AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
AMENDED AND RESTATED
MANAGEMENT SERVICES AGREEMENT
This AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT ("Management
Agreement") is entered into effective January 1, 1997 by and between Talbert
Medical Management Corporation, a Delaware corporation ("Manager") and
Talbert Medical Group, Inc., a Utah professional medical corporation
("Group").
R E C I T A L S
A. Manager is a Delaware corporation which is operated, in part, for
the purposes of providing management services related to the operation of
medical groups such as Group.
B. Group is a Utah professional medical corporation which is duly
licensed and qualified through service agreements with its independent
contractors and employees ("Group Physicians"), to provide physician services
to its patients ("Patients"). The Patients include individuals to whom
services are provided under the terms of contracts with payors for health
care services ("Group Agreements").
C. In connection with Group's providing physician services under
agreements with payors, negotiated by Manager, and for other valuable
consideration, Manager has agreed to provide the management services provided
for herein.
D. This Management Agreement is made in order to provide the terms upon
which Manager will provide management services to Group.
ARTICLE I
RESPONSIBILITIES OF MANAGER
Except as otherwise specifically provided herein, during the term of this
Management Agreement and any extensions and renewals hereof, Manager shall,
at its sole cost and expense, provide all management services including
providing facilities, support, non-physician personnel, billing, equipment,
furnishings, and supplies required for the operation of Group as an integral
part thereof at the premises established for such purposes. Such performance
by Manager shall be carried out in accordance with the following standards
and procedures:
I.1 PRACTICE SITES. Manager shall provide certain premises set forth on
EXHIBIT 1.1 hereto, together with all appurtenances, improvements, and
fixtures, (hereinafter collectively
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referred to as the "Practice Sites") at which Group will render professional
medical services. Changes in the location of a Practice Site may be effected
as of the expiration of any lease or other arrangement under which Manager
leases or occupies any Practice Site or at any other time as may be approved
by Manager. Any additional Practice Sites will be established as may be
approved by the Joint Operating Committee.
I.2 UTILITIES, BUILDING SERVICES, AND SUPPLIES. Manager shall provide
or arrange for all utilities and building services related to the utilization
by Group of Practice Sites. Manager shall also provide telephones,
reception, secretarial and transcribing services, paging devices, postage,
duplication services, office supplies and medical supplies which Manager
determines to be necessary or appropriate for the operation of the Practice
Sites.
I.3 EQUIPMENT, FURNITURE AND FURNISHINGS. Manager shall provide or
arrange for all the equipment (including computer equipment and software),
furniture, furnishings and personal property which Manager determines to be
necessary for the operation of Group ("Equipment").
I.4 REPAIR AND MAINTENANCE OF PRACTICE SITES AND EQUIPMENT. Manager
shall have the responsibility for:
I.4.1 REPAIR AND MAINTENANCE OF PRACTICE SITES. All of the lessee
maintenance and repair obligations for the Practice Sites required to be
provided pursuant to the terms of any Practice Site lease or similar
agreement, and any and all other maintenance and repairs to Practice Sites
which Manager determines to be necessary or appropriate for the efficient and
proper operation of Group.
I.4.2 REPAIR AND MAINTENANCE OF EQUIPMENT. The maintenance and
repair of all Equipment as determined by Manager to be necessary or
appropriate for the efficient and proper operation of Group.
I.5 REPLACEMENT EQUIPMENT. Should Manager determine that any then
existing Equipment utilized in the operations of Group is worn out or
obsolete and it is unreasonable, impossible, or economically impractical to
repair; and if Manager further determines that such Equipment is necessary or
appropriate for the efficient and proper operation of Group; then Manager
shall procure replacement Equipment.
I.6 SIGNS. Manager shall provide signage, including but not limited to
signage containing such name(s) as may be determined by Manager for
designation of Practice Sites.
I.7 PAYMENT OF TAXES. Manager shall have the responsibility to pay (i)
all taxes (excluding taxes measured by or based upon Group income or
professional service revenue), assessments, license fees and other charges
payable that are the responsibility of the occupant of the Practice Sites
which become payable during the term of this Management Agreement; (ii) all
taxes, assessments, license fees and other charges assessed on personal
property owned
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by Manager relating to the operation of Group; and (iii) all other business
taxes, licenses, or fees other than those related to the professional
licensure of physicians. Notwithstanding the foregoing, if Group or any
Group Physician maintains personal property at any Practice Site, then Group
or the Group Physician, as applicable, shall be responsible for the payment
of any taxes with respect to such property.
I.8 INSURANCE.
I.8.1 PRACTICE SITES. Manager shall procure and maintain all
insurance coverages deemed necessary by Manager for the operation of the
Practice Sites, including without limitation the following: (i)
comprehensive general liability insurance covering activities of Group naming
Manager, Manager's employees and Group as insured, (ii) general property
casualty insurance on the Practice Sites and contents owned or leased by
Manager in amounts consistent with Manager's risk management policies and
(iii) workers compensation insurance for employees of Manager and Group.
I.8.2 PROFESSIONAL LIABILITY INSURANCE. Manager, directly or
through its affiliates, shall procure and maintain, a policy or policies of
professional liability insurance providing coverage for Group and its
professional personnel. Such policy shall cover any acts of Group for the
professional negligence of its personnel which may have occurred during the
term of this Management Agreement. These policies of insurance shall be
written with limits of liability of no less than One Million Dollars
($1,000,000) per claim/Three Million Dollars ($3,000,000) annual aggregate.
Group shall cooperate with all reasonable requests of Manager in connection
with obtaining and maintaining this coverage.
I.8.3 DIRECTORS AND OFFICERS INSURANCE. Manager, directly or
through its affiliates, shall procure and maintain, a policy or policies of
directors and officers liability insurance providing coverage for the
directors, officers and authorized agents of Group. These policies of
insurance shall be written with limits of liability of no less than Five
Million Dollars ($5,000,000) per claim annual aggregate. Group shall
cooperate with all reasonable requests of Manager in connection with
obtaining and maintaining this coverage.
I.8.4 SELF INSURANCE. Notwithstanding any other provisions of
this Section 1.8, Manager may, at any time Manager deems appropriate, choose
to self insure for any or all insurance coverages for which Manager is
responsible pursuant to this Management Agreement.
I.9 NON-PROFESSIONAL PERSONNEL.
I.9.1 MANAGER TO EMPLOY; INITIAL EMPLOYMENT DECISIONS. Manager
shall provide all non-professional personnel to Group which Manager deems
reasonable and necessary for the efficient and proper operation of Group
based upon patient volume. For purposes of this Agreement, "Professional
Personnel" shall mean individuals employed by
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Group as physicians, optometrists, chiropractors, podiatrists, nurse
practitioners, nurse anesthetists, nurse midwives and physician assistants.
I.9.2 SPECIAL PROVISIONS APPLICABLE TO ALLIED HEALTH
PROFESSIONALS. Manager shall adhere to appropriate credentialing and other
professional review and qualification standards with respect to all personnel
to be employed or retained by Manager to perform services under this
Management Agreement who are licensed or certified to practice their
respective health care professions by the State of Utah (hereinafter
collectively referred to as "Allied Health Professionals").
I.9.3 SUPERVISION OF CLERICAL AND OTHER NON-MEDICAL SUPPORT
PERSONNEL. Manager shall supervise all clerical and other non-medical
support personnel and the non-medical functions of all Allied Health
Professionals. In addition, Manager shall provide for periodic review and
evaluation, including input from Group, of the performance of such personnel.
Manager shall establish a procedure through which Group may request
reassignment of particular personnel for express reasons relating to job
qualifications, training or performance, and Manager shall reasonably
accommodate such requests by Group which conform to this procedure.
I.9.4 DECISIONS RESERVED TO MANAGER. Manager shall make all
hiring and firing decisions and all determinations as to those wages,
salaries and compensation, including all determinations regarding the
retention, promotion, demotion, awarding of bonuses, salary adjustments, and
other matters affecting the terms and conditions of the employment of all
non-physician personnel in accordance with and subject to personnel policies
as may be adopted and modified from time to time by Manager. Staffing
levels, work hours and shifts, and employee benefit programs shall be
established and implemented by Manager in accordance with the policies and
funding arrangements developed by Manager.
I.10 BOOKKEEPING AND ACCOUNTING SERVICES. Manager shall provide Group
with all bookkeeping and accounting services Manager deems necessary or
appropriate for the efficient and proper operation of Group. Such services
shall include, without limitation, the maintenance, custody and supervision
of business records, papers, documents, ledgers, journals and reports
relating to the business operations of Group; the establishment,
administration and implementation of accounting procedures, controls, forms
and systems; the preparation of financial reports; the planning of the
business operations of the Group; the payment of accounts payable (including
claims administration and payment) and collection of accounts receivable; the
preparation of necessary Group tax returns (as opposed to the tax returns of
individual Group Physicians which shall be the responsibility of each
physician); and the administration of the compensation formula and
compensation distribution system established pursuant to the terms of this
Management Agreement.
I.11 FEE-FOR-SERVICE ADMINISTRATION. For Group Agreements which are not
subject to Section 1.12, and all care provided by Group other than under
Group Agreements, Manager shall provide the following additional
administrative services:
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I.11.1 FEE SCHEDULE. Development of a "chargemaster" fee schedule
for Group and determination of the appropriateness of revisions and
modifications to the fee schedule to reflect changed circumstances, with
approval from the Joint Operating Committee, in accordance with Section 5.2
of this Management Agreement.
I.11.2 BILLING AND COLLECTION. Billing and collection services
that Manager determines to be necessary or appropriate in connection with
charges resulting from the rendition of professional services by Group to
Patients; such services to include, but not be limited to, collection of
payments derived from coordination of benefits, collection of payments from
third party payors, and other payments due Group. Manager shall adhere to
the then current fee schedule provisions for discounts and courtesy services
to Patients. Manager shall maintain internal accounting records of all
billings to fee-for-service Patients and third-party payors.
I.12 CAPITATION ADMINISTRATION. For Group Agreements which involve
capitated payments to Group ("Capitated Agreements"), Manager shall provide
the following additional administrative services:
I.12.1 CALCULATION OF AMOUNTS DUE. Calculation of primary care and
specialty capitation and specialty, ancillary and other payable claims of
Group based upon contracts with non-Group Physicians and to prepare checks on
behalf of Group to pay amounts due.
I.12.2 BILLING UNDER CAPITATED AGREEMENTS. Billing in Group's name
and on its behalf, (a) payors for coordination of benefits and other third
party liability payments according to the terms of the Capitated Agreements,
(b) Patients in accordance with the terms and provisions of applicable
Capitated Agreements and (c) for amounts deemed ineligible under the terms of
Capitated Agreements where permitted by such Capitated Agreements. Manager
shall also review claim and capitation expense data to monitor any other
revenue receipt programs which any of the Capitated Agreements may have or
may institute, and to seek reimbursement pursuant to Capitated Agreements.
I.12.3 RECORDS. Manager shall maintain internal accounting records
including primary care encounters and authorizations for specialist referrals
under Capitated Agreements which will identify the services provided to
Patients covered by Capitated Agreements and the compensation received
therefor to enable a determination of the fee-for-service equivalency to be
made.
I.13 REVIEW AND AUDIT OF MANAGER. The annual financial statements of
Manager shall be annually audited in accordance with generally accepted
accounting standards or such other standards as may be appropriate for a
business of the size and scope of that conducted by Manager, by duly
qualified independent auditors. Copies of audited financial statements of
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Manager, subject to such restrictions as may be necessary to assure the
preservation of their confidentiality, shall be made available for review by
Group.
I.14 ADDITIONAL FINANCIAL AND MANAGEMENT REPORTS AND INFORMATION.
Manager shall prepare and deliver to Group, copies of the following reports:
I.14.1 INCOME STATEMENTS AND BALANCE SHEETS. Monthly income
statements and annual balance sheets of Group relating to the operation of
Group.
I.14.2 OTHER REPORTS. Any additional financial and management
reports and information prepared by Manager which Manager determines will
assist Group in evaluating physician productivity and the efficiency or
effectiveness of the medical services provided by Group to Patients.
I.15 MANAGEMENT INFORMATION SYSTEM. Manager shall be responsible for
the development or procurement and operation of a management information
system.
I.16 PHYSICIAN RECRUITMENT. Manager shall provide physician recruitment
services to Group.
I.17 HUMAN RESOURCES; CREDENTIALING. Manager shall provide any
necessary personnel and human resources services for its employees and the
Group. Manager shall provide credentialing services to the Group, in
accordance with standards established by Group.
I.18 MARKETING AND PUBLIC RELATIONS. Manager shall coordinate and
provide marketing and public relations services.
I.19 UM/QM POLICIES AND PROCEDURES; PREAUTHORIZATION. Manager shall
assist Group in the development of utilization management, quality management
and risk management policies and procedures for Group and Group Physicians.
Manager shall assist Group in the development of preauthorization protocols
for the administration of care under Capitated Agreements, other Group
Agreements in which Group is permitted to authorize care and for
fee-for-service Patients. Manager shall administer all such policies and
protocols under the direction and supervision of Group.
I.20 DISTRIBUTION OF COMPENSATION AND BONUSES TO GROUP PHYSICIANS; GROUP
BENEFITS ADMINISTRATION. Manager, on behalf of Group, shall administer the
payment of all compensation to all Group Physicians for providing services to
Patients including, without limitation, all applicable vacation pay, sick
leave, retirement benefits, social security and workers' compensation.
Manager shall also distribute to Group Physicians any bonuses or risk pool
amounts from whatever source derived, in accordance with the policies and
procedures adopted by Group. Manager shall contract for benefits on behalf
of Group and
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administer such benefits for Group, including any health, disability
insurance and life insurance.
I.21 ATTORNEY-IN-FACT. Group hereby constitutes and appoints Manager
for the term hereof as its true and lawful attorney-in-fact for the following
purposes:
I.21.1 DEPOSITORY ACCOUNT. To create and maintain a depository
account in the name of Group with a banking institution selected by Manager
(the "Account"). Group agrees to designate Manager as the sole party
authorized to make withdrawals from the Account, which designation may be
changed only by written notice to said institution, executed by both Group
and Manager; withdrawals from the Account shall be made only in accordance
with the terms of Sections 1.12, 2.15 or 3.1.4 of this Management Agreement.
I.21.2 RECEIPT OF PAYMENTS. To receive and deposit on a timely
basis capitation and other payments arising from Group Agreements, take
possession of and endorse in the name of Group all cash, notes, checks, money
orders, insurance payments, and any other instruments received as payment of
accounts receivable of Group however arising. Group shall immediately
forward to Manager in full any such payments that may come into the
possession of Group.
I.21.3 BILLING/CLAIMS PROCESSING. To perform the functions
described in Sections 1.11 and 1.12.
I.21.4 COLLECTION OF OTHER AMOUNTS DUE. To collect in the name of
Group and on its behalf all other charges or fees resulting from or related
to the provision of services to Patients including but not limited to any and
all hospital incentive funds and funds from shared risk pools under any risk
sharing arrangements wherein Group is or is deemed to be the provider of
medical services.
I.21.5 STOP-LOSS CLAIMS. To review claim and capitation expense
data to monitor Patients for whom patient care expenses exceed stop-loss
deductibles under Group Agreements, and to submit with the applicable Group
Agreements or other providers of stop-loss coverage orally or in writing
reimbursement requests on behalf of Group.
I.22 COMPLIANCE WITH LAW. The obligations of Manager pursuant to this
Management Agreement shall be subject to any limitations or restrictions
which may be imposed by law or regulation, and Manager may suspend any or all
obligations hereunder in the event that it reasonably determines, upon advice
of counsel, that the performance of any obligation pursuant to this
Management Agreement may contravene applicable law or regulation, the effect
of which would be to have a material adverse effect on the business,
financial condition, or operations of Manager or any affiliate.
ARTICLE II
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OBLIGATIONS OF GROUP
In providing its professional services to Patients, Group shall have the
following obligations:
II.1 GROUP PHYSICIANS AND PROFESSIONAL PERSONNEL. Group shall notify
Manager, upon execution of this Management Agreement, of the identities of
the Group Physicians and Professional Personnel (as defined in Section 1.9),
together with a list of all such individuals and their respective areas of
practice shall be attached hereto as EXHIBIT 2.1. Group shall enter into
employment agreements or contracts with all Group Physicians and Professional
Personnel. Any new employment agreements or contracts shall be reviewed and
approved by Manager prior to execution, and Manager shall promptly be
provided with copies of the executed employment agreements and contracts and
any revisions or amendments thereto. All Group Physicians shall be licensed
by the State of Utah and hold staff privileges at one or more hospitals
designated by Manager as participating hospitals.
II.2 PROVISION OF MEDICAL SERVICES. Group shall perform, or subcontract
to perform as necessary, all medically necessary services for Patients in
accordance with the terms of Group Agreements and subject to the utilization
review protocols. All subcontracts shall be negotiated and executed by
Manager on behalf of Group.
II.3 ADDITIONAL PHYSICIANS. Group shall use its best efforts to provide
any additional physicians required by the level of patient activity
anticipated by Manager and communicated to Group, with the specialty mix and
geographical location specified by Manager, within a reasonable period of
time.
II.4 HOURS OF SERVICE. Group shall maintain Group Physicians and
Professional Personnel at Practice Sites during the following hours of
service. Hours of service at any Practice Site shall be subject to review by
the Joint Operating Committee, in accordance with Section 5.2.
II.4.1 PATIENT MEDICAL SERVICES. Group shall provide available,
accessible and medically necessary services for Patients during regular
working hours established by Manager for each Practice Site.
II.4.2 WALK-IN AND COMMUNITY SERVICES. For walk-in and community
services, which may be provided at Practice Sites, Group shall provide (or
subcontract as necessary to provide) such services at the hours, including
extended hours, established by Manager.
II.4.3 AFTER HOURS CARE. Group shall provide (or subcontract as
necessary to provide) access to after hours services in accordance with Group
protocols and community standards of care.
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II.5 NON-DISCRIMINATION; COMPLIANCE WITH LAW. All employment policies,
standards and practices of Group shall be in accordance with applicable
equality provisions of state and federal law. In the event that any
government contract or regulation requires reports or disclosures of Manager
and its contractors, Group, upon Manager's request, shall make, execute and
deliver such reports, disclosures or other written information, guarantees or
assurances as may be reasonably requested by Manager to assure timely
compliance.
II.6 NON-DISCRIMINATORY PATIENT SELECTION AND SERVICES;
NON-DISCRIMINATORY PATIENT ASSIGNMENT. No Patient shall be discriminated
against for any reason prohibited by law. The Group Physicians shall also
abide by the patient service and assignment policies established from time to
time by Manager or applicable third party payors, including those relating to
accepting Patients who select or are assigned to Group under Group Agreements.
II.7 STANDARDS, ACCREDITATION, SURVEYS AND INSPECTIONS. Group shall
meet all medical practice, licensure and ethical standards, which are
pertinent to its activities or which by contract it has agreed to abide.
Group shall in good faith cooperate with inspections and on-site surveys of
Practice Sites as may be conducted by governmental agencies, accrediting
organizations or payors. Manager shall, to the extent possible, give Group
advance notice of such inspections and surveys and schedule them during
reasonable business hours.
II.8 CONTRACTS. Group and the Group Physicians shall abide by the terms
of any Group Agreements entered into by or with Manager on behalf of Group,
including, without limitation, self-insured, PPO, EPO, HMO and indemnity
contracts.
II.9 COMPLIANCE WITH POLICIES AND PROCEDURES.
II.9.1 ORGANIZATION AND REVIEW OF CARE. Group shall comply with
policies and procedures pertinent to quality management, utilization
management, risk management, scheduling, billing, claims payment, claims
adjudication, reconciliation of payments or reimbursements, and other
administrative matters relating to the organization of the non-professional
aspects of the delivery of care as may be established by Manager from time to
time.
II.9.2 UTILIZATION MANAGEMENT; QUALITY MANAGEMENT. Group shall
contractually bind each Group Physician to cooperate with and participate in
the applicable program and systems of quality management, grievance
procedures, peer review and utilization management. Information developed in
the course of physician quality assurance and peer review activities shall be
maintained by Manager as privileged and confidential except where its
disclosure is assented to by Group or is required by law.
II.9.3 PRIOR AUTHORIZATION. Group and each Group Physician agrees to
obtain prior authorization in accordance with any administrative procedures
developed in accordance
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with Section 1.19 or required pursuant to any administrative procedures of
third party payors in effect from time to time before rendering any service
requiring prior authorization.
II.10 RECORDS AND REPORTS. Group shall assist Manager in maintaining
and, where by law or legal process required, in divulging, records and
information concerning its health care services. Group shall give Manager
full access to all of its medical and financial records.
II.11 GROUP TO PROVIDE NECESSARY BILLING AND ENCOUNTER INFORMATION.
Group agrees to provide Manager with all billing and encounter information
for Patients, including, but not limited to the name of the patient, the date
of service, the nature and extent of services provided and any supporting
medical information, necessary to obtain payment or reimbursement for
services.
II.12 CONTINUING EDUCATION. Group Physicians shall maintain competence
in, and remain currently well-informed as to recent developments about, their
particular areas of medical practice, interest and specialization.
Accordingly, subject to Group at all times providing sufficient physicians to
care for the needs of Patients, the Group Physicians shall, in compliance
with policies set by Group and administered by Manager, attend seminars, keep
current with journals and take other reasonable steps to remain proficient in
their particular specialties. All seminars necessary to maintain licensure
or competence shall be the responsibility of the Group and the individual
Group Physician.
II.13 REFERRALS. Group and the Group Physicians shall make referrals to
specialists in a manner consistent with (a) pertinent policies and procedures
(which shall be developed in consultation with Manager), (b) the terms and
conditions of government programs or Group Agreements applicable to the care
of the Patient, and (c) any federal or state laws or regulations.
II.14 PHYSICIAN COMPENSATION. Group shall compensate Group Physicians
in accordance with a compensation formula developed in consultation with
Manager. Group shall make all final determinations as to the compensation
paid to Group Physicians.
II.15 GROUP EXPENSES. Payment of those expenses related to the
operation of Group which are designated on EXHIBIT 2.15 hereto ("Group
Expenses") shall be the sole responsibility of Group. To the extent that
Manager pays or incurs any Group Expenses, Group authorizes Manager to
promptly reimburse Manager from funds in the Account as soon as such funds
become available.
II.16 PROVIDER NUMBERS. Group shall procure and maintain a medical
group provider number, including without limitation, Medicare and Medicaid
provider numbers, necessary or appropriate to obtain payment or reimbursement
on Group's behalf.
ARTICLE III
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COMPENSATION OF MANAGER
III.1 MANAGEMENT FEE. Group and Manager agree that the compensation set
forth in this Article III is being paid to Manager in consideration of the
substantial commitment made by Manager hereunder and that such fees are fair
and reasonable. Subject to the provisions of Section 3.2, Manager shall be
paid the following amounts (collectively the "Management Fee"):
III.1.1 CLINIC EXPENSES. Manager shall be reimbursed the amount of
all Clinic Expenses paid by Manager.
III.1.2 ADVANCES TO GROUP. Manager shall be reimbursed any amounts
advanced to Group to fund obligations of Group, subject to the provisions of
Section 3.3.
III.1.3 OPERATIONS FEE. Manager shall receive a fee equal to fifteen
percent (15%) of the excess of Group Revenues over Clinic Expenses as a
result of Group operations.
III.1.4 ADDITIONAL MANAGED CARE PAYMENTS. Manager shall receive a fee
equal to thirty percent (30%) of Additional Managed Care Payments made to
Group.
III.1.5 MIS ALLOCATION. The Joint Operating Committee shall determine
from time to time a portion of the Management Fee which shall reasonably
represent the payment for services to Manager for the provision of
information, data and computer services in accordance with Section 1.15;
other than for transaction costs.
III.2 CALCULATION AND PAYMENT OF MANAGEMENT FEE. The Management Fee
under this Article III shall be payable monthly. The payment amounts shall
be estimated based upon the operating results of Group for the previous
month. Adjustments to the estimated payments shall be made to reconcile
actual amounts due under this Article III, by the end of the following month
during each calendar quarter. Upon preparation of quarterly financial
statements, final adjustments to the service fee for the quarter shall be
made and any additional payments owing to Manager or Group shall then be
made. Any audit adjustments shall be reflected in the calculation for the
fourth quarter. Manager shall be entitled to withdraw the Management Fee
from the Account maintained by Manager in accordance with Section 1.21.1.
III.3 ADVANCES TO GROUP. In the event that Manager and Group have
entered into an agreement which prescribes a minimum amount of compensation
for distribution by Group to Group Physicians in accordance with Section 2.14
("Minimum Group Compensation") and the payment of the Management Fee in
accordance with this Article III will leave Group with less than the amount
of the Minimum Group Compensation, Manager shall pay to Group an amount
necessary to provide Group with Minimum Group Compensation. Commencing
January 1, 1997, any such payment shall not be considered a reduction of the
Management
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Fee, but shall be an advance by Manager to Group, which shall be repaid from
revenues otherwise allocable to Group in the next succeeding monthly periods
for which Group receives at least Minimum Group Compensation.
III.4 ADJUSTMENT IN MANAGEMENT FEE. Manager shall periodically review
and have the right to adjust all or any components of the Management Fee,
taking into account such factors as the adequacy of compensation to Group and
changes in Manager's costs. Any adjustments made pursuant to this Section
3.4 shall be effective for the next succeeding calendar quarter following the
notice required by this Section 3.4. In the event that Manager proposes a
change in any component of the Management Fee, Manager shall consult with the
Joint Operating Committee about the proposed change and the reasons therefor.
Manager shall advise Group at least thirty (30) days in advance of the date
on which the revised Management Fee is to be effective by a written statement
which includes the basis for the change.
III.5 DEFINITIONS. For purposes of this Article III:
III.5.1 "ADDITIONAL MANAGED CARE PAYMENTS" shall mean all fees and
revenues recorded by or on behalf of Group or Manager for profits, whether
from the assumption of hospital risk funds in managed care risk assumption
arrangements or otherwise, including bonus, incentive and surplus payments
from pharmacy funds or other similar risk arrangements in effect from time to
time.
III.5.2 "CLINIC EXPENSES" shall mean all operating and non-operating
expenses of Manager incurred in the operation of Group, including, without
limitation, the items listed below.
(i) Salaries, benefits, (including contributions
under benefit plans), severance benefits and other direct
costs of all employees of Manager at each Practice Site;
(ii) Direct costs of all outside consultants
retained by Manager and approved by the Joint Operating
Committee to provide services at or in connection with Group
or who actually provide services at or in connection with
Group required for improved clinic performance; provided,
however, only that portion of such consultant's costs without
mark-up by Manager that is allocable to work performed at or
for the benefit of Group will be a Clinic Expense;
(iii) Obligations of Manager under leases or subleases;
(iv) Personal property and intangible taxes
assessed against Manager's assets, commencing on the date of
this Agreement;
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(v) Interest expense on indebtedness incurred by
Manager to finance or refinance any of its obligations
hereunder or services provided (interest expense will be
charged for funds borrowed from outside sources as well as
from Manager's affiliates; in the latter case, charges will
be computed at Manager's (or its finance subsidiary's)
intracompany borrowing rate as in effect from time to time
but not to exceed the prime rate of interest of Citibank,
N.A., as published from time to time in THE WALL STREET
JOURNAL (hereinafter, "Intracompany Borrowing Rate");
(vi) Other expenses incurred by Manager in carrying
out its obligations under this Agreement, but not including
corporate overhead charges as described below;
(vii) In the event an opportunity arises for
additional physicians in the service area of Group to become
employed by or merge with Group, and in the event such merger
is completed, amortization of intangible asset value as a
result of each such merger; and
(viii) Management information systems transaction
costs.
Clinic Expenses shall not include:
(i) Any corporate overhead charge from Manager
other than the kind of tems listed above, including costs of
employees of Manager who provide services at Group;
(ii) Any federal or state income taxes;
(iii) Amounts paid for ancillary or professional
services not provided by Group Physicians or Group, but for
which Group is responsible under the applicable Group
Agreement;
(iv) Any expenses which are expressly designated
herein as expenses or responsibilities of Group in accordance
with Section 2.15;
(v) Compensation to Group Physicians, in
accordance with Section 2.14, and to Allied Health
Professionals;
(vi) Any expenses associated with procuring and
maintaining professional liability insurance in accordance
with Section 1.8.2.
III.5.3 "GROUP REVENUE" shall consist of all fees or other
compensation actually recorded each month by or on behalf of Group as a
result of professional medical services rendered by Group (including Allied
Health Professionals) at the Practice Sites.
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Fee-for-service revenue of Group shall be calculated on an accrual basis,
with gross charges for services being reduced by all allowances for bad
debts, contractual adjustments, discounts, professional courtesies and
compromises or cancellations of accounts receivable of any kind or nature.
Capitated Agreement revenue of Group shall include coordination of benefits
payments, co-payment amounts, coinsurance amounts, withhold distributions,
and stop-loss insurance reimbursements.
ARTICLE IV
EXECUTION OF GROUP AGREEMENTS
IV.1 APPOINTMENT OF MANAGER AS ATTORNEY-IN-FACT. In order to facilitate
the execution of Group Agreements and other contracts, Group hereby
constitutes and appoints Manager as attorney-in-fact for Group and the Group
Physicians with the following powers:
IV.1.1 CONTRACTING GUIDELINES. The Joint Operating Committee shall
develop guidelines for Group Agreements, which guidelines shall include terms
minimally acceptable to Group for all such Agreements. Manager shall observe
the guidelines in the negotiation of Group Agreements, and in the event
Manager proposes entry into a Group Agreement which varies from the
guidelines, Manager shall seek approval of the Joint Operating Committee for
such Group Agreement.
IV.1.2 ENTRY INTO AGREEMENTS. To negotiate and execute in the name
of Group, all contracts or other arrangements for the provision of health care
services by Group Physicians, including Capitated Agreements.
IV.1.3 ADMINISTRATION OF AGREEMENTS. To exercise such rights
respecting the administration of Group Agreements or other arrangements
negotiated by Manager pursuant to Section 4.1.2, on behalf of Group and the
Group Physicians as may reasonably be requested by the third party payor with
whom the Group Agreement is executed and as are customary in the health care
industry to facilitate the effective participation of the Group Physicians.
This Section 4.1.3 is not intended and shall not be construed to delegate any
authority to Manager to modify any term or provision of this Management
Agreement, to confess or accept any liability or obligation not authorized
under the standards respecting Group Agreements as may be established by
Manager, or to exercise any rights respecting the management of Group, the
performance of professional services by any Group Physician, or to interfere
in any way with the professional practices and prerogatives of Group or any
Group Physician. The foregoing limitation shall not, however, be construed to
modify or limit any rights or obligations of any party arising under any
other provision of this Management Agreement, or pursuant to any other
contract or agreement to which such party is bound.
4.2 RESTRICTIONS ON GROUP. Group shall not, nor shall any Group
Physician, during the term of this Management Agreement enter into any
contract or other arrangement
14
for the provision of health care services other than those negotiated by
Manager in accordance with Section 4.1.2.
ARTICLE V
JOINT OPERATING COMMITTEE
V.1 COMPOSITION. Manager and Group shall constitute a Joint Operating
Committee, consisting of not fewer than three (3) representatives of Group's
Board of Directors and three (3) representatives of Manager. Each party may
change its representatives on the Joint Operating Committee from time to
time, upon notice to the other.
V.2 FUNCTIONS. The Joint Operating Committee shall advise Manager on
its administration of services under this Management Agreement and Group on
its performance of professional services pursuant to this Management
Agreement. The Joint Operating Committee shall have the specific functions
set forth on EXHIBIT 5.2 attached hereto and incorporated herein by this
reference. It is intended that the Joint Operating Committee provide
management support to Manager as required and that Manager and Group have a
duty to consult with, or seek approval from, the Joint Operating Committee on
those matters set forth in EXHIBIT 5.2 or as otherwise provided in this
Management Agreement.
V.3 MEETINGS. The Joint Operating Committee shall meet, upon the
request of Manager or of the representatives of Group, not less frequently
than quarterly.
V.4 RULES. The Joint Operating Committee may develop such rules and
procedures to govern its meetings and activities as its members deem
necessary.
ARTICLE VI
TERM; TERMINATION
VI.1 TERM; TERMINATION. The initial term of this Management Agreement
shall be twenty (20) years ("Initial Term"), commencing as of January 1, 1997
(the "Effective Date"), unless earlier terminated as hereinafter provided.
At the conclusion of the Initial Term, this Management Agreement shall be
extended for an additional ten (10) years ("First Extension"), and at the end
of the First Extension for an additional ten (10) years ("Second Extension"),
unless either Manager or Group notifies the other of its intention that the
Management Agreement terminate not later than 180 days prior to the end of
(a) the Initial Term, in the case of the First Extension or (b) the First
Extension, in the case of the Second Extension.
15
VI.2 TERMINATION FOR CAUSE. Either party may terminate this Management
Agreement at any time for "cause", which, for purposes of this Section 6.2
shall be defined as, and limited to, the following defaults by the other
party:
VI.2.1 LIQUIDATION; BANKRUPTCY. The defaulting party's application
for or consent to the appointment of a receiver, trustee or liquidator of all or
a substantial part of its assets, filing of a voluntary petition in
bankruptcy, making a general assignment for the benefit of creditors, filing
a petition or answer seeking reorganization or arrangement with creditors, or
taking advantage of any insolvency, or the entry of any order, judgment or
decree by any court of competent jurisdiction on the application of a
creditor or otherwise, adjudicating such party bankrupt or approving a
petition seeking reorganization of such party or appointment of a receiver,
trustee or liquidator of such party or of all or a substantial part of its
assets, and if such order, judgment or decree shall continue unstayed and in
effect for sixty (60) calendar days after its entry. Termination under this
Subsection 6.2.1 shall be effective automatically and immediately upon the
giving of written notice of termination by the non-defaulting party.
VI.2.2 BREACH. A failure by the defaulting party to perform any
material obligation required hereunder, if such default shall continue for
thirty (30) calendar days after the giving of written notice from the
nondefaulting party specifying the nature and extent of such default, or, if
the breach cannot reasonably be cured in thirty (30) days, if the breaching
party has not acted diligently, or subsequently acted diligently, to attempt
to cure the breach within the thirty (30) day period following notice from
the nondefaulting party. If the parties disagree as to the existence of a
breach, whether the breach has been cured or whether diligent efforts have
been made towards cure, the parties shall use their good faith efforts to
resolve the dispute through negotiation. Termination under this Subsection
6.2.2 shall be effective upon the conclusion of the thirty (30) day period.
VI.3 TERMINATION FOR CERTAIN TRANSACTIONS. Manager shall have the right
to terminate this Management Agreement in the event that Group, or any
successor to Group composed of fifty percent (50%) or more of Group
Physicians, become affiliated with another medical group, medical foundation,
management services organization, hospital or health system or third party
payor, any of which Manager, in its absolute discretion, deems a competitor,
or any affiliate or agent thereof and Group does not terminate such
affiliation within thirty (30) calendar days after the giving of written
notice by Manager.
VI.4 EFFECT OF TERMINATION.
VI.4.1 MANAGER TO CONTINUE TO PROVIDE SERVICES. Upon termination of
this Management Agreement, Manager shall continue to collect and receive all
compensation, reimbursement and payments due for services provided to
Patients prior to the effective date of termination, subject to the rights of
the parties hereunder to cancel, forgive, waive and settle such payments due,
and Manager shall be entitled to receive from such amounts any compensation
in accordance with the terms of Article III for services rendered by Manager.
To the extent necessary under Section 6.4.2, Manager shall provide
management services to
16
Group, in accordance with the terms of this Management Agreement, following
termination of this Management Agreement, and shall be entitled to
compensation in accordance with the terms of Article III.
VI.4.2 SERVICES UNDER GROUP AGREEMENTS; CARE OF PATIENTS. To the
extent required by Group Agreements, the parties shall observe the following
covenants, notwithstanding termination of this Management Agreement:
VI.4.2.1 GROUP AGREEMENT OBLIGATIONS. Each party shall
continue to perform services as required under the terms and conditions of
any Group Agreement in which Group and/or Manager is then participating or
otherwise has existing contractual obligations in accordance with the terms
of the Group Agreement.
VI.4.2.2 CARE OF PATIENTS. Each party shall continue to
perform such services as may be required to assure adequate care and
arrangements for appropriate referrals for patients who are receiving
hospital or other institutional services or who are involved in an active
regimen or course of medical treatment or other services at the time of such
termination.
VI.4.2.3 COLLECTIONS. The parties shall cooperate to pursue
collection of any payments to which they may be entitled for services
rendered after the termination of this Management Agreement.
VI.5 POST TERMINATION. Upon the termination of this Management Agreement:
VI.5.1 PRACTICE SITES. Subject to continuing care obligations in
Section 6.4.2, Group shall surrender to Manager all Practice Sites and
Equipment and other appurtenances thereto, in good condition, excepting
reasonable use and wear thereof and damage by fire, act of God, or by the
elements.
VI.5.2 PROPRIETARY INFORMATION. Group shall immediately
discontinue the use of and shall promptly return all proprietary information,
manuals, and other materials associated with or respecting Manager that have
been made available to Group by reason of its participation therein and shall
return all such property, together with any copies thereof in its possession,
to Manager.
VI.5.3 SOFTWARE. Group shall immediately cease to use all
software arranged for or provided by Manager and, within thirty (30) calendar
days after such termination, shall return to Manager the software, all
related documentation and computer programs and any copies thereof.
VI.5.4 ACCESS TO MEDICAL RECORDS. Group shall provide to Manager
access, at reasonable times and upon reasonable request, to Group's medical
records relating to Patients for a period not shorter than the applicable
statute of limitations for any claim
17
which may be asserted against Manager arising from its activities pursuant to
this Management Agreement.
VI.5.5 COVENANT NOT TO COMPETE. For a period of one (1) year
following the termination of this Agreement Group shall not, directly or
indirectly engage in the provision of medical care within a three (3) mile
radius of any of the Practice Sites, and no Group Physician shall engage in
the provision of medical care within a three (3) mile radius of the Practice
Site at which they practiced prior to termination. The parties agree that
the duration, area and scope of activities restricted hereunder are
reasonable and necessary to protect Manager's legitimate business interests.
In the event that a court or arbitrator shall determine that this covenant is
unenforceable because of its area, duration or prohibited scope of
activities, this covenant shall be construed, in a manner consistent with
applicable law, to provide the maximum restriction on the post termination
activities of Group and Group Physicians.
ARTICLE VII
RELATIONSHIP OF THE PARTIES
VII.1 NO FIDUCIARY DUTIES. None of the provisions of this Management
Agreement are intended to create, nor shall be deemed or construed to create,
any fiduciary duty between the parties or any relationship between the
parties other than that of independent parties contracting with each other
hereunder solely for the purpose of effecting the provisions of this
Management Agreement. The parties are not, and shall not be construed to be
in a relationship of joint venturers, partners or employer-employee.
VII.2 EXCLUSIVITY.
VII.2.1 PHYSICIAN SERVICES. During the term of this Management
Agreement, neither Group nor any Group Physician shall provide any medical
services except in accordance with the terms of this Management Agreement. A
Group Physician who terminates employment by Group shall be relieved of this
obligation, except that for a period of one (1) year following termination of
employment, such Group Physician shall not practice medicine or solicit any
Patient of Group served at the Practice Site for the purpose of treating such
patient at a medical facility within a three (3) mile radius of such Practice
Site. The parties agree that the duration, area and scope of activities
restricted hereunder are reasonable and necessary to protect Manager's
legitimate business interests. In the event that a court or arbitrator shall
determine that this covenant is unenforceable because of its area, duration
or prohibited scope of activities, this covenant shall be construed, in a
manner consistent with applicable law, to provide the maximum restriction on
the activities of Group and Group Physicians. Manager shall not, during the
term of this Agreement, contract with any physician or group of physicians to
provide services at a Practice Site or within a three (3) mile radius of a
Practice Site, unless Manager offers Group the opportunity to Group to
18
provide the services and Group declines to provide Group Physicians or hire
new physicians necessary to provide the requested services.
VII.2.2 MANAGEMENT SERVICES. During the term of this Management
Agreement, neither Group nor any Group Physician shall contract or arrange to
receive any services described in Article I (or any services substantially
similar to them) from any entity or person other than Manager. To the extent
that Group may require any service other than those described in Article I,
Group shall request such services from Manager, and Manager shall use
reasonable efforts to provide such service to Group.
VII.2.3 EXPANSION OF SERVICE AREA. In the event that Manager
determines to add Practice Sites or arrange to expand the services or service
area for which it contracts (an "Expansion"), it shall propose the Expansion
to the Joint Operating Committee and Group. In the event that Group declines
to provide Group Physicians or to add new physicians to provide necessary
medical services for the Expansion, then Manager may contract with other
physicians or groups to provide medical services for the Expansion.
ARTICLE VIII
MISCELLANEOUS
VIII.1 NOTICES. All notices to be given under this Management Agreement
shall be in writing and may be personally served upon the parties hereto or
may be served by depositing the same in the United States mail, postage
prepaid, as follows:
Manager: Talbert Medical Management Corporation
3540 Howard Way
Costa Mesa, CA 92626
Attn: President
Group: Talbert Medical Group, Inc.
2500 South State Street
Salt Lake City, Utah 84115
Attn: President
subject to the right of either party to change said address or addresses by
written notice of such new address to the other party.
VIII.2 PROPRIETY PROPERTY. Manager is and shall be the sole owner and
holder of all right, title and interest to the "Proprietary Property of
Manager" consisting of all copyright, service mark and trademark rights and
interests in the logo, systems, software, forms, form contracts, policy
manuals, marketing and public relations materials relating to the delivery
19
system for the Group. Group agrees that is shall not at any time knowingly
harm, misuse or bring into disrepute the Proprietary Property of Manager.
VIII.3 CONFIDENTIALITY. The terms of this Management Agreement are
confidential and shall not be disclosed except as necessary to the
performance of this Management Agreement or as required by law. Neither
Group nor Group Physicians shall disseminate or publish information developed
under this Management Agreement or contained in reports to be furnished
pursuant to this Management Agreement without prior written approval of
Manager.
VIII.4 ENTIRE AGREEMENT. The provisions of this Management Agreement
and any exhibits hereto and any writing signed by the party to be charged
contemporaneously herewith constitute the entire agreement between the
parties, and supersede any prior negotiations, understandings or agreements.
VIII.5 MODIFICATIONS. This Management Agreement may be amended,
modified or otherwise changed only upon the written consent of the parties
hereto.
VIII.6 THIRD PARTY RIGHTS. This Management Agreement shall not be
construed as conferring upon any third party any right or benefit and any and
all claims which may arise hereunder may be enforced solely by Group or by
Manager.
VIII.7 NO ASSIGNMENT. No party may assign its rights or delegate its
obligations under this Management Agreement without the prior written consent
of the other party; provided that Manager may assign its rights and
obligations under this Management Agreement to an affiliate, successor or a
wholly-owned subsidiary without the consent of Group.
VIII.8 GOVERNING LAW; ARBITRATION. This Management Agreement shall be
governed by Utah law. Any dispute between the parties shall be settled by
binding arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association. No punitive damages shall be awarded
in any such arbitration. The prevailing party in any such arbitration shall
be entitled to the recovery of reasonable attorneys' fees (including charges
for in-house counsel) and costs.
VIII.9 DOCUMENTS; NECESSARY ACTS. Each of the parties shall execute and
deliver all documents, papers, and instruments and perform such other acts as
may be necessary or convenient to carry out the terms of this Management
Agreement.
VIII.10 NON-WAIVER; BREACH. Any waiver of any term and condition hereof
must be in writing and signed by the party against whom it is sought to be
asserted. A party's neglect or failure in any case or circumstance to
require performance of the other party's obligations or to enforce its rights
in the event of a breach by the other party shall not affect such party's
right to enforce such rights and obligations in any other case or
circumstance. A waiver of any individual term or condition shall not be
construed as a waiver of any other term or
20
condition nor, unless so provided in such written waiver, of the term or
condition thereby waived in the event of a future or continuing breach by the
other party, except in the particular circumstance(s) in or for which such
waiver was provided.
VIII.11 SEVERABILITY; INVALIDITY OF ANY PROVISION. Nothing contained in
this Management Agreement shall be construed so as to require the commission
of an act contrary to law, and whenever there is any conflict between any
provision of this Management Agreement and any present statute, law,
ordinance or regulation contrary to which the parties have no legal right to
contract, the latter shall prevail. In such event, and in any case in which
any provision of this Management Agreement is determined by a court of
competent jurisdiction to be in violation of a statute, law, ordinance, or
regulation, the affected provision(s) shall be curtailed and limited only to
the extent necessary to bring it within the requirements of the law and,
insofar as possible under the circumstances, to carry out the purposes of
this Management Agreement.
VIII.12 CAPTIONS AND HEADINGS. The captions and headings in this
Management Agreement are intended for convenience only and are not to be
interpreted as part of this Agreement.
VIII.13 FORCE MAJEURE. Neither party shall be liable nor deemed to be
in default for any delay or failure in performance under this Management
Agreement or other interruption of service or employment deemed resulting,
directly or indirectly, from acts of God, civil or military authority, acts
of public enemy, war, accidents, fires, explosions, earthquakes, floods,
failure of transportation, machinery or supplies, vandalism, strikes or other
work interruptions beyond the reasonable control of either party. However,
both parties shall make good faith efforts to perform under this Management
Agreement in the event of any such circumstances.
VIII.14 MEDICARE AND MEDICAID PATIENTS. Manager and Group agree to
generate such records and make such disclosures as may be required, from time
to time, by the Medicare, Medicaid and other third party payment programs
with respect to their participation in this Management Agreement and the
rendition of services hereunder, in order to assure that both parties will be
able to meet all requirements for participation and payment associated with
such programs, including but not limited to the matters covered by Section
1861(v)(1)(I) of the Social Security Act. If either party is requested to
disclose books, documents, or records pursuant to any provision of this
Section 8.14 for an audit, it shall notify the other party of the nature and
scope of such request and each party shall make available, upon written
request of the other, all such books, documents, or records, during such
party's regular business hours.
EXECUTION
IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement on the day and year first written above.
21
TALBERT MEDICAL MANAGEMENT
CORPORATION ("Manager")
By:
------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
TALBERT MEDICAL GROUP, INC. ("Group")
By:
------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
22
EXHIBIT 1.1
PRACTICE SITES
23
EXHIBIT 2.1
GROUP PHYSICIANS AND PROFESSIONAL PERSONNEL
24
EXHIBIT 2.15
GROUP EXPENSES
1. Group Physician personal expenditures, including licensure costs,
continuing medical education allowances, sabbatical allowances and
auto allowances.
2. Group Physician personal equipment and furnishings, including
beepers, telephone equipment, white coats, and stethoscopes.
3. Meals related to Group activities and meetings.
4. Books and periodicals for Group Physicians.
5. Off-site meetings of Group Physicians.
25
EXHIBIT 5.2
JOINT OPERATING COMMITTEE FUNCTIONS
1. Develop strategy for new business, network development, new
Practice Sites, capital budgeting, marketing, and Group Agreements.
2. Evaluate and monitor operational parameters for assuring ongoing
success including but not limited to financial performance,
utilization trends, medical center operations, and overall quality
of care.
3. Address problem areas or opportunities which may be raised by
either of the two entities. Where problems are identified which can
not be solved at the medical center level, the Joint Operating
Committee will resolve and implement appropriate remedial action.
Decisions will be made by majority vote with a quorum present, which
majority shall consist of a majority of Group representatives and
Manager representatives.
4. Ensure that all responsibilities are identified and accounted for,
and any unnecessary duplication of effort shall be avoided by both the
Group and the Manager.
5. Ensure that communication between the Group and the Manager and
between the staff of these two entities is clear and unambiguous and
that a consistent and uniform perspective is presented to the
patients, employees, and external service partners.
26
TABLE OF CONTENTS
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ARTICLE I RESPONSIBILITIES OF MANAGER . . . . . . . . . . . . . . . . . . 1
1.1 Practice Sites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Utilities, Building Services, and Supplies. . . . . . . . . . . . . . . . 2
1.3 Equipment, Furniture and Furnishings. . . . . . . . . . . . . . . . . . . 2
1.4 Repair and Maintenance of Practice Sites and Equipment. . . . . . . . . . 2
1.4.1 Repair and Maintenance of Practice Sites. . . . . . . . . . . . 2
1.4.2 Repair and Maintenance of Equipment . . . . . . . . . . . . . . 2
1.5 Replacement Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8.1 Practice Sites. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8.2 Professional Liability Insurance. . . . . . . . . . . . . . . . 3
1.8.3 Directors and Officers Insurance. . . . . . . . . . . . . . . . 3
1.8.4 Self Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Non-Professional Personnel. . . . . . . . . . . . . . . . . . . . . . . . 3
1.9.1 Manager to Employ; Initial Employment Decisions . . . . . . . . 3
1.9.2 Special Provisions Applicable to Allied Health
Professionals . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9.3 Supervision of Clerical and Other Non-Medical Support Personnel 4
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1.9.4 Decisions Reserved to Manager . . . . . . . . . . . . . . . . . 4
1.10 Bookkeeping and Accounting Services . . . . . . . . . . . . . . . . . . . 4
1.11 Fee-For-Service Administration. . . . . . . . . . . . . . . . . . . . . . 4
1.11.1 Fee Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11.2 Billing and Collection. . . . . . . . . . . . . . . . . . . . . 5
1.12 Capitation Administration . . . . . . . . . . . . . . . . . . . . . . . . 5
1.12.1 Calculation of Amounts Due. . . . . . . . . . . . . . . . . . . 5
1.12.2 Billing Under Capitated Agreements. . . . . . . . . . . . . . . 5
1.12.3 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.13 Review and Audit of Manager . . . . . . . . . . . . . . . . . . . . . . . 5
1.14 Additional Financial and Management Reports and Information . . . . . . . 5
1.14.1 Income Statements and Balance Sheets. . . . . . . . . . . . . . 5
1.14.2 Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.15 Management Information System . . . . . . . . . . . . . . . . . . . . . . 6
1.16 Physician Recruitment . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.17 Human Resources; Credentialing. . . . . . . . . . . . . . . . . . . . . . 6
1.18 Marketing and Public Relations. . . . . . . . . . . . . . . . . . . . . . 6
1.19 UM/QM Policies and Procedures; Preauthorization . . . . . . . . . . . . . 6
1.20 Distribution of Compensation and Bonuses to Group Physicians;
Group Benefits Administration . . . . . . . . . . . . . . . . . . . . . . 6
1.21 Attorney-in-Fact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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1.21.1 Depository Account. . . . . . . . . . . . . . . . . . . . . . . 6
1.21.2 Receipt of Payments . . . . . . . . . . . . . . . . . . . . . . 7
1.21.3 Billing/Claims Processing . . . . . . . . . . . . . . . . . . . 7
1.21.4 Collection of Other Amounts Due . . . . . . . . . . . . . . . . 7
1.21.5 Stop-Loss Claims. . . . . . . . . . . . . . . . . . . . . . . . 7
1.22 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II OBLIGATIONS OF GROUP. . . . . . . . . . . . . . . . . . . . . . 7
2.1 Group Physicians and Professional Personnel . . . . . . . . . . . . . . . 7
2.2 Provision of Medical Services . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Additional Physicians . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Hours of Service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.1 Patient Medical Services. . . . . . . . . . . . . . . . . . . . 8
2.4.2 Walk-In and Community Services. . . . . . . . . . . . . . . . . 8
2.4.3 After Hours Care. . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Non-discrimination; Compliance with Law . . . . . . . . . . . . . . . . . 8
2.6 Non-discriminatory Patient Selection and Services;
Non-discriminatory Patient Assignment . . . . . . . . . . . . . . . . . . 8
2.7 Standards, Accreditation, Surveys and Inspections . . . . . . . . . . . . 8
2.8 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Compliance with Policies and Procedures . . . . . . . . . . . . . . . . . 9
2.9.1 Organization and Review of Care . . . . . . . . . . . . . . . . 9
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2.9.2 Utilization Management; Quality Management. . . . . . . . . . . 9
2.9.3 Prior Authorization . . . . . . . . . . . . . . . . . . . . . . 9
2.10 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.11 Group to Provide Necessary Billing and Encounter Information. . . . . . . 9
2.12 Continuing Education. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.13 Referrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.14 Physician Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.15 Group Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.16 Provider Numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III COMPENSATION OF MANAGER . . . . . . . . . . . . . . . . . . . . 10
3.1 Management Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1.1 Clinic Expenses.. . . . . . . . . . . . . . . . . . . . . . . . 10
3.1.2 Advances to Group.. . . . . . . . . . . . . . . . . . . . . . . 10
3.1.3 Operations Fee. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1.4 Additional Managed Care Payments. . . . . . . . . . . . . . . . 11
3.1.5 MIS Allocation. . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Calculation and Payment of Management Fee.. . . . . . . . . . . . . . . . 11
3.3 Advances to Group.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Adjustment in Management Fee. . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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3.5.1 "Additional Managed Care Payments". . . . . . . . . . . . . . . 11
3.5.2 "Clinic Expenses" . . . . . . . . . . . . . . . . . . . . . . . 12
3.5.3 "Group Revenue" . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV EXECUTION OF GROUP AGREEMENTS . . . . . . . . . . . . . . . . . 13
4.1 Appointment of Manager as Attorney-in-Fact. . . . . . . . . . . . . . . . 13
4.1.1 Contracting Guidelines. . . . . . . . . . . . . . . . . . . . . 13
4.1.2 Entry Into Agreements . . . . . . . . . . . . . . . . . . . . . 14
4.1.3 Administration of Agreements. . . . . . . . . . . . . . . . . . 14
4.2 Restrictions on Group . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V JOINT OPERATING COMMITTEE . . . . . . . . . . . . . . . . . . . 14
5.1 Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI TERM; TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Term; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Termination for Cause . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2.1 Liquidation; Bankruptcy . . . . . . . . . . . . . . . . . . . . 15
6.2.2 Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Termination for Certain Transactions. . . . . . . . . . . . . . . . . . . 16
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6.4 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4.1 Manager to Continue to Provide Services . . . . . . . . . . . . 16
6.4.2 Services Under Group Agreements; Care of Patients . . . . . . . 16
6.4.2.1 Group Agreement Obligations . . . . . . . . . . . . . . . . 16
6.4.2.2 Care of Patients. . . . . . . . . . . . . . . . . . . . . . 16
6.4.2.3 Collections . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Post Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5.1 Practice Sites. . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5.2 Proprietary Information . . . . . . . . . . . . . . . . . . . . 17
6.5.3 Software. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5.4 Access to Medical Records . . . . . . . . . . . . . . . . . . . 17
6.5.5 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII RELATIONSHIP OF THE PARTIES . . . . . . . . . . . . . . . . . . 17
7.1 No Fiduciary Duties.. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.2 Exclusivity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2.1 Physician Services. . . . . . . . . . . . . . . . . . . . . . . 18
7.2.2 Management Services.. . . . . . . . . . . . . . . . . . . . . . 18
7.2.3 Expansion of Service Area . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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8.2 Propriety Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.5 Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.6 Third Party Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.7 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
8.8 Governing Law; Arbitration. . . . . . . . . . . . . . . . . . . . . . . . 20
8.9 Documents; Necessary Acts . . . . . . . . . . . . . . . . . . . . . . . . 20
8.10 Non-Waiver; Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.11 Severability; Invalidity of Any Provision . . . . . . . . . . . . . . . . 20
8.12 Captions and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.13 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.14 Medicare and Medicaid Patients. . . . . . . . . . . . . . . . . . . . . . 21
Exhibit 1.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Exhibit 2.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Exhibit 2.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Exhibit 5.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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