applicable software vendors and will not rely on Lifemark's licenses.
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7.0 PAYMENT FOR PARTIAL SERVICES. During each month of the Partial Service
Period, AlohaCare shall pay Lifemark an amount equal to the Full Service Fee
less the amount agreed to by the parties as further described in Attachment E.
The Partial Service Fee shall be paid before the 10th day of each month during
the Partial Service Period. AlohaCare agrees to pay to Lifemark [x]* of(i)
payments, if any, denominated as Risk Factor Adjustment ("RFA") payments; (ii)
payment to AlohaCare of amounts withheld from monthly capitation attributable to
RFA during the Partial Service Period (but not during periods before the Full
Service Period); and (iii) payments to AlohaCare resulting from a recalculation
of RFA pertaining to the Partial Service Period of all previously unpaid RFA,
within 5 days of receipt of such monies from the State of Hawaii for months
during the Partial Service Period, regardless of when payment is actually made.
In addition, during the Partial Service Period, Lifemark shall remit payment to
AlohaCare for monies owed to the State of Hawaii as described in Paragraph 3.0,
above.
8.0 FAILURE TO PAY FEES. If AlohaCare fails to pay any amount due hereunder
(except as permitted in Paragraph 1.3, hereof)within 10 days of notification of
such failure, Lifemark may terminate this Agreement, immediately cease providing
any services to AlohaCare and without further notice terminate all electronic
connection with AlohaCare.
9.0 CONSULTING SERVICES. AlohaCare shall pay Lifemark an hourly fee for
administrative, technological or consulting services beyond the scope of the
services provided pursuant to Paragraphs 1.6 and 2.0 above. The hourly
consulting fees for various Lifemark personnel are set forth on Attachment F
hereto. To obtain consulting services, AlohaCare must submit to an authorized
officer of Lifemark a written request describing the services requested.
Lifemark will xxxx AlohaCare on a monthly basis for tasks completed during that
month and AlohaCare agrees to pay such invoices within 30 days of receipt.
Lifemark will cease providing all consulting services immediately upon a
consulting invoice not being paid.
10.0 MUTUAL RELEASE.
10.1 ALOHACARE RELEASE OF LIFEMARK. AlohaCare releases Lifemark, and
its officers, directors, employees, agents and attorneys, and holds each of
them harmless from all liability whatsoever arising out of losses, claims,
litigation, amounts
*CONFIDENTIAL TREATMENT REQUESTED.
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paid in settlement, judgments or other liabilities, including expenses,
costs and attorneys' fees (regardless of whether they are incurred in
investigation, settlement or litigation), relating to (i) claims made by
the State of Hawaii requiring AlohaCare to return monies to the State or
pay fines or penalties for any reason, including an alleged miscalculation
of the RFA; or (ii) alleged overpayments to, or other losses incurred in
connection with the contract with, University Health Care Associates.
Notwithstanding the foregoing, during the term of this Agreement, Lifemark
shall assist AlohaCare in the ongoing negotiations with QUEST officials
regarding the calculation of RFA during the first two QUEST contract
periods as well as assist in any litigation pertaining to RFA without
additional compensation.
10.2 LIFEMARK RELEASE OF ALOHACARE. Lifemark releases AlohaCare and its
officers, directors, employees, agents and attorneys, and holds each of
them harmless from all liability whatsoever arising out of losses,
claims, litigation, amounts paid in settlement, judgments or other
liabilities, including expenses, costs and attorneys' fees (regardless of
whether they are incurred in investigation, settlement or litigation),
relating to any matter arising prior to July 31, 1999; provided however,
nothing in Lifemark's release of AlohaCare shall be construed to relieve
AlohaCare from the obligation to pay all amounts due under this Agreement.
11.0 PAYMENT FOR PREPARATION OF RFP RESPONSE. Immediately upon execution of this
Agreement, as an absolute condition to Lifemark performing any of its
obligations hereunder, AlohaCare shall pay to Lifemark [x]* by wire transfer as
payment in full for Lifemark's preparation, on AlohaCare's behalf, the response
to the State of Hawaii's Request For Proposal during 1998-9.
12.0 MISCELLANEOUS.
12.1 CONFIDENTIALITY. AlohaCare and Lifemark agree to incorporate herein
by reference the terms and conditions regarding confidentiality as set forth in
Section V(B) of the First ASA.
12.2 RELATIONSHIP OF THE PARTIES. In the performance of the work, duties
and obligations of the parties pursuant to this Agreement, the parties shall at
all times, be acting and performing as independent contractors. No relationship
of employer and employee, or partners or joint ventures is created by this
Agreement, and neither party may therefore make any claim against the other
party for social security benefits, workers' compensation benefits, unemployment
insurance benefits, vacation pay, sick leave or any other employee benefit of
any kind. In
*CONFIDENTIAL TREATMENT REQUESTED.
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addition, neither party shall have any power or authority to act for or on
behalf of, or to bind the other except as herein expressly granted, and no other
or greater power or authority shall be implied by the grant or denial of power
or authority specifically mentioned herein.
12.3 ASSIGNMENT/SUBCONTRACTING. Neither party shall have the right to
assign, delegate or subcontract any of its rights or obligations hereunder
without the prior written consent of the other party; provided however, that
AlohaCare shall have the right to delegate and/or to subcontract with respect to
those administrative service responsibilities which it assumes on the Transfer
Date.
12.4 NOTICES. Except as set forth herein, all notices required or
permitted to be given hereunder, shall be in writing and shall be sent by United
States mail, certified or registered, return receipt requested, postage prepaid,
to the parties hereto at their respective addresses set forth on the signature
page hereto, or such other address as may be fixed in accordance with the
provisions hereof. Except as set forth herein, if mailed in accordance with the
provisions of this paragraph, such notice shall be deemed to be received three
(3) business days after mailing.
12.5 HEADINGS. The headings of the various sections of this Agreement are
inserted merely for the purpose of convenience and do not expressly or by
implication limit, define or extend the specific terms of the section so
designated.
12.6 WAIVER OF BREACH. The waiver by either party of a breach or violation
of any provision of this Agreement shall not operate as, nor be construed to be
a waiver of any subsequent breach thereof.
12.7 APPLICABLE LAW. This Agreement shall be governed in all respects
by the laws of the State of Hawaii.
12.8 INVALID PROVISIONS. If, for any reason, any provision of this
Agreement is or shall be hereafter determined by law, act, decision, or
regulation of a duly constituted body or authority, to be in any respect
invalid, such determination shall not nullify any of the other terms and
provisions of this Agreement and, unless otherwise agreed to in writing by the
parties, then, in order to prevent the invalidity of such provision or
provisions of this Agreement, the said provision or provisions shall be deemed
automatically amended in such respect as may be necessary to conform this entire
Agreement with such applicable law, act, decision, rule or regulation.
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12.9 NO THIRD-PARTY BENEFICIARY. This Agreement is entered into by and
between AlohaCare and Lifemark and for their benefit. There is no intent by
either party to create or establish third-party beneficiary status or rights or
their equivalent in any Member, subcontractor, or other third party, and no such
third party shall have any right to enforce any right or enjoy any benefit
created or established under this Agreement. Notwithstanding the foregoing,
Lifemark assents to, and waives all claims, whether against AlohaCare or any
other party, arising from or related to: (i) the hiring of its Executive
Director, Xxxx XxXxxxx by AlohaCare; (ii) Xx. XxXxxxx' advice and assistance to
AlohaCare in negotiation of this Agreement; and, (iii) the release of Xx.
XxXxxxx from his fiduciary obligations to Lifemark, which impede his ability to
act on behalf of AlohaCare.
12.10 ARBITRATION. In the event that any dispute relating to this
Agreement including, but not limited to, any dispute arising from or related to
Lifemark's provision of administrative services arises between Lifemark and
AlohaCare, the dispute shall be resolved by binding arbitration in accordance
with the Rules of Commercial Arbitration of the American Arbitration
Association. In no event may the arbitration be initiated more than one year
after the date one party first gave written notice of the dispute to the other
party. The arbitration shall be held in Honolulu, Hawaii or in such other
location as the parties may mutually agree upon. The arbitrator shall have no
power to award punitive or exemplary damages or vary the terms of this Agreement
and shall be bound by controlling law.
12.11 REVIEW AND AUDIT. Lifemark will at all times make available for
review and audit by either AlohaCare or its designee its files, books,
procedures and records (including computer terminal access to same) pertaining
to AlohaCare or the services provided by Lifemark under this Agreement. In
addition, Lifemark shall make available for interview with the auditor those
personnel with material involvement or responsibility with respect to the
services provided by Lifemark under this Agreement.
12.12 ENTIRE AGREEMENT; AMENDMENT. This Agreement and all exhibits hereto
shall constitute the entire agreement relating to the subject matter hereof
between the parties hereto, and supersedes all other agreements, written or
oral, relating to the subject matter hereof except as to those referenced
herein. This Agreement may be amended by mutual agreement of the parties,
provided that such amendment is reduced to writing and signed by both parties.
12.13 EXHIBITS. Any exhibits attached to this Agreement are an integral
part of this Agreement and are incorporated herein by reference.
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12.14 REPRESENTATION ON BOARD OF DIRECTORS. On the effective date of this
Agreement, the current Director who is employed by Lifemark shall resign. At the
next regularly scheduled meeting of the Board of Directors, the Board shall take
all action necessary for the appointment of a Lifemark representative as an ex
officio (nonvoting) member of the Board of Directors. Lifemark shall choose the
individual to be appointed. Upon termination of this Agreement with or without
cause, such Lifemark Director shall resign within five (5) business days of the
giving or receipt of notice of such termination.
IN WITNESS WHEREOF, the undersigned parties, through their officers who have the
authority to execute this Agreement, have executed this Agreement intending to
be bound thereby.
AlohaCare, Inc.
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
By: /s/ XXXXXXXX XXXXXXX-XXXXX
--------------------------
Its: President
--------------------------
Lifemark Corporation
0000 Xxxxx Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
By: /s/ XXXXXX XXXXX
---------------------------
Its: President
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