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EXHIBIT 10.13
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT (this "Agreement") is made and
entered into as of this 1 day of Sept., 1998, by and between HEALTH OPTIONS
ILLINOIS, INC., an Illinois corporation ("PHO"), and NORTH AMERICAN MEDICAL
MANAGEMENT - ILLINOIS, INC. an Illinois corporation ("Manager").
WITNESSETH
WHEREAS, PHO is a physician hospital association of physicians and
physician practice groups organized to engage in managed care contracting with
insurance companies, health maintenance organizations, employer self-funded
plans, health plans, provider sponsored organizations, and other managed care
organizations; and
WHEREAS, PHO desires to retain the services of Manager in connection
with selected business and administrative functions of its physician network,
including but not limited to, negotiating with managed care organizations with
respect to the delivery of health care services to the subscribers or
beneficiaries of health care plans, so as to permit physicians participating in
its network to devote their efforts on a concentrated and continuous basis to
the rendering of medical services to patients.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby forever
acknowledged and confessed, IPA agrees to purchase the business management
services of Manager and to appoint Manager as its agent to negotiate with
managed care organizations on its behalf as described herein, and Manager agrees
to provide such services and accepts its appointment as agent on the terms and
conditions provided in this Agreement.
ARTICLE I
DEFINITIONS
As used in this Agreement, each of the following terms shall have the
meaning set forth below:
1.1 "BENEFICIARY" shall mean any eligible individual who is
covered under a Benefit Agreement offered by a Payor and entitled to receive the
Covered Services pursuant to such Benefit Agreement.
1.2 "BENEFIT AGREEMENT" shall mean the contract which establishes
a Payor's obligation to the Beneficiary for the payment of medical, hospital or
other health care benefits.
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1.3 "COVERED SERVICES" shall mean those medical services
enumerated in Payor Contracts which Participating Physicians are obligated to
provide to Beneficiaries.
1.4 "PHO EXPENSES" shall mean all reasonable expenses of PHO which
are not covered by this Agreement, including but not limited to, (i) expenses
for director and officer liability insurance, professional liability insurance
and other insurance, (ii) travel and education expenses incurred by PHO members
on matters not related to the management or administration of the PHO, (iii)
marketing and advertising expenses over and above budgeted amounts, (iv) officer
stipends, including fees paid to medical directors and other medical
consultants, (v) director stipends for meeting attendance, (vi) optional
programs and specialized services focused on physician offices, including non
routine software enhancements, (vii) legal, auditing and financial review and
other professional fees of PHO related to PHO's review of Manager's books and
records, and (viii) costs for any management services not related to risk
contracts.
1.5 "PHO SURPLUS" shall mean the pre-tax net income of PHO for
risk contracts as determined by generally accepted accounting principles on an
accrual basis, which shall be calculated as the revenues of the PHO from all
sources relating to risk contracts, including without limitation, health plan
capitation payments, earned interest, incentive fund payments, reinsurance and
third party recovery amounts, minus the expenses of operating the business of
the PHO, which expenses shall include all Medical Expenses including capitation
expenses as determined by actuarially sound methods of distributing available
capitation from health plans and the Manager service fee described in Section
7.2(a). Revenue, incentive payments and expenses for other PPO, POS, and
non-risk business shall be excluded for purposes of calculating surpluses earned
on risk contracts.
1.6 "MANAGER EXPENSES" shall mean all expenses which are incurred
by Manager or its agents in connection with the performance of its duties under
this Agreement, including but not limited to, (i) Executive Director salary and
fees, (ii) salaries, benefits and other direct costs of Manager employees, (iii)
obligations of Manager under leases or subleases entered into in connection with
the performance of services hereunder, (iv) federal and state income, personal
property and intangible taxes assessed against Manager, (v) general liability
and insurance expenses of Manager (vi) costs of corporate allocations such as
routine computer hardware and software licenses currently used by Manager in
performing its services as well as routine enhancements and upgrades, and (vii)
other expenses incurred by Manager in carrying out its obligations under this
Agreement.
1.7 "MEDICAL EXPENSES" shall mean all expenses which are incurred
by PHO or its agents in connection with the Covered Services provided to
patients/Beneficiaries for which PHO has responsibility pursuant to the
applicable Payor Contract.
1.8 "MEDICAL SERVICES" shall mean general medical, specialty and
other health care services provided by Participating Physicians and other
professional personnel, pursuant to contracts between the PHO and third party
payors, including, without limitation, employees and independent contractors.
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1.9 "OUTCOMES MEASUREMENT PROGRAM" shall mean either the outcomes
measurement program developed, established and administered by PHO or its agents
for outcomes measurement activities, or a similar program developed, established
and administered by a Payor.
1.10 "PARTICIPATING PHYSICIANS" shall mean the physicians licensed
to practice medicine in the State of Illinois, and qualified to participate in
government programs as applicable who have entered into a Participation
Agreement with PHO.
1.11 "PARTICIPATION AGREEMENTS" shall mean the Participation
Agreements by and between PHO and its Participating Physicians or other
Providers pursuant to which the Participating Physicians or Providers agree to
provide Covered Services to Beneficiaries under Payor Contracts entered into by
PHO.
1.12 "PAYOR" shall mean any entity having a current valid Payor
Contract with PHO and which pays, indemnifies, or makes payments on behalf of
Beneficiaries for medical and hospital costs. This definition includes, but is
not limited to, insurance companies, health maintenance organizations, managed
care organizations, preferred provider organizations, Medicare and Medicaid,
third party administrators, a partially or fully self-insured employer, a
multiple employer trust or an employee welfare benefit plan and the clients of
any of the preceding entities.
1.13 "PAYOR CONTRACT" shall mean an agreement between PHO and a
Payor pursuant to which PHO agrees on behalf of the Participating Physicians to
render Covered Services to Beneficiaries through the Participating Physicians at
amounts determined and established in such agreement. Unless the PHO and Manager
mutually agree on a method by which Manager shall administer and be compensated
for non-capitated Payor Contracts, Payor Contracts as used in this Agreement
shall include only those agreements for which payment is made to the PHO on a
capitation basis in which capitation is made to PHO for a broad range of medical
services.
1.14 "PROVIDER" shall mean any Physician, group medical practice,
hospital or other health care provider which is a participating provider of a
Payor with which PHO contracts.
1.15 "UTILIZATION MANAGEMENT PROGRAM" shall mean (i) the
utilization management program developed, established and administered by PHO or
its agents for the determination of the medical necessity of medical services
provided to Beneficiaries, (ii) a utilization management program developed by a
Payor and administered by PHO, or (iii) a utilization management program
developed, established and administered by a Payor.
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ARTICLE II
GENERAL
2.1 RETENTION OF MANAGER. PHO hereby retains Manager for the
purpose of rendering all business management and support services specified in
Article III hereof and for the purpose of facilitating the negotiation and
execution of contracts with Payors on behalf of PHO in accordance with the
provisions of Article IV hereof, and Manager accepts such retention, subject at
all times to the provisions of this Agreement.
2.2 ENGAGEMENT TERMS. PHO retains Manager as its exclusive
management services provider. PHO acknowledges that Manager may provide its
services hereunder directly or may assign any and all of its obligations
hereunder to one of it's Affiliates or to PhyCor, Inc or one of its affiliates.
Provided however, any significant material function being considered for
subcontracting will be submitted to PHO for prior approval for input prior to
execution of a subcontract. Such prior approval will be promptly determined and
not unreasonably withheld. Manager shall provide such management services and/or
health care contract negotiation or agency services to PHO and its Participating
Physicians as PHO may reasonably request. Manager is expressly authorized to
provide such services in any reasonable manner Manager deems appropriate to meet
the day-to day requirements of the business functions of PHO and PHO's provision
of Covered Services to Beneficiaries. Manager may, to the extent it deems
appropriate, perform such business office services for PHO at locations of
Manager's choosing. Manager shall not without prior written approval provide any
management services to competing hospitals or PHOs as listed: St. Xxxxxxx
Medical Center, Condell Medical Center, and Lake Forest Hospital or their
successors or affiliates with principal locations of service in Lake County,
Illinois or within the Zip Codes described in the attached Exhibit A which
define the primary service area of the PHO. PHO acknowledges that Manager and
its assignees may provide management services to PHO and to such other groups or
entities through common management information systems, employees and other
resources. Nothing contained herein is intended to restrict in any respect the
ability of PhyCor, Inc. ("PhyCor") or any of its affiliates from engaging in the
acquisition or management of group medical practices within the Restricted Area
defined in Exhibit A. PHO and Manager agree that Manager is bound by certain
restrictions included in its agreement with Highland Park HealthCare. The
provision of management services to PHO by Manager for Medicare risk contracts
servicing Lake County, Illinois will require the written approval of Highland
Park HealthCare.
2.3 NEW SERVICES/LOCATIONS. Manager, at its option, shall have the
exclusive right to provide additional or new business management and other
services necessary to support PHO; provided that PHO determines that it needs or
desires such other services. Should Manager decline to provide the new or
additional services, PHO may perform or purchase such services from others at
its own expense.
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2.4 MEETINGS. PHO shall notify Manager in writing and shall
provide Manager or its assignees the opportunity to be present and heard at all
meetings of the PHO governing body or meetings of the PHO's senior officers
except those meetings or portions of meetings concerning Manager. Without the
written consent of Manager or its assignee, PHO shall not conduct meetings with
payors.
2.5 BOOKS AND RECORDS. PHO shall, at its cost and expense, have
the right, upon reasonable notice and during business hours, either directly or
through its agents, to review all books and records of the Manager and its
Affiliates in connection with services to be provided to the PHO hereunder. PHO
and its auditors or agents will agree to protect the confidentiality of
manager's proprietary procedures and not disclose them to any third party
without written permission from Manager.
ARTICLE III
SERVICES
3.1 PERFORMANCE OF MANAGEMENT FUNCTIONS. Manager may provide or
arrange for others to provide the services called for by this Agreement as
described herein in Schedule B. Manager is hereby expressly authorized to
perform its services hereunder in whatever manner it deems reasonably
appropriate to meet the day-to-day requirements of PHO operations in accordance
with the general standards approved by the governing body of PHO, including,
without limitation, performance of some of the business office functions at
locations other than the office of PHO. PHO will not act in a manner which would
prevent Manager from efficiently managing the day-to-day operations of PHO in a
business-like manner.
3.2 FINANCIAL PLANNING AND GOALS. Manager shall prepare annual
capital and operating budgets reflecting in reasonable detail anticipated
revenues and expenses and sources and uses of capital for the development and
conduct of PHO's activities. Said budget shall be presented to the governing
board of PHO at least sixty (60) days prior to the commencement of each fiscal
year of PHO. The governing board of PHO, shall, in its sole discretion approve,
modify or reject the proposed budgets submitted by Manager, but shall, in any
event, adopt an annual capital budget and an annual operating budget prior to
the commencement of each fiscal year. Manager will monitor the performance of
Participating Physicians, including certain key physicians, physician organized
delivery systems ("PODS") and the overall performance of PHO and will make
annual recommendations on the bonus distributions to be paid to key physicians
from PHO Surplus, as applicable.
3.3 AUDITS AND STATEMENTS. Manager shall prepare financial
statements reflecting the operations of PHO on a monthly basis and PODS
performance reports on a quarterly basis or at such other frequency as Manager
and PHO mutually determine to be reasonable. All financial statements prepared
by Manager shall be prepared in accordance with generally accepted accounting
principles. If PHO desires an audit of these financial statements, it may obtain
such audit as a PHO Expense;
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provided, however that should such an audit reveal material inaccuracies in
these financial statements, Manager shall reimburse PHO the cost of said audit.
3.4 ACCESS. Upon reasonable notice to Manager and without
disruption to normal business activities, PHO's senior officers, members of
PHO's governing body, or agents appointed by either shall have the right during
normal business hours to audit, examine, and make copies of books of account
maintained by Manager with respect to the provision of Covered Services and
Manager's xxxxxxxx and collections on PHO's behalf.
3.5 NON-MEDICAL MANAGEMENT AND ADMINISTRATIVE SERVICES.
(a) PHO hereby appoints Manager as its exclusive manager
and administrator of all day-to-day business functions for PHO's risk contract
business. PHO agrees that the purpose and intent of this Agreement is to relieve
its Participating Physicians and other Providers, to the maximum extent
possible, of the administrative, accounting, personnel and business aspects of
PHO, with Manager assuming responsibility and being given all necessary
authority to perform these functions. Manager's specific responsibilities shall
include without limitation: (i) maintaining open communications with PHO, PODS
leaders and such other key physicians as identified by PHO; (ii) appraising PHO,
PODS leaders and key physicians of central business issues; providing on-site
office staff education and training as requested by PHO; (iii) providing
staffing and administrative assistance at all PHO board and PODS leadership
meetings to transcribe meeting minutes and provide input as appropriate; (iv)
assisting PHO in providing prompt review and response to patient or provider
grievances, inpatient reviews, ambulatory referral reviews, discharge planning,
other administrative functions to support the utilization review process and
review and updates of Physician handbooks; (v) providing actuarial consulting
services for purposes of estimating PHO's reserves and incurred but not reported
("IBNR") claims; and (vi) such other assistance as agreed to by the parties to
support PHO's obligations to Participating Providers as set forth in certain
Participation Agreements and PHO's Policies, Rules and Regulations. Manager and
PHO agree that only Participating Physicians and Providers will perform the
medical functions and provide medical services through PHO. Manager will have no
authority, directly or indirectly, to perform, and will not perform, any medical
function. Manager may, however, advise PHO as to the relationship between its
performance of medical functions and the overall administrative and business
functioning of PHO. The parties acknowledge and agree that PHO, through its
governing body and Participating Physicians and Providers, and not Manager,
shall be responsible and liable for and shall have complete authority,
supervision, and control over the provision of all Medical Services performed
for patients and that all diagnoses, treatments and procedures related to
Medical Services shall be provided and performed under the supervision of
Physicians or other appropriately licensed professionals, as such professionals,
in their sole discretion, deem appropriate.
(b) Manager shall, on behalf of PHO, bill and collect
professional fees for medical services rendered by Participating Physicians of
PHO to the extent permitted under the applicable Payor Contract, and xxxx and
collect from managed care organizations for professional fees for medical
services rendered or to be rendered by Participating Physicians to Beneficiaries
which are to be paid for by the managed care organization. PHO hereby appoints
Manager for the term
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hereof to be its true and lawful attorney-in-fact, for the following purposes:
(i) to xxxx managed care organizations in PHO's name and on its behalf; (ii) to
collect accounts receivable resulting from such billing in PHO's name and on its
behalf; (iii) to receive payments from Payors, including prepayments received
from health care plans, Medicare, Medicaid and all other third-party payors or
managed care organizations; (iv) to take possession of and endorse in the name
of PHO (and/or in the name of an individual physician, such payment intended for
purpose of payment of a physician's xxxx) any notes, checks, money orders,
insurance payments and other instruments received in payment of accounts
receivable; (v) to determine, in accordance with performance criteria contained
in Exhibit C, which claims for payment from Participating Physicians are
appropriate and to pay such claims on a prompt basis, including fee for service
and capitation payments due Participating Physicians pursuant to the
Participation Agreement and to make prompt payment within thirty days of
properly submitted "clean" claims presented for payment by any other providers
who are to be paid by PHO, and (vi) with PHO's prior written consent, to
initiate the institution of legal proceedings in the name of PHO to collect any
accounts and monies owed to the PHO, to enforce the rights of PHO as creditors
under any contract or in connection with the rendering of any Covered Service,
and to contest adjustments and denials by governmental agencies (or their fiscal
intermediaries).
(c) Manager shall have procedures augmented in an PHO
Board approved banking resolution to permit Manager access to the PHO checking
account, which shall be established and maintained at a mutually acceptable
bank. In connection with the administration of funds under this Section and
throughout the term of this Agreement, PHO hereby grants Manager a special power
of attorney and appoints Manager as PHO's true and lawful agent and
attorney-in-fact, and Manager hereby accepts such special power of attorney and
appointment, to deposit appropriate funds into the PHO account and to make
withdrawals in accordance with the banking resolution from the PHO account for
payments specified in this Agreement and as requested by PHO. Manager shall be
obligated to deposit any monies or other assets it receives for any reason on
behalf of PHO in the PHO account. PHO shall insure that adequate working capital
is available in the account for the prompt payment of all obligations.
Notwithstanding the special power of attorney granted to Manager hereunder, PHO
may continue to draw checks on the PHO account. Upon request of Manager or the
financial institution wherein the PHO account is maintained, such additional
documents or instruments as may be necessary to evidence or effect the special
power of attorney shall be granted to Manager by PHO.
(d) Manager shall design, supervise and maintain custody
of all files and records relating to the operation of PHO in a format suitable
for review by outside parties, including but not limited to accounting, billing,
contracts and leases, and collection records. Manager shall maintain routine
communications with PHO's chief financial officer and/or finance committee and
shall assist PHO in preparing reports for PHO's board in advance of each board
meeting. Patient medical records shall not be maintained by Manager and shall at
all times be and remain the property of PHO or its Participating Physicians or
Providers and shall be located at clinical facilities where they are readily
accessible for patient care. The management of all medical records shall comply
with applicable state and federal statutes. Manager shall use its best efforts
to preserve the confidentiality
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of patient medical records and use information contained in such records only
for the limited purposes necessary for performing the services set forth herein;
provided, however, in no event shall a breach of said confidentiality
requirement be deemed a default under this Agreement.
(e) Manager shall provide the data necessary for PHO to
prepare its annual income tax returns and shall assist PHO in the preparation
and filing of such returns. Manager, however, shall have no responsibility for
the preparation, filing, or protesting of PHO's federal or state income tax
returns or the payment of such income taxes.
3.6 NETWORK DEVELOPMENT AND PHYSICIAN RECRUITMENT. Manager shall
perform administrative services reasonably necessary and appropriate to develop
the PHO, such as identifying potential candidates for participation in the PHO
network and arranging interviews. However, it will be and remain the
responsibility of PHO to interview, select, contract with, supervise,
compensate, control and terminate all physicians performing Covered Services or
other professional services, and Manager shall have no authority whatsoever with
respect to such activities. Manager shall appoint an Executive Director whose
primary assignment shall be to coordinate the delivery of services provided by
Manager under this Agreement and who shall be accessible to PHO and its
providers during regular business hours and on-call as required to respond to
PHO needs. PHO shall not unreasonably withhold consent for Executive Director to
have other assignments in the best interests of Manager's efficiency.
3.7 CREDENTIALING. Manager shall assist PHO in implementing its
credentialing process, administering the credentialing and recredentialing
process implemented by PHO under its own standards or those required by any
Payor (including, but not limited to, obtaining information regarding licensure,
medical staff participation, insurance coverages and other information relevant
to credentialing standards of PHO or the Payors), arranging interviews and
reporting the results of the credentialing of each physician to the appropriate
committee or to the governing body of PHO; provided, however, that PHO shall
interview and make the ultimate decision as to the suitability and compliance
with credentialing and recredentialing standards of any physician to become
associated with PHO, and PHO shall be responsible for implementing the
appropriate credentialing standards and offering or denying a Participation
Agreement to a physician.
3.8 CLAIMS COLLECTION AND PAYMENT. On behalf and for account of
PHO, Manager shall establish and maintain credit and billing and collection
policies and procedures and shall xxxx and collect all professional and other
fees due from Payors for Covered Services provided by or on behalf of PHO.
Manager shall operate the claims collection and payment operations in such
manner as to ensure timely and accurate processing and payment of claims
consistent with PHO's Participation Agreements and Payor Contracts. Manager
shall advise and consult with PHO regarding the fees and sub-capitation payments
for Covered Services under capitated agreements and shall reasonably and
mutually agree to NAMM's recommended rates for these payments; however for
non-risk fee-for-service agreements for PPO services or for any risk agreement
held by health plans or third party payors, physician members of the PHO Board
shall establish the fees to be charged for Covered
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Services, and Manager shall have no authority whatsoever with respect to the
establishment of such fees. If contracts are negotiated by Manager with a Payor
which involve a pass through of physician fees with little or no integration of
activities or which put physicians at little risk for the performance of other
physicians, then Manager shall comply with all requirements established from
time to time by applicable federal or state antitrust enforcement authorities
regarding the permissible scope of activities of Manager as the agent messenger
in establishing and negotiating fees.
3.9 CASE MANAGEMENT SERVICES. Manager shall provide administrative
assistance to PHO in managing the provision of Covered Services to
Beneficiaries, including conferring with Participating Physicians regarding
compliance with Payor requirements regarding appropriate courses of treatment.
3.10 UTILIZATION MANAGEMENT, OUTCOMES MEASUREMENT AND QUALITY
IMPROVEMENT. Manager shall assist PHO in fulfilling its obligation under any
Utilization Management, Outcomes Measurement, or Quality Improvement programs
implemented by any Payor or by Manager. Such outcomes measurement and
utilization management function shall be carried out in accordance with the
requirements of the applicable Payor Contract and may include any requirements
or standards adopted by the governing body of PHO.
3.11 PRE-CERTIFICATION, REFERRAL PRE-CERTIFICATION SERVICES.
Manager shall assist PHO in establishing a system for verification of
Beneficiary eligibility and shall assist PHO in processing referral requests
from Participating Physicians in accordance with the requirements established in
the applicable Payor Contract or by the PHO. Manager shall assist the PHO in
reviewing each referral, based upon established medical criteria, to ensure that
the referral is appropriate under the applicable requirements regarding medical
necessity and utilization. Manager shall assist PHO in assuring that referral
authorizations are processed, routed to the appropriate specialty care provider,
or denied. PHO shall insure that its participating providers comply with
Manager's procedures for the processing of referrals and certification of
service.
3.12 NEW SERVICES. Manager shall work with PHO to consider from
time to time whether it would be in the best interests of PHO for Manager to
make additional services available to PHO at its expense. If the parties
mutually agree on a new service, Manager shall make a good faith effort to
develop or acquire such services for PHO.
3.13 COMPLIANCE WITH APPLICABLE LAWS. Manager shall comply with all
applicable federal, state and local laws, regulations and restrictions in the
conduct of its obligations under this Agreement.
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ARTICLE IV
MANAGED CARE CONTRACTING
4.1 DELEGATION OF AUTHORITY TO NEGOTIATE. PHO hereby authorizes
Manager and appoints Manager as its attorney-in-fact to negotiate within the
parameters set by PHO and to recommend for PHO's execution, Payor Contracts on
behalf of PHO, including the details of capitation payment arrangements, in
accordance with criteria established from time to time by PHO. The negotiation
of fees with respect to any non-risk contracts that might be sought, shall be
undertaken strictly in compliance with antitrust precautions. All Payor
Contracts shall be subject to approval by PHO in accordance with procedures
established by the governing body of the PHO and this contingency will be
clearly communicated to Payors by Manager.
4.2 PAYOR CONTRACT PERFORMANCE. PHO shall provide or arrange for
Participating Physicians and other Providers to provide to Beneficiaries all of
the Covered Services under each Payor Contract entered into by Manager on behalf
of PHO in accordance with the terms of this Agreement, the Participation
Agreements and such Payor Contract. Manager's responsibilities shall include
without limitation, payment of provider capitation payments as provided in
Participation Agreements and prompt payment of clean claims presented to PHO for
payment by other Providers in accordance with the performance standards in
Exhibit C.
4.3 NEGOTIATION OF TERMS. Based on capitation rates and models,
fee schedules, and other information agreed to by PHO, Manager will enter into
negotiations with prospective Payors for the provision of Covered Services. If
the terms of any proposed Payor Contract differ from the scope of Covered
Services or compensation arrangements specified by PHO or its Participating
Physicians, Manager will review with the PHO the proposed terms of such
contract. PHO shall not unreasonably withhold its approval.
4.4 ADDITIONAL SERVICES. Manager may provide additional managed
care contracting services to PHO in accordance with terms and subject to
compensation arrangements agreed to by the parties.
ARTICLE V
AGREEMENTS AND RESPONSIBILITIES OF PHO
5.1 Licenses and Medical Practice. It shall be the duty of PHO to
assure that each of PHO's Participating Physicians execute PHO's standard form
of Participating Physician Agreement attached hereto as Exhibit E, particularly
in regards to Article III of that agreement regarding medical services and
responsibilities, and that other PHO Providers execute PHO's standard agreements
incorporating obligations of such Providers to maintain required licenses and to
comply with all legal requirements relating to the furnishing of Covered
Services and other medical services to the public.
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5.2 MEDICAL PRACTICE. The parties agree that PHO's Participating
Physicians and other Providers are to retain sole control of their medical
practices and maintain the physician-patient relationship, both in accordance
with the best medical judgment and discretion of the Participating Physicians.
The parties further agree that the Participating Physicians and other Providers
must remain solely responsible for the quality of medical services provided,
must render such services in accordance with generally accepted medical practice
and professionally recognized standards, and must exercise independent medical
judgment and have full authority over all Covered Services and all clinical
decisions pertaining to the delivery of Covered Services.
5.3 UTILIZATION MANAGEMENT, OUTCOMES MEASUREMENT AND QUALITY
IMPROVEMENT. PHO shall adopt and monitor the implementation of Utilization
Management, Outcomes Measurement and Quality Improvement Programs designed to
monitor and evaluate the quality of Covered Services provided by Participating
Physicians and other Providers and to evaluate the professional skills of
potential participating providers (including, without limitation, determining
whether each such provider may provide Covered Services and the scope and
conditions of such privileges) prior to permitting such persons to provide
Covered Services. Manager shall provide administrative services to PHO in
performing these programs.
5.4 ACCESS. At all times during the term of this Agreement, PHO
shall permit Manager to have access to all of PHO's books, records and reports,
contracts, agreements, licenses, survey, accreditations and any and all other
information reasonably requested by Manager to perform its duties under this
Agreement.
5.5 DELIVERY OF RECEIPTS. In the event PHO receives any funds due
PHO pursuant to a Payor Contract, PHO shall immediately deliver such funds to
Manager for deposit to the proper PHO bank account and for use on behalf of PHO
by Manager.
ARTICLE VI
INSURANCE AND INDEMNIFICATION
6.1 INSURANCE.
(a) Participating Physician Insurance Coverage. It shall
be the duty of PHO to implement policies and procedures to assure that each
Participating Physician and Provider has obtained and continues to maintain
throughout the term of this Agreement, at such Physician's or Provider's cost
and expense, a policy of general liability insurance with such coverages and
with such limits as shall be mutually satisfactory to PHO and Manager. In
addition, PHO shall cause each Participating Physician and other Provider to
carry professional liability insurance with limits of at least one million
dollars ($1,000,000) per occurrence and at least three million dollars
($3,000,000) in the annual aggregate or, if greater, such amounts as are
required by the Payor Contracts. Upon request of Manager, PHO agrees to provide
to Manager appropriate certificates or other evidence of such general and
professional liability insurance coverages. Through its agreements with
Participating Physicians, PHO shall require that for a period of four years
after termination of such
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agreements, any Physician whose professional liability insurance coverage is
through a claims made policy shall either purchase tail coverage for such period
or else remain in the practice of medicine and be covered by a claims made
policy with limits equal to or greater than those set forth above.
(b) PHO Insurance. PHO shall purchase managed healthcare
professional liability insurance in an amount appropriate to the liability risk
assumed by PHO, with limits of at least $1,000,000 per occurrence and
$3,000,000 in the annual aggregate.
(c) Manager Insurance. Manager shall, at its cost,
purchase errors and omissions liability insurance in an amount appropriate to
the liability risk assumed by Manager and its Affiliates, with limits of at
least $5,000,000 in the annual aggregate.
6.2 RECORDS. PHO shall maintain records and procedures as may be
required to account accurately for all Covered Services and other medical
services provided pursuant to this Agreement. Such records shall be kept in
accordance with generally accepted accounting principles, consistently applied,
and recognized standards of professional practice.
6.3 INDEMNIFICATION.
(a) PHO Indemnification. PHO shall indemnify, hold
harmless and defend Manager, its officers, directors, employees, agents,
successors and assigns, from and against any liability, loss, damage, claim,
cause of action, cost or expense, including reasonable attorneys' fees, caused
or asserted to have been caused, directly or indirectly, by or as a result of
the performance of Covered Services or other medical services or any other acts
or omissions by PHO or its Participating Physicians or other Providers during
the term hereof.
(b) Manager Indemnification. Manager shall indemnify,
hold harmless and defend PHO, its officers, directors, employees, agents,
successors and assigns, from and against any liability, loss, damage, claim,
cause of action, cost or expense, including reasonable attorneys' fees, caused
or asserted to have been caused, directly or indirectly, by or as a result of
the performance of its duties and responsibilities hereunder or other
administrative services contemplated herein or any other acts or omissions by
Manager or its Subcontractor during the term hereof.
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ARTICLE VII
COMPENSATION TO MANAGER
7.1 BASIS OF SERVICE FEE. PHO and Manager mutually recognize and
acknowledge that Manager will incur substantial costs on behalf of PHO, defined
herein as Manager Expenses, in providing support services, personnel,
management, administration and other items and services that are the subject
matter of this Agreement and in connection with the creation and use of systems
and administrative programs. PHO and Manager further recognize that certain of
such costs and expenses can vary to a considerable degree. Furthermore, PHO and
Manager agree that it will be impracticable to ascertain and segregate the exact
costs and expenses that will be incurred by Manager from time to time in
performance of its obligations under this Agreement. Therefore the parties agree
to the following fee arrangement.
7.2 SERVICES FEES
(a) Fixed Component Service Fee. PHO shall pay Manager
the service fees set forth in Exhibit D, which per member per month fees shall
vary by character of the Payor Contracts managed (whether commercial, Medicaid
or Medicare), the volume of enrollees, and whether hospital full risk funds are
also managed.
(b) Incentive Fee. From time to time the PHO is expected
to accumulate an PHO Surplus. When Manager and PHO mutually determine, on a
quarterly basis, that sufficient funds are available to met PHO contingencies
and cash flow needs, it may distribute sixty five percent (65%) of such PHO
Surplus to PHO with the understanding that fifteen percent (15%) of such amount
will be paid to PHO's key participant group pursuant to Manager's
recommendations as to distributions to key physicians and consistent with PHO's
Key Participant Group Compensation Plan. Manager will receive twenty percent
(20%) as the incentive component of its service fee. PHO owner shall receive the
remaining fifteen percent (15%) of earnings to be distributed as determined by
the PHO at its sole discretion.
7.3 PHO EXPENSES. PHO shall be responsible for bearing the cost
of the items identified as PHO Expenses, and Manager shall have no liability
therefor. PHO expenses shall be excluded from calculation of Surplus for
determination of Manager's incentive share.
7.4 MANAGER EXPENSES. Manager shall be responsible for bearing the
cost of the items identified as Manager Expenses, and PHO shall have no
liability therefor.
7.5 MANAGER'S COMPENSATION FOR NON-RISK CONTRACTS. In the event
PHO engages Manager to render management and administrative services in
connection with non-risk/noncapitated contracts, the fee the Manager will charge
to PHO for such services shall not exceed the Manager's actual cost of rendering
the services. Fees for non-risk contracts are described in Exhibit D. Fees will
be subject to annual review of costs and determination of Manager's ability to
provide the scope of services required by PHO. Incentive revenues and other
earnings in excess of these fees shall not be used to determine surplus for the
purposes of calculating Manager's incentive compensation.
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ARTICLE VIII
TERM AND TERMINATION
8.1 TERM OF AGREEMENT. This Agreement shall commence on the date
first set forth above, and shall expire on the third (3rd) anniversary of such
date unless extended or earlier terminated pursuant to the terms hereof.
8.2 EXTENDED TERM. Unless earlier terminated as provided for in
this Agreement, the term of this Agreement shall be extended automatically for
up to two (2) additional terms of two (2) years each, unless either party
delivers to the other party, not less than twelve (12) months prior to the
expiration of the then current term, written notice of such party's intention
not to extend the term of this Agreement.
8.3 BANKRUPTCY AND INSOLVENCY. This Agreement shall terminate, at
the option of the other party, upon the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by a party, or upon
other action taken or suffered, voluntarily or involuntarily, under any federal
or state law for the benefit of insolvency by a party, except for the filing of
a petition in involuntary bankruptcy against a party with the dismissal thereof
within thirty (30) days thereafter.
8.4 FAILURE OF PERFORMANCE. If Manager substantially fails to
perform any material duty or obligation imposed upon it by this Agreement (as
set forth on Exhibit C) and such default shall continue for a period of thirty
(30) days after written notice thereof specifying the nature of the default has
been given to Manager by PHO, PHO may terminate this Agreement upon sixty (60)
days prior written notice and seek relief or any other damages caused by
Manager. If PHO shall fail to perform any material duty or obligation imposed
upon it by this Agreement, and such default shall continue for a period of sixty
(60) days after written notice thereof specifying the nature of the default has
been given to PHO by Manager, Manager may terminate this Agreement upon sixty
(60) days prior written notice and seek relief or any other damages caused by
PHO. If Manager is notified of default and subsequently cures the breach on more
than three (3) occasions in any twelve (12) month period, PHO may consider such
as a material failure to perform and may terminate this agreement within sixty
(60) days prior written notice and seek relief or other damages caused by PHO.
8.5 TERMINATION BY AGREEMENT. In the event PHO and Manager shall
mutually agree in writing, this Agreement may be terminated on the date
specified in such written agreement.
8.6 EFFECT OF TERMINATION. Upon termination of this Agreement,
neither party shall have any further obligations hereunder, except for (i)
obligations accruing prior to the effective date of termination, and (ii)
obligations, promises or covenants set forth herein that are expressly made to
survive termination of this Agreement.
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ARTICLE IX
GENERAL PROVISIONS
9.1 NON-SOLICITATION. PHO agrees that for the term of this
Agreement or in the event of termination, for a period of one (1) year
thereafter, it shall not directly or indirectly hire or solicit, or attempt to
hire or solicit, an employee of Manager or its assignees or successors, or
request or induce, or attempt to request or induce, a then employee of Manager
or its assignees or successors, to terminate his or her employment and accept
employment with another entity. Notwithstanding the foregoing, the PHO shall not
be restricted from hiring any persons who were employees of the PHO prior to the
date hereof who have not subsequently entered into an agreement for employment
with Manager, PhyCor or any of its affiliates.
9.2 OWNERSHIP OF SYSTEMS AND INFORMATION. PHO hereby acknowledges
that the management information system to be used by Manager or its assignees in
the performance of the obligations hereunder is and shall remain the exclusive
property of Manager or its assignees. Other than the medical records, which
shall remain at all times the property of the Participating Physicians and any
raw data and reports attributable to PHO Beneficiaries, all records, files,
memoranda, outcomes data and all information and prepared by Manager or its
assignees in the performance of its obligations hereunder, shall be and remain
the property of Manager and PHO. Upon termination of this Agreement, PHO shall
promptly return to Manager or its assignees, all such materials in its
possession and shall not thereafter remove or cause removal thereof from the
premises of Manager or its assignees.
9.3 ASSIGNMENT. Manager shall have the right to assign its rights
and obligations hereunder to any affiliate of Manager and Manager may contract
with other entities in order to meet any and all of its obligations under this
Agreement. Manager shall have the right to assign its rights hereunder to any
lending institution, for security purposes or as collateral, from which Manager
obtains financing. Notwithstanding, Manager shall not have the right to assign
this Agreement to any company whose principal line of business is hospital
management or the business of insurance without the prior written consent of
PHO, which shall not be unreasonably withheld. PHO shall have the right to
assign its rights or obligations hereunder to any affiliate of PHO so long as
affiliate is not engaged in the business of insurance or in practice management,
PHO and IPA management or other business which creates a conflict of interest
with Manager. Any other assignment shall be without the written consent of
Manager which consent will not be unreasonably withheld.
9.4 WHOLE AGREEMENT; MODIFICATION. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements between the parties. There are no other
agreements or understandings, written or oral, between the parties regarding
this Agreement other than as set forth herein. This Agreement shall not be
modified or amended except by a written document executed by both parties to
this Agreement, and such written modifications shall be attached hereto.
9.5 NOTICES. All notices required or permitted by this Agreement
shall be in writing and shall be addressed as follows:
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TO PHO: HEALTH OPTIONS ILLINOIS, INC.
Xxxxx X. XxXxxxxxx, VP/CFO
-------------------------------------------
0000 X. Xxxxxxxx Xx.
-------------------------------------------
Xxxxxxxx, XX 00000
-------------------------------------------
Attn: President
TO MANAGER: NORTH AMERICAN MEDICAL MANAGEMENT-ILLINOIS,
INC.
000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attn: Executive Director
WITH A COPY TO: NORTH AMERICAN MEDICAL MANAGEMENT, INC.
00 Xxxxxx Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: General Counsel
or to such other address as either party shall notify the other in writing.
9.6 BINDING ON SUCCESSORS. This Agreement shall be binding upon
the parties hereto, and their respective successors and assigns, if any. It is
not the intention of PHO or Manager that Payors or Beneficiaries shall be third
party beneficiaries of the obligations of either party to this Agreement, and no
such Payors and Beneficiaries shall have the right to enforce any such
obligations.
9.7 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing, and signed by the parties hereto. The waiver of any
of the terms and conditions of this Agreement shall not be construed as a waiver
of any subsequent breach of the same or any other terms and conditions hereof.
9.8 GOVERNING LAW. The validity, interpretation and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Illinois. The parties acknowledge that Manager is not authorized or
qualified to engage in any activity which may be construed or deemed to
constitute the practice of medicine. To the extent any act or service required
of Manager in this Agreement should be construed or deemed, by any governmental
authority, agency or court to constitute the practice of medicine, the
performance of said act or service by Manager shall be deemed waived and forever
unenforceable.
9.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any portion shall be held invalid, illegal or unenforceable
for any reason, the remainder of this Agreement shall be effective and binding
upon the parties provided that the substance of the economic relationship
created by this Agreement remains materially unchanged.
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9.10 ADDITIONAL DOCUMENTS. Each of the parties hereto agrees to
execute any document or documents that may be requested from time to time by the
other party to implement or complete such party's obligations pursuant to this
Agreement.
9.11 ATTORNEYS' FEES. If legal action is commenced by either party
to enforce or defend its rights under this Agreement, the prevailing party in
such action shall be entitled to recover its costs and reasonable attorneys'
fees in addition to any other relief granted.
9.12 CONFIDENTIALITY. Except for disclosure to its attorneys,
bankers, underwriters or lenders, or as necessary or desirable for the conduct
of business, including negotiations with acquisition candidates, neither party
hereto shall disseminate or release to any third party or use for the benefit of
any person or entity, any information regarding any provision of this Agreement,
or any financial information regarding the other (past, present or future) that
was obtained by the other in the course of the negotiations of this Agreement or
in the course of the performance of this Agreement without the other party's
written approval. Provided, however, the foregoing shall not apply to
information which (i) is generally available to the public other than as a
result of a breach of confidentiality provisions; (ii) becomes available on a
non-confidential basis from a source other than the other party or its
affiliates or agents, which source was not itself bound by a confidentiality
agreement, or (iii) which is required to be disclosed by law or pursuant to
court order.
9.13 CONTRACT MODIFICATIONS FOR PROSPECTIVE LEGAL EVENTS. In the
event that any state or federal laws or regulations, now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency, or legal counsel expert in such matters
in a manner that indicates that the structure of this Agreement may be in
violation of such laws or regulations, PHO and Manager shall amend this
Agreement as necessary to assure compliance with legal requirements. To the
maximum extent possible, any such amendment shall preserve the underlying
economic and financial arrangements between PHO and Manager.
9.14 REMEDIES CUMULATIVE. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party shall be considered exclusive
of any other remedy available to any party, but the same shall be distinct,
separate and cumulative and may be exercised from time to time as often as
occasion may arise or as may be deemed expedient.
9.15 COMMUNICATIONS. PHO and Manager agree that good communication
between the parties is essential to the successful performance of this
Agreement, and each pledges to communicate fully and clearly with the other and
to cooperate in the provision of the services to be provided hereunder. Further,
the parties hereto agree to deal with each other in good faith.
9.16 INDEPENDENT RELATIONSHIP. It is mutually understood and agreed
that PHO and Manager, in performing their respective duties and obligations
under this Agreement, are at all times acting and performing as independent
contractors with respect to each other, and nothing in this Agreement is
intended and nothing shall be construed to create an employer/employee,
partnership or joint venture relationship, or to allow Manager to exercise
control or direction over the manner or method by which the Participating
Physicians perform Covered Services or other professional health care services.
Manager shall be the agent of PHO solely to perform Manager's obligations
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set forth in this Agreement that are related to the management of PHO's business
and not with respect to provision of Covered Services.
9.17 EVENTS EXCUSING PERFORMANCE. Manager and PHO shall not be
liable to the other party for failure to perform any of the services required
herein in the event of strikes, lock-outs, calamities or acts of God for so long
as such events continue, and for a reasonable period of time thereafter.
IN WITNESS WHEREOF, this Agreement is entered into and executed as of
the date first written above.
PHO:
HEALTH OPTIONS ILLINOIS, INC.
By: /s/ Xxxxx XxXxxxxxx
----------------------------------------
Xxxxx XxXxxxxxx
----------------------------------------
Printed Name
Title: Secretary
-------------------------------------
MANAGER:
NORTH AMERICAN MEDICAL MANAGEMENT-
ILLINOIS, INC.
By: /s/ Xxxxxx Xxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxx
----------------------------------------
Printed Name
Title: President
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