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EXHIBIT 10.18
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") is made and entered into this
1st day of August, 1996, by and between SWEDISH COVENANT MANAGED CARE ALLIANCE,
INC., a physician hospital organization (the "Company") organized under the laws
of the State of Illinois, and North American Medical Management - Illinois,
Inc., a corporation organized under the laws of the State of Illinois ("NAMM").
This Agreement shall take effect as of September 1, 1996 ("Effective Date").
WITNESSETH:
WHEREAS, the Company is affiliated with a hospital member ("Hospital")
of the Northwestern Healthcare Network ("NHN");
WHEREAS, NHN and NAMM entered into a certain Master Agreement (the
"Master Agreement"), whereby those parties agreed to certain issues with respect
to the control and operations of the Company, the terms of which Master
Agreement set forth the governance and terms of this Agreement as provided
below;
WHEREAS, NAMM operates in the State of Illinois to provide management
services to physicians and hospitals participating in Medicare-risk management
and other types of services which may be agreed to from time to time, and to
arrange for the provision of efficient and effective health care services;
WHEREAS, the Company requires certain staffing and management expertise
to provide it with administrative services;
WHEREAS, NAMM is an organization with personnel who have expertise in
managed care contracting, with particular expertise in the area of Medicare-risk
management and related claims processing, financial, business and medical
services management and administration; and
WHEREAS, the Company desires to retain NAMM, and NAMM desires to be
retained by the Company, all on terms and provisions mutually desirable to the
respective parties and for compensation to be paid by the Company to NAMM, on
such terms, provisions and compensation arrangements as are described in this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, covenants
and conditions hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which the parties hereby
acknowledge, the parties agree as follows.
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ARTICLE I
RELATIONSHIP OF THE PARTIES; MASTER AGREEMENT
1.01 RELATIONSHIP OF THE PARTIES
Except as otherwise provided in this Agreement, neither this Agreement
nor any of its provisions shall be construed to create any partnership,
joint venture, principal/agent or employer/employee relationship
between the Company and NAMM, or to in any way make one party
responsible for the debts, liabilities or any other legal obligations
of the other party. It is expressly understood and agreed by the
parties that the Company and NAMM shall at all times be acting as
entities independently contracting with each other for the performance
of services described in this Agreement. Neither party shall have the
power to bind or obligate the other party except as set forth in this
Agreement. Unless the Parties otherwise agree, this Agreement and all
references to the Company in this Agreement are limited to services
provided by NAMM solely with respect to Risk Contracts and related
services rather than all services and contracts entered into by the
Company. The Company does not report to NAMM and retains its separate
autonomy and direct reporting relationship to Swedish Covenant Managed
Care Alliance, Inc. and its affiliates and the other owners of the
Company.
1.02 MASTER AGREEMENT
The terms of the Master Agreement are Incorporated into this
Agreement by reference and all of the terms of this Agreement are
subject to and must comply with the applicable terms of the Master
Agreement. If there is any Inconsistency between the two agreements,
unless otherwise specifically provided, the provisions of this
Agreement shall be construed in a manner which is not Inconsistent with
the Master Agreement.
As an overview, the Master Agreement describes the contractual
relationships which may exist between NHN and NAMM regarding the
relationships between NAMM and NHN-affiliated general Hospitals and/or
affiliated Physician Organizations and Physician Hospital Organizations
("PHOs") for the purpose of Medicare risk contracting. The Master
Agreement describes two alternative models pursuant to which Hospitals,
affiliated Physician Organizations and/or PHOs may affiliate with NAMM.
The first alternative Includes the development of joint ventures (i.e.
the Management Companies) in which NAMM and the Hospitals, affiliated
Physician Organizations and/or PHOs act as investors (the "Equity
Model"). It is understood that this option is still available to the
Company or its affiliated hospital and PHO in the event that its
affiliated Physician Organization declines or, for whatever reason, is
unable to participate. The second alternative describes a relationship
in which NAMM agrees to provide management and
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administrative services for risk contracts to (ii) Management Companies
owned by the Hospitals, their affiliated Physician Organizations and/or
PHOs, or (ii) a Hospital division if the Parties agree to proceed in
that manner, in each case with NAMM having no ownership interest in the
Company ("Management Contract Model"). Every Hospital, its affiliated
Physician Organizations and/or PHOs has the opportunity to participate
in either the Equity Model or Management Contract Model (or other
participation model agreed upon by the Parties hereto and thereto) with
NAMM. The provisions of the Master Agreement which relate to the Equity
Model as defined therein shall not apply to the terms of this
Agreement, except as to when they require a termination of this
Agreement or as specifically set forth herein.
Capitalized terms used in this Agreement which are not defined herein
but are defined in the Master Agreement, shall have the meanings
ascribed to them in the Master Agreement.
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.01 NAHM REPRESENTATIONS, WARRANTIES AND AGREEMENTS
As a material inducement for Company to enter into this Agreement, NAMM
hereby represents, warrants and agrees as follows:
(A) NAMM has the legal power, right and authority to consummate
the transactions contemplated hereby.
(B) NAMM has been duly formed and is validly existing under the
laws of Illinois and has made all filings with governmental
authorities required by such laws.
(C) NAMM is a wholly owned subsidiary of North American Medical
Management, Inc. ("NAMM Parent") a Tennessee corporation that
is the parent of a number of comparable corporate subsidiaries
operating in seven states. NAMM Parent is a wholly owned
subsidiary of PhyCor, Inc., a Tennessee corporation that is
publicly traded on the Nasdaq stock exchange. At the end of
calendar year 1995, PhyCor, Inc. operated 33 multispecialty
clinics with approximately 2100 physicians and had annual
revenues in excess of $441,000,000.
(D) This Agreement, the Master Agreement and all other documents
and instruments which have been executed and delivered
pursuant to this Agreement, or, if not yet executed or
delivered will when so executed and delivered, constitute
valid and binding obligations of NAMM enforceable in
accordance with their respective terms, subject to the
provisions of all laws relating to bankruptcy and insolvency
and other laws relating to creditors' rights generally.
Neither the execution and delivery of this Agreement, nor the
Master Agreement, nor the incurrence of the obligations herein
set forth, nor the consummation of the transactions herein
contemplated, nor compliance with the terms of this Agreement
or the Master Agreement will conflict with or result in a
breach of any of the terms, conditions or provisions of, or
constitute a default under any, bond, note or other evidence
of indebtedness or any contract, indenture, mortgage, deed of
trust, loan, agreement, lease or other agreement or instrument
to which NAMM or NAMM Parent is a party.
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(E) NAMM has disclosed to NHN a true and accurate depiction of its
financial position as of the fiscal year ended December 31,
1995, and NAMM's financial position to date has not materially
changed from that reflected in such December 31, 1995
financial statements.
(F) NAMM and NAMM Parent have complied with all laws, ordinance
and regulations applicable to it Including the filing of all
required tax returns or other tax notices.
(G) There is no suit, action or other proceeding pending against
NAMM, NAMM Parent or any NAMM Affiliate (a NAMM Affiliate is
any party controlled by NAMM, under common control with NAMM
or in a joint venture with NAMM or other similar contractual
relationship), of such a magnitude or character as to put NAMM
at risk of being unable to meet fully and in good faith the
obligations imposed on NAMM by this Agreement.
(H) To the best of the knowledge of NAMM, none of the information
contained in the representations and warranties of NAMM set
forth in this Agreement or in any of the certificates,
exhibits and schedules, lists, documents or other instruments
delivered or to be delivered to NHN pursuant to this Agreement
or the Master Agreement contain any untrue statement of a
material fact or omit to state a material fact regarding the
operation of NAMM which would make the statements contained
herein or therein misleading
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ARTICLE III
OBLIGATIONS OF NAMM
3.01 AUTHORITY OF NAMM
The Company authorizes NAMM to manage the affairs and provide
administration services to the Company for the Company's Medicare HMO
(Risk Contracts) - and such other business as the Company shall
specifically authorize in writing for NAMM to perform for it
("Business"), as set forth in this Agreement, and as approved as set
forth in the Master Agreement. NAMM shall be authorized, without
further approval of the Company, to commit funds of the Company to
perform the services and to staff the Company as described hereunder,
and to contract for services for the Company, provided all such actions
are within the operating budgets previously approved by the Company's
Board of Directors and provided further that NAMM shall require in its
agreements with any third parties who may perform services on behalf of
NAMM that such contractors perform their duties in accordance with this
Agreement. The Company shall cooperate with and shall use its best
efforts to cause its employees, agents and independent contractors to
cooperate with personnel provided by NAMM hereunder so that NAMM may
perform its duties under this Agreement. NAMM shall manage and
administer the Business of the Company in accordance with the terms and
conditions of this Agreement.
Without limiting the need for NAMM to obtain prior approval of the
Company for other matters, NAMM will not take the following actions on
behalf of the Company, without the approval of the Company:
(A) endorse any note, or act as an accommodation party, or
otherwise become surety with respect to any amount;
(B) borrow or lend money, or make, deliver or accept any
commercial paper or execute any mortgage, bond, or lease,
purchase or contract to purchase any property, or sell or
contract to sell any property or assets of the Company;
(C) enter into any agreement as a result of which any person shall
obtain an interest in the Company;
(D) assign, transfer, pledge, compromise or release any of the
Company's claims or debts, except upon payment in full of such
claim or debt, or arbitrate or consent to the arbitration of
any of the Company's debts or claims;
(E) change the nature of the Company's Business;
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(F) distribute surplus amounts other than as agreed upon with the
Company;
(G) either individually or in the aggregate, make any expenditure,
allocate any expense or enter into a contract or agreement for
an amount in excess of five thousand dollars ($5,000), which
is not included in the operating or capital budget.
(H) enter into any agreement or transaction on behalf of the
Company with NAMM or a NAMM Affiliate;
(I) do any other act that would make it impossible to carry on the
ordinary business of the Company; or
(J) enter into any agreement involving the sale, lease, assignment
or use of any real estate, property or other assets owned,
operated, leased, managed by or otherwise related to the
Company or any of its affiliates.
3.02 MANAGEMENT SERVICES
NAMM will work in close cooperation with Company staff to provide those
management services specified in Exhibit A of this Agreement. In
addition, NAMM will perform the following services:
A. CONTRACT NEGOTIATIONS. NAMM will provide its expertise and
contacts in the managed care industry to facilitate
negotiation of Risk Contracts for the Company. As provided in
the Master Agreement, where permitted to do so by state or
federal regulations, contracts will be negotiated by NAMM for
NHN directly with the HMOs on behalf of the applicable
affiliated Physician Organization, PHO and/or Hospital, with
subcontracts to be provided from NHN to the Company to manage
the Physician Organization, PHO and Hospital only with respect
to the Medicare-risk products as described hereunder. NHN will
not charge any additional cost, fee or margin to the Company,
its Physician Organization, PHO or Hospital for contracting
with any HMOs or related payers. Where NAMM and NHN jointly
determine that they are required to do so by state or federal
regulations, NAMM will arrange for contracts to be negotiated
directly between an HMO and the applicable Hospital, and
affiliated Physician Organization and PHO, with appropriate
management and risk sharing agreements as necessary to provide
for the agreed distribution of surplus funds and to implement
the terms of the Master Agreement. The final contracts between
the HMOs and NHN will be subject to approval by the Company as
and to the extent the contracts relate to the services to be
provided by or through the Company. NAMM believes it is
crucial to obtain the Company's ongoing input during the
process of negotiating contracts with the HMO. This is
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especially true since the Company must agree with the final
HMO contract (as described above) before it is adopted by NHN.
Therefore, a representative of the Company will be Included in
meetings to develop the strategy for NAMM's negotiations with
the HMOs. NAMM shall keep the Company informed of the
discussions at, and results of, its meetings with the HMOs and
physicians.
B. FINANCIAL SERVICES. NAMM will assist the Company to manage the
funds paid under the Risk Contract and ensure that any surplus
funds are distributed in accordance with the agreements
between the Company and providers with which it contracts. As
more particularly described in Exhibit A, NAMM will provide
financial services to Company, Including the management of
bank accounts and the distribution of funds to affiliated
Physician Organizations, PHOs and Hospitals managed by the
Company. NAMM will arrange for audited financial statements of
the Company to be prepared in accordance with generally
accepted accounting principles and consistent with Exhibit
A.01(J). NAMM will also prepare operating and capital budgets
for the Company in a timely fashion, to be shared with NHN.
NAMM will determine the reasonable working capital
requirements of the Company. NAMM will be bonded and present
evidence of same to NHN and the Company in an amount agreed to
by the parties, as reasonably necessary to protect Company
funds.
C. PHYSICIAN SERVICE MANAGEMENT. As more particularly described
in Exhibit A, NAMM, through the auspices of the Company, will
manage one or more affiliated Physician Organizations and PHOs
regarding its provision of health care services under the Risk
Contract. As part of its duties for Risk Contracts, NAMM will
negotiate and manage agreements with affiliated Physician
Organizations and PHOs, which may include fee-for-service and
capitation agreements. When deemed reasonably appropriate by
NAMM, NAMM will also employ a Medical Advisor who will work in
close consultation with and through the medical director of
any affiliated Physician Organization and PHO in order to
manage the Risk Contract project or any other line of business
for which NAMM has been retained by the Company. The costs of
employing such Medical Advisor will be allocated, based upon
an appropriate measure of the use of such services, to all
Risk Contract arrangements managed by NAMM of Illinois.
D. SPECIFIC SERVICES FOR RISK CONTRACTS. As more particularly
described in Exhibit A, NAMM will provide the following
services to the Company with respect to Risk Contracts.
Performance of these services will be in compliance with
parameters outlined in the HMO agreements between any HMO and
NHN (or, in the limited cases described above, between an HMO
and the applicable affiliated Physician Organization, PHO
and/or Hospital). The Parties agree that certain services are
"core" services which will in all cases be provided by NAMM
(Including those set
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forth in paragraphs (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii) and (ix) below). NAMM will also look to existing
affiliated Physician Organization and PHO standards when
providing any of the services listed below and will try, to
the extent reasonably possible, to coordinate standards it
implements or recommends with such existing affiliated
Physician Organization or PHO standards. In addition, any such
significant changes and/or additional standards will be
communicated to the Physician Organization, PHO and Company
prior to being implemented by NAMM.
(i) Prepare and adopt initial benchmark utilization
review and quality management procedures.
(ii) Perform claims processing for providers.
(iii) Perform provider contracting services.
(iv) Perform utilization management and quality assurance
services, which will Include utilization
authorization, concurrent review, case management,
and discharge planning, and establish credentialing
criteria and grievance procedures.
(v) Perform member services relating to claims matters.
(vi) Establish and maintain financial management for the
affiliated Physician Organization, PHO and Hospitals,
Including risk-sharing administration only with
respect to the Medicare-risk contracts and program.
(vii) Administer provider education programs as reasonably
necessary.
(viii) Prepare quarterly individual and aggregate physician
profiling reports comparing physician performances to
adopted utilization review standards.
(ix) Recommend and administer quality outcome standards
and accompanying reports comparing physician
performance to standards required by the applicable
HMOs.
E. PROVIDING PHYSICIANS. NAMM will use its best efforts to
encourage physicians, Including a sufficient number of primary
care physicians, to form and participate in affiliated
Physician Organizations, PHOs where payments on a capitated
basis will be accepted by primary care physicians and in which
a sufficient number of primary care physicians are willing and
able to provide leadership to the affiliated Physician
Organization and PHO.
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F. PRICING AND SERVICE COVERAGE ISSUES. NAMM will assist the
Company, and provide the Company with guidance, in negotiating
which services should be provided by the Hospital and which
should be provided by the physicians, as they relate to
payments for such services out of the Hospital and Physician
Organization service fund account, as well as which prices the
Company's providers will charge. NAMM will provide a suggested
allocation of services and suggested prices based on
actuarially determined market basket pricing figures for the
Hospital and physicians providing medical services under the
Risk Contracts.
G. AGREEMENT TO SUBCONTRACT. NAMM agrees to subcontract with
Swedish Covenant or Managed Health Care Associates (MHCA) for
services referred in paragraph A, B, C, D, E, F if Swedish
Covenant and MHCA can provide these services at least as
effectively as NAMM and more efficiently. NAMM will have
authority to set operating policies and procedures and
supervise the personnel directly involved for any
subcontracted service. To the extent performance levels are
materially below other Chicago area NAMM sites for any ninety
(90) day period, NAMM and subcontractor will develop a
corrective action plan. If after another ninety (90) day
period performance levels have not improved, the subcontract
will be terminated. NAMM will not be penalized under the
performance requirements for substandard performance of
subcontractors.
3.03 REPORTING
NAMM shall provide to the Company the reports and compilations
described in Exhibit A which, together with any other reports referred
to in this Agreement, the parties believe are all of the reports
necessary for the management and administration of the Business. NAMM
shall provide additional extraordinary reports and compilations upon
request by the Company, which are reasonably necessary for management
and administration of the Business of the Company, consistent with the
Company's then current goals, objectives, financial condition and
business plan.
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3.04 NAMM STAFFING
NAMM will, through its own employees in the Chicago area and elsewhere,
provide management of all aspects of the Risk Contract business
associated with the Company in exchange for its participation in the
Company's profits as described in Article V of this Agreement. NAMM
will interview and select a Senior Management Team, subject to NHN
approval. Where such expertise is not provided by full-time personnel
of NAMM in the Chicago area, the expertise of other NAMM personnel or
consultants may be obtained on an hourly or shared (with other
NHN-related management companies) expenses basis when, in NAMM's
opinion, it is appropriate and financially efficient to do so, provided
that such expense is identified and approved in the Company budget as
an additional expense or if not, that the budget is amended and
approved in advance by the Company.
NAMM shall make available a sufficient number of its (or its
Affiliates') employees to fulfill its duties under this Agreement, as
identified in the budget, as such number is determined by NAMM, subject
to approval by the Company, and shall revise the budget to change the
number of employees as warranted by changes in the operations of the
Company. Such personnel shall be drawn from such locations as deemed
appropriate at the sole discretion of NAMM. NAMM shall be solely
responsible for performing job evaluations for all personnel hired by
NAMM (or its Affiliate) to carry out the terms of this Agreement,
provided that the Company retains the right to evaluate NAMM's overall
performance. NAMM shall also have in its sole discretion the authority
to hire and fire all NAMM (or its Affiliates') employees; except that
NAMM agrees to allow Swedish Covenant Managed Care Alliance's (SCMCA)
management committee to interview NAMM's designated SCMCA
administrative director, and to raise any reasonable concerns regarding
the ability to operate within SCMCA structure.
3.05 ANNUAL OPERATING BUDGET
NAMM shall develop and present to the Board of the Company annual
operating and capital budgets for the Company on a calendar year basis
or as agreed to. Upon approval of the annual budgets by the Company's
Board, NAMM shall operate within such budgets in providing its
management services to the Company.
3.06 RETENTION OF MEDICAL ADVISOR
NAMM shall, in consultation with the Company, be responsible for the
selection, development of performance standards for and appraisal of a
Medical Advisor who will help manage the Risk Contracts and work in
close consultation with and through the medical director of any
affiliated Physician Organization or PHO.
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3.07 KEY CONTACT
One of NAMM's (or its Affiliates') employees shall serve as the key
contact for the Company. The key contact will be the president of NAMM,
who will be principally responsible for managing NAMM's duties under
this Agreement and will be a member of the Senior Management Team of
the Company, approved as described in Section 3.04 of this Agreement.
Unless this individual shall die or become disabled and be unable to
perform such duties under this Agreement, NAMM shall not be permitted,
without the Company's consent, to replace this named individual as the
key contact. In the event of any such replacement, the Company and NHN
shall have the right to approve the individual selected by NAMM to
replace the key contact person, as a member of the Senior Management
Team and as the key contact under this Section, provided such approval
shall not be unreasonably withheld.
3.08 OWNERSHIP OF AND ACCESS TO RECORDS
All records relating to the Company's operations and Business
(Including, but not limited to, all books of account and general
administrative records, and all of the following, to the extent such
are non-proprietary to NAMM and relate solely to (or were purchased
solely for) the Company's operations: software programs, MIS data,
utilization management policies, credentialing guidelines, case
management, quality assurance information and all other related
documents and policies), shall be and remain the property of the
Company, except as the parties may otherwise agree in writing. All such
information, data and records may be used by NAMM to perform the
services hereunder. All property of this nature which was the
proprietary property of the Hospital or affiliated Physician
Organization or PHO which the Company or NAMM was allowed to utilize in
its management of the Company or the risk business shall remain the
proprietary property of the Hospital or the affiliated Physician
Organization or PHO, as the case may be. The Parties understand that
the Company will contract with a variety of health care providers and
that certain financial and medical record information from these
individual provider entities will be kept confidential and may not be
shared with the owners of the Company.
All records relating to NAMM's operations (Including, but not limited
to, the following, to the extent such are non-proprietary to the
Company and relate solely to (or were purchased solely for) NAMM's
operations: software programs, MIS data, utilization management
policies, credentialing guidelines, case management, quality assurance
information and all other related documents and policies), shall be and
remain the property of NAMM, except as the parties may otherwise agree
in writing. All such information, data and records may be used by the
Company with respect to the services hereunder. All property of this
nature which was the proprietary property of NAMM or which the Company
or an affiliated
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Physician Organization or hospital was allowed to utilize in the
Hospital's risk Business shall remain the proprietary property of NAMM.
NAMM will assure appropriate, convenient, and unlimited access to all
records of the Company to NHN except where such access might be limited
by patient medical record confidentiality requirements under law.
3.09 DISCLOSURE OF INFORMATION
NAMM agrees to make available information contained in the records of
the Company to parties to whom the Company has authorized such
disclosure, including NHN. NAMM agrees to protect the confidentiality
of such records and will only disclose confidential data upon written
consent of the affected parties or when subpoenaed or otherwise
required by law or compelled by legal process. NAMM agrees to disclose
to the Company any subpoena or other legal request for documents prior
to the disclosure of such documents in order to permit the Company to
intervene or file appropriate legal documents contesting their
disclosure. These obligations shall survive the termination of this
Agreement.
3.10 MEDICAL CONFIDENTIALITY
NAMM agrees to comply with applicable federal, state and local laws for
handling confidential medical information and shall take all
appropriate and reasonable action in developing technological and
contractual methods of maintaining confidentiality for any medical or
other confidential information converted to electronic data.
3.11 PERFORMANCE STANDARDS AND GOALS
In performing its obligations under this Agreement, NAMM shall act at
all times in a professional manner, devoting its efforts in good faith
and with reasonable diligence to the performance of this Agreement.
NAMM shall provide services in conformity with all applicable standards
set forth in the HMO contract pursuant to which Medical services are
being provided by the Company. For contracts other than Medicare, NAMM
agrees to set performance and utilization targets consistent with the
market and to obtain SCMCA Board approval before contracts are
initiated.
NAMM's overall performance hereunder will be evaluated by reference to
goals the Parties have established including the following (provided
that unless otherwise agreed to by the Parties, the amount of NAMM's
compensation provided for in Article V above is not dependent on
meeting such goals but may lead to termination for Cause under Section
7.02. The Company understands and accepts that NAMM's ability to comply
with these standards is based, at least in part, on its willingness to
accept and implement NAMM's recommendations made pursuant to this
Agreement):
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1. NAMM's success in realizing a decrease in the Hospital's Medicare
utilization rate to 1,200 acute inpatient days per 1,000 population by
the end of the third year of the Company's operations contingent on the
Company's agreement to retain directly or through NAMM an in-patient
manager whose duties shall be defined by the Parties. Any decrease must
only be accomplished while maintaining the quality of care.
2. Growth in member enrollment utilizing the services of the affiliated
Physician Organization (MHCA) or PHO providers. For example, the
Parties have as a goal reaching 1,500 enrolled Medicare recipients by
the end of 1998. Parties will evaluate and adjust the goal in light of
the market willingness to offer Medicare full risk contracts.
3. NAMM's ability to negotiate and obtain for the Company a portion or an
Increased portion of all health insurance premiums, Including those
that may be charged to the Medicare enrollees by the HMO, as evidence
by the HMO retaining less than 15% for administrative services and
profit with the understanding that this retention may be negotiated at
a higher rate should the HMO assume additional risks for healthcare
services.
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ARTICLE IV
OBLIGATIONS OF THE COMPANY
4.01 AUTHORITY OF THE COMPANY
The Board of Directors of the Company ("Board") shall be the governing
body of the Company and shall at all times exercise ultimate control
over the financial assets, operations and Business of the Company and
shall have the right under this Agreement to direct NAMM on how to
expend any funds or assets of the Company. The responsibilities of the
Company Include, but are not limited to, managing and administering the
Company's operations not delegated to NAMM hereunder and accepting or
rejecting recommendations by NAMM therefore. The Company shall continue
to exercise general responsibility for the operation and affairs of the
Company. NAMM shall administer the Company's adopted plans and criteria
and perform the services identified in this Agreement and in Exhibit A,
consistent with the directives and approvals of the Company.
4.02 OWNERSHIP OF ASSETS
The Company will own all of its assets purchased specifically for the
Company for purposes of operating the Medicare-risk undertaking,
considering the limitations thereon set forth in Section 3.08 above.
Upon termination of this Agreement as described in Article VII, Company
shall retain title and ownership of all said assets.
4.03 THE COMPANY'S RESPONSIBILITIES
HOSPITAL COOPERATION. The Board of the Company will use its best
efforts to assure that the management personnel of the Hospital
cooperate and give full support to the provisions of the Master
Agreement and this Agreement.
PROVIDING PHYSICIANS. The Board of the Company will use its best
efforts to encourage physicians, Including a sufficient number of
primary care physicians, to form and participate in affiliated
Physician Organizations and PHOs where payments are accepted on a
capitated basis by primary care physicians and in which a sufficient
number of primary care physicians are willing and able to provide
leadership to the Physician Organization and PHO.
ANCILLARY SERVICES. NAMM shall arrange for the provision of ancillary
and non-hospital services through entities affiliated with the
Hospital, the Company or other similarly situated providers willing to
contract. The Company shall cause the entities affiliated with the
Company or Hospital to price those ancillary and other non-hospital
services which they
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wish to provide through HMO contracts covered by the Master Agreement
at prices which are competitive with those otherwise available to HMOs
in the same or similarly situated community in the Chicago Metropolitan
area at the time the Risk Contracts are executed. Unless otherwise
agreed to by the parties, the Company shall cause the ancillary
providers affiliated with a Hospital to provide such services at prices
that are at least equal to the lowest prices that the affiliated entity
offers, at the time the Medicare-risk contracts are executed, to any
other payers (other than reimbursements received from Medicaid) in the
community. To implement this pricing process, NAMM will actuarially
determine a market-competitive price based on its assessment of the
market and will discuss with the Company, Hospital and affiliated
entity the basis for its recommendations and will obtain input from the
Hospital; the Hospital affiliated entity will then have a right of
first refusal to contract to provide such services at the price so
established by NAMM.
HOSPITAL SERVICES. The Company shall cause the Hospital to agree
(unless otherwise agreed to between such Hospital and NAMM) to provide
services through arrangements covered by the Master Agreement at prices
that are at least equal to the lowest prices that they offer, at the
time the applicable Risk Contracts are executed, to any other payers
(other than reimbursements received from Medicaid) in the community,
unless the lowest price offered by the Hospital is lower than the price
which may be obtained under the risk contract, as actuarially
determined by NAMM.
DISTRIBUTION OF SURPLUS FUNDS. The distribution of surplus funds for
affiliated Physician Organizations, PHOs and the Hospital shall be made
as set forth in Exhibit B hereto. The Company, or at its instruction,
NAMM shall be responsible for making the actual distribution of any
such funds.
4.04 DEVELOPMENT FUNDS
The Hospital, the Physician Organizations and/or PHOs affiliated with
the Company will provide development funds to the Company. The owners
of the Company, will contribute to the Company a maximum of $300,000,
as described in the following schedule. At the discretion of the
Company, this amount will be treated as equity in the Company or as an
operating capital loan to the Company.
The following is a schedule of the amounts to be required by the
Company on the dates indicated:
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Period of Time Maximum Amount
----------------- --------------
September 1, 1996 $100,000
December 1, 1996 $ 50,000
March 1, 1997 $ 50,000
June 1, 1997 $ 50,000
September 1, 1997 $ 50,000
4.05 THE COMPANY'S FINANCIAL RESPONSIBILITIES
Deficits of the Company's operations and the two risk service fund
accounts are dealt with as set forth in Exhibit B.
The other financial responsibilities of the Company shall Include, but
not be limited to, directly providing or paying the cost of providing
the following:
(A) All payments to health care providers.
(B) Interest expense for monies borrowed by the Company.
(C) Repayment of principal for monies borrowed by the Company.
(D) Attorney's fees and expenses Incurred by or on behalf of the
Company, relating to litigation by or against the Company or
otherwise directly relating to the Company's operations or
Business.
(E) Fees for accountants or consultants retained to audit the
Company and/or prepare and submit tax forms for the Company.
(F) A program of property, liability and other forms of insurance
coverage, limits and carriers acceptable to NAMM.
(G) All costs associated with investments or loans made by the
Company.
(H) Any dividends or distributions paid to shareholders of the
Company.
(I) Remuneration, if any, of the Company's officers and Board
members.
(J) Any other fees, costs, expenses or taxes paid by NAMM (in all
cases in conformity with the budget approved by the Company)
relating to the Business or operations of the Company.
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4.06 BOARD COMMITTEE MEETINGS
The Company Board shall schedule and hold regular, periodic meetings.
NAMM shall provide reports, which it is required to provide by the
terms of this Agreement, to the Board prior to such meetings.
Representatives of NAMM may be invited to be present at such meetings
and to be given prior notice of all regular and special meetings of the
Board, provided that the Board shall have the right to request that
NAMM be excluded from any meeting in which NAMM's performance will be
discussed, or otherwise as determined by the Board. Representatives of
NAMM shall also attend such Company committee meetings as NAMM and the
Company agree are necessary for an NAMM representative to attend.
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ARTICLE V
COMPENSATION TO NAMM
5.01 BASIS FOR ACCOUNTING
The accounting year for the Company shall be January 1 through December
31. Revenue and expenses shall be determined on an accrual basis and
be consistent with generally accepted accounting principles.
5.02 NAMM'S PARTICIPATION IN ANY COMPANY PROFITS
NAMM shall be paid a management fee for its services hereunder
("Management Fee") in an amount equal to fifteen thirty-fifths (15/35)
(per Exhibit C1, C2) of the Company's profit, if any, for each year of
this Agreement. The Company's profit is calculated as follows:
Revenue:
(i) the Company's share of the Physician Organization
surplus, if any, plus
(ii) the "4.50%/$4.50 Expense Reimbursement" (as defined
in Section 5.04 below) provided that if the
4.50%/$4.50 Expense Reimbursement exceeds the actual
expenses incurred by the Company for the year, such
excess will not be considered revenue; less
Expenses:
all expenses of the Company, including services provided by
the Company to NAMM (note that this is before payment of the
Management Fee to NAMM and any bonus payments to the local
management and employees of NAMM, as described below).
NAMM's share and local management and employees' share shall be limited
to the amounts shown on the following chart. The total that is credited
to the Company is 35%. The allocation of the Company's Profits (i.e.,
the Hospital's Business Profit as therein defined) is described in this
Section 5.02 of the Agreement
PHYSICIAN ORGANIZATION NAMM'S SHARE LOCAL MANAGEMENT SHARE
SURPLUS
- ------------------------ -------------------------------------- -------------------------------------
$0 to $1,000,000 18% of Surplus plus 6% of Surplus plus
$1,000,001 to $3,000,000 15% of Surplus over $1,000,000 plus 5% of Surplus over $1,000,000 plus
$3,000,001 to $6,000,000 11.25% of Surplus over $3,000,000 plus 3.75% of Surplus over $3,000,000 plus
$6,000,001 to $8,000,000 6% of Surplus over $6,000,000 plus 2% of Surplus over $6,000,000 plus
$8,000,001 to $10,000,000 3% of Surplus over $8,000,000 plus 1% of Surplus over $8,000,000 plus
$10,000,001 and greater 1.5% of Surplus over $10,000,000 0.5% of Surplus over $10,000,000
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NAMM will contribute to the Company 15/35 (per Exhibit E) of any operating
deficits incurred by the Company. The previous sentence does not apply during
the development phase of the Company's operations during which the
capitalization funds contributed by the owner(s) of the Company are being
utilized to fund Company deficits.
For example, if the 4.50%/$4.50 Expense Reimbursement for a year equaled
$100,000 and the Physician Organization surplus for that year was $500,000 (and,
as described in Exhibit B, 35% of that surplus was retained by the Company),
then:
1. If the Company's actual expenses for the year were $100,000, (a) the
revenue would be $175,000 (35% x $500,000) plus the $100,000
4.5%/$4.50 Expense Reimbursement, and (b) the actual incurred expenses
were $100,000, then the Company's profit would be $175,000, of which
NAMM would receive $75,000 (15/35 x $175,000), local management and
staff would receive $25,000 (5/35 x $175,000) and the owners of the
Company would receive $75,000 (15/35 x $175,000).
2. If the Company's actual expenses for the year were $150,000, (a) the
revenue would be $175,000 (35% x $500,000) plus the $100,000
4.5%/$4.50 Expense Reimbursement, and (b) the actual incurred expenses
were $150,000, then the Company's profit would be $125,000, of which
NAMM would receive $53,571.50 (15/35 x $125,000), local management and
staff would receive $17,857 (5/35 x $125,000) and the owners of the
Company would receive $53,571.50 (15/35 x $125,000).
3. If the Company's actual expenses for the year were $50,000, (a) the
revenue would be $175,000 (35% x $500,000) plus the $50,000 4.5%/$4.50
Expense Reimbursement, and (b) the actual incurred expenses were
$50,000, then the Company's profit would be $175,000, of which NAMM
would receive $75,000 (15/35 x $175,000), local management and staff
would receive $25,000 (5/35 x $175,000) and the owners of the Company
would receive $75,000 (15/35 x $175,000). Under this third example,
since the actual expenses incurred for the year were less than the
4.5%/$4.50 Expense Reimbursement, an adjustment may be made to future
payments under the 4.5%/$4.50 Expense Reimbursement, as described in
Section 5.04 below, to more closely reflect anticipated Company
expenses for future years and to recoup the unused amount for the past
year.
Attached to this Agreement as Exhibits C, D and E are charts which illustrate
the flow of funds for surplus distribution, sample capitation payment
distributions and responsibilities for deficits.
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5.03 PAYMENT IN THE EVENT THE JOINT MARKET STRATEGY IS NOT AGREED UPON
If this Agreement is terminated pursuant to Section 7.02(A) (i.e.
failure to agree on the Joint Market Strategy within ninety days
following the execution of the Master Agreement), NAMM shall be
reimbursed its full out-of-pocket expenses and for the value of any
consultation services provided to the Company directly related to the
development of the Company, which amount is considered part of the
development funds with which the Company was capitalized as described
in Section 4.02 above.
5.04 PAYMENT OF EXPENSE REIMBURSEMENTS TO NAMM
The Company shall allocate for NAMM as a management expense the
"4.5%/$4.50 Expense Reimbursement". The "4.5%/$4.50 Expense
Reimbursement" means a flat rate sum designed to offset basic fixed
expenses of the Company and will be equal to 4.5% of the total revenues
received for Medicare HMO enrollees and $4.50 per-member-per-month for
any Commercial HMO Members, as those percentage and dollar amounts may
be adjusted in the future, as described below in this paragraph. NAMM
will provide the Company with reports, on at least a quarterly basis,
to show the itemized actual expenses of the Company in comparison to
the amount received for the 4.5%/$4.50 Expense Reimbursement. The
Company and NAMM, in conjunction with the Hospital, affiliated
Physician Organizations and/or PHO providing medical services under
contracts with respect to the Company, will review this percentage and
amount annually (with a view to reducing them if the actual experience
in the prior year shows that the percentage and/or amount utilized
resulted in a material excess amount of reimbursement under this
provision) so that the per-member-per-month component of the management
fee provides sufficient funds only to meet break even expenses for the
Company. In order to avoid duplication of services among the Company,
the Hospital and the affiliated Physician Organization or PHO, NAMM may
utilize the services of the Hospital, Physician Organization and PHO to
the extent requested provided the services meet the standards set forth
by NAMM and the cost of such services to the Company is less than that
charged by NAMM at its cost, as described above.
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ARTICLE VI
EXCLUSIVITY
6.01 JOINT MARKET STRATEGY
The Joint Market Strategy will set forth the mutual and individual
goals of the Company, NAMM, NHN and the Hospitals, Physician
Organizations and PHOs affiliated with the Company. From the Company's
perspective, the purpose of the Agreement and the Joint Market Strategy
is to obtain NAMM's best efforts to Increase the market share of the
Company and its affiliated Hospital, Physician Organization and PHO. It
is a further goal that the Company or its Hospital affiliate be
designated the local hospital, for purposes of this Agreement and
Master Agreement having the right of first refusal to serve as the
local hospital or a venture party for opportunities outside of the
defined service area within Cook County. The Joint Market Strategy will
describe the Company Service Area by identifying (a) those hospitals
within the area that are considered as competitors of the Hospital(s)
and where management of a Physician Organization or PHO by NAMM would
be considered harmful to the competitive interests of the Company or
the Hospital affiliated Physician Organizations and/or PHOs, when it
attempts to secure payer contracts, whether Medicare, Medicaid or
commercial; (b) competitors to any affiliated Physician Organization or
PHO located outside a NHN Hospital Service Area ("Physician
Organizations' Service Area"); (c) specific geographic region, as
defined by zip codes, as to the Company's primary and secondary service
areas, for purposes of this Agreement; (d) describe goals and
opportunities for NAMM that are outside of the Hospitals' Service Areas
and Physician Organizations' Service Areas, or which are within those
areas but not available to and are not competitive with NHN, the
Hospitals or affiliated Physician Organizations or PHOs; (e) describing
those lines of business which the Parties agree to pursue in each
service area (Including establishing definitions or "Managed Care" and
"Commercial Business") and establish the principal that NAMM will use
its best efforts not to take actions which would adversely affect the
Hospital's other lines of business not being performed by NAMM for the
Company; and (f) for ventures outside of the primary service area, the
types of models for participation from those described in the Master
Agreement. Once agreed to, within ninety days after the execution of
the Master Agreement by NHN, the Company and NAMM, the Joint Market
Strategy shall be amended in the event there is a membership change
(addition or withdrawal) in which hospitals are Hospitals, or a
Physician Organization or PHO becomes or ceases being affiliated with
NHN, or NAMM, NHN and the Company otherwise agree.
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NAMM and the Company understand that the Company may from time to time
introduce NAMM to physicians and/or Physician Organizations who are not
affiliated with or participating in the Company. If after these
introductions and during the term of this Agreement such physicians
and/or Physician Organizations shall have further contract with NAMM,
NAMM shall keep the Company advised of such discussions, as
appropriate. NAMM and the Company understand that NAMM may from time to
time introduce the Company to physicians and/or Physician Organizations
who are not affiliated with or participating in the Company. If after
these introductions and during the term of this Agreement such
physicians and/or Physician Organizations shall have further contract
with the Company, the Company shall keep NAMM advised of such
discussions, as appropriate.
6.02 COMPANY EXCLUSIVITY
For the term of this Agreement, the Company, the Hospital affiliated
with the Company and its affiliated hospital entities will use NAMM to
manage their Risk Contracts unless otherwise agreed to by NAMM. For the
term of this Agreement, the Company, the Hospital affiliated with the
Company and its affiliated hospital entities will not joint venture
with, or otherwise engage, any third party company (other than NAMM)
for the management of their risk business unless otherwise agreed to by
NAMM.
6.03 NAMM EXCLUSIVITY
NAMM will not, during the term of this Agreement, provide any services
within the Company service area, as identified in the Joint Market
Strategy, without the approval of NHN and the Company. NAMM shall not,
for a one year period following the termination of this Agreement by
the Company for Cause, provide risk services (or any other services
being provided to the Company at the time of the termination or within
the six months prior thereto) to the Company, Hospitals, Physician
Organizations or PHOs affiliated with the Company, related providers,
or to any other hospital system or integrated delivery network
identified as competitors in the Joint Market Strategy, or to any
hospital within fifteen miles of the Hospital. Further, during the term
of this Agreement, NAMM shall not pro-actively solicit any of the
physicians or Physician Organizations who are affiliated with or
participating in the Company of any non-Medicare-risk lines of
business. Notwithstanding the previous sentence, Company hereby grants
specific permission for NAMM to enter into a management services
agreement with MHCA. These exclusivity provisions apply, after
termination of this Agreement, only if this Agreement is terminated for
cause.
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6.04 NON-SOLICITATION
During the term of this Agreement and for a one year period thereafter,
NAMM will not solicit for employment or services any person employed by
Company nor the Hospitals, Physician Organizations and PHOs affiliated
with the Company. During the term of this Agreement and for a one year
period thereafter, neither the Company nor the Hospitals, Physician
Organizations and PHOs affiliated with the Company will solicit for
employment or services any person employed by NAMM, provided, however,
that if this Agreement is extended for a total term of in excess of 20
years, the restriction on hiring NAMM employees following termination
of this Agreement will be deleted.
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ARTICLE VII
TERM AND TERMINATION
7.01 TERM
The term of this Agreement shall be from the Effective Date for a term
of seven years and shall automatically renew for one year terms
thereafter unless (1) either party to this Agreement gives at least one
year's prior written notice prior to the expiration of the term to the
other that this Agreement will not be renewed, or (2) this Agreement is
otherwise terminated as provided for herein. In no event shall this
Agreement extend beyond the end of the original ten year term of the
Master Agreement, unless otherwise agreed to by the Company, NAMM, NHN
and the owners of the Company.
7.02 TERMINATION FOR CAUSE
A party may terminate this Agreement by giving notice of termination to
the other party, specifying the effective date of such termination, for
the causes and within the time period set forth below:
(A) Ninety (90) days following the execution of the Master
Agreement, without notice, if the parties to this Agreement
and NHN fail to agree on a formal written Joint Market
Strategy (as defined in the Master Agreement);
(B) Within thirty (30) days of the date the party receives notice
of the Alternate Dispute Resolution ("ADR") decision if the
Parties to this Agreement and the Master Agreement cannot
agree as to the nature of an amendment to the Joint Market
Strategy in the event there is a membership change (addition
or withdrawal) in which hospitals are Hospitals (i.e., NHN
Hospitals), or a Physician Organization or PHO becomes or
ceases being affiliated with NHN, or otherwise, and the
Alternative Dispute Resolution provided for in the Master
Agreement does not provide a resolution to the issue by
providing for the changes required to the Joint Market
Strategy.
(C) Thirty days following notice if such other party: (i)
generally does not pay its debts as they become due or admits
in writing its inability to pay its debts, or makes a general
assignment for the benefit of creditors; (ii) commences any
case, proceeding or other action seeking to have an order for
relief entered on its behalf as a debtor or to adjudicate it
as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law
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relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for all or any
substantial part of its property; or (iii) takes any corporate
or other action to authorize or in contemplation of any of the
actions set forth in this Section 7.02(C);
(D) Thirty days following notice if any case, proceeding or other
action against such other party hereunder is commenced seeking
to have an order for relief entered against it as debtor or to
adjudicate it as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee,
custodian or other similar official for it or for or any
substantial part of its property;
(E) Except with respect to criminal conduct as to which there is
no cure period, termination of this Agreement may occur under
the following circumstances, provided the non breaching party
provides thirty (30) days' written notice to the breaching
party describing the breach, and at the end of such thirty
(30) day period the breaching party has not corrected the
breach to the reasonable satisfaction of the non breaching
party:
(i) Criminal conduct, violation of law or breach of
fiduciary duty by a Party to this Agreement.
(ii) Material breach of a substantive provision of this
Agreement by a party or failure of NAMM to meet the
performance standards set forth in Section 3.11.
(iii) Continuing failure of NAMM to maintain adequate
experienced staffing sufficient to provide
appropriate oversight to the Company or failure of
NAMM to manage the Company in an appropriate manner.
(iv) Continuing failure of a party to use its best efforts
to enlist sufficient support of enough primary care
physicians to provide adequate levels of physician
services for Medicare-risk contracts entered into by
the Company.
(v) Change in law as described in Article VIII, provided
that the attempt to address such change, as also
described in such section, is unsuccessful.
(vi) Breach of a representation or warranty as described
in Article II.
(F) Upon an assignment or change of ownership which is not
authorized pursuant to Article VIII;
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(G) If Hospital at any time ceases being affiliated with NHN, this
Agreement shall be terminated; or
(H) Failure to achieve any two (2) of the (3) Performance
Standards and Goals listed in Section 3.11 within a three (3)
year period from the Effective Date of this Agreement.
(I) Each period where an individual Physician Organization service
fund account or a Hospital service fund account runs an annual
deficit (which is above and beyond the budgeted losses to be
covered by the initial capitalization of the Company of
$300,000) for two (2) years in a row or three (3) years in any
given five (5) year period during the term of this Agreement.
SCMCA agrees to follow NAMM's reasonable recommendations
regarding operating changes required by NAMM to meet these
targets.
7.03 TERMINATION OF THE MASTER AGREEMENT
Consistent with the terms and conditions of Section D of Article V of
the Master Agreement, this Agreement shall terminate upon the effective
date of the termination of the Master Agreement unless otherwise agreed
to by the Company, NAMM, NHN and the owners of the Company.
7.04 TERMINATION BY MUTUAL AGREEMENT
This Agreement may be terminated upon the mutual agreement of the
Parties, which termination agreement shall specify all of the terms of
such termination.
7.05 CONSEQUENCES OF TERMINATION
(A) In the event of termination of this Agreement, the parties
shall cooperate with one another to prevent a disruption of
the Company's operations. The procedures to govern the conduct
of the parties hereto after termination of this Agreement are
as follows:
(1) NAMM shall conduct its affairs prior to the effective
date of the termination of this Agreement in such a
manner that it protects the interests of the Company
and allows an orderly takeover of NAMM's duties.
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(2) On the effective date of the termination of this
Agreement: (1) NAMM shall return all property
(Including, but not limited to, equipment, manuals
and supplies) of the Company in a manner that is
reasonably requested by the Company, that can be
accommodated by NAMM using existing NAMM equipment
and that will allow the Company to continue its
operations, and (2) the Company shall return all
property (Including, but not limited to, equipment,
manuals, programs of NAMM and supplies) of NAMM in a
manner that is reasonably requested by NAMM, that can
be accommodated by Company using existing Company
equipment and that will allow the Company to continue
its operations. NAMM will consult with the Company
after the date of termination with regard to the
above mentioned materials.
(3) The provisions of Article V of this Agreement
regarding Exclusivity shall continue to apply
notwithstanding a termination of this Agreement.
(4) Within 180 days following the effective date of the
termination of this Agreement, either party may
review any records or documents of the other party
relating to the Company and the services provided by
NAMM hereunder, in order that an accounting may be
conducted to settle all claims that each party hereto
may have against the other party.
(5) Cooperate with Company or its designee in
transitioning the claims processing, claims payment
and surplus fund management or any other management
activity which obligations shall survive the
termination of this Agreement. Except as specified
elsewhere in this Agreement or the Master Agreement
or as required by law, NAMM shall have no obligations
to the Company after the date of termination of this
Agreement.
(6) In the event of termination of this Agreement, either
party hereto shall be entitled to all remedies
provided in this Agreement in addition to any other
remedies that are available to it under law or
equity, Including the remedies of specific
performance, injunctions or any other measures that
either party hereto shall be believe it necessary to
take to protect its interests under this Agreement,
Including but not limited to its rights to protect
the exclusivity provisions hereof.
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ARTICLE VIII
MISCELLANEOUS
8.01 ASSIGNMENT
This Agreement shall not be assigned by either Party hereto without the
prior written consent of the other Party provided, however, that the
Company consents to NAMM assigning or subcontracting any of the
services hereunder to a subsidiary of NAMM, or any of its subsidiaries
or Affiliates, so long as such assignee or subcontractor agrees to be
bound by the terms and conditions of this Agreement, NAMM agrees to
continue to be bound by the terms of this Agreement and the conditions
of the third paragraph of this Section 8.01 continue to be met.
ORGANIZATIONAL CHANGE. It is recognized that the NAMM, NHN, the Company
or its affiliated Hospitals, Physician Organizations and/or PHOs may
undergo organizational changes during the term of this Agreement for
good and valid reasons that are important to their future success. It
is also recognized that the obligations and relationships established
by the Master Agreement and this Agreement implement important
strategies for the Parties and must, therefore, be protected from any
harmful influence that might be caused by organizational evolution.
NAMM. If NAMM or NAMM Parent is sold by PhyCor, Inc. to another
company New Owner) or is spun off as a separate company ("Newco"),
except as provided in the next sentence of this paragraph, the Company
may terminate this Agreement with NAMM for Cause. However, without
providing the Company with a right to terminate this Agreement with
NAMM for Cause, a New Owner or Newco may result from an organizational
change or may assign this Agreement to such New Owner or a Newco
provided that: (a) New Owner or Newco is not a hospital network, payer,
Physician Organization or other entity which could be considered as a
competitor of NHN, the Company or its affiliated Hospitals, entities,
Physician Organizations or PHOs, (b) NAMM shall continue to meet its
obligations under the Master Agreement and this Agreement without a
decrease in quality, responsiveness and effectiveness, (c) both Mr.
Herbert Fritch and Dr. John Jordan have not left (other than for death
or disability) their positions as senior officers in NAMM parent, and
(d) Mr. Fritch continues to oversee the services provided by NAMM
through his position as President and Chief Executive Officer of NAMM
Parent.
COMPANY. The Company may assign this Agreement to any new entity
created through merger, acquisition, or other organizational change
without the consent of NAMM unless such third party entity is a
competitor of NAMM providing the same services to third parties that
NAMM is providing to the Company. The Company shall be entitled to
assign this Agreement to any subsidiary or affiliate corporation of the
Company which is
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authorized to conduct business, and is duly formed as a for-profit or
not-for-profit corporation in the State of Illinois.
APPROVAL. If there is an assignment that is not approved as described
herein, there shall be a termination of this Agreement as described
above (unless the Parties agree otherwise), Notwithstanding the
foregoing, the Parties agree that such approval will not be
unreasonably withheld without good reason which shall be based on the
anticipation of harm to the non-assigning Party. These reasons may
Include, without limitation, consideration of the reputation of the
party to which the agreement is proposed to be assigned, whether such
party or a related party has sufficient experience in the area, whether
such party or a related party is a competitor of NHN or of a Hospital
or affiliated Physician Organization or PHO, or if such party's
operations are otherwise Incompatible with those of the non-assigning
Party.
8.02 BINDING ON SUCCESSORS AND PERMITTED ASSIGNS
The terms, covenants, conditions, provisions and agreements herein
contained shall be binding upon and inure to the benefit of the parties
hereto, and to their permitted successors and assignees.
8.03 NON-ASSUMPTION OF LIABILITIES AND INDEMNIFICATION
The parties agree to indemnify each other as follows:
(A) NAMM does not assume any of the obligations, liabilities or
debts of the Company and shall not, by virtue of its
performance hereunder, assume or become liable for any such
obligations, liabilities or debts of the Company. The Company
agrees to indemnify and hold NAMM harmless from and against
any and all such obligations, liabilities and debts of the
Company.
(B) The Company does not assume any of the obligations,
liabilities or debts of NAMM and shall not, by virtue of its
performance hereunder, assume or become liable for any such
obligations, liabilities or debts of NAMM. NAMM agrees to
indemnify and hold the Company harmless from and against any
and all such obligations, liabilities and debts of NAMM.
(C) Company and NAMM are independent contractors. Except as
otherwise provided in this Agreement, neither Company nor NAMM
nor any of their respective agents or employees shall be
liable for any act or omission of the other party; and each
party shall remain responsible for or liable for its own acts
or actions.
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8.04 INSURANCE
(A) Company shall purchase and maintain, at the sole cost and
expense of Company, policies of comprehensive general
liability insurance and such other insurance in such amounts
as shall be agreed upon between the Company and NAMM as is
necessary to ensure Company and its agents and employees,
acting within the scope of their duties, against any claim or
claims arising by reason of personal injuries or death
occasioned directly or indirectly in connection with their
performance of any services by the Company or by such agents
or employees and in connection with any other coverage in
effect for Company as the date of this Agreement. The Company
shall provide NAMM with prior notification of any
cancellation, termination, or material alteration of any such
insurance policies. Prior to the expiration and/or
cancellation of any such policy Company shall secure
replacement of such insurance coverage upon the same terms and
provisions and furnish NAMM with a certificate of insurance
for such replacement insurance coverage. In the event any
insurance required under this section is maintained and in
claims-made form, subject to applicable provisions of law, the
party required to maintain such insurance shall ensure the
tail period for not less than two years after the expiration
of the application policy.
(B) NAMM shall purchase and maintain, at the sole cost and expense
of NAMM, policies of insurance as provided for in the Master
Agreement, in such amounts that shall be necessary to ensure
NAMM and its agents and employees acting within the scope of
their duties against any claim or claims arising by reason of
personal injuries or death occasioned directly or indirectly
in connection with the performance of any services by NAMM or
by such agents or employees and in connection with any other
coverage in effect for NAMM as of the date of this Agreement.
NAMM shall provide Company with prior notification of any
cancellation, termination or material alteration of any such
insurance policies. Prior to the expiration and/or
cancellation of any such policy, NAMM shall secure replacement
of such insurance coverage upon the same terms and provisions
and furnish Company with a certificate of insurance for such
replacement insurance coverage. In the event any insurance
required under this section is maintained and in claims-made
form, subject to applicable provisions of law, the party
required to maintain such insurance shall ensure the tail
period for not less than two years after the expiration of the
application policy. NAMM shall name the Company and the
Hospital as an additional insured under such policies. NAMM
will maintain these coverages (or such additional coverages as
the Company and NAMM shall agree to) for the Company and, to
the extent NAMM manages other Management Companies it will
obtain additional coverage for those purposes.
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8.05 LAWS, REGULATIONS, LICENSES
(A) The parties agree that they shall at all times operate in a
lawful manner in accordance with all requirements of
applicable laws, rules and regulations. NAMM shall assist the
Company, in accordance with the terms of this Agreement, in
complying with all applicable federal, state, and local laws,
rules, and regulations relating to the Company and shall use
its best efforts to manage and provide administrative services
to the Company so that it shall maintain any necessary
licenses, permits, consents, and approvals from all
governmental agencies that have jurisdiction over the
operations of the Company. NAMM shall not be obligated to the
Company for failure of the Company to comply with any such
laws, rules, and regulations or for failure of the Company to
maintain any such licenses, permits, consents, and approvals,
if the failure of the Company to comply is not solely caused
by any act or failure to act by NAMM or its employees, agents,
representatives or contractors.
(B) Neither party shall knowingly, purposely or negligently take
any action that shall cause any government authority having
jurisdiction over the operation of the Company or NAMM to
institute any proceeding for the rescission or revocation of
any necessary license, permit, consent or approval.
(C) NAMM shall, with the written approval of the Company, have the
right, but not the obligation, to contest by appropriate legal
proceedings, diligently conducted in good faith in the name of
the Company, the validity or application of any law,
ordinance, rule, ruling, regulations, order or requirement of
any government agency having jurisdiction over the operation
of the Company. After having given its written approval, the
Company shall cooperate with NAMM with regard to the contest,
and the Company shall pay the reasonable attorneys' fees,
costs or fines Incurred with regard to the contest.
8.06 RIGHTS CUMULATIVE
No right or remedy herein conferred upon or reserved to either NAMM or
the Company is intended to be exclusive of any other right or remedy,
and each and every right and remedy shall be cumulative and in addition
to any other right or remedy given hereunder, or now or hereafter
legally existing upon the occurrence of any event of default hereunder.
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8.07 Waiver
The failure of either NAMM or the Company to insist at any time upon
the strict observance or performance of any of the provisions of this
Agreement or to exercise any right or remedy as provided in this
Agreement shall not impair any such right or remedy or be construed as
a waiver or relinquishment thereof. Every right and remedy given by
this Agreement to the parties hereto may be exercised from time to time
and as often as may be deemed expedient by the parties hereto, as the
case may be.
8.08 CAPTIONS AND HEADINGS
The captions and headings throughout this Agreement are for convenience
and reference only, and the words contained therein shall in no way be
held or deemed to define, limit, describe, explain, modify, amplify, or
add to the interpretation, construction or meaning of any provision of
or to the scope or intent of this Agreement nor in any way affect this
Agreement.
8.09 IMPOSSIBILITY OF PERFORMANCE
Neither the Company nor NAMM shall be deemed to be in violation of this
Agreement if prevented from performing any obligations hereunder for
any reasons beyond its control Including, without limitation, acts of
God or of any public enemy, flood, storm, strike, or action or inaction
of any federal, state or local regulatory agency. Nothing in this
Section 8.09 shall be construed to relieve NAMM or the Company, as the
case may be, of its duty to provide the Company or NAMM, as the case
may be, with notices it may receive of any action necessary for
compliance with federal, state or local requirements.
8.10 NOTICE
All notices, demands, and requests required hereunder shall be in
writing and shall be deemed given when mailed, postage prepaid, via
registered or certified mail or via overnight courier service, return
receipt requested, to the following address, and/or to such other
address or to such other person as may be designated by written notice
given from time to time during the term of this Agreement by one party
to the other:
(A) to the Company at: Swedish Covenant Managed Care Alliance, Inc.
Attention: Chairman of the Board
5145 North California Avenue
Chicago, IL 60625
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(B) to NAMM at: North American Medical Management -
Illinois, Inc.
Attention: President
188 Industrial Drive - Suite 428
Elmhurst, IL 60126
8.11 GOVERNING LAW
This Agreement has been executed and delivered in the State of Illinois
and all of the terms and provisions thereof and the rights and
obligations of the parties hereto shall be interpreted and enforced in
accordance with the laws thereof, without regard to the conflicts of
laws sections thereof. Notwithstanding anything contained in this
Agreement to the contrary, the parties agree to the exclusive
jurisdiction of any local or state court located in Cook County,
Illinois, or the United States District Court for the District of
Illinois, and the parties waive any objection which it may have based
on improper venue or forum non convenience to the conduct of any
proceeding in such court; provided, further, nothing contained in this
Agreement shall affect the right of the parties to serve legal process
in any manner permitted by law.
8.12 INVALIDITY OF PROVISIONS
The invalidity or unenforceability of any term or condition contained
herein shall in no way affect the validity or enforceability of the
remainder of this Agreement. Any such provision held or declared by a
court of competent jurisdiction to be invalid, illegal or unenforceable
under any law applicable thereto, shall be deemed deleted from this
Agreement without impairing or prejudicing the validity, legality, or
enforceability of the remaining provisions hereof
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8.13 CHANGE OF LAW
In the event that there shall be a change in applicable state or
federal law or specifically in Medicare or Medicaid statutes,
regulations, or instructions (or in the application thereof), the
adoption of new legislation, judicial interpretations, or a change in
any other third party payer reimbursement system, or any similar matter
which, in a Party's opinion materially and adversely affects such
Party's (or a Hospital's or affiliated Physician Organization's or
PHO's) rights or obligations or materially changes the economic or
legal relationships between the Parties as set forth in this Agreement
(a "Change") a Party may request that this Agreement shall terminate
upon at least thirty days prior advance written notice to the other
Parties, provided that (i) the Parties will attempt in good faith to
amend the provisions of this Agreement to comply with such Change so as
to not materially change the economic or legal relationships between
the Parties as set forth in this Agreement, (ii) such change is
accompanied by any required changes to the Master Agreement, upon the
consent of the Parties thereto, and (iii) any such termination cannot
occur before the effective date of the Change relied upon to terminate
this Agreement under this Section. If the Parties and their attorneys
do not agree that the Change materially adversely affects their
financial operations, and/or whether proposed changes to this Agreement
can be made which address the Change in a way which does not materially
and adversely affects such Party's (or a Hospitals or affiliated
Physician Organization's or PHO's) rights or obligations or materially
change the economic or legal relationships between the Parties as set
forth in this Agreement, an arbitrator, chosen in the manner described
in the ADR, shall decide such undetermined matters; provided, however,
that if the ADR process has not been completed by the effective date of
the Change no Party shall be required to take actions which it
reasonably believes would no longer be legal following the change,
subject to completion of the ADR process.
8.14 DISPUTE RESOLUTION
If any controversy, dispute or claim ("Dispute") between the parties
arises out of or relates to this Agreement, which the parties cannot
settle by good faith negotiations between them, the parties agree that
any of them may, upon written notice to the others, submit the Dispute
to the ADR process described in this Master Agreement. The Parties
shall split the cost of a mediation. This Section 8.14 is not
applicable if a party believes that it will suffer irreparable harm by
any delay caused by this mediation process. Except as specifically set
forth in this Agreement or in the Master Agreement, in the event
mediation does not resolve the Dispute within thirty (30) days, or
other period mutually agreeable to the parties, the parties may pursue
any and all remedies available to them at law or in equity.
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8.15 THIRD PARTY BENEFICIARIES
The parties to this Agreement intend that there be no third party
beneficiaries of this Agreement other than NHN to the extent required
to effectuate the terms of the Master Agreement.
8.16 ENTIRE AGREEMENT; CONFLICTS
This Agreement, Including the Master Agreement Incorporated herein,
contains the entire agreement between the parties hereto with regard to
this subject matter, and no representations or agreements, oral or
otherwise, between the parties not embodied herein or attached hereto
shall be of any force and effect. Any additions or amendments to this
Agreement subsequent hereto shall be of no force and effect unless in
writing and signed by the parties hereto. In the event there is a
conflict between the terms and conditions of this Agreement and the
Master Agreement, the Master Agreement shall control.
8.17 EXHIBITS
All Exhibits to this Agreement are to be considered part of this
Agreement, as if Incorporated herein, and all terms, provisions and
conditions stated in such Exhibits shall be binding on the parties to
this Agreement.
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8.18 CONFLICTS OF INTEREST STATEMENTS
NAMM agrees to execute a standard conflict of interest statement, on an
annual basis, with the first such signing occurring on the date hereof
(in the form of Exhibit F attached hereto).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and
year set forth above.
SWEDISH COVENANT MANAGED CARE
ALLIANCE, INC.
By: /s/
--------------------------------
Its: Chairman of the Board
------------------------------
Date: 9-24-96
-----------------------------
NORTH AMERICAN MEDICAL MANAGEMENT -
ILLINOIS, INC.
By: /s/ George E. Stevens
---------------------------------
George E. Stevens
Its: President
-------------------------------
Date: 9-24-96
------------------------------
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