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EXHIBIT 10.17
MANAGEMENT AGREEMENT
This Management Agreement ("Agreement") is made and entered into this
1st day of October, 1999, by and between Silver Cross Managed Care Organization,
a physician hospital organization (the "Company") organized under the laws of
the State of Delaware, 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 December 1, 1999 ("Effective Date").
WITNESSETH:
WHEREAS, NAMM operates in the State of Illinois to provide management
services to physicians and hospitals participating in HMO risk contracts 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, 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
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 Silver Cross Hospital and its affiliates and
the other owners of the Company.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.01 NAMM 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. NAMM Parent is a wholly owned subsidiary of
PhyCor, Inc., a Tennessee corporation that is publicly traded
on the Nasdaq stock exchange.
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(D) This 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 incurrence of the obligations herein set
forth, nor the consummation of the transactions herein
contemplated, nor compliance with the terms of this 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.
(E) PhyCor has disclosed to Silver Cross a true and accurate
depiction of its financial position as of the fiscal year
ended December 31, 1998, and financial position to date has
not materially changed from that reflected in such December
31, 1998 financial statements.
(F) NAMM and NAMM Parent have compiled 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 Silver Cross pursuant to this
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.
(I) NAMM and NAMM Parent have compiled with all laws, regulations,
policies or applicable provisions that are required for its or
company's participation in Medicare, Medicaid or any other
public or private medical payment program. Further, NAMM and
NAMM parent specifically represent that neither has been
excluded from participation in Medicare or Medicaid.
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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 Commercial 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 the 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 written approval of
the Company for other matters, NAMM will not take the following actions
on behalf of The Company, without the written 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;
(F) distribute surplus amounts other than as agreed upon with the
Company;
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(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
of 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. Where permitted
to do so by state or federal regulations, contracts will be
negotiated by NAMM for SMCO directly with the HMOs on behalf
of the applicable affiliated Physician Organization, PHO
and/or Hospital. Where NAMM and SCMCO 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 Agreement. 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 also prepare operating and capital budgets
for risk contracts for the Company in a timely fashion, to be
shared with the Company. NAMM will along with the Company
develop annual operating goals that are
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agreed upon by both parties at the time the annual budget is
presented to the Company Board of Directors. NAMM will
determine the reasonable working capital requirements of the
Company. NAMM will be bonded and present evidence of same to
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 reasonable 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
the Company (or, in the limited cases). The parties agree that
certain services are "core" services which will in all cases
be provided by NAMM (including those set 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.
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(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 for risk
contracts.
(vii) Administer provider education programs as reasonably
necessary.
(viii) Prepare semi-annual 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.
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.
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.
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 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.
3.05 ANNUAL OPERATING BUDGET
NAMM shall develop and present to the Board of the Company annual
operating and capital budgets for risk contracts for the Company. 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 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 Executive
Director, 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 resign 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 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.
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3.07 OWNERSHIP OF AND ACCESS TO RECORDS
All records relating to the Company's operations and Business
(including, but not limited to, all book 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 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 of 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 Physician Organization or hospital was allowed to
utilize in the Hospital's risk Business shall remain the proprietary
property of NAMM.
3.08 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. 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.
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3.09 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.
3.10 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.
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):
1. Claims processed by NAMM shall have a claim processing
accuracy rate of not less than 93%. Accuracy rate shall be
defined as the number of correct claims reviewed in an audit
sample divided by the total number of claims reviewed in the
audit sample. A "correct claim" is free from any errors
including, but not limited to, coding, financial or numerical.
2. 90% of claims processed by NAMM shall have a claim turnaround
time of not more than 18 days. Claim turnaround time shall be
defined as the number of days required to process all "clean"
claims from receipt date to paid date.
3. NAMM shall answer the phone on inquiries from enrollees, the
Company, or staff of the Company in an average of 80 seconds
or less except during open enrollment periods (Jan -Mar &
Oct-Nov.) Answering the phone is interpreted as answering with
the intent of working on the callers need(s) and answer time.
4. NAMM shall have a telephone abandonment rate on average of 8%
or less except during open enrollment periods (Jan - Mar. &
Oct - Nov.) Abandonment shall be defined as the percent of
calls who disconnect prior to the call being answered by a
representative.
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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 risk contract undertaking,
considering the limitations thereon set forth in Section 3.07 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 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 wish to provide through HMO contracts 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
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at prices that are at least equal to the lowest prices that the
affiliated entity offers, at the time the risk contracts are executed,
to any other payors (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 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 payors (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 THE COMPANY'S FINANCIAL RESPONSIBILITIES
Deficits of 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) Attorneys' 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.
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(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.
(K) IBNR - NAMM will monthly, calculate an estimate of incurred
But Not Reported (IBNR) based upon actuarial tested
methodology using claims lags and trending data in order to
insure the accuracy of the IBNR process. In cases where the
process is not accurate NAMM will correct the process.
4.05 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 shall 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 a NAMM representative to attend.
ARTICLE V
COMPENSATION TO NAMM
5.01 BASIS FOR ACCOUNTING
The accounting year for the Company shall be October through September
30. 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 related to risk
contracts hereunder ("Management Fee") as outlined in Exhibit C.
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ARTICLE VI
EXCLUSIVITY
6.01 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 the Companies risk business unless otherwise
agreed to by NAMM.
6.02 NAMM EXCLUSIVITY
NAMM will not, during the term of this Agreement, provide any services
to any Hospital/Provider within Will County without prior approval from
Company. However, Company will be reasonable in their review and timely
response time to all relevant requests for approval.
6.03 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 there, 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.
ARTICLE VII
TERM AND TERMINATION
7.01 TERM
The term of this Agreement shall be from the Effective Date for a term
of five (5) years and shall automatically renew for another one year
term (and shall continue to automatically renew for additional 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.
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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) 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 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);
(B) 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;
(C) Except with respect to criminal conduct, as to which there is
no cure period, termination of the 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 3.10.
(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 risk contracts entered into by the
Company.
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(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.
(vii) Breach of exclusivity provision described in Article
6.
(viii) Not withstanding any of the above; the Company
reserves the right during the term of this contract
and any subsequent renewals at its sole discretion to
terminate the contract in the event North American
Medical Management is sold to a third party with whom
the Company does not desire to maintain a contractual
relationship.
(D) Upon an assignment or change of ownership which is not
authorized pursuant to Article VIII;
7.03 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.
7.04 CONSEQUENCES OF TERMINATION
In the event of termination of this Agreement, the parties shall
cooperate with one another to prevent a disruption of the Company's
operations and NAMM shall cooperate with Company or its designee in
transitioning the claims. The procedures to govern the conduct of the
parties hereto after termination of this Agreement are as follows:
(A) 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.
(B) 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 reasonable 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.
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(C) 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.
(D) Cooperate with Company or its designee in transitioning the
claims processing, claims payment and surplus fund management
of any other management activity which obligations shall
survive the termination of this Agreement. Except as specified
elsewhere in this Agreement or as required by law, NAMM shall
have no obligations to the Company after the date of
termination of this Agreement.
(E) 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 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.
(F) In the event of termination of this Agreement for any reason
whatsoever NAMM will at the Company's option, continue to pay
claims for Dates of Services prior to the termination date for
a fee of $2.00 per commercial member per month for every month
that the company desires claims payment runout services.
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 or 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 NAMM, 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
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important to their future success. It is also recognized that the
obligations and relationships established by this Agreement implement
important strategies for the Parties and must, therefore, be protected
from any harmful influence that might be caused by organizational
evolution.
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 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 or a Hospital or
affiliated Physician Organization or PHO, or is 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 except those obligations, liabilities or debts
resulting from acts of NAMM in violation of the terms of this
Agreement.
(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
such obligations, liabilities and debts Of NAMM except those
obligations, liabilities or debts resulting from acts of the
Company in violation of the terms of this Agreement.
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(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.
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 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
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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.
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 solely caused by an
act or failure to act by the Company 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 attorney's 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: Silver Cross Managed Care Organization
Attention: Director, Managed Care
Silver Cross Hospital
1200 Maple Road
Joliet, IL 60432
(B) to NAMM at: North American Medical Management -
Illinois, Inc.
Attention: President
High Point Plaza
4415 West Harrison Street, Suite 300
Hillside, IL 60162
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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 Will County,
Illinois, or the United States District Court for the Northern District
of Illinois, and the parties waive any objection which it may have
based on improper venue or forum nonconvenience 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.
8.13 CHANGE OF LAW
In the event that there shall be a change in applicable state or
federal law regulations, or instructions (or in the application
thereof), the adoption of new legislation, judicial interpretations, or
a change in any other third party payor 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
the Agreement (a "Change") a Party may request that this Agreement
shall terminate upon at least thirty (30) 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, and
(ii) 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
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(or a Hospital's 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 Section 8.14 shall
decide such undetermined matters; provided, however, that if the DR
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 Dispute Resolution process.
8.14 DISPUTE RESOLUTION
If during this contract the parties are unable to resolve a dispute or
controversy among themselves, prior to instituting any court action or
demanding arbitration, they shall first endeavor to settle such dispute
in a non-binding voluntary manner by referring same to mediation
according to the rules of the American Arbitration Association. 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. 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.
8.15 THIRD PARTY BENEFICIARIES
The parties to this Agreement intend that there be no third party
beneficiaries of this Agreement.
8.16 ENTIRE AGREEMENT; CONFLICTS
This Agreement 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.
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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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and
year set forth above.
SILVER CROSS MANAGED CARE ORGANIZATION,
By: /s/ William R. Brownlow
-------------------------------------------------
William R. Brownlow
Its: CFO/Vice President, Finance
and Managed Care
Date: 1/31/01
-----------------------------------------------
NORTH AMERICAN MEDICAL MANAGEMENT - ILLINOIS, INC.
By: /s/ Wayne Aardsma
-------------------------------------------------
Wayne Aardsma
Its: President
------------------------------------------------
Date: 1/19/2001
-----------------------------------------------
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