EXHIBIT 10.26
August 24, 2000
Xxxxxxx Xxxxx
Director Risk Services
SIERRA HEALTH and LIFE INSURANCE CO., INC.
0000 Xxxxxx Xxx
Xxx Xxxxx, Xxxxxx 00000
RE: Binding Terms of Agreement for Radiological Carve Out/Texas
Health Choice and Other Matters.
Dear Xx. Xxxxx:
Pursuant to our various meetings and conversations, this letter shall constitute
evidence of our intent to enter into more formal written agreement for each
portion of our relationship and our Interim Agreement on the binding terms and
conditions of the respective arrangements between PHYMED Contracted Services
Corporation and its affiliated physician groups (hereafter collectively,
"PHYMED"), and Texas Health Choice, L.C. (hereafter, "Plan"); Sierra Texas
System, Inc. (hereafter "Sierra") and, The Medical Group of Texas, P.A.
(hereafter, "TMGT") for the provision by PHYMED of radiological and other
specialty services, as defined below, for members of the Plan in the Dallas
Forth Worth Area.
This Interim Agreement shall be effective September 5, 2000 (the "Effective
Date") and shall continue in effect until such time or our formal separate
written agreements are in place for each portion of the arrangement described in
this Interim Agreement.
Because of the short time frame, the parties recognize that certain terms and
conditions of this Agreement will not be resolved by September 5, 2000.
Accordingly it is the intention of the parties that subsequent to the Effective
Date, the parties will negotiate in good faith the specific open issues. In the
event the parties are unable to resolve these issues, the parties agree to
submit such issues, with the exception of lease rates and capitation, to binding
arbitration in accordance with paragraph 13 below.
I. Business
1. Upon execution hereof and effective as of September 5, 2000, PHYMED
will become, where Plan's contracts permit, the exclusive provider of Radiology
Services and Nuclear Medical Procedures for members of the Plan and shall
therefore enter into a Provider Service Agreement with the Plan. For the
purposes of this letter of intent, the term "Radiology Services" and "Nuclear
Medical Procedures" shall include the specific covered CPT codes set forth on
Exhibit A attached hereto and made a part hereof for all purposes. The terms
Radiology Services and Nuclear Medical Procedures are collectively referred to
herein as the "Contracted Services".
2. The "per member per month" payment for the Radiology Services (the
"Cap Payment") under the Services Agreement shall in no event be less than:
a. $3.33 per member per month - commercial
b. $5.75 per member per month - senior
c. $2.74 per member per month - POS
The above rates are subject to review either upon the completion of the
first six months of operation or if membership falls below 50,000.
Any authorized services rendered to Plan members, for
which PHYMED receives Cap Payment, by a radiology provider not
associated with PHYMED will be reimbursed by Plan. Such payment
will be adjusted from the Cap Payment to PHYMED.
The Cap Payment will be made each month on or around the 15th day of
each month the Services Agreement is in effect.
3. PHYMED will do or perform or have done or performed on its behalf
the following:
a. centralized scheduling for all locations (attachment #1)
implemented in such manner as to provide efficiency and
convenience for members of the Plan;
a. in-house radiology reads and exam interpretations or
subcontracted services (with IRG or others, pre-approved and
credentialed by Plan) to ensure standard turn-around time not
to exceed 24 hours for such reads and interpretations (STATS
will be handled as appropriate or required);
a. input results of operations into TMGT's "Practice Management
System" and to otherwise assist TMGT in the collection of
service data for inclusion in such Practice Management System;
4. The Plan shall, prior to September 10, 2000 and monthly during the
term of the Services Agreement, provide to PHYMED a current list of the
membership under the Plan and the Plan Physicians participating therein. The
Plan will provide examples of all reports with respect to membership and
physicians currently available. The Plan will further provide a detailed policy
relating to required data, pre-certification, authorizations, co-payments, and
Utilization Management along with associated protocols. Representatives of the
parties will work together to review and modify such policies and protocols as
may be necessary to harmonize and conform policies and procedures of PHYMED to
those of the Plan. The Plan will further make available to PHYMED credentialing
requirements for radiologists performing services under the Services Agreement.
5. TMGT and the Plan will provide to PHYMED a list of all outsourcing
contracts pertaining to outpatient radiology and identify those contracts and
agreements, which have an expiration date subsequent to September 5, 2000 or
which, for whatever reason, cannot be unilaterally terminated by TMGT upon the
giving of notice. It is the intention of the parties that all such outsourcing
contracts will be terminated with the exception of those specific contracts or
agreements the termination of which has been waived by PHYMED in writing.
II. Equipment/Records
6. Xxxxxx agrees to and does hereby bargain, sell, transfer and convey
and assign to PHYMED and PHYMED agrees to and does hereby acquire and purchase
effective September 5, 2000, the Equipment identified on Exhibit B attached
hereto and made a part hereof. The purchase price and terms and conditions,
warranties and representations regarding the sale or otherwise applicable to
such Equipment will be negotiated in good faith by and between the parties
subsequent to the date hereof but in no event later than December 31, 2000. The
parties will work together to determine the fair market value of all personal
property to be transferred to PHYMED as a result of this transaction including,
if necessary, the appointment of one or more appraisers to determine such value.
The costs associated with the appraisals shall be borne by the party incurring
same. Sierra reserves the right to retain specific equipment if desired.
7. TMGT and Sierra will cooperate with PHYMED in obtaining all
necessary certificates of registration termination, signed by the Radiation
Safety Officer, to be sent to the Texas Department of Health, US Food and Drug
Administration and the American College of Radiology. TMGT will further notify
film badge vendors and cause proper records to be transferred.
8. PHYMED will, on the Effective Date, assume responsibility as
custodian of all mammography films and shall covenant to make same available to
patients of TMGT as required. PHYMED will further retain onsite, records of all
examinations conducted for the two year period prior to the Closing. Those
records of patients who have been examined over two years prior to the Closing
will be retained by or delivered to TMGT for storage as required by applicable
law or the internal policies and procedures of TMGT.
III. Facilities/Leases
9. Effective on September 5, 2000, PHYMED will assume and take
possession of Leased Space at the following locations: Fort Worth, Southwest
Dallas and Dallas Specialty Center ("Lease Space"). The terms and conditions of
such lease, including the square footage and rent payable there for will be
negotiated in good faith by and between the parties subsequent to the effective
date of this Interim Agreement. At a minimum, the terms of each such lease shall
include terms and conditions normal and customary for such lease agreements.
Special provision will be made in the lease agreement or in the definitive
agreement, as required, for medical record storage areas.
10. It is the intention of PHYMED to offer radiological services to
persons other than members of the Plan. Notwithstanding the foregoing, however,
PHYMED will covenant that members of the Plan will have the same access to such
services as non-member patients.
IV. Employees
11. PHYMED, in its sole discretion, will make employment offers to
certain of Sierra's technical, clerical and administrative staff effective as of
the date responsibility for radiological services is assumed by PHYMED. Those
employees accepting such offers shall thereafter become employees of PHYMED
subject to PHYMED's internal policies and procedures. In this regard and as to
each employee considered for a position with PHYMED, Sierra will provide to
PHYMED information regarding the length of service, job title and pay rate for
such employees.
12. Xxxxxx will settle accrued vacation, sick time and bonuses with any
employee who terminates his or her employment with Sierra prior to the hiring of
such employee by PHYMED and save and hold PHYMED harmless from any and all
claims for such accrued and unpaid employee benefits. At a minimum, the Sierra
employees will retain current base salaries, seniority, and accrual rates when
employed by PHYMED. Notwithstanding the foregoing, Xxxxxx will maintain any
former Sierra employee employed by PHYMED on Sierra's employee benefit plans
until September 30, 2000 at which time PHYMED will assume sole responsibility
therefore.
V. General
13. The parties recognize that it is to their respective benefit for
PHYMED to assume the responsibility of providing the Contracted Services on
September 5, 2000. As part of the assumption of such services, the Equipment and
the Lease Space must be available to PHYMED. However, the parties recognize that
not all issues with respect to the provision of such services including, among
other matters, the service agreement, the purchase price of the Equipment or the
terms and conditions of the Lease Agreements, will be resolved by that time.
With the exception of the Cap Payment, which will be resolved prior to September
5, 2000, the parties agree that they will use their utmost good faith to resolve
the outstanding issues. To the extent that such issues cannot be resolved in
good faith by and between the parties, the parties agree to submit the issues
remaining, excluding issues related to lease rate, to binding arbitration in
Dallas, Texas. Such Arbitration will be conducted by the American Arbitration
Association under the rules and regulations that govern such procedures.
14. With respect to information concerning or relevant to the Plan and
its business and the proposed transaction contemplated herein, PHYMED agrees
that it will hold such information in strict confidence and will not disclose
any such information other than to its directors, officers, employees, agents
and representatives who need to know such information for the purpose of
evaluating the proposed transaction for the purpose of evaluating the proposed
transaction, who shall be informed by PHYMED of the confidential nature of such
information.
15. The parties further agree that:
a. PHYMED and the Plan each has or will by September 5, 2000 have
received all authorizations and third party consents, necessary or
advisable in the opinion of their respective counsel for the
consummation of the proposed transaction, and all applicable legal
requirements shall have been satisfied;
b. The board of directors or managers, as the case may be, shall or
will by September 5, 2000 approved the Agreement and the proposed
transaction;
c. The person signing this Agreement is authorized to do so and that
such Agreement when executed will be binding on the respective
parties.;
16. This Agreement will be governed under the laws of the State of
Texas with venue stipulated as being in Dallas County, Texas.
17. This Agreement may be executed in counterparts.
PHYMED Contracted Services
Corporation
/s/ Xxxxxx X. Xxxxxx
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BY Xxxxxx X. Xxxxxx, President
Texas Health Choice, L.C.
/s/ Xxxxx Xxxxxx
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BY Xxxxx Xxxxxx, C.O.O.
