AMENDED AND RESTATED
JOINT VENTURE AGREEMENT
THIS AMENDED AND RESTATED JOINT VENTURE AGREEMENT (the "Agreement")
effective as of the 1st day of January, 1997 by and among Blue Cross & Blue
Shield United of Wisconsin, a Wisconsin Chapter 613 insurance corporation
("Blue Cross"), United Wisconsin Services, Inc., a Wisconsin Chapter 180
business corporation ("UWS"), Valley Health Plan, Inc., a Wisconsin Chapter
611 insurance corporation ("VHP"), and Midelfort Clinic, Ltd., Mayo Health
System, a Wisconsin Chapter 181 business corporation (the "Clinic").
PREAMBLE
WHEREAS, Blue Cross and the Clinic entered into a Joint Venture
Agreement dated January 1, 1992 (the "1992 Agreement") for the purpose of
enhancing their respective businesses regarding managed care products which
utilize a provider network;
WHEREAS, the parties to the 1992 Agreement wish to enter into an
amended and restated agreement (the "Amended and Restated Joint Venture
Agreement), effective January 1, 1997, to address changes in product lines
and benefit design that have occurred since the inception of the joint
venture and to amend the 1992 Agreement in other respects as set forth herein;
WHEREAS, the Clinic has sold Midelfort Health Plan, Inc. ("MHP", n/k/a
VHP) to Blue Cross' affiliate, UWS, while retaining
an option to repurchase, under a Purchase and Sale Agreement dated as of
January 1, 1992 ("Purchase and Sale Agreement"), amended effective January 1,
1997;
WHEREAS, the parties wish to coordinate the design and marketing of
various managed care products which utilize a provider network, including,
without limitation, Preferred Provider Organization ("PPO"), Point of Service
("POS") and Health Maintenance Organization ("HMO") products and programs,
all of which may be fully insured or self-funded;
WHEREAS, the Clinic shall participate in these products not only as the
primary provider but also in the business of designing and marketing these
products;
WHEREAS, the Underwriters shall be liable for losses incurred by the
products, but shall share with the Clinic the collective profits of the
products; and
WHEREAS, Midelfort Clinic, Ltd. has been acquired by Mayo Foundation
for Medical Education and Research and the parties have consented to the
assignment by Midelfort Clinic, Ltd. to Midelfort Clinic, Ltd., Mayo Health
System, all of its right, title and interest in, to and under the 1992
Agreement and the Amended and Restated Joint Venture Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
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1. SCOPE OF AGREEMENT
1.1 Blue Cross shall be defined herein to include all its respective
subsidiaries and affiliates except wherein UWS is referred to
specifically. The Clinic shall be defined herein to include all its
respective subsidiaries and affiliates in which the Clinic has an
ownership interest (but not its sole member).
1.2 The parties to this Agreement have entered into a series of related
contracts with one another in order to produce, market, and administer
managed care products which utilize a provider network. The
relationships between and among the parties are that of independent
contractors working together in a cooperative arrangement. It is not
the intent of the parties to create, nor should this Agreement be
construed to create, a partnership or an employment relationship between
or among the parties.
1.3 This Agreement shall not create any agency relationship between or among
the parties other than those specifically enumerated in provider
agreements and administrative services agreements entered into between
Blue Cross and VHP, as the underwriters, and the Clinic. This Agreement
creates no fiduciary relationship between or among any of the parties.
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2. PRODUCTS
2.1 The parties will design and market various managed care products which
utilize a provider network, including PPO, POS and HMO, all of which may
be fully insured or self-funded. (Fully insured products are referred
to herein collectively as "Insured Products" and self-funded products
are referred to herein collectively as "Self-funded Products").
2.2 Blue Cross shall be the underwriter of the insured PPO plans and the
indemnity segment of POS plans and VHP shall be the underwriter of the
insured HMO plans (Blue Cross and VHP are in this role collectively
referred to as the "Underwriters"). On any self-funded program, Blue
Cross shall be the marketer of the PPO plans and VHP shall be the
marketer of the HMO and POS plans (Blue Cross and VHP are in this role
collectively referred to as the "Marketers").
2.3 The Clinic shall be the primary provider for all products contemplated
by this Agreement. The Clinic shall enter into provider agreements with
the Underwriters and the Marketers.
2.4 It is the intent of Blue Cross and the Clinic to cooperate in the design
and development of a Medicare Risk product and a managed care Workers'
Compensation product at such time that the parties mutually agree that
economic and market conditions are favorable.
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3. GOVERNING BOARD
3.1 The cooperative arrangement contemplated by this Agreement shall be
directed through a Governing Board. Blue Cross and the Clinic shall
each select four members of the Governing Board. The Governing Board
may select a smaller executive committee to manage the joint venture on
a day-to-day basis subject to the control of the Governing Board.
3.2 With respect to both Insured Products and Self-funded Products, all
major policies and decisions regarding the Underwriter's and/or
Marketer's business plan, marketing, benefit design, public relations,
provider contracting (including capitation and fee schedule)
administrative services agreements, and medical underwriting guidelines
shall be subject to approval by the Governing Board. Notwithstanding
the foregoing, the direct Underwriters shall have ultimate authority on
Insured Products in setting rates, medical underwriting functions and
reinsurance. VHP shall arrange for reinsurance for plans it underwrites
through a competitive bid process. Selection of the reinsurer shall be
based on price and cost control services offered by the reinsurer.
Notwithstanding the foregoing, VHP's selection of a reinsurer is subject
to the prior approval of the Governing Board.
3.3 In the event the positions of Director of VHP and/or the primary Medical
Director for VHP become vacant, the
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recommended candidate for either position will require the approval of
the Governing Board.
3.4 The four members of the Governing Board selected by Blue Cross shall be
responsible for selecting, negotiating and terminating contracts with
other independent providers, who are not otherwise affiliates of the
Clinic or members of the Mayo Health System, on behalf of Blue Cross
and/or VHP as Underwriters and/or Marketers subject to the following
conditions and restrictions:
(a) The four members of the Governing Board selected by the Clinic
shall be solicited to offer comments relating to the selection of
and contracting with independent providers or their termination.
Upon receipt of comments offered by the Clinic's Governing Board
members, a majority vote solely of the four Blue Cross members of
the Governing Board shall determine which such providers are
selected, the contract terms offered and afforded them and if and
when their contracts are terminated.
(b) Notwithstanding the foregoing, if any such independent providers
are afforded contract terms which are, in whole or in particular
part, more favorable to such providers than those afforded the
Clinic under its provider agreements with the Underwriters and/or
Marketers, such more favorable terms shall
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automatically and without further action of the parties be
incorporated in such agreements with the Clinic and shall remain in
place so long as such terms are afforded one or more independent
providers.
(c) In selecting independent providers, the Blue Cross members of the
Governing Board shall duly consider: the medical credentials of
such providers; whether the provider's credentials meet standards
set by the National Committee for Quality Assurance or other
accrediting agency acceptable to the Governing Board; whether there
is a need for their participation in order to provide an adequate
and appropriate level of medical services to insureds/enrollees;
whether the addition of such providers and the contract terms to be
afforded them are consistent with and will promote the provision of
managed medical care on a cost-efficient basis; and such other
factors as are reasonably deemed relevant by the Blue Cross members
of the Governing Board.
(d) Each application of an independent provider shall be duly
considered by the Blue Cross members of the Governing Board on a
timely basis and such members' decision on each such application
shall be timely communicated to the applicant.
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4. SERVICE AGREEMENTS AND PAYMENT TERMS
4.1 It is acknowledged that the Clinic and Blue Cross have entered into
administrative services agreements effective January 1, 1992 with the
Underwriters and/or Marketers regarding administration of the Insured
Products and/or Self-funded Products. The Governing Board and executive
committee members shall be compensated for their services to the joint
venture through the administrative services agreements. It is
anticipated that the Clinic, through administrative services agreements,
will provide quality assurance and medical management services to the
Underwriters and/or Marketers. All administrative services agreements
entered into shall receive approval of the Governing Board.
4.2 As to Insured Products, the terms of the administrative services
agreements shall provide that the Clinic and Blue Cross shall be
compensated for their services on an Actual Cost basis such that all
administrative profit will remain with the Underwriters to be shared
through the profit sharing formula outlined in Article 5 below. "Actual
Cost" as used herein, shall be defined as direct costs and indirect cost
allocation as provided for in the administrative services agreements.
4.3 As to Self-funded Products, all other factors being equal, the Marketers
shall treat the Clinic and Blue Cross as
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preferred vendors of administrative services. Terms and conditions of
such administrative services agreements shall be negotiated on an
arms-length basis. Notwithstanding the above, the Clinic and Blue Cross
shall provide such goods and/or services to the Marketers on terms no
less favorable than each one provides similar goods and services to
third parties.
4.4 VHP, as the Underwriter of the insured HMO plans, has entered into a
provider agreement with the Clinic to be the primary provider within the
network for the HMO plans. The terms of the provider agreement shall
provide for:
(a) the Clinic to be reimbursed through capitation. Effective January
1, 1997, the capitation rate shall be the rate in effect on
December 31, 1996, as shown in Attachment B, increased by five
percent (5%). At the Clinic's written request prior to July 1,
1997, the capitation rate shall be increased not less than an
additional two percent (2%) or more than an additional two and
one-half percent (2 1/2%) of the rate in effect on December 31,
1996, with the rate of change becoming effective on July 1, 1997.
Thereafter, annual increases, if any, shall be made on each January
1, with the rate of increase over the prior year's rate not to
exceed the rate of increase of the medical care component of the
Consumer Price Index ("CPI") for all
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urban consumers, United States City Average, during the preceding
twelve month period running from October 1 through September 30.
The Clinic shall provide written notice to VHP of any increase in
the fee schedule by December 1 of each year, any increase to become
effective on the following January 1. The capitation shall be
adjusted to reflect the following factors: age, sex, family status
(e.g., single, two individuals, family), product line and variable
office copayment. The capitation amount paid to the Clinic for
each product line shall be actuarially determined to reflect the
anticipated utilization of services. However, regardless of the
foregoing, the Clinic agrees that it shall offer to the joint
venture its Best Price for all products offered under this
Agreement within the Exclusive Area as defined in Section 6.1.
"Best Price" as used herein shall mean a price that is equal to or
lower than the price the Clinic accepts from any other
non-governmental payor with respect to insured and self-funded HMO,
PPO, and POS products.
(b) annual review of reimbursement to the Clinic to consider the impact
of new technology, which is not reflected in the CPI, and
unexpected changes in applicable community standards of practice,
upon the capitation rate with adjustments negotiated if
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appropriate and, if the parties cannot agree upon an appropriate
adjustment, a provision that the Governing Board shall determine
the appropriate adjustment, if any.
(c) an initial term of three years which may be renewed for an
additional three year term by mutual agreement; otherwise renewal
shall be for one year terms unless written notice of termination is
given at least 180 days prior to the end of the then current term
with a party able to terminate the Agreement at the end of the
initial term if proper notice is given; and
(d) the portion of the premium collected by VHP to be budgeted for the
hospital fund (the "Hospital Fund") to be set at thirty and
one-half percent (30 1/2%) of the premium revenue. (A description
of the manner in which the Hospital Fund is calculated is attached
hereto as Attachment A, which is incorporated herein by this
reference.) At the end of each calendar year, if the Hospital
Fund shows a deficit, each clinic affiliated with VHP (hereafter
"Option Clinic") shall be responsible for a percentage of the
deficit equal to the percentage of VHP members, on average,
serviced by that Option Clinic during such calendar year. If the
Hospital Fund shows an excess at the end of a calendar year, each
Option Clinic shall be entitled to a pro
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rata share of the excess that is equal to the percentage of
membership, on average, serviced by that Option Clinic during such
calendar year compared to the total VHP membership during such
calendar year. Settlement of the Hospital Fund shall be completed
by July 1 of each calendar year for the prior year's operations.
VHP shall provide the Option Clinics with Hospital Fund status
reports on a quarterly basis. The determination of Option Clinics
to be reimbursed from the Hospital Fund, and the percentage level
of reimbursement for each Option Clinic, shall be made upon a
majority vote of the Governing Board.
4.5 As to the insured PPO and POS products, the Clinic shall be the primary
provider to these plans. The Clinic shall provide medical services to
the PPO and POS plan beneficiaries pursuant to separate provider
agreements which shall be entered into as each such plan is established.
The terms of the provider agreements shall provide for: (a) the Clinic
to be reimbursed at the Clinic's then current fee schedule less a ten
percent (10%) discount; (b) the fee schedule shall be the Clinic's 1996
fee schedule with such changes as the Clinic enacts from time to time;
however, for purposes of this Agreement, any increase in a given CPT
code shall not exceed the increase in the medical care component of the
CPI for all urban consumers, United States City
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Average, for the same period of time as that period of time beginning
with the month in which the 1996 fee schedule was put into effect
through the time of the proposed increase in the CPT code, except that
an increase in a given CPT code may exceed the increase in the medical
care component of the CPI if approved by the Governing Board; and (c)
with Governing Board approval, review by the Governing Board of
reimbursement to the Clinic if utilization review illustrates the
Clinic's utilization or resulting cost to be above peer norm for three
consecutive quarters, with adjustments negotiated if appropriate.
5. PROFIT SHARING
5.1 Underwriting losses shall be the liability of the Underwriters, Blue
Cross and/or VHP respectively, on the Insured Products. Notwithstanding
the above, fifty percent of the aggregate net profits (calculated as set
forth below) shall be paid to the Clinic as set forth below.
5.2 Aggregate net profits shall be the sum of the following profits and
losses determined over the entire Initial Term of this Amended and
Restated Agreement as defined in Section 7.1 herein:
(a) Net profit/loss of VHP. Such net profit/loss shall be determined
by applying the same accounting principles applied in preparing
MHP's December 31, 1991 financial statement. As clarification,
calculation of net
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profit/loss shall not take into account any adjustments to the
reconciled purchase price as outlined in Section 4.4 of the
Purchase and Sale Agreement, any profit sharing payments made
pursuant to this Agreement, or any provision for the payment of
taxes. As further clarification, a sample profit-sharing
calculation is attached to this Agreement and incorporated herein
as Attachment C. Notwithstanding actual administrative expenses
incurred, total administrative expenses which may be charged
against income in calculating net profit/loss of VHP shall be the
lesser of: (i) actual costs incurred by VHP; or (ii) eight and
one-half percent (8 1/2%) of the gross premiums received for that
benefit year by VHP.
(b) Net underwriting profit/loss of each insured POS plan underwritten
by Blue Cross and offered by this joint venture. Net underwriting
profit/loss shall be calculated as net earned premiums less the sum
of incurred claims and administrative expenses. Total
administrative expenses used in calculating net underwriting
profit/loss shall not exceed the actual costs incurred by the
Underwriter pursuant to the administrative services agreements
referenced in Section 4.2 of this Agreement.
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(c) Net profit/loss of excess loss reinsurance provided by an insurer
affiliated with Blue Cross for each insured POS plan underwritten
by Blue Cross and offered by this joint venture. Such net
profit/loss shall be calculated as reinsurance premium paid to the
reinsurer, less: (i) claims paid plus; (ii) a reserve for claims
reported but not yet paid, and claims incurred but not yet
reported; and (iii) administrative expenses or fees related to the
reinsurance policy.
5.3 Aggregate net profits/losses shall be determined over the entire Initial
Term of this Agreement as defined in Section 7.1 herein.
Notwithstanding the above, the Clinic is interested in sharing net
profits with the Underwriters on an interim basis and the Underwriters
are interested in recouping, on an interim basis, from the Clinic any
profits shared for which loss carry backs indicate an overpayment was
made. Interim profit sharing and recoupment shall be as follows:
(a) Within 120 days following the end of the first Benefit Year, UWS
shall determine the aggregate net profits or losses as described in
Section 5.2, above for that Benefit Year alone. "Benefit Year" is
defined as a calendar year beginning on January 1 and ending on
December 31 of the same year for all years falling within the
Initial Term of this Agreement. If
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aggregate net profits are present, UWS shall make available to the
Clinic a line of credit, within 150 days following the end of the
first Benefit Year, equal to the Clinic's fifty percent (50%) share
of the aggregate net profits. The Clinic may draw on the line of
credit. Any monies so drawn on by the Clinic shall herein be
referred to as the "Balance Drawn".
(b) Within 120 days following the end of the second Benefit Year, UWS
shall determine the aggregate net profits or losses as described in
Section 5.2 above, in the aggregate for the first two Benefit
Years, accounting for both loss carry forwards and loss carry backs.
(i) Within 150 days following the end of each such Benefit Year,
the amount of the line of credit shall be adjusted so as to
be equal to the Clinic's fifty percent (50%) share of the
aggregate net profits so calculated. A party's share of
aggregate net profits shall not include any investment
income attributable to the other party's share of aggregate
net profits.
(ii) If after such adjustment to the amount of the line of credit
the Balance Drawn by the Clinic exceeds the adjusted line of
credit ("Overdraft"), the Clinic shall repay to UWS
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the amount of the Overdraft plus accruing interest.
Repayment shall be in twelve equal installments beginning on
the first of the month 150 days following the end of the
last Benefit Year. Interest on the monies owed by the
Clinic shall accrue at the prime rate, plus 100 basis
points, as determined by M & I Xxxxxxxx & Xxxxxx Bank,
Milwaukee, Wisconsin, on the close of business on the last
business day of the month preceding when the first
installment is due. Interest shall accrue beginning on the
first of the month 150 days following the end of the last
Benefit Year. The Clinic may repay all or part of the
Overdraft at any time.
(c) Within 180 days following the end of the third Benefit Year of the
Initial Term, UWS shall determine the aggregate net profits or
losses as determined in Section 5.2 above for all Benefit Years
which comprise the Initial Term of this Agreement, accounting for
both loss carry forwards and loss carry backs.
(i) If aggregate net profits are present, UWS shall pay to the
Clinic, within 210 days following the end of the third
Benefit Year of the Initial Term, the Clinic's respective
fifty
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percent (50%) share of the aggregate net profits. The
Clinic's share of such aggregate net profits shall be paid
to it by UWS first canceling the Balance Drawn by the
Clinic, up to the Clinic's share of such aggregate net
profits. If after such cancellation, aggregate net profits
remain to be paid to the Clinic by UWS, an appropriate cash
payment shall be made by UWS to the Clinic. If after such
cancellation an Overdraft remains to be paid by the Clinic
on the line of credit, the Clinic shall repay such Overdraft
as set forth in item (ii) below.
(ii) If aggregate net losses are present, the Clinic shall repay
UWS the Overdraft. Repayment shall be within 210 days
following the end of the third Benefit Year of the Initial
Term. Interest on the monies owed by the Clinic shall
accrue at the prime rate, plus 100 basis points, as
determined by M & I Xxxxxxxx & Ilsley Bank, Milwaukee,
Wisconsin, on the close of business on the last business day
of the month preceding when repayment is due. Interest
shall accrue beginning on the first of the month 210 days
following the end of the
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final Benefit Year of the Initial Term. The Clinic may
repay all or part of the amount owed at any time.
(d) If, after the Initial Term, this Agreement is renewed for an
additional three-year term or terms in accordance with Section 7.1,
aggregate net profits shall be shared on an interim basis as
described in (a) and (b), above, with final reconciliation
occurring following the third year of each such three-year term as
described in (c) above. If this Agreement is renewed for one or
more one-year terms, final reconciliation shall occur at the end of
each such one-year term.
6. EXCLUSIVITY
6.1 Unless otherwise agreed by the Governing Board, and subject to Section
6.2 below, no party may, during the Initial Term (as defined in Section
7.1) or any subsequent term(s) of this Amended and Restated Joint
Venture Agreement directly or indirectly offer or participate in the
offering, except through this joint venture, of any HMO, PPO, POS or
other managed care products, which utilize a provider network, either
insured, or self-funded, which has a participating provider located in
any of the following Wisconsin geographic areas: the counties of Xxxxxx,
Chippewa, Eau Claire and Xxxx; and the five-digit zip code area(s)
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comprising the City of Mondovi (this geographic area is hereinafter
referred to as the "Exclusive Area").
6.2 The Clinic may, without the prior approval of the Governing Board,
participate with parties other than Blue Cross, UWS and VHP in the
offering of managed care plans within the Exclusive Area only if:
(a) such managed care plans are offered only to employers having
multiple locations, one or more of which is located within the
Exclusive Area, and with employer headquarters located outside the
Exclusive Area;
6.3 During the term of this Agreement, the Clinic agrees to serve as a
provider for Blue Cross' PPO and POS plans for the following groups and
shall take such steps as are necessary to persuade Luther Hospital to
continue to serve as a provider in the same capacity:
(a) groups with operations and corporate headquarters located within
the Exclusive Area;
(b) groups with operations and/or corporate headquarters located within
Wisconsin but outside the Exclusive Area; and
(c) groups with corporate headquarters outside Wisconsin for which Blue
Cross participates with other Blue Cross
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and/or Blue Shield plans in the administration of the groups' Blue
Cross and/or Blue Shield labelled benefit plans.
6.4 The Clinic agrees to serve as a provider for subsidiaries or affiliates
of Blue Cross as of January 1, 1997, (not to include American Medical
Security Group, Inc.) which offer PPO networks for Insured Products and
third party administrative ("TPA") services for Self-funded Products.
However, the Clinic agrees to serve as a provider for an additional Blue
Cross affiliated TPA that may be formed after January 1, 1997. Clinic
further agrees to take such steps as are necessary to persuade Luther
Hospital to serve as a provider in the same capacity.
6.5 The Clinic may terminate its agreement to serve as a provider for the
products referenced in sections 6.3 and 6.4, above, by providing Blue
Cross or its subsidiary or affiliate, as appropriate, with ninety (90)
days prior written notice, with termination to be effective as of
January 1 of the following calendar year. In the event that the Clinic
exercises this option to terminate, the termination shall have no affect
on the parties' other rights and obligations under this Agreement, nor
shall the Clinic or Blue Cross, or their respective subsidiaries and
affiliates, have any further obligation to the other parties with
respect to the products referenced in sections 6.3 and
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6.4, except that: (i) the Clinic agrees to extend continued provider
services to all groups affected by the termination until the end of each
such group's benefit year; and (ii) during the course of any such
extension, the Clinic agrees to accept the same reimbursement terms and
other Agreement terms that were in effect immediately prior to
termination.
6.6 The parties to this Agreement acknowledge and agree that the provisions
of this Article 6, relating to exclusivity, are binding on those
subsidiaries and affiliates of the Clinic existing on January 1, 1992,
and shall be binding on later acquired or established subsidiaries or
affiliates only if such entities signify in writing their intent to be
bound.
7. TERM AND TERMINATION
7.1 The initial term ("Initial Term") of this Amended and Restated Joint
Venture Agreement shall be for three years, commencing on January 1,
1997 and continuing in effect through December 31, 1999. This Agreement
may be renewed for an additional three year term, commencing on January
1, 2000, by mutual written agreement of the parties; otherwise the joint
venture shall automatically renew for one year terms unless written
notice of termination is given at least 180 days prior to the end of the
then current term. This Agreement may be terminated at the end of the
Initial Term if proper notice is given.
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7.2 Notwithstanding the above, if, in accordance with the Purchase and Sale
Agreement, Clinic exercises its right to repurchase all outstanding
shares of VHP stock from UWS upon the third anniversary of this Amended
and Restated Joint Venture Agreement, or its termination, whichever is
earlier, this Agreement shall terminate unless the parties mutually
agree otherwise in writing. Additionally, in the event that a party
substantially breaches any material term or condition of this Agreement,
notice of the specific breach shall be given to the breaching party.
The breaching party shall have sixty (60) days to cure such breach. In
the event the breaching party fails to cure said breach, the
non-breaching party shall have the right to terminate this Agreement on
thirty (30) days prior written notice.
7.3 Notwithstanding the termination of this Agreement, all provider and
administrative services agreements entered into by the parties shall
continue according to the provisions contained in those provider
agreements.
8. MISCELLANEOUS
8.1 The parties agree that a high quality of service and participation in
this joint venture are to be provided by each party in their respective
duties and obligations.
8.2 In the event of a dispute between the parties relating to this
Agreement, such dispute shall be resolved by arbitration in accordance
with the rules of the American
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Arbitration Association. The inability of the Governing Board to take
action with regard to a particular matter due to an impasse shall not be
treated as a dispute affording either party the right to demand
arbitration to resolve such impasse.
8.3 This Agreement supersedes all prior agreements, proposals, offers or
letters of intent, including the 1992 Agreement, relating to the subject
matter hereof. Any amendment to this Agreement must be in writing,
executed by, and delivered to, each of the parties.
8.4 In the event that a court, regulator, or administrative judge of
competent jurisdiction declares any provision of this Agreement to be
invalid or unenforceable, such declaration shall have no effect on the
validity or enforceability of the remainder of this Agreement; provided,
however, that the basic purposes of this Agreement may be achieved
through the remaining valid provisions.
8.5 The parties acknowledge that all material and information of a given
party which has or will come into the possession of another party in
connection with this Agreement consists of confidential and proprietary
data. Each party agrees to hold such material and information in
strictest confidence, not to make use thereof other than for the
performance of this Agreement, and not to release or disclose it to any
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third party other than for the performance of this Agreement.
8.6 Failure by any party to insist upon compliance with any term or
provision of this Agreement at any time or under any set of
circumstances will not operate to waive or modify that provision or
render it unenforceable at any other time.
8.7 This Agreement shall be construed according to the laws of the State of
Wisconsin.
8.8 All notices required or permitted by this Agreement shall be sent to the
following addresses, or to such other persons or locations indicated in
writing by the parties:
BLUE CROSS:
Xxxxx X. Xxxxxxx, Vice President of Regional Services
X00 X00000 Xxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
UWS:
Xxxxxx X. Xxxxx, President
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
VHP:
Xxxxxx X. Xxxxxx, President
Valley Health Plan, Inc.
0000 XxxxXxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
CLINIC:
Xxxxxx Xxxxx, Executive Vice President
Midelfort Clinic, Ltd., Mayo Health System
0000 Xxxxxxxxx Xxxxxx
P. O. Xxx 0000
Xxx Xxxxxx, XX 00000
8.9 No party may assign its rights or delegate its duties under this
Agreement without the prior written consent of the other parties. Such
approved assignment or delegation shall
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inure to the benefit of the parties, their successors, and their
permitted assigns or delegates.
8.10 Each signatory hereto represents and warrants that his/her execution
of this Agreement on behalf of his/her respective party has been duly
authorized and approved by the parties' Board of Directors and/or
shareholders (if legally required).
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective representatives.
Attest: BLUE CROSS & BLUE SHIELD
UNITED OF WISCONSIN
--------------------------
By: /s/ [illegible]
-----------------------------
Title:
--------------------------
Attest: UNITED WISCONSIN SERVICES, INC.
--------------------------
By: /s/ [illegible]
-----------------------------
Title: President & CEO
--------------------------
Attest: VALLEY HEALTH PLAN, INC.
--------------------------
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Title: President
--------------------------
Attest: MIDELFORT CLINIC, LTD., MAYO
HEALTH SYSTEM
--------------------------
By: /s/ [illegible]
-----------------------------
Title: President
--------------------------
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ATTACHMENT A
VALLEY HEALTH PLAN HOSPITAL FUND
A. During each calendar year of the Amended and Restated Joint Venture
Agreement ("Agreement"), the Hospital Fund shall be set at thirty and
one-half percent (30 1/2 %) of premium revenue collected in that calendar
year with respect to the following products:
1. VHP HMO products;
2. VHP HMO Partner Plan;
3. Medicare Supplement Plan;
4. AgriHealth Plan; and
5. All products that require VHP members to select the Clinic or an
Option Clinic as a primary care provider.
B. The Hospital Fund covers inpatient care and outpatient care provided
in-network or out-of-network with an approved VHP authorization.
C. In accordance with section 4.4 (d) of the Agreement, the Hospital Fund
shall be calculated as follows:
[Insert sample Hospital Fund Calculation here.]
-28-
VALLEY HEALTH PLAN INC. Attachment B
CAPITATIONS
1997
MIDELFORT MEDICARE CARVEOUTS - OPTION 10
5% INCREASE OVER 1996
1 ON/1 OFF 1 ON/1 OFF
SINGLE 2 SINGLES REGULAR PARTNER
AGE GROUP 05/35/55 06/36/56 7/8/57/58 37/38
-----------------------------------------------------------------------
60 - 64 55.71 110.87 258.90 190.35
65 + 55.71 110.87 258.90 190.35
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT AGRICARE/AGRIHEALTH (NO COPAY) - OPTION 10
5% INCREASE OVER 1996
ADULT CHILD
AGE GROUP 20/120 29/129
------------------------------------
UNDER 30 52.36 22.28
30 - 39 49.43
40 - 49 50.69
50 - 59 56.54
60 - 69 61.99
65 + 68.26
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT MEDICARE SUPPLEMENTS - OPTION 10
5% INCREASE OVER 1996
1 ON/1 OFF 1 ON/1 OFF
SINGLE SINGLE SINGLE SINGLE SINGLE
AGE GROUP 41 42 43 44 45
----------------------------------------------------------------------------
65 - 69 50.21
70 - 74 56.27
75 - 79 60.13
80 - 84 60.13
85 + 60.13
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT OPTION STATE TEMP RATES - OPTION 10
5% INCREASE OVER 1996
SINGLE 2 Tier/Family
61 62 63 64
AGE GROUP MALE FEMALE MALE FEMALE
------------------ ------------------
UNDER 30 21.04 53.35 107.40 98.24
30 - 39 32.17 67.13 138.99 126.21
40 - 49 39.46 65.42 137.63 132.99
50 - 59 64.69 78.08 160.61 155.61
60 - 64 90.19 90.39 183.86 166.66
65+ 104.16 89.63 193.00 181.35
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT OPTION REGULAR PLAN (NO COPAY)- OPTION 10
STATE AND FEDERAL EMPLOYEES
5% INCREASE OVER 1996
SINGLE 3 TIER/2 PARTY 2 TIER/FAMILY 3 TIER/FAMILY
---------------------- ---------------------- ---------------------- ----------------------
71 75 72 76 74 78 73 77
AGE GROUP MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
---------------------- ---------------------- ---------------------- ----------------------
UNDER 30 29.83 75.99 131.33 105.28 153.21 140.10 184.25 153.38
30 - 39 45.73 95.66 143.21 138.03 198.32 180.06 216.71 199.36
40 - 49 56.14 93.23 146.38 143.52 196.37 189.74 214.88 204.40
50 - 59 92.19 111.30 201.07 180.90 229.20 222.07 247.10 236.19
60 - 64 128.60 128.90 252.58 222.01 262.44 237.85 284.97 263.59
65+ 148.57 127.81 273.52 252.09 275.47 258.84 289.06 275.66
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT OPTION PARTNERPLAN (NO COPAY)- OPTION 10
5% INCREASE OVER 1996
SINGLE 3 TIER/2 PARTY 2 TIER/FAMILY 3 TIER/FAMILY
---------------------- ---------------------- ---------------------- ----------------------
81 85 80/82 86/89 84 88 83 87
AGE GROUP MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
---------------------- ---------------------- ---------------------- ----------------------
UNDER 30 27.18 69.17 119.51 95.81 139.41 127.49 167.64 139.57
30 - 39 41.64 87.06 130.31 125.60 180.45 163.83 197.17 181.39
40 - 49 51.11 84.84 133.47 130.59 178.67 172.64 195.51 185.98
50 - 59 83.90 101.30 182.94 164.60 208.52 202.04 224.81 214.88
60 - 64 117.02 117.29 229.79 202.00 238.76 216.39 259.26 239.81
65+ 135.18 116.31 248.85 229.36 250.62 235.49 262.97 250.79
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT OPTION PARTNERPLAN ($10 COPAY)- OPTION 10
5% INCREASE OVER 1996
SINGLE 3 TIER/2 PARTY 2 TIER/FAMILY 3 TIER/FAMILY
---------------------- ---------------------- ---------------------- ----------------------
181 185 180/182 186/189 184 188 183 187
AGE GROUP MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
---------------------- ---------------------- ---------------------- ----------------------
UNDER 30 27.18 69.17 119.51 95.81 139.41 127.49 167.64 139.57
30 - 39 41.64 87.06 130.31 125.60 180.45 163.83 197.17 181.39
40 - 49 51.11 84.84 133.47 130.59 178.67 172.64 195.51 185.98
50 - 59 83.90 101.30 182.94 164.60 208.52 202.04 224.81 214.88
60 - 64 117.02 117.29 229.79 202.00 238.76 216.39 259.26 239.81
65+ 135.18 116.31 248.85 229.36 250.62 235.49 262.97 250.79
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT OPTION PARTNERPLAN ($15 COPAY)- OPTION 10
3.5% LESS THAN 1997 $10 COPAY
SINGLE 3 TIER/2 PARTY 2 TIER/FAMILY 3 TIER/FAMILY
---------------------- ---------------------- ---------------------- ----------------------
281 285 280/282 286/289 284 288 283 287
AGE GROUP MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
---------------------- ---------------------- ---------------------- ----------------------
UNDER 30 26.23 66.75 115.33 92.45 134.53 123.03 161.77 134.68
30 - 39 40.18 84.02 125.75 121.21 174.13 158.10 190.27 175.04
40 - 49 49.32 81.88 128.80 126.02 172.42 166.60 188.67 179.47
50 - 59 80.97 97.75 176.53 158.84 201.22 194.97 216.94 207.36
60 - 64 112.93 113.19 221.75 194.93 230.40 208.82 250.19 231.42
65+ 130.45 112.24 240.14 221.33 241.85 227.25 253.77 242.01
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT OPTION PARTNERPLAN ($20 COPAY)- OPTION 10
7.0% LESS THAN 1997 $10 COPAY
SINGLE 3 TIER/2 PARTY 2 TIER/FAMILY 3 TIER/FAMILY
---------------------- ---------------------- ---------------------- ----------------------
381 385 380/382 386/389 384 388 383 387
AGE GROUP MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
---------------------- ---------------------- ---------------------- ----------------------
UNDER 30 25.27 64.33 111.14 89.10 129.65 118.56 155.91 129.80
30 - 39 38.72 80.97 121.19 116.81 167.82 152.37 183.37 168.69
40 - 49 47.53 78.91 124.13 121.45 166.16 160.56 181.83 172.96
50 - 59 78.03 94.21 170.13 153.08 193.92 187.89 209.07 199.84
60 - 64 108.83 109.08 213.70 187.86 222.05 201.24 241.11 223.02
65+ 125.72 108.17 231.43 213.30 233.08 219.01 244.57 233.23
VALLEY HEALTH PLAN INC.
CAPITATIONS
1997
MIDELFORT OPTION PARTNERPLAN ($25 COPAY)- OPTION 10
10.0% LESS THAN 1997 $10 COPY
SINGLE 3 TIER/2 PARTY 2 TIER/FAMILY 3 TIER/FAMILY
---------------------- ---------------------- ---------------------- ----------------------
481 485 480/282 486/289 484 488 483 487
AGE GROUP MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE
---------------------- ---------------------- ---------------------- ----------------------
UNDER 30 24.46 62.26 107.56 86.23 125.46 114.74 150.88 125.61
30 - 39 37.47 78.36 117.28 113.04 162.40 147.45 117.45 163.25
40 - 49 46.00 76.36 120.13 117.54 160.80 155.38 175.96 167.38
50 - 59 75.51 91.17 164.64 148.14 187.67 181.83 202.33 193.40
60 - 64 105.32 105.56 206.81 181.80 214.88 194.75 233.33 215.83
65+ 121.66 104.68 223.96 206.42 225.56 211.94 236.68 225.71
ATTACHMENT C
PROFIT SHARING CALCULATION
The following reference lines on Report #2: Statement of Revenues,
Expenses, and Net Worth which is filed by Valley Health Plan with the Office
of the Commissioner of Insurance as of December 31 annually.
Line 29 Income (Loss)
PLUS
Line 30 Extraordinary Item
MINUS
Line 14 Incentive Pool and Withhold Adjustments
(Only the joint venture profit sharing portion)
EQUALS
TOTAL AMOUNT
TOTAL AMOUNT
DIVIDED BY 2 EQUALS
EACH PARTNERS BEFORETAX PROFIT SHARE
4 STATEMENT AS OF DECEMBER 31, 1995 OF THE VALLEY HEALTH PLAN, INC.
----------------- ------------------------
(Year Ending) (Name)
REPORT #2: STATEMENT OF REVENUES, EXPENSES AND NET WORTH
-----------------------------------------------------------------------------------------------------
Previous
Year-to-Date Calendar Year
------------------ --------------
1 2 3
Uncovered Total Total
-----------------------------------------------------------------------------------------------------
MEMBER MONTHS XXX 328,691 280,177
------------------------------------------------------------------------------------------------------
REVENUES:
1. Premium XXX 40,767,194 35,245,665
------------------------------------------------------------------------------------------------------
2. Fee-for-Service XXX 0 0
------------------------------------------------------------------------------------------------------
3. Title XVIII-Medicare XXX 0 0
------------------------------------------------------------------------------------------------------
4. Title XIX-Medicaid XXX 1,101,715 0
------------------------------------------------------------------------------------------------------
5. Investment XXX 892,468 520,626
------------------------------------------------------------------------------------------------------
6. Aggregate Write-Ins for Other Revenues XXX 0 0
------------------------------------------------------------------------------------------------------
7. TOTAL REVENUES (Items 1 to 6) XXX 42,761,377 35,766,311
------------------------------------------------------------------------------------------------------
EXPENSES:
MEDICAL AND HOSPITALS:
8. Physician Services 711,506 16,836,218 12,975,546
------------------------------------------------------------------------------------------------------
9. Other Professional Services 51,066 1,206,640 1,015,289
------------------------------------------------------------------------------------------------------
10. Outside Referrals 17,547 415,202 325,586
------------------------------------------------------------------------------------------------------
11. Emergency Room and Out-of-Area 26,107 617,764 823,204
------------------------------------------------------------------------------------------------------
12. Occupancy, Depreciation and Amortization 0 0 0
------------------------------------------------------------------------------------------------------
13. Inpatient and Outpatient 513,350 12,147,209 10,246,849
------------------------------------------------------------------------------------------------------
14. Incentive Pool and Withhold Adjustments 0 1,651,818 1,074,460
------------------------------------------------------------------------------------------------------
15. Aggregate Write-Ins for Other Medical
and Hospital Expenses 210,592 4,983,207 3,630,637
------------------------------------------------------------------------------------------------------
16. Subtotal (Items 8 to 15) 1,530,188 37,860,348 30,091,571
------------------------------------------------------------------------------------------------------
17. Reinsurance Expenses Net of Recoveries 0 (434,985) 105,957
------------------------------------------------------------------------------------------------------
LESS:
18. Copayments 0 0 0
------------------------------------------------------------------------------------------------------
19. COB and Subrogation 9,558 226,158 176,138
------------------------------------------------------------------------------------------------------
20. Subtotal (Items 18 and 19) 9,558 226,158 176,138
------------------------------------------------------------------------------------------------------
21. TOTAL MEDICAL AND HOSPITAL (Items 16 and 17 less 20) 1,520,630 37,199,205 30,021,390
------------------------------------------------------------------------------------------------------
ADMINISTRATION:
22. Compensation 0 913,022 806,760
------------------------------------------------------------------------------------------------------
23. Interest Expense 0 29,485 19,858
------------------------------------------------------------------------------------------------------
24. Occupancy, Depreciation and Amortization 0 13,730 13,730
------------------------------------------------------------------------------------------------------
25. Marketing 0 497,226 643,306
------------------------------------------------------------------------------------------------------
26. Aggregate Write-Ins for Other Administration Expenses 0 1,630,997 1,330,429
------------------------------------------------------------------------------------------------------
27. TOTAL ADMINISTRATION (Items 22 to 26) 0 3,084,460 2,816,083
------------------------------------------------------------------------------------------------------
28. TOTAL EXPENSES (Items 21 and 27) 1,520,630 40,283,665 32,837,473
------------------------------------------------------------------------------------------------------
29. INCOME (LOSS) (Items 7 less Item 26) XXX 2,477,712 2,926,838
------------------------------------------------------------------------------------------------------
30. Extraordinary Item 0 0 0
------------------------------------------------------------------------------------------------------
31. Provision for Federal Income Taxes and State Income Taxes 0 948,918 1,142,058
------------------------------------------------------------------------------------------------------
32. NET INCOME (LOSS) (Items 29, less Items 30 and 31) XXX 1,526,794 1,786,760
------------------------------------------------------------------------------------------------------
DETAILS OF WRITE-INS AGGREGATED AT ITEM 6 FOR OTHER REVENUES
------------------------------------------------------------------------------------------------------
0601 XXX
------------------------------------------------------------------------------------------------------
0602 XXX
------------------------------------------------------------------------------------------------------
0603 XXX
------------------------------------------------------------------------------------------------------
0604 XXX
------------------------------------------------------------------------------------------------------
0605 XXX
------------------------------------------------------------------------------------------------------
0698 Summary of remaining write-ins for Item 6
from overflow page XXX
------------------------------------------------------------------------------------------------------
0699 TOTALS (Items 0601 thru 0605 plus 0695) (Page 4, Item 6) XXX 0 0
------------------------------------------------------------------------------------------------------
DETAILS OF WRITE-INS AGGREGATED AT ITEM 15 FOR MEDICAL AND HOSPITAL EXPENSES
1501 Pharmacy Expenses 178,716 4,226,920 3,147,856
------------------------------------------------------------------------------------------------------
1502 Medical Equipment 31,876 754,287 482,781
------------------------------------------------------------------------------------------------------
1503
------------------------------------------------------------------------------------------------------
1504
------------------------------------------------------------------------------------------------------
1505
------------------------------------------------------------------------------------------------------
1598 Summary of remaining write-ins for Item 15
from overflow page
------------------------------------------------------------------------------------------------------
1599 TOTALS (Items 1501 thru 1505 plus 1598)
(Page 4, Item 15) 210,592 4,983,207 3,630,637
------------------------------------------------------------------------------------------------------
DETAILS OF WRITE-INS AGGREGATED AT ITEM 26 FOR OTHER ADMINISTRATIVE EXPENSES
2601 Administrative Expenses 0 1,356,997 1,163,126
------------------------------------------------------------------------------------------------------
2602 HIRSP Expenses 0 274,000 167,301
------------------------------------------------------------------------------------------------------
2603
------------------------------------------------------------------------------------------------------
2604
------------------------------------------------------------------------------------------------------
2605
------------------------------------------------------------------------------------------------------
2695 Summary of remaining write-ins for Items 26 from
overflow page
------------------------------------------------------------------------------------------------------
2699 TOTALS (Items 2601 thru 2605 plus 2696)(Page 4, Item 26) 0 1,630,997 1,330,429
------------------------------------------------------------------------------------------------------
