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PROSPECTUS SUPPLEMENT NO. 81 Filed pursuant to Rule 424(b)(3)
To the Prospectus dated January 5, 1998, Registration No.: 333-01926
As Supplemented to Date
8,000 Shares
of
Class B Common Stock of Doctors Health, Inc.
This Prospectus Supplement No. 81 relates to the issuance by Doctors
Health, Inc., a Maryland corporation ("Doctors Health") of 8,000 shares of
its Class B Common Stock, par value $.01 per share (the "Class B Common
Stock") pursuant to the Network Contracting and Management Services Agreement
(the "Network Agreement"), as amended, to be entered into between Gerald
Family Care, P.C. ("Physician"), and Doctors Health. This Prospectus
Supplement should be read in conjunction with the Prospectus dated January 5,
1998, the Prospectus Supplement No. 70 (Shareholders Letter Agreement), and
the Prospectus Supplement No. 76 which contains the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1998.
Doctors Health's principal executive office is located at 10451 Mill Run
Circle, Tenth Floor, Owings Mills, Maryland 21117, telephone number (410)
654-5800.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER OF
ANY PERSON TO EXCHANGE OR SELL, OR A SOLICITATION FROM ANY PERSON OF AN OFFER
TO EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS
SUPPLEMENT, OR THE SOLICITATION OF A PROXY FROM ANY PERSON, IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR ANY DISTRIBUTION OF
THE SECURITIES TO WHICH THIS PROSPECTUS SUPPLEMENT RELATES SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED THEREIN
IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________
See "Risk Factors" referred to on page S-2 hereof for certain
information that should be considered in connection with an investment in
securities of Doctors Health.
The date of this Prospectus Supplement is June 29, 1998.
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RISK FACTORS
Financial Performance of Doctors Health
Doctors Health has a limited operating history and for the fiscal years
ended June 30, 1996 and 1997 recorded a net loss of $7.2 million and $16.2
million, respectively. Doctors Health is likely to record a net loss for the
fiscal year ending June 30, 1998. There can be no assurance that after the
Closing Date Doctors Health will earn operating profits.
Risk Factors set forth in the Prospectus dated January 5, 1998
The Risk Factors set forth in the Prospectus are incorporated herein by
reference and should be read carefully by investors.
NETWORK AGREEMENT
The following description of the transactions contemplated by the
Network Agreement dated October 31, 1997 as amended, does not purport to be
complete and is qualified in its entirety by reference to the Network
Agreement, a copy of which is attached to this Prospectus Supplement as Annex
A and is incorporated herein. Physician is urged to read the Network
Agreement in its entirety.
General
Pursuant to the Network Agreement, (i) Physician agrees to participate
in the managed care agreements that Doctors Health enters into with Payors
who have contracted with Doctors Health with respect to HMO managed care
products ("Doctors Health HMO Plans"), (ii) Physician agrees to provide
eligible persons who elect to enroll in Doctors Health HMO Plans (each, a
"Doctors Health HMO Member") with those primary care services customarily
provided by primary care physicians, as may be required by the Doctors Health
HMO Plans, (iii) Physician will be paid cash in the amount of $60,000 upon
execution of the Network Agreement and satisfactory completion of
credentialing of Physician by Doctors Health, and (iv) Doctors Health will
issue to the Physician 8,000 shares of Doctors Health's Class B Common Stock.
Access to Doctors Health Services; Credentialing
Pursuant to the Network Agreement, Doctors Health and Physician agree to
cooperate in the design and implementation of an integrated managed care
information system which provides patient enrollment, eligibility, and
referral management capabilities. Physician is complying with Doctors Health
credentialing standards designed to verify professional credentials of
participating physicians.
Exclusive Network Arrangement
Pursuant to the Network Agreement, Physician agrees to participate in
the managed care agreements that Doctors Health enters into with certain
Doctors Health HMO Plans. Physician is required pursuant to the Network
Agreement to cooperate with Doctors Health in accepting Doctors Health HMO
Members under Medicare managed care contracts involving capitation payments,
global fee or other risk arrangements and agrees not to participate or
contract with any other HMO or other payor offering managed care or other
risk-type plans directly or indirectly; provided, however, that if Doctors
Health chooses not to pursue a contract with an identified HMO or is unable
to negotiate such a contract within a commercially reasonable time period,
Physician shall be free to pursue a contract with the identified HMO.
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Capitation Rates; Bonus Pool
The Network Agreement provides that Doctors Health will determine the
Medicare primary care base capitation rates using their good faith best
efforts to reflect the prevailing market rate for the county and city in
which Physician provides covered services (the "Primary Care Base Capitation
Rates"). The Primary Care Base Capitation Rate shall be increased by an
amount up to 10% based upon a formula for the number of Medicare members in
the physician's panel. The Medicare Primary Care Base Capitation Rate is set
forth on Exhibit 4.2 of the Network Agreement. All payments of the Primary
Care Base Capitation Rates will be made by Doctors Health directly to
Physician, by the fifth day of the month for the prior month's enrollment.
Physician agrees pursuant to the Network Agreement not to seek or collect or
accept any reimbursement from Doctors Health HMO Members or the Doctors
Health HMO Plans for any covered services provided to Doctors Health HMO
Members, except for copayments and coinsurance.
The Network Agreement also provides that Physician shall be entitled to
receive 25% of any surplus or be liable for 25% of any loss from
institutional services and professional services with respect to Doctors
Health Medicare HMO members served by the Physician.
Obligations of Physician
Pursuant to the Network Agreement, Physician agrees to abide by and
comply with the relevant provisions of the agreements between Doctors Health
and the Doctors Health HMO Plans. Doctors Health will provide Physician with
all relevant provisions that may apply to such Physician. In such
connection, the Network Agreement provides that Physician shall work
cooperatively and in good faith with Doctors Health and the other Doctors
Health affiliated physicians providing services to the Doctors Health HMO
members. Physicians are required to (i) prepare and maintain customary
medical records for services provided to Doctors Health HMO Members and
provide Doctors Health with access to such records without charge, (ii)
comply with and accept the payment conditions of the Network Agreement, (iii)
comply with managed care medical standards adopted by Doctors Health
affiliated physicians as part of the arrangements with the Doctors Health HMO
Plans, and (iv) cooperate with Doctors Health's efforts to contact eligible
Medicare and adult medicine patients in Physician's practice, including
providing mailing lists and the use of Physician's name in correspondence,
and (v) sign and submit in a timely manner authorizations, consents,
encounter data and other forms adopted by Doctors Health.
Pursuant to the Network Agreement, Physician will own and operate all
aspects of his medical practice and will remain responsible for all
operations of the medical practice, including all patient treatment decisions
and employee, office, lease and financial affairs. Doctors Health is not
engaged in the practice of medicine and will not interfere in any patient
treatment decisions. The Network Agreement provides an agreement by
Physician not to differentiate or discriminate in the treatment of patients
as to the quality of services delivered because of race, sex, age, religion,
place of residence, health status or source of payment. Physician is
required to make arrangements for 24 hour, seven day per week coverage to
Doctors Health HMO Members through other primary care physicians who
participate in the Doctors Health provider network.
Doctors Health will provide to Physician a list of other physicians and
other health care providers who provide medical services in the Doctors
Health provider network. Other than in cases of a bona fide emergency, the
Network Agreement requires Physician to utilize the Doctors Health provider
network when arranging for additional medical services required by Doctors
Health HMO Members. Doctors Health may use Physician's name, specialty,
telephone number
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and business location in marketing, descriptive and other information
relating to the Doctors Health HMO Plans. The Network Agreement provides
that Physician may be precluded from participating in a Doctors Health HMO
product by one of the Doctors Health HMO Plans. In such event, Doctors
Health will notify Physician, in writing, within 30 days of learning of such
an action, and will assist Physician, if requested, in seeking to overturn
such an action.
Existing Primary Care Capitation Contracts
The Network Agreement provides that if Physician is a party, directly or
indirectly, to any primary care capitation contract, Physician must notify
Doctors Health of such contract and must use its commercially reasonable best
efforts to assist Doctors Health in replacing such contract with a Doctors
Health HMO Plan, provided that the payment terms of such Doctors Health HMO
Plan are at or above the payment terms of such existing contract.
Quality Assurance/Utilization Review Programs
Pursuant to the Network Agreement, Physician will participate in all
utilization review, quality assurance and credentialing programs operated by
Doctors Health to assure or improve the quality and effective utilization of
health care services to the Doctors Health HMO Members. In such connection,
Physician agrees (i) not to hold Doctors Health or any other participants in
such quality assurance/utilization review programs responsible for reasonable
recommendations made or actions taken in good faith with respect to
Physician, and (ii) to participate in all programs developed by Doctors
Health that are designed to resolve Doctors Health HMO Member grievances.
Doctors Health Protocols
Pursuant to the Network Agreement, Physician agrees to follow the
protocols and practice procedures which have been developed by Doctors
Health's affiliated physicians which are applicable to physician participants
in the Doctors Health provider network. In such connection, if Physician
should ever deem any aspect of such protocols to be medically inappropriate
or otherwise inappropriate for utilization, Physician may notify Doctors
Health in writing with sufficient specificity to enable Doctors Health to
respond to Physician's concerns.
Term; Termination
The Network Agreement will terminate on April 30, 2003 unless earlier
terminated pursuant to its terms.
Doctors Health may terminate the Network Agreement by reasonable written
notice to Physician (i) if Physician is found guilty of committing a felony,
gross misconduct or an offense or, (ii) if Physician or any of Physician's
participating physicians are barred from participating in the Medicare or
Medicaid programs or any program operated by a Payor with which Doctors
Health has a managed care contract.
Either party may terminate the Network Agreement if any party fails to
perform a material duty or obligation after notice and such default continues
for a period of 60 days after such notice.
Physician has advised Doctors Health that Physician is subject to a
management services agreement with FPA which provides that the Physician may
be required to provide covered services to FPA's HMO members in the event FPA
establishes a full-risk Medicare managed care contract in the geographic area
served by Physician.
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Physician shall be entitled to terminate this Agreement at any time
after April 30, 2000 upon 60 days prior written notice in the event FPA
Medical Management, Inc. ("FPA") requires the Physician to enter into a
full-risk Medicare managed care contract product which conflicts with
Physician's engagement of Doctors Health under the Network Agreement. In
such event, Physician shall forfeit 133 shares of Class B Common Stock issued
to Physician as a signing bonus for each month that the initial term of the
Network Agreement that is not completed by Physician, except that the
restrictions with respect to 145 shares shall lapse on the month beginning
May 1, 2000. For purposes of the stock forfeiture, the restrictions shall
not lapse unless services are performed by Gerald for the entire month.
In addition, $36,000 of the $60,000 cash signing bonus paid to Physician
shall be subject to forfeiture and repayment to Doctors Health if the Network
Agreement terminates at any time on or after May 1, 2000. Commencing on May
1, 2000, the cash signing bonus forfeiture shall lapse at the rate of $1,000
per month to the extent Physician performs an entire month of service under
the Network Agreement.
Maintenance of Liability Insurance
The Network Agreement provides that Physician must maintain, at his
expense, general and professional liability insurance coverage of not less
than $1 million per claim and $3 million per year. Physician is required
pursuant to the Network Agreement to provide Doctors Health with copies of
such policies or other evidence of compliance with such insurance
requirements and is required to notify Doctors Health of any changes or
cancellations to any such policy. In the event of a cancellation of a
policy, Physician is required to purchase an extension of coverage
endorsement within 10 days of written notice of discontinuance and must
provide Doctors Health with a copy of such endorsement. Pursuant to the
Network Agreement, Physician must also notify Doctors Health promptly when
any patient of Physician files a claim or any notice of intent to commence
legal action alleging professional negligence against Physician, or of the
settlement of any such claim, or if a judgment is entered against Physician
in any such claim.
RESALE OF CLASS B COMMON STOCK
The shares of Class B Common Stock offered by this Prospectus Supplement
have been registered under the Securities Act of 1933, as amended. The
shares will be subject to the Stockholders Agreement attached hereto as Annex
B, and certain restrictions set forth in the Amendment to Network Agreement
included in Annex A and therefore, will not be freely transferable. In
addition, there is no public market for the Class B Common Stock.
LEGAL MATTERS
The validity of the Class B Common Stock offered hereby have been passed
upon for the Company by Venable, Baetjer and Howard, LLP, Baltimore, Maryland.
ANNEXES
Annex A--Network Contracting and Management Services Agreement between
Doctors Health, Inc. and Gerald Family Care, P.C. dated October 31, 1997 and
Amendment to Network Contracting and Management Services Agreement.
Annex B--Shareholders Letter Agreement, delivered to Physician as
Prospectus Supplement No. 70.
Annex C--Quarterly Report for the Quarter Ended March 31, 1998,
delivered to Physician as Prospectus No. 76.
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NETWORK CONTRACTING AND MANAGEMENT SERVICES AGREEMENT
THIS NETWORK CONTRACTING AND MANAGEMENT SERVICES AGREEMENT (the
"Agreement") is made and entered into as of the ____ day of October, 1997
(the "Effective Date") by and between DOCTORS HEALTH, INC., a Delaware
corporation ("DHI") and GERALD FAMILY CARE, P.C. ("Gerald").
WITNESSETH
WHEREAS, Gerald is an organization that employs primary care physicians
licensed to practice medicine in Maryland who participate in the preferred
provider panels offered by Gerald and desires to arrange for the provision of
various management, administrative and support services in connection with
managed care contracting;
WHEREAS, DHI has the resources to provide or arrange for the provision
of certain of the services required by Gerald; and Gerald desires to enter
into an agreement with DHI whereby DHI will provide such services; and
WHEREAS, Gerald desires to retain the services of DHI in connection with
negotiating with managed care organizations and other payors with respect to
the delivery of health care services to the subscribers or beneficiaries of
health care plans.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto do hereby agree as follows.
DEFINITIONS
As used in this Agreement, each of the following terms shall have the
meaning set forth below:
"Agreement". This Network Contracting and Management Services
Agreement between Gerald and DHI.
"Benefit Plan". Any health benefit plan or plans in which DHI
participates and which is designed or administered by a Payor or DHI under
which Gerald provides Covered Services through its Participating Physicians.
Copies of all Benefit Plans will be kept on file at the offices of DHI and
shall be made available upon request to Gerald and upon request to any
Participating Physician. DHI provides each Participating Physician a summary
explanation of the terms and conditions of each Benefit Plan.
"Bonus". Funds to be allocated for distribution by and among Gerald,
DHI and the Participating Physicians to reward patient service, patient
satisfaction, compliance with policies, good citizenship and the practice of
cost effective and high quality medicine.
"Care Management". A comprehensive program developed and administered
by DHI to facilitate the delivery of the highest quality, most appropriate
care in a cost effective manner. The components of Care Management include
Credentialing and Provider File Maintenance, Referral Management, Utilization
Management and Case Management.
"Case Management". A program developed and administered by DHI that
provides Physicians with the skills of registered nurses and licensed
clinical social workers (collectively a "Case Manager") necessary to assist
in the coordination of the care and services required by Members with
catastrophic and/or chronic illnesses or injuries. Through this program the
Case
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Manager works in conjunction with the Physician, Member and Member's family
to identify healthcare needs, develop a plan of care, establish realistic
treatment goals, coordinate and monitor necessary resources and evaluate
treatment progress.
"Covered Services". Those services that Gerald through DHI agrees on
behalf of the Participating Physicians to render, provide or arrange to or
for Members under any DHI Contract, and that are approved by the Payor and
payable under the terms of a Benefit Plan.
"Credentialing and Provider File Maintenance". In compliance with NCQA
standards, a service provided by DHI to ensure the quality of DHI's provider
network, which includes gathering information on DHI participating providers,
performing primary source verification, performing credentialing and
recredentialing review, and alerting providers when items need to be renewed
and/or reevaluated.
"Data Management". A service developed and administered by DHI that
coordinates the receipt and maintenance of payor eligibility and health
benefit plan information and coordinates and integrates a variety of data
necessary to yield reports reflecting the utilization, cost, and quality
performance of the DHI provider network.
"DHI Affiliate". Any entity which controls, is controlled by or under
common control with DHI, through the ownership of stock, equity interests or
other ability to control the management of such entity. DHI Affiliate also
includes any physician or physician group which has transferred its assets to
DHI or to a DHI Affiliate and has entered into a management contract with a
term in excess of one year with DHI without regard to the ability of DHI or
such other entity to control the other (each a "DHI Affiliated Medical
Group").
"DHI Contract". Defined in Article 2.1.
"DHI Expenses". All expenses incurred by DHI or its agents in
connection with the performance of its duties under this Agreement.
"Fee for Service Contract". Any agreement for professional services
only, including diagnosis, therapy, treatment, surgery and consultation
(without any risk sharing or responsibility for services provided by other
health care professionals or institutional providers of health care) which
are provided or supervised by a licensed physician under an agreement with an
insurer, health maintenance organization, preferred provider organization,
self-insured employer, labor union or other organization or entity that
arranges for the delivery of health care services to enrolled persons
(including subscribers and eligible dependents) entitled to benefits under
any health benefit plan, under which the physician (or Gerald acting on
behalf of the physicians) receives payment on a fee for service, discounted
fee for service, or fee schedule basis.
"Institutional Services". All Covered Services rendered under a DHI
Contract which are not Professional Services. Those services which
constitute Institutional Services may be specifically set forth in the DHI
Contract, in which case the provisions of such contract shall control and
supersede the definition of Institutional Services contained herein.
"Institutional Services Fund". The amount equal to (i) all contract
revenues or earnings attributable for payment of Institutional (and/or
facility) Services in any DHI Contract minus (ii) all reasonable costs and
expenses in connection with the provision of Institutional Services and
appropriate Reserves (as determined in accordance with sound actuarial
principles) related to the provision of Institutional Services.
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"Medically Necessary". The provision of medical services by a Physician
or other provider of health care which is: (i) consistent with the symptoms,
diagnosis, and treatment of illness, disease, or medical problems; (ii)
commonly and customarily recognized in the Physician's profession as
appropriate in the treatment of a diagnosed illness or injury; (iii) not
primarily for the convenience of the Member or the Physician; and (iv) the
most appropriate level of service that can safely be provided. Those services
which constitute medically necessary services may be specifically defined in
the DHI Contract, in which case the provisions of such contract shall control
and supersede the definition of medically necessary services contained herein
"Member". An enrolled person (including subscribers and eligible
dependents) entitled to benefits under any Benefit Plan from a Payor
contracting under a DHI Contract for the provision of health care and who is
entitled to receive care from a Participating Physician.
"Network Contracting and Management Services". The managed care
contracting, contract administration, finance, accounting, managed care
information systems management, stop loss insurance, community based
marketing, Case and Care Management, Data Management, Patient Services and
Third Party Administration services reasonably required by Gerald in
connection with the DHI Contracts, considering membership and revenue levels
and the nature of the health care industry in the Gerald service area,
including oversight of reimbursement and disbursement; Payor negotiating and
contracting services; Provider credentialing; quality management and
utilization management functions; physician and physician staff education and
training; claims coordination and payment; and coordination of the activities
of the Medical Director. Services specifically not included among Network
Contracting and Management Services include the preparation of business plans
and budgets, contracting and administrative services with respect to Fee For
Service Contracts and indemnity services and the internal business decisions
of Gerald.
"Outcomes Measurement". The outcomes measurement program provided by
DHI for outcomes measurement activities, or a similar program developed,
established and administered by a Payor.
"Participating Physicians". The Primary Care Physicians licensed to
practice medicine in the applicable service area who are owned or employed by
Gerald and to whom Gerald has been granted the appropriate authority to enter
into contracts on such physician's behalf. A list of Participating
Physicians, updated by Gerald as necessary, shall be attached hereto and made
a part hereof.
"Patient Services". A program developed and administered by DHI that
provides access to nurse triage and patient advocacy services. Through the
program, Members are provided with access to specially trained nurses who
answer questions regarding access to services, treatment alternatives, and
self care options.
"Payor". Any insurer, health maintenance organization, preferred
provider organization, self-insured employer, labor union or other
organization or entity that arranges for the delivery of health care services
to Members under a Benefit Plan. If and to the extent that DHI is or becomes
legally entitled and otherwise qualified to arrange for the delivery of
health care services directly to Members under a Benefit Plan, then DHI (or
an affiliate established by DHI for such purpose) shall be deemed a Payor for
purposes hereof.
"Primary Care Physician". Any primary care physician, to include
pediatrics, internal medicine, family practice, or geriatrician, as defined
by DHI, or otherwise as DHI and Gerald may mutually agree.
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"Professional Services". The professional services which are Covered
Services provided or supervised by a licensed physician and rendered directly
to a Member, including diagnosis, therapy, surgery and consultation, as
defined by DHI or a Payor in a DHI Contract. Those services which constitute
Covered Services for a given Payor contract may be specifically set forth in
the DHI Contract between DHI and a Payor, in which case the provisions of
such DHI Contract shall control and supersede this definition of Professional
Services.
"Professional Services Fund". The amount equal to (i) all DHI Contract
revenues and earnings attributable to Professional Services, minus (ii) all
reasonable costs and expenses in connection with the provision of
Professional Services, including, without limitation, the maintenance of
appropriate Reserves (as determined in accordance with sound actuarial
principles) related to the provision of Professional Services.
"Provider". Any physician, group medical practice, hospital,
ambulatory surgical center, ancillary service or other health care provider
which is a Participating provider of a Payor with which DHI or Gerald
contracts.
"Referral Management". A process developed and administered by DHI that
provides for the maintenance of referral directories; authorization of DHI
referrals to network providers; clinical review of referrals for
appropriateness and tracking and reporting of referral patterns to identify
outliners and encourage recommendations for change.
"Reserves". The amount of funds set aside by DHI for, or amounts
allocated during any period, (as determined in accordance with sound
actuarial principles) for the purpose of (i) funding reserves for contingent
liabilities (including reserves for claims reported and claims incurred but
not reported), expenses, working capital, repairs, replacements and renewals,
(ii) if applicable, paying taxes, insurance, debt service, or other costs or
expenses incident to the operation of Gerald, and (iii) creating funds for
the Bonus.
"Specialist Physician". Any physician who is not a Primary Care
Physician.
"Surplus" or "Loss". The amount equal to the balance, positive or
negative, of the Professional Services Fund and/or the Institutional Services
Fund, as the case may be, after payment of amounts owing or accrued with
respect to such funds, including the accruing of any withhold or bonus
amounts declared with respect to the time period to which the funds apply.
"Third Party Administration". A function performed by DHI for Gerald
to provide for the appropriate adjudication of claims, coordination of
benefits, subrogation services and integration with the reinsurance carrier.
"Utilization Review or Utilization Management". A function performed
by DHI for Gerald, or the Payor or its designee, to review and approve
whether the services provided by Physicians to or for Members are Covered
Services and medically necessary and/or appropriate under the Benefit Plans.
"Utilization Management Program". The utilization management program
designed and administered by DHI or its agents for the determination of the
medical necessity of medical services provided to Members, or a similar
program developed, established and administered by a Payor. The DHI
Utilization Management Program reviews and tracks the utilization of
healthcare services, particularly inpatient stays, to facilitate appropriate
hospital admissions; provides recommendations for alternate site care and
assists with the coordination of these services; provides clinical review of
procedural necessity; and works with the physician to identify practice
pattern trends.
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ARTICLE I. RELATIONSHIP OF THE PARTIES
1.1 Control Retained in Board. Gerald, through its Board of Directors,
shall at all times exercise ultimate authority and control over the policies
and assets of Gerald and shall retain the ultimate authority and
responsibility regarding the powers, duties, and responsibilities vested in
Gerald by law and regulation.
1.2 Relationship of the Parties. It is mutually understood and agreed
that Gerald and DHI, in performing their respective duties and obligations
under this agreement, are at all times acting and performing as independent
contractors with respect to each other, and nothing in this Agreement is
intended and nothing shall be construed to create an employer/employee,
partnership or joint venture relationship, or to allow DHI to exercise
control or direction over the manner or method by which the Participating
Physicians perform Covered Services or other professional health care
services. DHI shall be the agent of Gerald solely for the purposes set forth
in this Agreement that are related to the administration of the business and
contracting activities of Gerald relating to managed health care services and
not with respect to provision of Covered Services by the Participating
Physicians.
ARTICLE II. ENGAGEMENT OF DHI
2.1 Gerald hereby agrees to participate and provide Covered Services
through its Participating Physicians in accordance with DHI's contracts and
the Benefit Plans in connection with (i) CFS/Healthcare Corporation of the
Mid-Atlantic's (an affiliate of Blue-Cross/Blue Shield of Maryland) "Medi
CareFirst" Medicare HMO product, (ii) United Healthcare of the Mid-Atlantic's
(formerly Chesapeake Health Plan) "Advantage 65" Medicare HMO product, (iii)
NYLCare Health Plans of the Mid-Atlantic, Inc.'s NYLCare 65 product, and (iv)
any other risk-based, Medicare managed care contracts entered into by DHI
with a payor which include payment methodologies that are based upon
capitation arrangements, global fee arrangements, or which involve
substantial risk withholds, provided that the terms and conditions of the
applicable contract are as good or better than the terms that Gerald was
previously receiving (collectively, the "DHI Contracts"). Gerald hereby
appoints DHI as its provider of all Network Contracting and Management
Services with respect to the DHI Contracts for the term of this Agreement.
2.2 DHI shall advise Gerald with respect to, and where necessary or
appropriate with Gerald's approval, negotiate and enter into on behalf of
Gerald as Gerald's agent, all contractual arrangements with other third party
providers as shall be reasonably necessary or appropriate for the provision
of Covered Services under the DHI Contracts which Gerald cannot reasonably
fulfill or provide, including without limitation, Specialist Physicians,
hospitals, post hospital services, nursing homes, home health agencies,
laboratories, durable medical equipment suppliers and other outpatient
ancillary diagnostic and therapeutic services.
ARTICLE III. NETWORK CONTRACTING AND MANAGEMENT SERVICES
3.1 General Responsibilities and Services. DHI shall perform all
Network Contracting and Management Services as set forth in this Article 3
that are reasonably necessary for the operations of Gerald and the
implementation of Gerald's policies, as established by Gerald's Board of
Directors and as approved by DHI, which approval will not be unreasonably
denied or withheld, in connection with the DHI Contracts. Such services
shall be performed in accordance with applicable law, accepted standards in
the industry and the reasonable exercise of DHI' judgment. DHI shall be the
exclusive contractor to Gerald regarding the services to be performed under
this Agreement for all DHI Contracts and Gerald, for the Term hereof, hereby
appoints DHI, and DHI hereby accepts such appointment, as Gerald's
attorney-in-fact and agent
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to negotiate and execute all contracts and to otherwise act on behalf of
Gerald in connection with the DHI Contracts.
3.2 Specific Services. DHI shall provide those contracting,
management, administrative and support services as DHI determines to be
reasonably necessary for Gerald's participation in the DHI Contracts,
including Care Management, Data Management, Patient Services, quality
assurance, utilization management and review, finance, management,
information systems, Third Party Administration, Provider credentialing, and
other necessary services. In furtherance of this, DHI and Gerald shall
cooperate to:
(a) Establish, implement, and administer a quality assurance
program that determines clinical effectiveness, patient satisfaction, patient
compliance, accessibility and availability of services, efficiency and
appropriateness of services, and continuity of care.
(b) Establish, implement and administer a utilization management
and review program that provides prospective, concurrent and retrospective
review of services rendered by Gerald.
(c) Establish, implement, and administer accounting procedures and
controls for the efficient administration of Gerald's participation in the
DHI Contracts, including, but not limited to, auditing, budgeting, cash
management, and systems for the preparation of appropriate financial reports
related to the participation of Gerald and its Participating Physicians.
(d) Establish and maintain bank accounts in the name of DHI;
deposit in such bank accounts all moneys received from Gerald's participation
in the DHI Contracts and make such disbursements from such accounts on behalf
of Gerald or its Participating Physicians in such amounts and at such times
as the same are reasonably required and as is customary for the industry.
The parties recognize that: (i) as part of its business DHI may from time to
time be unable to keep Gerald's funds separate from other DHI funds and may
therefore commingle Gerald's funds and accounts with those of DHI and others,
(ii) DHI will pay to itself management fees and other amounts due and owing
to DHI from such accounts, and (iii) DHI will use all commercially reasonable
efforts to keep Gerald's funds separate from other moneys whenever possible.
(e) Design, implement, and administer such systems and procedures
as may be necessary for the appropriate adjudication and timely payment of
all claims in accordance with DHI' policy and procedure for the payment of
claims as set forth on Exhibit 3.2(e) attached hereto and made a part hereof.
(f) Develop, maintain, and conduct a coordination of benefits and
a subrogation program where applicable. DHI shall not have the
responsibility of collecting or distributing subrogation revenue on behalf of
providers.
(g) Design, implement, maintain and provide access to an
integrated managed care information system which provides patient enrollment,
eligibility and referral management capabilities which services will be
provided in conjunction with Gerald developed protocols ("DHI Managed Care
Information System"). After the Term of this Agreement, Gerald and the
Participating Physicians shall return to DHI the DHI Managed Care Information
System and shall have the right to purchase such DHI Managed Care Information
System at a mutually agreed upon rate.
(h) Assist Gerald in complying with DHI credentialing standards
and protocols which are designed to permit inclusion and verify the
professional credentials of Participating Physicians in DHI Contracts;
provided, however, that Gerald shall interview and make the ultimate decision
as to the suitability and compliance with credentialing and
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recredentialing standards of any physician to become associated with Gerald
and Gerald will be responsible for implementing the appropriate credentialing
standards and admitting or denying admittance to Gerald. If Gerald
determines a physician's credentials are acceptable and DHI (or any Payor
under a DHI Contract) determines such physician's credentials are not
acceptable, DHI retains the authority to preclude such physician from
participating in DHI Contracts after providing the Participating Physician
with a fair hearing. In the event that a Payor precludes a Participating
Physician from participating in a DHI Contract, DHI shall notify Gerald, in
writing, within 30 days of learning of such an action, and may assist
Participating Physician, if requested, in seeking to overturn such an action.
(i) Gerald authorizes DHI to bill for all amounts payable under
DHI Contracts. DHI shall process all payment requests, collect all fees to
be received from Payors and distribute amounts payable to the appropriate
parties. Collection of, and accounting for, co-payment obligations of
Members under any DHI Contract shall be the sole obligation of Gerald or the
Participating Physicians, and not of DHI.
(j) Subject to delegation by a Payor in a DHI Contract, DHI shall
establish a timely system for certification or verification of Members'
eligibility and shall process referral requests, in a timely manner, from
Participating Physicians in accordance with the requirements established in
the applicable DHI Contracts and the policies and procedures established for
each of its DHI Affiliates. Each referral will be reviewed, based upon
established medical criteria, to ensure that the referral is appropriate
under the applicable requirements regarding medical necessity and
utilization. Referral authorizations will be approved, routed to the
appropriate specialty care provider, or denied due to noncompliance with
applicable requirements.
(k) Design and implement Bonus programs to be allocated to
Participating Physicians to reward patient service, patient satisfaction,
compliance with policies, good citizenship and the practice of cost effective
and high quality medicine.
3.3 Accounting and Financial Records. DHI shall establish and
administer for Gerald such reasonable accounting procedures, controls, and
systems for the development, preparation and safekeeping of records and books
of account relating to Gerald's participation in the DHI Contracts as DHI
deems appropriate.
3.4 Income Taxes. DHI shall provide the data necessary for Gerald to
prepare its annual income tax returns. DHI shall have no responsibility for
the preparation or filing of federal or state income tax returns or the
payment of such income taxes of Gerald or any of its Participating Physicians.
3.5 Compliance with Applicable Laws. DHI and Gerald shall each comply
in all material respects with all applicable federal, state and local laws,
regulations and restrictions in the conduct of its obligations under this
Agreement and shall carry out its duties under this Agreement exercising
normal and customary business standards.
ARTICLE IV. MANAGED CARE CONTRACTING AND PHYSICIAN COMPENSATION
4.1 Delegation of Authority to Negotiate. Gerald hereby delegates
complete authority to DHI, and appoints DHI as its agent and attorney-in-fact
during the term of this Agreement, to negotiate on behalf of Gerald the
Medicare Managed Care Contracts described in Section 2.1(a) (including
capitation payment arrangements) with respect to the provision of Covered
Services to Medicare Members.
4.2 Negotiation of Terms; Capitation Payment. DHI will enter into
negotiations with prospective Payors for the provision of Covered Services
under a DHI Contract. DHI shall have
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the exclusive right to negotiate the terms and conditions for the provision
of services, including but not limited to: the scope of services under each
DHI Contract; fee schedules; capitation amounts; degree of risk assumed and
related reimbursement and other issues with Payors with respect to the DHI
Contracts. The parties shall negotiate annually, and establish before
November 30 of the year preceding each calendar year the Primary Care
Capitation Rate for each applicable county. The established Primary Care
Capitation Rate will always reflect the then prevailing market capitation
rate(s) being offered by Payors in each Maryland county for substantially
similar primary care capitation services and substantially similar bonus
arrangements, and shall in no event be lower than the Primary Care Capitation
Rate paid by DHI to any DHI Affiliate or other Primary Care Physician group
or Primary Care Physician providing substantially similar primary care
capitation services under a DHI Contract. For the 1997 calendar year, the
per Member per month ("PMPM") Medicare Primary Care Capitation Rates
established by DHI are set forth on Exhibit 4.2 attached hereto and made a
part hereof.
DHI and Gerald also agree that the Medicare Primary Care Capitation Rate
shall be increased on a quarterly basis by an amount up to ten percent (10%)
of the Medicare Primary Care Capitation Rate (the "Capitation Rate Modifier"
based on the number of Members in Gerald's panel as follows:
<TABLE>
<CAPTION>
No. of Members Capitation Rate Modifier
---------------------- ------------------------
<S> <C>
250 Members per Group 2.5%
500 Members per Group 5.0%
750 Members per Group 7.5%
1000 Members per Group 10.0%
</TABLE>
4.3 Distribution Mechanism. DHI shall, as part of its administrative
duties, be responsible for the distribution of reimbursement to and among
Gerald's Participating Physicians, including primary care capitation payments
made directly by DHI to Gerald pursuant to a DHI Contract. Such primary care
capitation payments shall be made directly by DHI to Gerald by the fifth
(5th) business day of each month for the prior month's enrollment. All other
disbursements and fees payable to Gerald for Covered Services rendered to
Members shall be made according to the DHI Policy and Procedure for Payment
of Claims as set forth on Exhibit 3.2(e). DHI and Gerald shall cooperate
with respect to, and jointly approve, any distribution arrangement with
respect to the Bonus or the Surplus to assure its compliance with regulatory
requirements applicable to such distributions as may be in effect from time
to time, and to ensure that it is consistent with the goals of an integrated
health network. Gerald agrees that the amount of the Bonus to be held for
distribution among its Participating Physicians, and the method and timing of
distribution, shall be presented to DHI for its consideration and review,
with final authority for the amount, method and timing of the distribution of
the Bonus being retained by Gerald.
ARTICLE V. AGREEMENTS AND RESPONSIBILITIES OF GERALD
5.1 DHI Contract Performance by Participating Physicians. Gerald
agrees to provide or arrange for Participating Physicians to provide to
Members any or all of the Covered Services under each DHI Contract entered
into by DHI in accordance with the terms of this Agreement. Gerald agrees to
describe to each Participating Physician the relationship between DHI, Gerald
and the Participating Physicians as it pertains to this Agreement and
warrants that each Participating Physician shall receive a copy and
explanation of the Participating Physician's duties and obligations as set
forth on Exhibit 5.1 attached hereto and made a part hereof. Gerald shall
incorporate such duties and obligations and the other relevant terms of this
Agreement into the employment agreements of the Participating Physicians or
cause each Participating Physician to execute and deliver to DHI a
Participating Physician Agreement (in the form attached to this Agreement as
Exhibit 5.1a), pursuant to which the Participating Physician agrees to act in
accordance with the terms of this Agreement.
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5.2 Marketing. Gerald agrees to arrange for the provision, on an
annual basis, of a listing of the Medicare eligible patients who have
received health care services from the Participating Physicians within the
prior two years. The list will be used for the sole purpose of contacting
Medicare eligible patients through the various marketing efforts established
by DHI and Gerald and the Health Care Financing Administration.
5.3 Gerald Responsibilities. Gerald will retain responsibility for any
required management or administrative service not assumed by DHI under this
contract. Such responsibilities include, but are not necessarily limited to:
(a) Establish, implement and administer all payroll functions for
Gerald employees, including the payment of all required payroll and other
state, federal and other taxes;
(b) Procure such insurance as may be required by Gerald to satisfy
all regulatory requirements and in accordance with sound risk management
standards; and to cooperate with DHI in coordinating insurance coverage to
minimize insurance costs through, among other things, a common professional
liability insurance policy, or a policy with the same insurer providing
professional liability insurance;
(c) Establish and implement procedures to maintain regulatory
compliance;
(d) Actively recruit Primary Care Physicians to join Gerald;
(e) Perform administrative services reasonably necessary and
appropriate to develop the Gerald network of Participating Physicians and to
recruit potential physicians to contract with Gerald. It will be and shall
remain the responsibility of Gerald to interview, select, contract with, and
terminate all physicians performing Covered Services or other professional
services and, except for credentialing, DHI shall have no responsibility with
respect to such activities;
(f) Not act in a manner which would prevent DHI from efficiently
performing its responsibilities under this Agreement in a business-like
manner;
(g) Coordinate with and through DHI all press releases, public
statements and other distributed literature, letters, notices, or marketing
materials pertaining to the relationship and provisions included in this
Agreement;
(h) Cooperate fully in the implementation of each of the actions
enumerated in Section 3.2; and
(i) Refrain from taking any action which would be detrimental to
DHI or detrimental to the administration, the negotiation of any DHI Contract
or the marketing and recruiting efforts of DHI.
5.4 Licenses. Gerald shall be responsible for causing each of Gerald's
Participating Physicians to be licensed without restriction in the state in
which the Participating Physician will render the Covered Services under the
DHI Contracts and to maintain such licensure during the term of this
Agreement. Gerald shall make a good faith effort to cause its Participating
Physicians to comply with all applicable federal, state and local laws,
regulations and restrictions in the conduct of its obligations under this
Agreement and with all legal requirements relating to the furnishing of
Covered Services and other medical services to the public and will obtain and
maintain, and shall cause each of its Participating Physicians to obtain and
maintain in effect all permits, licenses and governmental or board approvals
which may be necessary for that purpose.
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5.5 Medical Practice. Gerald shall make a good faith effort to cause
its Participating Physicians to render medical services in a manner which
seeks to provide availability, adequacy and continuity of care to Members,
and to provide Professional Services in accordance with generally accepted
community standards of performance of such Professional Services to any
Member who selects any one of its Participating Physicians as their Primary
Care Physician under any DHI Contract, during the term of this Agreement and
each applicable DHI Contract. Each Participating Physician shall be
responsible for his or her medical practice and shall maintain the
physician-patient relationship, both in accordance with the best medical
judgment and discretion of the Participating Physician. Participating
Physicians shall remain responsible for the quality of medical services
provided, shall render such services in accordance with generally accepted
medical practice and professional recognized standards, and shall exercise
independent medical judgment and have full authority over all Covered
Services and all clinical decisions pertaining to the delivery of Covered
Services, as may be described in applicable DHI Contracts.
5.6 Outcomes Measurement/Utilization Management and Related Programs.
Gerald shall receive from DHI, and adopt and monitor with DHI, the
implementation of reasonable outcomes measurement, risk and utilization
management, concurrent review, and case management programs designed to
monitor and evaluate the quality of Covered Services provided by
Participating Physicians and to evaluate the professional skills of potential
Participating Physicians. Through the assistance of Gerald, DHI will
incorporate the information derived from these categories and criteria into
DHI' ongoing qualitative and economic credentialing of its provider network.
5.7 Access. Gerald shall, with reasonable notice and during reasonable
business hours, permit DHI to have access to Gerald's books, records and
reports, contracts, agreements, licenses, survey, accreditation and any and
all other information reasonably requested by DHI to perform its duties under
this Agreement. For and throughout the term of this Agreement, DHI shall
provide a non transferable sub-license to Gerald for the use of any software
or other proprietary computer programs, without payment of any royalties,
which are necessary for access to and the use of data pertinent to Gerald
operations. The first sentence of this Section 5.7 shall survive the
termination of this Agreement.
5.8 Medical Director. Gerald may employ or shall designate a Gerald
Clinical Medical Director for the Gerald Network who shall be supervised by
and cooperate with DHI's Medical Director with respect to the provision of
Covered Services to Members under the DHI Contracts. Gerald shall cooperate
and cause all Participating Physicians to cooperate with the Gerald Clinical
Medical Director and DHI's Medical Director.
5.9 Individual Participating Physician. In the event that any
Participating Physician ceases to be employed by, or otherwise affiliated
with Gerald during the term of this Agreement, Gerald and DHI shall use their
best efforts to cause said Participating Physician to execute a DHI Primary
Care Participation Agreement. The terms and conditions of said agreement
shall be substantially the same as the terms and conditions of this Agreement
and shall be in effect during the remainder of the term of this Agreement.
ARTICLE VI. OWNERSHIP OF WORK PRODUCT
6.1 Work Product. All data, patient lists and reports ("Data") of
Gerald created or developed by DHI in performing DHI activities under this
Agreement shall be and remain the property of Gerald, with DHI having full
rights of access to and use of the Data for such purposes as DHI shall
determine in its sole discretion and Gerald hereby provides DHI a
royalty-free license of indefinite term to use the Data as DHI shall
determine. DHI shall retain ownership of, and shall
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not be constrained in any way, from use of advertising and marketing concepts
and ideas, operating guides, elements of management information systems and
designs, elements of computer software and systems, management information
and data processing systems and all other systems, techniques, methods and
materials used by DHI for Gerald. DHI shall not disclose to unaffiliated
third parties any confidential data, reports or other materials containing
information specific to Gerald without the prior consent of Gerald except as
otherwise required by law or regulation applicable to Gerald or DHI.
6.2. Records. Gerald and DHI shall maintain records and procedures as
may be required to account accurately for all Covered Services and other
medical services provided pursuant to this Agreement. Such records shall be
kept in accordance with applicable law, generally accepted principles and
recognized standards of professional practice.
ARTICLE VII. INDEMNIFICATION AND INSURANCE
7.1 Gerald Insurance. Gerald shall cause each Participating Physician
to purchase and maintain professional liability insurance including such tail
or prior acts coverage as may be necessary to avoid a gap in coverage for
claims arising from incidents occurring during the term of such Participating
Physician's participation in Gerald. Said insurance shall: (i) be obtained
from a carrier which meets such reasonable solvency and other standards as
may be set from time to time by DHI, in consultation with Gerald; (ii)
provide minimum policy limits at commercially reasonable levels, which
initially shall not be less than $1,000,000 per occurrence/$3,000,000 annual
aggregate or such other limits as may be required by DHI, in consultation
with Gerald for Participating Physician's specialty; and (iii) and shall
include coverage for the rendering of or failure to render professional
services by the Participating Physician or by any employee, agent or other
person for whose acts or omissions Participating Physician is responsible.
DHI shall arrange for and facilitate Gerald's obtaining and maintaining, at
Gerald's sole cost and expense, a policy of managed health care professional
liability insurance, with such limits as shall be reasonably satisfactory to
DHI and the Board of Directors of Gerald. Gerald shall also obtain and
maintain at its expense, throughout the term of this Agreement and, if
appropriate, general liability insurance, property and casualty insurance,
directors' and officers' liability insurance, out-of-area insurance,
reinsurance, insolvency insurance, and such other kinds of insurance in such
amounts, with such companies, and on such terms and conditions as DHI shall
determine appropriate subject to consultation with Gerald. The insurance
obligations under this Section 7.1 may be satisfied through self-insurance or
captive insurance arrangements with the prior written consent of DHI, which
shall not be unreasonably withheld. DHI will explore the feasibility of
offering a global insurance policy for all or a portion of the insurance
requirements if cost savings can be obtained, and will offer such insurance
policy or policies when feasible.
7.2 DHI Insurance. DHI shall obtain and maintain at its expense,
throughout the term of this Agreement if and as appropriate, a policy of
managed health care professional liability insurance, general liability
insurance, property and casualty insurance and such other kinds of insurance
in such amounts, with such companies, and on such terms and conditions as DHI
shall determine in its reasonable discretion after consultation with Gerald.
DHI' obligations under this Section 7.2 may be satisfied through
self-insurance or captive insurance arrangements. DHI will obtain
appropriate stop loss or reinsurance covering each DHI Contract in which
Gerald participates.
7.3. Indemnification. Gerald shall indemnify, hold harmless and defend
DHI and its officers, directors, employees, agents, successors and assigns,
from and against any liability, loss, damage, claim, cause of action, cost or
expense, including reasonable attorneys' fees, caused or asserted to have
been caused, directly or indirectly, by or as a result of the performance of
Covered Services or other medical services or any other acts or omissions by
Gerald, its officers, agents or its Participating Physicians during the term
hereof. DHI shall
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indemnify, hold harmless and defend Gerald, its officers, directors,
employees, agents, successors and assigns, from and against any liability,
loss, damages, claim, cause of action, cost or expense, including reasonable
attorneys' fees, caused or asserted to have been caused, directly or
indirectly, by or as a result of the performance or failure to perform by DHI
of its obligations under this Agreement or any other acts or omissions taken
by DHI, its officers, agents, directors or employees during the term hereof.
ARTICLE VIII. COMPENSATION AND FEES
8.1 DHI Services Fee. In consideration of Network Contracting and
Management Services to be provided by DHI under this Agreement, Gerald shall
pay DHI a Basic Services Fee with respect to each DHI Contract equal to
twelve percent (12%) of the total capitation or other payment or compensation
paid to or allocated to or for the use of or by DHI (including any funds held
by DHI or by or on behalf of a Payor in a bonus, risk sharing, or other fund
or account set aside to pay charges or fees, with respect to or from which
DHI has an absolute or contingent right to receive payment). The Basic
Services Fee shall be retained by DHI each year only to the extent of Surplus
for such year. Any portion of the Basic Services Fee not retained by DHI
shall be added to the amount of Loss calculated in Section 8.4.
8.2 Risk Sharing; Bonus. As a performance incentive, in order to
assist in achieving the use of cost effective, high quality health care for
the benefit of Members through the use of effective case management and
patient based health care, DHI and Gerald shall share on a 75% DHI / 25%
Gerald basis in each year in any Surplus or Loss for Institutional Services
and Professional Services under any DHI contract for any year.
8.3 Costs. DHI shall be responsible for bearing its costs with respect
to this Agreement, and other than the payment of the Fees set forth in this
Article 8, Gerald shall not have any liability for such costs.
8.4 Calculation of Surplus or Loss. DHI will pay or track all
Institutional Services and Professional Services under each DHI Contract
separately, and shall be responsible for calculating the Institutional
Services Fund and Professional Services Fund for each DHI Contract
separately. Settlement on the Institutional Services Fund and Professional
Services Fund for each DHI Contract shall occur within 120 days following the
end of the contract year for each DHI Contract, during which time Gerald will
be given access to all appropriate records and have the opportunity to verify
such fund balances. After final settlement on the Institutional Services
Fund and Professional Services Fund, no further adjustments will be made to
the Institutional Services Fund or Professional Services Fund for the
contract year and Payor in question. However, DHI reserves the right to
aggregate the Surplus with respect to one DHI Contract with any Loss in any
other DHI Contract for which Gerald is responsible, prior to distribution of
the Surplus. To the extent practical, a single aggregated payment of Surplus
will be made annually, but may be made more often if in the judgment of DHI
payment on a semi-annual basis is appropriate.
8.5 Funding of Losses. Any Loss allocable to Gerald as calculated
according to Section 8.4 remaining from any prior years shall be offset
against up to fifty percent (50%) of Gerald's share of Surplus for such year.
8.6 Signing Bonus. Gerald will be paid a Signing Bonus of $60,000 in
cash and 8,000 shares of DHI Class B Common Stock. This Signing Bonus will
be delivered after (a) execution of this Agreement, (b) satisfactory
credentialing of the Participating Physicians by DHI, and (c) provision by
Gerald of Gerald's financial statements and Medicare patient list, and is
subject to modification to the extent the information received by DHI differs
from the information previously provided to DHI. This Signing Bonus is made
based upon Gerald's assurance to DHI that its Participating Physicians are
actively practicing primary care physicians who intend to
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enter into a cooperative relationship with other DHI affiliated physicians to
manage care of Members participating in DHI Contracts and Benefit Plans
thereunder.
ARTICLE IX. TERM AND TERMINATION
9.1 Term of Agreement. This Agreement shall commence on the date first
set forth above, and shall expire on the fifth (5th) anniversary of such
date, unless extended or earlier terminated pursuant to the terms hereof.
9.2 Extended Term. Unless earlier terminated as provided for in this
Agreement, the term of this Agreement shall be extended automatically for
additional terms of three (3) years each, unless either party delivers to the
other party, not less than eight (8) months nor earlier than twelve (12)
months prior to the expiration of the preceding term, written notice of such
party's intention not to extend the term of this Agreement.
9.3 Bankruptcy and Insolvency. This Agreement shall terminate, at
the option of any other party, upon the filing of a petition in voluntary
bankruptcy or an assignment for the benefit of creditors by a party, or upon
other action taken or suffered, voluntarily or involuntarily, under any
federal or state law for the benefit of insolvents by a party, except for the
filing of a petition in involuntary bankruptcy against a party with the
dismissal thereof within sixty (60) days thereafter.
9.4 Special Events of Default. If Gerald or any of its officers,
directors or management employees, or any of the Participating Physicians, is
found guilty of a felony, gross misconduct or of an offense involving moral
turpitude, or if Gerald or any of the Participating Physicians is barred from
participating in the Medicare or Medicaid program or from any program
operated by a Payor with which DHI has a DHI Contract, DHI may terminate this
Agreement upon reasonable written notice and discussion with Gerald, subject
to Gerald's right to cure as stated below. Gerald agrees that in the event
the misconduct of a Participating Physician has or may result in prohibiting
Gerald or DHI from participating in the Medicare or Medicaid program or any
DHI Contract, Gerald will take such immediate action as is necessary to
ensure the ability of DHI to continue to participate in the Medicare or
Medicaid program or DHI Contract and that such curative action with respect
to the misconduct of a Participating Physician and the recovery of DHI' right
to participate in the Medicare or Medicaid program or any DHI Contract, shall
cure the event of default with respect to Gerald. The exercise of DHI's
right to terminate under this Section 9.4 shall not be considered exclusive
and shall not preclude DHI's right to exercise any and all other remedies it
may have in law or equity.
9.5 Failure of Performance. If any party to this Agreement
substantially fails to perform any material duty or obligation imposed upon
it by this Agreement or otherwise is in material breach of this Agreement,
and such default shall continue for a period of sixty (60) days after written
notice thereof specifying the nature of the default has been given to it by
another party hereto (or such longer time if the failure can not be cured
within such 60 days as long as the party in breach has initiated and is
diligently pursuing a cure within the 60 day time period which is reasonably
likely to cure the breach in a commercially reasonable time frame), the other
party may terminate this Agreement upon thirty (30) days prior written notice
and seek such relief or pecuniary loss or damages caused by such breaching
party, including, without limitation, actual damages. Failure to make
payments by DHI in accordance with this Agreement is grounds for immediate
termination after DHI has had thirty (30) days to cure such default. For
purposes of this Agreement, failure of performance of any material duty or
obligation shall include failure by a party to respond to communications,
telephonic or written, within 5 business days of receipt of such
communication, excluding physician referral or management of patient
inquiries, which shall be handled in all events in less than 48 hours unless
there exist special circumstances.
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9.6 Termination by Agreement. In the event Gerald and DHI shall
mutually agree in writing, this Agreement may be terminated on the date
specified in such written agreement.
9.7 Special Termination Right of DHI. DHI shall have the right to
terminate this Agreement if (i) DHI has accrued Losses attributable to the
DHI Contracts for any three (3) consecutive year period, or (ii) the
aggregate Loss in any year is equal to greater than twenty percent (20%) of
the total capitation allocated to the DHI Contracts. Only losses related to
Gerald shall be considered in calculating the accrued Loss, after giving
effect to recoveries under any stop loss or reinsurance or coordination of
benefits. The aggregate Loss shall be affirmed by DHI' regular certified
public accountant, measured at the end of DHI' year. The special right of
termination will not affect the performance of any DHI contract during the
term of that contract, but shall apply to each such DHI Contract at the time
such contract comes up for renewal or re-negotiation.
9.8 Procedure Upon Termination. In the event of the termination of
this Agreement by either party for any reason, including the special
termination rights enumerated in this Article 9, the Participating
Physicians' and other Providers' obligations in any DHI Contract shall remain
in full force and effect until the end of the term of such contract. During
this period, DHI shall assist Gerald in effecting an orderly transition of
the claims administration and other functions undertaken by DHI as follows:
(a) Beginning on the date of receipt of notice of termination for
any reason by either party, DHI shall, upon written request of Gerald,
immediately cooperate with Gerald in transferring all property of Gerald in
DHI' possession, and in arranging for the delivery of information and record
keeping functions to Gerald or such entity as is selected by Gerald to assume
the duties performed by DHI (the "Designated Entity"), so as to assist Gerald
in minimizing any interruption in its operations. Consistent with the usual
and customary industry practices, and subject to applicable vendor contracts
between DHI and any third party, DHI shall, or shall cause any such third
party to: (a) deliver or cause to be delivered to Gerald or the Designated
Entity, prior to the termination date, all documents, information and
material of Gerald (including electronic, microfilm and magnetic media
records); and (b) cooperate with Gerald in the transfer to Gerald or the
Designated Entity of all information and records directly relating to and
necessary to perform the various functions and services undertaken by DHI
under this Agreement in the operation of Gerald, including the planning and
execution of such transfer and diagnosis and correction of errors arising in
the course of such transfers.
(b) All records, data and other information transferred pursuant
to this Section 9.8 (the "Transferred Information") shall be furnished to
Gerald or the Designated Entity in machine readable form or in such other
format and medium designated by Gerald, which shall be reasonable and
appropriate for the nature of the specific type of Transferred Information.
(c) Each party shall use its commercially reasonable best efforts
to ensure that the transfer of Transferred Information and any other property
of Gerald under this Section 9.8 shall be completed on or before the
termination date; provided, however, that within the time period before such
completion, DHI shall use its commercially reasonable best efforts to meet
reasonable scheduling, directed by Gerald, during normal business hours.
9.9 Non-solicitation Following Early Termination. In the event of a
termination of this Agreement prior to the expiration of its term due to
failure of performance or breach by Gerald, after the term of each DHI
Contract, Gerald shall not (either directly or indirectly through another
entity, whether or not such other entity is affiliated with Gerald) solicit,
contract to provide, or provide services (other than Fee for Service
services) to, any Payors or Members covered under such terminated DHI
Contracts for a period of one year from the date of termination of the DHI
Contract, unless a patient, on an unsolicited basis requests that his
coverage be changed in
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order to retain such physician as his or her primary care provider. Gerald
also agrees to cooperate and use its best efforts to cause each of its
Participating Physicians to perform the foregoing.
9.10 Continuation of Care. Notwithstanding termination of this
Agreement, Gerald shall, at DHI's request, continue treatment of any Member
for the shorter of such periods of time (i) as may be required by law, (ii)
required by a Benefit Plan, or (iii) until the medically required course of
treatment has been completed, and Gerald shall be entitled to payment
hereunder for such purposes. Gerald shall continue to provide Covered
Services for a period of thirty (30) days notwithstanding the inability of
DHI or a Payor to pay amounts due Gerald, and Gerald shall use its best
efforts to assist in the orderly transfer of such Members at DHI's direction.
ARTICLE X. GENERAL PROVISIONS
10.1 Contract Modifications for Prospective Legal Events. In the event
that any state or federal laws or regulations, now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel to either party in
such a manner as to indicate that the structure of this Agreement may be in
violation of such laws or regulations, Gerald and DHI shall amend this
Agreement as necessary to bring it into compliance with the law. To the
maximum extent possible, any such amendment shall preserve the underlying
economic and financial arrangements between Gerald and DHI.
10.2 Assignment. DHI shall have the right, upon giving prior written
notice to Gerald, to assign its rights and obligations under this Agreement
to a DHI Affiliate. DHI may assign any or all of its obligations under this
Agreement to a non-affiliated third party with the prior written consent of
Gerald, which consent shall not be unreasonably withheld or delayed. Gerald
may not assign its rights and obligations under this Agreement without the
prior written consent of DHI.
10.3 Whole Agreement; Modification. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements between the parties. There are no other
agreements of understandings, written or oral, between the parties regarding
this Agreement other than as set forth herein. This Agreement shall not be
modified or amended except by a written document executed by both parties to
this Agreement, and such written modifications shall be attached hereto.
10.4 Notices. All notices required or permitted by this Agreement shall
be in writing and shall be addressed as follows:
If to DHI: Doctors Health, Inc.
10451 Mill Run Circle, 10th Floor
Owings Mills, Maryland 21117
Attn: Paul A. Serini, Executive Vice President,
Strategic Planning
Copy to: Corporate Counsel
Doctors Health, Inc.
10451 Mill Run Circle, 10th Floor
Owings Mills, Maryland 21117
If to Gerald: Gerald Family Care, P.C.
2139 Georgia Avenue, N.W. #200
Washington, D.C. 20001
Attn: George Cato, Chief Executive Officer
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or to such other address as either party shall notify the other in writing.
10.5 Binding on Successors. Subject to Section 10.2, this Agreement
shall be binding upon the parties hereto, and their respective successors and
assigns.
10.6 Waiver of Provisions. Any waiver of any terms and conditions
hereof must be in writing, and signed by the parties hereto. The waiver of
any of the terms and conditions of this Agreement shall not be construed as a
waiver of any subsequent breach of the same or any other terms and conditions
hereof.
10.7 Governing Law. The validity, interpretation and performance of
this Agreement shall be governed and construed in accordance with the laws of
the State of Maryland. The parties acknowledge that DHI is not authorized or
qualified to engage in any activity which may be construed or deemed to
constitute the practice of medicine. To the extent any act or service
required of DHI in this Agreement should be construed or deemed, by any
governmental authority, agency or court to constitute the practice of
medicine, the performance of said act or service by DHI shall be deemed
waived.
10.8. Severability. The provisions of this Agreement shall be
deemed severable and if any portion shall be held invalid, illegal or
unenforceable for any reason, the remainder of this Agreement shall be
effective and binding upon the parties.
10.9 Additional Documents. Each of the parties hereto agrees to execute
any document or documents that may be requested from time to time by the
other party to implement or complete such party's obligations pursuant to
this Agreement.
10.10 Confidentiality. Each party to this Agreement agrees to hold
all information about this contract and about the other party in the
strictest of confidence, and not to disclose any such information to any
person or entity without the consent of the other, unless required by law or
Section 10.15 of this Agreement.
10.11 Remedies Cumulative. No remedy set forth in this Agreement or
otherwise conferred upon or reserved to any party shall be considered
exclusive of any other remedy available to any party, but the same shall be
distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as may be deemed expedient.
10.12 Events Excusing Performance. Neither DHI nor Gerald shall be
liable to the other for failure to perform any of the services required
herein in the event of strikes, lock-outs, calamities, acts of God, or other
events over which the respective party has no control for so long as such
events continue, and for a reasonable period of time thereafter.
10.13 Third Party Rights. This Agreement is not intended to create
or confer a third party beneficiary status or rights in any person not a
party to this Agreement, including Members, Payors, Participating Physicians,
or other third parties, unless such rights are expressly set forth in this
Agreement.
10.14 Arbitration. Any controversy, dispute or claim arising out
of or relating to this Agreement or the breach thereof, including any
question regarding its interpretation, existence, validity or termination,
shall be resolved by arbitration in accordance with the provisions of Exhibit
10.14 attached hereto as a part hereof.
10.15 Records. To the extent required by Section 952 of the
Medicare and Medicaid Amendments of 1980, Gerald shall, on behalf of itself
and its Participating Physicians:
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(a) until the expiration of four (4) years after the furnishing of
services under this Agreement, make available, upon written request, to the
Secretary of Health and Human Services (the "Secretary") or the Comptroller
General of the United States, or to any of their duly authorized
representatives, the Agreement and such of its books, documents and records
as are necessary to certify the nature and extent of costs under the
Agreement; and
(b) if Gerald enters into a subcontract with a related
organization, as defined in federal law and regulations, under which any of
Gerald's duties under the Agreement are to be performed by such related
organization, which contract has a value or cost of $10,000 or more over a
twelve-month period, include in such subcontract a clause requiring the
related organization to make available, upon written request, to the
Secretary or Comptroller General, or any of their duly authorized
representatives, the subcontract, and any of the related organization's
books, documents and records as are necessary to verify the nature and extent
of such costs.
IN WITNESS WHEREOF, this Agreement is entered into and executed as
of the date first written above.
GERALD FAMILY CARE, P.C.
By: (Seal)
------------------------------
Name:
------------------------------
Title:
-----------------------------
DOCTORS HEALTH, INC.
By: (Seal)
-------------------------------
Name:
-------------------------------
Title:
------------------------------
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Exhibit 3.2(e)
DHI Policy and Procedure for Payment of Claims
In accordance with federal regulations and guidelines, DHI shall pay all
"clean" claims for services rendered to Members within 30 days of receipt of
such claim by DHI provided the completed claim is submitted to DHI on a
standard HCFA 1500 form for Professional Services or a UB92 form for
Institutional Services and the claim has a referral from the Participating
Primary Care Physician. A Clean claim form includes:
Name, ID Number, Age and Sex of the patient
Type of Services Provided
When and Where Services were Provided
The Provider of Services
Diagnosis and prognosis, if applicable
Drug therapy, if applicable
Status of patient, if appropriate
Certain claims require additional information to process a claim, including
surgical procedures requiring medical records, anesthesia and certain other
procedures to be identified by the DHI Medical Director. DHI shall pay such
claims requiring additional information within 30 days of the receipt of the
required information.
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Exhibit 4.2
Doctors Health
1997 Primary Care Base Capitation Rates
Medicare
<TABLE>
<CAPTION>
County Aged/ Disabled Institutionalized
-------------- -------------- -----------------
<S> <C> <C>
Allegany $26.70 $52.06
Anne Arundel $36.00 $60.00
Baltimore $30.36 $59.19
Baltimore City $31.23 $60.00
Calvert $26.15 $50.99
Caroline $24.00 $46.80
Carroll $26.97 $52.58
Cecil $24.86 $48.48
Charles $31.16 $60.00
Dorchester $24.00 $46.80
Frederick $24.00 $46.80
Garrett $24.00 $46.80
Harford $29.45 $57.43
Howard $30.68 $59.82
Kent $24.00 $46.80
Montgomery $32.00 $60.00
Prince George's $42.00 $60.00
Queen Anne $24.00 $46.80
St. Marys $26.34 $51.37
Somerset $24.00 $46.80
Talbot $24.00 $46.80
Washington $24.00 $46.80
Washington, D.C. $35.00 $60.00
Wicomico $24.00 $46.80
Worcester $24.00 $46.80
</TABLE>
------------------
Note:
* The base rate for Committed PCPs is the same as the "DHI partner rate".
* For the Medicare only PCPs, the Base Rates are the same, but the
capitation rate modifier ("CRM") criteria is different (see CRM section).
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Exhibit 5.1
DUTIES AND OBLIGATIONS OF PARTICIPATING PHYSICIANS
1. Physician agrees to enter into a cooperative relationship with other DHI
affiliated physicians to manage care to DHI/Gerald HMO Members.
2. Physician agrees to provide to eligible persons who elect to enroll in an
HMO managed care product offered by any Payor who has contracted with DHI
(the "DHI HMO Plans") those primary care services customarily provided
by primary care physicians to eligible patients, as may be required by
the DHI HMO Plans. These patients are referred to in this Exhibit as the
"DHI HMO Members".
3. Physician agrees to cooperate with DHI and Gerald in accepting DHI HMO
Members under the DHI HMO Plans.
4. Physician agrees to abide by and comply with the relevant provisions of
the agreements between DHI and the DHI HMO Plans. DHI shall provide all
relevant provisions that may apply to Physician.
5. Physician agrees to work cooperatively and in good faith with DHI and
the other DHI affiliated physicians providing services to the DHI HMO
Members. To this end, Physician will use all reasonable efforts to:
Prepare and maintain customary medical records for services provided
to DHI HMO Members and provide DHI with access to such
records without charge. DHI agrees that all patient records will
be treated as confidential and will comply with laws and
regulations related to confidentiality and all ethical standards
for physicians regarding the confidentiality of patient records.
Comply with and accept payment conditions of this Agreement.
Comply with managed care medical standards adopted by DHI affiliated
physicians as part of arrangements with the DHI HMO Plans.
Cooperate with DHI's efforts to contact eligible Medicare and adult
medicine patients in Physician's practice, including providing mailing
lists and use of Physician's name in correspondence.
Sign and submit in a timely manner authorizations, consents, encounter
data and other forms adopted by DHI.
Comply with DHI policies and guidelines, as approved by Gerald, which
DHI provides to physician.
6. Physician will participate in all utilization review, quality assurance
and credentialing p programs operated by DHI and Gerald to assure or
improve the quality and effective utilization of health care services to
the DHI HMO Members ("QA/UR Programs"). Physician agrees not to hold
DHI and other participants in the QA/UR Programs responsible for any
reasonable recommendations made or actions taken in good faith with
respect to Physician. Physician will participate in all programs
developed by DHI, in cooperation with Gerald, that are designed to
resolve DHI HMO Member grievances.
7. Physician agrees not to differentiate or discriminate in the treatment
of patients as to the quality of services delivered to DHI HMO Members
because of race, sex, age, religion, place of residence, health status or
source of payment, and to observe, protect and promote the rights of DHI
HMO Members as patients.
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8. Physician will in good faith make arrangements, with the support of
Physician's assigned DHI representative, for twenty-four hours, seven
days a week coverage to DHI HMO Members through other primary care
physicians who participate in the DHI provider network to the extent the
DHI provider network is adequate to provide such coverage in Physician's
service area.
9. Physician agrees to respond within seven (7) days of receipt to any
written inquiry from DHI and Gerald regarding services provided to DHI
HMO Members or any other matters relating to this Agreement, subject to
all laws regarding the confidentiality of medical records.
10. DHI will provide to Physician a list of other physicians and other
health care providers who provide medical services in the DHI provider
network. Other than in cases of a bona-fide medical emergency or where
DHI and the Physician have agreed the DHI provider network is
insufficient, Physician agrees to utilize the DHI provider network when
arranging for additional medical services required by DHI HMO Members.
11. DHI's affiliated physicians have developed protocols and practice
procedures applicable to fellow physician participants in the DHI
provider network (the "DHI Protocols"). Physician agrees to follow the
DHI Protocols when treating DHI HMO Members. If Physician should ever
deem any aspect of the DHI Protocols to be medically inappropriate or
otherwise inappropriate for utilization by Physician, Physician may
notify DHI in writing, with sufficient specificity to enable DHI to
respond to Physician's concerns.
12. Physician or Gerald will own and operate all aspects of his or her
medical practice and will remain responsible for all operations of the
medical practice, including all patient treatment decisions and
employee, office, lease and financial affairs. DHI is not engaged in
the practice of medicine and will not interfere in any patient treatment
decisions.
13. DHI may use Physician's name, specialty, telephone number(s), and
business location(s) in marketing, descriptive, and other information
relating to the DHI HMO Plans, and will include Physician as a member of
the DHI provider network during this Agreement. Physician may
nonetheless be precluded from participating in a DHI HMO Product by one
of the DHI HMO Plans. In such an event, DHI will notify Physician, in
writing, within 30 days of learning of such an action, and will assist
Physician, if requested, in seeking to overturn such an action.
14. In order to provide economic incentives for Physicians to provide the
best possible health care to DHI HMO Members while fostering
efficiencies in utilization and quality assurance, Physician will
participate in a bonus program established by Gerald to reward high
clinical quality, appropriate utilization, patient satisfaction and
retention and the extent of cooperation with other participating
physicians DHI.
15. Physician understands that DHI will be paid by the DHI HMO Plans for all
services provided by Physician to DHI HMO Members.
16. Physician agrees not to bill or collect any reimbursement from DHI HMO
Members or the DHI HMO Plans unless the service provided was not a
covered service under the DHI HMO Plan and the DHI HMO Member was given
prior written notice that the services would not be covered. However,
Physician may charge, bill, collect and keep from DHI HMO Members any
copayments or coinsurance. Physician agrees that, whether or not there
is any unresolved dispute for payment, under no circumstances, including
but not limited to nonpayment by DHI or DHI insolvency, will Physician
make any claims, other than for copayments or coinsurance, against any
DHI HMO Member for covered services.
17. Physician will maintain, at his or her expense, general and professional
liability insurance coverage of not less than $1,000,000 per claim and
$3,000,000 per year. Physician will provide DHI with copies of the
policies or other evidence of compliance with the insurance
requirements. Physician will notify DHI when any patient of Physician
files a claim or any notice of intent to commence legal action alleging
professional negligence against Physician or of the settlement of any
such claim by Physician or if a judgment is rendered against Physician
in any such legal action. Physician will promptly notify DHI in writing
of any changes in or cancellations of any policy of insurance maintained
by Physician. If
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such policy is written on a claims made basis and such coverage is
discontinued, Physician will purchase an "Extension of Coverage
Endorsement" within ten (10) days of written notice of discontinuance
and shall provide DHI with a copy of this endorsement.
18. To the extent required to enable DHI and Gerald to comply with Section
952 of the Medicare and Medicaid Amendments of 1980, or regulations
promulgated pursuant thereto, Physician shall until the expiration of
four (4) years after the furnishing of services under this Agreement,
make available, upon written request, to the Secretary of Health and
Human Services or the Comptroller General of the United States, or to
any of their duly authorized representatives, this Agreement and such of
Physician's books, documents and records as are necessary to certify the
nature and extent of costs under this Agreement.
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Exhibit 5.1a
PARTICIPATING PHYSICIAN AGREEMENT
As a Participating Physician of Gerald Family Care, P.C., I,
_____________________, M.D. agree to provide medical services to Doctors
Health, Inc. Members in accordance with the Network Contracting and
Management Services Agreement, dated October ___, 1997, between Doctors
Health, Inc. and Gerald Family Care, P.C., and to otherwise comply with the
provisions of that Agreement, including without limitation the provisions of
Section 5.1 thereof.
Participating Physician:
-------------------------------------------
Print Name:
Office address:
---------------------------
-------------------------------------------
Effective Date:
--------------
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Exhibit 10.14
ARBITRATION PROCEDURE
1. Institution of Arbitration Proceeding.
1.1. Any party to this Agreement (an "Initiating Party") may initiate an
arbitration proceeding (the "Proceeding") to resolve a Dispute subject to
resolution under this Schedule by giving written notice (the "Dispute
Notice") to the other party (the "Responding Party") to such Dispute. The
Dispute Notice shall describe the substance of the Dispute with sufficient
specificity to give the Responding party adequate notice of its nature.
Unless otherwise specified, time periods specified in this Schedule 10.14
shall be calculated from the date of the Dispute Notice (the "Commencement
Date").
2. Selection of Arbitral Panel.
2.1. The Arbitral Panel (the "Panel") shall consist of three
arbitrators, two of whom (the "Party Designated Arbitrators") shall be
selected by the parties pursuant to Section 2.2 hereof. The third arbitrator
shall be a "Neutral Arbitrator" selected by the Party Designated Arbitrators
pursuant to Section 2.3 hereof.
2.2. The Initiating Party shall designate its Party Designated
Arbitrator in the Dispute Notice. Within fifteen days of the Commencement
Date, the Responding Party shall designate its Party Designated Arbitrator.
2.3. Within forty-five days of the Commencement Date, the two Party
Designated Arbitrators shall agree upon and appoint a Neutral Arbitrator who
shall be an attorney who is a member of the National Health Lawyers
Association and who is knowledgeable in the subject matter of the Dispute.
2.4. Each party agrees promptly to disclose to the other party any
circumstances known to it which would cause reasonable doubt regarding the
impartiality of an individual under consideration or appointed as the Neutral
Arbitrator and any such individual shall also promptly disclose to the
parties any such circumstances.
2.5. During the process of selecting the Neutral Arbitrator and
thereafter during the course of this Proceeding, ex parte communications with
the Neutral Arbitrator or any individual under consideration as the Neutral
Arbitrator are prohibited and shall be disclosed by the party making any ex
parte communication, the Neutral Arbitrator or any individual under
consideration as a Neutral Arbitrator immediately upon discovery.
3. Pre-Hearing Procedures.
3.1. Within fifteen days of the appointment of the Neutral Arbitrator,
the Panel may convene a Pre-Hearing Conference to, inter alia, familiarize
the Neutral Arbitrator with the nature of the Dispute between the Parties,
determine the need for and the nature of discovery and establish a procedural
schedule for the further conduct of the Proceeding.
4. Discovery.
4.1. Discovery, appropriately limited by the nature of the Dispute, is
expressly contemplated and permitted. However, the Parties acknowledge and
agree that one of the benefits of resolving Disputes through arbitration is
the opportunity reasonably to limit discovery.
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The Parties further agree that they will endeavor to agree upon procedures
and a schedule for discovery that will result in a prompt and fair hearing
under these procedures.
4.2. Discovery requests and responses need not be served upon the Panel
but the Panel shall promptly convene upon motion of either party to resolve
discovery disputes, if any.
4.3. Discovery will be completed within sixty days of the Pre-Hearing
Conference.
5. Submission of Evidence and Hearing.
5.1. The Panel may receive evidence in the form of written statements
filed prior to Hearing for cross-examination on such statements or may
receive oral testimony at Hearing. Each party shall be entitled to submit
rebuttal testimony. The Panel may also permit opening and closing statements
of counsel at Hearing.
5.2. The Panel shall convene for Hearing the evidence and argument of
the parties at a time and place to be established by the Panel. The Hearing
shall be held no later than thirty days after the close of discovery or
thirty days after the Pre-Hearing Conference if there is no discovery.
5.3. At the Hearing, and for all other purposes related to the
Proceeding, the Initiating Party shall be deemed the party seeking
affirmative relief, shall go first and shall bear the burdens of proof and of
persuasion.
5.4. The Hearing shall be transcribed.
6. Post-Hearing Procedures.
6.1. The Panel may request post-hearing briefs and, if it does so, shall
establish a schedule for submission of such briefs at the close of Hearing.
6.2. Within thirty days of the later of the close of the Hearing or its
receipt of post-Hearing briefs, the Panel shall issue a written Decision and
Award which shall include findings of fact and explain the reasons for the
Decision.
7. Confidentiality.
7.1. Unless otherwise agreed, the Proceeding and all information and
documents relating to it shall be kept confidential by the Parties, the
Panel, witnesses and all other persons involved with the Proceeding.
Specifically, but without limitation, the Confidential Information of the
parties shall be safeguarded and maintained as confidential by all
participants in the Proceeding.
8. Court Proceedings.
8.1. Any party may seek temporary or preliminary injunctive relief or
actions in summary proceedings from any court of competent jurisdiction prior
to the time the Neutral Arbitrator is appointed. Any temporary or
preliminary injunctive relief granted by a court shall continue during the
pendency of the Proceeding unless the Panel shall, after hearing, direct
otherwise.
9. Costs.
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9.1. The Neutral Arbitrator's fees and expenses, and all expenses of the
Pre-Hearing Conference, Hearing or any other aspect of the Proceeding not
directly attributable to either party, such as the cost of transcription of
Panel Hearings and rental of Hearing rooms, shall be borne equally by the
parties.
9.2. The Panel shall in its Decision and Award determine whether and to
what extent either party is a prevailing party and entitled to an award of
its costs, including attorneys' fees.
10. Miscellaneous.
10.1. The parties may agree at any time to depart from these
procedures, including the time periods herein established. Although not
favored, the Panel may also permit departures from these procedures and time
periods absent agreement of the parties to prevent a miscarriage of justice.
10.2. Until the Neutral Arbitrator is appointed, any issue relating
to the Proceeding that is not provided for in these procedures shall be
governed by the then applicable Commercial Arbitration Rules of the American
Arbitration Association. Once the Neutral Arbitrator is appointed, the Panel
is empowered to resolve all issues not contemplated by these procedures and
upon which the parties cannot agree.
10.3. The Panel may grant any remedy or relief that it deems just
and equitable and within the scope of the agreement of the parties,
including, but not limited to, specific performance of a contract, injunctive
relief or other equitable relief.
10.4. These procedures contemplate a two-party Proceeding. If there
are more than two parties to a Proceeding, and they are unable by unanimous
agreement to align themselves as two parties, each party shall be entitled to
all the rights of a party hereunder, including specifically but without
limitation the right to appoint a Party Designated Arbitrator, and the
Neutral Arbitrator shall have a number of votes as to all matters decided by
the Panel equal to the sum of (i) the votes of all Party Designated
Arbitrators, and (ii) one.
10.5. The Panel may, in its discretion, convene and act by
conference call for all purposes other than taking oral testimony.
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Annex A
AMENDMENT TO NETWORK CONTRACTING AND
MANAGEMENT SERVICES AGREEMENT
THIS AMENDMENT (the "Amendment") is made and entered into as of the
29th day of June, 1998 (the "Effective Date") by and between Doctors Health,
Inc., a Delaware Corporation ("DHI") and Gerald Family Care, P.C. ("Gerald").
1. Purpose. The parties have agreed to amend certain provisions
of the Network Contracting and Management Services Agreement between DHI and
Gerald dated October 31, 1997.
2. The second line of the first full paragraph on page 9 of the
Network Agreement is deleted and the following is inserted in lien thereof:
"on a quarterly basis by an amount up to ten percent (10%) of the
Medicare Primary Care Base ... "
3. The second line of Section 8.6 is deleted and the following is
inserted in lien thereof:
"8,000 shares of DHI Class B Common Stock. This Signing Bonus will
be delivered after (a) "
4. Section 9.1 is deleted and the following is inserted in lieu
thereof:
"9.1 Term of Agreement. This Agreement shall commence on the date
first set forth above, and shall expire on April 30, 2003, unless extended or
earlier terminated pursuant to the terms hereof."
5. A new Section 9.11 shall be inserted following Section 9.10 as
follows:
"9.11 Special Termination Right of Gerald. Gerald shall have the
right to terminate this Agreement after April 30, 2000 if FPA Medical
Management, Inc. ("FPA") exercises its right of first refusal to require
Gerald to participate in full-risk Medicare managed care contracts between
HMOs or other payors and IPA, and such managed care contracts conflict with
Gerald's delivery of service to members under the DHI Contracts. In such
event, Gerald shall give DHI at least 60 days prior written notice that it
desires to exercise the special right of termination set forth in this
Section 9.11."
6. The following shall be added to Section 8.6:
"Of the 8,000 shares of DHI Class B Common Stock, (i) 3,200 shares
shall be subject only to the restrictions set forth in the Stockholders
Agreement; and (ii) 4,800 shares (a) shall be subject to the restrictions set
forth in the Stockholders Agreement and (b) shall be restricted shares
subject to forfeiture if the Network Agreement terminates at any time on or
after May 1, 2000. Commencing on May 1, 2000, the restrictions shall lapse
on the 4,800 shares at the rate 133 shares per month, except that the
restrictions with respect to 145 shares shall lapse on the month beginning
May 1, 2000. Such restrictions shall not lapse unless Gerald performs a
complete month under the Network Agreement. (For example, if Gerald
terminates the Network
<PAGE>
Agreement 1-1/2 months after May 1, 2000, the restrictions shall have lapsed
with respect to one month, or 133 shares. The remaining 4,667 shares shall
be forfeited.)."
"Of the $60,000 paid to Gerald as a cash signing bonus, $36,000
shall be subject to forfeiture and repayment to Doctors Health if the Network
Agreement terminates at any time after May 1, 2000. Commencing on May 1,
2000, the cash signing bonus forfeiture shall lapse at athe rate of $1,000
per month. Such forfeiture shall not lapse unless Gerald performs a complete
month under the Network Agreement. (For example, if Gerald terminates the
Network Agreement 1-1/2 months after May 1, 2000, one month of the cash
signing bonus ($1,000) shall not be subject to forfeiture and the remaining
$35,000 shall be immediately repaid to Doctors Health)."
7. Section 10.4 is amended by deleting it and inserting in lien
thereof the following:
"10.4 Notices. All notices required or permitted by this
Agreement shall be in writing and shall be addressed as follows:
If to DHI: Doctors Health, Inc.
10451 Mill Run Circle
10th Floor
Owings Mills, Maryland 21117
Attn: Operations Department
Copy to : Doctors Health, Inc.
10451 Mill Run Circle
10th Floor
Owings Mills, Maryland 21117
Attn: Legal Services Department
If to Gerald: Gerald Family care, P.C.
1160 Varnum Street, N.E.,
Suite 117
Washington, D.C. 20017
Attn: George Cato, "Chief Operation
Officer"
IN WITNESS WHEREOF, this Amendment is entered into and executed as
an instrument under seal as of the date first written above.
GERALD FAMILY CARE, P.C.
By: (SEAL)
-----------------------
Name:
------------------------
Title:
-----------------------
DOCTORS HEALTH, INC.
By: (SEAL)
-----------------------
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Stewart B. Gold, President
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