MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of June 1997, by and between MedServ of
Connecticut, Inc., a Connecticut corporation with offices at 1520 Highland
Avenue, Cheshire, Connecticut 06410 (the "Manager") and Physicians Care for
Connecticut, Inc., a Connecticut corporation with offices at 1520 Highland
Avenue, Cheshire, Connecticut 06410 ("Physicians Care").
WHEREAS, Physicians Care is organized under the laws of the State of
Connecticut and expects to obtain a license to do business as a health
maintenance organization ("HMO") in Connecticut, and may apply for a similar
license in other states, or may seek to be licensed to offer additional products
in the State of Connecticut;
WHEREAS, Physicians Care desires to purchase management and administrative
services to support its insurance business (the "Services");
WHEREAS, Manager has the resources and expertise to provide the Services and
Manager desires to provide such Services to Physicians Care; and
WHEREAS, the parties mutually desire to provide or arrange for the
provision of quality and cost effective care to enrollees in Physicians
Care's health plans (the "Plans") and to develop and operate Physicians Care
in a businesslike manner.
NOW, THEREFORE, in consideration of the mutual promises herein stated and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
I. AUTHORITY OF THE PARTIES
1.1 ENGAGEMENT OF MANAGER. Physicians Care hereby engages Manager as its
manager to operate Physicians Care in an efficient and businesslike manner and
in a manner that promotes quality healthcare in accordance with the terms
hereof. Manager hereby accepts the engagement.
1.2 DUTIES OF MANAGER. Physicians Care, acting through its Board of
Directors (the "Board of Directors") and in accordance with its Certificate of
Incorporation and Bylaws, shall at all times exercise ultimate authority over
the policies, assets and operations of Physicians Care and shall retain the
ultimate authority and responsibility regarding the powers, duties and
responsibilities vested in Physicians Care by law and regulation. Subject to the
foregoing and all other terms of this Agreement, Physicians Care hereby grants
and delegates to Manager the general authority to supervise and manage
Physicians Care on a day-to-day basis, subject to the direction of the
Physicians Care Board of Directors. Manager's specific responsibilities include,
but are not necessarily limited to, those set forth in Section II herein.
1.3 PHYSICIANS CARE APPROVALS. If Physicians Care is required or
permitted hereunder to take any action or give any approval, Manager shall be
entitled to rely upon the statements of one or more representative(s)
designated by resolutions adopted by Physicians Care's Board of Directors, to
act on its behalf. If no representative(s) are so designated, all necessary
actions shall be taken and approvals shall be given by the Board of Directors
of Physicians Care on a timely basis.
1.4 MAINTENANCE OF SOUND OPERATIONS. Physicians Care shall conduct its
affairs in accordance with the provisions of any state and federal laws and
regulations to which it is subject. Physicians Care shall honor all legitimate
debts and obligations to its creditors.
II. MANAGEMENT SERVICES
2.1 GENERAL RESPONSIBILITIES AND SERVICES. Manager shall perform all
management, administrative and other services that are reasonably necessary
for Physicians Care's financial stability, Physicians Care's competent and
efficient operations, and implementation of Physicians Care's policies as
established by Physicians Care's Board of Directors, including but not
limited to those services set forth in the remainder of this Section II. In
addition, Manager shall provide Physicians Care with all clerical services
reasonably required for the operation of an HMO. Manager shall use its best
efforts to act in a prompt, competent and businesslike manner to perform its
duties hereunder in good faith. Manager shall retain, in Physicians Care's
name and on Physicians Care's behalf and at Physicians Care's expense, such
accounting, actuarial, legal, and other purchased services as in Manager's
determination pursuant hereto that Physicians Care shall reasonably require
from time to time. Manager shall not be excused from its obligations to
provide management services hereunder on behalf of Physicians Care except to
the extent that Physicians Care refuses or is unable to expend funds as required
hereunder, execute agreements, or otherwise to act in a manner that
unreasonably prevents or constrains Manager from performing its
responsibilities under the Agreement.
2.2 APPLICATION FOR LICENSE AND PERMITS/REGULATORY REQUIREMENTS. Manager
shall apply for and use its best efforts to obtain and maintain, on behalf of
Physicians Care, all licenses, certificates, registrations and permits
required in connection with the management and operation of an HMO or any
other activity in which Physicians Care will engage as determined by the
Board of Directors. Physicians Care shall cooperate with Manager in applying
for, obtaining, and maintaining such licenses, certificates, registrations
and permits. Manager shall notify Physicians Care of changes in regulatory
requirements applicable to Physicians Care's business as soon as reasonably
possible, which notice shall state the actions which must be undertaken by
Physicians Care and/or Manager on its behalf to comply
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therewith. Manager shall propose a specific plan by which Physicians Care
will obtain National Committee for Quality Assurance Accreditation. Manager
shall periodically review the sufficiency of such agreements and shall
recommend to the Board of Directors modifications thereof which Manager
reasonably determines are necessary to comply with law or industry standards
or which will promote enrollment in Physicians Care's Plans.
2.3 SUBSCRIBER AGREEMENTS. Manager shall, in the name of and on behalf of
Physicians Care, negotiate and enter into agreements with employer groups or
individuals as necessary and/or appropriate to sell Physicians Care's Plans as
services.
2.4 UNDERWRITING. Manager shall be responsible for providing or securing
underwriting services necessary to establish the annual per capita revenue
requirement for each product offered by Physicians Care including all relevant
adjustments thereto for age/sex, health status, employer group size, rating
region, experience or plan types (e.g. family, spousal or individual) to develop
the budget of medical costs including line items for each category of medical
costs, and to complete any regulatory filing or to obtain regulatory approval
for the marketing and establishment of premium for each product, including the
rating and underwriting of accounts.
2.5 ENROLLEE MATERIALS. Manager shall be responsible for preparing and
revising, as appropriate, materials intended to inform or educate individuals
enrolled in Physicians Care's Plans (the "Enrollees") regarding terms and
conditions of the Plans, administrative procedures and Enrollee
responsibilities.
2.6 GRIEVANCE PROCEDURE. Manager shall be responsible for developing and
implementing a written grievance and complaint procedure for Physicians Care's
members.
2.7 ENROLLEE MANAGEMENT. Manager shall be responsible for obtaining or
providing Physicians Care with necessary services related to Enrollee
services and records, including receiving all documents necessary to confirm
enrollment, maintenance of accurate eligibility information, processing of
all Enrollee additions and deletions, and obtaining from Enrollees a general
consent for the release of medical and financial information to Physicians
Care and its Providers (whether directly or indirectly through MedServ IPA,
Inc. or any other party) as reasonably necessary to administer the Plans.
2.8 MARKETING AND ADVERTISING. Manager shall be responsible for developing
and implementing a marketing plan for Physicians Care, including a comprehensive
public relations and advertising program, designed to promote public awareness
of Physicians Care and enrollment in its Plans.
2.9 SALES. Manager shall be responsible for selling Physicians Care's
products whether directly or through a network of brokers and to document such
sales through execution of Subscriber Agreements.
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2.10 ACCOUNTING AND FINANCIAL SUPPORT. Manager shall be responsible for
establishing and administering accounting procedures and controls, and systems
for the preparation of appropriate financial, utilization, membership and
medical management reports for the efficient management and planning of
Physicians Care's business operations, systems for the billing of accounts and
the collection of accounts receivable, and systems to improve or expedite
providers access to relevant enrollment, claims and clinical information. The
foregoing shall include, but shall not be limited to:
a. Manager shall be responsible for preparing and presenting to
Physicians Care an annual operating and capital budget with appropriate
membership, revenue, and detailed line item cost estimates for each Plan
(the "Plan Budget"). Upon its adoption, the Plan Budgets shall serve as a
basis for the operation of Physicians Care during the year to which it is
related. All Plan Budgets shall be subject to the approval of Physicians Care.
b. Manager shall submit as soon as practicable but not less than
sixty (60) days prior to (i) the expiration of the initial Offering Period
for the Start-up and "Initial Operations" stages, and (ii) the first day of
each fiscal year of Physicians Care an administrative services budget with
detailed line item cost estimates for all Services contemplated to be
provided hereunder (the "Administrative Services Budget"). The start-up stage
shall commence as of the completion of the offering of Common Stock
contemplated by Physicians Care through the effective date of enrollment of
the first Enrollee in a Plan. The Initial Operations phase shall commence the
effective date of enrollment of the first Enrollee in a Plan and terminate on
the last day of the month in which Physicians Care attains a positive net
income from operations but not later than thirty-six (36) months after
commencement of the Initial Operations stage. The Administrative Services
Budget shall be the basis for compensation of the Manager pursuant to Section
VII.
c. Manager shall cause to be delivered to Physicians Care certain
financial statements and reports, including the following:
(i) Within forty-five (45) days after the close of each month, financial
statements for the preceding month and the fiscal year to date (unaudited
but consistent with generally accepted accounting principles ("GAAP")
consistently applied, except as directed by the Board of Directors)
containing a statement of income and expenses in reasonable detail,
variances from budget by Plan and in aggregate and such other financial
reports as Physicians Care may reasonably request from time to time;
(ii) Within sixty (60) days after the close of a fiscal year, financial
statements for the preceding fiscal year, prepared in accordance with GAAP
consistently applied, which shall be audited by an independent certified
public accounting firm approved by Physicians Care at Physicians Care's
expense, plus such other financial reports as Physicians Care may reasonably
request from time to time;
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(iii) Within time frames prescribed by regulatory authorities, financial
statements and other such reports prepared in accordance with standards
prescribed or permitted by such regulatory authorities;
(iv) Monthly and year-to-date summary reports regarding the utilization
and cost of health services and supplies;
(v) Marketing and enrollment reports for each Plan and as requested by
Physicians Care, indicating Enrollee demographics and employer profiles; and
(vi) If specifically requested by the Physicians Care's Board of
Directors, report(s) evaluating and making recommendations regarding the
performance by Manager or any of its designees of its obligations under this
Agreement, which report(s) shall be prepared at Physicians Care's expense by
a certified public accounting firm chosen by Manager with the approval of
Physicians Care which approval shall not be unreasonably withheld.
d. Manager shall be responsible for developing and implementing
accounting procedures appropriate to Physicians Care's operation.
e. Manager shall be responsible for preparing medical management
reports to assist providers in the evaluation of practice patterns for the
following categories: (i) by physician, (ii) by Member, (iii) by CPT-4 Code,
(iv) by diagnosis code, or (v) in such other format as may be reasonably
requested by Physicians Care.
f. Manager shall be responsible for preparing such other reports as
Physicians Care shall reasonably request.
2.11 CLAIMS ANALYSIS AND STATISTICAL REPORTING. As reasonably required and
requested by Physicians Care, Manager shall prepare and deliver to Physicians
Care reports setting forth various information and statistics regarding
utilization of services by Enrollees or performance of various operating
departments or divisions of Physicians Care.
2.12 PARTICIPATING PROVIDERS AND CREDENTIALING. 2.12.1 Manager shall, on
behalf of Physicians Care, be responsible for preparation and implementation of
contracts with providers of healthcare services or organizations thereof (I.E.,
physicians, IPAs, hospitals, etc.) with which or with whom Manager contracts,
to provide (or to arrange to provide) healthcare services to
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Enrollees (such contracting Providers are sometimes collectively referred
to herein as "Providers"). Manager is expressly authorized to contract with
MedServ IPA to make available a physician network in fulfillment of a
portion of its responsibilities under this subsection 2.12.2, provided that
under such contract MedServ shall have a right to terminate the contract in
the event that MedServ IPA contracts with an HMO licensed in Connecticut (the
"Competitor Contract") to make available the Physician Network to provide
healthcare services. MedServ agrees to issue notice of termination of such
contract upon receipt from Physicians Care of a certificate of an officer of
Physicians Care setting forth a resolution of Physicians Care's Board
determining in its reasonable judgment that the Competitor Contract is
contrary to the best interests of Physicians Care. The Manager shall cause
MedServ IPA to give notice to the Manager within five (5) days of execution
of a Competitor Contract.
Manager shall cause all contracts between Providers and MedServ IPA
or Physicians Care to contain terms required by law and consistent with the
Subscriber Agreements and as reasonably designed to promote enrollment in
Physicians Care's Plans. Such contracts shall specify that Providers shall
not, under any circumstances, seek payment from Enrollees for Covered
Services (as defined in the applicable Subscriber Agreement) provided to
Enrollees, except for copayments, deductibles or coinsurance amounts
specified in the applicable Subscriber Agreement with Physicians Care.
2.12.2 Manager shall periodically report to the Board of Directors
the status of Physicians Care's Provider networks and make recommendations
regarding additions/deletions from the Provider network.
2.12.3 Manager, on behalf of Physicians Care, shall conduct
credentialing activities for Physicians Care pursuant to credentialing
standards approved by the Board of Directors. Manager shall periodically
provide to the Board of Directors a comparison of Physicians Care's
credentialing standards to national standards and those of competitors.
2.13 QUALITY STANDARDS. Manager shall manage Physicians Care and shall
cause other agents or designees of Physicians Care, to perform their
responsibilities in a manner that enables Physicians Care to meet NCQA
accreditation standards and such other accreditation standards as reasonably
requested by Physicians Care's Board of Directors.
2.14 QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT. Manager shall be
responsible for development, recommendation and implementation of quality
management, utilization review, and similar programs.
2.15 MANAGEMENT INFORMATION SYSTEM. Subject to the approval of the Board
of Directors, Manager shall be responsible for providing or arranging for the
provision of a management information services ("MIS") appropriate for the
management of Physicians Care's operations.
2.16 PLANNING AND PRODUCT DEVELOPMENT. Manager shall prepare business
plans for the Board of Directors as requested by the Board. Manager shall
periodically survey the plan design and benefits of competitors and shall make
recommendations regarding modification of Plan design and introduction of new
Plans.
2.17 DEPOSIT AND DISBURSEMENT OF FUNDS. 2.17.1 Manager shall open and
maintain an Operating Account and such other bank accounts in Physicians Care's
name in accordance with requirements of state and federal laws and as authorized
by the Board of Directors, shall deposit in such Operating Account all monies
received arising from the operation of Physicians Care and shall make
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disbursements from such Operating Account and other bank accounts on behalf
of Physicians Care in such amounts and at such times as the same are required
and as directed by the Board of Directors. Signatories and approvals as to
amounts on all checks shall be in accordance with the duly adopted policies
of the Board of Directors, which policies shall not adversely affect the
Manager's ability to perform its duties hereunder.
2.17.2 Physicians Care agrees to establish an Administrative Services
Account and to deposit monthly in advance into such account the amounts
estimated pursuant to the Administrative Services Budget to be due for such
month to the Manager for Services hereunder.
2.17.3 Manager shall recommend to the Board of Directors reasonable
and prudent investment guidelines that comply with applicable state and
federal laws and shall have authority to invest any surplus funds on behalf
of Physicians Care subject to guidelines approved by its Board of Directors.
2.18 LEGAL ACTIONS AND COUNSEL. Manager shall notify Physicians Care
immediately of any and all legal actions brought against Physicians Care. In
addition, Manager shall provide the services of a General Counsel for Physicians
Care as outlined in Section IV below.
2.19 REPORTS. Manager shall be responsible for the preparation and
provision of such reports as may be required by any regulatory agency having
jurisdiction over the operations of Physicians Care including, but not limited
to, those required by state governmental agencies, the Health Care Financing
Administration, and the Internal Revenue Service.
2.20 GOVERNMENT REGULATIONS. Manager shall use all reasonable efforts,
within the scope of its authority and responsibilities hereunder, to ensure that
Physicians Care complies with the requirements of any applicable state or
federal statute, ordinance, law, rule, regulation, or order of any governmental
or regulatory body having jurisdiction over Physicians Care, including any
applicable requirements relating to federal qualification. Manager shall notify
the Board of Directors if the Manager reasonably determines that Physicians Care
is not compliant with any governmental regulation.
2.21 ANCILLARY AND OTHER AGREEMENTS. In Physicians Care's name and at
Physicians Care's expense, Manager shall negotiate and cause Physicians Care to
enter into such agreements as Manager may deem necessary or advisable in
accordance with Physicians Care Board policy, for the furnishing of those goods
and services necessary and appropriate for the maintenance and operation of
Physicians Care which are Physicians Care's responsibility under this Agreement.
Any such agreement which may involve a conflict of interest shall be disclosed
to and be subject to the prior approval of Physicians Care's Board of Directors,
which approval shall not be unreasonably withheld. Provided that such agreements
are negotiated, entered into and administered at arm's length, Manager shall be
permitted to enter into and perform such contracts with Physicians Care.
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2.22 CAPITAL EXPENDITURES. Manager shall review and make recommendations
to Physicians Care concerning proposed capital expenditures.
2.23 COOPERATION. Manager agrees to cooperate with Physicians Care or as
directed by the Board of Directors, with any auditor, consultant, legal counsel,
or other party engaged by Physicians Care relating to Physicians Care's products
subject to this Agreement. The Manager agrees to provide such parties at
reasonable times and upon reasonable notice with full and complete access to all
books, records, documents and other information relating to management
activities performed on behalf of Physicians Care.
2.24 POLICIES AND PROCEDURES. Whenever the Manager reasonably determines
that policies and procedures of Physicians Care should be instituted, modified
or deleted to facilitate effective operation of Physicians Care, the Manager
shall make a recommendation to the Board of Directors accordingly.
III. SUPPORT SERVICES
3.1 GENERAL RESPONSIBILITIES AND SERVICES. Manager shall provide all
clerical services reasonably required, including, but not limited to, claims
processing, member enrollment, and premium billing for Physicians Care's Plans.
Manager shall use its best efforts to act in a prompt, competent and
businesslike manner to perform its duties hereunder in good faith such that
Physicians Care offers a scope of services in support of administration of the
Plans which permits such Plans to be competitive in the marketplace.
3.2 ENROLLEE REGISTRATION. Manager shall be responsible for implementation
and maintenance of such systems and procedures as reasonably directed by
Physicians Care to enroll and disenroll new employer groups and individuals in a
prompt manner, and to maintain a continuous and accurate record of enrollment.
Such systems and procedures shall be installed and be operational no later than
the earliest effective date of any Physicians Care Subscriber Agreement. Such
system must permit Physician Care providers to confirm Enrollee eligibility
status electronically.
3.3 CLAIMS PROCESSING AND ADMINISTRATION. Manager shall be responsible for
the development, implementation, and maintenance of such systems and procedures
as may be reasonably directed by Physicians Care and as may be reasonably
necessary for the appropriate review and timely payment or disapproval of all
claims, with timing of such payments as directed by Physicians Care. Such system
shall use claim forms as approved by Physicians Care and shall capture all
information on such forms in the Manager's data base. Such systems and
procedures shall be installed and operational no later than the earliest
effective date of any Physicians Care Subscriber Agreement. Such system must
provide electronic submission and payment of claims.
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3.4 REFERRAL AUTHORIZATION. Manager shall be responsible for
implementation and maintenance of such systems and procedures as reasonably
directed by Physicians Care to monitor and record any prior authorization or
precertification required from a Physicians Care Manager or Physicians Care as a
condition of payment for Covered Services delivered to Enrollees. Such
authorization and precertification information shall be used as a Condition of
Payment to process and approve claims. Such system must permit Physicians Care
providers to submit such referral information to Physicians Care electronically.
3.5 DATABASE MANAGEMENT. Manager shall be responsible for maintenance and
management of a database of Physicians Care's claims, enrollment, customer
service and quality management information. Manager shall provide Physicians
Care with access to such database including reproduction on disks or electronic
transmissions to Physicians Care of data as reasonably requested by Physicians
Care. All data relating to Enrollees shall be the sole and exclusive property of
Physicians Care; provided, however, that during the term of this agreement,
Manager shall have a non-exclusive license to use such data solely for the
purpose of complying with its obligations hereunder to ensure effective
administration of the Plans.
3.6 PREMIUM BILLING AND COLLECTION OF ACCOUNTS. Manager shall be
responsible for the development, implementation, and maintenance of billing and
collection procedures reasonably appropriate to Physicians Care's operation.
IV. PERSONNEL
4.1 APPOINTMENT. Manager shall hire, appoint, and supervise the personnel
specified below, and all other personnel reasonably necessary or appropriate to
carry out its obligations under this Agreement and in accordance with the
Administrative Services Budget, all of whom shall be employees or independent
contractors of Manager. Such Manager personnel shall have the authority to act
on behalf of Physicians Care within the scope of authority common to their
positions in the industry, and the authority granted to Manager under this
Agreement, provided that they shall at all times perform their duties in
accordance with the Certificate of Incorporation and Bylaws of Physicians Care
and subject to the overall policy direction established by Physicians Care's
Board of Directors. The hiring, assignment and termination of such personnel
shall be within the discretion of Manager, but shall be subject to the approval
of the Board of Directors.
4.2 SPECIFIC PERSONNEL. Manager shall provide individuals to oversee the
operations of Physicians Care and arrange for the performance of services
reasonably required to be performed by Manager under this Agreement.
Specifically, the parties agree that Manager shall provide qualified individuals
to fill the following positions; among others:
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- CHIEF EXECUTIVE OFFICER("CEO"). The CEO shall be responsible to Physicians
Care's Board of Directors for the overall administration, operation and
performance of the Company.
- ASSOCIATE CHIEF EXECUTIVE OFFICER. The Associate Chief Executive Officer
shall assist the CEO in the discharge of his duties by consulting on
policies, performance goals, facilities planning and general operations of
the Company.
- VICE-PRESIDENT OF QUALITY MANAGEMENT AND UTILIZATION MANAGEMENT. The
Vice-President of Quality Management and Utilization Management will be
responsible for monitoring quantitative inpatient hospitalization and
outpatient ambulatory care experience and assuring that proper utilization
management techniques are used. The Vice-President of Quality Management
and Utilization Management shall also be responsible for the management of
quantative and qualitative information concerning patient outcomes and
physician/hospital practice patterns in accordance with the Physicians Care's
utilization standards.
- GENERAL COUNSEL. The General Counsel shall concentrate on legal matters
concerning procedures, entities, regulations, and laws relating to the
business of Physicians Care. The General Counsel shall also provide general
legal services required of corporate counsel on such matters as review,
negotiation, and drafting of contractual obligations, addressing members'
communications and questions, and coordinating services provided by outside
legal counsel as necessary and/or appropriate.
- CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be responsible for
the Company's overall financial plans, policies, and accounting practices.
- VICE PRESIDENT OF MEDICAL AFFAIRS. The Vice President of Medical Affairs
shall be responsible for overseeing the medical practices, medical service
delivery and quality of care for Physicians Care's Enrollees.
- DIRECTOR OF MIS. The Director of MIS shall be responsible for the operation
and maintenance of the computer system and information services provided for
Physicians Care, including all data storage, maintenance and reporting
responsibilities.
- VICE PRESIDENT OF MARKETING AND SALES. The Vice President of Marketing and
Sales shall be responsible for the overall administration of marketing and
sales activities.
4.3 OBLIGATIONS RELATING TO MANAGEMENT PERSONNEL. Physicians Care shall
cooperate in good faith with the management personnel provided by Manager
pursuant to this Agreement as may be reasonably necessary for such personnel to
perform their duties.
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4.4 COORDINATION OF PERSONNEL. Provided that the requirements of
Manager to operate Physicians Care can be adequately met, the personnel
appointed pursuant to this Section may also serve other entities which are
affiliates through common majority ownership or control of the Hartford
Medical Association County or New Haven County Medical Association or MedServ
IPA, Inc., or at the discretion of Physicians Care, such other entities as
approved by the Physicians Care Board of Directors.
4.5 CONSULTATIVE STAFF. Manager may, at its reasonable discretion,
utilize the consultative services and support of the professional staff at
its corporate offices and may engage the services of consultants or
independent contractors and other non-Manager personnel as may be necessary
in carrying out Manager's obligations hereunder. Compensation and expenses of
Manager's professional staff and all independent contractors providing
services shall be the responsibility of Manager and Physicians Care's sole
obligation shall be to pay the Management Fee to Manager and/or the costs as
specified under Section VII herein.
4.6 APPOINTMENT/REMOVAL OF PERSONNEL. The Board of Directors shall have
authority to approve appointment of any personnel for the positions
designated above and for any employment agreement with a term in excess of
one year. The Board of Directors may request the removal of any management
personnel selected by Manager and the Manager agrees to remove such personnel.
V. PROPERTY AND EQUIPMENT
5.1 ACQUISITION. Consistent with the Administrative Services Budget,
Manager shall be responsible for purchasing, leasing, renting, or otherwise
acquiring such property, equipment and supplies as Manager determines to be
reasonably necessary to provide the services set forth in this Agreement and
as may be reasonably required to carry out Physicians Care's contractual
obligations with Providers or Enrollees, subject to any limitations or
restrictions imposed by the Board of Directors. Title to all such property
shall be held by Physicians Care.
5.2 REPAIR AND MAINTENANCE. Manager shall be responsible for negotiating,
contracting for and supervising such repair and maintenance of any property and
equipment owned by Physicians Care as shall be necessary to maintain such
property and equipment in good working order.
5.3 UTILITIES AND SERVICES. Manager shall be responsible for negotiating
and entering into such administrative arrangements and agreements as it
determines to be reasonably necessary or advisable for the furnishing of
utilities, services, concessions and supplies for the maintenance and operation
of Physicians Care, and as may be necessary for Manager to provide the services
set forth in this Agreement.
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VI. INSURANCE
6.1 TYPES OF INSURANCE AND COSTS. Manager shall be responsible for
purchasing and maintaining on behalf of Physicians Care, at Physicians Care's
expense, various insurance policies as set forth in Exhibit 6.1 in such
amounts, with such companies, and on such terms and conditions upon which
Manager and Physicians Care shall mutually agree.
6.2 MANAGER'S INSURANCE. Manager shall obtain and maintain throughout the
term of this Agreement, at its sole expense, workers' compensation insurance and
other appropriate insurance covering employees of Manager who are utilized in
carrying out Manager's obligations under this Agreement and the other insurance
policies set forth in Exhibit 6.2.
6.3 NOTIFICATION OF CHANGES IN INSURANCE COVERAGE. Both parties agree
to provide the other with at least ten (10) days prior notice of the
cancellation, non-renewal or modification of any of the insurance policies
referenced in either Sections 6.1 or 6.2.
VII. COMPENSATION OF MANAGER
7.1 MANAGEMENT FEE. During the start-up and Initial Operation stages,
Manager shall be entitled to a Management Fee which shall be equal to the
Manager's actual cost of providing such services not to exceed amounts
approved in the Administrative Services Budget as described below plus an
allowance for Manager's profit and general administrative expense equal to 5
percent (5%) of such amounts. After completion of the start-up and Initial
Operations stages, the Manager shall be paid a negotiated percentage of
actual gross premium revenue per Enrollee per month as mutually agreed
between the Manager and Physicians Care as evidenced by an amendment to this
Agreement.
7.2 LIMITATION ON PAYMENTS. Physicians Care shall be responsible for
reimbursement of Manager for costs incurred to start up operations in any
service area, and for certain services directly attributable to Physicians
Care's business and operations up to the amount as set forth in the
Administrative Services Budget approved by the Board of Directors. The
Manager will make no expenditure in excess of the Administrative Services
Budget without the consent of the Board of Directors. If expenses for
services provided hereunder in aggregate are expected to exceed the
Administrative Services Budget by more than five percent (5%), or if expenses
related to any line item of such Budget are expected to exceed the amount
approved for such line item in such Budget by more than twenty percent (20%)
(whether or not aggregate expenses are expected to exceed the Budget), in
each case on a cumulative year to date basis, then the Manager agrees to
notify the Board of Directors of an anticipated increase to the Budget not
less than twenty (20) business days prior to any such excess being incurred,
such notice to include the reason for such variance and why it was not
anticipated at the time the Administrative Services Budget was approved the
requested modification to the Budget and alternatives available to Physicians
Care other than modification of the Budget. The Board shall act on such
request not more than twenty (20) business days after receipt of such
request.
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7.3 PROCESS FOR PAYMENT. For personnel costs associated with Services
provided hereunder, the Manager agrees to submit to Physicians Care not less
frequently than biweekly and not less than three (3) business days prior to
the due date for payment thereof, a detailed statement of actual personnel
expenses to be incurred for such period by the Manager. Unless objected to by
Physicians Care prior to such due date, the Manager may deduct from the
Administrative Services Account an amount equal to the personnel costs as set
forth in the detailed statement.
With respect to all other expenses of the Manager, the Manager agrees to
submit to Physicians Care an invoice and a detailed statement of actual
expenses on the fifth day of each month for the immediately preceding month.
Such detailed statement shall also include a certification of the Chief
Financial Officer of the Manager indicating the status of all accounts
payable of Physicians Care and the Manager related to Services hereunder, as
of the first day of the immediately preceding month, all additions to such
accounts payable for such month, and a detailed listing of the accounts
actually paid for such month. If not contested by Physicians Care within five
(5) business days of receipt hereof, the Manager may deduct from the
Administrative Services Account an amount equal to the undisputed amount of
such invoice. The Manager shall submit within thirty (30) days of the close
of each fiscal year a detailed reconciliation of all costs for Services
hereunder, payments made and amounts due. Physicians Care's failure to
contest any invoice shall not be deemed a waiver of any rights of Physicians
Care to dispute an amount due on annual reconciliation or within the
applicable statute of limitations.
VIII. RECORDS
8.1 OWNERSHIP OF RECORDS. All information relating to the operation of
Physicians Care, including but not limited to, all books of account, enrollment
records, general administrative records, account and Provider files, patient
records, and information generated under and/or contained in the MIS shall be
and remain the sole property of Physicians Care. Manager shall not possess any
interest, title, lien or right to any such data or records, except as expressly
set forth herein.
8.2 CONFIDENTIALITY OF RECORDS. 8.2.1 Manager shall use reasonable
efforts to protect the confidentiality of the records of Physicians Care and
shall to the extent of its authority and responsibility hereunder comply in
all material respects with all applicable laws and regulations relating to
the records of Physicians Care. In this connection, medical records and other
privileged Enrollee information, and information subject to confidentiality
agreements, will not be disclosed by Manager except (i) with the consent of
the subscriber or the parties to the applicable confidentiality agreement,
(ii) pursuant to a court order, (iii) as reasonably necessary for quality
assurance and utilization review programs of Physicians Care, or (iv) when
required by applicable law.
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8.3 COMPUTER PROGRAMS. Physicians Care covenants and agrees that any and
all computer programs and computer software developed or utilized by Manager in
order to fulfill Manager's responsibilities specified herein shall remain the
property of Manager, or shall be used by Manager pursuant to appropriate
authorization, and that Physicians Care shall not use such programs and software
for any purpose other than the activities of Physicians Care without the express
written consent of Manager; provided, however, that if Physicians Care funds the
development cost of any such program, whether in whole or in part, then such
program shall be the property of Physicians Care and Manager shall have a
license to use such program, which license shall automatically terminate upon
termination of this Agreement for any reason.
8.4 PROPRIETARY MATERIAL.
8.4.1 Physicians Care acknowledges that Manager, in providing
services under this Agreement, will by necessity divulge and provide to
Physicians Care confidential proprietary plans, programs, formula, methods
and other products and information (collectively, the "Proprietary Material")
relating to the business, services and activities of Manager in managing the
business and operations of Physicians Care including Proprietary Material
developed in the course of providing services hereunder. Physicians Care
agrees that, during the term of this Agreement and thereafter, Physicians
Care shall take reasonable steps to maintain the confidentiality of such
Proprietary Material and agrees not to disclose such Proprietary Material to
anyone other than Manager or other than is reasonably necessary in the
furtherance of Physicians Care's business and operations. This provision
shall not apply to any information which is now in, or subsequently enters
the public domain, provided that Physicians Care has not, in violation of
this provision, disclosed or caused to be disclosed such information so as to
make it enter the public domain. Proprietary Material shall be and remain the
property of Manager.
Upon termination of this Agreement all proprietary information shall be
destroyed by Physicians Care or returned to Manager whenever Manager so
requests in writing.
8.5 AUDIT OF RECORDS. Manager shall allow auditors designated by
Physicians Care at Physicians Care's expense to audit all of Manager's books
and records relating to Manager's expenses under this Agreement and to the
fees paid to Manager under this Agreement to verify the accuracy of the
aggregate amount of fees paid to Manager pursuant to Article VII.
IX. TERM OF AGREEMENT, TERMINATION
9.1 TERM. The initial term of this Agreement shall commence on the first
closing of the Offering of Shares of Physicians Care's Common Stock pursuant to
a certain SB-2 registration ("Effective Date") and shall continue for a period
of ten (10) years (the "Initial Term") unless sooner terminated as provided
herein. The Agreement shall thereafter be
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extended upon the same terms and conditions for successive three (3) year
terms ("Renewal Term"), unless terminated as provided herein. The word "term"
used in this Agreement without any modifier shall mean the Initial Term and
any Renewal Terms. Notwithstanding the foregoing, the Management Fee shall be
reevaluated for each calendar year in each Renewal Term pursuant to Section
7.1.
9.2 TERMINATION.
9.2.1 TERMINATION DURING RENEWAL TERM. This Agreement may be
terminated by either party by delivering one (1) year's prior written notice
of such termination to the other party.
9.2.2 TERMINATION UPON MUTUAL CONSENT. This Agreement may be
terminated at any time upon mutual consent of the parties.
9.2.3 BANKRUPTCY TERMINATION. Either party may terminate this
agreement immediately upon the bankruptcy of the other party. As used in this
Section 9.2.3, bankruptcy of a party hereto shall mean the filing of a
petition commencing a voluntary case against it under the Bankruptcy Code; a
general assignment by it for the benefit of creditors; its insolvency, its
inability to pay its debts as they become due; the filing by it of any
petition or answer in any proceeding seeking for itself or consenting to, any
insolvency, receivership, or similar relief under any law or regulation.
9.2.4 TERMINATION FOR BREACH OR DEFAULT. If either party fails
substantially to perform any of its material obligations hereunder (the
"Defaulting Party"), the other party (the "Non-defaulting Party") shall have
the right to give the Defaulting Party a notice of default ("Notice of
Default"). The Notice of Default shall set forth the nature of the obligation
that the Defaulting Party has not performed. If, within the ninety (90) day
period following the giving of the Notice of Default, the Defaulting Party in
good faith commences to perform such obligation and cure such default and,
thereafter, prosecutes to completion with diligence and continuity the curing
thereof without material adverse affect on the financial performance or
operations of Physicians Care, it shall be deemed that the default shall not
have occurred and the Agreement shall remain in effect. If within such ninety
(90) day period the Defaulting Party does not commence in good faith the
curing of such default or does not thereafter prosecute to completion with
diligence and continuity the curing hereof, the Non-defaulting Party shall
have the right to terminate this Agreement at the end of that ninety (90) day
period. The right to terminate this Agreement shall be in addition to any
other remedy available to the
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Non-defaulting Party, on account of any such breach or default. The waiver by
either party of a breach or violation of any provision of this Agreement
shall not operate as or be construed to be a waiver of any subsequent breach
thereof.
9.2.5 TERMINATION FOR SUSPENSION OR REVOCATION OF LICENSED PARTY.
Manager shall have the right to terminate this Agreement upon written notice
to Physicians Care if any of Physicians Care's Certificates of Authority to
operate Physicians Care are suspended or revoked or not renewed, except that
in the event that the loss of a Certificate is due to the actions of Manager,
Manager with the full cooperation of Physicians Care shall assume
responsibility for remedying the event which gave rise to the suspension,
revocation, or nonrenewal to ensure that Physicians Care maintains the
Certificates of Authority contemplated hereunder.
9.2.6 TERMINATION UPON FAILURE TO AGREE ON PERCENTAGE OF PREMIUM
PAYMENT OR BUDGET. This Agreement may be terminated by either party upon
failure to agree on the percentage of premium payment pursuant to Section 7.1
by delivering one year's prior written notice of such termination. The
payment rate to Manager shall be the rate then in effect upon failure to
agree on the percentage of premium payment.
9.5 COOPERATION FOLLOWING TERMINATION. Beginning on the date of receipt
of notice of termination for any reason by either party to this Agreement,
Manager shall upon written request of Physicians Care, continue to provide
services, equipment and supplies to Physicians Care in accordance with this
Agreement for a reasonable period of time, sufficient to enable Physicians
Care to engage another manager. During such period Manager shall be entitled
to payment in accordance with this Agreement.
X. INDEMNIFICATION
10.1 INDEMNIFICATION OF MANAGER. Physicians Care shall indemnify and hold
harmless Manager from and against any and all damages, liabilities, actions,
suits, proceedings, claims, demands, losses, costs and expenses (including
reasonable attorneys' fees) that shall or may arise out of or in connection with
certain acts or omissions by Physicians Care to the extent not covered by
insurance.
10.2 INDEMNIFICATION OF PHYSICIANS CARE. Manager shall indemnify and hold
harmless Physicians Care from and against any and all damages, liabilities,
actions, suits, proceedings, claims, demands, losses, costs and expenses
(including reasonable attorneys' fees) that shall or may arise out of or in
connection with certain acts or omissions by Manager except where Manager
carries out in good faith the directives or policies of Physicians Care's Board
of Directors without negligence or willful misconduct, to the extent not covered
by insurance.
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XI. GENERAL PROVISIONS
11.1 ASSIGNMENT AND SUBCONTRACTING. This Agreement shall be binding upon
and inure to the benefit of each of the parties' respective successors and
assigns, provided that such successor and/or assign is capable of fulfilling and
assumes the duties set forth in this Agreement, and the parties hereto remain
primarily liable for performance hereunder. Manager shall be permitted, in its
sole discretion, to fulfill or perform any of its obligations under this
Agreement by or through contracts or subcontracts with third parties therefore;
provided, however, that Manager shall remain fully liable and responsible for
the performance of its duties and obligations under this Agreement. Except as
set forth in this Section 10.1 neither party shall in any manner inconsistent
with this Agreement, assign, subcontract or otherwise delegate its rights and
responsibilities under this Agreement unless the other party shall so consent by
prior written consent, which consent shall not be unreasonably withheld.
11.2 NONASSUMPTION OF LIABILITIES. Manager shall not by entering into and
performing this Agreement, be or become liable for any of the existing or future
obligations, liabilities or debts of Physicians Care, and Physicians Care shall
not assume or become liable for any of the existing or future obligations,
liabilities or debts of Manager.
11.3 IMPOSSIBILITY OF PERFORMANCE. Neither Manager nor Physicians Care
shall be deemed to be in default of this Agreement if prevented from performing
any obligation hereunder for any reasons beyond its control, including without
limitation governmental laws and regulations, acts of God or the public, flood
or storm or strikes. In such case, the parties shall negotiate in good faith
with the goal or intent of preserving this Agreement and the respective rights
and obligations of the parties.
11.4 INTERPRETATION. The validity, enforceability and interpretation of
any provision of this Agreement determined and governed by the laws of the State
of Connecticut. The invalidity or enforceability of any terms or provisions
hereof shall not unless, otherwise specified herein, affect the validity or
enforceability of any other term or provision of this Agreement unless the term
or provision is material and its invalidity or unenforceability results in a
substantial economic detriment to Physicians Care or Manager.
11.5 INDEPENDENT CONTRACTORS. Nothing in this Agreement shall affect the
separate identity of Physicians Care and Manager. Other than as provided in this
Agreement or other written agreement, it is not the intention of the parties
hereto to create a partnership or agency relationship. Nothing contained in this
Agreement is intended to cause either party to be the partner or agent of the
other or as limiting in any manner the parties in the conduct of their
respective businesses, ventures or activities, except as may be permitted
under this Agreement.
11.6 ENTIRE AGREEMENT, AMENDMENT. This Agreement, including its
Attachments and riders, contains all the terms and conditions agreed upon by
the parties hereto, and constitutes the entire understanding of the parties.
It supersedes all other agreements of the parties, oral or otherwise,
regarding the subject matter. This Agreement may not be amended or modified
in any material respect except by written instruction duly executed by the
parties hereto.
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11.7 NOTICES. Any notice request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by registered or
certified mail, postage prepaid, return receipt requested as follows:
If to Manager:
MedServ of Connecticut, Inc.
1520 Highland Avenue
Cheshire, Connecticut 06410
Attn: President
If to Physicians Care:
Physicians Care For Connecticut, Inc.
1520 Highland Avenue
Cheshire, Connecticut 06410
Attn: Chairperson of the Board
or to such other address as addressee may have specified in a notice duly
given to the sender in the manner provided herein, Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to
have been given as of the date so delivered or mailed.
11.8 HEADING. The headings contained herein are for convenience of
reference only and are not intended to define, limit, or describe the scope or
intent of any provision of this Agreement.
11.9 WAIVER. The waiver by either party of any of the terms or provisions
of this Agreement shall not be deemed to constitute a waiver of any of its other
terms or provisions. No waiver of the provisions of this Agreement shall be
deemed to constitute a continuing waiver thereof unless otherwise expressly
provided herein.
11.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts, all of which together shall constitute one and the same
instrument.
11.11 AUTHORITY TO EXECUTE AGREEMENT. The individual executing this
Agreement on behalf of each party is duly empowered to execute the Agreement and
bind said party to the terms hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MEDSERV OF CONNECTICUT, INC.
By:________________________________
Its:_______________________________
Date:
PHYSICIANS CARE FOR CONNECTICUT, INC.
By:________________________________
Its:_______________________________
Date:
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